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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1996
REGISTRATION NO. 33
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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<S> <C>
AMERUS CAPITAL I AMERUS LIFE HOLDINGS, INC.
(Exact name of Registrant as specified in its charter) (Exact name of Registrant as specified in its charter)
DELAWARE IOWA
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
42-6559006 42-1459712
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
6719 6719
(Primary Standard Industrial (Primary Standard Industrial
Classification Code Number) Classification Code Number)
418 SIXTH AVENUE 418 SIXTH AVENUE
DES MOINES, IOWA 50306-2499 DES MOINES, IOWA 50306-2499
(515) 280-1331 (515) 280-1331
(Address, including zip code, and telephone number, (Address, including zip code, and telephone number,
including area code, of Registrant's principal executive including area code, of Registrant's principal executive
offices) offices)
</TABLE>
JAMES A. SMALLENBERGER
SENIOR VICE PRESIDENT AND SECRETARY
AMERUS LIFE HOLDINGS, INC.
418 SIXTH AVENUE
DES MOINES, IOWA 50306-2499
(515) 280-1331
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
<TABLE>
<S> <C>
RICHARD G. CLEMENS, ESQ. WILLIAM D. TORCHIANA, ESQ.
SIDLEY & AUSTIN SULLIVAN & CROMWELL
ONE FIRST NATIONAL PLAZA 125 BROAD STREET
CHICAGO, ILLINOIS 60603 NEW YORK, NEW YORK 10004
(312) 853-7000 (212) 558-4000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE FEE(2)
<S> <C> <C> <C> <C>
Quarterly Income Preferred Securities of AmerUs Capital
I.......................................................
Junior Subordinated Debentures of AmerUs Life Holdings,
Inc.(3).................................................
Guarantee of AmerUs Life Holdings, Inc. with respect to
the Quarterly Income Preferred Securities of AmerUs
Capital I(4)............................................
Total.............................................. 3,450,000 $25.00 $86,250,000 $26,137
</TABLE>
(1) Estimated solely for purposes of determining the registration fee.
(2) Calculated pursuant to Rule 457(a) based on an estimate of the maximum
offering price.
(3) The Junior Subordinated Debentures will be purchased by AmerUs Capital I
with the proceeds of the sale of the Quarterly Income Preferred Securities.
No separate consideration will be received for the Junior Subordinated
Debentures.
(4) No separate consideration will be received for the AmerUs Life Holdings,
Inc. Guarantee. Pursuant to Rule 457(a) no separate fee is payable in
respect of the AmerUs Life Holdings, Inc. Guarantee.
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 8, 1996
3,000,000 PREFERRED SECURITIES
AMERUS CAPITAL I
% CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES,
SERIES A (QUIPS-SM-)*
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT THE ISSUER HAS FUNDS, AS SET FORTH HEREIN, BY
AMERUS LIFE HOLDINGS, INC.
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The % Cumulative Quarterly Income Preferred Securities, Series A (the
"Preferred Securities") offered hereby (the "Preferred Offering"), represent
undivided beneficial interests in the assets of AmerUs Capital I, a trust formed
under the laws of the State of Delaware (the "Issuer" or the "Trust"). AmerUs
Life Holdings, Inc., an Iowa corporation ("ALH"), will be the owner of all of
the beneficial interests represented by common securities (the "Common
Securities") of the Issuer. Wilmington Trust Company is the Property Trustee of
the Issuer. The Issuer exists for the sole purpose of issuing the Preferred
Securities and the Common Securities and investing the proceeds thereof in %
Junior Subordinated Debentures, Series A (QUIDS-SM-)* (the "Junior Subordinated
Debentures"), to be issued by ALH. The Junior Subordinated Debentures will
mature on , 2026, which date may be extended to a date not later
than , 2045 if certain conditions are met. The Preferred Securities
will have a preference under certain circumstances with respect to cash
distributions and amounts payable on liquidation, redemption or otherwise over
the Common Securities. See "Description of the Preferred
Securities--Subordination of Common Securities."
Holders of the Preferred Securities will be entitled to receive preferential
cumulative cash distributions accruing from the date of original issuance and
payable quarterly in arrears on the last day of March, June, September and
December of each year, commencing March 31, 1997, at the annual rate of % of
the liquidation amount of $25 per Preferred Security ("distributions"). ALH has
the right to defer payments of interest on the Junior
(CONTINUED ON NEXT PAGE)
SEE "RISK FACTORS" BEGINNING ON PAGE HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO THE
OFFERING PRICE COMMISSION(1) ISSUER(2)(3)
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<S> <C> <C> <C>
Per Preferred Security.............................................. $25.00 (2) $25.00
Total(4)............................................................ $75,000,000 (2) $75,000,000
</TABLE>
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(1) The Issuer, ALH and AmerUs Life have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures, the
Underwriting Agreement provides that ALH will pay to the Underwriters, as
compensation ("Underwriters' Compensation") for their arranging the
investment therein of such proceeds, $ per Preferred Security (or $ in
the aggregate). See "Underwriting."
(3) Expenses of the offering, which are payable by ALH, are estimated to be
$ .
(4) The Trust has granted the Underwriters an option for 30 days to purchase up
to an additional 450,000 Preferred Securities at the initial public offering
price per Preferred Security, solely to cover over-allotments, if any. If
such option is exercised in full, the total initial public offering price
and proceeds to the Issuer will be $86,250,000 and $86,250,000,
respectively, and the total Underwriters' Compensation paid by ALH for
arranging the investments will be $ . See "Underwriting."
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The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that the Preferred Securities will be ready for delivery in book-entry form only
through the facilities of DTC, on or about , 1996, against payment
therefor in immediately available funds.
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* QUIPS and QUIDS are servicemarks of Goldman, Sachs & Co.
GOLDMAN, SACHS & CO.
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The date of this Prospectus is , 1996.
<PAGE>
IN CONNECTION WITH THIS PREFERRED OFFERING, THE UNDERWRITERS MAY OVER-ALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
PREFERRED SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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(CONTINUED FROM PREVIOUS PAGE)
Subordinated Debentures by extending the interest payment period thereon at any
time or from time to time for up to 20 consecutive quarters with respect to each
deferral period (each an "Extension Period"), provided that no Extension Period
may extend beyond the Stated Maturity (as defined herein) of the Junior
Subordinated Debentures. Upon the termination of any such Extension Period and
the payment of all amounts then due, ALH may elect to begin a new Extension
Period subject to the requirements set forth herein. If interest payments are so
deferred, distributions on the Preferred Securities will also be deferred and
ALH will not be permitted to declare or pay any cash distributions with respect
to ALH's capital stock or debt securities of ALH that rank pari passu with or
junior to the Junior Subordinated Debentures. During an Extension Period,
distributions will continue to accrue, and holders of Preferred Securities will
be required to accrue interest income for United States federal income tax
purposes. See "Description of the Junior Subordinated Debentures--Option to
Extend Interest Payment Period" and "United States Federal Income
Taxation--Original Issue Discount."
ALH has, through the Guarantee, the Trust Agreement, the Preferred
Securities, the Indenture and the Expense Agreement (each as defined herein),
taken together, fully, irrevocably and unconditionally guaranteed all of the
Issuer's obligations under the Trust Securities. See "Relationship Among the
Preferred Securities, the Junior Subordinated Debentures and the Guarantee--Full
and Unconditional Guarantee". The Guarantee of ALH guarantees the payment of
distributions and payments on liquidation or redemption of the Preferred
Securities, but only in each case to the extent of funds held by the Issuer, as
described herein (the "Guarantee"). See "Description of the Guarantee." If ALH
does not make interest payments on the Junior Subordinated Debentures held by
the Issuer, the Issuer will have insufficient funds to pay distributions on the
Preferred Securities. The Guarantee does not cover payment of distributions when
the Issuer does not have sufficient funds to pay such distributions. In such
event, a holder of Preferred Securities may institute a legal proceeding
directly against ALH to enforce payment of such distributions to such holder.
See "Description of Junior Subordinated Debentures-- Enforcement of Certain
Rights by Holders of Preferred Securities." ALH's obligations under the
Guarantee and the Junior Subordinated Debentures are subordinate and junior in
right of payment to all Senior Debt (as defined herein) of ALH.
The Preferred Securities are subject to mandatory redemption, in whole or in
part, upon repayment of the Junior Subordinated Debentures at maturity or their
earlier redemption at a redemption price of $25 per Preferred Security, plus
accrued and unpaid distributions thereon to the date fixed for redemption. See
"Description of Preferred Securities--Redemption." ALH will have the option at
any time on or after , 2001 to redeem, in whole or in part, the
Junior Subordinated Debentures. In addition, ALH also will have the right at any
time, upon occurrence of a Special Event (as defined herein), to redeem, in
whole but not in part, the Junior Subordinated Debentures. See "Description of
Junior Subordinated Debentures--Optional Redemption."
At any time, ALH will have the right to terminate the Issuer and cause the
Junior Subordinated Debentures to be distributed to the holders of the Preferred
Securities in liquidation of the Issuer. If ALH elects to liquidate the Issuer
and thereby causes the Junior Subordinated Debentures to be distributed to
holders of the Preferred Securities in liquidation of the Issuer, ALH shall have
the right to shorten or extend the maturity of such Junior Subordinated
Debentures, provided that it can extend the maturity only if at the time such
election is made and at the time of extension (i) ALH is not in bankruptcy,
otherwise insolvent or in liquidation, (ii) ALH is not in default in the payment
of any interest or principal on the Junior Subordinated Debentures, (iii) the
Issuer is not in arrears on payments of distributions on the
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Preferred Securities and no deferred distributions are accumulated, (iv) the
Junior Subordinated Debentures are rated not less than BBB- by Standard & Poor's
or Baa3 by Moody's or the equivalent by any other nationally recognized
statistical rating organization and (v) the extended Stated Maturity is no later
than the 49th anniversary of the initial issuance of the Preferred Securities.
If ALH shortens or extends the maturity of the Junior Subordinated Debentures,
the Redemption Date for the Preferred Securities will be similarly shortened or
extended. See "Description of Preferred Securities--Redemption".
The Junior Subordinated Debentures are subordinated and junior in right of
payment to all Senior Debt of ALH. After the completion of the Preferred
Offering and the Common Stock Offerings (as defined herein) and the repayment of
debt with the proceeds thereof, ALH will have approximately $81.1 million
principal amount of indebtedness for borrowed money and capital lease
obligations constituting Senior Debt. The terms of the Junior Subordinated
Debentures do not limit ALH's ability to incur additional Senior Debt. ALH is a
non-operating holding company and substantially all of the operating assets of
ALH and its consolidated subsidiaries are owned by its subsidiary, AmerUs Life.
ALH relies primarily on interest and dividends from AmerUs Life to meet its
obligations for payment of principal and interest on its outstanding debt
obligations and corporate expenses. Accordingly, the Junior Subordinated
Debentures will be effectively subordinated to all existing and future
liabilities of ALH's subsidiaries, and holders of Junior Subordinated Debentures
should look only to the assets of ALH for payments on the Junior Subordinated
Debentures. The payment of dividends by AmerUs Life is limited under the
insurance laws of Iowa. See "Description of the Junior Subordinated
Debentures--Subordination."
In the event of the liquidation of the Issuer, the holders of the Preferred
Securities will be entitled to receive for each Preferred Security a Liquidation
Amount of $25 per Preferred Security plus accrued and unpaid distributions
thereon to the date of payment, subject to certain limitations. See "Description
of the Preferred Securities--Liquidation Distribution Upon Dissolution."
The Issuer intends to have the Preferred Securities approved for listing on
the New York Stock Exchange under the symbol . If the Junior Subordinated
Debentures are distributed to the holders of the Preferred Securities upon the
liquidation of the Issuer, ALH will use its best efforts to list the Junior
Subordinated Debentures on the New York Stock Exchange or such other stock
exchanges or other self-regulatory organizations, if any, on which the Preferred
Securities are then listed.
The Preferred Securities will be represented by global certificates
registered in the name of The Depository Trust Company ("DTC") or its nominee.
Beneficial interests in the Preferred Securities will be shown on, and transfers
thereof will be effected only through, records maintained by participants in
DTC. Except as described herein, Preferred Securities in certificated form will
not be issued in exchange for the global certificates. See "Description of
Preferred Securities--Book-Entry-Only Issuance--The Depository Trust Company."
FOR NORTH CAROLINA RESIDENTS: THE COMMISSIONER OF INSURANCE OF THE STATE OF
NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS PREFERRED OFFERING NOR HAS
THE COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
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AVAILABLE INFORMATION
The Trust and ALH have filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement on Form S-1 (together with all
amendments and exhibits thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Preferred Securities, the Junior Subordinated Debentures and the Guarantee. This
Prospectus, which forms a part of the Registration Statement, does not contain
all the information set forth in the Registration Statement, certain parts of
which have been omitted in accordance with the Rules and Regulations of the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
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more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. The Registration
Statement, including the exhibits and schedules filed therewith, may be examined
without charge at the public reference facilities maintained by the Commission
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices at Room 3190, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
13th Floor, New York, New York 10048. Copies of all or any part of the
Registration Statement may be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Commission maintains a Web Site (http.//www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants who file electronically with the Commission.
ALH will be subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, will file reports and other information with the Commission. In
addition, the Trust and ALH intend to furnish to holders of Preferred Securities
annual reports containing consolidated financial statements of ALH certified by
an independent public accounting firm. Such reports and other information may be
inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
No separate financial statements of the Trust have been included herein. ALH
and the Trust do not consider such financial statements material to holders of
the Preferred Securities because the Trust is a newly formed special purpose
entity, has no operating history or independent operations and is not engaged
in, and does not propose to engage in, any activity other than its holding as
trust assets the Junior Subordinated Debentures of ALH and its issuance of the
Preferred Securities and Common Securities. See "The Issuer," "Description of
the Preferred Securities," "Description of the Guarantee" and "Description of
the Junior Subordinated Debentures." The Trust is a statutory business trust
formed under the laws of the State of Delaware. ALH, as of the date hereof,
beneficially owns all of the beneficial interests in the Trust. ALH's and the
Trust's principal executive offices are located at 418 Sixth Avenue, Des Moines,
Iowa 50306-2499, telephone number (515) 280-1331.
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
DETAILED INFORMATION, CONSOLIDATED FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. CERTAIN INSURANCE TERMS AND
OTHER CAPITALIZED TERMS USED IN THIS PROSPECTUS ARE DEFINED IN THE "GLOSSARY OF
CERTAIN INSURANCE AND OTHER DEFINED TERMS" HEREIN AND ARE PRINTED IN BOLD THE
FIRST TIME THEY APPEAR IN TEXT BELOW. FOR PURPOSES OF THIS PROSPECTUS, THE TERM
"ALH" REFERS TO AMERUS LIFE HOLDINGS, INC., EXCLUDING ITS SUBSIDIARIES. THE TERM
"COMPANY" REFERS TO ALH AND ITS SUBSIDIARIES, COLLECTIVELY, UNLESS THE CONTEXT
OTHERWISE REQUIRES. THE TERM "AMERUS LIFE" REFERS AT ALL TIMES TO AMERUS LIFE
INSURANCE COMPANY AND ITS SUBSIDIARIES. THE TERM "AMERICAN MUTUAL LIFE" REFERS
TO AMERICAN MUTUAL LIFE INSURANCE COMPANY PRIOR TO ITS CONVERSION INTO A STOCK
LIFE COMPANY AND NAME CHANGE TO AMERUS LIFE INSURANCE COMPANY ON JUNE 30, 1996,
EXCLUDING AMERUS FINANCIAL SERVICES, INC. ("AFS") AND ITS SUBSIDIARIES (TOGETHER
WITH AFS, THE "NON-LIFE INSURANCE SUBSIDIARIES"). THE TERM "PLAN" REFERS TO THE
PLAN OF REORGANIZATION OF AMERICAN MUTUAL LIFE DATED OCTOBER 27, 1995, THE
EFFECTIVE DATE OF WHICH WAS JUNE 30, 1996.
THE INFORMATION CONTAINED IN THIS PROSPECTUS, UNLESS OTHERWISE INDICATED,
GIVES EFFECT TO (I) THE REORGANIZATION (AS DEFINED HEREIN) OF AMERICAN MUTUAL
LIFE AND (II) THE DISTRIBUTION BY AMERUS LIFE OF ITS NON-LIFE INSURANCE
SUBSIDIARIES (THE "DISTRIBUTION") TO AMERUS GROUP CO. ("AMERUS GROUP"), THE
COMPANY'S IMMEDIATE PARENT CORPORATION, AS IF BOTH HAD BEEN COMPLETED AT THE
BEGINNING OF THE PERIODS IDENTIFIED HEREIN AND ASSUMES THAT, DURING THE PERIODS
PRESENTED, THE COMPANY OWNED AND OPERATED THE ASSETS IT WILL OWN AS A RESULT OF
SUCH REORGANIZATION AND DISTRIBUTION. THE INFORMATION CONTAINED HEREIN, UNLESS
OTHERWISE INDICATED, DOES NOT GIVE EFFECT TO A CAPITAL CONTRIBUTION ( THE
"CAPITAL CONTRIBUTION") BY AMERUS LIFE TO AFS OF (I) ASSETS CONSISTING PRIMARILY
OF COMMERCIAL MORTGAGES, REAL ESTATE AND FIXED MATURITY SECURITIES HAVING AN
APPROXIMATE NET CARRYING VALUE OF $79 MILLION AND (II) A 9% SURPLUS NOTE, DUE
, 2006, IN THE FACE AMOUNT OF $50 MILLION ISSUED BY AMERUS LIFE TO
AFS. UNLESS OTHERWISE SPECIFIED, THE INFORMATION CONTAINED HEREIN ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION IN THE PUBLIC OFFERING.
ALL FINANCIAL INFORMATION IN THIS PROSPECTUS IS PRESENTED IN ACCORDANCE WITH
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOR LIFE INSURANCE
COMPANIES ("GAAP") UNLESS OTHERWISE SPECIFIED. STATUTORY DATA INCLUDED HEREIN
HAVE BEEN DERIVED FROM THE ANNUAL AND QUARTERLY STATEMENTS OF AMERICAN MUTUAL
LIFE AS FILED WITH INSURANCE REGULATORY AUTHORITIES AND PREPARED IN ACCORDANCE
WITH STATUTORY ACCOUNTING PRACTICES.
THE COMPANY
The Company is engaged in the business of marketing, UNDERWRITING and
distributing a broad range of individual life insurance and ANNUITY products to
individuals and businesses in 45 states and the District of Columbia. The
Company's primary product offerings consist of WHOLE LIFE, UNIVERSAL LIFE and
TERM LIFE INSURANCE policies and FIXED ANNUITIES. In addition, on April 1, 1996
the Company acquired a 34% interest in a variable life insurance and annuity
company through a joint venture arrangement (the "Ameritas Joint Venture") with
Ameritas Life Insurance Corp. ("Ameritas"). The Company's distribution systems
now market fixed annuities issued by Ameritas Variable Life Insurance Company
("AVLIC") and have begun to sell AVLIC's variable life insurance and VARIABLE
ANNUITY products. The Company has a history of competitive product performance
and, as a result, is consistently ranked by A.M. BEST among industry leaders in
delivering low-cost products to its customers.
The Company's subsidiary, AmerUs Life, was originally incorporated in 1896
as a mutual insurance company under the name Central Life Assurance Society of
the United States. Its name was changed to American Mutual Life Insurance
Company in 1994 following the merger of American Mutual Life Insurance Company
("Old AML") into Central Life Assurance Company ("Central Life"). On June 30,
1996, American Mutual Life was converted into a stock life insurance company
pursuant to the Plan and its name was changed to AmerUs Life. As of June 30,
1996, AmerUs Life had approximately 423,000 life insurance POLICIES and annuity
contracts outstanding and individual life insurance IN FORCE, net of
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REINSURANCE, of approximately $26.2 billion. As of June 30, 1996, the Company
had total assets of $4.2 billion and total shareholders' equity of $375 million
(prior to the Offerings, after giving effect to the Capital Contribution).
The Company's target markets are individuals in the middle and upper income
brackets and small businesses. Its geographic focus is national in scope (except
for Connecticut, Maine, New Hampshire, New York and Vermont, in which the
Company is not licensed to do business), and it primarily serves suburban and
rural areas. The Company distributes its products primarily through a
combination of CAREER GENERAL AGENCY and PERSONAL PRODUCING GENERAL AGENCY
("PPGA") distribution systems, as well as a network of independent brokers. The
career general agency system consists of a network of 33 career general
agencies, with approximately 525 career agents. The PPGA system is comprised of
approximately 450 PPGAs, with approximately 1,000 agents. Variable life
insurance products and the fixed and variable annuities offered by the Ameritas
Joint Venture are marketed through the Company's distribution systems and the
distribution systems of Ameritas and AVLIC, which consist of approximately 250
agents and 450 independent broker-dealers (with approximately 7,500 registered
representatives), respectively.
AmerUs Life's claims-paying ability is rated "AA-" (Very high) by DUFF &
PHELPS and "A" (Good) by STANDARD & POOR'S. AmerUs Life's financial strength is
rated "A" (Excellent) by A.M. Best and "A2" (Good) by MOODY'S. See "Risk
Factors--Importance of Ratings."
BUSINESS STRATEGY
The Company's business strategy to achieve earnings growth and increase
shareholder value is focused on managing certain operating fundamentals that
historically have compared favorably to the industry. The Company intends to
utilize these operating strengths to differentiate its products by maintaining
its position and reputation as a low-cost producer that provides high-value
products to its life insurance and annuity customers, while also providing
superior service to both agents and customers. The Company believes it is well
positioned to compete effectively based upon a number of strengths including its
strong operating performance, customer-driven product offerings, productive and
diversified distribution systems, sophisticated asset/liability management
capabilities and a customer service orientation. In addition, the Company
intends to continue to seek new business opportunities through mergers,
acquisitions and strategic alliances. From 1980 through 1995, as a result of
mergers and acquisitions, as well as through internal growth, the Company
sustained a compound annual growth rate (on a statutory basis) of 11.8% in
premium income, of 13.2% in assets, and of 12.6% in surplus and ASSET VALUATION
RESERVE, versus 6.8%, 10.4% and 8.2%, respectively, for the industry as a whole.
(Source for industry growth rates: A.M. Best).
The Company believes that its operating performance is significantly
impacted by four basic elements: (i) MORTALITY, (ii) PERSISTENCY, (iii)
operating expenses, and (iv) investment yield. Management focuses on these
principal elements to generate strong operating performance and enhance
shareholder value. The Company believes that its results for each of these
elements for the last several years compares favorably with others in the life
insurance industry. In addition to realizing efficiencies from the merger of Old
AML into Central Life in 1994, the Company has benefited from its efficient use
of technology, its advanced customer service systems, its variable-cost based
distribution system, and its sophisticated asset/liability management system.
The Company has other strengths which enable it to compete effectively in
the industry. The Company's products have a long history of being competitive
within the industry, as measured by data compiled and published by A.M. Best.
See "Business--Products." The Company also has a productive and diversified
distribution system, with a distribution network comprised of a career general
agency system, a PPGA system, distribution channels available to it through the
Ameritas Joint Venture and a sales network of certain of the Company's
affiliates.
Management believes that mergers, acquisitions and strategic alliances will
be necessary to more fully utilize the Company's distribution and administrative
capacity and to obtain improved economies of
6
<PAGE>
scale and a lower cost structure. The mutual holding company structure provides
the Company with access to the capital markets, creating the flexibility to
selectively pursue acquisitions of stock insurance companies and to continue to
pursue mergers (through AMHC) with mutual insurance companies. The Company has
historically sought mergers, acquisitions and strategic alliances with the goal
of improving its position in existing market segments or entering desirable new
market segments. Based on the Company's success in identifying and effectively
implementing mergers, acquisitions and strategic alliances, management intends
to actively and selectively participate in such transactions in the future as a
means to further enhance shareholder value. Notable recent activities include
the combination by merger of Old AML into Central Life in 1994, and the Ameritas
Joint Venture which was completed in April 1996.
7
<PAGE>
ORGANIZATIONAL STRUCTURE
The following chart illustrates the general organization of AMHC and its
subsidiaries, including the Company, after the Preferred Offering and the Common
Stock Offerings:
[GRAPH]
* The Non-Life Insurance Subsidiaries consist of AFS and its subsidiaries,
which include AmerUs Bank, FSB, AmerUs Mortgage, Inc., Iowa Realty Co., Inc.
and AmerUs Properties, Inc.
** AmerUs Life participates in the Ameritas Joint Venture through its ownership
interest in AMAL Corporation, a Nebraska corporation ("AMAL"). See
"Business--Ameritas Joint Venture."
8
<PAGE>
THE REORGANIZATION AND DISTRIBUTION OF THE NON-LIFE INSURANCE SUBSIDIARIES
On October 27, 1995, the Board of Directors of American Mutual Life adopted
the Plan, which authorized American Mutual Life to reorganize into a mutual
insurance holding company structure (the "Reorganization"). The Iowa
Commissioner of Insurance (the "Iowa Commissioner") held a public hearing on the
Reorganization on November 21, 1995. The Plan was approved by American Mutual
Life's policyowners on November 28, 1995, and the Iowa Commissioner approved the
Plan on December 13, 1995. The Reorganization became effective on June 30, 1996
(the "Effective Date"). American Mutual Life was the first company to obtain
approval under the Iowa mutual insurance holding company statute to form a
mutual insurance holding company.
Pursuant to the Reorganization, American Mutual Life formed AMHC as a mutual
insurance holding company and American Mutual Life was converted into a stock
life insurance company and its name was changed to AmerUs Life Insurance
Company. As part of the Reorganization, the policyowners' contract rights in
their insurance policies and annuities remained with AmerUs Life and the
policyowners automatically became MEMBERS of AMHC, and thereby became entitled
to vote for directors of AMHC. Purchasers of insurance policies and annuities
from AmerUs Life after the Reorganization automatically become members of AMHC
(subject to certain exceptions and conditions set forth in the Plan).
As part of the Reorganization, all of the shares of capital stock of AmerUs
Life were issued to AMHC. Subsequent to the Reorganization, on August 1, 1996,
AMHC contributed all of its shares of capital stock of AmerUs Life to AmerUs
Group. The Company was formed on August 1, 1996, as of which date all of its
shares of capital stock were issued to AmerUs Group.
Prior to the Distribution, AmerUs Life made the Capital Contribution to AFS.
The net assets contributed in the Capital Contribution had an aggregate carrying
value of approximately $129 million as of the date of contribution. Following
the Capital Contribution, a series of transactions was undertaken by the Company
and its AFFILIATES. AmerUs Life effected the Distribution, pursuant to which it
distributed AFS and the other Non-Life Insurance Subsidiaries to AmerUs Group.
Immediately after the Distribution, AmerUs Group contributed all of the shares
of common stock in AmerUs Life to the Company. Under this structure, the Company
is an intermediate holding company, with AmerUs Group as its direct parent
company and AmerUs Life as its wholly-owned subsidiary. Under Iowa law, AMHC is
required to retain direct or indirect ownership and control of shares
representing a majority of the vote of the outstanding capital stock of the
Company. Immediately following the Distribution, the Company entered into a bank
credit facility pursuant to which it borrowed $50 million in term debt and $125
million under a revolving line of credit (the "Bank Credit Facility"). The
Company used the proceeds from such borrowings to make a $175 million capital
contribution to AmerUs Life. The Company will use certain proceeds of the
Preferred Offering and the Common Stock Offerings (as defined below) to repay
such borrowings.
The Distribution effectively separated AMHC's non-life insurance businesses
from the life insurance businesses owned by the Company, such that the companies
engaged in non-life insurance businesses are no longer subsidiaries of the
Company. See "The Reorganization and Distribution of the Non-Life Insurance
Subsidiaries."
9
<PAGE>
AMERUS CAPITAL I
AmerUs Capital I is a statutory business trust formed under Delaware law.
The Issuer exists for the exclusive purposes of (i) issuing the Preferred
Securities and Common Securities representing undivided beneficial interests in
the assets of the Issuer, (ii) investing the gross proceeds of the sale of the
Preferred Securities and Common Securities in the Junior Subordinated Debentures
and (iii) engaging in only those other activities necessary or incidental
thereto. All of the Common Securities, having an aggregate liquidation amount
equal to 3% of the total capital of the Issuer, will be owned by ALH. The Common
Securities will rank pari passu, and payments will be made thereon pro rata,
with the Preferred Securities, except that upon the occurrence and continuance
of an event of default under the Amended and Restated Trust Agreement (the
"Trust Agreement"), among ALH as Depositor and Wilmington Trust Company, as
Property Trustee, and the Administrative Trustees named therein, the rights of
the holders of the Common Securities to payment in respect of distributions and
payments upon liquidation, redemption and otherwise will be subordinated to the
rights of the holders of the Preferred Securities. The Property Trustee and
Administrative Trustees are referred to herein, collectively, as the "Trustees."
Subject to the right of holders of Preferred Securities to appoint a substitute
Property Trustee upon the occurrence of certain events described herein, ALH, as
owner of all of the Common Securities, has the exclusive right (subject to the
provisions of the Trust Agreement) to appoint, remove or replace the Property
Trustee, the duties and obligations of which will be governed by the Trust
Agreement. ALH will pay all fees and expenses related to the Issuer and the
offering of the Securities (as defined below).
THE PREFERRED OFFERING
<TABLE>
<CAPTION>
Issuer.............................. AmerUs Capital I
<S> <C>
Securities Offered.................. $75,000,000 of % Cumulative Quarterly Income
Preferred Securities.
Ownership........................... The ownership interests in the Trust will be
evidenced by (i) a class of Preferred Securities
representing approximately 97% of the ownership
interests in the Trust and (ii) a class of Common
Securities (together with the Preferred Securities,
the "Trust Securities") representing approximately 3%
of the ownership interests in the Trust.
Maturity of the Junior Subordinated
Debentures......................... , 2026, but the maturity date may be extended for up
to an additional 19 years at the option of ALH,
provided certain conditions are met (such date, as it
may be extended, the "Stated Maturity"). The
Preferred Securities are mandatorily redeemable upon
the maturity or earlier redemption of the Junior
Subordinated Debentures.
Distribution Payment Dates.......... The last day of March, June, September and December,
commencing March 31, 1997.
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Extension of Interest Payment ALH will have the right to extend the interest
Period............................. payment period on the Junior Subordinated Debentures
for up to 20 consecutive quarters, and, as a
consequence during this period, quarterly
distributions on the Preferred Securities would be
deferred (but will continue to accrue with interest).
During an Extension Period, neither ALH nor any of
its subsidiaries shall (i) declare or pay any
dividends or distributions (other than dividends or
distributions in common stock of ALH) on, or redeem,
purchase, acquire or make a liquidation payment with
respect to, any of ALH's outstanding capital stock or
(ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem
any debt securities that rank pari passu with or
junior to the Junior Subordinated Debentures or make
any guarantee payments with respect to the foregoing.
This deferral feature cannot be used to extend the
maturity of the Junior Subordinated Debentures.
Guarantee........................... The Preferred Securities will be guaranteed by ALH to
the limited extent set forth herein.
Mandatory Redemption................ The Preferred Securities are subject to mandatory
redemption upon repayment of the Junior Subordinated
Debentures at maturity or their earlier redemption.
ALH will have the option at any time on or after
, 2001, to redeem, in whole or in part,
the Junior Subordinated Debentures, at par, plus
accrued and unpaid interest, if any, through the
redemption date. ALH will also have the right at any
time, upon the occurrence of a Special Event (as de-
fined herein), to redeem, in whole but not in part,
the Junior Subordinated Debentures.
Liquidation Amount.................. $25.00 per Preferred Security (the "Liquidation
Amount").
Subordination of Common Income distributions, payments of redemption prices
Securities......................... and amounts distributed in connection with the
liquidation of the Trust will be made pari passu
among holders of Preferred Securities and ALH, as
holder of the Common Securities, except that, in the
event of a default by ALH on the Junior Subordinated
Debentures, (i) full income distributions and
payments of redemption prices will be made on the
Preferred Securities before further income
distributions or payments of redemption prices are
made on the Common Securities, and (ii) the full
liquidation preference will be paid on the Preferred
Securities in the event of a liquidation of the Trust
before any liquidating distribution is made on the
Common Securities.
Use of Proceeds..................... All of the proceeds from the sale of Preferred
Securities will be invested by the Trust in the
Junior Subordinated Debentures. ALH will use the
proceeds from issuance of the Junior Subordinated
Debentures to repay debt which is outstanding under
to the Bank Credit Facility.
Listing............................. The issuer intends to have the Preferred Securities
approved for listing on the New York Stock Exchange
under the symbol .
</TABLE>
11
<PAGE>
THE COMMON STOCK OFFERINGS
Up to shares of Class A Common Stock of ALH are being offered
by the Company in a subscription offering (the "Subscription Offering") in
accordance with priority subscription rights provided under the Plan to eligible
policyowners of AmerUs Life. The Subscription Offering commenced on November ,
1996. The Company intends to offer all or a portion of the shares of Class A
Common Stock not subscribed for in an underwritten public offering (the "Public
Offering," and together with the Subscription Offering, the "Common Stock
Offerings"). The consummation of the Common Stock Offerings is not conditioned
upon completion of this Preferred Offering and, although it is currently the
Company's intention to complete the Common Stock Offerings prior to or
contemporaneously with this Preferred Offering, there can be no assurance that
the Common Stock Offerings will be completed prior to the completion of this
Preferred Offering. See "The Common Stock Offerings."
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The summary consolidated financial data below for each of the three years
ending December 31, 1995 are derived from the Consolidated Financial Statements
of the Company, which financial statements have been audited by KPMG Peat
Marwick LLP, independent auditors. The summary consolidated financial data
provided below for each of the six-month periods ending June 30, 1996 and 1995
and for each of the two years ending December 31, 1992 are derived from the
unaudited consolidated financial statements of the Company.
The foregoing give effect to the Reorganization and the Distribution as if
both had been completed prior to the periods presented, but do not give effect
to the Capital Contribution. In the opinion of management, the financial
information presented for all interim periods reflects all adjustments
(consisting only of normal recurring adjustments) necessary for a full
presentation of such data. Results for the six-month periods ending June 30,
1996 and 1995 are not necessarily indicative of results that may be expected for
any other interim period or the year as a whole. This data should be read in
conjunction with (i) "Management's Discussion and Analysis of Results of
Operations and Financial Condition," (ii) the audited Consolidated Financial
Statements of the Company as of December 31, 1995 and 1994, and for each of the
years in the three-year period ended December 31, 1995, which financial
statements have been audited by KPMG Peat Marwick LLP, independent auditors,
together with the related notes and the report thereon, (iii) the unaudited
consolidated financial statements of the Company as of June 30, 1996 and 1995
and for each of the six-month periods ended June 30, 1996 and 1995 and (iv)
other financial data included elsewhere in this Prospectus.
12
<PAGE>
<TABLE>
<CAPTION>
AS OF OR FOR THE SIX
MONTHS ENDED JUNE AS OF OR FOR THE YEAR ENDED DECEMBER 31,(A)
30,(A)
-------------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Revenues:
Insurance premiums.............................. $ 123.3 $ 121.3 $ 244.1 $ 237.9 $ 226.4 $ 192.9 $ 186.9
Product charges................................. 29.3 29.5 57.3 56.3 57.4 57.2 50.8
Net investment income........................... 143.9 141.3 285.2 275.7 269.9 273.1 268.6
Realized gains (losses) on investments.......... 64.4 24.1 51.4 (19.9) 15.5 10.1 15.7
Other income.................................... 1.3 0.3 5.4 2.4 2.4 0.9 3.6
--------- --------- --------- --------- --------- --------- ---------
Total revenues.................................... 362.2 316.5 643.4 552.4 571.6 534.2 525.6
Benefits and expenses:
Total policyowner benefits...................... 189.3 188.2 374.6 369.9 364.3 334.8 327.8
Total expenses.................................. 55.1 49.4 108.9 111.4 106.0 100.0 87.6
Dividends to policyowners....................... 26.3 24.0 49.4 45.0 45.5 42.1 40.9
--------- --------- --------- --------- --------- --------- ---------
Total benefits and expenses....................... 270.7 261.6 532.9 526.3 515.8 476.9 456.3
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes........................ 91.5 54.9 110.5 26.1 55.8 57.3 69.3
Income tax expense................................ 33.6 20.9 41.2 19.4 21.4 18.6 24.5
--------- --------- --------- --------- --------- --------- ---------
Income before cumulative effect of a change in
accounting principles............................ 57.9 34.0 69.3 6.7 34.4 38.7 44.8
Cumulative effect of a change in accounting
principles, net of tax........................... 0.0 0.0 0.0 0.0 (3.2) 0.0 0.0
--------- --------- --------- --------- --------- --------- ---------
Net income........................................ $ 57.9 $ 34.0 $ 69.3 $ 6.7 $ 31.2 $ 38.7 $ 44.8
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Earnings per share................................
CONSOLIDATED BALANCE SHEET DATA:
Total invested assets............................. $ 3,824.1 $ 3,415.1 $ 3,965.0 $ 3,491.7 $ 3,639.3 $ 3,274.8 $ 3,155.8
Total assets...................................... 4,274.0 4,243.1 4,371.9 4,036.9 4,030.7 3,707.6 3,572.5
Total liabilities................................. 3,770.0 3,747.4 3,832.0 3,618.6 3,524.8 3,286.4 3,195.6
Total shareholders' equity (B).................... 504.0 495.7 539.9 418.3 505.9 421.2 376.9
OTHER OPERATING DATA:
Adjusted net income (C)........................... $ 21.0 $ 19.1 $ 38.0 $ 34.4 $ 24.2 $ 32.1 $ 36.3
Adjusted earnings per share (C)................... -- -- -- --
Adjusted return on average equity (C)............. 8.0% 8.4% 7.9% 7.4% 5.2% 8.0% 10.5%
Adjusted pro forma net income (D)................. $ 21.1 $ -- $ 39.4 -- -- -- --
Adjusted pro forma earnings per share (D)......... -- -- -- --
Adjusted pro forma return on average equity (D)... 8.7% -- 8.9% -- -- -- --
Individual life insurance in force, net of
reinsurance...................................... $ 26,219 $ 25,631 $ 25,984 $ 25,282 $ 24,698 $ 23,947 $ 23,181
Number of employees............................... 405 406 406 457 489 505 526
STATUTORY DATA:
Statutory premiums and deposits:
Individual life................................. $ 158.6 $ 152.1 $ 307.1 $ 296.4 $ 286.3 $ 270.2 $ 261.7
Annuities (E)................................... 56.5 112.7 197.1 187.8 90.4 65.2 108.5
</TABLE>
- ------------------
(A) The merger of Old AML into Central Life, which was consummated in 1994, has
been accounted for as a pooling of interests transaction.
(B) Amounts reported prior to June 30, 1996 reflect policyowners' equity. From
December 31, 1993, results reflect the impact of SFAS 115, "Accounting for
Certain Investments in Debt and Equity Securities." See Note 2 to
Consolidated Financial Statements.
(C) Adjusted data reflects net income adjusted to eliminate certain items which
management believes are not indicative of overall operating trends,
including realized gains and losses, merger-related costs, reorganization
costs, curtailment gain, and SFAS 106 transition obligation, all of which
are net of tax, and mutual life insurance company EQUITY ADD-ON TAX. See
"Management's Discussion and Analysis of Results of Operations and
Financial Condition--Adjusted Net Income."
(D) Amounts represent net income adjusted for the items set forth in footnote
(C) above and the effects of the Common Stock Offerings and the Preferred
Offering. See "Unaudited Pro Forma Condensed Consolidated Financial
Statements."
(E) Effective May 1996, substantially all new sales of individual deferred
annuities are made through the Ameritas Joint Venture. See
"Business--Ameritas Joint Venture."
13
<PAGE>
RISK FACTORS
POTENTIAL INVESTORS SHOULD CAREFULLY CONSIDER THE "RISK FACTORS" AND OTHER
INFORMATION IN THIS PROSPECTUS PRIOR TO MAKING AN INVESTMENT DECISION REGARDING
THE PREFERRED SECURITIES.
RISK FACTORS RELATING TO THE PREFERRED SECURITIES:
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE GUARANTEE
AND THE JUNIOR SUBORDINATED DEBENTURES
ALH's obligations under the Guarantee are unsecured and rank subordinate and
junior in right of payment to all Senior Debt of ALH. The obligations of ALH
under the Junior Subordinated Debentures are subordinate and junior in right of
payment to all present and future Senior Debt of ALH and pari passu with
obligations to or rights of ALH's other general unsecured creditors. ALH is a
non-operating holding company and substantially all of the operating assets of
ALH and its consolidated subsidiaries are owned by its subsidiary, AmerUs Life.
ALH relies primarily on interest and dividends from AmerUs Life to meet its
obligations for payment of principal and interest on its outstanding debt
obligations and corporate expenses. Accordingly, the Junior Subordinated
Debentures will be effectively subordinated to all existing and future
liabilities of ALH's subsidiaries, and holders of Junior Subordinated Debentures
should look only to the assets of ALH for payments on the Junior Subordinated
Debentures. The payment of dividends by AmerUs Life is limited under the
insurance laws of Iowa. See "Supervision and Regulation--Regulation of AmerUs
Life." There are no terms in the Preferred Securities, the Junior Subordinated
Debentures or the Guarantee that limit ALH's ability to incur additional
indebtedness, including Senior Debt. After the completion of the Preferred
Offering and the Common Stock Offerings and the repayment of debt with the
proceeds thereof, ALH will have approximately $81.1 million of principal amount
of indebtedness for borrowed money and capital lease obligations constituting
Senior Debt. See "Description of the Guarantee--Status of the Guarantee" and
"Description of the Junior Subordinated Debentures--Subordination."
The ability of the Issuer to pay amounts due on the Preferred Securities is
solely dependent upon ALH making payments on the Junior Subordinated Debentures
as and when required.
RIGHTS UNDER THE GUARANTEE
The Guarantee will be qualified as an indenture under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"). The Property Trustee
(herein sometimes called the "Trustee") will act as indenture trustee under the
Guarantee for the purposes of compliance with the Trust Indenture Act and to
hold the Guarantee for the benefit of the holders of the Trust Securities. The
Guarantee guarantees to the holders of the Trust Securities the payment (but not
the collection) of (i) any accrued and unpaid distributions that are required to
be paid on the Preferred Securities, to the extent the Trust has funds available
therefor, (ii) the redemption price of $25 per Preferred Security, including all
accrued and unpaid distributions with respect to Preferred Securities called for
redemption by the Trust, to the extent the Trust has funds available therefor
and (iii) upon a voluntary or involuntary dissolution, winding-up or termination
of the Trust (other than in connection with the distribution of Junior
Subordinated Debentures to the holders of Preferred Securities or a redemption
of all the Preferred Securities), the lesser of (a) the aggregate of the
Liquidation Amount and all accrued and unpaid distributions on the Trust
Securities to the date of the payment to the extent the Trust has funds
available therefor or (b) the amount of assets of the Trust remaining available
for distribution to holders of the Trust Securities in liquidation of the Trust.
The holders of not less than a majority in aggregate Liquidation Amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or to direct
the exercise of any trust power conferred upon the Trustee under the Guarantee.
Any holder of the Preferred Securities may institute a legal proceeding directly
against ALH to enforce its rights under the Guarantee without first instituting
a legal proceeding against the Issuer, the Guarantee Trustee or any other person
or entity. If ALH were to default on its obligation to pay amounts payable under
the Junior Subordinated Debentures, the Issuer would lack funds for the payment
of distributions or amounts payable on redemption of the Preferred Securities or
otherwise, and, in such event, holders of the Preferred Securities would not be
able to rely upon the Guarantee for
14
<PAGE>
payment of such amounts. Instead, in the event an Event of Default under the
Indenture shall have occurred and be continuing and such event is attributable
to the failure of ALH to pay interest on or principal on the Junior Subordinated
Debentures on the payment date on which such payment is due and payable, then a
holder of Preferred Securities may institute a legal proceeding directly against
ALH for enforcement of payment to such holder of the principal of or interest on
such Junior Subordinated Debentures having a principal amount equal to the
aggregate Liquidation Amount of the Preferred Securities of such holder (a
"Direct Action"). Except as set forth herein, holders of the Junior Subordinated
Debentures will not be able to exercise directly any other remedy available to
the holders of the Junior Subordinated Debentures or assert directly any other
rights in respect of the Junior Subordinated Debentures. See "Description of
Junior Subordinated Debentures--Enforcement of Certain Rights of Holders of
Preferred Securities," "Description of the Junior Subordinated
Debentures--Events of Default" and "Description of the Guarantee." The Trust
Agreement provides that each holder of Preferred Securities by acceptance
thereof agrees to the provisions of the Guarantee and the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
AND THE TRUSTEE; LIMITED VOTING RIGHTS
If the Trustee or a holder of Preferred Securities obtains a judgment
against ALH following the occurrence of an Event of Default under the Indenture,
the provisions of Iowa law regulating mutual insurance holding companies would
limit the ability of the Trustee to realize upon the assets of ALH by conveying
or transferring the capital stock of AmerUs Life owned by ALH. Any conveyance,
transfer, assignment or alienation of a majority of the voting shares of AmerUs
Life to an entity which is not a mutual insurance holding company would violate
Iowa law and such voting shares are not subject to execution and levy. The
trustee would not be restricted by such law in disposing of voting shares owned
by ALH which exceeded such majority requirement. See "The Reorganization and
Distribution of the Non-Life Insurance Subsidiaries -- Regulation of AMHC after
the Reorganization."
Holders of Preferred Securities will have generally limited voting rights
relating only to the modification of the Preferred Securities and the
dissolution, winding-up or termination of the Issuer. Holders of Preferred
Securities will not be entitled to vote to appoint, remove or replace the
Property Trustee, which voting rights are vested exclusively in the holder of
the Common Securities, except upon the occurrence of certain events described
herein. The Property Trustee, the Administrative Trustees and ALH may amend the
Trust Agreement without the consent of holders of Preferred Securities to ensure
that the Issuer will be classified for United States federal income tax purposes
as a grantor trust or to ensure that the Issuer will not be required to register
as an "investment company" under the Investment Company Act, even if such action
adversely affects the interests of such holders. See "Description of the
Preferred Securities--Voting Rights."
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
ALH has the right under the Indenture to defer payments of interest on the
Junior Subordinated Debentures by extending the interest payment period at any
time, and from time to time, on the Junior Subordinated Debentures for a period
not exceeding 20 consecutive quarters with respect to each deferred period (each
an "Extension Period"), provided that no Extension Period may extend beyond the
Stated Maturity of the Preferred Securities. As a consequence of such an
extension, quarterly distributions on the Preferred Securities would be deferred
(but despite such deferral would continue to accrue with interest thereon
compounded quarterly) by the Trust during any such Extension Period. In the
event that ALH exercises this right to defer interest payments, then ALH shall
not, and shall cause any subsidiary of ALH not to, (a) declare or pay dividends
or a distribution (other than dividends or distributions in common stock of ALH)
on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of ALH's outstanding capital stock or (b) make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by ALH that rank pari passu with or junior to the Junior
Subordinated Debentures or make any guarantee payments with respect thereto.
Prior to the termination of any such Extension Period, ALH may further extend
the interest payment period; provided that such Extension Period, together with
all such previous and further extensions thereof, may not exceed 20 consecutive
quarters or extend beyond the Stated Maturity of the
15
<PAGE>
Junior Subordinated Debentures. Upon the termination of any Extension Period and
the payment of all amounts then due, ALH may commence a new Extension Period,
subject to the above requirements. There is no limitation on the number of times
that ALH may elect to begin an Extension Period. See "Description of the
Preferred Securities--Distributions" and "Description of the Junior Subordinated
Debentures--Option to Extend Interest Payment Period."
Should ALH exercise its right to defer payments of interest by extending the
interest payment period, each holder of Preferred Securities will continue to
include the deferred interest in income (as original issue discount) for United
States federal income tax purposes, even though no current cash distribution
will be made in respect of such income. In addition, each such holder of
Preferred Securities will not receive the cash from the Trust related to such
income if such holder disposes of its Preferred Securities prior to the record
date for distributions of such amounts. See "United States Federal Income
Taxation -- Original Issue Discount." ALH has no present intention of exercising
its right to defer payments of interest by extending the interest payment period
on the Junior Subordinated Debentures. However, should ALH determine to exercise
such right in the future, the market price of the Preferred Securities is likely
to be affected. A holder that disposes of its Preferred Securities during an
Extension Period, therefore, might not receive the same return on its investment
as a holder that continues to hold its Preferred Securities. In addition, as a
result of the existence of ALH's right to defer interest payments, the market
price of the Preferred Securities (which represent an undivided beneficial
interest in the Junior Subordinated Debentures) may be more volatile than other
securities on which original issue discount accrues that are not subject to such
deferrals.
SPECIAL EVENT REDEMPTION OR EXCHANGE
Upon the occurrence of a Special Event (as defined herein), ALH shall have
the right to redeem the Junior Subordinated Debentures, in whole but not in part
within 90 days following the occurrence of such Special Event and therefore
cause a mandatory redemption of the Preferred Securities at the redemption
price. At any time, ALH has the right to terminate the Issuer and, after
satisfaction of the liabilities of creditors of the Issuer as provided by
applicable laws, cause the Junior Subordinated Debentures to be distributed to
the holders of the Preferred Securities in connection with the liquidation of
the Trust. "Special Event" means an Investment Company Event or a Tax Event. An
Investment Company Event means the receipt by the Issuer of an opinion of
counsel experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), the Issuer is or
will be considered an investment company that is required to be registered under
the Investment Company Act of 1940, as amended, which Change in 1940 Act Law
becomes effective on or after the date of original issuance of the Preferred
Securities. A Tax Event means the receipt by the Issuer of an opinion of counsel
experienced in such matters to the effect that, as a result of (a) any amendment
to, or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein affecting taxation, or (b) any amendment to,
or change in, an interpretation or application of such laws or regulations by
any legislative body, court, governmental agency or regulatory authority
(including the enactment of any legislation and the publication of any judicial
decision or regulatory determination on or after the date of issuance of the
Preferred Securities), there is more than an insubstantial risk that (i) the
Issuer is, or will be within 90 days of the date of such opinion, subject to
United States Federal income tax with respect to income received or accrued on
the Junior Subordinated Debentures, (ii) interest payable by ALH on the Junior
Subordinated Debentures is not, or within 90 days of the date of such opinion,
will not be, deductible by ALH, in whole or in part, for United States Federal
income tax purposes, or (iii) the Issuer is, or will be within 90 days of the
date of such opinion, subject to more than a de minimis amount of other taxes,
duties or other governmental charges. See "Description of the Preferred
Securities--Redemption--Special Event Redemption or Distribution of Junior
Subordinated Debentures."
The receipt of cash by the holders of the Preferred Securities upon a
dissolution of the Trust would be a taxable event to such holders. Under current
United States federal income tax law, a distribution of
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Junior Subordinated Debentures upon the dissolution of the Trust would not be a
taxable event to holders of the Preferred Securities. See "United States Federal
Income Taxation--Receipt of Junior Subordinated Debentures or Cash Upon
Liquidation of AmerUs Capital I."
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for Preferred Securities if a dissolution or liquidation of the Trust
were to occur. Accordingly, the Preferred Securities that an investor may
purchase, whether pursuant to the offer made hereby or in the secondary market,
or the Junior Subordinated Debentures that a holder of Preferred Securities may
receive on dissolution and liquidation of the Trust, may trade at a discount to
the price that the investor paid to purchase the Preferred Securities offered
hereby.
In addition, because ALH has the right to shorten or extend the maturity of
the Junior Subordinated Debentures upon a termination of the Issuer and the
distribution of the Junior Subordinated Debentures to holders of Preferred
Securities, there can be no assurance that ALH will not exercise its option to
change the maturity of the Junior Subordinated Debentures upon an exchange.
Because holders of Preferred Securities may receive Junior Subordinated
Debentures upon the occurrence of a Special Event, prospective purchasers of
Preferred Securities are also making an investment decision with regard to the
Junior Subordinated Debentures and should carefully review all the information
regarding the Junior Subordinated Debentures contained herein. See "Description
of the Preferred Securities--Redemption--Special Event Redemption or
Distribution" and "Description of the Junior Subordinated Debentures--General."
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill") was
released, which would, among other things, generally deny interest deductions
for interest on an instrument, issued by a corporation, that has a maximum
weighted average maturity of more than 40 years. The Bill would also generally
deny interest deductions for interest on an instrument, issued by a corporation,
that has a maximum term of more than 20 years and that is not shown as
indebtedness on the separate balance sheet of the issuer or, where the
instrument is issued to a related party (other than a corporation), where the
holder or some other related party issues a related instrument that is not shown
as indebtedness on the issuer's consolidated balance sheet. The above-described
provisions of the Bill were proposed to be effective generally for debt
instruments issued on or after December 7, 1995. If either provision were to
apply to the Junior Subordinated Debentures, ALH would be unable to deduct
interest on the Junior Subordinated Debentures. However, on March 29, 1996, the
Chairmen of the Senate Finance and House Ways and Means Committees issued a
joint statement to the effect that it was their intention that the effective
date of the President's legislative proposals, if adopted, will be no earlier
than the date of appropriate Congressional action. ALH believes that, under
current law, it will be able to deduct interest on the Junior Subordinated
Debentures. There can be no assurance, however, that current or future
legislative proposals or final legislation will not affect the ability of ALH to
deduct interest on the Junior Subordinated Debentures. Such a change could give
rise to a Tax Event, which may permit ALH to cause a redemption of the Preferred
Securities. See "Description of the Preferred Securities--Redemption-- Special
Event Redemption or Distribution" and "United States Federal Income
Taxation--Possible Tax Law Changes."
TRADING CHARACTERISTICS OF THE PREFERRED SECURITIES
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A holder who disposes of his Preferred Securities
between record dates for payments of distributions thereon will be required to
include accrued but unpaid interest on the Junior Subordinated Debentures
through the date of disposition in income as ordinary income (i.e., original
issue discount), and to add such amount to his adjusted tax basis in his pro
rata share of the underlying Junior Subordinated Debentures deemed disposed of.
To the extent that the selling price is less than the holder's adjusted tax
basis, a holder will recognize a
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capital loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax purposes.
See "United States Federal Income Taxation-- Original Issue Discount" and
"--Sales of Preferred Securities."
As indicated above, it is anticipated that the Preferred Securities will be
listed for trading on the New York Stock Exchange. If the Preferred Securities
are not listed on a national securities exchange or the NASDAQ National Market
and the Underwriters do not make a market for the securities, the liquidity of
the Preferred Securities could be adversely affected.
RISK FACTORS RELATING TO THE COMPANY:
HOLDING COMPANY STRUCTURE; LIMITATIONS ON DIVIDENDS
ALH is an insurance holding company whose assets consist primarily of all of
the outstanding shares of common stock of AmerUs Life. ALH's ongoing ability to
pay dividends to its shareholders and meet its other obligations, including
operating expenses and any debt, is primarily dependent upon the receipt of
sufficient funds from AmerUs Life. The payment of dividends by AmerUs Life to
ALH is regulated under Iowa law. Under Iowa law, AmerUs Life may pay dividends
only from the earned surplus arising from its business and must receive the
prior approval of the Iowa Commissioner to pay a dividend if such dividend would
exceed certain statutory limitations. The current statutory limitation is the
greater of (i) 10% of AmerUs Life's capital and statutory surplus as of the
preceding year end or (ii) the net gain from operations for the previous
calendar year. Iowa law gives the Iowa Commissioner broad discretion to
disapprove requests for dividends in excess of these limits. Based on this
limitation and 1995 statutory results, and absent the Distribution, AmerUs Life
would have been able to pay approximately $40 million in dividends to ALH in
1996 without obtaining the Iowa Commissioner's approval. However, as a result of
the Distribution, AmerUs Life will not be able to pay any additional dividends
in the 12-month period following the Distribution without the prior approval of
the Iowa Commissioner. AmerUs Life's inability to pay dividends to ALH in the
future in an amount sufficient for ALH to pay dividends to its shareholders and
meet its other obligations could have a material adverse effect on ALH and its
ability to meet its obligations. See "Supervision and Regulation."
COMPETITIVE ENVIRONMENT
The Company competes with a large number of other insurers and non-insurance
financial service companies, such as banks, broker-dealers and mutual funds,
many of whom have greater financial resources, offer alternative products and,
with respect to other insurers, have higher claims-paying ability and financial
strength ratings than the Company. Competition exists for individual consumers
and agents and other distributors of life insurance and annuity products.
National banks, with their pre-existing customer bases for financial services
products, may pose increasing competition in the future to insurers who sell
life insurance and annuity products, including the Company. Recent United States
Supreme Court decisions have expanded the authority of national banks to sell
life insurance products and annuities.
Several proposals to repeal or modify the Glass-Steagall Act of 1933, as
amended, and the Bank Holding Company Act of 1956, as amended, have been made by
members of Congress and the Clinton administration. Currently, the Bank Holding
Company Act restricts banks from being affiliated with insurance companies.
Certain of the proposals would repeal or modify these restrictions and permit
banks to become affiliated with insurance companies. None of these proposals has
yet been enacted, and it is not possible to predict whether any of these
proposals will be enacted or, if enacted, their potential effect on the Company.
The Company must attract and retain productive agents to sell its life
insurance and annuity products. Strong competition exists among insurance
companies for agents with demonstrated ability. Competition among insurance
companies for such agents is based on, among other things, the services provided
to, and relationships developed with, these agents in addition to compensation
and product structure.
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IMPORTANCE OF RATINGS
Ratings with respect to claims-paying ability and financial strength have
become an increasingly important factor in establishing the competitive position
of insurance companies. Each of the rating agencies reviews its ratings
periodically and there can be no assurance that current ratings will be
maintained in the future. Claims-paying and financial strength ratings are based
upon factors relevant to policyowners and are not directed toward protection of
shareholders. AmerUs Life's claims-paying ability is currently rated "AA-" (Very
high) by Duff & Phelps and "A" (Good) by Standard & Poor's. Its financial
strength is rated "A" (Excellent) by A.M. Best and "A2" (Good) by Moody's. A
downgrade in such ratings could significantly affect sales of life insurance and
annuity products and could have a material adverse effect on the results of
operations of the Company. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition."
INTEREST RATE FLUCTUATIONS; RISK OF IMPACT OF FORCED LIQUIDATION OF INVESTMENT
PORTFOLIO
Severe interest rate fluctuations could adversely affect AmerUs Life's
ability to pay policyowner benefits with operating and investment cash flows,
cash on hand and other cash sources. In the unanticipated event that such
sources would prove inadequate, management believes the Company could meet
shortfalls with funds available to the Company as a result of its membership in
the Federal Home Loan Bank of Des Moines, as well as other borrowing sources.
See "Management's Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources."
Interest rate fluctuations may also have an impact on policyowner behavior.
To the extent that the Company does not maintain competitive interest rates with
those credited in the marketplace, increased policyowner lapses may be
experienced. While such lapses would generate surrender charges during the
current period, they would reduce the Company's future income. Although
historically the Company's actual lapse experience has been better than the
industry average, no assurance can be given that this will always be true in the
future.
The Company's actual cash flows from investments may differ from those
anticipated at the time of investment. Some of the Company's corporate bonds
have call features which could cause the Company to reinvest these proceeds at
lower interest rates if such bonds were called prior to their stated maturities.
As of June 30, 1996, approximately $337 million, or 15% of the bond portfolio
(excluding mortgage and other asset-backed securities), was subject to call. The
Company's collateralized mortgage obligations ("CMOs") and other asset-backed
securities are purchased based on assumptions regarding rates of prepayments. To
the extent that actual prepayments are earlier or later than anticipated at the
time of purchase, the Company may not receive cash flows when expected or
needed. These prepayment rates are influenced by interest rates available for
new mortgages as well as general economic conditions.
FUTURE POLICY BENEFITS
The liability established by the Company for future life insurance and
annuity policy benefits is based upon assumptions concerning a number of
factors, including future interest rates, mortality, persistency and expenses.
Actual experience will likely differ from assumed experience. Should the
Company's provision for future policy benefits prove inadequate, future earnings
will be adversely affected.
REGULATORY AND RELATED MATTERS
AmerUs Life is subject to regulation by state regulators under the insurance
laws of states in which it conducts business. The Company, AmerUs Life and AMHC
are also subject to regulation by the Insurance Division of the Iowa Department
of Commerce. The purpose of such regulation is primarily to provide safeguards
for policyowners rather than to protect the interests of shareholders. The
insurance laws of the various states establish regulatory agencies with broad
administrative powers including, among others, the authority to grant or revoke
operating licenses and to regulate sales practices, investments, deposits of
securities, the form and content of financial statements and insurance policies,
accounting practices and the maintenance of specified RESERVES and capital. See
"Supervision and Regulation."
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The insurance regulatory framework has been subject to increasing scrutiny
by the National Association of Insurance Commissioners ("NAIC"), state
legislatures, regulators and Congress. The NAIC and state regulators have from
time to time re-examined laws and regulations, with an emphasis on insurance
company investment and solvency issues. State legislatures have considered or
enacted legislative proposals that alter, and in many cases increase, state
regulation of insurance companies. In recent years, various legislative
proposals have been introduced in Congress that called for the federal
government to assume some role in the regulation of the insurance industry. To
date, none of the Congressional proposals has been enacted and it cannot be
predicted what form any such future proposals might take or what effect, if any,
such proposals might have on AmerUs Life if enacted into law.
Insurance regulators have also given greater emphasis in recent years to the
investigation of allegations of improper sales practices by insurance agents,
including churning and misleading sales presentations. The NAIC has adopted a
model law and regulation which would standardize the form and content of any
illustrations provided to prospective purchasers of individual life insurance
products. The model law has been enacted, to be effective January 1, 1997, in
North Carolina and Utah, and is currently under consideration in California,
Louisiana, North Dakota and Texas. Management expects that similar legislation
will eventually be enacted in additional states in which AmerUs Life sells
individual life insurance products. There can be no assurance as to whether this
reform will have a material adverse impact on sales of such products by the
industry as a whole or by AmerUs Life. In recent years, life insurance
companies, including AmerUs Life, have been named defendants in class action
lawsuits relating to life insurance pricing and sales practices. While the
litigation is being vigorously defended and AmerUs Life denies the allegations,
there can be no assurance that this or future litigation or regulatory
initiatives will not have a material adverse effect on the life insurance
industry generally or on the Company. "See Business--Legal Proceedings."
State guaranty associations assess insurance companies to pay contractual
benefits owed by impaired, insolvent or failed insurance companies. AmerUs Life
was assessed, net of amounts estimated to be recoverable from future state
PREMIUM taxes, approximately $0.3 million during the six months ended June 30,
1996 and $0.4 million, $1.2 million and $3.3 million for the years ended
December 31, 1995, 1994, and 1993, respectively. AmerUs Life cannot predict the
amount of any future assessments. See "Supervision and Regulation."
In addition, the Iowa Commissioner has proposed rules that would regulate
the issuance of stock by the Company in the Common Stock Offerings and in
subsequent offerings. See "Supervision and Regulation--Regulation of the Company
and AMHC."
POTENTIAL TAX LEGISLATION
Congress has from time to time considered possible legislation that would
reduce or eliminate the benefits to policyowners of the deferral of taxation on
the accretion of value within certain annuities and life insurance products or
otherwise affect the taxation of annuities and life insurance products and
insurance companies. Other possible legislation, including a simplified "flat
tax" income tax structure with an exemption from taxation for investment income,
could also adversely affect purchases of annuities and life insurance products
if such legislation were to be enacted. There can be no assurance as to what, if
any, future legislation might be enacted or, if enacted, whether any such
legislation would contain provisions with possible adverse effects on the
Company's life insurance and annuity products.
THE CLOSED BLOCK
Under the Plan, AmerUs Life established and will operate a CLOSED BLOCK for
the benefit of the CLOSED BLOCK BUSINESS. The Closed Block is based on a concept
included in demutualization plans of other mutual life insurance companies and
is designed to give reasonable assurance to policyowners included therein that,
after the Reorganization, assets will be available to maintain DIVIDEND SCALES
and interest credits in effect prior to the Reorganization if the experience
underlying such scales and credits continues. In accordance with the Plan,
certain of AmerUs Life's invested assets, as well as cash and short-term
investments, were allocated by AmerUs Life to the Closed Block as of June 30,
1996. Non-investment grade bonds, mortgage loans, preferred stock, real estate
and certain other invested assets
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were not included in this allocation to the Closed Block. The amount of assets
allocated to the Closed Block is expected to produce cash flows which, together
with future revenues from the Closed Block Business, are expected to be
sufficient to support the Closed Block Business, including provisions for
payment of claims, taxes and certain limited expenses and for the continuation
of policyowner dividend scales and interest credits in effect prior to the
Reorganization, if the experience underlying such dividend scales continues. The
assets, including the revenue therefrom, allocated to the Closed Block Business
will accrue solely to the benefit of owners of the policies included in the
Closed Block Business until such time as the Closed Block is no longer in
effect; accordingly, such assets and the revenue therefrom will not be available
for the benefit of AmerUs Life or the Company.
To the extent that over time cash flows from the assets allocated to the
Closed Block and other experience relating to the Closed Block are, in the
aggregate, more or less favorable than assumed in establishing the Closed Block,
total dividends paid to Closed Block policyowners in the future would be greater
than or less than the total dividends that would have been paid to these
policyowners if the dividend scales in effect prior to the Reorganization had
been continued. Any excess of cumulative favorable deviations for Closed Block
policies over unfavorable deviations will be available for distribution over
time to Closed Block policyowners and will not be available to AmerUs Life or
the Company. Unless the Iowa Commissioner consents to an earlier termination,
the Closed Block will continue to be in effect until the date on which none of
the policies in the Closed Block remains in force.
The Company will continue to pay guaranteed benefits under all policies,
including the policies included in the Closed Block in accordance with their
terms. If the assets allocated to the Closed Block, the investment cash flows
from those assets and the revenues from the policies included in the Closed
Block including investment income thereon prove to be insufficient to pay the
benefits guaranteed under the policies included in the Closed Block, the Company
will be required to make such payments from its general funds. The Company bears
the costs of operating and managing the Closed Block and, accordingly, such
costs were not funded as part of the assets allocated to the Closed Block. Any
increase in such costs in the future would be borne by the Company. See "The
Reorganization and Distribution of the Non-life Insurance
Subsidiaries--Establishment and Operation of the Closed Block."
THE COMPANY
ALH is an Iowa business corporation which was formed in August of 1996
primarily for the purpose of owning all of the stock of AmerUs Life following
the Reorganization. See "The Reorganization and Distribution of the Non-Life
Insurance Subsidiaries." AmerUs Life, ALH's principal asset and wholly-owned
subsidiary, is an Iowa stock life insurance company.
AmerUs Life was originally incorporated in 1896 as a mutual insurance
company under the name Central Life Assurance Society of the United States. In
1994, Old AML merged into Central Life and the resulting entity changed its name
to American Mutual Life. On June 30, 1996, pursuant to the Plan, American Mutual
Life formed AMHC as a mutual insurance holding company and American Mutual Life
was converted into a stock life insurance company and its name was changed to
AmerUs Life Insurance Company.
The Company offers a broad line of individual life insurance and annuity
products through a nationwide distribution system. It presently conducts
business in 45 states and the District of Columbia. As of June 30, 1996, the
Company had approximately 423,000 life insurance policies and annuity contracts
outstanding and individual life insurance in force, net of reinsurance, of
approximately $26.2 billion. As of June 30, 1996, the Company had total assets
of $4.2 billion and total shareholders' equity of $375 million (prior to the
Common Stock Offerings, after giving effect to the Capital Contribution).
The Company's executive offices are located at 418 Sixth Avenue, Des Moines,
Iowa 50306-2499, and its telephone number is (515) 280-1331.
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THE ISSUER
The Issuer is a statutory business trust formed under Delaware law pursuant
to (i) a trust agreement executed by ALH, as Depositor, and the Property Trustee
of the Issuer and (ii) the filing of a certificate of trust with the Delaware
Secretary of State. The trust agreement will be amended and restated in its
entirety (as so amended and restated, the "Trust Agreement") substantially in
the form filed as an exhibit to the Registration Statement of which this
prospectus forms a part. The Trust Agreement will be qualified as an indenture
under the Trust Indenture Act. The Issuer exists for the exclusive purposes of
(i) issuing and selling the Preferred Securities and the Common Securities, (ii)
using the proceeds from the sale of the Preferred Securities and the Common
Securities to acquire the Junior Subordinated Debentures issued by ALH, and
(iii) engaging in only those other activities necessary, convenient or
incidental thereto. Accordingly, the Junior Subordinated Debentures and the
right to reimbursement of expenses under the Expense Agreement will be the sole
assets of the Issuer, and payments under the Junior Subordinated Debentures and
the Expense Agreement will be the sole revenue of the Issuer.
All of the Common Securities of the Issuer will be owned by ALH. The Common
Securities will rank pari passu, and payments will be made thereon pro rata,
with the Preferred Securities, except that upon the occurrence and continuance
of an Event of Default under the Trust Agreement (as defined therein), the
rights of ALH as holder of the Common Securities to payment in respect of
distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the holders of the Preferred Securities. See
"Description of the Preferred Securities -- Subordination of Common Securities".
ALH will acquire Common Securities in aggregate liquidation amount equal to 3%
of the total capital of the Issuer.
The Issuer has a term of approximately 55 years, but may terminate earlier
as provided in the Trust Agreement. The Issuer's business and affairs are
conducted by its trustees, each appointed by ALH as holder of the Common
Securities. The trustees for the Issuer will be Wilmington Trust Company, as the
Property Trustee, and three individual Administrative Trustees who are employees
or officers of or affiliated with ALH. Wilmington Trust Company, as Property
Trustee, will act as sole indenture trustee under the Trust Agreement for
purposes of compliance with the Trust Indenture Act. Wilmington Trust Company
will also act as trustee under the Guarantee and the Indenture (each as defined
herein). See "Description of the Guarantee" and "Description of the Junior
Subordinated Debentures." The holder of the Common Securities of the Issuer, or
the holders of a majority in Liquidation Amount of the Preferred Securities if
an Event of Default under the Indenture has occurred and is continuing, will be
entitled to appoint, remove or replace the Property Trustee. In no event will
the holders of the Preferred Securities have the right to vote to appoint,
remove or replace the Administrative Trustees; such voting rights are vested
exclusively in the holder of the Common Securities. The duties and obligations
of the Property Trustee are governed by the applicable Trust Agreement. ALH will
pay all fees and expenses related to the Issuer and the offering of the
Preferred Securities and will pay, directly or indirectly, all ongoing costs,
expenses and liabilities of the Issuer.
The principal executive office of the Issuer is located at 418 Sixth Avenue,
Des Moines, Iowa 50306-2499 and its telephone number is (515) 280-1331.
THE REORGANIZATION AND DISTRIBUTION OF THE
NON-LIFE INSURANCE SUBSIDIARIES
DESCRIPTION OF THE REORGANIZATION
On October 27, 1995, the Board of Directors of American Mutual Life adopted
the Plan, which authorized American Mutual Life to effect the Reorganization.
Pursuant to the Reorganization, American Mutual Life formed AMHC as a mutual
insurance holding company and American Mutual Life was converted into a stock
life insurance company and its name was changed to AmerUs Life Insurance
Company. The Iowa Commissioner held a public hearing on the Reorganization on
November 21, 1995. The Plan was approved by American Mutual Life's policyowners
on November 28, 1995. The Iowa Commissioner approved the Plan on December 13,
1995, and the Plan became effective on June 30, 1996 (the "Effective Date").
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As part of the Reorganization, all of the shares of capital stock of AmerUs
Life were issued to AMHC. Subsequent to the Reorganization, on August 1, 1996,
AMHC contributed all of its shares of capital stock of AmerUs Life to AmerUs
Group. The Company was formed on August 1, 1996, as of which date all of its
shares of capital stock were issued to AmerUs Group. Immediately after the
Distribution, AmerUs Group contributed all of its shares of common stock in
AmerUs Life to the Company. Under this structure, the Company is an intermediate
holding company, with AmerUs Group as its direct parent company and AmerUs Life
as its wholly-owned subsidiary. Under Iowa law, AMHC is required to retain
direct or indirect ownership and control of shares representing a majority of
the vote of the outstanding capital stock of the Company.
Immediately following the Reorganization, the policyowners' contract rights
in their life insurance policies and annuities remained with AmerUs Life and the
policyowners automatically became members of AMHC, and thereby became entitled
to vote for directors of AMHC and on certain other matters as set forth in
AMHC's articles of incorporation. Purchasers of life insurance policies and
annuities from AmerUs Life after the Reorganization automatically become members
of AMHC (subject to certain exceptions and conditions set forth in the Plan).
American Mutual Life was the first company to obtain approval under the Iowa
mutual holding company statute to form a mutual insurance holding company. The
Company understands that a number of other states, including California,
Minnesota, Missouri, Pennsylvania and Vermont, and the District of Columbia,
have recently adopted laws authorizing the formation of mutual insurance holding
companies.
DISTRIBUTION OF THE NON-LIFE INSURANCE SUBSIDIARIES AND RELATED TRANSACTIONS
Prior to the Distribution, AmerUs Life made the Capital Contribution to AFS.
The net assets contributed in the Capital Contribution had an aggregate carrying
value of approximately $129 million as of the date of such contribution.
Following the Capital Contribution, a series of transactions was undertaken by
the Company and its affiliates. AmerUs Life effected the Distribution, pursuant
to which it distributed AFS and the other Non-Life Insurance Subsidiaries to
AmerUs Group. Immediately following the Distribution, the Company borrowed $50
million in term debt and $125 million under a revolving line of credit pursuant
to the Bank Credit Facility. The Company used the proceeds from such borrowings
to make a $175 million capital contribution to AmerUs Life. The Consolidated
Financial Statements and other financial information presented herein give
effect to the Reorganization and the Distribution as if both had been completed
prior to the periods presented (including giving effect to the establishment of
the Closed Block from June 30, 1996 forward), but do not give effect to the
Capital Contribution.
The Distribution effectively separated AMHC's non-life insurance businesses
from the life insurance businesses owned by the Company, such that the companies
engaged in non-life insurance businesses are no longer subsidiaries of the
Company.
BACKGROUND AND REASONS FOR THE REORGANIZATION AND DISTRIBUTION
Recognizing the capital-raising difficulties faced by mutual insurers and
the present competitive state of the insurance industry, the Iowa legislature in
1995 amended Iowa's insurance law to permit mutual insurance companies
incorporated in Iowa to reorganize into a mutual insurance holding company
structure.
As a mutual life insurance company, American Mutual Life had no ability to
issue shares of capital stock and consequently had no access to market sources
of equity capital and limited ability to increase its surplus and fund future
growth while maintaining the financial strength necessary to assure policyowners
that their obligations will be met. The Reorganization will position the Company
to obtain access to equity capital through the Common Stock Offerings and will
enable the Company to effect future equity offerings as necessary and
appropriate to satisfy its capital requirements.
The Reorganization is also intended to facilitate potential mergers,
acquisitions and strategic alliances by creating a more flexible corporate
structure. Among other things, the Reorganization will facilitate the
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issuance of stock by the Company to consummate acquisitions, while at the same
time maintaining the ability to enter into mergers at the AMHC level with mutual
insurance holding companies and to acquire mutual insurance companies which
could be converted into stock insurance subsidiaries of AMHC.
The Iowa legislation would permit AMHC subsequently to demutualize, a
process which would cause AMHC to convert from mutual to stock form and become
publicly owned by shareholders. Pursuant to the Company's Articles of
Incorporation, upon a demutualization all of the Company's shares of outstanding
Class B Common Stock will automatically convert into shares of Class A Common
Stock. See "Description of the Capital Stock." AMHC has no present plans to
demutualize.
The Capital Contribution and the Distribution are important preliminary
transactions that are necessary to effectuate the Preferred Offering and the
Common Stock Offerings successfully.
REGULATION OF AMHC AFTER THE REORGANIZATION
AMHC, as a mutual insurance holding company incorporated in Iowa, is subject
to regulation at a level substantially equal to that of an Iowa domestic
insurance company. The Iowa Commissioner retains jurisdiction at all times over
a mutual insurance holding company and any intermediate insurance holding
company to assure that policyowners' interests are protected. See "Supervision
and Regulation."
Under Iowa law, shares of capital stock of AmerUs Life which carry the right
to cast a majority of the votes entitled to be cast by all of the outstanding
shares of the capital stock (which are required at all times to be owned,
directly or indirectly, by AMHC) may not be conveyed, transferred, assigned,
pledged, subjected to a security interest or lien, encumbered, or otherwise
hypothecated or alienated by AMHC or any intermediate holding company, including
the Company. Any conveyance, transfer, assignment, pledge, security interest,
lien, encumbrance, hypothecation or alienation by AMHC or any intermediate
holding company, in or on such shares of AmerUs Life having a voting majority
shall be deemed void in inverse chronological order from the date of such
transaction to the extent necessary to give AMHC unencumbered direct or indirect
ownership of such shares having a voting majority.
ESTABLISHMENT AND OPERATION OF THE CLOSED BLOCK
In connection with the Reorganization, the Closed Block was established.
Insurance policies which had a dividend scale in effect as of June 30, 1996 were
included in the Closed Block. The Closed Block was designed to provide
reasonable assurance to policyowners included therein that, after the
Reorganization, assets will be available to maintain the dividend scales and
interest credits in effect prior to the Reorganization if the experience
underlying such scales and credits continues. The establishment of the Closed
Block did not alter, diminish, reduce or in any other way adversely affect these
policyowners' contractual rights.
The Closed Block was established on June 30, 1996. Pursuant to the Plan,
assets were allocated to the Closed Block at June 30, 1996 in an amount which
the Company expects to produce cash flows which, together with anticipated
revenues from the Closed Block Business, are expected to be sufficient to
support the Closed Block Business, including provision for payment of claims,
taxes and certain limited expenses and for the continuation of dividend scales
and interest credits in effect prior to the Reorganization if the experience
underlying such scales and credits continues or for appropriate adjustments in
such scales and credits if the experience changes. The assets, including the
revenue therefrom, allocated to the Closed Block will accrue solely to the
benefit of policyowners included in the Closed Block Business until such time as
the Closed Block is no longer in effect. To the extent that over time cash flows
from the assets allocated to the Closed Block and other experience relating to
the Closed Block are, in the aggregate, more or less favorable than assumed in
establishing the Closed Block, total dividends and interest credits paid to
Closed Block policyowners in the future may be greater than or less than the
total dividends and interest credits that would have been paid to these
policyowners if the dividend scales and interest credits in effect prior to the
Reorganization had been continued. Dividends and interest credits on policies
included in the Closed Block, as in the past, will be declared at the discretion
of AmerUs Life's Board of Directors and may vary from time to time (reflecting
changes in investment, mortality, persistency and other experience factors).
AmerUs Life will not be required to
24
<PAGE>
support the payment of dividends and interest credits on Closed Block policies
from its general funds above certain guaranteed levels, although it could choose
to provide such support if it were deemed to be in the best interests of AmerUs
Life's shareholders.
AmerUs Life will continue to pay guaranteed benefits under all policies,
including the policies included in the Closed Block, in accordance with their
terms. If the assets allocated to the Closed Block, the investment cash flows
from those assets and the revenues from the policies included in the Closed
Block including investment income thereon prove to be insufficient to pay the
benefits guaranteed under the policies included in the Closed Block, AmerUs Life
will be required to make such payments from its general funds. AmerUs Life bears
the costs of operating and managing the Closed Block and, accordingly, such
costs were not funded as part of the assets allocated to the Closed Block. Any
increase in such costs in the future would be borne by AmerUs Life. Since the
Closed Block has been funded to provide for payment of guaranteed benefits as
well as future dividends, it should not be necessary to use other general funds
to pay guaranteed benefits unless the Closed Block Business experiences
substantial adverse deviations in investment, mortality, persistency or other
experience factors. While AmerUs Life will use its best efforts to support the
policies included in the Closed Block with the assets allocated to the Closed
Block, these assets will be subject to the same liabilities (with the same
priority in liquidation) as assets outside the Closed Block.
The Closed Block Business will consist of the policies within the classes
specified in the Plan, but only to the extent such policies were in force on
June 30, 1996. A policy may be within a class for which there is a dividend
scale currently in effect, even if it does not receive a current dividend, and,
therefore, the policy would be included in the Closed Block.
Premiums received and policy benefits paid by AmerUs Life on the policies
included in the Closed Block and investment cash flows from the assets allocated
to the Closed Block and from the investment of net cash flow will be added to or
withdrawn from the Closed Block as provided in the Plan. The Closed Block will
be allocated its share of state, local and federal taxes paid on the Closed
Block Business in accordance with tax sharing procedures set forth in the Plan.
However, commissions and other expenses (including investment management
expenses) of operating and administering the Closed Block will not be charged to
the Closed Block except to the limited extent provided in the Plan. If expenses
of operating and administering the Closed Block were to increase after June 30,
1996, such increases would be paid by AmerUs Life. Future estimated cash
outflows were considered in determining the amount of assets allocated to the
Closed Block.
Dividends and interest credits on the Closed Block policies will be set
periodically by AmerUs Life's Board of Directors in accordance with applicable
law and with the objective that all of the assets will be distributed to owners
of Closed Block policies. Such dividends and interest credits will also be
allocated among the policies included in the Closed Block so as to reflect the
underlying experience of the Closed Block and the degree to which the various
classes of Closed Block policies contributed to such experience. An income
statement, balance sheet and schedule of investments for the Closed Block will
be prepared and submitted to the Iowa Commissioner and AmerUs Life's Board of
Directors annually. AmerUs Life will retain an independent consulting actuary to
review the operation of the Closed Block and dividend and interest credit
determinations and to report his or her findings to the Iowa Commissioner and
AmerUs Life's Board of Directors at least every three years, with the first
review to be made as of December 31, 1998.
The Closed Block will continue in effect until either (i) the last policy in
the Closed Block is no longer in force or (ii) the Closed Block is dissolved.
The Plan provides that the Closed Block may not be dissolved without the
approval of the Iowa Commissioner, which approval could only be obtained if
dissolution were demonstrated not to be adverse to the interests of the
policyowners whose policies make up the Closed Block. If the Closed Block is
dissolved, the assets associated with the Closed Block will become part of
AmerUs Life's general funds. If the Closed Block is not dissolved, the expected
life of the Closed Block is in excess of 75 years.
25
<PAGE>
CLOSED BLOCK ASSETS AND LIABILITIES
In accordance with the Plan, certain of AmerUs Life's invested assets, as
well as cash and short-term investments, were allocated to the Closed Block at
June 30, 1996. Non-investment grade bonds, commercial mortgage loans, common and
preferred stock and real estate owned were not included in this allocation to
the Closed Block.
The bonds allocated to the Closed Block include assets of similar asset type
and maturity that were part of the investment segment for AmerUs Life's
TRADITIONAL LIFE INSURANCE policies. In addition, AmerUs Life included in the
Closed Block cash and short-term investments in order to meet the short-term
liquidity requirements of the Closed Block. For GAAP purposes, Closed Block
assets include deferred acquisition costs relating to policies in the Closed
Block.
The composition of assets in the Closed Block will change over time as a
result of new investments, prepayments, calls, maturities and sales. New
investments for the Closed Block acquired with Closed Block cash flows shall be
allocated to the Closed Block upon acquisition and shall consist only of
investments permitted by the investment policy for the Closed Block. In the
event of liquidation, the assets allocated to the Closed Block will be subject
to the same liabilities (with the same priority) as assets outside the Closed
Block.
The establishment and operation of the Closed Block as contemplated by the
Plan is intended to make adequate provision for allocating to the Closed Block
assets which will be reasonably sufficient to enable the Closed Block to provide
for the guaranteed benefits, certain expenses and taxes associated with Closed
Block policies, and to provide for the continuation of the current dividend
scales and interest credits in effect prior to the Reorganization if the
experience underlying those scales and credits continues. As of June 30, 1996
the Closed Block assets of $1,160.6 million and liabilities of $1,511.8 million
were established on a preliminary basis. Final funding of the Closed Block will
occur prior to the completion of the Offerings.
The excess of Closed Block Liabilities over Closed Block Assets represents
the expected future after-tax contributions (before expense charges, which were
not funded in the Closed Block) from the Closed Block which may be recognized in
income over the period the policies in the Closed Block remain in force.
If the actual contribution from the Closed Block in any given period equals
or exceeds the expected contribution for such period as determined at the
establishment of the Closed Block, the expected contribution would be recognized
in income from continuing operations for that period. Any excess of the actual
contribution over the expected contribution would also be recognized in income
from continuing operations to the extent that the aggregate expected
contribution for all prior periods exceeded the aggregate actual contribution.
Any remaining excess of actual contribution over expected contributions would be
accrued in the Closed Block as a liability for future policyowners' dividends.
This accrual for future dividends effectively limits the actual Closed Block
contribution recognized in income from continuing operations to the Closed Block
contribution expected to emerge from operation of the Closed Block as determined
as of the date of establishment of the Closed Block.
If over the period the policies and contracts in the Closed Block remain in
force and the actual contribution from the Closed Block is less than the
expected contribution from the Closed Block, only such actual contribution
(which could reflect a loss) would be recognized in income from continuing
operations. If the actual contribution from the Closed Block in any given period
is less than the expected contribution for that period and changes in dividends
scales are inadequate to offset the negative performance in relation to the
expected performance, the contribution inuring to shareholders of AmerUs Life
will be reduced. If a liability for policyowners' dividends had been previously
established in the Closed Block because the actual contribution to the relevant
date had exceeded the expected contribution to such date, such liability would
be reduced (but not below zero) in any periods in which the actual contribution
for that period is less than the expected contribution for such period.
26
<PAGE>
THE COMMON STOCK OFFERINGS
Up to shares of Class A Common Stock of ALH are being offered by ALH
in the Subscription Offering in accordance with the priority subscription rights
provided under the Plan to eligible policyowners of AmerUs Life. The
Subscription Offering commenced on November , 1996. ALH intends to offer in
the Public Offering all or a portion of the shares of Class A Common Stock not
subscribed for in the Subscription Offering. The consummation of the Common
Stock Offerings is not conditioned upon completion of this Offering and,
although it is currently the Company's intention to complete the Common Stock
Offerings prior to or contemporaneously with this Preferred Offering, there can
be no assurance that the Common Stock Offerings will be completed prior to the
completion of the Preferred Offering.
Assuming that the price for the Class A Common Stock in the Public Offering
(or the revised subscription price if the Public Offering is not consummated) is
equal to $ per share, the net proceeds to ALH from the Common Stock
Offerings are expected to be approximately $92 million after deducting the
estimated expenses of such offerings. Of such estimated proceeds, $50 million
will be advanced by ALH to AmerUs Life in exchange for a surplus note issued by
AmerUs Life and $42 million will be used by ALH to repay debt under the Bank
Credit Facility. AmerUs Life will use the proceeds it receives from the surplus
note to redeem the surplus note contributed to AFS as part of the capital
contribution. See "Capitalization" and "Use of Proceeds."
ALH estimates the net proceeds to be received from this Preferred Offering
to be $72.4 million, after giving effect to the underwriting discount and
estimated offering expenses of ALH. It is expected that ALH will use such
proceeds to repay debt under the Bank Credit Facility. See "The Preferred
Offering" and "Management's Discussion and Analysis of Results of Operation and
Financial Condition--Liquidity and Capital Resources."
The net proceeds to ALH from the Common Stock Offerings are expected to be
approximately $92 million after deducting the estimated expenses of the Common
Stock Offerings. Of such estimated proceeds, $50 million will be advanced by ALH
to AmerUs Life in exchange for a surplus note issued by AmerUs Life and $42
million will be used by ALH to repay debt under the Bank Credit Facility. AmerUs
Life will use the proceeds it receives from the surplus note to redeem the
surplus note contributed to AFS as part of the Capital Contribution.
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the Company's ratios and pro forma ratios of
earnings to combined fixed charges and preferred stock dividends for the years
and periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 1996 1995
------------------------------ --------------------------------
HISTORICAL PRO FORMA(2) HISTORICAL PRO FORMA(2) 1994 1993
------------- --------------- ------------- ----------------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to combined
fixed charges and preferred stock
dividends (1)....................... 96.60 14.06 47.93 9.34 6.32 7.31
<CAPTION>
1992 1991
----- -----
<S> <C> <C>
Ratio of earnings to combined
fixed charges and preferred stock
dividends (1)....................... 6.44 6.58
</TABLE>
- ------------------
(1) For purposes of computing the ratio of earnings to combined fixed charges
and preferred stock dividends, "earnings" consists of income from operations
before Federal income taxes, fixed charges and pre-tax earnings required to
cover preferred stock dividend requirements.
(2) Pro forma amounts include the following adjustments:
(a) the net increase in interest expense (including preferred stock
dividends) resulting from the proposed issuance of preferred stock,
assuming an 8 3/4% dividend, and the corresponding retirement of debt
with the proceeds from the Offering; and
(b) the receipt by the Company of net proceeds in the Common Stock Offerings
of $92 million and the net increase in interest expense resulting from
borrowings under the Bank Credit Facility, both of which occurred
subsequent to June 30, 1996. See "Unaudited Pro Forma Condensed
Consolidated Statement of Income".
27
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company at June 30, 1996 on an actual basis and on a pro forma basis as
adjusted to reflect (i) the Capital Contribution, (ii) the sale of million
shares of Class A Common Stock in the Common Stock Offerings at a per share
price of $ , as if such sales had occurred as of June 30, 1996 (after
deducting the underwriting discount and estimated offering expenses payable by
the Company), (iii) the issuance of the Junior Subordinated Debentures in
connection with the Preferred Offering and (iv) the establishment of the Bank
Credit Facility, as if such Capital Contribution, sale, issuance and
establishment had occurred as of June 30, 1996. See "Use of Proceeds" and "The
Common Stock Offerings." This table should be read in conjunction with the
Consolidated Financial Statements, including the related notes and report
thereon and the Unaudited Pro Forma Condensed Consolidated Financial Statements
of the Company appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT JUNE 30, 1996
--------------------------------------------------------------------------------------------------
PRO FORMA FOR
THE CAPITAL
PRO FORMA CONTRIBUTIONS,
ADJUSTMENTS FOR PRO FORMA FOR PRO FORMA AS ADJUSTED FOR
THE CAPITAL THE CAPITAL ADJUSTMENTS FOR THE COMMON PRO FORMA
CONTRIBUTION, AND CONTRIBUTION THE COMMON STOCK OFFERINGS ADJUSTMENTS FOR
THE BANK CREDIT AND THE BANK STOCK AND THE BANK THE PREFERRED
HISTORICAL FACILITY(A) CREDIT FACILITY OFFERINGS(B) CREDIT FACILITY OFFERING(C)
----------- ----------------- --------------- --------------- --------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Long Term Debt................ $ 29.3 $ 216.2 $ 245.5 $ (92.0) $ 153.5 $ (72.4)
----------- ------- ------- ------ ------- ------
Company-obligated
mandatorily-redeemable
Preferred Securities(C)...... -- -- -- -- -- 75.0
------
Equity:(D)
Preferred Stock, no par
value, 25,000,000 shares
authorized; no shares
issued and outstanding..... -- -- -- -- -- --
Class A Common Stock, no par
value, 75,000,000 shares
authorized;
shares issued and
outstanding historical and
shares pro
forma...................... -- -- --
Class B Common Stock, no par
value, 50,000,000 shares
authorized; 5,000,000
shares issued and
outstanding................ 5.0 -- 5.0 -- 5.0 --
Additional paid-in
capital.................... -- -- -- 92.0 92.0 --
Retained earnings........... 479.5 (129.0) 350.5 -- 350.5 --
Unrealized appreciation of
invested assets, net....... 19.5 -- 19.5 -- 19.5 --
----------- ------- ------- ------ ------- ------
Total equity.............. 504.0 (129.0) 375.0 92.0 467.0 --
----------- ------- ------- ------ ------- ------
Total capitalization.......... $ 533.3 $ 87.2 $ 620.5 -- $ 620.5 $ 2.6
----------- ------- ------- ------ ------- ------
----------- ------- ------- ------ ------- ------
<CAPTION>
PRO FORMA FOR
THE CAPITAL
CONTRIBUTIONS,
AS ADJUSTED FOR
THE COMMON
STOCK
OFFERINGS, THE
BANK CREDIT
FACILITY AND
THE PREFERRED
OFFERING
---------------
<S> <C>
Long Term Debt................ $ 81.1
-------
Company-obligated
mandatorily-redeemable
Preferred Securities(C)...... 75.0
-------
Equity:(D)
Preferred Stock, no par
value, 25,000,000 shares
authorized; no shares
issued and outstanding..... --
Class A Common Stock, no par
value, 75,000,000 shares
authorized;
shares issued and
outstanding historical and
shares pro
forma......................
Class B Common Stock, no par
value, 50,000,000 shares
authorized; 5,000,000
shares issued and
outstanding................ 5.0
Additional paid-in
capital.................... 92.0
Retained earnings........... 350.5
Unrealized appreciation of
invested assets, net....... 19.5
-------
Total equity.............. 467.0
-------
Total capitalization.......... $ 623.1
-------
-------
</TABLE>
- ------------------
(A) Represents AmerUs Life's Capital Contribution to AFS of certain net assets
having an aggregate net carrying value of approximately $129 million as of
the date such contribution is made, including the issuance of a $50 million
surplus note. Also represents the establishment of the Bank Credit Facility,
which consists of $50 million in term debt and a $125 million revolving
credit facility.
(B) Represents the issuance of Class A Common Stock (net of related issuance
costs).
(C) Represents the issuance of the Preferred Securities by the Trust (net of
related issuance costs). One hundred percent of the assets of the Trust will
consist of approximately $75 million in principal amount of the Junior
Subordinated Debentures of the Company. The financial statements of the
Trust will be reflected in the Company's consolidated financial statements
with the Preferred Securities shown as Company-obligated
mandatorily-redeemable Preferred Securities of the Trust.
(D) Retroactively restated to give effect to the issuance of Class A Common
Stock and Class B Common Stock to AmerUs Group.
28
<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, the Issuer will be treated as a subsidiary
of the Company and, accordingly, the accounts of the Issuer will be included in
the consolidated financial statements of the Company. The Preferred Securities
will be presented as a separate line item in the consolidated balance sheets of
the Company, entitled "Company - Obligated Mandatorily Redeemable Preferred
Securities" and appropriate disclosures about the Preferred Securities, the
Guarantee and the Junior Subordinated Debentures will be included in the notes
to the consolidated financial statements. For financial reporting purposes, the
Company will record distributions payable on the Preferred Securities as an
expense in its consolidated statements of income.
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table sets forth certain financial and operating data of the
Company. The selected consolidated financial data below for each of the three
years ending December 31, 1995 are derived from the Consolidated Financial
Statements of the Company, which financial statements have been audited by KPMG
Peat Marwick LLP, independent auditors. The selected consolidated financial data
provided below for each of the six-month periods ending June 30, 1996 and 1995
and for each of the two years ending December 31, 1992 are derived from the
unaudited consolidated financial statements of the Company.
The foregoing give effect to the Reorganization and the Distribution as if
both had been completed prior to the periods presented, but do not give effect
to the Capital Contribution. In the opinion of management, the financial
information presented for all interim periods reflects all adjustments
(consisting only of normal recurring adjustments) necessary for a full
presentation of such data. Results for the six-month periods ending June 30,
1996 and 1995 are not necessarily indicative of results that may be expected for
any other interim period or the year as a whole. This data should be read in
conjunction with (i) "Management's Discussion and Analysis of Results of
Operations and Financial Condition," (ii) the audited Consolidated Financial
Statements of the Company as of December 31, 1995 and 1994, and for each of the
years in the three-year period ended December 31, 1995, which financial
statements have been audited by KPMG Peat Marwick LLP, independent auditors,
together with the related notes and the report thereon, (iii) the unaudited
consolidated financial statements of the Company as of June 30, 1996 and 1995
and for each of the six-month periods ended June 30, 1996 and 1995, and (iv)
other financial data included elsewhere in this Prospectus.
29
<PAGE>
<TABLE>
<CAPTION>
AS OF OR FOR THE SIX
MONTHS ENDED JUNE
30,(A) AS OF OR FOR THE YEAR ENDED DECEMBER 31,(A)
-------------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Revenues:
Insurance premiums................... $ 123.3 $ 121.3 $ 244.1 $ 237.9 $ 226.4 $ 192.9 $ 186.9
Product charges...................... 29.3 29.5 57.3 56.3 57.4 57.2 50.8
Net investment income................ 143.9 141.3 285.2 275.7 269.9 273.1 268.6
Realized gains (losses) on
investments......................... 64.4 24.1 51.4 (19.9) 15.5 10.1 15.7
Other income......................... 1.3 0.3 5.4 2.4 2.4 0.9 3.6
--------- --------- --------- --------- --------- --------- ---------
Total revenues......................... 362.2 316.5 643.4 552.4 571.6 534.2 525.6
Benefits and expenses:
Total policyowner benefits........... 189.3 188.2 374.6 369.9 364.3 334.8 327.8
Total expenses....................... 55.1 49.4 108.9 111.4 106.0 100.0 87.6
Dividends to policyowners............ 26.3 24.0 49.4 45.0 45.5 42.1 40.9
--------- --------- --------- --------- --------- --------- ---------
Total benefits and expenses............ 270.7 261.6 532.9 526.3 515.8 476.9 456.3
Income before income taxes............. 91.5 54.9 110.5 26.1 55.8 57.3 69.3
Income tax expense..................... 33.6 20.9 41.2 19.4 21.4 18.6 24.5
--------- --------- --------- --------- --------- --------- ---------
Income before cumulative effect of a
change in accounting principles....... 57.9 34.0 69.3 6.7 34.4 38.7 44.8
Cumulative effect of a change in
accounting principles, net of tax..... 0.0 0.0 0.0 0.0 (3.2) 0.0 0.0
--------- --------- --------- --------- --------- --------- ---------
Net income............................. $ 57.9 $ 34.0 $ 69.3 $ 6.7 $ 31.2 $ 38.7 $ 44.8
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Earnings per share.....................
CONSOLIDATED BALANCE SHEET DATA:
Total invested assets.................. $ 3,824.1 $ 3,415.1 $ 3,965.0 $ 3,491.7 $ 3,639.3 $ 3,274.8 $ 3,155.8
Total assets........................... 4,274.0 4,243.1 4,371.9 4,036.9 4,030.7 3,707.6 3,572.5
Total liabilities...................... 3,770.0 3,747.4 3,832.0 3,618.6 3,524.8 3,286.4 3,195.6
Total shareholders' equity (B)......... 504.0 495.7 539.9 418.3 505.9 421.2 376.9
OTHER OPERATING DATA:
Adjusted net income (C)................ $ 21.0 $ 19.1 $ 38.0 $ 34.4 $ 24.2 $ 32.1 $ 36.3
Adjusted earnings per share (C)........ $ $ $ -- -- -- --
Adjusted return on average equity
(C)................................... 8.0% 8.4% 7.9% 7.4% 5.2% 8.0% 10.5%
Adjusted pro forma net income (D)...... $ 21.1 -- $ 39.4 -- -- -- --
Adjusted pro forma earnings
per share (D)......................... -- -- -- -- -- -- --
Adjusted pro forma return on average
equity (D)............................ 8.7% -- 8.9% -- -- -- --
Individual life insurance in force, net
of reinsurance........................ $ 26,219 $ 25,631 $ 25,984 $ 25,282 $ 24,698 $ 23,947 $ 23,181
Number of employees.................... 405 406 406 457 489 505 526
STATUTORY DATA:
Statutory premiums and deposits:
Individual life...................... $ 158.6 $ 152.1 $ 307.1 $ 296.4 $ 286.3 $ 270.2 $ 261.7
Annuities (E)........................ 56.5 112.7 197.1 187.8 90.4 65.2 108.5
</TABLE>
- ------------------
(A) The merger of Central Life and Old AML, which was consummated in 1994, has
been accounted for as a pooling of interests transaction.
(B) Amounts reported prior to June 30, 1996 reflect policyowners' equity. From
December 31, 1993, results reflect the impact of SFAS 115, "Accounting for
Certain Investments in Debt and Equity Securities." See Note 2 to
Consolidated Financial Statements.
(C) Adjusted data reflects net income adjusted to eliminate certain items which
management believes are not indicative of overall operating trends,
including realized gains and losses, merger-related costs, reorganization
costs, curtailment gain, and SFAS 106 transition obligations, all of which
are net of tax, and mutual life insurance company equity add-on tax. See
"Management's Discussion and Analysis of Results of Operations and
Financial Condition--Adjusted Net Income."
(D) Amounts represent net income adjusted for the items set forth in footnote
(C) above and the effects of the Common Stock Offerings and the Preferred
Offering. See "Unaudited Pro Forma Condensed Consolidated Financial
Statements."
(E) Effective May 1996, substantially all new sales of individual deferred
annuities are made through the Ameritas Joint Venture. See
"Business--Ameritas Joint Venture."
30
<PAGE>
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed Consolidated Financial
Statements give effect to (i) the establishment of the Closed Block, (ii) the
Capital Contribution, (iii) the sale of shares of Class A Common Stock in
the Common Stock Offerings at an estimated per share price of $ (after
deducting the underwriting discount and assuming no exercise of the
underwriters' over-allotment option), (iv) the Preferred Offering, and (v) the
establishment of the Bank Credit Facility, as if the establishment of the Closed
Block, the Capital Contribution, the Common Stock Offerings, the Offering and
the Bank Credit Facility had occurred as of June 30, 1996, for the purposes of
the unaudited pro forma condensed consolidated balance sheet and as of the
beginning of the respective periods for the purposes of the consolidated pro
forma condensed consolidated statements of income for the six months ended June
30, 1996 and the year ended December 31, 1995.
The unaudited pro forma information reflects estimated net proceeds from the
Common Stock Offerings of $92 million and estimated net proceeds from the
Preferred Offering of $72.4 million (in each case after deducting the
underwriting discount and estimated offering expenses payable by the Company).
Of the $92 million estimated net proceeds from the Common Stock Offerings, (i)
$50 million will be advanced to AmerUs Life in exchange for a surplus note to be
issued by AmerUs Life (which will be used to redeem the $50 million surplus note
held by AFS) and (ii) an estimated $42 million will be used by the Company to
retire debt under the Bank Credit Facility. The estimated net proceeds from the
Preferred Offering will be used to repay debt under the Bank Credit Facility. At
the time of the Distribution, $50 million will be borrowed by the Company as
term debt and $125 million under the revolving loan component of the Bank Credit
Facility. The Company used the proceeds from such borrowings to make a $175
million capital contribution to AmerUs Life. See "Use of Proceeds" and "The
Common Stock Offerings."
The Unaudited Pro Forma Condensed Consolidated Financial Statements are
based on available information and on assumptions management believes are
reasonable and that reflect the effects of the transactions described above.
Such Unaudited Pro Forma Condensed Consolidated Financial Statements are
provided for informational purposes only and should not be construed to be
indicative of the Company's consolidated financial position or results of
operations had these transactions been consummated on the dates assumed and do
not in any way represent a projection or forecast of the Company's consolidated
financial position or results of operations for any future date or period. The
Unaudited Pro Forma Condensed Consolidated Financial Statements should be read
in conjunction with the notes thereto, the audited Consolidated Financial
Statements of the Company, together with the related notes and report thereon,
the unaudited consolidated statements of the Company included elsewhere in this
Prospectus and with the information set forth under "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and "Business."
31
<PAGE>
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------------------------------------
COMMON STOCK PRO FORMA
OFFERINGS AND ASSUMING
REORGANIZATION PREFERRED PREFERRED
HISTORICAL (A) RELATED ADJUSTMENTS OFFERING (E) OFFERING (F)
------------- --------------------- ------------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS:
Invested assets
Fixed maturities................................. $ 2,326.9 $ 170.3 (B)(D $ 2,497.2
Equity securities................................ 90.4 (0.7)(B) 89.7
Short-term investments........................... 23.2 23.2
Mortgage loans................................... 278.3 (35.0)(B) 243.3
Real estate...................................... 44.1 (42.2)(B) 1.9
Policy loans..................................... 63.6 63.6
Other investments................................ 65.6 (5.2)(B) 60.4
Closed Block invested assets..................... 932.0 932.0
------------- ------- ------ -----------
Total investments................................ 3,824.1 87.2 3,911.3
Accrued investment income.......................... 35.7 35.7
Deferred policy acquisition costs.................. 128.8 128.8
Deferred income taxes.............................. 3.6 3.6
Property and equipment, net........................ 13.6 13.6
Other assets....................................... 39.6 2.6 42.2
Closed Block other assets.......................... 228.6 228.6
------------- ------- ------ -----------
Total assets................................... $ 4,274.0 $ 87.2 $ 2.6 $ 4,363.8
------------- ------- ------ -----------
------------- ------- ------ -----------
LIABILITIES:
Policyowner reserves and policyowner funds......... $ 2,098.0 $ 2,098.0
Other liabilities.................................. 130.9 130.9
Long-term debt..................................... 29.3 124.2 (B)(C)(D (72.4) 81.1
Closed Block liabilities........................... 1,511.8 1,511.8
------------- ------- ------ -----------
Total liabilities.............................. 3,770.0 124.2 (72.4) 3,821.8
Company-obligated mandatorily redeemable preferred
securities........................................ -- 75.0 75.0
SHAREHOLDERS' EQUITY:
Preferred stock, no par value, 20,000,000 shares
authorized, no shares issued and outstanding...... --
Common stock, Class A, no par value, 75,000,000
shares authorized; shares issued and
outstanding historical; shares pro
forma.............................................
Common stock, Class B, no par value, 50,000,000
shares authorized; 5,000,000 shares issued and
outstanding....................................... 5.0 5.0
Additional paid in capital......................... 92.0(C) 92.0
Retained earnings.................................. 479.5 (129.0)(B) 350.5
Unrealized appreciation of available for sale
securities........................................ 19.5 19.5
------------- ------- ------ -----------
Total shareholders' equity..................... 504.0 (37.0) -- 467.0
------------- ------- ------ -----------
Total liabilities and shareholders' equity..... $ 4,274.0 $ 87.2 $ 2.6 $ 4,363.8
------------- ------- ------ -----------
------------- ------- ------ -----------
</TABLE>
(The Accompanying Notes are an integral part of this Unaudited
Pro Forma Condensed Consolidated Balance Sheet)
32
<PAGE>
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
---------------------------------------------------------------
COMMON STOCK PRO FORMA
OFFERINGS AND ASSUMING
REORGANIZATION PREFERRED PREFERRED
HISTORICAL (A) RELATED ADJUSTMENTS OFFERING (E) OFFERING (F)
------------- --------------------- ------------ -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
REVENUES:
Insurance premiums................................ $ 123.3 $ (96.3)(G) $ 27.0
Product charges................................... 29.3 (9.1)(G) 20.2
Net investment income............................. 143.9 (27.7)(B)(G)(M) 116.2
Realized gains on investments..................... 64.4 1.2(G) 65.6
Other............................................. 1.3 1.0(H) 2.3
Contribution from the Closed Block................ 0.0 6.4(G) 6.4
------------- ------- ------------ -----------
Total revenues.................................... 362.2 (124.5) -- 237.7
------------- ------- ------------ -----------
BENEFITS AND EXPENSES:
Total policyowner benefits........................ 189.3 (104.0)(G) 85.3
Total expenses.................................... 55.1 4.4 (L)(J 1.2(K) 60.7
Dividends to policyowners......................... 26.3 (26.3)(G)
------------- ------- ------------ -----------
Total benefits and expenses....................... 270.7 (125.9) 1.2 146.0
------------- ------- ------------ -----------
Income before income taxes.......................... 91.5 1.4 (1.2) 91.7
Income tax expense.................................. 33.6 (3.9)(I)(N) (0.4)(N) 29.3
------------- ------- ------------ -----------
Net income.......................................... $ 57.9 $ 5.3 $ (0.8) $ 62.4
------------- ------- ------------ -----------
------------- ------- ------------ -----------
Net income per share................................
Shares used in the calculation of net income per
share..............................................
</TABLE>
(The Accompanying Notes are an integral part of this
Unaudited Pro Forma Condensed Consolidated Statement of Income)
33
<PAGE>
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
---------------------------------------------------------------
COMMON STOCK PRO FORMA
OFFERINGS AND ASSUMING
REORGANIZATION PREFERRED PREFERRED
HISTORICAL (A) RELATED ADJUSTMENTS OFFERING (E) OFFERING (F)
------------- --------------------- ------------ -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
REVENUES:
Insurance premiums................................ $ 244.1 $ (181.1)(G) $ 63.0
Product charges................................... 57.3 (16.9)(G) 40.4
Net investment income............................. 285.2 (59.3)(B)(G)(M) 225.9
Realized gains on investments..................... 51.4 (0.9)(G) 50.5
Other............................................. 5.4 1.2 (G)(H 6.6
Contribution from the Closed Block................ 27.0(G) 27.0
------------- ------- ------------ -----------
Total revenues.................................... 643.4 (230.0) -- 413.4
------------- ------- ------------ -----------
BENEFITS AND EXPENSES:
Total policyowner benefits........................ 374.6 (192.6)(G) 182.0
Total expenses.................................... 108.9 7.6 (L)(J 2.3(K) 118.8
Dividends to policyowners......................... 49.4 (49.4)(G)
------------- ------- ------------ -----------
Total benefits and expenses....................... 532.9 (234.4) 2.3 300.8
------------- ------- ------------ -----------
Income before income taxes.......................... 110.5 4.4 (2.3) 112.6
Income tax expense.................................. 41.2 1.5(N) (0.8)(N) 41.9
------------- ------- ------------ -----------
Net income.......................................... $ 69.3 $ 2.9 $ (1.5) $ 70.7
------------- ------- ------------ -----------
------------- ------- ------------ -----------
Net income per share................................
Shares used in the calculation of net income per
share..............................................
</TABLE>
(The Accompanying Notes are an integral part of this
Unaudited Pro Forma Condensed Consolidated Statement of Income)
34
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(A) Prior to the effective date of the Registration Statement relating to
the Common Stock Offerings, AmerUs Life effected the Distribution of its
Non-Life Insurance Subsidiaries to AmerUs Group. Accordingly, the Consolidated
Financial Statements include only the accounts and operations, after
eliminations, of the Company and its wholly-owned life insurance subsidiaries,
principally, AmerUs Life and American Vanguard Life Insurance Company.
(B) The Capital Contribution consists of a contribution of net assets as
follows:
<TABLE>
<CAPTION>
BOOK VALUE
JUNE 30, 1996
--------------
(IN MILLIONS)
<S> <C>
Fixed maturity securities..................................................... $ 4.7
Equity securities............................................................. 0.7
Mortgage loans................................................................ 35.0
Real estate................................................................... 42.2
Other investments............................................................. 5.2
Surplus note issued by AmerUs Life............................................ 50.0
Long-term debt assumed........................................................ (8.8)
-------
$ 129.0
-------
-------
</TABLE>
Such contributions were made prior to the effective date of the Registration
Statement related to the Common Stock Offerings. Net investment income has been
reduced by $2.1 million and $3.7 million for the six months ended June 30, 1996
and the year ended December 31, 1995, respectively, which represents the actual
net investment income of the assets distributed.
(C) Represents estimated net proceeds of $92 million from the issuance of
shares of Class A Common Stock and the use of the proceeds to retire long-term
debt including the surplus note issued to AFS as part of the Capital
Contribution.
(D) Represents $175 million of proceeds from the Bank Credit Facility and
the investment of such proceeds in fixed maturity securities.
(E) Represents estimated net proceeds of $72.4 million from this Preferred
Offering and the use of such proceeds to repay long-term debt. See "Use of
Proceeds."
(F) Giving effect to the establishment of the Closed Block, management fee
income, the Capital Contribution, the Common Stock Offerings, the Bank Credit
Facility, and this Preferred Offering.
(G) The unaudited pro forma condensed consolidated statements of income
reflect an allocation of revenues and expenses to the Closed Block based on
certain estimates and assumptions that management believes are reasonable. The
contribution from the Closed Block reflected in the unaudited pro forma
condensed consolidated statements of income is not necessarily indicative of the
Closed Block's contribution had the Closed Block been established as of January
1, 1995 or of the expected contribution for any future period.
The Closed Block will include only those revenues, benefits, expenses and
dividends considered in funding the Closed Block. See "The Reorganization and
Distribution of the Non-Life Insurance Subsidiaries--Establishment and Operation
of the Closed Block." The pre-tax contribution from the Closed Block is reported
as a single line item of total revenues from continuing operations. Many
expenses related to the Closed Block operations are charged to operations
outside the Closed Block, accordingly, the contribution from the Closed Block
does not represent the actual profitability of the Closed Block operations.
Operating costs and expenses outside of the Closed Block are, therefore,
disproportionate to the business outside the Closed Block. Income tax expense
applicable to the Closed Block, which will be funded in the Closed Block, is
reflected as a component of income tax expense.
35
<PAGE>
The excess of Closed Block liabilities over Closed Block assets as of June
30, 1996 represents the total estimated future contribution from the Closed
Block expected to emerge from operations in the Closed Block after income taxes.
If the actual contribution from the Closed Block in any given period equals or
exceeds the expected contribution for such period as determined at the
establishment of the Closed Block, the expected contribution would be recognized
in income from continuing operations for that period. Any excess of the actual
contribution over the expected contribution would also be recognized in income
from continuing operations to the extent that the aggregate expected
contribution for all prior periods exceeded the aggregate actual contribution.
Any remaining excess of actual contribution over expected contributions would be
accrued in the Closed Block as a liability for future policyowners' dividends.
This accrual for the future dividends effectively limits the actual Closed Block
contribution recognized in income from continuing operations to the Closed Block
contribution expected to emerge from operation of the Closed Block as determined
as of the date of establishment of the Closed Block.
The following is a summary of Closed Block pro forma income statement data
for the respective periods:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------------ -------------------
(IN MILLIONS)
<S> <C> <C>
CLOSED BLOCK REVENUES
Insurance premiums....................................................... $ 96.3 $ 181.1
Product charges.......................................................... 9.1 16.9
Net investment income.................................................... 32.5 69.3
Realized gains (losses) on investments................................... (1.2) 0.9
Other.................................................................... -- 0.8
------- -------
$ 136.7 $ 269.0
CLOSED BLOCK EXPENSES
Total policyowner benefits............................................... 104.0 192.6
Dividends to policyowners................................................ 26.3 49.4
------- -------
$ 130.3 $ 242.0
------- -------
------- -------
Contributions from the Closed Block...................................... $ 6.4 $ 27.0
------- -------
------- -------
</TABLE>
If over the period the policies and contracts in the Closed Block remain in
force the actual contributions from the Closed Block is less than the expected
contribution from the Closed Block, only such actual contribution would be
recognized in income from continuing operations. If the actual contribution from
the Closed Block in any given period is less than the expected contribution for
that period and changes in dividend scales are inadequate to offset the negative
performance in relation to the expected performance, the contribution inuring to
shareholders of the Company will be reduced. If a liability for policyowners'
dividends had been previously established in the Closed Block because the actual
contribution to the relevant date had exceeded the expected contribution to such
date, such liability would be reduced (but not below zero) in any periods in
which the actual contribution for that period is less than the expected
contribution for such period. See "The Reorganization and Distribution of the
Non-Life Insurance Subsidiaries" and "Management's Discussion of Results of
Operations and Financial Conditions."
(H) Represents management and other fees to be received under an
Intercompany Agreement between AmerUs Group and the Company as compensation for
services rendered by Company employees. See "Certain Transactions and
Relationships."
(I) Represents the elimination of $4.4 million of the mutual company equity
add-on tax for the six months ended June 30, 1996, which is applicable only to
mutual life insurance companies. This adjustment can vary significantly from
year to year, based on rates published by the IRS. The Company believes that
this tax will not be applicable to the Company after the Reorganization due to
AmerUs Life's conversion into a stock corporation.
36
<PAGE>
(J) Total expenses have been reduced by $0.5 million and $1.1 million for
the six months ended June 30, 1996 and the year ended December 31, 1995,
respectively, as a result of the assignment of a certain employment contract to
AMHC.
(K) Represents dividends on the shares issued in conjunction with this
Preferred Offering which are assumed to be payable at 8 3/4% per annum and are
classified as interest expense, net of the reduction in interest expense
resulting from the retirement of long-term debt from the proceeds from this
Preferred Offering.
(L) Represents interest expense under the Bank Credit Facility based upon a
rate of 6% per annum, and interest expense on the surplus note at 9% per annum.
The resulting adjustment was $4.9 million and $8.8 million for the six months
ended June 30, 1996 and the year ended December 31, 1995, respectively.
(M) Net investment income was adjusted to reflect the investment of the net
proceeds from the Bank Credit Facility at the average rate of return on the
Company's investment portfolio (7.86% and 7.84% for the six months ended June
30, 1996 and the year ended December 31, 1995, respectively). The resulting
adjustment was $6.9 million and $13.7 million for the six months ended June 30,
1996 and the year ended December 31, 1995, respectively.
(N) Represents the income tax effect on the net pro forma adjustments.
37
<PAGE>
ORGANIZATIONAL STRUCTURE
The following chart illustrates the general organization of AMHC and its
subsidiaries, including the Company, after the Preferred Offering and the Common
Stock Offerings:
[GRAPH]
* The Non-Life Insurance Subsidiaries consist of AFS and its subsidiaries,
which include AmerUs Bank, FSB, AmerUs Mortgage, Inc., Iowa Realty Co., Inc.
and AmerUs Properties, Inc.
** AmerUs Life participates in the Ameritas Joint Venture through its ownership
interest in AMAL Corporation, a Nebraska corporation ("AMAL"). See
"Business--Ameritas Joint Venture."
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THE FOLLOWING ANALYSIS OF THE CONSOLIDATED RESULTS OF OPERATIONS AND
FINANCIAL CONDITION OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA AND CONSOLIDATED FINANCIAL
STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS PROSPECTUS.
BACKGROUND
THE REORGANIZATION, THE CAPITAL CONTRIBUTION AND THE DISTRIBUTION
ALH is an insurance holding company formed on August 1, 1996, in connection
with the Reorganization of American Mutual Life on June 30, 1996. As part of the
Reorganization, all of the shares of capital stock of AmerUs Life were issued to
AMHC. Subsequent to the Reorganization, on August 1, 1996, AMHC contributed all
of its shares of capital stock of AmerUs Life to AmerUs Group. On August 1,
1996, all of the shares of the Company's capital stock were issued to AmerUs
Group. See "The Reorganization and Distribution of the Non-Life Insurance
Subsidiaries."
Prior to the effective date of the Registration Statement relating to the
Common Stock Offerings, AmerUs Life made the Capital Contribution to AFS. The
Capital Contribution consisted of (i) commercial mortgages, real estate and
fixed maturity securities having a net carrying value of approximately $79
million and (ii) the Surplus Note, which has a face amount of $50 million.
Following the Capital Contribution, a series of transactions was undertaken by
the Company and its affiliates. AmerUs Life effected the Distribution pursuant
to which it distributed AFS and the other Non-Life Insurance Subsidiaries to
AmerUs Group. Immediately after the Distribution, AmerUs Group contributed all
of its shares of common stock in AmerUs Life to the Company. Under this
structure, the Company is an intermediate holding company, with AmerUs Group as
its direct parent company and AmerUs Life as its wholly-owned subsidiary. Under
Iowa law, AMHC is required to retain direct or indirect ownership and control of
shares representing a majority of the vote of the outstanding capital stock of
the Company. Immediately following the Distribution, the Company entered into
the Bank Credit Facility, pursuant to which it borrowed $50 million in term debt
and $125 million through a revolving line of credit. The Company used the
proceeds from such borrowings to make a $175 million capital contribution to
AmerUs Life. The Company will use certain proceeds of the Common Stock Offerings
and this Preferred Offering to repay such borrowings.
The Distribution effectively separated AMHC's non-life insurance businesses
from the life insurance businesses owned by the Company, such that the companies
engaged in non-life insurance businesses are no longer subsidiaries of the
Company. See "The Reorganization and Distribution of the Non-Life Insurance
Subsidiaries."
THE CLOSED BLOCK
In connection with the Reorganization, the Closed Block was established.
Insurance policies which had a dividend scale in effect as of June 30, 1996 were
included in the Closed Block. The Closed Block is designed to provide reasonable
assurance to owners of insurance policies included therein that, after the
Reorganization, assets will be available to maintain the dividend scales and
interest credits in effect for 1995 if the experience underlying such scales and
credits continues. See "Risk Factors--The Closed Block" and "The Reorganization
and Distribution of the Non-Life Insurance Subsidiaries--Establishment and
Operation of the Closed Block." Although the Closed Block is not expected to
affect the net income of the Company, the financial presentation of the results
of operations and financial position of the Company will be affected in future
reporting periods.
The contribution to the operating income of the Company from the Closed
Block will be reported as a single line item in the income statement.
Accordingly, premiums, product charges, investment income, realized gains
(losses) on investments, policyowner benefits, expenses and dividends
attributable to the Closed Block will be shown as a net number, the
"Contribution from the Closed Block." This will result in material reductions in
the respective line items in the income statement in future periods while having
no affect on net income. Also, all investments allocated to the Closed Block
will be grouped together and
39
<PAGE>
shown as a single item entitled "Closed Block Investments," and all other assets
allocated to the Closed Block will be grouped together and shown as a separate
item entitled "Closed Block Assets." Likewise, all liabilities attributable to
the Closed Block will be combined and disclosed as the "Closed Block
Liabilities." See "Unaudited Pro Forma Condensed Consolidated Financial
Statements."
ACCOUNTING TREATMENT
The Selected Consolidated Financial and Operating Data, the Consolidated
Financial Statements and other financial data of the Company presented herein
give effect to the Reorganization and the Distribution as if both had been
completed prior to the periods presented (including giving effect to the
establishment of the Closed Block as of June 30, 1996), but do not give effect
to the Capital Contribution.
AMERITAS JOINT VENTURE
Under the Ameritas Joint Venture, the Company will no longer offer DEFERRED
FIXED ANNUITIES for sale to new customers except through the Ameritas Joint
Venture, although the Company will continue to issue renewal and replacement
annuity contracts with respect to annuity contracts issued by it prior to the
formation of the Ameritas Joint Venture. Consequently, future sales of fixed
annuities by the Company will be substantially reduced, which will have an
effect on future investment income and product charges of the Company.
Management believes that any reductions in net income resulting from the
curtailment of direct annuity sales by the Company will be more than offset by
management fees and by the Company's increased equity interest in the net income
of the Ameritas Joint Venture.
OVERVIEW
The Company is engaged in the business of underwriting, marketing and
distributing a broad range of individual life insurance and annuity products to
individuals and businesses in 45 states and the District of Columbia. The
Company's primary product offerings consist of whole life, universal life and
term life insurance policies and fixed annuities. Since April 1, 1996 the
Company has been a party to the Ameritas Joint Venture with Ameritas Life
Insurance Corp., through which it now markets fixed annuities and has begun to
sell variable annuities and variable life insurance products. See
"Business--Products" and "Business--Ameritas Joint Venture."
In accordance with GAAP, universal life insurance premiums and annuity
deposits received are reflected as increases in liabilities for policyowner
account balances and not as revenues. Revenues reported for universal life and
annuity products consist of policy charges for the cost of insurance,
administration charges and surrender charges assessed against policyowner
account balances. Surrender benefits paid relating to universal life insurance
policies and annuity products are reflected as decreases in liabilities for
policyowner account balances and not as expenses. Amounts for interest credited
to universal life and annuity policyowner account balances and benefit claims in
excess of policyowner account balances are reported as expenses in the financial
statements. The Company receives investment income earned from the funds
deposited into account balances by universal life and annuity policyowners, the
majority of which is passed through to such policyowners in the form of interest
credited.
Premium revenues reported for traditional life insurance products are
recognized as revenues when due. Future policy benefits and policy acquisition
costs are recognized as expenses over the life of the policy by means of a
provision for future policy benefits and amortization of deferred policy
acquisition costs.
The costs related to acquiring new business, including certain costs of
issuing policies and certain other variable selling expenses (principally
commissions), defined as deferred policy acquisition costs, are capitalized and
amortized as an expense in proportion to expected profits or margins from such
policies. This amortization is adjusted when current or estimated future gross
profits or margins on the underlying policies vary from previous estimates. For
example, the amortization of deferred policy acquisition costs is accelerated
when policy terminations are higher than originally estimated or when
investments supporting the policies are sold at a gain prior to their
anticipated maturity. Death and other policyowner benefits reflect exposure to
mortality risk and fluctuate from period to period based on the
40
<PAGE>
level of claims incurred within insurance retention limits. The profitability of
the Company is primarily affected by expense levels, interest spread results
(i.e., the excess of investment earnings over the interest credited to
policyowners) and fluctuations in mortality and other policyowner benefits. The
Company has the ability to mitigate adverse experience through adjustments to
credited interest rates, policyowner dividends or cost of insurance charges.
ADJUSTED NET INCOME
The following table reflects net income adjusted to eliminate certain items
(net of applicable income taxes) which management believes are not necessarily
indicative of overall operating trends, including net realized gains or losses
on investments:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net income........................................ $ 57,921 $ 34,002 $ 69,348 $ 6,667 $ 31,209 $ 38,753 $ 44,847
Net realized (gains) losses on investments (A).... (41,866) (15,698) (32,244) 11,223 (10,187) (6,646) (8,547)
Merger-related costs (B).......................... 821 1,451 6,882
Equity add-on tax (C)............................. 4,397 9,585
Reorganization costs (D).......................... 588 1,426
Adoption of SFAS 106 (E).......................... 3,214
Curtailment gain (F).............................. (2,015)
--------- --------- --------- --------- --------- --------- ---------
Adjusted net income............................... $ 21,040 $ 19,125 $ 37,966 $ 34,357 $ 24,236 $ 32,107 $ 36,300
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Adjusted earnings per share....................... $ $ $ -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
- ------------------
(A) Represents realized gains or losses on investments less that portion of the
amortization of deferred policy acquisition costs adjusted for income taxes
on such amounts.
(B) Effective December 31, 1994, Old AML merged into Central Life; these amounts
are costs related to the merger and include early retirement and severance
costs, legal, consulting, postage and printing costs and costs associated
with the establishment of a charitable trust.
(C) Represents the mutual life insurance company equity add-on tax, which is
applicable only to mutual life insurance companies and which the Company
believes will not be applicable to the Company on an ongoing basis due to
AmerUs Life's conversion into a stock company.
(D) Represents costs directly related to the Reorganization consisting primarily
of printing, postage, legal and consulting costs. All of the 1995 costs were
incurred in the second half of 1995.
(E) As of January 1, 1993, the Company adopted SFAS 106, pursuant to which the
cost of certain post-retirement benefits must be recognized on an accrual
basis as employees perform services to earn such benefits. The Company's
transition obligation as of January 1, 1993 amounted to approximately $3.2
million, net of income tax benefits, and was recorded as a cumulative effect
adjustment to net income.
(F) Represents a curtailment gain resulting from the freezing of the Company's
defined benefit pension plans as of December 31, 1995.
41
<PAGE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
A summary of the Company's revenues follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30,
------------------------
1996 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Insurance premiums
Traditional life insurance premiums......................................... $ 113,347 $ 106,251
Immediate annuity and supplementary contract premiums....................... 8,097 10,440
Other premiums.............................................................. 1,898 4,640
----------- -----------
Total insurance premiums.................................................. 123,342 121,331
Universal life product charges.............................................. 28,841 29,178
Annuity product charges..................................................... 431 330
----------- -----------
Total product charges..................................................... 29,272 29,508
Net investment income....................................................... 143,888 141,267
Realized gains (losses) on investments...................................... 64,409 24,150
Other revenues.............................................................. 1,330 251
----------- -----------
Total revenues............................................................ $ 362,241 $ 316,507
----------- -----------
----------- -----------
</TABLE>
Insurance premiums increased $2.0 million to $123.3 million in the six
months ended June 30, 1996 compared to $121.3 million in the six months ended
June 30, 1995. Traditional life insurance premiums increased $7.1 million due to
continued growth in renewal premiums. Immediate annuity deposits and
SUPPLEMENTARY CONTRACT premiums were $2.3 million lower in the first half of
1996 than for the same period in 1995 due to decreased immediate annuity sales.
Other premiums were $2.7 million lower in the six months ended June 30, 1996
than in the six months ended June 30, 1995 primarily due to the Company's exit
from several group life and long-term disability reinsurance pools in the second
half of 1995, as part of management's continuing review of insurance products'
profitability.
Universal life product charges were $0.3 million lower in the first half of
1996 compared to the first half of 1995 primarily due to increased reinsurance
costs relative to the increase in COST OF INSURANCE charges for the 1996 period.
Net investment income increased by $2.6 million, or 1.9%, to $143.9 million
in the six months ended June 30, 1996 as compared to $141.3 million in the six
months ended June 30, 1995. The increase was attributable to an increase in
average invested assets. Average invested assets increased by $166.2 million to
$3,894.6 million during the first half of 1996. The effective yield on average
invested assets was 7.85% in the first half of 1995, compared to 7.86% in the
first half of 1996.
Realized gains on investments were $64.4 million in the six months ended
June 30, 1996 compared to $24.1 million in the six months ended June 30, 1995.
The increase of $40.3 million resulted primarily from increased sales of common
stock, reflecting the Company's decision to reduce its exposure to equity
securities.
Other revenues increased by $1.0 million in the six months ended June 30,
1996 compared to the six months ended June 30, 1995, primarily due to proceeds
from a favorable litigation settlement.
42
<PAGE>
A summary of the Company's policyowner benefits follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30,
------------------------
1996 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Traditional life insurance
Death benefits.................................................... $ 19,664 $ 17,080
Change in liability for future policy benefits and other policy
benefits......................................................... 79,670 74,425
----------- -----------
Total traditional life insurance benefits....................... 99,334 91,505
Universal life insurance
Death benefits in excess of cash value............................ 8,896 8,660
Interest credited to policyowner account balances................. 24,378 23,077
Other policy benefits............................................. 2,468 3,581
----------- -----------
Total universal life insurance benefits......................... 35,742 35,318
Annuities
Interest credited to deferred annuity account balances............ 35,712 38,181
Other annuity benefits............................................ 16,234 18,168
----------- -----------
Total annuity benefits.......................................... 51,946 56,349
Miscellaneous benefits.............................................. 2,306 5,079
----------- -----------
Total policyowner benefits...................................... $ 189,328 $ 188,251
----------- -----------
----------- -----------
</TABLE>
Total policyowner benefits increased by $1.1 million from the first half of
1995 to $189.3 million in the first half of 1996. Traditional life benefits
increased $7.8 million primarily due to the growth in the amount of such
business in force and less favorable mortality experience. Universal life
benefits increased $0.4 million primarily due to increased interest credited to
policyowner account balances. While the weighted average CREDITING RATE for the
Company's universal life liabilities decreased 15 basis points from 6.51% in the
six months ended June 30, 1995 to 6.36% in the six months ended June 30, 1996,
the Company's average liabilities increased $43.2 million, or 5.7%, from the
first half of 1995 to the first half of 1996, resulting in the increased
credited amounts in the 1996 period.
Annuity benefits decreased $4.4 million in the six month period ended June
30, 1996 to $51.9 million compared to $56.3 million in the six months ended June
30, 1995. Such benefits decreased due to reduced interest credited to
policyowner account balances and decreased other annuity benefits. The weighted
average crediting rate for the Company's individual deferred annuity liabilities
decreased 92 basis points to 5.51% in the six months ended June 30, 1996
compared to 6.43% in the six months ended June 30, 1995. The Company's average
annuity liabilities decreased $45.7 million, or 3.5%, from the first half of
1995 to the first half of 1996, also contributing to the decrease in interest
credited amounts in the 1996 period. The decrease in other annuity benefits was
the result of reduced immediate annuity sales in 1996.
The decrease in miscellaneous benefits of $2.8 million to $2.3 million in
the six months ended June 30, 1996 compared to $5.1 million in the six months
ended June 30, 1995 was primarily the result of the Company's exit from several
group life and long-term disability reinsurance pools in the second half of
1995.
43
<PAGE>
A summary of the Company's expenses follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1996 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Commission expense, net of deferrals............................................. $ 3,840 $ 5,331
Other underwriting, acquisition and insurance expenses, net of deferrals......... 24,378 18,824
Amortization of deferred policy acquisition costs................................ 26,823 25,247
--------- ---------
Total expenses............................................................... $ 55,041 $ 49,402
--------- ---------
--------- ---------
</TABLE>
Commission expense, net of deferrals, decreased $1.5 million to $3.8 million
for the six months ended June 30, 1996, primarily due to a decrease in gross
commission expense of $2.8 million from 1995 to 1996 as a result of lower sales
levels, lower annuity rollovers and the conversion of new annuity sales to the
Ameritas Joint Venture in May, 1996. Other underwriting, acquisition and
insurance expenses, net of deferrals, increased by $5.6 million, or 29.5%, to
$24.4 million in the six months ended June 30, 1996. The increase in expenses in
the first half of 1996 was primarily due to increased costs related to long-term
incentive plans, the Reorganization, the Ameritas Joint Venture, settlements and
associated legal fees and higher premium taxes.
The amortization of deferred policy acquisition costs increased by $1.6
million in the first half of 1996 to $26.8 million compared to $25.2 million in
the first half of 1995. The increase in amortization in the first half of 1996
was primarily due to higher gross profits in the first half of 1996.
Dividends to policyowners increased by $2.3 million, or 9.8%, to $26.3
million in the six months ended June 30, 1996 compared to $24.0 million in the
six months ended June 30, 1995. The growth in dividends was primarily the result
of the growth and aging of the in-force policies. Traditional life reserves grew
8.0% from the six months ended June 30, 1995 to $1.16 billion in the six months
ended June 30, 1996. The weighted average dividend rate credited to these
policies was 7.14% for both 1996 and 1995.
Income before income taxes increased by $36.6 million, or 66.8%, to $91.5
million in the six months ended June 30, 1996 compared to $54.9 million in the
six months ended June 30, 1995. The increase resulted primarily from the
increase of $40.3 million in realized gains on investments.
Income tax expense increased by $12.7 million for the six months ended June
30, 1996 to $33.6 million as compared to $20.9 million for the six months ended
June 30, 1995. The increased income taxes for the six months ended June 30, 1996
were the result of the higher pre-tax income discussed above and a $4.4 million
provision for the equity add-on tax in the first half of 1996 partially offset
by $2.2 million of tax credits. The effective income tax rate for the first half
of 1996 was 36.7% and for the first half of 1995 was 38.1%.
Net income increased by $23.9 million in the six months ended June 30, 1996
to $57.9 million from $34.0 million in the six months ended June 30, 1995. This
increase resulted from the increases in pre-tax income discussed above.
44
<PAGE>
1995 COMPARED TO 1994
A summary of the Company's revenues follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1994
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Insurance premiums
Traditional life insurance premiums......................................... $ 219,732 $ 209,447
Immediate annuity and supplementary contract premiums....................... 17,659 16,680
Other premiums.............................................................. 6,696 11,785
----------- -----------
Total insurance premiums.................................................. 244,087 237,912
Universal life product charges.............................................. 56,763 55,815
Annuity product charges..................................................... 607 547
----------- -----------
Total product charges..................................................... 57,370 56,362
Net investment income....................................................... 285,244 275,691
Realized gains (losses) on investments...................................... 51,387 (19,930)
Other revenues.............................................................. 5,390 2,391
----------- -----------
Total revenues............................................................ $ 643,478 $ 552,426
----------- -----------
----------- -----------
</TABLE>
Insurance premiums increased $6.2 million to $244.1 million in 1995 compared
to $237.9 million in 1994. Traditional life insurance premiums increased $10.3
million as a result of continued growth in renewal premiums. Immediate annuity
deposits and supplementary contract premiums were $1.0 million greater in 1995
than 1994 due to increased immediate annuity sales. Other premiums were $5.1
million lower in 1995 than in 1994 primarily due to the Company's exit from
several group life and long-term disability reinsurance pools in 1995, as part
of management's continuing review of insurance products' profitability.
Universal life product charges were $0.9 million higher in 1995 compared to
1994 primarily due to increased cost of insurance charges as a result of the
normal aging of that block of business.
Net investment income increased by $9.5 million, or 3.5%, to $285.2 million
in 1995 as compared to $275.7 million in 1994. The increase was attributable to
an increase in average invested assets partially offset by a decline in the
effective yield on average invested assets. Average invested assets increased by
$162.9 million to $3,728.4 million during 1995. The effective yield on average
invested assets decreased from 7.90% in 1994 to 7.84% in 1995 reflecting a
reduction in interest income on both bonds and commercial mortgages as a result
of lower market interest rates on new investments.
Realized gains on investments were $51.4 million in 1995 compared to
realized losses of $19.9 million in 1994. The increase of $71.3 million in 1995
resulted primarily from the combination of increased gains of $32.5 million over
1994 amounts from the sale of common stock and a gain of $9.4 million in 1995
compared to a loss of $25.5 million in 1994 from sales of fixed maturity
securities. Of the losses incurred in 1994, $21.1 million were incurred in
connection with sales of fixed maturity securities which resulted from a planned
investment strategy to increase after-tax investment yields in future periods by
disposing of selected fixed maturity securities.
Other revenues increased in 1995 by $3.0 million from 1994 levels, primarily
due to a gain of $3.1 million which resulted from the curtailment of the
Company's defined benefit pension plans, effective December 31, 1995. See Note 7
to the Consolidated Financial Statements.
45
<PAGE>
A summary of the Company's policyowner benefits follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1994
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Traditional life insurance
Death benefits.............................................................. $ 32,196 $ 30,044
Change in liability for future policy benefits and other policy benefits.... 152,742 149,283
----------- -----------
Total traditional life insurance benefits................................. 184,938 179,327
Universal life insurance
Death benefits in excess of cash value...................................... 17,098 15,165
Interest credited to policyowner account balances........................... 45,240 42,095
Other policy benefits....................................................... 5,214 7,237
----------- -----------
Total universal life insurance benefits................................... 67,552 64,497
Annuities
Interest credited to deferred annuity account balances...................... 78,120 77,980
Other annuity benefits...................................................... 35,582 34,918
----------- -----------
Total annuity benefits.................................................... 113,702 112,898
Miscellaneous benefits........................................................ 8,428 13,174
----------- -----------
Total policyowner benefits................................................ $ 374,620 $ 369,896
----------- -----------
----------- -----------
</TABLE>
Total policyowner benefits increased $4.7 million from 1994 to $374.6
million in 1995. Traditional life benefits increased $5.6 million due primarily
to increased mortality costs and increased liabilities for future policy
benefits, in each case associated with the growth in the amount of such business
in force. Universal life benefits increased $3.1 million primarily due to
increased interest credited to policyowner account balances. The weighted
average crediting rate for the Company's universal life liabilities increased 23
basis points from 6.44% in 1994 to 6.67% in 1995, and the Company's average
liabilities increased $41.9 million, or 5.8%, from 1994 to 1995, resulting in
the increased credited amounts in 1995.
Annuity benefits increased $0.8 million in 1995 to $113.7 million compared
to $112.9 million in 1994. Such benefits increased due to increased interest
credited to policyowner account balances and increased other annuity benefits.
While the weighted average crediting rate for the Company's individual deferred
annuity liabilities decreased 25 basis points to 6.16% in 1995 compared to 6.41%
in 1994, the Company's average liabilities increased $32.1 million, or 2.5%,
from 1994 to 1995, resulting in the increased interest credited amounts in 1995.
The increased other annuity benefits were the result of continued growth in the
immediate annuity and supplementary contract business in force.
The decrease in miscellaneous benefits of $4.8 million to $8.4 million in
1995 compared to $13.2 million in 1994 was primarily the result of the Company's
exit from several group life and long-term disability reinsurance pools in 1995.
46
<PAGE>
A summary of the Company's expenses follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1994
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Commission expense, net of deferrals.......................................... $ 10,448 $ 9,451
Other underwriting, acquisition and insurance expenses, net of deferrals...... 48,207 59,153
Amortization of deferred policy acquisition costs............................. 50,239 42,756
----------- -----------
Total expenses............................................................ $ 108,894 $ 111,360
----------- -----------
----------- -----------
</TABLE>
Commission expense, net of deferrals, increased $1.0 million, or 10.5%, in
1995 to $10.4 million, primarily as a result of the integration of the product
lines of Central Life and Old AML and an increase in gross commissions of $3.0
million as a result of increased annuity sales in 1995. Other underwriting,
acquisition and insurance expenses, net of deferrals, decreased in 1995 by $10.9
million, or 18.5%, to $48.2 million. 1995 was the first year of the consolidated
operations of Central Life and Old AML. As a result of the combination,
approximately $7.8 million of cost reductions were realized in 1995 from 1994
combined levels, excluding the merger-related expenses described below. These
reductions in 1995 were partially offset by increased legal and settlement costs
of $1.1 million, higher incentive compensation of $1.0 million and $2.2 million
of expenses related to the investigation and review of alternate capital
structures, including implementing the Reorganization. Included in 1994 expenses
were approximately $10.0 million of expenses related to the merger of the two
companies compared to $2.2 million of merger-related costs in 1995.
The amortization of deferred policy acquisition costs increased by $7.4
million to $50.2 million in 1995 compared to $42.8 million in 1994. The increase
in amortization in 1995 was primarily due to higher realized gains and gross
profits in 1995 than in 1994.
Dividends to policyowners increased by $4.4 million, or 9.7%, to $49.4
million in 1995 compared to $45.0 million in 1994. The growth in dividends was
primarily the result of the growth and aging of the in-force policies.
Traditional life reserves grew 8.4% from 1994 to $1.12 billion in 1995. The
weighted average dividend rate credited to these policies was 7.14% for 1995 and
1994.
Income before income taxes increased by $84.5 million, or 323%, to $110.6
million in 1995 compared to $26.1 million in 1994. The increase resulted
primarily from the $9.5 million increase in net investment income, net realized
gains on investments of $51.4 million in 1995 as compared to net realized losses
on investments of $19.9 million in 1994, and reduced expenses, partially offset
by higher dividends to policyowners.
Income tax expense increased by $21.7 million to $41.2 million in 1995 as
compared to $19.5 million in 1994. The increased 1995 income taxes were the
result of the higher pre-tax income discussed above. The effective income tax
rate for 1995 was 37.3% and for 1994 was 74.5%. In 1994, American Mutual Life
was subject to the equity add-on tax which resulted in an additional $9.6
million of current income tax expense.
Net income increased by $62.8 million in 1995 to $69.4 million from $6.6
million in 1994. This increase resulted from the increases in pre-tax income
discussed above.
47
<PAGE>
1994 COMPARED TO 1993
A summary of the Company's revenues follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1994 1993
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Insurance premiums
Traditional life insurance premiums......................................... $ 209,447 $ 198,079
Immediate annuity and supplementary contract premiums....................... 16,680 16,737
Other premiums.............................................................. 11,785 11,544
----------- -----------
Total insurance premiums.................................................. 237,912 226,360
Universal life product charges.............................................. 55,815 56,928
Annuity product charges..................................................... 547 545
----------- -----------
Total product charges..................................................... 56,362 57,473
Net investment income....................................................... 275,691 269,854
Realized gains (losses) on investments...................................... (19,930) 15,460
Other revenues.............................................................. 2,391 2,498
----------- -----------
Total revenues............................................................ $ 552,426 $ 571,645
----------- -----------
----------- -----------
</TABLE>
Insurance premiums increased $11.5 million to $237.9 million in 1994
compared to $226.4 million in 1993. Traditional life insurance premiums
increased $11.4 million primarily as a result of continued growth in renewal
premiums.
Universal life product charges were $1.1 million lower in 1994 than in 1993
primarily due to a decrease in cost of insurance charges by the Company in its
universal life product line in 1994.
Net investment income increased by $5.8 million, or 2.2%, to $275.7 million
in 1994 as compared to $269.9 million in 1993. The increase was attributable to
an increase in average invested assets partially offset by a decline in the
effective yield on average invested assets. Average invested assets increased by
$108.5 million to $3,565.5 million during 1994. The effective yield on average
invested assets decreased from 8.08% in 1993 to 7.90% in 1994, primarily
reflecting lower reinvestment rates in late 1993 and throughout 1994.
Realized losses on investments were $19.9 million in 1994 compared to gains
of $15.5 million in 1993. The realized losses in 1994 resulted in part from a
planned investment strategy to increase after-tax investment yields in future
periods by disposing of selected fixed maturity securities that generated losses
of $21.1 million in 1994.
48
<PAGE>
A summary of the Company's policyowner benefits follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1994 1993
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Traditional life insurance
Death benefits.............................................................. $ 30,044 $ 28,516
Change in liability for future policy benefits and other policy benefits.... 149,283 143,659
----------- -----------
Total traditional life insurance benefits................................. 179,327 172,175
Universal life insurance
Death benefits in excess of cash value...................................... 15,165 13,270
Interest credited to policyowner account balances........................... 42,095 40,060
Other policy benefits....................................................... 7,237 7,007
----------- -----------
Total universal life insurance benefits................................... 64,497 60,337
Annuities
Interest credited to deferred annuity account balances...................... 77,980 82,314
Other annuity benefits...................................................... 34,918 38,001
----------- -----------
Total annuity benefits.................................................... 112,898 120,315
Miscellaneous benefits........................................................ 13,174 11,446
----------- -----------
Total policyowner benefits................................................ $ 369,896 $ 364,273
----------- -----------
----------- -----------
</TABLE>
Total policyowner benefits increased by $5.6 million from 1993 to $369.9
million in 1994. Traditional life benefits increased $7.2 million primarily due
to increased mortality costs and increased liabilities for future policy
benefits, in each case associated with the growth in the amount of such business
in force. Universal life benefits increased $4.2 million due to increased
mortality costs and increased interest credited to policyowner account balances
resulting from the growth in the amount of such business in force. While the
weighted average crediting rate for the Company's universal life liabilities
decreased 15 basis points from 6.59% in 1993 to 6.44% in 1994, the Company's
average liabilities increased $43.8 million, or 6.5% ,from 1993 to 1994,
resulting in the increased credited amounts in 1994.
Annuity benefits decreased $7.4 million in 1994 to $112.9 million compared
to $120.3 million in 1993. Such benefits decreased due to reduced interest
credited to policyowner account balances and decreased other annuity benefits.
While the Company's average annuity liabilities increased $88.2 million or 7.4%
for these products from 1993 to 1994, this was more than offset by the reduction
in the weighted average crediting rate on these products of 54 basis points from
6.95% in 1993 to 6.41% in 1994, resulting in the decreased interest credited
amounts in 1994. The decrease in other annuity benefits was the result of a
change in valuation basis on structured settlement contracts which increased
reserves in 1993, partially offset by the growth of immediate annuity and
supplementary contract business in force in 1994.
The increase in miscellaneous benefits of $1.7 million was primarily due to
a reduction of reserves in the Company's group accident and health business in
1993.
49
<PAGE>
A summary of the Company's expenses follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1994 1993
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Commission expense, net of deferrals.......................................... $ 9,451 $ 9,239
Other underwriting, acquisition and insurance expenses, net of deferrals...... 59,153 49,398
Amortization of deferred policy acquisition costs............................. 42,756 47,441
----------- -----------
Total expenses............................................................ $ 111,360 $ 106,078
----------- -----------
----------- -----------
</TABLE>
Commission expense, net of deferrals, increased $0.2 million to $9.4 million
in 1994 as compared to $9.2 million in 1993. Other underwriting, acquisition and
insurance expenses, net of deferrals, increased in 1994 by $9.8 million, or
19.7%, to $59.2 million, primarily due to approximately $10.0 million of merger-
related expenses incurred in 1994 in connection with the merger of Central Life
and Old AML.
The amortization of deferred policy acquisition costs decreased by $4.6
million in 1994 to $42.8 million compared to $47.4 million in 1993. The change
in amortization was primarily the result of the combination of decreased
amortization due to realized losses in 1994 and higher amortization in 1993 due
to changes in assumptions as to future profitability resulting from an expected
decrease in cost of insurance charges in the universal life product line, net of
an expected improvement in mortality experience.
Dividends to policyowners decreased by $0.5 million, or 1.1% to $45.0
million in 1994 compared to $45.5 million in 1993. The decrease in dividends was
primarily the result of a dividend scale reduction in 1994. The weighted average
dividend rate credited to these policies was 7.14% in 1994 compared to 7.34% in
1993. Traditional life reserves grew 9.3% from 1993 to $1.03 billion in 1994.
Income before income taxes and before the cumulative effect of a change in
accounting principles decreased by $29.7 million, or 53.1%, to $26.1 million in
1994 compared to $55.8 million in 1993. The decrease resulted primarily from net
realized losses on investments of $19.9 million in 1994 as compared to $15.5
million in net realized gains on investments in 1993 and an increase of $9.8
million in underwriting, acquisition and insurance expenses, net of deferrals,
partially offset by higher net investment income, lower amortization of deferred
policy acquisition costs and lower crediting rates on all product lines.
Income tax expense decreased by $1.9 million from 1993 to 1994. The
decreased 1994 income taxes were the result of the lower pre-tax income
discussed above, partially offset by the equity add-on tax in 1994. The
effective income tax rate for 1994, adjusted for the equity add-on tax, was
identical to the 1993 rate of 38%. In 1994, American Mutual Life was subject to
the equity add-on tax which resulted in an additional $9.6 million of current
income tax expense. The 1993 equity add-on tax was zero.
As of January 1, 1993, the Company adopted SFAS 106, pursuant to which the
cost of certain post-retirement benefits must be recognized on an accrual basis
as employees perform services to earn such benefits. The Company's transition
obligation as of January 1, 1993 amounted to approximately $3.2 million, net of
income tax benefits, and was recorded as a cumulative effect adjustment to net
income.
Net income decreased by $24.6 million in 1994 to $6.6 million compared to
$31.2 million in 1993. The primary reasons for the decrease were investment
losses, merger-related costs and the equity add-on tax in 1994.
LIQUIDITY AND CAPITAL RESOURCES
THE COMPANY
The Company's cash flow from operations will consist of dividends from
subsidiaries, if declared and paid, interest income on loans and advances to its
subsidiaries (including a surplus note issued to
50
<PAGE>
the Company by AmerUs Life), investment income on assets held by the Company and
fees which the Company will charge AmerUs Group, AmerUs Life and certain other
of its affiliates for management services, offset by the expenses incurred for
debt service, salaries and other expenses.
The Company intends to rely primarily on dividends and interest income from
AmerUs Life to make any dividend payments to its shareholders. The payment of
dividends by AmerUs Life to the Company is regulated under Iowa law. Under Iowa
law, AmerUs Life may pay dividends only from the earned surplus arising from its
business and must receive the prior approval of the Iowa Commissioner to pay a
dividend, if such dividend would exceed certain statutory limitations. The
current statutory limitation is the greater of (i) 10% of AmerUs Life's capital
and surplus as of the preceding year end or (ii) the net gain from operations
for the previous calendar year. Iowa law gives the Iowa Commissioner broad
discretion to disapprove requests for dividends in excess of these limits.
During 1996, the maximum amount that would have been legally available for
distribution to the Company, absent the Distribution, without further regulatory
approval would have been approximately $40 million. However, as a result of the
Distribution, AmerUs Life will not be able to pay dividends to the Company in
the 12-month period following the Distribution without the prior consent of the
Iowa Commissioner. See "Supervision and Regulation."
Immediately following the Distribution, the Company borrowed $175 million,
including $50 million in term debt and $125 million under a revolving line of
credit, pursuant to the Bank Credit Facility. A substantial portion of the
aggregate proceeds of the Common Stock Offerings and the Preferred Offering will
be used to repay debt under the revolving credit portion of the Bank Credit
Facility. Following such repayment, the Company would have significant borrowing
capacity under its revolving line of credit.
The Company may from time to time review potential acquisition
opportunities. The Company anticipates that funding for any such acquisition may
be provided from available cash resources or from debt or equity financing. As
of June 30, 1996 the Company had no material commitments for capital
expenditures.
AMERUS LIFE
AmerUs Life's cash inflows consist primarily of premium income, deposits to
policyowner account balances, income from investments, sales, maturities and
calls of investments and repayments of investment principal. Cash outflows are
primarily related to withdrawals of policyowner account balances, investment
purchases, payment of policy acquisition costs, payment of policyowner benefits,
income taxes and current operating expenses. Life insurance companies generally
produce a positive cash flow from operations, as measured by the amount by which
cash inflows are adequate to meet benefit obligations to policyowners and normal
operating expenses as they are incurred. The remaining cash flow is generally
used to increase the asset base to provide funds to meet the need for future
policy benefit payments and for writing new business.
Management anticipates that funds to meet its short-term and long-term
capital expenditures, cash dividends to shareholders and operating cash needs
will come from existing capital and internally generated funds. Management
believes that the current level of cash and available-for-sale and short-term
securities, combined with expected net cash inflows from operations, maturities
of fixed maturity investments, principal payments on mortgage-backed securities
and its insurance products, will be adequate to meet AmerUs Life's anticipated
short-term cash obligations.
AmerUs Life generated cash flows from operating activities of $52.2 million,
$202.0 million, $172.4 million and $173.6 million, for the six months ended June
30, 1996 and for the years ended December 31, 1995, 1994 and 1993, respectively.
Excess operating cash flows were primarily used to increase AmerUs Life's fixed
maturity investment portfolio.
Matching the investment portfolio maturities to the cash flow demands of the
type of insurance being provided is an important consideration for each type of
life insurance product and annuity. AmerUs Life continuously monitors benefits
and surrenders to provide projections of future cash requirements. As part of
this monitoring process, AmerUs Life performs cash flow testing of its assets
and
51
<PAGE>
liabilities under various scenarios to evaluate the adequacy of reserves. In
developing its investment strategy, AmerUs Life establishes a level of cash and
securities which, combined with expected net cash inflows from operations,
maturities of fixed maturity investments and principal payments on mortgage-
backed securities, are believed adequate to meet anticipated short-term and
long-term benefit and expense payment obligations. There can be no assurance
that future experience regarding benefits and surrenders will be similar to
historic experience since withdrawal and surrender levels are influenced by such
factors as the interest rate environment and AmerUs Life's claims-paying and
financial strength ratings. See "Risk Factors--Exposure to Withdrawals and
Surrenders."
AmerUs Life takes into account asset-liability management considerations.
Contract terms for AmerUs Life's INTEREST-SENSITIVE PRODUCTS include SURRENDER
AND WITHDRAWAL provisions which mitigate the risk of losses due to early
withdrawals. These provisions generally do one or more of the following: limit
the amount of penalty-free withdrawals, limit the circumstances under which
withdrawals are permitted, or assess a surrender charge or market value
adjustment relating to the underlying assets. The following table summarizes
statutory liabilities for interest-sensitive life products and annuities by
their contractual withdrawal provisions at December 31, 1995 (dollars in
millions):
<TABLE>
<S> <C> <C>
Not subject to discretionary withdrawal..................... $ 231
Subject to discretionary withdrawal with adjustments:
Specified surrender charges (A)........................... 867
Market value adjustments.................................. 413
---------
Subtotal................................................ 1,280
Subject to discretionary withdrawal without adjustments..... 716
---------
Total................................................... $ 2,227
---------
---------
</TABLE>
- --------------
(A) Includes $255 million of statutory liabilities with a contractual surrender
charge of less than five percent of the account balance.
Through its membership in the Federal Home Loan Bank of Des Moines, AmerUs
Life is eligible to borrow on a line of credit available to provide it
additional liquidity. The line of credit, the amount of which is re-set
annually, is based on the amount of capital stock of the Federal Home Loan Bank
of Des Moines owned by AmerUs Life, which supported a borrowing capacity of $70
million as of December 31, 1995. Interest is payable at a current rate at the
time of any advance. As of June 30, 1996, AmerUs Life had a $25 million open
secured line of credit and there were no borrowings outstanding.
AmerUs Life may also obtain liquidity through sales of investments or
borrowings collateralized by its investment portfolio. AmerUs Life's investment
portfolio as of June 30, 1996 had a carrying value of $3.8 billion. As of June
30, 1996, fixed maturity securities were $3.1 billion, or 81.0%, of invested
assets, with public and private fixed maturity securities constituting $2.7
billion, or 88.7%, and $348.6 million, or 11.3%, of total fixed maturity
securities, respectively. See "Business--Investment Portfolio."
EFFECTS OF INFLATION AND INTEREST RATE CHANGES
The Company does not believe that inflation has had a material effect on its
consolidated results of operations.
Interest rate changes may have temporary effects on the sale and
profitability of the annuities and life insurance products offered by the
Company. For example, if interest rates rise, competing investments (such as
annuities or life insurance products offered by the Company's competitors,
certificates of deposit, mutual funds, and similar instruments) may become more
attractive to potential purchasers of the Company's products until the Company
increases the interest rate credited to owners of its annuities and life
insurance products. In contrast, as interest rates fall, the Company attempts to
adjust its credited rates to compensate for the corresponding decline in
reinvestment rates. The Company monitors
52
<PAGE>
interest rates and sells annuities and life insurance policies that permit
flexible responses to interest rate changes as part of the Company's management
of interest spreads. However, the profitability of the Company's products is not
based solely upon interest rate spreads but also on persistency, mortality and
expenses.
The Company manages its investment portfolio in part to reduce its exposure
to interest rate fluctuations. In general, the market value of the Company's
fixed maturity portfolio increases or decreases in an inverse relationship with
fluctuations in interest rates, and the Company's net investment income
increases or decreases in a direct relationship with interest rate changes.
Although all of its assets support all of its liabilities, the Company has
developed an asset/liability management approach with separate investment
portfolios for major product lines such as traditional life, universal life and
annuities. Investment policies and strategies have been established based on the
specific characteristics of each product line. The portfolio investment policies
and strategies establish asset duration, quality and other guidelines. The
Company utilizes analytical systems to establish an optimal asset mix for each
line of business. The Company seeks to manage the asset/liability mismatch and
the associated interest rate risk through active management of the investment
portfolio. Financial, actuarial, investment, product development and product
marketing professionals work together throughout the product development,
introduction and management phases to jointly develop and implement product
features, initial and renewal crediting strategies, and investment strategies
based on extensive modeling of a variety of factors under a number of interest
rate scenarios.
In force reserves and the assets allocated to each segment are modeled on a
regular basis to analyze projected cash flows under a variety of economic
scenarios. The result of this modeling is used to modify asset allocation,
investment portfolio duration and CONVEXITY and renewal crediting strategies.
The Company does invest in collateralized mortgage obligations as part of its
basic portfolio strategy, but uses other types of derivatives only as a hedge
against the effects of interest rate fluctuations or to synthetically alter the
investment characteristics of specific assets. For a further discussion and
disclosure of the nature and extent of the Company's use of derivatives, see
Note 13 to the Consolidated Financial Statements.
FEDERAL INCOME TAX MATTERS
For periods prior to this Preferred Offering and the Common Stock Offerings,
the Company and its subsidiaries filed as part of a consolidated United States
federal income tax return with AMHC and its subsidiaries. For periods after this
Preferred Offering and the Common Stock Offerings, the Company and its
subsidiaries will not file as part of a consolidated United States federal
income tax return with AMHC. Further, the Company and its subsidiary AmerUs Life
will not be eligible to file a consolidated United States federal income tax
return for five years.
EMERGING ACCOUNTING MATTERS
SFAS NO. 121
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long Lived Assets and Long Lived Assets to be
Disposed of." This standard establishes criteria for the identification and
recognition of the impairment of certain assets to be held and used in an
entity's business. The statement does not apply to financial instruments,
deferred income tax assets or intangibles such as deferred policy acquisition
costs and value of insurance IN FORCE acquired. It does, however, apply to
assets such as property and equipment and related goodwill. SFAS No. 121 is
effective for the Company's financial statements after December 31, 1995. While
certain of the Company's assets are subject to the provisions of SFAS No. 121,
management believes the standard will have no material effect on the Company's
consolidated financial statements.
SFAS NO. 125
In June 1996, the FASB issued Statement No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No.
125 provides consistent accounting standards for securitizations and other
transfers of financial assets, determines when financial assets
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(liabilities) should be considered sold (settled) and removed from the balance
sheet, and determines when related revenues and expenses should be recognized.
FASB Statement No. 125 is effective for transfers and servicing of financial
assets and extinguishments of liabilities occurring after December 31, 1996.
This statement will be applicable to the Company, however, management believes
that it will have no material effect on the Company's consolidated financial
statements.
STATUTORY ACCOUNTING CODIFICATION
The NAIC currently is in the process of codifying statutory accounting
practices, the result of which is expected to constitute the only source of
"prescribed" statutory accounting practices. Accordingly, that project, which is
not expected to be completed before the end of 1997, will likely change certain
statutory accounting practices. The codification may result in changes to the
permitted or prescribed accounting practices that the Company's insurance
subsidiaries use to prepare their statutory-basis financial statements.
BUSINESS
GENERAL
The Company is engaged in the business of marketing, underwriting and
distributing a broad range of individual life insurance and annuity products to
individuals and businesses in 45 states and the District of Columbia. The
Company's primary product offerings consist of whole life, universal life and
term life insurance policies and fixed annuities. In addition, on April 1, 1996
the Company acquired a 34% interest in a variable life insurance and annuity
company through a joint venture arrangement (the "Ameritas Joint Venture") with
Ameritas Life Insurance Corp. ("Ameritas"). The Company's distribution systems
now market fixed annuities issued by AVLIC and have begun to sell AVLIC's
variable life insurance and variable annuity products. The Company has a history
of competitive product performance and, as a result, is consistently ranked by
A.M. Best among industry leaders in delivering low-cost products to its
customers.
The Company's subsidiary, AmerUs Life, was originally incorporated in 1896
as a mutual insurance company under the name Central Life Assurance Society of
the United States. Its name was changed to American Mutual Life Insurance
Company in 1994 following the merger of Old AML into Central Life. On June 30,
1996, American Mutual Life was converted into a stock life insurance company
pursuant to the Plan and its name was changed to AmerUs Life. As of June 30,
1996, AmerUs Life had approximately 423,000 life insurance policies and annuity
contracts outstanding and individual life insurance in force, net of
reinsurance, of approximately $26.2 billion. As of June 30, 1996, the Company
had total assets of $4.2 billion and total shareholders' equity of $375 million
(prior to the Offerings, after giving effect to the Capital Contribution).
The Company's target markets are individuals in the middle and upper income
brackets and small businesses. Its geographic focus is national in scope (except
for Connecticut, Maine, New Hampshire, New York and Vermont, in which the
Company is not licensed to do business), and it primarily serves suburban and
rural areas. The Company distributes its products primarily through a
combination of career general agency and personal producing general agency
("PPGA") distribution systems, as well as a network of independent brokers. The
career general agency system consists of a network of 33 career general
agencies, with approximately 525 career agents. The PPGA system is comprised of
approximately 450 PPGAs, with approximately 1,000 agents. Variable life
insurance products and the fixed and variable annuities offered by the Ameritas
Joint Venture are marketed through the Company's distribution systems and the
distribution systems of Ameritas and AVLIC, which consist of approximately 250
agents and 450 independent broker-dealers (with approximately 7,500 registered
representatives), respectively.
AmerUs Life's claims-paying ability is rated "AA-" (Very high) by Duff &
Phelps and "A" (Good) by Standard & Poor's. AmerUs Life's financial strength is
rated "A" (Excellent) by A.M. Best and "A2" (Good) by Moody's. See "Risk
Factors--Importance of Ratings."
BUSINESS STRATEGY
The Company's business strategy to achieve earnings growth and increase
shareholder value is focused on managing certain operating fundamentals where
the Company's results have historically
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compared favorably to the industry. The Company intends to utilize these
operating strengths to differentiate its products by maintaining its position
and reputation as a low-cost producer that provides high-value products to its
life insurance and annuity customers, while also providing superior service to
both agents and customers. The Company believes it is well positioned to compete
effectively based upon a number of strengths including its strong operating
performance, customer-driven product offerings, productive and diversified
distribution systems, sophisticated asset/liability management capabilities and
a customer service orientation. In addition, the Company intends to continue to
seek new business opportunities through mergers, acquisitions and strategic
alliances. From 1980 through 1995, as a result of mergers and acquisitions, as
well as through internal growth, the Company sustained a compound annual growth
rate (on a statutory basis) of 11.8% in premium income, of 13.2% in assets, and
of 12.6% in surplus and asset valuation reserve, versus 6.8%, 10.4% and 8.2%,
respectively, for the industry as a whole. (Source for industry growth rates:
A.M. Best)
STRONG OPERATING PERFORMANCE
The Company believes that its operating performance is significantly
impacted by four basic elements: (i) mortality, (ii) persistency, (iii)
operating expenses, and (iv) investment yield. Management specifically focuses
on these principal elements, as well as other factors, to generate a strong
operating performance, thereby enhancing shareholder value and allowing the
Company to maintain its strong competitive position.
The Company believes its conservative risk selection practices, its
disciplined field underwriting and its focus on maintaining a suburban and rural
customer base have resulted in the Company realizing favorable mortality
experience for the last several years compared with others in the life insurance
industry. See "--Insurance Underwriting." The Company fully underwrites each
application and has no group underwriting or guaranteed issue business.
The Company has consistently achieved higher persistency on its life
insurance products (i.e., lower lapse rates) than the industry averages. See
"--Products." This has resulted in a higher level of renewal premiums and, as a
result, a larger revenue base over which to amortize acquisition costs. This
higher persistency has been achieved by providing incentives to agents by, among
other things, grading production bonuses by actual persistency, paying
persistency bonuses, awarding recognition for both career agency and career
agent persistency achievements, and monitoring agency persistency on a monthly
basis. Also, the Company believes that its favorable career agent retention rate
has contributed to the higher persistency rates it has achieved.
The Company has aggressively managed its cost structure, reducing general
insurance expenses by $7.8 million, or 16.6%, in 1995 compared to 1994
(excluding certain non-recurring expenses). This reduction reflects, among other
things, efficiencies realized from the merger of Old AML into Central Life at
the beginning of 1995. Additional cost reductions are expected to be realized as
product lines of the two companies are further integrated and the technology
applications of Central Life are applied to all of the Old AML business. Other
factors contributing to the Company's lower cost structure include: (i) a flat
organizational structure which allows the Company to be responsive to changing
business conditions; (ii) the location of the Company in a geographic area which
provides lower cost operations than found in many other areas of the country;
(iii) a well-trained, experienced workforce; and (iv) efficient use of
technology.
The Company's distribution systems are compensated almost entirely on a
variable-cost basis, which provides flexibility in managing distribution costs
and has allowed the Company to maintain acquisition costs which management
believes to be lower than many other companies in the industry. The Company also
focuses on reducing acquisition costs. For example, the Company reduced life
insurance acquisition costs in its career general agency system by approximately
9% from 1992 through 1995.
The Company has maintained portfolio yields which have generally exceeded
the life insurance industry averages, while substantially reducing exposure to
higher risk assets such as mortgages and real estate over the last several
years. As of June 30, 1996, mortgages were 7.3% of invested assets and real
estate acquired in foreclosure was 0.6% (6.4% and 0.6%, respectively, after
giving effect to the Capital Contribution). At the same time, overall credit
quality of invested assets has been substantially
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improved. These results have been achieved in part by a more systematic and
sophisticated investment strategy, recruitment and development of experienced
investment professionals, enhanced systems technology and reduced investment
expenses. Attractive risk-adjusted yields on its investments have enabled the
Company to offer competitive pricing on its products and to attract and retain
business, while maintaining the Company's profitability.
COMPETITIVE PRODUCT OFFERINGS WHICH MEET DEMANDS OF CUSTOMERS
The Company's business strategy emphasizes the development of products which
meet the demands of its customers. The Company's products have a long history of
being very competitive within the industry, as measured by data compiled and
published by A.M. Best. The Company's participating whole life insurance
products have consistently ranked among the top ten based on 10 and 20 year
interest adjusted surrender cost indices, and its universal life insurance
products have consistently ranked among the top quartile based on 5 and 10 year
cash values. The Company's fixed annuity products are also highly competitive in
the industry, having ranked among the top ten in surveys measuring account and
cash values of single premium deferred annuity products. See "--Products."
The Company continuously monitors the marketplace to identify and develop
new products and improve existing products. For example, in 1989, the Company
introduced a life insurance product which combined permanent whole life
insurance, increasing paid-up additions and decreasing term life insurance.
These flexible life insurance products can be tailored to meet the life
insurance needs of the customer at a premium level which is attractive to the
customer. These products were substantially enhanced with additional features in
1994, and generated over 20% of total new annualized life premiums in 1995.
Recent product development activity has been done on an integrated basis,
using a team approach involving the Company's distribution, investment and
asset/liability management units. In 1993, the Company used this approach to
develop a new series of deferred annuities with more attractive features and
pricing. These new products were substantially responsible for an increase in
annuity sales from $57.2 million in 1992 to $191.5 million in 1995. In 1996, the
Company's distribution systems began offering, through the Ameritas Joint
Venture, variable life insurance and variable annuities issued by AVLIC. These
products enable the policyowner to share in the investment experience of a
SEPARATE ACCOUNT. These additional products expand the product portfolio
available to producers in the career general agency and PPGA systems and provide
the Company with immediate access to one of the fastest-growing business
segments within the life insurance and annuity business.
The Company also continuously reviews its product lines to eliminate low
volume products and augment its existing products to increase sales of such
products. In addition, the Company regularly reviews the pricing of its
products. Where the Company has decided not to manufacture a line of products it
has made arrangements in selected cases to sell products of other companies.
This practice provides producers with a broader line of competitive products
while enabling the Company to focus on its core lines of business.
PRODUCTIVE AND DIVERSIFIED DISTRIBUTION SYSTEMS
One of the Company's strategies for growth is to make its distribution
systems more productive and diversified. Prior to the merger of Old AML into
Central Life, the Company's distribution system consisted primarily of its
career general agency system. With the merger, the Company added the PPGA
distribution system of Old AML. The Company successfully rationalized the
overlapping career general agency distribution system and the PPGA distribution
system, leaving existing agencies and agents in place in their existing systems
and dividing the country along geographic lines for new recruiting of career
general agencies and PPGAs. The Ameritas Joint Venture provides access to a
network of approximately 450 independent broker/dealers (with approximately
7,500 registered representatives) and the Ameritas agency distribution systems.
The Company has recently added two additional regional vice presidents to
strengthen its distribution systems management and increase recruiting of new
general agents and agents. The Company
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believes it will be able to recruit both inexperienced and experienced producers
by providing a broad range of competitive products, including the newly added
variable life insurance and variable annuity products, and by offering strong
marketing and administrative support services and competitive compensation. The
Company's variable cost-based compensation systems, which include bonus
opportunities based on production and persistency, are designed to attract and
reward producers who sell increasing amounts of persisting business.
SOPHISTICATED ASSET/LIABILITY MANAGEMENT
The Company has developed a sophisticated approach to asset/liability
management. The investment unit and the asset/liability management unit work
together closely to identify investments which provide maximum returns
consistent with acceptable risk levels and liability durations. The asset
portfolio is segmented by liability type, with tailored investment strategies
for specific product lines. The Company has the ability to continuously model
the actual results of its investment portfolio against expected results in order
to identify changing market conditions early and, where appropriate, exit
existing investments and shift to new investments which better meet the
Company's investment objectives.
CUSTOMER SERVICE ORIENTATION
As part of a strategy to provide better service to agents and customers, the
Company continues to invest in advanced customer service systems and technology
to support these functions. In addition to improving the level of service, these
investments have also reduced administration costs. The Company developed and
installed an imaging system in its new business processing unit in 1991 and is
currently developing and installing a second generation imaging system in both
the new business and in force business units. During the past five years,
numerous enhancements have been added to the original imaging system to
facilitate more efficient and accurate processing of new business. The new
imaging system will incorporate all of these and additional enhancements
developed from the experience gained in using the original system. The immediate
on-line availability to any service representative of policy-related
correspondence and documents enables the Company to provide fast, comprehensive
service to inquiries by policyowners and agents. Along with easy access to data,
work flow and other management tools provided by the system have resulted in
improved productivity.
MERGERS, ACQUISITIONS AND STRATEGIC ALLIANCES
Consistent with increased merger and acquisition activity in the life
insurance industry, management believes that mergers, acquisitions and strategic
alliances will be necessary to more fully utilize the Company's distribution and
administrative capacity and to obtain improved economies of scale and a lower
cost structure.
The mutual holding company structure provides the Company with access to the
capital markets, creating the flexibility to selectively pursue acquisitions of
stock insurance companies and to continue to, pursue mergers (through AMHC) with
mutual insurance companies. Based on the Company's success in identifying and
effectively implementing mergers, acquisitions and strategic alliances,
management intends to actively and selectively participate in such transactions
in the future as a means to further enhance shareholder value.
The Company has historically pursued mergers, acquisitions and strategic
alliances with the goals of improving its position in existing market segments
or entering desirable new market segments. Notable recent activities include the
combination by merger of Old AML into Central Life in 1994, and the Ameritas
Joint Venture which was completed in April, 1996. As part of the merger of Old
AML into Central Life in December, 1994, management was able to: (i)
substantially integrate the administrative operations of the two companies
within a four-month period in late 1994 and achieve a $7.8 million, or 16.6%,
expense reduction (excluding certain non-recurring expenses) in 1995 with
minimal disruption to policyowners and agents and without a reduction in the
quality or quantity of services offered; (ii) successfully rationalize the
different distribution systems existing after the merger with no loss of
production; and (iii) consolidate the product lines of Old AML and Central Life
into one integrated line of products by selecting the best products from each
portfolio and making them available through both the career general agency and
PPGA systems.
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The Ameritas Joint Venture is an important part of the Company's overall
strategic plan to continue to identify profitable insurance products and to
achieve growth. The strategic alliance with Ameritas benefited the Company by
providing it with immediate access to a line of existing variable life insurance
and variable annuity products and a share in an already-established business,
thereby avoiding the time and cost associated with developing a new product
line.
AMERITAS JOINT VENTURE
The Company's partner in the Ameritas Joint Venture is Ameritas Life
Insurance Corp., a Nebraska mutual life insurance company which has been in
existence for more than 100 years. Ameritas is licensed to conduct business in
all states except New York and the District of Columbia, and had approximately
250 agents as of December 31, 1995. On a statutory basis, Ameritas had $1.7
billion in assets, $7.7 billion of insurance in force and $246.6 million in
policyowners' surplus as of June 30, 1996. Ameritas currently has claims-paying
ability or financial strength ratings of "AA" (Excellent) by Standard & Poor's
and "A+" (Superior) by A.M. Best.
The Company participates in the Ameritas Joint Venture through AmerUs Life's
34% ownership interest in AMAL Corporation, a Nebraska corporation ("AMAL").
AMAL's operations are conducted through AVLIC and Ameritas Investment Corp., a
registered broker-dealer ("AIC"), its two wholly-owned subsidiaries, which have
been in business since 1983. AVLIC is licensed to conduct business in 46 states
and the District of Columbia and currently markets its products and those of AIC
through approximately 450 independent broker-dealers (with approximately 7,500
registered representatives) and the Ameritas distribution system. AIC is a
registered broker/dealer which is licensed to do business in 49 states. As of
June 30, 1996, AMAL had total consolidated assets of $967.8 million and total
consolidated shareholders' equity of $52.8 million on a GAAP basis. AVLIC had
$2.6 billion of insurance in force and $48.6 million in surplus as of June
30,1996, on a statutory basis.
AmerUs Life contributed $20.4 million in cash and substantially all of its
new fixed annuity production, as well as other consideration, for its interest
in AMAL. Under the terms of the Joint Venture Agreement, AmerUs Life has an
option to purchase an additional 5% to 15% of AMAL (the "Option") if certain
premium growth targets are met. The Option is exercisable in three portions,
each of which would permit AmerUs Life to acquire the number of newly-authorized
shares that would increase its equity ownership by 5%. Each portion of the
Option is exercisable at specified exercise prices set forth in the Joint
Venture Agreement.
Management of the Ameritas Joint Venture is shared between AmerUs Life and
Ameritas. Each has equal membership on the board of directors of AMAL, AVLIC and
AIC.
The Joint Venture Agreement provides that certain conditions may trigger
buy-sell provisions of the Joint Venture Agreement in the event of certain
disputes between the parties. In addition, such buy-sell provisions may be
triggered by a transaction involving a "change of control" as defined in the
Joint Venture Agreement.
The Company and Ameritas each have guaranteed the obligations of AVLIC. The
guarantee of each party is joint and several, and will remain in effect until
certain financial conditions are met.
PRODUCTS
The Company offers a diverse line of individual life insurance products
which are tailored to its markets and distributed primarily through its career
general agency and PPGA distribution systems. In addition, the Company is a
party to the Ameritas Joint Venture, which offers fixed and variable annuity and
variable life insurance products. As a result of superior operating
fundamentals, including mortality, persistency, operating expenses and
investment yield, the Company has had a long history of providing high-value,
low-cost products to its customers, while operating profitably. Moreover, the
Company continuously reviews and updates its product portfolio in order to
continue offering a broad range of products at competitive performance levels.
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INDIVIDUAL LIFE INSURANCE AND FIXED ANNUITY PRODUCTS
The Company offers a broad line of individual traditional life and universal
life insurance products. Traditional life insurance has accounted for
approximately 60% to 75% of the Company's total individual life insurance
premiums for the last five years and universal life insurance has accounted for
approximately 25% to 40% of its total individual life insurance premiums for the
same time period. In addition, the Company has historically offered a broad line
of fixed annuity products.
The following table sets forth information regarding the Company's sales
activity by product:
SALES ACTIVITY BY PRODUCT -- STATUTORY BASIS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Individual life insurance:
Participating whole life............. $ 8,948 $ 10,059 $ 20,857 $ 21,319 $ 22,547 $ 19,796 $ 17,791
Universal life....................... 3,727 3,340 8,072 5,698 6,037 8,629 13,418
Term life............................ 1,369 1,336 2,717 3,154 2,820 3,068 3,218
--------- --------- --------- --------- --------- --------- ---------
Total life insurance (A)........... $ 14,044 $ 14,735 $ 31,646 $ 30,171 $ 31,404 $ 31,493 $ 34,427
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Individual annuities (B)(C)............ $ 49,537 $ 107,023 $ 191,474 $ 180,459 $ 80,934 $ 57,240 $ 101,496
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
- ------------------
(A) Direct FIRST YEAR ANNUALIZED PREMIUMS.
(B) Direct first year and single collected premiums.
(C) Effective May 1996, substantially all new sales of individual deferred
annuities are made through the Ameritas Joint Venture. See "--Ameritas Joint
Venture."
TRADITIONAL LIFE INSURANCE PRODUCTS. The Company's traditional life
insurance products have a long history of being highly competitive within the
industry. The Company is the only participant in the industry to have had its
participating whole life insurance products ranked among the top ten in annual
surveys prepared by A.M. Best for each of the years 1976 through 1995. (Source:
Best's Review, Rankings of 10- and 20-year Interest Adjusted Surrender Cost
Index, 1976-1995). Management believes that such surveys provide a gauge for
measuring product performance based upon operating fundamentals, including
mortality, persistency, operating expenses and investment yield, and that the
consistent high rankings of the Company's traditional life insurance products in
such surveys reflect the Company's status within the industry as a provider of
high-value products to its customers.
The Company's traditional life insurance products include participating
whole life and term life insurance products. PARTICIPATING WHOLE LIFE INSURANCE
is designed to provide benefits for the life of the insured. This product
generally provides for level premiums and a level death benefit and requires
payments in excess of the mortality cost in earlier years to offset increasing
mortality costs in later years. The Company also offers a SECOND TO DIE WHOLE
LIFE INSURANCE product which insures two lives and provides benefits upon the
death of the second insured. The Company targets its second to die products
primarily to potential customers seeking to achieve estate planning goals.
The Company also offers a portfolio of term life insurance policies that
provide life insurance protection for a specific time period (which generally
can be renewed at an increased premium). Such policies are mortality-based and
offer no cash accumulation feature. The Company currently is substantially
revising its term life insurance portfolio, which is expected to be introduced
in late 1996 or early 1997.
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Since 1989, the Company has offered a flexible life insurance product, which
is a combination of permanent participating whole life insurance, increasing
paid-up additions and decreasing term insurance coverage. In 1994, the Company
began offering an enhanced version of this product. These products give
policyowners additional flexibility in designing an appropriate combination of
permanent and term life insurance coverages to meet their specific needs at
varying premium levels.
For the year ended December 31, 1995, sales of participating whole life and
term life insurance products represented 66% and 9% of first year ANNUALIZED
PREMIUMS, respectively, for all individual life insurance products.
UNIVERSAL LIFE INSURANCE PRODUCTS. The Company has maintained consistently
competitive universal life products. Based on annual surveys by A.M. Best
measuring account and cash values of universal life products, the Company's
products have consistently ranked in the top half of all companies included in
the survey with respect to account values and has ranked in the top quarter of
all companies included in the survey with respect to cash values. (Source:
Best's Review, Rankings of 5-year Account and Cash Values, 1991-1995; Rankings
of 10-year Account and Cash Values, 1993-1995, with 1993 the initial year of the
survey of 10-year values).
The Company's universal life insurance products provide benefits for the
life of the insured. Within limits established by the Company and state
regulations, policyowners may vary the premiums and the amount of the policy's
death benefit as long as there are sufficient policy funds available to cover
all policy charges for the coming period. The weighted average crediting rate
for the Company's universal life insurance liabilities was 6.67% for the year
1995 and 6.36% for the six months ended June 30, 1996.
For the year ended December 31, 1995, sales of universal life insurance
products represented 25% of first year annualized premiums for all individual
life insurance products.
FIXED ANNUITY PRODUCTS. Historically, the Company has offered a broad
portfolio of fixed annuity products. Annuities provide for the payment of
periodic benefits for a specified time period. Benefits may commence immediately
or may be deferred to a future date. Fixed annuities generally are backed by a
general investment account and credited with a rate of return that is
periodically reset.
The Company's fixed annuity products are also highly competitive within the
industry. The Company's single premium deferred annuity products were ranked
among the industry leaders in annual surveys by A.M. Best for 1991 through 1995
measuring account and cash values of single premium deferred annuity products of
participants in the industry. (Source: Best's Review, Rankings of 5- and 10-year
Account Values and 5- and 10-year Cash Values, 1991-1995).
From September 1993 until the commencement of the Ameritas Joint Venture,
the majority of the Company's fixed annuity sales consisted of its Advantage
Series of deferred annuities. The Advantage Series consists of three products
comprised of two book value annuities, which are fixed annuities, and one market
value adjusted annuity, which is a fixed annuity with a market adjustment
feature. Both book value annuities have a first year interest rate guarantee.
One of the book value annuities also provides a bonus interest rate for the
first year. The market value adjusted annuity has a first year interest rate
guarantee and also provides a bonus interest rate for the first year. In 1995,
the Advantage Series accounted for over $163 million in premiums, which
represented approximately 85% of the Company's total fixed annuity production
for the year.
AMERITAS JOINT VENTURE PRODUCTS
On April 1, 1996, the Company commenced the Ameritas Joint Venture with
Ameritas, through which the Company's distribution systems now offer AVLIC's
fixed annuity products and have begun to offer AVLIC's variable life insurance
and annuity products. The fixed annuities currently offered by the Ameritas
Joint Venture are substantially similar to the Company's Advantage Series
products. The Company's investment in the Ameritas Joint Venture affords the
Company access to a line of existing variable life insurance and variable
annuity products while providing a lower-cost entry into an established
business, thereby eliminating significant start-up costs and allowing for
immediate potential earnings. See "--Ameritas Joint Venture."
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The Ameritas Joint Venture offers, through AVLIC, flexible premium and
single premium variable universal life insurance products and variable
annuities. Variable products provide for allocation of funds to a GENERAL
ACCOUNT or to one or more separate accounts under which the owner bears the
investment risk. Through AVLIC's fund managers, which include Fidelity
Management and Research Company, Fred Alger Management, Inc. and Massachusetts
Financial Services Company, owners of variable annuities and life insurance
policies are able to choose from a range of investment funds offered by each
manager. In the future, AVLIC may also sell low load life insurance products,
which have a lower commission rate, and may acquire other companies or business
lines in appropriate circumstances.
Under the terms of the Joint Venture Agreement governing the Ameritas Joint
Venture, the Company and Ameritas will write a substantial portion of their new
single and flexible premium deferred fixed annuities and variable annuities and
variable life insurance through the Ameritas Joint Venture (provided that the
Company has retained the right to continue to issue business to its fixed
annuity customers in existence prior to the effective date of the Joint Venture
Agreement). In connection with executing the Joint Venture Agreement, the
parties also entered into a Management and Administrative Service Agreement
which was effective as of April 1, 1996 (the "Service Agreement"), pursuant to
which the parties agreed that all product development, administration and
investment management services relating to the fixed annuity products offered by
the Ameritas Joint Venture will be performed by the Company, and all such
functions relating to the variable life insurance and variable annuity products
offered by the Ameritas Joint Venture will be performed by Ameritas. Ameritas
also provides certain other administrative services to the Ameritas Joint
Venture under the Service Agreement.
The variable life insurance products and the fixed and variable annuities
offered by the Ameritas Joint Venture are distributed through the Company's
career general agency and PPGA distribution systems, as well as through the
distribution systems of Ameritas and AVLIC. See "--Ameritas Joint Venture" and
"Certain Transactions and Relationships."
In response to customer demand, the Company is developing an equity index
annuity which it anticipates will be offered through the Ameritas Joint Venture
beginning in the Fall of 1996. An equity index annuity provides a baseline fixed
rate of return in addition to the possibility of sharing in a portion of the
appreciation realized from an investment in an indexed investment fund, such as
the S&P 500 stock index.
SPONSORED PRODUCTS
The Company also derives fee income from the sale of various sponsored
products through its career general agency and PPGA distribution systems under
co-marketing arrangements with leading insurance providers for such products.
Such sponsored products include individual long-term disability and group life,
health and dental insurance products. In addition, the Company's career general
agency and PPGA distribution systems sell certificates of deposit issued by
AmerUs Bank, from which the Company obtains additional fee income.
61
<PAGE>
The following table sets forth the Company's collected premiums for the
periods indicated:
COLLECTED PREMIUMS BY PRODUCT -- STATUTORY BASIS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Direct individual life premiums collected:
Traditional life:
First year & single...................... $ 34,427 $ 33,101 $ 70,786 $ 71,830 $ 71,267 $ 61,720 $ 58,512
Renewal.................................. 81,721 76,200 153,299 143,048 130,223 119,108 108,698
--------- --------- --------- --------- --------- --------- ---------
Total................................ $ 116,148 $ 109,301 $ 224,085 $ 214,878 $ 201,490 $ 180,828 $ 167,210
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Universal Life:
First year & single...................... $ 7,549 $ 5,901 $ 15,451 $ 10,224 $ 10,939 $ 17,235 $ 26,369
Renewal.................................. 38,446 39,175 77,151 80,338 83,372 84,405 80,114
--------- --------- --------- --------- --------- --------- ---------
Total................................ $ 45,995 $ 45,076 $ 92,602 $ 90,562 $ 94,311 $ 101,640 $ 106,483
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Total direct life...................... $ 162,143 $ 154,377 $ 316,687 $ 305,440 $ 295,801 $ 282,468 $ 273,693
Reinsurance assumed........................ 757 702 1,337 1,114 1,154 988 1,178
Reinsurance ceded.......................... (6,579) (6,742) (13,795) (13,477) (15,020) (14,903) (14,776)
--------- --------- --------- --------- --------- --------- ---------
Total individual life, net of
reinsurance............................... $ 156,321 $ 148,337 $ 304,229 $ 293,077 $ 281,935 $ 268,553 $ 260,095
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Direct annuity premiums collected:
Individual (A)........................... $ 54,568 $ 110,847 $ 197,959 $ 189,097 $ 91,745 $ 66,750 $ 110,080
Group.................................... 50 567 (665) 2,580 1,726 766 867
--------- --------- --------- --------- --------- --------- ---------
Total annuities........................ 54,618 111,414 197,294 191,677 93,471 67,516 110,947
Reinsurance ceded.......................... (345) (611) (853) (1,123) (1,147) (1,393) (1,467)
--------- --------- --------- --------- --------- --------- ---------
Total annuities, net of reinsurance........ $ 54,273 $ 110,803 $ 196,441 $ 190,554 $ 92,324 $ 66,123 $ 109,480
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Total group life, net of reinsurance (B)... $ 1,543 $ 1,348 $ 6,634 $ 10,436 $ 9,669 $ 8,367 $ 8,287
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Total accident & health, net of reinsurance
(C)....................................... $ 102 $ 124 $ 264 $ 387 $ 459 $ 607 $ 4,410
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Total collected premiums, net of
reinsurance............................... $ 212,239 $ 260,612 $ 507,568 $ 494,454 $ 384,387 $ 343,650 $ 382,272
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
- ------------------
(A) Effective May 1996, substantially all new sales of individual deferred
annuities are made through the Ameritas Joint Venture. See "--Ameritas Joint
Venture."
(B) The Company sold substantially all of its group life business as of July 1,
1996 and is no longer actively marketing this line of business.
(C) The Company sold substantially all of its accident and health business in
1991 and is no longer actively marketing this line of business.
62
<PAGE>
The following table sets forth information regarding life insurance and
annuities in force for each date presented:
LIFE INSURANCE AND ANNUITIES IN FORCE
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
JUNE 30, ---------------------------------------------------------------
1996 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Individual life insurance:
Traditional
Number of policies............... 252,341 253,656 259,229 262,243 264,683 274,090
GAAP life reserves............... $ 1,164,065 $ 1,120,799 $ 1,033,909 $ 945,763 $ 846,661 $ 779,594
Face amounts..................... $16,654,000 $16,600,000 $15,871,000 $15,201,000 $14,094,000 $13,813,000
Universal life
Number of policies............... 117,985 121,619 124,225 127,658 131,196 129,429
GAAP life reserves............... $ 805,049 $ 784,363 $ 740,638 $ 700,556 $ 653,038 $ 596,721
Face amounts..................... $12,221,000 $12,211,000 $12,631,000 $12,744,000 $13,244,000 $12,607,000
Total individual life
Number of policies............... 370,326 375,275 383,454 389,901 395,879 403,519
GAAP life reserves............... $ 1,969,114 $ 1,905,162 $ 1,774,547 $ 1,646,319 $ 1,499,699 $ 1,376,315
Face amounts..................... $28,875,000 $28,811,000 $28,502,000 $27,945,000 $27,338,000 $26,420,000
Annuities (A):
Number of policies............... 51,926 56,054 52,616 50,322 44,177 42,372
GAAP reserves.................... $ 1,256,230 $ 1,327,176 $ 1,337,395 $ 1,260,775 $ 1,157,313 $ 1,105,157
Group life insurance (B):
Number of lives.................. 33,107 32,724 29,592 27,013 28,238 31,481
Face amounts..................... $ 872,000 $ 829,000 $ 741,000 $ 834,000 $ 846,000 $ 1,467,000
</TABLE>
- ------------------
(A) Effective May 1996, substantially all new sales of individual deferred
annuities are made through the Ameritas Joint Venture. See "--Ameritas Joint
Venture."
(B) The Company sold substantially all of its group life business as of July 1,
1996 and is no longer actively marketing this line of business.
The Company has experienced higher persistency for its insurance products
(i.e., lower lapse rates) than industry averages. The ability to achieve higher
persistency results in lower unit costs. The following table illustrates lapse
rates on individual life insurance products for the Company and for stock and
mutual life insurance companies for the years ended December 31, 1991 through
1995:
INDIVIDUAL LIFE INSURANCE LAPSE RATIOS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------
1995 1994 1993 1992
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Mutual life companies (A)............................................. 7.4% 7.4% 9.8% 8.5%
Stock life companies (A).............................................. 9.3 8.8 9.9 9.9
Total life insurance industry (A)................................... 8.6 8.3 9.8 9.4
Company............................................................... 7.2 7.1 6.9 6.9
<CAPTION>
1991
-----------
<S> <C>
Mutual life companies (A)............................................. 8.8%
Stock life companies (A).............................................. 10.7
Total life insurance industry (A)................................... 10.1
Company............................................................... 6.9
</TABLE>
- --------------
(A) Source: A.M. Best individual life lapse ratios (median values).
DISTRIBUTION
The Company markets its insurance products on a national basis primarily
through a career general agency system, a PPGA system, independent insurance
brokers and certain of the Company's affiliates. The Company employs ten
Regional Vice Presidents who are responsible for supervising the career general
agencies and/or PPGA agents within their assigned geographic regions.
63
<PAGE>
The following table illustrates sales activity of the Company's three
principal distribution sources for the six months ended June 30, 1996 and the
year ended December 31, 1995:
SALES ACTIVITY BY DISTRIBUTION SOURCE -- STATUTORY BASIS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
-------------------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
Career General Agency System:
Traditional life insurance (A)................................. $ 6,848 $ 14,754
Universal life insurance....................................... 2,987 6,767
Individual annuity (B)......................................... 36,384 152,190
-------- ----------
Subtotal..................................................... $ 46,219 $ 173,711
-------- ----------
-------- ----------
PPGA System:
Traditional life insurance (A)................................. 3,461 8,761
Universal life insurance....................................... 690 1,121
Individual annuity (B)......................................... 9,759 26,615
-------- ----------
Subtotal..................................................... $ 13,910 $ 36,497
-------- ----------
-------- ----------
Sales through Affiliates:
Traditional life insurance (A)................................. 8 59
Universal life insurance....................................... 50 184
Individual annuity (B)......................................... 3,394 12,669
-------- ----------
Subtotal..................................................... $ 3,452 $ 12,912
-------- ----------
-------- ----------
Total Sales:
Traditional life insurance (A)................................. 10,317 23,574
Universal life insurance....................................... 3,727 8,072
Individual annuity (B)......................................... 49,537 191,474
-------- ----------
Total (A)(B)................................................. $ 63,581 $ 223,120
-------- ----------
-------- ----------
</TABLE>
- --------------
(A) Amounts for traditional and universal life insurance reflect direct first
year annualized premiums. Amounts for annuities reflect direct first year
and single collected premiums.
(B) Effective May 1996, substantially all new sales of individual deferred
annuities are made through the Ameritas Joint Venture. See "--Ameritas Joint
Venture."
CAREER GENERAL AGENCY SYSTEM AND BROKERS
Under the career general agency system, the Company enters into a
contractual arrangement with the career general agent for the sale of insurance
products by the career agents and brokers assigned to the career general agent's
agency. The career general agents are primarily compensated by an overwriting
commission on the first year commissions paid to career agents and brokers in
the career general agent's agency and by renewal commissions on premiums
subsequently collected on that business.
The career general agents are independent contractors and are generally
responsible for the expenses of operating their agencies, including office and
overhead expenses and the recruiting, selection, contracting, training and
development of career agents and brokers in their agency. Currently, the Company
has 33 career general agencies in 20 states, through which approximately 525
career agents sell the Company's products. While career agents in the career
general agency system are non-exclusive, the Company believes most agents use
the Company's products for a majority of their new business of the type of
products offered by the Company. No single career general agency accounts for
more than 10% of the total first year commissions paid by the Company.
64
<PAGE>
Career agents are also independent contractors and are primarily compensated
by commissions on first year and renewal premiums collected on business written
by them. In addition, career agents can earn bonus commissions, graded by
production and persistency on their business.
The Company believes the quality of the agents in its career general agency
system is competitive with that of other life insurance companies. The Company's
retention of its career general agency sales force has historically been above
the average retention rates of other companies in the industry. The Company
attributes its success in attracting and retaining qualified agents to the high
quality of its products, its marketing support and administrative services and
its competitive compensation structure. The Company also provides career general
agents with various screening tools which enable the general agents to screen
career agent applicants to eliminate those who may not be qualified.
The Company also sells its products through a network of approximately 1,650
insurance brokers in all jurisdictions in which the Company is licensed to sell
insurance. Brokers are independent contractors who sell a variety of insurance
products issued by various companies. Brokers operate through the career general
agency system but are compensated under a commission structure which is separate
from those used for career agents and in the PPGA system.
PERSONAL PRODUCING GENERAL AGENCY SYSTEM
Under the PPGA system, the Company contracts primarily with individuals who
are experienced individual agents or head a small group of experienced
individual agents. These individuals are independent contractors and are
responsible for all of their own expenses. These individuals often sell products
for other insurance companies, and may offer selected products of the Company
rather than the Company's full line of insurance products.
PPGAs are compensated by commissions on first year and renewal premiums
collected on business written by themselves and the agents in their units. In
addition to a base commission, PPGAs may earn bonus commissions on their
business, graded by production and persistency.
DISTRIBUTIONS THROUGH AFFILIATES
The Company also sells its products through certain of its affiliated
companies. The Company has arrangements with AmerUs Investments, Inc. ("AmerUs
Investments"), a wholly-owned subsidiary of AmerUs Bank, to market products of
the Company. The Company has entered into an agreement with AmerUs Investments
pursuant to which the Company and AVLIC pay AmerUs Investments fees in the form
of commissions in exchange for generating sales of such products. Persons
selling the Company's products under this arrangement are employees of AmerUs
Investments and are paid a regular salary in addition to being eligible for
commissions under a commission structure (which is distinct from the structure
used under the Company's career general agency and PPGA systems). See "Certain
Transactions and Relationships--Sale of Insurance Policies."
AVLIC has a separate arrangement with AmerUs Investments pursuant to which
AmerUs Investments sells variable and fixed annuities and variable life
insurance products.
MARKETING SUPPORT SERVICES
The Company also supports its distribution systems with a trained staff of
marketing and other professionals who provide the career general agency and PPGA
systems with a wide range of services in support of the sale of the Company's
products. In addition to providing information about the products offered by the
Company, these professionals are able to offer detailed advice on business
insurance, financial and estate planning and other advanced underwriting
services.
The Company also provides its agents in both the career general agency and
PPGA systems with insurance industry information support services and computer
technology. For example, an advanced illustration and sales presentation
computer software package is provided to agents to assist them in
65
<PAGE>
their selling efforts. In addition, the Company's agents use computer technology
to individualize marketing and product use information at the point of sale to
better service policyowners and potential policyowners. The Company supports
these systems with in-house computer professionals to assist agents with
software and systems questions relating to its computer-assisted marketing
tools.
The Company conducts an intensive annual educational conference as part of
its continuing efforts to educate and train agents and to market the Company's
products. The conference is generally well-attended by the Company's agents and
other interested persons who are not affiliated with the Company.
INSURANCE UNDERWRITING
The Company follows detailed, uniform underwriting practices and procedures
in its insurance business which are designed to assess risks before issuing
coverage to qualified applicants. The Company has professional underwriters who
evaluate policy applications on the basis of information provided by applicants
and others. As demonstrated by the following table, the Company's underwriting
standards produced mortality results which are generally more favorable than the
assumptions used in its product pricing, which are based upon industry
guidelines:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Ratio of actual mortality to pricing mortality (A)(B)............ 81.2% 90.5% 86.4% 88.8% 94.7%
</TABLE>
- --------------
(A) Results illustrated for 1991-1993 are for Central Life only.
(B) Pricing mortality is established at a level below the 1975-1980 Basic Table,
an experience mortality table widely used in the industry as a basis of
mortality.
Management also believes that its actual mortality results compare favorably
to those of others in the industry. The Company believes that its favorable
mortality results are attributable to, among other things, the geographic
location of its customer base in rural and suburban areas (as opposed to urban
areas), the higher-income profile of its customer base and its consistent
application of appropriate underwriting criteria to the processing of new
customer applications.
RESERVES
In accordance with applicable insurance regulations, the Company records as
liabilities in its statutory financial statements actuarially determined
reserves that are calculated to meet future obligations of its in force life
insurance and annuity contracts. The reserves are based on actuarially
recognized methods using prescribed MORBIDITY and mortality tables and interest
rates. Reserves include UNEARNED PREMIUMS, premium deposits, claims that have
been reported but are not yet paid, claims that have been incurred but have not
been reported, and claims in the process of settlement. The Company's reserves
comply with state insurance department statutory requirements.
The reserves for future policy benefits reflected in the Consolidated
Financial Statements are calculated in accordance with GAAP. The liability for
future policy benefits for traditional life insurance is computed using a net
level method, including assumptions as to investment yields, mortality,
morbidity, withdrawals, and other assumptions based on experience, modified as
necessary to give effect to anticipated trends. Benefit reserves for traditional
limited-payment life insurance policies include the deferred portion of the
premiums received during the premium-paying period. Deferred premiums are
recognized as income over the life of the policies. Policy benefit claims are
charged to expense in the period that the claims are incurred. All
insurance-related benefits, losses and expenses are reported net of reinsurance.
Future policy benefit reserves for universal life insurance and investment
products are computed under a retrospective deposit method and represent policy
account balances before applicable surrender charges. Policy benefits and claims
that are charged to expense include benefit claims incurred in the period in
excess of related policy account balances.
66
<PAGE>
REINSURANCE
In accordance with industry practices, the Company reinsures portions of its
life insurance and disability income exposure, generally with unaffiliated
insurance companies under traditional indemnity reinsurance agreements.
Reinsurance arrangements entered into with unaffiliated insurance companies are
in accordance with standard reinsurance practices within the industry. As of
December 31, 1995, the Company had reinsurance arrangements in place for life
insurance having a face amount of approximately $2.9 billion with 20
unaffiliated reinsurers. All of the companies with which the Company had life
reinsurance arrangements as of such date were rated "A-" or better by A.M. Best.
The Company's largest life reinsurance relationship as of December 31, 1995 was
with RGA Reinsurance Company with life reinsurance in the face amount of
approximately $1 billion. As of December 31, 1995, the Company's top five
reinsurers (by face amount reinsured) constituted approximately 80% of the total
face amount reinsured by the Company as of such date. Of the top five
reinsurers, four were rated "A+" and the other was rated "A" by A.M. Best as of
December 31, 1995.
The Company enters into indemnity reinsurance arrangements to assist in
diversifying its risks and to limit the maximum loss on risks that exceed the
Company's policy retention limits. The Company's present maximum retention limit
for life insurance policies is $1,000,000 per life insured. Indemnity
reinsurance does not fully discharge the Company's obligation to pay claims on
the reinsured business. The Company as the CEDING insurer remains responsible
for policy claims to the extent the reinsurer fails to pay such claims. The
Company annually monitors the creditworthiness of its primary reinsurers, and
has experienced no material reinsurance recoverability problems in recent years.
INVESTMENT PORTFOLIO
GENERAL
The Company maintains a diversified portfolio of investments which is
supervised by an experienced in-house staff of investment professionals. The
Company employs sophisticated asset management techniques in order to achieve
competitive yields, while maintaining risk at acceptable levels. The asset
portfolio is segmented by liability type, with tailored investment strategies
for specific product lines. Investment policies and significant individual
investments are subject to approval by the Investment Committee of the Board of
Directors of AmerUs Life. Management regularly monitors individual assets and
asset groups, in addition to monitoring the overall asset mix. In addition, the
Investment Committee reviews investment guidelines and monitors internal
controls.
INVESTMENT STRATEGY
The Company's investment philosophy is to employ an integrated
asset/liability management approach with separate investment portfolios for
specific product lines, such as traditional life, universal life and annuities,
to generate attractive risk-adjusted returns on capital. Essential to this
philosophy is coordinating investments in the investment portfolio with product
strategies, focusing on risk-adjusted returns and identifying and evaluating
associated business risks.
The Company's asset/liability management approach utilizes separate
investment portfolios for specific product lines, such as traditional life,
universal life and annuities. Investment policies and strategies have been
established based on the specific characteristics of each product line. The
portfolio investment policies and strategies establish asset duration, quality
and other guidelines. The Company utilizes analytical systems to establish an
optimal asset mix for each line of business. The Company seeks to manage the
asset/liability mismatch and the associated interest rate risk through active
management of the investment portfolio. Financial, actuarial, investment,
product development and product marketing professionals work together throughout
the product development, introduction and management phases to jointly develop
and implement product features, initial and renewal crediting strategies, and
investment strategies based on extensive modeling of a variety of factors under
a number of interest rate scenarios.
67
<PAGE>
In force reserves and the assets allocated to each segment are modeled to
analyze projected cash flows under a variety of economic scenarios. The result
of this modeling is used to modify asset allocation, investment portfolio
duration and convexity and renewal crediting strategies. The Company invests in
collateralized mortgage obligations ("CMOs") as part of its basic portfolio
strategy, but uses other types of derivatives only as a hedge against the
effects of interest rate fluctuations or to synthetically alter the investment
characteristics of specific assets. For example, the Company uses interest rate
swaps and caps to reduce its exposure to changes in interest rates and to manage
duration mismatches.
The Company seeks to manage the relationship between risk and expected
return to maintain a prudent balance between the two. Like others in the
industry, the Company is exposed to various potential sources of investment risk
including: credit risk relating to the uncertainty attached to the timing and
amount of principal and interest payments, interest rate risk relating to the
economic effects of changing interest rates, real estate risk relating to
changes in property value due to local economic and demographic conditions, and
liquidity risk relating to holding assets for which there is no active secondary
market. The Company manages credit risk principally by careful analysis of the
creditworthiness of each issuer, diversification of its holdings and prudent
asset allocation. It manages interest rate risk through sophisticated
asset/liability management techniques, including the selective use of derivative
instruments. It manages real estate risk principally by geographic and
demographic diversification, careful periodic monitoring of local economic and
other conditions and by limiting loan to value rates to acceptable levels. The
Company manages liquidity risk principally by asset allocation and by
maintaining various credit facilities and a portfolio of public, investment
grade securities in an amount not less than 50% of the total invested assets.
The objective of the Company's mortgage backed securities ("MBS")
investments is to provide incremental return, while maintaining reasonable
liquidity and cash flow stability. Each MBS is evaluated to determine its
interest rate sensitivity and average life variability. In general, the Company
seeks investments which provide improved cash flow stability through either
implicit or explicit prepayment protection. Investments with implicit prepayment
protection can take the form of pass-throughs or CMOs backed by seasoned pools
of loans which have already had ample opportunity to refinance but have failed
to do so. Explicit prepayment protection can take the form of prepayment
lockouts, yield maintenance provisions or prepayment penalties, which are common
features of multifamily MBS, commercial MBS and FHA-insured project loans. The
Company has established specific investment guidelines for the management of
MBS. As a general policy, the Company does not invest in interest-only and
principal-only or other similar leveraged derivative mortgage instruments.
The Company has improved the quality of its investment portfolio in recent
years in a number of respects. The Company has reduced real estate-related
assets (defined as real estate loans and real estate equity investments) as a
percentage of total invested assets from previous levels. Real estate related
assets, which totaled 19.2% of invested assets as of December 31, 1993, were
reduced to 14.5% of invested assets as of December 31, 1994, to 10.2% of total
invested assets as of December 31, 1995 and to 8.4% (6.6% after giving effect to
the Capital Contribution) of invested assets as of June 30, 1996. The Company's
problem loan ratio (defined as aggregate delinquent, in process of foreclosure
and restructured mortgage loans) also decreased from 21.3% as of December 31,
1994 to 9.4% as of December 31, 1995, and to 7.6% (6.8% after giving effect to
the Capital Contribution) as of June 30, 1996.
The Company in recent years has also reduced its exposure to higher risk
fixed maturity securities and common stock. The Company's percentage of higher
risk fixed maturity assets (defined as assets categorized in NAIC designations
3-6) was approximately 5.4% of total invested assets as of June 30, 1996, as
compared to 5.3% as of December 31, 1995 and 6.9% as of December 31, 1994. In
addition, the Company decreased its common stock holdings to 0.4% of total
invested assets as of June 30, 1996, down from 2.1% as of December 31, 1995 and
3.7% as of December 31, 1994.
68
<PAGE>
INVESTMENT MONITORING AND VALUATION
As part of the Company's investment management process, it regularly
monitors its invested assets. Fixed maturity securities are reviewed upon
receipt of the obligor's financial statements, generally on a quarterly basis,
for financial performance and historical compliance with financial covenants.
Generally, the Company reviews its commercial mortgage loan and equity real
estate portfolios on a monthly basis and identifies all commercial mortgage
loans and equity real estate which cause management to conclude that such loans
or investments require increased management attention due to payment
delinquencies. Detailed property analyses and property valuations are performed
annually for each commercial mortgage loan. The Company generally requires
borrowers to submit their financial statements for annual review.
The Company has policies and procedures which management believes value
invested assets fairly and consistently. As a result of the implementation of
SFAS 115 as of December 31, 1993, certain fixed maturity securities are
classified as available-for-sale, and therefore are carried at fair value in the
Company's Consolidated Financial Statements. Public and private fixed maturity
securities are carried principally at fair value, which is based on quoted
market prices or dealer quotes. If a quoted market price is unavailable, fair
value is estimated using values obtained from independent pricing services. In
the case of private placements, if quotes are unavailable price is estimated by
discounting expected future cash flows using a current market rate applicable to
the yield, credit quality and maturity of the investments.
Equity securities are carried principally at fair value, based on quoted
market prices. To value performing fixed interest rate mortgage loans, the
estimated net cash flows to maturity are discounted to derive an estimated
market value. The discount rate used is based on the individual loan's remaining
weighted average life and a basis point spread over the United States Treasury
yield curve at the date of valuation. Performing variable rate commercial loans
and residential loans are valued at par. Restructured, foreclosed or delinquent
loans, as well as loans to affiliates, are valued primarily at the lower of the
estimated net cash flows to maturity discounted at a market rate of interest, or
the current outstanding principal balance. Equity real estate is carried at
depreciated cost, or amortized cost for capital leases, less valuation
allowances. Equity real estate acquired in satisfaction of debt is valued at the
lower of cost or estimated fair value at the date of acquisition and is
periodically revalued. Valuation allowances for other than temporary impairments
in value are netted against the asset categories to which they apply, and
additions to valuation allowances are included in total investment results.
INVESTED ASSETS
The Company maintains a diversified portfolio of investments, including
public and private fixed maturity securities, commercial mortgage loans and
equity real estate. The Company's objective is to maintain a high-quality,
diversified fixed maturity securities portfolio that produces a yield and total
return that supports the various product line liabilities and the Company's
earnings goals.
As a result of establishing the Closed Block on June 30, 1996, the Company
allocated certain assets from its investment portfolio to the Closed Block. See
"The Reorganization and Distribution of the Non-Life Insurance
Subsidiaries--Establishment and Operation of the Closed Block." The following
table summarizes consolidated invested assets by asset category as of June 30,
1996 and as of December 31, 1995, 1994 and 1993, and sets forth the allocation
of such assets between the Closed Block and the general account. The remaining
information in this Prospectus relating to the Company's investment portfolio
presents information about the investment portfolio on a combined basis
(including invested assets in both the Closed Block and the general account).
69
<PAGE>
CONSOLIDATED INVESTED ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, 1996 ------------------------------------------------
-------------------------------------------------
CARRYING CARRYING 1995 1994
VALUE VALUE-- COMBINED ----------------------- -----------------------
CLOSED GENERAL CARRYING CARRYING CARRYING
BLOCK ACCOUNT VALUE % OF TOTAL VALUE % OF TOTAL VALUE % OF TOTAL
----------- ----------- ----------- ---------- ----------- ---------- ----------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed maturity
securities:
Public.............. $ 585.9 $ 2,162.3 $ 2,748.2 71.9% $ 2,717.7 68.5% $ 2,056.4 58.9%
Private............. 184.0 164.6 348.6 9.1 424.4 10.7 510.3 14.6
----------- ----------- ----------- ----- ----------- ----- ----------- -----
Subtotal 769.9 2,326.9 3,096.8 81.0 3,142.1 79.2 2,566.7 73.5
Equity securities..... -- 90.4 90.4 2.4 109.7 2.8 178.8 5.1
Mortgage loans........ -- 278.3 278.3 7.3 353.6 8.9 447.7 12.8
Policy loans.......... 162.1 63.6 225.7 5.9 220.0 5.6 209.5 6.0
Real estate:
Investments......... -- 18.8 18.8 0.5 20.2 0.5 29.4 0.9
Foreclosures........ -- 25.3 25.3 0.6 31.9 0.8 28.8 0.8
----------- ----------- ----------- ----- ----------- ----- ----------- -----
Subtotal.......... -- 44.1 44.1 1.1 52.1 1.3 58.2 1.7
Other invested
assets............... -- 65.6 65.6 1.7 48.1 1.2 22.3 0.6
Short-term
investments.......... -- 23.2 23.2 0.6 39.4 1.0 8.5 0.3
----------- ----------- ----------- ----- ----------- ----- ----------- -----
Total invested
assets............... $ 932.0 $ 2,892.1 $ 3,824.1 100.0% $ 3,965.0 100.0% $ 3,491.7 100.0%
----------- ----------- ----------- ----- ----------- ----- ----------- -----
----------- ----------- ----------- ----- ----------- ----- ----------- -----
<CAPTION>
1993
-----------------------
CARRYING
VALUE % OF TOTAL
----------- ----------
<S> <C> <C>
Fixed maturity
securities:
Public.............. $ 2,015.8 55.4%
Private............. 516.6 14.2
----------- -----
Subtotal 2,532.4 69.6
Equity securities..... 174.4 4.8
Mortgage loans........ 652.2 17.9
Policy loans.......... 197.1 5.4
Real estate:
Investments......... 14.2 0.4
Foreclosures........ 32.6 0.9
----------- -----
Subtotal.......... 46.8 1.3
Other invested
assets............... 14.8 0.4
Short-term
investments.......... 21.8 0.6
----------- -----
Total invested
assets............... $ 3,639.5 100.0%
----------- -----
----------- -----
</TABLE>
FIXED MATURITY SECURITIES. The fixed maturity securities portfolio consists
primarily of investment grade corporate fixed maturity securities, high-quality
MBS and United States government and agency obligations. As of June 30, 1996,
fixed maturity securities were $3,096.8 million, or 81.0% of the carrying value
of invested assets with public and private fixed maturity securities
constituting $2,748.2 million, or 88.7%, and $348.6 million, or 11.3%, of total
fixed maturity securities, respectively.
The following table summarizes the composition of the fixed maturity
securities by category as of June 30, 1996 and December 31, 1995:
COMPOSITION OF FIXED MATURITY SECURITIES
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
------------------------ ------------------------
CARRYING CARRYING
VALUE % OF TOTAL VALUE % OF TOTAL
---------- ------------ ---------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
U.S. government/agencies........................................ $ 67.8 2.2% $ 67.2 2.1%
State and political subdivisions................................ -- -- 1.7 0.1
Foreign governments............................................. 26.2 0.8 22.4 0.7
Corporate....................................................... 1,900.5 61.4 2,131.8 67.8
MBS:
U.S. government/agencies.................................... 706.6 22.8 686.8 21.9
Non-government/agencies..................................... 395.7 12.8 232.2 7.4
---------- ----- ---------- -----
Subtotal-MBS................................................ 1,102.3 35.6 919.0 29.3
---------- ----- ---------- -----
Total........................................................... $ 3,096.8 100.0% $ 3,142.1 100.0%
---------- ----- ---------- -----
---------- ----- ---------- -----
</TABLE>
70
<PAGE>
The following table summarizes corporate fixed maturity securities by
industry of the issuers:
COMPOSITION OF CORPORATE
FIXED MATURITY SECURITIES BY INDUSTRY
<TABLE>
<CAPTION>
% OF CORPORATE
JUNE 30, 1996 FIXED MATURITY
CLASSIFICATION CARRYING VALUE SECURITIES
- --------------------------------------------------------------------------------- -------------- -----------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Utilities........................................................................ $ 337.8 17.8%
Nondepository credit institutions................................................ 211.3 11.1
Depository institutions.......................................................... 204.2 10.7
Petroleum refining and related industries........................................ 106.8 5.6
Chemicals and related products................................................... 100.8 5.3
Air transportation............................................................... 92.1 4.8
Electrical and other electrical equipment (excluding computers).................. 76.0 4.0
General merchandise stores....................................................... 58.0 3.1
Industrial, commercial machinery and computer equipment.......................... 54.4 2.9
Oil and gas...................................................................... 53.5 2.8
Other............................................................................ 605.6 31.9
-------------- -----
Total........................................................................ $ 1,900.5 100.0%
-------------- -----
-------------- -----
</TABLE>
The following table summarizes fixed maturity securities by remaining
maturity as of June 30, 1996:
REMAINING MATURITY OF FIXED MATURITY SECURITIES
<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------
CARRYING
VALUE % OF TOTAL
---------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Due:
In one year or less (1996)......................................... $ 19.5 0.7%
One to five years (1997-2001)...................................... 481.5 15.5
Five to 10 years (2002-2006)....................................... 997.9 32.2
10 to 20 years (2007-2016)......................................... 365.3 11.8
Over 20 years (2017 and after)..................................... 130.3 4.2
---------- -----
Subtotal......................................................... 1,994.5 64.4
MBS................................................................ 1,102.3 35.6
---------- -----
Total.......................................................... $ 3,096.8 100.0%
---------- -----
---------- -----
</TABLE>
The Company's portfolio of investment grade fixed maturity securities is
diversified by number and type of issuer. As of June 30, 1996, investment grade
fixed maturity securities included the securities of over 621 issuers, with 970
different issues of securities. No issuer represents more than 2.2% of
investment grade fixed maturity securities.
Below-investment grade fixed maturity securities as of June 30, 1996
included the securities of 55 issuers representing 5.4% of total invested
assets, with the largest being a $10 million investment.
71
<PAGE>
As of June 30, 1996, 75.6% of total invested assets were investment grade
fixed maturity securities. The following table sets forth the credit quality, by
NAIC designation and Standard & Poor's rating equivalents, of fixed maturity
securities as of June 30, 1996:
FIXED MATURITY SECURITIES BY NAIC DESIGNATION
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------------------------------------------------------
PUBLIC PRIVATE TOTAL
----------------------- ------------------------ -----------------------
NAIC STANDARD & POOR'S CARRYING CARRYING CARRYING
DESIGNATION EQUIVALENT DESIGNATION VALUE % OF TOTAL VALUE % OF TOTAL VALUE % OF TOTAL
- ------------ ------------------------------ ---------- ----------- ----------- ----------- ---------- -----------
(DOLLARS IN MILLIONS)
<C> <S> <C> <C> <C> <C> <C> <C>
1 A- or Higher.................. $ 1,778.8 64.7% $ 48.1 13.8% $ 1,826.9 59.0%
2 BBB- to BBB+.................. 809.2 29.5 254.6 73.0 1,063.8 34.3
---------- ----- ----------- ----- ---------- -----
Total investment grade........ 2,588.0 94.2 302.7 86.8 2,890.7 93.3
---------- ----- ----------- ----- ---------- -----
3 BB to BB+..................... 107.2 3.9 33.1 9.5 140.3 4.5
4 B............................. 53.0 1.9 10.5 3.0 63.5 2.1
5 CCC or lower.................. -- -- 0.1 0.0 0.1 0.0
6 In or near default............ -- -- 2.2 0.7 2.2 0.1
---------- ----- ----------- ----- ---------- -----
Total below investment
grade........................ 160.2 5.8 45.9 13.2 206.1 6.7
---------- ----- ----------- ----- ---------- -----
Total......................... $ 2,748.2 100.0% $ 348.6 100.0% $ 3,096.8 100.0%
---------- ----- ----------- ----- ---------- -----
---------- ----- ----------- ----- ---------- -----
</TABLE>
MBS comprise a core position within the Company's fixed maturity securities
investments. MBS investments include residential and commercial MBS. As of June
30, 1996, MBS were $1,102.3 million or 28.8%, of total invested assets of which
$706.6 million, or 64.1% of MBS were guaranteed by the United States government
or an agency of the United States government. Other MBS were $395.7 million, or
35.9%, of MBS as of June 30, 1996. Management believes that the quality of
assets in the MBS portfolio is generally high, with 86.1% of such assets
representing agency backed or "AAA" rated securities.
The Company uses interest rate swaps and caps to reduce its exposure to
changes in interest rates and to manage duration mismatches. Although the
Company is subject to the risk that counterparties will fail to perform, credit
standings of counterparties are monitored regularly. The Company's policy is to
contract only with counterparties that are rated "AA" or higher; accordingly, it
is expected that counterparties will be able to satisfy their obligations under
such contracts. The Company is also subject to the risk associated with changes
in the value of contracts. However, such adverse changes in value generally are
offset by changes in the value of the items being hedged. The notional principal
amounts of the swaps and caps, which represent the extent of the Company's
involvement in such contracts but not the risk of loss, at June 30, 1996
amounted to $900.0 million. The swaps had a carrying value and a fair value
which amounted to a net receivable position of $5.9 million at June 30, 1996.
The carrying value and fair value of interest rate caps and swaptions amounted
to $10.6 million and $11.0 million, respectively, and are reflected as "other
investments" on the Company's consolidated financial statements as of June 30,
1996. The net amount payable or receivable from interest rate swaps and caps is
accrued as an adjustment to interest income.
MORTGAGE LOANS. As of June 30, 1996, mortgage loans in the investment
portfolio were $278.3 million, or 7.3% of the aggregate carrying value of
invested assets ($243.3 million, or 6.4%, after giving effect to the Capital
Contribution). Of the June 30, 1996 amount, commercial mortgage loans were
98.7%, and residential mortgage loans were 1.3%.
In the last two years, the Company has significantly reduced its mortgage
loan investments as a percentage of its invested assets through sales of certain
mortgage loan assets; decreased originations of new loans and write-downs of
delinquent loans. As of December 31, 1993, mortgage loans totaled $652.2
million, or 17.9% of invested assets. By December 31, 1995, such investments
totaled $353.6 million, or 8.9% of invested assets and by June 30, 1996 such
investments totaled $278.3 million, or 7.3%
72
<PAGE>
of invested assets. Commercial mortgage loans consist primarily of fixed-rate
mortgage loans on complete properties. As of June 30, 1996, the Company held 168
individual commercial mortgage loans having an average interest rate, maturity
and balance of 9.2%, 70 months and $1.7 million, respectively.
The following table sets forth additions, reductions from payments and other
charges, foreclosures and miscellaneous adjustments to the mortgage loan
portfolio based on unpaid principal balances for the six-month periods ended
June 30, 1996 and 1995 and for the years ended December 31, 1995, 1994 and 1993:
MORTGAGE LOAN ASSET FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30, YEAR ENDED DECEMBER 31,
------------------------ -------------------------------------
1996 1995 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Commercial mortgage loans:
Beginning balance................................ $ 379.4 $ 504.0 $ 504.0 $ 723.6 $ 733.3
Plus: Additions.................................. 5.3 19.7 39.9 75.3 73.1
Less: Payments and other credits................. 41.4 38.4 134.9 123.3 73.1
Foreclosed properties....................... 6.2 9.5 18.0 14.0 9.7
Sales....................................... 47.2 -- 11.6 157.6 --
----------- ----------- ----------- ----------- -----------
Ending balance................................... 289.9 475.8 379.4 504.0 723.6
Residential mortgage loans......................... 3.7 6.4 4.3 9.2 8.8
----------- ----------- ----------- ----------- -----------
293.6 482.2 383.7 513.2 732.4
Valuation allowance for mortgage loan losses....... 15.3 60.0 30.1 65.5 80.2
----------- ----------- ----------- ----------- -----------
Total mortgage loans on real estate................ $ 278.3 $ 422.2 $ 353.6 $ 447.7 $ 652.2
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Valuation allowance as percentage of mortgage
loans............................................. 5.2% 12.4% 7.8% 12.8% 11.0%
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
Substantially all of the new commercial mortgage loans were originated by
the Company through mortgage loan correspondents with whom the Company had an
ongoing relationship at the time such mortgage loans were originated. The
Company is not originating new commercial mortgage loans although it is renewing
existing loans in its portfolio in selected cases. The Company annually
estimates the current loan-to-value ratios of its commercial mortgage loans
based on an analysis of the operating statements of each mortgaged property.
73
<PAGE>
The following table sets forth the maturity and principal repayment schedule
for the commercial mortgage loan portfolio as of June 30, 1996:
COMMERCIAL MORTGAGE LOAN SCHEDULED
PRINCIPAL REPAYMENTS
<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------------------------------------------------
MATURITY PAYMENTS ALL OTHER LOAN ANNUAL
YEAR ON BALLOON LOANS PAYMENTS TOTAL % OF TOTAL
- ------------------------------------------- ------------------- ----------------- --------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
1996....................................... $ 52.8 $ 9.1 $ 61.9 21.4%
1997....................................... 50.2 8.0 58.2 20.1
1998....................................... 8.5 7.1 15.6 5.4
1999....................................... 17.4 7.1 24.5 8.4
2000-2015.................................. 84.1 45.6 129.7 44.7
------- ----- --------- -----
Total...................................... $ 213.0 $ 76.9 $ 289.9 100.0%
------- ----- --------- -----
------- ----- --------- -----
</TABLE>
As of June 30, 1996, only $8.7 million, or 3.0% ($5.6 million, or 2.3%,
after giving effect to the Capital Contribution), of the Company's loan
portfolio (as measured by principal balance) was classified as delinquent or in
foreclosure. As of the same date, only $13.4 million, or 4.6% ($10.9 million, or
4.5%, after giving effect to the Capital Contribution), of the Company's loan
portfolio (as measured by principal balance) was classified as restructured. For
the first six months of 1996, the Company's foreclosures were approximately
$300,000 (as measured by principal balance).
In November 1994, in a transaction approved by the Iowa Commissioner, the
Company securitized a pool of 89 fixed rate commercial/multifamily mortgage
loans with a then outstanding aggregate principal balance of approximately $158
million. The Company sold these mortgage loans to a trust. Several classes of
Commercial/Multifamily Mortgage Pass-Through Certificates, Series 1994-1 (the
"Certificates") representing undivided beneficial ownership interests in the
trust were then issued and sold in a private placement. The Company retained a
residual interest in the trust which had a carrying value as of June 30, 1996 of
$3.7 million. The primary purpose of this securitization was to convert the
mortgage loans into cash, which could then be reinvested, and fixed maturity
securities so as to enhance the Company's liquidity, overall investment quality
and long-term economic value.
EQUITY REAL ESTATE. In recent years the Company has significantly reduced
its equity real estate portfolio. As of June 30, 1996, investment real estate
consisted of 22 properties located in eight states. The carrying value of
investment real estate as of June 30, 1996 was $18.8 million ($1.9 million after
giving effect to the Capital Contribution). As of June 30, 1996, the Company's
rental properties were 89% occupied by third parties or by the Company.
OTHER. The Company held $225.7 million of policy loans on individual
insurance products as of June 30, 1996. Of these policy loans, 71.8% were on
traditional life policies and 28.2% were on universal life policies and
annuities. Policy loans are permitted to the extent of a policy's contractual
limits and are fully collateralized by policy cash values. Loan rates are fixed
in the contracts and range from 5.2% to 8.0%.
As of June 30, 1996, the Company held equity securities of $90.4 million
(primarily preferred stock). The largest holding of equity securities had a
carrying value of $12.2 million as of June 30, 1996.
The Company held $88.8 million of other invested assets (including
short-term investments) on June 30, 1996. Other invested assets included various
joint venture investments, financial instruments and goodwill booked in
connection with the Company's investment in the Ameritas Joint Venture. See Note
13 to "Consolidated Financial Statements."
74
<PAGE>
COMPETITION
The Company operates in a highly competitive industry. Numerous life
insurance companies and other entities, including banks and other financial
institutions, compete with the Company, many of which have greater financial and
other resources as compared to the Company. The Company believes that the
principal competitive factors in the sale of insurance products are product
features, price, commission structure, perceived stability of the insurer,
claims-paying ratings, value-added service and name recognition. Many other
companies are capable of competing for sales in the Company's target markets
(including companies that do not presently compete in such markets). The
Company's ability to compete for sales is dependent upon its ability to address
the competitive factors described above.
In addition to competing for sales, the Company competes for qualified
agents and brokers to distribute its products. Strong competition exists among
insurance companies for agents and brokers with demonstrated ability. Management
believes that the bases of competition for the services of such agents and
brokers are commission structure, support services, prior relationships and the
strength of an insurer's products. Although the Company believes that it has
good relationships with its agents and brokers, its ability to compete will
depend on its continued ability to attract and retain qualified persons.
FEDERAL INCOME TAX CONSIDERATIONS
Certain of the life insurance products and annuities marketed and issued by
AmerUs Life and the Ameritas Joint Venture enjoy income tax advantages as
compared to other savings investments, such as certificates of deposit and
taxable bonds. One important tax advantage is the deferral of income taxation on
any increases in the contract values during the accumulation phase of the life
insurance and annuities in contrast to the current taxation of all earnings on
many other savings and investment products. In the event that the federal income
tax laws are changed so that accumulated earnings on these life insurance
policies and annuities do not enjoy the tax deferral described above, or so that
additional savings and investment products achieve similar tax deferral status,
or so that tax rates are significantly lower so that the policyowner's or
annuitant's ability to defer income tax on policy or annuity earnings is no
longer a significant factor for the policyowner, consumer demand for the
affected products could decline materially. From time to time, Congress has
considered proposals to revise or eliminate this tax deferral. There is no such
proposal currently pending in Congress, nor has the current administration
announced any consideration of any such proposal. If legislation were enacted to
eliminate the tax advantages of life insurance policies and annuities, such a
change could have an adverse effect on the ability of the Company to sell those
products.
EMPLOYEES
As of June 30, 1996, the Company had 405 full-time employees. None of the
Company's employees are covered by a collective bargaining agreement and the
Company believes that its relations with employees are satisfactory.
Certain employees of the Company also provide services to other affiliated
entities, including affiliates not directly owned by the Company. See "Certain
Transactions and Relationships."
SUBSIDIARIES
The Company was formed in August, 1996 in connection with the
Reorganization. See "The Reorganization and Distribution of the Non-Life
Insurance Subsidiaries." AmerUs Life has three wholly-owned subsidiaries: CLA
Assurance Company, an Iowa life insurance company, Centralife Annuity Services,
Inc., an Arizona corporation, and American Vanguard Life Insurance Company, an
Iowa life insurance company. In addition, AmerUs Life currently owns a 34%
interest in AMAL Corporation, through whose wholly-owned subsidiaries the
Ameritas Joint Venture operates. See "--Ameritas Joint Venture."
LEGAL PROCEEDINGS
The Company is involved in various legal actions from time to time arising
from the ordinary course of its business. As of the date hereof, the Company
does not believe that any such legal actions will have a material adverse effect
upon its operations or financial condition.
75
<PAGE>
AmerUs Life is a defendant in a class action lawsuit which was brought on
August 31, 1995 in the District Court for Travis County, Texas. The complaint,
which seeks unspecified damages, was filed by former policyowners on behalf of
themselves and all similarly situated persons who purchased individual life
insurance policies which were underwritten and sold by AmerUs Life within Texas
and which were based upon uniform sales presentations and policy illustrations
from and after the mid-1980s using a "vanishing premium" concept. AmerUs Life
has denied the allegations contained in such complaint, including the existence
of a legitimate class. The litigation is in the discovery stage and a hearing on
certification of the class has not yet been held. The litigation is being
vigorously defended by AmerUs Life. The parties have engaged in court-ordered
mediation with respect to this action.
A class action lawsuit was also filed in June 1996 in the United States
District Court for the Northern District of California. The complaint alleges
that AmerUs Life improperly passed an increase in its corporate income taxes
(known as the deferred acquisition cost, or DAC, tax) through to policyowners in
breach of the terms of certain of its life and annuity policies. The plaintiff,
an insured under a universal life policy issued by Central Life, seeks
unspecified damages and injunctive relief on behalf of himself and all
policyowners of AmerUs Life with universal life, term and "blended" life
insurance policies and annuities. AmerUs Life has denied the allegations
contained in such complaint, including the existence of a legitimate class. The
litigation is in the early discovery stage and a hearing on certification of the
class has not yet been held. The litigation is being vigorously defended by
AmerUs Life.
PROPERTIES
The Company's principal business operations are conducted from two
locations. The Company's executive offices consist of approximately 20,000
square feet located at 418 Sixth Avenue, Des Moines, Iowa. AmerUs Life's
executive offices consist of approximately 125,000 square feet located at 611
Fifth Avenue, Des Moines, Iowa. The Company and AmerUs Life will both lease
their executive offices from API after the Capital Contribution has been
effected, as both properties will be part of the Capital Contribution. See
"Certain Transactions and Relationships."
76
<PAGE>
SUPERVISION AND REGULATION
REGULATION OF THE COMPANY AND AMHC
A mutual insurance holding company is subject to regulation at a level
substantially equal to that of an Iowa domestic insurance company, and is
governed by statutory and regulatory requirements which are identical to, or
which parallel, the regulatory requirements imposed upon Iowa domestic insurance
companies. The Iowa Commissioner has jurisdiction over an intermediate holding
company, such as the Company, as if it were a mutual insurance holding company.
AMHC and the Company are each subject to the Iowa Insurer Supervision,
Rehabilitation and Liquidation Act, Iowa Code Chapter 507C. In addition, AMHC
and the Company are subject to the provisions of the Iowa Insurance Holding
Company Systems Act in the same manner and to the same extent as domestic
insurance companies. In addition, the assets of AMHC and the Company are
available to satisfy claims of policyowners, in the same manner as a domestic
insurance company in the event the Iowa Commissioner initiates a proceeding
under Chapter 507C.
AMHC and the Company may not merge with, be acquired by or acquire another
entity without approval of the Iowa Commissioner. In addition, in the case of a
merger or consolidation, separate approval by the Iowa Attorney General is
required. The statutory provisions applicable to the demutualization of a
domestic mutual life insurance company are applicable to the demutualization of
a mutual insurance holding company. In addition, no person may acquire or make
an offer to acquire voting stock in the Company if such acquisition would result
in such person's obtaining control over the Company. Generally, any person who,
directly or indirectly, owns, controls, holds with the power to vote, or holds
proxies representing 10% or more of the Company's voting securities (consisting
of both Class A Common Stock and Class B Common Stock) is deemed to have
control.
Under rules adopted by the Iowa Commissioner, AMHC is required to provide to
the Iowa Division of Insurance an annual report containing historical and
prospective information, including financial statements, an investment plan
covering all assets, any intention it has of borrowing money and information
regarding any "closed block" formed as part of a reorganization.
In addition to rules establishing the terms and conditions pursuant to which
the Iowa Commissioner will approve the sale of stock of an intermediate
insurance holding company or a subsidiary stock insurance company resulting from
a reorganization pursuant to Iowa law, the Iowa Commissioner has adopted rules
that also limit the activities and affiliations that are permissible for mutual
insurance holding companies. Under such rules, among other things, (i) at least
50 percent of the GAAP net worth of the mutual insurance holding company must be
invested in insurance company subsidiaries; (ii) a mutual insurance holding
company may not pay any policy credit, dividend or other distribution to any
policyowner member unless such payment has been approved by the Iowa
Commissioner; and (iii) a mutual insurance holding company must obtain the
approval of the Iowa Commissioner for any merger or acquisition (if at any time
it acquires or plans to acquire more than 50 percent of a stock insurance
company, a mutual insurance holding company must submit to the Iowa Commissioner
a plan describing any membership interests of policyowners).
REGULATION OF AMERUS LIFE
The Company will rely primarily on dividends and interest income from AmerUs
Life to make any dividend payments to its shareholders. The ability of AmerUs
Life to pay dividends to the Company is limited by law to earned profits
(statutory unassigned surplus) as of the date the dividend is paid, as
determined in accordance with accounting practices prescribed or permitted by
the insurance regulatory authorities of the State of Iowa. In addition, under
the Iowa Insurance Holding Company Systems Act, AmerUs Life may not pay an
"extraordinary" dividend without prior notice to and approval by the Iowa
Commissioner. An "extraordinary" dividend is defined under the Iowa Holding
Company Systems Act as any dividend or distribution of cash or other property
whose fair market value, together with that of other dividends or distributions
made within the preceding 12 months exceeds the greater of (i) 10% of
policyowners' surplus (total statutory capital stock and STATUTORY SURPLUS) as
of December 31 of the
77
<PAGE>
preceding year, or (ii) the statutory net gain from operations of the insurer
for the 12 month period ending the December 31 of the preceding year. Iowa law
gives the Iowa Commissioner broad discretion to disapprove requests for
dividends in excess of these limits. Based on this limitation and 1995 statutory
results, AmerUs Life would be able to pay approximately $40 million in dividends
to the Company in 1996 without obtaining the Iowa Commissioner's approval.
However, as a result of the Distribution, AmerUs Life will not be able to pay
any additional dividends to the Company in the 12-month period following the
Distribution without the prior consent of the Iowa Commissioner.
AmerUs Life and its subsidiaries are subject to regulation and supervision
by the states in which they transact business. State insurance laws generally
establish supervisory agencies with broad administrative and supervisory powers
related to granting and revoking licenses, transacting business, establishing
guaranty fund associations, licensing agents, approving policy forms, regulating
premium rates for some lines of business, establishing reserve requirements,
prescribing the form and content of required financial statements and reports,
determining the reasonableness and adequacy of statutory capital and surplus,
and regulating the type and amount of investments permitted.
Every state in which AmerUs Life is licensed administers a guaranty fund,
which provides for assessments of licensed insurers for the protection of
policyowners of insolvent insurance companies. There has been an increase in the
number of insurance companies that are under supervision which has resulted in
an increase in the amount of assessments to cover losses to policyowners of such
companies. Assessments can be partially recovered through a reduction in future
premium taxes in some states. In these situations, the assessments are generally
capitalized and amortized against future reductions in premium taxes. Net
assessment expenses for AmerUs Life amounted to $0.3 million for the first six
months of 1996, $0.4 million in 1995, $1.2 million in 1994 and $3.3 million in
1993. Management cannot reasonably predict the amount of future assessments, if
any.
Ethical sales practices and compliance with applicable laws and regulations
relevant to the life insurance industry have been a continuing focus of the
Company's support efforts. The Company has a continuing education program
focusing on ethical practices which is being provided to all agents. A program
is currently being implemented to further formalize the Company's current
practices and standards in the compliance and market conduct areas.
Recently, the insurance regulatory framework has been placed under increased
scrutiny by various states, the federal government and the NAIC. Various states
have considered or enacted legislation which changes, and in many cases
increases, the state's authority to regulate insurance companies. Although
legislation has been under consideration for several years in Congress which, if
enacted, would result in the federal government assuming some role in the
regulation of insurance companies, management does not expect the current
Congress to enact federal insurance regulation. The NAIC, in conjunction with
state regulators, has been reviewing existing insurance laws and regulations.
The NAIC recently approved and recommended to the states for adoption and
implementation several regulatory initiatives designed to reduce the risk of
insurance company insolvencies. Through the NAIC accreditation program, these
recommendations for state legislation have taken on an increased significance.
Two such initiatives are risk-based capital standards ("RBC") which have been
adopted by the NAIC, and a model investment law which is currently under
consideration.
The RBC standards for life insurance companies were adopted by the NAIC in
1992 and require insurance companies to calculate and report for statutory basis
financial statements information under a risk-based capital formula. The formula
is embodied in the NAIC Model Act, which has been adopted by many states,
including Iowa. RBC requirements are intended to allow insurance regulators to
identify at an early stage inadequately capitalized insurance companies based
upon the types and mixtures of risks inherent in such companies' operations. The
formula includes components for asset risk, liability risk, interest rate
exposure and other factors.
The RBC requirements are intended to be used by insurance regulators as an
early warning tool to identify deteriorating or weakly capitalized companies for
the purpose of initiating regulatory actions.
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<PAGE>
They are not designed as a ranking mechanism for adequately capitalized
companies. In addition, the formula defines a new minimum capital standard which
supplements the low, fixed minimum capital and surplus requirements previously
implemented on a state-by-state basis.
The Iowa RBC requirements categorize insurance companies according to the
extent to which they meet or exceed certain RBC thresholds. The law requires
increasing degrees of regulatory oversight and intervention based on the level
of an insurance company's authorized control level RBC as its RBC declines.
These degrees of regulatory action are triggered by the RBC level of an
insurance company as follows:(i) a "Company Action Level Event" (requiring the
insurance company to inform and obtain approval from the Director of a
comprehensive financial plan for increasing its RBC), which would occur if,
among other things, an insurance company's RBC falls below 200% of its
authorized control level RBC, or if an insurance company's RBC falls below 250%
of its authorized control level RBC and has a negative trend; (ii) a "Regulatory
Action Level Event" (resulting in, in addition to the requirement of a financial
plan, regulatory actions including examination of an insurance company's assets,
liabilities and operations followed by an order specifying such corrective
actions as the Director determines to be appropriate), which would occur if,
among other things, an insurance company's RBC falls below 150% of its
authorized control level RBC; (iii) an "Authorized Control Level Event"
(resulting in, in addition to the regulatory actions above, such actions as are
necessary to cause an insurance company to be placed under regulatory control in
a rehabilitation or liquidation proceeding if deemed to be in the best interests
of policyowners, creditors and the public), which would occur if, among other
things, an insurance company's RBC falls below 100% of its authorized control
level RBC; and (iv) a "Mandatory Control Level Event" (resulting in, on a
mandatory basis, such actions as are necessary to cause an insurance company to
be placed under regulatory control in a rehabilitation or liquidation
proceeding), which would occur if, among other things, an insurance company's
RBC falls below 70% of its authorized control level RBC.
As of June 30, 1996, AmerUs Life's RBC levels were significantly in excess
of RBC thresholds. Management believes that the RBC levels will be significantly
in excess of RBC thresholds as of the closing of the Offerings. As a result, the
RBC requirements are not expected to have an impact upon AmerUs Life's
operations, financial condition or operating results.
Approximately once every three to five years, as part of their routine
regulatory oversight process, state insurance departments conduct detailed
examinations of the books, records and accounts of insurance companies domiciled
in their states. Such examinations are generally conducted in cooperation with
the departments of two or three other states, under guidelines promulgated by
the NAIC. AmerUs Life was last examined by the Iowa Commissioner as of December
31, 1993. No material issues were raised by the Iowa Commissioner in such
examination.
A committee of the NAIC is developing model legislation to govern insurance
company investments. Several discussion drafts have been released over the past
two to three years. However, implementation of any investment model law is not
anticipated in the foreseeable future. Management believes that if the current
discussion draft were adopted without modification it would not have a material
impact on the Company.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the current
directors and executive officers of the Company and AmerUs Life.
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY AND AMERUS LIFE
- ------------------------------ --- ---------------------------------------------------------------------------
<S> <C> <C>
John R. Albers 65 Director
Roger K. Brooks 59 Director, Chairman, President and Chief Executive Officer of the Company
and Chairman of AmerUs Life
Malcolm Candlish 61 Director
D T Doan 64 Director and Vice Chairman of the Company and President of AmerUs Life
Thomas F. Gaffney 51 Director
Sam C. Kalainov 66 Director
John W. Norris, Jr. 60 Director
Jack C. Pester 61 Director
John A. Wing 61 Director
Thomas C. Godlasky 41 Executive Vice President and Chief Investment Officer of the Company and
AmerUs Life
Michael E. Sproule 49 Executive Vice President and Chief Financial Officer of the Company and
AmerUs Life
Victor N. Daley 53 Senior Vice President and Chief Human Resources Officer of the Company and
AmerUs Life
Michael G. Fraizer 46 Senior Vice President and Controller/Treasurer of the Company and AmerUs
Life
</TABLE>
Set forth below with respect to each of the directors and executive officers
of the Company and AmerUs Life is a description of such individual's business
experience, principal occupation and employment during at least the last five
years:
John R. Albers served as a director of American Mutual Life from November
1983 to June 1996. Since April 1996 Mr. Albers has served as a director of AMAL.
Mr. Albers is President and CEO of Fairfield Enterprises, Inc., Dallas Texas.
From August 1988 to April 1995, Mr. Albers was the Chairman, CEO & President of
Dr. Pepper/Seven-Up Companies, Dallas, Texas. From July 1995 to the present, Mr.
Albers has served as a director of First Alert, Inc., Aurora, Illinois.
Roger K. Brooks served as a director of American Mutual Life from February
1971 to June 1996. Mr. Brooks was the Chief Executive Officer of American Mutual
Life from December 1994 to June 1996, and prior thereto was the Chairman and
Chief Executive Officer of American Mutual Life. Since April 1996 Mr. Brooks has
served as a director of AMAL.
Malcolm Candlish served as a director of American Mutual Life from February
1987 to June 1996. Since December 1992 Mr. Candlish has been the Chairman of
First Alert, Inc., Aurora, Illinois. He also held the positions of Chief
Executive Officer of First Alert, Inc. from December 1992 until September 1996
and of President from May 1996 until September 1996. From 1989 to 1992, Mr.
Candlish was the Chairman and Chief Executive Officer of Sealy, Inc., Cleveland,
Ohio. Since 1991 Mr. Candlish has served as a director of Black & Decker
Corporation, Towson, Maryland.
D T Doan served as a director and Vice Chairman of American Mutual Life from
December 1994 to June 1996. From October 1995 until June 1996, Mr. Doan was
President--Insurance Operations of American Mutual Life. Mr. Doan held the same
position from August 1992 to January 1995. From
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<PAGE>
August 1987 to August 1992, Mr. Doan was Executive Vice President--Corporate of
American Mutual Life. Since April 1996 Mr. Doan has served as a director of
AMAL, AVLIC and AIC. Since April 1996, Mr. Doan has served as Executive Vice
President of AMAL and AVLIC and Senior Vice President of AIC.
Thomas F. Gaffney served as a director of American Mutual Life from November
1983 to June 1996. Mr. Gaffney is a private investor who lives in Tierra Verde,
Florida. From 1987 to 1990, Mr. Gaffney was the Chairman of Oxford Investment
Group, Bloomfield Hills, Michigan.
Sam C. Kalainov served as a director of American Mutual Life from December
1994 to June 1996. Mr. Kalainov was the Chairman of American Mutual Life from
December 1994 until June 1996 and Chairman of AmerUs Life from July 1996 until
September 1996. From 1982 to December 1994, Mr. Kalainov was a director,
Chairman and Chief Executive Officer of Old AML.
John W. Norris, Jr. served as a director of American Mutual Life from
November 1974 to June 1996. Mr. Norris is Chairman and CEO of Lennox
International, Inc., Dallas, Texas. Mr. Norris has also served as a director of
Atmos Energy Corporation, Dallas, Texas since August 1987.
Jack C. Pester served as a director of American Mutual Life from December
1994 to June 1996. From May 1981 to December 1994, Mr. Pester was a director of
Old AML. Mr. Pester is a Senior Vice President of The Coastal Corporation,
Houston, Texas. Since August 1994 Mr. Pester has also served as a director of
KFX, Inc., Denver, Colorado.
John A. Wing served as a director of American Mutual Life from May 1991 to
June 1996. Mr. Wing is Chairman and Chief Executive Officer of The Chicago
Corporation, Chicago, Illinois.
Thomas C. Godlasky was Executive Vice President and Chief Investment Officer
of American Mutual Life from January 1995 to June 1996. From February 1988 to
January 1995, he was Manager of the Fixed Income and Derivatives Department of
Providian Corporation, Louisville, Kentucky. Since April 1996, Mr. Godlasky has
served as a director of AVLIC and AIC.
Michael E. Sproule was Executive Vice President and Chief Financial Officer
of American Mutual from August 1992 to June 1996. From January 1991 through July
1992, he was Executive Vice President and Chief Financial Officer of ICH
Corporation, Louisville, Kentucky and from January 1988 to December 1990, he was
a Consultant with Tillinghast, New York, New York. Since April 1996, Mr. Sproule
has served as a director of AVLIC and AIC.
Victor N. Daley was Senior Vice President and Chief Human Resources Officer
of American Mutual Life from September 1995 to June 1996. From April 1989 to
September 1995 Mr. Daley was Senior Vice President and Chief Administrative
Officer of Royal Insurance, Charlotte, North Carolina.
Michael G. Fraizer was Senior Vice President and Controller/Treasurer of
American Mutual Life from January 1993 to June 1996. From April 1991 to January
1993, Mr. Fraizer was Senior Vice President and Chief Financial Officer of Iowa
Realty Co., Inc. and from April 1977 to April 1991, he was a Partner with
McGladrey & Pullen, Des Moines, Iowa.
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<PAGE>
BOARD OF DIRECTORS OF THE COMPANY
The business of the Company is managed under the direction of the Company's
Board of Directors. The Board of Directors is presently composed of nine
directors and the Company intends to add two additional outside directors after
completion of the Common Stock Offerings. The Board is divided into three
classes. Messrs. Candlish, Kalainov and Norris are in Class I, which class will
stand for election at the annual meeting of shareholders to be held in 1997.
Messrs. Albers, Doan and Gaffney are in Class II, which class will stand for
election at the annual meeting of shareholders to be held in 1998. Messrs.
Brooks, Pester and Wing are in Class III, which class will stand for election at
the annual meeting of shareholders to be held in 1999.
Consistent with proposed regulations recently promulgated by the Iowa
Commissioner, at least three of the Company's outside directors will not be
directors of AMHC or any of AMHC's subsidiaries. In addition, at least two of
the Company's outside directors will have had no previous affiliation with the
Company. The Company's independent directors will review any intercompany
transactions involving potential conflicts of interest between the Company and
AMHC and its subsidiaries.
The Company's Board of Directors has also established an Executive Committee
which will consist of between three and five members of the Board and will be
chaired by Mr. Brooks. The Executive Committee exercises the power and authority
of the Directors in all matters that do not require action by the entire Board
of Directors. The members of the Executive Committee will be appointed prior to
the Offerings.
The Company's Board of Directors has also established an Audit Committee and
a Human Resources Committee. The Audit Committee recommends the firm to be
appointed as independent accountants to audit financial statements and to
perform services related to the audit, reviews the scope and results of the
audit with the independent accountants, reviews with management and the
independent accountants the Company's year-end operating results and considers
the adequacy of the Company's internal accounting procedures. The Audit
Committee will consist of three members of the Board who will be appointed prior
to the Offerings. The Human Resources Committee reviews and recommends the
compensation arrangements for all executive officers, approves such arrangements
for other senior level employees, and takes such actions as may be required in
connection with certain compensation and incentive plans of the Company. The
Human Resources Committee consists of Messrs. Albers, Candlish and Norris, each
of whom qualifies as a Non-Employee Director, as such term is used in Rule 16b-3
promulgated under the Securities Exchange Act of 1934.
BOARD OF DIRECTORS OF AMERUS LIFE
The Board of Directors of AmerUs Life is presently composed of the same nine
directors as the Company.
COMPENSATION OF DIRECTORS
Compensation for all non-employee directors is $ per meeting of the
Board of Directors of the Company, $ per meeting of the Board of Directors
of AmerUs Life and $ per meeting of a committee of the Board of Directors
of the Company. Directors who are officers or employees of the Company or any
affiliate of the Company receive no compensation for serving as directors. All
directors are reimbursed for out-of-pocket expenses incurred in connection with
attendance at any meeting of the Board of Directors or committee of the Board of
Directors of the Company or AmerUs Life.
Directors are also eligible to participate in the Company's Non-Employee
Director Stock Plan, which the Company's Board of Directors approved on
September 15, 1996. See "Management Compensation--Compensation Pursuant to Stock
Plans of the Company."
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<PAGE>
MANAGEMENT COMPENSATION
EXECUTIVE OFFICER COMPENSATION
Since the formation of the Company, none of the executive officers has
received any compensation from the Company. All compensation received, earned or
accrued by such executive officers has been from AmerUs Life.
The following summary compensation table sets forth certain information
concerning compensation for services rendered in all capacities awarded or paid
by the Company (including compensation paid by AmerUs Life) to its Chief
Executive Officer and the other named executive officers (the "Named Executive
Officers") during the year ended December 31, 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------- LTIP ALL OTHER
SALARY BONUS(A) PAYOUTS(B) COMPENSATION(C)
NAME AND PRINCIPAL POSITION FISCAL YEAR $ $ $ $
- ------------------------------------------------- ----------- --------- ----------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
Roger K. Brooks
Chairman, President and Chief Executive Officer
of the Company and Chairman of AmerUs Life 1995 440,000 300,000 352,000
D T Doan
Vice Chairman of the Company and President of
AmerUs Life 1995 275,000 132,500 137,600
Thomas C. Godlasky
Executive Vice President and Chief Investment
Officer of the Company and AmerUs Life 1995 239,600 125,000 204,000(D)
Michael E. Sproule
Executive Vice President and Chief Financial
Officer of the Company and AmerUs Life 1995 250,000 200,000 125,000
Sam C. Kalainov
Former Chairman (E) 1995 440,000 300,000 352,000
</TABLE>
- ------------------
(A) Pursuant to the Management Incentive Plan.
(B) Long term incentive compensation pursuant to the Performance Share Plan (the
"LTIP"). LTIP payouts indicated were earned in 1995 and are payable in 1996.
(C) De minimus benefits and perquisites are not included as they are in the
aggregate not significant.
(D) The amount shown reflects payment of a $204,000 sign-on bonus of which a
pro-rata portion is repayable in the event of termination during the initial
36 months of employment.
(E) Mr. Kalainov served as Chairman of AmerUs Life until September 1996. In
August 1996, Mr. Kalainov became Chairman of AMHC and AmerUs Group. Mr.
Kalainov is no longer an officer of the Company.
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<PAGE>
COMPENSATION PURSUANT TO STOCK PLANS OF THE COMPANY
STOCK INCENTIVE PLAN
On September 15, 1996, the Company's Board of Directors adopted the AmerUs
Life Holdings, Inc. Stock Incentive Plan (the "Stock Plan" or the "Plan"). The
purpose of the Stock Plan is to enable the Company to attract and retain
employees who will contribute to the Company's long-term success by enabling
such employees to participate in the long-term success and growth of the Company
through an equity interest in the Company.
The Stock Plan provides for the grant of options (including incentive stock
options and non-qualified stock options), stock appreciation rights and
restricted stock awards. To date, no options or other awards have been granted
under the Stock Plan. In addition, consistent with proposed rules recently
promulgated by the Iowa Commissioner, no options or awards will be granted by
the Company during the six-month period following the closing of the Common
Stock Offerings.
The summary of the Stock Plan which appears below is qualified in its
entirety by reference to the full text of such Plan.
TYPES OF AWARDS. The Stock Plan provides for the grant of any or all of the
following types of awards: (1) stock options, including incentive stock options
and non-qualified stock options; (2) stock appreciation rights; and (3)
restricted stock. Awards may be granted in combination as determined by the
Human Resources Committees of the Board of Directors (the "Committee"). The
initial grant will be in the form of Non-Qualified Stock Options.
TERM. The Company anticipates that the Stock Plan will be approved by the
Company's sole shareholder and become effective prior to the closing of the
Offerings. The Stock Plan will terminate ten years after its effective date (the
"Termination Date"). No awards shall be granted pursuant to the Plan after the
Termination Date, but awards granted prior thereto may extend beyond such time.
The Board of Directors may terminate the Plan prior to the Termination Date,
however, termination of the Plan will not affect awards made prior to
termination.
ELIGIBILITY. Officers and other key and high potential employees of the
Company, its affiliates and its subsidiaries (but excluding members of the
Committee and any person who serves only as a director) who are responsible for
or contribute to the management, growth and/or profitability of the business of
the Company are eligible to be granted stock options, stock appreciation rights,
or restricted stock awards. The options and participants under the Plan will be
selected from time to time by the Committee, in its sole discretion, from among
those eligible, and the Committee shall determine, in its sole discretion, the
number of shares covered by each award or grant.
SHARES SUBJECT TO THE STOCK PLAN. The total number of shares of Class A
Common Stock reserved and available for distribution under the Stock Plan shall
be 1.4 million. Such shares may consist, in whole or in part, of authorized and
unissued shares or treasury shares. If any shares of Class A Common Stock that
have been optioned cease to be subject to option, or if any shares subject to
Restricted Stock Award granted hereunder are forfeited or such awards otherwise
terminate, such shares shall again be available for distribution in connection
with future awards under the Plan. The maximum total number of shares subject to
awards which may be granted under the Plan in any one year will be 700,000, and
the maximum number of shares subject to awards which may be granted under the
Plan to any individual in any one year is 230,000 (in both cases, subject to
appropriate adjustments to reflect changes in capitalization of the Company).
STOCK OPTIONS. The Committee is authorized to determine the terms and
conditions of all option grants, subject to the limitations that the option
price per share may not be less than the fair market value of a share of the
Company's common stock on the date of grant and the term of an option may not be
longer than ten (10) years. Payment of the option price may be made in any
manner specified by the Committee (which may include cash or common stock of the
Company, or by "cashless exercise").
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<PAGE>
STOCK APPRECIATION RIGHTS ("SARS"). The Committee is authorized to grant
SARs in tandem with options under the Stock Plan. A SAR can be exercised only to
the extent the options with respect to which it is granted is not exercised, and
is subject to the same terms and conditions as the option to which it relates.
Upon exercise of a SAR, the holder will be entitled to receive, for each share
with respect to which the SAR is exercised, an amount (the "appreciation") equal
to the difference between the option price of the related option and the fair
market value of a share of common stock of the Company on the date of exercise
of the SAR. The appreciation will be payable in cash or Class A Common Stock, at
the discretion of the Committee.
RESTRICTED STOCK. The Committee is authorized to award restricted stock
under the Stock Plan subject to the terms and conditions as the Committee may
determine. The Committee has the authority to determine the number of shares of
restricted stock to be awarded, the price, if any, to be paid by the recipient
of the restricted stock, and the date or dates on which the restricted stock
will vest. The vesting of restricted stock may be conditioned upon the
completion of a specific period of service with the Company, upon the attainment
of specified performance goals, or upon such other criteria as the Committee may
determine. The Stock Plan gives the Committee discretion to make loans to the
recipients for the purchase price of restricted stock and to accelerate the
vesting of restricted stock on a case by case basis at any time.
FEDERAL INCOME TAX ASPECTS. The following is a brief summary of the Federal
income tax consequences of awards made under the Stock Plan. This summary does
not describe state, local or foreign tax consequences. The information contained
in this section is based on present law and regulations, which are subject to be
changed prospectively or retroactively.
The optionee will recognize no taxable income upon the grant or exercise of
an incentive stock option (as defined under the Plan), and the Company will not
be entitled to any deduction. Upon a disposition of the shares after the later
of two years from the date of grant and one year from the date of exercise, the
participant will recognize long-term capital gain or loss equal to the
difference, if any, between the amount realized and the exercise price. The
excess, if any, of the fair market value of the shares of Class A Common Stock
on the date of exercise of the Incentive Stock Option over the exercise price
may be subject to alternative minimum tax. In such circumstances, no deduction
will be allowed to the Company for Federal income tax purposes.
If Class A Common Stock acquired upon the exercise of an Incentive Stock
Option is disposed of prior to the expiration of the holding periods described
above, (i) the optionee will recognize ordinary compensation income in the
taxable year of disposition in an amount equal to the excess, if any, of the
lesser of the fair market value of the shares on the date of exercise and the
amount realized on the disposition of the shares, over the exercise price paid
for such shares; and (ii) the Company will be entitled to a corresponding
deduction.
With respect to Non-Qualified Options (as defined under the Plan) (i) upon
grant of the option, the optionee will recognize no income; and (ii) upon
exercise of the option, the optionee will recognize ordinary compensation income
in an amount equal to the excess, if any, of the fair market value of the shares
on the date of exercise over the exercise price, and the Company will be
entitled to a corresponding deduction. On the disposition of the shares, the
optionee will recognize gain or loss equal to the amount realized and the sum of
the exercise price and the ordinary compensation income realized. Such gain or
loss will be treated as either short-term or long-term capital gain or loss,
depending upon the length of time that the optionee has held the shares.
An optionee recognizes no taxable income upon the grant of a SAR, and the
Company is not entitled to a deduction. An optionee will recognize ordinary
income, and the Company will be entitled to a deduction at the time of exercise
equal to the cash or fair market value of common stock payable upon such
exercise.
The grant of Restricted Stock (as defined under the Plan) under the Stock
Plan will not result in income for the grantee or in a deduction for the
Company, assuming the shares transferred are subject
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<PAGE>
to a "substantial risk of forfeiture" as intended by the Company. If there are
no such restrictions, the grantee would recognize ordinary income upon receipt
of shares. Dividends paid to the grantee while the stock remains subject to
restriction will be treated as compensation for Federal income tax purposes. At
the time the restrictions lapse, the grantee will recognize ordinary income, and
the Company will be entitled to a deduction measured by the fair market value of
the shares at the time of lapse. However, an optionee may elect to recognize
income measured by the fair market value of the shares at the time of grant and
the Company will be entitled to a corresponding deduction.
Awards paid to certain executive officers may be subject to the limitations
under Section 162(m) of the Internal Revenue Code that prohibit the deduction of
certain compensation paid in excess of $1,000,000 in any taxable year. The
application of such section to awards made under plans adopted and approved
prior to the time at which a company's stock becomes publicly traded is not
clear. The Company believes that compensation payable pursuant to options
granted under the Stock Plan should not be limited as to deductibility by reason
of Section 162(m) and that compensation payable in respect of other awards may
fail to be deductible for Federal income tax purposes unless such awards qualify
for certain exemptive relief that may be available for grants made prior to the
first meeting of shareholders of the Company at which directors are elected in
1999.
NON-EMPLOYEE DIRECTOR STOCK PLAN
On September 15, 1996, the Company's Board of Directors adopted the AmerUs
Life Non-Employee Director Stock Plan (the "Director Plan"). The Company
anticipates the Director Plan will be approved by the Company's sole shareholder
and become effective prior to the closing of the Common Stock Offerings. The
purpose of the Director Plan is to provide stock-based compensation to eligible
Directors of the Company in order to encourage a high level of Director
performance and to provide Directors with a proprietary interest in the
Company's success.
The Director Plan provides for grants of restricted shares of the Company's
Class A Common Stock ("Restricted Shares") and for the grant of options. To
date, no Restricted Shares or options have been granted. In addition, consistent
with proposed rules recently promulgated by the Iowa Commissioner, no Restricted
Shares or options will be granted under the Director Plan during the six-month
period following the closing of the Offerings.
The Director Plan is administered by the Committee. The total number of
shares of Class A Common Stock reserved and available for distribution under the
Director Plan shall be 150,000. Such shares may consist, in whole or in part, of
authorized and unissued shares or treasury shares.
Each Non-Employee Director of the Company is eligible to participate in the
Director Plan. A "Non-Employee Director" for this purpose means Directors who
are not officers for purposes of Section 16 of the Exchange Act or otherwise
employed, or a consultant to, the Company or any of its affiliates, and who is
an outside director under Section 1.162-27(e)(3) of the regulations promulgated
under the Code.
STOCK OPTIONS. Beginning January 1, 1998, options covering 2,500 shares of
Class A Common Stock of the Company shall be granted to each Non-Employee
Director automatically on the first day of each calendar year in which the Class
A Common Stock is publicly traded on the NASDAQ National Market. Options granted
under the Director Plan shall be evidenced by a written agreement in such form
as the Committee shall from time to time approve. The option price per share of
Class A Common Stock purchasable under an option shall be 100% of the fair
market value of the Class A Common Stock on the date of the grant of the option.
Each option shall be exercisable for a term of ten (10) years from the date such
option is granted. Options will not become exercisable until the expiration of
twelve (12) months from the date of the grant of the option.
RESTRICTED STOCK AWARDS. Each Non-Employee Director may elect, pursuant to
a written irrevocable election, to receive Restricted Stock in lieu of part or
all of such Non-Employee Director's director fees. The number of shares of
Restricted Stock granted to a Non-Employee Director pursuant to such
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<PAGE>
election shall be equal to the dollar amount of director fees which the
Non-Employee Director has elected not to receive, divided by seventy-five
percent (75%) of the fair market value of the Class A Common Stock as of the
date of payment.
Generally, a Non-Employee will not be permitted to sell, transfer, pledge or
assign shares of Restricted Stock awarded under the Director Plan for a period
of two (2) years following the effective date of the Restricted Stock Agreement
pursuant to which such shares of Restricted Stock are awarded.
FEDERAL INCOME TAX ASPECTS. Federal income tax consequences of options and
Restricted Stock granted under the Director Plan are the same as those described
with respect to Non-Qualified Options and Restricted Stock under the Stock
Incentive Plan.
COMPENSATION PURSUANT TO AMERUS LIFE PLANS
MANAGEMENT INCENTIVE PLAN
AmerUs Life sponsors a Management Incentive Plan ("MIP") for officers and
key management employees of the Company and its subsidiaries. On an annual
basis, AmerUs Life establishes various and distinct goals for its executives and
key managers. Goals generally relate to objectives such as increased revenue,
expense levels and earnings. Attainment of individual and AmerUs Life goals can
generate payment of cash bonuses ranging from 15% to 70% of an executive's base
salary. Payment of these annual incentives is approved by the Board of Directors
and made in a separate lump-sum on or before the end of February of the ensuing
year.
LONG-TERM INCENTIVE COMPENSATION PLAN
AmerUs Life established a long-term incentive compensation Performance Share
Plan effective January 1, 1995 (the "LTIP"). Under the LTIP, the Human Resources
Committee of the Company's Board of Directors has the authority to grant
Performance Shares to eligible employees on such dates as the Human Resources
Committee shall determine. The LTIP will be integrated with the Stock Plan such
that long term compensation earned in connection with services provided to the
Company will be paid through the Stock Plan.
The Human Resources Committee determines the terms and conditions of the
Performance Share awards consistent with the LTIP. Each Performance Share has a
notional value of $100 and a maximum value of $200 at the end of the three-year
performance cycle to which the Performance Share relates (the "Performance
Cycle"). Performance goals are measured by the cumulative growth in AmerUs
Life's consolidated adjusted GAAP net worth ("Adjusted GAAP Value"), as
determined annually by the Human Resources Committee, and are set at a range of
levels for a given Performance Cycle. Goals are set to establish the level of
increase in Adjusted GAAP Value in the Performance Cycle that is required in
order for the value of the Performance Shares to reach its maximum level of $200
at the end of such Performance Cycle. Threshold levels are also set to establish
the level of increase in Adjusted GAAP Value in the Performance Cycle that is
required in order for the Performance Shares to maintain a value of $50 at the
end of such cycle. If threshold levels are not met, the Performance Shares will
have no value at the end of the Performance Cycle. Performance goals for a given
Performance Cycle under the LTIP are established at the time Performance Shares
are granted.
The first Performance Shares were awarded under the LTIP on January 1, 1995.
On such date, Performance Shares relating to three Performance Cycles were
awarded, one relating to the first full three-year Performance Cycle ending on
December 31, 1997, and the other two relating to two transitional one- and
two-year Performance Cycles ending on December 31, 1995 and December 31, 1996,
respectively. Performance Shares were also awarded on January 1, 1996 for the
three-year Performance Cycle ending on December 31, 1998.
The various performance goals set for the Performance Shares awarded on
January 1, 1995 and January 1, 1996 ranged from a minimum of 8% Adjusted GAAP
Value to 16% Adjusted GAAP Value. The
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<PAGE>
increases in Adjusted GAAP Value necessary for the Performance Shares to reach
their maximum value for the Performance Cycles ending December 31, 1996, 1997
and 1998 are 15%, 16% and 16%, respectively.
LONG-TERM INCENTIVE PLANS - AWARDS
IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF NON-STOCK
SHARES, PERFORMANCE OR PRICE-BASED PLANS
UNITS OR OTHER PERIOD -----------------------------------
OTHER RIGHTS UNTIL MATURATION THRESHOLD TARGET MAXIMUM
(#) OR PAYOUT ($) ($) ($)
------------- ---------------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Roger K. Brooks 1,760 1/95 - 12/95 88,000 176,000 352,000
2,640 1/95 - 12/96 132,000 264,000 528,000
3,520 1/95 - 12/97 176,000 352,000 704,000
D T Doan 688 1/95 - 12/95 34,400 68,800 137,600
1,031 1/95 - 12/96 51,550 103,100 206,200
1,375 1/95 - 12/97 68,750 137,500 275,000
Thomas C. Godlasky 625 1/95 - 12/95 31,250 62,500 125,000
938 1/95 - 12/96 46,900 93,800 187,600
1,250 1/95 - 12/97 62,500 125,000 250,000
Michael E. Sproule 625 1/95 - 12/95 31,250 62,500 125,000
938 1/95 - 12/96 46,900 93,800 187,600
1,250 1/95 - 12/97 62,500 125,000 250,000
Sam C. Kalainov 1,760 1/95 - 12/95 88,000 176,000 352,000
2,640 1/95 - 12/96 132,000 264,000 528,000
3,520 1/95 - 12/97 176,000 352,000 704,000
</TABLE>
SAVINGS AND PROFIT SHARING PLANS
Each of the Named Executive Officers participates in the All*AmerUs Savings
& Retirement Plan for Employees of American Mutual Life (the "Savings &
Retirement Plan"), a profit sharing plan containing a qualified cash or deferred
arrangement and the All*AmerUs Supplemental Executive Retirement Plan (the
"Supplemental Plan"). Each of the Named Executive Officers also has a frozen
benefit under either the American Mutual Life Insurance Company Employees'
Pension Plan (the "AML Employees' Frozen Pension Plan") or the American Mutual
Life Insurance (formerly Central Life Assurance) Company Pension Plan (the "AML
(formerly Central Life) Frozen Pension Plan") (the AML Employees' Frozen Pension
Plan and the AML (formerly Central Life) Frozen Pension Plan are hereinafter
sometimes collectively referred to as the "Frozen Pension Plans"). Certain of
the Named Executive Officers additionally have a frozen benefit under the
American Mutual Life Insurance Company Supplemental Executive Retirement Plan
(the "AML Frozen SERP").
SAVINGS & RETIREMENT PLAN
Prior to December 31, 1995, the Company maintained three separate defined
contribution plans for eligible employees (collectively the "AmerUs Life Former
Savings Plans"). Contributions under the AmerUs Life Former Savings Plans ceased
as of December 31, 1995 and effective January 1, 1996, the AmerUs Life Former
Savings Plans were merged into the Savings & Retirement Plan. The Company's and
API's aggregate contributions to the AmerUs Life Former Savings Plans were
approximately $568,943 in 1995.
The Savings & Retirement Plan is intended to be qualified under Sections
401(a) and 501(a) of the Internal Revenue Code (the "Code") and is administered
by the AmerUs Life Benefit and Pension Committee (the "Committee"), whose
members are appointed by the Board of Directors of AmerUs Life. The Committee is
responsible for interpreting the Savings & Retirement Plan, making certain
amendments thereto and adopting rules and regulations reasonably necessary or
advisable to implement and
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administer the plan. The Savings & Retirement Plan allows for elective employee
before-tax contributions, a set level of basic and matching contributions to be
made by AmerUs Life and API, a discretionary level of profit-sharing
contributions and an individually-determined supplemental contribution, if
applicable.
Employee contributions are governed by Code Section 401(k). Participants may
elect to make before-tax contributions to the Savings & Retirement Plan that are
at least 1% and not more than 15% of the participant's compensation. The
Committee may reduce, suspend or refund the contribution of a "highly
compensated member" (as defined in the Savings & Retirement Plan) in order to
ensure compliance with the nondiscrimination tests set forth in the Savings &
Retirement Plan.
AmerUs Life will contribute 4% of each eligible participating employee's
compensation as of the end of a plan year in accordance with the provisions of
the Savings & Retirement Plan ("Basic Contributions"). In addition, AmerUs Life
will make a matching contribution of 125% of an employee's before-tax
contribution, up to a maximum of 4% of an employee's compensation ("Matching
Contributions").
AmerUs Life may also contribute, on behalf of each participating employee
who was, as of December 31, 1995, an active participant in either Frozen Pension
Plan, a certain percentage of such employee's compensation ("Interim Benefit
Supplement"), in order to make up any shortfall between the amount to which such
employee would have been entitled under either of the Frozen Pension Plans as
compared to such employee's projected benefits under the Savings & Retirement
Plan. The amount of the Interim Benefit Supplement made on behalf of any
eligible employee is reduced by any profit sharing contribution allocated to
such employee under the Savings & Retirement Plan.
The Savings & Retirement Plan is generally available to all full-time
employees of AmerUs Life. An employee's compensation, for purposes of
contributions based thereon, consists of an employee's W-2 compensation with
certain adjustments. All contributions made by AmerUs Life are made to the
participants' individual accounts and the Basic Contributions, Matching
Contributions, Profit-Sharing Contributions and the Interim Benefit Supplement
are subject to forfeiture until fully vested under the Savings & Retirement
Plan's vesting schedule. The amount of before-tax contributions made by a
participant and contributions made by AmerUs Life are limited by the Code. In
the event the Committee determines that such limits are exceeded, it shall cause
any such excess contributions to be distributed, forfeited or placed in the
non-qualified Supplemental Plan in accordance with the terms of the Savings &
Retirement Plan and the Supplemental Plan. A distribution from the vested
portion of an employee's account is generally payable upon retirement at or
after normal retirement age (age 65) or upon other termination of employment.
AmerUs Life may terminate or amend the Savings & Retirement Plan, the
Supplemental Plan, or completely discontinue contributions, at any time it may
deem advisable.
SUPPLEMENTAL PLAN
AmerUs Life has adopted, effective January 1, 1996, the Supplemental Plan.
Certain employees whose benefits under the Savings & Retirement Plan are limited
by the provisions of Section 401(a)(17) of the Code and for whom compensation is
deferred, are eligible to participate in such plan. The Supplemental Plan is not
intended to meet the qualification requirements of Section 401 of the Code, and
no cash or funds shall be set aside or otherwise segregated for the payment of
benefits under such plan until such time as benefits are actually paid.
FROZEN PENSION PLANS
Prior to January 1, 1996, American Mutual Life maintained the Frozen Pension
Plans, which were qualified under Section 401(a) of the Code. The benefits under
both such plans were curtailed as of December 31, 1995 and the Frozen Pension
Plans were merged into the surviving American Mutual Life Insurance Company
Pension Plan (the "Surviving AML Pension Plan"). Retirement benefits under the
predecessor AML Employees' Frozen Pension Plan were based primarily on an
employees' years of service and compensation during the highest five consecutive
plan years of employment or the last 60 months, if greater, as of December 31,
1995; retirement benefits under the predecessor AML (formerly
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Central Life) Frozen Pension Plan were based primarily on an employees' years of
service and career compensation as of December 31, 1995. All employees' frozen
accrued benefits as of December 31, 1995 are fully vested.
Prior to January 1, 1996, American Mutual Life also maintained the AML
Frozen SERP and the Central Life Frozen SERP, which were similar in operation to
the Supplemental Plan currently in effect. The benefits under these plan were
also curtailed as of December 31, 1995.
The following table sets forth the frozen accrued monthly benefits payable
as a straight life annuity to each of the Named Executive Officers under the
Surviving AML Pension Plan, including the AML Frozen SERP, assuming retirement
at age 65 (current normal retirement age):
<TABLE>
<CAPTION>
PENSION TABLE
FROZEN ACCRUED BENEFITS UNDER THE
SURVIVING AML PENSION PLAN INCLUDING THE FROZEN SERP
- ----------------------------------------------------------------------------------------------
NAME MONTHLY BENEFITS
- --------------------------------------------------------------------------- -----------------
<S> <C>
Roger K. Brooks............................................................ $ 27,550
D T Doan................................................................... 15,640
Thomas C. Godlasky......................................................... 321
Michael E. Sproule......................................................... 1,360
Sam C. Kalainov............................................................ 34,261(1)
</TABLE>
- --------------
(1) Included in this amount is $9,148 in monthly benefits due under the terms of
an Employment Agreement, dated February 1, 1995, between American Mutual
Life and Sam C. Kalainov. See
"--Employment Agreement."
EMPLOYMENT AGREEMENT
AmerUs Life entered into an employment agreement (the "Employment
Agreement") with Mr. Kalainov, dated February 1, 1995, under which he serves as
the Chairman of the Board of Directors of AmerUs Life and Chairman of AmerUs
Life's Charitable Foundation (the "Foundation"). The term of the Employment
Agreement continues until May 15, 2000, but may expire earlier if Mr. Brooks
ceases to perform the duties of Chief Executive Officer ("CEO") of AmerUs Life.
If Mr. Kalainov's service as Chairman terminates prior to May 15, 2000, AmerUs
Life is required to execute a consulting contract with him pursuant to which,
among other things, AmerUs Life is obligated to pay the difference between the
benefits Mr. Kalainov receives under AmerUs Life's pension plans and the sum of
his base salary plus incentive compensation for the preceding 12 months. The
Employment Agreement provides that Mr. Kalainov will serve as Chairman of the
Foundation until May 15, 2000.
Pursuant to the Employment Agreement, Mr. Kalainov receives the annual
salary and incentive compensation described in the Summary Compensation Table.
Mr. Kalainov participates in AmerUs Life's employee benefit plan (the "Benefit
Plan") and is also entitled to certain perquisites and other incidental
expenses. Mr. Kalainov is also entitled to certain retirement benefits and
health insurance coverage upon his retirement. It is anticipated that prior to
the consummation of the Common Stock Offerings, Mr. Kalainov will enter into an
employment agreement with AMHC and his existing employment agreement with AmerUs
Life will be terminated and will no longer be an obligation of AmerUs Life or
the Company.
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
The Company's Articles of Incorporation provide that the Company shall
indemnify its directors to the fullest extent possible under the IBCA. The
Company's Bylaws extend the same indemnity to its officers. The Articles of
Incorporation provide that no director shall be liable to the Company or its
shareholders for monetary damages for breach of the individual's fiduciary duty
as a director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its shareholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for any transaction in which the director derived an improper
personal benefit, or (iv) under the IBCA provisions relating to improper
distributions. The Company has also entered into indemnification agreements with
its directors and executive officers with respect to liabilities arising out of
certain matters, including matters arising under the Securities Act.
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CERTAIN TRANSACTIONS AND RELATIONSHIPS
THE FOLLOWING SUMMARIES OF THE INTERCOMPANY AGREEMENT AND OTHER AGREEMENTS
IDENTIFIED DO NOT PURPORT TO BE COMPLETE AND ARE QUALIFIED IN THEIR ENTIRETY BY
REFERENCE TO SUCH AGREEMENTS. A COPY OF THE INTERCOMPANY AGREEMENT AND THE OTHER
AGREEMENTS IDENTIFIED BELOW HAVE BEEN FILED AS EXHIBITS TO THE REGISTRATION
STATEMENT OF WHICH THIS PROSPECTUS IS A PART. AS USED HEREIN, "AMERUS AFFILIATED
GROUP" MEANS AMHC AND ITS DIRECT AND INDIRECT SUBSIDIARIES NOW OR HEREAFTER
EXISTING, OTHER THAN THE COMPANY AND ITS SUBSIDIARIES. CAPITALIZED TERMS USED
BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO THEM IN SUCH AGREEMENTS.
AmerUs Life is a wholly-owned direct subsidiary of the Company. The Company
is a direct subsidiary of AmerUs Group, which in turn is a wholly-owned direct
subsidiary of AMHC. As a result of such ownership, AMHC, AmerUs Group, the other
subsidiaries of AmerUs Group and the Company and its subsidiaries, including
AmerUs Life, have a variety of relationships, certain of which are summarized
below. Management believes that the terms of the agreements described herein are
on a basis no less favorable than could be obtained from unaffiliated third
parties.
OWNERSHIP OF VOTING INTERESTS OF THE COMPANY
As a result of the Reorganization of the Company and its affiliates into a
mutual insurance holding company structure, AMHC is required by Iowa law to own,
directly or indirectly through one or more intermediate holding companies,
shares of capital stock of the Company which carry the right to cast a majority
of the votes entitled to be cast by all of the outstanding shares of the capital
stock at a shareholders' meeting of the Company. See "Supervision and
Regulation--Regulation of the Company and AMHC." In compliance with this
requirement, all of the issued and outstanding shares of the Company's Class B
Common Stock are owned by AmerUs Group, a wholly-owned subsidiary of AMHC and
the Company's immediate parent. Such ownership will continue after the closing
of this Offering. Additionally, the Company's Articles of Incorporation provide
that no shares of its Class B Common Stock may be owned by any person other than
AMHC, a subsidiary of AMHC or another mutual insurance holding company or
intermediate holding company as expressly authorized by Iowa law or by the Iowa
Commissioner. See "Ownership of Common Stock--Ownership of Class B Common
Stock." Any proposed amendments to such provisions of the Company's Articles of
Incorporation are subject to approval by the Iowa Commissioner and the Iowa
Attorney General.
AMHC'S POLICY WITH RESPECT TO CORPORATE OPPORTUNITIES
The Company has been advised that AMHC has adopted a general policy with
respect to certain corporate opportunities presented to AMHC. The implementation
of such policy in any situation is expressly subject to any applicable
regulatory, tax, contractual or legal restrictions as well as issues as to
feasibility. Pursuant to such policy, so long as AMHC directly or indirectly
owns at least 50.1% of the voting power of the outstanding common stock of the
Company (the "Voting Control Period"), AMHC intends to first offer to the
Company any corporate opportunity relating to the acquisition of any stock life
insurance company or any company (other than a mutual insurance holding company)
primarily engaged in owning a stock life insurance company. During the Voting
Control Period, AMHC also intends to first offer to the Company any corporate
opportunity primarily relating to a joint venture, partnership, or similar
affiliation in the life insurance or annuity industry. During the Voting Control
Period, in the event that AMHC merges with a mutual insurance holding company
owning a stock life insurance company or a mutual insurance company is
reorganized pursuant to Chapter 521A of the Iowa Code into a stock life
insurance company subsidiary of AMHC, AMHC intends, if the other party to the
transaction agrees, to offer the Company the corporate opportunity to combine
such acquired company with the Company or a subsidiary thereof in exchange for
appropriate consideration.
Any combination would be on terms which are approved by a majority of the
independent directors of AMHC and the Company and set forth in a written
agreement between the parties. However, neither AMHC nor the Company is
obligated to take any action which is not consistent with their respective
fiduciary duties or applicable contractual, regulatory, tax or legal
requirements. Moreover, the results of negotiations with parties interested in a
potential transaction or other factors, such as feasibility or a
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desire to maintain the separate identities and assets of two insurers, may
result in AMHC not presenting a potential transaction to the Company or a
company acquired by AMHC not being combined with the Company or a subsidiary
thereof.
Under AMHC's policy, a corporate opportunity is considered to be a business
opportunity in the life insurance and annuity business known to AMHC which the
Company is legally and financially able to undertake, is of practical advantage
to the Company and is one in which the Company has an interest or a reasonable
expectancy. If the Company does not choose to pursue a corporate opportunity
within a reasonable period after such opportunity is first presented to it, AMHC
would not intend to afford the Company any further opportunity with respect to
such potential transaction.
INTERCOMPANY AGREEMENT
AMHC, AmerUs Group and the Company have entered into an Intercompany
Agreement dated as of September 15, 1996 (the "Intercompany Agreement"), certain
provisions of which are summarized below.
LICENSE TO USE THE AMERUS NAME AND CERTAIN TRADEMARKS
Pursuant to the Intercompany Agreement, AmerUs Group and certain members of
the AmerUs Affiliated Group have granted to the Company and certain of its
subsidiaries, a non-exclusive, revocable license to use the AmerUs name and
certain trademarks (collectively, the "Trademarks") solely in connection with
the Company's life insurance business and activities related to such life
insurance business. The Intercompany Agreement provides, among other things,
that subject to AmerUs Group's ability to revoke the license in the
circumstances described below and subject to regulatory approval, within a
specified time from the date on which the AmerUs Affiliated Group ceases to
control more than 50% of the combined voting power of the outstanding Common
Stock (the "License Trigger Date"), if the Company's name or any of its
subsidiaries' names at such time includes the "AmerUs" name, the Company and
such subsidiaries will be required to change their names and will be required to
discontinue the use of certain related marks. Following the License Trigger
Date, the Company and its subsidiaries will continue to have the right to use
the AmerUs name in connection with the identification of insurance products for
an initial five-year period with an option to renew for an additional five
years, for which the Company will pay a nominal annual fee to AmerUs Group until
such time as the Company and its subsidiaries completely discontinue use of the
"AmerUs" name. In addition, the Intercompany Agreement provides that the Company
and its subsidiaries will not, without the prior written consent of AmerUs
Group, take any action with respect to (i) any litigation or proceeding
involving the Trademarks, (ii) any change in the Company names, logos and other
identifications that might reasonably be expected to affect the Trademarks or
(iii) any advertising campaigns or strategies that use the Trademarks or that
refer to any member of the AmerUs Affiliated Group. AmerUs Group has the right
to revoke the license under certain circumstances relating to advertising,
promotion or use of the Trademarks in a manner contrary to AmerUs Group
guidelines. In addition, AmerUs Group can revoke any of the Company's
subsidiaries' use of the license if there is a change of control of any such
subsidiary of the Company that is licensed to use the Trademarks. A revocation
by AmerUs Group of the license to use the Trademarks could have a material
adverse effect on the Company's ability to conduct its business.
INDEMNIFICATION
The Intercompany Agreement provides that the Company will indemnify each
member of the AmerUs Affiliated Group and each of their respective officers,
directors, employees and agents (collectively, the "Indemnitees") against losses
based on, arising out of or resulting from (i) the use of the Trademarks by the
Company or its subsidiaries, (ii) the ownership or the operation of the assets
or properties, and the operation or conduct of the business, of the Company or
its subsidiaries, (iii) any other activities of the Company or its subsidiaries,
(iv) any other acts or omissions by the Company or its subsidiaries arising out
of performance of the Intercompany Agreement and certain other agreements, (v)
any guaranty, keep well, net worth or financial condition maintenance agreement
of or by any member of the AmerUs Affiliated Group provided to any parties with
respect to any actual or contingent obligation of the Company or its
subsidiaries, (vi) any breach by the Company of the Intercompany
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Agreement, and (vii) certain other matters. In addition, the Company has agreed
to indemnify the Indemnitees against certain civil liabilities, including
liabilities under the Securities Act, relating to misstatements in or omissions
from the Registration Statement of which this Prospectus forms a part and any
other registration statement that the Company files under the Securities Act
(other than misstatements or omissions made in reliance on information relating
to and furnished by any member of the AmerUs Affiliated Group for use in the
preparation thereof, against which AMHC has agreed to indemnify the Company).
AMHC has also agreed to indemnify the Company and its subsidiaries and each of
their respective officers, directors, employees and agents against losses based
on, arising out of or resulting from (i) any breach by the AmerUs Affiliated
Group of the Intercompany Agreement, (ii) the ownership or the operation of the
assets or properties, and the operation or conduct of the business of any member
of the AmerUs Affiliated Group, (iii) certain third party claims relating to the
Trademarks and (iv) certain other specifically identified matters.
AMHC CONSENT TO CERTAIN EVENTS
The Intercompany Agreement provides that until the date on which the members
of the AmerUs Affiliated Group cease to control at least 50.1% of the combined
voting power of the outstanding Common Stock of the Company (the "Trigger
Date"), the prior written consent of AMHC will be required for: (i) any
consolidation or merger of the Company or any of its subsidiaries with any
person (other than certain transactions involving wholly owned subsidiaries);
(ii) any sale, lease, exchange or other disposition or any acquisition by the
Company or any of its subsidiaries (other than transactions to which the Company
and its wholly owned subsidiaries are the only parties), or any series of
related dispositions or acquisitions, involving consideration in excess of $20
million; (iii) any change in the authorized capital stock of the Company or the
creation of any class or series of capital stock of the Company, (iv) any
issuance by the Company or any subsidiary of the Company of any equity
securities or equity derivative securities, except (a) up to three million
shares of Common Stock pursuant to employee and director stock option, profit
sharing and other benefit plans of the Company and its subsidiaries, (b) the
issuance of Preferred Stock which is not convertible or exchangeable into Common
Stock and which only has voting rights required by law, (c) the issuance of
shares of capital stock of a wholly owned subsidiary of the Company and (d)
pursuant to the Transactions (defined as the Offerings and any corporate
reorganization or transaction undertaken in connection with the Offerings to
which the Company or any of its subsidiaries is a party); (v) the dissolution of
the Company; (vi) transactions or a series of related transactions with
affiliates of the Company (other than members of the AmerUs Affiliated Group)
involving consideration in excess of $10 million, other than (a) the
Transactions, (b) transactions on terms substantially the same as or more
favorable to the Company than those that would be available from an unaffiliated
third party and (c) transactions between or among any of the Company and its
wholly owned subsidiaries; and (vii) any corporate action by the Company which
would cause the Company or AmerUs Life to violate the requirements of Section
521A.14 of the Iowa Insurance Code (relating to mutual insurance holding
companies).
REGISTRATION RIGHTS
The Company has granted to the AmerUs Affiliated Group certain demand and
"piggyback" registration rights with respect to shares of Common Stock owned by
it. The AmerUs Affiliated Group has the right to request up to two demand
registrations in each calendar year. The AmerUs Affiliated Group also has the
right, which it may exercise at any time and from time to time, to include the
shares of Common Stock held by it in certain other registrations of common
equity securities of the Company initiated by the Company on its own behalf or
on behalf of any shareholder of the Company. Such registration rights are
transferable by the AmerUs Affiliated Group provided that such transferee is (i)
a member of the AmerUs Affiliated Group or (ii) an institutional accredited
investor (as defined under Rule 501(a) promulgated under the Securities Act)
permitted to acquire such registrable shares under applicable law. The Company
has agreed to pay all costs and expenses in connection with each such
registration, except underwriting discounts, commissions and legal fees of the
AmerUs Affiliated Group applicable to the shares of Common Stock sold by the
AmerUs Affiliated Group. The Intercompany
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Agreement contains customary terms and provisions with respect to, among other
things, registration procedures and certain rights to indemnification granted by
parties thereunder in connection with the registration of Common Stock on behalf
of the AmerUs Affiliated Group.
REIMBURSEMENT AGREEMENTS
The Company has agreed to pay all costs and expenses incurred in connection
with the Company's formation, the Transactions and all related transactions,
except as otherwise described in this Prospectus.
EQUITY PURCHASE RIGHTS
The Company has agreed that, to the extent permitted by Nasdaq National
Market, Inc. so long as the Company is listed on the Nasdaq National Market, and
so long as the AmerUs Affiliated Group controls at least 50.1% of the combined
voting power of the outstanding Common Stock of the Company, the AmerUs
Affiliated Group may purchase its pro rata share (based on its then current
percentage equity interest in the Company) of any voting equity security issued
by the Company (excluding any such securities offered in connection with
employee and director stock option or other benefit plans, dividend reinvestment
plans and other offerings other than for cash).
CERTAIN BUSINESS RELATIONSHIPS
The Company has agreed that all distribution arrangements in effect as of
September 15, 1996 pursuant to which members of the AmerUs Affiliated Group
distribute insurance products of the Company or its subsidiaries shall continue
until such time as the members of the AmerUs Affiliated Group cease to control
at least 50.1% of the combined voting power of the outstanding Common Stock.
MANAGEMENT SERVICES
Until the Trigger Date, the Company has agreed to provide to the AmerUs
Affiliated Group certain management and administrative services, including: (i)
general management services and (ii) assistance in matters relating to
operations, strategy and business planning. In connection with such services the
Company will be subject to the exclusive authority of the Board of Directors of
AMHC or the AmerUs Affiliated Group member for which such services are
performed. AmerUs Group will pay the Company $2.0 million per year in
consideration for such services, commencing after the Distribution.
TAX ALLOCATION AGREEMENT
The Company and AMHC have entered into an agreement relating to the
allocation of Federal and state income tax liabilities attributable to periods
before and after the Offerings (the "Tax Allocation Agreement"). Under the Tax
Allocation Agreement, the Company will be responsible for all income tax
liabilities that are attributable to the net income of the Company and its
subsidiaries under applicable Federal and state tax laws. The Company will have
no responsibility for income tax liabilities attributable to AMHC and its
wholly-owned subsidiaries under such laws, including any liabilities that may
have arisen while such subsidiaries were wholly-owned subsidiaries of AmerUs
Life. If and to the extent that losses of AMHC and its wholly-owned subsidiaries
are applied to reduce the Federal or state income taxes attributable to the net
income of the Company, the Company will be required to make a payment to AMHC
equal to such tax reduction. Conversely, if and to the extent that losses of the
Company are applied to reduce the Federal or state income tax liability
attributable to the net income of AMHC and its wholly-owned subsidiaries for any
year, AMHC will be required to make a payment to the Company equal to such tax
reduction. It is not anticipated that the Federal or state income tax liability
of the Company or its subsidiaries will be determined on a consolidated or
combined basis with that of AMHC or any of its wholly-owned subsidiaries for any
period after the Offerings.
AGREEMENTS INVOLVING REAL ESTATE
AmerUs Life has entered into asset and property management contracts with
API. Pursuant to such agreements, API provides asset and property management
services to AmerUs Life with respect to certain real estate owned by AmerUs
Life. The total expenses incurred by AmerUs Life pursuant to such agreements
equaled approximately $1,422,000 and $579,000 for the year ended December 31,
1995 and the six months ended June 30, 1996, respectively.
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AmerUs Life, as lessor, has entered into leases of business property with
various members of the AmerUs Affiliated Group. These leases have varying terms
which call for combined monthly rentals of $36,000. These leases will be
assigned to API at the time the Capital Contribution is made, as the properties
to which they relate are to be included in the properties which will be
distributed as part of the Capital Contribution.
Total rental income earned by the Company under all agreements with members
of the AmerUs Affiliated Group was approximately $32,000 and $219,000 for the
year ended December 31, 1995 and the six months ended June 30, 1996,
respectively.
The Company will enter into lease agreements with API at the time of the
Capital Contribution because the facilities occupied by the Company as its
executive and home offices will be transferred to API as part of the Capital
Contribution. It is expected that the lease agreements will require monthly
payments of $82,000 on a net basis for a period of 5 years. API is in the
process of acquiring real estate which is intended to be the combined executive
and home office locations of the Company. If the purchase is completed, it is
the Company's intention to relocate to such facilities and enter into lease
agreements with API with respect to such facilities which will replace the
Company's then-existing leases with API.
During 1995, AmerUs Life paid rentals to AmerUs Bank of $48,000 and $24,000
for the year ended December 31, 1995 and the six months ended June 30, 1996,
respectively, under the terms of a lease agreement which expired in 1996.
AmerUs Life has entered into various limited partnership agreements in which
API or an affiliate serves as general partner. AmerUs Life sold several of these
partnership interests to newly formed partnerships in which API has an interest.
Total proceeds from these sales were $10,956,600 and $1,638,000 in the year
ended December 31, 1995 and in the six months ended June 30, 1996, respectively.
After such sales, AmerUs Life purchased a 9.75% limited partnership interest in
one of the newly formed partnerships for $2,160,000, of which $1,026,000 had
been contributed as of June 30, 1996. In addition, AmerUs Life agreed to make
loans to the newly formed partnerships in the aggregate amount of up to
$18,600,000, of which $7,100,000 was outstanding as of June 30, 1996.
AmerUs Life has also entered into agreements with various partnerships in
which API has an interest pursuant to which AmerUs Life is obligated to make
future capital contribution to such partnerships in an amount not to exceed
$5,830,000.
As of June 30, 1996, AmerUs Life had a total investment of $13,725,000 in
various partnerships in which API had an interest.
AmerUs Life sold certain limited partnership interests to API at their
carrying value of $1,697,000 in 1995.
LOAN SERVICING AGREEMENTS
AmerUs Life has entered into various loan servicing agreements with various
members of the AmerUs Affiliated Group. The total expenses incurred by AmerUs
Life for such services was approximately $1,533,000 and $1,009,000 for the year
ended December 31, 1995 and the six months ended June 30, 1996, respectively.
AmerUs Life has also entered into various loan servicing agreements with
AmerUs Bank. Pursuant to such agreements, AmerUs Life services certain
nonresidential mortgage loans on behalf of AmerUs Bank. The total revenues
earned by AmerUs Life for such services were approximately $30,000 and $14,000
for the year ended December 31, 1995 and the six months ended June 30, 1996,
respectively.
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OTHER SERVICE AGREEMENTS
AmerUs Life has entered into various miscellaneous services agreements with
members of the AmerUs Affiliated Group. Pursuant to such agreements, AmerUs Life
provides certain communications, tax, law department, accounting department,
internal audit, administrative and data processing services to such other
parties to the agreements, as requested. The aggregate revenues earned for
services performed by AmerUs Life in accordance with such agreements were
approximately $6,604,000 and $2,974,000 for the year ended December 31, 1995 and
the six months ended June 30, 1996, respectively.
PURCHASE OF LOANS AND SECURITIZATION
AmerUs Life has entered into a purchase agreement with AmerUs Bank, dated as
of June 28, 1996, pursuant to which AmerUs Life acquired an HEL Asset-Backed
Class A Note (the "Note") and Class R Certificate Series 1996-1 (the
"Certificate"). The Note had a face amount of $43,715,845 and pays interest at
the rate of 8.35% per annum. The Certificate has a face amount of $3,039,069 and
pays interest at the rate of 16.81% per annum. The Note and Certificate are
backed by the assets of the AB Home Equity Loan Trust (the "AB Trust"), which
consist of approximately $47 million of second mortgage loans. Pursuant to a
Pooling and Servicing Agreement, dated as of June 28, 1996 (the "Pooling and
Servicing Agreement"), between AmerUs Bank and Boatmen's Trust Company
("Boatmen's"), and a Transfer Agreement, dated as of June 28, 1996, between
AmerUs Bank and Boatmen's, as trustee of the AB Trust, the AB Trust acquired
such loans from AmerUs Bank, and paid a purchase price of $46,754,914, the par
value of the loans. Under the Pooling and Servicing Agreement AmerUs Bank acts
as the servicer of the loans and receives a servicing fee equivalent to the
amount of all interest collected on the loans in excess of 8.9%.
SALE OF INSURANCE POLICIES
AmerUs Life has entered into an agreement, dated January 1, 1995, with
AmerUs Investments, Inc. ("AmerUs Investments"), a wholly-owned subsidiary of
AmerUs Bank, to market products of AmerUs Life. Pursuant to this agreement,
AmerUs Life pays AmerUs Bank fees in the form of commissions in exchange for
generating sales of such products. Total commissions paid to AmerUs Investments
were $1,259,000 and $147,000 for the year ended December 31, 1995 and six months
ended June 30, 1996, respectively.
The Company has also entered into certain Affiliated Agent Contracts with
employees of AmerUs Investments (the "Affiliated Agents") to solicit, sell and
service AmerUs Life insurance products and has also entered into a Servicing
Agreement, dated March 1, 1992, with AmerUs Investments pursuant to which AmerUs
Investments agreed to service the business sold by any Affiliated Agent and
otherwise supervise its employees who are Affiliated Agents.
CAPITAL CONTRIBUTION
Prior to the Distribution, AmerUs Life made the Capital Contribution to AFS.
The Capital Contribution consisted of (i) commercial mortgages, real estate and
fixed maturity securities having a net carrying value of approximately $79
million and (ii) a surplus note in the face amount of $50 million. Following the
Capital Contribution, AmerUs Life caused its Non-Life Insurance Subsidiaries
(including AFS) to be distributed to AmerUs Group pursuant to the Distribution.
The Distribution effectively separated AMHC's non-life insurance businesses from
the life insurance businesses owned by the Company, such that the companies
engaged in non-life insurance businesses are no longer be subsidiaries of the
Company. See "The Reorganization and Distribution of the Non-Life Insurance
Subsidiaries."
From time to time AmerUs Life has made capital contributions to Lartnec
Investment Co. ("Lartnec"). Lartnec had previously been a subsidiary of AmerUs
Life and AFS had been a subsidiary of Lartnec. Prior to the Distribution,
Lartnec was merged downstream into AFS, and pursuant to the Distribution AFS was
distributed to AmerUs Group, thereby becoming a sister corporation to AmerUs
Life. In 1995, AmerUs Life made capital contributions to Lartnec in the
approximate aggregate amount of $41,156,000. In 1996, prior to the Distribution,
AmerUs Life made additional capital contributions to Lartnec in the approximate
total amount of $4,563,000.
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LOANS AND CREDIT SUPPORT TO THE AMERUS AFFILIATED GROUP
AmerUs Life has provided financing to members of the AmerUs Affiliated Group
or their affiliates for various purposes. The outstanding balance of all such
financings was $63.9 million and $64.6 million as of December 31, 1995 and June
30, 1996 respectively. AmerUs Life recorded interest income of $6.0 million and
$3.3 million for the year ended December 31, 1995 and the six months ended June
30, 1996, respectively. After giving effect to the Capital Contribution, the
amounts for such periods would have been $48.9 million and $49.7 million,
respectively.
AmerUs Life has also pledged investment securities as collateral for
indebtedness of the AmerUs Affiliated Group. AmerUs Life will be released from
this collateral agreement under the terms of the new Bank Credit Facility. The
value of the collateral pledged was $112.4 million and $113.3 million as of
December 31, 1995 and June 30, 1996, respectively. The pledges will be released
upon the effectiveness of the Bank Credit Facility.
In addition, AmerUs Life guaranteed various borrowings of members of the
AmerUs Affiliated Group with outstanding balances of approximately $7.3 million
and $7.2 million at December 31, 1995 and June 30, 1996, respectively.
AmerUs Life has outstanding loan commitments to various partnerships in
which API has an interest. At June 30, 1996, the outstanding loan commitments
were approximately $4,000,000.
DESCRIPTION OF THE PREFERRED SECURITIES
The Trust Agreement among ALH, as Depositor, and Wilmington Trust Company,
as Property Trustee, and the three Administrative Trustees named therein,
authorizes and creates the Issuer. The Trust Agreement will be qualified under
the Trust Indenture Act. The Property Trustee, Wilmington Trust Company will act
as the trustee for purposes of compliance with the provisions of the Trust
Indenture Act. The Preferred Securities and the Common Securities (together,
"Trust Securities") will be issued by the Administrative Trustees on behalf of
the Issuer pursuant to the terms of the Trust Agreement. The Preferred
Securities represent undivided beneficial interests in the Issuer and entitle
the holders thereof to a preference in certain circumstances with respect to
distributions and amounts payable on redemption or liquidation over the Common
Securities, as well as other benefits as described in the Trust Agreement. The
following summaries of certain provisions of the Trust Agreement do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, all the provisions of the Trust Agreement, including the
definitions therein of certain terms, and the Trust Indenture Act. Wherever
particular sections or defined terms of the Trust Agreement are referred to,
such sections or defined terms are incorporated herein by reference. The form of
the Trust Agreement has been filed as an exhibit to the Registration Statement
of which this Prospectus forms a part.
GENERAL
All of the Common Securities will be owned, directly or indirectly, by ALH.
The Common Securities rank pari passu, and payments will be made thereon pro
rata, with the Preferred Securities except as described under "--Subordination
of Common Securities." (Section 4.03.) The Junior Subordinated Debentures will
be owned by the Property Trustee and held in trust for the benefit of the Trust
and the holders of the Trust Securities. (Section 2.09.) The Guarantee is a full
and unconditional guarantee with respect to the Preferred Securities but does
not guarantee payment of distributions or amounts payable on redemption or
liquidation of the Preferred Securities when the Issuer does not have funds
available to pay such distributions.
DISTRIBUTIONS
The Preferred Securities represent undivided beneficial interests in the
assets of the Issuer, and the distributions on each Preferred Security will be
payable at a rate per annum of % of the stated Liquidation Amount of $25 per
Preferred Security. If the interest payment period for the Junior Subordinated
Debentures is extended pursuant to the Indenture, then the rate per annum at
which distributions on the Preferred Securities accumulate shall be increased by
an amount such that the aggregate
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amount of distributions that accumulate on all Preferred Securities during any
such Extension Period is equal to the aggregate amount of interest (including
interest payable on unpaid interest at the percentage rate per annum set forth
above, compounded quarterly) that accrues during any such extended interest
payment period on the Junior Subordinated Debentures (the "Additional Amounts").
The term "distributions" as used herein includes any such interest payable
unless otherwise stated. The amount of distributions payable for any period will
be computed on the basis of a 360-day year of twelve 30-day months. (Section
4.01(b).) See "Description of the Junior Subordinated Debentures--Interest."
Distributions on the Preferred Securities will be cumulative, will accrue
from , 1996 and will be payable quarterly in arrears, on the last
day of March, June, September and December of each year, commencing March 31,
1997, except as otherwise described below. In the event that any date on which
distributions are otherwise payable on the Preferred Securities is not a
Business Day, payment of the distribution payable on such date will be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay) except that, if such Business Day is
in the next succeeding calendar year, payment of such distribution shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such date (each date on which distributions are otherwise
payable in accordance with the foregoing, a "Distribution Date"). "Business Day"
means any day other than a Saturday or Sunday, or a day on which banking
institutions in The City of New York are authorized or required by law or
executive order to remain closed or a day on which the Corporate Trust Office of
the Property Trustee or Debenture Trustee (as defined herein) is closed for
business. (Section 4.01(a).)
ALH has the right under the Indenture (as defined below) pursuant to which
it will issue the Junior Subordinated Debentures, to defer the payment of
interest from time to time on the Junior Subordinated Debentures for a period
not exceeding 20 consecutive quarters with respect to each deferred period
(each, an "Extension Period"), provided that no Extension Period may extend
beyond the Stated Maturity of the Junior Subordinated Debentures. As a
consequence of any such election, quarterly distributions on the Preferred
Securities will be deferred (but would continue to accrue with interest thereon,
including interest payable on unpaid interest at the rate per annum set forth
above, compounded quarterly) by the Issuer during any such Extension Period. In
the event that ALH exercises this right, during such Extension Period ALH may
not, and shall cause any Subsidiary of ALH not to, (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of ALH's capital stock or (ii) make any
payment of principal, interest or premium, if any, on or repay, repurchase or
redeem any debt securities of ALH that rank pari passu with or junior in
interest to the Junior Subordinated Debentures or make any guarantee payments
with respect to any guarantee by ALH of the debt securities of any subsidiary of
ALH that by their terms rank PARI PASSU or junior in interest to the Junior
Subordinated Debentures (other than (a) dividends or distributions in Common
Stock of ALH, (b) payments under the Guarantee, and (c) purchases of Common
Stock related to the issuance of Common Stock under any of ALH's benefit plans
for its directors, officers or employees). Prior to the termination of any such
Extension Period, ALH may further extend the interest payment period, provided
that no Extension Period together with all such previous and further extensions
thereof may exceed 20 consecutive quarters or extend beyond the Stated Maturity
of the Junior Subordinated Debentures. Upon the termination of any Extension
Period and the payment of all amounts then due, ALH may elect to begin a new
Extension Period, subject to the above requirements. There is no limitation on
the number of times that ALH may elect to begin an Extension Period. See
"Description of the Junior Subordinated Debentures--Interest" and "Description
of the Junior Subordinated Debentures--Option to Extend Interest Payment
Period."
It is anticipated that the income of the Issuer available for distribution
to the holders of the Preferred Securities will be limited to payments under the
Junior Subordinated Debentures in which the Issuer will invest the proceeds from
the issuance and sale of the Preferred Securities and the Common Securities. See
"Description of the Junior Subordinated Debentures." If ALH does not make
interest payments on
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the Junior Subordinated Debentures, the Property Trustee will not have funds
available to pay distributions on the Preferred Securities. The payment of
distributions (if and to the extent the Issuer has funds legally available for
the payment of such distributions and cash sufficient to make such payments) is
guaranteed on a limited basis by ALH as set forth herein under "Description of
the Guarantee."
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the register of the Issuer on the relevant record
dates, which, as long as the Preferred Securities remain in book-entry-only
form, will be one Business Day prior to the relevant Distribution Date. Subject
to any applicable laws and regulations and the provisions of the Trust
Agreement, each such payment will be made as described under "--Book-Entry-Only
Issuance--The Depository Trust Company" below. In the event the Preferred
Securities do not remain in book-entry-only form, the relevant record date shall
be the date 15 days prior to the relevant Distribution Date. (Section 4.01(d).)
REDEMPTION
MANDATORY REDEMPTION. Upon the repayment or redemption, in whole or in
part, of the Junior Subordinated Debentures, whether at Stated Maturity or upon
earlier redemption as provided in the Indenture, the proceeds from such
repayment shall be applied by the Trustee to redeem a Like Amount (as defined
below) of Preferred Securities, upon not less than 30 nor more than 60 days'
notice, at a redemption price equal to the aggregate Liquidation Amount (as
defined below) of such Preferred Securities plus accumulated but unpaid
distributions thereon to the date of redemption (the "Redemption Price"). See
"Description of the Junior Subordinated Debentures--Optional Redemption."
ALH has the right to redeem the Junior Subordinated Debentures (a) on or
after , 2001, in whole or in part, subject to the conditions
described under "Description of Junior Subordinated Debentures--Optional
Redemption", or (b) at any time, in whole but not in part, on occurrence of a
Tax Event or an Investment Company Event (each, as defined below, a "Special
Event") and subject to the further conditions described under "Description of
the Junior Subordinated Debentures--Optional Redemption."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION OF JUNIOR SUBORDINATED
DEBENTURES. If a Special Event shall occur and be continuing, ALH has the right
to redeem the Junior Subordinated Debentures in whole (but not in part) and
thereby cause a mandatory redemption of the Preferred Securities and Common
Securities in whole (but not in part) at the Redemption Price within 90 days
following the occurrence of such Special Event. At any time, ALH has the right
to terminate the Issuer and, after satisfaction of the liabilities of creditors
of the Issuer as provided by applicable law, cause a Like Amount of the Junior
Subordinated Debentures to be distributed to the holders of the Preferred
Securities and Common Securities in liquidation of the Issuer. If ALH does not
elect either option described above, the Preferred Securities will remain
outstanding and, in the event a Tax Event has occurred and is continuing,
Additional Sums (as defined below) may be payable on the Junior Subordinated
Debentures. "Additional Sums" means the additional amounts as may be necessary
in order that the amount of distributions then due and payable by the Issuer on
the outstanding Preferred Securities and Common Securities of the Issuer shall
not be reduced as a result of any additional taxes, duties and other
governmental charges to which the Issuer has become subject as a result of a Tax
Event.
If ALH elects to liquidate the Issuer and thereby causes the Junior
Subordinated Debentures to be distributed to holders of the Preferred Securities
in liquidation of the Issuer, ALH shall have the right to shorten or extend the
maturity of such Junior Subordinated Debentures, provided that it can extend the
maturity only if certain conditions are met. See "Description of The Junior
Subordinated Debentures-- General".
"Investment Company Event" means the receipt by the Issuer of an opinion of
counsel experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), the Issuer is or
will be considered an
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"investment company" that is required to be registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), which Change in
1940 Act Law becomes effective on or after the date of original issuance of the
Preferred Securities issued by the Issuer.
"Like Amount" means (i), with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount (as defined below) equal to the
principal amount of Junior Subordinated Debentures to be contemporaneously
redeemed in accordance with the Indenture and the proceeds of which will be used
to pay the Redemption Price of such Trust Securities, and (ii) with respect to a
distribution to holders of Trust Securities of Junior Subordinated Debentures in
connection with a dissolution or liquidation of the Issuer, Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holder to whom such Junior Subordinated Debentures are
distributed.
"Liquidation Amount" means the stated amount of $25 per Trust Security.
"Tax Event" means the receipt by the Issuer of an opinion of counsel
experienced in such matters to the effect that, as a result of (a) any amendment
to, or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein affecting taxation, or (b) any amendment to,
or change in an interpretation or application of such laws or regulations by any
legislative body, court, governmental agency or regulatory authority (including
the enactment of any legislation and the publication of any judicial decision or
regulatory determination on or after the date of issuance of the Preferred
Securities), there is more than an insubstantial risk that (i) the Issuer is, or
will be within 90 days of the date of such opinion, subject to United States
federal income tax with respect to interest income received or accrued on the
Junior Subordinated Debentures, (ii) interest payable by ALH on the Junior
Subordinated Debentures is not, or within 90 days of the date of such opinion,
will not be, deductible by ALH, in whole or in part, for United States federal
income tax purposes, or (iii) the Issuer is, or will be within 90 days of the
date of such opinion, subject to more than a de minimis amount of other taxes,
duties or other governmental charges.
With certain limited exceptions, after the liquidation date fixed for any
distribution of Junior Subordinated Debentures for Preferred Securities (i) the
Preferred Securities will no longer be deemed to be outstanding, (ii) The
Depository Trust Company ("DTC") or its nominee, as the record holder of the
Preferred Securities, will receive a registered global certificate or
certificates representing the Junior Subordinated Debentures to be delivered
upon such distribution, (iii) any certificates representing Preferred Securities
not held by DTC or its nominee will be deemed to represent a Like Amount of
Junior Subordinated Debentures, accruing interest at the rate provided for in
the Junior Subordinated Debentures from the last distribution date on which a
distribution was made on such Trust Securities until such certificates are
surrendered and (iv) all rights of the holders of Trust Securities will cease,
except the rights of such holders to receive Junior Subordinated Debentures upon
surrender of the certificates representing Trust Securities. (Section 9.04(c).)
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for Preferred Securities if a dissolution and liquidation of the Issuer
were to occur. Accordingly, the Preferred Securities that an investor may
purchase, or the Junior Subordinated Debentures that the investor may receive on
dissolution and liquidation of the Issuer, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered hereby.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date shall be redeemed at
the Redemption Price with the proceeds from the contemporaneous redemption of
Junior Subordinated Debentures. Redemptions of the Preferred Securities shall be
made and the Redemption Price shall be payable on each Redemption Date only to
the extent that the Issuer has funds available for the payment of such
Redemption Price. (Section 4.02(c).) See also "--Subordination of Common
Securities."
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If the Property Trustee gives a notice of redemption in respect of Preferred
Securities, then, by 12:00 noon, New York time, on the Redemption Date, subject
to the immediately preceding paragraph, the Property Trustee will, so long as
the Preferred Securities are in book-entry-only form, irrevocably deposit with
DTC funds sufficient to pay the applicable Redemption Price and will give DTC
irrevocable instructions and authority to pay the Redemption Price to the
holders of the Preferred Securities. See "--Book-Entry-Only Issuance--The
Depository Trust Company." If the Preferred Securities are no longer in book-
entry-only form, the Property Trustee, subject to the immediately preceding
paragraph, will irrevocably deposit with the paying agent for the Preferred
Securities funds sufficient to pay the applicable Redemption Price and will give
such paying agent irrevocable instructions and authority to pay the Redemption
Price to the holders thereof upon surrender of their certificates representing
Preferred Securities. Notwithstanding the foregoing, distributions payable on or
prior to the Redemption Date for any Preferred Securities called for redemption
shall be payable to the holders of such Preferred Securities as they appear on
the register for the Preferred Securities on the relevant record dates for the
related Distribution Dates. If notice of redemption shall have been given and
funds deposited as required, then upon the Redemption Date, all rights of
holders of such Preferred Securities so called for redemption will cease, except
the right of the holders of such Preferred Securities to receive the Redemption
Price, but without interest on such Redemption Price, and such Preferred
Securities will cease to be outstanding. In the event that any date fixed for
redemption of Preferred Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay), except that, if such Business Day falls in the next calendar
year, such payment shall be made on the immediately preceding Business Day in
each case, with the same force and effect as if made on such date. In the event
that payment of the Redemption Price in respect of any Preferred Securities
called for redemption is improperly withheld or refused and not paid either by
the Issuer or by ALH pursuant to the Guarantee described under "Description of
the Guarantee," distributions on such Preferred Securities will continue to
accrue, at the then applicable rate, from the original Redemption Date to the
date of payment, in which case the actual payment date will be the date fixed
for redemption for purposes of calculating the Redemption Price. (Section
4.02(d).)
Payment of the Redemption Price on the Preferred Securities and distribution
of Junior Subordinated Debentures to holders of Preferred Securities shall be
made to the recordholders thereof as they appear on the register for the
Preferred Securities on the relevant record date, which shall be one Business
Day prior to the relevant Redemption Date or liquidation date, as applicable;
provided, however, that in the event that the Preferred Securities do not remain
in book-entry-only form, the relevant record date shall be the date 15 days
prior to the Redemption Date or liquidation date, as applicable. (Section
4.02(e).)
If less than all the outstanding Trust Securities are to be redeemed on a
Redemption Date, then the aggregate Liquidation Amount of Trust Securities to be
redeemed shall be allocated pro rata among the Common Securities and the
Preferred Securities according to their aggregate Liquidation Amount. The
particular Preferred Securities to be redeemed shall be selected on a pro rata
basis (based upon Liquidation Amounts) not more than 60 days prior to the
Redemption Date by the Property Trustee from the outstanding Preferred
Securities not previously called for redemption by such method (including,
without limitation, by lot) as the Property Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $25 or an integral multiple of $25 in excess thereof) of the
Liquidation Amount of Preferred Securities of a denomination larger than $25.
See "--Book-Entry Only Issuance--The Depository Trust Company." The Property
Trustee shall promptly notify the Security Registrar in writing of the Preferred
Securities selected for redemption and, in the case of any Preferred Securities
selected for partial redemption, the Liquidation Amount thereof to be redeemed.
For all purposes of the Trust Agreement, unless the context otherwise requires,
all provisions relating to the redemption of Preferred Securities shall relate,
in the case of any Preferred Securities redeemed or to be redeemed only in part,
to the portion of the Liquidation Amount of Preferred Securities which has been
or is to be redeemed. (Section 4.02(f).)
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Subject to applicable law (including, without limitation, United States
federal securities law), ALH or its subsidiaries may at any time and from time
to time purchase outstanding Preferred Securities by tender, in the open market
or by private agreement.
SUBORDINATION OF COMMON SECURITIES
Payment of distributions (including Additional Amounts, if applicable) on,
and the Redemption Price of, the Preferred Securities, as applicable, shall be
made, subject to the second preceding paragraph, pro rata based on the
Liquidation Amount of the Trust Securities; provided, however, that if on any
Distribution Date or Redemption Date any Event of Default (as defined below, see
"--Events of Default; Notice") under the Trust Agreement resulting from an
"Event of Default" under the Indenture (also referred to herein as a "Debenture
Event of Default") shall have occurred and be continuing, no payment of any
distribution (including Additional Amounts, if applicable) on, or Redemption
Price of, any Common Security, and no other payment on account of the
redemption, liquidation or other acquisition of Common Securities, shall be made
unless payment in full in cash of all accumulated and unpaid distributions
(including Additional Amounts, if applicable) on all outstanding Preferred
Securities for all distribution periods terminating on or prior thereto, or in
the case of payment of the Redemption Price the full amount of such Redemption
Price on all outstanding Preferred Securities, shall have been made or provided
for, and all funds available to the Property Trustee shall first be applied to
the payment in full in cash of all distributions (including Additional Amounts,
if applicable) on, or the Redemption Price of, Preferred Securities then due and
payable. (Section 4.03(a).)
In the case of the occurrence of any Event of Default under the Trust
Agreement resulting from an "Event of Default" under the Indenture, the holder
of Common Securities will be deemed to have waived any right to act with respect
to any such Event of Default under the Trust Agreement until the effect of all
such Events of Default with respect to the Preferred Securities have been cured,
waived or otherwise eliminated. Until any such Events of Default under the Trust
Agreement with respect to the Preferred Securities have been cured, waived or
otherwise eliminated, the Property Trustee shall act solely on behalf of the
holders of the Preferred Securities and not the holder of the Common Securities,
and only the holders of the Preferred Securities will have the right to direct
the Property Trustee to act on their behalf. (Section 4.03(b).)
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to the Trust Agreement, the Issuer shall be liquidated by the
Trustees on the first to occur of: (i) the expiration of the term of the Issuer;
(ii) the occurrence of a Bankruptcy Event in respect of, or the dissolution or
liquidation of, ALH; (iii) the distribution of the Junior Subordinated
Debentures to the holders of Preferred Securities and Common Securities if ALH,
as Depositor, has given written direction to the Property Trustee to terminate
the Issuer (which direction is optional and wholly within the discretion of ALH,
as Depositor); (iv) the redemption of all of the Trust Securities; and (v) the
entry of an order for dissolution of the Issuer by a court of competent
jurisdiction. (Sections 9.01 and 9.02.)
If an Early Termination Event specified in clause (ii), (iii) or (v) above
occurs, the Issuer shall be liquidated by the Trustees as expeditiously as the
Trustees determine to be possible by distributing, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, to each
holder of Preferred Securities and Common Securities a Like Amount of Junior
Subordinated Debentures, unless such distribution is determined by the Property
Trustee not to be practical, in which event such holders will be entitled to
receive, out of the assets of the Issuer available for distribution to holders
after satisfaction of liabilities to creditors, an amount equal to the stated
Liquidation Amount of $25 per Trust Security plus accrued and unpaid
distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because the Issuer has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then, subject to the next succeeding
sentence, the amounts payable by the Issuer on the Trust Securities shall be
paid on a pro rata basis (based on Liquidation Amounts). The holder of the
Common Securities will be entitled to receive
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Liquidation Distributions upon any such dissolution pro rata with the holders of
the Preferred Securities, except that if an Event of Default has occurred and is
continuing under the Trust Agreement, the Preferred Securities shall have a
priority over the Common Securities. (Sections 9.04(a) and 9.04(d).)
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under the
Trust Agreement with respect to the Preferred Securities issued thereunder
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) the occurrence of an "Event of Default" as defined in Section 501
of the Indenture (see "Description of Junior Subordinated
Debentures--Debenture Events of Default"); or
(ii) default by the Property Trustee in the payment of any distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days; or
(iii) default by the Property Trustee in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Trustees in the Trust Agreement (other than
a covenant or warranty, a default in the performance of which or the breach
of which is dealt with in clause (ii) or (iii) above), and continuation of
such default or breach for a period of 60 days after there has been given,
by registered or certified mail, to the defaulting Trustee or Trustees by
the holders of at least 25% in aggregate Liquidation Amount of the
outstanding Preferred Securities a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by ALH to appoint a
successor Property Trustee within 60 days thereof. (Section 101.)
Within five Business Days after the occurrence of any Event of Default, the
Property Trustee shall transmit notice of any Event of Default actually known to
the Property Trustee to the holders of Trust Securities, the Administrative
Trustees and the Depositor, unless such default shall have been cured or waived.
(Section 8.02.) Each of ALH, as Depositor, and the Administrative Trustees on
behalf of the Trust is required to file annually with the Property Trustee a
certificate as to whether or not they are in compliance with all of the
conditions and covenants applicable to them under the Trust Agreement. (Section
8.16.)
If an Event of Default has occurred and is continuing, the Preferred
Securities shall have a priority over the Common Securities upon dissolution of
the Issuer as described above. See "--Liquidation Distribution Upon
Dissolution." The existence of an Event of Default does not entitle the holders
of Preferred Securities to accelerate the maturity thereof.
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REMOVAL OF TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any Trustee may be removed at any time by the holder of the Common Securities.
If a Debenture Event of Default has occurred and is continuing, the Property
Trustee may be removed at such time by the holders of a majority in Liquidation
Amount of the outstanding Preferred Securities. In no event will the holders of
the Preferred Securities have the right to vote to appoint, remove or replace
the Administrative Trustees, which voting rights are vested exclusively in ALH
as the holder of the Common Securities. No resignation or removal of any Trustee
and no appointment of a successor Trustee shall be effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable provisions of the Trust Agreement. (Section 8.10.)
MERGER OR CONSOLIDATION OF TRUSTEES
Any corporation into which the Property Trustee or any Administrative
Trustee that is not a natural person may be merged or converted or with which it
may be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which any such Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of any
such Trustee, shall be the successor of such Trustee under the Trust Agreement,
provided such corporation shall be otherwise qualified and eligible. (Section
8.12.)
MERGER, CONSOLIDATION, AMALGAMATION OR REPLACEMENT OF THE ISSUER
The Issuer may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below. The Issuer may, at the request of ALH, with the consent of the
Administrative Trustees and without the consent of the holders of the Preferred
Securities or the Property Trustee, merge with or into, consolidate, amalgamate,
or be replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to a trust organized as such under the laws of any
State; provided, that (i) such successor entity either (a) expressly assumes all
of the obligations of the Issuer with respect to the Preferred Securities or (b)
substitutes for the Preferred Securities other securities having substantially
the same terms as the Preferred Securities (the "Successor Securities") so long
as the Successor Securities rank the same as the Preferred Securities rank in
priority with respect to distributions and payments upon liquidation, redemption
and otherwise, (ii) ALH expressly appoints a trustee of such successor entity
possessing the same powers and duties as the Property Trustee as the holder of
the Junior Subordinated Debentures, (iii) the Successor Securities are listed or
quoted, or any Successor Securities will be listed or quoted upon notification
of issuance, on any national securities exchange, the Nasdaq National Market or
other organization on which the Preferred Securities are then listed or quoted,
if any, (iv) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the Preferred Securities (including any
Successor Securities) to be downgraded by any nationally recognized statistical
rating organization, (v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Preferred Securities (including any
Successor Securities) in any material respect, (vi) such successor entity has a
purpose identical to that of the Issuer, (vii) prior to such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, ALH has
received an opinion from independent counsel to the Issuer experienced in such
matters to the effect that (a) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Preferred Securities (including
any Successor Securities) in any material respect, and (b) following such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease,
neither the Issuer nor such successor entity will be required to register as an
investment company under the Investment Company Act and (viii) ALH or any
permitted successor or assignee owns all of the Common Securities of such
successor entity and guarantees the obligations of such successor entity under
the Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, an Issuer shall not, except with the consent of
holders of 100% in Liquidation Amount of the Preferred Securities, consolidate,
amalgamate, merge with or into or be replaced by or convey, transfer or lease
its properties and assets substantially as an entirety to any
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other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease would cause the Issuer or the successor entity to
be classified as other than a grantor trust for United States Federal income tax
purposes. (Section 9.05.)
VOTING RIGHTS
Except as provided below and under "Description of the Guarantee--Amendments
and Assignment" and as otherwise required by law and the Trust Agreement, the
holders of the Preferred Securities will have no voting rights. (Section
6.01(a).)
The Trust Agreement may be amended from time to time by ALH, the Property
Trustee and the Administrative Trustees, without the consent of the holders of
the Preferred Securities (i) to cure any ambiguity, correct or supplement any
provision in the Trust Agreement that may be inconsistent with any other
provision, or to make any other provisions with respect to matters or questions
arising under the Trust Agreement, which shall not be inconsistent with the
other provisions of the Trust Agreement, or (ii) to modify, eliminate or add to
any provisions of the Trust Agreement to such extent as shall be necessary to
ensure that the Issuer will be classified for United States Federal income tax
purposes as a grantor trust at all times that any Trust Securities are
outstanding or to ensure that the Issuer will not be required to register as an
"investment company" under the Investment Company Act; provided, however, that
in the case of clause (i), such action shall not adversely affect in any
material respect the interests of any holder of Trust Securities, and any
amendments of such Trust Agreement shall become effective when notice thereof is
given to the holders of Trust Securities. The Trust Agreement may be amended by
ALH, the Property Trustee and the Administrative Trustees with (i) the consent
of holders representing not less than a majority (based upon Liquidation
Amounts) of the outstanding Trust Securities, and (ii) receipt by the Trustees
of an opinion of counsel to the effect that such amendment or the exercise of
any power granted to the Trustees in accordance with such amendment will not
affect the Issuer's status as a grantor trust for United States Federal income
tax purposes or the Issuer's exemption from status as an "investment company"
under the Investment Company Act, provided that without the consent of each
affected holder of Trust Securities, such Trust Agreement may not be amended to
(i) change the amount or timing of any distribution on the Trust Securities or
otherwise adversely affect the amount of any distribution required to be made in
respect of the Trust Securities as of a specified date or (ii) restrict the
right of a holder of Trust Securities to institute suit for the enforcement of
any such payment on or after such date. (Section 10.03.)
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred on the Debenture Trustee with respect to
the Junior Subordinated Debentures, (ii) waive any past default that is waivable
under Section 513 of the Indenture, (iii) exercise any right to rescind or annul
a declaration that the principal of all the Junior Subordinated Debentures shall
be due and payable or (iv) consent to any amendment, modification or termination
of the Indenture or the Junior Subordinated Debentures, where such consent shall
be required, without, in each case, obtaining the prior approval of the holders
of at least a majority in aggregate Liquidation Amount of the outstanding
Preferred Securities; provided, however, that where a consent under the
Indenture would require the consent of each holder of Junior Subordinated
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior consent of each holder of Preferred Securities. The
Trustees shall not revoke any action previously authorized or approved by a vote
of the holders of Preferred Securities except by subsequent vote of the holders
of Preferred Securities. The Property Trustee shall notify all holders of the
Preferred Securities of any notice of default received from the Debenture
Trustee. In addition to obtaining the foregoing approvals of the holders of the
Preferred Securities, prior to taking any of the foregoing actions, the Trustees
shall, at the expense of ALH, obtain an opinion of counsel experienced in such
matters to the effect that the Issuer will not fail to be classified as a
grantor trust for United States federal income tax purposes on account of such
action. (Section 6.01(b).)
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Any required approval of holders of Preferred Securities may be given at a
separate meeting of holders of Preferred Securities convened for such purpose or
pursuant to written consent. The Administrative Trustees will cause a notice of
any meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be taken,
to be given to each holder of record of Preferred Securities in the manner set
forth in the Trust Agreement (Sections 6.02 and 6.06.)
No vote or consent of the holders of Preferred Securities will be required
for the Issuer to redeem and cancel Preferred Securities in accordance with the
Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned by ALH, the Trustees or any affiliate of ALH or any
Trustee, shall, for purposes of such vote or consent, be treated as if they were
not outstanding. (Section 1.01.)
CO-TRUSTEES AND SEPARATE TRUSTEE
Unless an Event of Default under the Trust Agreement shall have occurred and
be continuing, at any time or times, for the purpose of meeting the legal
requirements of the Trust Indenture Act or of any jurisdiction in which any part
of the Trust Property (as defined in the Trust Agreement) may at the time be
located, the Administrative Trustees and ALH shall have power to appoint, and
upon the written request of the Administrative Trustees, ALH, as Depositor,
shall for such purpose join with the Administrative Trustees in the execution,
delivery, and performance of all instruments and agreements necessary or proper
to appoint one or more persons approved by the Property Trustee either to act as
co-trustee, jointly with the Property Trustee, of all or any part of such Trust
Property, or to act as separate trustee of any such property, in either case
with such powers as may be provided in the instrument of appointment, and to
vest in such person or persons in such capacity, any property, title, right or
power deemed necessary or desirable, subject to the provisions of the Trust
Agreement. If the Depositor does not join in such appointment within 15 days
after the receipt by it of a request so to do, or in case a Debenture Event of
Default has occurred and is continuing, the Property Trustee alone shall have
power to make such appointment. (Section 8.09.)
PAYMENT AND PAYING AGENCY
Payments of distributions (including Additional Amounts if applicable) in
respect of the Preferred Securities shall be made to DTC (so long as the
Preferred Securities are held by DTC), which shall credit the relevant Persons'
accounts at DTC on the applicable distribution dates or, if the Preferred
Securities are not held by DTC, such payments shall be made by check mailed to
the address of the Person entitled thereto as such address shall appear on the
Security Register. The Paying Agent shall initially be Wilmington Trust Company,
and any co-paying agent chosen by Wilmington Trust Company and acceptable to the
Administrative Trustees and ALH. The Paying Agent shall be permitted to resign
as Paying Agent upon 30 days' written notice to the Administrative Trustees, the
Property Trustee and ALH. In the event that Wilmington Trust Company shall no
longer be the Paying Agent or a successor Paying Agent shall resign or its
authority to act be revoked, the Administrative Trustees shall appoint a
successor to act as Paying Agent (which shall be a bank or trust company
acceptable to the Property Trustee and ALH). (Sections 4.04 and 5.09.)
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
DTC will act as securities depositary for the Preferred Securities. The
Preferred Securities will be issued only as fully registered securities
registered in the name of Cede & Co. (DTC's nominee). One or more
fully-registered global Preferred Security certificates will be issued,
representing in the aggregate the total number of Preferred Securities, and will
be deposited with DTC.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds
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securities that its participants ("Participants") deposit with DTC. DTC also
facilitates the settlement among Participants through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations ("Direct Participants"). DTC is owned by a
number of its Direct Participants and by the New York Stock Exchange, Inc. (the
"New York Stock Exchange"), the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain custodial relationships with Direct
Participants, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
each Preferred Security ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Preferred Securities, unless use of the book-entry
system for the Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities; DTC's records reflect only the identity of the Direct Participants
to whose accounts such Preferred Securities are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners will
be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce the amount of the
interest of each Direct Participant in such Preferred Securities in accordance
with its procedures. DTC's current practice is to determine by lot the amount of
the interest of each Direct Participant to be redeemed.
Although voting with respect to the Preferred Securities is limited to the
holders of record of the Preferred Securities, in those cases where a vote is
required, neither DTC nor Cede & Co. will itself consent or vote with respect to
Preferred Securities. Under its usual procedures, DTC would mail an Omnibus
Proxy to the Property Trustee as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Preferred Securities are credited on the
record date (identified in a listing attached to the Omnibus Proxy).
Distribution payments on the Preferred Securities will be made by the Issuer
to DTC. DTC's practice is to credit Direct Participants' accounts on the
relevant payment date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive payments
on such payment date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices and will be the
responsibility of such Participant and not of DTC, the Issuer or ALH, subject to
any statutory or regulatory requirements as may be in effect from time to time.
Payment of distributions to DTC is the responsibility of the Issuer,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursements of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
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DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving 90 days' prior written
notice to the Issuer and the registrar and transfer agent. If DTC stops
providing such service and a successor securities depositary is not obtained,
Preferred Security certificates must be printed and delivered. Additionally, ALH
could decide to discontinue use of the system of book-entry transfers through
DTC (or a successor depositary). After a Debenture Event of Default, the holders
of a majority in Liquidation Amount of Preferred Securities may determine to
discontinue the system of book-entry transfers through DTC. In that event,
definitive certificates for the Preferred Securities will be printed and
delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Issuer and ALH believe to be reliable.
Neither the Issuer nor ALH has any responsibility for the performance by DTC or
its Participants of their respective obligations as described hereunder or under
the rules and procedures governing their respective operations.
REGISTRAR AND TRANSFER AGENT
Wilmington Trust Company will act as registrar and transfer agent for the
Preferred Securities. (Section 5.04.)
Registration of transfers or exchanges of Preferred Securities will be
effected without charge by or on behalf of the Issuer, but upon payment (with
the giving of such indemnity as the Issuer or ALH may require) of a sum
sufficient to cover any tax or other government charges that may be imposed in
connection with any transfer or exchange. The Security Registrar will not be
required to register the transfer of any Preferred Securities that have been
called for redemption. (Section 5.04.)
MISCELLANEOUS
The Issuer intends to have the Preferred Securities approved for listing on
the New York Stock Exchange under the symbol .
The Administrative Trustees are authorized and directed to conduct the
affairs of the Issuer and to operate the Issuer in such a way that the Issuer
will not be deemed to be an "investment company" required to be registered under
the Investment Company Act or fail or cease to qualify as a grantor trust for
United States federal income tax purposes and so that the Junior Subordinated
Debentures will be treated as indebtedness of ALH for United States federal
income tax purposes. In this connection, ALH and the Administrative Trustees are
authorized to take any action, and inconsistent with applicable law, the
certificate of trust of the Issuer or the Trust Agreement, that each of ALH and
the Administrative Trustees determines in its discretion to be necessary or
desirable for such purposes, as long as such action does not adversely affect
the interests of the holders of the Preferred Securities. (Section 2.07(d).)
Holders of the Preferred Securities have no preemptive or similar rights.
(Section 5.14.)
The Issuer may not borrow money or issue debt or mortgage or pledge any of
its assets.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee that
will be executed and delivered by ALH for the benefit of the holders from time
to time of the Trust Securities. The Guarantee will be qualified under the Trust
Indenture Act, and Wilmington Trust Company will act as indenture trustee (the
"Guarantee Trustee") under the Guarantee for purposes of compliance with the
Trust Indenture Act. The terms of the Guarantee will be those set forth in such
Guarantee and those made part of such Guarantee by the Trust Indenture Act. This
summary does not purport to be complete and is subject in all respects to the
provisions of, and is qualified in its entirety by reference to, the Guarantee
(including the definitions therein of certain terms), which is filed as an
exhibit to the Registration Statement of which this Prospectus forms a part, and
the Trust Indenture Act. The Guarantee Trustee will hold the Guarantee for the
benefit of the holders of the Trust Securities.
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GENERAL
ALH will irrevocably and unconditionally agree, to the extent set forth
herein, to pay the Guarantee Payments (as defined below) in full to the holders
of the Preferred Securities (without duplication of amounts theretofore paid by
or on behalf of the Issuer), as and when due, regardless of any defense, right
of set-off or counterclaim which the Issuer may have or assert. The following
payments with respect to Preferred Securities, to the extent not paid by or on
behalf of the Issuer (the "Guarantee Payments"), will be subject to the
Guarantee (without duplication): (i) any accrued and unpaid distributions
required to be paid on the Preferred Securities, to the extent the Issuer shall
have funds available therefor at such time, (ii) the Redemption Price with
respect to any Preferred Securities called for redemption by the Issuer, to the
extent the Issuer shall have funds available therefor at such time, and (iii)
upon a voluntary or involuntary dissolution, winding-up or termination of the
Issuer (other than in connection with a redemption of all of the Preferred
Securities or the exchange of Preferred Securities for Junior Subordinated
Debentures as provided in the Trust Agreement), the lesser of (a) the aggregate
of the Liquidation Amount and all accrued and unpaid distributions on the
Preferred Securiites to the date of payment to the extent the Issuer shall have
funds available therefor at such time and (b) the amount of assets of the Issuer
remaining available for distribution to holders of Preferred Securities in
liquidation of the Issuer. ALH's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by ALH to the holders of
Preferred Securities or by causing the Issuer to pay such amounts to such
holders.
The Guarantee will be a full and unconditional guarantee on a subordinated
basis with respect to the Preferred Securities issued by the Issuer from the
time of issuance of the Preferred Securities, but will not apply to any payment
of distributions if and to the extent that the Issuer does not have funds
sufficient to make such payments or to collection of payment. If ALH does not
make interest payments on the Junior Subordinated Debentures held by the Issuer,
it is expected that the Issuer will not pay distributions on the Preferred
Securities. The Guarantee will rank subordinate and junior in right of payment
to all liabilities of ALH (except those made pari passu with or subordinate to
the Guarantee by their terms). ALH's obligations under the Trust Agreement, the
Guarantee, the Indenture, the Junior Subordinated Debentures and the Expense
Agreement in the aggregate provide a full and unconditional guarantee on a
subordinated basis by ALH of payments due on the Preferred Securities. See
"--Status of the Guarantee."
ALH is a non-operating holding company and substantially all of the
operating assets of ALH and its consolidated subsidiaries are owned by such
subsidiaries, principally AmerUs Life. ALH relies primarily on interest and
dividends from AmerUs Life to meet its obligations for payment of principal and
interest on outstanding debt obligations and corporate expenses. Accordingly,
ALH's obligations under the Guarantees will be effectively subordinated to all
existing and future liabilities of ALH's subsidiaries, and claimants should look
only to the assets of ALH for payments thereunder. The payment of dividends by
AmerUs Life is limited by Iowa law. See "Risk Factors--Ranking of Subordinated
Obligations under the Guarantee and the Junior Subordinated Debentures" and
"Supervision and Regulation--Regulation of AmerUs Life."
CERTAIN COVENANTS OF ALH
In the Guarantee, ALH will covenant that, so long as any Preferred
Securities remain outstanding, ALH will not, and will cause its subsidiaries not
to, (a) declare or pay any dividends or distributions on (other than dividends
or distributions in Common Stock of ALH), or redeem, purchase, acquire or make a
liquidation payment with respect to, any of ALH's outstanding capital stock or
(b) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities that rank pari passu with or junior to
the Junior Subordinated Debentures or make any guarantee payments with respect
to the foregoing if at such time (i) ALH shall be in default with respect to its
guarantee payments under the Guarantee, (ii) there shall have occurred and be
continuing any event that would constitute an Event of Default under the
Indenture or (iii) ALH shall have given notice of its selection of an extended
interest period (as provided in the Indenture) and such period, or any extension
thereof, is continuing.
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AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities (in which case no vote will be required), the
terms of the Guarantee may be amended only with the prior approval of the
holders of not less than a majority of the Liquidation Amount of the outstanding
Preferred Securities. All guarantees and agreements contained in the Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
ALH and shall inure to the benefit of the holders of the Preferred Securities
then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of ALH
to perform any of its payment or other obligations thereunder. The holders of a
majority in aggregate Liquidation Amount of the Preferred Securities have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Guarantee Trustee in respect of the Guarantee or to
direct the exercise of any trust or power conferred upon the Guarantee Trustee
under the Guarantee.
Any holder of Preferred Securities may institute a legal proceeding directly
against ALH to enforce its rights under such Guarantee without first instituting
a legal proceeding against the Issuer, the Guarantee Trustee or any other person
or entity.
ALH will be required to provide annually to the Guarantee Trustee a
statement as to the performance by ALH of certain of its obligations under the
Guarantee and as to any default in such performance. ALH will also be required
to file annually with the Guarantee Trustee an officer's certificate as to ALH's
compliance with all conditions under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
default by ALH in performance of the Guarantee, undertakes to perform only such
duties as are specifically set forth in the Guarantee and, after default with
respect to the Guarantee, must exercise the same degree of care and skill as a
prudent individual would exercise in the conduct of his or her own affairs.
Subject to this provision, the Guarantee Trustee is under no obligation to
exercise any of the powers vested in it by the Guarantee at the request of any
holder of Preferred Securities unless it is offered reasonable indemnity against
the costs, expenses and liabilities that might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon (i)
full payment of the Redemption Price of all Preferred Securities, (ii) the
distribution of Junior Subordinated Debentures to holders of Preferred
Securities in exchange for all of the Preferred Securities or (iii) upon payment
in full of the amounts payable in accordance with the Trust Agreement upon
liquidation of the Issuer. Notwithstanding the foregoing, the Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of Preferred Securities must restore payment of any sums paid
under the Preferred Securities or the Guarantee.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of ALH and will rank
(i) subordinate and junior in right of payment to all other liabilities of ALH
(except those made pari passu by their terms), (ii) pari passu with the most
senior preferred or preference stock now or hereafter issued by ALH and with any
guarantee now or hereafter entered into by ALH in respect of any preferred or
preference stock of any affiliate of ALH and (iii) senior to ALH's common stock.
The Trust Agreement provides that each holder of Trust Securities by acceptance
thereof agrees to the subordination provisions and other terms of the Guarantee.
The Guarantee will constitute a guarantee of payment and not merely of
collection (i.e., the guaranteed party may institute a legal proceeding directly
against the guarantor to enforce its rights under the guarantee without first
instituting a legal proceeding against any other person or entity).
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The Guarantee will be held for the benefit of the holders of the Preferred
Securities and Common Securities. The Guarantee will not be discharged except by
payment of the Guarantee Payment in full to the extent not paid by the Issuer or
upon distribution to the holders of the Preferred Securities of the Junior
Subordinated Debentures. The Guarantee does not place a limitation on the amount
of additional Senior Debt that may be incurred by ALH. ALH expects from time to
time to incur additional indebtedness constituting Senior Debt.
GOVERNING LAW
The Guarantee Agreement will be governed by, and construed in accordance
with, the laws of the State of New York.
THE EXPENSE AGREEMENT
Pursuant to the Expense Agreement entered into by ALH under the Trust
Agreement (the "Expense Agreement"), ALH will irrevocably and unconditionally
guarantee to each person or entity to whom the Issuer becomes indebted or
liable, the full payment of any costs, expenses or liabilities of the Issuer,
other than obligations of the Issuer to pay to the holders of any Preferred
Securities or other similar interests in the Issuer of the amounts due such
holders pursuant to the terms of the Preferred Securities or such other similar
interests, as the case may be.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Set forth below is a description of specific terms of the Junior
Subordinated Debentures in which the Issuer will invest the proceeds of the
issuance and sale of the Issuer Securities. The Junior Subordinated Debentures
will be qualified under the Trust Indenture Act. The following description does
not purport to be complete and is qualified in its entirety by reference to the
description in the Indenture, dated as of , 1996 (the "Indenture"),
between ALH and Wilmington Trust Company, as trustee with respect to the Junior
Subordinated Debentures (the "Debenture Trustee"), which is filed as an exhibit
to the Registration Statement of which this Prospectus forms a part, and the
Trust Indenture Act. Whenever particular provisions or defined terms in the
Indenture are referred to herein, such provisions or defined terms are
incorporated by reference herein. Section references used herein are references
to provisions of the Indenture unless otherwise noted.
Under certain circumstances involving the dissolution of the Issuer
following the occurrence of a Special Event, Junior Subordinated Debentures may
be distributed to the holders of the Preferred Securities in liquidation of the
Issuer. See "Description of the Preferred Securities--Redemption-- Special Event
Redemption or Distribution."
GENERAL
The Junior Subordinated Debentures will be limited in aggregate principal
amount to a sum equal to the aggregate stated Liquidation Amount of the
Preferred Securities plus ALH's concurrent investment in the Common Securities.
The Junior Subordinated Debentures will be unsecured, subordinated obligations
of ALH which rank junior to all ALH's Senior Debt (as defined below).
The Junior Subordinated Debentures will initially mature on ,
2026. The Company shall have the right to (i) change the maturity date of the
Junior Subordinated Debentures upon the liquidation of the Issuer and the
exchange of the Junior Subordinated Debentures for the Preferred Securities of
the Issuer, and (ii) extend the maturity date of the Junior Subordinated
Debentures at any time at the election of ALH for one or more periods, but in no
event to a date later than , 2045 (such date, as it may be extended,
the "Stated Maturity"), provided that at the time any election to extend the
maturity date is made and at the time of such extension (i) ALH is not in
bankruptcy, otherwise insolvent or in liquidation, (ii) ALH is not in default in
the payment of any interest or principal on the Junior Subordinated Debentures
and no deferred interest payments thereon have accrued, (iii) the Issuer is not
in arrears on payments of distributions on Preferred Securities and no deferred
distributions thereon are accumulated, (iv) the Junior Subordinated Debentures
are rated not less than BBB- by Standard & Poor's Ratings Group or Baa3 by
Moody's Investors Service, Inc. or the equivalent by any other
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nationally recognized statistical rating organization and (v) the extended
Stated Maturity is no later than the 49th anniversary of the initial issuance of
the Preferred Securities; provided, however, that, if ALH exercises its right to
liquidate the Issuer and exchange the Junior Subordinated Debentures for the
Preferred Securities as specified above, effective upon such exercise the Stated
Maturity of the Junior Subordinated Debentures may be changed to any date
elected by ALH that is (i) no earlier than the date five years after the initial
issuance of the Preferred Securities and (ii) no later than the date 30 years
(plus an extended term of up to an additional 19 years if the above-referenced
conditions are satisfied) after the date of the initial issuance of the
Preferred Securities. (Section 301.)
ALH is a non-operating holding company and substantially all of the
operating assets of ALH and its consolidated subsidiaries are owned by such
subsidiaries, principally AmerUs Life. ALH relies primarily on interest and
dividends from AmerUs Life to meet its obligations for payment of principal and
interest on its outstanding debt obligations and corporate expenses.
Accordingly, ALH's obligations under the Junior Subordinated Debentures will be
effectively subordinated to all existing and future liabilities of ALH's
subsidiaries, including liabilities under contracts of insurance and annuities
written by AmerUs Life. Claimants should look only to the assets of ALH for
payment thereunder. The payment of dividends by AmerUs Life is limited by Iowa
insurance law. See "Risk Factors--Ranking of Subordinated Obligations Under the
Guarantee and the Junior Subordinated Debentures" and "Supervision and
Regulation--Regulation of AmerUs Life."
OPTIONAL REDEMPTION
On or after , 2001, ALH will have the right at any time and from
time to time to redeem the Junior Subordinated Debentures, in whole or in part,
at a Redemption Price equal to 100% of the principal amount of the Junior
Subordinated Debentures being redeemed plus any accrued and unpaid interest
thereon to the Redemption Date. (Section 1207.)
If a Special Event shall occur and be continuing, ALH shall have the right
to redeem the Junior Subordinated Debentures, in whole but not in part, at a
Redemption Price equal to 100% of the principal amount of Junior Subordinated
Debentures then outstanding plus any accrued and unpaid interest to the
Redemption Date. (Section 1207.)
Junior Subordinated Debentures in denominations larger than $25 may be
redeemed in part but only in integral multiples of $25. Unless ALH defaults in
payment of the Redemption Price, on and after the Redemption Date interest
ceases to accrue on such Junior Subordinated Debentures or portions thereof
called for redemption.
For so long as the Issuer is the holder of all the outstanding Junior
Subordinated Debentures, the proceeds of any such redemption described above
will be used by the Issuer to redeem Preferred Securities in accordance with
their terms. ALH may not redeem the Junior Subordinated Debentures in part
unless all accrued and unpaid interest has been paid in full on all outstanding
Junior Subordinated Debentures for all quarterly interest periods terminating on
or prior to the Redemption Date. (Section 1207.)
Any optional redemption of the Junior Subordinated Debentures shall be made
upon not less than 30 nor more than 60 days' notice, as provided in the
Indenture. (Section 1204.)
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
Under certain circumstances involving the termination of the Issuer, Junior
Subordinated Debentures may be distributed to the holders of the Preferred
Securities in liquidation of the Issuer after the satisfaction of liabilities to
creditors of the Issuer as provided by applicable law. If distributed to holders
of Preferred Securities in liquidation, the Junior Subordinated Debentures will
initially be issued in the form of one or more global securities and DTC, or any
successor depositary for the Preferred Securities will act as depositary for the
Junior Subordinated Debentures. It is anticipated that the depositary
arrangements for the Junior Subordinated Debentures would be substantially
identical to those in effect for the Preferred Securities. If the Junior
Subordinated Debentures are distributed to the holders of Preferred Securities
upon the liquidation of the Issuer, ALH will use its best efforts to list the
Junior Subordinated
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Debentures on the New York Stock Exchange or such other stock exchanges or other
self regulatory organizations, if any, on which the Preferred Securities are
then listed. There can be no assurance as to the market price of any Junior
Subordinated Debentures that may be distributed to the holders of the Preferred
Securities. For a description of DTC and the terms of the depositary matters,
see "Description of the Preferred Securities--Book-Entry-Only Issuance--The
Depositary Trust Company."
INTEREST
The Junior Subordinated Debentures shall bear interest at the rate of %
per annum. Such interest is payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year (each, an "Interest Payment Date"),
commencing March 31, 1997, to the person in whose name each Junior Subordinated
Debenture is registered, subject to certain exceptions, at the close of business
on the fifteenth day next preceding such Interest Payment Date. (Sections 301
and 307.) It is anticipated that, until the liquidation, if any, of the Issuer,
each Junior Subordinated Debenture will be held in the name of the Property
Trustee in trust for the benefit of the Trust and the holders of the Preferred
Securities.
The amount of interest payable for any period will be computed on the basis
of a 360 day year of twelve 30 day months. (Section 310). In the event that any
date on which interest is payable on the Junior Subordinated Debentures is not a
Business Day, then payment of the interest payable on such date will be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on the date the payment was originally payable. A "Business Day"
shall mean any day other than a Saturday or Sundary or day on which banking
institutions in the City of New York are authorized or required by law or
executive order to remain closed or a day on which the Corporate Trust Office of
the Property Trustee or Debenture Trustee is closed for business. Accrued
interest that is not paid on the applicable Interest Payment Date will bear
additional interest on the amount thereof (to the extent permitted by law) at
the rate per annum of % thereof, compounded quarterly ("Additional
Interest"). The term "interest" as used herein shall include quarterly interest
payments, interest on quarterly interest payments not paid on the applicable
Interest Payment Date and Additional Sums (as described below), as applicable.
(Section 301.)
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Event of Default under the Indenture has occurred and is
continuing, ALH shall have the right at any time during the term of the Junior
Subordinated Debentures to defer the payment of interest on such Junior
Subordinated Debentures from time to time for a period not exceeding 20
consecutive quarters (each, an "Extension Period") during which period interest
will compound quarterly, provided that no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated Debentures. The Company shall have
the right to make partial payments of interest on any Interest Payment Date. At
the end of any such Extension Period, ALH must pay all interest then accrued and
unpaid (together with interest thereon at the rate specified for the Junior
Subordinated Debentures to the extent permitted by applicable law). During an
Extension Period, interest will continue to accrue and holders of Junior
Subordinated Debentures (or holders of Preferred Securities while outstanding)
will be required to accrue interest income for United States federal income tax
purposes. See "United States Federal Income Taxation--Original Issue Discount."
However, during any such Extension Period, ALH shall not, and shall cause any
Subsidiary of ALH not to, (a) declare or pay any dividends or distributions on,
or redeem, purchase, acquire or make a liquidation payment with respect to, any
of ALH's capital stock or (b) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities of ALH
that rank pari passu with or junior in interest to the Junior Subordinated
Debentures or make any guarantee payments with respect to any guarantee by ALH
of the debt securities of any subsidiary of ALH that by their terms rank PARI
PASSU or junior in interest to the Junior Subordinated Debentures (other than
(a) dividends or distributions in Common Stock of ALH, (b) payments under the
Guarantee, and (c) purchases of Common Stock related to the issuance of Common
Stock under any of ALH's benefit plans for its directors, officers or
employees). Prior to the
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termination of any such Extension Period, ALH may further extend the interest
payment period, provided that such Extension Period together with all such
previous and further extensions thereof shall not exceed 20 consecutive quarters
or extend beyond the Stated Maturity of the Junior Subordinated Debentures. Upon
the termination of any Extension Period and the payment of all amounts then due
on any Interest Payment Date, ALH may elect to begin a new Extension Period,
subject to the above requirements. No interest shall be due and payable during
an Extension Period, except at the end thereof. ALH must give the Debenture
Trustee and the holders of the Junior Subordinated Debentures notice of its
election to begin any Extension Period at least one Business Day prior to the
earlier of (i) the Interest Payment Date or (ii) the date the distributions on
the Preferred Securities are payable or (iii) the date the Administrative
Trustees are required to give notice to the New York Stock Exchange, the Nasdaq
National Market or other applicable self-regulatory organization or to holders
of the Preferred Securities of the record date or the date such distributions
are payable, but in any event not less than one Business Day prior to such
record date. The Debenture Trustee shall give notice of ALH's election to begin
any Extension Period to the holders of the Preferred Securities. There is no
limitation on the number of times that ALH may elect to begin an Extension
Period. (Section 301.)
SET-OFF
Notwithstanding anything to the contrary in the Indenture, ALH shall have
the right to set-off any payment it is otherwise required to make thereunder
with respect to any Junior Subordinated Debenture and to the extent ALH has
theretofore made, or is concurrently on the date of such payment making, a
payment under the Guarantee or certain other payments in connection with any
Direct Action taken by holder of Preferred Securities in accordance with the
terms of the Indenture. (Section 311.)
SUBORDINATION
The Junior Subordinated Debentures are subordinate and junior in right of
payment to all Senior Debt (as defined below) of ALH as provided in the
Indenture. No payment on account of principal of (or premium, if any) or
interest on, the Junior Subordinated Debentures or on account of the purchase or
other acquisition of the Junior Subordinated Debentures by ALH or any subsidiary
may be made if ALH has defaulted on any payment of principal of or interest on
Senior Debt when due, or if the maturity of any Senior Debt has been accelerated
because of a default until such event of default shall have been ended or
waived. (Section 1104.) Upon any distribution of assets of ALH to creditors upon
any dissolution, winding-up, liquidation or reorganization, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
principal of, and premium, if any, and interest on all Senior Debt must be paid
in full before the holders of the Junior Subordinated Debentures are entitled to
receive or retain any payment thereon. (Section 1102.) Subject to the prior
payment of all Senior Debt, the rights of the holders of the Junior Subordinated
Debentures will be subrogated to the rights of the holders of Senior Debt to the
extent of the payments or distributions made to the holders of such Senior Debt
until all amounts owing on the Junior Subordinated Debentures are paid in full.
(Section 1106.)
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"Debt" means with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; and (vi) every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable for, directly or indirectly,
as obligor or otherwise. (Section 101.)
"Senior Debt" means the principal of (and premium, if any) and interest, if
any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to ALH whether or not such claim for
post-petition interest is allowed in such proceeding), on Debt, whether incurred
on or prior to the date of the Indenture or thereafter incurred, unless, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are not superior in right of
payment to the Junior Subordinated Debentures or to other Debt which is PARI
PASSU with, or subordinated to, the Junior Subordinated Debentures; PROVIDED,
however, that Senior Debt shall not be deemed to include (i) any Debt of ALH
which, when incurred and without respect to any election under Section 1111(b)
of the Bankruptcy Code, was without recourse to ALH, (ii) any Debt of ALH to any
of its subsidiaries, (iii) Debt to any employee of ALH, (iv) any liability for
taxes, (v) Debt or other monetary obligations to trade creditors or assumed by
ALH or any of its subsidiaries in the ordinary course of business in connection
with the obtaining of goods, materials or services, and (vi) the Junior
Subordinated Debentures.
ALH is a non-operating holding company and substantially all of the
operating assets of ALH and its consolidated subsidiaries are owned by such
subsidiaries, principally AmerUs Life. ALH relies primarily on interest and
dividends from AmerUs Life to meet its obligations for payment of principal and
interest on its outstanding debt obligations and corporate expenses.
Accordingly, ALH's obligations under the Junior Subordinated Debentures will be
effectively subordinated to all existing and future liabilities of ALH's
subsidiaries, including liabilities under contracts of insurance and annuities
written by AmerUs Life. Holders of Junior Subordinated Debentures should look
only to the assets of ALH for payments of interest and principal and premium, if
any. The payment of dividends by AmerUs Life is limited by Iowa insurance law.
See "Risk Factors--Ranking of Subordinate Obligations under the Guarantee and
the Junior Subordinated Debentures."
The Indenture does not limit the aggregate amount of Senior Debt that may be
issued. After the completion of the Offering and the Common Stock Offerings and
the repayment of debt with the proceeds thereof, ALH will have approximately
$81.1 million of principal amount of indebtedness for borrowed money and capital
lease obligations constituting Senior Debt.
CERTAIN COVENANTS OF ALH
ALH will covenant in the Indenture that if and so long as (i) the Issuer is
the holder of all of the outstanding Junior Subordinated Debentures, (ii) a Tax
Event has occurred and is continuing and (iii) ALH has not redeemed the Junior
Subordinated Debentures pursuant to the Indenture or terminated the Issuer
pursuant to the Trust Agreement, ALH will pay to the Issuer, for so long as the
Issuer is the registered holder of any Junior Subordinated Debentures, the
additional amounts as may be necessary in order that the amount of distributions
then due and payable by the Issuer on the outstanding Preferred Securities and
Common Securities of the Issuer shall not be reduced as a result of any
additional taxes, duties and other governmental charges to which the Issuer has
become subject as a result of a Tax Event. (Section 1005). ALH will also
covenant that it will not, and it will not permit any Subsidiary to, (a) declare
or pay any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of ALH's outstanding capital stock or
(b) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities that rank pari passu
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with or junior to the Junior Subordinated Debentures or make any guarantee
payments with respect to any guarantee by ALH of the debt securities of any
subsidiary of ALH that by their terms rank pari passu or junior in interest to
the Junior Subordinated Securities, (other than (a) dividends or distributions
in Common Stock of ALH, (b) payments under the Guarantee, and (c) purchases of
Common Stock related to the issuance of Common Stock under any of ALH's benefit
plans for its directors, officers or employees) if at such time (i) there shall
have occurred and be continuing any event that, with the giving of notice or the
lapse of time, or both, would constitute an Event of Default under the Indenture
and in respect of which ALH shall not have taken reasonable steps to cure, (ii)
ALH shall be in default with respect to its payment of any obligations under the
Guarantee or (iii) ALH shall have given notice of its selection of an Extension
Period as provided in the Indenture and shall not have rescinded such notice,
and such Extension Period, or any extension thereof, shall be continuing
(Section 1006.) ALH will also covenant (i) to maintain directly or indirectly
100% ownership of the Common Securities of the Issuer (provided, however, that
any permitted successor of ALH may succeed to such ownership), (ii) not to
voluntarily dissolve, wind-up or terminate the Issuer, except in connection with
a distribution of the Junior Subordinated Debentures to the holders of the
Preferred Securities in liquidation of the Issuer or in connection with certain
mergers, consolidations or amalgamations permitted by the Trust Agreement and
(iii) to use its reasonable efforts, consistent with the terms and provisions of
the Trust Agreement, to cause the Issuer to remain a business trust and to be
classified as a grantor trust for United States federal income tax purposes,
except in connection with a distribution of the Junior Subordinated Debentures
to the holders of the Preferred Securities in liquidation of the Issuer.
(Section 1006.)
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events, that has occurred and is continuing constitutes an "Event of Default"
(also referred to herein as a "Debenture Event of Default") with respect to the
Junior Subordinated Debentures:
(a) failure for 30 days to pay interest on the Junior Subordinated
Debentures (including Additional Interest, if any) when due (subject to the
deferral of any due date in the case of an Extension Period); or
(b) failure to pay principal on the Junior Subordinated Debentures when
due whether at Stated Maturity, upon redemption, by declaration or
otherwise; or
(c) failure to observe or perform in any material respect any other
covenant contained in the Indenture for 90 days after written notice to ALH
from the Debenture Trustee or the holders of at least 25% in aggregate
principal amount of the outstanding Junior Subordinated Debentures; or
(d) certain events in bankruptcy, insolvency or reorganization of ALH.
(Section 501.)
The holders of a majority in principal amount of the outstanding Junior
Subordinated Debentures have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee,
under certain conditions. (Section 512.) The Debenture Trustee or the holders of
not less then 25% in principal amount of the outstanding Junior Subordinated
Debentures may declare the principal of all the Junior Subordinated Debentures
due and payable immediately upon the occurrence and continuation of a Debenture
Event of Default, and should the Debenture Trustee or such holders of Junior
Subordinated Debentures fail to make such declaration, the holders of at least
25% in aggregate liquidation preference of Preferred Securities then outstanding
shall have such right. The holders of a majority in principal amount of the
outstanding Junior Subordinated Debentures may annul such declaration and its
consequences if all Events of Default have been cured (other than the
non-payment of the principal of the Junior Subordinated Debentures which has
become due solely by such acceleration) and a sum sufficient to pay all overdue
installments of interest, principal due otherwise than by acceleration
(including any applicable premium) and certain sums due to the Debenture Trustee
have been deposited with the Debenture Trustee. If the holders of the Junior
Subordinated Debentures fail to annul such declaration and waive such default,
the holders of a majority in aggregate liquidation preference of the Preferred
Securities shall have such right. (Section 502 and Section 513.)
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The holders of not less than a majority in aggregate principal amount of the
outstanding Junior Subordinated Debentures affected thereby may, on behalf of
the holders of all the Junior Subordinated Debentures, waive any past default,
except a default in the payment of principal or interest (unless such default
has been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration has been deposited with the
Debenture Trustee) or a default in respect of a covenant or provision which
under the Indenture cannot be modified or amended without the consent of the
holder of each outstanding Junior Subordinated Debenture affected. If the
holders of the Junior Subordinated Debentures fail to annul such declaration and
waive such default, the holders of a majority in aggregate Liquidation Amount of
the Preferred Securities shall have such right. (Section 513.) ALH is required
to file annually with the Debenture Trustee a certificate as to whether or not
ALH is in default in the performance, observance or fulfillment of or compliance
with any of the material terms, provisions, covenants and conditions of the
Indenture. (Section 1004.)
In case a Debenture Event of Default shall occur and be continuing, the
Debenture Trustee will have the right to declare the principal of the Junior
Subordinated Debentures to be forthwith due and payable and to enforce its other
rights as a creditor with respect to the Junior Subordinated Debentures. If the
Debenture Trustee obtains a judgment against ALH following the occurrence of an
Event of Default under the Indenture, the provisions of Iowa law regulating
mutual insurance holding companies would limit the ability of the Debenture
Trustee to realize upon the assets of ALH by conveying or transferring the
capital stock of AmerUs Life owned by ALH. Any conveyance, transfer, assignment
or alienation of a majority of the voting shares of AmerUs Life to an entity
which is not a mutual insurance holding company would violate Iowa law and such
voting shares are not subject to execution and levy. The Debenture Trustee would
not be restricted by such law in disposing of voting shares owned by ALH which
exceeded such majority requirement. See "The Reorganization and Distribution of
the Non-Life Insurance Subsidiaries--Regulation of AMHC after the
Reorganization."
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of ALH to pay interest on or principal of
the Junior Subordinated Debentures on the date such interest or principal is
otherwise payable, any holder of Preferred Securities may institute a suit
directly against ALH for enforcement of payment to such holder of the principal
of and interest on such Junior Subordinated Debentures having a principal amount
equal to the aggregate liquidation preference of the Preferred Securities of
such holder (a "Direct Action") (Section 508). ALH may not amend the Indenture
to remove the foregoing right to bring a Direct Action without the prior written
consent of the holders of all of the outstanding Preferred Securities. (Section
902).
The holders of the Preferred Securities would not be able to exercise
directly any remedies other than those set forth in the preceding paragraph
available to the holders of the Junior Subordinated Debentures unless there
shall have been a Debenture Event of Default and the holders of the Junior
Subordinated Debentures fail to exercise such remedies. See "--Debenture Events
of Default; Notice".
FORM, EXCHANGE AND TRANSFER
The Junior Subordinated Debentures will be issuable only in registered form,
without coupons, and only in denominations of $25 and integral multiples
thereof. (Section 302.)
Subject to the terms of the Indenture, Junior Subordinated Debentures may be
presented for registration of transfer (duly endorsed or with the form of
transfer endorsed thereon duly executed) at the office of the Security Registrar
or at an office or agency of ALH designated by ALH for such purpose. No service
charge will be made to a holder for any registration of transfer or exchange of
Junior Subordinated Debentures, but the Security Registrar may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith. Such transfer or exchange will be effected upon
the Security Registrar or ALH, as the case may be, being satisfied with the
documents of title and identity of the person making the request. ALH has
appointed the Debenture Trustee as
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Security Registrar. (Section 305.) ALH may at any time designate additional
transfer agents or rescind the designation of any transfer agent or approve a
change in the office through which any transfer agent acts. (Section 1002.)
Neither ALH nor the Security Registrar will be required (i) to issue,
transfer or exchange any Junior Subordinated Debenture during a period beginning
at the opening of business 15 days before the day of selection for redemption of
any such Junior Subordinated Debentures pursuant to the Indenture and ending at
the close of business on the day of mailing of notice of redemption, or (ii) to
transfer or exchange any Junior Subordinated Debentures so selected for
redemption, in whole or in part, except the unredeemed portion of any such
Junior Subordinated Debentures being redeemed in part. (Section 305.)
PAYMENT AND PAYING AGENTS
Payment of interest on a Junior Subordinated Debenture on any Interest
Payment Date will be made to the Person in whose name such Junior Subordinated
Debenture (or Predecessor Security) is registered at the close of business on
the Regular Record Date for such interest payment. (Section 307.)
Principal of and any interest on the Junior Subordinated Debentures will be
payable at the office of such Paying Agent or Paying Agents as ALH may designate
for such purpose from time to time, except that, at the option of ALH, payment
of any interest may be made (i) by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register or (ii)
by wire transfer in immediately available funds at such place and to such
account as may be designated by the Person entitled thereto as specified in the
Security Register. Wilmington Trust Company will act as Paying Agent with
respect to the Junior Subordinated Debentures. ALH may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts. (Section
301.)
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting ALH and the Debenture Trustee,
with the consent of the holders of not less than a majority in principal amount
of the outstanding Junior Subordinated Debentures, to modify the Indenture in a
manner affecting the rights of the holders of the Junior Subordinated
Debentures; provided, that no such modification may, without the consent of the
holder of each outstanding Junior Subordinated Debenture affected thereby, (i)
change the Stated Maturity of, the principal of, or any installment of interest
on any Junior Subordinated Debenture or reduce the principal amount thereof, or
reduce the rate or extend the time for payment of interest thereon or any
premium payable upon the redemption thereof, or impair the right to institute
suit for the enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption, on or after the Redemption Date), or
modify the provisions of the Indenture with respect to the subordination of the
Junior Subordinated Debentures in a manner adverse to holders thereof (except
such change or extension as is contemplated thereby), (ii) reduce the percentage
in principal amount of outstanding Junior Subordinated Debentures, the holders
of which are required to consent to any such modification of the Indenture or
any waiver provided for in the Indenture, or (iii) modify certain provisions of
the Indenture providing for waiver of defaults, waiver of covenants and
modification of the Indenture, except to increase the percentage or to provide
that certain other provisions of the Indenture cannot be modified or waived
without the consent of the holder of each outstanding Junior Subordinated
Debenture; provided, that, so long as any of the Preferred Securities remains
outstanding, no such modification may be made that adversely affects the holders
of the Preferred Securities, and no termination of the Indenture may occur, and
no waiver of any Event of Default or compliance with any covenant under the
Indenture may be effective, without the prior consent of the holders of at least
a majority of the aggregate liquidation preference of the outstanding Preferred
Securities unless and until the principal of and any premium on the Junior
Subordinated Debentures and all accrued and unpaid interest thereon have been
paid in full. (Section 902.)
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CONSOLIDATION, MERGER AND SALE
ALH, without the consent of the holders of any outstanding Junior
Subordinated Debentures, may consolidate with or merge into, or convey, transfer
or lease its properties and assets substantially as an entirety to any Person,
and may permit any person to merge into, or convey, transfer or lease its
properties and assets substantially as an entirety to ALH, provided (i) that any
successor Person must be a corporation, partnership, trust or other entity
organized and validly existing under the laws of any domestic jurisdiction and
must expressly assume ALH's obligations on the Junior Subordinated Debentures
and under the Indenture, (ii) that immediately after giving effect to the
transaction no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have occurred and be
continuing, (iii) that such transaction is permitted under the Trust Agreement
and Guarantee and does not give rise to any breach or violation of, the Trust
Agreement or the Guarantee and (iv) that certain other conditions are met.
(Section 801).
The general provisions of the Indenture do not afford holders of Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving ALH that may adversely affect holders of the Junior
Subordinated Debentures.
SATISFACTION AND DISCHARGE
Under the terms of the Indenture, ALH will be discharged from any and all
obligations in respect of the Indenture (except as to (i) any surviving rights
of transfer or exchange of Junior Subordinated Debentures, (ii) rights under the
Indenture of holders of the Junior Subordinated Debentures to receive payments
of principal of (and premium, if any) and interest on the Junior Subordinated
Debentures and other rights, duties and obligations of the holders as
beneficiaries under the Indenture with respect to the amounts, if any, deposited
with the Trustee pursuant to the discharge provisions of the Indenture, and
(iii) the rights and obligations of the Trustee hereunder), if the Junior
Subordinated Debentures have become due and payable, or will become due and
payable at their Stated Maturity within one year of the date of deposit or if
redeemable at the option of ALH, are to be called for redemption within one year
under arrangements satisfactory to the Trustee and (i) ALH deposits with the
Debenture Trustee, in trust, cash or cash equivalents in an amount sufficient to
pay all the principal of, premium, if any, and interest on the Junior
Subordinated Debentures to the date of such deposit or to the Stated Maturity or
Redemption Date, as the case may be; (ii) ALH pays all other sums payable by ALH
under the Indenture, and (iii) ALH delivers to the Trustee an appropriate
Officer's Certificate and Opinion of Counsel. (Section 401.)
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by,
and construed in accordance with, the laws of the State of New York. (Section
112.)
MISCELLANEOUS
ALH will have the right of all times to assign any of its rights or
obligations under the Indenture to a direct or indirect wholly-owned subsidiary
of ALH, provided that, in the event of any such assignment, ALH will remain
liable for all such obligations. The Issuer may not assign any of its rights
under the Indenture without the prior written consent of ALH. The Indenture is
not otherwise assignable by the parties thereto. Subject to the foregoing, the
Indenture will be binding upon and inure to the benefit of the parties thereto
and their respective successors and assigns. (Section 109.)
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of distributions and other amounts due on the Trust Securities (to
the extent the Issuer has funds available for the payment of such distributions)
are irrevocably guaranteed by ALH as and to the extent set forth under
"Description of the Guarantee." Taken together, ALH's obligations under the
Junior Subordinated Debentures, the Indenture, the Trust Agreement, the Expense
Agreement, and the
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Guarantee provide, in the aggregate, a full, irrevocable and unconditional
guarantee of payments of distributions and other amounts due on the Trust
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such guarantee. It is only the
combined operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Issuer's obligations under the
Trust Securities. If and to the extent that ALH does not make payments on the
Junior Subordinated Debentures, the Issuer will not pay distributions or other
amounts due on its Trust Securities. The Guarantee does not cover payment of
distributions when the Issuer does not have sufficient funds to pay such
distributions. In such event, the remedy of a holder of Preferred Securities is
to institute a legal proceeding directly against ALH for enforcement of payment
of such distributions to such holder. The obligations of ALH under the Guarantee
are subordinate and junior in right of payment to all Senior Debt of ALH.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
distributions and other payments due on the Preferred Securities, primarily
because (i) the aggregate principal amount of the Junior Subordinated Debentures
will be equal to the sum of the aggregate stated Liquidation Amount of the
Preferred Securities and Common Securities; (ii) the interest rate and interest
and other payment dates on the Junior Subordinated Debentures will match the
distribution rate and distribution and other payment dates for the Preferred
Securities; (iii) ALH shall pay for all and any costs, expenses and liabilities
of the Issuer except the Issuer's obligations to holders of its Preferred
Securities under the Preferred Securities; and (iv) the Trust Agreement further
provides that the Issuer will not engage in any activity that is not consistent
with its limited purposes.
Notwithstanding anything to the contrary in the Indenture, ALH has the right
to set-off any payment it is otherwise required to make thereunder with and to
the extent ALH has theretofore made, or is concurrently on the date of such
payment making, a payment under the Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any Preferred Security may institute a legal proceeding directly
against ALH to enforce its rights under the Guarantee without first instituting
a legal proceeding against the Guarantee Trustee, the Issuer or any other person
or entity.
A default or event of default under any Senior Debt of ALH would not
constitute a default or Event of Default under the Indenture. However, in the
event of payment defaults under, or acceleration of Senior Debt of ALH, the
subordination provisions of the Indenture provide that no payments may be made
in respect of the Junior Subordinated Debentures until such Senior Debt has been
paid in full or any payment default thereunder has been cured or waived. Failure
to make required payments on Junior Subordinated Debentures would constitute an
Event of Default under the Indenture.
LIMITED PURPOSE OF ISSUER
The Issuer's Preferred Securities evidence a beneficial interest in the
Issuer, and the Issuer exists for the sole purpose of issuing its Preferred
Securities and Common Securities and investing the proceeds thereof in the
Junior Subordinated Debentures. A principal difference between the rights of a
holder of a Preferred Security and a holder of a Junior Subordinated Debenture
is that a holder of a Junior Subordinated Debenture is entitled to receive from
ALH the principal amount of and interest accrued on the Junior Subordinated
Debentures held, while a holder of Preferred Securities is entitled to receive
distributions from the Issuer (or from ALH under the applicable Guarantee) if
and to the extent the Issuer has funds available for payment of such
distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary dissolution, winding-up or termination of
the Issuer, the holders of Preferred Securities will be entitled to receive as a
preference, out of assets available for distribution to holders, the Liquidation
Distribution in cash or Junior Subordinated Debentures. See "Description of
Preferred Securities--Liquidation Distribution Upon Dissolution". Upon any
voluntary or involuntary
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liquidation or bankruptcy of ALH, the Property Trustee, as holder of the Junior
Subordinated Debentures, would be a subordinated creditor of ALH, subordinated
in right of payment to all Senior Debt, but entitled to receive payment in full
of principal, premium, if any, and interest, before any shareholders of ALH
receive payments or distributions. Since ALH is Guarantor under the Guarantee
and has agreed, as Depositor, to pay for all costs, expenses and liabilities of
the Issuer (other than United States withholding taxes and other than the
Issuer's obligations to Preferred Security holders under the Preferred
Securities), the positions of a holder of Preferred Securities and a holder of
Junior Subordinated Debentures relative to other creditors and to shareholders
of ALH in the event of liquidation or bankruptcy of ALH would be substantially
the same.
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following is a summary of certain of the material United States federal
income tax consequences of the purchase, ownership and disposition of Preferred
Securities. Unless otherwise stated, this summary deals only with Preferred
Securities held as capital assets by holders that purchase the Preferred
Securities upon original issuance. This summary does not address all the tax
consequences that may be relevant to holders that may be subject to special tax
treatment such as, for example, banks, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities or currencies,
tax-exempt investors, persons whose functional currency is other than the United
States dollar, persons who hold Preferred Securities as part of a straddle,
hedging or conversion transaction or, except as specifically described herein,
foreign taxpayers. In addition, this summary does not address any aspects of
state, local, or foreign laws. This summary is based on the Internal Revenue
Code of 1986, as amended, Treasury regulations promulgated thereunder and
administrative and judicial interpretations thereof, as of the date hereof, all
of which are subject to change, possibly on a retroactive basis. Each holder
should consult its tax advisor as to its particular tax consequences of
acquiring, holding, and disposing of the Preferred Securities, including the tax
consequences under state, local, and foreign laws.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
Sidley & Austin, special counsel to ALH, has rendered its opinion generally
to the effect that, under current United States federal income tax law and
assuming full compliance with the terms of the Indenture (and certain other
documents), and based on certain facts and assumptions contained in such
opinion, the Junior Subordinated Debentures held by the Trust will be classified
for United States federal income tax purposes as indebtedness of ALH.
Accordingly, corporate holders of Preferred Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Preferred Securities.
CLASSIFICATION OF THE TRUST
Sidley & Austin, special counsel to ALH and the Trust, has rendered its
opinion generally to the effect that, under current United States federal income
tax law and assuming full compliance with the terms of the Trust Agreement and
the Indenture (and certain other documents), and based on certain facts and
assumptions contained in such opinion, the Trust will be classified for United
States federal income tax purposes as a grantor trust and not as an association
taxable as a corporation. Accordingly, for United States federal income tax
purposes, each holder of Preferred Securities will generally be considered the
owner of an undivided interest in the Junior Subordinated Debentures, and each
holder will be required to include in its gross income any original issue
discount ("OID") accrued with respect to its allocable share of those Junior
Subordinated Debentures. Investors should be aware that the foregoing opinions
of Sidley & Austin have not been confirmed by the Internal Revenue Service (the
"Service"), by private ruling or otherwise, and are not binding on the Service
or the courts.
ORIGINAL ISSUE DISCOUNT
Because ALH has the option, under the terms of the Junior Subordinated
Debentures, to defer payments of interest by extending interest payment periods
for up to 20 quarters, all of the stated interest
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payments on the Junior Subordinated Debentures will be treated as OID. Holders
of debt instruments issued with OID must include that discount in income on an
economic accrual basis before the receipt of cash attributable to the discount,
regardless of their method of tax accounting. Generally, all of a holder's
taxable interest income with respect to the Junior Subordinated Debentures will
be accounted for as OID, and actual distributions of stated interest will not be
separately reported as taxable income. The amount of OID that accrues in any
quarter will approximately equal the amount of the interest that accrues on the
Junior Subordinated Debentures in that quarter at the stated interest rate. In
the event that the interest payment period is extended, holders will continue to
accrue OID approximately equal to the amount of the interest payment due at the
end of the extended interest payment period on an economic accrual basis over
the length of the extended interest period.
MARKET DISCOUNT AND PREMIUM
Holders of Preferred Securities other than holders that purchased the
Preferred Securities upon original issuance may be considered to have acquired
their undivided interest in the Junior Subordinated Debentures with market
discount, amortizable bond premium or acquisition premium as such terms are
defined for United States federal income tax purposes. Such holders are advised
to consult their tax advisors as to the income tax consequences of the
acquisition, ownership and disposition of the Preferred Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the caption "Description of
the Preferred Securities--Redemption--Special Event Redemption or Distribution
of Junior Subordinated Debentures," Junior Subordinated Debentures may be
distributed to holders in exchange for the Preferred Securities and in
liquidation of the Trust. Under current United States federal income tax law,
such a distribution would be treated as a non-taxable event to each holder, and
each holder would have an aggregate tax basis in the Junior Subordinated
Debentures equal to such holder's aggregate tax basis in its Preferred
Securities. A holder's holding period in the Junior Subordinated Debentures so
received in liquidation of the Trust would include the period during which the
Preferred Securities were held by such holder.
Under certain circumstances described herein (see "Description of the
Preferred Securities"), the Junior Subordinated Debentures may be redeemed for
cash and the proceeds of such redemption distributed to holders in redemption of
their Preferred Securities. Under current United States federal income tax law,
such a redemption would constitute a taxable disposition of the redeemed
Preferred Securities, and a holder would recognize gain or loss as if it sold
such redeemed Preferred Securities for cash. See "United States Federal Income
Taxation--Sales of Preferred Securities."
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will recognize gain or loss equal
to the difference between such holder's adjusted tax basis in the Preferred
Securities and the amount realized on the sale of such Preferred Securities. A
holder's adjusted tax basis in the Preferred Securities will generally be the
initial purchase price increased by OID previously includible in such holder's
gross income to the date of disposition and decreased by payments received on
the Preferred Securities. Such gain or loss will generally be a capital gain or
loss and will generally be a long-term capital gain or loss if the Preferred
Securities have been held for more than one year.
The Preferred Securities may trade at prices that do not accurately reflect
the value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A holder that disposes of Preferred Securities between
record dates for payments of distributions thereon will be required to include
accrued but unpaid interest on the Junior Subordinated Debentures through the
date of disposition in income as ordinary income, and to add such amount to such
holder's adjusted tax basis in the pro rata share of the underlying Junior
Subordinated Debentures deemed disposed of. To the extent that the selling price
is less than the holder's adjusted tax basis (so determined) a holder will
recognize a capital loss. Subject to certain limited exceptions, capital losses
cannot be applied to offset ordinary income for United States federal income tax
purposes.
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UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the United
States, a foreign corporation, a nonresident alien individual, a foreign
partnership, or a nonresident fiduciary of a foreign estate or trust. The
discussion assumes that income with respect to the Preferred Security is not
effectively connected with a trade or business in the United States in which the
United States Alien Holder is engaged.
Under current United States federal income tax law, and subject to the
discussion of backup withholding in the following section: (1) payments of
principal and interest (including OID) by the Trust or any of its paying agents
to any holder of a Preferred Security that is a United States Alien Holder will
not be subject to withholding of United States federal income tax; provided
that, in the case of interest, (a) the beneficial owner of the Preferred
Security does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of ALH entitled to vote, (b) the
beneficial owner of the Preferred Security is not a controlled foreign
corporation that is related, directly or indirectly, to ALH through stock
ownership, and (c) either (A) the beneficial owner of the Preferred Security
certifies to the Trust or its agent, under penalties of perjury, that it is a
United States Alien Holder and provides its name and address or (B) a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution"), and holds the Preferred Securities in such capacity, certifies to
the Trust or its agent, under penalties of perjury, that such statement has been
received from the beneficial owner by it or by a Financial Institution between
it and the beneficial owner and furnishes the Trust or its agent with a copy
thereof; and (2) a United States Alien Holder of a Preferred Security will
generally not be subject to withholding of United States federal income tax on
any gain realized upon the sale or other disposition of a Preferred Security.
On April 15, 1996, proposed Treasury Regulation (the "1996 Proposed
Regulations") were issued which, if adopted in final form, could affect the
United States taxation of United States Alien Holders. The 1996 Proposed
Regulations are generally proposed to be effective for payments after December
31, 1997, regardless of the issue date of the instrument with respect to which
such payments are made, subject to certain transition rules. It cannot be
predicted at this time whether the 1996 Proposed Regulations will become
effective as proposed or what, if any, modifications may be made to them.
Prospective investors are urged to consult their tax advisors with respect to
the effect the 1996 Proposed Regulations may have if adopted.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
Under current United States federal income tax law, information reporting
requirements apply to interest (including original issue discount) and principal
payments made to, and to the proceeds of sales before maturity by, certain
non-corporate persons. In addition, a 31% backup withholding tax applies if a
non-corporate person (i) fails to furnish such person's Taxpayer Identification
Number ("TIN") (which, for an individual, would be his or her Social Security
Number) to the payor in the manner required, (ii) furnishes an incorrect TIN and
the payor is so notified by the Service, (iii) is notified by the Service that
such person has failed properly to report payments of interest and dividends or
(iv) in certain circumstances, fails to certify, under penalties of perjury,
that such person has not been notified by the Service that such person is
subject to backup withholding for failure properly to report interest and
dividend payments. Backup withholding does not apply with respect to payments
made to certain exempt recipients, such as corporations and tax-exempt
organizations.
In the case of a United States Alien Holder, backup withholding and
information reporting do not apply to payments of principal and interest on a
Preferred Security with respect to which such Holder has provided the required
certification under penalties of perjury that such Holder is a United States
Alien Holder or has otherwise established an exemption, provided that certain
conditions are satisfied.
In general, (i) principal or interest payments on a Preferred Security
collected outside the United States by a foreign office of a custodian, nominee
or other agent acting on behalf of a beneficial owner of a Preferred Security
and (ii) payments on the sale, exchange or retirement of a Preferred Security to
or through a foreign office of a broker are not subject to backup withholding or
information reporting.
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However, if such custodian, nominee, agent or broker is a United States person,
a controlled foreign corporation for United States tax purposes, or a foreign
person 50% or more of whose gross income is effectively connected with the
conduct of a United States trade or business for a specified three-year period,
such custodian, nominee, agent or broker may be subject to certain information
reporting (but not backup withholding) requirements with respect to such
payments.
Backup withholding tax is not an additional tax. Rather, any amounts
withheld from a payment to a person under the backup withholding rules are
allowed as a refund or a credit against such person's United States federal
income tax, provided that the required information is furnished to the Service.
POSSIBLE TAX LAW CHANGES
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill"), the
revenue portion of President Clinton's budget proposal, was released. The Bill
would, among other things, generally deny interest deductions for interest on an
instrument, issued by a corporation, that has a maximum weighted average
maturity of more than 40 years. The Bill would also generally deny interest
deductions for interest on an instrument, issued by a corporation, that has a
maximum term of more than 20 years and that is not shown as indebtedness on the
separate balance sheet of the issuer or, where the instrument is issued to a
related party (other than a corporation), where the holder or some other related
party issues a related instrument that is not shown as indebtedness on the
issuer's consolidated balance sheet. For purposes of determining the weighted
average maturity or the term of an instrument, any right to extend would be
treated as exercised. The above-described provisions of the Bill were proposed
to be effective generally for instruments issued on or after December 7, 1995.
If either provision were to apply to the Junior Subordinated Debentures, ALH
would be unable to deduct interest on the Junior Subordinated Debentures.
However, on March 29, 1996, the Chairmen of the Senate Finance and House Ways
and Means Committees issued a joint statement to the effect that it was their
intention that the effective date of the President's legislative proposals, if
adopted, will be no earlier than the date of appropriate Congressional action.
ALH believes that, under current law, it will be able to deduct interest on the
Junior Subordinated Debentures. There can be no assurance, however, that current
or future legislative proposals or final legislation will not affect the ability
of ALH to deduct interest on the Junior Subordinated Debentures. Such a change
could give rise to a Tax Event, which may permit ALH to cause a redemption of
the Preferred Securities. See "Description of the Preferred
Securities--Redemption--Special Event Redemption or Distribution." Such a tax
law change would not alter the United States federal income tax consequences of
the purchase, ownership and disposition of Preferred Securities to holders
thereof.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA")
and/or the Code impose certain restrictionS on (a) employee benefit plans (as
defined in Section 3(3) of ERISA), (b) plans described in Section 4975(e)(1) of
the Code, including individual retirement accounts or Keogh Plans, (c) any
entities whose underlying assets include plan assets by reason of a plan's
investment in such entities (each of (a), (b) and (c) a "Plan") and (d) persons
who have certain specified relationships to such Plans ("Parties-in-Interest"
under ERISA and Disqualified Persons" under the Code).
ERISA also imposes certain duties on persons who are fiduciaries of Plans
subject to ERISA. In addition, ERISA and the Code prohibit a broad range of
transactions ("Prohibited Transactions") between a Plan and Parties-in-Interest
or Disqualified Persons with respect to such Plans.
A regulation issued under ERISA (the "ERISA Regulation") provides that
assets of an entity will not be plan assets of a Plan which purchases an equity
interest in the entity if the equity interest is a "publicly-offered security"
(the "Publicly-Offered Security Exception") or certain exceptions apply.
Accordingly, if the Publicly-Offered Security Exception applies to the Preferred
Securities, the underlying assets of the Issuer will not be considered to be
plan assets and the activities of the Issuer will not, in general, be subject to
the restrictions of ERISA or the Code. The Publicly-Offered Security Exception
applies if the equity interest is (1) "freely transferable," (2) part of a class
of securities that is "widely held" (i.e., held by 100 or more investors
independent of the issuer and of each other) and (3) either (a)
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part of a class of securities registered under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, or (b) sold to the Plan as part of a public
offering pursuant to an effective registration statement under the Securities
Act of 1933 and the class of which such equity interest is a part is timely
registered under the Securities Exchange Act of 1934. It is expected that the
Preferred Securities will qualify for the Publicly-Offered Security Exception
because the Preferred Securities may be transferred at any time, will be
registered as described above and, although the Issuer will not know the
identity or number of investors holding Preferred Securities, it is expected,
and the Issuer has no reason to believe otherwise, that the Preferred Securities
will be owned by at least 100 independent investors.
Nevertheless, even if the underlying assets of the Issuer are not plan
assets, because of the activities of ALH or the activities of its affiliates,
ALH may be deemed to be a Party-in-Interest or Disqualified Person with respect
to certain Plans. In addition, (i) the net proceeds of the issuance of the
Preferred Securities will be used by the Issuer to purchase the Junior
Subordinated Debentures from ALH and (ii) ALH will agree to pay the Guarantee
Payments to the holders of the Preferred Securities. If the Preferred Securities
are acquired and held by a Plan with respect to which ALH is a Party-in-Interest
or Disqualified Person, such acquisition and holding could be deemed to be a
direct or indirect Prohibited Transaction. Such transactions may, however, be
exempt from the penalties otherwise applicable to such transactions by reason of
the existence of one or more statutory or administrative exemptions such as
those described below. If the conditions of one or more of these exemptions (or
some other applicable exemption) are met, then the acquisition and holding of
the Preferred Securities by or on behalf of a Plan with respect to which ALH is
a Party-in-Interest or Disqualified Person should be exempt from the penalties
applicable to a Prohibited Transaction under ERISA and the Code. Such
administrative exemptions may apply with respect to Plan assets held, managed
and/or invested by, inter alia, certain bank collective investment funds,
insurance company pooled separate accounts and qualified professional asset
managers, as set forth in a series of administrative exemptions (Prohibited
Transaction Exemption ("PTE") 91-38, 56 FR 31966, June 12, 1991, PTE 90-1, 55 FR
2891, January 29, 1990, and PTE 84-14, 49 FR 22157, May 25, 1984, respectively).
If the conditions of one or more of these exemptions (or some other applicable
exemption) are met, then the acquisition and holding of the Preferred Securities
by or on behalf of a Plan should be exempt from certain of the prohibited
transactions provisions of ERISA and the Code. It should be noted, however, that
even if the conditions specified in one or more of these exemptions are met, the
scope of relief provided by such exemptions may not necessarily cover all acts
that might be construed as prohibited transactions under ERISA and the Code.
Prior to making an investment in the Preferred Securities, a Plan investor
must determine whether ALH is a Party-in-Interest or Disqualified Person with
respect to such Plan and, if so, whether such transaction is subject to one or
more statutory or administrative exemptions, including those described above.
Prior to making an investment in the Preferred Securities, prospective
investors should consult with their legal advisors concerning the impact of
ERISA and the Code and the potential consequences of such investment with
respect to their specific circumstances.
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OWNERSHIP OF COMMON STOCK
OWNERSHIP OF CLASS A COMMON STOCK
Immediately prior to the Common Stock Offerings there will be
million issued and outstanding shares of Class A Common Stock, all of which will
be owned by AmerUs Group. Other than such shares, as of the date of this
Prospectus no shares of Class A Common Stock were beneficially owned by any
person, including any director or officer of the Company or AmerUs Life.
OWNERSHIP OF CLASS B COMMON STOCK
Immediately prior to the Common Stock Offerings, there will be five million
issued and outstanding shares of Class B Common Stock, all of which will be
owned by AmerUs Group. Pursuant to ALH's Articles of Incorporation, no shares of
Class B Common Stock may be owned by any person other than AMHC, a subsidiary of
AMHC or another mutual insurance holding company or intermediate holding company
as authorized by applicable law.
CLASS A COMMON STOCK SUBSCRIPTIONS BY MANAGEMENT
Directors and officers of the Company may subscribe for Shares in the
Subscription Offering if they are eligible policyowners of AmerUs Life. The
terms pursuant to which directors and officers of the Company may obtain shares
in the Subscription Offering are identical to the terms for other policyowners.
In addition, directors and officers as a group would be limited under rules
recently proposed by the Iowa Commissioner to purchasing no more than five
percent of the shares offered in any offering of common stock made by the
Company.
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UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
ALH, AmerUs Life and the Issuer have agreed that the Issuer will issue and sell
to each of the Underwriters named below, and each of such Underwriters, for whom
Goldman, Sachs & Co. are acting as representatives, has severally agreed to
purchase from the Issuer the respective number of Preferred Securities set forth
opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITER SECURITIES
- --------------------------------------------------------------------------------- -----------
<S> <C>
Goldman, Sachs & Co..............................................................
-----------
Total........................................................................ 3,000,000
-----------
-----------
</TABLE>
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all the Preferred Securities
offered hereby, if any are taken.
The Underwriters propose to offer the Preferred Securities in part directly
to the public at the initial public offering price set forth on the cover page
of this Prospectus and in part to certain securities dealers at such price less
a concession of $ per Preferred Security. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per Preferred
Security to certain brokers and dealers. After the Preferred Securities are
released for sale to the public, the offering price and other selling terms may
from time to time be varied by the representatives.
The Issuer has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 450,000
additional Preferred Securities solely to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of Preferred Securities to be purchased
by each of them, as shown in the foregoing table, bears to the 3,000,000
Preferred Securities offered.
In view of the fact that the proceeds from the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures issued by
ALH, the Underwriting Agreement provides that ALH will pay as Underwriters'
Compensation for the Underwriters' arranging the investment therein of such
proceeds an amount of $ per Preferred Security for the accounts of the
several Underwriters.
ALH and the Issuer have agreed that, during the period beginning from the
date of the Underwriting Agreement and continuing to and including the earlier
of (i) the termination of trading restrictions on the Preferred Securities, as
determined by the Underwriters, or (ii) 30 days after the closing date, they
will not offer, sell, contract to sell, or otherwise dispose of any Preferred
Securities, any other interests of the Issuer, or any preferred stock or any
other securities of the Issuer or ALH which are substantially similar to the
Preferred Securities, including any guarantee of such security, or any
securities convertible into or exchangeable for or representing the right to
receive Preferred Securities, preferred stock or such substantially similar
securities of either the Issuer or ALH, without the prior written consent of
Goldman, Sachs & Co., except for the Preferred Securities, the Common Securities
and the Guarantee.
Prior to this offering, there has been no public market for the Preferred
Securities. The Issuer intends to have the Preferred Securities approved for
listing on the New York Stock Exchange under the symbol . Trading of the
Preferred Securities is expected to commence within a thirty-day period after
the initial delivery of the Preferred Securities. The representatives of the
Underwriters have advised ALH that they intend to make a market in the Preferred
Securities prior to commencement of trading, but are not obligated to do so and
may discontinue any such market making at any time without notice. No assurance
can be given as to the liquidity of the trading market for the Preferred
Securities.
127
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The Issuer, ALH and AmerUs Life have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act.
Certain of the Underwriters engage in transactions with, and from time to
time have performed services for, the Company in the ordinary course of
business. Goldman, Sachs & Co. have rendered financial advisory services to the
Company from time to time and have received customary fees for their services.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Preferred
Securities, the enforceability of the Trust Agreement and the formation of the
Issuer will be passed upon by Richards, Layton & Finger, special Delaware
Counsel to ALH and the Issuer. The validity of the Guarantee and the Junior
Subordinated Debentures will be passed upon for ALH by Sidley & Austin, and for
the Underwriters by Sullivan & Cromwell, New York, New York. Sidley & Austin and
Sullivan & Cromwell will rely on the opinion of Richards, Layton & Finger as to
matters of Delaware law and upon the opinion of James A. Smallenberger, Esq.,
Senior Vice President and Secretary of ALH, as to matters of Iowa law. Certain
matters relating to the United States federal income tax considerations will be
passed upon for ALH by Sidley & Austin.
EXPERTS
The Consolidated Financial Statements and Schedules of the Company as of
December 31, 1995 and 1994 and for each of the years in the three-year period
ended December 31, 1995, have been included herein and in the Registration
Statement in reliance upon the reports of KPMG Peat Marwick LLP, independent
auditors, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
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GLOSSARY OF CERTAIN INSURANCE AND
OTHER DEFINED TERMS
THE FOLLOWING GLOSSARY INCLUDES DEFINITIONS OF CERTAIN INSURANCE AND OTHER
DEFINED TERMS.
<TABLE>
<S> <C>
ACQUISITION COSTS............................ Costs including commissions, policy issue and
underwriting costs, and other costs incurred
to acquire or renew traditional life
insurance, universal life insurance and
annuity products.
AFFILIATE.................................... With respect to any person, any other Person
which directly or indirectly controls, is
controlled by or is under common control with
such Person.
A.M. BEST.................................... A.M. Best Company, Inc. A.M. Best financial
condition ratings are opinions of an
insurance company's financial strength,
operating performance and ability to meet its
obligations to policyowners. Such ratings are
based upon a comprehensive review of a
company's financial performance, which is
supplemented by certain data, including
responses to A.M. Best's questionnaires,
quarterly NAIC filings, state insurance
department examination reports, loss reserve
reports, annual reports and reports filed
with state insurance departments. A.M. Best
undertakes a quantitative evaluation based on
profitability, leverage and liquidity and a
qualitative evaluation based upon the
composition of a company's book of business
or spread of risk, the amount,
appropriateness and soundness of reinsurance,
the quality, diversification and estimated
market value of its assets, the adequacy of
its loss reserves and policyowners' surplus
and the experience and competence of its
management. A.M. Best Company, Inc. uses the
following rating scale:
</TABLE>
<TABLE>
<S> <C> <C>
A++ and A+ Superior
A and A- Excellent
B++ and B+ Very Good
B and B- Adequate
C++ and C+ Fair
C and C- Marginal
D Very Vulnerable
E Under State Supervision
F In Liquidation
</TABLE>
<TABLE>
<S> <C>
ANNUALIZED PREMIUM........................... The expected premium payment for a 12-month
period for each policy, excluding single
premium policies. Actual premium payments may
be higher or lower than annualized premiums.
ANNUITY...................................... A contract that pays a periodic income
benefit for the life of a person (the
annuitant), the lives of two or more persons
or a specific period of time.
</TABLE>
129
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ASSET VALUATION RESERVE OR AVR............... The asset valuation reserve adopted by the
NAIC in December 1991 to replace the MSVR.
AVR appears as a liability on a life
insurer's statutory financial statements
beginning with the insurer's statutory
financial statements for 1992. AVR
establishes STATUTORY RESERVES for debt
securities, preferred stocks, common stock,
mortgage loans, equity real estate and joint
ventures and other invested assets. AVR
generally captures all realized and
unrealized gains and losses on such assets,
other than those resulting from changes in
interest rates. AVR has no effect on
financial statements prepared in conformity
with GAAP.
CAREER GENERAL AGENTS........................ Individuals who are in charge of an insurance
agency. They are independent contractors, who
are responsible for recruiting, training and
developing new agents in addition to
supervising experienced agents in their
agency; however, they may personally sell new
business. Career General Agents are paid
based on the business produced by their
agency and are also paid allowances to cover
their agency expenses and additional amounts
to compensate them for recruiting, training
and developing new agents.
CAREER GENERAL AGENCY SYSTEM................. The network of career general agencies
through which the Company distributes its
insurance and annuity products.
CEDING....................................... The reinsuring of all or a portion of an
insurer's risk with another insurer.
CLOSED BLOCK................................. The closed block of participating business to
be established, as of the Effective Date, by
AmerUs Life for the exclusive benefit of the
policies included therein.
CLOSED BLOCK BUSINESS........................ The policies within the classes specified in
the Plan (which policy classes constitute all
of the classes of individual traditional life
insurance policies and all universal life
insurance policies for which AmerUs Life had
a dividend scale in effect prior to the
Reorganization), but only to the extent such
policies are in force on the Effective Date.
CONVEXITY.................................... A measure of the shape of the price/yield
curve. Convexity explains the difference
between the prices estimated by standard
duration and the actual market prices of a
security resulting from a change in
market-required yield.
COST OF INSURANCE............................ The mortality charges assessed against
universal life insurance policies.
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130
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CREDITING RATES.............................. Interest rates applied to life insurance
policies and annuity contracts, whether
contractually guaranteed or currently
declared for a specified period.
DEFERRED FIXED ANNUITY....................... A fixed annuity that has a deferred or
accumulation period from the time of premium
payment(s) to the payout of a periodic income
benefit.
DIFFERENTIAL EARNINGS AMOUNT................. The amount of additional income which is
imputed to a mutual life insurance company
under Section 809 of the Internal Revenue
Code based on a comparison of the current
one-year average of mutual life insurance
company earnings rates with an adjusted
average of stock life insurance company
earnings rates for the previous three years.
The tax resulting from this additional income
is referred to as the "equity add-on tax."
DIVIDEND SCALE............................... The actuarial formula used by life insurance
companies to determine amounts payable as
dividends on participating policies based on
experience factors relating to, among other
things, investment results, mortality, lapse
rates, expenses and policy loan interest and
utilization rates.
DUFF & PHELPS................................ Duff & Phelps Credit Rating Co. Duff &
Phelp's claims-paying ability ratings are
opinions of an operating insurance company's
future ability to pay its policy and contract
obligations in a timely fashion. Duff &
Phelps claims-paying ability ratings are
based on certain qualitative and quantitative
factors including, among other factors, the
economic fundamentals of the company's
principal lines of business, the company's
competitive position and asset and liability
management practices. Duff & Phelps Credit
Rating Co. uses the following rating scale:
</TABLE>
<TABLE>
<S> <C> <C>
AAA Highest claims-paying
ability
AA+, AA and AA- Very high claims-paying
ability
A+, A and A- High claims-paying
ability
BBB+, BBB Adequate claims-paying
and BBB- ability
BB+, BB and BB- Uncertain claims-paying
ability
B+, B and B- Possessing risk that
policyowners and
contractholders will
not be paid when due
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131
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CCC+, CCC and Substantial risk that
CCC- policyowners and
contractholders will
not be paid when due
DD Company is under order
of liquidation
</TABLE>
<TABLE>
<S> <C>
EQUITY ADD-ON TAX (OR DIFFERENTIAL EARNINGS
TAX)........................................ The tax resulting from the differential
earnings amount, which is the amount of
additional income imputed to a mutual life
insurance company under Section 809 of the
Internal Revenue Code based on a comparison
of the current one-year average of mutual
life insurance company earnings rates with an
adjusted average of stock life insurance
company earnings rates from the previous
three years.
FIRST YEAR ANNUALIZED PREMIUMS............... The expected premium payment for the first
policy year for each policy, excluding single
premium policies. Actual premium payments may
be higher or lower than first year annualized
premiums. This is a common insurance industry
measurement of sales achievement.
FIXED ANNUITY................................ Contract that guarantees that a specific sum
of money will be paid in the future, usually
as monthly income, to an annuitant. The
dollar amount paid to the annuitant will not
fluctuate regardless of adverse changes in
the insurance company's mortality experience,
investment return and expenses.
GAAP......................................... United States generally accepted accounting
principles for life insurance companies.
GENERAL ACCOUNT.............................. All investment accounts maintained by an
insurer, other than the separate accounts.
IMR.......................................... The interest maintenance reserve adopted by
the NAIC in December 1991. IMR appears as a
liability on a life insurer's statutory
financial statements beginning with the
insurer's statutory financial statements for
1992 and applies to all types of fixed income
investments (bonds, preferred stock,
mortgage-backed securities and mortgage
loans). IMR captures the net gains or losses
arising from changes in the overall level of
interest rates which are realized upon the
sale of such investments, and IMR amortizes
these net realized gains into income over the
remaining life of each investment sold. IMR
has no effect on financial statements
prepared in conformity with GAAP.
IN FORCE..................................... A life insurance policy or annuity contract
that has not expired.
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132
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INTEREST-SENSITIVE PRODUCTS.................. Insurance and annuity products for which
interest in excess of guaranteed levels is
credited to the policy.
MEMBER....................................... A person having rights or interests arising
under AMHC's articles of incorporation or
otherwise by law in respect of each insurance
policy or annuity contract of AmerUs Life,
including, but not limited to, any right to
vote.
MOODY'S...................................... Moody's Investors Service, Inc. Moody's
financial strength ratings are opinions of an
operating insurance company's ability to
discharge senior policyowner claims and
obligations pursuant to its insurance
policies. Moody's financial strength ratings
are based on information provided by the
company and federal and state regulators.
Moody's Investors Service, Inc. uses the
following rating scale:
</TABLE>
<TABLE>
<S> <C> <C>
Aaa Exceptional
Aa1, Aa2 and Aa3 Excellent
A1, A2 and A3 Good
Baa1, Baa2 and Adequate
Baa3
Ba1, Ba2 and Ba3 Questionable
B1, B2 and B3 Poor
Caa Very poor
Ca Extremely poor
C Lowest
</TABLE>
<TABLE>
<S> <C>
MORBIDITY.................................... The relative incidence of disability or
sickness due to disease or physical
impairment.
MORTALITY.................................... The relative incidence of death of life
insureds or annuitants.
MSVR......................................... Mandatory securities valuation reserve
required prior to 1992 statutory financial
statements by state insurance regulatory
authorities. MSVR was established as a
liability on a life insurer's statutory
financial statements and was intended to
absorb realized and unrealized gains and
losses sustained from time to time on a
portion of an insurer's general account debt
securities and preferred stock portfolios.
MSVR had no effect on financial statements
prepared in conformity with GAAP. The MSVR
was replaced by the AVR and IMR effective
with respect to an insurer's statutory
financial statements for 1992.
</TABLE>
<TABLE>
<S> <C>
NAIC......................................... The National Association of Insurance
Commissioners, an association of the chief
insurance supervisory officials of each
state, territory and insular possession of
the United States.
</TABLE>
133
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NET LEVEL METHOD............................. Reserve method used for traditional life
insurance. Such method defines the reserve as
the excess of the present value of future
guaranteed benefits over the present value of
future net premiums.
PARTICIPATING WHOLE LIFE POLICIES OR
PARTICIPATING WHOLE LIFE INSURANCE.......... Whole life policies or insurance under which
the owner thereof is eligible to share in the
earnings of the insurer through dividends.
PERSISTENCY.................................. The percentage of life insurance policies or
annuity contracts remaining in force from
period to period.
PERSONAL PRODUCING GENERAL AGENTS OR PPGAS... Independent agents who sell products directly
to the consumer and write business directly
with insurance companies and who are
compensated primarily for personal
production.
PPGA SYSTEM.................................. The network of PPGAs through which the
Company distributes its insurance and annuity
products.
PLAN......................................... The Plan of Reorganization of American Mutual
Life, including all schedules and exhibits
thereto, pursuant to which American Mutual
Life reorganized into a mutual insurance
holding company structure, as such Plan may
be amended from time to time.
POLICY....................................... Generally, a life insurance policy
(including, without limitation, a pure
endowment contract) or annuity contract
issued by the Company.
PREMIUM...................................... Payments and considerations received on
insurance policies and annuity contracts
issued or reinsured by an insurance company.
Under GAAP, premiums on universal life and
deferred annuity contracts are not accounted
for as revenues.
REINSURANCE.................................. The practice whereby one party, called the
reinsurer or assuming company, in
consideration of a premium paid to such
party, agrees to indemnify another party,
called the ceding company or primary insurer,
for risks underwritten by the ceding company.
Reinsurance provides a primary insurer with
three major benefits: it reduces net
liability on individual risks; it helps to
protect against catastrophic losses; and it
helps to maintain acceptable surplus and
reserve ratios. Reinsurance provides a
primary insurer with additional underwriting
capacity in that the primary insurer can
accept larger risks and can expand the volume
of business it writes without increasing its
capital base. The ceding company remains
liable on its obligations under the policies
reinsured if the reinsurer fails to pay
claims on a reinsured policy.
</TABLE>
134
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<TABLE>
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RESERVES..................................... Liabilities established by insurers to
reflect the estimated discounted present
value of costs of claims, payments or
contract liabilities and the related expenses
that the insurer will ultimately be required
to pay in respect of insurance or annuities
it has written.
RISK-BASED CAPITAL REQUIREMENTS OR RBC....... Regulatory and rating agency targeted surplus
based on the relationship of statutory
surplus, with certain adjustments, to the sum
of stated percentages of each element of a
specified list of company risk exposures.
SFAS......................................... Statement of Financial Accounting Standards.
SECOND TO DIE WHOLE LIFE INSURANCE........... A whole life policy in which two persons are
named as insureds. The death benefit is paid
upon the death of the second to die of the
two insureds.
SEPARATE ACCOUNTS............................ Investment accounts maintained by an insurer
to which funds have been allocated for
certain policies under provisions of relevant
state law. The investments in each separate
account are maintained separately from those
in other separate accounts and the general
account. The investment results of the
separate account assets are passed through
directly to the separate account
policyowners, so that an insurer derives
management and other fees from, but bears no
investment risk on, these assets, except the
risk on a small number of products that
returns on separate assets will not meet the
relatively low minimum rate guaranteed on
these products.
SINGLE-PREMIUM LIFE INSURANCE................ A life insurance policy which requires a
single payment of the premium.
SINGLE-PREMIUM VARIABLE ANNUITIES............ A variable annuity contract which requires a
single payment of the premium.
STANDARD & POOR'S............................ Standard & Poor's Ratings Group. Standard &
Poor's claims-paying ability ratings are
opinions of an operating insurance company's
financial ability to meet its obligations
under its insurance policies. Standard &
Poor's claims-paying ability ratings are
based on current information provided by the
subject insurance company and other reliable
sources. Standard & Poor's Rating Group uses
the following rating scale:
</TABLE>
<TABLE>
<S> <C> <C>
AAA Superior
AA+, AA and AA- Excellent financial
security
A+, A and A- Good financial security
BBB+, BBB Adequate
and BBB-
BB+, Bb and BB- Financial security may
be adequate
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135
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<TABLE>
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B+, B and B- Vulnerable
CCC Extremely vulnerable
R Regulatory actions
BBBq, Bbq and Bq Qualified solvency
ratings
</TABLE>
<TABLE>
<S> <C>
STATUTORY ACCOUNTING PRACTICES............... Accounting practices prescribed or permitted
by the Iowa Department of Insurance.
STATUTORY RESERVES........................... Monetary amounts established by state
insurance law that an insurer must have
available to provide for future obligations
with respect to all policies. Statutory
reserves are liabilities on the balance sheet
of financial statements prepared in
conformity with Statutory Accounting
Practices.
STATUTORY SURPLUS............................ The excess of statutory admitted assets over
statutory liabilities as shown on an
insurer's statutory financial statements.
SURRENDERS AND WITHDRAWALS................... Relinquishment of life insurance policies and
annuity contracts for their entire net cash
surrender values and withdrawals of a portion
of such values.
SUPPLEMENTARY CONTRACT....................... An agreement by an insurer to retain the lump
sum payable under an insurance policy and to
make payments in accordance with the
settlement option chosen.
TERM LIFE INSURANCE.......................... Insurance protection during a certain number
of years but expiring without policy cash
value if the insured survives the stated
period.
TRADITIONAL LIFE INSURANCE................... Consists of whole life insurance and term
life insurance.
UNDERWRITING................................. The insurer's process of examining, accepting
or rejecting insurance risks, and classifying
those accepted, in order to charge the
appropriate premium for each accepted risk.
UNEARNED PREMIUM............................. The portion of an insurance premium paid
other than that which has paid for the
insurance protection already provided on a
policy.
UNIVERSAL LIFE INSURANCE..................... A form of life insurance where an insurance
account is maintained for each insurance
policy. Premiums, net of specified expenses,
are credited to the account, as is interest,
generally at a rate determined from time to
time by the insurer. Specific charges are
made against the account for the cost of
insurance protection and for the insurer's
expenses. The universal life form allows
considerable flexibility as to the amount and
timing of premium payments and for the level
of death benefits provided.
VARIABLE ANNUITY............................. Annuity in which premium payments are used to
purchase accumulation units. The value of a
unit
</TABLE>
136
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fluctuates in accordance with the investment
experience of a separate account; variable
annuity contracts typically include a general
account guaranteed interest investment
option. At the time of the payment of
benefits to the annuitant, the annuitant can
generally elect from a number of payment
options which provide either fixed or
variable benefit payments.
WHOLE LIFE INSURANCE OR WHOLE LIFE Insurance that may be kept in force for a
POLICIES.................................... person's entire life by paying one or more
premiums. It is paid for in one of three
different ways: (i) ordinary life insurance
(premiums are payable as long as the insured
lives), (ii) limited payment life insurance
(premiums are payable over a specified number
of years), and (iii) single premium life
insurance (a lump sum amount paid at the
inception of the policy). The insurance
policy pays a benefit (contractual amount
adjusted for items such as policy loans and
dividends, if any) at the death of the
insured. Whole life insurance also builds up
cash values.
</TABLE>
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
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PAGE
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Independent Auditors' Report............................................................................... F-2
Consolidated Balance Sheets as of June 30, 1996 (unaudited) and December 31, 1995 and 1994................. F-3
Consolidated Income Statements for the six months ended June 30, 1996 and 1995 (unaudited) and the years
ended December 31, 1995, 1994 and 1993.................................................................... F-4
Consolidated Statements of Policyowners' Equity for the six months ended June 30, 1996 (unaudited) and the
years ended December 31, 1995, 1994 and 1993.............................................................. F-5
Consolidated Statements of Cash Flows for the six months ended June 30, 1996 and 1995 (unaudited) and the
years ended December 31, 1995, 1994 and 1993.............................................................. F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
WHEN THE TRANSACTION REFERRED TO IN NOTE 1 OF NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS HAS BEEN CONSUMMATED, WE WILL BE ABLE TO RENDER THE
FOLLOWING REPORT.
KPMG PEAT MARWICK LLP
INDEPENDENT AUDITORS' REPORT
The Board of Directors
AmerUs Life Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of AmerUs Life
Holdings, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, policyowners' equity, and cash flows
for each of the years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AmerUs Life
Holdings, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in note 1 to the consolidated financial statements, the Company
implemented the provisions of the Statement of Financial Accounting Standards
(SFAS) No. 120, "Accounting and Reporting by Mutual Life Insurance Enterprises
and by Insurance Enterprises for Certain Long-Duration Participating Contracts,"
and in 1993 the Company implemented the provisions of SFAS 106, "Employers
Accounting for Postretirement Benefits Other Than Pensions," and SFAS 115,
"Accounting for Certain Investments in Debt and Equity Securities. Also, as
discussed in note 1 to the consolidated financial statements, the Company has
restated its consolidated financial statements to reflect the spin-off of a
wholly owned subsidiary, which resulted in a change in the subsidiaries
comprising the consolidated financial statements.
Des Moines, Iowa
July 1, 1996, except as to note 1,
which is as of October , 1996
F-2
<PAGE>
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
JUNE 30, JUNE 30, ---------- ----------
1996 1996
PRO FORMA ------------
AS ADJUSTED
FOR THE (UNAUDITED)
CAPITAL
CONTRIBUTION
(NOTE 15)
------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Investments (notes 2 and 5):
Securities available-for-sale at fair value:
Fixed maturity securities (amortized cost 1995--$2,951,249
and
1994--$2,663,985).......................................... $2,322,223 $2,326,904 $3,142,096 $2,566,768
Equity securities (cost 1995--$52,869 and 1994--$112,992)... 89,760 90,438 109,675 178,770
Short-term investments...................................... 23,163 23,163 39,353 8,529
Mortgage loans on real estate (notes 3 and 5)................. 243,323 278,328 353,597 447,663
Real estate................................................... 1,861 44,085 52,199 58,164
Policy loans.................................................. 63,586 63,586 220,044 209,512
Other investments............................................. 60,378 65,602 48,064 22,256
Closed block investments...................................... 932,014 932,014 -- --
------------ ------------ ---------- ----------
Total investments......................................... 3,736,308 3,824,120 3,965,028 3,491,662
Cash............................................................ -- -- 4,620 23,382
Accrued investment income....................................... 35,796 35,746 49,226 50,711
Premiums and fees receivable.................................... -- -- 6,908 6,220
Reinsurance receivables......................................... -- -- 1,392 1,169
Deferred policy acquisition costs (note 4)...................... 128,820 128,820 267,711 404,361
Deferred income taxes........................................... 3,600 3,600 -- --
Property and equipment (less accumulated depreciation 1995--
$19,229 and 1994--$20,133)..................................... 13,553 13,553 13,502 13,979
Other assets.................................................... 39,567 39,567 63,559 45,467
Closed block assets............................................. 228,574 228,574 -- --
------------ ------------ ---------- ----------
Total assets.............................................. $4,186,168 $4,273,980 $4,371,946 $4,036,951
------------ ------------ ---------- ----------
------------ ------------ ---------- ----------
LIABILITIES AND POLICYOWNERS' EQUITY
Liabilities:
Policy reserves and policyowner funds:
Future life and annuity policy benefits..................... $2,097,994 $2,097,994 $3,435,505 $3,309,529
Policyowner funds........................................... -- -- 56,474 51,464
------------ ------------ ---------- ----------
2,097,994 2,097,994 3,491,979 3,360,993
Checks drawn in excess of bank balances....................... 10,590 10,590 -- --
Accrued expenses.............................................. 9,588 9,588 11,100 15,677
Dividends payable to policyowners............................. -- -- 129,558 126,041
Policy and contract claims.................................... 12,828 12,828 16,617 9,803
Income taxes payable.......................................... 33,625 33,625 18,760 15,462
Deferred income taxes (note 6)................................ -- -- 48,623 1,482
Other liabilities............................................. 64,281 64,281 78,939 51,213
Long-term debt (note 5)....................................... 70,487 29,299 36,461 37,957
Closed block liabilities...................................... 1,511,766 1,511,766 -- --
------------ ------------ ---------- ----------
Total liabilities......................................... 3,811,159 3,769,921 3,832,037 3,618,628
------------ ------------ ---------- ----------
Policyowners' equity (note 11):
Unrealized appreciation of available-for-sale securities (note
2)........................................................... 19,456 19,456 108,714 15,320
Policyowners' surplus......................................... 355,553 484,553 431,195 403,003
------------ ------------ ---------- ----------
Total policyowners' equity................................ 375,009 504,009 539,909 418,323
------------ ------------ ---------- ----------
Commitments and contingencies (note 10)
Total liabilities and policyowners' equity................ $4,186,168 $4,273,980 $4,371,946 $4,036,951
------------ ------------ ---------- ----------
------------ ------------ ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
SIX MONTHS ENDED JUNE 30, ----------- ----------- -----------
--------------------------
1996
------------ 1995
(UNAUDITED) ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Insurance premiums............................ $ 123,342 $ 121,331 $ 244,087 $ 237,912 $ 226,360
Universal life and annuity product charges.... 29,272 29,508 57,370 56,362 57,473
Net investment income (note 2)................ 143,888 141,267 285,244 275,691 269,854
Realized gains (losses) on investments (note
2)........................................... 64,409 24,150 51,387 (19,930) 15,460
Other......................................... 1,330 251 5,390 2,391 2,498
------------ ------------ ----------- ----------- -----------
362,241 316,507 643,478 552,426 571,645
------------ ------------ ----------- ----------- -----------
Benefits and expenses:
Policyowner benefits.......................... 189,328 188,251 374,620 369,896 364,273
Underwriting, acquisition, and insurance
expenses..................................... 28,218 24,155 58,655 68,604 58,637
Amortization of deferred policy acquisition
costs (note 4)............................... 26,823 25,247 50,239 42,756 47,441
Dividends to policyowners..................... 26,324 23,964 49,414 45,039 45,519
------------ ------------ ----------- ----------- -----------
270,693 261,617 532,928 526,295 515,870
------------ ------------ ----------- ----------- -----------
Income before income taxes and cumulative
effect of change in accounting
principles............................... 91,548 54,890 110,550 26,131 55,775
Income tax expense (note 6)................... 33,627 20,888 41,202 19,464 21,352
------------ ------------ ----------- ----------- -----------
Income before cumulative effect of change in
accounting principles........................ 57,921 34,002 69,348 6,667 34,423
Cumulative effect of change in accounting
principle, net of tax (note 7)............... -- -- -- -- (3,214)
------------ ------------ ----------- ----------- -----------
Net income................................ $ 57,921 $ 34,002 $ 69,348 $ 6,667 $ 31,209
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF POLICYOWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
AND SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION)
OF AVAILABLE-
FOR-SALE TOTAL
SECURITIES POLICYOWNERS' POLICYOWNERS'
(NOTE 2) SURPLUS EQUITY
-------------- -------------- --------------
<S> <C> <C> <C>
Balance at January 1, 1993............................................ $ 50,768 $ 370,399 $ 421,167
Net income............................................................ -- 31,209 31,209
Net unrealized appreciation........................................... 8,058 -- 8,058
Dividend to American Mutual Holding Company (note 11)................. -- (310) (310)
Cumulative effect of change in accounting for investments (note 2).... 45,755 -- 45,755
-------------- -------------- --------------
Balance at December 31, 1993.......................................... 104,581 401,298 505,879
Net income............................................................ -- 6,667 6,667
Net unrealized depreciation........................................... (89,261) -- (89,261)
Dividend to American Mutual Holding Company (note 11)................. -- (4,962) (4,962)
-------------- -------------- --------------
Balance at December 31, 1994.......................................... 15,320 403,003 418,323
Net income............................................................ -- 69,348 69,348
Net unrealized appreciation........................................... 93,394 -- 93,394
Dividend to American Mutual Holding Company (note 11)................. -- (41,156) (41,156)
-------------- -------------- --------------
Balance at December 31, 1995.......................................... 108,714 431,195 539,909
Net income (unaudited)................................................ -- 57,921 57,921
Net unrealized depreciation (unaudited)............................... (89,258) -- (89,258)
Dividend to American Mutual Holding Company (unaudited)............... -- (4,563) (4,563)
-------------- -------------- --------------
Balance at June 30, 1996 (unaudited).................................. $ 19,456 $ 484,553 $ 504,009
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
SIX MONTHS ENDED JUNE 30, --------- --------- ---------
--------------------------
1996
------------ 1995
(UNAUDITED) ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................................... $ 57,921 $ 34,002 $ 69,348 $ 6,667 $ 31,209
Adjustments to reconcile net income to net cash provided
by operating activities:
Policyowner assessments on universal life and annuity
products.............................................. (29,272) (29,508) (57,370) (56,362) (57,473)
Interest credited to policyowner account balances...... 60,090 61,258 123,360 120,075 122,375
Realized investment (gains) losses..................... (64,409) (24,150) (51,387) 19,930 (15,460)
Change in:
Accrued investment income............................ 3,616 2,054 1,485 (1,250) 1,004
Reinsurance CEDED receivables........................ 192 684 (223) 666 (1,473)
Deferred policy acquisition costs.................... 565 (2,402) (7,491) (11,682) (1,259)
Liabilities for future policy benefits............... 31,652 36,784 94,856 94,862 111,619
Policy and contract claims and other policyowner
funds............................................... (3,789) 3,030 6,814 (2,828) 4,390
Income taxes:
Current............................................ 14,865 15,106 3,298 6,727 (14,619)
Deferred........................................... (4,224) (9,076) (3,105) 2,602 (10,034)
Other, net............................................. (15,012) 17,536 22,437 (7,057) 3,366
------------ ------------ --------- --------- ---------
Net cash provided by operating activities.............. 52,195 105,318 202,022 172,350 173,645
------------ ------------ --------- --------- ---------
Cash flows from investing activities:
Purchase of fixed maturities available for sale.......... (765,036) (726,063) (887,971) (886,236) (817,520)
Maturities, calls, and principal reductions of fixed
maturities available for sale........................... 686,987 606,086 582,980 591,965 650,108
Purchase of equity securities............................ (66,921) (54,112) (117,345) (69,813) (846,038)
Proceeds from sale of equity securities.................. 84,982 73,841 178,115 48,117 825,223
Proceeds from repayment and sale of mortgage loans....... 62,248 16,068 112,484 234,722 61,131
Purchase of mortgage loans............................... -- -- (37,328) (78,830) (73,704)
Purchase of real estate and other invested assets........ -- -- (28,490) (31,515) (3,825)
Proceeds from sale of real estate and other invested
assets.................................................. 7,240 1,166 31,484 18,806 2,822
Change in policy loans, net.............................. (5,675) (5,983) (10,532) (12,364) (7,498)
Tax on capital gains..................................... -- (188) (16,524) 5,136 (8,817)
Other assets, net........................................ 16,146 19,730 44,855 45,150 25,974
------------ ------------ --------- --------- ---------
Net cash provided by (used in) investing activities.... 19,971 (69,455) (148,272) (134,862) (192,144)
------------ ------------ --------- --------- ---------
Cash flows from financing activities:
Change in checks drawn in excess of bank balances........ 10,590 -- -- -- --
Deposits to policyowner account balances................. 91,918 144,945 272,431 260,172 169,118
Withdrawals from policyowner account balances............ (167,569) (147,540) (302,291) (208,313) (175,246)
Change in borrowed money, net............................ (7,162) (4,887) (1,496) (71,708) 20,974
Dividends to American Mutual Holding Company............. (4,563) (27,777) (41,156) (4,962) (310)
------------ ------------ --------- --------- ---------
Net cash (used in) provided by financing activities.... (76,786) (35,259) (72,512) (24,811) 14,536
------------ ------------ --------- --------- ---------
Net (decrease) increase in cash........................ (4,620) 604 (18,762) 12,677 (3,963)
Cash at beginning of year.................................. 4,620 23,382 23,382 10,705 14,668
------------ ------------ --------- --------- ---------
Cash at end of year........................................ $ -- $ 23,986 $ 4,620 $ 23,382 $ 10,705
------------ ------------ --------- --------- ---------
------------ ------------ --------- --------- ---------
Supplemental disclosure of cash activities:
Interest paid............................................ $ 400 $ 236 $ 684 $ 1,724 $ 331
------------ ------------ --------- --------- ---------
------------ ------------ --------- --------- ---------
Income taxes paid........................................ $ 35,000 $ 21,300 $ 51,900 $ 14,630 $ 45,172
------------ ------------ --------- --------- ---------
------------ ------------ --------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
AmerUs Life Holdings, Inc.'s (the Company) operations consist primarily of
marketing, underwriting, and distributing life insurance, annuities, and related
products to individuals throughout the United States. The Company's products are
sold through a career general agency system and a personal producing general
agency system. The life insurance and annuity operations are the Company's only
business segment.
ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
The Company was formed on August 1, 1996 in conjunction with a plan of
reorganization (the Reorganization) of the former American Mutual Life Insurance
Company (American Mutual Life). Pursuant to the Reorganization which became
effective on June 30, 1996 (the Effective Date), American Mutual Life was
converted to a mutual insurance holding company structure whereby American
Mutual Holding Company (AMHC), a mutual insurance holding company, was formed.
Additionally, American Mutual Life was converted to a stock life insurance
company and renamed AmerUs Life Insurance Company (AmerUs Life). All of the
initial shares of capital stock of AmerUs Life were issued to AMHC.
Subsequently, AMHC transferred all of the shares of AmerUs Life to the Company
in exchange for all of the initial shares of the Company.
American Mutual Life was previously known as Central Life Assurance Company.
American Mutual Life Insurance Company merged with and into Central Life
Assurance Company on December 31, 1994, with Central Life Assurance Company as
the surviving company existing under the name American Mutual Life Insurance
Company. The accompanying consolidated financial statements present the pooling
of interests of both companies.
In connection with the Reorganization of American Mutual Life into a mutual
insurance holding company structure, the nonlife insurance operations of
American Mutual Life (AmerUs Financial Services (AFS), formerly Lartnec
Investment Company), will be spun off and become a sister corporation to the
Company, also wholly owned by AMHC, prior to the effective date of the
subscription offering of common stock. The purpose of the spin-off, which is
planned by the Company during the fourth quarter of 1996, is to remove the
nonlife insurance operations from the Company. The accounts and operations of
AFS and its wholly owned subsidiaries are not included in the Company's
consolidated financial statements. All name references in the accompanying
consolidated financial statements and the notes thereto have been changed to
reflect the Reorganization. The effect of the change in the reporting entity was
to decrease (increase) net income by AFS' net income (loss) of $10,539,000,
($101,000), and $6,055,000 in 1995, 1994, and 1993, respectively.
The accompanying consolidated financial statements include only the accounts
and operations, after intercompany eliminations, of AmerUs Life Holdings, Inc.
and its wholly owned subsidiaries, principally, AmerUs Life Insurance Company
and American Vanguard Life Insurance Company (American Vanguard Life).
The Reorganization contained an arrangement, known as a closed block, to
provide for dividends on policies that were in force on the Effective Date and
were within the classes of individual policies for which the Company had a
dividend scale in effect at the time of the Reorganization. The closed block was
designed to give reasonable assurance to owners of affected policies that assets
will be available to support such policies, including maintaining dividend
scales in effect at the time of the Reorganization, if the experience underlying
such scales continues. The assets, including revenue therefrom, allocated to the
closed block will accrue solely to the benefit of the owners of policies
included in the block until the block is no longer in effect. The Company will
not be required to support the payment of dividends on closed block policies
from its general funds.
F-7
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
BASIS OF PRESENTATION
The accompanying consolidated financial statements of the Company and its
wholly owned subsidiaries have been prepared in conformity with GAAP which, as
to the insurance company subsidiaries, differ from statutory accounting
practices prescribed or permitted by regulatory authorities.
The insurance company subsidiaries have adopted SFAS 120, "Accounting and
Reporting by Mutual Life Insurance Enterprises and by Insurance Enterprises for
Certain Long-Duration Participating Contracts." SFAS 120 permits stock life
insurance companies to apply the provisions of the American Institute of
Certified Public Accountant's Statement of Position 95-1, "Accounting for
Certain Insurance Activities of Mutual Life Insurance Enterprises," to
participating life insurance contracts that meet the conditions in SFAS 120. The
accompanying consolidated financial statements have been restated for the
effects of implementing SFAS 120.
INTERIM FINANCIAL INFORMATION
The consolidated financial statements as of June 30, 1996, and for the
six-month periods ended June 30, 1996 and 1995, and related disclosures in these
notes have not been audited. The interim consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and notes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals unless
noted otherwise herein) considered necessary for a fair presentation have been
included. Operating results for the six-month period ended June 30, 1996, are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1996.
Summarized financial information of the closed block as of June 30, 1996, is
as follows (in thousands):
<TABLE>
<CAPTION>
(UNAUDITED)
-------------
<S> <C>
Assets:
Fixed maturities, at fair value.............................................. $ 769,881
Policy loans................................................................. 162,133
Accrued investment income.................................................... 9,864
Other assets................................................................. 16,475
Deferred acquisition costs................................................... 202,235
-------------
Total assets............................................................... $ 1,160,588
-------------
-------------
Liabilities:
Future life and annuity policy benefits...................................... $ 1,320,136
Policyowner funds............................................................ 60,638
Dividends payable to policyowners............................................ 130,992
-------------
Total liabilities.......................................................... $ 1,511,766
-------------
-------------
</TABLE>
F-8
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS
Investments in fixed maturity and equity securities that are to be held for
indefinite periods of time are reported as securities available for sale.
Securities available for sale are reported in the accompanying consolidated
financial statements at fair value. Any valuation changes resulting from changes
in the fair value of these securities are reflected as a component of
policyowners' equity. These unrealized gains or losses in policyowners' equity
are reported net of taxes and adjustments to deferred policy acquisition costs.
Premiums and discounts on fixed maturity securities are amortized or
accreted over the life of the related security as an adjustment to yield using
the effective interest method. Realized gains and losses are included in
earnings and are determined using the specific identification method. The
carrying value of investments is reduced to its estimated realizable value if a
decline in fair value is considered other than temporary with such reduction
charged to earnings.
Mortgage loans on real estate and other long-term investments are stated at
cost less amortized discounts and allowances for possible losses. Policy loans
are stated at their aggregate unpaid balances. Real estate acquired by
foreclosure is stated at the lower of cost or fair value less estimated costs to
sell.
Investments in real estate and mortgage loans on real estate are considered
impaired when the Company determines that collection of all amounts due under
the contractual terms is doubtful or carrying values exceed fair values. The
Company adjusts real estate and mortgage loans on real estate to their estimated
net realizable value at the point at which it determines an impairment is other
than temporary. In addition, the Company has established a valuation allowance
for mortgage loans on real estate and other invested assets. Valuation
allowances for other than temporary impairments in value are netted against the
asset categories to which they apply, and additions to valuation allowances are
included in total investment results.
INTEREST RATE SWAPS AND CAPS
The Company uses interest rate swaps and caps as part of its overall
interest rate risk management strategy for certain life insurance and annuity
products. Gains and losses on those instruments are included in the carrying
value of the underlying hedged investments, or anticipated investment
transactions, and are amortized over the remaining lives of the hedged
investments as adjustments to investment income. Any unamortized gains or losses
are recognized when the underlying investments are sold.
Interest rate swap contracts are used to convert the interest rate
characteristics (fixed or variable) of certain investments to match those of the
related insurance liabilities that the investments are supporting. The net
interest effect of such swap transactions is reported as an adjustment of
interest income as incurred.
Interest rate caps are used to limit the effects of changing interest rates
on yields of variable rate or short-term assets or liabilities. The initial cost
of any such agreement is amortized to other expense over the life of the
agreement. Periodic payments that are receivable as a result of the agreements
are accrued as an adjustment of interest income or benefits from the hedged
item.
POLICY ACQUISITION COSTS
Certain commissions, policy issue and underwriting costs, and other variable
costs incurred to acquire or renew traditional life insurance, universal life
insurance, and annuity products have been deferred. The amortization method of
deferred policy acquisition costs for traditional life insurance products is
different, dependent upon whether the contract is participating or
non-participating. Participating contracts are those which are expected to pay
dividends to policyowners in proportion to their
F-9
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
relative contribution to the Company's surplus. Deferred policy acquisition
costs for participating traditional life insurance are being amortized over the
life of the policies generally in proportion to the present value of estimated
gross margins. Non-participating traditional life insurance deferred policy
acquisition costs are being amortized over the premium-paying period of the
related policies in proportion to the ratio of annual premium revenues to total
anticipated premium revenues using assumptions consistent with those used in
computing policy benefit reserves. For universal life insurance and annuity
products, deferred policy acquisition costs are being amortized generally in
proportion to the present value of estimated gross margins from surrender
charges and investment, mortality, and expense margins. The amortization for
participating traditional life, universal life, and annuity products is adjusted
retrospectively when current or estimated future gross profits or margins on the
underlying policies vary from previous estimates. Deferred policy acquisition
costs are adjusted for the impact on estimated gross profits of net unrealized
gains and losses on securities.
RECOGNITION OF REVENUES
Premiums for traditional life insurance products (including those products
with fixed and guaranteed premiums and benefits and which consist principally of
whole life insurance policies, limited-payment life insurance policies, and
certain annuities with life contingencies) are recognized as revenues when due.
Amounts received as payments for universal life insurance policies and for
annuity products (including deferred annuities and annuities without life
contingencies) are not recorded as premium revenue. Revenues for such contracts
consist of policy charges for the COST OF INSURANCE, policy administration
charges, and surrender charges assessed against policyowner account balances
during the period. All insurance-related revenue is reported net of reinsurance
ceded.
FUTURE POLICY BENEFITS
The liability for future policy benefits for traditional life insurance is
computed using the NET LEVEL METHOD, utilizing statutory interest and mortality
assumptions. Reserve interest assumptions range from 2.00 percent to 7.25
percent. The weighted average assumed interest rate for all traditional life
policy reserves was 4.20 percent in 1995, 4.10 percent in 1994, and 4.00 percent
in 1993. Policy benefit claims are charged to expense in the period that the
claims are incurred. All insurance-related benefits, losses, and expenses are
reported net of reinsurance ceded.
Future policy benefit reserves for universal life insurance and annuity
products are computed under a retrospective deposit method and represent policy
account balances before applicable surrender charges. Policy benefits and claims
that are charged to expense include benefit claims incurred in the period in
excess of related policy account balances. The weighted average interest
crediting rate for universal life products was 6.67 percent in 1995, 6.44
percent in 1994, and 6.59 percent in 1993. The weighted average interest
crediting rate for annuity products was 6.16 percent in 1995, 6.41 percent in
1994, and 6.95 percent in 1993.
PARTICIPATING POLICIES
Participating policies entitle the policyowners to receive dividends based
on actual interest, mortality, morbidity, and expense experience for the related
policies. These dividends are distributed to the policyowners through an annual
dividend using current dividend scales which are approved by the board of
directors. Nearly 100 percent of traditional life policies are currently paying
dividends and traditional life policies represent 68 percent of the Company's
individual life policies in force.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and is depreciated principally
under the straight-line method.
F-10
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GUARANTY FUND ASSESSMENTS
The Company is subject to insurance guaranty laws in the states in which it
writes business. These laws provide for assessments against insurance companies
for the benefit of policyowners and claimants in the event of insolvency of
other life insurance companies. As of December 31, 1995, the Company has accrued
for the gross amount of guaranty fund assessments for known insolvencies net of
estimated recoveries of premium tax offsets.
BENEFIT PLAN COSTS
The Company recognizes pension costs for its defined benefit plans in
accordance with SFAS 87, "Employers' Accounting for Pensions." Pension costs are
funded according to regulations provided under the Internal Revenue Code.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Under SFAS 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," the cost of postretirement benefits must be recognized on an
accrual basis as employees perform services to earn the benefits. The Company
adopted SFAS 106 as of January 1, 1993. Prior to 1993, the cost of retiree
health care and life insurance benefits was recognized as an expense when paid.
INCOME TAXES
The Company and its subsidiaries, with the exception of American Vanguard
Life, file a consolidated federal income tax return with AFS and its
subsidiaries. The separate return method is used to compute the Company's
provision for federal income taxes. Deferred income tax assets and liabilities
are determined based on differences among the financial reporting and tax bases
of assets and liabilities and are measured using the enacted tax rates and laws.
PENDING ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued SFAS 121
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
Be Disposed Of." This statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable and an impairment loss must be recognized.
SFAS 121 is effective for the Company commencing January 1, 1996. The
Company believes that the adoption of this statement in 1996 will have an
immaterial impact on its results of operations, financial condition, and
liquidity.
BUSINESS RISKS
The Company operates in a business environment which is subject to various
risks and uncertainties. Such risks and uncertainties include interest rate
risk, legal and regulatory changes, and default risk.
Interest rate risk is the potential for interest rates to change, which can
cause fluctuations in the value of investments. To the extent that fluctuations
in interest rates cause the duration of assets and liabilities to differ, the
Company may have to sell assets prior to their maturity and realize losses.
Interest rate exposure for the investment portfolio is managed through
asset/liability management techniques which attempt to match the duration of the
assets with the estimated duration of the liabilities. The Company also utilizes
derivative investment contracts to manage interest rate risk.
The potential also exists for changes in the legal or regulatory environment
in which the Company operates, which can create additional costs and expenses
not anticipated by the Company in pricing its products. In other words,
regulatory initiatives or new legal theories may create costs for the Company
beyond those recorded in the financial statements. The Company mitigates this
risk by operating in a
F-11
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
geographically disperse area, which reduces its exposure to any single
jurisdiction, closely monitoring the regulatory environment to anticipate
changes, and by using underwriting practices which identify and minimize the
potential adverse impact of this risk.
Default risk is the risk that issuers of securities owned by the Company may
default or that other parties, including reinsurers, may not be able to pay
amounts due the Company. The Company minimizes this risk by adhering to a
conservative investment strategy, maintaining sound reinsurance and credit and
collection policies, and providing allowances or reserves for any amounts deemed
uncollectible.
(2) INVESTMENTS
On December 31, 1993, the Company adopted SFAS 115, "Accounting for Certain
Investments in Debt and Equity Securities," which expands the use of fair value
accounting for those securities that a company does not have positive intent and
ability to hold to maturity. Implementation of SFAS 115 increased policyowners'
equity by $45.8 million, which reflected the unrealized appreciation of fixed
maturity securities available for sale, net of related deferred policy
acquisition costs and deferred taxes.
The Company's investments are classified as available-for-sale securities
and are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
------------- ----------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Available-for-sale securities at
December 31, 1995:
Fixed maturity securities:
Corporate bonds.................. $ 1,977,567 $ 160,486 $ 6,208 $ 2,131,845
U.S. government bonds............ 65,513 1,652 -- 67,165
Foreign government bonds......... 20,149 2,267 -- 22,416
Mortgage-backed bonds............ 886,470 33,837 1,323 918,984
State and municipal bonds........ 1,550 136 -- 1,686
------------- ----------- ----------- -------------
$ 2,951,249 $ 198,378 $ 7,531 $ 3,142,096
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
Equity securities.................. $ 52,869 $ 57,380 $ 574 $ 109,675
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
Short-term investments............. $ 39,276 $ 77 $ -- $ 39,353
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
</TABLE>
F-12
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(2) INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
------------- ----------- ----------- -------------
(IN THOUSANDS)
Available-for-sale securities at
December 31, 1994:
<S> <C> <C> <C> <C>
Fixed maturity securities:
Corporate bonds.................. $ 1,754,413 $ 19,003 $ 73,277 $ 1,700,139
U.S. government bonds............ 47,682 44 390 47,336
Foreign government bonds......... 12,147 80 226 12,001
Mortgage-backed bonds............ 847,390 4,945 47,272 805,063
State and municipal bonds........ 2,353 10 134 2,229
------------- ----------- ----------- -------------
$ 2,663,985 $ 24,082 $ 121,299 $ 2,566,768
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
Equity securities.................. $ 112,992 $ 70,578 $ 4,800 $ 178,770
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
Short-term investments............. $ 8,529 $ -- $ -- $ 8,529
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
</TABLE>
The amortized cost and estimated fair value of investments in fixed maturity
securities at December 31, 1995, are summarized by stated maturity as follows:
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE
----------------------------
AMORTIZED
COST FAIR VALUE
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Maturity:
Due in 1996................................................... $ 36,689 $ 36,955
Due in 1997 - 2001............................................ 408,834 432,572
Due in 2002 - 2006............................................ 1,149,125 1,235,078
Due after 2006................................................ 470,131 518,507
Mortgage-backed securities...................................... 886,470 918,984
------------- -------------
$ 2,951,249 $ 3,142,096
------------- -------------
------------- -------------
</TABLE>
The foregoing data is based on the stated maturities of the securities.
Actual maturities will differ for some securities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
The ratings of the Company's fixed maturity securities at December 31, 1995,
using Standard & Poors rating service, are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Treasuries and AAA............................................. $ 983,804
<S> <C>
AA............................................................. 51,439
A.............................................................. 597,502
BBB............................................................ 1,313,014
BB............................................................. 167,366
Less than BB................................................... 28,971
----------
$3,142,096
----------
----------
</TABLE>
The Company's investment in non-income producing fixed maturity securities
and real estate was $9.7 million as of December 31, 1995.
F-13
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(2) INVESTMENTS (CONTINUED)
Major categories of investment income are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturity securities.............................. $ 231,208 $ 206,346 $ 201,203
Equity securities...................................... 6,311 7,821 5,834
Mortgage loans on real estate.......................... 33,738 55,181 57,031
Real estate............................................ 9,729 9,907 6,708
Policy loans........................................... 14,043 12,745 12,572
Other.................................................. 5,211 2,329 722
----------- ----------- -----------
Gross investment income............................ 300,240 294,329 284,070
Investment expenses.................................... 14,996 18,638 14,216
----------- ----------- -----------
Net investment income.............................. $ 285,244 $ 275,691 $ 269,854
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Investment expenses include depreciation on real estate of $2.9 million,
$2.0 million and $2.0 million in 1995, 1994, and 1993, respectively.
Realized gains and losses on investments and provisions for losses are
summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities:
Gross realized gains.................................. $ 18,652 $ 10,879 $ 18,679
Gross realized losses................................. (9,240) (36,423) (6,809)
Equity securities:
Gross realized gains.................................. 45,419 14,746 10,095
Gross realized losses................................. (3,634) (5,181) (2,887)
Other investments......................................... 812 (2,744) (642)
Net provision for losses--mortgage loans on real estate... (622) (1,207) (2,976)
--------- ---------- ---------
$ 51,387 $ (19,930) $ 15,460
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
The unrealized appreciation (depreciation) on invested assets available for
sale is reported as a separate component of policyowners' equity, reduced by
adjustments to deferred acquisition costs and a provision for deferred income
taxes.
A summary of the components of the net unrealized appreciation
(depreciation) on invested assets carried at fair value (in thousands) is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994 1993
----------- ---------- -----------
<S> <C> <C> <C>
Unrealized appreciation (depreciation):
Fixed maturity securities............................ $ 190,847 $ (97,217) $ 153,744
Equity securities.................................... 56,806 65,778 87,247
Short-term investments............................... 77 -- --
Other investments...................................... 6,335 (2,277) 211
Deferred policy acquisition costs...................... (88,039) 56,102 (81,492)
Deferred income taxes.................................. (57,312) (7,066) (55,129)
----------- ---------- -----------
$ 108,714 $ 15,320 $ 104,581
----------- ---------- -----------
----------- ---------- -----------
</TABLE>
F-14
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(2) INVESTMENTS (CONTINUED)
The change in unrealized appreciation (depreciation) on fixed maturity
securities was $288 million, ($251) million, and $154 million in 1995, 1994 and
1993, respectively; the corresponding amounts for equity securities were ($9)
million, ($21) million, and $11 million.
At December 31, 1995 and 1994, investments in fixed maturity securities with
a carrying amount of $2.4 million and $2.3 million, respectively, were on
deposit with state insurance departments to satisfy regulatory requirements.
No investment in any person or its affiliates exceeded 10 percent of
policyowners' equity at December 31, 1995.
(3) MORTGAGE LOANS ON REAL ESTATE
Mortgage loans on real estate consist almost entirely of commercial mortgage
loan investments, substantially all of which are made on a full recourse basis
and consist primarily of fixed-rate first mortgages on completed properties. The
following table sets forth additions, reductions from payments, and other
charges and foreclosures related to the mortgage loan portfolio (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Commercial loans:
Beginning balance................................................. $ 504,034 $ 723,602
Additions......................................................... 39,933 75,275
Payments and miscellaneous charges................................ (146,496) (280,871)
Foreclosed properties............................................. (18,057) (13,972)
------------ ------------
Ending balance.................................................... 379,414 504,034
Residential and other mortgage loans.............................. 4,250 9,178
Valuation allowance............................................... (30,067) (65,549)
------------ ------------
Total mortgage loans.......................................... $ 353,597 $ 447,663
------------ ------------
------------ ------------
</TABLE>
The Company manages its credit risk associated with these loans by
diversifying its mortgage portfolio by property type and geographic location and
by seeking favorable loan to value ratios on secured properties. The portfolio
credit risk for mortgage loans was concentrated in the following geographic
regions (dollar amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------
1995 1994
------------------------ ------------------------
NUMBER AMOUNT NUMBER AMOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Commercial:
California................................... 31 $ 69,946 42 $ 90,482
Florida...................................... 6 21,964 9 28,677
Iowa......................................... 56 95,837 66 108,944
Kansas....................................... 14 29,249 16 39,643
Texas........................................ 9 28,053 14 59,233
Washington................................... 8 15,172 10 28,949
Other........................................ 88 119,193 109 148,106
Residential.................................... 95 4,250 196 9,178
Valuation allowance............................ -- (30,067) -- (65,549)
--- ----------- --- -----------
307 $ 353,597 462 $ 447,663
--- ----------- --- -----------
--- ----------- --- -----------
</TABLE>
F-15
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(3) MORTGAGE LOANS ON REAL ESTATE (CONTINUED)
At December 31, 1995, the Company's investment in mortgage loans included
$77.4 million in loans that are considered to be impaired, for which the related
allowance for credit losses is $16.9 million. The average recorded investment in
impaired loans during the year ended December 31, 1995, was $86.9 million. For
the year ended December 31, 1995, the Company recorded $6.9 million in interest
income on those impaired loans.
No mortgage loan on any one individual property exceeds $14 million at
December 31, 1995.
Provisions for losses are summarized as follows :
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year............................. $ 65,549 $ 80,220 $ 81,040
---------- ---------- ---------
Provisions for losses - mortgage loans................... 622 1,207 2,976
Provision on mortgages sold/transferred to real estate... (36,104) (15,878) (3,796)
---------- ---------- ---------
Net decrease for year.................................. (35,482) (14,671) (820)
---------- ---------- ---------
Balance at end of year................................... $ 30,067 $ 65,549 $ 80,220
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
(4) DEFERRED POLICY ACQUISITION COSTS
A summary of the policy acquisition costs deferred and amortized are as
follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1995 1994 1993
------------ ----------- -----------
<S> <C> <C> <C>
Balance at beginning of year.......................... $ 404,361 $ 255,085 $ 335,318
Policy acquisition costs deferred..................... 57,730 54,438 48,700
Policy acquisition costs amortized.................... (50,239) (42,756) (47,441)
Change in unrealized (gain) loss on available-for-sale
securities........................................... (144,141) 137,594 (81,492)
------------ ----------- -----------
Balance at end of year................................ $ 267,711 $ 404,361 $ 255,085
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
The components of the deferred policy acquisition costs are as follows (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Universal life insurance and annuity products.......... $ 144,262 $ 224,078 $ 151,038
Participating traditional life insurance............... 103,250 160,780 86,132
Non-participating traditional life insurance........... 20,199 19,503 17,915
----------- ----------- -----------
$ 267,711 $ 404,361 $ 255,085
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Commissions represent over 85 percent of policy acquisition costs deferred.
F-16
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(5) DEBT
Debt at December 31, 1995 and 1994, consists of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Short-term:
Line of credit with Federal Home Loan Bank - interest is paid at a rate of
5.70% at December 31,1995.The agreement provides for maximum borrowings of
$50,000,000. The Company has assigned all Federal Home Loan Bank stock and has
assigned other securities as collateral on the line of credit................. $ -- $ 3,665
Long-term:
The Iowa Housing Finance Authority variable rate (5.35% at December 31,1995)
demand Multi-Family Housing Bond Series 1985-A................................ 8,813 8,948
Federal Home Loan Bank community investment long-term advances with a weighted
average interest rate of 6.54% at December 31, 1995 maturing at various dates
through July 2010............................................................. 11,765 --
The Housing and Redevelopment Authority of the City of St. Paul, Minnesota,
demand rental housing development revenue bonds Series 1985-A were repaid in
1995.......................................................................... -- 3,884
Class A certificate holders of 1988-1 REMIC with a weighted average interest
rate of 9% at December 31, 1995............................................... 15,883 21,268
Other............................................................................ -- 192
--------- ---------
$ 36,461 $ 37,957
--------- ---------
--------- ---------
</TABLE>
Maturities of long-term debt are as follows for each of the five years
ending December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Year ending December 31:
1996.......................................................................... $ 16,136
1997.......................................................................... 8,911
1998.......................................................................... 202
1999.......................................................................... 216
2000.......................................................................... 232
Thereafter.................................................................... 10,764
--------------
$ 36,461
--------------
--------------
</TABLE>
At December 31, 1995, the carrying value of the securities assigned to the
Federal Home Loan Bank as collateral on the line of credit and long-term
advances totaled $27 million. The bonds are collateralized by certain mortgage
loans held by the Company with a carrying value of $12 million at December 31,
1995.
Interest paid totaled $.6 million, $1.7 million and $.3 million in 1995,
1994, and 1993, respectively.
F-17
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(6) FEDERAL INCOME TAXES
Comprehensive federal income tax expense is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax expense on:
Operations......................................................... $ 41,202 $ 19,464 $ 21,352
Unrealized holding gains (losses) on available-for-sale
securities........................................................ 50,246 48,063 (28,975)
Accounting change for postretirement benefits...................... -- -- (1,731)
--------- --------- ---------
$ 91,448 $ 67,527 $ (9,354)
--------- --------- ---------
--------- --------- ---------
</TABLE>
The effective income tax rate on pre-tax income before cumulative effect of
changes in accounting principles is higher than the prevailing corporate federal
income tax rate and is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Corporate federal income tax rate...................................... 35.00% 35.00% 35.00%
Differential earnings amount........................................... -- 36.68 --
Tax-exempt investment income........................................... (.24) (1.66) (.59)
Cumulative effect of tax rate change................................... -- -- 1.57
Merger expenses........................................................ .48 2.29 --
Other items, net....................................................... 2.03 2.18 2.30
----- ----- -----
Effective tax rate................................................. 37.27% 74.49% 38.28%
----- ----- -----
----- ----- -----
</TABLE>
The differential earnings amount is an equity add-on tax which mutual life
insurance companies are required to pay. The amount is determined annually and
is calculated by comparing the earnings rate of mutual life insurance companies
and certain stock life insurance companies. In certain years, such as 1993 and
1995, the calculations have resulted in negative adjustments with no additional
tax amount to be paid.
The Company's federal income tax expense (benefit) is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current............................................................. $ 44,307 $ 16,862 $ 31,386
Deferred............................................................ (3,105) 2,602 (10,034)
--------- --------- ----------
Total federal income tax expense................................ $ 41,202 $ 19,464 $ 21,352
--------- --------- ----------
--------- --------- ----------
</TABLE>
F-18
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(6) FEDERAL INCOME TAXES (CONTINUED)
The significant components of net deferred income tax assets and liabilities
are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Deferred income tax assets:
Policy reserves and policyholder funds.................................... $ 106,813 $ 101,509
Policy acquisition costs capitalized for tax.............................. 26,588 21,208
Net unrealized depreciation on available-for-sale securities.............. -- 11,801
Deferred policy acquisition costs related to unrealized appreciation...... 30,813 --
Deferred compensation..................................................... 10,134 7,109
Other..................................................................... 23,344 31,422
------------ ------------
Total gross deferred income tax assets.................................. 197,692 173,049
Deferred income tax liabilities:
Deferred policy acquisition costs......................................... (124,513) (121,891)
Net unrealized appreciation on available-for-sale securities.............. (88,922) --
Deferred policy acquisition costs related to unrealized depreciation...... -- (19,636)
Reinsurance receivable.................................................... (23,403) (22,838)
Other..................................................................... (9,477) (10,166)
------------ ------------
Total gross deferred tax liability...................................... (246,315) (174,531)
------------ ------------
Net deferred income tax liability....................................... $ (48,623) $ (1,482)
------------ ------------
------------ ------------
</TABLE>
The Company is required to establish a "valuation allowance" for any portion
of the deferred tax asset that management believes will not be realized. In the
opinion of management, it is more likely than not that it will realize the
benefit of the net deferred tax asset, and, therefore, no such valuation
allowance has been established.
Federal income tax returns for the Company for years through 1987 are closed
to further assessment of taxes. Examinations of federal income tax returns for
1988 and 1989 have been made by the Internal Revenue Service. The Internal
Revenue Service is examining federal income tax returns of the Company for 1990
through 1992. Management believes adequate provisions have been made for any
additional taxes which may become due with respect to open years.
Income taxes paid by the Company totaled $51.9 million, $14.6 million, and
$45.2 million in 1995, 1994, and 1993, respectively.
(7) DEFINED BENEFIT PENSION PLANS
The Company has defined benefit pension plans which cover substantially all
of the Company's employees, as well as employees of certain companies directly
or indirectly owned by the Company, including AFS and its subsidiaries. The
plans provide for benefits based upon years of service and the
F-19
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(7) DEFINED BENEFIT PENSION PLANS (CONTINUED)
employee's compensation. Information for the Company's portion of the plans'
funded status is not available. The following information presents the plans'
funded status and pension cost, based upon measurement dates of December 31,
1995 and 1994 (prior to revaluation for curtailment of the plans):
<TABLE>
<CAPTION>
1995 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of accumulated benefit obligation, including
vested benefits of $45,505 and $37,331 in 1995 and 1994,
respectively........................................................ $ (45,505) $ (38,750)
---------- ----------
---------- ----------
Projected benefit obligation for service rendered to date-- includes
effect of increase in compensation levels........................... $ (45,505) $ (45,697)
Plans' assets at fair value, primarily consisting of mutual funds and
certificates of deposit............................................. 52,592 47,017
---------- ----------
Plans' assets in excess of projected benefit obligations............. 7,087 1,320
Unrecognized (gain) loss from actual experience difference from
assumed and effects of changes in assumptions....................... (2,745) 376
Unrecognized prior service cost...................................... -- (1,473)
Net unrecognized obligation at January 1, 1988 and 1987, being
amortized over 15 years............................................. -- 54
---------- ----------
Prepaid pension cost................................................. $ 4,342 $ 277
---------- ----------
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost--benefits earned during year................... $ 1,768 $ 2,325 $ 2,058
Interest cost on projected benefit obligation............... 3,609 3,282 3,155
Actual return on plan assets................................ (3,729) (3,632) (3,769)
Net amortization and deferral............................... (114) (37) 391
Special termination benefits due to early retirement........ -- 1,597 993
--------- --------- ---------
Defined benefit pension cost............................ $ 1,534 $ 3,535 $ 2,828
--------- --------- ---------
--------- --------- ---------
Company's portion of net pension cost....................... $ 696 $ 2,578 $ 1,267
--------- --------- ---------
--------- --------- ---------
</TABLE>
The weighted average discount rate was 7.25 percent, 8.00 percent, and 7.45
percent in 1995, 1994, and 1993, respectively. The rate of increase in future
compensation levels was 5.50 percent, 5.00 percent, and 6.9 percent in 1995,
1994, and 1993, respectively. The expected long-term rate of return on assets
was 8.00 percent, 7.50 percent, and 7.60 percent in 1995, 1994, and 1993,
respectively.
During 1993, the Company offered an early retirement plan to qualifying
employees based on age and years of service. The Company's portion of the loss
recognized for the years ending December 31, 1994 and 1993, from the curtailment
and special termination benefits for the plan was approximately $1.6 million and
$.4 million, respectively.
The Company has frozen the defined benefit pension plans effective December
31, 1995, and has recognized their portion of a curtailment gain amounting to
$6.2 million, or $3.1 million after federal excise taxes, as other revenues.
Effective January 1, 1996, the defined benefit pension plans have been replaced
by a defined contribution savings and retirement plan which also replaces the
Company's defined contribution pension plans.
F-20
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(7) DEFINED BENEFIT PENSION PLANS (CONTINUED)
DEFINED CONTRIBUTION PENSION PLANS
The Company has three defined contribution 401(k) plans which cover
substantially all employees. The Company's total contribution under the plans
amounted to $.4 million, $.6 million, and $.7 million for the years ended
December 31, 1995, 1994, and 1993, respectively. Effective January 1, 1996, the
defined contribution 401(k) plans together with the defined benefit pension
plans have been replaced by a single defined contribution savings and retirement
plan.
NONQUALIFIED PENSION PLAN
The Company also has a nonqualified pension plan covering substantially all
of its career and general agents. Accumulated benefits of the plan are unfunded
and have been included in other liabilities at December 31, 1995 and 1994,
amounting to $13.6 million and $10.9 million, respectively.
POSTRETIREMENT PLANS
The Company has postretirement benefit plans to provide certain eligible
participants and dependents with certain medical, dental, and life insurance
benefits. As discussed in note 1, the Company adopted SFAS 106 as of January 1,
1993. The Company's transition obligation as of January 1, 1993, amounted to
$3.2 million, net of income tax benefits of $1.7 million, and was recorded as a
cumulative effect adjustment to income. The Company's plan for medical and life
insurance benefits is combined with that of the subsidiaries of AMHC.
Information for the Company's individual funded status is not available. The
following information is presented on a combined plan basis accompanied by the
Company's portion of the net periodic postretirement benefit expense and sets
forth the combined postretirement benefit plans' funded status at December 31,
1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Fully eligible active plan participants................................ $ 491 $ 425
Other active plan participants......................................... 1,716 1,724
Retirees............................................................... 6,121 5,481
--------- ---------
Accumulated postretirement benefit obligation............................ 8,328 7,630
Unrecognized prior service cost.......................................... (27) --
Unrecognized (loss) gain................................................. (167) 124
--------- ---------
Accrued postretirement benefit cost...................................... $ 8,134 $ 7,754
--------- ---------
--------- ---------
</TABLE>
Net periodic postretirement benefit expense for 1995, 1994, and 1993
included the following components:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost....................................................... $ 248 $ 268 $ 153
Interest cost...................................................... 586 521 373
Net amortization and deferral...................................... 5 19 --
Curtailment and special termination benefits....................... -- -- 613
--------- --------- ---------
Net periodic postretirement benefit expense.................... $ 839 $ 808 $ 1,139
--------- --------- ---------
--------- --------- ---------
Company's portion of net periodic postretirement benefit expense... $ 639 $ 426 $ 727
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-21
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(7) DEFINED BENEFIT PENSION PLANS (CONTINUED)
The weighted-average annual assumed rate of increase in the per capita cost
of covered benefits (i.e., health care cost trend rate) for the medical and
dental plan is approximately 9.00 percent, 9.50 percent, and 10.00 percent for
1995, 1994, and 1993, respectively, and is assumed to decrease gradually to 5.50
percent over nine years and remain at that level thereafter. The health care
cost trend rate assumption has a significant effect on the amounts reported. For
example, increasing the assumed health care cost trend rates by one percentage
point in each year would increase the accumulated postretirement benefit
obligation for the medical plan as of December 31, 1995 and 1994, by 7.70
percent and 4.50 percent, respectively, and the aggregate of the service and
interest cost components of net periodic postretirement benefit expense for
1995, 1994, and 1993 by $.06 million, $.02 million, and $.03 million,
respectively, on a combined basis. The weighted-average discount rate used in
determining the accumulated postretirement benefit obligation was 7.25 percent,
8.00 percent, and 7.57 percent as of December 31, 1995, 1994, and 1993,
respectively.
(8) RELATED PARTY TRANSACTIONS
The Company has financed approximately $7.4 million at December 31, 1995, of
indebtedness of a subsidiary of AFS, receiving interest in the amount of $.8
million in both in 1995 and 1994. The Company pledged bonds and securities with
a carrying value of $107 million at December 31, 1995, as collateral for
affiliates' indebtedness, including the collateral pledged for the credit
arrangements discussed in note 5.
The following summarizes transactions of the Company with AFS and its
subsidiaries in 1995, 1994, and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Capital contributions...................................... $ 41,157 $ 4,959 $ 310
Management, administrative, data processing, and other
services fees charged to certain subsidiaries of AFS...... 9,164 8,162 7,500
Investments in bonds and accrued interest in AFS and
subsidiaries as of December 31............................ 12,868 17,242 20,813
Investments in mortgage loans from joint ventures in which
a subsidiary of AFS has a partnership interest at December
31........................................................ 16,275 30,775 40,500
Payable to a subsidiary of AFS for purchase of commercial
mortgage loans at December 31............................. 6,520 -- --
Transfer of partnership interests in certain joint ventures
to a subsidiary of AFS.................................... 1,697 -- --
Real estate management fees charged by a subsidiary of
AFS....................................................... 2,555 1,301 1,811
</TABLE>
(9) REINSURANCE
At December 31, 1995, the Company's maximum retention limit for acceptance
of risk on life insurance was $1 million. Retention limits for certain policies
issued prior to July 1, 1985, was $125,000 and for certain policies issued after
June 30, 1985, and before December 1, 1994, was $250,000. There are reinsurance
agreements with various companies whereby insurance in excess of these retention
limits are reinsured. Insurance in-force ceded to nonaffiliated companies under
risk sharing arrangements at December 31, 1995, 1994, and 1993, totaled
approximately $2,916 million, $3,265 million, and $3,247 million, respectively.
F-22
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(9) REINSURANCE (CONTINUED)
Total life premiums ceded amounted to $14.2 million, $13.7 million, and
$15.3 million in 1995, 1994, and 1993, respectively. Total life premiums assumed
amounted to $4.9 million, $7.9 million, and $8.5 million, respectively.
To the extent that reinsuring companies are unable to meet obligations under
these agreements, the Company remains liable. To limit the possibility of such
losses, the Company evaluates the financial condition of its reinsurers and
monitors concentration of credit risk.
(10) COMMITMENTS AND CONTINGENCIES
AFS and its subsidiaries have various credit lines and arrangements totaling
$94 million at December 31, 1995. Approximately $92 million was outstanding
under these agreements at December 31, 1995, which are collateralized by Company
investments of approximately $107 million.
The Company guarantees the payment of 60 percent of a pool of mortgage loans
and the related interest, previously sold to an unrelated party. The outstanding
balance of such mortgage loans subject to this repayment guarantee at December
31, 1995, was approximately $13 million.
The Company is party to financial instruments in the normal course of
business to meet the financing needs of its customers having risk exposure not
reflected in the balance sheet. These financial instruments include commitments
to extend credit and standby letters of credit. Commitments to extend credit are
agreements to lend to customers. Commitments generally have fixed expiration
dates and may require payment of a fee. Since many commitments expire without
being drawn upon, the total amount of commitments does not necessarily represent
future cash requirements. At December 31, 1995, outstanding commitments to
extend credit totaled approximately $6 million.
AmerUs Life is a defendant in a class action lawsuit which was brought on
August 31, 1995 in the District Court for Travis County, Texas. The complaint,
which seeks unspecified damages, was filed by former policyowners on behalf of
themselves and all similarly situated persons who purchased individual life
insurance policies which were underwritten and sold by AmerUs Life within Texas
and which were based upon uniform sales presentations and policy illustrations
from and after the mid-1980s using a "vanishing premium" concept. AmerUs Life
has denied the allegations contained in such complaint, including the existence
of a legitimate class. The litigation is in the discovery stage and a hearing on
certification of the class has not yet been held. The litigation is being
vigorously defended by AmerUs Life. The parties have engaged in court-ordered
mediation with respect to this action.
A class action lawsuit also was filed in June 1996 in the United States
District Court for the Northern District of California. The complaint alleges
that AmerUs Life improperly passed an increase in its corporate income taxes
(known as the deferred acquisition cost, or DAC, tax) through to policyowners in
breach of the terms of its life (other than traditional whole life) and annuity
policies. The plaintiff, an insured under a universal life policy issued by
Central Life, seeks unspecified damages and injunctive relief on behalf of
himself and all policyowners of AmerUs Life with universal life, term and
"blended" life insurance policies and annuities. AmerUs Life has denied the
allegations contained in such complaint, including the existence of a legitimate
class. The litigation is in the early discovery stage and a hearing on
certification of the class has not yet been held. The litigation is being
vigorously defended by AmerUs Life.
In the ordinary course of business, the Company and subsidiaries are also
engaged in certain other litigation, none of which management believes is
material.
F-23
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(11) POLICYOWNERS' EQUITY
Generally, the policyowners' surplus of the Company's insurance subsidiaries
available for distribution to the Company are limited to the amounts that the
insurance subsidiaries' net assets, as determined in accordance with statutory
accounting practices, exceed minimum statutory capital requirements; however,
payments of such amounts as dividends may be subject to approval by regulatory
authorities. In 1996, the Company's insurance subsidiaries could distribute
approximately $40 million in the form of dividends to the Company without prior
approval of such regulatory authorities. However, as a result of the spin off,
the Company will not be able to pay additional dividends in the 12-month period
following the spin off of AFS without the prior approval of the Iowa
Commissioner.
The Company made additional contributions to AFS amounting to $41 million,
$5 million, and $.3 million in 1995, 1994, and 1993, respectively, which have
been considered dividends to AMHC as a result of the spin-off of AFS.
(12) STATUTORY ACCOUNTING PRACTICES
The Company's statutory net income was $49.3 million, $20.8 million and
$28.2 million for 1995, 1994, and 1993, respectively.
The Company's statutory surplus and capital was $155.1 million and $183.6
million at December 31, 1995 and 1994, respectively.
The Company's insurance subsidiaries are domiciled in Iowa and prepare their
statutory-basis financial statements in accordance with accounting practices
prescribed or permitted by the Iowa Department of Commerce (Iowa Department).
Prescribed statutory accounting practices include state laws, regulations, and
general administrative rules, as well as a variety of publications of the
National Association of Insurance Commissioners (NAIC). Permitted statutory
accounting practices encompass all accounting practices that are not prescribed;
such practices may differ from state to state, may differ from company to
company within a state, and may change in the future. The NAIC currently is in
the process of codifying statutory accounting practices, the result of which is
expected to constitute the only source of prescribed statutory accounting
practices. Accordingly, that project, which is expected to be completed in 1997,
will likely change, to some extent, prescribed statutory accounting practices
and may result in changes to the accounting practices that insurance enterprises
use to prepare their statutory financial statements.
The Company does not utilize any permitted practices in the preparation of
its statutory-basis financial statements which would have a material impact on
statutory surplus.
The Iowa Department imposes minimum risk-based capital requirements on
insurance enterprises that were developed by the National Association of
Insurance Commissioners (NAIC). The formulas for determining the amount of
risk-based capital (RBC) specify various weighting factors that are applied to
financial balances or various levels or activity based on the perceived degree
of risk. Regulatory compliance is determined by a ratio (the Ratio) of the
enterprise's regulatory total adjusted capital, as defined by the NAIC, to its
authorized control level, RBC, as defined by the NAIC. Enterprises below
specific trigger points or ratios are classified within certain levels, each of
which requires specified corrective action.
Each of the Company's insurance subsidiaries has a Ratio that is at least
400 percent of the minimum RBC requirements; accordingly, the Company's
subsidiaries meet the RBC requirements.
(13) FINANCIAL INSTRUMENTS
The Company utilizes a variety of off-balance-sheet financial instruments as
part of its efforts to hedge and manage fluctuations in the market value of its
portfolio of available-for-sale securities, attributable to changes in general
interest rate levels, and to manage duration mismatch of assets and
F-24
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(13) FINANCIAL INSTRUMENTS (CONTINUED)
liabilities. Those instruments include interest rate exchange agreements (swaps
and caps) and involve elements of credit and market risks in excess of the
amounts recognized in the accompanying financial statements at a given point in
time. The contract or notional amounts of those instruments reflect the extent
of involvement in the various types of financial instruments.
The Company's exposure to credit risk is the risk of loss from a
counterparty failing to perform according to the terms of the contract. That
exposure includes settlement risk (i.e., the risk that the counterparty defaults
after the Company has delivered funds or securities under terms of the contract)
that would result in an accounting loss and replacement cost risk (i.e., the
cost to replace the contract at current market rates should the counterparty
default prior to settlement date). To limit exposure associated with
counterparty nonperformance on interest rate exchange agreements, the Company
enters into master netting agreements with its counterparties.
The credit risk on all financial instruments, whether on or off the balance
sheet, is controlled through an on-going credit review, approval, and monitoring
process. The Company determines, on an individual counterparty basis, the need
for collateral or other security to support financial instruments with credit
risk and establishes individual and aggregate counterparty exposure limits.
At December 31, 1995, the Company's outstanding derivative positions shown
in notional or contract amounts, along with their carrying value and estimated
fair values, are summarized as follows:
<TABLE>
<CAPTION>
NOTIONAL CARRYING FAIR
AMOUNT VALUE VALUE
----------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest rate caps................................................. $ 450,000 $ 4,112 $ 4,110
Received fixed..................................................... 150,000 11,887 11,887
Pay fixed.......................................................... 150,000 (3,392) (3,392)
----------- --------- ---------
$ 750,000 $ 12,607 $ 12,605
----------- --------- ---------
----------- --------- ---------
</TABLE>
There were no material derivative positions at December 31, 1994.
INTEREST RATE EXCHANGE AGREEMENTS
The Company enters into interest rate exchange agreements to reduce and
manage interest rate risk associated with individual assets and liabilities and
its overall aggregate portfolio. The interest rate swap agreements, which expire
in 1999, generally involve the exchange of fixed and floating rate interest
payments, without an exchange of the underlying principal. The interest rate cap
agreements, which expire between 1996 and 2000, involve the payment of a maximum
fixed interest rate when an indexed rate exceeds that fixed rate. The amounts to
be received or paid pursuant to those agreements are accrued and recognized in
the accompanying consolidated statements of income through an adjustment to
investment income over the life of the agreements. The net effect on income from
amortization and interest paid or received was an increase of $1.5 million for
1995. There were no material effects in 1994 and 1993. Gains or losses realized
on closed or terminated agreements accounted for as hedges are deferred and
amortized to investment income on a constant yield basis over the shorter of the
life of the agreements or the expected remaining life of the underlying assets
or liabilities. There were no net deferred gains on interest rate exchange
agreements as of December 31, 1995, 1994, and 1993.
F-25
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(13) FINANCIAL INSTRUMENTS (CONTINUED)
The following table shows unrealized gains and losses on derivative
positions.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------------------------------------
TOTAL NET
NOTIONAL UNREALIZED UNREALIZED UNREALIZED
VALUE GAINS LOSSES GAINS (LOSSES)
----------- ----------- ----------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Received fixed.................................. $ 150,000 $ 11,887 $ -- $ 11,887
Pay fixed....................................... 150,000 -- 3,392 (3,392)
Interest rate caps.............................. 450,000 183 2,518 (2,335)
----------- ----------- ----------- --------------
$ 750,000 $ 12,070 $ 5,910 $ 6,160
----------- ----------- ----------- --------------
----------- ----------- ----------- --------------
</TABLE>
The Company is exposed to credit loss in the event of nonperformance by
counterparties on interest rate cap and interest rate swap agreements. The
Company does not anticipate nonperformance by any of these counterparties. The
credit risk associated with such agreements is minimized by purchasing such
agreements from financial institutions with long-standing, superior performance
records. The amount of such exposure is essentially their replacement cost,
which is approximated by the unrealized gains in such contracts.
The Company has no current exposure to the counterparty when a contract
contains an unrealized loss.
MATURITY SCHEDULE BY YEAR FOR DERIVATIVE PRODUCTS
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Receive fixed swaps:
Notional amount (in thousands).......... $ 150,000
Weighted average:
Receive rate............................ 7.86% 7.86% 7.86% 7.86%
Pay rate................................ 5.45% 5.06% 5.59% 5.89%
Pay fixed swaps
Notional amount (in thousands).......... $ 150,000
Weighted average:
Receive rate............................ 5.51% 5.06% 5.61% 5.89%
Pay rate................................ 6.23% 6.23% 6.23% 6.23%
Total weighted average rates on swaps:
Receive rate............................ 6.68% 6.46% 6.73% 6.87%
Pay rate................................ 5.84% 5.64% 5.91% 6.06%
Interest rate caps
Notional amount (in thousands).......... $ 25,000 $ 25,000 $ 25,000 $ 150,000 $ 300,000
Total notional value of swaps and caps (in
thousands)............................... $ 25,000 $ 25,000 $ 25,000 $ 450,000 $ 300,000
</TABLE>
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS 107, "Disclosures about Fair Values of Financial Instruments," requires
disclosures of fair value information about financial instruments, whether
recognized or not recognized in a company's balance sheet, for which it is
practicable to estimate that value. In cases where quoted market prices are not
available, fair values are based on estimates using discounted cash flow or
other valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rates and estimates of the amount and
timing of future cash flows. SFAS 107 excludes certain insurance liabilities and
other non-financial instruments from its disclosure requirements. The fair value
amounts
F-26
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
presented herein do not include an amount for the value associated with customer
or agent relationships, the expected interest margin (interest earnings over
interest credited) to be earned in the future on investment-type products, or
other intangible items. Accordingly, the aggregate fair value amounts presented
herein do not necessarily represent the underlying value of the Company;
likewise, care should be exercised in deriving conclusions about the Company's
business or financial condition based on the fair value information presented
herein.
The Company closely monitors the level of its insurance liabilities, the
level of interest rates credited to its interest sensitive products, and the
assumed interest margin provided for within the pricing structure of its other
products. Those amounts are taken into consideration in the Company's overall
management of interest rate risk that attempts to minimize exposure to changing
interest rates through the matching of investment maturities with amounts
expected to be due under insurance contracts. As such, the Company believes that
it has reduced the volatility inherent in its fair value adjusted policyowners'
equity, although such volatility will not be reduced completely. The Company has
used discount rates in the determination of fair values for its liabilities that
are consistent with market yields for related assets. The use of the asset
market yield is consistent with management's opinion that the risks inherent in
the Company's asset and liability portfolios are similar, and the fact that fair
values for both assets and liabilities generally will react in much the same
manner during periods of interest rate changes. However, that assumption might
not result in fair values that are consistent with values obtained through an
actuarial appraisal of the Company's business or values that might arise in a
negotiated transaction.
The presentation on the following page reflects fair values for those
instruments specifically covered by SFAS 107, along with fair value amounts for
those traditional insurance liabilities for which disclosure is permitted but
not required; the fair values for all other assets and liabilities have been
reported at their carrying amounts.
VALUATION METHODS AND ASSUMPTIONS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash, short-term investments, policy loans, accrued investment income:
the carrying amounts for these instruments approximate their fair
values.
Fixed maturities and equity securities: fair values for bonds are based
on quoted market prices or dealer quotes. If a quoted market price is
not available, fair value is estimated using values obtained from
independent pricing services or, in the case of private placements, are
estimated by discounting expected future cash flows using a current
market rate applicable to the yield, credit quality, and maturity of the
investments. The fair values for preferred and common stocks are based
on quoted market prices.
Mortgage loans on real estate: for all performing fixed interest rate
loans, the estimated net cash flows to maturity were discounted to
derive an estimated market value. The discount rate used was based on
the individual loan's remaining weighted average life and a basis point
spread over the December 31, 1995, United States treasury yield curve.
Performing variable rate commercial loans and residential loans were
valued at the current outstanding balance. Loans which have been
restructured, are in foreclosure, are significantly delinquent, or are
to affiliates were valued primarily at the lower of the estimated net
cash flows to maturity discounted at a market rate of interest or the
current outstanding principal balance.
Hedging instruments: fair values for derivative securities are based on
pricing models or formulas using current assumptions and are classified
as other assets or other liabilities.
F-27
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Policy reserves: fair values of the Company's liabilities under
contracts not involving significant mortality or morbidity risks
(principally, annuities) are stated at the cost the Company would incur
to extinguish the liability; i.e., the cash surrender value.
Long-term debt: fair values for long-term debt are estimated using
discounted cash flow analysis based on the Company's current incremental
borrowing rate for similar types of borrowing arrangements.
The carrying amounts of other financial assets, dividends payable to
policyowners, and policy reserves including significant mortality or morbidity
risks approximate their fair values.
The estimated fair values of the Company's significant financial instruments
at December 31, 1995 and 1994, are as follows:
<TABLE>
<CAPTION>
1995 1994
---------------------------- ----------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------- ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Securities available-for-sale:
Fixed maturity......................... $ 3,142,096 $ 3,142,096 $ 2,566,768 $ 2,566,768
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Equity securities...................... $ 109,675 $ 109,675 $ 178,770 $ 178,770
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Short-term investments................. $ 39,353 $ 39,353 $ 8,529 $ 8,529
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Mortgage loans on real estate............ $ 353,597 $ 369,706 $ 447,663 $ 431,812
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Interest rate caps....................... $ 6,445 $ 4,110 $ 3,648 $ 3,626
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Financial liabilities--policy reserves for
annuities................................. $ 1,524,801 $ 1,493,847 $ 1,575,131 $ 1,543,129
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Long-term debt............................. $ 36,461 $ 36,461 $ 34,292 $ 34,292
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Unrecognized financial instruments--
interest rate swaps:
Net receivable position................ $ -- $ 11,887 $ -- $ --
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Net payable position................... $ -- $ (3,392) $ -- $ (1,819)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
F-28
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(15) UNAUDITED PRO FORMA ADJUSTMENT FOR THE CAPITAL CONTRIBUTION
The Company plans to make a capital contribution to AFS of certain assets
and liabilities having a net book value of $129.0 million prior to the
subscription offering of Class A Common Stock in the offerings as follows:
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA JUNE 30,
AS ADJUSTED ADJUSTMENT FOR 1996
FOR THE THE CAPITAL -------------
CAPITAL CONTRIBUTION
CONTRIBUTION -------------- (UNAUDITED)
-------------- (UNAUDITED)
(UNAUDITED)
<S> <C> <C> <C>
Fixed maturity securities......................................... $ 2,322,223 $ (4,681) $ 2,326,904
-------------- -------------- -------------
-------------- -------------- -------------
Equity securities................................................. $ 89,760 $ (678) $ 90,438
-------------- -------------- -------------
-------------- -------------- -------------
Mortgage loans on real estate..................................... $ 243,323 $ (35,005) $ 278,328
-------------- -------------- -------------
-------------- -------------- -------------
Real estate....................................................... $ 1,861 $ (42,224) $ 44,085
-------------- -------------- -------------
-------------- -------------- -------------
Other Investments................................................. $ 60,378 $ (5,224) $ 65,602
-------------- -------------- -------------
-------------- -------------- -------------
Long-term debt.................................................... $ 70,487 $ (41,188) $ 29,299
-------------- -------------- -------------
-------------- -------------- -------------
Policyowners' surplus............................................. $ 355,553 $ 129,000 $ 484,553
-------------- -------------- -------------
-------------- -------------- -------------
</TABLE>
F-29
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF ALH SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information.............................. 3
Prospectus Summary................................. 5
Risk Factors....................................... 14
The Company........................................ 21
The Issuer......................................... 22
The Reorganization and Distribution of the Non-Life
Insurance Subsidiaries............................ 22
The Common Stock Offerings......................... 27
Ratio of Earnings to to Combined Fixed Charges and
Preferred Stock Dividends......................... 27
Capitalization..................................... 28
Accounting Treatment............................... 29
Selected Consolidated Financial and Operating
Data.............................................. 29
Unaudited Pro Forma Condensed Consolidated
Financial Statements.............................. 31
Management's Discussion and Analysis of Results of
Operations and Financial Condition................ 39
Business........................................... 54
Supervision and Regulation......................... 77
Management......................................... 80
Management Compensation............................ 83
Certain Transactions and Relationships............. 91
Description of the Preferred Securities............ 97
Description of the Guarantee....................... 108
Description of the Junior Subordinated
Debentures........................................ 111
Relationship Among the Preferred Securities, the
Junior Subordinated Debentures and the
Guarantee......................................... 119
United States Federal Income Taxation.............. 121
ERISA Considerations............................... 124
Ownership of Common Stock.......................... 126
Underwriting....................................... 127
Validity of Securities............................. 128
Experts............................................ 128
Glossary of Certain Insurance and Other Defined
Terms............................................. 129
Index to Consolidated Financial Statements......... F-1
</TABLE>
THROUGH AND INCLUDING , 1997, (THE TH DAY AFTER THE DATE OF
THIS PROSPECTUS) ALL DEALERS EFFECTING TRANSACTIONS IN THE PREFERRED SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
3,000,000
PREFERRED SECURITIES
AMERUS CAPITAL I
% CUMULATIVE QUARTERLY
INCOME PREFERRED SECURITIES,
SERIES A (QUIPS-TM-)
GUARANTEED TO THE EXTENT THE ISSUER HAS FUNDS, AS SET FORTH HEREIN, BY
AMERUS LIFE HOLDINGS, INC.
-------------
PROSPECTUS
-------------
GOLDMAN, SACHS & CO.
REPRESENTATIVES OF THE UNDERWRITERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
It is anticipated that there will be expenses incurred by the Registrants in
connection with the issuance and distribution of the Preferred Securities as
follows:
<TABLE>
<C> <S> <C>
(a) SEC registration fee......................................... $ 26,137
(b) Printing Fees and Expenses................................... *
(c) Accounting Fees and Expenses................................. *
(d) Legal Fees and Expenses...................................... *
(e) Blue Sky Fees and Expenses................................... *
(f) NYSE Listing Fee............................................. *
(g) Rating Agency Fees........................................... *
(h) Trustee's Fees............................................... *
(i) NASD Filing Fee.............................................. *
(j) Other........................................................ *
---------
Total...................................................... $ *
---------
---------
</TABLE>
- --------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 851 and 856 of the Iowa Business Corporation Act ("IBCA") provide
that a corporation has the power to indemnify its directors and officers against
liabilities and expenses incurred by reason of such person serving in the
capacity of director or officer, if such person has acted in good faith and in a
manner reasonably believed by the individual to be in or not opposed to the best
interests of the corporation, and in any criminal proceeding if such person had
no reasonable cause to believe the individual's conduct was unlawful. The
foregoing indemnity provisions notwithstanding, in the case of actions brought
by or in the right of the corporation, no indemnification shall be made to such
director or officer with respect to any matter as to which such individual has
been adjudged to be liable to the corporation unless, and only to the extent
that, a court determines that indemnification is proper under the circumstances.
The Company's Articles of Incorporation provide that the Company shall
indemnify its directors to the fullest extent possible under the IBCA. The
Company's Bylaws extend the same indemnity to its officers. The Articles of
Incorporation provide that no director shall be liable to the Company or its
shareholders for monetary damages for breach of the individual's fiduciary duty
as a director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its shareholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for any transaction in which the director derived an improper
personal benefit, or (iv) under the IBCA provisions relating to improper
distributions.
The Company maintains a directors' and officers' liability insurance policy
to insure against losses arising from claims made against its directors and
officers, subject to the limitations and conditions as set forth in the
policies. In adition, the Company has entered into indemnification agreements
with its directors and certain of its executive officers providing for the
indemnification of such persons as permitted by the Company's Articles of
Incorporation and Iowa law.
Under the Trust Agreement, the Company will agree to indemnify each of the
Trustees of the Issuer or any predecessor Trustee for the Issuer, and to hold
the Trustees harmless against, any loss, damage, claims, liability or expense
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the Trust Agreement,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties under the Trust Agreement.
II-1
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, trustees or persons controlling the
Registrants pursuant to the foregoing provisions, the Registrants have been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On , 1996 the Company issued million shares of Class A
Common Stock and 5,000,000 shares of Class B Common Stock to AmerUs Group. See
"The Reorganization and Distribution of the Non-Life Insurance Subsidiaries."
The initial issuance of such shares was made in reliance upon exemptions from
the registration provisions of the Securities Act set forth in Section 3(a)(11)
and Section 4(2) thereof (including the rules and regulations promulgated
thereunder) relative to, respectively, intrastate sales by an issuer and sales
not involving a public offering. No underwriters were involved in the initial
issuance of shares described in this paragraph.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
*1.1 Form of Underwriting Agreement between the Issuer, ALH and AmerUs Life on the one hand, and the
Representatives of the Underwriters, on behalf of the Underwriters, on the other hand.
**2.1 Plan of Reorganization dated October 27, 1995
**3.1 Articles of Incorporation of the Company
**3.2 Bylaws of the Company
**3.3 Proposed Amended and Restated Articles of Incorporation of the Company
3.4 Certificate of Trust of the Issuer
3.5 Trust Agreement
3.6 Form of Amended and Restated Trust Agreement
4.1 Form of Indenture between the Company and Wilmington Trust Company, as Indenture Trustee
4.2 Form of Preferred Security (included in Exhibit 3.6)
4.3 Form of Junior Subordinated Debenture (included in Exhibit 3.6)
4.4 Form of Guarantee Agreement between the Company and Wilmington Trust Company, as Guarantee Trustee
*5.1 Opinion of James A. Smallenberger, Esq.
*5.2 Opinion of Richards, Layton & Finger
*8.1 Opinion of Sidley & Austin re: certain Tax Matters
*10.1 Form of Intercompany Agreement dated as of September , 1996, among American Mutual Holding Company,
AmerUs Group Co. and the Company
*10.2 Amended and Restated Joint Venture Agreement, dated as of , 1996, between American Mutual
Insurance Company and Ameritas Life Insurance Corp.
*10.3 Management and Administrative Service Agreement, dated as of April 1, 1996, among American Mutual
Life Insurance Company, Ameritas Variable Life Insurance Company and Ameritas Life Insurance Corp.
**10.4 Agreement and Plan of Merger, dated as of August 24, 1994, among Central Life Assurance Company and
American Mutual Life Insurance Company
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
**10.5 Line of Credit Application and Approval, dated February 28, 1996 and April 22, 1996, respectively,
between American Mutual Life Insurance Company and Federal Home Loan Bank of Des Moines
**10.6 All*AmerUs Supplemental Executive Retirement Plan, effective January 1, 1996
**10.7 American Mutual Life Insurance Company Supplemental Pension Plan (which was curtailed as of December
31, 1995)
*10.8 Central Life Assurance Company Supplemental Pension Plan (which was curtailed as of December 31,
1995)
*10.9 Management Incentive Plan
*10.10 AmerUs Life Insurance Company Performance Share Plan
**10.11 AmerUs Life Stock Incentive Plan
**10.12 Employment Agreement, dated February 1, 1995, between American Mutual Life Insurance Company and Sam
C. Kalainov
**10.13 AmerUs Life Non-Employee Director Stock Plan
**10.14 Modification of Real Estate Contract, dated as of July 1, 1996, between AmerUs Life Insurance Company
and AmerUs Properties, Inc.
**10.15 Asset Management and Disposition Agreement, dated January 3, 1995, between American Mutual Life
Insurance Company and Central Properties, Inc. (now AmerUs Properties, Inc.)
*10.16 Management Contract, dated January 1, 1993, between Central Life Assurance Company and Central
Properties, Inc. (now AmerUs Properties, Inc.)
**10.17 Management Contract, dated November 1, 1994, between American Mutual Life Insurance Company and CPI
Resource Group (now AmerUs Group Co.)
**10.18 Management Contract, dated January 1, 1993, between Central Life Assurance Company and Central
Properties, Inc. (now AmerUs Properties, Inc. )
**10.19 Management Contract, dated January 1, 1995, between American Mutual Life Insurance Company and
Central Properties, Inc. (now AmerUs Properties, Inc.)
**10.20 Management Contract, dated July 1, 1994, between Central Life Assurance Company and CPI Resource
Group (now AmerUs Group Co.)
*10.21 Management Contract, dated February 1, 1994, between Central Life Assurance Company and Central
Properties, Inc. (now AmerUs Properties, Inc.)
**10.22 Management Contract, dated May 1, 1994, between Central Life Assurance Company and Central
Properties, Inc. (now AmerUs Properties, Inc. )
**10.23 Management Contract, dated February 1, 1994, between Central Life Assurance Company and Central
Properties, Inc. (now AmerUs Properties, Inc. )
**10.24 Management Contract, dated January 4, 1994, between Central Life Assurance Company and CPI Resource
Group (now AmerUs Group Co.)
**10.25 Management Contract, dated November 1, 1994, between American Mutual Life Insurance Company and CPI
Resource Group (now AmerUs Group Co.)
**10.26 Lease - Business Property, dated December 1, 1995, between American Mutual Life Insurance Company and
AmerUs Leasing
**10.27 Lease - Business Property, dated January 1, 1996, between American Mutual Life Insurance Company and
AmerUs Bank
**10.28 Lease - Business Property, dated January 1, 1996, between American Mutual Life Insurance Company and
AmerUs Bank
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
**10.29 Lease - Business Property, dated January 1, 1996, between American Mutual Life Insurance Company and
AmerUs Bank
**10.30 Lease - Business Property, dated January 1, 1996, between American Mutual Life Insurance Company and
AmerUs Group
**10.31 Lease - Business Property, dated January 1, 1996, between American Mutual Life Insurance Company and
AmerUs Group
*10.32 Assumption and Amendment of Lease Agreement, dated as of November 27, 1993 among Central Life
Assurance Company, Midland Savings Bank FSB (now AmerUs Bank) and Midland Financial Mortgages, Inc.
(now AmerUs Mortgage, Inc.)
**10.33 Form of Indemnification Agreement executed with directors and certain officers
*10.34 Amended and Restated Agreement and Certificate of Limited Partnership of CPI Housing Partners I,
L.P., dated as of September 1, 1995, among AmerUs Properties, Inc., American Mutual Life Insurance
Company and American Mutual Affordable Housing Partners, L.P.
*10.35 Amended and Restated Agreement of Limited Partnership of American Mutual Affordable Housing Partners,
L.P., dated as of September 1, 1995, among GrA Partners Joint Venture, AmerUs Properties, Inc.,
American Mutual Life Insurance Company, NCC Polar Company and NCC Orion Company
*10.36 Amended and Restated Agreement and Certificate of Limited Partnership of 65th & Vista, L.P., dated as
of September 1, 1995, among AmerUs Properties, Inc., American Mutual Life Insurance Company and
American Mutual Affordable Housing Partners, L.P.
*10.37 Amended and Restated Agreement and Certificate of Limited Partnership of 60th & Vista, L.P., dated as
of September 1, 1995, among I.R.F.B. Joint Venture, American Mutual Life Insurance Company and
American Mutual Affordable Housing Partners, L.P.
*10.38 Certificate of Limited Partnership and Limited Partnership Agreement of CPI Housing Partners II,
L.P., dated March 27, 1995, between Central Properties, Inc. (now AmerUs Properties, Inc.) and
American Mutual Life Insurance Company
*10.39 Amended and Restated Agreement and Certificate of Limited Partnership of API Housing Partners III,
L.P., dated as of March 1, 1996, among AmerUs Properties, Inc., American Mutual Life Insurance
Company, American Mutual Affordable Housing Partners II, L.P. and AmerUs Management, Inc.
*10.40 Certificate of Limited Partnership and Limited Partnership Agreement of API Housing Partners IV,
L.P., dated as of June , 1995, between AmerUs Properties, Inc. and American Mutual Life Insurance
Company
*10.41 Amended and Restated Agreement and Certificate of Limited Partnership of API Housing Partners V,
L.P., dated as of March 1, 1996, among AmerUs Properties, Inc., American Mutual Life Insurance
Company, American Mutual Affordable Housing Partners II, L.P. and AmerUs Management, Inc.
*10.42 Amended and Restated Agreement and Certificate of Limited Partnership of API-Chimney Ridge Partners,
L.P., dated as of March 1, 1996, among AmerUs Properties, Inc., American Mutual Life Insurance
Company, American Mutual Affordable Housing Partners II, L.P. and AmerUs Management, Inc.
**10.43 Certificate of Limited Partnership and Limited Partnership Agreement of API Housing Partners VI,
L.P., dated as of October 10, 1995, between AmerUs Properties, Inc. and American Mutual Life
Insurance Company
*10.44 Certificate of Limited Partnership and Limited Partnership Agreement of 86th & Meredith Associates,
L.P., dated as of February 14, 1995, between Central Properties, Inc. (now AmerUs Properties, Inc.)
and American Mutual Life Insurance Company
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
**10.45 Certificate of Limited Partnership and Limited Partnership Agreement of Altoona Meadows Investors,
L.P., dated as of February 22, 1995, between KPI Investments, Inc. and Dennis Galeazzi
**10.46 First Amendment to the Certificate of Limited Partnership and Limited Partnership Agreement of
Altoona Meadows Investors, L.P., dated as of September 28, 1995, between KPI Investments, Inc. and
American Mutual Life Insurance Company
**10.47 Loan Servicing Agreement, dated August 1, 1990, between Central Life Assurance Company and Midland
Financial Mortgages, Inc. (now AmerUs Mortgage), filed as Exhibit 10.30 to Central Resource Group,
Inc.'s Registration Statement on Form S-1, Registration No. 33-48359, filed on June 4, 1992
**10.48 Construction Loan Servicing Agreement, dated November 20, 1995, between American Mutual Life
Insurance Company and AmerUs Properties, Inc.
*10.49 Servicing Agreement, dated March 1996, between American Mutual Life Insurance Company and AmerUs
Properties, Inc.
**10.50 Loan Servicing Agreement, dated September 1, 1994, between Central Life Assurance Company and Midland
Savings Bank, FSB (now AmerUs Bank)
**10.51 Miscellaneous Services Agreement, dated as of January 1, 1996, among American Mutual Life Insurance
Company, AmerUs Group Co., AmerUs Bank, AmerUs Mortgage, Inc., Iowa Realty Company, Inc., Midland
Homes, Inc., Iowa Title Company, AmerUs Insurance, Inc., and AmerUs Finance Inc.
**10.52 Amendment to Service Agreement, dated as of May 1, 1996, between American Mutual Life Insurance
Company and AmerUs Bank
**10.53 Data Processing Service Agreement, dated November 1, 1989, between Central Life Assurance Company and
Midland Financial Savings and Loan Association (now AmerUs Bank), filed as Exhibit 10.29 to Central
Resource Group, Inc.'s Registration Statement on Form S-1, Registration No. 33-48359, filed on June
4, 1992
**10.54 First Amendment to Data Processing Service Agreement, dated as of September 30, 1990, between Central
Life Assurance Company and Midland Savings Bank FSB (now AmerUs Bank)
**10.55 Second Amendment to Data Processing Service Agreement, dated as of May 1, 1991, between Central Life
Assurance Company and Midland Savings Bank FSB (now AmerUs Bank)
**10.56 Third Amendment to Data Processing Service Agreement, dated as of October 1, 1991, between Central
Life Assurance Company and Midland Savings Bank, FSB (now AmerUs Bank)
**10.57 Fourth Amendment to Data Processing Service Agreement, dated as of January 2, 1992, between Central
Life Assurance Company and Midland Savings Bank, FSB (now AmerUs Bank)
**10.58 Fifth Amendment to Data Processing Service Agreement, dated as of July 1, 1993, between Central Life
Assurance Company and Midland Savings Bank FSB (now AmerUs Bank)
**10.59 Sixth Amendment to Data Processing Service Agreement, dated as of September 1, 1995, between American
Mutual Insurance Company and AmerUs Bank
**10.60 Seventh Amendment to Data Processing Service Agreement, dated as of January 1, 1996, between American
Mutual Life Insurance Company and AmerUs Bank
*10.61 Data Processing Support Services Agreement, dated as of July 1, 1993, between Central Life Assurance
Company and Midland Savings Bank, FSB (now AmerUs Bank)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
**10.62 Miscellaneous Services Agreement, dated as of February 5, 1992, between Central Life Assurance
Company and Midland Savings Bank FSB (now AmerUs Bank)
**10.63 Investment Management Agreement, dated as of August 15, 1992, between Central Life Assurance Company
and Midland Savings Bank FSB (now AmerUs Bank)
**10.64 Disbursement Services Agreement, dated as of April 15, 1995, between American Mutual Life Insurance
Company and Midland Savings Bank FSB (now AmerUs Bank)
**10.65 Purchase Agreement, dated as of June 28, 1996, between AmerUs Life Insurance Company and AmerUs Bank
**10.66 Brokerage Contract dated January 1, 1995, among American Mutual Life Insurance Company and Midland
Investment Services, Inc. (now AmerUs Investments, Inc.)
**10.67 Servicing Agreement, dated March 1, 1992, between Central Life Assurance Company and Midland
Investment Services, Inc. (now AmerUs Investments, Inc.)
*10.68 Tax Allocation Agreement dated , 1996
12.1 Statement of Earnings to Combined Fixed Charges and Preferred Stock Dividends
**21.1 List of Subsidiaries
23.1 Consent of KPMG Peat Marwick LLP
*23.2 Consent of James A. Smallenberger, Esq. (to be included in Exhibit 5.1)
*23.3 Consent of Richards, Layton & Finger (to be included in Exhibit 5.2)
*23.4 Consent of Sidley & Austin (to be included in Exhibit 8.1)
24.1 Powers of Attorney
25.1 Statement of Eligibility of Wilmington Trust Company as to the Guarantee
25.2 Statement of Eligibility of Wilmington Trust Company as to the Preferred Securities
25.3 Statement of Eligibility of Wilmington Trust Company as to the Junior Subordinated Debentures
**27.1 Financial Data Schedule
</TABLE>
- --------------
*To be filed by amendment
**Incorporated by reference to the Company's Registration Statement on Form S-1
filed on September 18, 1996. (SEC file number 333-12239)
(b)FINANCIAL STATEMENT SCHEDULES:
Report of Independent Auditors on Schedules
Schedule I -- Summary of Investments (Other than Investments in Related
Parties)
Schedule III -- Supplementary Insurance Information
Schedule IV -- Reinsurance
Schedule V -- Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions described in Item 14 above, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of
II-6
<PAGE>
the registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that: (1) for purposes of
determining any liability under the Securities Act, the information omitted from
the form of prospectus filed as part of a registration statement in reliance
upon Rule 430A and contained in the form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was declared
effective; and (2) for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
In the event this Preferred Offering is completed, the undersigned hereby
undertakes to provide to the underwriters at the closing specified in the
underwriting agreement, certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to each
purchaser.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Des Moines, Iowa on
October , 1996.
AMERUS LIFE HOLDINGS, INC.
By: /s/ Roger K. Brooks
--------------------------------------
Roger K. Brooks
CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on September 18, 1996 by the following
persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S)
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ Roger K. Brooks
------------------------------------------- Chairman, President and Chief Executive Officer
Roger K. Brooks (principal executive officer) and Director
/s/ Michael E. Sproule
------------------------------------------- Executive Vice President and Chief Financial Officer
Michael E. Sproule (principal financial officer)
/s/ Michael G. Fraizer
------------------------------------------- Senior Vice President and Controller/Treasurer (principal
Michael G. Fraizer accounting officer)
*
------------------------------------------- Director
John R. Albers
*
------------------------------------------- Director
Malcolm Candlish
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE(S)
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
*
------------------------------------------- Director
D T Doan
*
------------------------------------------- Director
Thomas F. Gaffney
*
------------------------------------------- Director
Sam C. Kalainov
*
------------------------------------------- Director
John W. Norris, Jr.
*
------------------------------------------- Director
Jack C. Pester
*
------------------------------------------- Director
John A. Wing
*By: /s/ James A. Smallenberger
-------------------------------------------
(ATTORNEY IN FACT)
</TABLE>
II-9
<PAGE>
AMERUS LIFE HOLDINGS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
SCHEDULE PAGE
- --------- ---------
<C> <S> <C>
Report of Independent Auditors on Schedules
I Summary of Investments -- Other than Investments in Related Parties............................ II-11
III Supplementary Insurance Information............................................................ II-12
IV Reinsurance.................................................................................... II-13
V Valuation and Qualifying Accounts.............................................................. II-14
</TABLE>
All other schedules are omitted for the reason that they are not required, are
not applicable or that the equivalent information has been included in the
consolidated financial statements, and notes thereto, or elsewhere herein.
II-10
<PAGE>
WHEN THE TRANSACTION REFERRED TO IN NOTE 1 OF NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS HAS BEEN CONSUMMATED, WE WILL BE ABLE TO RENDER THE
FOLLOWING REPORT.
KPMG PEAT MARWICK LLP
REPORT OF INDEPENDENT AUDITORS ON SCHEDULES
The Board of Directors
AmerUs Life Holdings, Inc.:
Under date of July 1, 1996, except as to note 1 which is as of October , 1996
we reported on the consolidated balance sheets of AmerUs Life Holdings, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of income, policyowners' equity, and cash flows for each of the years
in the three-year period ended December 31, 1995, which are included in the
prospectus.
As reported in note 1 to the consolidated financial statements, the Company
implemented the provisions of the Statement of Financial Accounting Standards
(SFAS) No. 120, "Accounting and Reporting by Mutual Life Insurance Enterprises
and by Insurance Enterprises for Certain Long-Duration Participating Contracts,"
and in 1993 the Company implemented the provisions of SFAS 106, "Employers
Accounting for Postretirement Benefits Other Than Pensions," and SFAS 115,
"Accounting for Certain Investments in Debt and Equity Securities." Also, as
discussed in note 1 to the consolidated financial statements, the Company has
restated its consolidated financial statements to reflect the spin-off of a
wholly owned subsidiary, which resulted in a change in the subsidiaries
comprising the consolidated financial statements.
In connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related consolidated financial statement
schedules in the registration statement. These financial statement schedules are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
Des Moines, Iowa
July 1, 1996, except as to note 1,
which is as of October , 1996
II-11
<PAGE>
AMERUS LIFE HOLDINGS, INC.
SCHEDULE I
SUMMARY OF INVESTMENTS
<TABLE>
<CAPTION>
AMOUNT AT WHICH
AMORTIZED SHOWN IN THE
TYPE OF INVESTMENT COST MARKET VALUE BALANCE SHEET
- ------------------------------------------------------------------ ------------- ------------- ---------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
December 31, 1995
Fixed Maturities:
Bonds
United States Government and government agencies and
authorities.................................................. $ 719,454 $ 753,953 $ 753,953
States, municipalities and political subdivisions............. 1,550 1,686 1,686
Foreign governments........................................... 20,149 22,416 22,416
Public utilities.............................................. 382,637 417,625 417,625
Convertibles and bonds with warrants attached................. 53,909 57,504 57,504
All other corporate bonds..................................... 1,773,550 1,888,913 1,888,913
------------- ------------- ---------------
Total fixed maturities...................................... 2,951,249 3,142,096 3,142,096
------------- ------------- ---------------
Equity securities:
Common stocks
Public utilities.............................................. 2,216 11,254 11,254
Banks, trust and insurance companies.......................... 18,742 27,845 27,845
Industrial, miscellaneous and all other....................... 6,029 41,935 41,935
Nonredeemable preferred stocks.................................. 25,882 28,641 28,641
------------- ------------- ---------------
Total equity securities..................................... 52,869 109,675 109,675
------------- ------------- ---------------
Mortgage loans on real estate..................................... 353,597 353,597
Real estate....................................................... 52,199 52,199
Policy loans...................................................... 220,044 220,044
Other long-term investments....................................... 48,064 48,064
Short-term investments............................................ 39,353 39,353
------------- ---------------
Total investments........................................... $ 3,717,376 $ 3,965,028
------------- ---------------
------------- ---------------
</TABLE>
II-12
<PAGE>
AMERUS LIFE HOLDINGS, INC.
SCHEDULE III
SUPPLEMENTARY INSURANCE INFORMATION
<TABLE>
<CAPTION>
FUTURE POLICY
BENEFITS, BENEFITS,
DEFERRED LOSSES, OTHER POLICY CLAIMS,
POLICY CLAIMS AND CLAIMS AND NET LOSSES AND
ACQUISITION LOSS UNEARNED BENEFITS PREMIUM INVESTMENT SETTLEMENT
SEGMENT COST EXPENSES (1) PREMIUMS PAYABLE (2) REVENUE INCOME EXPENSES
- ------------------------ ----------- ------------- ----------- ------------ ----------- ----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE INSURANCE
12/31/95 $ 267,711 $ 3,621,537 $ 0 $ 16,617 $ 244,087 $ 285,244 $ 424,034
12/31/94 $ 404,361 $ 3,487,034 $ 0 $ 9,803 $ 237,912 $ 275,691 $ 414,935
12/31/93 $ 226,360 $ 269,854 $ 409,792
<CAPTION>
AMORTIZATION
OF DEFERRED
POLICY OTHER
ACQUISITION OPERATING PREMIUMS
SEGMENT COSTS EXPENSES WRITTEN
- ------------------------ ------------- ----------- ---------------
<S> <C> <C> <C>
LIFE INSURANCE
12/31/95 $ 50,239 $ 58,655 n/a
12/31/94 $ 42,756 $ 68,604 n/a
12/31/93 $ 47,441 $ 58,637 n/a
</TABLE>
- --------------
(1) Includes policy reserves, policyholder funds, and dividends payable
(2) Policy and contract claims
II-13
<PAGE>
AMERUS LIFE HOLDINGS, INC.
SCHEDULE IV
REINSURANCE
<TABLE>
<CAPTION>
PERCENTAGE
CEDED TO ASSUMED FROM OF AMOUNT
OTHER OTHER ASSUMED TO
GROSS AMOUNT COMPANIES COMPANIES NET AMOUNT NET
-------------- ------------- ------------- -------------- ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995
Life insurance in force........... $ 29,640,037 $ 2,916,812 $ 56,226 $ 26,779,451 0.21%
Premiums
Life insurance premiums and
charges........................ $ 310,543 $ 14,186 $ 4,862 $ 301,219 1.61%
Accident and health insurance... 2,595 2,361 4 268 1.68%
-------------- ------------- ------------- -------------- ------------
Total premiums.................. $ 313,138 $ 16,547 $ 4,866 $ 301,457 1.61%
-------------- ------------- ------------- -------------- ------------
Year ended December 31, 1994
Life insurance in force........... $ 31,514,751 $ 3,265,105 $ 2,590,847 $ 30,840,493 8.40%
Premiums
Life insurance premiums and
charges........................ $ 299,769 $ 13,740 $ 7,857 $ 293,886 2.67%
Accident and health insurance... 3,024 2,697 61 388 15.72%
-------------- ------------- ------------- -------------- ------------
Total premiums.................. $ 302,793 $ 16,437 $ 7,918 $ 294,274 2.69%
-------------- ------------- ------------- -------------- ------------
Year ended December 31, 1993
Life insurance in force........... $ 33,152,140 $ 3,370,347 $ 4,689,689 $ 34,471,482 13.60%
Premiums
Life insurance premiums and
charges........................ $ 290,162 $ 15,292 $ 8,478 $ 283,348 2.99%
Accident and health insurance... 3,183 2,843 145 485 29.90%
-------------- ------------- ------------- -------------- ------------
Total premiums.................. $ 293,345 $ 18,135 $ 8,623 $ 283,833 3.04%
-------------- ------------- ------------- -------------- ------------
</TABLE>
II-14
<PAGE>
AMERUS LIFE HOLDINGS, INC.
SCHEDULE V
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
--------------------------------------------- DEDUCTIONS --
BALANCE AT CHARGED TO PROVISION ON
BEGINNING OF COSTS AND CHARGED TO MORTGAGES SOLD/ BALANCE AT
DESCRIPTION PERIOD EXPENSES OTHER ACCOUNTS TRANSFERRED END OF PERIOD
- -------------------- ------------- -------------------- ----------------------- ----------------- -------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Mortgage Loans
1995.............. $ 65,549 $ 622 $ -- $ (36,104) $ 30,067
1994.............. $ 80,220 $ 1,207 $ -- $ (15,878) $ 65,549
1993.............. $ 81,040 $ 2,976 $ -- $ (3,796) $ 80,220
</TABLE>
II-15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
EXHIBITS
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
AMERUS CAPITAL I
AMERUS LIFE HOLDINGS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement between the Issuer, ALH and AmerUs Life on the one hand, and the
Representatives of the Underwriters, on behalf of the Underwriters, on the other hand.
**2.1 Plan of Reorganization dated October 27, 1995
**3.1 Articles of Incorporation of the Company
**3.2 Bylaws of the Company
**3.3 Proposed Amended and Restated Articles of Incorporation of the Company
3.4 Certificate of Trust of the Issuer
3.5 Trust Agreement
3.6 Form of Amended and Restated Trust Agreement
4.1 Form of Indenture between the Company and Wilmington Trust Company, as Indenture Trustee
4.2 Form of Preferred Security (included in Exhibit 3.6)
4.3 Form of Junior Subordinated Debenture (included in Exhibit 3.6)
4.4 Form of Guarantee Agreement between the Company and Wilmington Trust Company, as Guarantee Trustee
*5.1 Opinion of James A. Smallenberger, Esq.
*5.2 Opinion of Richards, Layton & Finger
*8.1 Opinion of Sidley & Austin re: certain Tax Matters
*10.1 Form of Intercompany Agreement dated as of September , 1996, among American Mutual Holding Company,
AmerUs Group Co. and the Company
*10.2 Amended and Restated Joint Venture Agreement, dated as of , 1996, between American Mutual
Insurance Company and Ameritas Life Insurance Corp.
*10.3 Management and Administrative Service Agreement, dated as of April 1, 1996, among American Mutual
Life Insurance Company, Ameritas Variable Life Insurance Company and Ameritas Life Insurance Corp.
**10.4 Agreement and Plan of Merger, dated as of August 24, 1994, among Central Life Assurance Company and
American Mutual Life Insurance Company
**10.5 Line of Credit Application and Approval, dated February 28, 1996 and April 22, 1996, respectively,
between American Mutual Life Insurance Company and Federal Home Loan Bank of Des Moines
**10.6 All*AmerUs Supplemental Executive Retirement Plan, effective January 1, 1996
**10.7 American Mutual Life Insurance Company Supplemental Pension Plan (which was curtailed as of December
31, 1995)
*10.8 Central Life Assurance Company Supplemental Pension Plan (which was curtailed as of December 31,
1995)
*10.9 Management Incentive Plan
*10.10 AmerUs Life Insurance Company Performance Share Plan
**10.11 AmerUs Life Stock Incentive Plan
**10.12 Employment Agreement, dated February 1, 1995, between American Mutual Life Insurance Company and Sam
C. Kalainov
**10.13 AmerUs Life Non-Employee Director Stock Plan
**10.14 Modification of Real Estate Contract, dated as of July 1, 1996, between AmerUs Life Insurance Company
and AmerUs Properties, Inc.
**10.15 Asset Management and Disposition Agreement, dated January 3, 1995, between American Mutual Life
Insurance Company and Central Properties, Inc. (now AmerUs Properties, Inc.)
*10.16 Management Contract, dated January 1, 1993, between Central Life Assurance Company and Central
Properties, Inc. (now AmerUs Properties, Inc.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
**10.17 Management Contract, dated November 1, 1994, between American Mutual Life Insurance Company and CPI
Resource Group (now AmerUs Group Co.)
**10.18 Management Contract, dated January 1, 1993, between Central Life Assurance Company and Central
Properties, Inc. (now AmerUs Properties, Inc. )
**10.19 Management Contract, dated January 1, 1995, between American Mutual Life Insurance Company and
Central Properties, Inc. (now AmerUs Properties, Inc.)
**10.20 Management Contract, dated July 1, 1994, between Central Life Assurance Company and CPI Resource
Group (now AmerUs Group Co.)
*10.21 Management Contract, dated February 1, 1994, between Central Life Assurance Company and Central
Properties, Inc. (now AmerUs Properties, Inc.)
**10.22 Management Contract, dated May 1, 1994, between Central Life Assurance Company and Central
Properties, Inc. (now AmerUs Properties, Inc. )
**10.23 Management Contract, dated February 1, 1994, between Central Life Assurance Company and Central
Properties, Inc. (now AmerUs Properties, Inc. )
**10.24 Management Contract, dated January 4, 1994, between Central Life Assurance Company and CPI Resource
Group (now AmerUs Group Co.)
**10.25 Management Contract, dated November 1, 1994, between American Mutual Life Insurance Company and CPI
Resource Group (now AmerUs Group Co.)
**10.26 Lease - Business Property, dated December 1, 1995, between American Mutual Life Insurance Company and
AmerUs Leasing
**10.27 Lease - Business Property, dated January 1, 1996, between American Mutual Life Insurance Company and
AmerUs Bank
**10.28 Lease - Business Property, dated January 1, 1996, between American Mutual Life Insurance Company and
AmerUs Bank
**10.29 Lease - Business Property, dated January 1, 1996, between American Mutual Life Insurance Company and
AmerUs Bank
**10.30 Lease - Business Property, dated January 1, 1996, between American Mutual Life Insurance Company and
AmerUs Group
**10.31 Lease - Business Property, dated January 1, 1996, between American Mutual Life Insurance Company and
AmerUs Group
*10.32 Assumption and Amendment of Lease Agreement, dated as of November 27, 1993 among Central Life
Assurance Company, Midland Savings Bank FSB (now AmerUs Bank) and Midland Financial Mortgages, Inc.
(now AmerUs Mortgage, Inc.)
**10.33 Form of Indemnification Agreement executed with directors and certain officers
*10.34 Amended and Restated Agreement and Certificate of Limited Partnership of CPI Housing Partners I,
L.P., dated as of September 1, 1995, among AmerUs Properties, Inc., American Mutual Life Insurance
Company and American Mutual Affordable Housing Partners, L.P.
*10.35 Amended and Restated Agreement of Limited Partnership of American Mutual Affordable Housing Partners,
L.P., dated as of September 1, 1995, among GrA Partners Joint Venture, AmerUs Properties, Inc.,
American Mutual Life Insurance Company, NCC Polar Company and NCC Orion Company
*10.36 Amended and Restated Agreement and Certificate of Limited Partnership of 65th & Vista, L.P., dated as
of September 1, 1995, among AmerUs Properties, Inc., American Mutual Life Insurance Company and
American Mutual Affordable Housing Partners, L.P.
*10.37 Amended and Restated Agreement and Certificate of Limited Partnership of 60th & Vista, L.P., dated as
of September 1, 1995, among I.R.F.B. Joint Venture, American Mutual Life Insurance Company and
American Mutual Affordable Housing Partners, L.P.
*10.38 Certificate of Limited Partnership and Limited Partnership Agreement of CPI Housing Partners II,
L.P., dated March 27, 1995, between Central Properties, Inc. (now AmerUs Properties, Inc.) and
American Mutual Life Insurance Company
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
*10.39 Amended and Restated Agreement and Certificate of Limited Partnership of API Housing Partners III,
L.P., dated as of March 1, 1996, among AmerUs Properties, Inc., American Mutual Life Insurance
Company, American Mutual Affordable Housing Partners II, L.P. and AmerUs Management, Inc.
*10.40 Certificate of Limited Partnership and Limited Partnership Agreement of API Housing Partners IV,
L.P., dated as of June , 1995, between AmerUs Properties, Inc. and American Mutual Life Insurance
Company
*10.41 Amended and Restated Agreement and Certificate of Limited Partnership of API Housing Partners V,
L.P., dated as of March 1, 1996, among AmerUs Properties, Inc., American Mutual Life Insurance
Company, American Mutual Affordable Housing Partners II, L.P. and AmerUs Management, Inc.
*10.42 Amended and Restated Agreement and Certificate of Limited Partnership of API-Chimney Ridge Partners,
L.P., dated as of March 1, 1996, among AmerUs Properties, Inc., American Mutual Life Insurance
Company, American Mutual Affordable Housing Partners II, L.P. and AmerUs Management, Inc.
**10.43 Certificate of Limited Partnership and Limited Partnership Agreement of API Housing Partners VI,
L.P., dated as of October 10, 1995, between AmerUs Properties, Inc. and American Mutual Life
Insurance Company
*10.44 Certificate of Limited Partnership and Limited Partnership Agreement of 86th & Meredith Associates,
L.P., dated as of February 14, 1995, between Central Properties, Inc. (now AmerUs Properties, Inc.)
and American Mutual Life Insurance Company
**10.45 Certificate of Limited Partnership and Limited Partnership Agreement of Altoona Meadows Investors,
L.P., dated as of February 22, 1995, between KPI Investments, Inc. and Dennis Galeazzi
**10.46 First Amendment to the Certificate of Limited Partnership and Limited Partnership Agreement of
Altoona Meadows Investors, L.P., dated as of September 28, 1995, between KPI Investments, Inc. and
American Mutual Life Insurance Company
**10.47 Loan Servicing Agreement, dated August 1, 1990, between Central Life Assurance Company and Midland
Financial Mortgages, Inc. (now AmerUs Mortgage), filed as Exhibit 10.30 to Central Resource Group,
Inc.'s Registration Statement on Form S-1, Registration No. 33-48359, filed on June 4, 1992
**10.48 Construction Loan Servicing Agreement, dated November 20, 1995, between American Mutual Life
Insurance Company and AmerUs Properties, Inc.
*10.49 Servicing Agreement, dated March 1996, between American Mutual Life Insurance Company and AmerUs
Properties, Inc.
**10.50 Loan Servicing Agreement, dated September 1, 1994, between Central Life Assurance Company and Midland
Savings Bank, FSB (now AmerUs Bank)
**10.51 Miscellaneous Services Agreement, dated as of January 1, 1996, among American Mutual Life Insurance
Company, AmerUs Group Co., AmerUs Bank, AmerUs Mortgage, Inc., Iowa Realty Company, Inc., Midland
Homes, Inc., Iowa Title Company, AmerUs Insurance, Inc., and AmerUs Finance Inc.
**10.52 Amendment to Service Agreement, dated as of May 1, 1996, between American Mutual Life Insurance
Company and AmerUs Bank
**10.53 Data Processing Service Agreement, dated November 1, 1989, between Central Life Assurance Company and
Midland Financial Savings and Loan Association (now AmerUs Bank), filed as Exhibit 10.29 to Central
Resource Group, Inc.'s Registration Statement on Form S-1, Registration No. 33-48359, filed on June
4, 1992
**10.54 First Amendment to Data Processing Service Agreement, dated as of September 30, 1990, between Central
Life Assurance Company and Midland Savings Bank FSB (now AmerUs Bank)
**10.55 Second Amendment to Data Processing Service Agreement, dated as of May 1, 1991, between Central Life
Assurance Company and Midland Savings Bank FSB (now AmerUs Bank)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
**10.56 Third Amendment to Data Processing Service Agreement, dated as of October 1, 1991, between Central
Life Assurance Company and Midland Savings Bank, FSB (now AmerUs Bank)
**10.57 Fourth Amendment to Data Processing Service Agreement, dated as of January 2, 1992, between Central
Life Assurance Company and Midland Savings Bank, FSB (now AmerUs Bank)
**10.58 Fifth Amendment to Data Processing Service Agreement, dated as of July 1, 1993, between Central Life
Assurance Company and Midland Savings Bank FSB (now AmerUs Bank)
**10.59 Sixth Amendment to Data Processing Service Agreement, dated as of September 1, 1995, between American
Mutual Insurance Company and AmerUs Bank
**10.60 Seventh Amendment to Data Processing Service Agreement, dated as of January 1, 1996, between American
Mutual Life Insurance Company and AmerUs Bank
*10.61 Data Processing Support Services Agreement, dated as of July 1, 1993, between Central Life Assurance
Company and Midland Savings Bank, FSB (now AmerUs Bank)
**10.62 Miscellaneous Services Agreement, dated as of February 5, 1992, between Central Life Assurance
Company and Midland Savings Bank FSB (now AmerUs Bank)
**10.63 Investment Management Agreement, dated as of August 15, 1992, between Central Life Assurance Company
and Midland Savings Bank FSB (now AmerUs Bank)
**10.64 Disbursement Services Agreement, dated as of April 15, 1995, between American Mutual Life Insurance
Company and Midland Savings Bank FSB (now AmerUs Bank)
**10.65 Purchase Agreement, dated as of June 28, 1996, between AmerUs Life Insurance Company and AmerUs Bank
**10.66 Brokerage Contract dated January 1, 1995, among American Mutual Life Insurance Company and Midland
Investment Services, Inc. (now AmerUs Investments, Inc.)
**10.67 Servicing Agreement, dated March 1, 1992, between Central Life Assurance Company and Midland
Investment Services, Inc. (now AmerUs Investments, Inc.)
*10.68 Tax Allocation Agreement dated , 1996
12.1 Statement of Earnings to Combined Fixed Charges and Preferred Stock Dividends
**21.1 List of Subsidiaries
23.1 Consent of KPMG Peat Marwick LLP
*23.2 Consent of James A. Smallenberger, Esq. (to be included in Exhibit 5.1)
*23.3 Consent of Richards, Layton & Finger (to be included in Exhibit 5.2)
*23.4 Consent of Sidley & Austin (to be included in Exhibit 8.1)
24.1 Powers of Attorney
25.1 Statement of Eligibility of Wilmington Trust Company as to the Guarantee
25.2 Statement of Eligibility of Wilmington Trust Company as to the Preferred Securities
25.3 Statement of Eligibility of Wilmington Trust Company as to the Junior Subordinated Debentures
**27.1 Financial Data Schedule
</TABLE>
- --------------
*To be filed by amendment
**Incorporated by reference to the Company's Registration Statement on Form S-1
filed on September 18, 1996. (SEC file number 333-12239)
<PAGE>
CERTIFICATE OF TRUST
OF
AMERUS CAPITAL I
THIS Certificate of Trust of AmerUs Capital I (the "Trust"), dated
October 4, 1996, is being duly executed and filed by Wilmington Trust Company, a
Delaware banking corporation, as trustee, to form a business trust under the
Delaware Business Trust Act (12 DEL. C. Section 3801 ET SEQ.).
1. NAME. The name of the business trust being formed hereby is
AmerUs Capital I.
2. DELAWARE TRUSTEE. The name and business address of the trustee
of the Trust in the State of Delaware is Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective upon
filing.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first-above
written.
Wilmington Trust Company,
as trustee
By:/s/ Donald G. MacKelcan
--------------------------------
Name: Donald G. MacKelcan
Title: Assistant Vice President
<PAGE>
TRUST AGREEMENT
This TRUST AGREEMENT, dated as of October 4, 1996, among AmerUs Life
Holdings, Inc., an Iowa corporation, as "Depositor," and Wilmington Trust
Company, a banking corporation duly organized and existing under the laws of the
State of Delaware, not in its individual capacity but solely as Trustee. The
Depositor and the Trustee hereby agree as follows:
1. The trust created hereby shall be known as "Amerus Capital I," in
which name the Trustee, or the Depositor to the extent provided herein, may
conduct the business of the Trust, make and execute contracts, and sue and be
sued.
2. The Depositor hereby assigns, transfers, conveys and sets over to
the Trustee the sum of $10. The Trustee hereby acknowledges receipt of such
amount in trust from the Depositor, which amount shall constitute the initial
trust estate. The Trustee hereby declares that it will hold the trust estate in
trust for the Depositor. It is the intention of the parties hereto that the
Trust created hereby constitute a business trust under Chapter 38 of Title 12 of
the Delaware Code, 12 DEL. C. Section 3801 ET SEQ. (the "Business Trust Act"),
and that this document constitutes the governing instrument of the Trust. The
Trustee is hereby authorized and directed to execute and file a certificate of
trust with the Delaware Secretary of State in accordance with the provisions of
the Business Trust Act.
3. The Depositor and the Trustee will enter into an amended and
restated Trust Agreement, satisfactory to each such party and substantially in
the form included as Exhibit 4.1 to the 1933 Act Registration Statement referred
to below, to provide for the contemplated operation of the Trust created hereby
and the issuance of the Preferred Securities and Common Securities referred to
therein. Prior to the execution and delivery of such amended and restated Trust
Agreement, the Trustee shall not have any duty or obligation hereunder or with
respect to the trust estate, except as otherwise required by applicable law or
as may be necessary to obtain prior to such execution and delivery of any
licenses, consents or approvals required by applicable law or otherwise.
4. The Depositor and the Trustee hereby authorize and direct the
Depositor, as the sponsor of the Trust, (i) to file with the Securities and
Exchange Commission (the "Commission") and execute, in each case on behalf of
the Trust, (a) the Registration Statement on Form S-1 (the "1933 Act
Registration Statement"), including any pre-effective or post-effective
amendments to such 1933 Act Registration Statement (including the prospectus and
the exhibits contained therein), relating to the registration under the
Securities Act of 1933, as amended, of the Preferred Securities of the Trust and
certain other securities and (b) a Registration Statement on Form 8-A (the "1934
Act Registration Statement") (including all pre-effective and post-effective
amendments thereto) relating to the registration of the Preferred Securities of
the Trust under Section 12(b) of the Securities Exchange Act of 1934, as
amended; (ii) to file with such securities exchange or exchanges or the Nasdaq
National Market System ("Nasdaq"), as shall be determined by the Depositor, and
execute on behalf of the Trust a listing application and all other applications,
statements, certificates, agreements and other instruments as shall be necessary
or
<PAGE>
desirable to cause the Preferred Securities to be listed on such securities
exchanges or quoted on Nasdaq, as applicable; (iii) to file and execute on
behalf of the Trust such applications, reports, surety bonds, irrevocable
consents, appointments of attorney for service of process and other papers and
documents as shall be necessary or desirable to register the Preferred
Securities under the securities or "Blue Sky" laws, and to obtain any permits
under the insurance laws of such jurisdictions as the Depositor, on behalf of
the Trust, may deem necessary or desirable and (iv) to execute on behalf of the
Trust that certain Underwriting Agreement relating to the Preferred Securities,
among the Trust, the Depositor and the several Underwriters named therein,
substantially in the form included as Exhibit 1 to the 1933 Act Registration
Statement. In the event that any filing referred to in clauses (i), (ii) and
(iii) above is required by the rules and regulations of the Commission, any
securities exchange, Nasdaq or state securities or blue sky laws, to be executed
on behalf of the Trust by the Trustee, Wilmington Trust Company, in its capacity
as Trustee of the Trust, is hereby authorized and directed to join in any such
filing and to execute on behalf of the Trust any and all of the foregoing. In
connection with all of the foregoing, the Depositor hereby constitutes and
appoints Michael E. Sproule, Michael G. Fraizer and James A. Smallenberger, and
each of them, as its true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the Depositor or in the
Depositor's name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to the 1933 Act
Registration Statement and the 1934 Act Registration Statement and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as the Depositor might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
respective substitute or substitutes, shall do or cause to be done by virtue
hereof.
5. This Trust Agreement may be executed in one or more counterparts.
6. The number of Trustees initially shall be one (1) and thereafter
the number of Trustees shall be such number as shall be fixed from time to time
by a written instrument signed by the Depositor which may increase or decrease
the number of Trustees; provided, however, that to the extent required by the
Business Trust Act, one Trustee shall either be a natural person who is a
resident of the State of Delaware or, if not a natural person, an entity which
has its principal place of business in the State of Delaware and otherwise meets
the requirements of applicable Delaware law. Subject to the foregoing, the
Depositor is entitled to appoint or remove without cause the Trustee at any
time. The Trustee may resign upon thirty days prior notice to the Depositor.
7. This Trust Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without regard to conflict
of laws of principles).
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed as of the day and year first above written.
AMERUS LIFE HOLDINGS, INC., as
Depositor
By: /s/ James A. Smallenberger
---------------------------------
Name: James A. Smallenberger
Title: Senior Vice President &
Secretary
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Trustee
By: /s/ Donald G. MacKelcan
---------------------------------
Name: Donald G. MacKelcan
Title: Assistant Vice President
3
<PAGE>
[Exhibit 3.6]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
TRUST AGREEMENT
among
AMERUS LIFE HOLDINGS, INC., as Depositor,
WILMINGTON TRUST COMPANY.,
as Property Trustee,
and
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
Dated as of _______________, 1996
AMERUS CAPITAL I
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AmerUs Capital I
Certain Sections of this Trust Agreement relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Trust Agreement
Act Section Section
- --------------- --------
Section 310(a)(1) . . . . . . . . . . . . . . . . . . 8.07
(a)(2) . . . . . . . . . . . . . . . . . . 8.07
(a)(3) . . . . . . . . . . . . . . . . . . 8.09
(a)(4) . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . 8.08
Section 311(a) . . . . . . . . . . . . . . . . . . 8.13
(b) . . . . . . . . . . . . . . . . . . 8.13
Section 312(a) . . . . . . . . . . . . . . . . . . 5.07
(b) . . . . . . . . . . . . . . . . . . 5.07
(c) . . . . . . . . . . . . . . . . . . 5.07
Section 313(a) . . . . . . . . . . . . . . . . . . 8.14(a)
(a)(4) . . . . . . . . . . . . . . . . . . 8.14(b)
(b) . . . . . . . . . . . . . . . . . . 8.14(b)
(c) . . . . . . . . . . . . . . . . . . 8.14(a)
(d) . . . . . . . . . . . . . . . . . . 8.14(a),8.14(b)
Section 314(a) . . . . . . . . . . . . . . . . . . 8.15
(b) . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . 8.16
(c)(2) . . . . . . . . . . . . . . . . . . 8.16
(c)(3) . . . . . . . . . . . . . . . . . . 8.16
(d) . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . 1.01
Section 315(a) . . . . . . . . . . . . . . . . . . 8.01
(b) . . . . . . . . . . . . . . . . . . 8.02, 8.14(b)
(c) . . . . . . . . . . . . . . . . . . 8.01(a)
(d) . . . . . . . . . . . . . . . . . . 8.01, 8.03
(e) . . . . . . . . . . . . . . . . . . Not Applicable
______________
Note: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Trust Agreement.
<PAGE>
Section 316(a) . . . . . . . . . . . . . . . . . Not Applicable
(a)(1)(A) . . . . . . . . . . . . . . . . . Not Applicable
(a)(1)(B) . . . . . . . . . . . . . . . . . Not Applicable
(a)(2) . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . Not Applicable
(c) . . . . . . . . . . . . . . . . . Not Applicable
Section 317(a)(1) . . . . . . . . . . . . . . . . . Not Applicable
(a)(2) . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . 5.09
Section 318(a) . . . . . . . . . . . . . . . . . 10.10
______________
Note: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Trust Agreement.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Defined Terms
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
Establishment of the Trust
Section 2.01. Name. . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.02. Office of the Property Trustee; Principal Place
of Business. . . . . . . . . . . . . . . . . . . . . 10
Section 2.03. Initial Contribution of Trust Property;
Organizational Expenses. . . . . . . . . . . . . . . 10
Section 2.04. Issuance of the Preferred Securities. . . . . . . . . . 10
Section 2.05. Purchase of Debentures; Issuance of the Common
Securities . . . . . . . . . . . . . . . . . . . . . 10
Section 2.06. Declaration of Trust. . . . . . . . . . . . . . . . . . 11
Section 2.07. Authorization to Enter into Certain Transactions. . . . 11
Section 2.08. Assets of Trust . . . . . . . . . . . . . . . . . . . . 15
Section 2.09. Title to Trust Property . . . . . . . . . . . . . . . . 15
ARTICLE III
Payment Account
Section 3.01. Payment Account . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IV
Distributions; Redemption
Section 4.01. Distributions . . . . . . . . . . . . . . . . . . . . . 16
Section 4.02. Redemption. . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.03. Subordination of Common Securities. . . . . . . . . . . 19
Section 4.04. Payment Procedures. . . . . . . . . . . . . . . . . . . 19
Section 4.05. Tax Returns and Reports . . . . . . . . . . . . . . . . 19
Section 4.06. Payment of Taxes, Duties, Etc. of the Trust . . . . . . 20
Section 4.07. Payments under Indenture. . . . . . . . . . . . . . . . 20
-i-
<PAGE>
Page
----
ARTICLE V
Trust Securities Certificates
Section 5.01. Initial Ownership . . . . . . . . . . . . . . . . . . . 21
Section 5.02. The Trust Securities Certificates . . . . . . . . . . . 21
Section 5.03. Delivery of Trust Securities Certificates . . . . . . . 21
Section 5.04. Registration of Transfer and Exchange of Preferred
Securities Certificates . . . . . . . . . . . . . . . 21
Section 5.05. Mutilated, Destroyed, Lost or Stolen Trust Securities
Certificates. . . . . . . . . . . . . . . . . . . . . 22
Section 5.06. Persons Deemed Securityholders. . . . . . . . . . . . . 22
Section 5.07. Access to List of Securityholders' Names and
Addresses. . . . . . . . . . . . . . . . . . . . . . 23
Section 5.08. Maintenance of Office or Agency . . . . . . . . . . . . 23
Section 5.09. Appointment of Paying Agent . . . . . . . . . . . . . . 23
Section 5.10. Ownership of Common Securities by Depositor . . . . . . 24
Section 5.11. Book-Entry Preferred Securities Certificates; Common
Securities Certificate. . . . . . . . . . . . . . . . 24
Section 5.12. Notices to Clearing Agency. . . . . . . . . . . . . . . 25
Section 5.13. Definitive Preferred Securities Certificates. . . . . . 25
Section 5.14. Rights of Securityholders . . . . . . . . . . . . . . . 26
ARTICLE VI
Acts of Securityholders; Meetings; Voting
Section 6.01. Limitations on Voting Rights. . . . . . . . . . . . . . 28
Section 6.02. Notice of Meetings. . . . . . . . . . . . . . . . . . . 29
Section 6.03. Meetings of Preferred Securityholders . . . . . . . . . 29
Section 6.04. Voting Rights . . . . . . . . . . . . . . . . . . . . . 29
Section 6.05. Proxies, etc. . . . . . . . . . . . . . . . . . . . . . 29
Section 6.06. Securityholder Action by Written Consent. . . . . . . . 30
Section 6.07. Record Date for Voting and Other Purposes . . . . . . . 30
Section 6.08. Acts of Securityholders . . . . . . . . . . . . . . . . 30
Section 6.09. Inspection of Records . . . . . . . . . . . . . . . . . 31
-ii-
<PAGE>
Page
----
ARTICLE VII
Representations and Warranties
Section 7.01. Representations and Warranties of the Bank and
the Property Trustee . . . . . . . . . . . . . . . . 32
Section 7.02. Representations and Warranties of Parent. . . . . . . . 33
ARTICLE VIII
The Trustees
Section 8.01. Certain Duties and Responsibilities . . . . . . . . . . 33
Section 8.02. Certain Notices . . . . . . . . . . . . . . . . . . . . 35
Section 8.03. Certain Rights of Property Trustee. . . . . . . . . . . 35
Section 8.04. Not Responsible for Recitals or Issuance of
Securities . . . . . . . . . . . . . . . . . . . . . 37
Section 8.05. May Hold Securities . . . . . . . . . . . . . . . . . . 37
Section 8.06. Compensation; Indemnity; Fees . . . . . . . . . . . . . 38
Section 8.07. Corporate Property Trustee Required; Eligibility
of Trustees. . . . . . . . . . . . . . . . . . . . . 38
Section 8.08. Conflicting Interests . . . . . . . . . . . . . . . . . 39
Section 8.09. Co-Trustees and Separate Trustee. . . . . . . . . . . . 39
Section 8.10. Resignation and Removal; Appointment of Successor . . . 40
Section 8.11. Acceptance of Appointment by Successor. . . . . . . . . 42
Section 8.12. Merger, Conversion, Consolidation or Succession to
Business of a Trustee . . . . . . . . . . . . . . . . 43
Section 8.13. Preferential Collection of Claims Against
Depositor or Trust . . . . . . . . . . . . . . . . . 43
Section 8.14. Reports by Property Trustee . . . . . . . . . . . . . . 44
Section 8.15. Reports to the Property Trustee . . . . . . . . . . . . 44
Section 8.16. Evidence of Compliance with Conditions Precedent. . . . 45
Section 8.17. Number of Trustees. . . . . . . . . . . . . . . . . . . 45
Section 8.18. Delegation of Power . . . . . . . . . . . . . . . . . . 45
ARTICLE IX
Termination and Liquidation
Section 9.01. Termination Upon Expiration Date. . . . . . . . . . . . 46
Section 9.02. Early Termination . . . . . . . . . . . . . . . . . . . 46
Section 9.03. Termination . . . . . . . . . . . . . . . . . . . . . . 46
-iii-
<PAGE>
Page
----
Section 9.04. Liquidation . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.05. Merger, Consolidation, Amalgamation or Replacement
of the Trust. . . . . . . . . . . . . . . . . . . . . 48
Section 10.01. Expense Agreement. . . . . . . . . . . . . . . . . . . 49
Section 10.02. Limitation of Rights of Securityholders. . . . . . . . 49
Section 10.03. Amendment. . . . . . . . . . . . . . . . . . . . . . . 49
Section 10.04. Separability . . . . . . . . . . . . . . . . . . . . . 50
SECTION 10.05. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . 51
Section 10.06. Payments Due on Non-Business Day . . . . . . . . . . . 51
Section 10.07. Successors . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.08. Headings . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.09. Reports, Notices and Demands . . . . . . . . . . . . . 51
Section 10.10. Agreement Not to Petition. . . . . . . . . . . . . . . 52
Section 10.11. Trust Indenture Act; Conflict with Trust
Indenture Act . . . . . . . . . . . . . . . . . . . 52
Section 10.12. Rights Under Indenture . . . . . . . . . . . . . . . . 52
Section 10.13. Effectiveness. . . . . . . . . . . . . . . . . . . . . 52
Exhibit A Certificate of Trust
Exhibit B Form of Certificate Depository Agreement
Exhibit C Form of Common Securities Certificate
Exhibit D Form of Preferred Securities Certificate
iv
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT, dated as of _______________,
1996, among (i) AmerUs Life Holdings, Inc., an Iowa corporation (the "Depositor"
or "Parent"), (ii) Wilmington Trust Company, a banking corporation duly
organized and existing under the laws of Delaware, as trustee (the "Property
Trustee" and, in its separate corporate capacity and not in its capacity as
Property Trustee, the "Bank"), (iii) Michael E. Sproule, an individual, Michael
G. Fraizer, an individual and James A. Smallenberger, an individual, each of
whose address is c/o AmerUs Life Holdings, Inc., 418 Sixth Avenue, Des Moines,
Iowa 50306-2499 (each an "Administrative Trustee" and collectively the
"Administrative Trustees") (the Property Trustee and the Administrative Trustees
being referred to collectively as the "Trustees") and (iv) the several Holders,
as hereinafter defined.
WITNESSETH:
WHEREAS, the Depositor and the Property Trustee have heretofore duly
declared and established a business trust pursuant to the Delaware Business
Trust Act by the entering into of that certain Trust Agreement, dated as of
October 4, 1996 (the "Original Trust Agreement"), and by the execution and
filing by the Property Trustee with the Secretary of State of the State of
Delaware of the Certificate of Trust, filed on October 4, 1996, attached as
Exhibit A; and
WHEREAS, the Depositor and the Property Trustee desire to amend and
restate the Original Trust Agreement in its entirety as set forth herein to
provide for, among other things, (i) the acquisition by the Trust from the
Depositor of all of the right, title and interest in the Debentures, (ii) the
issuance of the Common Securities by the Trust to the Depositor, (iii) the
issuance and sale of the Preferred Securities by the Trust pursuant to the
Underwriting Agreement and (iv) the appointment of the Administrative Trustees;
NOW THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, each party, for the benefit of the other party and
for the benefit of the Securityholders, hereby amends and restates the Original
Trust Agreement in its entirety and agrees as follows:
ARTICLE I
Defined Terms
Section 1.01. DEFINITIONS. For all purposes of this Trust Agreement,
except as otherwise expressly provided or unless the context otherwise requires:
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(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may
be, of this Trust Agreement; and
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
"ACT" has the meaning specified in Section 6.08.
"ADDITIONAL AMOUNT" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of Additional Interest (as
defined in the Indenture) paid by the Depositor on a Like Amount of Debentures
for such period.
"ADDITIONAL SUMS" has the meaning specified in Section 1005 of the
Indenture.
"ADMINISTRATIVE TRUSTEE" means each of the individuals identified as
an "Administrative Trustee" in the preamble to this Trust Agreement, solely in
his capacity as Administrative Trustee of the Trust formed and continued
hereunder and not in his individual capacity, or such Administrative Trustee's
successor in interest in such capacity, or any successor trustee appointed as
herein provided.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"BANK" has the meaning specified in the preamble to this Trust
Agreement.
"BANKRUPTCY EVENT" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction in
the premises judging such Person a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjudication
or composition of or in respect of such Person under any applicable Federal
or State bankruptcy, insolvency, reorganization or other similar law, or
appointing a receiver, liquidator, assignee, trustee sequestrator or
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other similar official of such Person or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a period
of 60 consecutive days; or
(b) the institution by such Person of proceedings to be adjudicated a
bankrupt or insolvent, or of the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under any
applicable Federal or State bankruptcy, insolvency, reorganization or other
similar law, or the consent by it to the filing of such petition or to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator or
similar official of such Person or of any substantial part of its property
or the admission by it in writing of its inability to pay its debts
generally as they become due and its willingness to be adjudicated as a
bankrupt, or the making by it of an assignment for the benefit of
creditors, or the taking of action by such Person in furtherance of any
such action.
"BANKRUPTCY LAWS" has the meaning specified in Section 10.10.
"BOARD RESOLUTION" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Depositor to have been duly adopted
by the Depositor's Board of Directors or a duly authorized committee thereof or
officers of the Company to which authority to act on behalf of the Board of
Directors has been delegated and to be in full force and effect on the date of
such certification, and delivered to the Property Trustee.
"BOOK ENTRY PREFERRED SECURITIES CERTIFICATES" means a beneficial
interest in the Preferred Securities Certificates, ownership and transfers of
which shall be made through book entries by a Clearing Agency as described in
Section 5.11.
"BUSINESS DAY" means a day other than (a) a Saturday or Sunday, (b) a
day on which banking institutions in The City of New York are authorized or
obligated by law or executive order to remain closed, or (c) a day on which the
Property Trustee's Corporate Trust Office or the Debenture Trustee's Corporate
Trust Office is closed for business.
"CERTIFICATE DEPOSITORY AGREEMENT" means the agreement among the
Trust, the Depositor and The Depository Trust Company, as the initial Clearing
Agency, dated as of the Closing Date, relating to the Trust Securities
Certificates, substantially in the form attached as Exhibit B, as the same may
be amended and supplemented from time to time.
"CLEARING AGENCY" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended. The Depository Trust Company will be the initial Clearing Agency.
"CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
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"CLOSING DATE" means the First Time of Delivery as defined in the
Underwriting Agreement, which date is also the date of execution and delivery of
this Trust Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, as
amended, or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act, then the body performing such duties at such time.
"COMMON SECURITY" means an undivided beneficial interest in the assets
of the Trust, having a Liquidation Amount of $25 and having the rights provided
therefor in this Trust Agreement, including the right to receive Distributions
and a Liquidation Distribution as provided herein.
"COMMON SECURITIES CERTIFICATE" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as Exhibit C.
"CORPORATE TRUST OFFICE" means the principal office of the Property
Trustee located in Wilmington, Delaware.
"DEBENTURE EVENT OF DEFAULT" means an "Event of Default" as defined in
the Indenture.
"DEBENTURE REDEMPTION DATE" means "Redemption Date" as defined in the
Indenture.
"DEBENTURE TRUSTEE" means Wilmington Trust Company, a banking
corporation duly organized and existing under the laws of the State of Delaware.
"DEBENTURES" means the [$75,000,000] aggregate principal amount (or up
to [$86,250,000] aggregate principal amount if and to the extent the
overallotment option granted by the Trust to the underwriters of the Preferred
Securities is exercised) of the Parent's [_____%] Junior Subordinated
Debentures, issued pursuant to the Indenture.
"DEFINITIVE PREFERRED SECURITIES CERTIFICATES" means either or both
(as the context requires) of (a) Preferred Securities Certificates issued as
Book-Entry Preferred Securities Certificates as provided in Section 5.11(a) and
(b) Preferred Securities Certificates issued in certificated, fully registered
form as provided in Section 5.13.
"DELAWARE BUSINESS TRUST ACT" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. C. Section 3801, ET SEQ., as it may be amended from time
to time.
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"DEPOSITOR" has the meaning specified in the preamble to this Trust
Agreement and includes AmerUs Life Holdings, Inc. in its capacity as Holder of
the Common Securities.
"DISTRIBUTION DATE" has the meaning specified in Section 4.01(a).
"DISTRIBUTIONS" means amounts payable in respect of the Trust
Securities as provided in Section 4.01.
"EVENT OF DEFAULT" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Property Trustee in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days; or
(c) default by the Property Trustee in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Trustees in this Trust Agreement (other
than a covenant or warranty a default in the performance of which or the
breach of which is dealt with in clause (b) or (c), above) and continuation
of such default or breach for a period of 60 days after there has been
given, by registered or certified mail, to the defaulting Trustee or
Trustees by the Holders of at least 25% in aggregate Liquidation Amount of
the Outstanding Preferred Securities a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the Property
Trustee and the failure by the Depositor to appoint a successor Property
Trustee within 60 days thereof.
"EXPENSE AGREEMENT" means the Agreement as to Expenses and Liabilities
between the Parent and the Trust, substantially in the form attached as
Exhibit A to the Indenture, as amended from time to time.
"GUARANTEE" means the Guarantee Agreement executed and delivered by
the Parent and Wilmington Trust Company, a banking corporation, as trustee,
contemporaneously with the execution and delivery of this Trust Agreement, for
the benefit of the Holders of the Preferred Securities, as amended from time to
time.
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"INDENTURE" means the Indenture, dated as of _______________, 1996,
between the Parent and the Debenture Trustee, as trustee, as amended or
supplemented from time to time.
"LIEN" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.
"LIKE AMOUNT" means (a) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Debentures to be contemporaneously redeemed in accordance with the
Indenture and the proceeds of which will be used to pay the Redemption Price of
such Trust Securities, and (b) with respect to a distribution of Debentures to
Holders of Trust Securities in connection with a dissolution or liquidation of
the Trust, Debentures having a principal amount equal to the Liquidation Amount
of the Trust Securities of the Holder to whom such Debentures are distributed.
"LIQUIDATION AMOUNT" means the stated amount of $25 per Trust
Security.
"LIQUIDATION DATE" means each Date on which Debentures are to be
distributed to Holders of Trust Securities in connection with a dissolution and
liquidation of the Trust pursuant to Section 9.04(a).
"LIQUIDATION DISTRIBUTION" has the meaning specified in Section
9.04(d).
"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Depositor, and delivered to the appropriate Trustee. One of
the officers signing an Officers' Certificate given pursuant to Section 8.16
shall be the principal executive, financial or accounting officer of the
Depositor. Any Officers' Certificate delivered with respect to compliance with
a condition or covenant provided for in this Trust Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
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"OPINION OF COUNSEL" means a written opinion of counsel, who may be
counsel for the Trust, the Property Trustee or the Depositor, and may be an
employee of any thereof, and who shall be acceptable to the Property Trustee.
"ORIGINAL TRUST AGREEMENT" has the meaning specified in the recitals
to this Trust Agreement.
"OUTSTANDING", when used with respect to Preferred Securities, means,
as of the date of determination, all Preferred Securities theretofore executed,
authenticated and delivered under this Trust Agreement, EXCEPT:
(a) Preferred Securities theretofore canceled by the Administrative
Trustees or delivered to the Administrative Trustees for cancellation;
(b) Preferred Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property Trustee
or any Paying Agent for the Holders of such Preferred Securities; PROVIDED
that, if such Preferred Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Trust Agreement; and
(c) Preferred Securities in exchange for or in lieu of which other
Preferred Securities have been executed, authenticated and delivered
pursuant to this Trust Agreement;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
Liquidation Amount of the Outstanding Preferred Securities have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
Preferred Securities owned by the Depositor, any Trustee or any Affiliate of the
Depositor or any Trustee shall be disregarded and deemed not to be Outstanding,
except that (a) in determining whether any Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Preferred Securities which such Trustee knows to be so owned shall
be so disregarded and (b) the foregoing shall not apply at any time when all of
the Outstanding Preferred Securities are owned by the Depositor, one or more of
the Trustees and/or any such Affiliate. Preferred Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Administrative Trustees the pledgee's
right so to act with respect to such Preferred Securities and that the pledgee
is not the Depositor or any Affiliate of the Depositor.
"OWNER" means each Person who is the beneficial owner of a Book Entry
Preferred Securities Certificate as reflected in the records of the Clearing
Agency or, if a Clearing Agency Participant is not the Owner, then as reflected
in the records of a Person maintaining an account with such Clearing Agency
(directly or indirectly, in accordance with the rules of such Clearing Agency).
"PARENT" has the meaning specified in the preamble to this Trust
Agreement.
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"PAYING AGENT" means any paying agent or co-paying agent appointed
pursuant to Section 5.09 and shall initially be the Bank.
"PAYMENT ACCOUNT" means a segregated non-interest-bearing corporate
trust account maintained by the Property Trustee with the Bank in its corporate
trust department for the benefit of the Securityholders in which all amounts
paid in respect of the Debentures will be held and from which the Property
Trustee shall make payments to the Securityholders in accordance with
Section 4.01.
"PERSON" means any individual, corporation, partnership, joint
venture, trust, limited liability company or corporation, unincorporated
organization or government or any agency or political subdivision thereof.
"PREFERRED SECURITY" means an undivided beneficial interest in the
assets of the Trust, having a Liquidation Amount of $25 and having rights
provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"PREFERRED SECURITIES CERTIFICATE" means a certificate evidencing
ownership of Preferred Securities, substantially in the form attached as
Exhibit D.
"PROPERTY TRUSTEE" means the commercial bank or trust company
identified as the "Property Trustee" in the preamble to this Trust Agreement
solely in its capacity as Property Trustee of the Trust heretofore formed and
continued hereunder and not in its individual capacity, or its successor in
interest in such capacity, or any successor property trustee appointed as herein
provided.
"REDEMPTION DATE" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; PROVIDED that each Debenture Redemption Date shall be a Redemption
Date for a Like Amount of Trust Securities.
"REDEMPTION PRICE" means, with respect to any date fixed for
redemption of any Trust Security, the Liquidation Amount of such Trust Security,
plus accumulated and unpaid Distributions to such date, plus the amount of the
premium, if any, paid by the Depositor upon the concurrent redemption of a Like
Amount of Debentures allocated on a pro rata basis (based on Liquidation
Amounts) among the Trust Securities.
"RELEVANT TRUSTEE" shall have the meaning specified in Section 8.10.
"SECURITIES REGISTER" and "SECURITIES REGISTRAR" have the respective
meanings specified in Section 5.04.
"SECURITYHOLDER" or "HOLDER" means a Person in whose name a Trust
Security or Securities is registered in the Securities Register; any such Person
shall be deemed to be a
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beneficial owner within the meaning of the Delaware Business Trust Act;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
amount of Preferred Securities have voted on any matter provided for in this
Trust Agreement, then for the purpose of any such determination, so long as
Definitive Preferred Securities Certificates have not been issued, the term
Securityholders or Holders as used herein shall refer to Owners.
"TRANSFER AGENT" shall be the person specified in or pursuant to
Section 5.04.
"TRUST" means the Delaware business trust created and continued hereby
and identified on the cover page to this Trust Agreement.
"TRUST AGREEMENT" means this Amended and Restated Trust Agreement, as
the same may be modified, amended or supplemented in accordance with the
applicable provisions hereof, including all exhibits hereto, including, for all
purposes of this Trust Agreement and any such modification, amendment or
supplement, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this Trust Agreement and any such modification, amendment or
supplement, respectively.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; PROVIDED, HOWEVER,
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"TRUST PROPERTY" means (a) the Debentures, (b) any cash on deposit in,
or owing to, the Payment Account, (c) all proceeds and rights in respect of the
foregoing and any other property and assets for the time being held or deemed to
be held by the Property Trustee pursuant to the trusts of this Trust Agreement
and (d) the rights of the Property Trustee under the Guarantee.
"TRUST SECURITY" means any one of the Common Securities or the
Preferred Securities.
"TRUST SECURITIES CERTIFICATE" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
"TRUSTEES" has the meaning specified in the preamble to this Trust
Agreement.
"UNDERWRITING AGREEMENT" means the Underwriting Agreement, dated as of
_______________, 1996, among the Trust, the Parent and the underwriters named
therein.
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ARTICLE II
Establishment of the Trust
Section 2.01. NAME. The Trust created and continued hereby shall be
known as "AmerUs Capital I," as such name may be modified from time to time by
the Administrative Trustees following written notice to the Holders of Trust
Securities and the other Trustees, in which name the Trustees may conduct the
business of the Trust, make and execute contracts and other instruments on
behalf of the Trust and sue and be sued.
Section 2.02. OFFICE OF THE PROPERTY TRUSTEE; PRINCIPAL PLACE OF
BUSINESS. The office of the Property Trustee in the State of Delaware is Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
Corporate Trust Administration, or such other address in the State of Delaware
as the Property Trustee may designate by written notice to the Securityholders
and the Depositor. The principal place of business of the Trust is c/o AmerUs
Life Holdings, Inc., 418 Sixth Avenue, Des Moines, Iowa 50306-2499.
Section 2.03. INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL
EXPENSES. The Property Trustee acknowledges receipt in trust from the Depositor
in connection with the Original Trust Agreement of the sum of $10, which
constituted the initial Trust Property. The Depositor shall pay organizational
expenses of the Trust as they arise or shall, upon request of any Trustee,
promptly reimburse such Trustee for any such expenses paid by such Trustee. The
Depositor shall make no claim upon the Trust Property for the payment of such
expenses.
Section 2.04. ISSUANCE OF THE PREFERRED SECURITIES. On
_______________, 1996 the Depositor, on behalf of the Trust and pursuant to the
Original Trust Agreement, executed and delivered the Underwriting Agreement.
Contemporaneously with the execution and delivery of this Trust Agreement, an
Administrative Trustee, on behalf of the Trust, shall execute and deliver to the
underwriters named in the Underwriting Agreement Preferred Securities
Certificates, registered in the name of the nominee of the initial Clearing
Agency, in an aggregate amount of [3,000,000] Preferred Securities having an
aggregate Liquidation Amount of [$75,000,000], against receipt of the aggregate
purchase price of such Preferred Securities of [$75,000,000], which amount the
Administrative Trustee shall promptly deliver to the Property Trustee. In the
event and to the extent the overallotment option granted by the Trust pursuant
to the Underwriting Agreement is exercised by such underwriters, an
Administrative Trustee, on behalf of the Trust, shall execute and deliver to
such underwriters Preferred Securities Certificates, registered in the name of
the nominee of the initial Clearing Agency, in an aggregate amount of up to
[450,000] Preferred Securities having an aggregate Liquidation Amount of up to
[$11,250,000], against receipt of the aggregate purchase price of such Preferred
Securities of up to [$11,250,000] which amount the Administrative Trustee shall
promptly deliver to the Property Trustee, on the date specified pursuant to the
Underwriting Agreement.
Section 2.05. PURCHASE OF DEBENTURES; ISSUANCE OF THE COMMON
SECURITIES. Contemporaneously with the execution and delivery of this Trust
Agreement, an Administrative
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Trustee, on behalf of the Trust, shall purchase from the Depositor Debentures,
registered in the name of the Trust and having an aggregate principal amount
equal to [$75,000,000], and, in satisfaction of the purchase price for such
Debentures, (w) the Property Trustee, on behalf of the Trust, shall deliver to
the Depositor the sum of [$____________], and (x) contemporaneously therewith,
an Administrative Trustee, on behalf of the Trust, shall execute and deliver to
the Depositor Common Securities Certificates, registered in the name of the
Depositor, in an aggregate amount of [90,000] Common Securities having an
aggregate Liquidation Amount of [$2,250,000]. In the event the overallotment
option granted by the Trust with respect to the Preferred Securities pursuant to
the Underwriting Agreement is exercised by the underwriters named therein, an
Administrative Trustee, on behalf of the Trust, shall purchase from the
Depositor Debentures, registered in the name of the Trust and having an
aggregate principal amount up to [$11,250,000], and, in satisfaction of the
purchase price for such Debentures, (y) the Property Trustee, on behalf of the
Trust, shall deliver to the Depositor an amount equal to [_____%] of the
aggregate principal amount of Debentures being purchased, and (z)
contemporaneously therewith, an Administrative Trustee, on behalf of the Trust,
shall execute and deliver to the Depositor Common Securities Certificates,
registered in the name of the Depositor, in an aggregate amount (determined on a
pro rata basis to the extent the overallotment option is exercised) of up to
[13,500] Common Securities having an aggregate Liquidation Amount of up to
[$337,500].
Section 2.06. DECLARATION OF TRUST. The exclusive purposes and
functions of the Trust are (a) to issue and sell Trust Securities and use the
proceeds from such sale to acquire the Debentures, and (b) to engage in those
activities necessary, convenient or incidental thereto. The Depositor hereby
appoints the Trustees as trustees of the Trust, to have all the rights, powers
and duties set forth herein and the Trustees hereby accept such appointment.
The Property Trustee hereby declares that it will hold the Trust Property in
trust upon and subject to the conditions set forth herein for the benefit of the
Trust and the Securityholders. The Administrative Trustees shall have all
rights, powers and duties set forth herein and in accordance with applicable law
with respect to accomplishing the purposes of the Trust.
Section 2.07. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS.
(a) The Property Trustee and the Administrative Trustees shall conduct
the affairs of the Trust in accordance with the terms of this Trust Agreement.
Subject to the limitations set forth in paragraph (b) of this Section, and in
accordance with the following provisions (i) and (ii), the Property Trustee and
the Administrative Trustees shall have the authority to enter into all
transactions and agreements determined by the Trustees to be appropriate in
exercising the authority, express or implied, otherwise granted to the Trustees
under this Trust Agreement, and to perform all acts in furtherance thereof,
including without limitation, the following:
(i) As among the Trustees, the Administrative Trustees shall have the
power, duty and authority to act on behalf of the Trust with respect to the
following matters:
(A) the issuance and sale of the Trust Securities;
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(B) to cause the Trust to enter into, and to execute, deliver
and perform on behalf of the Trust, the Expense Agreement and the
Certificate Depository Agreement and such other agreements as may be
necessary or desirable in connection with the purposes and function of
the Trust;
(C) assisting in the registration of the Preferred Securities
under the Securities Act of 1933, as amended, and under state
securities or blue sky laws, and the qualification of this Trust
Agreement under the Trust Indenture Act;
(D) assisting in the quotation or listing of the Preferred
Securities upon the Nasdaq National Market or such securities exchange
or exchanges as shall be determined by the Depositor and the
registration of the Preferred Securities under the Securities Exchange
Act of 1934, as amended, and the preparation and filing of all
periodic and other reports and other documents pursuant to the
foregoing;
(E) the sending of notices (other than notices of default) and
other information regarding the Trust Securities and the Debentures to
the Securityholders in accordance with this Trust Agreement;
(F) the appointment of a Paying Agent, authenticating agent,
Securities Registrar and Transfer Agent in accordance with this Trust
Agreement;
(G) registering transfers of the Trust Securities in accordance
with this Trust Agreement;
(H) to the extent provided in this Trust Agreement, the winding
up of the affairs of and liquidation of the Trust and the preparation,
execution and filing of the certificate of cancellation with the
Secretary of State of the State of Delaware;
(I) unless otherwise determined by the Depositor, the Property
Trustee or the Administrative Trustees, or as otherwise required by
the Delaware Business Trust Act or the Trust Indenture Act, to execute
on behalf of the Trust (either acting alone or together with any or
all of the Administrative Trustees) any documents that the
Administrative Trustees have the power to execute pursuant to this
Trust Agreement; and
(J) the taking of any action incidental to the foregoing as the
Trustees may from time to time determine is necessary or advisable to
give effect to the terms of this Trust Agreement and protect and
conserve the Trust Property for the benefit of the Securityholders
(without consideration of the effect of any such action on any
particular Securityholder).
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(ii) As among the Trustees, the Property Trustee shall have the
power, duty and authority to act on behalf of the Trust with respect to the
following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any other payments
made in respect of the Debentures in the Payment Account;
(D) the distribution of amounts owed to the Securityholders in
respect of the Trust Securities;
(E) the exercise of all of the rights, powers and privileges of
a holder of the Debentures;
(F) the sending of notices of default and other information
regarding the Trust Securities and the Debentures to the
Securityholders in accordance with this Trust Agreement;
(G) the distribution of the Trust Property in accordance with
the terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement, the winding
up of the affairs of and liquidation of the Trust and the preparation,
execution and filing of the certificate of cancellation with the
Secretary of State of the State of Delaware;
(I) after an Event of Default the taking of any action
incidental to the foregoing as the Property Trustee may from time to
time determine is necessary or advisable to give effect to the terms
of this Trust Agreement and protect and conserve the Trust Property
for the benefit of the Securityholders (without consideration of the
effect of any such action on any particular Securityholder); and
(J) subject to this Section 2.07(a)(ii), the Property Trustee
shall have none of the duties, liabilities, powers or the authority of
the Administrative Trustees set forth in Section 2.07(a)(i).
(b) So long as this Trust Agreement remains in effect, the Trust (or
the Trustees acting on behalf of the Trust) shall not undertake any business,
activities or transaction except as expressly provided herein or contemplated
hereby. In particular, the Trustees and the Trust shall not (i) acquire any
investments or engage in any activities not authorized by this Trust Agreement,
(ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or otherwise
dispose of any of the
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Trust Property or interests therein, including to Securityholders, except as
expressly provided herein, (iii) take any action that would result in more than
an insubstantial risk that the Trust would fail or cease to qualify as a
"grantor trust" for United States Federal income tax purposes, (iv) incur any
indebtedness for borrowed money or issue any other debt or (v) take or consent
to any action that would result in the placement of a Lien on any of the Trust
Property. The Administrative Trustees shall defend all claims and demands of
all Persons at any time claiming any Lien on any of the Trust Property adverse
to the interest of the Trust or the Securityholders in their capacity as
Securityholders.
(c) In connection with the issue and sale of the Preferred Securities,
the Depositor shall have the right and responsibility to assist the Trust with
respect to, or effect on behalf of the Trust, the following (and any actions
taken by the Depositor in furtherance of the following prior to the date of this
Trust Agreement are hereby ratified and confirmed in all respects as actions of
the Trust):
(i) to prepare for filing by the Trust with the Commission and to
execute on behalf of the Trust a registration statement on Form S-1 in
relation to the Preferred Securities, including any amendments thereto;
(ii) to determine the States in which to take appropriate action to
qualify or register for sale all or part of the Preferred Securities and to
do any and all such acts, other than actions which must be taken by or on
behalf of the Trust, and advise the Trustees of actions they must take on
behalf of the Trust, and prepare for execution and filing any documents to
be executed and filed by the Trust or on behalf of the Trust, as the
Depositor deems necessary or advisable in order to comply with the
applicable laws of any such States;
(iii) to prepare for filing by the Trust an application to the Nasdaq
National Market System ("Nasdaq") or any national stock exchange for
quotation or listing upon notice of issuance, as applicable, of any
Preferred Securities;
(iv) to prepare for filing by the Trust with the Commission a
registration statement on Form 8-A relating to the registration of the
Preferred Securities under Section 12(b) or 12(g) of the Exchange Act,
including any amendments thereto;
(v) to negotiate the terms of, and execute and deliver, the
Underwriting Agreement providing for the sale of the Preferred Securities;
and
(vi) to take any other actions necessary or desirable to carry out
any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the
Administrative Trustees are authorized and directed to conduct the affairs of
the Trust and to operate the Trust so that the Trust will not (i) be deemed to
be an "investment company" required to be registered under the
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Investment Company Act of 1940, as amended, or (ii) fail or cease to qualify as
a grantor trust for United States Federal income tax purposes and so that the
Debentures will be treated as indebtedness of the Depositor for United States
Federal income tax purposes. In this connection, the Depositor and the
Administrative Trustees are authorized to take any action, not inconsistent with
applicable law, the Certificate of Trust or this Trust Agreement, that each of
the Depositor and the Administrative Trustees determines in its discretion to be
necessary or desirable for such purposes as long as such action does not
adversely affect the interests of the Holders of the Preferred Securities.
(e) All prior actions taken by Michael E. Sproule, Michael G. Fraizer
and James A. Smallenberger on behalf of Parent in furtherance of Parent's
powers, duties and obligations under the Original Trust Agreement are hereby
ratified and affirmed as actions of the Trust.
Section 2.08. ASSETS OF TRUST. The assets of the Trust shall consist
of the Trust Property.
Section 2.09. TITLE TO TRUST PROPERTY. Legal title to all Trust
Property shall be vested at all times in the Property Trustee (in its capacity
as such) and shall be held and administered by the Property Trustee for the
benefit of the Trust and the Securityholders in accordance with this Trust
Agreement.
ARTICLE III
Payment Account
Section 3.01. PAYMENT ACCOUNT.
(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and any agent of the
Property Trustee shall have exclusive control and sole right of withdrawal with
respect to the Payment Account for the purpose of making deposits in and
withdrawals from the Payment Account in accordance with this Trust Agreement.
All monies and other property deposited or held from time to time in the Payment
Account shall be held by the Property Trustee in the Payment Account for the
exclusive benefit of the Securityholders and for distribution as herein
provided, including (and subject to) any priority of payments provided for
herein.
(b) The Property Trustee shall deposit in the Payment Account,
promptly upon receipt, all payments of principal of or interest on, and any
other payments or proceeds with respect to, the Debentures. Amounts held in the
Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
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ARTICLE IV
Distributions; Redemption
Section 4.01. DISTRIBUTIONS.
(a) Distributions on the Trust Securities shall be cumulative, and
will accumulate whether or not there are funds of the Trust available for the
payment of Distributions. Distributions shall accrue from _______________,
1996, and, except in the event that the Parent exercises its right to extend the
interest payment period for the Debentures pursuant to Section 301 of the
Indenture, shall be payable quarterly in arrears on March 31, June 30, September
30 and December 31 of each year, commencing on March 31, 1997. If any date on
which Distributions are otherwise payable on the Trust Securities is not a
Business Day, then the payment of such Distribution shall be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, payment of such Distribution shall be made on
the immediately preceding Business Day, in each case with the same force and
effect as if made on such date (each date on which distributions are payable in
accordance with this Section 4.01(a), a "Distribution Date").
(b) The Trust Securities represent undivided beneficial interests in
the assets of the Trust and, subject to Section 4.03 hereof, all Distributions
will be made pro rata on each of the Trust Securities. Distributions payable on
the Preferred Securities shall be fixed at a rate of [_____%] per annum of the
Liquidation Amount of the Preferred Securities. Distributions payable on the
Common Securities shall be fixed at a rate of [_____%] per annum of the
Liquidation Amount of the Common Securities. The amount of Distributions
payable for any full quarterly period shall be computed on the basis of twelve
30-day months and a 360-day year and, for any period shorter than a full monthly
period, shall be computed on the basis of the actual number of days elapsed in
such period. The amount of Distributions payable for any period shall include
the Additional Amounts, if any.
(c) Distributions on the Trust Securities shall be made by the
Property Trustee from the Payment Account and shall be deemed payable on each
Distribution Date only to the extent that the Trust has funds available in the
Payment Account for the payment of such Distributions.
(d) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on the
Securities Register for the Trust Securities on the relevant record date, which
shall be one Business Day prior to such Distribution Date; PROVIDED, HOWEVER,
that in the event that the Preferred Securities do not remain in book-entry-only
form, the relevant record date shall be the date 15 days prior to the relevant
Distribution Date.
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Section 4.02. REDEMPTION.
(a) On each Debenture Redemption Date and on the stated maturity of
the Debentures, the Trust will be required to redeem a Like Amount of Trust
Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date to each Holder of Trust Securities to be redeemed,
at such Holder's address appearing in the Security Register. All notices of
redemption or liquidation shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities are to be
redeemed, the identification and the total Liquidation Amount of the particular
Trust Securities to be redeemed; and
(v) that on the Redemption Date the Redemption Price will become due and
payable upon each such Trust Security to be redeemed and that Distributions
thereon will cease to accrue on and after said date.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the contemporaneous
redemption of Debentures. Redemptions of the Trust Securities shall be made and
the Redemption Price shall be payable on each Redemption Date only to the extent
that the Trust has funds available in the Payment Account for the payment of
such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect of
any Preferred Securities, then, by 12:00 noon, New York time, on the Redemption
Date, subject to Section 4.02(c), the Property Trustee will, so long as the
Preferred Securities are in book-entry-only form, irrevocably deposit with the
Clearing Agency for the Preferred Securities funds sufficient to pay the
applicable Redemption Price, will give such Clearing Agency irrevocable
instructions and authority to pay the Redemption Price to the Holders thereof.
If the Preferred Securities are no longer in book-entry-only form, the Property
Trustee, subject to Section 4.02(c), will irrevocably deposit with the Paying
Agent funds sufficient to pay the applicable Redemption Price and will give the
Paying Agent irrevocable instructions and authority to pay the Redemption Price
to the Holders thereof upon surrender of their Preferred Securities
Certificates. Notwithstanding the foregoing, Distributions payable on or prior
to the Redemption Date for any Trust Securities called for redemption shall be
payable to the Holders of such Trust Securities as they appear on the Register
for the Trust Securities on the relevant record dates for the related
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Distribution Dates. If notice of redemption shall have been given and funds
deposited as required, then upon the Redemption Date, all rights of
Securityholders holding Trust Securities so called for redemption will cease,
except the right of such Securityholders to receive the Redemption Price, but
without interest on such Redemption Price, and such Trust Securities will cease
to be outstanding. In the event that any date fixed for redemption of Trust
Securities is not a Business Day, then payment of the Redemption Price payable
on such date will be made on the next succeeding day which is a Business Day
(and without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day, in each case, with the same
force and effect as if made on such date. In the event that payment of the
Redemption Price in respect of any Trust Securities called for redemption is
improperly withheld or refused and not paid either by the Trust or by the
Depositor pursuant to the Guarantee, Distributions on such Trust Securities will
continue to accrue, at the then applicable rate, from the Redemption Date
originally established by the Trust for such Trust Securities to the date such
Redemption Price is actually paid, in which case the actual payment date will be
the date fixed for redemption for purposes of calculating the Redemption Price.
(e) Payment of the Redemption Price on the Trust Securities and
distribution of Debentures to holders of Preferred Securities shall be made to
the recordholders thereof as they appear on the Securities Register for the
Trust Securities on the relevant record date, which shall be one Business Day
prior to the relevant Redemption Date or liquidation date, as applicable;
PROVIDED, HOWEVER, that in the event that the Preferred Securities do not remain
in book-entry-only form, the relevant record date shall be the fifteenth day
prior to the Redemption Date or liquidation date, as applicable.
(f) If less than all the Outstanding Trust Securities are to be
redeemed on a Redemption Date, then the aggregate Liquidation Amount of Trust
Securities to be redeemed shall be allocated proportionally between the Common
Securities and the Preferred Securities according to their aggregate liquidation
preferences. The particular Preferred Securities to be redeemed shall be
selected on a pro rata basis (based upon Liquidation Amounts) not more than
60 days prior to the Redemption Date by the Property Trustee from the
Outstanding Preferred Securities not previously called for redemption, by such
method (including, without limitation, by lot) as the Property Trustee shall
deem fair and appropriate and which may provide for the selection for redemption
of portions (equal to $25 or an integral multiple of $25 in excess thereof) of
the Liquidation Amount of Preferred Securities of a denomination larger than
$25. The Property Trustee shall promptly notify the Security Registrar in
writing of the Preferred Securities selected for redemption and, in the case of
any Preferred Securities selected for partial redemption, the Liquidation Amount
thereof to be redeemed. For all purposes of this Trust Agreement, unless the
context otherwise requires, all provisions relating to the redemption of
Preferred Securities shall relate, in the case of any Preferred Securities
redeemed or to be redeemed only in part, to the portion of the Liquidation
Amount of Preferred Securities which has been or is to be redeemed.
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Section 4.03. SUBORDINATION OF COMMON SECURITIES.
(a) Payment of Distributions (including Additional Amounts, if
applicable) on, and the Redemption Price of, the Trust Securities, as
applicable, shall be made, subject to Section 4.02(f), PRO RATA based on the
Liquidation Amount of the Trust Securities; PROVIDED, HOWEVER, that if on any
Distribution Date or Redemption Date any Event of Default resulting from a
Debenture Event of Default shall have occurred and be continuing, no payment of
any Distribution (including Additional Amounts, if applicable) on, or Redemption
Price of, any Common Security, and no other payment on account of the
redemption, liquidation or other acquisition of Common Securities, shall be made
unless payment in full in cash of all accumulated and unpaid Distributions
(including Additional Amounts, if applicable) on all Outstanding Preferred
Securities for all distribution periods terminating on or prior thereto, or in
the case of payment of the Redemption Price the full amount of such Redemption
Price on all Outstanding Preferred Securities, shall have been made or provided
for, and all funds available to the Property Trustee shall first be applied to
the payment in full in cash of all Distributions (including Additional Amounts,
if applicable) on, or the Redemption Price of, Preferred Securities then due and
payable.
(b) In the case of the occurrence of any Event of Default resulting
from any Debenture Event of Default, the Holder of Common Securities will be
deemed to have waived any right to act with respect to any such Event of Default
under this Trust Agreement until the effect of all such Events of Default with
respect to the Preferred Securities have been cured, waived or otherwise
eliminated. Until any such Events of Default under this Trust Agreement with
respect to the Preferred Securities have been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the Holders of
the Preferred Securities and not the Holder of the Common Securities, and only
the Holders of the Preferred Securities will have the right to direct the
Property Trustee to act on their behalf.
Section 4.04. PAYMENT PROCEDURES. Payments of Distributions
(including Additional Amounts if applicable) in respect of the Preferred
Securities shall be made by check mailed to the address of the Person entitled
thereto as such address shall appear on the Securities Register or, if the
Preferred Securities are held by a Clearing Agency, such payments shall be made
either by check or by wire transfer, at the option of the Paying Agent, to the
Clearing Agency in immediately available funds, which shall credit the relevant
Persons' accounts at such Clearing Agency on the applicable distribution dates.
Payments in respect of the Common Securities shall be made in such manner as
shall be mutually agreed between the Property Trustee and the Holder of the
Common Securities.
Section 4.05. TAX RETURNS AND REPORTS.
(a) The Administrative Trustees shall prepare (or cause to be
prepared), at the Depositor's expense, and file by January 31 following each
calendar year all Federal, state and local tax and information returns and
reports required to be filed by or in respect of the Trust. In this regard, by
January 31 following each calendar year the Administrative Trustees shall (a)
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prepare and file (or cause to be prepared or filed) the Internal Revenue Service
Form 1041 (or any successor form) required to be filed in respect of the Trust
in each taxable year of the Trust and (b) prepare and furnish (or cause to be
prepared and furnished) to each Securityholder the related Internal Revenue
Service Form 1099 (or any successor form). The Administrative Trustees shall
provide the Depositor and the Property Trustee with a copy of all such returns,
reports and schedules promptly after such filing or furnishing.
(b) In the event that any withholding tax is imposed on the Trust's
payment to a Securityholder, such tax shall reduce the amount otherwise
distributable to the Securityholder in accordance with this Section. Any
Securityholder who is a nonresident alien individual or which is organized under
the laws of a jurisdiction outside the United States shall, on or prior to the
date such Securityholder becomes a Securityholder, (a) so notify the Trust and
the Trustees, and (b) either (i) provide the Trust and the Trustees with
Internal Revenue Service form 1001, 4224, 8709 or W-8, as appropriate, or (ii)
notify the Trust and the Trustees that it is not entitled to an exemption from
United States withholding tax or a reduction in the rate thereof on payments of
interest. Any such Securityholder agrees by its acceptance of a Preferred
Security, on an ongoing basis, to provide like certification for each taxable
year for which it is necessary to provide such information and to notify the
Trust and the Trustees should subsequent circumstances arise affecting the
information provided the Trustees in clauses (a) and (b) above. The Trustees
shall be fully protected in relying upon, and each Securityholder by its
acceptance of a Preferred Security hereunder agrees to indemnify and hold the
Trustees harmless against all claims or liability of any kind arising in
connection with or related to the Trustees' reliance upon any documents, forms
or information provided by any Securityholder to the Trustees. In addition, if
the Trustees have not withheld taxed on any payment made to any Securityholder,
and the Trustees are subsequently required to remit to any taxing authority any
such amount not withheld, such Securityholder shall return such amount to the
Trustees upon written demand by the Trustees. The Trustees shall be liable only
for direct (but not consequential) damages to any Securityholder due to the
Trustees' violation of the Code and only to the extent such liability is caused
by the Trustees' failure to act in accordance with its standard of care under
this Agreement. The Trustees shall comply with United States Federal
withholding and backup withholding tax laws and information reporting
requirements with respect to any payments to Securityholders under the Trust
Securities.
Section 4.06. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST. Upon
receipt under the Debentures of Additional Sums (as defined in the Indenture),
the Property Trustee shall promptly pay any taxes, duties or governmental
charges of whatsoever nature (other than withholding taxes) imposed on the Trust
by the United States or any other taxing authority.
Section 4.07. PAYMENTS UNDER INDENTURE. Any amount payable hereunder
to any Holder of Preferred Securities (and any Owner with respect thereto) shall
be reduced by the amount of any corresponding payment such Holder (and Owner)
has directly received pursuant to Section 508 of the Indenture.
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ARTICLE V
Trust Securities Certificates
Section 5.01. INITIAL OWNERSHIP. Upon the formation of the Trust and
the contribution by the Depositor pursuant to Section 2.03 and until the
issuance of the Trust Securities, and at any time during which no Trust
Securities are outstanding, the Depositor shall be the sole beneficial owner of
the Trust.
Section 5.02. THE TRUST SECURITIES CERTIFICATES. The Preferred
Securities Certificates shall be issued in minimum denominations of $25
Liquidation Amount and integral multiples of $25 in excess thereof, and the
Common Securities Certificates shall be issued in denominations of $25
Liquidation Amount and integral multiples thereof. The Trust Securities
Certificates shall be executed on behalf of the Trust by manual signature of at
least one Administrative Trustee. Trust Securities Certificates bearing the
manual signatures of individuals who were, at the time when such signatures
shall have been affixed, authorized to sign on behalf of the Trust, shall be
validly issued and entitled to the benefits of this Trust Agreement,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the delivery of such Trust Securities Certificates or did
not hold such offices at the date of delivery of such Trust Securities
Certificates. A transferee of a Trust Securities Certificate shall become a
Securityholder, and shall be entitled to the rights and subject to the
obligations of a Securityholder hereunder, upon due registration of such Trust
Securities Certificate in such transferee's name pursuant to Section 5.04.
Section 5.03. DELIVERY OF TRUST SECURITIES CERTIFICATES. On the
Closing Date and on any date on which Preferred Securities are required to be
delivered pursuant to the exercise of the overallotment option provided for in
the Underwriting Agreement, the Administrative Trustees shall cause Trust
Securities Certificates, in an aggregate Liquidation Amount as provided in
Sections 2.04 and 2.05, to be executed on behalf of the Trust and delivered to
or upon the written order of the Depositor, signed by its chairman of the board,
its president or any vice president, without further corporate action by the
Depositor, in authorized denominations.
Section 5.04. REGISTRATION OF TRANSFER AND EXCHANGE OF PREFERRED
SECURITIES CERTIFICATES. The Depositor shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 5.08, a Securities Register in
which, subject to such reasonable regulations as it may prescribe, the
Securities Registrar shall provide for the registration of Preferred Securities
Certificates and Common Securities Certificates (subject to Section 5.10 in the
case of the Common Securities Certificates) and registration of transfers and
exchanges of Preferred Securities Certificates as herein provided. The Bank
shall be the initial Securities Registrar and Transfer Agent. The provisions of
Sections 8.01, 8.03 and 8.06 shall apply to the Bank also in its role as
Securities Registrar and Transfer Agent, for so long as the Bank shall act as
Securities Registrar and Transfer Agent.
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Upon surrender for registration of transfer of any Preferred
Securities Certificate at the office or agency maintained pursuant to
Section 5.08, the Administrative Trustees or any one of them shall execute and
shall cause to be delivered, in the name of the designated transferee or
transferees, one or more new Preferred Securities Certificates in authorized
denominations of a like aggregate Liquidation Amount dated the date of execution
by such Administrative Trustee or Trustees. The Securities Registrar shall not
be required to register the transfer of any Preferred Securities that have been
called for redemption. At the option of a Holder, Preferred Securities
Certificates may be exchanged for other Preferred Securities Certificates in
authorized denominations and of a like aggregate Liquidation Amount upon
surrender of the Preferred Securities Certificates to be exchanged at the office
or agency maintained pursuant to Section 5.08.
Every Preferred Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to an Administrative Trustee and the
Securities Registrar duly executed by the Holder or his attorney duly authorized
in writing. Each Preferred Securities Certificate surrendered for registration
of transfer or exchange shall be canceled and subsequently disposed of by the
Administrative Trustees.
No service charge shall be made for any registration of transfer or
exchange of Preferred Securities Certificates, but the Securities Registrar may
require payment (with the giving of such indemnity as the Trust or the Parent
may require) of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Preferred
Securities Certificates.
Section 5.05. MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES
CERTIFICATES. If (a) any mutilated Trust Securities Certificate shall be
surrendered to the Securities Registrar, or if the Securities Registrar shall
receive evidence to its satisfaction of the destruction, loss or theft of any
Trust Securities Certificate and (b) there shall be delivered to the Securities
Registrar and the Administrative Trustees such security or indemnity as may be
required by them to save each of them harmless, then in the absence of notice
that such Trust Securities Certificate shall have been acquired by a bona fide
purchaser, the Administrative Trustees, or any one of them, on behalf of the
Trust shall execute and cause to be made available for delivery, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Trust Securities
Certificate, a new Trust Securities Certificate of like class, tenor and
denomination. In connection with the issuance of any new Trust Securities
Certificate under this Section, the Administrative Trustees or the Securities
Registrar may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith. Any duplicate
Trust Securities Certificate issued pursuant to this Section shall constitute
conclusive evidence of an undivided beneficial interest in the assets of the
Trust, as if originally issued, whether or not the lost, stolen or destroyed
Trust Securities Certificate shall be found at any time.
Section 5.06. PERSONS DEEMED SECURITYHOLDERS. Prior to due
presentation of a Trust Securities Certificate for registration of transfer, the
Administrative Trustees or the Securities Registrar shall treat the Person in
whose name any Trust Securities Certificate shall be
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registered in the Securities Register as the owner of such Trust Securities
Certificate for the purpose of receiving distributions and for all other
purposes whatsoever, and neither the Trustees nor the Securities Registrar shall
be bound by any notice to the contrary.
Section 5.07. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND ADDRESSES.
The duties and responsibilities of the Depositor and any other party to provide
any list of Securityholders shall be as set forth in the Trust Indenture Act,
including Section 312 of such Trust Indenture Act. Each Holder, by receiving
and holding a Trust Securities Certificate, and each Owner shall be deemed to
have agreed not to hold either the Depositor, the Property Trustee or the
Administrative Trustees accountable by reason of the disclosure of its name and
address, regardless of the source from which such information was derived.
Section 5.08. MAINTENANCE OF OFFICE OR AGENCY. The Administrative
Trustees shall maintain, an office or offices or agency or agencies where
Preferred Securities Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Trustees in
respect of the Trust Securities Certificates may be served. The Administrative
Trustees initially designate the Bank, c/o Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890, for such
purposes. The Administrative Trustees shall give prompt written notice to the
Depositor and to the Securityholders of any change in the location of the
Securities Register or any such office or agency.
Section 5.09. APPOINTMENT OF PAYING AGENT. The Paying Agent shall
make distributions to Securityholders from the Payment Account and shall report
the amounts of such distributions to the Property Trustee and the Administrative
Trustees. Any Paying Agent shall have the revocable power to withdraw funds
from the Payment Account for the purpose of making the distributions referred to
above. The Administrative Trustees may revoke such power and remove the Paying
Agent if such Trustees determine in their sole discretion that the Paying Agent
shall have failed to perform its obligations under this Trust Agreement in any
material respect. The Paying Agent shall initially be the Bank, and any
co-paying agent chosen by the Bank, and acceptable to the Administrative
Trustees and the Depositor. Any Person acting as Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' written notice to the
Administrative Trustees, the Property Trustee and the Depositor. In the event
that the Bank shall no longer be the Paying Agent or a successor Paying Agent
shall resign or its authority to act be revoked, the Administrative Trustees
shall appoint a successor that is acceptable to the Property Trustee and the
Depositor to act as Paying Agent (which shall be a bank or trust company). The
Administrative Trustees shall cause such successor Paying Agent or any
additional Paying Agent appointed by the Administrative Trustees to execute and
deliver to the Trustees an instrument in which such successor Paying Agent or
additional Paying Agent shall agree with the Trustees that as Paying Agent, such
successor Paying Agent or additional Paying Agent will hold all sums, if any,
held by it for payment to the Securityholders in trust for the benefit of the
Securityholders entitled thereto until such sums shall be paid to such
Securityholders. The Paying Agent shall return all unclaimed funds to the
Property Trustee and upon removal of a Paying Agent such Paying Agent shall also
return all funds in its possession to the Property Trustee. The provisions of
Sections 8.01, 8.03 and 8.06 shall apply to the Bank also in its role as Paying
Agent, for so
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long as the Bank shall act as Paying Agent and, to the extent applicable, to any
other paying agent appointed hereunder. Any reference in this Agreement to the
Paying Agent shall include any co-paying agent unless the context requires
otherwise.
Section 5.10. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR. On the
Closing Date and on each other date provided for in Section 2.05, the Depositor
shall acquire and retain beneficial and record ownership of the Common
Securities. Any attempted transfer of the Common Securities shall be void;
PROVIDED that any permitted successor of the Depositor under the Indenture may
succeed to the Depositor's ownership of the Common Securities. The
Administrative Trustees shall cause each Common Securities Certificate issued to
the Depositor to contain a legend stating "THIS CERTIFICATE IS NOT
TRANSFERABLE".
Section 5.11. BOOK-ENTRY PREFERRED SECURITIES CERTIFICATES; COMMON
SECURITIES CERTIFICATE.
(a) The Preferred Securities Certificates, upon original issuance,
will be issued in the form of a typewritten Preferred Securities Certificate or
Certificates representing Book-Entry Preferred Securities Certificates, to be
delivered to The Depository Trust Company, the initial Clearing Agency, by, or
on behalf of, the Trust. Such Preferred Securities Certificate or Certificates
shall initially be registered on the Securities Register in the name of Cede &
Co., the nominee of the initial Clearing Agency, and no Owner will receive a
Definitive Preferred Securities Certificate representing such Owner's interest
in such Preferred Securities, except as provided in Section 5.13. Unless and
until Definitive Preferred Securities Certificates have been issued to Owners
pursuant to Section 5.13:
(i) the provisions of this Section 5.11(a) shall be in full force and
effect;
(ii) the Securities Registrar and the Trustees shall be entitled to deal
with the Clearing Agency for all purposes of this Trust Agreement relating to
the Book-Entry Preferred Securities Certificates (including the payment of the
Liquidation Amount of and Distributions on the Book-Entry Preferred Securities
and the giving of instructions or directions to Owners of Book-Entry Preferred
Securities) as the sole Holder of the Book-Entry Preferred Securities and shall
have no obligations to the Owners thereof;
(iii) to the extent that the provisions of this Section 5.11 conflict with
any other provisions of this Trust Agreement, the provisions of this
Section 5.11 shall control;
(iv) the rights of the Owners of the Book-Entry Preferred Securities
Certificates shall be exercised only through the Clearing Agency and shall be
limited to those established by law and agreements between such Owners and the
Clearing Agency and/or the Clearing Agency Participants. Pursuant to the
Certificate Depository Agreement, unless and until Definitive Preferred
Securities Certificates are issued pursuant to Section 5.13, the initial
Clearing Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit payments on the Preferred Securities to
such Clearing Agency Participants; and
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(v) whenever this Trust Agreement requires or permits actions to be
taken based upon instructions or directions of Holders of Trust Certificates
evidencing a specified percentage of the aggregate Liquidation Amount, the
Clearing Agency shall be deemed to represent such percentage only to the extent
that it has received instructions to such effect from Owners and/or Clearing
Agency Participants owning or representing, respectively, such required
percentage of the beneficial interest in the applicable class of Trust
Certificates and has delivered such instructions to the Administrative Trustees.
(b) A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
Section 5.12. NOTICES TO CLEARING AGENCY. To the extent that a
notice or other communication to the Owners is required under this Trust
Agreement, unless and until Definitive Preferred Securities Certificates shall
have been issued to Owners pursuant to Section 5.13, the Trustees shall give all
such notices and communications specified herein to be given to Owners to the
Clearing Agency, and shall have no obligations to the Owners.
Section 5.13. DEFINITIVE PREFERRED SECURITIES CERTIFICATES. If
(a) the Clearing Agency advises the Trustees and the Company in writing that it
is no longer willing or able to properly discharge its responsibilities with
respect to the Preferred Securities Certificates, and the Depositor is unable to
locate a qualified successor, (b) the Depositor at its option advises the
Trustees in writing that it elects to terminate the book-entry system through
the Clearing Agency or (c) after the occurrence of a Debenture Event of Default,
Owners of Preferred Securities Certificates representing beneficial interests
aggregating at least a majority of the Liquidation Amount advise the
Administrative Trustees in writing that the continuation of a book-entry system
through the Clearing Agency is no longer in the best interest of the Owners of
Preferred Securities Certificates, then the Administrative Trustees shall notify
the Clearing Agency and the Clearing Agency shall notify all Owners of Preferred
Securities Certificates and the Trustees of the occurrence of any such event and
of the availability of the Definitive Preferred Securities Certificates to
Owners of such class or classes, as applicable, requesting the same. Upon
surrender to the Administrative Trustees of the typewritten Preferred Securities
Certificate or Certificates representing the Book Entry Preferred Securities
Certificates by the Clearing Agency, accompanied by registration instructions,
the Administrative Trustees, or any one of them, shall execute the Definitive
Preferred Securities Certificates in accordance with the instructions of the
Clearing Agency. Neither the Securities Registrar nor the Trustees shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions. Upon the issuance
of Definitive Preferred Securities Certificates, the Trustees shall recognize
the Holders of the Definitive Preferred Securities Certificates as
Securityholders. The Definitive Preferred Securities Certificates shall be
printed, lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Administrative Trustees, as evidenced by the
execution thereof by the Administrative Trustees or any one of them and may have
such letters, numbers or other marks of identification or designation and such
legends or endorsements as the Administrative Trustees may deem appropriate, or
as may be required to
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comply with any law or rule or regulation made pursuant thereto or with any rule
or regulation of any stock exchange on which Preferred Securities may be listed,
or to conform to usage.
Section 5.14. RIGHTS OF SECURITYHOLDERS.
(a) The legal title to the Trust Property is vested exclusively in
the Property Trustee (in its capacity as such) in accordance with Section 2.09,
and the Securityholders shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Trust conferred by their
Trust Securities and they shall have no right to call for any partition or
division of property, profits or rights of the Trust except as described below.
The Trust Securities shall be personal property giving only the rights
specifically set forth therein and in this Trust Agreement. The Trust
Securities shall have no preemptive rights and when issued and delivered to
Securityholders against payment of the purchase price therefor and upon such
payment will be fully paid and nonassessable by the Trust. The Holders of the
Trust Securities, in their capacities as such, shall be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware.
(b) For so long as any Preferred Securities remain Outstanding, if,
upon a Debenture Event of Default, the Debenture Trustee fails or the holders of
not less than 25% in principal amount of the outstanding Debentures fail to
declare the principal of all of the Debentures to be immediately due and
payable, the Holders of at least 25% in Liquidation Amount of the Preferred
Securities then Outstanding shall have such right by a notice in writing to the
Depositor and the Debenture Trustee; and upon any such declaration such
principal amount of and the accrued interest on all of the Debentures shall
become immediately due and payable, provided that the payment of principal and
interest on such Debentures remains subordinated to the extent provided in the
Indenture.
At any time after such a declaration of acceleration with respect to
the Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as in the Indenture
provided, the Holders of a majority in Liquidation Amount of the Preferred
Securities, by written notice to the Property Trustee, the Depositor and the
Debenture Trustee, may rescind and annul such declaration and its consequences
if:
(i) the Depositor has paid or deposited with the Debenture
Trustee a sum sufficient to pay:
(A) all overdue installments of interest (including any
Additional Interest (as defined in the Indenture) on all of the
Debentures,
(B) the principal of (and premium, if any, on) any Debenture
which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Debentures,
and
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(C) all sums paid or advanced by the Denture Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and
advances of the Debenture Trustee and the Property Trustee, their
agents and counsel; and
(ii) all Debenture Events of Default, other than the non-payment
of the principal of the Debentures which has become due solely by such
acceleration, have been cured or waived as provided in Section 513 of the
Indenture.
The holders of a majority in aggregate Liquidation Amount of the
Preferred Securities may, on behalf of the Holders of all the Preferred
Securities, waive any past default under the Indenture, except a default in the
payment of principal or interest (unless such default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee) or
a default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Debenture. No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Upon receipt by the Property Trustee of written notice declaring such
an acceleration, or rescission and annulment thereof, by Holders of the
Preferred Securities all or part of which are represented by Book-Entry
Preferred Securities Certificates, a record date shall be established for
determining Holders of Outstanding Preferred Securities entitled to join in such
notice, which record date shall be at the close of business on the day the
Property Trustee receives such notice. The Holders on such record date, or
their duly designated proxies, and only such Persons, shall be entitled to join
in such notice, whether or not such Holders remain Holders after such record
date; PROVIDED, that, unless such declaration of acceleration, or rescission and
annulment, as the case may be, shall have become effective by virtue of the
requisite percentage having joined in such notice prior to the day which is 90
days after such record date, such notice of declaration or acceleration, or
rescission and annulment, as the case may be, shall automatically and without
further action by any Holder be canceled and of no further effect. Nothing in
this paragraph shall prevent a Holder, or a proxy of a Holder, from giving,
after expiration of such 90-day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, that is
identical to a written notice which has been canceled pursuant to the proviso to
the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 5.14(b).
(c) For so long as any Preferred Securities remain outstanding, to
the fullest extent permitted by law and subject to the terms of this Trust
Agreement and the Indenture, upon a Debenture Event of Default specified in
Section 501(1) or 501(2) of the Indenture, any Holder of Preferred Securities
shall have the right to institute a proceeding directly against the Depositor,
pursuant to Section 508 of the Indenture, for enforcement of payment to such
Holder of the principal amount of or interest on Debentures having a principal
amount equal to the Liquidation Amount of the Preferred Securities of such
Holder (a "Direct Action"). Except as set forth in Section 5.14(b) and (c), the
Holders of Preferred Securities shall have no right to exercise directly any
right or remedy available to the holders of, or in respect of, the Debentures.
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ARTICLE VI
Acts of Securityholders; Meetings; Voting
Section 6.01. LIMITATIONS ON VOTING RIGHTS.
(a) Except as provided in this Section, in Section 10.03 and in the
Indenture and as otherwise required by law, no Holder of Preferred Securities
shall have any right to vote or in any manner otherwise control the
administration, operation and management of the Trust or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the Trust Securities Certificates, be construed so as to constitute the
Securityholders from time to time as partners or members of an association.
(b) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Debenture Trustee with respect to such
Debentures, (ii) waive any past default which is waivable under Section 513 of
the Indenture, (iii) exercise any right to rescind or annul a declaration that
the principal of all the Debentures shall be due and payable or (iv) consent to
any amendment, modification or termination of the Indenture or the Debentures,
where such consent shall be required, without, in each case, obtaining the prior
approval of the Holders of at least a majority in Liquidation Amount of the
Outstanding Preferred Securities; PROVIDED, HOWEVER, that where a consent under
the Indenture would require the consent of each holder of Debentures affected
thereby, no such consent shall be given by the Property Trustee without the
prior written consent of each Holder of Preferred Securities. The Trustees
shall not revoke any action previously authorized or approved by a vote of the
Holders of Preferred Securities, except by a subsequent vote of the Holders of
Preferred Securities. The Property Trustee shall notify all Holders of the
Preferred Securities of any notice of default received from the Debenture
Trustee. In addition to obtaining the foregoing approvals of the Holders of the
Preferred Securities, prior to taking any of the foregoing actions, the Trustees
shall, at the expense of the Depositor, obtain an Opinion of Counsel experienced
in such matters to the effect that the Trust will not fail to be classified as a
grantor trust for United States Federal income tax purposes on account of such
action.
(c) Except as provided in Section 10.03, if any proposed amendment to
the Trust Agreement provides for, or the Trustees otherwise propose to effect,
(i) any action that would adversely affect in any material respect the powers,
preferences or special rights of the Preferred Securities, whether by way of
amendment to the Trust Agreement or otherwise, or (ii) the dissolution,
winding-up or termination of the Trust, other than pursuant to the terms of this
Trust Agreement, then the Holders of Outstanding Preferred Securities as a class
will be entitled to vote on such amendment or proposal and such amendment or
proposal shall not be effective except with the approval of the Holders of at
least a majority in Liquidation Amount of the Outstanding Preferred Securities.
No amendment to this Trust Agreement may be made if, as a result of such
amendment, the Trust would fail to be classified as a grantor trust for United
States Federal
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income tax purposes or would lose its exemption from status as an "investment
company" under the Investment Company Act.
Section 6.02. NOTICE OF MEETINGS. Notice of all meetings of the
Preferred Securityholders, stating the time, place and purpose of the meeting,
shall be given by the Administrative Trustees pursuant to Section 10.09 to each
Preferred Securityholder of record, at his registered address, at least 15 days
and not more than 90 days before the meeting. At any such meeting, any business
properly before the meeting may be so considered whether or not stated in the
notice of the meeting. Any adjourned meeting may be held as adjourned without
further notice.
Any and all notices to which any Preferred Securityholder hereunder
may be entitled and any and all communications shall be deemed duly served or
given if mailed, postage prepaid, addressed to any Preferred Securityholder of
record at his last known address as recorded on the Securities Register.
Section 6.03. MEETINGS OF PREFERRED SECURITYHOLDERS. No annual
meeting of Securityholders is required to be held. The Administrative Trustees,
however, shall call a meeting of Securityholders to vote on any matter upon the
written request of the Preferred Securityholders of record of 25% of the
Outstanding Preferred Securities (based upon their Liquidation Amount) and the
Administrative Trustees or the Property Trustee may, at any time in their
discretion, call a meeting of Preferred Securityholders to vote on any matters
as to the which Preferred Securityholders are entitled to vote.
Preferred Securityholders of record of 50% of the Outstanding
Preferred Securities (based upon their Liquidation Amount), present in person or
by proxy, shall constitute a quorum at any meeting of Securityholders.
If a quorum is present at a meeting, an affirmative vote by the
Preferred Securityholders of record present, in person or by proxy, holding more
than a majority of the Preferred Securities (based upon their Liquidation
Amount) held by the Preferred Securityholders of record present, either in
person or by proxy, at such meeting shall constitute the action of the
Securityholders, unless this Trust Agreement requires a greater number of
affirmative votes.
Section 6.04. VOTING RIGHTS. Securityholders shall be entitled to
one vote for each $25 of Liquidation Amount represented by their Trust
Securities in respect of any matter as to which such Securityholders are
entitled to vote.
Section 6.05. PROXIES, ETC. At any meeting of Securityholders, any
Securityholder entitled to vote thereat may vote by proxy, provided that no
proxy shall be voted at any meeting unless it shall have been placed on file
with the Administrative Trustees, or with such other officer or agent of the
Trust as the Administrative Trustees may direct, for verification prior to the
time at which such vote shall be taken. Pursuant to a resolution of the
Property Trustee, proxies may be solicited in the name of the Property Trustee
or one or more officers of the Property
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Trustee. Only Securityholders of record shall be entitled to vote. When Trust
Securities are held jointly by several persons, any one of them may vote at any
meeting in person or by proxy in respect of such Trust Securities, but if more
than one of them shall be present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Trust Securities. A
proxy purporting to be executed by or on behalf of a Securityholder shall be
deemed valid unless challenged at or prior to its exercise, and the burden of
proving invalidity shall rest on the challenger. No proxy shall be valid more
than three years after its date of execution.
Section 6.06. SECURITYHOLDER ACTION BY WRITTEN CONSENT. Any action
which may be taken by Securityholders at a meeting may be taken without a
meeting if Securityholders holding more than a majority of all Outstanding Trust
Securities (based upon their Liquidation Amount) entitled to vote in respect of
such action (or such larger proportion thereof as shall be required by any
express provision of this Trust Agreement) shall consent to the action in
writing. The Administrative Trustees shall cause a notice of any matter upon
which action by written consent of the Securityholders is to be taken, to be
given to each Holder of record of the Outstanding Preferred Securities in the
same manner as that set forth in Section 6.02 for notice of meetings.
Section 6.07. RECORD DATE FOR VOTING AND OTHER PURPOSES. For the
purposes of determining the Securityholders who are entitled to notice of and to
vote at any meeting or by written consent, or to participate in any distribution
on the Trust Securities in respect of which a record date is not otherwise
provided for in this Trust Agreement, or for the purpose of any other action,
the Administrative Trustees may from time to time fix a date, not more than
90 days prior to the date of any meeting of Securityholders or the payment of
distribution or other action, as the case may be, as a record date for the
determination of the identity of the Securityholders of record for such
purposes.
Section 6.08. ACTS OF SECURITYHOLDERS. Any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted by this Trust Agreement to be given, made or taken by Securityholders
or Owners may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Securityholders or Owners in person
or by an agent duly appointed in writing; and, except as otherwise expressly
provided herein, such action shall become effective when such instrument or
instruments are delivered to an Administrative Trustee. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Securityholders or Owners signing such
instrument or instruments. Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose of this
Trust Agreement and (subject to Section 8.01) conclusive in favor of the
Trustees, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual
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signing such instrument or writing acknowledged to him the execution thereof.
Where such execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the execution of any
such instrument or writing, or the authority of the Person executing the same,
may also be proved in any other manner which any Trustee receiving the same
deems sufficient.
The ownership of Preferred Securities shall be proved by the
Securities Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Securityholder of any Trust Security shall bind every future
Securityholder of the same Trust Security and the Securityholder of every Trust
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or suffered to
be done by the Trustees or the Trust in reliance thereon, whether or not
notation of such action is made upon such Trust Security.
Without limiting the foregoing, a Securityholder entitled hereunder to
take any action hereunder with regard to any particular Trust Security may do so
with regard to all or any part of the Liquidation Amount of such Trust Security
or by one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such Liquidation Amount.
If any dispute shall arise between the Securityholders of Trust
Securities and the Administrative Trustees or among such Securityholders or
Trustees with respect to the authenticity, validity or binding nature of any
request, demand, authorization, direction, consent, waiver or other Act of such
Securityholder or Trustee under this Article VI, then the determination of such
matter by the Property Trustee shall be conclusive with respect to such matter.
A Securityholder may institute a legal proceeding directly against the
Depositor under the Guarantee to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee (as defined
in the Guarantee), the Trust or any person or entity.
Section 6.09. INSPECTION OF RECORDS. Upon reasonable notice to the
Administrative Trustees and the Property Trustee, the records of the Trust shall
be open to inspection by Securityholders during normal business hours for any
purpose reasonably related to such Securityholder's interest as a
Securityholder.
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ARTICLE VII
Representations and Warranties
Section 7.01. REPRESENTATIONS AND WARRANTIES OF THE BANK AND THE
PROPERTY TRUSTEE. The Bank and the Property Trustee, each severally on behalf
of and as to itself, hereby represents and warrants as to itself only and for
the benefit of the Depositor and the Securityholders that:
(a) the Bank is a banking corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware;
(b) the Bank has full corporate power, authority and legal right to
execute, deliver and perform its obligations under this Trust Agreement and
has taken all necessary action to authorize the execution, delivery and
performance by it of this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed and
delivered by the Bank and constitutes the valid and legally binding
agreement of the Bank enforceable against the Bank 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;
(d) the execution, delivery and performance by the Bank of this Trust
Agreement have been duly authorized by all necessary corporate and other
action on the part of the Bank and the Property Trustee, and do not require
any approval of stockholders of the Bank and such execution, delivery and
performance will not (i) violate the Bank's Charter or By-laws,
(ii) violate any provision of, or constitute, with or without notice or
lapse of time, a default under, or result in the creation or imposition of,
any Lien on any properties included in the Trust Property pursuant to the
provisions of, any indenture, mortgage, credit agreement, license or other
agreement or instrument to which the Property Trustee or the Bank is a
party or by which it is bound, or (iii) violate any law, governmental rule
or regulation of the State of Delaware or the United States governing the
banking or trust powers of the Bank and the Property Trustee or any order,
judgment or decree applicable to the Property Trustee or the Bank;
(e) neither the authorization, execution or delivery by the Bank of
this Trust Agreement nor the consummation of any of the transactions by the
Bank or the Property Trustee contemplated herein or therein require the
consent or approval of, the giving of notice to, the registration with or
the taking of any other action with respect to any governmental authority
or agency under any existing federal law governing the banking or trust
powers of the Bank or under the laws of the United States or the State of
Delaware;
(f) there are no proceedings pending or, to the best of the Bank's
knowledge, threatened against or affecting the Bank or the Property Trustee
in any court or before any
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governmental authority, agency or arbitration board or tribunal which,
individually or in the aggregate, would materially and adversely affect the
Trust or would question the right, power and authority of the Bank to enter
into or perform its obligations as one of the Trustees under this Trust
Agreement; and
(g) the principal place of business of the Property Trustee is located
in the State of Delaware.
Section 7.02. REPRESENTATIONS AND WARRANTIES OF PARENT. The Parent
hereby represents and warrants for the benefit of the Securityholders that:
(a) this Trust Agreement has been duly authorized, executed and
delivered by Parent and constitutes the valid and legally binding agreement
of Parent enforceable against Parent 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;
(b) the Trust Securities Certificates issued on the Closing Date on
behalf of the Trust have been, and any Trust Securities Certificates to be
issued at the time of exercise, if any, of the overallotment option under
the Underwriting Agreement will be duly authorized and will have been, as
of each such date, duly and validly executed, issued and delivered by the
Trustees pursuant to the terms and provisions of, and in accordance with
the requirements of, this Trust Agreement and the Securityholders will be,
as of each such date, entitled to the benefits of this Trust Agreement; and
(c) there are no taxes, fees or other governmental charges payable by
the Trust (or the Trustees on behalf of the Trust) under the laws of the
State of Delaware or any political subdivision thereof in connection with
the execution, delivery and performance by the Bank or the Property
Trustee, as the case may be, of this Trust Agreement.
ARTICLE VIII
The Trustees
Section 8.01. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The duties and responsibilities of the Trustees shall be as
provided by this Trust Agreement and, in the case of the Property Trustee, by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Trust Agreement shall require the Trustees to expend or risk their own funds or
otherwise incur any financial liability in the performance of any of their
duties hereunder, or in the exercise of any of their rights or powers, if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. Whether or not therein expressly so provided, every provi-
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sion of this Trust Agreement relating to the conduct or affecting the liability
of or affording protection to the Trustees shall be subject to the provisions of
this Section.
(b) All payments made by the Property Trustee or a Paying Agent in
respect of the Trust Securities shall be made only from the income and proceeds
from the Trust Property and only to the extent that there shall be sufficient
income or proceeds from the Trust Property to enable the Property Trustee or a
Paying Agent to make payments in accordance with the terms hereof. Each
Securityholder, by its acceptance of a Trust Security, agrees that it will look
solely to the income and proceeds from the Trust Property to the extent legally
available for distribution to it as herein provided and that the Trustees are
not personally liable to it for any amount distributable in respect of any Trust
Security or for any other liability in respect of any Trust Security. This
Section 8.01(b) does not limit the liability of the Trustees expressly set forth
elsewhere in this Trust Agreement or, in the case of the Property Trustee, in
the Trust Indenture Act.
(c) The Property Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Trust Agreement and no implied covenants shall be read into this Trust
Agreement against the Property Trustee. In case an Event of Default has
occurred (that has not been cured or waived), the Property Trustee shall
exercise such of the rights and powers vested in it by this Trust Agreement, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of his or her own
affairs.
(d) No provision of this Trust Agreement shall be construed to relieve
the Property Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) the Property Trustee shall not be liable for any error of
judgment made in good faith by an authorized officer of the
Property Trustee, unless it shall be proved that the Property
Trustee was negligent in ascertaining the pertinent facts;
(ii) the Property Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
majority in Liquidation Amount of the Trust Securities relating
to the time, method and place of conducting any proceeding for
any remedy available to the Property Trustee, or exercising any
trust or power conferred upon the Property Trustee under this
Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the custody,
safe keeping and physical preservation of the Debentures and
the Payment Account shall be to deal with such property in a
similar manner as the Property Trustee
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deals with similar property for its own account, subject to the
protections and limitations on liability afforded to the
Property Trustee under this Trust Agreement and the Trust
Indenture Act;
(iv) the Property Trustee shall not be liable for any interest on
any money received by it except as it may otherwise agree with
the Depositor. Money held by the Property Trustee need not be
segregated from other funds held by it except in relation to
the Payment Account maintained by the Property Trustee pursuant
to Section 3.01 and except to the extent otherwise required by
law; and
(v) the Property Trustee shall not be responsible for monitoring
the compliance by the Administrative Trustees or the Depositor
with their respective duties under this Trust Agreement, nor
shall the Property Trustee be liable for the default or
misconduct of the Administrative Trustees or the Depositor.
Section 8.02. CERTAIN NOTICES.
Within five Business Days after the occurrence of any Event of
Default, the Property Trustee shall transmit, in the manner and to the extent
provided in Section 10.09, notice of any Event of Default actually known to the
Property Trustee to the Securityholders, the Administrative Trustees and the
Depositor, unless such default shall have been cured or waived.
Within five Business Days after the receipt of notice of the
Depositor's exercise of its right to defer the payment of interest on the
Debentures pursuant to the Indenture, the Administrative Trustees shall
transmit, in the manner and to the extent provided in Section 10.09, notice of
such exercise to the Securityholders and the Property Trustee, unless such
exercise shall have been revoked.
Section 8.03. CERTAIN RIGHTS OF PROPERTY TRUSTEE. Subject to the
provisions of Section 8.01 and except as provided by law:
(a) the Property Trustee may rely and shall be protected in acting or
refraining from acting in good faith upon any resolution, Opinion of
Counsel, certificate, written representation of a Holder or transferee,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(b) if (i) in performing its duties under this Trust Agreement the
Property Trustee is required to decide between alternative courses of
action or (ii) in construing any of the provisions in this Trust Agreement
the Property Trustee finds the same ambiguous or inconsistent with any
other provisions contained herein or (iii) the Property Trustee is unsure
of the application of any provision of this Trust Agreement, then, except
as to any
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matter as to which the Preferred Securityholders are entitled to vote under
the terms of this Trust Agreement, the Property Trustee shall deliver a
notice to the Depositor requesting written instructions of the Depositor as
to the course of action to be taken. The Property Trustee shall take such
action, or refrain from taking such action, as the Property Trustee shall
be instructed in writing to take, or to refrain from taking, by the
Depositor; PROVIDED, HOWEVER, that if the Property Trustee does not receive
such instructions of the Depositor within ten Business Days after it has
delivered such notice, or such reasonably shorter period of time set forth
in such notice (which to the extent practicable shall not be less than two
Business Days), it may, but shall be under no duty to, take or refrain from
taking such action not inconsistent with this Trust Agreement as it shall
deem advisable and in the best interests of the Securityholders, in which
event the Property Trustee shall have no liability except for its own bad
faith, negligence or willful misconduct;
(c) any direction or act of the Depositor or the Administrative
Trustees contemplated by this Trust Agreement shall be sufficiently
evidenced by an Officer's Certificate;
(d) whenever in the administration of this Trust Agreement, the
Property Trustee shall deem it desirable that a matter be established
before undertaking, suffering or omitting any action hereunder, the
Property Trustee (unless other evidence is herein specifically prescribed)
may, in the absence of bad faith on its part, request and rely upon an
Officer's Certificate which, upon receipt of such request, shall be
promptly delivered by the Depositor or the Administrative Trustees;
(e) the Property Trustee shall have no duty to see to any recording,
filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or reregistration thereof;
(f) the Property Trustee may (at the expense of Depositor) consult
with counsel (which counsel may be counsel to the Depositor or any of its
Affiliates, and may include any of its employees) and the written advice of
such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon; the Property Trustee shall have the right at
any time to seek instructions concerning the administration of this Trust
Agreement from any court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Trust Agreement at the request
or direction of any of the Securityholders pursuant to this Trust
Agreement, unless such Securityholders shall have offered to the Property
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request
or direction;
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(h) the Property Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond, debenture, note or other evidence of indebtedness or other paper or
document, unless requested in writing to do so by one or more
Securityholders, but the Property Trustee may make such further inquiry or
investigation into such facts or matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
its agents or attorneys, provided that the Property Trustee shall be
responsible for its own negligence or recklessness with respect to
selection of any agent or attorney appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the
Property Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder the Property Trustee (i) may request instructions from the
Holders of the Trust Securities which instructions may only be given by the
Holders of the same proportion in Liquidation Amount of the Trust
Securities as would be entitled to direct the Property Trustee under the
terms of the Trust Securities in respect of such remedy, right or action,
(ii) may refrain from enforcing such remedy or right or taking such other
action until such instructions are received, and (iii) shall be protected
in acting in accordance with such instructions; and
(k) except as otherwise expressly provided by this Trust Agreement,
the Property Trustee shall not be under any obligation to take any action
that is discretionary under the provisions of this Trust Agreement.
No provision of this Trust Agreement shall be deemed to impose any duty or
obligation on the Property Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any jurisdiction
in which it shall be illegal, or in which the Property Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts, or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Property Trustee shall be
construed to be a duty.
Section 8.04. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Trust Securities Certificates shall be
taken as the statements of the Trust, and the Trustees do not assume any
responsibility for their correctness. The Trustees shall not be accountable for
the use or application by the Trust of Trust Securities or the proceeds of the
Trust Securities.
Section 8.05. MAY HOLD SECURITIES. Except as provided in the
definition of the term "Outstanding" in Article I, any Trustee or any other
agent of any Trustee or the Trust, in its individual or any other capacity, may
become the owner or pledgee of Trust Securities and, subject to Sections 8.8 and
8.13, may otherwise deal with the Trust with the same rights it would have if it
were not a Trustee or such other agent.
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Section 8.06. COMPENSATION; INDEMNITY; FEES.
The Trust shall:
(a) pay to the Trustees from time to time reasonable compensation
for all services rendered by them hereunder and in the case of the
Property Trustee, such compensation as is separately agreed by the
Depositor and the Property Trustee (which compensation shall not be
limited by any provision of law in regard to the compensation of a
trustee of an express trust); and
(b) except as otherwise expressly provided herein, reimburse the
Trustees upon request for all reasonable expenses, disbursements and
advances incurred or made by the Trustees in accordance with any
provision of this Trust Agreement (including the reasonable
compensation and the expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith.
The Depositor agrees to indemnify each of the Trustees or any
predecessor Trustee for, and to hold the Trustees harmless against, any loss,
damage, claims, liability, tax, penalty or expense of any kind and nature
whatsoever incurred without negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of this Trust Agreement,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder. The provisions of this Section 8.06 shall survive the
termination of this Trust Agreement. To secure the Trustees' rights under this
Section 806, the Property Trustee shall have a lien against the Trust Property
which lien shall be subordinate to the rights of the Securityholders but prior
to the rights of Depositor as to any Trust Property.
Section 8.07. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF
TRUSTEES.
(a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that is
eligible pursuant to the Trust Indenture Act to act as such and has a combined
capital and surplus of at least $50,000,000. If any such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of its supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Property Trustee with respect to the
Trust Securities shall cease to be eligible in accordance with the provisions of
this Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Securities. Each Administrative Trustee
shall be either a natural person who
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is at least 21 years of age or a legal entity that shall act through one or more
persons authorized to bind that entity.
(c) There shall at all times be a Trustee with respect to the Trust
Securities that shall either be (i) a natural person who is at least 21 years
of age and a resident of the State of Delaware or (ii) a legal entity with its
principal place of business in the State of Delaware and that otherwise meets
the requirements of applicable Delaware law that shall act through one or more
persons authorized to bind such entity.
Section 8.08. CONFLICTING INTERESTS. If the Property Trustee has or
shall acquire a conflicting interest within the meaning of the Trust Indenture
Act, the Property Trustee shall either eliminate such interest or resign, to the
extent and in the manner provided by, and subject to the provisions of, the
Trust Indenture Act and this Trust Agreement.
Section 8.09. CO-TRUSTEES AND SEPARATE TRUSTEE. Unless an Event of
Default shall have occurred and be continuing, at any time or times, for the
purpose of meeting the legal requirements of the Trust Indenture Act or of any
jurisdiction in which any part of the Trust Property may at the time be located,
the Depositor and the Administrative Trustees, by agreed action of the majority
of such Trustees, shall have power to appoint, and upon the written request of
the Administrative Trustees, the Depositor shall for such purpose join with the
Administrative Trustees in the execution, delivery, and performance of all
instruments and agreements necessary or proper to appoint one or more Persons
approved by the Property Trustee either to act as co-trustee, jointly with the
Property Trustee, of all or any part of such Trust Property, or to act as
separate trustee of any such property, in either case with such powers as may be
provided in the instrument of appointment, and to vest in such Person or Persons
in the capacity aforesaid, any property, title, right or power deemed necessary
or desirable, subject to the other provisions of this Trust Agreement. If the
Depositor does not join in such appointment within 15 days after the receipt by
it of a request so to do, or in case a Debenture Event of Default has occurred
and is continuing, the Property Trustee alone shall also have power to make such
appointment. Any co-trustee or separate trustee appointed pursuant to this
Section shall satisfy the requirements of Section 8.07.
Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged, and delivered
by the Depositor.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
(a) The Trust Securities shall be executed and delivered and all
rights, powers, duties, and obligations hereunder in respect of the
custody of securities, cash and other personal property held by, or
required to be deposited or pledged
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with, the Trustees specified hereunder, shall be exercised, solely by such
Trustees and not by such co-trustee or separate trustee.
(b) The rights, powers, duties, and obligations hereby conferred
or imposed upon the Property Trustee in respect of any property
covered by such appointment shall be conferred or imposed upon and
exercised or performed by the Property Trustee or by the Property
Trustee and such co-trustee or separate trustee jointly, as shall be
provided in the instrument appointing such co-trustee or separate
trustee, except to the extent that under any law of any jurisdiction
in which any particular act is to be performed, the Property Trustee
shall be incompetent or unqualified to perform such act, in which
event such rights, powers, duties, and obligations shall be exercised
and performed by such co-trustee or separate trustee.
(c) The Property Trustee at any time, by an instrument in writing
executed by it, with the written concurrence of the Depositor, may
accept the resignation of or remove any co-trustee or separate trustee
appointed under this Section, and, in case a Debenture Event of
Default has occurred and is continuing, the Property Trustee shall
have power to accept the resignation of, or remove, any such
co-trustee or separate trustee without the concurrence of the
Depositor. Upon the written request of the Property Trustee, the
Depositor shall join with the Property Trustee in the execution,
delivery, and performance of all instruments and agreements necessary
or proper to effectuate such resignation or removal. A successor to
any co-trustee or separate trustee so resigned or removed may be
appointed in the manner provided in this Section.
(d) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Property
Trustee, or any other trustee hereunder.
(e) The Property Trustee shall not be liable by reason of any act
of a co-trustee or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee shall be
deemed to have been delivered to each such co-trustee and separate
trustee.
Section 8.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. No
resignation or removal of any Trustee (the "Relevant Trustee") and no
appointment of a successor Relevant Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the successor Relevant
Trustee in accordance with the applicable requirements of Section 8.11.
Subject to the immediately preceding paragraph, the Relevant Trustee
may resign at any time with respect to the Trust Securities by giving written
notice thereof to the
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Securityholders. If the instrument of acceptance by a successor Relevant
Trustee required by Section 8.11 shall not have been delivered to the Relevant
Trustee within 30 days after the giving of such notice of resignation, the
resigning Relevant Trustee may petition, at the expense of the Trust, any court
of competent jurisdiction for the appointment of a successor Relevant Trustee
with respect to the Trust Securities.
Subject to the following sentence, any of the Trustees may be removed
at any time by Act of the Common Securityholder. If a Debenture Event of
Default shall have occurred and be continuing, the Property Trustee may be
removed at such time by Act of the Holders of a majority in Liquidation Amount
of the Outstanding Preferred Securities, delivered to the Property Trustee (in
its individual capacity and on behalf of the Trust). An Administrative Trustee
may be removed by the Common Securityholder at any time.
If the Relevant Trustee shall resign, be removed or become incapable
of continuing to act as Relevant Trustee, or if a vacancy shall occur in the
office of any Trustee for any cause, at a time when no Debenture Event of
Default shall have occurred and be continuing, the Common Securityholder, by Act
of the Common Securityholder delivered to the retiring Relevant Trustee, shall
promptly appoint a successor Relevant Trustee or Trustees with respect to the
Trust Securities and the Trust, and the retiring Relevant Trustee shall comply
with the applicable requirements of Section 8.11. If the Property Trustee shall
resign, be removed or become incapable of continuing to act as the Property
Trustee at a time when a Debenture Event of Default shall have occurred and be
continuing, the Preferred Securityholders, by Act of the Securityholders of a
majority in Liquidation Amount of the Preferred Securities then Outstanding
delivered to the retiring Relevant Trustee, shall promptly appoint a successor
Relevant Trustee or Trustees with respect to the Trust Securities and the Trust,
and such successor Trustee shall comply with the applicable requirements of
Section 8.11. If an Administrative Trustee shall resign, be removed or become
incapable of continuing to act as Administrative Trustee at a time when a
Debenture Event of Default shall have occurred and is continuing, the Common
Securityholder may appoint a successor Administrative Trustee, which successor
Trustee shall comply with the applicable requirements of Section 8.11 or the
Common Securityholder may reduce the number of Administrative Trustees pursuant
to Section 8.17(a). If no successor Relevant Trustee with respect to the Trust
Securities shall have been so appointed by the Common Securityholder or the
Preferred Securityholders and accepted appointment in the manner required by
Section 8.11, any Securityholder who has been a Securityholder of Trust
Securities for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Relevant Trustee with respect to the Trust
Securities.
The Property Trustee shall give notice of each resignation and each
removal of the Property Trustee with respect to the Trust Securities and the
Trust and each appointment of a successor Property Trustee with respect to the
Trust Securities and the Trust to all Securityholders in the manner provided in
Section 10.09 and shall give notice to the Depositor. Each notice shall include
the name of the successor Property Trustee with respect to the Trust Securities
and the Trust and the address of its Corporate Trust Office.
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Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee or a Property Trustee who is
a natural person dies or becomes incompetent or incapacitated, the vacancy
created by such death, incompetence or incapacity may be filled by (a) the
unanimous act of remaining Administrative Trustees if there are at least two of
them or (b) otherwise by the Depositor (with the successor in each case being an
individual who satisfies the eligibility requirement for Administrative Trustees
set forth in Section 8.07). Additionally, notwithstanding the foregoing or any
other provision of this Trust Agreement, in the event the Depositor believes
that any Administrative Trustee or a Property Trustee who is a natural person,
as the case may be, has become incompetent or incapacitated, the Depositor, by
notice to the remaining Trustees, may terminate the status of such Person as an
Administrative Trustee or a Property Trustee, as the case may be (in which case
the vacancy so created will be filled in accordance with the preceding
sentence).
Section 8.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. In case of the
appointment hereunder of a successor Relevant Trustee with respect to all Trust
Securities and the Trust, every such successor Relevant Trustee so appointed
shall execute, acknowledge and deliver to the Trust and to the retiring Relevant
Trustee an instrument accepting such appointment, and thereupon the resignation
or removal of the retiring Relevant Trustee shall become effective and such
successor Relevant Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring
Relevant Trustee; but, on the request of the Depositor or the successor Relevant
Trustee, such retiring Relevant Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Relevant
Trustee all the rights, powers and trusts of the retiring Relevant Trustee and
shall duly assign, transfer and deliver to such successor Relevant Trustee all
property and money held by such retiring Relevant Trustee hereunder.
In case of the appointment hereunder of a successor Relevant Trustee
with respect to the Trust Securities and the Trust, the retiring Relevant
Trustee and each successor Relevant Trustee with respect to the Trust Securities
shall execute and deliver an amendment hereto wherein each successor Relevant
Trustee shall accept such appointment and which (a) shall contain such
provisions as shall be necessary or desirable to transfer and confirm to, and to
vest in, each successor Relevant Trustee all the rights, powers, trusts and
duties of the retiring Relevant Trustee with respect to the Trust Securities and
the Trust and (b) shall add to or change any of the provisions of this Trust
Agreement as shall be necessary to provide for or facilitate the administration
of the trusts hereunder by more than one Relevant Trustee, it being understood
that nothing herein or in such amendment shall constitute such Relevant Trustees
co-trustees of the same trust and that each such Relevant Trustee shall be
trustee of a trust or trusts hereunder separate and apart from any trust or
trusts hereunder administered by any other such Relevant Trustee and upon the
execution and delivery of such amendment the resignation or removal of the
retiring Relevant Trustee shall become effective to the extent provided therein
and each such successor Relevant Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Relevant Trustee with respect to the Trust Securities and the
Trust; but, on request of the Trust or any successor Relevant Trustee such
retiring Relevant Trustee shall duly assign, transfer and deliver to such
successor Relevant
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Trustee all Trust Property, all proceeds thereof and money held by such retiring
Relevant Trustee hereunder with respect to the Trust Securities and the Trust.
Upon request of any such successor Relevant Trustee, the Trust shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Relevant Trustee all such rights, powers and trusts
referred to in the first or second preceding paragraph, as the case may be.
No successor Relevant Trustee shall accept its appointment unless at
the time of such acceptance such successor Relevant Trustee shall be qualified
and eligible under this Article.
Section 8.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS OF A TRUSTEE. Any corporation into which the Property Trustee or any
Administrative Trustee which is not a natural person may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which such Relevant Trustee shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of any such Relevant Trustee, shall be the successor of such
Relevant Trustee hereunder, provided such corporation shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto.
Section 8.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR
TRUST. In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Trust or any other obligor upon the
Trust Securities or the property of the Trust or of such other obligor or their
creditors, the Property Trustee (irrespective of whether any Distributions on
the Trust Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Property Trustee shall
have made any demand on the Trust for the payment of any past due Distributions)
shall be entitled and empowered, to the fullest extent permitted by law, by
intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of any
Distributions owing and unpaid in respect of the Trust Securities and to file
such other papers or documents as may be necessary or advisable in order to have
the claims of the Property Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Property Trustee and, in the event the
Property Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Property Trustee any amount due it for the
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reasonable compensation, expenses, disbursements and advances of the Property
Trustee, its agents and counsel, and any other amounts due the Property Trustee.
Nothing herein contained shall be deemed to authorize the Property
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement adjustment or compensation affecting the
Trust Securities or the rights of any Holder thereof or to authorize the
Property Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 8.14. REPORTS BY PROPERTY TRUSTEE.
(a) Within 60 days after December 31 of each year commencing with
December 31, 1996 the Property Trustee shall transmit by mail to all
Securityholders, as their names and addresses appear in the Securities Register,
and to the Depositor, a brief report dated as of such December 31 with respect
to:
(i) its eligibility under Section 8.07 or, in lieu thereof, if to the
best of its knowledge it has continued to be eligible under said Section, a
written statement to such effect;
(ii) a statement that the Property Trustee has complied with all of its
obligations under this Trust Agreement during the twelve-month period (or, in
the case of the initial report, the period since the Closing Date) ending with
such December 31 or, if the Property Trustee has not complied in any material
respect with such obligations, a description of such non-compliance; and
(iii) any change in the property and funds in its possession as Property
Trustee since the date of its last report and any action taken by the Property
Trustee in the performance of its duties hereunder which it has not previously
reported and which in its opinion materially affects the Trust Securities.
(b) In addition the Property Trustee shall transmit to Securityholders
such reports concerning the Property Trustee and its actions under this Trust
Agreement as may be required pursuant to the Trust Indenture Act at the times
and in the manner provided pursuant thereto.
(c) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Property Trustee with the each stock exchange, the
Nasdaq National Market or such other interdealer quotation system or
self-regulatory organization upon which the Trust Securities are listed or
traded, with the Commission and with the Depositor.
Section 8.15. REPORTS TO THE PROPERTY TRUSTEE. The Depositor and the
Administrative Trustees on behalf of the Trust shall provide to the Property
Trustee such documents, reports and information as required by Section 314 of
the Trust Indenture Act (if any) and the compliance certificate required by
Section 314 of the Trust Indenture Act in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act.
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Section 8.16. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Each
of the Depositor and the Administrative Trustees on behalf of the Trust shall
provide to the Property Trustee such evidence of compliance with any conditions
precedent, if any, provided for in this Trust Agreement that relate to any of
the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) of the Trust Indenture Act may be given in the form of an Officers'
Certificate.
Section 8.17. NUMBER OF TRUSTEES.
(a) The number of Trustees shall be four, provided that the Depositor,
by written instrument may increase or decrease the number of Administrative
Trustees.
(b) If a Trustee ceases to hold office for any reason and the number
of Administrative Trustees is not reduced pursuant to Section 8.17(a), or if the
number of Trustees is increased pursuant to Section 8.17(a), a vacancy shall
occur. The vacancy shall be filled with a Trustee appointed in accordance with
Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to annul the Trust. Whenever a vacancy in the number of Administrative Trustees
shall occur, until such vacancy is filled by the appointment of an
Administrative Trustee in accordance with Section 8.10, the Administrative
Trustees in office, regardless of their number (and notwithstanding any other
provision of this Agreement), shall have all the powers granted to the
Administrative Trustees and shall discharge all the duties imposed upon the
Administrative Trustees by this Trust Agreement.
Section 8.18. DELEGATION OF POWER.
(a) Any Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21 his
or her power for the purpose of executing any documents contemplated in Section
2.07(a), including any registration statement or amendment thereto filed with
the Commission, or making any other governmental filing; and
(b) the Administrative Trustees shall have power to delegate from time
to time to such of their number or to the Depositor the doing of such things and
the execution of such instruments either in the name of the Trust or the names
of the Administrative Trustees or otherwise as the Administrative Trustees may
deem expedient, to the extent such delegation is not prohibited by applicable
law or contrary to the provisions of the Trust, as set forth herein.
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ARTICLE IX
Termination and Liquidation
Section 9.01. TERMINATION UPON EXPIRATION DATE. The Trust shall
automatically terminate on December 31, 2051, (the "Expiration Date") following
the distribution of the Trust Property in accordance with Section 9.04.
Section 9.02. EARLY TERMINATION. Upon the first to occur of any of
the following events (such first occurrence, an "Early Termination Event"):
(a) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor;
(b) the written direction to the Property Trustee from the
Depositor at any time (which direction is optional and wholly within
the discretion of the Depositor) to terminate the Trust and distribute
Debentures to the Securityholders in exchange for the Preferred
Securities;
(c) the redemption of all of the Trust Securities; and
(d) an order for dissolution of the Trust shall have been
entered by a court of competent jurisdiction.
then the Trustees shall take such action as is required by Section 4.02 or
Section 9.04, as applicable, and as soon as practicable after the occurrence of
any event referred to in this Section 9.02, the Trustees shall cause to be filed
a certificate of cancellation relating to the Trust with the Secretary of State
of the State of Delaware.
Section 9.03. TERMINATION. The respective obligations and
responsibilities of the Trustees and the Trust created and continued hereby
shall terminate upon the latest to occur of the following: (a) the distribution
by the Property Trustee to Securityholders upon the liquidation of the Trust
pursuant to Section 9.04, or upon the redemption of all of the Trust Securities
pursuant to Section 4.02, of all amounts required to be distributed hereunder
upon the final payment of the Trust Securities; (b) the payment of any expenses
owed by the Trust; and (c) the discharge of all administrative duties of the
Administrative Trustees, including the performance of any tax reporting
obligations with respect to the Trust or the Securityholders.
Section 9.04. LIQUIDATION.
(a) If an Early Termination Event specified in clause (a), (b) or (d)
of Section 9.02 occurs, the Trust shall be liquidated by the Trustees as
expeditiously as the Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, to each Securityholder a Like Amount of Debentures, subject to Section
9.04(d).
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Notice of liquidation shall be given by the Administrative Trustees by
first-class mail, postage prepaid, mailed not later than 30 nor more than
60 days prior to the Liquidation Date to each Holder of Trust Securities at such
Holder's address appearing in the Securities Register. All notices of
liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the Trust Securities
will no longer be deemed to be outstanding and any Trust Securities Certificates
not surrendered for exchange will be deemed to represent a Like Amount of
Debentures; and
(iii) provide such information with respect to the mechanics by which
Holders may exchange Trust Securities Certificates for Debentures, or if
Section 9.04(d) applies, receive a Liquidation Distribution, as the
Administrative Trustees or the Property Trustee shall deem appropriate.
(b) Except where Section 9.02(c) or 9.04(d) applies, in order to
effect the liquidation of the Trust and distribution of the Debentures to
Securityholders, the Property Trustee shall establish a record date for such
distribution (which shall be not more than 45 days prior to the Liquidation
Date) and, either itself acting as exchange agent or through the appointment of
a separate exchange agent, shall establish such procedures as it shall deem
appropriate to effect the distribution of Debentures in exchange for the
Outstanding Trust Securities Certificates.
(c) Except where Section 9.02 (c) or 9.04(d) applies, after the
Liquidation Date, (i) the Trust Securities will no longer be deemed to be
Outstanding, (ii) The Depository Trust Company ("DTC") or its nominee, as the
record Holder of the Preferred Securities, will receive a registered global
certificate or certificates representing the Debentures to be delivered upon
such distribution, (iii) any Preferred Securities Certificates not held by DTC
or its nominee will be deemed to represent a Like Amount of Debentures, accruing
interest at the rate provided for in the Debentures from the last Distribution
Date on which a Distribution was made on such Trust Certificates until such
certificates are so surrendered (and until such certificates are so surrendered,
no payments or interest or principal will be made to Holders of Trust Securities
Certificates with respect to such Debentures), (iv) certificates representing a
Like Amount of Debentures will be issued to the Holder of the Common Securities
Certificates, upon surrender of such certificates to the Administrative Trustees
or their agent for exchange, (v) all rights of Securityholders holding Trust
Securities will cease, except the right of such Securityholders to receive
Debentures upon surrender of Trust Securities Certificates, and (vi) the
Depositor shall use its reasonable efforts to have the Debentures listed on the
New York Stock Exchange or on such other exchange, interdealer quotation system
or self-regulatory organization as the Preferred Securities are then listed.
(d) In the event that, notwithstanding the other provisions of this
Section 9.04, whether because of an order for dissolution entered by a court of
competent jurisdiction or
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payment at the stated maturity thereof of all principal of and interest on the
Debentures or otherwise, distribution of the Debentures in the manner provided
herein is determined by the Property Trustee not to be practical, the Trust
Property shall be liquidated, and the Trust shall be dissolved, wound-up or
terminated, by the Property Trustee in such manner as the Property Trustee
determines. In such event, on the date of the dissolution, winding-up or other
termination of the Trust, Securityholders will be entitled to receive out of the
assets of the Trust available for distribution to Securityholders, after
satisfaction of liabilities to creditors, an amount equal to the Liquidation
Amount per Trust Security plus accrued and unpaid Distributions thereon to the
date of payment (such amount being the "Liquidation Distribution"). If, upon
any such dissolution, winding up or termination, the Liquidation Distribution
can be paid only in part because the Trust has insufficient assets available to
pay in full the aggregate Liquidation Distribution, then, subject to the next
succeeding sentence, the amounts payable by the Trust on the Trust Securities
shall be paid on a PRO RATA basis (based upon Liquidation Amounts). The Holder
of the Common Securities will be entitled to receive Liquidation Distributions
upon any such dissolution, winding-up or termination PRO RATA (determined as
aforesaid) with Holders of Preferred Securities, except that, if an Event of
Default has occurred and is continuing, the Preferred Securities shall have a
priority over the Common Securities.
Section 9.05. MERGER, CONSOLIDATION, AMALGAMATION OR REPLACEMENT OF
THE TRUST. The Trust may not merge with or into, consolidate, amalgamate, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except pursuant
to this Section 9.5. At the request of the Depositor, with the consent of the
Administrative Trustees and without the consent of the Holders of the Preferred
Securities or the Property Trustee, the Trust may merge with or into,
consolidate, amalgamate, or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to a trust organized as such
under the laws of any State; provided, that (i) such successor entity either (a)
expressly assumes all of the obligations of the Trust with respect to the
Preferred Securities or (b) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the same as the
Preferred Securities rank in priority with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) the Depositor expressly
appoints a trustee of such successor entity possessing the same powers and
duties as the Property Trustee as the holder of the Debentures, (iii) the
Successor Securities are listed or quoted, or any Successor Securities will be
listed or quoted upon notification of issuance, on any national securities
exchange, the Nasdaq National Market or other organization on which the
Preferred Securities are then quoted or listed, if any, (iv) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
cause the Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
Holders of the Preferred Securities (including any Successor Securities) in any
material respect, (vi) such successor entity has a purpose identical to that of
the Trust, (vii) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the Depositor has received an opinion from
independent counsel to the Trust experienced in such matters to the effect that
(a) such merger, consolidation, amalgamation,
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replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the Holders of the Preferred Securities (including
any Successor Securities) in any material respect, and (b) following such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease,
neither the Trust nor such successor entity will be required to register as an
investment company under the 1940 Act and (viii) the Depositor or any permitted
successor or assignee owns all of the Common Securities of such successor entity
and guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee. Notwithstanding
the foregoing, the Trust shall not, except with the consent of Holders of 100%
in Liquidation Amount of the Preferred Securities, consolidate, amalgamate,
merge with or into, or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to any other entity or permit
any other entity to consolidate, amalgamate, merge with or into, or replace it
if such consolidation, amalgamation, merger, replacement, conveyance, transfer
or lease would cause the Trust or the successor entity to be classified as other
than a grantor trust for United States Federal Income tax purposes.
ARTICLE X
Miscellaneous Provisions
Section 10.01. EXPENSE AGREEMENT. It is the contemplation of the
parties that the Expense Agreement shall be entered into no later than
_______________, 1996.
Section 10.02. LIMITATION OF RIGHTS OF SECURITYHOLDERS. The death or
incapacity of any person having an interest, beneficial or otherwise, in Trust
Securities shall not operate to terminate this Trust Agreement, nor entitle the
legal representatives or heirs of such person or any Securityholder for such
person, to claim an accounting, take any action or bring any proceeding in any
court for a partition or winding up of the arrangements contemplated hereby, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
Section 10.03. AMENDMENT.
(a) This Trust Agreement may be amended from time to time by the
Trustees and the Depositor, without the consent of any Securityholders, (i) to
cure any ambiguity, correct or supplement any provision herein which may be
inconsistent with any other provision herein, or to make any other provisions
with respect to matters or questions arising under this Trust Agreement, which
shall not be inconsistent with the other provisions of this Trust Agreement, or
(ii) to modify, eliminate or add to any provisions of this Trust Agreement to
such extent as shall be necessary to ensure that the Trust will be classified
for United States Federal income tax purposes as a grantor trust at all times
that any Trust Securities are outstanding or to ensure that the Trust will not
be required to register as an "investment company" under the Investment Company
Act of 1940, as amended; PROVIDED, HOWEVER, that in the case of clause (i), such
action shall not adversely affect in any material respect the interests of any
Securityholder and any
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<PAGE>
amendments of this Trust Agreement shall become effective when notice thereof is
given to the Securityholders.
(b) Except as provided in Section 10.03(c) hereof, any provision of
this Trust Agreement may be amended by the Trustees and the Depositor with
(i) the consent of Trust Securityholders representing not less than a majority
(based upon Liquidation Amounts) of the Trust Securities then Outstanding and
(ii) the receipt by the Trustees of an Opinion of Counsel to the effect that
such amendment or the exercise of any power granted to the Trustees in
accordance with such amendment will not affect the Trust's status as a grantor
trust for United States Federal income tax purposes or the Trust's exemption
from status as an "investment company" under the Investment Company Act of 1940,
as amended.
(c) In addition to and notwithstanding any other provision in this
Trust Agreement, without the consent of each affected Securityholder (such
consent being obtained in accordance with Section 6.03 or 6.06 hereof), this
Trust Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date or (ii) restrict the right of a Securityholder to institute suit
for the enforcement of any such payment on or after such date; notwithstanding
any other provision herein without the unanimous consent of the Securityholders
(such consent being obtained in accordance with Section 6.03 or 6.06 hereof),
paragraph (b) of this Section 10.03 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Trustee shall enter into or consent to any amendment to this Trust Agreement
which would cause the Trust to (i) fail or cease to qualify, as evidenced by an
Opinion of Counsel, for an exemption from status of an "investment company"
under the Investment Company Act of 1940, as amended, or (ii) fail or cease
to be classified, as evidenced by an Opinion of Counsel, as a grantor trust
for United States Federal income tax purposes.
(e) Notwithstanding anything in this Trust Agreement to the contrary,
without the consent of the Depositor, this Trust Agreement may not be amended in
a manner which imposes any additional obligation on the Depositor.
(f) In the event that any amendment to this Trust Agreement is made,
the Administrative Trustees shall promptly provide to the Depositor a copy of
such amendment.
(g) The Property Trustee shall not be required to enter into any
amendment to this Trust Agreement which affects its own rights, duties or
immunities under this Trust Agreement. The Property Trustee shall be entitled
to receive an Opinion of Counsel and an Officer's Certificate stating that any
amendment to this Trust Agreement is in compliance with this Trust Agreement.
Section 10.04. SEPARABILITY. In case any provision in this Trust
Agreement or in the Trust Securities Certificates shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
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<PAGE>
SECTION 10.05. GOVERNING LAW. THIS TRUST AGREEMENT AND THE RIGHTS
AND OBLIGATIONS OF EACH OF THE SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH
RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
Section 10.06. PAYMENTS DUE ON NON-BUSINESS DAY. If the date fixed
for any payment on any Trust Security shall be a day which is not a Business
Day, then such payment need not be made on such date but may be made on the next
succeeding day which is a Business Day (except as otherwise provided in Section
4.01(a) and 4.02(d)), with the same force and effect as though made on the date
fixed for such payment, and no interest shall accrue thereon for the period
after such date.
Section 10.07. SUCCESSORS. This Trust Agreement shall be binding
upon and shall inure to the benefit of any successor to the Depositor, the Trust
or any Relevant Trustee, including any successor by operation of law. Except in
connection with a consolidation, merger or sale involving the Depositor that is
permitted under Article Eight of the Indenture and pursuant to which the
assignee agrees in writing to perform the Depositor's obligations hereunder, the
Depositor shall not assign its obligations hereunder.
Section 10.08. HEADINGS. The Article and Section headings are for
convenience only and shall not affect the construction of this Trust Agreement.
Section 10.09. REPORTS, NOTICES AND DEMANDS. Any report, notice,
demand or other communication which by any provision of this Trust Agreement is
required or permitted to be given or served to or upon any Securityholder or the
Depositor shall be given or served in writing by deposit thereof, postage
prepaid, in the United States mail, hand delivery or facsimile transmission, in
each case, addressed, (a) in the case of a Preferred Securityholder, to such
Preferred Securityholder as such Securityholder's name and address may appear on
the Securities Register; and (b) in the case of the Common Securityholder or the
Depositor, to AmerUs Life Holdings, Inc., 418 Sixth Avenue, Des Moines, Iowa
50306-2499, Attention: Secretary, facsimile no.: (515) 283-3402. Such notice,
demand or other communication to or upon a Securityholder shall be deemed to
have been sufficiently given or made, for all purposes, upon hand delivery,
mailing or transmission.
Any notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
the Trust, the Property Trustee or the Administrative Trustees shall be given in
writing addressed (until another address is published by the Trust) as follows:
(a) with respect to the Property Trustee, to Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration; and (b) with respect to the
Administrative Trustees, to them at the address above for notices to the
Depositor, marked "Attention: Administrative Trustees of AmerUs Capital I c/o
Secretary." Such notice, demand or other communication to or
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upon the Trust or the Property Trustee shall be deemed to have been sufficiently
given or made only upon actual receipt of the writing by the Trust or the
Property Trustee.
Section 10.10. AGREEMENT NOT TO PETITION. Each of the Trustees and
the Depositor agree for the benefit of the Securityholders that, until at least
one year and one day after the Trust has been terminated in accordance with
Article IX, they shall not file, or join in the filing of, a petition against
the Trust under any bankruptcy, reorganization, arrangement, insolvency,
liquidation or other similar law (including, without limitation, the United
States Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise join in
the commencement of any proceeding against the Trust under any Bankruptcy Law.
In the event the Depositor takes action in violation of this Section 10.10, the
Property Trustee agrees, for the benefit of Securityholders, that at the expense
of the Depositor, it shall file an answer with the bankruptcy court or otherwise
properly contest the filing of such petition by the Depositor against the Trust
or the commencement of such action and raise the defense that the Depositor has
agreed in writing not to take such action and should be stopped and precluded
therefrom and such other defenses, if any, as counsel for the Property Trustee
or the Trust may assert. The provisions of this Section 10.10 shall survive the
termination of this Trust Agreement.
Section 10.11. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE
ACT.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trust Agreement and shall, to
the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a Trustee
for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in this Trust
Agreement by any of the provisions of the Trust Indenture Act, such required
provision shall control. If any provision of this Trust Agreement modifies or
excludes any provision of the Trust Indenture Act which may be so modified or
excluded, the latter provision shall be deemed to apply to this Trust Agreement
as so modified or excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust Agreement
shall not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
Section 10.12. RIGHTS UNDER INDENTURE. The Trust may not assign any
of its rights under the Indenture without the prior written consent of the
Depositor.
Section 10.13. EFFECTIVENESS. This Trust Agreement shall become
effective when signed by the Depositor and the Bank. Each Administrative
Trustee shall assume the duties of an Administrative Trustee hereunder when he
signs the signature page hereof.
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<PAGE>
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY OR ON
BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR
FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE
BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST
SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND AGREEMENT
TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND THE
INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH SECURITYHOLDER
AND SUCH OTHERS THAT THOSE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT SHALL BE
BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER
AND SUCH OTHERS.
AMERUS LIFE HOLDINGS, INC.
By:
-------------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY,
as Property Trustee
By:
-------------------------------------
Name:
Title:
,
----------------------------------------
Michael E. Sproule,
as Administrative Trustee
,
----------------------------------------
Michael G. Fraizer,
as Administrative Trustee
,
----------------------------------------
James A. Smallenberger,
as Administrative Trustee
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EXHIBIT A
CERTIFICATE OF TRUST
OF
AMERUS CAPITAL I
THIS Certificate of Trust of AmerUs Capital I (the "Trust"), dated ,
1996, is being duly executed and filed by Wilmington Trust Company, a Delaware
banking corporation, as trustee, to form a business trust under the Delaware
Business Trust Act (12 DEL. C. Section 3801 ET SEQ.)
1. NAME. The name of the business trust being formed hereby is AmerUs
Capital I.
2. DELAWARE TRUSTEE. The name and business address of the trustee of the
Trust in the State of Delaware is Wilmington Trust Company, Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate
Trust Administration.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective upon
filing.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust,
has executed this Certificate of Trust as of the date first-above written.
Wilmington Trust Company,
as trustee
By:
---------------------------
Name:
Title:
<PAGE>
EXHIBIT B
, 1996
The Depository Company,
55 Water Street, 49th Floor,
New York, New York 10041-0099
Attention:
------------------------
General Counsel's Office
Re: AmerUs Capital I [ %] Preferred Securities
--------------------------------------------------
Ladies and Gentlemen:
The purpose of this letter is to set forth certain matters relating to the
issuance and deposit with The Depository Trust Company ("DTC") of the AmerUs
Capital I [ %] Cumulative Quarterly Income Preferred Securities, Series A
(the "Preferred Securities"), of AmerUs Capital I, a Delaware business trust
(the "Issuer"), formed pursuant to a Trust Agreement between AmerUs Life
Holdings, Inc. ("ALH"), and Wilmington Trust Company, as Property Trustee and
the Administrative Trustees named therein. The payment of distributions on the
Preferred Securities and payments due upon liquidation of Issuer or redemption
of the Preferred Securities to the extent the Issuer has funds available for the
payment thereof are guaranteed by ALH to the extent set forth in a Guarantee
Agreement dated , 1996 by ALH with respect to the Preferred Securities.
ALH and the Issuer propose to sell the Preferred Securities to certain
underwriters (the "Underwriters") pursuant to an Underwriting Agreement dated
, 1996 by and among the Underwriters, the Issuer and ALH and the
Underwriters wish to take delivery of the Preferred Securities through DTC.
Wilmington Trust Company is acting as transfer agent and registrar with respect
to the Preferred Securities (the "Transfer Agent and Registrar").
B-1
<PAGE>
To induce DTC to accept the Preferred Securities as eligible for deposit at
DTC, and to act in accordance with DTC's rules with respect to the Preferred
Securities, the Issuer, the Transfer Agent and Registrar and DTC agree among
each other as follows:
1. Prior to the closing of the sale of the Preferred Securities to the
Underwriters, which is expected to occur on or about , 1996, there
shall be deposited with DTC one or more global certificates (individually and
collectively, the "Global Certificate") registered in the name of DTC's nominee,
Cede & Co., representing an aggregate of [ ] Preferred Securities and
bearing the following legend:
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to Issuer or its
agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, Cede & Co. has an interest herein.
2. The Amended and Restated Trust Agreement of the Issuer provides for
the voting by holders of the Preferred Securities under certain limited
circumstances. The Issuer shall establish a record date for such purposes and
shall, to the extent possible, give DTC notice such record date not less than 15
calendar days in advance of such record date.
3. In the event of a stock split, conversion, recapitalization,
reorganization or any other similar transaction resulting in the cancellation of
all or any part of the Preferred Securities outstanding, the Issuer or the
Transfer Agent and Registrar shall send DTC a notice of such event at least 5
business days prior to the effective date of such event.
4. In the event of distribution on, or an offering or issuance of rights
with respect to, the Preferred Securities outstanding, the Issuer or the
Transfer Agent and Registrar shall send DTC a notice specifying: (a) the amount
of and conditions, if any, applicable to the payment of any such distribution or
any such offering or issuance of rights; (b) any applicable expiration or
deadline date, or any date by which any action on the part of the holders of
Preferred Securities is required; and (c) the date any required notice is to be
mailed by or on behalf of the Issuer to holders of Preferred Securities or
published by or on behalf of the Issuer (whether by mail or publication, the
"Publication Date"). Such notice shall be sent to DTC by a secure means (e.g.,
legible telecopy, registered or certified mail, overnight delivery) in a timely
manner designed to assure that such notice is in DTC's possession no later than
the close of business on the business day before the Publication Date. The
Issuer or the Transfer Agent and Registrar will forward such notice either in a
separate secure transmission for each CUSIP number or in a secure transmission
of multiple CUSIP numbers (if applicable) that includes a manifest or list of
each CUSIP number submitted in that transmission. (The party sending such
B-2
<PAGE>
notice shall have a method to verify subsequently the use of such means and the
timeliness of such notice.) The Publication Date shall not be less than 30
calendar days nor more than 60 calendar days prior to the payment of any such
distribution or any such offering or issuance of rights with respect to the
Preferred Securities. After establishing the amount of payment to be made on
the Preferred Securities, the Issuer or the Transfer Agent and Registrar will
notify DTC's Dividend Department of such payment 5 business days prior to
payment date. Notices to DTC's Dividend Department by telecopy shall be sent to
(212) 709-1723. Such notices by mail or by any other means shall be sent to:
Manager, Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
The Issuer or the Transfer Agent and Registrar shall confirm DTC's receipt
of such telecopy by telephoning the Dividend Department at (212) 709-1270.
5. In the event of a redemption by the Issuer of the Preferred
Securities, notice specifying the terms of the redemption and the Publication
Date of such notice shall be sent by the Issuer or the Transfer Agent and
Registrar to DTC not less than 30 calendar days prior to such event by a secure
means in the manner set forth in paragraph 4. Such redemption notice shall be
sent to DTC's Call Notification Department at (516) 227-4164 or (516) 227-4190,
and receipt of such notice shall be confirmed by telephoning (516) 227-4070.
Notice by mail or by any other means shall be sent to:
Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, New York 11530-4719
6. In the event of any invitation to tender the Preferred Securities,
notice specifying the terms of the tender and the Publication Date of such
notice shall be sent by the Issuer or the Transfer Agent and Registrar to DTC by
a secure means and in a timely manner as described in paragraph 4. Notices to
DTC pursuant to this paragraph and notices of other corporate actions (including
mandatory tenders, exchanges and capital changes), shall be sent, unless
notification to another department is expressly provided for herein, by telecopy
to DTC's
B-3
<PAGE>
Reorganization Department at (212) 709-1093 or (212) 709-1094 and receipt of
such notice shall be confirmed by telephoning (212) 709-6884, or by mail or any
other means to:
Manager, Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
7. All notices and payment advices sent to DTC shall contain the CUSIP
number or numbers of the Preferred Securities and the accompanying designation
of the Preferred Securities, which, as of the date of this letter, is
"AmerUs Capital I [ %] Cumulative Quarterly Income Preferred
Securities, Series A".
8. Distribution payments or other cash payments with respect to the
Preferred Securities evidenced by the Global Certificate shall be received by
Cede & Co., as nominee of DTC, or its registered assigns in next day funds on
each payment date (or in accordance with existing arrangements between the
Issuer or the Transfer Agent and Registrar and DTC). Such payments shall be
made payable to the order of Cede & Co., and shall be addressed as follows:
NDFS Redemption Department
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
Any payments made by wire transfer to Cede & Co., as nominees of DTC
shall be directed as follows:
Cede & Co.
ABA#
ATT.:
for deposit to: - Account # -
9. DTC may by prior written notice direct the Issuer and the Transfer
Agent and Registrar to use any other telecopy number or address of DTC as the
number or address to which notices or payments may be sent.
10. In the event of a conversion, redemption, or any other similar
transaction (e.g., tender made and accepted in response to the Issuer's or the
Transfer Agent and Registrar's invitation) necessitating a reduction in the
aggregate number of Preferred Securities outstanding evidenced by the Global
certificate, DTC, in its discretion: (a) may request the Issuer or the Transfer
Agent and Registrar to issue and countersign an new Global certificate; or (b)
may make an appropriate notation on the Global certificate indicating the date
and amount of such reduction.
B-4
<PAGE>
11. DTC may discontinue its services as a securities depositary with
respect to the Preferred Securities at any time by giving at least 90 days'
prior written notice to the Issuer and the Transfer Agent and Registrar (at
which time DTC will confirm with the Issuer or the Transfer Agent and Registrar
the aggregate number of Preferred Securities deposited with it) and discharging
its responsibilities with respect thereto under applicable law. Under such
circumstances, the Issuer may determine to make alternative arrangements for
book-entry settlement for the Preferred Securities, make available one or more
separate global certificates evidencing Preferred Securities to any Participant
having Preferred Securities credited to its DTC account, or issue definitive
Preferred Securities to the beneficial holders thereof, and in any such case,
DTC agrees to cooperate fully with the Issuer and the Transfer Agent and
Registrar and to return the Global certificate, duly endorsed for transfer as
directed by the Issuer or the Transfer Agent and Registrar, together with any
other documents of transfer reasonably requested by the Issuer or the Transfer
Agent and Registrar.
12. In the event that the Issuer determines that beneficial owners of
Preferred Securities shall be able to obtain definitive Preferred Securities,
the Issuer or the Transfer Agent and Registrar shall notify DTC of the
availability of certificates. In such event, the Issuer or the Transfer Agent
and Registrar shall issue, transfer and exchange certificates in appropriate
amounts, as required by DTC and others, and DTC agrees to cooperate fully with
the Issuer and the Transfer Agent and Registrar and to return the Global
certificate, duly endorsed for transfer as directed by the Issuer or the
Transfer Agent and Registrar, together with any other documents of transfer
reasonably requested by the Issuer or the Transfer Agent and Registrar.
13. This letter may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
B-5
<PAGE>
Nothing herein shall be deemed to require the Transfer Agent and
Registrar to advance funds on behalf of AmerUS Capital I.
Very truly yours,
AMERUS CAPITAL I
(As Issuer)
By: _____________________________________
Name:
Administrative Trustee
By: _____________________________________
Name:
Title: Administrative Trustee
WILMINGTON TRUST COMPANY
(As Transfer Agent and Registrar)
By: _____________________________________
Name:
Title:
RECEIVED AND ACCEPTED:
THE DEPOSITORY TRUST COMPANY
By _______________________________
Authorized Officer
B-6
<PAGE>
EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE
Certificate Number Number of Common Securities
C-1
Certificate Evidencing Common Securities
of
AmerUS Capital I
[______%] Common Securities
(liquidation amount $25 per Common Security)
AmerUS Capital I, a statutory business trust formed under the laws of
the State of Delaware (the "Trust"), hereby certifies that AmerUS Life
Holdings, Inc. (the "Holder") is the registered owner of ________ (________)
common securities of the Trust representing undivided beneficial interests in
the assets of the Trust and designated the [______%] Common Securities
(liquidation amount $25 per Common Security) (the "Common Securities"). In
accordance with Section 5.10 of the Trust Agreement (as defined below) the
Common Securities are not transferable and any attempted transfer hereof
shall be void. The designations, rights, privileges, restrictions,
preferences and other terms and provisions of the Common Securities are set
forth in, and this certificate and the Common Securities represented hereby
are issued and shall in all respects be subject to the terms and provisions
of, the Amended and Restated Trust Agreement of the Trust dated as of
_____________________, 1996, among the Holder, as Depositor, Wilmington Trust
Company, as Property Trustee, and the Administrative Trustees named therein,
as the same may be amended from time to time (the "Trust Agreement")
including the designation of the terms of the Common Securities as set forth
therein. The Trust will furnish a copy of the Trust Agreement to the Holder
without charge upon written request to the Trust at its principal place of
business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this _______ day of ___________, 1996.
AMERUS CAPITAL I
By: _________________________________
Name:
Administrative Trustee
C-1
<PAGE>
EXHIBIT D
IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT - This
Preferred Security is a Global Certificate within the meaning of the Trust
Agreement hereinafter referred to and is registered in the name of The
Depository Trust Company (the "Depository") or a nominee of the Depository.
This Preferred Security is exchangeable for Preferred Securities registered
in the name of a person other than the Depository or its nominee only in the
limited circumstances described in the Trust Agreement and no transfer of
this Preferred Security (other than a transfer of this Preferred Security as
a whole by the Depository to a nominee of the Depository or by a nominee of
the Depository to the Depository or another nominee of the Depository) may be
registered except in limited circumstances.
Unless this Preferred Security is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York) to
AmerUS Capital I or its agent for registration of transfer, exchange or
payment, and any Preferred Security issued is registered in the name of Cede
& Co. or such other name as requested by an authorized representative of The
Depository Trust Company and any payment hereon is made to Cede & Co., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an
interest herein.
Certificate Number Number of Preferred Securities
P-
CUSIP NO.
Certificate Evidencing Preferred Securities
of
AmerUS Capital I
[_____%] Cumulative Quarterly Income Preferred Securities,
Series A
(liquidation amount $25 per Preferred Security)
AmerUS Capital I, a statutory business trust formed under the laws of
the State of Delaware (the "Trust"), hereby certifies that _________________
(the "Holder") is the registered owner of _______________ (___________)
preferred securities of the Trust representing an undivided beneficial
interest in the assets of the Trust and designated the AmerUS Capital I
[____%] Cumulative Quarterly Income Preferred Securities, Series A
(liquidation amount $25 per Preferred Security) (the "Preferred Securities").
The Preferred Securities are transferable on the books and records of the
Trust, in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer as provided in
Section 5.04 of the Trust Agreement (as defined below). The designations,
rights, privileges, restrictions, preferences and other terms and provisions
of the Preferred Securities are set forth in, and this certificate and the
Preferred
D-1
<PAGE>
Securities represented hereby and issued and shall in all respects be subject
to the terms and provisions of, the Amended and Restated Trust Agreement of
the trust dated as of _______________, 1996, among AmerUS Life Holdings,
Inc., an Iowa corporation, as Depositor, Wilmington Trust Company, as
Property Trustee, and the Administrative Trustees named therein, as the same
may be amended from time to time (the "Trust Agreement") including the
designation of the terms of Preferred Securities as set forth therein. The
Holder is entitled to the benefits of the Guarantee Agreement entered into by
AmerUS Life Holdings, Inc., an Iowa corporation, and Wilmington Trust Company
as guarantee trustee, dated as of _______________, 1996 (the "Guarantee") to
the extent provided therein. The Trust will furnish a copy of the Trust
Agreement and the Guarantee to the Holder without charge upon written request
to the Trust at its principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this _______ day of _____________, 1996.
AMERUS CAPITAL I
By: ____________________________________
Name:
Administrative Trustee
D-2
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
agent to transfer this Preferred Security Certificate on the books of the
Trust. The agent may substitute another to act for him or her.
Date: ________________
Signature: ______________________________
(Sign exactly as your name appears on the other side of this Preferred
Security Certificate)
Signature(s) Guaranteed:
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockholders, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
D-3
<PAGE>
[Exhibit 4.1]
AMERUS LIFE HOLDINGS, INC.
TO
WILMINGTON TRUST COMPANY
Trustee
________________
Junior Subordinated Indenture
Dated as of _____________, 1996
Up to [$86,250,000]
[____%] Junior Subordinated Debentures, Series A
<PAGE>
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
- --------------- ---------
Section 310(a)(1) . . . . . . . . . . . . . . . . . . . 609
(a)(2) . . . . . . . . . . . . . . . . . . . 609
(a)(3) . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . 608, 610
Section 311(a) . . . . . . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . . . . . . 613
Section 312(a) . . . . . . . . . . . . . . . . . . . 701
702(a)
(b) . . . . . . . . . . . . . . . . . . . 702(b)
(c) . . . . . . . . . . . . . . . . . . . 702(c)
Section 313(a) . . . . . . . . . . . . . . . . . . . 703(a)
(a)(4) . . . . . . . . . . . . . . . . . . . 101, 1004
(b) . . . . . . . . . . . . . . . . . . . 703(a)
(c) . . . . . . . . . . . . . . . . . . . 703(a)
(d) . . . . . . . . . . . . . . . . . . . 703(b)
Section 314(a) . . . . . . . . . . . . . . . . . . . 704
(b) . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . 102
Section 315(a) . . . . . . . . . . . . . . . . . . . 601
(b) . . . . . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . . . . . . 514
Section 316(a) . . . . . . . . . . . . . . . . . . . 101
(a)(1)(A) . . . . . . . . . . . . . . . . . . . 502
512
(a)(1)(B) . . . . . . . . . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . . . . . 104(c)
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . . . 1003
Section 318(a) . . . . . . . . . . . . . . . . . . . 107
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Additional Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Additional Sums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Additional Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
AmerUs Capital I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Authenticating Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Board Resolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Common Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Company Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Company Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Corporate Trust Office. . . . . . . . . . . . . . . . . . . . . . . . . . 4
Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Defaulted Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Depository. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Expense Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Extension Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Global Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Government Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . 5
Holder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Interest Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Company Event. . . . . . . . . . . . . . . . . . . . . . . . . 6
Junior Subordinated Payment . . . . . . . . . . . . . . . . . . . . . . . 6
Maturity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-i-
<PAGE>
Page
----
Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Parent Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Predecessor Security. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Preferred Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Proceeding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Property Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Redemption Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Regular Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Security Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Security Registrar. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Special Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Special Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Stated Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Tax Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Trust Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Vice President. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 102. Compliance Certificates and Opinions . . . . . . . . . . . . . . 9
SECTION 103. Form of Documents Delivered to Trustee . . . . . . . . . . . . .10
SECTION 104. Acts of Holders; Record Dates. . . . . . . . . . . . . . . . . .11
SECTION 105. Notices, Etc., to Trustee and the Company. . . . . . . . . . . .12
SECTION 106. Notice to Holders; Waiver. . . . . . . . . . . . . . . . . . . .12
SECTION 107. Conflict with Trust Indenture Act. . . . . . . . . . . . . . . .13
SECTION 108. Effect of Headings and Table of Contents . . . . . . . . . . . .13
SECTION 109. Successors and Assigns . . . . . . . . . . . . . . . . . . . . .13
SECTION 110. Separability Clause. . . . . . . . . . . . . . . . . . . . . . .13
SECTION 111. Benefits of Indenture. . . . . . . . . . . . . . . . . . . . . .13
SECTION 112. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 113. Non-Business Days. . . . . . . . . . . . . . . . . . . . . . . .14
-ii-
<PAGE>
Page
----
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally. . . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 202. Form of Face of Security . . . . . . . . . . . . . . . . . . . .15
SECTION 203. Form of Reverse of Security. . . . . . . . . . . . . . . . . . .18
SECTION 204. Additional Provisions Required in Global Security. . . . . . . .20
SECTION 205. Form of Trustee's Certificate of Authentication. . . . . . . . .21
ARTICLE THREE
The Securities
SECTION 301. Title and Terms; Paying Agent. . . . . . . . . . . . . . . . . .21
SECTION 302. Denominations. . . . . . . . . . . . . . . . . . . . . . . . . .24
SECTION 303. Execution, Authentication, Delivery and Dating . . . . . . . . .24
SECTION 304. Temporary Securities . . . . . . . . . . . . . . . . . . . . . .25
SECTION 305. Registration, Registration of Transfer and Exchange. . . . . . .25
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities . . . . . . . .27
SECTION 307. Payment of Interest; Interest Rights Preserved . . . . . . . . .28
SECTION 308. Persons Deemed Owners. . . . . . . . . . . . . . . . . . . . . .29
SECTION 309. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . .29
SECTION 310. Computation of Interest. . . . . . . . . . . . . . . . . . . . .29
SECTION 311. Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . .29
SECTION 312. Agreed Tax Treatment.. . . . . . . . . . . . . . . . . . . . . .30
SECTION 313. CUSIP Numbers. . . . . . . . . . . . . . . . . . . . . . . . . .30
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture. . . . . . . . . . . . .30
SECTION 402. Application of Trust Money . . . . . . . . . . . . . . . . . . .31
SECTION 403. Satisfaction, Discharge and Defeasance of Securities . . . . . .32
-iii-
<PAGE>
Page
----
ARTICLE FIVE
Remedies
SECTION 501. Events of Default. . . . . . . . . . . . . . . . . . . . . . . .33
SECTION 502. Acceleration of Maturity; Rescission and Annulment . . . . . . .34
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 504. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . .36
SECTION 505. Trustee May Enforce Claims Without Possession of Securities. . .37
SECTION 506. Application of Money Collected . . . . . . . . . . . . . . . . .37
SECTION 507. Limitation on Suits. . . . . . . . . . . . . . . . . . . . . . .38
SECTION 508. Unconditional Right of Holders to Receive Principal and
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
SECTION 509. Restoration of Rights and Remedies . . . . . . . . . . . . . . .39
SECTION 510. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . .39
SECTION 511. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . .40
SECTION 512. Control by Holders . . . . . . . . . . . . . . . . . . . . . . .40
SECTION 513. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . .41
SECTION 514. Undertaking for Costs. . . . . . . . . . . . . . . . . . . . . .41
SECTION 515. Waiver of Usury, Stay or Extension Laws. . . . . . . . . . . . .42
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities. . . . . . . . . . . . . . .42
SECTION 602. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . .43
SECTION 603. Certain Rights of Trustee. . . . . . . . . . . . . . . . . . . .44
SECTION 604. Not Responsible for Recitals or Issuance of Securities . . . . .45
SECTION 605. May Hold Securities. . . . . . . . . . . . . . . . . . . . . . .45
SECTION 606. Money Held in Trust. . . . . . . . . . . . . . . . . . . . . . .45
SECTION 607. Compensation; Reimbursement; and Indemnity . . . . . . . . . . .45
SECTION 608. Disqualification; Conflicting Interests. . . . . . . . . . . . .46
SECTION 609. Corporate Trustee Required; Eligibility. . . . . . . . . . . . .47
SECTION 610. Resignation and Removal; Appointment of Successor. . . . . . . .47
SECTION 611. Acceptance of Appointment by Successor . . . . . . . . . . . . .48
SECTION 612. Merger, Conversion, Consolidation or Succession to Business. . .49
SECTION 613. Preferential Collection of Claims Against Company. . . . . . . .49
SECTION 614. Appointment of Authenticating Agent. . . . . . . . . . . . . . .49
-iv-
<PAGE>
Page
----
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders. . . .51
SECTION 702. Preservation of Information; Communications to Holders . . . . .51
SECTION 703. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . .52
SECTION 704. Reports by Company . . . . . . . . . . . . . . . . . . . . . . .52
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms . . . . . .52
SECTION 802. Successor Substituted. . . . . . . . . . . . . . . . . . . . . .53
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of Holders . . . . . . .54
SECTION 902. Supplemental Indentures with Consent of Holders. . . . . . . . .55
SECTION 903. Execution of Supplemental Indentures . . . . . . . . . . . . . .56
SECTION 904. Effect of Supplemental Indentures. . . . . . . . . . . . . . . .56
SECTION 905. Conformity with Trust Indenture Act. . . . . . . . . . . . . . .57
SECTION 906. Reference in Securities to Supplemental Indentures . . . . . . .57
ARTICLE TEN
Covenants; Representations and Warranties
SECTION 1001. Payment of Principal and Interest . . . . . . . . . . . . . . .57
SECTION 1002. Maintenance of Office or Agency . . . . . . . . . . . . . . . .57
SECTION 1003. Money for Security Payments to Be Held in Trust . . . . . . . .58
SECTION 1004. Statement by Officers as to Compliance. . . . . . . . . . . . .59
SECTION 1005. Additional Sums . . . . . . . . . . . . . . . . . . . . . . . .59
SECTION 1006. Additional Covenants. . . . . . . . . . . . . . . . . . . . . .60
-v-
<PAGE>
SECTION 1007. Waiver of Certain Covenants . . . . . . . . . . . . . . . . . .61
ARTICLE ELEVEN
Subordination of Securities
SECTION 1101. Securities Subordinate to Senior Debt . . . . . . . . . . . . .61
SECTION 1102. Payment Over of Proceeds Upon Dissolution, Etc. . . . . . . . .61
SECTION 1103. Prior Payment to Senior Debt Upon Acceleration of Securities. .62
SECTION 1104. No Payment When Senior Debt in Default. . . . . . . . . . . . .63
SECTION 1105. Payment Permitted If No Default.. . . . . . . . . . . . . . . .63
SECTION 1106. Subrogation to Rights of Holders of Senior Debt.. . . . . . . .64
SECTION 1107. Provisions Solely to Define Relative Rights.. . . . . . . . . .64
SECTION 1108. Trustee to Effectuate Subordination.. . . . . . . . . . . . . .65
SECTION 1109. No Waiver of Subordination Provisions . . . . . . . . . . . . .65
SECTION 1110. Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . .65
SECTION 1111. Reliance on Judicial Order or Certificate of Liquidating
Agent.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
SECTION 1112. Trustee Not Fiduciary for Holders of Senior Debt. . . . . . . .66
SECTION 1113. Rights of Trustee as Holder of Senior Debt; Preservation of
Trustee's Rights. . . . . . . . . . . . . . . . . . . . . . . .66
SECTION 1114. Article Applicable to Paying Agents.. . . . . . . . . . . . . .66
SECTION 1115. Certain Conversions or Exchanges Deemed Payment.. . . . . . . .66
ARTICLE TWELVE
Redemption of Securities
SECTION 1201. Applicability of this Article . . . . . . . . . . . . . . . . .67
SECTION 1202. Election to Redeem; Notice to Trustee . . . . . . . . . . . . .67
SECTION 1203. Selection by Trustee of Securities to Be Redeemed . . . . . . .67
SECTION 1204. Notice of Redemption. . . . . . . . . . . . . . . . . . . . . .68
SECTION 1205. Deposit of Redemption Price . . . . . . . . . . . . . . . . . .69
SECTION 1206. Securities Payable on Redemption Date . . . . . . . . . . . . .69
SECTION 1207. Optional Redemption; Conditions to Optional Redemption. . . . .70
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ANNEX A: Form of Amended and Restated Trust Agreement between the Company, as
Depositor, and Wilmington Trust Company, Michael E. Sproule, Michael
G. Fraizer and James A. Smallenberger, as trustees, dated as of
______________, 1996.
EXHIBIT A: Agreement As To Expenses And Liabilities
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INDENTURE, dated as of _____________, 1996, between AmerUs Life
Holdings, Inc., a corporation duly organized and existing under the laws of the
State of Iowa (herein called the "COMPANY"), having its principal office at 418
Sixth Avenue, Des Moines, Iowa 50306-2499, and Wilmington Trust Company, a
banking corporation duly organized and existing under the laws of Delaware, as
Trustee (herein called the "TRUSTEE"). Unless otherwise defined herein, all
capitalized items used herein shall have the meanings ascribed to them in the
Amended and Restated Trust Agreement between the Company, as Depositor and
Wilmington Trust Company, Michael E. Sproule, Michael G. Fraizer and James A.
Smallenberger as trustees, dated as of _____________, 1996 (the "TRUST
AGREEMENT"), as in effect on the date hereof, the form of which is attached as
Annex A hereto.
RECITALS OF THE COMPANY
WHEREAS, AmerUs Capital I (as defined herein) may pursuant to the
Underwriting Agreement dated ________________, 1996 among the Company, AmerUs
Capital I and the Underwriters named therein issue up to [$____________]
aggregate liquidation preference of its [____%] Cumulative Quarterly Income
Preferred Securities, Series A (the "PREFERRED SECURITIES") with a liquidation
preference of $25 per Preferred Security;
WHEREAS, this Indenture is subject to the provisions of the Trust
Indenture Act of 1939, as amended, that are required to be part of this
Indenture and shall, to the extent applicable, be governed by such provisions;
WHEREAS, the Company is guaranteeing the payment of distributions on
the Preferred Securities and the Common Securities, liquidation preference $25
per Common Security (the "COMMON SECURITIES" and, together with the Preferred
Securities, the "TRUST SECURITIES"), of AmerUs Capital I and payment of the
Redemption Price and payments on liquidation with respect to the Trust
Securities, to the extent provided in the Guarantee Agreement dated
_______________, 1996, by the Company and Wilmington Trust Company, as guarantee
trustee (the "PARENT GUARANTEE") for the benefit of the holders of the Trust
Securities;
WHEREAS, the Company wishes to sell to AmerUs Capital I, and AmerUs
Capital I wishes to purchase from the Company, Securities (as defined below) in
an aggregate principal amount up to [$86,250,000] and in satisfaction of the
purchase price for such Securities, the trustees of AmerUs Capital I, on behalf
of AmerUs Capital I, wish to (i) execute and deliver to the Company Common
Securities certificates evidencing an ownership interest in AmerUs Capital I,
registered in the name of the Company, in an aggregate amount of up to [103,500]
Common Securities having an aggregate liquidation amount of up to [$2,587,500],
and (ii) deliver to the Company the sum of up to [$_______________];
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WHEREAS, the Company has duly authorized the creation and issuance of
an issue of its unsecured [____%] junior subordinated debentures, series A (the
"SECURITIES"), of substantially the tenor and amount hereinafter set forth
issued to evidence loans made to the Company of the proceeds from the issuance
by AmerUs Capital I of the Preferred Securities and Common Securities, to
provide the terms and conditions upon which the Securities are to be
authenticated, issued and delivered and to provide therefor the Company has duly
authorized the execution and delivery of this Indenture; and
WHEREAS, all things necessary to make the Securities, when executed by
the Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holder thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles, and the term "generally accepted accounting
principles" with respect to any computation required or permitted
hereunder shall mean such accounting principles which are generally
accepted at the date or time of such computation; provided, that when
two or more principles are so generally accepted, it shall mean that
set of principles consistent with those in use by the Company; and
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(4) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"ACT", when used with respect to any Holder, has the meaning specified
in Section 104.
"ADDITIONAL INTEREST" means interest, if any, that shall accrue on any
interest on the Securities the payment of which has not been made on the
applicable Interest Payment Date and which shall accrue at the rate of [____]%
per annum compounded quarterly (to the extent permitted by law).
"ADDITIONAL SUMS" has the meaning specified in Section 1005.
"ADDITIONAL TAXES" means the sum of any additional taxes, duties and
other governmental charges to which AmerUs Capital I has become subject from
time to time as a result of a Tax Event.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"CONTROL" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the
foregoing.
"AMERUS CAPITAL I" means the business trust declared and established
pursuant to the Delaware Business Trust Act (12 Del. Code Section 3801 et. seq.)
by the Trust Agreement.
"AUTHENTICATING AGENT" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities.
"BOARD OF DIRECTORS" means either the board of directors of the
Company or any duly authorized committee of that board.
"BOARD RESOLUTION" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors or such committee of the Board of Directors or officers
of the Company to which authority to act on behalf of the Board of Directors has
been delegated, and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"BUSINESS DAY" means any day other than a Saturday or Sunday or a day
on which banking institutions in The City of New York are authorized or required
by law or executive
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order to remain closed or a day on which the Corporate Trust Office of the
Trustee, or the principal office of the Property Trustee under the Trust
Agreement, is closed for business.
"COMMISSION" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or,
if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"COMMON SECURITIES" has the meaning specified in the recitals to this
Indenture.
"COMMON STOCK" means the common stock, without par value, of the
Company.
"COMPANY" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"COMPANY REQUEST" or "COMPANY ORDER" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Chief
Executive Officer, its Vice Chairman of the Board, its President or a Vice
President, and by its Treasurer, an Assistant Treasurer, the Controller, its
Secretary or an Assistant Secretary, and delivered to the Trustee.
"CORPORATE TRUST OFFICE" means the principal office of the Trustee in
the City of Wilmington, Delaware, at which at any particular time its corporate
trust business shall be administered and which at the date of this Indenture is
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890.
"CORPORATION" includes a corporation, association, company, joint-
stock company or business trust.
"DEBT" means, with respect to any Person, whether recourse is to all
or a portion of the assets of such Person and whether or not contingent, (i)
every obligation of such Person for money borrowed; (ii) every obligation of
such Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; and (vi) every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable for, directly or indirectly,
as obligor or otherwise.
"DEFAULTED INTEREST" has the meaning specified in Section 307.
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"DEPOSITORY" means, with respect to the Securities issuable or issued
in whole or in part in the form of one or more Global Securities, the Person
designated as Depository by the Company pursuant to this Indenture or any
successor thereto.
"EVENT OF DEFAULT" has the meaning specified in Section 501.
"EXPENSE AGREEMENT" means the Expense Agreement contemplated by
Section 607.
"EXTENSION PERIOD" has the meaning specified in Section 301.
"GLOBAL SECURITY" means a Security in the form prescribed in Section
204 evidencing all or part of the Securities, issued to the Depository or its
nominee, and registered in the name of such Depository or its nominee.
"GOVERNMENT OBLIGATIONS" means, with respect to the Securities,
securities which are (i) direct obligations of the United States of America or
(ii) obligations of a Person controlled or supervised by and acting as an agency
or instrumentality of the United States of America the payment of which is
unconditionally guaranteed by the United States of America and which, in either
case, are full faith and credit obligations of the United States of America and
are not callable or redeemable at the option of the issuer thereof and shall
also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act of 1933, as amended) as custodian with respect to
any such Government Obligation or a specific payment of interest on or principal
of any such Government Obligation held by such custodian for the account of the
holder of such depository receipt; PROVIDED that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
"HOLDER" means a Person in whose name a Security is registered in the
Security Register.
"INDENTURE" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"INTEREST PAYMENT DATE", when used with respect to any installment of
interest on a Security, means the date specified in such Security as the fixed
date on which an installment of interest with respect to the Securities is due
and payable.
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"INVESTMENT COMPANY EVENT" means the receipt by AmerUs Capital I of an
Opinion of Counsel experienced in such matters to the effect that, as a result
of the occurrence of a change in law or regulation or a change in interpretation
or application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), AmerUs Capital I is
or will be considered an "investment company" that is required to be registered
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), which Change in 1940 Act Law becomes effective on or after the date of
original issuance of the Preferred Securities issues by AmerUs Capital I.
"JUNIOR SUBORDINATED PAYMENT" has the meaning specified in Section
1102.
"MATURITY", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of
the Board, the Chief Executive Officer, a Vice Chairman of the Board, the
President or a Vice President, and by the Treasurer, an Assistant Treasurer, the
Controller, the Secretary or an Assistant Secretary, of the Company, and
delivered to the Trustee. One of the officers signing an Officers' Certificate
given pursuant to Section 1004 shall be the principal executive, financial or
accounting officer of the Company.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be
counsel for the Company (and who may be an employee of the Company), and who
shall be acceptable to the Trustee.
"OUTSTANDING," when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, EXCEPT: (i) Securities theretofore canceled by the
Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose
payment or redemption money in the necessary amount has been theretofore
deposited with the Trustee or any Paying Agent (other than the Company) in trust
or set aside and segregated in trust by the Company (if the Company shall act as
its own Paying Agent) for the Holders of such Securities, PROVIDED that, if such
Securities are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the Trustee has
been made; and (iii) Securities which have been paid pursuant to Section 306, or
in exchange for or in lieu of which other Securities have been authenticated and
delivered pursuant to this Indenture, other than any such Securities in respect
of which there shall have been presented to the Trustee proof satisfactory to it
that such Securities are held by Holders in whose hands such Securities are
valid, binding and legal obligations of the Company; PROVIDED, HOWEVER, that in
determining whether the Holders of the requisite principal amount of Outstanding
Securities have given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Securities owned by the Company or any other
obligor upon the Securities or any Affiliate of the Company or such other
obligor shall be disregarded and deemed not to be
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Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction of
the Trustee the pledgee's right so to act with respect to such Securities and
that the pledgee is not the Company or any other obligor upon the Securities or
any Affiliate of the Company or such other obligor. Upon the written request of
the Trustee, the Company shall furnish to the Trustee promptly an Officers'
Certificate listing and identifying all Securities, if any, known by the Company
to be owned or held by or for the account of the Company, or any other obligor
on the Securities or any Affiliate of the Company or such obligor, and, subject
to the provisions of Section 601, the Trustee shall be entitled to accept such
Officers' Certificate as conclusive evidence of the facts therein set forth and
of the fact that all Securities not listed therein are Outstanding for the
purpose of any such determination.
"PARENT GUARANTEE" has the meaning specified in the Recitals to this
Indenture.
"PAYING AGENT" means any Person authorized by the Company to pay the
principal of or interest on any Securities on behalf of the Company.
"PERSON" means any individual, corporation, partnership, joint
venture, association, limited liability company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"PREDECESSOR SECURITY" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"PREFERRED SECURITIES" has the meaning specified in the Recitals to
this Indenture.
"PROCEEDING" has the meaning specified in Section 1102.
"PROPERTY TRUSTEE" means the commercial bank or trust company
identified as the "Property Trustee" in the Trust Agreement, solely in its
capacity as Property Trustee under such Trust Agreement and not in its
individual capacity, or its successor in interest in such capacity, or any
successor property trustee appointed as therein provided.
"REDEMPTION DATE", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"REDEMPTION PRICE", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
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"REGULAR RECORD DATE" for the interest payable on any Interest Payment
Date means the fifteenth day next preceding such Interest Payment Date.
"RESPONSIBLE OFFICER", when used with respect to the Trustee, means
any officer of the Trustee assigned by the Trustee from time to time to
administer its corporate trust matters.
"SECURITIES" has the meaning specified in the Recitals to this
Indenture.
"SECURITY REGISTER" and "SECURITY REGISTRAR" have the respective
meanings specified in Section 305.
"SENIOR DEBT" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of this Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Securities or to other Debt which is PARI
PASSU with, or subordinated to, the Securities; PROVIDED, HOWEVER, that Senior
Debt shall not be deemed to include (a) any Debt of the Company which, when
incurred and without respect to any election under Section 1111(b) of the
Bankruptcy Reform Act of 1978, was without recourse to the Company, (b) any Debt
of the Company to any of its Subsidiaries, (c) Debt to any employee of the
Company, (d) any liability for taxes, (e) Debt or other monetary obligations to
trade creditors created or assumed by the Company or any of these Subsidiaries
in the ordinary course of business in connection with the obtaining of goods,
materials or services and (f) the Securities.
"SPECIAL EVENT" means either an Investment Company Event or a Tax
Event.
"SPECIAL RECORD DATE" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
"STATED MATURITY", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the date on which the principal, together with any accrued
and unpaid interest (including Additional Interest), of such Security or such
installment of interest is due and payable (whether the initial such date or, if
pursuant to Section 301 the Company elects to extend the Stated Maturity, such
later date as is chosen by the Company pursuant to Section 301).
"SUBSIDIARY" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For the purposes of this definition, "voting stock" means stock
which ordinarily has voting power for the election of directors, whether at all
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times or only so long as no senior class of stock has such voting power by
reason of any contingency.
"TAX EVENT" means the receipt by AmerUs Capital I of an Opinion of
Counsel experienced in such matters to the effect that, as a result of (a) any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein affecting taxation, or
(b) any amendment to, or change in an interpretation or application of such laws
or regulations by any legislative body, court, governmental agency or regulatory
authority (including the enactment of any legislation and the publication of any
judicial decision or regulatory determination on or after the date of issuance
of the Preferred Securities), there is more than an insubstantial risk that
(i) AmerUs Capital I is, or will be within 90 days of the date of such Opinion
of Counsel, subject to United States Federal income tax with respect to interest
income received or accrued on the Securities, (ii) interest payable by the
Company on the Securities is not, or within 90 days of the date of such Opinion
of Counsel will not be, deductible by the Company, in whole or in part, for
United States Federal income tax purposes, or (iii) AmerUs Capital I is, or will
be within 90 days of the date of such Opinion of Counsel, subject to more than a
DE MINIMIS amount of other taxes, duties or other governmental charges.
"TRUST AGREEMENT" has the meaning specified in the first paragraph of
this Indenture.
"TRUSTEE" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 as amended
and as in force at the date as of which this instrument was executed; PROVIDED,
HOWEVER, that in the event the Trust Indenture Act of 1939 is amended after such
date, "Trust Indenture Act" means, to the extent required by any such amendment,
the Trust Indenture Act of 1939 as so amended.
"TRUST SECURITIES" has the meaning specified in the Recitals to this
Indenture.
"VICE PRESIDENT", when used with respect to the Company or the
Trustee, means any duly appointed vice president, whether or not designated by a
number or a word or words added before or after the title "vice president".
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent
(including covenants, compliance with which
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constitutes a condition precedent), if any, provided for in this Indenture
relating to the proposed action have been complied with and an Opinion of
Counsel stating that in the opinion of such counsel all conditions precedent
(including covenants compliance with which constitute a condition precedent), if
any, have been complied with, except that in the case of any such application or
request as to which the furnishing of such documents is specifically required by
any provision of this Indenture relating to such particular application or
request, no additional certificate or opinion need be furnished. Every
certificate or opinion delivered with respect to compliance with a condition or
covenant provided for in this Indenture (other than the certificate provided
pursuant to Section 1004) shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions herein relating
thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
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Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. ACTS OF HOLDERS; RECORD DATES.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given to or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee at the address specified in Section 105 and, where it is hereby
expressly required, to the Company. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "ACT" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 601)
conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution by any Person of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, but shall not be obligated, to fix any day as the record date for
the purpose of determining the Holders entitled to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action, or to
vote on any action, authorized or permitted to be given or taken by Holders.
Except as otherwise provided herein, if not set by the Company prior to the
first solicitation of a Holder made by any Person in respect of any such action,
or, in the case of any such vote, prior to such vote, the record date for any
such action or vote shall be the 30th day (or, if later, the date of the most
recent list of Holders required to be provided pursuant to Section 701) prior to
such first solicitation or vote, as the case may be. With regard to any record
date, only the Holders on such date (or their duly designated proxies) shall be
entitled to give or take, or vote on, the relevant action, whether or not such
Persons continue to be Holders after such record date, PROVIDED, HOWEVER, that
unless such vote or consent is obtained from the Holders (or their duly
designated proxies) of the requisite principal amount of Outstanding Securities
prior to the date which is the 120th day after such record date, any such vote
or
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consent previously given shall automatically and without further action by any
Holder be canceled and of no further effect.
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
SECTION 105. NOTICES, ETC., TO TRUSTEE AND THE COMPANY.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, Attention: Corporate
Trust Administration or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 106. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
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In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. SUCCESSORS AND ASSIGNS.
The Company will have the right at all times to assign any of its
rights or obligations under this Indenture to a direct or indirect wholly-owned
subsidiary of the Company, PROVIDED, that, in the event of any such assignment,
the Company will remain liable for all such obligations. AmerUs Capital I may
not assign any of its rights under this Indenture without the prior written
consent of the Company. This Indenture is not otherwise assignable by the
parties hereto. Subject to the foregoing, this Indenture shall bind and inure
to the benefit of the parties hereto and their respective successors and
assigns, whether so expressed or not.
SECTION 110. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto, any Paying Agent and
their successors and assigns
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hereunder, the holders of Senior Debt, the holders of Preferred Securities (to
the extent provided herein) and the Holders of Securities, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
SECTION 112. GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THIS INDENTURE IS SUBJECT
TO THE PROVISIONS OF THE TRUST INDENTURE ACT OF 1939, AS AMENDED, THAT ARE
REQUIRED TO BE PART OF THIS INDENTURE AND SHALL, TO THE EXTENT APPLICABLE, BE
GOVERNED BY SUCH PROVISIONS.
SECTION 113. NON-BUSINESS DAYS.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of interest or
principal of the Securities need not be made on such date, but may be made on
the next succeeding Business Day in each case (except that, if such Business Day
is in the next succeeding calendar year, such Interest Payment Date, Redemption
Date or Stated Maturity, as the case may be, shall be the immediately preceding
Business Day) in each case with the same force and effect as if made on the
Interest Payment Date or Redemption Date, or at the Stated Maturity, PROVIDED
that no interest shall accrue for the period from and after such Interest
Payment Date, Redemption Date or Stated Maturity, as the case may be.
ARTICLE TWO
Security Forms
SECTION 201. FORMS GENERALLY.
The Securities and the Trustee's certificates of authentication shall
be in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with applicable tax laws or the rules of any securities
exchange, the Nasdaq National Market or any other applicable self-regulatory
organization as may, consistently herewith, be determined by the officers
executing such Securities, as evidenced by their execution of the Securities.
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The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these or other methods, if required by any
securities exchange on which the Securities may be listed, on a steel engraved
border or steel engraved borders or may be produced in any other manner
permitted by the rules of any securities exchange on which the Securities may be
listed, all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
SECTION 202. FORM OF FACE OF SECURITY.
[If the Security is a Global Security, insert--This Security is a
Global Security within the meaning of the Indenture hereinafter referred to and
is registered in the name of The Depository Trust Company (the "Depository") or
a nominee of the Depository. This Security is exchangeable for Securities
registered in the name of a person other than the Depository or its nominee only
in the limited circumstances described in the Indenture and no transfer of this
Security (other than a transfer of this Security as a whole by the Depository to
a nominee of the Depository or by a nominee of the Depository to the Depository
or another nominee of the Depository) may be registered except in limited
circumstances.
Unless this Security is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York) to AmerUs Life
Holdings, Inc. or its agent for registration of transfer, exchange, or payment,
and any Security issued is registered in the name of Code & Co. or such other
name as requested by an authorized representative of The Depository Trust
Company and any payment hereon is made to Cede & Co. ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co. has an interest herein.]
AMERUS LIFE HOLDINGS
[____%] Junior Subordinated Debenture, Series A
No._________ $_________
CUSIP No. _______________
AMERUS LIFE HOLDINGS, INC., a corporation duly organized and existing
under the laws of the State of Iowa (herein called "ALH", which term includes
any successor corporation under the Indenture hereinafter referred to), for
value received, hereby promises to pay to _____________________________, or
registered assigns, the principal sum of _________ DOLLARS ($__________) on
______________ 2026; provided that the Company may (i) change the Maturity Date
upon the occurrence of an exchange of the Securities for the Trust Securities
subject to certain conditions set forth in Section 301 of the Indenture, which
changed maturity date shall in no case be earlier than ___________________, or
later than
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______________________, and (ii) extend the maturity date subject to certain
conditions specified in Section 301 of the Indenture, which extended maturity
date shall in no case be later than ___________, 2045. The Company further
promises to pay interest on said principal sum from ______________, 1996 or from
the most recent interest payment date (each such date, an "Interest Payment
Date") to which interest has been paid or duly provided for, quarterly (subject
to deferral as set forth herein) in arrears on March 31, June 30, September 30
and December 31 of each year, commencing March 31, 1997, at the rate of [____%]
per annum PLUS Additional Interest, if any, until the principal hereof shall
have become due and payable, and on any overdue principal and (without
duplication and to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest at the same rate of
[_____%] per annum compounded quarterly. The amount of interest payable for any
period will be computed on the basis of twelve 30-day months and a 360-day year.
In the event that any date on which interest is payable on this Security is not
a Business Day, then a payment of the interest payable on such date will be made
on the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on the date the payment was originally payable. A "BUSINESS DAY"
shall mean any day other than a day on which banking institutions in the City of
New York are authorized or required by law or executive order to remain closed
or a day on which the Corporate Trust Office of the Trustee, or the principal
office of the Property Trustee under the Trust Agreement, is closed for
business. The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities, as defined in the Indenture) is registered at the close of business
on the Regular Record Date for such interest installment, which shall be the
close of business on the Business Day next preceding such Interest Payment Date.
Any such interest installment not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed or the Nasdaq National Market if the
Securities are quoted thereon, or of any other applicable self-regulatory
organization, and upon such notice as may be required by such exchange, the
Nasdaq National Market or such other organization all as more fully provided in
said Indenture.
ALH shall have the right at any time during the term of this
Security, from time to time, to extend the interest payment period of such
Security for up to 20 consecutive quarters (an "EXTENSION PERIOD"), during which
period interest will compound quarterly and ALH shall have the right to make
partial payments of interest on any Interest Payment Date, and at the end of
which Extension Period ALH shall pay all interest then accrued and unpaid
(together with interest thereon at the rate specified for the Securities to the
extent that payment of such interest is
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permitted by applicable law); PROVIDED that during any such Extension Period,
ALH shall not, and shall cause any Subsidiary of ALH not to, (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of ALH's outstanding capital stock or
(ii) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt security of ALH ranking PARI PASSU with or junior
in interest to this Security or make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any Subsidiary of the Company
that by their terms rank PARI PASSU or junior in interest to the Securities
(other than (a) dividends or distributions in Common Stock of the Company, (b)
payments under any Parent Guarantee, and (c) purchases of Common Stock related
to the issuance of Common Stock under any of the Company's benefit plans for its
directors, officers or employees). Prior to the termination of any such
Extension Period, ALH may further extend the interest payment period, PROVIDED
that such Extension Period together with all such previous and further
extensions thereof shall not exceed 20 consecutive quarters or extend beyond the
Maturity of this Security. Upon the termination of any such Extension Period
and upon the payment of all accrued and unpaid interest and any Additional
Interest then due, ALH may select a new Extension Period, subject to the above
requirements. No interest shall be due and payable during an Extension Period,
except at the end thereof. ALH shall give the Trustee notice of its selection
of an Extension Period at least one Business Day prior to the earlier of (i) the
Interest Payment Date or (ii) the date AmerUs Capital I is required to give
notice to any securities exchange or the Nasdaq National Market or other
applicable self-regulatory organization or to holders of the Preferred
Securities of the record date or the date such distributions are payable, but in
any event not less than one Business Day prior to such record date.
Payment of the principal of and premium, if any, and interest on this
Security will be made at the office or agency of ALH maintained for that purpose
in the United States, in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts; PROVIDED, HOWEVER, that at the option of ALH payment of interest may be
made (i) by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or (ii) by wire transfer in
immediately available funds at such place and to such account as may be
designated by the Person entitled thereto as specified in the Security Register.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and subject in right of payment to the prior
payment in full of all Senior Debt, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions,
(b) authorizes and directs the Trustee on his behalf to take such action as may
be necessary or appropriate to effectuate the subordination so provided and
(c) appoints the Trustee his attorney-in-fact for any and all such purposes.
Each Holder hereof, by his acceptance hereof, waives all notice of the
acceptance of the subordination provisions contained herein and in the Indenture
by each holder of Senior Debt, whether now outstanding or hereafter incurred,
and waives reliance by each such holder upon said provisions.
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Reference is hereby made to the further provisions of the Indenture
summarized on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, AmerUs Life Holdings, Inc. has caused this
instrument to be duly executed under its corporate seal.
Dated:
AMERUS LIFE HOLDINGS, INC.
By:___________________________
Name:
Title:
Attest:
_______________________
SECTION 203. FORM OF REVERSE OF SECURITY.
This Security is one of a duly authorized issue of Securities of ALH,
designated as its [____%] Junior Subordinated Debentures, Series A (herein
called the "SECURITIES"), limited in aggregate principal amount to [$86,250,000]
issued under an Indenture, dated as of _________, 1996 (herein called the
"INDENTURE"), between ALH and Wilmington Trust Company, as Trustee (herein
called the "TRUSTEE", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Trustee, ALH and the Holders of the
Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered.
All terms used in this Security which are defined in the Indenture or
in the Trust Agreement attached as Annex A thereto shall have the meanings
assigned to them in the Indenture or the Trust Agreement, as the case may be.
At any time on or after ____________________, 2001, ALH shall have the
right, subject to the terms and conditions of Article Twelve of the Indenture,
to redeem this Security at the option of ALH, without premium or penalty, in
whole or in part, at a Redemption Price equal to 100% of the principal amount to
be redeemed plus accrued but unpaid interest, including any Additional Interest,
if any, to the Redemption Date.
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If a Special Event as defined in Article Twelve of the Indenture shall
occur and be continuing, ALH shall have the right, subject to the terms and
conditions of Article Twelve of the Indenture, to redeem this Security at the
option of ALH, without premium or penalty, in whole but not in part, subject to
the provisions of Section 1207 and other provisions of Article Twelve of the
Indenture, at a Redemption Price equal to 100% of the principal amount thereof
plus accrued but unpaid interest, including any Additional Interest, if any, to
the Redemption Date. Any redemption pursuant to this paragraph will be made
upon not less than 30 nor more than 60 days' notice, at the Redemption Price.
If the Securities are only partially redeemed by ALH, the Securities will be
redeemed PRO RATA.
In the event of redemption of this Security in part only, a new
Security or Securities for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.
If an Event of Default with respect to the Securities shall occur and
be continuing, the principal of the Securities may be declared due and payable
in the manner, with the effect and subject to the conditions provided in the
Indenture.
The Indenture contains provisions for satisfaction and discharge and
defeasance at any time of the entire indebtedness of this Security upon
compliance by ALH with certain conditions set forth in the Indenture.
The Indenture contains provisions permitting ALH and the Trustee, with
the consent of Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities, to modify the Indenture in a manner affecting the
rights of the Holders of the Securities; PROVIDED that no such modification may,
without the consent of the Holder of each Outstanding Security affected thereby,
(i) change the fixed maturity of the Securities (except such extension or
extensions as is contemplated hereby), or reduce the principal amount thereof,
or reduce the rate or extend the time of payment of interest thereon, or
(ii) reduce the percentage of principal amount of the Securities, the Holders of
which are required to consent to any such modification of the Indenture;
PROVIDED, that, so long as any of the Preferred Securities remains Outstanding,
no such modification may be made that adversely affects the Holders of the
Preferred Securities, and no termination of the Indenture may occur, and no
waiver of any event of Default or compliance with any covenant under the
Indenture may be effective, without the prior consent of the Holders of at least
a majority of the aggregate Liquidation Amount (as defined in the Trust
Agreement) of the Outstanding Preferred Securities unless and until the
principal of the Securities and all accrued and unpaid interest (including any
Additional Interest) thereon have been paid in full. The Indenture also
contains provisions permitting Holders of specified percentages in principal
amount of the Securities at the time Outstanding, on behalf of the Holders of
all Securities, to waive compliance by ALH with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Security shall be conclusive
and binding upon such Holder and upon all future Holders of this Security and of
any Security issued upon the registration of
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<PAGE>
transfer hereof or in exchange therefore or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of ALH, which is
absolute and unconditional, to pay the principal of and premium, if any, and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of Wilmington Trust Company in Wilmington, Delaware, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to Wilmington Trust Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or
transferees. No service charge shall be made for any such registration of
transfer or exchange, but Wilmington Trust Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
Prior to due presentment of this Security for registration of
transfer, ALH, the Trustee and any agent of ALH or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither ALH, the Trustee
nor any such agent shall be affected by notice to the contrary.
The Securities are issuable only in registered form without coupons in
denominations of $25 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
The Company and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agree that for United States Federal, state and local
tax purposes it is intended that this Security constitute indebtedness.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES THEREOF.
SECTION 204. ADDITIONAL PROVISIONS REQUIRED IN GLOBAL SECURITY.
Any Global Security issued hereunder shall, in addition to the
provisions contained in Sections 202 and 203, bear a legend in substantially the
following form:
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"This Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of a
Depositary or a nominee of a Depository. This Security is
exchangeable for Securities registered in the name of a Person other
than the Depositary or its nominee only in the limited circumstances
described in the Indenture and may not be transferred except as a
whole by the Depositary to a nominee of the Depositary or by a nominee
of the Depositary to the Depositary or another nominee of the
Depositary."
SECTION 205. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Securities referred to in the within-mentioned
Indenture.
Wilmington Trust Company,
AS TRUSTEE
By: _______________________
AUTHORIZED OFFICER
ARTICLE THREE
The Securities
SECTION 301. TITLE AND TERMS; PAYING AGENT.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to [$86,250,000]
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section 304,
305, 306, 906 or 1208.
The Securities shall be known and designated as the "[____%] Junior
Subordinated Debentures, Series A" of the Company. Their initial Stated
Maturity shall be ____________, 2026. The Company shall have the right to (a)
change the Maturity Date of the Securities upon the liquidation of AmerUs
Capital I and the exchange of the Securities for the Preferred Securities of
AmerUs Capital I and (b) extend the Stated Maturity for the Securities at any
time at the election of the Company for one or more periods, but in no event to
a date later than ______, 2045; PROVIDED that at the time any election to extend
the Maturity Date is made and at the time of such extension, (i) the Company is
not in bankruptcy, otherwise insolvent or in liquidation, (ii) the Company is
not in default in the payment of any interest or principal on the Securities and
no deferred interest payments thereon have accrued, (iii) AmerUs Capital I is
not in arrears on payments of Distributions on its Preferred Securities and no
deferred Distributions
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thereon are accumulated, (iv) the Securities are rated not less than BBB- by
Standard & Poor's Ratings Group or Baa3 by Moody's Investors Service, Inc. or
the equivalent by any other nationally recognized statistical rating
organization, and (v) the extended Stated Maturity is no later than the 49th
anniversary of the initial issuance of the Preferred Securities; PROVIDED,
HOWEVER, that, if the Company exercises its right to liquidate AmerUs Capital I
and exchange the Securities for the Preferred Securities as specified in clause
(a) above, effective upon such exercise the Stated Maturity of the Securities
may be changed to any date elected by the Company that is (i) no earlier than
the date that is five years after the initial issuance of the Preferred
Securities and (ii) no later than the date 30 years (plus an extended term of up
to an additional 19 years if the above-referenced conditions are satisfied)
after the date of the initial issuance of the Preferred Securities of AmerUs
Capital I.
The Securities shall bear interest at the rate of [_____%] per annum,
from _________________, 1996 or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, as the case may be, payable
quarterly (subject to deferral as set forth herein), in arrears, on March 31,
June 30, September 30 and December 31 of each year, commencing March 31, 1997
until the principal thereof is paid or made available for payment. Interest
will compound quarterly and will accrue at the rate of [_____%] per annum on any
interest installment the payment of which has not been made on the applicable
Interest Payment Date or during an extension of an interest payment period as
set forth below in this Section 301. In the event that any date on which
interest is payable on the Securities is not a Business Day, then a payment of
the interest payable on such date will be made on the next succeeding day which
is a Business Day (except that, if such Business Day is in the next succeeding
calendar year, such Interest Payment Date shall be the immediately preceding
Business Day) (and without any interest or other payment in respect of any such
delay), in each case with the same force and effect as if made on the date the
payment was originally payable.
So long as no Event of Default hereunder has occurred and is
continuing, the Company shall have the right, at any time during the term of the
Securities, to defer the payment of interest on such Securities from time to
time, for up to 20 consecutive quarters (each, an "EXTENSION PERIOD") during
which Extension Periods interest will compound quarterly and the Company shall
have the right to make partial payments of interest on any Interest Payment
Date. No Extension Period shall end on a date other than an Interest Payment
Date. At the end of any such Extension Period the Company shall pay all
interest then accrued and unpaid on the Securities (together with Additional
Interest thereon, if any, at the rate specified for the Securities to the extent
permitted by applicable law), PROVIDED, HOWEVER, that during any such Extension
Period, the Company shall not, and shall cause any Subsidiary not to,
(i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of the Company's
capital stock, or (ii) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Company
ranking PARI PASSU with or junior in interest to the Securities or make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any Subsidiary of the Company that by their terms rank PARI PASSU
or junior in interest to the Securities (other than (a) dividends or
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distributions in Common Stock of the Company (b) payments under the Parent
Guarantee, and (c) purchases of Common Stock related to the issuance of Common
Stock under any of the Company's benefit plans for its directors, officers or
employees). Prior to the termination of any such Extension Period, the Company
may further extend the interest payment period, PROVIDED that such Extension
Period together with all such previous and further extensions thereof shall not
exceed 20 consecutive quarters or extend beyond the Maturity of the Securities.
Upon the termination of any Extension Period and upon the payment of all accrued
and unpaid interest and any Additional Interest then due, the Company may elect
to begin a new Extension Period, subject to the above requirements. No interest
shall be due and payable during an Extension Period, except at the end thereof.
The Company shall give the Trustee and the Holders of the Securities notice of
its election to begin any such Extension Period at least one Business Day prior
to the earlier of (i) the Interest Payment Date or (ii) the date the
Distributions on the Preferred Securities are payable or (iii) the date the
Administrative Trustees are required to give notice to any securities exchange
or the Nasdaq National Market or other applicable self-regulatory organization
or to holders of the Preferred Securities of the record date or the date such
Distributions are payable, but in any event not less than one Business Day prior
to such record date.
The Trustee shall promptly give notice of the Company election to
begin any such Extension Period to the Holders of the Outstanding Securities.
The principal of and interest on the Securities shall be payable at
the office of such Paying Agent or Paying Agents as the Company may designate
for such purpose from time to time, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts; PROVIDED, HOWEVER, that at the option of the Company
payment of interest may be made (i) by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register or
(ii) by wire transfer in immediately available funds at such place and to such
account as may be designated by the Person entitled thereto as specified in the
Security Register.
The Company designates Wilmington Trust Company as the initial Paying
Agent with respect to the Securities. The Company may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts pursuant to
Section 1002.
The Securities shall be subordinated in right of payment to Senior
Debt as provided in Article Eleven.
The Securities shall be redeemable as provided in Article Twelve.
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SECTION 302. DENOMINATIONS.
The Securities shall be issuable only in registered form, without
coupons, and only in denominations of $25 and any integral multiple thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication. Securities may be authenticated on original
issuance from time to time and delivered pursuant to such procedures acceptable
to the Trustee ("Procedures") as may be specified from time to time by Company
Order. Procedures may authorize authentication and delivery pursuant to oral
instructions of the Company or a duly authorized agent, which instructions shall
be promptly confirmed in writing.
Prior to the delivery of a Security in any such form to the Trustee
for authentication, the Company shall deliver to the Trustee a Company Order
requesting the Trustee's authentication and delivery of all or a portion of the
Securities, and if less than all, setting forth procedures for such
authentication. The Trustee in accordance with such Company Order shall
authenticate and deliver such Securities as in this Indenture provided and not
otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
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SECTION 304. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities
having the same date of issuance and Stated Maturity and having the same terms
as such temporary Securities. Until so exchanged the temporary Securities shall
in all respects be entitled to the same benefits under this Indenture as
definitive Securities.
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
collectively referred to as the "SECURITY REGISTER") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is hereby
appointed "SECURITY REGISTRAR" for the purpose of registering Securities and
transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security (duly
endorsed or with the form of transfer endorsed thereon duly executed) at the
office of the Security Registrar or at an office or agency of the Company
designated pursuant to Section 1002 for such purpose, the Company shall execute,
and the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Securities of any authorized
denominations, of a like aggregate principal amount, having the same date of
issuance, Stated Maturity and terms.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations, of a like aggregate principal amount
having the same date of issuance, Stated Maturity and terms, upon surrender of
the Securities to be exchanged at such office or agency. Whenever any
Securities are so surrendered for exchange, the Company shall
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execute, and the Trustee shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by the
Holder thereof or his attorney duly authorized in writing. Such transfer or
exchange will be effected upon the Security Registrar or the Company, as the
case may be, being satisfied with the documents of title and identity of the
Person making the request.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Securities, but the Company or the Securities Registrar
may require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Securities, other than exchanges pursuant to Section 304, 906 or
1208 not involving any transfer.
Notwithstanding any of the foregoing, any Global Security shall be
exchangeable pursuant to this Section for Securities registered in the name of
Persons other than the Depositary for such Security or its nominee only if (i)
such Depositary notifies the Company that it is unwilling or unable to continue
as Depositary for such Global Security or if at any time such Depositary ceases
to be a clearing agency registered under the Securities Exchange Act of 1934, as
amended, (ii) the Company executes and delivers to the Trustee a Company Order
that such Global Security shall be so exchangeable or (iii) there shall have
occurred and be continuing an Event of Default with respect to the Securities.
Any Global Security that is exchangeable pursuant to the preceding sentence
shall be exchangeable for Securities registered in such names as such Depositary
shall direct.
Notwithstanding any other provision in this Indenture, a Global
Security may not be transferred except as a whole by the Depositary with respect
to such Global Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary.
Neither the Company nor the Security Registrar shall be required,
pursuant to the provisions of this Section, (a) to issue, transfer or exchange
any Security during a period beginning at the opening of business 15 days before
the day of selection for redemption of Securities pursuant to Article Twelve and
ending at the close of business on the day of mailing of notice of redemption or
(b) to transfer or exchange any Security so selected for redemption in
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whole or in part, except, in the case of any Security to be redeemed in part,
any portion thereof not to be redeemed.
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If any mutilated Security is surrendered to the Trustee together with
such security or indemnity as may be required by the Company or the Trustee to
save each of them harmless, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security of like tenor and
principal amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee
(i) evidence to their satisfaction of the destruction, loss or theft of any
Security and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall execute and upon its request the Trustee
shall authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
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SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest payment.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"DEFAULTED INTEREST") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the expense
of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at his address as it appears in
the Security Register, not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed, such Defaulted Interest
shall be paid to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of business
on such Special Record Date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and, if so
listed, upon such notice as may be required by such exchange, (or by the
Trustee if the Securities are not listed) if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
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Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue (including in each such case Additional Interest),
which were carried by such other Security.
SECTION 308. PERSONS DEEMED OWNERS.
The Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of and (subject
to Section 307) interest (including Additional Interest) on such Security and
for all other purposes whatsoever, whether or not such Security be overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
SECTION 309. CANCELLATION.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and any such Securities and Securities surrendered
directly to the Trustee for any such purpose shall be promptly canceled by it.
The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly canceled by the Trustee. No Securities shall be authenticated
in lieu of or in exchange for any Securities canceled as provided in this
Section, except as expressly permitted by this Indenture. All canceled
Securities held by the Trustee shall be disposed of as directed by a Company
Order.
SECTION 310. COMPUTATION OF INTEREST.
Interest on the Securities payable for any full quarterly period shall
be computed on the basis of a 360-day year of twelve 30-day months and, for any
period shorter than a full monthly period, shall be computed on the basis of the
actual number of days elapsed in such period.
SECTION 311. RIGHT OF SET-OFF.
Notwithstanding anything to the contrary in the Indenture, the Company
shall have the right to set-off any payment it is otherwise required to make
hereunder with respect to any Security and to the extent the Company has
theretofore made, or is concurrently on the date of such payment making, a
payment under the Parent Guarantee or under Section 508 hereof.
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SECTION 312. AGREED TAX TREATMENT.
Each Security issued hereunder shall provide that the Company and, by
its acceptance of a Security or a beneficial interest therein, the Holder of,
and any Person that acquires a beneficial interest in, such Security agree that
for United States Federal, state and local tax purposes it is intended that such
Security constitute indebtedness.
SECTION 313. CUSIP NUMBERS.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; PROVIDED that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall cease to be of further effect (except as to (i)
any surviving rights of registration of transfer or exchange of Securities, (ii)
rights hereunder of Holders to receive payments of principal of (and premium, if
any) and interest on the Securities and other rights, duties and obligations of
the Holders as beneficiaries hereof with respect to the amounts, if any,
deposited with the Trustee pursuant to this Article Four and (iii) the rights
and obligations of the Trustee hereunder), and the Trustee, on written demand of
and at the expense of the Company, shall execute instruments supplied by the
Company acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 306 and (ii) Securities
for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust, as provided in Section 1003) have
been delivered to the Trustee for cancellation; or
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(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year of the date of deposit, or
(iii) if redeemable at the option of the Company, are to be
called for redemption within one year under arrangements satisfactory
to the Trustee for the giving of notice of redemption by the Trustee
in the name, and at the expense, of the Company
and the Company, in the case of (i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee cash or cash equivalents, as trust
funds in trust for the purpose, an amount sufficient to pay and discharge
the entire indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal, premium, if any, and interest
(including Additional Interest) to the date of such deposit (in the case of
Securities which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 or money or Government
Obligations deposited with the Trustee pursuant to Section 403, or received by
the Trustee in respect of Government Obligations deposited with the Trustee,
pursuant to Section 403, shall be held in trust and applied by the Trustee, in
accordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (and premium, if any) and interest for the
payment of which such money or
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obligations have been deposited with or received by the Trustee; PROVIDED,
HOWEVER, such monies need not be segregated from other funds except to the
extent required by law.
SECTION 403. SATISFACTION, DISCHARGE AND DEFEASANCE OF SECURITIES.
The Company shall be deemed to have paid and discharged the entire
indebtedness on all the Outstanding Securities and the Trustee, at the expense
of the Company, shall execute proper instruments acknowledging satisfaction and
discharge of such indebtedness, when
(1) with respect to all Outstanding Securities,
(A) the Company has irrevocably deposited or caused to be
irrevocably deposited with the Trustee as trust funds in
trust for such purpose an amount sufficient to pay and
discharge the entire indebtedness on all Outstanding
Securities for principal (and premium, if any) and interest
(including any Additional Interest) to the Stated Maturity
or any Redemption Date as contemplated by the penultimate
paragraph of this Section, as the case may be; or
(B) the Company has irrevocably deposited or caused to be
irrevocably deposited with the Trustee as obligations in
trust for such purpose an amount of Government Obligations
as will, in the written opinion of independent public
accountants delivered to the Trustee, together with
predetermined and certain income to accrue thereon, without
consideration of any reinvestment thereof, be sufficient to
pay and discharge when due the entire indebtedness on all
Outstanding Securities for principal (and premium, if any)
and interest (including any Additional Interest) to the
Stated Maturity or any Redemption Date as contemplated by
the penultimate paragraph of this Section, as the case may
be; and
(2) the Company has paid or caused to be paid all other sums payable
with respect to the Outstanding Securities; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of the
entire indebtedness on all Outstanding Securities have been complied with.
Any deposits with the Trustee referred to in Section 403(1) above
shall be irrevocable and shall be made under the terms of an escrow trust
agreement in form and substance reasonably satisfactory to the Trustee. If any
Outstanding Securities are to be redeemed prior to their Stated Maturity
pursuant to any optional redemption provisions, the applicable escrow trust
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agreement shall provide therefor and the Company shall make such arrangements as
are satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company. If the Securities are
not to become due and payable at their Stated Maturity or upon call for
redemption within one year of the date of deposit, then the Company shall give,
not later than the date of such deposit, notice of such deposit to the Holders
of Securities.
Upon the satisfaction of the conditions set forth in this Section with
respect to all the Outstanding Securities, the terms and conditions of the
Securities, including the terms and conditions with respect thereto set forth in
this Indenture, shall no longer be binding upon, or applicable to, the Company;
PROVIDED, that the Company shall not be discharged from any payment obligations
in respect of Securities which are deemed not to be Outstanding under clause
(iii) of the definition thereof if such obligations continue to be valid
obligations of the Company under applicable law.
ARTICLE FIVE
Remedies
SECTION 501. EVENTS OF DEFAULT.
"EVENT OF DEFAULT", wherever used herein, means any one of the
following events that has occurred and is continuing (whatever the reason for
such Event of Default and whether it shall be occasioned by the provisions of
Article Eleven or be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) failure for 30 days to pay any interest on the Securities
(including Additional Interest, if any) when due (subject to the deferral
of any due date in the case of an Extension Period); or
(2) failure to pay any principal on the Securities when due whether
at Stated Maturity, upon redemption, by declaration or otherwise; or
(3) failure to observe or perform in any material respect any other
covenant herein for 90 days after written notice to the Company from the
Trustee or the holders of at least 25% in aggregate principal amount of the
Outstanding Securities; or
(4) entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as
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properly filed a petition seeking reorganization, arrangement, adjustment
or composition of or in respect of the Company under any applicable Federal
or State law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or of
substantially all of the property of the Company, or ordering the winding
up or liquidation of its affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in effect
for a period of 60 consecutive days; or
(5) (A) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or (B) the consent by the Company
or to the entry of a decree or order for relief in respect of itself in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against the
Company, or (C) the filing by the Company of a petition or answer or
consent seeking reorganization or relief under any applicable Federal or
State law, or (D) the consent by the Company to the filing of such petition
or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of
the Company or of all or substantially all of the property of the Company,
or (E) the making by the Company of an assignment for the benefit of
creditors, or (F) the taking of corporate action by the Company in
furtherance of any such action.
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Securities shall have the right to declare the principal of all
the Securities to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders) PROVIDED, that if upon an Event
of Default, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Outstanding Securities fail to declare the principal of
the Securities to be immediately due and payable, the holders of at least 25% in
aggregate liquidation preference of Preferred Securities then Outstanding shall
have such right, by a notice in writing to the Company and the Trustee; and upon
any such declaration such principal amount of and the accrued interest
(including any Additional Interest) on all the Securities shall become
immediately due and payable, PROVIDED that the payment of principal and
interest (including any Additional Interest) on such Securities shall remain
subordinated to the extent provided in Article Eleven.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article, the Holders of a majority
in principal amount of the Outstanding
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Securities, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue installments of interest (including any
Additional Interest) on all Securities,
(B) the principal of (and premium, if any, on) any Securities
which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Securities,
and
(C) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
(2) all Events of Default, other than the non-payment of the
principal of Securities which has become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
If the Holders of a majority in principal amount of the outstanding
Securities fail to annul such declaration and its consequences, the holders
of a majority in aggregate liquidation preference of the Preferred Securities
may rescind and annul such declaration and its consequences, subject to the
foregoing conditions.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Upon receipt by the Trustee of written notice declaring such an
acceleration, or rescission and annulment thereof, with respect to Securities
all or part of which are represented by a Global Security, a record date shall
be established for determining Holders of Outstanding Securities entitled to
join in such notice, which record date shall be at the close of business on the
day the Trustee receives such notice. The Holders on such record date, or their
duly designated proxies, and only such Persons, shall be entitled to join in
such notice, whether or not such Holders remain Holders after such record date;
PROVIDED, that, unless such declaration of acceleration, or rescission and
annulment, as the case may be, shall have become effective by virtue of the
requisite percentage having joined in such notice prior to the day which is 90
days after such record date, such notice of declaration of acceleration, or
rescission and annulment, as the case may be, shall automatically and without
further action by any Holder be canceled and of no further effect. Nothing in
this paragraph shall prevent a Holder, or a proxy of a Holder, from giving,
after expiration of such 90-day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, that is
identical to a written notice which has been canceled pursuant to the proviso to
the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 502.
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SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
The Company covenants that if
(1) default is made in the payment of any installment of
interest (including any Additional Interest) on any Security when such
interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (and
premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal (and premium, if any) and interest (including
any Additional Interest), and, in addition thereto, all amounts owing the
Trustee under Section 607.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon the Securities and collect the
monies adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal (and premium, if any) or
interest (including Additional Interest)) shall be entitled and empowered, by
intervention in such proceeding or otherwise, (i) to file and prove a claim for
the whole amount of principal (and premium, if any) and interest (including any
Additional Interest)
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owing and unpaid in respect to the Securities and to file such other papers or
documents as may be necessary or advisable and to take any and all actions as
are authorized under the Trust Indenture Act in order to have the claims of the
Holders and any predecessor to the Trustee under Section 607 allowed in any such
judicial proceedings, and (ii) in particular, the Trustee shall be authorized to
collect and receive any monies or other property payable or deliverable on any
such claims and to distribute the same in accordance with Section 506; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee for distribution in accordance with
Section 506 and, in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it and any predecessor Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; PROVIDED,
however, that the Trustee may, on behalf of the Holders, vote for the election
of a trustee in bankruptcy or similar official and be a member of a creditors'
or other similar committee.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for payment of all the amounts owing the Trustee and any predecessor
Trustee under Section 607, its agents and counsel, be for the ratable benefit of
the Holders of the Securities in respect of which such judgment has been
recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED.
Subject to Article Eleven, any money or property collected or to be
applied by the Trustee pursuant to this Article shall be applied in the
following order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money or property on account of principal (or premium, if
any) or interest (including any Additional Interest), upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee
and any predecessor Trustee under Section 607; and
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SECOND: To the payment of the amounts then due and
unpaid for principal of (and premium, if any) and interest
(including any Additional Interest) on the Securities in
respect of which or for the benefit of which such money has
been collected, ratably, without preference or priority of
any kind, according to the amounts due and payable on such
Securities for principal (and premium, if any) and interest
(including any Additional Interest), respectively; and
THIRD: The balance, if any, to the Person or Persons
entitled thereto.
SECTION 507 LIMITATION ON SUITS.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver, assignee, trustee, liquidator, sequestrator or other
similar official or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its
own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing itself of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders, or to obtain or to seek to obtain priority or preference over any
other Holders or to enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all the Holders.
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SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL AND INTEREST.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 307) interest (including any Additional Interest) on such Security on
the respective Stated Maturities expressed in such Security (or, in the case of
redemption, on the Redemption Date) and to institute suit for the enforcement of
any such payment, and such right shall not be impaired without the consent of
such Holder. Any holder of the Preferred Securities shall have the right, upon
the occurrence of an Event of Default described in Section 501(1) or 501(2)
hereof, to institute a suit directly against the Company for enforcement of
payment to such holder of principal of (and premium, if any) and (subject to
Section 307) interest (including any Additional Interest) on the Securities
having a principal amount equal to the aggregate liquidation preference of the
Preferred Securities held by such holder.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
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SECTION 511. DELAY OR OMISSION NOT WAIVER.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 306, no delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the Holders,
as the case may be.
SECTION 512. CONTROL BY HOLDERS.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, PROVIDED that
(1) such direction shall not be in conflict with any
rule of law or with this Indenture,
(2) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such
direction, and
(3) subject to the provisions of Section 601, the
Trustee shall have the right to decline to follow such
direction if the Trustee in good faith shall, by a
Responsible Officer or Officers of the Trustee, determine
that the proceeding so directed would be unjustly
prejudicial to the Holders not joining in any such direction
or would involve the Trustee in personal liability.
Upon receipt by the Trustee of any written notice directing the time, method or
place of conducting any such proceeding or exercising any such trust or power,
with respect to Securities all or part of which are represented by a Global
Security, a record date shall be established for determining Holders of
Outstanding Securities entitled to join in such notice, which record date shall
be at the close of business on the day the Trustee receives such notice. The
Holders on such record date, or their duly designated proxies, and only such
Persons, shall be entitled to join in such notice, whether or not such Holders
remain Holders after such record date; PROVIDED, that, unless the Holders of a
majority in principal amount of the Outstanding Securities shall have joined in
such notice prior to the day which is 90 days after such record date, such
notice shall automatically and without further action by any Holder be canceled
and of no further effect. Nothing in this paragraph shall prevent a Holder, or
a proxy of a Holder, from giving, after expiration of such 90-day period, a new
notice identical to a notice which has been canceled
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pursuant to the proviso to the preceding sentence, in which event a new record
date shall be established pursuant to the provisions of this Section.
SECTION 513. WAIVER OF PAST DEFAULTS.
Subject to Sections 902 and 1010 hereof, the Holders of not less than
a majority in aggregate principal amount of the Outstanding Securities affected
thereby may, on behalf of the Holders of all the Securities, waive any past
default hereunder and its consequences, except a default: (1) in the payment
of the principal of or interest on any Security (unless such default has been
cured and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited with the
Trustee); or (2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security affected. If the Holders of such Securities fail to
waive such default, the holders of not less than a majority in aggregate
liquidation preference of the Preferred Securities shall have such right.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 514. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs against any such party litigant including
reasonable attorneys' fees, in the manner and to the extent provided in the
Trust Indenture Act having due regard to the merits and good faith of the claims
or defenses made by such party litigants; but the provisions of this Section
shall not apply to any suit instituted by the Trustee, to any suit instituted by
any Holder, or group of Holders, holding in the aggregate more than 10% in
principal amount of the Outstanding Securities, or to any suit instituted by any
Holder for the enforcement of the payment of the principal of (or premium, if
any) or interest (including any Additional Interest) on any Security on or after
the respective Stated Maturities expressed in such Security.
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SECTION 515. WAIVER OF USURY, STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.
The duties and responsibilities of the Trustee shall be as provided by
this Indenture and the Trust Indenture Act. Notwithstanding the foregoing, no
provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture; but in the case of any such certificates or
opinions which by any provisions hereof are specifically required to
be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the
requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and
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skill in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct except that
(1) this Subsection shall not be construed to limit the effect
of Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts;
and
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with
the direction of Holders pursuant to Section 512 relating to the time,
method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the
Trustee under this Indenture with respect to the Securities.
(d) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if there shall be reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
SECTION 602. NOTICE OF DEFAULTS.
Within 90 days after actual knowledge by a Responsible Officer of the
Trustee of the occurrence of any default hereunder, the Trustee shall transmit
by mail to all Holders of Securities, as their names and addresses appear in the
Securities Register, notice of such default hereunder known to the Trustee,
unless such default shall have been cured or waived; PROVIDED, HOWEVER, that
except in the case of a default in the payment of the principal of (or premium,
if any) or interest (including any Additional Interest) on any Security, the
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee or a trust committee of directors
and/or Responsible Officers of the Trustee in good faith determine that the
withholding of such notice is in the interests of the Holders of Securities;
PROVIDED, FURTHER, that in the case of any default of the character specified in
Section 501(3), no such notice
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to Holders shall be given until at least 30 days after the occurrence thereof.
For the purpose of this Section, the term "default" means any event which is, or
after notice or lapse of time or both would become, an Event of Default. For
purposes of this Section, the Trustee shall be deemed to have actual knowledge
of a default if it has received written notice of such default in the manner
contemplated by Section 105.
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its choice and the
written advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, indenture, Security, note, other evidence of indebtedness or other
paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see
fit, and, if the
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Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the
use or application by the Company of the Securities or the proceeds thereof.
SECTION 605. MAY HOLD SECURITIES.
The Trustee, any Paying Agent, any Security Registrar, or any other
agent of the Company, in its individual or any other capacity, may become the
owner or pledgee of Securities and, subject to Sections 608 and 613, may
otherwise deal with the Company with the same rights it would have if it were
not Trustee, Paying Agent, Security Registrar, or such other agent. Money held
by the Trustee in trust hereunder shall not be invested by the Trustee pending
distribution thereof to the holders of the Securities.
SECTION 606. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
SECTION 607. COMPENSATION; REIMBURSEMENT; AND INDEMNITY.
The Company agrees
(1) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from time to time
agree in writing for all
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services rendered by it hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an
express trust);
(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any and all loss, damage, claim, liability, action, suit,
cost or expense (including the reasonable compensation and the
expenses and disbursements of its agents and counsel) of any kind and
nature whatsoever incurred without negligence or bad faith, arising
out of or in connection with the acceptance or administration of this
trust or the performance of its duties hereunder, including the costs
and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
In addition, the Company hereby agrees to pay all amounts owing
under Section 8.06 of the Trust Agreement and to enter into and perform an
Expense Agreement substantially in the Form of Exhibit A to this Indenture.
To secure the Company's payment obligations under this Section 607, the
Trustee shall have a lien against all money or property held or collected by
the Trustee, which lien shall be subordinate to the rights of the
Securityholders but prior to the rights of the Company to any such money or
property.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 501(4) or (5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Bankruptcy Reform Act of 1978 or any successor statute.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 608. DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, Section 310(b) the Trust Indenture Act and this Indenture.
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SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000, subject to
supervision or examination by Federal or State authority. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Person shall be deemed
to be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect hereinafter specified in this Article.
Neither the Company nor any Person directly or indirectly controlling,
controlled by or under common control with the Company shall serve as Trustee
for the Securities issued hereunder.
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been
a bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or
by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
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then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If
the Company fails to appoint a successor Trustee within thirty (30) days of such
resignation, removal, or incapability, or the occurrence of such vacancy, the
retiring Trustee may, subject to Section 514, petition any court of competent
jurisdiction for the appointment of a successor Trustee. If, within one year
after such resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Securities delivered to the
Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Trustee
and supersede the successor Trustee appointed by the Company or any court. If
no successor Trustee shall have been so appointed by the Company or the Holders
and accepted appointment in the manner hereinafter provided, any Holder who has
been a bona fide Holder of a Security for at least six months may, subject to
Section 514, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; PROVIDED that, on request of the Company or
the successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee,
the Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts referred to in this Section.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
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SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated, and in case any
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor Trustee or in
the name of such successor Trustee, and in all cases the certificate of
authentication shall have the full force which it is provided anywhere in the
Securities or in this Indenture that the certificate of the Trustee will have.
SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint an Authenticating Agent or Agents which shall
be authorized to act on behalf of the Trustee to authenticate Securities issued
upon original issue and upon exchange, registration or transfer or partial
redemption thereof, and Securities so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and obligatory for all purposes as
if authenticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, or of any State, Territory or
the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at lease annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so
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published. If at any time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, such Authenticating Agent shall
resign immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of an Authenticating Agent shall be the successor
Authenticating Agent hereunder, provided such corporation shall be otherwise
eligible under this Section, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 106 to all Holders of Securities.
Any successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 607.
If an appointment is made pursuant to this Section, the Securities may
have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
This is one of the Securities referred to in the within mentioned Indenture.
-----------------------------------
-----------------------------------
As Trustee
By:
--------------------------------
As Authenticating Agent
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By:
--------------------------------
Authorized Officer
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.
The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, not later than January 15 and July 15 in each
year, a list, in such form as the Trustee may reasonably require, of
the names and addresses of the Holders as of such January 1 and July
1, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
EXCLUDING from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
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SECTION 703. REPORTS BY TRUSTEE.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
(b) Reports so required to be transmitted at stated intervals of not
more than 12 months shall be transmitted no later than July 15 in each calendar
year, commencing with the first July 15 after the first issuance of Securities
under this Indenture.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed and the Nasdaq National Market if the Securities
are quoted thereon, with the Commission and with the Company. The Company will
notify the Trustee whenever the Securities are listed on any stock exchange.
SECTION 704. REPORTS BY COMPANY.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; PROVIDED that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 shall be
filed with the Trustee within 15 days after the same is so required to be filed
with the Commission. Notwithstanding that the Company may not be required to
remain subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company shall continue to file with the
Commission and provide the Trustee with the annual reports and the information,
documents and other reports which are specified in Sections 13 and 15(d) of the
Securities Exchange Act of 1934. The Company also shall comply with the other
provisions of Trust Indenture Act Section 314(a).
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless:
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(1) in case the Company shall consolidate with or merge into
another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties
and assets of the Company substantially as an entirety shall be a
corporation, partnership, trust or other entity, shall be organized
and validly existing under the laws of the United States of America,
any State thereof or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to
the Trustee, in form satisfactory to the Trustee, the due and punctual
payment of the principal of (and premium, if any) and interest
(including any Additional Interest) on all the Securities and the
performance or observance of every covenant of this Indenture and the
Securities on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction, no
Event of Default, and no event which, after notice or lapse of time or
both, would become an Event of Default, shall have happened and be
continuing;
(3) such consolidation or merger or conveyance, transfer or
lease of properties or assets of the Company is permitted under the
Trust Agreement and the Parent Guarantee and does not give rise to any
breach or violation of, the Trust Agreement or the Parent Guarantee;
and
(4) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such
transaction, such supplemental indenture complies with this Article
and that all conditions precedent herein provided for relating to such
transaction have been complied with; and the Trustee, subject to
Section 601, may rely upon such Officers' Certificate and Opinion of
Counsel as conclusive evidence that such transaction complies with
this Section.
SECTION 802. SUCCESSOR SUBSTITUTED.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of the properties
and assets of the Company substantially as an entirety in accordance with
Section 801, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein; and in the event of any such
conveyance, transfer or lease, the
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Company shall be discharged from all obligations and covenants under this
Indenture and the Securities and may be dissolved and liquidated.
Such successor Person may cause to be signed, and may issue either in
its own mane or in the name of the Company, any or all of the Securities
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee; and, upon the order of such successor Person
instead of the Company and subject to all the terms, conditions and limitations
in this Indenture prescribed, the Trustee shall authenticate and shall deliver
any Securities which previously shall have been signed and delivered by the
officers of the Company to the Trustee for authentication pursuant to such
provisions and any Securities which such successor Person thereafter shall cause
to be signed and delivered to the Trustee on its behalf for the purpose pursuant
to such provisions. All the Securities so issued shall in all respects have the
same legal rank and benefit under this Indenture as the Securities theretofore
or thereafter issued in accordance with the terms of this Indenture as though
all of such Securities has been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form may be made in the Securities thereafter to
be issued as may be appropriate.
ARTICLE NINE
Supplemental Indentures
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the
Company herein and in the Securities; or
(2) to convey, transfer, assign, mortgage or pledge any property
to or with the Trustee or to surrender any right or power herein
conferred upon the Company; or
(3) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon
the Company; or
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(4) to add any additional Events of Default; or
(5) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be inconsistent
with the provisions of this Indenture, PROVIDED that such action
pursuant to this clause (3) shall not adversely affect the interests
of the Holders of the Securities or, so long as any of the Preferred
Securities shall remain outstanding, the holders of the Preferred
Securities; or
(6) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee; or
(7) to comply with the requirements of the Commission in order
to effect or maintain the qualification of this Indenture under the
Trust Indenture Act.
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
PROVIDED, HOWEVER, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
(1) except to the extent permitted and subject to the conditions
set forth in Section 301 with respect to the extension of the Stated
Maturity or interest payment period of the Securities, change the
Stated Maturity of, the principal of, or any installment of interest
(including any Additional Interest) on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or reduce any
premium payable upon the redemption thereof, or change the place of
payment where, or the coin or currency in which, any Security or
interest thereon is payable, or impair the right to institute suit for
the enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption, on or after the Redemption
Date), or modify the provisions of this Indenture with respect to the
subordination of the Securities in a manner adverse to the Holders, or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required
for any waiver (of
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compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 513 or
Section 1007, except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security
affected thereby;
PROVIDED, that, so long as any of the Preferred Securities remains outstanding,
no such amendment shall be made that adversely affects the holders of the
Preferred Securities, and no termination of this Indenture shall occur, and no
waiver of any Event of Default or compliance with any covenant under this
Indenture shall be effective, without the prior consent of the holders of at
least a majority of the aggregate liquidation preference of the Outstanding
Preferred Securities unless and until the principal of and any premium on the
Securities and all accrued and, subject to Section 307, unpaid interest
(including any Additional Interest) thereon have been paid in full, PROVIDED
FURTHER, that so long as any of the Preferred Securities remains outstanding, no
amendment shall be made to Section 508 of this Indenture without the prior
consent of the holders of each Preferred Security then Outstanding unless and
until the principal (and premium, if any) of the Securities and all accrued and
(subject to Section 301) unpaid interest (including any Additional Interest)
thereon have been paid in full.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture, and
that all conditions precedent have been complied with. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture which
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a
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part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Company, bear a notation in form approved by the Company as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Company, to any
such supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities.
ARTICLE TEN
Covenants; Representations and Warranties
SECTION 1001. PAYMENT OF PRINCIPAL AND INTEREST.
The Company covenants and agrees for the benefit of the Securities
that it will duly and punctually pay the principal of (and premium, if any) and
interest on the Securities in accordance with the terms of the Securities and
this Indenture.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in Wilmington, Delaware, an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange, and where notices
and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company initially appoints the Trustee, acting
through its Corporate Trust Office, as its agent for said purposes. The Company
will give prompt written notice to the Trustee of any change in the location of
any such office or agency. If at any time the Company shall fail to maintain
any such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee, and the
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Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in the United States) where the Securities may be presented
or surrendered for any or all of such purposes, and may from time to time
rescind such designations; PROVIDED, HOWEVER, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in the United States for such purposes. The Company will
give prompt written notice to the Trustee of any such designation and any change
in the location of any such office or agency.
SECTION 1003. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal (and premium, if any) of or interest
on any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal (and premium, if
any) or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided, and will promptly notify the
Trustee of its failure so to act. In such case the Company shall not invest the
amount so segregated and held in trust pending the distribution thereof.
Whenever the Company shall have one or more Paying Agents, it will,
prior to 10:00 a.m. New York City time on each due date of the principal of or
interest on any Securities, deposit with a Paying Agent a sum sufficient to pay
the principal (and premium, if any) or interest so becoming due, such sum to be
held in trust for the benefit of the Persons entitled to such principal (and
premium, if any) or interest, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (i) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent, (ii) hold all sums held by it for the
payment of the principal of (and premium, if any) or interest on Securities in
trust for the benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided, (iii) give the
Trustee notice of any default by the Company (or any other obligor upon the
Securities) in the making of any payment of principal (and premium, if any) or
interest, and (iv) at any time during the continuance of any such default by the
Company (or any other obligor upon the Securities) in the making of any payment
of principal (and premium, if any) or interest, upon written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent.
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The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by the Company or any Paying Agent to
the Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall (unless otherwise required by mandatory provision of applicable escheat or
abandoned or unclaimed property law) be paid to the Company on Company Request,
or (if then held by the Company) shall (unless otherwise required by mandatory
provision of applicable escheat or abandoned or unclaimed property law) be
discharged from such trust; and the Holder of such Security shall thereafter, as
an unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease.
SECTION 1004. STATEMENT BY OFFICERS AS TO COMPLIANCE.
The Company will deliver to the Trustee, within 120 days after the end
of each calendar year of the Company ending after the date hereof, an Officers'
Certificate covering the preceding calendar year, stating whether or not to the
best knowledge of the signers thereof the Company is in default in the
performance, observance or fulfillment of or compliance with any of the material
terms, provisions, covenants and conditions of this Indenture (without regard to
any period of grace or requirement of notice provided hereunder) and, if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge.
SECTION 1005. ADDITIONAL SUMS.
In the event that (i) AmerUs Capital I is the Holder of all of the
Outstanding Securities, (ii) a Tax Event shall have occurred and be continuing
and (iii) the Company shall not have redeemed the Securities pursuant to Section
1201 or terminated AmerUs Capital I pursuant to Section 9.2(b) of the Trust
Agreement, the Company shall pay to AmerUs Capital I (and its permitted
successors or assigns under the Trust Agreement) for so long as AmerUs Capital I
(or its permitted successor or assignee) is the registered holder of any
Securities, such additional amounts as may be necessary in order that the amount
of distributions (including any Additional Amounts (as defined in the Trust
Agreement)) then due and payable by AmerUs Capital I on the
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Preferred Securities and Common Securities that at any time remain
outstanding in accordance with the terms thereof shall not be reduced as a
result of any Additional Taxes (the "Additional Sums"). Whenever in this
Indenture or the Securities there is a reference in any context to the payment
of principal of or interest on the Securities, such mention shall be deemed to
include mention of the payments of the Additional Sums provided for in this
paragraph to the extent that, in such context, Additional Sums are, were or
would be payable in respect thereof pursuant to the provisions of this paragraph
and express mention of the payment of Additional Sums (if applicable) in any
provisions hereof shall not be construed as excluding Additional Sums in those
provisions hereof where such express mention is not made, PROVIDED, however,
that the extension of an interest payment period pursuant to Section 301 or the
Securities shall not extend the payment of any Additional Sums that may be due
and payable during such interest payment period.
SECTION 1006. ADDITIONAL COVENANTS.
The Company covenants and agrees with each Holder of Securities that
it shall not, and it will not permit any Subsidiary of the Company to, (a)
declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of the Company's outstanding
capital stock, or (b) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities that rank PARI PASSU
with or junior to the Securities or make any guarantee payments with respect to
any guarantee by the Company of the debt Securities of any Subsidiary of the
Company that by their terms rank PARI PASSU or junior in interest to the
Securities (other than (a) dividends or distributions in Common Stock of the
Company, (b) payments under the Parent Guarantee, and (c) purchases of Common
Stock related to the issuance of Common Stock under any of the Company's benefit
plans for its directors, officers or employees) if at such time (i) there shall
have occurred and be continuing any event that (a) with the giving of notice or
the lapse of time or both, would constitute an Event of Default hereunder and
(b) in respect of which the Company shall not have taken reasonable steps to
cure, (ii) the Company shall be in default with respect to its payment of any
obligations under the Parent Guarantee or (iii) the Company shall have given
notice of its selection of an Extension Period as provided herein and shall not
have rescinded such notice and such period, or any extension thereof, shall be
continuing.
The Company also covenants (i) to maintain directly or indirectly 100%
ownership of the Common Securities of AmerUs Capital I; PROVIDED, HOWEVER, that
any permitted successor of the Company hereunder may succeed to the Company's
ownership of such Common Securities, (ii) not to voluntarily dissolve, wind-up
or terminate AmerUs Capital I, except (a) in connection with a distribution of
the Securities to the holders of Preferred Securities in liquidation of AmerUs
Capital I or (b) in connection with certain mergers, consolidations or
amalgamations permitted by the Trust Agreement, and (iii) to use its reasonable
efforts, consistent with the terms and provisions of the Trust Agreement, to
cause AmerUs Capital I to remain a business trust and to be classified as a
grantor trust for United States Federal income tax purposes, except in
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connection with a distribution of the Securities to the holders of Preferred
Securities in liquidation of AmerUs Capital I.
SECTION 1007. WAIVER OF CERTAIN COVENANTS.
Except as otherwise specified as contemplated by Section 301 for
Securities, the Company may, with respect to the Securities, omit in any
particular instance to comply with any term, provision or condition set forth in
any covenant provided pursuant to Section 901(2) for the benefit of the Holders
if before or after the time for such compliance the Holders of at least a
majority in principal amount of the Outstanding Securities shall, by Act of such
Holders, either waive such compliance in such instance or generally waive
compliance with such term, provision or condition, but no such waiver shall
extend to or affect such term, provision or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the obligations
of the Company and the duties of the Trustee in respect of any such term,
provision or condition shall remain in full force and effect.
ARTICLE ELEVEN
Subordination of Securities
SECTION 1101. SECURITIES SUBORDINATE TO SENIOR DEBT.
The Company covenants and agrees, and each Holder of a Security, by
its acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article (subject to Article Four),
the payment of the principal of (and premium, if any) and interest (including
any Additional Interest) on each and all of the Securities are hereby expressly
made subordinate and subject in right of payment to the prior payment in full of
all amounts then due and payable in respect of all Senior Debt.
SECTION 1102. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
In the case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company (each such event, if any,
herein sometimes referred to as a "Proceeding"), then the holders of Senior Debt
shall be entitled to receive payment in full of principal of (and premium, if
any) and interest, if any, on such Senior Debt, or provision shall be made for
such payment in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of Senior Debt, before the Holders of the Securities are entitled
to receive or retain any payment or distribution of any kind or character,
whether in cash, property or securities (including any payment or distribution
which may be payable or deliverable by reason of the payment of any other Debt
of the Company (including the Securities) subordinated to the payment of the
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Securities, such payment or distribution being hereinafter referred to as a
"Junior Subordinated Payment"), on account of principal of (or premium, if any)
or interest (including any Additional Interest) on the Securities or on account
of the purchase or other acquisition of Securities by the Company or any
Subsidiary and to that end the holders of Senior Debt shall be entitled to
receive, for application to the payment thereof, any payment or distribution of
any kind or character, whether in cash, property or securities, including any
Junior Subordinated Payment, which may be payable or deliverable in respect of
the Securities in any such Proceeding.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any Junior Subordinated
Payment, before all Senior Debt is paid in full or payment thereof is provided
for in cash or cash equivalents or otherwise in a manner satisfactory to the
holders of Senior Debt, and if such fact shall, at or prior to the time of such
payment or distribution, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event such payment or distribution shall be
paid over or delivered forthwith to the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee, agent or other Person making payment
or distribution of assets of the Company for application to the payment of all
Senior Debt remaining unpaid, to the extent necessary to pay all Senior Debt in
full, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Debt.
For purposes of this Article only, the words "any payment or
distribution of any kind or character, whether in cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment which securities are subordinated in
right of payment to all then outstanding Senior Debt to substantially the same
extent as the Securities are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the sale of
all or substantially all of its properties and assets as an entirety to another
Person upon the terms and conditions set forth in Article Eight shall not be
deemed a Proceeding for the purposes of this Section if the Person formed by
such consolidation or into which the Company is merged or the Person which
acquires by sale such properties and assets as an entirety, as the case may be,
shall, as a part of such consolidation, merger, or sale comply with the
conditions set forth in Article Eight.
SECTION 1103. PRIOR PAYMENT TO SENIOR DEBT UPON ACCELERATION OF SECURITIES.
In the event that any Securities are declared due and payable before
their Stated Maturity, then and in such event the holders of the Senior Debt
outstanding at the time such Securities so become due and payable shall be
entitled to receive payment in full of all amounts due on or in respect of such
Senior Debt (including any amounts due upon acceleration), or provision shall be
made for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Debt, before the Holders of the Securities
are entitled to
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receive any payment or distribution of any kind or character, whether in cash,
properties or securities (including any Junior Subordinated Payment) by the
Company on account of the principal of (or premium, if any) or interest
(including any Additional Interest) on the Securities or on account of the
purchase or other acquisition of Securities by the Company or any Subsidiary.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 1102 would be applicable.
SECTION 1104. NO PAYMENT WHEN SENIOR DEBT IN DEFAULT.
(a) In the event and during the continuation of any default in the
payment of principal of (or premium, if any) or interest on any Senior Debt, or
in the event that any event of default with respect to any Senior Debt shall
have occurred and be continuing and shall have resulted in such Senior Debt
becoming or being declared due and payable prior to the date on which it would
otherwise have become due and payable, unless and until such event of default
shall have been cured or waived or shall have ceased to exist and such
acceleration shall have been rescinded or annulled, or (b) in the event any
judicial proceeding with respect to any such default in payment or such event or
default, then no payment or distribution of any kind or character, whether in
cash, properties or securities (including any Junior Subordinated Payment) shall
be made by the Company on account of principal of (or premium, if any) or
interest (including any Additional Interest), if any, on the Securities or on
account of the purchase or other acquisition of Securities by the Company or any
Subsidiary.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 1102 would be applicable.
SECTION 1105. PAYMENT PERMITTED IF NO DEFAULT.
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Securities shall prevent (a) the Company, at any time except during
the pendency of any Proceeding referred to in Section 1102 or under the
conditions described in Sections 1103 and
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1104, from making payments at any time of principal of (and premium, if any) or
interest on the Securities, or (b) the application by the Trustee of any money
or Government Obligations deposited with it hereunder to the payment of or on
account of the principal of (and premium, if any) or interest (including any
Additional Interest) on the Securities or the retention of such payment by the
Holders, if, at the time of such application by the Trustee, it did not have
knowledge that such payment would have been prohibited by the provisions of this
Article.
SECTION 1106. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR DEBT.
Subject to the payment in full of all Senior Debt, or the provision
for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of the Senior Debt, the Holders of the Securities
shall be subrogated to the extent of the payments or distributions made to the
holders of such Senior Debt pursuant to the provisions of this Article (equally
and ratably with the holders of all indebtedness of the Company which by its
express terms is subordinated to Senior Debt of the Company to substantially the
same extent as the Securities are subordinated to the Senior Debt and is
entitled to like rights of subrogation by reason of any payments or
distributions made to holders of such Senior Debt) to the rights of the holders
of such Senior Debt to receive payments and distributions of cash, property and
securities applicable to the Senior Debt until the principal of (and premium, if
any) and interest on the Securities shall be paid in full. For purposes of such
subrogation or assignment, no payments or distributions to the holders of the
Senior Debt of any cash, property or securities to which the Holders of the
Securities or the Trustee would be entitled except for the provisions of this
Article, and no payments over pursuant to the provisions of this Article to the
holders of Senior Debt by Holders of the Securities or the Trustee, shall, as
among the Company, its creditors other than holders of Senior Debt, and the
Holders of the Securities, be deemed to be a payment or distribution by the
Company to or on account of the Senior Debt.
SECTION 1107. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Debt on the other hand. Nothing contained in
this Article or elsewhere in this Indenture or in the Securities is intended to
or shall (a) impair, as between the Company and the Holders of the Securities,
the obligations of the Company, which are absolute and unconditional, to pay to
the Holders of the Securities the principal of (and premium, if any) and
interest (including any Additional Interest) on the Securities as and when the
same shall become due and payable in accordance with their terms; or (b) affect
the relative rights against the Company of the Holders of the Securities and
creditors of the Company other than their rights in relation to the holders of
Senior Debt; or (c) prevent the Trustee or the Holder of any Security from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture including, without limitation, filing and voting claims in any
Proceeding, subject to the rights, if any, under this Article of the holders of
Senior Debt to receive cash, property and securities otherwise payable or
deliverable to the Trustee or such Holder.
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SECTION 1108. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of a Security by his or her acceptance thereof authorizes
and directs the Trustee on his or her behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination provided
in this Article and appoints the Trustee his or her attorney-in-fact for any and
all such purpose.
SECTION 1109. NO WAIVER OF SUBORDINATION PROVISIONS.
No right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance by
the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof that any such holder may have or otherwise
be charged with.
SECTION 1110. NOTICE TO TRUSTEE.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company that would prohibit the making of any payment to or by
the Trustee in respect of the Securities. Notwithstanding the provisions of
this Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts that would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Debt or from any trustee, agent or representative
therefor (whether or not the facts contained in such notice are true); PROVIDED,
HOWEVER, that if the Trustee shall not have received the notice provided for in
this Section at least two Business Days prior to the date upon which by the
terms hereof any monies may become payable for any purpose (including, without
limitation, the payment of the principal of (and premium, if any) or interest
(including any Additional Interest) on any Security), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power and
authority to receive such monies and to apply the same to the purposes for which
they were received, and shall not be affected by any notice to the contrary
which may be received by it within two Business Days prior to such date.
SECTION 1111. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee, subject to the provisions of Article Six, and the
Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such Proceeding is
pending, or a certificate of the trustee in bankruptcy,
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receiver, liquidating trustee, custodian, assignee for the benefit of creditors,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the Holders of Securities, for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
the Senior Debt and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article.
SECTION 1112. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR DEBT.
The Trustee, in its capacity as trustee under this Indenture, shall
not be deemed to owe any fiduciary duty to the holders of Senior Debt and shall
not be liable to any such holders if it shall in good faith mistakenly pay over
or distribute to Holders of Securities or to the Company or to any other Person
cash, property or securities to which any holders of Senior Debt shall be
entitled by virtue of this Article or otherwise.
SECTION 1113. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR DEBT; PRESERVATION OF
TRUSTEE'S RIGHTS.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article in respect of any Senior Debt which may at any
time held by it, to the same extent as any other holder of Senior Debt, and
nothing in this Indenture shall deprive the Trustee of any of its rights as such
holder.
SECTION 1114. ARTICLE APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee.
SECTION 1115. CERTAIN CONVERSIONS OR EXCHANGES DEEMED PAYMENT.
For the purposes of this Article only, (a) the issuance and delivery
of junior securities upon exchange of Securities shall not be deemed to
constitute a payment or distribution on account of the principal of (or premium,
if any) or interest (including any Additional Interest) on Securities or on
account of the purchase or other acquisition of Securities, and (b) the payment,
issuance or delivery of cash, property or securities (other than junior
securities) upon exchange of a Security shall be deemed to constitute payment on
account of the principal of such security. For the purposes of this Section,
the term "junior securities" means (i) shares of any stock of any class of the
Company and (ii) securities of the
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Company which are subordinated in right of payment to all Senior Debt which may
be outstanding at the time of issuance or delivery of such securities to
substantially the same extent as, or to a greater extent than, the Securities
are so subordinated as provided in this Article.
ARTICLE TWELVE
Redemption of Securities
SECTION 1201. APPLICABILITY OF THIS ARTICLE.
Redemption of Securities as permitted or required by any form of
Security issued pursuant to this Indenture shall be made in accordance with such
form of Security and this Article; PROVIDED, however, that if any provision of
any such form of Security shall conflict with any provision of this Article, the
provision of such form of Security shall govern. Except as otherwise set forth
in the form of Security, each Security shall be subject to partial redemption
only in the amount of $25, or integral multiples thereof.
SECTION 1202. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities shall be
evidenced by or pursuant to a Board Resolution. In case of any redemption at
the election of the Company of less than all of the Securities, the Company
shall, not less than 30 days nor more than 60 days prior to the Redemption Date
fixed by the Company (unless a shorter notice shall be satisfactory to the
Trustee), notify the Trustee of such Redemption Date and of the principal amount
of Securities to be redeemed. In the case of any redemption of Securities prior
to the expiration of any restriction on such redemption provided in the terms of
such Securities, the Company shall furnish the Trustee with an Officers'
Certificate and an Opinion of Counsel evidencing compliance with such
restriction.
SECTION 1203. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.
If less than all the Securities are to be redeemed (unless such
redemption affects only a single Security), the particular Securities to be
redeemed shall be selected on a not more than 60 days prior to the Redemption
Date by the Trustee, from the Outstanding Securities not previously called for
redemption, by such method as the Trustee shall deem fair and appropriate and
which may provide for the selection for redemption of a portion of the principal
amount of any Security, provided that the unredeemed portion of the principal
amount of any Security shall be in an authorized denomination (which shall not
be less than the minimum authorized denomination) for such security.
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<PAGE>
The Trustee shall promptly notify the Company in writing of the
Securities selected for partial redemption and the principal amount thereof to
be redeemed.
The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security which has been or is to be
redeemed. If the Company shall so direct, Securities registered in the name of
the Company, any Affiliate or any Subsidiary thereof shall not be included in
the Securities selected for redemption.
SECTION 1204. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not later than the thirtieth day and not earlier than the
sixtieth day prior to the Redemption Date, to each Holder of Securities to be
redeemed, at the address of such Holder as it appears in the Security Register.
All notices of redemption shall identify the Securities to be redeemed
(including CUSIP number) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Securities are to be redeemed, the
identification (and, in the case of partial redemption, the respective
principal amounts) of the particular Securities to be redeemed;
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security or portion thereof, and that interest
thereon, if any, shall cease to accrue on and after said date, and
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price.
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<PAGE>
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall not be
irrevocable. The notice if mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice. In any case, a failure to give such notice by mail or any
defect in the notice to the Holder of any Security designated for redemption as
a whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security.
SECTION 1205. DEPOSIT OF REDEMPTION PRICE.
Prior to 10:00 a.m. New York City time on the Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money sufficient to pay the Redemption
Price of all the Securities so called for redemption.
SECTION 1206. SECURITIES PAYABLE ON REDEMPTION DATE.
If any notice of redemption has been given as provided in Section
1204, the Securities or portion of Securities with respect to which such notice
has been given shall become due and payable on the Redemption Date at the place
or places stated in such notice and at the Redemption Price therein specified,
and from and after such date (unless the Company shall default in the payment of
the Redemption Price and accrued interest) such Securities shall cease to bear
interest. On presentation and surrender of such Securities at a place of payment
in said notice specified, the said Securities or the specified portions thereof
shall be paid and redeemed by the Company at the applicable Redemption Price.
Upon presentation of any Security redeemed in part only, the Company
shall execute and the Trustee shall authenticate and deliver to the Holder
thereof, at the expense of the Company, a new Security or Securities, of
authorized denominations, in aggregate principal amount equal to the unredeemed
portion of the Security so presented and having the same date of issuance,
Stated Maturity and terms. If a Global Security is so surrendered, such new
Security will also be a new Global Security.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal of and premium, if any, on such
Security shall, until paid, bear interest from the Redemption Date at the rate
prescribed therefor in the Security.
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SECTION 1207. OPTIONAL REDEMPTION; CONDITIONS TO OPTIONAL REDEMPTION.
At any time on or after ___________, 2001, the Company shall have the
right, subject to the last paragraph of this Section, to redeem the Securities,
in whole or in part, from time to time, at a Redemption Price equal to 100% of
the principal amount of Securities to be redeemed plus any accrued but unpaid
interest, including Additional Interest, if any, to the Redemption Date. The
Company shall not redeem the Securities in part unless all accrued and unpaid
interest (including any Additional Interest) has been paid in full on all
Securities Outstanding for all quarterly interest periods terminating on or
prior to the Redemption Date.
If a Special Event shall occur and be continuing, the Company may, at
its option, within 90 days of the occurrence of such Special Event, subject to
the last paragraph of this Section and the other provisions of this Article
Twelve, redeem the Securities in whole but not in part, at a Redemption Price
equal to 100% of the principal amount of Securities then outstanding plus
accrued but unpaid interest, including Additional Interest, if any, to the
Redemption Date.
For so long as AmerUs Capital I is the Holder of all Securities
Outstanding, the proceeds of any redemption described in this Section shall be
used by AmerUs Capital I to redeem Preferred Securities in accordance with their
terms.
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<PAGE>
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
AMERUS LIFE HOLDINGS, INC.
By:
--------------------------------
Name:
Title:
Attest:
- ----------------------------
WILMINGTON TRUST COMPANY
By:
-------------------------------
Name:
Title:
Attest:
- ----------------------------
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<PAGE>
STATE OF ________ ) ss.:
COUNTY OF ________ )
On the _____ day of _________________ 1996, before me personally came
[________________], to me known, who, being by me duly sworn, did depose and say
that he/she is the [____________________] of AmerUs Life Holdings, Inc. one of
the corporations described in and which executed the foregoing instrument; and
that he/she signed his/her name thereto by authority of the Board of Directors
of such corporation.
------------------------------
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<PAGE>
STATE OF ________ ) ss.:
COUNTY OF ________ )
On the _____ day of ________________, 1996, before me personally came
____________________, to me known, who, being by me duly sworn, did depose and
say that he/she is a ________________ of Wilmington Trust Company a Delaware
banking corporation described in and which executed the foregoing instrument;
and that he/she signed his/her name thereto by authority of the Board of
Directors of such corporation.
-----------------------------
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<PAGE>
EXHIBIT A
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT dated as of 1996, between AmerUs Life
Holdings, an Iowa corporation ("ALH"), and AmerUs Capital I, a Delaware business
trust (the "Trust").
WHEREAS, the Trust intends to issue its % Common Securities (the
"Common Securities") to and receive Debentures from ALH and to issue and sell
% Cumulative Quarterly Income Preferred Securities, Series A (the "Preferred
Securities") with such powers, preferences and special rights and restrictions
as are set forth in the Amended and Restated Trust Agreement of the Trust dated
as of 1996, among ALH, as Depositor, Wilmington Trust Company, as
Property Trustee and the Administrative Trustees named therein as the same may
be amended from time to time (the "Trust Agreement");
WHEREAS, ALH will directly or indirectly own all of the Common
Securities of the Trust and will issue the Debentures;
NOW, THEREFORE, in consideration of the purchase by each holder of the
Preferred Securities, which purchase ALH hereby agrees shall benefit ALH and
which purchase ALH acknowledges will be made in reliance upon the execution and
delivery of this Agreement, ALH and Trust hereby agree as follows:
ARTICLE I
Section 1.01. GUARANTEE BY ALH. Subject to the terms and conditions
hereof, ALH hereby irrevocably and unconditionally guarantees to each person or
entity to whom the Trust is now or hereafter becomes indebted or liable (the
"Beneficiaries") the full payment, when and as due, of any and all Obligations
(as hereinafter defined) to such Beneficiaries. As used herein, "Obligations"
means any indebtedness, expenses or liabilities of the Trust (including, without
limitation, the fees, expenses and indemnities of the Trustees), other than
obligations of the Trust to pay to holders of any Preferred Securities or other
similar interests in the Trust the amounts due such holders pursuant to the
terms of the Preferred Securities or such other similar interests, as the case
may be. This Agreement is intended to be for the benefit of, and to be
enforceable by, all such Beneficiaries, whether or not such Beneficiaries have
received notice hereof.
Section 1.02. TERM OF AGREEMENT. This Agreement shall terminate and
be of no further force and effect upon the later of (a) the date on which full
payment has been made of all amounts payable to all holders of all the Preferred
Securities (whether upon redemption, liquidation, exchange or otherwise) and
(b) the date on which there are no Beneficiaries remaining; provided, however,
that this Agreement shall continue to be effective or shall be reinstated, as
the case may be, if at any time any holder of Preferred Securities or any
Beneficiary must restore payment of any sums paid under the Preferred
Securities, under any Obligation, under the Guarantee Agreement dated the date
hereof by ALH and Wilmington Trust Company as guarantee trustee or under this
Agreement for any reason whatsoever. This Agreement is continuing, irrevocable,
unconditional and absolute.
Section 1.03. WAIVER OF NOTICE. ALH hereby waives notice of
acceptance of this Agreement and of any Obligation to which it applies or may
apply, and ALH hereby waives presentment, demand for payment, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.
<PAGE>
Section 1.04. NO IMPAIRMENT. The obligations, covenants, agreements
and duties of ALH under this Agreement shall in no way be affected or impaired
by reason of the happening from time to time of any of the following:
(i) the extension of time for the payment by the Trust of all or
any portion of the Obligations or for the performance of any
other obligation under, arising out of, or in connection with,
the Obligations;
(ii) any failure, omission, delay or lack of diligence on the part
of the Beneficiaries to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Beneficiaries with
respect to the Obligations or any action on the part of the
Trust granting indulgence or extension of any kind; or
(iii) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization,
arrangement, composition or readjustment of debt of, or other
similar proceedings affecting, the Trust or any of the assets
of the Trust.
There shall be no obligation of the Beneficiaries to give notice to, or obtain
the consent of, ALH with respect to the happening of any of the foregoing.
Section 1.05. ENFORCEMENT. A Beneficiary may enforce this Agreement
directly against ALH and ALH waives any right or remedy to require that any
action be brought against the Trust or any other person or entity before
proceeding against ALH.
Section 1.06. SUBROGATION. ALH shall be subrogated to all (if any)
rights of the Trust in respect of any amounts paid to the Beneficiaries by ALH
under this Agreement; provided, however, that ALH shall not (except to the
extent required by mandatory provisions of law) be entitled to enforce or
exercise any rights which it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under this
Agreement, if, at the time of any such payment under this Agreement, if at the
time of any such payment, any amounts are due and unpaid under this Agreement.
ARTICLE II
Section 2.01. BINDING EFFECT. All guarantees and agreements
contained in this Agreement shall bind the successors, assigns, receivers,
trustees and representatives of ALH and shall inure to the benefit of the
Beneficiaries.
Section 2.02. AMENDMENT. So long as there remains any Beneficiary or
any Preferred Securities are outstanding, this Agreement shall not be modified
or amended in any manner adverse to such Beneficiary or to the holders of the
Preferred Securities.
Section 2.03. NOTICES. Any notice, request or other communication
required or permitted to be given hereunder shall be given in writing by
delivering the same against receipt therefor by facsimile transmission
(confirmed by mail) or by registered or certified mail, addressed as follows
(and if so given, shall be deemed given when mailed):
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<PAGE>
AmerUs Capital I
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Facsimile No.: 302-651-8882
Attention: Corporate Trust Administration
AmerUs Life Holdings, Inc.
418 Sixth Avenue
Des Moines, Iowa 50306-2499
Facsimile No.: (515) 283-3286
Attention: Executive Vice President
and Chief Financial Officer
(with a copy to the attention of the
Secretary)
Facsimile No.: (515) 283-3402)
Section 2.04 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned such terms in the Trust Agreement.
THIS AGREEMENT is executed as of the day and year first above written.
AMERUS LIFE HOLDINGS, INC.
By:
--------------------------------------
Name: Michael E. Sproule
Title: Executive Vice President
and Chief Financial Officer
AMERUS CAPITAL I
By:
--------------------------------------
Name: Michael E. Sproule
Administrative Trustee
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<PAGE>
[Exhibit 4.4]
GUARANTEE AGREEMENT
Between
AmerUs Life Holdings, Inc.
(as Guarantor)
and
Wilmington Trust Company
(as Trustee)
dated as of
, 1996
<PAGE>
CROSS-REFERENCE TABLE*
Section of Section of
Trust Indenture Act Guarantee
of 1939, as amended Agreement
- ------------------- ----------
310(a) . . . . . . . . . . . . . . . . . . . . . . . . . 4.01(a)
310(b) . . . . . . . . . . . . . . . . . . . . . . . . . 4.01(c), 2.08
310(c) . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . 2.02(b)
311(b) . . . . . . . . . . . . . . . . . . . . . . . . . 2.02(b)
311(c) . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . 2.02(a)
312(b) . . . . . . . . . . . . . . . . . . . . . . . . . 2.02(b)
313 . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
314(b) . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(c) . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
314(d) . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(e) . . . . . . . . . . . . . . . . . . . . . . . . . 1.01, 2.05, 3.02
314(f) . . . . . . . . . . . . . . . . . . . . . . . . . 2.01, 3.02
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . 3.01(d)
315(b) . . . . . . . . . . . . . . . . . . . . . . . . . 2.07
315(c) . . . . . . . . . . . . . . . . . . . . . . . . . 3.01
315(d) . . . . . . . . . . . . . . . . . . . . . . . . . 3.01(d)
316(a) . . . . . . . . . . . . . . . . . . . . . . . . . 5.04(a), 2.06
316(b) . . . . . . . . . . . . . . . . . . . . . . . . . 5.03
316(c) . . . . . . . . . . . . . . . . . . . . . . . . . 2.02
317(a) . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
317(b) . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . 2.01(b)
318(b) . . . . . . . . . . . . . . . . . . . . . . . . . 2.01
318(c) . . . . . . . . . . . . . . . . . . . . . . . . . 2.01(a)
- ---------------
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.01.Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.01.Trust Indenture Act; Application. . . . . . . . . . . . . . . . 4
SECTION 2.02.Lists of Holders. . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.03.Reports by the Guarantee Trustee. . . . . . . . . . . . . . . . 5
SECTION 2.04.Periodic Reports to Guarantee Trustee . . . . . . . . . . . . . 5
SECTION 2.05.Evidence of Compliance with Conditions Precedent. . . . . . . . 5
SECTION 2.06.Events of Default; Waiver . . . . . . . . . . . . . . . . . . . 5
SECTION 2.07.Event of Default; Notice. . . . . . . . . . . . . . . . . . . . 5
SECTION 2.08.Conflicting Interests . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
POWERS, DUTIES AND RIGHTS
OF GUARANTEE TRUSTEE
SECTION 3.01.Powers and Duties of the Guarantee Trustee. . . . . . . . . . . 6
SECTION 3.02.Certain Rights of Guarantee Trustee . . . . . . . . . . . . . . 7
SECTION 3.03.Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 4.01.Guarantee Trustee; Eligibility. . . . . . . . . . . . . . . . . 9
SECTION 4.02.Appointment, Removal and Resignation of Guarantee Trustees. . . 9
<PAGE>
ARTICLE V
GUARANTEE
SECTION 5.01.Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . .10
SECTION 5.02.Waiver of Notice and Demand . . . . . . . . . . . . . . . . . .10
SECTION 5.03.Obligations Not Affected. . . . . . . . . . . . . . . . . . . .10
SECTION 5.04.Rights of Holders . . . . . . . . . . . . . . . . . . . . . . .11
SECTION 5.05.Guarantee of Payment. . . . . . . . . . . . . . . . . . . . . .11
SECTION 5.06.Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . .11
SECTION 5.07.Independent Obligations . . . . . . . . . . . . . . . . . . . .12
ARTICLE VI
COVENANTS AND SUBORDINATION
SECTION 6.01.Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . .12
SECTION 6.02.Subordination . . . . . . . . . . . . . . . . . . . . . . . . .12
SECTION 6.03.Pari Passu Guarantees . . . . . . . . . . . . . . . . . . . . .12
ARTICLE VII
TERMINATION
SECTION 7.01.Termination . . . . . . . . . . . . . . . . . . . . . . . . . .12
ARTICLE VIII
MISCELLANEOUS
. . . . . . . . . . . . . . . . . .
SECTION 8.01.Successors and Assigns. . . . . . . . . . . . . . . . . . . . .13
SECTION 8.02.Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . .13
SECTION 8.03.Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
SECTION 8.04. Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 8.05. Interpretation . . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 8.06. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . .15
<PAGE>
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of 1996, is executed and delivered
by AmerUs Life Holdings, Inc., an Iowa corporation (the "Guarantor"), and
Wilmington Trust Company, a Delaware banking corporation, as trustee (the
"Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Trust Securities (as defined herein) of AmerUs Capital I,
a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the "Trust
Agreement"), dated as of , 1996 among the Trustees of the Issuer
named therein and the Guarantor, as Depositor, the Issuer is issuing up to
$86,250,000 aggregate liquidation amount of its % Cumulative Quarterly
Income Preferred Securities, Series A (liquidation amount $25 per preferred
security) (the "Preferred Securities" and, together with the Common
Securities, the "Trust Securities") and up to $2,667,525 aggregate
liquidation amount of its Common Securities, each representing ownership
interests in the assets of the Issuer and having the terms set forth in the
Trust Agreement;
WHEREAS, the Trust Securities will be issued by the Issuer and the
proceeds thereof will be used to purchase the Debentures (as defined in the
Trust Agreement) of the Guarantor which will be deposited with Wilmington Trust
Company, as Property Trustee under the Trust Agreement, as trust assets; and
WHEREAS, as incentive for the Holders to purchase Preferred Securities
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth herein, to pay to the Holders the Guarantee Payments (as defined
herein) and to make certain other payments on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities or Common Securities, which purchase the Guarantor hereby
agrees shall benefit the Guarantor, the Guarantor executes and delivers this
Guarantee Agreement for the benefit of the Holders from time to time of the
Preferred Securities and the Common Securities.
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. As used in this Guarantee Agreement, the
terms set forth below shall, unless the context otherwise requires, have the
following meanings. Capitalized or otherwise defined terms used but not
otherwise defined herein shall have the meanings assigned to such terms in the
Trust Agreement as in effect on the date hereof unless otherwise indicated.
<PAGE>
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person, PROVIDED, HOWEVER that an Affiliate of the
Guarantor shall not be deemed to include the Issuer. For the purposes of this
definition, "CONTROL" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer (liquidation amount $25 per
Common Security).
"Debt" means, with respect to any Person, whether recourse is to all
or a portion of the assets of such Person and whether or not contingent, (i)
every obligation of such Person for money borrowed; (ii) every obligation of
such Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; and (vi) every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable for, directly or indirectly,
as obligor or otherwise.
"Event of Default" shall mean a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement; provided, however,
that, except with respect to a default in payment of any Guarantee Payments, the
Guarantor shall have received notice of default and shall not have cured such
default within 60 days after receipt of such notice.
"Guarantee" means this Guarantee Agreement, dated as of ,
1996, between AmerUs Life Holdings, Inc. and the Guarantee Trustee.
"Guarantee Payments" shall mean the following payments or
distributions, without duplication, with respect to the Preferred Securities
and Common Securities, as the case may be, to the extent not paid or made by
the Issuer: (i) any accrued and unpaid Distributions (as defined in the
Trust Agreement) required to be paid on the Trust Securities, to the extent
the Issuer shall have funds available therefor at such time, (ii) the
redemption price, including all accrued and unpaid Distributions to the date
of redemption (the "Redemption Price"), with respect to the Trust Securities,
called for redemption by the Issuer to the extent the Issuer shall have funds
available therefor at such time, and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Issuer, unless Debentures are
distributed to the Holders, the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid Distributions on the Trust
Securities to the date of payment to the extent the Issuer shall have funds
available therefor at such time, and (b) the amount of assets of the Issuer
remaining available for distribution to Holders in liquidation of the Issuer
(in either case, the "Liquidation Distribution").
"Guarantee Trustee" means Wilmington Trust Company, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee Agreement and thereafter means each such
Successor Guarantee Trustee.
"Holder" shall mean any holder, as registered on the books and
records of the Issuer, of any Trust Securities; provided, however, that in
determining whether the holders of the requisite
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<PAGE>
percentage of Preferred Securities have given any request, notice, consent or
waiver hereunder, "Holder" shall not include the Guarantor, the Guarantee
Trustee or any Affiliate of the Guarantor or the Guarantee Trustee.
"Indenture" means the Indenture dated as of , 1996, among
the Guarantor and Wilmington Trust Company, as trustee.
"Majority in liquidation amount of the Preferred Securities" means,
except as provided by the Trust Indenture Act, a vote by Holder(s) of Preferred
Securities, voting separately as a class, of more than 50% of the liquidation
amount of all then outstanding Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman of the Board, Vice Chairman of the Board,
Chief Executive Officer, the President or a Vice President, and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of
such Person, and delivered to the Guarantee Trustee. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Guarantee Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Responsible Officer" means, with respect to the Guarantee Trustee,
any vice-president, any assistant vice-president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, any financial services
officer or any other officer of the Corporate Trust Department of the Guarantee
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of that officer's knowledge of and familiarity with the particular
subject.
"Senior Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Guarantor whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of this Guarantee or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such
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<PAGE>
obligations are not superior in right of payment to the Guarantee or to other
Debt which is pari passu with, or subordinated to, the Guarantee; provided,
however, that Senior Debt shall not be deemed to include (a) any Debt of the
Guarantor which when incurred and without respect to any election under Section
111(b) of the Bankruptcy Reform Act of 1978, was without recourse to the
Guarantor, (b) any Debt of the Guarantor to any of its Subsidiaries, (c) Debt to
any employee of the Guarantor, (d) any liability for taxes, (e) Debt or other
monetary obligations to trade creditors created or assumed by the Guarantor or
any of its Subsidiaries in the ordinary course of business in connection with
the obtaining of goods, materials or services and (f) Debt issued under the
Indenture and (g) the Guarantee.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.01.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.01. TRUST INDENTURE ACT; APPLICATION.
(a) This Guarantee Agreement is subject to the provisions of the
Trust Indenture Act that are required to be part of this Guarantee
Agreement and shall, to the extent applicable, be governed by such
provisions.
(b) If and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by Section
310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
SECTION 2.02. LISTS OF HOLDERS.
(a) The Guarantor shall furnish or cause to be furnished to the
Guarantee Trustee (a) semiannually, not later than February 15 and
August 15 in each year, a list, in such form as the Guarantee Trustee may
reasonably require, of the names and addresses of the Holders of the
Preferred Securities and Common Securities ("List of Holders") as of a date
not more than 15 days prior to the delivery thereof, and (b) at such other
times as the Guarantee Trustee may request in writing, within 30 days after
the receipt by the Guarantor of any such request, a List of Holders as of a
date not more than 15 days prior to the time such list is furnished;
provided that the Guarantor shall not be obligated to provide such List of
Holders at any time when the List of Holders does not differ from the most
recent List of Holders given to the Guarantee Trustee by the Guarantor.
The Guarantee Trustee may destroy any List of Holders previously given to
it on receipt of a new List of Holders.
(b) The Guarantee Trustee shall comply with its obligations under
Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act.
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<PAGE>
SECTION 2.03. REPORTS BY THE GUARANTEE TRUSTEE. Not later than July
15 of each year, commencing July 15, 1997, the Guarantee Trustee shall provide
to the Holders such reports as are required by Section 313 of the Trust
Indenture Act, if any, in the form and in the manner provided by Section 313 of
the Trust Indenture Act. The Guarantee Trustee shall also comply with the
requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.04. PERIODIC REPORTS TO GUARANTEE TRUSTEE. The Guarantor
shall provide to the Guarantee Trustee, the Securities and Exchange Commission
and the Holders such documents, reports and information as required by Section
314 (if any) and the compliance certificate required by Section 314 of the Trust
Indenture Act in the form, in the manner and at the times required by Section
314 of the Trust Indenture Act.
SECTION 2.05. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. The
Guarantor shall provide to the Guarantee Trustee such evidence of compliance
with any conditions precedent, if any, provided for in this Guarantee Agreement
that relate to any of the matters set forth in Section 314(c) of the Trust
Indenture Act. Any certificate or opinion required to be given by an officer
pursuant to Section 314(c)(1) may be given in the form of an Officers'
Certificate.
SECTION 2.06. EVENTS OF DEFAULT; WAIVER. The Holders of a Majority
in liquidation preference of the Preferred Securities may, by vote, on behalf of
the Holders of all of the Preferred Securities and Common Securities, waive any
past Event of Default and its consequences. Upon such waiver, any such Event of
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured, for every purpose of this Guarantee Agreement, but
no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon.
SECTION 2.07. EVENT OF DEFAULT; NOTICE.
(a) The Guarantee Trustee shall, within 90 days after the occurrence
of an Event of Default, transmit by mail, first class postage prepaid, to
the Holders of the Preferred Securities, notices of all Events of Default
known to the Guarantee Trustee, unless such defaults have been cured before
the giving of such notice, provided, that, the Guarantee Trustee shall be
protected in withholding such notice if and so long as the board of
directors, the executive committee, or a trust committee of directors
and/or Responsible Officers of the Guarantee Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders of the Preferred Securities.
(b) The Guarantee Trustee shall not be deemed to have knowledge of
any Event of Default unless the Guarantee Trustee shall have received
written notice, or a Responsible Officer charged with the administration of
the Trust Agreement shall have obtained written notice, of such Event of
Default.
SECTION 2.08. CONFLICTING INTERESTS. The Trust Agreement and the
Indenture shall be deemed to be specifically described in this Guarantee
Agreement for the purposes of clause (i) of the first proviso contained in
Section 310(b) of the Trust Indenture Act.
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<PAGE>
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
GUARANTEE TRUSTEE
SECTION 3.01. POWERS AND DUTIES OF THE GUARANTEE TRUSTEE.
(a) This Guarantee Agreement shall be held by the Guarantee Trustee
for the benefit of the Holders of the Preferred Securities and Common
Securities, and the Guarantee Trustee shall not transfer this Guarantee
Agreement to any Person except a Holder of Preferred Securities exercising
his or her rights pursuant to Section 5.04(iv) or to a Successor Guarantee
Trustee on acceptance by such Successor Guarantee Trustee of its
appointment to act as Successor Guarantee Trustee. The right, title and
interest of the Guarantee Trustee shall automatically vest in any Successor
Guarantee Trustee, upon acceptance by such Successor Guarantee Trustee of
its appointment hereunder, and such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of
the Holders of the Preferred Securities and Common Securities.
(c) The Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically
set forth in this Guarantee Agreement, and no implied covenants shall be
read into this Guarantee Agreement against the Guarantee Trustee. In case
an Event of Default has occurred (that has not been cured or waived
pursuant to Section 2.06), the Guarantee Trustee shall exercise such of the
rights and powers vested in it by this Guarantee Agreement, and use the
same degree of care and skill in its exercise thereof, as a prudent
individual would exercise or use under the circumstances in the conduct of
his or her own affairs.
(d) No provision of this Guarantee Agreement shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action,
its own negligent failure to act, or its own willful misconduct, except
that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Guarantee Trustee
shall be determined solely by the express provisions of this
Guarantee Agreement, and the Guarantee Trustee shall not be
liable except for the performance of such duties and obligations
as are specifically set forth in this Guarantee Agreement; and
(B) in the absence of bad faith on the part of the
Guarantee Trustee, the Guarantee Trustee may conclusively rely,
as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Guarantee Trustee and conforming to the
requirements of this
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<PAGE>
Guarantee Agreement; but in the case of any such certificates or
opinions that by any provision hereof or of the Trust Indenture
Act are specifically required to be furnished to the Guarantee
Trustee, the Guarantee Trustee shall be under a duty to examine
the same to determine whether or not they conform to the
requirements of this Guarantee Agreement;
(ii) the Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was
negligent in ascertaining the pertinent facts upon which such judgment
was made;
(iii) the Guarantee Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
Majority in liquidation amount of the Preferred Securities relating to
the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee, or exercising any trust or power
conferred upon the Guarantee Trustee under this Guarantee Agreement;
and
(iv) no provision of this Guarantee Agreement shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties
or in the exercise of any of its rights or powers, if the Guarantee
Trustee shall have reasonable grounds for believing that the repayment
of such funds or liability is not reasonably assured to it under the
terms of this Guarantee Agreement or adequate indemnity against such
risk or liability is not reasonably assured to it.
SECTION 3.02. CERTAIN RIGHTS OF GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.01:
(i) The Guarantee Trustee may rely and shall be fully protected
in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document reasonably believed by it to be genuine and
to have been signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Guarantee Agreement shall be sufficiently evidenced by an Officers'
Certificate unless otherwise prescribed herein.
(iii) Whenever, in the administration of this Guarantee
Agreement, the Guarantee Trustee shall deem it desirable that a matter
be proved or established before taking, suffering or omitting any
action hereunder, the Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad faith on
its part, request and rely upon an Officers' Certificate which, upon
receipt of such request from the Guarantee Trustee, shall be promptly
delivered by the Guarantor.
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<PAGE>
(iv) The Guarantee Trustee may (at the expense of the Guarantor)
consult with legal counsel, and the written advice or opinion of such
legal counsel with respect to legal matters shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with such
advice or opinion. Such legal counsel may legal be counsel to the
Guarantor or any of its Affiliates and may be one of its employees.
The Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Guarantee Agreement
from any court of competent jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee
Agreement at the request or direction of any Holder, unless such
Holder shall have provided to the Guarantee Trustee such adequate
security and indemnity as would satisfy a reasonable person in the
position of the Guarantee Trustee, against the costs, expenses
(including attorneys' fees and expenses) and liabilities that might be
incurred by it in complying with such request or direction, including
such reasonable advances as may be requested by the Guarantee Trustee;
provided that, nothing contained in this Section 3.02(a)(v) shall be
taken to relieve the Guarantee Trustee, upon the occurrence of an
Event of Default, of its obligation to exercise the rights and powers
vested in it by this Guarantee Agreement.
(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit.
(vii) The Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents or attorneys, and the Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of any such
agent or attorney appointed with due care by it hereunder.
(viii) Whenever in the administration of this Guarantee
Agreement the Guarantee Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or taking
any other action hereunder, the Guarantee Trustee (A) may request
instructions from the Holders of the Preferred Securities and Common
Securities, (B) may refrain from enforcing such remedy or right or
taking such other action until such instructions are received, and (C)
shall be protected in acting in accordance with such instructions.
(b) No provision of this Guarantee Agreement shall be deemed to
impose any duty or obligation on the Guarantee Trustee to perform any act
or acts or exercise any right, power, duty or obligation conferred or
imposed on it in any jurisdiction in which it shall be illegal, or in which
the Guarantee Trustee shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or acts or to exercise any
such right, power, duty or obligation. No permissive power or authority
available to the Guarantee Trustee shall be construed to be a duty to act
in accordance with such power and authority.
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<PAGE>
SECTION 3.03. INDEMNITY. The Guarantor agrees to indemnify the
Guarantee Trustee for, and to hold it harmless against, any loss, damage,
claims, liability, penalty or expense incurred without negligence or bad faith
on the part of the Guarantee Trustee, arising out of or in connection with the
acceptance or administration of this Guarantee Agreement, including the costs
and expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder. The
Guarantee Trustee will not claim or exact any lien or charge on any Guarantee
Payments as a result of any amount due to it under this Guarantee Agreement.
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 4.01. GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall at all times be a Guarantee Trustee which shall
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the Trust Indenture
Act to act as such and has a combined capital and surplus of at least
50 million U.S. dollars ($50,000,000), and shall be a corporation
meeting the requirements of Section 310(a) of the Trust Indenture Act.
If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of a supervising or examining
authority, then, for the purposes of this Section 4.01(a)(ii) and to
the extent permitted by the Trust Indenture Act, the combined capital
and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of
condition so published.
(b) If at any time the Guarantee Trustee shall cease to be eligible
to so act under Section 4.01(a), the Guarantee Trustee shall immediately
resign in the manner and with the effect set out in Section 4.02(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act,
the Guarantee Trustee and Guarantor shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act.
SECTION 4.02. APPOINTMENT, REMOVAL AND RESIGNATION OF GUARANTEE
TRUSTEES.
(a) Subject to Section 4.02(b), the Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until a Successor
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Guarantee Trustee and
delivered to the Guarantor.
(c) The Guarantee Trustee appointed hereunder shall hold office until
a Successor Guarantee Trustee shall have been appointed or until its
removal or resignation. The Guarantee
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<PAGE>
Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing executed by the Guarantee Trustee
and delivered to the Guarantor, which resignation shall not take effect
until a Successor Guarantee Trustee has been appointed and has accepted
such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning
Guarantee Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.02 within 30 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition, at the expense of the Guarantor, any court
of competent jurisdiction for appointment of a Successor Guarantee Trustee.
Such court may thereupon, after prescribing such notice, if any, as it may
deem proper, appoint a Successor Guarantee Trustee.
ARTICLE V
GUARANTEE
SECTION 5.01. GUARANTEE. The Guarantor irrevocably and
unconditionally agrees to pay in full to the Holders the Guarantee Payments
(without duplication of amounts theretofore paid by or on behalf of the
Issuer), as and when due, regardless of any defense, right of set-off or
counterclaim which the Issuer may have or assert; PROVIDED, HOWEVER, that
upon an Event of Default hereunder or an "Event of Default" under the
Indenture, Holders of Preferred Securities shall have priority over Holders
of Common Securities with respect to payment of Guarantee Payments or any
other payments made hereunder. The Guarantor's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts
by the Guarantor to the Holders or by causing the Issuer to pay such amounts
to the Holders.
SECTION 5.02. WAIVER OF NOTICE AND DEMAND. The Guarantor hereby
waives notice of acceptance of the Guarantee Agreement and of any liability to
which it applies or may apply, presentment, demand for payment, any right to
require a proceeding first against the Guarantee Trustee, the Issuer or any
other Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.
SECTION 5.03. OBLIGATIONS NOT AFFECTED. The obligations, covenants,
agreements and duties of the Guarantor under this Guarantee Agreement shall in
no way be affected or impaired by reason of the happening from time to time of
any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Trust Securities
to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions (other than an extension of time for payment
of Distributions that results from the extension of any interest payment
period on the Debentures as so provided in the Indenture), Redemption
Price, Liquidation Distribution or any other sums payable under the terms
of the Preferred Securities or the extension of time for the performance of
any other obligation under, arising out of, or in connection with, the
Trust Securities;
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<PAGE>
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Trust
Securities or any action on the part of the Issuer granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the Issuer
or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Trust
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute
a legal or equitable discharge or defense of a guarantor, it being the
intent of this Section 5.03 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain consent
of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 5.04. RIGHTS OF HOLDERS. The Guarantor expressly
acknowledges that: (i) this Guarantee Agreement will be deposited with the
Guarantee Trustee to be held for the benefit of the Holders; (ii) the Guarantee
Trustee has the right to enforce this Guarantee Agreement on behalf of the
Holders; (iii) the Holders of a Majority in liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of this
Guarantee Agreement or exercising any trust or power conferred upon the
Guarantee Trustee under this Guarantee Agreement; and (iv) any Holder of the
Preferred Securities may institute a legal proceeding directly against the
Guarantor to enforce its rights under this Guarantee Agreement, without first
instituting a legal proceeding against the Guarantee Trustee, the Issuer or any
other Person.
SECTION 5.05. GUARANTEE OF PAYMENT. This Guarantee Agreement creates
a guarantee of payment and not merely of collection. This Guarantee Agreement
will not be discharged except by payment of the Guarantee Payments in full
(without duplication of amounts theretofore paid by the Issuer) or upon
distribution of Debentures to Holders as provided in the Trust Agreement.
SECTION 5.06. SUBROGATION. The Guarantor shall be subrogated to all
(if any) rights of the Holders against the Issuer in respect of any amounts paid
to the Holders by the Guarantor under this Guarantee Agreement and shall have
the right to waive payment by the Issuer pursuant to Section 5.01; PROVIDED,
HOWEVER, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any rights which
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee Agreement,
if, at the time of any such payment, any amounts are due and unpaid under this
Guarantee Agreement. If any amount shall be paid to the Guarantor in violation
of the preceding sentence,
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<PAGE>
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.
SECTION 5.07. INDEPENDENT OBLIGATIONS. The Guarantor acknowledges
that its obligations hereunder are independent of the obligations of the
Issuer with respect to the Trust Securities and that the Guarantor shall be
liable as principal and as debtor hereunder to make Guarantee Payments
pursuant to the terms of this Guarantee Agreement notwithstanding the
occurrence of any event referred to in subsections (a) through (g),
inclusive, of Section 5.03 hereof.
ARTICLE VI
COVENANTS AND SUBORDINATION
SECTION 6.01. COVENANTS. So long as any Trust Securities remain
outstanding, the Guarantor shall not, and shall cause its Subsidiaries (as
defined in the Indenture) not to, (i) declare or pay any dividends or
distributions on (other than dividends or distributions in common stock of the
Guarantor), or redeem, purchase, acquire or make a liquidation payment with
respect to, any of the Guarantor's outstanding capital stock or (ii) make any
payment of principal, interest or premium, if any, on or repay, repurchase or
redeem any debt securities that rank PARI PASSU with or junior to the Debentures
or make any guarantee payments with respect to the foregoing, if at such time
(i) the Guarantor shall be in default with respect to its Guarantee Payments
hereunder, (ii) there shall have occurred and be continuing any event of default
under the Indenture or (iii) the Guarantor shall have given notice of its
selection of an Extension Period (as defined in the Indenture) and such period,
or any extension thereof, is continuing.
SECTION 6.02. SUBORDINATION. This Guarantee Agreement will
constitute an unsecured obligation of the Guarantor and will rank subordinate
and junior in right of payment to all Senior Debt of the Guarantor.
SECTION 6.03. PARI PASSU GUARANTEES. This Guarantee Agreement shall
rank pari passu with any similar guarantee agreements issued by the Guarantor on
behalf of the holders of preferred securities issued by a business trust or
similar entity whose common securities are owned, directly or indirectly, by the
Guarantor.
ARTICLE VII
TERMINATION
SECTION 7.01. TERMINATION. This Guarantee Agreement shall
terminate and be of no further force and effect upon (i) full payment of the
Redemption Price of all Trust Securities, (ii) the distribution of Debentures
to Holders of Trust Securities in exchange for all of the Trust Securities or
(iii) full payment of the amounts payable in accordance with the Trust
Agreement upon liquidation of the Issuer. Notwithstanding the foregoing,
this Guarantee Agreement will continue to be effective or will be reinstated,
as the case may be, if at any time any Holder must restore payment of any
sums paid with respect to Trust Securities or this Guarantee Agreement.
Guarantor will indemnify each Holder and hold it harmless from and against
any loss it may suffer in such circumstance.
-12-
<PAGE>
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. SUCCESSORS AND ASSIGNS. All guarantees and agreements
contained in this Guarantee Agreement shall bind the successors, assigns,
receivers, trustees and representatives of the Guarantor and shall inure to the
benefit of the Holders of the Trust Securities then outstanding. Except in
connection with a consolidation, merger or sale involving the Guarantor that is
permitted under Article Eight of the Indenture and pursuant to which the
assignee agrees in writing to perform the Guarantor's obligations hereunder, the
Guarantor shall not assign its obligations hereunder.
SECTION 8.02. AMENDMENTS. Except with respect to any changes which
do not adversely affect the rights of Holders (in which case no consent of
Holders will be required), this Guarantee Agreement may only be amended with the
prior approval of the Holders of not less than a Majority in liquidation amount
of the outstanding Preferred Securities. The provisions of Article VI of the
Trust Agreement concerning meetings of Holders shall apply to the giving of such
approval.
SECTION 8.03. NOTICES. Any notice, request or other communication
required or permitted to be given hereunder shall be in writing, duly signed by
the party giving such notice, and delivered, telecopied or mailed by first class
mail as follows:
(a) if given to the Guarantor, to the address set forth below or such
other address as the Guarantor may give notice of to the Guarantee Trustee:
AmerUs Life Holdings, Inc.
418 Sixth Avenue
Des Moines, Iowa 50306-2499
Facsimile No: (515) 283-3402
Attention: Secretary
(b) if given to the Issuer, at the address set forth below or such
other address as the Issuer may give notice of to the Guarantee Trustee:
AmerUs Capital I
c/o AmerUs Life Holdings, Inc.
418 Sixth Avenue
Des Moines, Iowa 50306-2499
Facsimile No: (515) 283-3402
Attention: Administrative Trustee
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<PAGE>
with copy to:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Facsimile No: (302) 651-8882
Attention: Corporate Trust Administration
(c) if given to the Guarantee Trustee, at the Guarantee Trustee's
address set forth below:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Facsimile No: (302) 651-8882
Attention: Corporate Trust Administration
(d) if given to any Holder of Preferred or Common Securities, at the
address set forth on the books and records of the Issuer.
All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 8.04. BENEFIT. This Guarantee Agreement is solely for the
benefit of the Holders, and is not separately transferable from the Trust
Securities.
SECTION 8.05. INTERPRETATION. In this Guarantee Agreement, unless
the context otherwise requires:
(a) Capitalized terms used in this Guarantee Agreement but not
defined in the preamble hereto have the respective meanings assigned to
them in Section 1.01 unless otherwise indicated;
(b) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;
(c) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or
amended from time to time;
(d) all references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified;
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<PAGE>
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Guarantee Agreement unless otherwise defined in this
Guarantee Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice versa;
and
(g) the masculine, feminine or neuter genders used herein shall
include the masculine, feminine and neuter genders.
SECTION 8.06. GOVERNING LAW. THIS GUARANTEE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
This instrument may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
THIS GUARANTEE AGREEMENT is executed as of the day and year first
above written.
AMERUS LIFE HOLDINGS, INC.
By:
-------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY
as Guarantee Trustee
By:
-------------------------------
Name:
Title:
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<PAGE>
AmerUs Life Holdings, Inc.
Exhibit 12.1 - Statement Re Computation of Ratios
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
1996 1995 1995 1994 1993 1992 1991
(Dollars in thousands) Historical Pro forma Historical Pro forma
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income before income
taxes and accounting
changes $91,548 $91,700 $54,890 $110,550 $112,600 $26,131 $55,775 $57,300 $69,300
Add, Combined Fixed
Charges and Preferred
Stock Dividends 958 7,020 1,089 2,356 13,505 4,913 8,833 10,532 12,422
----------------------------- ----------------------------------------------------------------
Adjusted Earnings $92,506 $98,720 $55,979 $112,906 $126,105 $31,044 $64,608 $67,832 $81,722
----------------------------- ----------------------------------------------------------------
----------------------------- ----------------------------------------------------------------
Fixed Charges:
Interest on indebtedness
Historical $958 $958 $1,089 $2,356 $2,356 $4,913 $8,833 $10,532 $12,422
Pro forma 2,736 4,502
Amortization of debt
expense, pro forma 43 85
----------------------------- -------------------- ------ -----------------------------
Total Fixed Charges $958 $3,738 $1,089 $2,356 $6,943 $4,913 $8,833 $10,532 $12,422
Pre-tax earnings to
cover preferred stock
dividends 3,281 6,563
----------------------------- ----------------------------------------------------------------
Combined Fixed Charges
and Preferred Stock
Dividends $958 $7,020 $1,089 $2,356 $13,505 $4,913 $8,833 $10,532 $12,422
----------------------------- -------------------- ----------------------------------------
----------------------------- -------------------- ----------------------------------------
Ratio of Earnings to
Combined Fixed
Changes and Preferred
Stock Dividends 96.60 14.06 51.40 47.93 9.34 6.32 7.31 6.44 6.58
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
AmerUs Life Holdings, Inc.:
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the Prospectus.
KPMG Peat Marwick LLP
Des Moines, Iowa
October 8, 1996
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints Michael E. Sproule, Michael G. Fraizer
and James A. Smallenberger, and each of them, his true and lawful attorneys-in-
fact and agents, with full power of substitution and resubstitution for him and
in his name, place and stead, in any and all capacities to sign a registration
statement on Form S-1 relating to the registration of (i) Quarterly Income
Preferred Securities by AmerUs Capital I, an affiliate of AmerUs Life Holdings,
Inc. (ii) Junior Subordinated Debentures by AmerUs Life Holdings, Inc., and
(iii) a Guarantee of AmerUs Life Holdings, Inc. with respect to the Quarterly
Income Preferred Securities of AmerUs Capital I and any and all amendments
(including post-effective amendments) to such registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and any documents
relating to the qualification or registration under state Blue Sky or securities
laws of such states, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes he might or could do in person, ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has signed his name this
18th day of September, 1996.
/s/ John R. Albers
------------------------------
John R. Albers
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints Michael E. Sproule, Michael G. Fraizer
and James A. Smallenberger, and each of them, his true and lawful attorneys-in-
fact and agents, with full power of substitution and resubstitution for him and
in his name, place and stead, in any and all capacities to sign a registration
statement on Form S-1 relating to the registration of (i) Quarterly Income
Preferred Securities by AmerUs Capital I, an affiliate of AmerUs Life Holdings,
Inc. (ii) Junior Subordinated Debentures by AmerUs Life Holdings, Inc., and
(iii) a Guarantee of AmerUs Life Holdings, Inc. with respect to the Quarterly
Income Preferred Securities of AmerUs Capital I and any and all amendments
(including post-effective amendments) to such registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and any documents
relating to the qualification or registration under state Blue Sky or securities
laws of such states, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes he might or could do in person, ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has signed his name this
18th day of September, 1996.
/s/ Roger K. Brooks
------------------------------
Roger K. Brooks
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints Michael E. Sproule, Michael G. Fraizer
and James A. Smallenberger, and each of them, his true and lawful attorneys-in-
fact and agents, with full power of substitution and resubstitution for him and
in his name, place and stead, in any and all capacities to sign a registration
statement on Form S-1 relating to the registration of (i) Quarterly Income
Preferred Securities by AmerUs Capital I, an affiliate of AmerUs Life Holdings,
Inc. (ii) Junior Subordinated Debentures by AmerUs Life Holdings, Inc., and
(iii) a Guarantee of AmerUs Life Holdings, Inc. with respect to the Quarterly
Income Preferred Securities of AmerUs Capital I and any and all amendments
(including post-effective amendments) to such registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and any documents
relating to the qualification or registration under state Blue Sky or securities
laws of such states, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes he might or could do in person, ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has signed his name this
18th day of September, 1996.
/s/ Malcolm Candlish
------------------------------
Malcolm Candlish
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints Michael E. Sproule, Michael G. Fraizer
and James A. Smallenberger, and each of them, his true and lawful attorneys-in-
fact and agents, with full power of substitution and resubstitution for him and
in his name, place and stead, in any and all capacities to sign a registration
statement on Form S-1 relating to the registration of (i) Quarterly Income
Preferred Securities by AmerUs Capital I, an affiliate of AmerUs Life Holdings,
Inc. (ii) Junior Subordinated Debentures by AmerUs Life Holdings, Inc., and
(iii) a Guarantee of AmerUs Life Holdings, Inc. with respect to the Quarterly
Income Preferred Securities of AmerUs Capital I and any and all amendments
(including post-effective amendments) to such registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and any documents
relating to the qualification or registration under state Blue Sky or securities
laws of such states, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes he might or could do in person, ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has signed his name this
18th day of September, 1996.
/s/ D T Doan
------------------------------
D T Doan
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints Michael E. Sproule, Michael G. Fraizer
and James A. Smallenberger, and each of them, his true and lawful attorneys-in-
fact and agents, with full power of substitution and resubstitution for him and
in his name, place and stead, in any and all capacities to sign a registration
statement on Form S-1 relating to the registration of (i) Quarterly Income
Preferred Securities by AmerUs Capital I, an affiliate of AmerUs Life Holdings,
Inc. (ii) Junior Subordinated Debentures by AmerUs Life Holdings, Inc., and
(iii) a Guarantee of AmerUs Life Holdings, Inc. with respect to the Quarterly
Income Preferred Securities of AmerUs Capital I and any and all amendments
(including post-effective amendments) to such registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and any documents
relating to the qualification or registration under state Blue Sky or securities
laws of such states, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes he might or could do in person, ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has signed his name this
18th day of September, 1996.
/s/ Thomas F. Gaffney
------------------------------
Thomas F. Gaffney
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints Michael E. Sproule, Michael G. Fraizer
and James A. Smallenberger, and each of them, his true and lawful attorneys-in-
fact and agents, with full power of substitution and resubstitution for him and
in his name, place and stead, in any and all capacities to sign a registration
statement on Form S-1 relating to the registration of (i) Quarterly Income
Preferred Securities by AmerUs Capital I, an affiliate of AmerUs Life Holdings,
Inc. (ii) Junior Subordinated Debentures by AmerUs Life Holdings, Inc., and
(iii) a Guarantee of AmerUs Life Holdings, Inc. with respect to the Quarterly
Income Preferred Securities of AmerUs Capital I and any and all amendments
(including post-effective amendments) to such registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and any documents
relating to the qualification or registration under state Blue Sky or securities
laws of such states, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes he might or could do in person, ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has signed his name this
18th day of September, 1996.
/s/ Sam C. Kalainov
------------------------------
Sam C. Kalainov
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints Michael E. Sproule, Michael G. Fraizer
and James A. Smallenberger, and each of them, his true and lawful attorneys-in-
fact and agents, with full power of substitution and resubstitution for him and
in his name, place and stead, in any and all capacities to sign a registration
statement on Form S-1 relating to the registration of (i) Quarterly Income
Preferred Securities by AmerUs Capital I, an affiliate of AmerUs Life Holdings,
Inc. (ii) Junior Subordinated Debentures by AmerUs Life Holdings, Inc., and
(iii) a Guarantee of AmerUs Life Holdings, Inc. with respect to the Quarterly
Income Preferred Securities of AmerUs Capital I and any and all amendments
(including post-effective amendments) to such registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and any documents
relating to the qualification or registration under state Blue Sky or securities
laws of such states, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes he might or could do in person, ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has signed his name this
18th day of September, 1996.
/s/ John W. Norris, Jr.
------------------------------
John W. Norris, Jr.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints Michael E. Sproule, Michael G. Fraizer
and James A. Smallenberger, and each of them, his true and lawful attorneys-in-
fact and agents, with full power of substitution and resubstitution for him and
in his name, place and stead, in any and all capacities to sign a registration
statement on Form S-1 relating to the registration of (i) Quarterly Income
Preferred Securities by AmerUs Capital I, an affiliate of AmerUs Life Holdings,
Inc. (ii) Junior Subordinated Debentures by AmerUs Life Holdings, Inc., and
(iii) a Guarantee of AmerUs Life Holdings, Inc. with respect to the Quarterly
Income Preferred Securities of AmerUs Capital I and any and all amendments
(including post-effective amendments) to such registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and any documents
relating to the qualification or registration under state Blue Sky or securities
laws of such states, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes he might or could do in person, ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has signed his name this
18th day of September, 1996.
/s/ Jack C. Pester
------------------------------
Jack C. Pester
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints Michael E. Sproule, Michael G. Fraizer
and James A. Smallenberger, and each of them, his true and lawful attorneys-in-
fact and agents, with full power of substitution and resubstitution for him and
in his name, place and stead, in any and all capacities to sign a registration
statement on Form S-1 relating to the registration of (i) Quarterly Income
Preferred Securities by AmerUs Capital I, an affiliate of AmerUs Life Holdings,
Inc. (ii) Junior Subordinated Debentures by AmerUs Life Holdings, Inc., and
(iii) a Guarantee of AmerUs Life Holdings, Inc. with respect to the Quarterly
Income Preferred Securities of AmerUs Capital I and any and all amendments
(including post-effective amendments) to such registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and any documents
relating to the qualification or registration under state Blue Sky or securities
laws of such states, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes he might or could do in person, ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has signed his name this
18th day of September, 1996.
/s/ John A. Wing
------------------------------
John A. Wing
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints Michael G. Fraizer and James A.
Smallenberger, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign a registration
statement on Form S-1 relating to the registration of (i) Quarterly Income
Preferred Securities by AmerUs Capital I, an affiliate of AmerUs Life Holdings,
Inc. (ii) Junior Subordinated Debentures by AmerUs Life Holdings, Inc., and
(iii) a Guarantee of AmerUs Life Holdings, Inc. with respect to the Quarterly
Income Preferred Securities of AmerUs Capital I and any and all amendments
(including post-effective amendments) to such registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and any documents
relating to the qualification or registration under state Blue Sky or securities
laws of such states, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes he might or could do in person, ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has signed his name this
18th day of September, 1996.
/s/ Michael E. Sproule
------------------------------
Michael E. Sproule
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints Michael E. Sproule and James A.
Smallenberger, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign a registration
statement on Form S-1 relating to the registration of (i) Quarterly Income
Preferred Securities by AmerUs Capital I, an affiliate of AmerUs Life Holdings,
Inc. (ii) Junior Subordinated Debentures by AmerUs Life Holdings, Inc., and
(iii) a Guarantee of AmerUs Life Holdings, Inc. with respect to the Quarterly
Income Preferred Securities of AmerUs Capital I and any and all amendments
(including post-effective amendments) to such registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and any documents
relating to the qualification or registration under state Blue Sky or securities
laws of such states, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes he might or could do in person, ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has signed his name this
18th day of September, 1996.
/s/ Michael G. Fraizer
------------------------------
Michael G. Fraizer
<PAGE>
Registration No.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
----
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
AMERUS LIFE HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
Iowa 42-1459712
(State of incorporation) (I.R.S. employer identification no.)
418 Sixth Avenue
Des Moines, Iowa 50306-2499
(Address of principal executive offices) (Zip Code)
Guarantee of AmerUs Life Holdings, Inc. with respect to the
Quarterly Income Preferred Securities of AmerUs Capital I
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee
and upon information furnished by the obligor, the obligor is not an
affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to exercise
corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 4th day
of October, 1996.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ I. A. Lennon By:/s/ Thomas P. Laskaris
----------------------------- ---------------------------
Assistant Secretary Name: Thomas P. Laskaris
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE>
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is WILMINGTON TRUST COMPANY whose address is
Rodney Square North, in said City. In addition to such principal office,
the said corporation maintains and operates branch offices in the City of
Newark, New Castle County, Delaware, the Town of Newport, New Castle
County, Delaware, at Claymont, New Castle County, Delaware, at Greenville,
New Castle County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of business as
may be authorized from time to time by the agency or agencies of the
government of the State of Delaware empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with the
Constitution or laws of the United States or of this State, to
discount bills, notes or other evidences of debt, to receive deposits
of money, or securities for money, to buy gold and silver bullion and
foreign coins, to buy and sell bills of exchange, and generally to
use, exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or necessary for
the transaction of the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation, association,
state or municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two parties,
and in like manner may act as Treasurer of any corporation or
municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit, order,
or decree to be entered in any court of record within the State of
Delaware or elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so appointed
by any person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity, it shall not be required to give bond with surety, but its
capital stock shall be taken and held as security for the performance
of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts
and evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony,
or possession thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property, any and all the rights, powers and
privileges of individual
3
<PAGE>
owners thereof, including the right to vote thereon; to invest and
deal in and with any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and proper, and from
time to time to vary or realize such investments; to issue bonds and
secure the same by pledges or deeds of trust or mortgages of or upon
the whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when the Board
of Directors shall determine, and in the promotion of its said
corporate business of investment and to the extent authorized by law,
to lease, purchase, hold, sell, assign, transfer, pledge, mortgage and
convey real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that the
said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in any
manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount, execute
and issue promissory notes, drafts, bills of exchange, warrants,
bonds, debentures, and other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any foreign
country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted
by reference to or inference from the terms of any other clause of
this or any other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
FOURTH: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of
5
<PAGE>
stock and whether such dividends shall be cumulative or non-
cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding-
up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section (b)
of this Article FOURTH), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article FOURTH), and subject further to any conditions which may be
fixed in accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article FOURTH), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to
6
<PAGE>
receive all of the remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common
Stock held by them respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article FOURTH, each holder
of Common Stock shall have one vote in respect of each share of Common
Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations
or associations, whether such holders or others, and upon such terms as may
be deemed advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section (b) of this
Article FOURTH and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the powers,
preferences and rights of such other series shall be fixed by the Board of
Directors as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided, however, that
the Board of Directors may provide in the resolution or resolutions as to
any series of Preferred Stock adopted pursuant to section (b) of this
Article FOURTH that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the outstanding shares of
such series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
7
<PAGE>
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be reduced
so as to shorten the term of any director at the time in office, and
provided further, that the number of directors constituting the whole Board
shall be twenty-four until otherwise fixed by a majority of the whole
Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected
to hold office for a term expiring at the second succeeding annual meeting
and directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Any vacancies in the
Board of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the Board of
Directors, acting by a majority of the directors then in office, although
less than a quorum, and any directors so chosen shall hold office until the
next annual election of directors. At such election, the stockholders
shall elect a successor to such director to hold office until the next
election of the class for which such director shall have been chosen and
until his successor shall be elected and qualified. No decrease in the
number of directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the
8
<PAGE>
Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the outstanding
shares of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class) cast
at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on behalf
of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
SEVENTH: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
9
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NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class).
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from time
to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this
Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
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(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
FIFTEENTH shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article FIFTEENTH shall not
be applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
By-Laws if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation of any
such transaction:
(A) is the beneficial owner, directly or indirectly, of more than 10%
of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,00,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or
SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON FEBRUARY 21, 1991
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10 days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
Section 5. Regular meetings of the Board of Directors shall be held on the
third Thursday of each month at the principal office of the Company, or at such
other place and
<PAGE>
time as may be designated by the Board of Directors, the Chairman of the Board,
or the President.
Section 6. Special meetings of the Board of Directors may be called at any
time by the Chairman of the Board of Directors or by the President, and shall be
called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its election
by the stockholders shall appoint an Executive Committee, a Trust Committee, an
Audit Committee and a Compensation Committee, and shall elect from its own
members a Chairman of the Board of Directors and a President who may be the same
person. The Board of Directors shall also elect at such meeting a Secretary and
a Treasurer, who may be the same person, may appoint at any time such other
committees and elect or appoint such other officers as it may deem advisable.
The Board of Directors may also elect at such meeting one or more Associate
Directors.
Section 11. The Board of Directors may at any time remove, with or without
cause, any member of any Committee appointed by it or any associate director or
officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine
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members who shall be selected by the Board of Directors from its own members and
who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the
Board of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office
of the Company or elsewhere in its discretion at least once a week in each week
the Board is not regularly scheduled to meet. A majority of its members shall
be necessary to constitute a quorum for the transaction of business. Special
meetings of the Executive Committee may be held at any time when a quorum is
present.
(D) Minutes of each meeting of the Executive Committee shall
be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity
to prevent the conduct and management of the affairs and business of the Company
by its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
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Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of
the Company or elsewhere in its discretion at least once a month. A majority of
its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Trust Committee may be held at any time when
a quorum is present.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who
shall be selected by the Board of Directors from its own members, none of whom
shall be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the Board
of Directors; it shall consider all matters brought to its attention by the
officer in charge of the Audit Division, review all reports of examination of
the Company made by any governmental agency or such independent auditor employed
for that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more
than
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<PAGE>
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by
the Board of Directors as an associate director, to serve during the pleasure of
the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The President shall have the powers and duties pertaining to
the office
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<PAGE>
of the President conferred or imposed upon him by statute or assigned to him by
the Board of Directors in the absence of the Chairman of the Board the President
shall have the powers and duties of the Chairman of the Board.
Section 3. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 4. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 5. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 6. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 7. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 8. The officer designated by the Board of Directors to be in
charge of the
6
<PAGE>
Audit Division of the Company with such title as the Board of Directors shall
prescribe, shall report to and be directly responsible only to the Board of
Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 9. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 10. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of
stock shall be issued only upon giving such security as may be satisfactory to
the Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or
7
<PAGE>
conversion or exchange of capital stock shall go into effect, or a date in
connection with obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice President,
however denominated by the Board of Directors, shall have full power and
authority to enter into, make, sign, execute, acknowledge and/or deliver and the
Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as although
expressly authorized by the Board of Directors and/or the Executive Committee.
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time
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<PAGE>
determine. Directors and associate directors who serve as members of
committees, other than salaried employees of the Company, shall be paid such
reasonable honoraria or fees for services as members of committees as the Board
of Directors shall from time to time determine and directors and associate
directors may be employed by the Company for such special services as the Board
of Directors may from time to time determine and shall be paid for such special
services so performed reasonable compensation as may be determined by the Board
of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, PROVIDED, HOWEVER,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In
any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses under applicable law.
(D) The rights conferred on any person by this Article X shall
not be exclusive of any other rights which such person may have or hereafter
acquire under any statute, provision of the Charter or Act of Incorporation,
these By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
9
<PAGE>
(E) Any repeal or modification of the foregoing provisions of
this Article X shall not adversely affect any right or protection hereunder of
any person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
10
<PAGE>
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: October 4, 1996 By: /s/ Thomas P. Laskaris
-------------------------------
Name: Thomas P. Laskaris
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ---------------------------------------------------------- ------------------
Name of Bank City
in the State of DELAWARE , at the close of business on June 30, 1996.
------------
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins . . . . . . . 197,600
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities. . . . . . . . . . . . . . . . . . . . . . 495,691
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . 851,207
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Securities purchased under agreements to resell. . . . . . . . . . . . 44,000
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 3,483,407
LESS: Allowance for loan and lease losses. . . . . . 48,992
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve.3,434,415
Assets held in trading accounts. . . . . . . . . . . . . . . . . . . . 0
Premises and fixed assets (including capitalized leases) . . . . . . . 80,629
Other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . 6,713
Investments in unconsolidated subsidiaries and associated companies. . 127
Customers' liability to this bank on acceptances outstanding . . . . . 0
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,164
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,722
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,241,268
CONTINUED ON NEXT PAGE
<PAGE>
LIABILITIES
Deposits:
In domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . .3,389,271
Noninterest-bearing . . . . . . . . . . 731,169
Interest-bearing. . . . . . . . . . 2,658,102
Federal funds purchased. . . . . . . . . . . . . . . . . . . . . . . . 69,265
Securities sold under agreements to repurchase . . . . . . . . . . . . 200,471
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . 74,421
Trading liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other borrowed money:. . . . . . . . . . . . . . . . . . . . . . . . . ///////
With original maturity of one year or less. . . . . . . . . . . . 962,500
With original maturity of more than one year. . . . . . . . . . . 28,000
Mortgage indebtedness and obligations under capitalized leases . . . . 0
Bank's liability on acceptances executed and outstanding . . . . . . . 0
Subordinated notes and debentures. . . . . . . . . . . . . . . . . . . 0
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 97,430
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . .4,821,358
Limited-life preferred stock and related surplus . . . . . . . . . . . 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus. . . . . . . . . . . . . 0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,115
Undivided profits and capital reserves . . . . . . . . . . . . . . . . 359,327
Net unrealized holding gains (losses) on available-for-sale
securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,032)
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . 419,910
Total liabilities, limited-life preferred stock, and equity capital. .5,241,268
<PAGE>
Registration No.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) ___
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
AMERUS LIFE HOLDINGS, INC.
AMERUS CAPITAL I
(Exact name of obligor as specified in its charter)
Iowa 42-1459712
Delaware Applied for
(State of incorporation) (I.R.S. employer identification no.)
418 Sixth Avenue
Des Moines, Iowa 50306-2499
(Address of principal executive offices) (Zip Code)
Quarterly Income Preferred Securities of AmerUs Capital I
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee and
upon information furnished by the obligor, the obligor is not an affiliate
of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of Eligibility
and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to exercise
corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 4th day
of October, 1996.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ I. A. Lennon By: /s/ Thomas P. Laskaris
---------------------------- ---------------------------
Assistant Secretary Name: Thomas P. Laskaris
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE>
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is WILMINGTON TRUST COMPANY whose address is
Rodney Square North, in said City. In addition to such principal office,
the said corporation maintains and operates branch offices in the City of
Newark, New Castle County, Delaware, the Town of Newport, New Castle
County, Delaware, at Claymont, New Castle County, Delaware, at Greenville,
New Castle County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of business as
may be authorized from time to time by the agency or agencies of the
government of the State of Delaware empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with the
Constitution or laws of the United States or of this State, to
discount bills, notes or other evidences of debt, to receive deposits
of money, or securities for money, to buy gold and silver bullion and
foreign coins, to buy and sell bills of exchange, and generally to
use, exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or necessary for
the transaction of the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation, association,
state or municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two parties,
and in like manner may act as Treasurer of any corporation or
municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit, order,
or decree to be entered in any court of record within the State of
Delaware or elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so appointed
by any person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity, it shall not be required to give bond with surety, but its
capital stock shall be taken and held as security for the performance
of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts
and evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony,
or possession thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property, any and all the rights, powers and
privileges of individual
3
<PAGE>
owners thereof, including the right to vote thereon; to invest and
deal in and with any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and proper, and from
time to time to vary or realize such investments; to issue bonds and
secure the same by pledges or deeds of trust or mortgages of or upon
the whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when the Board
of Directors shall determine, and in the promotion of its said
corporate business of investment and to the extent authorized by law,
to lease, purchase, hold, sell, assign, transfer, pledge, mortgage and
convey real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that the
said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in any
manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount, execute
and issue promissory notes, drafts, bills of exchange, warrants,
bonds, debentures, and other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any foreign
country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted
by reference to or inference from the terms of any other clause of
this or any other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
FOURTH: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of
5
<PAGE>
stock and whether such dividends shall be cumulative or non-
cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding-
up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section (b)
of this Article FOURTH), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article FOURTH), and subject further to any conditions which may be
fixed in accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article FOURTH), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to
6
<PAGE>
receive all of the remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common
Stock held by them respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article FOURTH, each holder
of Common Stock shall have one vote in respect of each share of Common
Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations
or associations, whether such holders or others, and upon such terms as may
be deemed advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section (b) of this
Article FOURTH and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the powers,
preferences and rights of such other series shall be fixed by the Board of
Directors as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided, however, that
the Board of Directors may provide in the resolution or resolutions as to
any series of Preferred Stock adopted pursuant to section (b) of this
Article FOURTH that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the outstanding shares of
such series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
7
<PAGE>
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be reduced
so as to shorten the term of any director at the time in office, and
provided further, that the number of directors constituting the whole Board
shall be twenty-four until otherwise fixed by a majority of the whole
Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected
to hold office for a term expiring at the second succeeding annual meeting
and directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Any vacancies in the
Board of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the Board of
Directors, acting by a majority of the directors then in office, although
less than a quorum, and any directors so chosen shall hold office until the
next annual election of directors. At such election, the stockholders
shall elect a successor to such director to hold office until the next
election of the class for which such director shall have been chosen and
until his successor shall be elected and qualified. No decrease in the
number of directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the
8
<PAGE>
Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the outstanding
shares of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class) cast
at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on behalf
of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
SEVENTH: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
9
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NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class).
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from time
to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this
Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
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(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
FIFTEENTH shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article FIFTEENTH shall not
be applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
By-Laws if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation of any
such transaction:
(A) is the beneficial owner, directly or indirectly, of more than 10%
of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,00,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or
SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON FEBRUARY 21, 1991
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10 days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
Section 5. Regular meetings of the Board of Directors shall be held on the
third Thursday of each month at the principal office of the Company, or at such
other place and
<PAGE>
time as may be designated by the Board of Directors, the Chairman of the Board,
or the President.
Section 6. Special meetings of the Board of Directors may be called at any
time by the Chairman of the Board of Directors or by the President, and shall be
called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its election
by the stockholders shall appoint an Executive Committee, a Trust Committee, an
Audit Committee and a Compensation Committee, and shall elect from its own
members a Chairman of the Board of Directors and a President who may be the same
person. The Board of Directors shall also elect at such meeting a Secretary and
a Treasurer, who may be the same person, may appoint at any time such other
committees and elect or appoint such other officers as it may deem advisable.
The Board of Directors may also elect at such meeting one or more Associate
Directors.
Section 11. The Board of Directors may at any time remove, with or without
cause, any member of any Committee appointed by it or any associate director or
officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine
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members who shall be selected by the Board of Directors from its own members and
who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the
Board of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office
of the Company or elsewhere in its discretion at least once a week in each week
the Board is not regularly scheduled to meet. A majority of its members shall
be necessary to constitute a quorum for the transaction of business. Special
meetings of the Executive Committee may be held at any time when a quorum is
present.
(D) Minutes of each meeting of the Executive Committee shall
be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity
to prevent the conduct and management of the affairs and business of the Company
by its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
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Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of
the Company or elsewhere in its discretion at least once a month. A majority of
its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Trust Committee may be held at any time when
a quorum is present.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who
shall be selected by the Board of Directors from its own members, none of whom
shall be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the Board
of Directors; it shall consider all matters brought to its attention by the
officer in charge of the Audit Division, review all reports of examination of
the Company made by any governmental agency or such independent auditor employed
for that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more
than
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<PAGE>
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by
the Board of Directors as an associate director, to serve during the pleasure of
the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The President shall have the powers and duties pertaining to
the office
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<PAGE>
of the President conferred or imposed upon him by statute or assigned to him by
the Board of Directors in the absence of the Chairman of the Board the President
shall have the powers and duties of the Chairman of the Board.
Section 3. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 4. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 5. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 6. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 7. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 8. The officer designated by the Board of Directors to be in
charge of the
6
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Audit Division of the Company with such title as the Board of Directors shall
prescribe, shall report to and be directly responsible only to the Board of
Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 9. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 10. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of
stock shall be issued only upon giving such security as may be satisfactory to
the Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or
7
<PAGE>
conversion or exchange of capital stock shall go into effect, or a date in
connection with obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice President,
however denominated by the Board of Directors, shall have full power and
authority to enter into, make, sign, execute, acknowledge and/or deliver and the
Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as although
expressly authorized by the Board of Directors and/or the Executive Committee.
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time
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<PAGE>
determine. Directors and associate directors who serve as members of
committees, other than salaried employees of the Company, shall be paid such
reasonable honoraria or fees for services as members of committees as the Board
of Directors shall from time to time determine and directors and associate
directors may be employed by the Company for such special services as the Board
of Directors may from time to time determine and shall be paid for such special
services so performed reasonable compensation as may be determined by the Board
of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, PROVIDED, HOWEVER,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In
any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses under applicable law.
(D) The rights conferred on any person by this Article X shall
not be exclusive of any other rights which such person may have or hereafter
acquire under any statute, provision of the Charter or Act of Incorporation,
these By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
9
<PAGE>
(E) Any repeal or modification of the foregoing provisions of
this Article X shall not adversely affect any right or protection hereunder of
any person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
10
<PAGE>
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: October 4, 1996 By: /s/ Thomas P. Laskaris
-------------------------------
Name: Thomas P. Laskaris
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ------------------------------------------------------- ---------------------
Name of Bank City
in the State of DELAWARE , at the close of business on June 30, 1996.
------------
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins. . . . . 197,600
Interest-bearing balances. . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities. . . . . . . . . . . . . . . . . . . . . . 495,691
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . 851,207
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Securities purchased under agreements to resell. . . . . . . . . . . . 44,000
Loans and lease financing receivables:
Loans and leases, net of unearned income . . . . 3,483,407
LESS: Allowance for loan and lease losses . . . 48,992
LESS: Allocated transfer risk reserve . . . . . 0
Loans and leases, net of unearned income, allowance,
and reserve . . . . . . . . . . . . . . . . . . . . . . . 3,434,415
Assets held in trading accounts. . . . . . . . . . . . . . . . . . . . 0
Premises and fixed assets (including capitalized leases) . . . . . . . 80,629
Other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . 6,713
Investments in unconsolidated subsidiaries and associated companies. . 127
Customers' liability to this bank on acceptances outstanding . . . . . 0
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,164
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,722
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,241,268
CONTINUED ON NEXT PAGE
<PAGE>
LIABILITIES
Deposits:
In domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . . 3,389,271
Noninterest-bearing. . . . . . . . . . . . . . . 731,169
Interest-bearing . . . . . . . . . . . . . . . . 2,658,102
Federal funds purchased. . . . . . . . . . . . . . . . . . . . . . . . 69,265
Securities sold under agreements to repurchase . . . . . . . . . . . . 200,471
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . 74,421
Trading liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other borrowed money:. . . . . . . . . . . . . . . . . . . . . . . . . ///////
With original maturity of one year or less . . . . . . . . . 962,500
With original maturity of more than one year . . . . . . . . 28,000
Mortgage indebtedness and obligations under capitalized leases . . . . 0
Bank's liability on acceptances executed and outstanding . . . . . . . 0
Subordinated notes and debentures. . . . . . . . . . . . . . . . . . . 0
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 97,430
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,821,358
Limited-life preferred stock and related surplus . . . . . . . . . . . 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus. . . . . . . . . . . . . 0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,115
Undivided profits and capital reserves . . . . . . . . . . . . . . . . 359,327
Net unrealized holding gains (losses) on available-for-sale
securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,032)
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . 419,910
Total liabilities, limited-life preferred stock, and equity capital. . 5,241,268
2
<PAGE>
Registration No.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)
----
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
AMERUS LIFE HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
Iowa 42-1459712
(State of incorporation) (I.R.S. employer identification no.)
418 Sixth Avenue
Des Moines, Iowa 50306-2499
(Address of principal executive offices) (Zip Code)
Junior Subordinated Debentures due 2026 of AmerUs Life Holdings, Inc.
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee and
upon information furnished by the obligor, the obligor is not an affiliate
of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to exercise
corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 4th day
of October, 1996.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ I. A. Lennon By:/s/ Thomas P. Laskaris
----------------------------- ---------------------------
Assistant Secretary Name: Thomas P. Laskaris
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE>
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is WILMINGTON TRUST COMPANY whose address is
Rodney Square North, in said City. In addition to such principal office,
the said corporation maintains and operates branch offices in the City of
Newark, New Castle County, Delaware, the Town of Newport, New Castle
County, Delaware, at Claymont, New Castle County, Delaware, at Greenville,
New Castle County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of business as
may be authorized from time to time by the agency or agencies of the
government of the State of Delaware empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with the
Constitution or laws of the United States or of this State, to
discount bills, notes or other evidences of debt, to receive deposits
of money, or securities for money, to buy gold and silver bullion and
foreign coins, to buy and sell bills of exchange, and generally to
use, exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or necessary for
the transaction of the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation, association,
state or municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two parties,
and in like manner may act as Treasurer of any corporation or
municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit, order,
or decree to be entered in any court of record within the State of
Delaware or elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so appointed
by any person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity, it shall not be required to give bond with surety, but its
capital stock shall be taken and held as security for the performance
of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts
and evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony,
or possession thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property, any and all the rights, powers and
privileges of individual
3
<PAGE>
owners thereof, including the right to vote thereon; to invest and
deal in and with any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and proper, and from
time to time to vary or realize such investments; to issue bonds and
secure the same by pledges or deeds of trust or mortgages of or upon
the whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when the Board
of Directors shall determine, and in the promotion of its said
corporate business of investment and to the extent authorized by law,
to lease, purchase, hold, sell, assign, transfer, pledge, mortgage and
convey real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that the
said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in any
manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount, execute
and issue promissory notes, drafts, bills of exchange, warrants,
bonds, debentures, and other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any foreign
country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted
by reference to or inference from the terms of any other clause of
this or any other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
FOURTH: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of
5
<PAGE>
stock and whether such dividends shall be cumulative or non-
cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding-
up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section (b)
of this Article FOURTH), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article FOURTH), and subject further to any conditions which may be
fixed in accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article FOURTH), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to
6
<PAGE>
receive all of the remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common
Stock held by them respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article FOURTH, each holder
of Common Stock shall have one vote in respect of each share of Common
Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations
or associations, whether such holders or others, and upon such terms as may
be deemed advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section (b) of this
Article FOURTH and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the powers,
preferences and rights of such other series shall be fixed by the Board of
Directors as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided, however, that
the Board of Directors may provide in the resolution or resolutions as to
any series of Preferred Stock adopted pursuant to section (b) of this
Article FOURTH that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the outstanding shares of
such series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
7
<PAGE>
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be reduced
so as to shorten the term of any director at the time in office, and
provided further, that the number of directors constituting the whole Board
shall be twenty-four until otherwise fixed by a majority of the whole
Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected
to hold office for a term expiring at the second succeeding annual meeting
and directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Any vacancies in the
Board of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the Board of
Directors, acting by a majority of the directors then in office, although
less than a quorum, and any directors so chosen shall hold office until the
next annual election of directors. At such election, the stockholders
shall elect a successor to such director to hold office until the next
election of the class for which such director shall have been chosen and
until his successor shall be elected and qualified. No decrease in the
number of directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the
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Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the outstanding
shares of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class) cast
at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on behalf
of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
SEVENTH: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
9
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NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class).
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from time
to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this
Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
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(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
FIFTEENTH shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article FIFTEENTH shall not
be applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
By-Laws if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation of any
such transaction:
(A) is the beneficial owner, directly or indirectly, of more than 10%
of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,00,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or
SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON FEBRUARY 21, 1991
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10 days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
Section 5. Regular meetings of the Board of Directors shall be held on the
third Thursday of each month at the principal office of the Company, or at such
other place and
<PAGE>
time as may be designated by the Board of Directors, the Chairman of the Board,
or the President.
Section 6. Special meetings of the Board of Directors may be called at any
time by the Chairman of the Board of Directors or by the President, and shall be
called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its election
by the stockholders shall appoint an Executive Committee, a Trust Committee, an
Audit Committee and a Compensation Committee, and shall elect from its own
members a Chairman of the Board of Directors and a President who may be the same
person. The Board of Directors shall also elect at such meeting a Secretary and
a Treasurer, who may be the same person, may appoint at any time such other
committees and elect or appoint such other officers as it may deem advisable.
The Board of Directors may also elect at such meeting one or more Associate
Directors.
Section 11. The Board of Directors may at any time remove, with or without
cause, any member of any Committee appointed by it or any associate director or
officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine
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members who shall be selected by the Board of Directors from its own members and
who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the
Board of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office
of the Company or elsewhere in its discretion at least once a week in each week
the Board is not regularly scheduled to meet. A majority of its members shall
be necessary to constitute a quorum for the transaction of business. Special
meetings of the Executive Committee may be held at any time when a quorum is
present.
(D) Minutes of each meeting of the Executive Committee shall
be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity
to prevent the conduct and management of the affairs and business of the Company
by its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
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Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of
the Company or elsewhere in its discretion at least once a month. A majority of
its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Trust Committee may be held at any time when
a quorum is present.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who
shall be selected by the Board of Directors from its own members, none of whom
shall be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the Board
of Directors; it shall consider all matters brought to its attention by the
officer in charge of the Audit Division, review all reports of examination of
the Company made by any governmental agency or such independent auditor employed
for that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more
than
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<PAGE>
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by
the Board of Directors as an associate director, to serve during the pleasure of
the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The President shall have the powers and duties pertaining to
the office
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<PAGE>
of the President conferred or imposed upon him by statute or assigned to him by
the Board of Directors in the absence of the Chairman of the Board the President
shall have the powers and duties of the Chairman of the Board.
Section 3. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 4. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 5. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 6. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 7. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 8. The officer designated by the Board of Directors to be in
charge of the
6
<PAGE>
Audit Division of the Company with such title as the Board of Directors shall
prescribe, shall report to and be directly responsible only to the Board of
Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 9. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 10. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of
stock shall be issued only upon giving such security as may be satisfactory to
the Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or
7
<PAGE>
conversion or exchange of capital stock shall go into effect, or a date in
connection with obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice President,
however denominated by the Board of Directors, shall have full power and
authority to enter into, make, sign, execute, acknowledge and/or deliver and the
Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as although
expressly authorized by the Board of Directors and/or the Executive Committee.
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time
8
<PAGE>
determine. Directors and associate directors who serve as members of
committees, other than salaried employees of the Company, shall be paid such
reasonable honoraria or fees for services as members of committees as the Board
of Directors shall from time to time determine and directors and associate
directors may be employed by the Company for such special services as the Board
of Directors may from time to time determine and shall be paid for such special
services so performed reasonable compensation as may be determined by the Board
of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, PROVIDED, HOWEVER,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In
any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses under applicable law.
(D) The rights conferred on any person by this Article X shall
not be exclusive of any other rights which such person may have or hereafter
acquire under any statute, provision of the Charter or Act of Incorporation,
these By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
9
<PAGE>
(E) Any repeal or modification of the foregoing provisions of
this Article X shall not adversely affect any right or protection hereunder of
any person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
10
<PAGE>
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: October 4, 1996 By: /s/ Thomas P. Laskaris
-----------------------------
Name: Thomas P. Laskaris
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ---------------------------------------------------------- ------------------
Name of Bank City
in the State of DELAWARE , at the close of business on June 30, 1996.
------------
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins . . . . . . 197,600
Interest-bearing balances . . . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities. . . . . . . . . . . . . . . . . . . . . 495,691
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . 851,207
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Securities purchased under agreements to resell. . . . . . . . . . . 44,000
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . .3,483,407
LESS: Allowance for loan and lease losses. . . . . . 48,992
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance,
and reserve . . . . . . . . . . . . . . . . . . . . . . . . . 3,434,415
Assets held in trading accounts. . . . . . . . . . . . . . . . . . . 0
Premises and fixed assets (including capitalized leases) . . . . . . 80,629
Other real estate owned. . . . . . . . . . . . . . . . . . . . . . . 6,713
Investments in unconsolidated subsidiaries and associated companies. 127
Customers' liability to this bank on acceptances outstanding . . . . 0
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . 4,164
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,722
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,241,268
CONTINUED ON NEXT PAGE
<PAGE>
LIABILITIES
Deposits:
In domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . 3,389,271
Noninterest-bearing . . . . . . . . 731,169
Interest-bearing. . . . . . . . . . 2,658,102
Federal funds purchased. . . . . . . . . . . . . . . . . . . . . . . 69,265
Securities sold under agreements to repurchase . . . . . . . . . . . 200,471
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . 74,421
Trading liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 0
Other borrowed money:. . . . . . . . . . . . . . . . . . . . . . . . ///////
With original maturity of one year or less. . . . . . . . . . . 962,500
With original maturity of more than one year. . . . . . . . . . 28,000
Mortgage indebtedness and obligations under capitalized leases . . . 0
Bank's liability on acceptances executed and outstanding . . . . . . 0
Subordinated notes and debentures. . . . . . . . . . . . . . . . . . 0
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 97,430
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 4,821,358
Limited-life preferred stock and related surplus . . . . . . . . . . 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus. . . . . . . . . . . . 0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,115
Undivided profits and capital reserves . . . . . . . . . . . . . . . 359,327
Net unrealized holding gains (losses) on available-for-sale
securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,032)
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . 419,910
Total liabilities, limited-life preferred stock, and
equity capital. . . . . . . . . . . . . . . . . . . . . . . . . . 5,241,268
2
