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ASSET ACQUISITION AGREEMENT
THIS ASSET ACQUISITION AGREEMENT (this "AGREEMENT") is entered into
as of September 25, 2000 by and between (1) FBL FINANCIAL GROUP, INC., an Iowa
corporation ("FBL"), (2) FARM BUREAU LIFE INSURANCE COMPANY, an Iowa
corporation ("FBLI") (3) KANSAS FARM BUREAU SERVICES, INC., a Kansas
corporation ("KFBS"); (4) KANSAS FARM BUREAU LIFE INSURANCE COMPANY, INC. a
Kansas corporation (the "INSURANCE SUBSIDIARY"); and (5) THE KANSAS FARM
BUREAU, a Kansas nonprofit corporation ("KFB") (each sometimes referred to
herein after as a "PARTY" and hereinafter sometimes collectively referred to
as the "PARTIES").
RECITALS
A. The parties intend that, subject to the terms and conditions
hereinafter set forth, the following transactions (the "TRANSACTIONS") shall
occur:
Step One: Insurance Subsidiary will transfer all of its
Assets, other than its 200,000 shares of FBL common stock (the
"INSURANCE SUBSIDIARY ASSETS"), to FBLI in exchange for
3,410,999 shares of Series C Preferred Stock of FBL and the
assumption of certain Liabilities of Insurance Subsidiary.
Step Two: Insurance Subsidiary will liquidate, distributing
its 200,000 shares of FBL common stock and the Series C
Preferred Stock of FBL received in Step One, to KFBS.
Step Three: KFBS will transfer certain Assets (the "KFBS
ACQUIRED ASSETS"), consisting of not less than $1,380,026 of
cash, and all of its other Assets except, (i) 42,000 shares of
FBL common stock, (ii) the FBL stock received from Insurance
Subsidiary in Step Two, (iii) the stock of its Subsidiaries,
and (iii) approximately $8 million in other fair market value
of Assets (the "KFBS RETAINED ASSETS") to FBL in exchange for
(i) one (1) share of Series C Preferred Stock of FBL, (ii) the
assumption by FBL of the Graham Liability, and (iii)
potentially up to 341,100 additional shares of Series C
Preferred to the extent the fair market value of the KFBS
Acquired Assets exceeds $1,380,026.
Step Four: KFBS will liquidate, distributing the KFBS Retained
Assets and the Series C Preferred Stock of FBL received in
Step Three to KFB.
The KFBS Acquired Assets and the Insurance Subsidiary Assets
are referred to herein collectively as the "ACQUIRED ASSETS".
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B. The Transactions are intended to be treated in accordance
with the purchase method of accounting and as a tax-free reorganization
pursuant to the provisions of Section 368(a)(1)(C) of the Internal Revenue
Code of 1986, as amended (the "CODE").
C. Capitalized terms used herein as defined terms are defined
in Article X of this Agreement or when initially used in this Agreement. When
reference is made in this Agreement to a Section, Schedule or Exhibit, such
reference shall be to a Section, Schedule or Exhibit of this Agreement unless
otherwise indicated or unless the context shall otherwise require. The table
of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. The definitions of terms in this Agreement shall be applicable
to both the plural and the singular forms of the terms defined when either
such form is used in this Agreement. Whenever the words "include", "includes"
or "including" are used in this Agreement, they shall be deemed to be followed
by the words "without limitation". The words "hereof", "herein" and
"hereunder", and other words of similar import, refer to this Agreement as a
whole and not to any particular Section, subsection, paragraph or clause.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties
and covenants herein contained, and subject to the conditions herein stated,
the parties agree as follows:
ARTICLE I
THE TRANSFERS AND THE CONSIDERATION
Section 1.1 The Transfer and the Consideration. On and subject to the
terms and conditions of this Agreement at the Closing, KFBS agrees to
transfer, convey and deliver to FBL the KFBS Acquired Assets and Insurance
Subsidiary agrees to transfer, convey and deliver to FBLI the Insurance
Subsidiary Assets, in exchange, respectively, for the KFBS Consideration and
Insurance Subsidiary Consideration, as defined in Section 1.2 and 1.3,
respectively.
Section 1.2 The KFBS Consideration. FBL agrees to issue and deliver
to KFBS at the Closing as the consideration for the KFBS Acquired Assets (i)
one share of FBL Series C Cumulative Voting Preferred Stock having the terms
set forth on the form of certificate of designations accompanying this
Agreement as EXHIBIT A (the "SERIES C PREFERRED"), (ii) an agreement to assume
the obligations of KFBS to John Graham described in the KFBS Disclosure
Schedule ("THE GRAHAM LIABILITY"); and (iii) if the fair market value of the
KFBS Acquired Assets exceeds $1,380,026, such number of additional shares of
Series C Preferred as is calculated by dividing the fair market value of such
KFBS Acquired Assets by 25.8425, but not to exceed 341,000 shares (the "KFBS
CONSIDERATION").
Section 1.3 Insurance Subsidiary Consideration. FBLI agrees to
transfer and deliver to Insurance Subsidiary at the Closing as the
consideration for the Insurance Subsidiary Assets 3,410,999 shares of Series C
Preferred Stock, and to assume the Liabilities of Insurance Subsidiary
reflected on the June 30, 2000 balance sheet of Insurance Subsidiary (the
"INSURANCE
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SUBSIDIARY CONSIDERATION"), excluding (i) Liabilities incurred prior to June
30, 2000, and not reflected on the June 30, 2000 balance sheet of Insurance
Subsidiary (ii) Liabilities incurred prior to Closing and subsequent to June
30, 2000 other than in the ordinary course of business of Insurance Subsidiary
and (iii) Liabilities paid prior to Closing and subsequent to June 30, 2000 in
the ordinary course of business of Insurance Subsidiary (the "EXCLUDED
INSURANCE SUBSIDIARY LIABILITIES"). The amount of the Excluded Insurance
Subsidiary Liabilities shall be subject to audit and to approval by FBLI after
Closing. The KFBS Consideration and the Insurance Subsidiary Consideration are
referred to together herein as the "CONSIDERATION".
ARTICLE II
THE CLOSING
Section 2.1 The Effective Time. The effective date and time of the
Transactions (other than the Reorganization) (the "EFFECTIVE TIME") will be
12:01 a.m. Central Time on January 1, 2001 or such other date and time as
shall be agreed upon by the parties.
Section 2.2 Closing and Closing Date. Unless this Agreement shall
have been terminated and the transactions herein contemplated shall have been
abandoned pursuant to Section 8.1, and subject to the satisfaction or waiver
of the conditions set forth in Article VII, the closing of the Transactions
(the "CLOSING") will take place commencing at 9:00 a.m. Central Time on the
second Business Day following the later of January 1, 2001 or two days
following the date on which the last of the conditions set forth in Article
VII shall be fulfilled or waived in accordance with this Agreement (the
"CLOSING DATE"), at the offices of Blackwell Sanders Peper Martin LLP,
attorneys for KFBS, KFB, and Insurance Subsidiary, unless another date, time
or place is agreed to in writing by the parties hereto.
Section 2.3 Deliveries at the Closing. At the Closing, (i) KFBS and
Insurance Subsidiary will deliver to FBL and FBLI the various certificates,
instruments, and documents referred to in Section 7.2 below; (ii) FBL and FBLI
will deliver to KFBS and Insurance Subsidiary the various certificates,
instruments, and documents referred to in Section 7.3 below; (iii) the
appropriate parties will execute and deliver the agreements described in
Article III below; (iv) KFBS and Insurance Subsidiary will execute and deliver
to FBL and FBLI such instruments of transfer and conveyance as FBL, FBLI and
their counsel reasonably may request; and (v) FBL will deliver to each of
Insurance Subsidiary and KFBS a stock certificate representing the Series C
Preferred as specified in Section 1.2 and 1.3 above and such other instruments
of assumption of Liabilities as KFB and KFBS and their counsel reasonably
require;
ARTICLE III
OTHER AGREEMENTS
Section 3.1 Agreement With KFB. At the Closing, FBL, FBLI and KFB
agree to execute the transition and indemnity agreement (the "TRANSITION AND
INDEMNITY AGREEMENT") substantially in the form accompanying this Agreement as
EXHIBIT B.
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Section 3.2 Registration Rights Agreement. At the Closing, FBL and
KFB agree to execute a registration rights agreement (the "REGISTRATION RIGHTS
AGREEMENT") substantially in the form accompanying this Agreement as EXHIBIT C.
Section 3.3 Services and Royalty Agreements. At the Closing, FBLI
agrees to execute a facilities agreement (the "SERVICES AGREEMENT") and a
royalty agreement (the "ROYALTY AGREEMENT") substantially in the forms
accompanying this Agreement as EXHIBIT D and EXHIBIT E, respectively.
Section 3.4 Casualty Company Service Agreement. At or before the
Closing, a casualty company service agreement between Insurance Subsidiary
[and KFBS] (the "CASUALTY COMPANY SERVICE AGREEMENT"), substantially in the
form accompanying this Agreement as EXHIBIT F, shall have been executed and
delivered by the persons named therein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF KFBS
KFBS represents and warrants to FBL and FBLI that the statements made
in this Article IV are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date,as though made then
and as though the Closing Date were substituted for the date of this Agreement
throughout this Article IV, except as set forth in the KFBS Disclosure
Schedule accompanying this Agreement and initialed by the parties as the same
may be amended pursuant to this Agreement. The KFBS Disclosure Schedule will
be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this Article IV. The parties agree that disclosure on
one schedule shall be deemed disclosure for all representations and
warranties, provided that the disclosure describes with reasonable specificity
the matters required to be disclosed in connection with the other
representations and warranties in order to give FBL knowledge of such matters.
Section 4.1 Organization and Qualification of KFBS.
(a) KFBS is a corporation duly organized, validly existing and
in good standing under the Laws of the State of Kansas and has full corporate
power, authority and legal right to conduct its Business as it is currently
being conducted. KFBS is duly qualified to do business, and is in good
standing, in the respective jurisdictions where the nature of its business or
the ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so qualified or in good standing would not,
individually or in the aggregate, have a Material Adverse Effect.
(b) Copies of the articles of incorporation of KFBS, including
all amendments thereof and copies of the By-Laws of KFBS, as currently in
effect, have heretofore been delivered to FBL. KFBS does not have any other
constitutive documents, other than its articles of incorporation and By-Laws.
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Section 4.2 Capitalization of KFBS. The authorized capital stock of
KFBS consists solely of 10,000 shares of Class A common stock, $100 par value,
of which 3,050 shares are issued and outstanding, 90,000 shares of Class B
common stock, $100 par value, of which no shares are issued and outstanding,
1,500 shares of Class 5% preferred stock, $100 par value, of which no shares
are issued and outstanding, 50,000 shares of Class 6% preferred stock, $100
par value, of which no shares are issued and outstanding, 50,000 shares of
Class 7% preferred stock, $100 par value, of which 3,000 shares are issued and
outstanding and 50,000 shares of Class 8% preferred stock, $100 par value, of
which no shares are issued and outstanding.
Section 4.3 Subsidiaries.
(a) KFBS has four Subsidiaries other than the Insurance
Subsidiary and as of the Closing will have no Subsidiaries other than the
Insurance Subsidiary. Copies of the articles of incorporation and By-Laws (or
other constitutive documents) of the Insurance Subsidiary have heretofore been
delivered to FBL, and such copies are accurate and complete as of the date
hereof. The Insurance Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of Kansas and has the corporate
power and authority and all necessary government approvals to own, lease and
operate its properties and to carry on its Business as now being conducted,
except where the failure to be so organized, existing and in good standing or
to have such power and authority or necessary governmental approvals would not
individually or in the aggregate have a Material Adverse Effect. The Insurance
Subsidiary is duly qualified or licensed and in good standing to do business
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or
licensing necessary, except in such jurisdictions where the failure to be so
duly qualified or licensed and in good standing would not individually or in
the aggregate have a Material Adverse Effect. Except for ownership of an
equity interest in American Agricultural Insurance Company, Western
Agricultural Insurance Company, Kansas Venture Capital and common stock of FBL
and ownership of certain Investment Assets, the Insurance Subsidiary does not
own, directly or indirectly, any equity or similar interest in any Person that
directly or indirectly conducts any activity which is material to Insurance
Subsidiary.
(b) The Insurance Subsidiary (i) possesses an Insurance License
in each jurisdiction in which it is required to possess an Insurance License,
and (ii) is duly authorized in Kansas and each other applicable jurisdiction
to write each line of business reported as being written in the Insurance
Subsidiary SAP Statements for 1999. All such Insurance Licenses, including,
but not limited to, authorizations to transact reinsurance, are listed and
described in the KFBS Disclosure Schedule and are in full force and effect
without amendment, limitation or restriction, other than as described in the
KFBS Disclosure Schedule, and neither KFBS nor the Insurance Subsidiary has
Knowledge of any event, inquiry or Proceeding which is reasonably likely to
lead to the revocation, amendment, failure to renew, limitation, suspension or
restriction of any such Insurance License.
(c) The authorized capital stock of the Insurance Subsidiary
consists solely of 6,000 shares of common stock, $100 par value, of which
6,000 shares of common stock are issued and
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outstanding. As of the date of this Agreement, KFBS is, directly or
indirectly, the record and beneficial owner of 5,922 shares of common stock
of the Insurance Subsidiary and certain members of the board of directors of
the Insurance Subsidiary are the record and beneficial owners of 78 shares of
common stock of the Insurance Subsidiary prior to the closing, KFBS will
acquire such shares owned by the members of the Board of Directors of the
Insurance Subsidiary without cost to Insurance Subsidiary. As of the Closing,
KFBS will be, directly or indirectly, the record and beneficial owner of all
of the Insurance Subsidiary stock. No Subsidiary Stock is or may become
required to be issued by reason of any options, warrants, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable or exercisable for,
shares of any Subsidiary Stock, and except for purchasing the 78 shares of
common stock from the directors of the Insurance Subsidiary, there are no
contracts, commitments, understandings or arrangements by which KFBS or
Insurance Subsidiary is or may be bound to issue, redeem, purchase or sell
additional shares of Subsidiary stock or securities convertible into or
exchangeable or exercisable for any such shares. All of shares of Insurance
Subsidiary stock are validly issued, fully paid and nonassessable and are (or
will at the Closing be) owned by KFBS free and clear of all liens, claims,
encumbrances, restraints on alienation, or any other restrictions with
respect to the transferability or assignability thereof (other than
restrictions on transfer imposed by federal or state securities laws or
insurance laws).
Section 4.4 Authority Relative to this Agreement.
(a) KFBS and Insurance Subsidiary each has full corporate power,
authority and legal right to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly approved and authorized by the Boards of Directors of KFBS and
Insurance Subsidiary and by KFB as the sole stockholder of KFBS. No other
corporate proceedings on the part of KFBS, Insurance Subsidiary or KFB are
necessary to authorize this Agreement and the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed and
delivered by KFBS and (assuming this Agreement is a legal, valid and binding
obligation of FBL) constitutes a legal, valid and binding agreement of KFBS
and Insurance Subsidiary enforceable against KFBS and Insurance Subsidiary in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
Section 4.5 No Violation; Governmental Filings. Except as set forth
in the KFSB Disclosure Schedule:
(a) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not (i)
constitute a breach or violation of or default under the articles of
incorporation or the By-Laws of KFB, KFBS or of the Insurance Subsidiary, (ii)
violate, conflict with, or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Lien upon any of
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the Acquired Assets under any of the terms, conditions or provisions of any
Contract to which KFBS or the Insurance Subsidiary is a party or to which it
or any of the Acquired Assets may be subject or (iii) constitute a breach or
violation of or default under any Environmental Permit, Law, Order, or License
to which KFBS or the Insurance Subsidiary is subject, other than, in the case
of clauses (ii) and (iii), events or other matters that would not,
individually or in the aggregate, have a Material Adverse Effect.
(b) Except for (i) the filing of this Agreement with and the
approval of such by the Kansas Insurance Department and the Iowa Insurance
Department, and (ii) the filings required under the HSR Act and the expiration
or other termination of any waiting period applicable to the Sale under such
act, no consent, approval, permit, notice, Order or authorization of, or
registration, application, declaration or filing with (each a "CONSENT OR
FILING") any Person is required with respect to KFBS or the Insurance
Subsidiary in connection with the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, except for such
Consents or Filings the failure of which to make or obtain would not,
individually or in the aggregate, prevent or be a material impediment to the
consummation of the transactions contemplated hereby or have a Material
Adverse Effect.
Section 4.6 SAP Statements of Insurance Subsidiary. KFBS has
previously delivered to FBL true and complete copies of the following:
(a) the Annual Statements for the Insurance Subsidiary as of and
for the years ended December 31, 1997, 1998 and 1999;
(b) the Quarterly Statements for the Insurance Subsidiary as of
and for the calendar quarter ended June 30, 2000;
(c) any supplemental or separate statutory annual statements or
quarterly statements for Insurance Subsidiary for any of the periods ended
December 31, 1997, 1998 or 1999 or June 30, 2000, that are filed with any
insurance Governmental Entity and that differ from the Annual Statements or
the Quarterly Statements described in Section 4.6(a) or (b); and
(d) the audited SAP balance sheets of Insurance Subsidiary as of
December 31, 1997, 1998 and 1999 and the related audited summary of operations
and statements of change in capital and surplus and cash flows of Insurance
Subsidiary for each such year, together with the notes related thereto and the
reports thereon of Deloitte & Touche, (collectively with the items described
in Section 4.6(a), (b) and (c), the "INSURANCE SUBSIDIARY SAP STATEMENTS").
Since December 31, 1999, Insurance Subsidiary has filed all SAP
Statements required to be filed with or submitted to the appropriate
regulatory authorities, except for such filings or submissions for which
failure to so file or submit would not, individually or in the aggregate, have
a Material Adverse Effect.
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Each Insurance Subsidiary SAP Statement complied (and, as to SAP
Statements filed after the date of this Agreement, will comply) in all
material respects with all applicable Laws when so filed, and all material
deficiencies with respect to any such Insurance Subsidiary SAP Statement, of
which KFBS has Knowledge, have been cured or corrected. Each Insurance
Subsidiary SAP Statement (and the notes related thereto) referred to in
Section 4.6(a), (b), and (d) hereof was prepared (and, as to SAP Statements
filed after the date of this Agreement, will be prepared) in accordance with
SAP and presents (and, as to SAP Statements filed after the date of this
Agreement, will present) fairly, in all material respects, the financial
position of Insurance Subsidiary as of the respective dates thereof and the
related summaries of operations and changes in capital and surplus and cash
flows of Insurance Subsidiary for the respective periods covered thereby. To
the Knowledge of KFBS, each Insurance Subsidiary SAP Statement (including the
notes related thereto) referred to in Section 4.6(c) hereof was prepared (or,
in the case of similar SAP Statements filed after the date of this Agreement,
will be prepared) in accordance with the statutory accounting practices
required by the insurance Governmental Entity in the jurisdiction in which
such statement was (or will be) filed.
Section 4.7 Reinsurance Agreements. To the knowledge of KFBS, no
material amount recoverable pursuant to any material reinsurance, coinsurance,
excess insurance, ceding of insurance, assumption of insurance or
indemnification with respect to insurance or similar material arrangements
(collectively, "REINSURANCE AGREEMENTS") applicable to the Insurance
Subsidiary or its properties or assets is not fully collectible in due course.
Insurance Subsidiary is entitled to take full credit in its SAP Statements
pursuant to applicable insurance laws, rules and regulations for such
reinsurance, coinsurance or excess insurance ceded pursuant to any such
Reinsurance Agreement. The KFBS Disclosure Schedule sets forth all reinsurance
contracts or arrangements entered into by KFBS or Insurance Subsidiary in
which KFBS or Insurance Subsidiary has ceded risk to any Person.
Section 4.8 Reserves. The aggregate actuarial reserves and other
actuarial amounts held in respect of Liabilities with respect to Insurance
Contracts of Insurance Subsidiary as established or reflected in its December
31, 1999 Annual Statement or in the June 30, 2000 Quarterly Statement, (the
"INSURANCE SUBSIDIARY 2000 QUARTERLY STATEMENT"): (a)(i) were determined in
accordance with generally accepted actuarial standards consistently applied,
(ii) were fairly stated in accordance with sound actuarial principles and
(iii) were based on actuarial assumptions that are in accordance with or more
conservative than those specified in the related Insurance Contracts; (b) met,
in all material respects, the requirements of the insurance Laws of Kansas and
all other applicable jurisdictions; (c) included provision for all actuarial
reserves and related statement items which ought to be established and (d)
were, in the reasonable judgment of KFBS, adequate at such date (under
generally accepted actuarial standards consistently applied) to cover the
total amount of all reasonably anticipated matured and unmatured Liabilities,
claims and benefits incurred but not reported of Insurance Subsidiary under
all outstanding Insurance Contracts pursuant to which Insurance Subsidiary has
any Liability. To the Knowledge of KFBS, the actuarial opinion used in
connection with the 1999 Annual Statement of Insurance Subsidiary is true,
complete and accurate in all material respects. Insurance Subsidiary owns
Assets that qualify as admitted assets under applicable insurance Laws in an
amount at least equal to the sum of its statutory reserves and other similar
amounts.
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Section 4.9 Absence of Certain Changes or Events. Except as set forth
in the KFBS Disclosure Schedule, since June 30, 2000, each of KFBS and
Insurance Subsidiary has conducted its Business only in the ordinary course of
business, consistent with past practice, and there has not occurred (i) a
Material Adverse Effect; (ii) except as required by SAP, any material change
by Insurance Subsidiary in accounting principles, practices or methods; (iii)
any material addition, or Insurance Subsidiary's reserve development involving
a prospective material addition, to Insurance Subsidiary's reserves for future
policy benefits or other policy claims and benefits other than as a result of
ordinary sales activities or otherwise in the ordinary course of business; or
(iv) except as required by SAP, any material change in the accounting,
actuarial, investment, reserving, underwriting or claims administration
policies, practices, procedures, methods, assumptions or principles of
Insurance Subsidiary. Except as set forth in the KFBS Disclosure Schedule,
since June 30, 2000, there has not been any increase in the compensation
payable or that could become payable by KFBS and Insurance Subsidiary to
officers or key employees or any amendment of any of the compensation and
benefit plans other than increases or amendments in the ordinary course.
Section 4.10 No Undisclosed Liabilities or Litigation. Except as
disclosed in the Financial Statements delivered to FBL pursuant to Sections
4.6 and 4.7 hereof or as set forth in the KFBS Disclosure Schedule, neither
KFBS nor Insurance Subsidiary has any Liabilities, other than Liabilities
arising since the June 30, 2000 Financial Statements in the ordinary course of
business and consistent with past practice that, individually or in the
aggregate, would have a Material Adverse Effect. Except as disclosed in the
KFBS Disclosure Schedule, there are no Proceedings pending or, to the
Knowledge of KFBS, threatened against KFBS or Insurance Subsidiary before any
Governmental Entity or arbitrator which, individually or in the aggregate,
would have a Material Adverse Effect. Neither KFBS nor Insurance Subsidiary is
subject to any Order, except for Orders which, individually or in the
aggregate, would not have a Material Adverse Effect.
Section 4.11 Takeover Statutes. KFBS has taken or will take all
actions necessary such that no restrictive provision of any "fair price,"
"moratorium," "control share acquisition," "interested shareholder" or other
similar anti-takeover statute or regulation (each a "TAKEOVER STATUTE") or
restrictive provision of any applicable anti-takeover provision in the charter
or By-Laws of KFBS is, or at the Effective Time will be, applicable to KFBS,
FBL, the Transactions or any other transactions contemplated by this Agreement.
Section 4.12 Compliance with Law.
(a) Except as set forth in the KFBS Disclosure Schedule, neither
KFBS nor Insurance Subsidiary is in violation (or, with notice or lapse of
time or both, would be in violation) of any term or provision of any Law or
Order applicable to it or any of the Acquired Assets, the violation of which ,
individually or in the aggregate with all other such violations, would have a
Material Adverse Effect. KFBS has delivered to FBL all reports (including, but
not limited to, draft reports) of examinations of the affairs of Insurance
Subsidiary (including, but not limited to, market conduct examinations) issued
by insurance Governmental Entities for any period ending
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on a date on or after January 1, 1995; except as set forth in the KFBS
Disclosure Schedule, all deficiencies or violations in such reports for any
prior period have been resolved. Except as set forth in the KFBS Disclosure
Schedule, all outstanding Insurance Contracts issued or assumed by Insurance
Subsidiary are, to the extent required by Law, on forms and at rates approved
by the insurance regulatory authorities of the jurisdictions where issued
except as would, individually or in the aggregate, not have a Material Adverse
Effect or have been filed with and not objected to by such authorities within
the periods provided for objection.
(b) Except as set forth in the KFBS Disclosure Schedule, neither
KFBS nor Insurance Subsidiary is a party to any Contract with or other
undertaking to, or is subject to any Order by, or is a recipient of any
supervisory letter or other written communication of any kind from, any
Governmental Entity which (i) currently has a Material Adverse Effect on its
Business or the Acquired Assets, or (ii) has been received since January 1,
1995 and relates to its reserve adequacy or its marketing, sales, trade or
underwriting practices or policies, nor, to the Knowledge of KFBS has KFBS or
Insurance Subsidiary been notified in writing by any Governmental Entity that
it is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such Order, Contract,
undertaking, letter or other written communication.
(c) KFBS has previously provided FBL with a true, complete and
correct copy of KFBS's and/or Insurance Subsidiary's compliance program and
procedures and, except as set forth in the KFBS Disclosure Schedule, KFBS has
no Knowledge of any noncompliance therewith in any material respect.
(d) KFBS and Insurance Subsidiary and each of their officers,
independent contractors, subagents, consultants and employees who are required
by reason of the nature of their relationship with KFBS or Insurance
Subsidiary to be registered or appointed as an investment advisor, investment
adviser representative, broker-dealer agent, broker-dealer, registered
representative, sales person, insurance agent or insurance producer, commodity
trading adviser, commodity pool operator or real estate broker or salesman
with the SEC or the securities commission or insurance department of any state
or any self-regulatory body or other Governmental Entity or any insurer, is
duly registered or appointed as such and such registration or appointment is
in full force and effect, except where the failure to be registered or to have
such registration in full force and effect would, individually or in the
aggregate, have a Material Adverse Effect. Except as set forth in the KFBS
Disclosure Schedule, to the Knowledge of KFBS, none of KFBS or any of such
other Persons has been enjoined, indicted, convicted or made the subject of
any consent decree or administrative order on account of any material
violation of applicable Law in connection with such Person's actions in any of
the foregoing capacities or, to the Knowledge of KFBS, any enforcement or
disciplinary proceeding alleging any such violation since January 1, 1995.
KFBS and Insurance Subsidiary have filed all forms, reports, statements and
other documents required by Law to be filed by them with the SEC, all other
reports (periodic or otherwise) and registration statements, including,
without limitation, reports in connection with sales of variable annuity or
variable life contracts, and all amendments and supplements to all such
reports and registration statements, and all such forms, reports, statements
and other documents did not at the time they were filed (at the time they
became
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effective and so long as they remain effective in case of registration
statements and amendments thereto) contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
Section 4.13 Assets.
(a) Except as set forth in the KFBS Disclosure Schedule and
except for Assets disposed of since June 30, 2000 in the ordinary course of
business and consistent with past practice: (i) Insurance Subsidiary has good
title to all Insurance Subsidiary Assets, and all such Insurance Subsidiary
Assets are owned by Insurance Subsidiary, free and clear of all Liens, other
than Permitted Liens, and the bonds, notes, debentures and other evidences of
indebtedness that constitute Investment Assets, disclosed or otherwise
reflected in its June 30, 2000 Quarterly Statement or acquired thereafter,
are, to the Knowledge of KFBS, as of the date of this Agreement, in all
material respects collectible in accordance with the terms of the Investment
Assets and the documents relating thereto; (ii)(A) Insurance Subsidiary has a
valid leasehold interest in all real property used in the conduct of its
Business or of a type which would be required to be specifically disclosed by
Insurance Subsidiary in Schedule A of its Annual Statement, free and clear of
all Liens, other than Permitted Liens; (B) in the aggregate all such real
property, other than unimproved land, is, in all material respects, in working
condition, without need for repair and suitable for its current uses; and (C)
Insurance Subsidiary owns, leases or otherwise has the valid right to use
adequate means of ingress and egress to, from and over all such real property;
(iii) Insurance Subsidiary owns good and indefeasible title to, or has a valid
leasehold interest in or has a valid right under Contract to use, all personal
property that is material to the conduct of its Business, free and clear of
all Liens other than Permitted Liens, and, in the aggregate, all such personal
property is, in all material respects, in good operating condition and repair,
ordinary wear and tear excepted, and is, in all material respects, suitable
and adequate for its current uses; and (iv) Insurance Subsidiary has the right
to use free and clear of any royalty or other payment obligations, claims of
infringement or alleged infringement or other Liens, other than Permitted
Liens and other than contractual agreements with respect to licensing and
maintenance fees, all Intellectual Property that is material to the conduct of
its Business, all of which (other than related documentation, manuals,
training materials and policy forms), as of the date of this Agreement, is
listed in the KFBS Disclosure Schedule; and to the Knowledge of KFBS, neither
KFBS nor Insurance Subsidiary is in material conflict with or violation or
infringement of, nor has KFBS or Insurance Subsidiary received any written
notice of any such conflict with or violation or infringement of, any asserted
rights of any other Person with respect to any Intellectual Property,
including, without limitation, the Intellectual Property listed in the KFBS
Disclosure Schedule.
(b) No sales or brokerage commission or fee or other
compensation is or will be payable in connection with any Real Property as a
result of the consummation of the transactions contemplated hereby.
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Section 4.14 Environmental Matters.
(a) Except as set forth in the KFBS Disclosure Schedule, to the
Knowledge of KFBS, all Real Property (including all owners or operators
thereof) is in substantial compliance in all material respects with all
applicable Environmental Laws, which compliance includes, but is not limited
to, the possession of all Environmental Permits required under Environmental
Laws and compliance with the material terms and conditions thereof, other than
such Real Property in respect of which the failure to comply with applicable
Environmental Laws is not reasonably likely (i) to have a Material Adverse
Effect or (ii) to result in costs of further investigation, clean-up and
related oversight, fines, penalties and third party claims. Except as set
forth in the KFBS Disclosure Schedule, neither KFBS nor Insurance Subsidiary
has received, nor does KFBS have Knowledge of, any communication (written or
oral), whether from a Governmental Entity, citizens' group, employee or
otherwise, that alleges that KFBS or Insurance Subsidiary or any Real Property
(including any owner or operator thereof) is not in such compliance, and, to
the Knowledge of KFBS there are no circumstances that are reasonably likely to
prevent or interfere with such compliance in the future. Neither KFBS nor
Insurance Subsidiary has been notified by, nor does KFBS have Knowledge of any
notification by, any Governmental Entity that any such Environmental Permit
will be modified, suspended or revoked or cannot be renewed or transferred in
the ordinary course of business consistent with past practice or in connection
with the Transactions.
(b) Except as set forth in the KFBS Disclosure Schedule, to the
Knowledge of KFBS, there is no Environmental Claim pending or threatened in
writing against KFBS, Insurance Subsidiary, any Real Property (including any
owner or operator thereof) or any Person whose Liability for any Environmental
Claims Insurance Subsidiary has or may have retained or assumed either
contractually or by operation of Law and to the Knowledge of KFBS, there are
no facts existing on the date hereof which would result in any such
Environmental Claim.
(c) To the Knowledge of KFBS, there have been no releases,
spills, leaks or discharges of Hazardous Substances at, from or to any Real
Property (other than those properties set forth in the KFBS Disclosure
Schedule) or any other property which required or is reasonably likely to
require KFBS or Insurance Subsidiary to undertake investigation, abatement,
removal, remedial, corrective or other response action pursuant to applicable
Environmental Laws. To the Knowledge of KFBS, none of the Real Property (i) is
listed or proposed for listing on any list maintained by any Governmental
Entity of sites that may require investigation, abatement, removal, remedial,
corrective or other response action, including, but not limited to, the
CERCLIS or the NPL, (ii) other than those properties set forth in the KFBS
Disclosure Schedule, is the subject of any investigation, abatement, removal,
remedial, corrective or other response action, or (iii) is subject to any
restrictions on ownership, occupancy, use or transferability under any
Environmental Law.
(d) Except as set forth in the KFBS Disclosure Schedule, to the
knowledge of KFBS no Hazardous Substances were manufactured, generated,
stored, treated, transported from or otherwise managed at any Real Property,
nor were Hazardous Substances from any Real Property disposed of at any other
property.
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(e) To the Knowledge of KFBS, there are no conditions or
circumstances concerning or related to the Business or operations of KFBS or
Insurance Subsidiary or at any Real Property, which would pose a risk to the
environment, natural resources or the health and safety of any Person.
(f) Except as set forth in the KFBS Disclosure Schedule, to the
Knowledge of KFBS, there is no Real Property or formerly owned Real Property
that was, or is, subject to notification and/or disclosure requirements
pursuant to state property transfer statutes.
(g) Except as set forth in the KFBS Disclosure Schedule, to the
Knowledge of KFBS, there are no underground storage tanks or surface
impoundments that ever existed, or currently exist, upon, in or under any Real
Property.
Section 4.15 Contracts. The KFBS Disclosure Schedule contains a true
and complete list of all the following Contracts (true and complete copies of
all such written Contracts having been made available to FBL), currently in
force, to which Insurance Subsidiary is a party or by which any Insurance
Subsidiary Assets are or may be bound, as such Contracts may have been amended
to the date hereof:
(a) all employment, consultation, retirement, termination,
post-employment benefits, sign-on, and buy-out or Contracts with any present
or former officer, director, trustee, employee, agent, broker or independent
contractor of KFBS or Insurance Subsidiary including, but not limited to,
loans or advances to any such Person or any Affiliate of such Person;
(b) all Contracts (other than, with respect to Investment
Assets, Contracts containing customary restrictions on the ability to own or
operate competing real property in a specified geographic area) with any
Person including, but not limited to, any Governmental Entity, containing any
provision or covenant (i) limiting the ability of Insurance Subsidiary to
engage in any line of business, to compete with any Person, to do business
with any Person or in any location or to employ any Person or (ii) limiting
the ability of any Person to compete with or obtain products or services from
Insurance Subsidiary, which, in the case of any such Contract described in
clauses (i) and (ii) would individually or together with other such Contracts
have a Material Adverse Effect;
(c) all Contracts relating to the borrowing of money in excess
of $100,000 by Insurance Subsidiary or the direct or indirect guarantee by
Insurance Subsidiary of any obligation of any Person for borrowed money or
other financial obligation of any Person in excess of $100,000 (other than
indebtedness in respect of Investment Assets), or any other Liability of
Insurance Subsidiary in respect of indebtedness for borrowed money or other
financial obligation of any Person in excess of $100,000 (other than
indebtedness in respect of Investment Assets), including, but not limited to,
any Contract relating to or containing provisions with respect to (i) the
maintenance of compensating balances that are not terminable by Insurance
Subsidiary without penalty upon not more than ninety (90) days' notice, (ii)
any lines of credit or similar facilities, (iii) the payment for property,
products or services of any other Person even if such
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property, products or services are not conveyed, delivered or rendered or (iv)
any obligation to satisfy any financial obligation or covenants, including,
but not limited to, take-or-pay, keep-well, make-whole or maintenance of
working capital, capital or earnings levels or financial ratios or to satisfy
similar requirements;
(d) all Contracts (other than Insurance Contracts and other
Contracts entered into in the ordinary course of business) with any Person
containing any provision or covenant relating to the indemnification or
holding harmless by Insurance Subsidiary of any Person which is reasonably
likely to result in a Liability to Insurance Subsidiary of $50,000 or more;
(e) all leases or subleases or other arrangements for the use of
Real Property and all other leases, subleases or rental or use Contracts
providing for annual rental payments to be paid by or on behalf of Insurance
Subsidiary, involving, in the case of each of the foregoing, annual payments
in excess of $50,000;
(f) all Contracts relating to the future disposition (including,
but not limited to, restrictions on transfer or rights of first refusal) or
acquisition of any interest in any business enterprise, and all Contracts
relating to the future disposition of a material portion of the Assets of
Insurance Subsidiary other than in each case any Investment Asset or interest
in any business enterprise or Assets to be acquired or disposed of in the
ordinary course of business;
(g) all investment advisory Contracts with any investment
company registered under the Investment Company Act or with any investment
advisory client;
(h) all Insurance Contracts which constitute Contracts for
reinsurance, and any Contract pursuant to which Insurance Subsidiary receives
or has received surplus relief including, with respect to each such Contract,
the ceding and assuming Person, the business reinsured and the amount of the
Liability reinsured;
(i) all other Contracts (other than (i) Insurance Contracts,
(ii) Contracts relating to Investment Assets entered into in the ordinary
course of business, (iii) employment Contracts that are not otherwise required
to be set forth in the KFBS Disclosure Schedule, and (iv) other Contracts
which are expressly excluded under any other subsection of this Section 4.15)
that involve or are reasonably likely to involve the payment pursuant to the
terms of such Contracts by or to Insurance Subsidiary of $50,000 or more, or
that are otherwise material to Insurance Subsidiary;
(j) list of all Contracts (other than individual Agent
Contracts) between Insurance Subsidiary and any Person involving agency
Contracts and marketing relationships;
(k) all Contracts or arrangements (including, but not limited
to, those relating to allocations of expenses, personnel, services or
facilities) between or among Insurance Subsidiary and any Subsidiary or
Affiliate of KFBS;
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(l) all outstanding proxies (other than routine proxies in
connection with annual meetings), powers of attorney or similar delegations of
authority of KFBS or Insurance Subsidiary to an unrelated Person, other than
those entered into in the ordinary course of business in connection with
Investment Assets; and
(m) all Contracts the terms of which provide that the
Transactions will give rise to a severance liability for KFBS, or Insurance
Subsidiary.
The KFBS Disclosure Schedule also contains a listing of all Third
Party Administrators of KFBS and the Insurance Subsidiary.
Each of the Contracts listed in the KFBS Disclosure Schedule is in
full force and effect and constitutes a legal, valid and binding obligation of
each of KFBS and Insurance Subsidiary to the extent that either is a party
thereto, and, to the Knowledge of KFBS, of each other Person that is a party
thereto. Except as set forth in the KFBS Disclosure Schedule, neither KFBS nor
Insurance Subsidiary is, and, to the Knowledge of KFBS, no other party to such
Contract is, in material violation, breach or default of any such Contract or,
with or without notice or lapse of time or both, would be in material
violation, breach or default of any such Contract, except for any violation,
breach or default which, individually or in the aggregate, would not have a
Material Adverse Effect. Except as set forth in the KFBS Disclosure Schedule,
to the Knowledge of KFBS, no such Contract contains any provision providing
that any party thereto other than KFBS or Insurance Subsidiary may terminate
such Contract by reason of the execution of this Agreement or the consummation
of the transactions contemplated hereby.
Section 4.16 Insurance Issued by Insurance Subsidiary. Except as
set forth in the KFBS Disclosure Schedule:
(a) All material contracts, arrangements, treaties and
agreements to which Insurance Subsidiary is a party with respect to
reinsurance applicable to insurance in force on the date of this Agreement,
and all material contracts, arrangements, treaties and agreements under which
Insurance Subsidiary has any obligation to cede insurance, are valid, binding
and in full force and effect in accordance with their terms. Insurance
Subsidiary is not, and to the Knowledge of KFBS, no other party thereto is, in
material default of any provision thereof and no such material agreement
contains any provision providing that the other party thereto may terminate
the same by reason of the transactions contemplated by this Agreement or any
other provision which would be altered or otherwise become applicable by
reason of such transactions;
(b) Except as set forth on the KFBS Disclosure Schedule, each
insurance policy or certificate form, as well as any related application form,
written advertising material and rate or rule currently marketed by Insurance
Subsidiary, the use or issuance of which requires filing or approval, has been
appropriately filed, and if required, approved by the insurance regulatory
authorities of any state in which such policies and forms are required to be
filed. To the Knowledge of KFBS, all such policies and certificates, forms,
applications, advertising materials and rates or rules are in compliance in
all material respects with all applicable Laws and regulations;
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(c) Since June 30, 2000, no form of Insurance Contract written
by Insurance Subsidiary has been amended in any material respect and, except
with respect to new states and new products, no sales of Insurance Contracts
using any new forms have been commenced other than changes to forms which are
not, in the aggregate, material to Insurance Subsidiary;
(d) Since January 1, 1996 all claims and benefits claimed by any
Person under any Insurance Contract of Insurance Subsidiary have or will have
in all material respects been paid (or provision for payment thereof has been
made) in accordance with the terms of the Contracts under which they arose,
and such payments were not delinquent and were paid (or will be paid) without
fines or penalties, except for any such claims or claim for benefits of less
than $100,000 for which the Insurance Subsidiary reasonably believes there is
a reasonable basis to contest payment and is taking (or is preparing to take)
such action;
(e) Except as set forth in the SAP Statements referred to in
Section 4.6, no provision in any policy in force gives policyholders the right
to receive dividends or distributions on their policies (other than accruals
of interest on cash values or as claim benefits) or otherwise share in the
benefits, revenue or profits of Insurance Subsidiary. Except as paid in the
ordinary course of business, Insurance Subsidiary is not liable to pay
commissions upon the renewal of any insurance policy nor is it a party to any
agreement providing for the collection of insurance premiums payable to
Insurance Subsidiary by any other Person;
(f) To the Knowledge of KFBS, (i) each insurance agent or
broker, at the time such agent or broker wrote, sold or produced business for
Insurance Subsidiary, was duly licensed as an insurance agent or broker (for
the type of business written, sold or produced by such insurance agent or
broker) in the particular jurisdiction in which such agent or broker wrote,
sold or produced such business for Insurance Subsidiary, and (ii) no such
insurance agent or broker violated any term or provision of any Law or order
applicable to any aspect (including, but not limited to, the marketing,
writing, sale or production) of the Business of Insurance Subsidiary;
(g) KFBS has provided FBL with a copy of all investment policies
and procedures for Insurance Subsidiary;
(h) Insurance Subsidiary is not in violation of Law regarding
the Insurance Contracts in any matter in which the potential liability exceeds
$50,000;
(i) Except as set forth in the KFBS Disclosure Schedule,
Insurance Subsidiary is not engaged in any activity that would require
registration as an investment company, broker-dealer, investment advisor or
fund administrator under any state or Federal Law, including the Exchange Act,
the Investment Company Act and the Investment Advisers Act. Neither KFBS nor
Insurance Subsidiary maintains or manages any open-end management investment
company or portfolio as such terms are defined by the Investment Company Act;
(j) Neither KFBS nor Insurance Subsidiary is engaged in the
business of serving as a custodian or transfer agent;
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(k) Insurance Subsidiary has duly and validly filed or caused to
be filed all material reports, statements, documents, registrations, filings
or submissions that were required by applicable Laws to be filed except for
those filings the failure of which to make would not have a Material Adverse
Effect; all such filings complied with all applicable Laws in all material
respects when filed, and to the Knowledge of KFBS, no material deficiencies
have been asserted with respect to any such filings which have not been
satisfied. Except as set forth in the KFBS Disclosure Schedule, all
outstanding insurance policies, annuity contracts and assumption certificates
issued by Insurance Subsidiary and now in force are, to the extent required
under applicable Laws, on forms approved by the insurance regulatory authority
of the jurisdiction where issued and utilize premium rates which if required
to be filed with or approved by insurance regulatory authorities have been so
filed or approved, except where such premium rates would not have a Material
Adverse Effect, and the premiums charged conform thereto, except where the
failure to conform would not have a Material Adverse Effect; and
(l) Except as set forth in the KFBS Disclosure Schedule, and
with respect to all insurance issued:
(i) To the Knowledge of KFBS, no other party to any
reinsurance, coinsurance or other similar agreement with Insurance
Subsidiary is in default thereunder, except for such defaults that
would not have a Material Adverse Effect; and
(ii) The Insurance Contracts of Insurance Subsidiary meet all
the applicable definitions of the Code and ERISA, and the regulations
and rulings thereunder, necessary to qualify for the tax and other
benefits intended and promised to contract holders, including, but not
limited to, treatment as life insurance contracts or annuity contracts
under Sections 7702 and 72 of the Code, respectively.
Section 4.17 Cancellations. Except as set forth in the KFBS
Disclosure Schedule, since June 30, 2000, no Person or group of Persons acting
in concert writing, selling or producing insurance business, which in the
aggregate accounted for five percent (5%) or more of the gross premium income
of Insurance Subsidiary for the period ended June 30, 2000, has terminated or
substantially reduced, or threatened, in writing, to terminate or
substantially reduce, its relationship with Insurance Subsidiary. Except as
set forth in the KFBS Disclosure Schedule, to the Knowledge of KFBS, since
June 30, 2000, no policyholder or group of policyholders acting in concert has
withdrawn or given notice, in writing, of its intent to withdraw, or
threatened, in writing, to withdraw, funds under any Insurance Contract to
which Insurance Subsidiary is a party in excess of five percent (5%) or more
of the insurance reserves of Insurance Subsidiary at June 30, 2000.
Section 4.18 Operations Insurance. The KFBS Disclosure Schedule
contains a true, complete and correct list of all liability, property, workers
compensation, directors and officers liability, and other similar Insurance
Contracts that will insure the Business or properties of Insurance Subsidiary
or affect or relate to the ownership, use, or operations of any Acquired Asset
and that have been issued to KFBS or Insurance Subsidiary (including, but not
limited to,
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the names and addresses of the insurers, the expiration dates thereof, any
deductible amounts in respect thereof, and the annual premiums and payment
terms thereof) and a description of all claims thereunder or, to the Knowledge
of KFBS any events which have occurred and may be covered thereunder, in
either case in excess of $50,000 per incident since January 1, 1995 through
the date hereof. All such insurance is in full force and effect and, to the
Knowledge of KFBS, is with financially sound and reputable insurers. To the
Knowledge of KFBS, all notices of reportable incidents with respect to such
insurance occurring during the last five years have been given in writing to
appropriate carriers on a basis sufficiently timely to preserve the right of
recovery of such insurance. Except as set forth in the KFBS Disclosure
Schedule, to the Knowledge of KFBS, no party to any Insurance Contract has
stated, in writing, an intent or threatened, in writing, to terminate or
materially increase the premium in respect of any such Insurance Contract.
Section 4.19 Taxes and Tax Returns. Except as set forth in the KFBS
Disclosure Schedule:
(a) All Tax Returns required under applicable Law to be filed
with or provided to any Person by KFBS or Insurance Subsidiary have been (and,
as to Tax Returns not filed as of the date hereof, will be) timely filed or
provided in the manner prescribed by Law and such Tax Returns were (and, as to
Tax Returns not filed as of the date hereof, will be) true, complete and
correct, and all taxes shown due on such Tax Returns have been timely paid,
together with any interest and penalties then due;
(b) KFBS and Insurance Subsidiary have within the time and in
the manner prescribed by Law paid (and until the Effective Time will pay
within the time and in the manner prescribed by Law) all Taxes due and payable
except for those contested in good faith and for which adequate reserves have
been taken. No claim has ever been made by an authority in a jurisdiction
where KFBS or Insurance Subsidiary does not file Tax Returns that such Person
may be subject to Taxation by that jurisdiction;
(c) KFBS and Insurance Subsidiary have established (and until
the Effective Time will maintain) on their books and records reserves adequate
to pay all Taxes not yet due and payable and all deficiencies asserted,
proposed or threatened against KFBS or Insurance Subsidiary;
(d) There are no Tax Liens upon the Assets of KFBS or Insurance
Subsidiary except Liens for Taxes not yet due;
(e) KFBS and Insurance Subsidiary have materially complied (and
until the Effective Time will materially comply) with all applicable Laws
relating to information reporting or to the withholding of Taxes (including,
but not limited to, information reporting and withholding of Taxes pursuant to
Sections 1441, 1442, 3402, 3405, 3406, 6041, 6041A, 6042 6047, 6049, 6051 and
6052 of the Code or similar provisions under any state, local or foreign Laws)
and have, within the time and in the manner prescribed by Law, paid all
amounts required to be so withheld and paid over under all applicable Laws;
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(f) Neither KFBS nor Insurance Subsidiary has requested any
extension of time within which to file any Tax Return, which Tax Return has
not since been filed;
(g) Neither KFBS nor Insurance Subsidiary has executed any
outstanding waivers, extensions or comparable consents regarding the
application of the statute of limitations with respect to any Taxes or Tax
Returns. The statute of limitations for the assessment of all Taxes has
expired for all applicable Tax Returns of KFBS and Insurance Subsidiary or
those Tax Returns have been examined by the appropriate Taxing authorities for
all periods through December 31, 1996, and no deficiency for any Taxes has
been proposed, asserted or assessed against KFBS or Insurance Subsidiary that
has not been resolved and paid in full;
(h) No outstanding deficiencies, assessments or written
proposals for the assessment of any Taxes have been proposed, asserted or
assessed against KFBS or Insurance Subsidiary;
(i) No Proceedings are presently pending with regard to any
Taxes or Tax Returns of KFBS or Insurance Subsidiary. Neither KFBS nor
Insurance Subsidiary has any Knowledge of any threatened Proceeding with
respect to any such Taxes or Tax Returns. To the best of the Knowledge of KFBS
and Insurance Subsidiary, no state of facts exists or has existed which would
constitute grounds for the assessment of any liability for Taxes with respect
to the periods which have not been audited by the IRS or other Taxing
authority;
(j) No power of attorney currently in force has been granted by
KFBS or Insurance Subsidiary with respect to any matter relating to Taxes;
(k) Neither KFBS nor Insurance Subsidiary has received a Tax
Ruling (as defined below) or entered into a Closing Agreement (as defined
below) with any Taxing authority that would have a continuing adverse effect
after the Effective Time. "TAX RULING" shall mean a written ruling of a Taxing
authority relating to Taxes. "CLOSING AGREEMENT" shall mean a written and
legally binding agreement with a Taxing authority relating to Taxes;
(l) KFBS and Insurance Subsidiary have made available (or, in
the case of Tax Returns not filed as of the date hereof or not immediately
available, will make available) to FBL complete and accurate copies of (i) all
Tax Returns, and any amendments thereto, filed by or on behalf of KFBS and
Insurance Subsidiary for all Taxable years since 1995 and (ii) all audit
reports received from any Taxing authority relating to any Tax Return filed by
KFBS or Insurance Subsidiary;
(m) KFBS and Insurance Subsidiary are parties to a Tax
allocation and sharing agreement with the other Subsidiaries of KFBS, as
described in the KFBS Disclosure Schedule.
(n) KFBS is not subject to Taxation under Part 1 of Subchapter L
of the Code;
(o) Neither KFBS nor Insurance Subsidiary is a party to any
Contract or arrangement that, separately or in the aggregate, pursuant to
which it has made or is required to make
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payments which could constitute "excess parachute payment" and be
non-deductible pursuant to Section 280G of the Code;
(p) Except as set forth in the KFBS Disclosure Schedule, no
election under Section 338 of the Code (or any predecessor provisions) has
been made by or with respect to KFBS or Insurance Subsidiary or any of their
respective assets or properties;
(q) No property of KFBS or Insurance Subsidiary is property that
(i) KFBS or Insurance Subsidiary or any party to this transaction is or will
be required to treat as being owned by another Person pursuant to the
provisions of Section 168(f)(8) of the Code (as in effect prior to its
amendment by the Tax Reform Act of 1986) or (ii) is subject to the
"alternative depreciation system" described in Section 168 of the Code;
(r) Neither KFBS nor Insurance Subsidiary is required to include
in income any adjustment pursuant to Section 481(a) of the Code by reason of a
voluntary change in accounting method as disclosed on IRS Form 3115 (copies of
which are available to be reviewed by FBL) initiated by KFBS or Insurance
Subsidiary and neither KFBS nor Insurance Subsidiary has proposed any such
adjustment or change in accounting method;
(s) All transactions that are likely to give rise to an
understatement of federal income Tax (within the meaning of Section 6661 of
the Code for Tax Returns filed on or before December 31, 1989, and within the
meaning of Section 6662 of the Code for Tax Returns filed after December 31,
1989) have been adequately disclosed (or, with respect to Tax Returns not yet
filed as of the date hereof, will be adequately disclosed) on the Tax Returns
in accordance with Section 6661(b)(2)(B) of the Code for Tax Returns filed on
or prior to December 31, 1990, and in accordance with Section 6662(d)(2)(B) of
the Code for Tax Returns filed after December 31, 1990;
(t) All net operating loss carryovers available to offset future
income of KFBS and Insurance Subsidiary have been disclosed in the KFBS
Disclosure Schedule. The KFBS Disclosure Schedule discloses the amount of and
year of expiration of each net operating loss carryover, and such net
operating loss carryovers are not subject to any limitations or disallowances,
including but not limited to Sections 382, 269 and 482;
(u) All Tax credit carryovers available to offset future Tax
liability of KFBS and Insurance Subsidiary have been disclosed in the KFBS
Disclosure Schedule. The KFBS Disclosure Schedule discloses the amount of and
year of expiration of each Tax credit carryover, and such Tax credit
carryovers are not subject to any limitation or reduction;
(v) Neither KFBS nor Insurance Subsidiary has been a United
States real property holding company (as defined in Section 897(c)(2) of the
Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of
the Code;
(w) No indebtedness of KFBS or Insurance Subsidiary is
"corporate acquisition indebtedness" within the meaning of Section 279(b) of
the Code;
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(x) Neither KFBS nor Insurance Subsidiary has filed (or will
file prior to the Effective Time) a consent pursuant to Section 341(f) of the
Code concerning collapsible corporations or has agreed to have Section
341(f)(2) of the Code apply to any disposition of a "subsection (f) asset" (as
that term is defined in Section 341(f)(4) of the Code) owned by KFBS or
Insurance Subsidiary;
(y) Neither KFBS nor Insurance Subsidiary has engaged in any
intercompany transactions within the meaning of Treasury Regulation Section
1.1502-13 or Temporary Treasury Regulation Section 1.1502-13T for which any
income or gain will remain unrecognized as of the date hereof and no "excess
loss accounts" exist with respect to the stock of Insurance Subsidiary, within
the meaning of Treasury Regulation Section 1.1502-19, as of the date hereof;
(z) Neither KFBS nor Insurance Subsidiary has entered into a
records retention agreement with any taxing authority;
(aa) Neither KFBS nor Insurance Subsidiary has invested in any
low income housing tax credit project for which a tax credit pursuant to
Section 42 was available to either KFBS or Insurance Subsidiary and such Tax
credit was so taken by KFBS or Insurance Subsidiary;
(bb) Neither KFBS nor Insurance Subsidiary owns any interest in
any partnership or limited liability company, which interest has a negative
capital account; and
(cc) Neither KFBS nor Insurance Subsidiary has taken any action
or has any Knowledge of any fact or circumstance relating to KFBS or Insurance
Subsidiary that is reasonably likely to adversely affect the status of the
Sale as a reorganization under Section 368 of the Code; and
(dd) Section 4.19(dd) of the KFBS Disclosure Schedule sets forth
the following information with respect to each of KFBS and Insurance
Subsidiary as of the most recent practicable date, as well as on an estimated
pro forma basis as of the Closing giving effect to the consummation of the
transactions contemplated hereby): (A) the basis of KFBS or Insurance
Subsidiary in its assets; (B) the amount of any net operating loss, net
capital loss, unused investment or other credit, unused foreign tax, or excess
charitable contribution allocable to KFBS or Insurance Subsidiary; and (C) the
amount of any deferred gain or loss allocable to KFBS or Insurance Subsidiary
arising out of any deferred intercompany transaction.
Section 4.20 Benefit Plans. The KFBS Disclosure Schedule sets forth a
complete and correct list of all Benefit Plans (as defined below). Except as
disclosed in the KFBS Disclosure Schedule:
(a) Each "employee pension benefit plan" (as defined in Section
3(2) of the ERISA) (hereinafter a "PENSION PLAN"), "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA) (hereinafter a "WELFARE PLAN"),
and each other plan, program, arrangement or policy (written or oral) relating
to bonuses, deferred compensation, performance compensation,
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compensation, stock purchases, stock options, stock appreciation, severance,
salary continuation, vacation, sick leave, holiday pay, fringe benefits,
personnel policies, reimbursement programs, incentives, insurance, welfare or
other employee benefits, in each case maintained or contributed to, or
required to be maintained or contributed to, by KFBS or Insurance Subsidiary
for the benefit of any present or former officers, employees, agents,
directors or independent contractors of KFBS or Insurance Subsidiary (all the
foregoing being herein called "Benefit Plans") has been administered in
accordance with its terms, except for any failures that, individually or in
the aggregate, would not have a Material Adverse Effect. All required
contributions to the Benefit Plans have been or will, prior to Closing, be
made. KFBS, Insurance Subsidiary and all the Benefit Plans are in compliance
with the applicable provisions of ERISA, the Code, all other applicable laws
and all applicable collective bargaining agreements, except for those
instances of non-compliance that, individually or in the aggregate, would not
have a Material Adverse Effect. Complete and correct copies of all current and
prior documents, including all amendments thereto, with respect to each
Benefit Plan have been delivered to FBL. Except as described in the KFBS
Disclosure Schedule, copies of all summary plan descriptions, summaries of
material modifications, other material communications concerning the Benefit
Plans, and the three most recent Forms 5500 for each Benefit Plan (if
required) have also been delivered to FBL.
(b) Except as described in the KFBS Disclosure Schedule, none of
KFBS or any other person or entity that together with KFBS is treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code (each a
"COMMONLY CONTROLLED ENTITY") maintains, sponsors or contributes to or within
the past six years maintained, sponsored or contributed to a Pension Plan
covered by Title IV of ERISA (a "TITLE IV PLAN").
(c) Neither KFBS nor a Commonly Controlled Entity is required to
contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA) or has withdrawn from any multiemployer plan where such withdrawal has
resulted or would result in any "withdrawal liability" (within the meaning of
Section 4201 of ERISA) that has not been fully paid.
(d) Except as described in the KFBS Disclosure Schedule, there
are no pending claims (other than routine benefit claims), lawsuits or
arbitrations which have been asserted or instituted, or to the Knowledge of
KFBS threatened, against any Benefit Plan, any of the fiduciaries thereof or
KFBS or Insurance Subsidiary with respect to their duties under the Benefit
Plans.
(e) Neither KFBS nor a Commonly Controlled Entity, nor any of
their respective employees or directors, nor any fiduciary, has engaged in any
transaction, including the execution and delivery of this Agreement and other
agreements, instruments and documents for which execution and delivery by KFBS
is contemplated herein, in violation of Section 406(a) or (b) of ERISA or
which is a "prohibited transaction" (as defined in Section 4975(c)(i) of the
Code) for which no exemption exists under Section 408(b) of ERISA or Section
4975(d) of the Code or for which no administrative exemption has been granted
under Section 408(a) of ERISA.
(f) Except as set forth in the KFBS Disclosure Schedule, the
Benefit Plans and their related trusts intended to qualify under Sections 401
and 501(a) of the Code, respectively,
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received favorable determination letters from the IRS. Any voluntary employee
benefit association intended to qualify under Section 501(c)(9) of the Code
which provides benefits to current or former employees of KFBS and Insurance
Subsidiary, or their beneficiaries, received a favorable determination letter
from the Internal Revenue Service. Copies of all such determination letters
have been delivered to FBL. No such trust or voluntary employee beneficiary
association is subject to any excise tax or to taxation under Section 511 of
the Code.
(g) KFBS and Insurance Subsidiary have no liability (contingent
or otherwise) under Section 4069 of ERISA by reason of a transfer of any
underfunded pension plan.
(h) A complete and correct copy of the most recent actuarial
report (including for purposes of Financial Accounting Standards Board report
nos. 87, 106 and 112) with respect to each Benefit Plan providing retiree
medical or life insurance coverage for employees of KFBS and Insurance
Subsidiary has been provided to FBL. Except as disclosed in the KFBS
Disclosure Schedule, no current employee of KFBS or Insurance Subsidiary would
be entitled if his or her employment with KFBS and Insurance Subsidiary is
terminated to any retiree medical or insurance coverage other than as required
by Section 4980B of the Code and applicable state law requiring continuation
of insurance coverage.
(i) Except as disclosed in the KFBS Disclosure Schedule any
amount that could be received as a result of any of the transactions
contemplated by this Agreement by any employee, officer or director of KFBS or
Insurance Subsidiary under any employment, severance or termination agreement,
other compensation arrangement or Benefit Plan currently in effect would not
be characterized as an "excess parachute payment" (as such term is defined in
Section 280G of the Code).
(j) Except as disclosed in the KFBS Disclosure Schedule or
contemplated by this Agreement, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will,
as a result of such transactions or any event occurring thereafter (i) result
in any payment becoming due to any employee (current, former or retired) of
KFBS and Insurance Subsidiary, (ii) increase any benefits under any Benefit
Plan or (iii) result in the acceleration of the time of payment of, vesting of
or other rights with respect to any such benefits.
(k) All group health plans of each Commonly Controlled Entity
have been operated in compliance with the requirements of Sections 162(k) (as
in effect immediately prior to the Technical and Miscellaneous Revenue Act of
1988), 4980B of the Code, and 9801 et seq. of the Code to the extent such
requirements are applicable, except for any instances of non-compliance that,
individually or in the aggregate, would not have a Material Adverse Effect.
(l) There has been no act or omission by any Commonly Controlled
Entity that has given rise to or may give rise to fines, penalties, taxes, or
related charges under Section 502(c), (i) or (l), Section 4071 of ERISA or
Chapter 43 of the Code.
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Section 4.21 Labor Relations and Employment.
(a) Except to the extent set forth in the KFBS Disclosure Schedule, (i)
there is no labor strike, material labor dispute, slowdown, stoppage or lockout
actually pending, or to the Knowledge of KFBS, threatened against or affecting
KFBS or Insurance Subsidiary, and since January 1, 1995 there has not been any
such action; (ii) to the Knowledge of KFBS, no union claims to represent the
employees of KFBS or Insurance Subsidiary, there are no current union organizing
activities among the employees of KFBS or of Insurance Subsidiary and KFBS has
not received notice of any unfair labor practice complaint or charge against it
pending before the National Labor Relations Board; (iii) neither KFBS nor
Insurance Subsidiary is a party to or is bound by any collective bargaining or
similar agreement with any labor organization, or work rules or practices agreed
to with any labor organization or employee association, applicable to employees
of KFBS or of Insurance Subsidiary; (iv) there are no written personnel
policies, rules or procedures applicable to employees of KFBS that will become
employees of FBL or Insurance Subsidiary, other than those set forth in the KFBS
Disclosure Schedule; and (v) Insurance Subsidiary is in compliance with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment, wages and hours except for matters that could give
rise to a liability of less than $50,000. The KFBS Disclosure Schedule sets
forth all the employment agreements to which KFBS or Insurance Subsidiary is a
party and which are part of the Acquired Assets. Such agreements accurately set
forth all compensation which KFBS or Insurance Subsidiary is contractually
obligated to pay each such person. Except as set forth in the KFBS Disclosure
Schedule, no employee, officer, director or independent contractor of KFBS or
Insurance Subsidiary is entitled to any payment of money or other thing of value
or will receive any rights with respect to the capital stock of Insurance
Subsidiary as a result of this Agreement.
(b) Since the enactment of the WARN Act, neither KFBS nor Insurance
Subsidiary has effectuated (i) a "plant closing" (as defined in the WARN Act)
affecting any site of employment or one or more facilities or operating units
within any site of employment or facility of KFBS or Insurance Subsidiary; or
(ii) a "mass layoff" (as defined in the WARN Act) affecting any site of
employment or facility of KFBS; nor has KFBS been affected by any transaction or
engaged in layoffs or employment terminations sufficient in number to trigger
application of any similar state or local Law. Except as set forth in the KFBS
Disclosure Schedule, none of KFBS's or Insurance Subsidiary's employees has
suffered an "employment loss" (as defined in the WARN Act) since December 31,
1999.
(c) KFBS and Insurance Subsidiary each (i) has withheld all amounts
required by Law or by agreement to be withheld from the wages, salaries and
other payments to the employees, former employees, directors and former
directors of KFBS and Insurance Subsidiary, (ii) is not liable for any arrears
of wages or any Taxes or any penalty for failure to comply with any of the
foregoing, and (iii) is not liable for any payment to any trust or other fund or
to any Governmental Entity, with respect to unemployment compensation benefits,
social security or other benefits except, in the cases of clauses (ii) and (iii)
to the extent that any such violation or liability would not, individually or in
the aggregate have a Material Adverse Effect.
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Section 4.22 Transactions with Affiliates. Except as set forth in the
KFBS Disclosure Schedule or the SAP Statements, neither KFBS nor Insurance
Subsidiary has entered into any transaction with an Affiliate in connection with
which either KFBS or Insurance Subsidiary has continuing obligations, in the
ordinary course of business or otherwise, which is not on terms at least as
favorable to KFBS or Insurance Subsidiary as would have been applicable if such
transaction had been entered into on an arm's-length basis with an unaffiliated
third party. KFBS has not made or declared any dividend or distribution that was
disproportionate in favor of any Affiliate.
Section 4.23 Accredited Investor Status. Each of Insurance Subsidiary
and KFBS is an Accredited Investor. Each of Insurance Subsidiary and KFBS has
received all information concerning FBL that it has requested and has had
sufficient opportunity to ask questions and receive answers from officers of FBL
regarding all matters relating to FBL and its investment in the Series C
Preferred.
Section 4.24 Investment Company. Except as set forth in the KFBS
Disclosure Schedule: (i) Insurance Subsidiary does not maintain any separate
accounts; (ii) neither KFBS nor Insurance Subsidiary conducts activities of
or is otherwise deemed under applicable law to control an "investment
advisor" as such term is defined in Section 2(a)(20) of the 1940 Act, whether
or not registered under the Investment Advisers Act of 1940, as amended;
(iii) neither KFBS nor Insurance Subsidiary is an "investment company" as
defined under the 1940 Act, and; (iv) neither KFBS nor Insurance Subsidiary
sponsors any Person that is such an investment company.
Section 4.25 Disclosure. The representations and warranties contained
in this Article IV do not contain any untrue statement of a material fact.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF FBL
FBL (and, where expressly so stated, FBLI) represents and warrants to
KFBS and KFB that the statements made in this Article V are correct and complete
as of the date of this Agreement and will be correct and complete as of the
Closing Date as though made then and as though the Closing Date were substituted
for the date of this Agreement throughout this Article V, except as set forth in
the FBL SEC Documents.. The parties agree that disclosure in the FBL SEC
Documents shall be deemed disclosure for all representations and warranties,
provided that the disclosure describes with reasonable specificity the matters
required to be disclosed in connection with the representations and warranties
in order to give KFBS and KFB knowledge of such matters.
Section 5.1 Organization and Qualification. FBL is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Iowa and has full corporate power, authority and legal right to conduct its
Business as it is currently being conducted. FBL is duly
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qualified to do business, and is in good standing, in the jurisdictions where
the character of its Assets owned or leased or the nature of its Business
makes such qualification necessary, except for failures to be so qualified or
in good standing which are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect. Each FBLI insurance subsidiary
possesses an Insurance License in each jurisdiction in which it is required
to possess an Insurance License. All such Insurance Licenses, including, but
not limited to, authorizations to transact reinsurance, are in full force and
effect without amendment, limitation or restriction, and FBL does not have
Knowledge of any event, inquiry or Proceeding which is reasonably likely to
lead to the revocation, amendment, failure to renew, limitation, suspension
or restriction of any such Insurance License.
Section 5.2 Capitalization of FBL. FBL is capitalized as described in
the June 30, 2000, Form 10Q filed for the period ending June 30, 2000 included
in the FBL SEC Documents, except for subsequent purchases of Class A Common
Stock by FBL pursuant to its announced share acquisition programs (including the
FBL offer to purchase its Class A Common Shares announced on the date of this
Agreement) and subsequent issuances of Class A Common Stock pursuant to
outstanding employee and director option plans and other obligations.
Section 5.3 Subsidiaries.
(a) FBLI is a corporation duly organized, validly existing and in good
standing under the laws of Iowa and has the corporate power and authority and
all necessary government approvals to own, lease and operate its properties and
to carry on its Business as now being conducted, except where the failure to be
so organized, existing and in good standing or to have such power and authority
or necessary governmental approvals would not individually or in the aggregate
have a Material Adverse Effect. FBLI is duly qualified or licensed and in good
standing to do business in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing would not
individually or in the aggregate have a Material Adverse Effect.
(b) FBLI (i) possesses an Insurance License in Kansas and in each other
jurisdiction in which it is required to possess an Insurance License, and (ii)
is duly authorized in Iowa and each other applicable jurisdiction to write each
line of business reported as being written in the FBLI 1999 Annual Statement.
All such Insurance Licenses are in full force and effect without amendment,
limitation or restriction, and FBLI has no Knowledge of any event, inquiry or
Proceeding which is reasonably likely to lead to the revocation, amendment,
failure to renew, limitation, suspension or restriction of any such Insurance
License.
(c) The authorized capital stock of FBLI consists solely of 994,000
shares of common stock, $50 par value, of which 50,000 shares are issued and
outstanding. As of the date of this Agreement, FBL is, directly or indirectly,
the record and beneficial owner of all 50,000 shares of common stock of FBLI.
There are no contracts, commitments, understandings or arrangements by which FBL
or FBLI is or may be bound to issue, redeem, purchase or sell additional shares
of FBLI or securities convertible into or exchangeable or exercisable for any
such shares. All of
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such shares of FBLI Stock are validly issued, fully paid and nonassessable
and are owned by FBL free and clear of all liens, claims, encumbrances,
restraints on alienation, or any other restrictions with respect to the
transferability or assignability thereof (other than restrictions on transfer
imposed by federal or state securities laws and insurance laws).
Section 5.4 Authority Relative to this Agreement.
(a) FBL and FBLI each has full power, authority and legal right to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly approved and
authorized by the Boards of Directors of FBL and FBLI. No other corporate
proceedings on the part of FBL and FBLI are necessary to authorize this
Agreement and the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed and delivered by
FBL and FBLI and (assuming this Agreement is a legal, valid and binding
obligation of KFBS, KFB and Insurance Subsidiary) constitutes a legal, valid and
binding agreement of FBL and FBLI enforceable against FBL and FBLI in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
Section 5.5 No Violation.
(a) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not (i) constitute a
breach or violation of or default under the articles of incorporation or the
By-Laws of FBL or FBLI, (ii) violate, conflict with, or result in a breach of
any provisions of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a right
of termination or acceleration under, or result in the creation of any Lien upon
any of the Assets of FBL or FBLI under, any of the terms, conditions or
provisions of any Contract to which FBL or FBLI is a party or to which it or any
of its Assets may be subject or (iii) constitute a breach or violation of or
default under any Environmental Permit, Law or License to which FBL or FBLI is
subject other than, in the case of clauses (ii) and (iii), events or other
matters that are not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect.
(b) Except for (i) the filings required under the HSR Act and the
expiration or other termination of any waiting period applicable to the
Transactions under such act, and (ii) the filing of appropriate documents with
and such consents as may be required under the Investment Company Act and the
Investment Advisors Act, (iii) the filing of such reports under the Exchange
Act, as may be required in connection with this Agreement and the transactions
contemplated by this Agreement, (iv) the filing with the New York Stock Exchange
of a supplemental application for approval for listing the Class A Common Shares
issuable upon conversion or redemption of the Series C Preferred, subject to
official notice of issuance, and (v) the approval of the Kansas Insurance
Department, and the Iowa Insurance Department, no
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Consent or Filing of or with any Person is required with respect to FBL or
any FBL Subsidiary or any FBL Affiliate in connection with the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby, except for such Consents or Filings the failure of which
to make or obtain would not, individually or in the aggregate, prevent or be
a material impediment to the consummation of the transactions contemplated
hereby or have a Material Adverse Effect.
Section 5.6 Reinsurance Agreements. Except as to matters which would
not, individually or in the aggregate have a Material Adverse Effect, to the
Knowledge of FBL no amount recoverable pursuant to any Reinsurance Agreements is
not fully collectible in due course. FBLI is entitled to take full credit in its
SAP Statements pursuant to applicable insurance laws, rules and regulations for
such reinsurance, coinsurance or excess insurance ceded pursuant to any such
Reinsurance Agreement.
Section 5.7 Reserves. The aggregate actuarial reserves and other
actuarial amounts held in respect of Liabilities with respect to Insurance
Contracts of FBLI as established or reflected in its December 31, 1999 Annual
Statement or in the June 30, 2000 Quarterly Statement, (the "FBLI 2000 QUARTERLY
STATEMENT"): (a)(i) were determined in accordance with generally accepted
actuarial standards consistently applied, (ii) were fairly stated in accordance
with sound actuarial principles and (iii) were based on actuarial assumptions
that are in accordance with or more conservative than those specified in the
related Insurance Contracts; (b) met, in all material respects, the requirements
of the insurance Laws of Iowa and all other applicable jurisdictions; (c)
included provision for all actuarial reserves and related statement items which
ought to be established and (d) were, in the reasonable judgment of FBLI,
adequate at such date (under generally accepted actuarial standards consistently
applied) to cover the total amount of all reasonably anticipated matured and
unmatured Liabilities, claims and benefits incurred but not reported of FBLI
under all outstanding Insurance Contracts pursuant to which FBLI has any
Liability. FBLI owns Assets that qualify as admitted assets under applicable
insurance Laws in an amount at least equal to the sum of its statutory reserves
and other similar amounts.
Section 5.8 Absence of Certain Changes or Events. Except for the
transfer of its disability income insurance business, or as disclosed in the FBL
SEC Documents, since June 30, 2000, each of FBL and FBLI has conducted its
Business only in the ordinary course of business, consistent with past practice,
and there has not occurred (i) a Material Adverse Effect, or any event or events
which, individually or in the aggregate, are reasonably likely to have a
Material Adverse Effect; (ii) except as required by GAAP or SAP, any material
change by FBLI in accounting principles, practices or methods; (iii) any
material addition, or FBLI's reserve development involving a prospective
material addition, to FBLI's reserves for future policy benefits or other policy
claims and benefits other than as a result of ordinary sales activities or
otherwise in the ordinary course of business; or (iv) except as required by GAAP
or SAP, any material change in the accounting, actuarial, investment, reserving,
underwriting or claims administration policies, practices, procedures, methods,
assumptions or principles of FBLI.
Section 5.9 No Undisclosed Liabilities or Litigation. Except as
disclosed in the FBL SEC Documents, neither FBL nor FBLI has any Liabilities,
other than Liabilities arising since the
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date of the applicable Financial Statement in the ordinary course of business
and consistent with past practice that, individually or in the aggregate,
would have a Material Adverse Effect. Except as disclosed in the FBL SEC
Documents, there are no Proceedings pending or, to the Knowledge of FBL,
threatened against FBL or FBLI before any Governmental Entity or arbitrator
which, individually or in the aggregate, would have a Material Adverse
Effect. Neither FBL nor FBLI is subject to any Order, except for Orders
which, individually or in the aggregate, would not have a Material Adverse
Effect.
Section 5.10 Compliance with Law.
(a) Neither FBL nor FBLI is in violation (or, with notice or lapse of
time or both, would be in violation) of any term or provision of any Law or
Order applicable to it or any of its Assets, the violation of which individually
or in the aggregate with all other such violations, would have a Material
Adverse Effect. All deficiencies or violations indicated in any report issued by
any Insurance Governmental Entity for any prior period have been resolved,
except for those deficiencies or violations which, individually or in the
aggregate would not have a Material Adverse Effect. All outstanding Insurance
Contracts issued or assumed by FBLI are, to the extent required by Law, on forms
and at rates approved by the insurance regulatory authorities of the
jurisdictions where issued except as would in the aggregate or individually, not
have a Material Adverse Effect or have been filed with and not objected to by
such authorities within the periods provided for objection.
(b) Neither FBL nor FBLI is a party to any Contract with or other
undertaking to, or is subject to any Order by, or is a recipient of any
supervisory letter or other written communication of any kind from, any
Governmental Entity which (i) currently has a Material Adverse Effect on its
Business or Assets, or (ii) has been received since January 1, 1995 and relates
to its reserve adequacy or its marketing, sales, trade or underwriting practices
or policies, nor, to the Knowledge of FBL, has FBL or FBLI been notified in
writing by any Governmental Entity that it is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
such Order, Contract, undertaking, letter or other written communication, except
for matters which would not, individually or in the aggregate, have a Material
Adverse Effect.
(c) FBLI has adopted a market conduct compliance program and procedures
and FBL has no Knowledge of any noncompliance therewith, except for matters
which would not, individually or in the aggregate, have a Material Adverse
Effect.
(d) FBL and FBLI and each of their officers, independent contractors,
subagents, consultants and employees who are required by reason of the nature of
their relationship with FBL or FBLI to be registered or appointed as an
investment advisor, investment adviser representative, broker-dealer agent,
broker-dealer, registered representative, sales person, insurance agent or
insurance producer, commodity trading adviser, commodity pool operator or real
estate broker or salesman with the SEC or the securities commission or insurance
department of any state or any self-regulatory body or other Governmental Entity
or any insurer, is duly registered or appointed as such and such registration or
appointment is in full force and effect, except where the failure to be
registered or to have such registration in full force and effect
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would not, individually or in the aggregate, have a Material Adverse Effect.
To the Knowledge of FBL, none of FBL or any of such other Persons has been
enjoined, indicted, convicted or made the subject of any consent decree or
administrative order on account of any violation of applicable Law which,
individually or in the aggregate, would have a Material Adverse Effect, in
connection with such Person's actions in any of the foregoing capacities or,
to the Knowledge of FBL, any enforcement or disciplinary proceeding alleging
any such violation since January 1, 1995. FBL and FBLI have filed all forms,
reports, statements and other documents required by Law to be filed by them
with the SEC, all other reports (periodic or otherwise) and registration
statements, including, without limitation, reports in connection with sales
of variable annuity or variable life contracts, and all amendments and
supplements to all such reports and registration statements, and all such
forms, reports, statements and other documents did not at the time they were
filed (at the time they became effective and so long as they remain effective
in case of registration statements and amendments thereto) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein.
Section 5.11 Environmental Matters. Except for matters which would not
individually or in the aggregate, have a Material Adverse Effect, to the
Knowledge of FBL, (i) all real property used in the Business of FBL or FBLI
("FBL Real Property") (including all owners or operators thereof) is in
substantial compliance in all material respects with all applicable
Environmental Laws, which compliance includes, but is not limited to, the
possession of all Environmental Permits required under Environmental Laws and
compliance with the material terms and conditions thereof; (ii) neither FBL nor
FBLI has received, nor do they have Knowledge of, any communication (written or
oral), whether from a Governmental Entity, citizens' group, employee or
otherwise, that alleges that FBL or FBLI or any Real Property (including any
owner or operator thereof) is not in such compliance, and, to the Knowledge of
FBL, there are no circumstances that are reasonably likely to prevent or
interfere with such compliance in the future; and (iii) neither FBL nor FBLI has
been notified by, nor do they have Knowledge of any notification by, any
Governmental Entity that any such Environmental Permit will be modified,
suspended or revoked or cannot be renewed or transferred in the ordinary course
of business consistent with past practice or in connection with the
Transactions.
Section 5.12 Insurance Issued by FBLI. Except with respect to matters
which would not, individually or in the aggregate, have a Material Adverse
Effect:
(a) All contracts, arrangements, treaties and agreements to which FBLI
is a party with respect to reinsurance applicable to insurance in force on the
date of this Agreement, and all contracts, arrangements, treaties and agreements
under which FBLI has any obligation to cede insurance, are valid, binding and in
full force and effect in accordance with their terms. FBLI is not, and to the
Knowledge of FBLI, no other party thereto is, in default of any provision
thereof and no such material agreement contains any provision providing that the
other party thereto may terminate the same by reason of the transactions
contemplated by this Agreement or any other provision which would be altered or
otherwise become applicable by reason of such transactions;
(b) Each insurance policy or certificate form, as well as any related
application form, written advertising material and rate or rule currently
marketed by FBLI, the use or issuance of
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which requires filing or approval, has been appropriately filed, and if
required, approved by the insurance regulatory authorities of any state in
which such policies and forms are required to be filed. To the Knowledge of
FBLI, all such policies and certificates, forms, applications, advertising
materials and rates or rules are in compliance with all applicable Laws and
regulations;
(c) Since January 1, 1996 all claims and benefits claimed by any Person
under any Insurance Contract of FBLI have been or will be paid (or provision for
payment thereof has been made) in accordance with the terms of the Contracts
under which they arose, and such payments were not delinquent and were paid (or
will be paid) without fines or penalties;
(d) Except as paid in the ordinary course of business, FBLI is not
liable to pay commissions upon the renewal of any insurance policy nor is it a
party to any agreement providing for the collection of insurance premiums
payable to FBLI by any other Person;
(e) To the Knowledge of FBL, (i) each insurance agent or broker, at the
time such agent or broker wrote, sold or produced business for FBLI, was duly
licensed as an insurance agent or broker (for the type of business written, sold
or produced by such insurance agent or broker) in the particular jurisdiction in
which such agent or broker wrote, sold or produced such business for FBLI, and
(ii) no such insurance agent or broker violated any term or provision of any Law
or order applicable to any aspect (including, but not limited to, the marketing,
writing, sale or production) of the Business of FBLI;
(f) FBLI is not in violation of Law regarding the Insurance Contracts
or the maintenance and management of any open-end management company or
portfolio;
(g) FBLI is NOT engaged in any activity that would require registration
as an investment company, broker-dealer, investment advisor or fund
administrator under any state or Federal Law, including the Exchange Act, the
Investment Company Act and the Investment Advisers Act with respect to which it
is not registered;
(h) FBLI has duly and validly filed or caused to be filed all reports,
statements, documents, registrations, filings or submissions that were required
by applicable Laws to be filed; all such filings complied with all applicable
Laws when filed, and to the Knowledge of FBL, no deficiencies have been asserted
with respect to any such filings which have not been satisfied. All outstanding
insurance policies, annuity contracts and assumption certificates issued by FBLI
and now in force are, to the extent required under applicable Laws, on forms
approved by the insurance regulatory authority of the jurisdiction where issued
and utilize premium rates which if required to be filed with or approved by
insurance regulatory authorities have been so filed or approved and the premiums
charged conform thereto; and
(i) With respect to all insurance issued: (i) to FBL's Knowledge, no
other party to any reinsurance, coinsurance or other similar agreement with FBLI
is in default thereunder; and (ii) the Insurance Contracts of FBLI meet all the
applicable definitions of the Code and ERISA, and the regulations and rulings
thereunder, necessary to qualify for the tax and other benefits
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intended and promised to contract holders, including, but not limited to,
treatment as life insurance contracts or annuity contracts under Sections 7702
and 72 of the Code, respectively.
Section 5.13 Cancellations. Since December 31, 1999, no Person or
group of Persons acting in concert writing, selling or producing insurance
business, which in the aggregate accounted for five percent (5%) or more of
the gross premium income of FBLI for the year ended December 31, 1999, has
terminated or substantially reduced, or threatened, in writing, to terminate
or substantially reduce, its relationship with FBLI. To the Knowledge of FBL,
since December 31, 1999, no policyholder or group of policyholders acting in
concert has withdrawn or given notice, in writing, of its intent to withdraw,
or threatened, in writing, to withdraw, funds under any Insurance Contract to
which FBLI is a party in excess of five percent (5%) or more of the insurance
reserves of FBLI at December 31, 1999.
Section 5.14 Taxes and Tax Returns. Except to the extent that no
Material Adverse Effect would be sustained by FBL or FBLI:
(a) All Tax Returns required under applicable Law to be filed
with or provided to any Person by FBL or FBLI have been (and, as to Tax
Returns not filed as of the date hereof, will be) timely filed or provided in
the manner prescribed by Law and such Tax Returns were (and, as to Tax Returns
not filed as of the date hereof, will be) true, complete and correct, and all
taxes shown due on such Tax Returns have been timely paid, together with any
interest and penalties then due;
(b) FBL and FBLI have within the time and in the manner
prescribed by Law paid (and until the Effective Time will pay within the time
and in the manner prescribed by Law) all Taxes due and payable except for
those contested in good faith and for which adequate reserves have been taken;
(c) FBL and FBLI have established (and until the Effective Time
will maintain) on their books and records reserves adequate to pay all Taxes
not yet due and payable and all deficiencies asserted, proposed or threatened
against FBL or FBLI;
(d) There are no Tax Liens upon the Assets of FBL or FBLI except
Liens for Taxes not yet due;
(e) FBL and FBLI have materially complied (and until the
Effective Time will materially comply) with all applicable Laws relating to
information reporting or to the withholding of Taxes and have, within the time
and in the manner prescribed by Law, paid all amounts required to be so
withheld and paid over under all applicable Laws;
(f) No outstanding deficiencies, assessments or written
proposals for the assessment of any Taxes have been proposed, asserted or
assessed against FBL or FBLI; and
(g) No Proceedings are presently pending with regard to any
Taxes or Tax Returns of FBL or FBLI. Neither FBL nor FBLI has any Knowledge of
any threatened Proceeding with
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respect to any such Taxes or Tax Returns. To the Knowledge of FBL, no state of
facts exists or has existed which would constitute grounds for the assessment
of any liability for Taxes with respect to the periods which have not been
audited by the IRS or other Taxing authority.
Section 5.15 Benefit Plans. Except as to matters which would not,
individually or in the aggregate, have a Material Adverse Effect:
(a) Each Benefit Plan in each case maintained or contributed to,
or required to be maintained or contributed to, by FBL or FBLI for the benefit
of any present or former officers, employees, agents, directors or independent
contractors of FBL or FBLI has been administered in accordance with its terms.
All required contributions to the Benefit Plans have been or will, prior to
Closing, be made. FBL, FBLI and all the Benefit Plans are in compliance with
the applicable provisions of ERISA, the Code, all other applicable laws and
all applicable collective bargaining agreements.
(b) There are no pending claims (other than routine benefit
claims), lawsuits or arbitrations which have been asserted or instituted, or
to the Knowledge of FBL threatened, against any Benefit Plan, any of the
fiduciaries thereof or FBL or FBLI with respect to their duties under the
Benefit Plans.
(c) Neither FBL nor a FBLI, nor any of their respective
employees or directors, nor any fiduciary, has engaged in any transaction,
including the execution and delivery of this Agreement and other agreements,
instruments and documents for which execution and delivery by FBL or FBLI is
contemplated herein, in violation of Section 406(a) or (b) of ERISA or which
is a "prohibited transaction" (as defined in Section 4975(c)(i) of the Code)
for which no exemption exists under Section 408(b) of ERISA or Section 4975(d)
of the Code or for which no administrative exemption has been granted under
Section 408(a) of ERISA.
(d) The Benefit Plans and their related trusts intended to
qualify under Sections 401 and 501(a) of the Code, respectively, received
favorable determination letters from the IRS.
(e) FBL and FBLI have no liability (contingent or otherwise)
under Section 4069 of ERISA by reason of a transfer of any underfunded pension
plan.
Section 5.16 Labor Relations and Employment.
(a) There is no labor strike, material labor dispute, slowdown,
stoppage or lockout actually pending, or to the Knowledge of FBL, threatened
against or affecting FBL or FBLI, and since January 1, 1995 there has not been
any such action. To the Knowledge of FBL, no union claims to represent the
employees of FBL or FBLI, there are no current union organizing activities
among the employees of FBL or of FBLI and FBL has not received notice of any
unfair labor practice complaint or charge against it pending before the
National Labor Relations Board. Neither FBL nor FBLI is a party to or is bound
by any collective bargaining or similar agreement with any labor organization,
or work rules or practices agreed to with any labor organization or employee
association, applicable to employees of FBL or of FBLI. FBLI is in compliance
with
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all applicable Laws respecting employment and employment practices, terms and
conditions of employment, wages and hours except for matters that individually
or in the aggregate would not have a Material Adverse Effect.
(b) Since the enactment of the WARN Act, except as to matters
which would not, individually or in the aggregate have a Material Adverse
Effect, neither FBL nor FBLI has effectuated (i) a "plant closing" (as defined
in the WARN Act) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of FBL or FBLI; or
(ii) a "mass layoff" (as defined in the WARN Act) affecting any site of
employment or facility of FBL or FBLI; nor has FBL been affected by any
transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state or local Law. None of FBL's
or FBLI's employees has suffered an "employment loss" (as defined in the WARN
Act) since December 31, 1999.
(c) FBL and FBLI each (i) has withheld all amounts required by
Law or by agreement to be withheld from the wages, salaries and other payments
to the employees, former employees, directors and former directors of FBL and
FBLI, (ii) is not liable for any arrears of wages or any Taxes or any penalty
for failure to comply with any of the foregoing, and (iii) is not liable for
any payment to any trust or other fund or to any Governmental Entity, with
respect to unemployment compensation benefits, social security or other
benefits except to the extent that any such violation or liability would not,
individually or in the aggregate have a Material Adverse Effect.
Section 5.17 Investment Company. FBL and FBLI are in compliance,
except as to matters which would not, individually or in the aggregate have a
Material Adverse Effect, with the requirements of the Investment Advisors Act.
FBLI maintains and is otherwise deemed under applicable law to control one or
more "investment advisors" as such term is defined in Section 2(a)(20) of the
Investment Advisors Act.
Section 5.18 SEC Documents. FBL has timely filed all required
reports, schedules, forms, statements and other documents with the SEC since
January 1998 (such reports, schedules, forms, statements and other documents
are hereinafter referred to as the "FBL SEC DOCUMENTS"). As of their
respective dates, the FBL SEC Documents complied with the requirements of the
Securities Act, or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such SEC
Documents, and none of the SEC Documents as of such dates contained any untrue
statement of a material fact.
Section 5.19 Eligibility. FBL is eligible to use Form S-3 under the
Securities Act.
ARTICLE VI
CERTAIN COVENANTS
Section 6.1 KFBS Conduct of Business Pending the Closing. KFBS
covenants and agrees as to itself and Insurance Subsidiary that, at all times
up to and including the Effective Time, unless FBL shall otherwise consent in
writing (FBL agreeing that it will use its best efforts
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to respond to any request received from KFBS arising under this Article VI
within five Business Days, or sooner as circumstances may require, after
receipt of such request), or except as otherwise expressly permitted or
contemplated by this Agreement or the Agreement with KFB or except as
otherwise contemplated by the Reorganization:
(a) Subject to any applicable regulatory requirements, KFBS
shall, and shall cause Insurance Subsidiary to, conduct its Business only in
the ordinary course and in substantially the same manner as heretofore
conducted since June 30, 2000 and in a manner which is not inconsistent with
the consummation of the transactions contemplated hereby, and KFBS and
Insurance Subsidiary shall use all reasonable efforts to preserve intact its
present business organization and preserve its regular services to, and
maintain its relationships with policyholders, insurers, agents, sales and
distribution organizations, underwriters, investment customers, brokers,
suppliers and all others having business dealings with it to the end that its
goodwill and ongoing Business shall not be impaired in any material respect;
(b) Subject to any applicable regulatory requirements, KFBS
shall not, and shall not permit Insurance Subsidiary to, make or propose to
make any change in its dividend or interest crediting practices or policies or
in its underwriting, pricing, claims, risk retention, investment, reinsurance
practices or policies in any material respect; and KFBS agrees that it will
notify FBL and provide FBL with information in reasonable detail regarding any
material transactions (excluding investment transactions in the ordinary
course of business consistent with past practice, but including transactions
involving the securitization of Assets of KFBS or of Insurance Subsidiary and
transactions involving derivative securities), whether involving a purchase or
sale, that it or Insurance Subsidiary is seriously considering;
(c) KFBS shall not, and shall not permit Insurance Subsidiary
to, make any material change in accounting methods or practices, including
without limitation any change with respect to establishment of reserves for
unearned premiums, reserves for future policy benefits, losses (including
without limitation incurred but not reported losses) and loss adjustment
expenses, or any change in depreciation or amortization policies or rates
adopted by it, except as required by Law or SAP;
(d) KFBS shall not, and shall not permit Insurance Subsidiary
to, (i) amend its articles of incorporation or By-Laws (unless contemplated
hereby), (ii) incur any individual Liability or series of related Liabilities
in excess of $50,000 other than in the ordinary course of business consistent
with past practice, (iii) incur any indebtedness for money borrowed in the
aggregate for KFBS and Insurance Subsidiary in excess of $50,000, (iv) agree
to any merger, consolidation, acquisition, redomestication, sale of all or a
substantial portion of its Assets, bulk or assumption reinsurance arrangement
or other similar reorganization, arrangement or business combination, (v)
prior to notifying FBL, enter into any partnership, joint venture or profit
sharing Contract, (vi) enter into any Contract limiting the ability of KFBS or
of Insurance Subsidiary to engage in any Business, to compete with any Person,
to do business with any Person or in any location or to employ any Person or
limiting the ability of any Person to compete with such party or Insurance
Subsidiary, (vii) enter into any Contract relating to the direct or indirect
guarantee of any obligation of any Person in respect of indebtedness for
borrowed money or other financial
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obligation of any Person other than in the ordinary course of business
consistent with past practice, (viii) intentionally delete or destroy any
policyholder records which deletion or destruction is not reasonably
reparable, (ix) enter into any Contract that could materially and adversely
affect the consummation of the transactions contemplated hereby, or (x) modify
any Contract with respect to the subject of any of the foregoing clauses;
(e) KFBS shall not permit Insurance Subsidiary to issue or sell
any shares of or interests in, or rights of any kind to acquire any shares of
or interests in, or to receive any payment based on the value of, the capital
stock of or other equity interests in or any securities convertible into
shares of any capital stock of or other equity interests in Insurance
Subsidiary;
(f) Except (a) as set forth in the KFBS Disclosure Schedule, or
(b) as required by the terms of agreements or plans already in effect,
applicable Law or as envisioned by this Agreement, KFBS shall not, and shall
not permit Insurance Subsidiary to (i) adopt or implement, or commit to adopt
or implement, or materially amend, any collective bargaining, compensation,
employment, consulting, pension, profit sharing, bonus, incentive, group
insurance, termination, retirement or other employee benefit Contract, plan or
policy, (ii) enter into or materially amend any severance Contract, (iii)
increase in any manner the compensation of, or enter into any Contract
relating to the borrowing of money by, its directors, officers or other
employees, except pursuant to the terms of agreements or plans as currently in
effect and except for employee compensation increases made in the ordinary
course of business consistent with past practices; (iv) increase by more than
five percent (5%) the aggregate number of its employees, (v) pay or agree to
pay any pension, retirement allowance or other employee benefit not required
by the current terms of any existing plan, agreement or arrangement to any
director, officer or other employee, whether past or present, (vi) voluntarily
recognize any labor organization or any other Person as a collective
bargaining representative of one or more bargaining units comprising a
material number of employees, or (vii) other than obligations that arise by
operation of law or under the By-Laws of a party as they exist on the date of
this Agreement, enter into, adopt or increase any indemnification or hold
harmless arrangements with any directors, officers or other employees or
agents of such party or Insurance Subsidiary;
(g) Other than in the ordinary course of business consistent
with past practice, or with the prior consent of FBL, KFBS shall not, and
shall not permit Insurance Subsidiary to, make any capital expenditures or
expenditures or commitments for expenditures for the purchase or lease of any
products or services or group of products or services (other than with respect
to Investment Assets) which in one or a series of related transactions exceed
$100,000 except for expenditures relating to this Agreement and the
consummation of the transactions contemplated hereby, and expenditures
required to be made pursuant to existing Contracts to which KFBS or Insurance
Subsidiary is a party, which Contracts are set forth in the KFBS Disclosure
Schedule;
(h) Other than in the ordinary course of business consistent
with past practice or in connection with the redemption of outstanding
guaranteed investment contracts in the exercise of KFBS's reasonable judgment,
KFBS shall not, and shall not permit Insurance Subsidiary to, waive any rights
with a value in excess of $10,000 or any other rights which are material to
any Contract or make any payment, direct or indirect, of any Liability in
excess of $10,000 before the
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same comes due in accordance with its terms, in each case, including, but not
limited to, any provision of any Insurance Contract to permit a cash-out
thereof;
(i) Except in accordance with the statement of investment policy
set forth in the KFBS Disclosure Schedule attached hereto, KFBS shall not, and
shall not permit Insurance Subsidiary to, (i) sell, lease, mortgage, encumber
or otherwise grant any interest in or dispose of any Assets (ii) restructure,
amend, modify or otherwise affect any Investment Asset or any Contract
relating thereto which is material to the financial condition of KFBS or of
KFBS and Insurance Subsidiary taken as a whole, and KFBS shall furnish to FBL
a monthly report, in detail reasonably acceptable to FBL, of all such
transactions or other changes (other than changes in market values or ordinary
course changes such as interest payments, maturities, etc.) affecting
Investment Assets of KFBS or Insurance Subsidiary which took place since the
last such report;
(j) Except in accordance with the statement of investment policy
set forth in the KFBS Disclosure Schedule attached hereto, KFBS agrees that it
shall not, nor shall it permit Insurance Subsidiary to make any equity real
estate investments (other than through restructuring or foreclosure or
pursuant to commitments existing at the date hereof or to protect the value of
existing investments in the exercise of reasonable business judgment) and that
neither KFBS nor Insurance Subsidiary shall take any action, other than in the
exercise of reasonable business judgment and following discussion with FBL,
which results, individually or in the aggregate, in an adverse impact on the
surplus of Insurance Subsidiary;
(k) Other than in the ordinary course of business consistent
with past practice, or as required by applicable regulations, and except for
the amendment of the sublease between Insurance Subsidiary and an Affiliate of
KFB to reduce term thereof KFBS shall not, and shall not permit Insurance
Subsidiary to, enter into any material Contract or amend or waive any material
provision of any material Contract which would involve the payment by KFBS or
Insurance Subsidiary of $10,000 or more;
(l) KFBS shall not, and shall not permit Insurance Subsidiary
to, enter into any new, or materially amend any existing, reinsurance
Contracts or arrangements, except in accordance with existing reinsurance
agreements or in the ordinary course of business and consistent with past
practice;
(m) KFBS shall, and shall cause Insurance Subsidiary to,
maintain uninterrupted its existing insurance coverage of all types in effect
or procure substantially similar substitute insurance policies with
financially sound and reputable insurance companies in at least such amounts
and against such risks as are currently covered by such policies if such
coverage is available;
(n) KFBS shall deliver to FBL as promptly as practicable after
preparation thereof, but in no event later than the date of filing with
respect to unaudited or audited, as the case may be, SAP Statements for
Insurance Subsidiary filed by or on behalf of such Insurance Subsidiary after
the date hereof;
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(o) KFBS shall inform FBL regarding the progress of any material
claim, action, suit, litigation, proceeding, arbitration, investigation, audit
or controversy relating to Taxes;
(p) Neither KFBS nor Insurance Subsidiary shall (i) make or
rescind any material express or deemed election relating to Taxes, (ii) except
as contemplated by this Agreement, make a request for a Tax Ruling or enter
into a Closing Agreement, settlement or compromise with respect to any
material Tax matter or (iii) with respect to any material Tax matter, change
any of its methods of reporting income or deductions for federal income Tax
purposes from those employed in the preparation of its federal income Tax
Return for the Taxable year ending December 31, 1999, except as may be
required by Law;
(q) Neither KFBS nor Insurance Subsidiary shall declare, set
aside or pay any dividends or distributions (whether in cash, stock or
property) in respect of any capital stock of Insurance Subsidiary or redeem,
purchase or otherwise acquire any of such Insurance Subsidiary's capital stock;
(r) Except as provided in the KFBS Disclosure Schedule, neither
KFBS nor Insurance Subsidiary shall settle or compromise any claim in any
pending or threatened litigation in an amount exceeding $100,000 other than
settlement of pending or threatened litigation, action, proceeding or
investigation with respect to claims arising under contracts of insurance or
reinsurance underwritten, ceded or assumed by Insurance Subsidiary which
settlement will not have a Material Adverse Effect;
(s) Neither KFBS nor Insurance Subsidiary shall do any other act
which would cause any representation or warranty of KFBS or Insurance
Subsidiary in this Agreement to be or become untrue in any material respect,
unless required by applicable law; and
(t) Neither KFBS nor Insurance Subsidiary shall agree, in
writing or otherwise, to take any of the actions prohibited by the foregoing
clauses (a) through (s).
Section 6.2 Reasonable Efforts. Upon the terms and subject to the
conditions herein provided, each of the parties hereto agrees to use all
commercially reasonable efforts to take, or cause to be taken all action, to
do, or cause to be done, and to assist and cooperate with the other party
hereto in doing or causing to be done, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement, including, but
not limited to, (i) the actions set forth in Article III hereof, (ii) the
obtaining of all Governmental Approvals, and all other necessary actions or
nonactions, waivers, consents and approvals from all appropriate Governmental
Entities and other Persons and the making of all necessary registrations and
filings, (iii) the obtaining of the opinions and other documents referred to
in Article VII hereof, (iv) the resolution of all organizational and human
resources issues relating to the transactions contemplated hereby, (v) the
obtaining or making of all Consents, Environmental Permits, Filings or
Licenses necessary or desirable to ensure that the Business of the Insurance
Subsidiary may be conducted without disruption consistent with the past
practice of Insurance Subsidiary and (vi) the defending of any Proceedings
challenging this Agreement or the consummation of the transactions
contemplated
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hereby, the defense of which shall, at the request of either KFBS or FBL, be
conducted jointly by FBL and KFBS on a basis that is satisfactory to both KFBS
and FBL.
Section 6.3 Access and Information. The parties hereto shall (a)
afford to their respective accountants, legal counsel and other advisors full
access through the period immediately prior to the Effective Time to all of
their Assets, books, Contracts, commitments and records (including, but not
limited to, Tax Returns), and (b) during such period, shall furnish promptly
to the other parties all such information concerning its Business, Assets and
personnel, in either clause (a) or (b), as may be reasonably requested.
Information provided by any party shall be kept confidential by the other
parties and shall not be disclosed unless such information (1) was known to
the other party or parties or was in their possession prior to the date of
this Agreement and was not identified by the furnishing party as being
confidential, (2) is or becomes generally available to the public other than
by unauthorized disclosure by the furnishing party, (3) becomes available to a
party from a third party authorized to make such disclosure, (4) is
independently developed by a party, or (5) is required to be disclosed by law
or by court order.
Section 6.4 Notice of Proceedings. Each of FBL and KFBS shall
promptly notify the other of, and provide to the other all information
relating to, any Proceedings or investigations commenced or, to its Knowledge,
threatened against, relating to or involving or otherwise affecting FBL or
KFBS or any of their respective Subsidiaries, as the case may be, which, if
pending on the date hereof, would have been required to have been disclosed in
writing pursuant to Sections 4.10 or 5.9 hereof or which relate to the
execution of this Agreement or the consummation of the transactions
contemplated hereby.
Section 6.5 Notification of Certain Other Matters. Each party shall
promptly notify the other of any change or other event which, individually or
in the aggregate, would have a Material Adverse Effect including, but not
limited to, any of the following:
(a) any written notice of a default or event which, with notice
or lapse of time or both, would become a default, received by such party
subsequent to the date of this Agreement and prior to the Effective Time,
under any material Contract to which such party is a party or by which such
party or its respective Assets may be subject or bound;
(b) the occurrence of any event which, with notice or lapse of
time or both, constitutes a default under any material Contract to which such
party is a party;
(c) any written notice from or to any Person alleging that the
consent of such Person is or may be required in connection with the execution
of this Agreement or the consummation of the transactions contemplated hereby,
if the failure to obtain such a consent would have a Material Adverse Effect
on either party;
(d) except as set forth below, any written notice from or to any
Governmental Entity in connection with this Agreement or the transactions
contemplated hereby; and
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(e) any matter hereafter arising or discovered which, if
existing or known at the date hereof, would have been required to be set forth
or described in the FBL Disclosure Schedule or the KFBS Disclosure Schedule,
as the case may be; provided, however, that no such supplemental or amended
disclosure by any party shall be deemed to cure any breach of a representation
or warranty made as of the date hereof, unless the other party so agrees in
writing.
In furtherance of the foregoing, to the fullest extent permitted
under applicable Law, each party shall provide the other with copies (or, to
the extent written materials are not involved, oral notice) of proposed
notices, applications or any other communications to any Governmental Entity
or rating agency in connection with this Agreement or the transactions
contemplated hereby, including, but not limited to, in respect of the
Governmental Approvals, in each case at least three (3) Business Days prior to
dispatch of written materials (or, to the extent written materials are not
involved, prior to initiation) and neither FBL nor KFBS will dispatch (or, to
the extent written materials are not involved, initiate) such notice,
application or communication without the prior consent of the other party,
which consent shall not be unreasonably withheld or delayed; provided,
however, that KFB and KFBS may submit a request for a private letter ruling to
the IRS with respect to the Transactions without prior notice or consent of
FBL.
Section 6.6 Acquisition Proposals. Prior to the termination of this
Agreement, each of KFB and KFBS will not, and will not permit or cause
Insurance Subsidiary or any of the officers or directors of it or Insurance
Subsidiary to, and shall direct its and Insurance Subsidiary's employees,
agents and representatives (including any investment banker, attorney or
accountant retained by it or Insurance Subsidiary) not to, directly or
indirectly, initiate, solicit, encourage or otherwise facilitate any inquiries
or the making of any proposal or offer with respect to a sale, reorganization,
share exchange, consolidation or similar transaction involving, or any
purchase of any of the assets or any equity securities of Insurance
Subsidiary, or any other business combination involving the stock or Assets of
Insurance Subsidiary (any such proposal or offer being hereinafter referred to
as an "ACQUISITION PROPOSAL"). Each of KFB and KFBS will not, and will not
permit or cause Insurance Subsidiary or any of the officers and directors of
it or its Subsidiaries to and shall direct its and Insurance Subsidiary's
employees, agents and representatives (including any investment banker,
attorney or accountant retained by it or Insurance Subsidiary) not to,
directly or indirectly, engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any Person
relating to an Acquisition Proposal, whether made before or after the date of
this Agreement, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal.
Section 6.7 Changes of Capital Structures. During the period from the
date of this Agreement to the Effective Time, except as expressly contemplated
or permitted by this Agreement:
(a) FBL shall not adjust, split, combine or reclassify any of
its capital stock;
(b) FBL shall not issue any shares of its capital stock, except
for issuances at fair market value or pursuant to benefit plans, director
compensation plans or stock options disclosed in the FBL SEC Documents.
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(c) Except in connection with the Reorganization and the
acquisition of shares of common stock of the Insurance Subsidiary owned by
members of the Insurance Subsidiary's board of directors, Insurance Subsidiary
shall not make, declare or pay any dividend, or make any other distribution or
indirectly redeem, purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible (whether currently
convertible or convertible only after the passage of time or the occurrence of
certain events) into or exchangeable for any shares of its capital stock;
(d) Insurance Subsidiary shall not grant any stock appreciation
rights or grant any individual, corporation or other entity any right to
acquire any shares of its capital stock; and
(e) Insurance Subsidiary shall not issue any additional shares
of capital stock.
Section 6.8 Stock Exchange Listing. At the appropriate time, FBL
shall cause the Class A Common Shares to be issued upon conversion or
redemption of the Series C Preferred to be approved for listing on the New
York Stock Exchange.
Section 6.9 Defined Benefit Pension Plan Contribution. Prior to
Closing, KFBS shall make or cause to be made a contribution to its defined
benefit Pension Plan (the "KFBS PENSION PLAN") sufficient to make such KFBS
Pension Plan fully funded using assumptions prescribed by the Pension Benefit
Guaranty Corporation for plan terminations as of the Closing. As soon as
practicable following Closing, but no later than 60 days following Closing,
KFBS shall cause the trustee or trustees of the KFBS Pension Plan to transfer
to a defined benefit pension plan designated by the FBL (the "FBL PENSION
PLAN") a portion of the total market value of assets of the KFBS Pension Plan
at Closing equal in amount, to the projected benefit obligation for employees
of Insurance Subsidiary employed by FBLI (the "Transferred Employees") divided
by the projected benefit obligation for the FKBS Pension Plan including the
Transferred Employees. The projected benefit obligation shall be determined as
of the Closing using assumptions consistent with the last fiscal year end. In
no event will the amount transferred be less than the present value of accrued
benefits on a plan termination basis using the actuarial assumptions
prescribed by the Pension Benefit Guaranty Corporation for plan terminations
as of the Closing. These calculations shall be performed by the actuary for
the KFBS Pension Plan in accordance with the normal procedures and practices
of KFBS in preparing the actuarial report, and reviewed by the actuary for the
FBL Pension Plan. In the event of a disagreement between the KFBS actuary and
the FBL actuary, they shall appoint a third actuary to resolve their
differences, with the costs of the third actuary to be shared equally by KFBS
and FBL.
Section 6.10 Transfer of 401(k) Account Balance. At the Closing, KFBS
agrees to cause the trustee of the KFBS 401(k) Plan to transfer to the trustee
of the FBL 401(k) Plan, the 401(k) Plan Transfer Amount as hereinafter
defined. The 401(k) "PLAN TRANSFER AMOUNT" shall be the amount equal to the
account balances in the KFBS 401(k) Plan attributable to the Transferred
Employees as shown on the most recent valuation report prior to the transfer
date (including any amounts accrued as of such date but not yet contributed to
the KFBS 401(k) Plan or not yet allocated to the account of a Transferred
Employee. The Plan Transfer Amount shall take into
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account any distributions, in-service withdrawals or participant loans
received by Transferred Employees prior to the Transfer Date. The Plan
Transfer Amount shall be transferred to the trustee of the FBL 401(k) Plan
entirely in cash and notes which represent the participant loans of
Transferred Employees. Notwithstanding the provisions hereof, the transfer of
any amount required by the preceding Provisions of this Section 6.10 which is
prohibited by law, shall not be made.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions to Each Party's Obligation to Effect the
Transactions. The respective obligation of each party to effect the
Transactions is subject to the satisfaction or waiver by all parties on or
prior to the Closing Date of the following conditions:
(a) Antitrust. The waiting periods (and any extensions thereof)
applicable to the transactions contemplated by this Agreement under the HSR
Act shall have been terminated or shall have expired.
(b) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Transactions shall be in effect; provided, however,
that each of the parties shall have used reasonable efforts to prevent the
entry of any such injunction or other order and to appeal as promptly as
possible any such injunction or other order that may be entered.
(c) Material Consents and Filings. KFB, KFBS, FBL, FBLI and
Insurance Subsidiary shall have obtained or made, as appropriate, Consents,
and Filings all of which shall be in full force and effect at the Effective
Time, in each case without the abrogation or diminishment of the Licenses
currently held by KFBS or Insurance Subsidiary or the imposition of
significant restrictions upon the transactions contemplated hereby or the
conduct of the business of FBL.
(d) No Litigation. There shall not be instituted, pending, or to
the Knowledge of KFBS or to the Knowledge of FBL, threatened, any action,
suit, investigation, or other proceeding in, before, or by any Governmental
Entity or other Person (i) challenging the acquisition by FBL and FBLI of the
Acquired Assets, seeking to restrain or prohibit the consummation of the
Transactions, or seeking to obtain from any party any damages that are
material in relation to the Transactions, (ii) seeking to prohibit or limit
the ownership or operation by KFBS, FBL or any Subsidiary of any material
portion of the Business or Assets of KFBS, FBL or any Subsidiary or to compel
KFBS, FBL or any Subsidiary to dispose of or hold separate any material
portion of the business or assets of KFBS, FBL or any Subsidiary, as a result
of the Transactions, or (iii) which would otherwise have a Material Adverse
Effect on KFBS, KFB, or Insurance Subsidiary, or a Material Adverse Effect on
FBL or FBLI.
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Section 7.2 Conditions to Obligations of FBL. The obligations of FBL
to consummate the Transactions are further subject to the satisfaction or
waiver by FBL and FBLI on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of KFBS set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and warranties
of KFBS set forth in this Agreement that are not so qualified shall be true
and correct in all material respects, in each case on and as of the Closing
Date, except to the extent any such representation or warranty expressly
relates to an earlier date (in which case as of such date), and FBL and FBLI
shall have received a certificate signed on behalf of KFBS by the Chief
Executive Officer and the Chief Financial Officer of KFBS to such effect.
(b) Performance of Obligations of KFBS. KFBS shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and FBL and FBLI
shall have received a certificate signed on behalf of KFBS by the Chief
Executive Officer and the Chief Financial Officer of KFBS to such effect.
(c) Officers' and Directors' Certificates. KFBS shall have
delivered to FBL and FBLI a certificate dated the Closing Date and executed by
the Secretary of KFBS, certifying (a) that KFBS has duly and validly taken all
corporate action necessary to authorize its execution and delivery of this
Agreement and its performance of its obligations under this Agreement, and (b)
that the resolutions (true and complete copies of which shall be attached to
the certificate) of the Board of Directors and stockholder of KFBS with
respect to this Agreement and the Transactions have been duly and validly
adopted and are in full force and effect. In addition, KFBS shall have
delivered to FBL executed copies of the certificates, dated the Closing Date,
of officers and directors of KFBS and its Subsidiaries that may reasonably be
required by counsel in connection with the tax opinion referred to in Section
7.3(d) of this Agreement.
(d) Absence of Material Adverse Effect on KFBS or Insurance
Subsidiary. There shall not have occurred any event, change, effect or
development which, individually or in the aggregate, has had or is reasonably
likely to have, a Material Adverse Effect on the Acquired Assets or Business
of KFBS or Insurance Subsidiary; provided, however, that any refusal by FBL or
FBLI to close based on this condition must be accompanied by a prompt
commencement of the mediation process set forth in Section 8.2 below.
(e) Good Standing Certificates. KFBS shall have delivered to FBL
at the Closing (i) certified certificates of good standing for KFBS and
Insurance Subsidiary dated not more than five calendar days prior to the
Closing Date from the Kansas Secretary of State and (ii) bring down
certificates of good standing dated as of the Closing Date for insurance
permits from the Kansas Insurance Department with respect to Insurance
Subsidiary.
(f) Other Agreements. KFB and its Affiliates, as appropriate,
shall have executed and delivered the agreements referred to in Article III.
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(g) GAAP Financial Statements. The parties acknowledge that
heretofore neither KFBS nor Insurance Subsidiary have been required to, and
neither have, prepared or produced financial statements in accordance with
GAAP. If FBL determines that it will be required under the Exchange Act to
file historical GAAP financial statements of Insurance Subsidiary, KFBS will
at Closing deliver to FBL, at FBL's sole expense, true and complete copies of
the (i) Insurance Subsidiary audited GAAP Financial Statements for the years
ended December 31, 1997, 1998 and 1999, including the Balance Sheets,
Statements of Income and Comprehensive Income, Statements of Changes in
Stockholders' Equity, Statements of Cash Flows and Notes to Financial
Statements, and (ii) the Insurance Subsidiary unaudited GAAP Financial
Statements for the nine months ended September 30, 2000, including the
Insurance Subsidiary Balance Sheet, Statement of Income and Comprehensive
Income, Statement of Changes in Stockholders' Equity, Statement of Cash Flows
and Notes to Financial Statements (collectively, the "INSURANCE SUBSIDIARY
GAAP FINANCIAL STATEMENTS"). The Insurance Subsidiary GAAP Financial
Statements will comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, will have been prepared in accordance with GAAP applied
on a consistent basis during the periods presented (except as may be indicated
in the notes thereto or, in the case of unaudited interim financial
statements, as permitted by Rule 10-01 of Regulation S-X) and will fairly
present, in all material respects, the financial position of the Insurance
Subsidiary as of the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited interim
financial statements, to normal year-end audit adjustments) in accordance with
GAAP. FBL will cooperate with and assist KFBS and Insurance Subsidiary in the
preparation of such statements. Should KFBS fail to deliver such statements at
Closing, FBL may determine to postpone the Closing until such time as such
statements are complete, but not beyond July 1, 2001. KFBS and FBL shall
cooperate in the production and delivery of GAAP financial statements of
Insurance Subsidiary prepared on a purchase GAAP basis.
(h) Prior to the Closing Date, Insurance Subsidiary and KFBS
shall have amended the employee severance plan applicable to the Transferred
Employees to provide that the Transferred Employees, are not entitled to
severance pay as a result of termination of their employment relationship with
the Insurance Subsidiary.
Section 7.3 Conditions to Obligation of KFBS. The obligation of KFB,
KFBS and Insurance Subsidiary to effect the Transactions is further subject to
the satisfaction or waiver by KFB, KFBS and Insurance Subsidiary on or prior
to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and
warranties of FBL set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and warranties
of FBL set forth in this Agreement that are not so qualified shall be true and
correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, except to the extent any such representation or warranty expressly
relates to an earlier date (in which case as of such date), and KFBS shall
have received a certificate signed on behalf of FBL by the Chief Executive
Officer and the Chief Financial Officer of FBL to such effect.
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(b) Performance of Obligations of FBL. FBL shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and KFBS shall have received a
certificate signed on behalf of FBL by the Chief Executive Officer and the
Chief Financial Officer of FBL to such effect.
(c) Officers' and Directors' Certificates. FBL shall have
delivered to KFBS a certificate, dated the Closing Date and executed by the
Secretary of FBL certifying (a) that FBL and FBLI each has duly and validly
taken all corporate action necessary to authorize its execution and delivery
of this Agreement and its performance of its obligations under this Agreement,
and (b) that the resolutions (true and complete copies of which shall be
attached to the certificate) of the Board of Directors of FBL and FBLI with
respect to this Agreement and the transactions contemplated hereby have been
duly and validly adopted and are in full force and effect. In addition, FBL
shall have delivered to FBL executed copies of the certificates, dated the
Closing Date, of officers and directors of FBL that may reasonably be required
by counsel in connection with the tax opinion referred to in Section 7.3(d) of
this Agreement.
(d) Tax Opinion. KFBS shall have received an opinion dated the
Closing Date from Blackwell Sanders Peper Martin L.L.P., in form and substance
reasonably satisfactory to KFBS, substantially to the effect that, on the
basis of facts, representations, and assumptions set forth in such opinion
which are consistent with the state of facts existing on the Closing Date, the
Transactions will be treated for United States Federal income tax purposes as
reorganizations within the meaning of Section 368(a)(1)(C) of the Code and
that no gain or loss will be recognized on steps One and Two and Three of the
Transactions and on step Four, with respect to the transfer and receipt of FBL
stock. In rendering such opinion, the giver may require and rely upon (and may
incorporate by reference) representations and covenants, including those
contained in certificates of officers of FBL, KFBS and others necessary to
give such opinion and to provide assurance to the stockholder of KFBS that
gain will not be recognized in the Transactions. The specific provisions of
each such representation and covenant shall be in form and substance
reasonably satisfactory to the giver of the opinion and each such
representation and covenant shall be dated on or before the date of such
opinion and shall not have been withdrawn or modified in any material respect.
(e) Absence of Material Adverse Effect on FBL. There shall not
have occurred since the date of this Agreement any event, change, effect or
development which, individually or in the aggregate, has had or is reasonably
likely to have, a Material Adverse Effect on FBL; provided, however, that any
refusal by KFBS or Insurance Subsidiary to close based on this condition must
be accompanied by a prompt commencement of the mediation process set forth in
Section 8.2 below.
(f) Private Letter Ruling. KFBS shall have either received from
the IRS a private letter ruling with respect to the tax treatment of the
Transactions that is acceptable to KFBS in its sole discretion, or shall have
received the tax opinion described in subsection (d) of this Section 7.3.
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ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated and the
Transactions abandoned at any time prior to the Effective Time:
(a) by mutual consent of all parties in a written instrument
signed by all parties;
(b) by any party if consummation of the Transactions is barred
by a permanent injunction which is final and non-appealable;
(c) by KFBS upon (i) a material breach of any representation or
warranty of FBL or FBLI or if any representation or warranty of FBL or FBLI
shall be or becomes untrue in any material respect, which breach or failure to
comply or untruth is not curable or, if curable is not cured within 45
Business Days after written notice thereof has been given to FBL, or (ii)
FBL's failure to comply in any material respect with any of its covenants or
agreements (materiality being construed in light of the transactions
contemplated by this Agreement);
(d) by FBL upon, (i) a material breach of any representation or
warranty of KFBS or if any representation or warranty of KFBS shall be or
become untrue in any material respect, which breach or failure to comply or
untruth is not curable or, if curable, is not cured within 45 Business Days
after written notice thereof has been given to KFBS, or (ii) KFBS's failure to
comply in any material respect with any of its covenants or agreements
(materiality being construed in light of the transactions contemplated by this
Agreement); or
(e) by FBL or KFBS, on or after July 1, 2001 if the Closing
shall not have occurred prior to that date, and provided such party shall not
then be in default under this Agreement.
Section 8.2 Mediation. Prior to the exercise by KFBS of its right to
terminate this Agreement pursuant to Section 8.1(c) hereof, and prior to the
exercise by FBL of its right to terminate this Agreement pursuant to Section
8.1(d) hereof, the respective party intending to exercise such right of
termination shall give written notice to the other parties specifying in
detail the reasons for such intended termination (the "TERMINATION NOTICE").
Any other party may request, in writing (the "MEETING REQUEST"), that a
meeting of the Chief Executive Officers (individually a "CEO" and collectively
the "CEOS") of each party (the "CEO MEETING") be held at a reasonably
specified time (not more than five Business Days after the date of the
Termination Notice) and place for the purpose of attempting to resolve the
issues raised in the Termination Notice. The CEOs shall meet (together with
such other persons as any of them deem appropriate) and attempt in good faith
to resolve the issues. If after such meeting, the CEOs are not able to resolve
the disputed issues, any CEO may request the designation of a mediator to help
resolve the dispute. The party who first requests mediation shall have the
right to designate the mediator. The mediator shall not have the authority to
resolve the issues, but shall act solely in the role of a mediator to seek to
bring the parties to an agreement. The CEOs shall meet with the mediator on at
least one occasion. If after the CEO Meeting and the meeting
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with the mediator, no resolution has been achieved, the party sending the
Termination Notice so desires, it may terminate this Agreement pursuant to the
appropriate section of this Article VIII.
Section 8.3 Effect of Termination. In the event of the termination of
this Agreement by any party, as provided above, this Agreement shall
thereafter become void and, except for the provisions related to
confidentiality contained in Section 6.3, there shall be no Liability on the
part of any party hereto against any other party hereto, or on the part of its
directors, officers, employees, shareholders or agents (or those of Insurance
Subsidiary or Affiliates), except that any such termination shall be without
prejudice to the rights of either party hereto (or Insurance Subsidiary or
Affiliates) arising out of the willful breach by the other party (or Insurance
Subsidiary or Affiliates) of any representation or warranty or any covenant or
agreement contained in this Agreement.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Survival of Representations and Warranties. The
representations, warranties and agreements in this Agreement shall survive the
Effective Time for a period of twenty (20) years.
Section 9.2 Fees and Expenses. If the Transactions are not
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs or expenses, except that FBL shall be responsible for all fees and
expenses incurred by KFBS and Insurance Subsidiary in satisfying the condition
of Closing set forth in Section 7.2(g).
Section 9.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given, upon receipt,
if mailed by registered or certified mail, postage prepaid, return receipt
requested, overnight delivery, confirmed facsimile transmission or hand
delivery, as follows:
(a) If to FBL or FBLI, to: FBL Financial Group, Inc.
Attention: CEO
5400 University Avenue
West Des Moines, IA 50266
FAX: (515) 225-4686
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with a copy to: Stephen R. Morain, Esquire
5400 University Avenue
West Des Moines, IA 50266
FAX: (515) 225-4686
(b) If to KFBS, to: Michael Wilds
The Kansas Farm Bureau
2627 KFB Plaza
P.O. Box 3500
Manhattan, KS 66502-8508
FAX: (785) 587-6602
with a copy to: Terry Arthur, Esquire
General Counsel
2627 KFB Plaza
P.O. Box 3500
Manhattan, KS 66502-8508
FAX: (785) 587-6602
and to: Steve Carman, Esquire
Blackwell, Sanders, Peper,
Martin LLP
2300 Main Street, Suite 1000
Kansas City, MO 64108
FAX: (816) 983-8080
or to such other address as the Person to whom notice is given may have
previously furnished to the other party in writing in accordance herewith.
Section 9.4 Amendments. This Agreement may be amended by the parties
hereto at any time. Any amendment, modification or material waiver of this
Agreement shall be subject to the approval of the Kansas Insurance Department
and the Iowa Insurance Department. This Agreement may not be amended, modified
or supplemented except by written agreement of the parties hereto.
Section 9.5 No Waiver. Nothing contained in this Agreement shall
cause the failure of any party to insist upon strict compliance with any
covenant, obligation, condition or agreement contained herein to operate as a
waiver of, or estoppel with respect to, any such covenant, obligation,
condition or agreement by the party entitled to the benefit thereof.
Section 9.6 Brokers. KFBS represents and warrants that no broker,
finder or investment banker is entitled to any brokerage, finder's or other
fee or commission in connection with the transactions contemplated hereby
based upon arrangements made by or on behalf of KFBS. FBL represents and
warrants that no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated
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hereby based upon arrangements made by or on behalf of FBL or FBLI, except for
FBL's financial advisor, Keefe, Bruyette & Woods, Inc., whose fees shall be
paid by FBL.
Section 9.7 Publicity. So long as this Agreement is in effect, each
of the parties hereto: (i) shall not, and shall cause its Affiliates not to,
issue or cause the publication of any press release or other announcement to
any Person with respect to this Agreement or the transactions contemplated
hereby without the consent of the other party, which consent shall not be
unreasonably withheld or delayed; provided, however, that nothing contained
herein shall (A) limit the right of each of the parties hereto and their
Affiliates to make a legally required filing or communication, provided that,
to the extent possible, such party shall consult with the other party before
making such filing or communication, or responding to any communications
initiated by any non-affiliated Person, including, but not limited to, any
rating agency or Governmental Entity, (B) prohibit either party hereto (or its
Affiliates) from initiating communications with, and making presentations to,
any rating agency or Governmental Entity relating to the transactions
contemplated hereby if such party gives prior notice thereof to the other
party hereto, or (C) prohibit FBL or KFBS or any of their respective
Affiliates from communicating to any third party information in any way
relating to the Sale that has been made known to the general public, other
than in violation of this Agreement, prior to the time of such communication;
and (ii) shall cooperate fully with the other party hereto with respect to
issuing or publishing any press release, or other announcement or other
written communication to any non-affiliated Person and preparing written and
oral communications to the employees and agents of each party hereto with the
purpose of effectuating the Sale and (iii) shall promptly notify the other
party of any announcements which are made to affiliated Persons and any
communications received from and responses provided to non-affiliated Persons,
in either case, with respect to this Agreement or the transactions
contemplated hereby.
Section 9.8 Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.9 Nonassignability. This Agreement shall not be assigned by
a party hereto by operation of Law or otherwise without the prior written
consent of the other parties hereto.
Section 9.10 Beneficiaries. This Agreement shall be binding upon and
inure solely to the benefit of the parties hereto and their permitted assigns,
and nothing in this Agreement, expressed or implied, is intended to confer
upon any other Person (including, but not limited to, any policyholder or
employee of KFBS, FBL or their Subsidiaries) any rights or remedies of any
nature under or by reason of this Agreement.
Section 9.11 Triplicates; Counterparts. This Agreement shall be
executed in triplicate and may be executed in counterparts each of which shall
be deemed to constitute an original and constitute one and the same instrument.
Section 9.12 Governing Law; Jurisdiction. This Agreement shall be
governed by and construed and enforced in accordance with the laws of the
State of Iowa (except to the extent that
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the Kansas Insurance Law shall be held to govern the terms of the Sale)
without regard to its conflict of laws rules.
Section 9.13 Entire Agreement. This Agreement and the agreements
contemplated hereof and executed at Closing constitute the entire agreement
between the parties hereto and supersede all prior agreements and
understandings, oral or written, between the parties hereto with respect to
the subject matter hereof and thereof.
Section 9.14 Severability. If any provisions hereof shall be held
invalid or unenforceable by any court of competent jurisdiction or as a result
of future legislative action, such holding or action shall be strictly
construed and shall not affect the validity or effect of any other provision
hereof; provided, however, that the parties shall use reasonable efforts,
including, but not limited to, the amendment of this Agreement, to ensure that
this Agreement shall reflect as closely as practicable the intent of the
parties hereto.
Section 9.15 Specific Performance. Each of the parties hereto
acknowledges and agrees that the other party hereto would be irreparably
damaged in the event any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
Accordingly, each of the parties hereto agrees that they each shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Agreement and to enforce specifically this Agreement and the terms and
provisions thereof in any action instituted in any court of the United States
or any state thereof having subject matter jurisdiction, in addition to any
other remedy to which a party may be entitled, at law or in equity.
Section 9.16 Counting. If the due date for any action to be taken
under this Agreement (including, but not limited to, the delivery of notices)
is not a Business Day, then such action shall be considered timely taken if
performed on or prior to the next Business Day following such due date.
ARTICLE X
DEFINITIONS
Section 10.1 Definitions. When used in this Agreement, the
following words or phrases have the following meanings:
"Accredited Investor" shall have the meaning set forth in Rule
501(a)(3) of Regulation D under the Securities Act.
"Acquired Assets" shall have the meaning set forth in Recital A
hereof.
"Acquisition Proposal" shall have the meaning set forth in Section
6.6 hereof.
"Affiliate" shall mean a Person that directly, or indirectly through
one or more intermediaries, controls, is controlled by or is under common
control with another Person or
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beneficially owns or has the power to vote or direct the vote of ten percent
(10%) or more of the voting stock (or of any other form of general
partnership, limited partnership or voting equity interest in the case of a
Person that is not a corporation) of such other Person. For purposes of this
definition, "control", including the terms "controlling" and "controlled",
means the power to direct the management and policies of a Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
credit arrangement, as trustee, partner or executor or otherwise.
"Agreement" shall mean this Agreement, including the Disclosure
Schedules.
"Annual Statements" shall mean, with respect to any Person, the
annual statements of such Person filed with or submitted to the insurance
regulatory body in the jurisdiction in which such Person is domiciled on forms
prescribed or permitted by such regulatory body.
"Assets" shall mean, as to a Person, all rights, titles, franchises
and interests in and to every species of property, real, personal and mixed,
and chooses in action thereunto belonging, including, but not limited to,
Environmental Permits, Investment Assets, Intellectual Property, Contracts,
Licenses, privileges and all other assets whatsoever, tangible or intangible,
of such Person.
"Benefit Plan" shall have the meaning set forth in Section 4.20
hereof.
"Business" shall mean, as to a Person, the business, operations,
activities and affairs of such Person.
"Business Day" shall means any day other than Saturday, Sunday or any
other day in which commercial banks in New York, New York are required to or
permitted to be closed.
"Casualty Company Service Agreement" shall have the meaning set forth
in Section 3.4.
"CEO" and "CEOs" shall have the meaning asset forth in Section 8.2.
"CEO Meeting" shall have the meaning set forth in Section 8.2.
"CERCLIS" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Information System.
"Closing" shall have the meaning set forth in Section 2.2 hereof.
"Closing Agreement" shall have the meaning set forth in Section
4.19(k) hereof.
"Closing Date" shall have the meaning set forth in Section 2.2 hereof.
"Code" shall have the meaning set forth in Recital B of this
Agreement.
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"Commonly Controlled Entity" shall have the meaning set forth in
Section 4.20(b).
"Computer Software" shall mean any and all computer software
consisting of sets of statements or instructions to be used, directly or
indirectly, in a computer, including, but not limited to, the following: (i)
all source code, object code and natural language code therefor and all
component modules thereof, (ii) all versions thereof, (iii) all screen
displays and designs thereof and (iv) all user, technical, training and other
documentation relating to any of the foregoing.
"Consent or Filing" shall have the meaning set forth in Section
4.5(b) hereof.
"Consideration" shall have the meaning set forth in Section 1.3
hereof.
"Contract" or "Contracts" shall mean a contract, agreement,
commitment, indenture, note, bond, mortgage, license, lease, assignment,
arrangement or understanding.
"Effective Time" shall have the meaning set forth in Section 2.1
hereof.
"Environmental Claim" shall mean any investigation, notice of
violation, demand, allegation, action, suit, injunction, judgment, order,
consent decree, penalty, fine, lien, proceeding, or claim (whether
administrative, judicial or private in nature) arising: (A) pursuant to, or in
connection with, an actual or alleged violation of any Environmental Law; (B)
in connection with any Hazardous Substances or actual or alleged activity
associated with any Hazardous Substances; (C) from any abatement, removal,
remedial, corrective or other response action in connection with any Hazardous
Substances, Environmental Law or other order or directive of any federal,
state or local governmental authority; or (D) from any actual or alleged
damage, injury, threat or harm to health, safety, natural resources or the
environment. Environmental Claim shall not include claims for coverage by an
insured.
"Environmental Law" shall mean any local, state or federal statute,
rule, regulation, order, code, directive or ordinance and any binding judicial
or administrative interpretation thereof or requirements thereunder pertaining
to: (A) the regulation and protection of health, safety and the indoor or
outdoor environment; (B) the conservation, management, development, control
and/or use of land (including zoning laws and ordinances), natural resources
and wildlife; (C) the protection or use of surface water and ground water; (D)
the management, manufacture, possession, presence, use, generation,
transportation, treatment, storage, disposal, release, threatened release,
abatement, removal, remediation or handling of, or exposure to, any Hazardous
Substances; or (E) pollution (including any release into air, land, surface
water and ground water); and includes without limitation the following federal
statutes (and their implementing regulations and the analogous state statutes
and regulations): the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act; the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid
Waste Amendments of 1984; the Federal Water Pollution Control Act of 1972, as
amended by the Clean Water Act of 1977.
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"Environmental Permit" shall mean any permit, license, variance,
certificate, consent, letter, clearance, closure, exemption, authorization,
decision or action or approval required to be obtained from any federal, state
or local governmental authority with jurisdiction over and pursuant to any
Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Excluded Insurance Subsidiary Liabilities" shall have the meaning
set forth in Section 1.3 hereof.
"Facilities Agreement" shall have the meaning set forth in Section
3.3 hereof.
"FBL" shall have the meaning set forth in the preamble to this
Agreement.
"FBL Disclosure Schedule" shall mean the disclosure schedule
delivered by FBL to KFBS, dated the date hereof.
"FBL Pension Plan' shall have the meaning set forth in Section 6.9.
"FBL Real Property" shall have the meaning set forth in Section 5.11.
"FBL SEC Documents" shall have the meaning set forth in Section 5.18
hereof.
"FBL Subsidiaries" shall mean the Subsidiaries of FBL.
"FBL Insurance Subsidiary" shall mean each FBL Subsidiary that
transacts or is authorized to transact an insurance or reinsurance business.
"FBLI" shall have the meaning set forth in the preamble to this
Agreement.
"Financial Statements" shall mean balance sheets, statements of
income, changes in capital and surplus and statements of cash flows,
including, but not limited to, all notes, schedules, exhibits and other
attachments thereto, whether consolidated, combined or separate or audited or
unaudited or prepared in accordance with SAP or GAAP.
"GAAP" shall mean generally accepted accounting principles in the
United States of America applied on a consistent basis.
"GAAP Financial Statements" shall mean Financial Statements prepared in
accordance with GAAP.
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"Governmental Approvals" shall mean the Consent required to be
obtained from the Kansas Superintendent of Insurance, and, if required, from
the Iowa Commissioner of Insurance.
"Governmental Entity" or "Governmental Entities" shall mean a court,
executive office, legislature, governmental agency, commission or
administrative, regulatory or self-regulatory authority or instrumentality,
domestic or foreign.
"Graham Liability" shall have the meaning set forth in Section 1.2.
"Hazardous Substances" shall mean chemicals, products, compounds,
by-products, pollutants, contaminants, hazardous wastes or toxic or hazardous
substances regulated under any Environmental Law, including, but not limited
to, asbestos or asbestos-containing materials, polychlorinated biphenyls,
pesticides and oils, petroleum and petroleum products.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"Insurance Contract" shall mean any Contract of insurance,
including, but not limited to, reinsurance contracts, variable annuity and
fixed annuity contracts or products, life insurance contracts, and funding
agreements.
"Insurance License" shall mean a License granted by a Governmental
Entity to transact an insurance or reinsurance business, issue fixed or variable
annuity contracts or products, or issue life insurance contracts.
"Insurance Subsidiary" shall have the meaning set forth in the
preamble to this Agreement.
"Insurance Subsidiary Assets" shall have the meaning set forth in
Recital A to this Agreement.
"Insurance Subsidiary Consideration" shall have the meaning set forth
in Section 1.3 hereof.
"Insurance Subsidiary GAAP Financial Statements" shall have the meaning
set forth in Section 7.2(g) hereof.
"Insurance Subsidiary SAP Statements" shall have the meaning set forth
in Section 4.6(d) hereof.
"Insurance Subsidiary 2000 Quarterly Statement" shall have the meaning
set forth in Section 4.7.
"Intellectual Property" shall mean: trademarks, service marks, brand
names, certification marks, trade dress, assumed names, trade names and other
indications of origin, good will
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associated with the foregoing and registrations in any extension,
modification or renewal of any such registration or application; inventions,
discoveries and ideas, whether patentable or not in any jurisdiction;
patents, applications for patents (including but not limited to divisions,
continuations, continuations in part and renewal applications), and any
renewals, extensions or reissues thereof, in any jurisdiction; nonpublic
information, trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any Person; writings
and other works, whether copyrightable or not in any jurisdiction, and any
renewals or extensions thereof; and any similar intellectual property or
proprietary rights; provided, that Intellectual Property shall include
Computer Software.
"Investment Advisers Act" shall mean the Investment Advisers Act of
1940, as amended, and the rules and regulations of the SEC promulgated
thereunder.
"Investment Assets" shall mean bonds, notes, debentures, mortgage
loans, collateral loans and all other instruments of indebtedness, stocks,
partnership or joint venture interests and all other equity interests
(including, but not limited to, equity interests in Subsidiaries or other
Affiliates), real estate and leasehold and other interests therein,
certificates issued by or interests in trusts, cash on hand and on deposit,
personal property and interests therein and all other assets acquired for
investment purposes.
"Investment Company Act" shall mean the Investment Company Act of
1940, as amended, and the rules and regulations of the SEC promulgated
thereunder.
"IRS" shall mean the Internal Revenue Service or any successor
agency.
"KFB" shall have the meaning set forth in the preamble to this
Agreement.
"KFBS" shall have the meaning set forth in the preamble to this
Agreement.
"KFBS Acquired Assets" shall have the meaning set forth in Recital A
to this Agreement.
"KFBS Consideration" shall have the meaning set forth in Section 1.2.
"KFBS Disclosure Schedule" shall mean the disclosure schedule
delivered by KFBS to FBL, dated the date hereof.
"KFBS Pension Plan" shall have the meaning set forth in Section 6.9.
"KFBS Retained Assets" shall have the meaning set forth in Recital A.
"Knowledge of FBL" shall mean the actual knowledge of William J.
Oddy, James W. Noyce, James P. Brannen, Donald J. Seibel, Robert A. Simons
and David A. McNeill.
"Knowledge of KFBS" shall mean, the actual knowledge of: Stan
Ahlerich, Michael Wilds, Charles Arthur III, Gary Walter, Dave Denning, Jim
Cahn and Dan Yunk.
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"Law" shall mean a law, statute, ordinance, rule or regulation
enacted or promulgated, or Order issued or rendered, by any Governmental
Entity.
"Liability" shall mean a liability, obligation, claim or cause of
action (of any kind or nature whatsoever, whether absolute, accrued,
contingent or other, and whether known or unknown), including, but not
limited to, any liability, obligation, claim or cause of action arising
pursuant to or as a result of an Insurance Contract or pursuant to any
Environmental Claim.
"License" shall mean a license, certificate of authority, permit or
other authorization to transact an activity or business, whether granted by a
Governmental Entity or by any other Person.
"Lien" shall mean a lien, mortgage, deed of trust, deed to secure
debt, pledge, assessment, security interest, lease, sublease, charge, claim,
levy or other encumbrance of any kind.
"Losses" shall mean all losses, claims, damages, costs, expenses,
liabilities and judgments, including, but not limited to, court costs and
attorneys' fees.
"Material Adverse Effect" shall mean a material adverse effect on
the business, results of operations or financial condition of any party or
any of its Subsidiaries taken as a whole, or on the ability of such party to
consummate the transactions contemplated by this Agreement.
"Meeting Request" shall have the meaning set forth in Section 8.2.
"NAIC" shall mean the National Association of Insurance
Commissioners.
"NPL" shall mean the National Priority List.
"Order" shall mean an order, writ, ruling, judgment, directive,
injunction or decree of any arbitrator or Governmental Entity.
"Pension Plan" shall have the meaning set forth in Section 4.20(a)
hereof.
"Permitted Liens" shall mean, as to a party hereto, (a) those Liens
set forth in the FBL Disclosure Schedule or the KFBS Disclosure Schedule, or
otherwise approved in writing by the other party, (b) any Lien that is set
forth in the public records or in title reports or title insurance binders
that have been made available to the other party relating to any interest in
the real property set forth in the FBL Disclosure Schedule or the KFBS
Disclosure Schedule and any lease or sublease, (c) Liens for water and sewer
charges and current Taxes not yet due and payable or being contested in good
faith, (d) Liens arising from securities lending activities undertaken in the
ordinary course of business of a Person, (e) other Liens (including, but not
limited to, mechanic's, courier's, worker's, repairer's, materialman's,
warehouseman's and other similar Liens) arising or incurred in the ordinary
course of business as would not, individually or in the aggregate, materially
adversely affect the value of, or materially adversely interfere with
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the use of, the property subject thereto, and (f) Liens arising or resulting
from any action taken by the other party hereto or any of its respective
Subsidiaries (but not including the execution, delivery or performance of
this Agreement or the Sale).
"Person" shall mean an individual, corporation, partnership,
association, joint stock company, limited liability company, Governmental
Entity, business trust, unincorporated organization or other legal entity.
"Proceedings" shall mean civil, criminal or administrative actions,
suits, hearings, claims, investigations and other similar proceedings.
"Quarterly Statements" shall mean, with respect to any Person, the
quarterly statements of such Person filed with or submitted to the insurance
regulatory body in the jurisdiction in which such Person is domiciled on
forms prescribed or permitted by such regulatory body.
"Rating Agencies" shall mean A.M. Best and Company, Standard and
Poor's Corporation, Moody's Investor Services, Inc., and Duff & Phelps Credit
Rating Agency.
"Real Property" shall mean all land, land improvements and fixtures
owned by, leased to or used in the Business of Insurance Subsidiary.
"Registration Rights Agreement" shall have the meaning set forth in
Section 3.2 hereof.
"Reinsurance Agreements" shall have the meaning set forth in Section
4.7 hereof.
"Reorganization" shall mean the reorganization of KFBS which will
occur between the date of this Agreement and the Closing, including but not
limited to the transfer of the assets and business of Kansas Agricultural
Marketing Association, FBS Services Insurance Agency, Inc., FB Capital
Management of Kansas, Inc., and Travel Agency out of KFBS.
"Royalty Agreement" shall have the meaning set forth in Section 3.3
hereof.
"SAP" shall mean statutory accounting practices prescribed by the
NAIC and prescribed or permitted by the applicable insurance regulatory body
applied on a consistent basis.
"SAP Statements" shall mean Annual Statements and Quarterly
Statements.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Series C Preferred" shall have the meaning set forth in Section 1.2
hereof.
"Subsidiary" of a Person shall mean an Affiliate of such Person more
than fifty percent of any class of voting stock (or of any other form of
voting equity interest in the case of a Person
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that is not a corporation) of which is beneficially owned by the Person
directly or indirectly through one or more other Persons.
"Takeover Statute" shall have the meaning set forth in Section 4.11
hereof.
"Tax or Tax Return" shall mean a report, return or other information
required under any applicable Law to be filed or provided to any Person with
respect to Taxes including, where permitted or required, combined or
consolidated returns for any group of entities that includes FBL or any FBL
Subsidiary on the one hand, or KFBS or Insurance Subsidiary on the other hand.
"Taxes" shall mean any federal, state, county, local or foreign taxes,
charges, fees, levies or other assessments, including all net income, gross
income, premiums, sales and use, ad valorem, transfer, gains, profits, windfall
profits, excise, franchise, real and personal property, gross receipts, capital
stock, production, business and occupation, employment, disability, payroll,
license, estimated, stamp, custom duties, severance or withholding taxes, other
taxes or similar charges of any kind whatsoever imposed by any Governmental
Entity, whether imposed directly on a Person or resulting under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
Law), as a transferee or successor, by Contract or otherwise and includes any
interest and penalties (civil or criminal) on or additions to any such taxes or
in respect of a failure to comply with any requirement relating to any Tax
Return and any expenses incurred in connection with the determination,
settlement or litigation of any such tax liability.
"Tax Ruling" shall have the meaning set forth at Section 4.19(k).
"Termination Notice" shall have the meaning set forth in Section 8.2.
"Third Party Administrator" shall mean any third party administrator of
either FBL or KFBS.
"Title IV Plan" shall have the meaning set forth in Section 4.20(b)
hereof.
"Transactions" shall have the meaning set forth in Recital A hereof.
"Transferred Employees" shall have the meaning set forth at Section
6.9.
"Transition and Indemnity Agreement" shall have the meaning set
forth in Section 3.1.
"Treasury Regulation" shall mean the regulations promulgated by the
U.S. Department of the Treasury pursuant to the Code.
"WARN Act" shall mean the Worker Adjustment and Retraining Notification
Act of 1988, as amended.
"Welfare Plan" shall have the meaning set forth in Section 4.20(a)
hereof.
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[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of FBL, FBLI, KFB, KFBS and Insurance Subsidiary
as of the date first above written.
FBL FINANCIAL GROUP, INC. (FBL) FARM BUREAU LIFE INSURANCE
COMPANY (FBLI)
By: /s/ William J. Oddy By: /s/ William J. Oddy
Name: William J. Oddy Name: William J. Oddy
Title: Chief Executive Officer Title: Chief Executive Officer
KANSAS FARM BUREAU SERVICES, INC. THE KANSAS FARM BUREAU
(KFBS) (KFB)
By: /s/ Stanley R. Ahlerich By: /s/ Stanley R. Ahlerich
Name: Stanley R. Ahlerich Name: Stanley R. Ahlerich
Title: President Title: President
KANSAS FARM BUREAU LIFE INSURANCE
COMPANY, INC. (Insurance Subsidiary)
By: /s/ Stanley R. Ahlerich
Name: Stanley R. Ahlerich
Title: President
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