<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 8, 1998.
REGISTRATION NO. 333-50249
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
<TABLE>
<S> <C> <C>
AMERUS LIFE HOLDINGS, INC. IOWA 42-1459712
AMERUS CAPITAL II DELAWARE 42-6571888
AMERUS CAPITAL III DELAWARE 42-6571890
(Exact name of the (State or other jurisdiction (I.R.S. Employer
Registrants of incorporation or Identification No.)
as specified in their organization)
respective charters)
</TABLE>
699 WALNUT STREET
DES MOINES, IOWA 50309-3948
(515) 362-3600
(Address, including zip code, and telephone number, including
area code, of each Registrant's principal executive offices)
------------------------
JAMES A. SMALLENBERGER
SENIOR VICE PRESIDENT AND SECRETARY
699 WALNUT STREET
DES MOINES, IOWA 50309-3948
(515) 362-3600
(Name, address, including zip code, and telephone
number, including area code, of agent for service for each Registrant)
------------------------
COPY TO:
RICHARD G. CLEMENS, ESQ.
SIDLEY & AUSTIN
ONE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60603
(312) 853-7000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective, as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
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. [ ]
(Continued on next page)
<PAGE> 2
(Continued from previous page)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==========================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) UNIT(2) PRICE(2) FEE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Debt Securities of AmerUs Life
Holdings, Inc......................
- --------------------------------------------------------------------------------------------------------------------------
Preferred Stock of AmerUs Life
Holdings, Inc., no par value(3)....
- --------------------------------------------------------------------------------------------------------------------------
Class A Common Stock of AmerUs Life
Holdings, Inc., no par value(3)....
- --------------------------------------------------------------------------------------------------------------------------
Purchase Contracts of AmerUs Life
Holdings, Inc.(4)..................
- --------------------------------------------------------------------------------------------------------------------------
Warrants of AmerUs Life
Holdings, Inc......................
- --------------------------------------------------------------------------------------------------------------------------
Capital Securities of AmerUs Capital
II(5)..............................
- --------------------------------------------------------------------------------------------------------------------------
Capital Securities of AmerUs Capital
III(5).............................
- --------------------------------------------------------------------------------------------------------------------------
Unit(s)(6)...........................
- --------------------------------------------------------------------------------------------------------------------------
AmerUs Life Holdings, Inc. Guarantees
with respect to the Capital
Securities of AmerUs Capital II and
AmerUs Capital III(7)..............
- --------------------------------------------------------------------------------------------------------------------------
Total................................ $750,000,000 100% $750,000,000 $221,250
==========================================================================================================================
</TABLE>
(1) Such indeterminate number or amount of Debt Securities, Preferred Stock,
Class A Common Stock, Purchase Contracts, Units, Warrants and Guarantees of
AmerUs Life Holdings, Inc. (the "Company") and Capital Securities of AmerUs
Capital II and AmerUs Capital III (the "AmerUs Trusts") as may from time to
time be issued at indeterminate prices. Debt Securities of the Company may
be issued and sold to the AmerUs Trusts, in which event such Debt Securities
may later be distributed to the holders of Capital Securities of the AmerUs
Trusts for no further consideration upon a dissolution of any such AmerUs
Trust and the distribution of the assets thereof. The amount registered is
in United States dollars or the equivalent thereof in any other currency,
currency unit or units, or composite currency or currencies.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457. The aggregate offering price of the Debt Securities,
Preferred Stock, Class A Common Stock, Purchase Contracts, Stock Purchase
Units, Warrants and Capital Securities, and the exercise price of any
securities issuable upon exercise of Warrants registered hereby will not
exceed $750,000,000.
(3) Also includes such indeterminate number of shares of Preferred Stock and
Class A Common Stock as may be issued upon conversion of or exchange for any
Debt Securities or Preferred Stock registered hereunder that provide for
conversion or exchange into other securities. No separate consideration will
be received for the Preferred Stock or Class A Common Stock issuable upon
conversion of or in exchange for Debt Securities or Preferred Stock. Also
consists of such currently indeterminate number of shares of Class A Common
Stock to be issuable by the Company upon settlement of the Purchase
Contracts of the Company.
(4) Each Purchase Contract of the Company obligates the Company to sell, and the
holder thereof to purchase, a number of shares of Common Stock of the
Company.
(5) Each Capital Security of AmerUs Capital II or AmerUs Capital III represents
a preferred undivided beneficial interest in the assets of AmerUs Capital II
or AmerUs Capital III, respectively.
(6) Each Unit consists initially of a Capital Security of AmerUs Capital II or
AmerUs Capital III and a Purchase Contract.
(7) No separate consideration will be received for the Guarantees of the
Company.
------------------------
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 3
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 SUPPLEMENT AND THE ACCOMPANYING
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.
SUBJECT TO COMPLETION, DATED JUNE 8, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE , 1998)
$125,000,000
AMERUS LIFE HOLDINGS, INC. LOGO
AMERUS LIFE HOLDINGS, INC.
% SENIOR NOTES DUE , 2008
------------------
The % Senior Notes due 2008 (the "Notes") of AmerUs Life Holdings,
Inc. (the "Company") being offered hereby will mature on June , 2008.
Interest on the Notes is payable semiannually on June and December
of each year, commencing December , 1998. The Notes are not
redeemable prior to maturity and are not entitled to any sinking fund. See
"Description of Notes."
The Notes will be represented by one or more global Notes registered in the
name of the nominee of The Depository Trust Company ("DTC"), which will act as
the depository. Interests in the global Notes will be shown on, and transfers
thereof will be effected only through, records maintained by DTC and its
participants. Except as described herein, Notes in definitive form will not be
issued. Settlement for the Notes will be made in immediately available funds.
The Notes will trade in DTC's Same-Day Funds Settlement System, and secondary
market trading activity in the Notes will therefore settle in immediately
available funds. All payments of principal and interest will be made by the
Company in immediately available funds. See "Description of Notes -- Same-Day
Settlement and Payment."
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE S-7 OF THIS PROSPECTUS SUPPLEMENT AND
PAGE 13 OF THE ACCOMPANYING PROSPECTUS FOR CERTAIN CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THE NOTES.
------------------
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 SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===============================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Per Note % % %
- ---------------------------------------------------------------------------------------------------------------
Total $ $ $
===============================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from June , 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) Before deduction of expenses payable by the Company estimated at
$ .
------------------
The Notes 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 Notes will be ready for
delivery in book-entry form only through the facilities of DTC in New York, New
York, on or about June , 1998, against payment therefor in immediately
available funds.
------------------
SALOMON SMITH BARNEY GOLDMAN, SACHS & CO.
CHASE SECURITIES INC. CREDIT SUISSE FIRST BOSTON
June , 1998
<PAGE> 4
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE IOWA
COMMISSIONER OF INSURANCE NOR HAS THE IOWA COMMISSIONER OF INSURANCE RULED UPON
THE ACCURACY OR ADEQUACY OF THE ACCOMPANYING PROSPECTUS (THE "PROSPECTUS") OR
THIS PROSPECTUS SUPPLEMENT.
------------------
FOR NORTH CAROLINA INVESTORS: THE COMMISSIONER OF INSURANCE OF THE STATE OF
NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING NOR HAS SUCH
COMMISSIONER RULED UPON THE ACCURACY OR THE ADEQUACY OF THE ACCOMPANYING
PROSPECTUS OR THIS PROSPECTUS SUPPLEMENT.
------------------
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES A SAFE HARBOR
FOR FORWARD-LOOKING STATEMENTS. A NUMBER OF MATTERS AND SUBJECT AREAS DISCUSSED
OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS ARE NOT LIMITED TO HISTORICAL OR CURRENT FACTS AND DEAL WITH
POTENTIAL FUTURE CIRCUMSTANCES AND DEVELOPMENTS. FACTORS THAT MAY CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED OR PROJECTED IN SUCH
FORWARD LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES:
(I) HEIGHTENED COMPETITION, INCLUDING THE ENTRY OF NEW COMPETITORS AND THE
DEVELOPMENT OF NEW PRODUCTS BY COMPETITORS; (II) ADVERSE STATE AND FEDERAL
LEGISLATION AND REGULATION, INCLUDING INCREASES IN MINIMUM CAPITAL AND RESERVES,
AND OTHER FINANCIAL VIABILITY REQUIREMENTS AND ADDITIONAL REGULATIONS OF MUTUAL
HOLDING COMPANIES; (III) FAILURE TO DEVELOP MULTIPLE DISTRIBUTION CHANNELS IN
ORDER TO OBTAIN NEW CUSTOMERS OR FAILURE TO RETAIN EXISTING CUSTOMERS; (IV)
INABILITY TO CARRY OUT MARKETING AND SALES PLANS, INCLUDING, AMONG OTHERS,
CHANGES TO CERTAIN PRODUCTS AND ACCEPTANCE OF THE REVISED PRODUCTS IN THE
MARKET; (V) LOSS OF KEY EXECUTIVES; (VI) CHANGES IN INTEREST RATES CAUSING A
REDUCTION OF INVESTMENT INCOME; (VII) GENERAL ECONOMIC AND BUSINESS CONDITIONS
WHICH ARE LESS FAVORABLE THAN EXPECTED; (VIII) UNANTICIPATED CHANGES IN INDUSTRY
TRENDS; (IX) INACCURACIES IN ASSUMPTIONS REGARDING FUTURE MORBIDITY,
PERSISTENCY, MORTALITY AND INTEREST RATES USED IN CALCULATING RESERVE AMOUNTS;
(X) ADVERSE CHANGES IN RATINGS ASSIGNED BY RATING AGENCIES; (XI) CHANGES IN TAX
LAWS WHICH NEGATIVELY AFFECT DEMAND FOR THE COMPANY'S PRODUCTS; (XII) THE RISK
FACTORS OR UNCERTAINTIES LISTED HEREIN OR LISTED FROM TIME TO TIME IN THIS
PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS OR ANY DOCUMENT INCORPORATED
BY REFERENCE HEREIN; AND (XIII) WITH RESPECT TO COST SAVINGS THAT ARE EXPECTED
TO BE REALIZED FROM, AND COSTS ASSOCIATED WITH, THE RECENT ACQUISITIONS OF DELTA
LIFE CORPORATION ("DELTA") AND AMVESTORS FINANCIAL CORPORATION ("AMVESTORS"),
THE FOLLOWING POSSIBILITIES: (A) THE EXPECTED COST SAVINGS TO BE REALIZED
THROUGH COMBINING CERTAIN FUNCTIONS OF THE COMPANY, DELTA AND AMVESTORS TO
ELIMINATE REDUNDANCIES AND BETTER SERVE THE COMBINED COMPANY'S CUSTOMERS, AND
REDUCTIONS IN STAFF CANNOT BE FULLY REALIZED BECAUSE THE CHANGES ARE NOT MADE OR
UNANTICIPATED ADDED COSTS ARE INCURRED; AND (B) COSTS OR DIFFICULTIES RELATED TO
THE INTEGRATION OF
S-2
<PAGE> 5
THE BUSINESSES OF DELTA AND AMVESTORS WITH THE COMPANY'S OTHER BUSINESSES ARE
GREATER THAN EXPECTED. A VARIETY OF FACTORS COULD CAUSE THE COMPANY'S ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THE EXPECTED RESULTS EXPRESSED IN THE
COMPANY'S FORWARD-LOOKING STATEMENTS, INCLUDING THOSE SET FORTH IN THE RISK
FACTORS AND ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS
OR THE DOCUMENTS INCORPORATED BY REFERENCE THEREIN.
S-3
<PAGE> 6
THE COMPANY
OVERVIEW
The Company is an insurance holding company engaged through its
subsidiaries in the business of marketing, underwriting and distributing a broad
range of individual life insurance and annuity products to individuals and
businesses in 49 states, the District of Columbia and the U.S. Virgin Islands.
The Company's primary product offerings consist of whole life, universal life
and term life insurance policies and fixed annuities. As of March 31, 1998, the
Company had approximately 567,000 life insurance policies and annuity contracts
outstanding and individual life insurance in force, net of reinsurance, of
approximately $26.9 billion with life insurance reserves of $2.4 billion and
annuity reserves of $5.9 billion. As of March 31, 1998, the Company had total
assets of $10.4 billion and total shareholders' equity of $944.6 million. See
"The Company," "Organizational Structure" and "Business" in the accompanying
Prospectus for a more detailed description of the Company.
RECENT ACQUISITIONS
The Company made two major acquisitions in 1997. The Company acquired Delta
Life Corporation ("Delta") on October 23 for approximately $165 million in cash
and AmVestors Financial Corporation ("AmVestors") on December 19 in a stock
exchange valued at approximately $350 million. Both Delta and AmVestors
specialize in the sale of fixed annuity products, thus strengthening the
Company's presence in the rapidly growing asset accumulation and retirement
savings markets. The acquisitions, along with the growth of AmerUs Life
Insurance Company ("AmerUs Life"), increased the Company's assets from $4.4
billion at March 31, 1997 to $10.4 billion at March 31, 1998.
RECENT DEVELOPMENTS
REFINANCING PLAN
On April 16, 1998, the Company announced a refinancing plan (the
"Refinancing Plan") that includes this offering of Notes and an offering of up
to $150 million of unit securities (the "Units") consisting of subordinated debt
securities and a contract to purchase the Company's Class A Common Stock, no par
value (the "Class A Common Stock") (the "Units Offering," and together with this
offering of Notes, the "Offerings"). Proceeds from the Offerings will be used to
repay the outstanding balance of $250 million on the Company's revolving bank
debt (the "Bank Debt"), to partially fund a buyback of up to $75 million of the
Company's Class A Common Stock (the "Stock Repurchase Plan") and for general
corporate purposes.
The Units Offering requires the approval of the Iowa Commissioner of
Insurance (the "Commissioner"). On April 16, 1998, the Company filed an
application to obtain such approval. The Commissioner held a hearing on May 27,
1998 to review the Company's application in respect of the Units Offering. If
the Commissioner approves the Units Offering, the Company expects to commence
the Units Offering as soon as practicable after obtaining such approval and any
bank consents which may be required for the Units Offering. See "Risk Factors --
Uncertainties Regarding the Future Sale of Equity Securities."
RECENT RATINGS ACTIONS
Certain ratings agencies have recently reviewed the ratings assigned to the
Company and its life insurance subsidiaries. On April 14, 1998, Standard &
Poor's Ratings Service reaffirmed its single-A insurer financial strength rating
for AmerUs Life while on May 1, 1998, Moody's Investors Service downgraded
AmerUs Life's financial strength rating to A3 from A2. At the same time, Moody's
reaffirmed the long-term credit ratings of the Company at Ba1 for the Company's
junior subordinated debt and at Baa3 for the preferred stock rating of AmerUs
Capital I and upgraded the insurance financial strength rating of AmVestor's
subsidiary, American Investors Life Insurance Company, to Baal from Baa3. In
addition, Moody's assigned an A3 insurance financial strength rating to Delta's
life insurance subsidiary, Delta Life and Annuity Company. Moody's warned that
the outlook on all the debt, preferred stock and insurance financial strength
ratings remained negative, given the Company's aggressive strategy of rapid
growth through acquisitions. See "Risk Factors -- Importance of Ratings" in the
accompanying Prospectus.
S-4
<PAGE> 7
SELECTED CONSOLIDATED FINANCIAL
AND OPERATING DATA
The following table sets forth certain consolidated financial and operating
data of the Company. The selected consolidated financial and operating data
below for the three-month periods ended March 31, 1997 and 1998 are derived from
unaudited interim financial statements of the Company incorporated by reference
in the Prospectus. In the opinion of management, such unaudited interim
financial statements include all adjustments (consisting only of normal
recurring accruals) necessary for a fair, consistent presentation, in accordance
with generally accepted accounting principles ("GAAP"), of such information. The
selected consolidated financial and operating data for the three-months ended
March 31, 1998 are not necessarily indicative of the Company's results for any
future interim period or the entire year. During the fourth quarter of 1997, the
Company acquired Delta and AmVestors in transactions that were accounted for
using the purchase method of accounting. As a result, only the Consolidated
Income Statement Data and the Consolidated Balance Sheet Data as of or for the
three-month period ended March 31, 1998 include the results of Delta and
AmVestors.
<TABLE>
<CAPTION>
AS OF OR FOR THE
THREE MONTHS ENDED
MARCH 31, (UNAUDITED)
----------------------
1998(A) 1997
------- ----
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Revenues:
Insurance premiums........................................ $ 17.3 $ 8.2
Product charges........................................... 16.4 11.2
Net investment income..................................... 133.1 50.9
Realized gains on investments............................. 6.2 5.2
Contribution from the Closed Block........................ 9.0 9.3
--------- ---------
Total revenues.............................................. 182.0 84.8
--------- ---------
Benefits and expenses:
Total policyowner benefits................................ 107.3 45.5
Total expenses............................................ 36.2 16.1
Dividends to policyowners................................. 0.3 0.1
--------- ---------
Total benefits and expenses................................. 143.8 61.7
--------- ---------
Income from operations...................................... 38.2 23.1
Interest expense............................................ 6.7 3.0
--------- ---------
Income before income tax expense and equity in earnings of
unconsolidated subsidiary................................. 31.5 20.1
Income tax expense.......................................... 10.1 5.7
--------- ---------
Income before equity in earnings of unconsolidated
subsidiary................................................ 21.4 14.4
Equity in earnings of unconsolidated subsidiary............. 0.4 0.2
--------- ---------
Net income.................................................. $ 21.8 $ 14.6
========= =========
Earnings per common share(B)................................
Basic..................................................... $ 0.63 $ 0.63
Diluted................................................... 0.62 0.63
Dividends declared per common share......................... 0.10 --
Ratios of earnings to fixed charges(C)(D)................... 1.39x 2.11x
</TABLE>
S-5
<PAGE> 8
<TABLE>
<CAPTION>
AS OF OR FOR THE
THREE MONTHS ENDED
MARCH 31, (UNAUDITED)
----------------------
1998(A) 1997
------- ----
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Total invested assets....................................... $ 7,775.7 $ 2,864.1
Total assets................................................ 10,354.9 4,412.0
Total liabilities........................................... 9,324.3 3,822.4
Company-obligated mandatorily redeemable preferred
securities................................................ 86.0 86.0
Total stockholders' equity(E)............................... 944.6 503.6
OTHER OPERATING DATA:
Adjusted operating income(F)................................ $ 19.5 $ 11.6
Adjusted operating income per common share (basic and
diluted)(F)............................................... 0.56 0.50
Individual life insurance in force, net of reinsurance...... 26,935 25,735
Life insurance reserves..................................... 2,369 2,065
Annuity reserves............................................ 5,930 1,323
Number of employees......................................... 710 405
STATUTORY DATA:
Premiums and deposits:
Individual life........................................... $ 84.9 $ 81.6
Annuities................................................. 173.7 12.4
</TABLE>
- ---------------
(A) Consolidated Income Statement Data includes the results for Delta and
AmVestors for the three-month period ended March 31, 1998, and Consolidated
Balance Sheet Data includes period-end data for Delta and AmVestors as of
March 31, 1998.
(B) Basic earnings per common share for the first quarter of 1998 is calculated
using 29.73 million weighted average shares of Class A Common Stock and 5
million shares of Class B Common Stock outstanding. Diluted earnings per
common share for the first quarter of 1998 is calculated using 29.83
million weighted average shares of Class A Common Stock and 5 million
shares of Class B Common Stock outstanding. The basic and diluted earnings
per common share for the first quarter of 1997 are calculated using 18.16
million shares of Class A Common Stock and 5 million shares of Class B
Common Stock outstanding.
(C) For purposes of computing the ratio of earnings to fixed charges,
"earnings" consist of income from operations before federal income taxes,
fixed charges and pre-tax earnings required to cover preferred stock
dividend requirements. "Fixed charges" consist of interest expense on debt
and capital securities, amortization of debt expense and interest credited
on deferred annuities.
(D) Since the Company currently has no preferred stock outstanding, the ratio
of earnings to fixed charges and preferred stock dividends is the same as
the ratio of earnings to fixed charges.
(E) Amounts shown include the effects of reporting fixed maturity securities at
fair value and recording the unrealized appreciation or depreciation on
such securities as a component of stockholders' equity, net of tax and
other adjustments. Such adjustments are in accordance with Statement of
Financial Accounting Standards 115, "Accounting for Certain Investments in
Debt and Equity Securities," which the Company adopted December 31, 1993.
(F) Adjusted operating income reflects net income adjusted to eliminate certain
items (net of applicable income taxes) which management believes are not
necessarily indicative of overall operating trends. For example, net
realized capital gains or losses on investments, excluding gains or losses
on convertible debt which are considered core earnings, are eliminated.
Different items are likely to occur in each period presented and others may
have different opinions as to which items may warrant adjustment. The
adjusted operating income shown does not constitute net income computed in
accordance with GAAP. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition-Adjusted Operating Income" in the
accompanying Prospectus.
S-6
<PAGE> 9
RISK FACTORS
The following risk factor supplements the risk factors contained in the
Prospectus and should be read in connection with the risk factors contained
therein.
UNCERTAINTIES REGARDING THE FUTURE SALE OF EQUITY SECURITIES
The Company is an insurance holding company subject to regulation by the
Iowa Insurance Division. Iowa law requires the prior approval of the
Commissioner for the sale of any stock of the Company, including the Units
Offering. While the Company has no reason to believe that the Commissioner will
disapprove the Units Offering or any other sale of the Company's stock, there
can be no assurance as to the Commissioner's approval of the Units Offering or
any other subsequent offering of the Company's stock. The inability to obtain
approval for the Units Offering from the Commissioner, or the failure to obtain
any required bank consents, would adversely affect the Company's ability to
complete its Refinancing Plan, including the complete repayment of Bank Debt.
The inability to obtain approval for future offerings of the Company's stock
would adversely impact the Company's ability to raise capital for mergers,
acquisitions or other corporate purposes. Moreover, there can be no assurance
that if the Company obtains the approval of the Commissioner to commence the
Units Offering that such offering will be consummated.
USE OF PROCEEDS
The net proceeds from the sale of the Notes, estimated to be approximately
$ million (after deduction of underwriting discounts and estimated offering
expenses), will be used by the Company to partially repay the $250 million of
Bank Debt. In addition, the Company has made application with the Commissioner
to issue up to $150 million of Units, the proceeds of which will be used to
repay the remaining outstanding Bank Debt, to partially fund a stock repurchase
of up to $75 million of the Company's Class A Common Stock and for general
corporate purposes. The offering made hereby and the Units Offering are
independent offerings and the consummation of either of the offerings is not
conditioned upon the consummation of the other offering. There can be no
assurance that the Units Offering will be consummated. See "Risk Factors" above.
Upon completion of the Notes offering, the Company will retain an open secured
line of credit under the Credit Agreement (as defined herein under "Description
of Notes -- Certain Definitions Applicable to the Notes") in an amount not to
exceed $150 million.
S-7
<PAGE> 10
CAPITALIZATION
The following table summarizes the actual capitalization of the Company and
its consolidated subsidiaries at March 31, 1998 and such capitalization adjusted
on a pro forma basis to reflect the sale of the Notes offered hereby and an
assumed application of the proceeds from such sale, after underwriting
commissions and estimated expenses of this offering, to repay indebtedness. This
table should be read in conjunction with the Company's Quarterly Report on Form
10-Q for the three months ended March 31, 1998 which is incorporated by
reference in the Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
---------------------------
PRO FORMA FOR
THE ISSUANCE
ACTUAL OF THE NOTES
---------- -------------
(IN THOUSANDS)
<S> <C> <C>
Commercial paper and notes payable:
Bank Debt................................................. $ 266,341 $ 141,341
Notes..................................................... -- 125,000
---------- ----------
Total Debt............................................. 266,341 266,341
Capital Securities........................................ 86,000 86,000
---------- ----------
Shareholders' equity:
Class A Common Stock...................................... 29,735 29,735
Class B Common Stock...................................... 5,000 5,000
Accumulated other comprehensive income, net of deferred
income taxes.............................................. 54,099 54,099
Additional paid-in capital.................................. 383,686 383,686
Retained earnings........................................... 472,108 472,108
---------- ----------
Total shareholders' equity.................................. 944,628 944,628
---------- ----------
Total capitalization................................... $1,296,969 $1,296,969
========== ==========
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS
The information appearing below has been extracted from Management's
Discussion and Analysis of Results of Operations and Financial Condition
contained in the Company's Report on Form 10-Q for the three-month period ended
March 31, 1998 (which is incorporated by reference in the Prospectus) and should
be read in conjunction with the more complete information contained therein.
RESULTS OF OPERATIONS -- FIRST QUARTER 1998 COMPARED TO FIRST QUARTER 1997
REVENUES
Individual life and annuity premiums and product charges increased by $14.3
million, or 73.8%, to $33.6 million for the first quarter of 1998 from $19.3
million for the first quarter of 1997. Included in the 1998 increase were $6.3
million of insurance and annuity premiums and product charges from Delta and
AmVestors. Insurance premiums increased by $9.1 million to $17.3 million for the
first quarter of 1998 compared to $8.2 million for the first quarter of 1997.
Included in the increased insurance premiums in 1998 was $2.0 million from the
acquisitions. Traditional life insurance premiums increased by $5.6 million
primarily as a result of growth in renewal premiums on traditional life
insurance policies not included in the Closed Block (as defined in the
Prospectus). Immediate annuity deposits and supplementary contract premiums were
$3.5 million higher in 1998 than in 1997 with $1.8 million from the recent
acquisitions of Delta and AmVestors and $1.7 million from increased immediate
annuity and supplementary contract premium sales of AmerUs Life.
Universal life product charges increased by $0.6 million for the first
quarter of 1998 primarily due to increased cost of insurance charges as a result
of the normal aging of the block of business.
Annuity product charges for first quarter 1998 increased by $4.5 million
from 1997 amounts. The increase includes $4.3 million of annuity product charges
from Delta and AmVestors.
Net investment income increased by $82.2 million to $133.1 million for
first quarter 1998. Included in the 1998 increase in net investment income was
$82.6 million of net investment income from Delta and AmVestors. The remaining
$0.4 million decrease in net investment income was attributable to a decrease in
average invested assets (excluding market value adjustments, the Closed Block
and Delta and AmVestors) partially offset by an increase in effective yields on
average invested assets. Average invested assets (excluding market value
adjustments, the Closed Block and Delta and AmVestors) in the first quarter of
1998 decreased by $56.8 million from the first quarter of 1997, primarily as a
result of the continued runoff of AmerUs Life's individual deferred annuity
business. Effective May 1996, substantially all new sales of individual deferred
annuities by AmerUs Life's distribution network have been made through the joint
venture (the "Ameritas Joint Venture") with Ameritas Life Insurance Corp.
pursuant to which AmerUs Life markets fixed annuities issued by Ameritas
Variable Life Insurance Company ("AVLIC") and sells AVLIC's variable life
insurance and variable annuity products. The effective yield on average invested
assets (excluding market value adjustments, the Closed Block and Delta and
AmVestors) increased from 7.22% for the first quarter of 1997 to 7.26% for the
first quarter of 1998.
Realized gains on investments were $6.2 million for the first quarter of
1998 compared to gains of $5.2 million for the first quarter of 1997. Included
in the first quarter amounts were $1.9 million of gains from Delta and
AmVestors.
THE CLOSED BLOCK
The Closed Block was established on June 30, 1996. Insurance policies which
had a dividend scale in effect as of June 30, 1996 were included in the Closed
Block as defined in the Prospectus. The Closed Block was designed to provide
reasonable assurance to owners of insurance policies included therein that,
after the Company's reorganization, assets would be available to maintain the
dividend scales and interest credits in effect prior to the Company's
reorganization if the experience underlying such scales and credits continues.
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The contribution to the operating income of the Company from the Closed
Block is reported as a single line item in the income statement. Accordingly,
premiums, product charges, investment income, realized gains or losses on
investments, policyowner benefits and dividends attributable to the Closed
Block, less certain minor expenses including amortization of deferred policy
acquisition costs, are shown as a net number under the caption "Contribution
from the Closed Block." This results in material reductions in the respective
line items in the income statement while having no effect on net income. The
expenses associated with the administration of the policies included in the
Closed Block and the renewal commissions on these policies are not charged
against the Contribution from the Closed Block, but rather are grouped with
underwriting, acquisition and insurance expenses. Also, all assets allocated to
the Closed Block are grouped together and shown as a separate item entitled
"Closed Block Assets." Likewise, all liabilities attributable to the Closed
Block are combined and disclosed as "Closed Block Liabilities."
The contribution from the Closed Block for the first quarter of 1998 was
$9.0 million compared to $9.3 million for the same period in 1997.
Closed Block insurance premiums decreased by $4.5 million to $50.4 million
for the first quarter of 1998 compared to $54.9 million for the same period in
1997. Insurance policies which had a dividend scale in effect as of June 30,
1996 were included in the Closed Block. The decrease in insurance premiums
reflects a reduction in the Closed Block's traditional life insurance business
in force as a result of the lapse of such business. Similarly, the decrease in
product charges on universal life policies included in the Closed Block is
primarily the result of the reduction of such business in force.
Net investment income for the Closed Block increased by $2.9 million to
$29.2 million for the first quarter of 1998 compared to $26.3 million for the
first quarter of 1997 due primarily to higher average invested assets (excluding
market value adjustments) partially offset by lower effective yields. Average
invested assets (excluding market value adjustments) increased by $125.6 million
and average effective yields decreased by 19 basis points for the Closed Block.
Realized gains on investments of the Closed Block were $0.9 million for the
first quarter of 1998 compared to a $0.6 million realized loss for the same
period in 1997.
Closed Block policyowner benefits were $49.0 million for the first quarter
of 1998 compared to $49.7 million a year ago. The decrease in benefits was
largely the result of lower death benefits on the Closed Block policies.
Insurance expenses for the Closed Block were $1.4 million for the first
quarter of 1998 compared to $1.5 million for the first quarter of 1997. The
decrease in expenses is the result of reduced premium taxes on such business due
to the lower insurance premiums.
The amortization of deferred policy acquisition costs for the Closed Block
increased by $1.2 million to $8.0 million for the first quarter of 1998.
Deferred policy acquisition costs are generally amortized in proportion to gross
margins, including realized capital gains. Lower death benefits and increased
realized capital gains in the first quarter of 1998, compared to the same period
in 1997, contributed to higher gross margins in 1998 on those policies included
in the Closed Block for which deferred costs are amortized, resulting in the
increased amortization in 1998.
Closed Block dividends to policyowners were $16.6 million for the first
quarter of 1998 compared to $17.1 million for the same period in 1997.
POLICYOWNER BENEFITS
Total policyowner benefits were $107.3 million for the first quarter of
1998 compared to $45.5 million for the first quarter of 1997, an increase of
$61.8 million. Included in the first quarter 1998 amounts were $63.0 million of
benefits of acquired companies primarily consisting of interest credited to
deferred annuity account balances. Traditional life insurance benefits increased
by $1.0 million in 1998 primarily due to the growth and aging of such business
in force. Universal life insurance benefits were $1.3 million lower in 1998
primarily due to decreased death benefits as a result of lower mortality.
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Annuity benefits increased by $62.0 million for the first quarter of 1998
to $85.8 million compared to $23.8 million for the first quarter of 1997.
Included in the first quarter 1998 annuity benefits were $62.0 million
attributable to the recent acquisitions of Delta and AmVestors. AmerUs Life's
annuity benefits were $23.8 million for both the first quarters of 1998 and
1997. Interest credited to AmerUs Life's policyowner account balances decreased
by $1.8 million to $13.6 million for the first quarter of 1998 compared to $15.4
million for the same period in 1997. The weighted average crediting rate for
AmerUs Life's individual deferred annuity liabilities decreased by 19 basis
points from 5.48% for the first quarter of 1997 to 5.29% for the first quarter
of 1998, and AmerUs Life's average deferred annuity liabilities decreased by
$110.4 million from the first quarter of 1997 to the same period in 1998 also
contributing to the lower credited amounts in 1998. Other annuity benefits for
AmerUs Life increased by $1.8 million to $10.2 million for the first quarter of
1998 compared to $8.4 million for the first quarter of 1997, primarily as a
result of increased immediate annuity and supplementary contract premium sales.
EXPENSES
The Company's commission expense, net of deferrals, increased by $1.0
million to $3.1 million for the first quarter of 1998 compared to $2.1 million
for the first quarter of 1997. Included in the increase is $0.4 million of
commission expense, net of deferrals, from the recent acquisitions. Other
underwriting, acquisition and insurance expenses, net of deferrals, increased by
$16.0 million to $24.9 million for the first quarter of 1998. Included in the
1998 amounts is $15.7 million of expenses for the recently acquired companies,
including $1.8 million of goodwill amortization and $6.7 million of amortization
of value of business acquired. Excluding recently acquired companies, other
underwriting, acquisition and insurance expenses, net of deferrals, increased by
$0.3 million.
The amortization of deferred policy acquisition costs increased by $3.1
million to $8.2 million in the first quarter of 1998 compared to $5.1 million in
the first quarter of 1997. Deferred policy acquisition costs are generally
amortized in proportion to gross margins, including realized capital gains.
Lower death benefits and increased realized capital gains in the first quarter
of 1998, compared to the first quarter of 1997, contributed to higher gross
margins in 1998 on products for which deferred costs are amortized, resulting in
the increased amortization in 1998.
INCOME FROM OPERATIONS
Income from operations increased by $15.1 million to $38.2 million for the
first quarter of 1998 compared to $23.1 million for the same period in 1997,
with the recent acquisitions of Delta and AmVestors adding $11.7 million of
income from operations during the first quarter of 1998. Improved product
margins, in large part due to the result of better mortality, contributed to the
remaining increase in income from operations in 1998.
INTEREST EXPENSE
Interest expense increased by $3.7 million in the first quarter of 1998 to
$6.7 million compared to $3.0 million for the first quarter of 1997. The
increased interest expense in the first quarter of 1998 was due to increased
interest expense on the capital securities issued by the Company on February 3,
1997 and increased interest expense on the revolving line of credit as a result
of increased debt levels.
INCOME BEFORE INCOME TAX EXPENSE
Income before income tax expense and equity in earnings of unconsolidated
subsidiary increased by $11.4 million to $31.5 million for the first quarter of
1998 compared to $20.1 million for the first quarter of 1997, with the recent
acquisitions of Delta and AmVestors adding $11.7 million to such income for the
first quarter of 1998.
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<PAGE> 14
INCOME TAX EXPENSE
Income tax expense increased by $4.4 million to $10.1 million for the first
quarter of 1998 compared to $5.7 million for the same period of 1997. The
increase in income tax expense was primarily due to the higher pre-tax income,
including income from the recent acquisitions of Delta and AmVestors. The
effective income tax rate for the first quarter of 1998 was 32.3% compared to
28.5% for the first quarter of 1997. The higher effective tax rate in 1998 was
in part attributable to the non-deductibility of the amortization of goodwill
resulting from the recent acquisitions. In addition, relatively similar amounts
of tax credits in 1998 and 1997 had a greater impact on reducing the effective
tax rate for the first quarter of 1997 due to the lower income in the first
quarter of 1997.
NET INCOME
Net income increased by $7.2 million to $21.8 million for the first quarter
of 1998 compared to $14.6 million for the same period in 1997, with the recent
acquisitions of Delta and AmVestors adding $6.5 million of net income for the
first quarter of 1998.
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<PAGE> 15
DESCRIPTION OF NOTES
The Notes are an issue of the Company's Senior Debt Securities (as
described in the accompanying Prospectus as "Senior Indebtedness"). The
following description of the terms of the Notes supplements the description of
the Senior Indebtedness contained in the Prospectus, should be read in
conjunction with the "Description of Debt Securities" contained in the
Prospectus and is qualified in its entirety by reference to the terms and
provisions of the Notes.
GENERAL
The Notes are to be issued as a separate series under an indenture, dated
as of June , 1998 (the "Senior Indenture"), between the Company and First
Union National Bank, as trustee (the "Trustee"). Capitalized terms not otherwise
defined in this Prospectus Supplement have the meanings given to them in the
Prospectus and the Senior Indenture.
The Notes will be limited to $125,000,000 in aggregate principal amount and
will mature on June , 2008. The Notes will be unsecured and will rank pari
passu with all other unsecured and unsubordinated obligations of the Company. At
March 31, 1998, the Company had no unsecured and unsubordinated indebtedness
outstanding. In addition, the Company's subsidiaries had $16.3 million of
indebtedness outstanding at March 31, 1998, which would be structurally senior
to the Notes. The Senior Indenture does not limit the aggregate amount of Senior
Indebtedness that may be issued thereunder, nor does it limit the incurrence or
issuance of other secured or unsecured debt of the Company or its subsidiaries.
Senior Indebtedness may be issued from time to time in one or more series up to
the aggregate amount from time to time authorized by the Company for each
series.
The Notes will bear interest at the rate per annum shown on the cover page
of this Prospectus Supplement from June , 1998 or from the most recent
Interest Payment Date to which interest has been paid or provided for, payable
semiannually in arrears on December and June of each year, commencing
December , 1998 (each an "Interest Payment Date"), to the persons in whose
names such Notes were registered at the close of business on the next preceding
December and June , whether or not a Business Day (as defined below)
(each a "Regular Record Date"), respectively. Interest on the Notes will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Interest payable on a Note on any Interest Payment Date or at maturity
shall be the amount of interest accrued from and including the next preceding
Interest Payment Date in respect of which interest has been paid or provided for
(or from and including June , 1998, if no interest has been paid or provided
for with respect to such Note) to, but excluding, the Interest Payment Date or
the date of maturity, as the case may be. If any Interest Payment Date or the
maturity date of a Note falls on a day that is not a Business Day, the payment
shall be made on the next Business Day as if it were made on the date such
payment was due and, provided such payment is made on the next Business Day, no
interest shall accrue on the amount so payable for the period from and after
such Interest Payment Date or the maturity date, as the case may be. "Business
Day" means any day, other than a Saturday, Sunday, legal holiday, or other day
on which banks in The City of New York are required or authorized by law,
regulation or executive order to close. Interest on the Notes will be computed
on the basis of a 360-day year comprised of twelve 30-day months.
The provisions of Article Four of the Indenture relating to defeasance and
covenant defeasance, described in the Prospectus under "Description of Debt
Securities -- Defeasance and Covenant Defeasance," are applicable to the Notes.
LIMITATIONS UPON LIENS
Under the terms of the Notes, the Company will not, nor will it permit any
Restricted Subsidiary (as defined herein) to, issue, assume or guarantee any
indebtedness for money borrowed if such indebtedness is secured by a Lien (as
defined herein) upon any Principal Property (as defined herein) of the Company
or any Restricted Subsidiary or on any shares of capital stock of any Restricted
Subsidiary (whether such Principal Property or shares of capital stock are now
owned or hereafter acquired) without in any such case effectively
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<PAGE> 16
providing that the Notes (together with, if the Company shall so determine, any
other indebtedness of or indebtedness guaranteed by the Company or such
Restricted Subsidiary entitled thereto (subject to applicable priority of
payment)) shall be secured equally and ratably with or prior to such
indebtedness, except that the foregoing restriction shall not apply to (i) Liens
on property or assets (including shares of stock or other equity interests) of
any Subsidiary existing at the time such Subsidiary becomes a Restricted
Subsidiary; (ii) Liens on property or assets (including shares of stock or other
equity interests) existing at the time of acquisition thereof, or Liens on
property or assets (including shares of stock or other equity interests) which
secure the payment of the purchase price of such property or assets (including
shares of stock or other equity interests) (such purchase price including any
indebtedness assumed or repaid in connection with such purchase), or Liens on
property or assets (including shares of stock or other equity interests) which
secure indebtedness incurred or guaranteed for the purpose of financing or
refinancing the purchase price of such property or assets (including shares of
stock or other equity interests) or the construction of such property or assets
(including improvements to existing property or assets), which indebtedness is
incurred or guaranteed within 180 days after the latest of such acquisition or
completion of such construction or commencement of operation of such property or
assets and which does not exceed 100% of such purchase price; (iii) Liens
securing indebtedness owing by any Restricted Subsidiary to the Company or a
wholly owned Restricted Subsidiary; (iv) Liens on property or assets (including
shares of stock or other equity interests) of a corporation existing at the time
such corporation is merged into or consolidated with the Company or a Restricted
Subsidiary or at the time of a purchase, lease, or other acquisition of the
properties or assets (including shares of stock or other equity interests) of a
corporation or other Person as an entirety or substantially as an entirety by
the Company or a Restricted Subsidiary; (v) Liens on property or assets
(including shares of stock or other equity interests) of the Company or a
Restricted Subsidiary in favor of the United States of America or any State
thereof or any department, agency, instrumentality or political subdivision
thereof, or in favor of any other country, or any political subdivision thereof,
to secure any indebtedness incurred or guaranteed for the purpose of financing
all or any part of the purchase price or the cost of construction of the
property or assets (including shares of stock or other equity interests) subject
to such Liens within 180 days after the latest of the acquisition, completion of
construction or commencement of operation of such property or assets (including
shares of stock or other equity interests), provided that the principal amount
of any indebtedness secured by such a Lien does not exceed 100% of such purchase
price or cost and such Lien does not extend to or cover any property or assets
(including shares of stock or other equity interests) other than the specific
item of property or assets (including shares of stock or other equity interests)
(or portion thereof) acquired, constructed or constituting the improvements made
with the proceeds of such Indebtedness and the proceeds thereof; (vi) Liens
imposed by or in favor of any governmental authority for taxes, assessments or
other charges which are not yet due or which are being contested in good faith
and by appropriate proceedings and for which adequate reserves shall have been
established on the books of the Company or any of its Restricted Subsidiaries;
(vii) (A) Pledges or deposits to secure the Company's or any Restricted
Subsidiary's obligations under worker's compensation laws, unemployment
insurance laws or similar legislation and (B) materialmen's, mechanics',
carriers', repairmen's or other like Liens, or deposits to obtain the release of
such Liens, in an aggregate amount not exceeding $250,000 at any one time and
outstanding no longer than 30 days; in each case, however, only to the extent
arising and continuing in the ordinary course of business; (viii) Easements,
rights-of-way, restrictions and other similar encumbrances affecting real
property incurred in the ordinary course of business which, in the aggregate,
are not substantial in amount and which do not in any case materially detract
from the value of the property subject thereto or interfere with the ordinary
conduct of the business of the Company; (ix) Landlord's Liens for rental not yet
due and payable; (x) Liens which secure statutory obligations of the Company or
any Person controlling the Company which are required by the Commissioner
pursuant to Section 521A.14 of the Iowa Code or otherwise; (xi) Liens upon any
property or assets (including shares of stock or other equity interests) of the
Company and its Restricted Subsidiaries securing indebtedness under the Credit
Agreement in a principal amount not exceeding the principal amount outstanding
or committed under the Credit Agreement; (xii) Liens on property or assets
(including shares of stock or other equity interests) of the Company or any
Restricted Subsidiary outstanding as of the date of the Senior Indenture; (xiii)
Liens on proceeds of any property or assets (including shares of stock or other
equity interests) subject to Lien as permitted by the terms of the Notes; (xiv)
Liens on property or assets (including shares of stock or other equity
interests) used to defease indebtedness not in violation of the terms of the
Notes; or (xv) any
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<PAGE> 17
extension, renewal or replacement (or successive extensions, renewals or
replacements), in whole or in part, of any Liens referred to in the foregoing
clauses (i) or (xiv), inclusive; provided, however, that the principal amount of
such indebtedness secured thereby shall not exceed the principal amount of such
indebtedness so secured at the time of such extension, renewal or replacement,
and that such extension, renewal or replacement shall be limited to all or a
part of the property or assets (including shares of stock or other equity
interests) which secured the Lien so extended, renewed or replaced (plus
improvements and construction on such property or assets (including shares of
stock or other equity interests)). Notwithstanding the above, the Company and
one or more Restricted Subsidiaries may, without securing the Notes, issue,
assume or guarantee secured indebtedness which would otherwise be subject to the
foregoing restrictions, provided that after giving effect thereto, the aggregate
amount of such indebtedness issued pursuant to such exception at such time does
not exceed 10% of Consolidated Net Tangible Assets (as defined herein). In
computing the aggregate amount of indebtedness outstanding for purposes of the
foregoing sentence, there shall not be included in the calculation an
indebtedness issued, assumed or guaranteed pursuant to clauses (i) through (xv)
above.
LIMITATION ON DISPOSITION OF STOCK OF RESTRICTED SUBSIDIARIES
So long as the Notes are outstanding and except in a transaction otherwise
governed by the Senior Indenture, the Company may not issue, sell, convey,
lease, transfer or otherwise dispose of any shares of securities convertible or
exchangeable into, or warrants, rights or options to subscribe for or purchase
shares of capital stock (other than preferred stock having no voting rights of
any kind, except as required by law or in the event of non-payment of dividends)
of any Restricted Subsidiary, nor will it permit any Restricted Subsidiary to
issue (other than to the Company) any shares (other than director's qualifying
shares) of, or securities convertible or exchangeable into, or warrants, rights
or options to subscribe for or purchase shares of, capital stock (other than
preferred stock having no voting rights of any kind, except as required by law
or in the event of non-payment of dividends) of any Restricted Subsidiary, if,
after giving effect to any such transaction and the issuance of the maximum
number of shares issuable upon the conversion or exercise of all such
convertible securities, warrants, rights or options, the Company would own,
directly or indirectly, less than 80% of the capital stock of any Restricted
Subsidiary (other than preferred stock having no voting rights of any kind,
except as required by law or in the event of non-payment of dividends);
provided, however, that (i) any issuance, sale, conveyance, lease, transfer or
other disposition permitted by the Company may only be made for at least fair
market value as determined by the Board of Directors pursuant to a Board
Resolution adopted in good faith, and (ii) the foregoing shall not prohibit any
such issuance, sale, conveyance, lease, transfer or disposition of securities if
required by any law or any regulation or order of any governmental or insurance
regulatory authority. Notwithstanding the foregoing, (x) the Company may merge
or consolidate any of its Restricted Subsidiaries into or with another direct
wholly owned Subsidiary of the Company and (y) the Company may, subject to the
provisions set forth in "Description of Debt Securities -- Consolidation, Merger
and Sale by the Company" in the Prospectus, sell, convey, lease, transfer or
otherwise dispose of the entire capital stock of any Restricted Subsidiary at
one time for at least a fair market value consideration as determined by the
Board of Directors pursuant to a Board Resolution adopted in good faith.
CERTAIN DEFINITIONS APPLICABLE TO THE NOTES
"Consolidated Net Tangible Assets" means the total amount of assets (less
applicable reserves and other properly deductible items) after deducting
therefrom (i) all current liabilities (excluding any thereof which are by their
terms extendible or renewable at the option of other obligor thereon to a time
more than twelve months after the time as of which the amount thereof is being
corrupted), and (ii) all goodwill, trade names, trademarks, patents, unamortized
debt discount and expense and other like intangibles, all as set forth on the
most recent balance sheet of the Company and its consolidated Subsidiaries and
prepared in accordance with GAAP.
"Credit Agreement" means the Revolving Credit and Term Loan Agreement,
dated as of October 23, 1997, by and among the Company, the signatory banks
thereto and the Chase Manhattan Bank, as administrative agent, as amended,
modified, supplemented or restated from time to time, or refunded, refinanced,
restructured, repaid, renewed, extended, replaced or succeeded (regardless of
any gaps in time),
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<PAGE> 18
whether with the same or different agents and lenders, on one or more occasions;
provided, however, that in the event that the Credit Agreement is amended,
modified, supplemented or restated, or refunded, refinanced, restructured,
repaid, renewed, extended, replaced or succeeded after the date of the Senior
Indenture, the Credit Agreement and such amendment, modification, supplement,
restatement, refunding, refinancing, restructuring, repayment, renewal,
extension, replacement or succeeding agreement will not be a "Credit Agreement"
for the purposes of this definition if the amount outstanding or committed
thereunder at any time exceeds in the aggregate principal amount $150 million.
"Lien" means any mortgage, deed of trust, pledge, lien, security interest
or other encumbrance, (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof, any filing or
agreement to give a lien or file a financing statement as a debtor under the
Uniform Commercial Code or any similar statute other than to reflect ownership
by a third party of property leased to the Company or any Restricted Subsidiary
under a lease which is not in the nature of a conditional sale or title
retention agreement).
"Principal Property" means all land, buildings, machinery and equipment,
and leasehold interests and improvements in respect of the foregoing, which
would be reflected on a consolidated balance sheet of the Company and its
Subsidiaries prepared in accordance with GAAP, excluding all such tangible
property located outside the United States of America and excluding any such
property which, in the opinion of the Board of Directors set forth in a Board
Resolution, is not material to the Company and its consolidated Subsidiaries
taken as a whole.
"Restricted Subsidiary" means a Subsidiary which is a regulated insurance
company principally engaged in one or more of the life, annuity, property and
casualty insurance businesses; provided that no such Subsidiary shall be a
Restricted Subsidiary if (i) (a) the total assets of such Subsidiary are less
than 10% of the total assets of the Company and its consolidated Subsidiaries
(including such Subsidiary), in each case as set forth on the most recent fiscal
year-end balance sheets of such Subsidiary and the Company and its consolidated
Subsidiaries, respectively, and computed in accordance with GAAP and (b) the
total revenues of such Subsidiary are less than 10% of the total revenues of the
Company and its consolidated Subsidiaries (including such Subsidiary), in each
case as set forth on the most recent fiscal year-end income statements of such
Subsidiary and the Company and its consolidated Subsidiaries, respectively, and
computed in accordance with GAAP or (ii) the Subsidiary is an Unrestricted
Subsidiary.
"Subsidiary" means, with respect to any Person, (i) a corporation more than
50% of the combined voting power of the outstanding Voting Stock of which is
owned, directly or indirectly, by such Person or by one or more other
Subsidiaries of such Person or by such Person and one or more Subsidiaries
thereof, (ii) any other Person (other than a corporation) in which such Person,
or one or more other Subsidiaries of such Person or such Person and one or more
other Subsidiaries thereof, directly or indirectly, has at least a majority
ownership and power to direct the policies, management and affairs thereof, or
(iii) any other Person which is otherwise controlled by such Person or by one or
more other Subsidiaries of such Person or by such Person and one or more other
Subsidiaries of such Person.
"Unrestricted Subsidiary" means (i) a Subsidiary of the Company which
becomes a Subsidiary after the date of the Senior Indenture which has been
designated as an "Unrestricted Subsidiary" for purposes of the Senior Indenture
by the Board of Directors, as evidenced by a Board Resolution, and at least 20%
of whose common stock is held by one or more persons (other than the Company and
its Affiliates) which acquired such common stock in a bona fide transaction or
series of transactions for fair value or (ii) in the judgment of the Board of
Directors, as evidenced by a Board Resolution, such Subsidiary is not material
to the financial condition of the Company and its consolidated Subsidiaries
taken as a whole.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal and interest will be made by the
Company in U.S. dollars in immediately available funds.
The Notes will trade in the Same-Day Funds Settlement System of the
Depository (as defined herein) until maturity, and secondary market trading
activity in the Notes will therefore be required by the Depository to settle in
immediately available funds.
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<PAGE> 19
BOOK-ENTRY, DELIVERY AND FORM
The Notes will be issued in fully-registered form, without coupons, in
denominations of $1,000 and integral multiples thereof, through the facilities
of DTC, New York, New York (the "Depository").
The Company has established a depositary arrangement with the Depository
with respect to the Notes, the terms of which are summarized below. The Notes
will be represented by global Notes registered in the name of the nominee of the
Depository. Beneficial interests in each Note will be shown on, and transfers
thereof will be effected only through, records maintained by the Depository
(with respect to beneficial interests of Participants (as defined below)) or by
Participants or persons that hold interests through Participants (with respect
to beneficial interests of persons that hold interests through Participants).
So long as the Depository or its nominee is the registered owner of the
Notes, the Depository or its nominee, as the case may be, will be the sole
Holder of the Notes represented thereby for all purposes under the Senior
Indenture. Except as otherwise provided below, the Beneficial Owners (as defined
below) of the Notes will not be entitled to receive physical delivery of
certificated Notes and will not be considered the Holders thereof for any
purpose under the Senior Indenture, and no Notes shall be exchangeable or
transferable. Accordingly, each Beneficial Owner must rely on the procedures of
the Depository and, if such Beneficial Owner is not a Participant, on the
procedures of the Participant through which such Beneficial Owner owns its
interest in order to exercise any rights of a Holder under such Note or the
Senior Indenture. The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of such securities in certificated form.
Such limits and laws may impair the ability to transfer beneficial interests in
the Notes.
The following is based on information furnished by the Depository:
The Depository will act as securities depository for the Notes. The
Notes will be issued as fully registered securities registered in the name
of Cede & Co. (the Depository's partnership nominee). One global Note will
be issued with respect to the Notes.
The Depository 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 Securities Exchange Act of 1934, as amended. The Depository
holds securities that its participants ("Participants") deposit with the
Depository. The Depository also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement
of securities certificates. Direct Participants of the Depository ("Direct
Participants") include securities brokers and dealers, such as the
Underwriters, banks, trust companies, clearing corporations and certain
other organizations. The Depository is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc.
Access to the Depository's system is also available to others such as
securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules
applicable to the Depository and its Participants are on file with the
Securities and Exchange Commission.
Purchases of Notes under the Depository's system must be made by or
through Direct Participants, which will receive a credit for such Notes on
the Depository's records. The ownership interest of each actual purchaser
of each Note represented by a global Note ("Beneficial Owner") is in turn
to be recorded on the records of Direct Participants and Indirect
Participants. Beneficial Owners will not receive written confirmation from
the Depository of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well
as periodic statements of their holdings, from the Direct Participants or
Indirect Participants through which such Beneficial Owner entered into the
transaction. Transfers of ownership interests in the Notes are to be
accomplished by entries made on the books of Participants acting on behalf
of Beneficial Owners. Beneficial Owners of Notes will not receive
certificated Notes representing their ownership interests therein, except
in the
S-17
<PAGE> 20
event that use of the book-entry system for the Notes is discontinued or a
Default or an Event of Default (as defined in the Senior Indenture) has
occurred and is continuing.
To facilitate subsequent transfers, all Notes which are deposited
with, or on behalf of, the Depository are registered in the name of the
Depository's nominee, Cede & Co. The deposit of Notes with, or on behalf
of, the Depository and their registration in the name of Cede & Co. effect
no change in beneficial ownership. The Depository has no knowledge of the
actual Beneficial Owners of the Notes; the Depository's records reflect
only the identity of the Direct Participants to whose accounts such Notes
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 the Depository to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct Participants and Indirect Participants to 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.
Neither the Depository nor Cede & Co. will consent or vote with
respect to the Notes. Under its usual procedures, the Depository mails an
Omnibus Proxy to the Company as soon as possible after the applicable
record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting
rights to those Direct Participants to whose accounts the Notes are
credited on the applicable record date (identified in a listing attached to
the Omnibus Proxy).
Principal, premium, if any, and/or interest, if any, payments on the
Notes will be made in immediately available funds to the Depository. The
Depository's practice is to credit Direct Participants' accounts on the
applicable payment date in accordance with their respective holdings shown
on the Depository's records unless the Depository has reason to believe
that it will not receive payment on such date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name", and will be the
responsibility of such Participant and not of the Underwriters, the
Depository, the Trustee or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal, premium, if any, and/or interest, if any, to the Depository is
the responsibility of the Company and the Trustee, disbursement of such
payments to Direct Participants shall be the responsibility of the
Depository, and disbursement of such payments to the Beneficial Owners
shall be the responsibility of Direct Participants and Indirect
Participants.
Redemption notices shall be sent to Cede & Co. If less than all of the
Notes are being redeemed, the Depository's practice is to determine by lot
the amount of the interest of each Direct Participant in such issue to be
redeemed.
The Depository may discontinue providing its services as securities
depository with respect to the Notes at any time by giving reasonable
notice to the Company or the Trustee. Under such circumstances, in the
event that a successor securities depository is not obtained, certificated
Notes are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through the Depository (or a successor securities depository). In
that event, certificated Notes will be printed and delivered.
The information in this section concerning the Depository and the
Depository's system has been obtained from sources that the Company believes to
be reliable, but the Company takes no responsibility for the accuracy thereof.
First Union National Bank maintains commercial banking relationships with
the Company.
S-18
<PAGE> 21
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement and pricing agreement (referred to herein collectively as the
"Underwriting Agreement") among the Company and the Underwriters named below
(the "Underwriters"), the Company has agreed to sell to each of the
Underwriters, and each of the Underwriters has severally but not jointly agreed
to purchase from the Company, the following respective principal amounts of the
Notes:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITERS OF NOTES
------------ ----------------
<S> <C>
Salomon Brothers Inc ....................................... $
Goldman, Sachs & Co. .......................................
Chase Securities Inc. ......................................
Credit Suisse First Boston Corporation .....................
------------
Total.................................................. $125,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Notes are subject to certain
conditions precedent, that the Underwriting Agreement may be terminated under
certain circumstances and that the Underwriters will be obligated to purchase
all of the Notes if any are purchased.
The Company has been advised by the Underwriters that the Underwriters
propose initially to offer the Notes to the public at the public offering price
set forth on the cover page of this Prospectus Supplement and to certain dealers
at such price less a concession not in excess of % of the principal amount
of the Notes. The Underwriters may allow, and such dealers may reallow, a
concession to certain other dealers not in excess of % of the principal
amount of the Notes. After the initial public offering, the public offering
price and such concessions to dealers may be changed from time to time.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain civil liabilities, including liabilities
under the Securities Act of 1933, as amended, or contribute to payments that the
Underwriters may be required to make in respect thereof.
The Notes are a new issue of securities with no established trading market.
The Company does not intend to apply for listing of the Notes on a national
securities exchange, but has been advised by the Underwriters that they
presently intend to make a market in the Notes, as permitted by applicable laws
and regulations. The Underwriters are not obligated, however, to make a market
in the Notes, and any such market making may be discontinued at any time without
notice at the sole discretion of the Underwriters. Accordingly, no assurance can
be given as to the liquidity of, or the trading market for, the Notes.
The Underwriters and certain of their affiliates and associates may be
customers of, have borrowing relationships with, engage in transactions with,
and/or perform services, including investment banking services, for, the Company
and its subsidiaries in the ordinary course of business.
In connection with this offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Notes. Such
transactions may include stabilization transactions effected in accordance with
Rule 104 of Regulation M under the Securities Exchange Act of 1934, as amended,
pursuant to which such persons may bid for or purchase Notes for the purpose of
stabilizing their market price. The Underwriters also may create a short
position for their respective accounts by selling more Notes in connection with
this offering than they are committed to purchase from the Company, and in such
case may purchase Notes in the open market following completion of this offering
to cover all or a portion of such short position. In addition, Salomon Brothers
Inc, on behalf of the Underwriters, may impose "penalty bids" under contractual
arrangements between the Underwriters whereby it may reclaim from an Underwriter
(or dealer participating in this offering) for the account of the Underwriters,
the selling concession with respect to Notes that are distributed in this
offering but subsequently purchased for the account of the Underwriters in the
open market. Any of the transactions
S-19
<PAGE> 22
described in this paragraph may result in the maintenance of the price of the
Notes at a level above that which might otherwise prevail in the open market.
None of the transactions described in this paragraph is required, and, if they
are undertaken, they may be discontinued at any time.
VALIDITY OF NOTES
The validity of the Notes will be passed upon for the Company 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 Joseph K.
Haggerty, Esq., Senior Vice President and General Counsel of the Company, as to
matters of Iowa law.
S-20
<PAGE> 23
======================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS SUPPLEMENT 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 SUPPLEMENT OR
THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
The Company............................. S-4
Recent Developments..................... S-4
Selected Consolidated Financial and
Operating Data........................ S-5
Risk Factors............................ S-7
Use of Proceeds......................... S-7
Capitalization.......................... S-8
Management's Discussion and Analysis of
Results of Operations................. S-9
Description of Notes.................... S-13
Underwriting............................ S-19
Validity of Notes....................... S-20
PROSPECTUS
Available Information................... 4
Incorporation of Certain Documents by
Reference............................. 4
The Company............................. 6
The AmerUs Trusts....................... 8
Selected Consolidated Financial and
Operating Data........................ 11
Risk Factors............................ 13
Use of Proceeds......................... 18
Reorganization and Recent
Acquisitions.......................... 19
Management's Discussion and Analysis of
Results of Operations and Financial
Condition............................. 22
Business................................ 34
Description of Debt Securities.......... 43
Description of Capital Stock............ 53
Description of Warrants................. 59
Description of Capital Securities of the
AmerUs Trusts......................... 60
Description of Guarantees............... 61
Description of the Purchased Contracts
and the Units......................... 64
Plan of Distribution.................... 64
Validity of Securities.................. 65
Experts................................. 66
</TABLE>
======================================================
======================================================
$125,000,000
AMERUS LIFE
HOLDINGS, INC.
% SENIOR NOTES
DUE , 2008
AMERUS LIFE HOLDINGS, INC. LOGO
------------
PROSPECTUS SUPPLEMENT
JUNE , 1998
(INCLUDING PROSPECTUS DATED
JUNE , 1998)
------------
SALOMON SMITH BARNEY
GOLDMAN, SACHS & CO.
CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON
======================================================
<PAGE> 24
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 SUPPLEMENT AND THE ACCOMPANYING 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.
SUBJECT TO COMPLETION, DATED JUNE 4, 1998
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 4, 1998
UNITS
AMERUS LIFE HOLDINGS, INC.
AMERUS CAPITAL II
% ADJUSTABLE CONVERSION-RATE EQUITY SECURITY UNITS
---------------------
Each Unit will have a stated amount of $ (equal to the last reported
per share sale price of the Common Stock on the NYSE on the date of this
Prospectus). Each Unit will initially consist of (a) a Purchase Contract under
which the holder will purchase from the Company on the Stock Purchase Date
of , 2001, for cash in an amount equal to the Stated Amount, between
of a share and one share of Common Stock (depending on the
Applicable Market Value of the Common Stock on the Stock Purchase Date, as
described herein), subject to adjustment in certain circumstances, and (b) a
Quarterly Income Preferred Security ("QUIPS"(SM)*) of the Trust having a
liquidation amount equal to the Stated Amount, a distribution rate of % per
annum and a mandatory redemption date of , 2003, subject
to a Call Option granted by the holder of the Unit to the Call Option Holder
permitting the Call Option Holder to acquire the QUIPS on or before ,
2001, in exchange for a package of consideration which will include Treasury
Securities that will provide payments matching the distribution rate referred to
above through the Stock Purchase Date and payments equal to the Stated Amount on
the Stock Purchase Date. For so long as any Purchase Contract remains in effect,
such Purchase Contract and the QUIPS or other Pledged Securities securing it
(and, for so long as the Call Option relating to such Pledged Securities is
exercisable, the obligations of the holder to the Call Option Holder thereunder)
will not be separable and may be transferred only as an integrated Unit. See
"Description of the Units".
For the period from the date of issuance of the Units to the Stock Purchase
Date, each holder of a Unit (other than a Stripped Unit) will be entitled to
receive cash payments of % of the Stated Amount per annum, payable in
arrears on the Quarterly Payment Dates of , ,
and of each year (unless deferred as described
herein). Such payments will consist of payments on the QUIPS or other Pledged
Securities plus Contract Fees payable by the Company or net of Contract Fees
payable by the holders, as the case may be. If a holder of a Unit does not
provide cash to settle the underlying Purchase Contract in the manner described
herein on the Stock Purchase Date, cash proceeds from the QUIPS or other Pledged
Securities underlying such Unit will be applied on the Stock Purchase Date to
the purchase of Common Stock pursuant to such Purchase Contract. See
"Description of the Units".
Prior to the offering made hereby there has been no public market for the
Units. [Application will be made to list the Normal Units on the NYSE under the
symbol " ".] The Common Stock is listed on the NYSE under the symbol
"AMH". The last reported sale price of the Common Stock on the NYSE on
, 1998 was $ per share.
SEE "RISK FACTORS" BEGINNING ON PAGE S- OF THIS PROSPECTUS SUPPLEMENT AND
PAGE OF THE ACCOMPANYING PROSPECTUS FOR CERTAIN CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THE UNITS.
---------------------
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 SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC OFFERING PROCEEDS FROM SALE UNDERWRITING PROCEEDS TO
PRICE OF UNITS(1) OF CALL OPTIONS DISCOUNT(2) COMPANY(1)(3)
----------------------- ------------------ ------------ -------------
<S> <C> <C> <C> <C>
Per Unit.......................... $ $ $ $
Total(4).......................... $ $ $ $
</TABLE>
- ---------------
(1) Plus accrued distributions on the QUIPS and plus or net of accrued Contract
Fees, if any, from , 1998.
(2) The Company and the Trust have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of $ payable by the Company.
(4) The Company and the Trust have granted the Underwriters an option for 30
days with respect to an additional Units, solely to cover
over-allotments. If such option is exercised in full, the total initial
public offering price of Units, proceeds from sale of Call Options,
underwriting discount and proceeds to Company will be $ ,
$ , $ and $ , respectively. See "Underwriting".
---------------------
The Units 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 Units will be ready for
delivery in book entry form only through the facilities of The Depository Trust
Company in New York, New York, on or about , 1998, against payment
therefor in immediately available funds.
- ---------------
* QUIPS is a servicemark of Goldman, Sachs & Co.
GOLDMAN, SACHS & CO. SALOMON SMITH BARNEY
---------------------
The date of this Prospectus Supplement is , 1998.
<PAGE> 25
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE UNITS, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES,
AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE IOWA
COMMISSIONER OF INSURANCE NOR HAS THE IOWA COMMISSIONER OF INSURANCE RULED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
---------------------
FOR NORTH CAROLINA INVESTORS: THE COMMISSIONER OF INSURANCE OF THE STATE OF
NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING NOR HAS SUCH
COMMISSIONER RULED UPON THE ACCURACY OR THE ADEQUACY OF THE ACCOMPANYING
PROSPECTUS OR THIS PROSPECTUS SUPPLEMENT.
---------------------
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES A SAFE HARBOR
FOR FORWARD-LOOKING STATEMENTS. A NUMBER OF MATTERS AND SUBJECT AREAS DISCUSSED
OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS ARE NOT LIMITED TO HISTORICAL OR CURRENT FACTS AND DEAL WITH
POTENTIAL FUTURE CIRCUMSTANCES AND DEVELOPMENTS. FACTORS THAT MAY CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED OR PROJECTED IN SUCH
FORWARD LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES:
(I) HEIGHTENED COMPETITION, INCLUDING THE ENTRY OF NEW COMPETITORS AND THE
DEVELOPMENT OF NEW PRODUCTS BY COMPETITORS; (II) ADVERSE STATE AND FEDERAL
LEGISLATION AND REGULATION, INCLUDING INCREASES IN MINIMUM CAPITAL AND RESERVES,
AND OTHER FINANCIAL VIABILITY REQUIREMENTS AND ADDITIONAL REGULATIONS OF MUTUAL
HOLDING COMPANIES; (III) FAILURE TO DEVELOP MULTIPLE DISTRIBUTION CHANNELS IN
ORDER TO OBTAIN NEW CUSTOMERS OR FAILURE TO RETAIN EXISTING CUSTOMERS; (IV)
INABILITY TO CARRY OUT MARKETING AND SALES PLANS, INCLUDING, AMONG OTHERS,
CHANGES TO CERTAIN PRODUCTS AND ACCEPTANCE OF THE REVISED PRODUCTS IN THE
MARKET; (V) LOSS OF KEY EXECUTIVES; (VI) CHANGES IN INTEREST RATES CAUSING A
REDUCTION OF INVESTMENT INCOME; (VII) GENERAL ECONOMIC AND BUSINESS CONDITIONS
WHICH ARE LESS FAVORABLE THAN EXPECTED; (VIII) UNANTICIPATED CHANGES IN INDUSTRY
TRENDS; (IX) INACCURACIES IN ASSUMPTIONS REGARDING FUTURE MORBIDITY,
PERSISTENCY, MORTALITY AND INTEREST RATES USED IN CALCULATING RESERVE AMOUNTS;
(X) ADVERSE CHANGES IN RATINGS ASSIGNED BY RATING AGENCIES; (XI) CHANGES IN TAX
LAWS WHICH NEGATIVELY AFFECT DEMAND FOR THE COMPANY'S PRODUCTS; (XII) THE RISK
FACTORS OR UNCERTAINTIES LISTED HEREIN OR LISTED FROM TIME TO TIME IN THIS
PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS OR ANY DOCUMENT INCORPORATED
BY REFERENCE HEREIN; AND (XIII) WITH RESPECT TO COST SAVINGS THAT ARE EXPECTED
TO BE REALIZED FROM, AND COSTS ASSOCIATED WITH, THE RECENT ACQUISITIONS OF DELTA
LIFE CORPORATION ("DELTA") AND AMVESTORS FINANCIAL CORPORATION ("AMVESTORS"),
THE FOLLOWING POSSIBILITIES: (A) THE EXPECTED COST SAVINGS TO BE REALIZED
THROUGH COMBINING CERTAIN FUNCTIONS OF THE COMPANY, DELTA AND AMVESTORS TO
ELIMINATE REDUNDANCIES AND BETTER SERVE THE COMBINED COMPANY'S CUSTOMERS, AND
REDUCTIONS IN STAFF CANNOT BE FULLY REALIZED BECAUSE THE CHANGES ARE NOT MADE OR
UNANTICIPATED ADDED COSTS ARE INCURRED; AND (B) COSTS OR DIFFICULTIES RELATED TO
THE INTEGRATION OF THE BUSINESSES OF DELTA AND AMVESTORS WITH THE COMPANY'S
OTHER BUSINESSES ARE GREATER THAN EXPECTED. A VARIETY OF FACTORS COULD CAUSE THE
COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE EXPECTED RESULTS
EXPRESSED IN THE COMPANY'S FORWARD-LOOKING STATEMENTS, INCLUDING THOSE SET FORTH
IN THE RISK FACTORS AND ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT, THE
ACCOMPANYING PROSPECTUS OR THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN.
S-2
<PAGE> 26
PROSPECTUS SUMMARY
OVERVIEW
AmerUs Life Holdings, Inc. (the "Company") is an insurance holding company
engaged through its subsidiaries in the business of marketing, underwriting and
distributing a broad range of individual life insurance and annuity products to
individuals and businesses in 49 states, the District of Columbia and the U.S.
Virgin Islands. The Company's primary product offerings consist of whole life,
universal life and term life insurance policies and fixed annuities. As of March
31, 1998, the Company had approximately 567,000 life insurance policies and
annuity contracts outstanding and individual life insurance in force, net of
reinsurance, of approximately $26.9 billion with life insurance reserves of $2.4
billion and annuity reserves of $5.9 billion. As of March 31, 1998, the Company
had total assets of $10.4 billion and total shareholders' equity of $944.6
million. See "The Company", "Organizational Structure" and "Business" in the
accompanying Prospectus for a more detailed description of the Company.
RECENT ACQUISITIONS
The Company made two major acquisitions in 1997. The Company acquired Delta
Life Corporation ("Delta") on October 23 for approximately $165 million in cash
and AmVestors Financial Corporation ("AmVestors") on December 19 in a stock
exchange valued at approximately $350 million. Both Delta and AmVestors
specialize in the sale of fixed annuity products, thus strengthening the
Company's presence in the rapidly growing asset accumulation and retirement
savings markets. The acquisitions, along with the growth of AmerUs Life
Insurance Company ("AmerUs Life"), increased the Company's assets from $4.4
billion at March 31, 1997 to $10.4 billion at March 31, 1998.
RECENT DEVELOPMENTS
REFINANCING PLAN
On April 16, 1998, the Company announced a refinancing plan (the
"Refinancing Plan") that includes this offering of Units (the "Units Offering")
and an offering of up to $125 million of debt securities (the "Notes Offering,"
and together with this Units Offering, the "Offerings"). Proceeds from the
Offerings will be used to repay the outstanding balance of $250 million on the
Company's revolving bank debt (the "Bank Debt"), to partially fund a buyback of
up to $75 million of the Company's Class A Common Stock (the "Stock Repurchase
Plan") and for general corporate purposes.
RECENT RATINGS ACTIONS
Certain ratings agencies have recently reviewed the ratings assigned to the
Company and its life insurance subsidiaries. On April 14, 1998, Standard &
Poor's reaffirmed its single-A insurer financial strength rating for AmerUs Life
while on May 1, 1998 Moody's Investors Service downgraded AmerUs Life's
financial strength rating to A3 from A2. At the same time, Moody's reaffirmed at
Ba1 the long-term credit ratings for the Company's junior subordinated debt and
at Baa3 for the preferred stock rating of AmerUs Capital I and upgraded the
insurance financial strength rating of AmVestor's subsidiary, American Investors
Life Insurance Company to Baa1 from Baa3. In addition, Moody's assigned an A3
insurance financial strength rating to Delta's life insurance subsidiary, Delta
Life and Annuity Company. Moody's warned that the outlook on all the debt,
preferred stock and insurance financial strength ratings remained negative,
given the Company's aggressive strategy of rapid growth through acquisition. See
"Risk Factors -- Importance of Ratings" in the prospectus to which this
Prospectus Supplement relates (the "Prospectus").
S-3
<PAGE> 27
THE TRUST
AmerUs Capital II (the "Trust") is a statutory business trust created under
the laws of the State of Delaware pursuant to (i) a declaration of trust, dated
as of April 14, 1998, executed by the Company, as sponsor (the "Sponsor"), and
certain of the trustees of the Trust (the "Issuer Trustees") and (ii) the filing
of a certificate of trust with the Secretary of State of the State of Delaware
on April 14, 1998. Such declaration of trust will be amended and restated in its
entirety (as so amended and restated, the "Declaration") substantially in the
form filed as an exhibit to the Registration Statement to which this Prospectus
Supplement relates. The Declaration will be qualified as an indenture under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Trust
exists for the exclusive purposes of (i) issuing the Trust Securities (as
defined herein) representing undivided beneficial interests in the assets of the
Trust, (ii) investing the proceeds of the Trust Securities in the Junior
Subordinated Debentures (as defined herein) and (iii) engaging in only those
other activities necessary or incidental thereto. Accordingly, the Junior
Subordinated Debentures will be the sole assets of the Trust and payments under
the Junior Subordinated Debentures will be the sole revenue of the Trust. All of
the Common Trust Securities (as defined herein) will be directly or indirectly
owned by the Company.
THE OFFERING
THE UNITS
Securities Offered......... Adjustable Conversion-rate Equity Security Units
(the "Units", as more fully defined below).
Issuers.................... AmerUs Life Holdings, Inc. (the "Company") and
AmerUs Capital II (the "Trust").
Stated Amount.............. $ per Unit (the "Stated Amount").
Payments on the Units...... For the period from the date of issuance of the
Units to the Stock Purchase Date (as defined
herein), each holder of a Unit (other than a
Stripped Unit (as defined herein)) will be entitled
to receive cash payments of % of the Stated
Amount per annum, payable in arrears. Such payments
will consist of payments on the QUIPS (as defined
herein) or other Pledged Securities (as defined
herein) plus Contract Fees (as defined herein)
payable by the Company or net of Contract Fees
payable by the holders, as the case may be.
Quarterly Payment Dates.... , ,
and of each year (the "Quarterly
Payment Dates"), subject to the deferral provisions
described below.
Stock Purchase Date........ , 2001 (the "Stock
Purchase Date").
Settlement................. On the Stock Purchase Date, a holder of Units
shall, in order to settle the underlying Purchase
Contracts, provide cash in the manner described
herein. The Common Stock purchased and the Pledged
Securities securing such Purchase Contracts (or, in
the case of Treasury Securities, the proceeds from
such Treasury Securities, net of any unpaid
Contract Fees payable by the holder accrued thereon
to the Stock Purchase Date) would then be delivered
to the holder.
S-4
<PAGE> 28
If a holder of Units fails to provide cash for
settlement of the underlying Purchase Contracts on
the Stock Purchase Date, then (a) if QUIPS (or
Junior Subordinated Debentures) underlie such
Units, the Collateral Agent will, on behalf of the
holder, exercise the Junior Subordinated Debenture
Put Option (as defined herein) with respect
thereto; and (b) a portion of the proceeds from the
exercise of the Junior Subordinated Debenture Put
Option (or, if Treasury Securities rather than
QUIPS or Junior Subordinated Debentures underlie
such Units, a portion of the proceeds from such
securities) will be applied to satisfy in full the
holder's obligations under such Purchase Contracts
and the remainder of such proceeds, if any, will be
paid to the holder.
Settlement Rate............ The number of shares of Common Stock issuable upon
settlement of each Purchase Contract (the
"Settlement Rate") will be between
of a share and one share of Common Stock (subject
to adjustment under certain circumstances). More
specifically, the Settlement Rate will be
calculated as follows, subject to adjustment in
certain circumstances:
(a) if the Applicable Market Value (as defined
herein) is greater than or equal to $ (the
"Threshold Appreciation Price") (i.e.,
approximately % higher than the Stated
Amount), the Settlement Rate will be
;
(b) if the Applicable Market Value is less than the
Threshold Appreciation Price but greater than the
Stated Amount, the Settlement Rate will equal the
Stated Amount divided by the Applicable Market
Value (i.e., the Settlement Rate will be calculated
so that the Applicable Market Value of the Common
Stock purchasable under each Purchase Contract
would equal the Stated Amount payable therefor);
and
(c) if the Applicable Market Value is less than or
equal to the Stated Amount, the Settlement Rate
will be one.
"Applicable Market Value" means the average of the
Closing Prices (as defined herein) per share of
Common Stock on each of the twenty consecutive
Trading Days (as defined herein) ending on the last
Trading Day immediately preceding the Stock
Purchase Date.
The following table illustrates the applicable
Settlement Rate and approximate market value of the
Common Stock receivable upon
S-5
<PAGE> 29
settlement of the Units at certain assumed
Applicable Market Values:
<TABLE>
<CAPTION>
---------------------------------------------------------------
NUMBER OF SHARES VALUE OF SHARES
IF THE APPLICABLE RECEIVED PER UNIT RECEIVED PER UNIT
MARKET VALUE IS UPON SETTLEMENT UPON SETTLEMENT(1)
---------------------------------------------------------------
<S> <C> <C>
$ per share $
(i.e., 150% of Stated (i.e., % of Stated
Amount) Amount)
---------------------------------------------------------------
$ per share $
(i.e., Threshold (i.e., Stated Amount)
Appreciation Price)
---------------------------------------------------------------
$ per share $
(i.e., 1/2 way between (i.e., Stated Amount)
Stated Amount and
Threshold
Appreciation Price)
---------------------------------------------------------------
$ per share 1.0 $
(i.e., Stated Amount) (i.e., Stated Amount)
---------------------------------------------------------------
$ per share 1.0 $
(i.e., 50% of Stated (i.e., 50% of Stated
Amount) Amount)
---------------------------------------------------------------
</TABLE>
--------------------------------------------
(1) Assumes that Applicable Market Value accurately
reflects fair market value on the Stock
Purchase Date.
Relationship of Units to
Common Stock............. Cash payments on the Units that are not Stripped
Units (consisting of payments on the QUIPS plus or
net of Contract Fees) will accrue at a rate per
annum that is greater than the current dividend
yield on the Common Stock. However, since the
number of shares of Common Stock issuable upon
settlement of each Purchase Contract may decline by
up to approximately % as the Applicable Market
Value increases, the opportunity for equity
appreciation afforded by an investment in the Units
is less than that afforded by a direct investment
in the Common Stock.
Components of the Units.... Each Unit will initially consist of:
(a) a purchase contract ("Purchase Contract") under
which (i) the holder will purchase from the Company
on the Stock Purchase Date, for cash in an amount
equal to the Stated Amount, a number of shares of
Common Stock equal to the Settlement Rate, and (ii)
contract fees ("Contract Fees") will be payable at
the rate of % of the Stated Amount per annum
(the "Contract Fee Rate") as described below, and
(b) a Quarterly Income Preferred Security
("QUIPS"(SM), which term may refer to a single
security or more than one security as the context
may require) of the Trust having a liquidation
amount equal to the Stated Amount, a distribution
rate of % of the Stated Amount per annum and
S-6
<PAGE> 30
a mandatory redemption date of , 2003 (the
"QUIPS and Debenture Maturity Date"), subject to a
Call Option ("Call Option") granted by the holder
of the Unit to Goldman, Sachs & Co. (in its
capacity as the holder of the Call Options, and
together with any transferee of the Call Options in
such capacity, the "Call Option Holder") that (when
aggregated with the Call Options underlying all
other Units) will entitle the Call Option Holder to
acquire the QUIPS underlying the Units (or the
Junior Subordinated Debentures substituted
therefor), on or before , 2001 the
last Quarterly Payment Date prior to the Stock
Purchase Date (or, if such date is not a Trading
Day, the next succeeding Trading Day) (the "Call
Option Expiration Date"), in exchange for a package
of consideration (the "Aggregate Consideration
Deliverable on Exercise of the Call Options") which
will include U.S. Treasury Strips, U.S. Treasury
Bills or other U.S. Treasury Securities (any of the
foregoing, ("Treasury Securities")) that will
provide payments matching the aggregate
distributions due on such Quips (or interest due on
such Junior Subordinated Debentures) through the
Stock Purchase Date (assuming for this purpose,
even if not true, that the distribution or interest
rate thereon remains as set forth above) through
the Stock Purchase Date and Treasury Securities
that will provide payments equal to the aggregate
Stated Amount of such Units on the Stock Purchase
Date.
The QUIPS underlying a Unit will be pledged to
, as collateral agent for the
Company and the Call Option Holder (together with
any successor thereto in such capacity, the
"Collateral Agent"), to secure the holder's
obligations to the Company and the Call Option
Holder under the Purchase Contract and Call Option
underlying such Unit. The QUIPS, or any securities
substituted therefor as securities pledged to the
Collateral Agent to secure such obligations, are
herein referred to as "Pledged Securities". If
Treasury Securities are exchanged for Pledged
Securities upon exercise of the Call Options or
Junior Subordinated Debentures are distributed in
respect of Pledged Securities upon dissolution of
the Trust, the Treasury Securities so exchanged or
the Junior Subordinated Debentures so distributed
will automatically be substituted as Pledged
Securities in place of the securities that
theretofore had been Pledged Securities.
The obligations of the holders of Units under the
Purchase Contracts, if not paid in cash by such
holders, will be funded out of payments made in
respect of the Pledged Securities. For so long as a
Purchase Contract remains in effect, such Purchase
Contract and the QUIPS or other Pledged Securities
securing it (and, for so long as a Call Option
relating to such Pledged Securities is exercisable,
the obligations of the holder to the Call Option
Holder thereunder) will not be separable and may be
transferred only as an integrated Unit.
Formation of the Units..... At the closing of the offering made hereby, the
Underwriters specified herein (the "Underwriters")
will (a) enter into Purchase Contracts with the
Company and (b) purchase QUIPS from the
S-7
<PAGE> 31
Trust for cash. The Underwriters will fund that
cash in part by the sale of the Units offered
hereby to the initial investors thereof and in part
by the sale of Call Options (on behalf of such
initial investors) to the Call Option Holder. The
Trust will use that cash to purchase Junior
Subordinated Debentures from the Company. The QUIPS
will then be pledged to the Collateral Agent as
contemplated above.
The rights to purchase Common Stock under a
Purchase Contract, together with the QUIPS or other
Pledged Securities pledged to secure the
obligations referred to in (a) and (b) below,
subject to (a) the obligations owed to the Company
under such Purchase Contract, (b) the obligations
owed to the Call Option Holder under the Call
Option relating to such QUIPS or other Pledged
Securities (which, in the case of Normal Units, can
only be Junior Subordinated Debentures) and (c) the
pledge arrangements securing the foregoing
obligations, are collectively referred to herein as
a "Normal Unit".
Each holder of Normal Units will have the right to
substitute, as Pledged Securities, Treasury
Securities that will generate payments matching
such holder's obligations under the underlying
Purchase Contracts, in return for the securities
that theretofore had been the Pledged Securities
underlying such Normal Units. For so long as the
Call Options underlying such Normal Units remain
exercisable, such right of substitution may be
exercised only if the holder obtains an instrument
from the Call Option Holder releasing its security
interest in the Pledged Securities securing such
Call Options and agreeing that such Call Options no
longer underlie such Normal Units (or the Stripped
Units they become). The holder might obtain such an
instrument by separately documenting such Call
Options with the Call Option Holder (and, if
required by the Call Option Holder, entering into
credit support arrangements satisfactory to the
Call Option Holder backing such Call Options),
paying the Call Option Holder to cancel such Call
Options or otherwise. However, the Call Option
Holder will be under no obligation to deliver such
an instrument, and there can be no assurance that a
holder will be able to induce the Call Option
Holder to do so. Therefore, investors may not be
able to capitalize on any appreciation of the QUIPS
through this means.
Goldman, Sachs & Co. have advised the Company that,
while they are the Call Option Holder, they will
evaluate requests to release their security
interests in the Pledged Securities on a case-by-
case basis, taking into account the market value of
the Pledged Securities as compared to the cost to
the Call Option Holder of exercising the Call
Options, the availability and amount of credit
support, any payments to be made in connection
therewith and other factors pertaining at the time
of any requested release. In doing so, Goldman,
Sachs & Co. would expect that they would not grant
such a request unless the value of the payments and
other new rights offered by the holder were no less
valuable to Goldman, Sachs & Co. than the rights
they had before granting such request.
S-8
<PAGE> 32
If a holder of Normal Units exercises such holder's
right to substitute Treasury Securities as Pledged
Securities in the manner described herein, the
securities that theretofore had been the Pledged
Securities underlying such Normal Units will be
released from the pledge arrangement described
herein and delivered to such holder, and such
holder's remaining rights and obligations under
such Normal Units will thereupon become "Stripped
Units" that will no longer generate cash payments
to such holder (other than Contract Fees, if any,
payable by the Company pursuant to the underlying
Purchase Contracts) and will no longer be listed on
the New York Stock Exchange ("NYSE") or be fungible
with Normal Units.
The Normal Units and any Stripped Units are
collectively referred to herein as the "Units."
Contract Fees.............. The holders of Units may be required to pay
Contract Fees to the Company, or the Company may be
required to pay Contract Fees to the holders of
Units, as specified in the final Prospectus
Supplement for the offering made hereby.
The obligation of the holders of Units to pay
Contract Fees to the Company will be funded out of
payments made in respect of the Pledged Securities.
If payments made in respect of the Pledged
Securities are insufficient to cover the obligation
of the holders of the Units to pay Contract Fees,
such obligation will be deferred until the earlier
of the date sufficient cash is available and the
Stock Purchase Date.
Any obligation of the Company to pay Contract Fees
to the holders of Units will be unsecured and
junior in right of payment to all Senior
Indebtedness (as defined herein) of the Company.
The Company will generally have the right to defer
the payment of Contract Fees at any time or from
time to time for a period not extending beyond the
Stock Purchase Date.
Any deferred Contract Fees payable by the holders
of Units or the Company will bear additional
Contract Fees at the rate of % per annum plus,
for the period after the Call Option Expiration
Date, the amount (if any) by which the interest
rate on the Junior Subordinated Debentures shall
have been increased (as described herein) (the
"Deferral Rate") (compounding on each succeeding
Quarterly Payment Date) until paid.
Termination................ The Purchase Contracts (including the right to
receive and the obligation to pay accrued or
deferred Contract Fees and the right and obligation
to purchase Common Stock) will automatically
terminate upon the occurrence of certain events of
bankruptcy, insolvency or reorganization with
respect to the Company. Upon such termination, the
Call Options will terminate and the Collateral
Agent will release the Pledged Securities held by
it to the Unit Agent for distribution to the
holders.
THE QUIPS
The Trust.................. The QUIPS will be issued by the Trust, a Delaware
statutory business trust. The Junior Subordinated
Debentures due
S-9
<PAGE> 33
, 2003 (the "Junior Subordinated Debentures") of
the Company will be the sole assets of the Trust,
and payments on those Junior Subordinated
Debentures will be the sole revenue of the Trust.
The Company will own all of the common undivided
beneficial interests in the assets of the Trust
(the "Common Trust Securities" and, collectively
with the QUIPS, the "Trust Securities").
The QUIPS.................. The QUIPS will represent preferred undivided
beneficial interests in the assets of the Trust.
Each QUIPS will have a Liquidation Amount (as
defined in the Declaration) equal to the Stated
Amount. Distributions on the QUIPS will be
cumulative, will accrue from the first date of
issuance of the QUIPS at an initial rate of % per
annum (such rate, as it may be increased in the
manner described herein, the "QUIPS and Debenture
Rate") as applied to the Liquidation Amount thereof
and will be payable quarterly in arrears on each
Quarterly Payment Date, subject to the deferral
provisions described below. The QUIPS will be
mandatorily redeemable in whole on the QUIPS and
Debenture Maturity Date of , 2003,
at a redemption price equal to the aggregate
Liquidation Amount thereof plus unpaid
distributions accrued thereon to such date, out of
the proceeds of the repayment of the Junior
Subordinated Debentures at maturity.
Junior Subordinated
Debentures............... The Junior Subordinated Debentures will be issued
by the Company under an indenture (the "Indenture")
between First Union National Bank, as trustee
(together with any successor thereto in such
capacity, the "Debenture Trustee"), and the
Company, in an aggregate principal amount equal to
the aggregate Liquidation Amount of the Trust
Securities. Interest on the Junior Subordinated
Debentures will accrue from the first date of
issuance of the Junior Subordinated Debentures at a
rate per annum equal to the QUIPS and Debenture
Rate referred to above and will be payable
quarterly in arrears on each Quarterly Payment
Date, subject to the deferral provisions described
below. The Junior Subordinated Debentures will
mature on the QUIPS and Debenture Maturity Date and
will not be redeemable at the option of the Company
prior to such date. The Junior Subordinated
Debentures will be unsecured and junior in right of
payment to all Senior Indebtedness of the Company.
On the Call Option Expiration Date, a nationally
recognized investment banking firm chosen by the
Company (the "Rate Increase Agent") will determine
whether the then current aggregate market value of
the QUIPS (or, if the QUIPS are no longer
outstanding, Junior Subordinated Debentures)
underlying the Normal Units is at least equal to
100.25% of the Cash Equivalent of the Aggregate
Call Option Exercise Consideration (as defined
herein). If the Rate Increase Agent determines that
it is (or the QUIPS and Debenture Rate is already
equal to or greater than the Maximum QUIPS and
Debenture Rate (as defined herein)), interest on
the Junior Subordinated Debentures (and, if the
QUIPS remain outstanding, distributions on the
QUIPS) will continue to accrue at the initial QUIPS
and Debenture Rate. If the Rate Increase Agent
S-10
<PAGE> 34
determines that it is not (and the QUIPS and
Debenture Rate is less than the Maximum QUIPS and
Debenture Rate), the Rate Increase Agent will
select an increased rate equal to the lower of (a)
the rate that it determines is sufficient to cause
the then current aggregate market value of such
QUIPS (or, if the QUIPS are no longer outstanding,
such Junior Subordinated Debentures) to be at least
equal to 100.25% of the Cash Equivalent of the
Aggregate Call Option Exercise Consideration and
(b) the Maximum QUIPS and Debenture Rate, and the
QUIPS and Debenture Rate will thereupon become that
increased rate. It is currently anticipated that
[Salomon Smith Barney] will be the Rate Increase
Agent. See "Description of the Junior Subordinated
Debentures -- Market Rate Increase".
Interest and QUIPS
Distribution Deferral
Provisions............... The Company will generally have the right to defer
the payments of interest on the Junior Subordinated
Debentures at any time or from time to time for a
period not extending beyond the QUIPS and Debenture
Maturity Date. Upon any such deferral, quarterly
distributions on the QUIPS by the Trust will be
deferred. However, deferred payments of interest on
the Junior Subordinated Debentures and deferred
distributions on the QUIPS will bear additional
interest or distributions at a rate per annum equal
to the Deferral Rate (compounding on each
succeeding Quarterly Payment Date) until paid.
Junior Subordinated
Debenture Put Options.... Each holder of Junior Subordinated Debentures will
have the right to require the Company to repurchase
such Junior Subordinated Debentures, in whole or in
part, on the Stock Purchase Date, for a purchase
price equal to the aggregate principal amount of
such Junior Subordinated Debentures plus unpaid
interest accrued thereon to the Stock Purchase
Date, but only if the cash received on the exercise
of such option is used to settle the Purchase
Contracts secured thereby. See "Description of the
Units -- Description of the Junior Subordinated
Debentures -- Junior Subordinated Debenture Put
Options".
Each holder of QUIPS will have the option to
require the Trust to distribute the underlying
Junior Subordinated Debentures to the Put Agent (as
defined herein), on the Stock Purchase Date, in
exchange for such QUIPS, in connection with the
concurrent exercise by the Put Agent on behalf of
such holder of the Junior Subordinated Debenture
Put Option related thereto as described above.
Exchange of QUIPS for
Junior Subordinated
Debentures............... The Company will have the right at any time to
terminate the Trust and cause the Junior
Subordinated Debentures to be distributed to the
holders of the QUIPS and Common Trust Securities in
liquidation of the Trust.
The Guarantee.............. Pursuant to a guarantee agreement (the "Guarantee")
between the Company and First Union National Bank,
as trustee (together with any successor thereto in
such capacity, the "Guarantee
S-11
<PAGE> 35
Trustee"), the Company will guarantee the payment
of distributions and other payments on the QUIPS to
the extent that the Trust has funds on hand
sufficient therefor.
GENERAL
Listing.................... Application will be made to list the Normal Units
on the NYSE.
Federal Income Tax
Consequences............. In general, holders of the Units will be subject to
federal income tax on the accrual of original issue
discount in respect of the Units and upon
disposition of the Units (including disposition
pursuant to exercise of the Call Option). For a
discussion of the United States federal income tax
consequences associated with the purchase,
ownership, and disposition of the Units, QUIPS,
Purchase Contracts and Common Stock, see "Certain
Federal Income Tax Consequences". Prospective
investors should be aware that no statutory,
judicial or administrative authority directly
addresses the tax treatment of Units or instruments
similar to Units for United States federal income
tax purposes. ACCORDINGLY, PROSPECTIVE INVESTORS
ARE URGED TO CONSULT THEIR TAX ADVISORS CONCERNING
THE TAX CONSEQUENCES OF AN INVESTMENT IN THE UNITS,
INCLUDING THE APPLICATION OF STATE, LOCAL AND
FOREIGN OR OTHER TAX LAWS AND THE POSSIBLE EFFECTS
OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
Use of Proceeds............ The Company intends to use the net proceeds of the
offering made hereby and of the Senior Debt
Offering (as defined herein) to repay the Bank
Debt, to partially fund the Stock Repurchase Plan
and for general corporate purposes. See "Use of
Proceeds."
Senior Debt Offering....... Concurrently with the offering made hereby, the
Company is also offering $125,000,000 % Senior
Notes due , 2008. The
Notes Offering is being made by means of a separate
prospectus. Neither the Notes Offering nor the
offering made hereby is conditioned on consummation
of the other offering. There can be no assurance
that the Notes Offering will be consummated. This
Prospectus Supplement does not constitute an offer
to buy or the solicitation of an offer to sell the
Senior Notes being offered in the Notes Offering.
S-12
<PAGE> 36
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table sets forth certain consolidated financial and operating
data of the Company. The selected consolidated financial and operating data
below for the three-month periods ended March 31, 1997 and 1998 are derived from
unaudited interim financial statements of the Company incorporated by reference
in this Prospectus. In the opinion of management, such unaudited interim
financial statements include all adjustments (consisting only of normal
recurring accruals) necessary for a fair, consistent presentation, in accordance
with generally accepted accounting principles, of such information. The selected
consolidated financial and operating data for the three months ended March 31,
1998 are not necessarily indicative of the Company's results for any future
interim period or the entire year. During the fourth quarter of 1997, the
Company acquired Delta and AmVestors in transactions that were accounted for
using the purchase method of accounting. As a result, only the Consolidated
Income Statement Data and the Consolidated Balance Sheet Data as of or for the
three-month period ended March 31, 1998 include the results of Delta and
AmVestors.
<TABLE>
<CAPTION>
AS OF OR FOR THE
THREE MONTHS ENDED
MARCH 31,
(UNAUDITED)
----------------------
1998(A) 1997
--------- --------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Revenues:
Insurance premiums........................................ $ 17.3 $ 8.2
Product charges........................................... 16.4 11.2
Net investment income..................................... 133.1 50.9
Realized gains on investments............................. 6.2 5.2
Contribution from the Closed Block........................ 9.0 9.3
--------- --------
Total revenues...................................... 182.0 84.8
--------- --------
Benefits and expenses:
Total policyowner benefits................................ 107.3 45.5
Total expenses............................................ 36.2 16.1
Dividends to policyowners................................. 0.3 0.1
--------- --------
Total benefits and expenses......................... 143.8 61.7
--------- --------
Income from operations...................................... 38.2 23.1
Interest expense............................................ 6.7 3.0
--------- --------
Income before income tax expense and equity in earnings of
unconsolidated subsidiary................................. 31.5 20.1
Income tax expense.......................................... 10.1 5.7
--------- --------
Income before equity in earnings of unconsolidated
subsidiary................................................ 21.4 14.4
Equity in earnings of unconsolidated subsidiary............. 0.4 0.2
--------- --------
Net income.................................................. $ 21.8 $ 14.6
========= ========
Earnings per common share(B)
Basic..................................................... $ 0.63 $ 0.63
Diluted................................................... $ 0.62 $ 0.63
Dividends declared per common share......................... $ 0.10 $ --
Ratios of earnings to fixed charges(C)(D)................... 1.39 2.11
CONSOLIDATED BALANCE SHEET DATA:
Total invested assets....................................... $ 7,775.7 $2,864.1
Total assets................................................ 10,354.9 4,412.0
Total liabilities........................................... 9,324.3 3,822.4
Company-obligated mandatorily redeemable preferred
securities................................................ 86.0 86.0
Total stockholders' equity(E)............................... 944.6 503.6
OTHER OPERATING DATA:
Adjusted operating income(F)................................ $ 19.5 $ 11.6
Adjusted operating income per common share (basic and
diluted)(F)............................................... $ 0.56 $ 0.50
Individual life insurance in force, net of reinsurance...... $ 26,935 $ 25,735
Life insurance reserves..................................... $ 2,369 $ 2,065
Annuity reserves............................................ $ 5,930 $ 1,323
Number of employees......................................... 710 405
STATUTORY DATA:
Premiums and deposits:
Individual life........................................... $ 84.9 $ 81.6
Annuities................................................. $ 173.7 $ 12.4
</TABLE>
- ---------------
(A) Consolidated Income Statement Data includes the results for Delta and
AmVestors for the three-month period ended March 31, 1998, and Consolidated
Balance Sheet Data includes period-end data for Delta and AmVestors as of
March 31, 1998.
S-13
<PAGE> 37
(B) Basic earnings per common share for the first quarter of 1998 is calculated
using 29.73 million weighted average shares of Class A Common Stock and 5
million shares of Class B Common Stock outstanding. Diluted earnings per
common share for the first quarter of 1998 is calculated using 29.83 million
weighted average shares of Class A Common Stock and 5 million shares of
Class B Common Stock outstanding. The basic and diluted earnings per common
share for the first quarter of 1997 are calculated using 18.16 million
shares of Class A Common Stock and 5 million shares of Class B Common Stock
outstanding.
(C) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consist of income from operations before federal income taxes, fixed charges
and pre-tax earnings required to cover preferred stock dividend
requirements. "Fixed charges" consist of interest expense on debt and
capital securities, amortization of debt expense and interest credited on
deferred annuities.
(D) Since the Company currently has no preferred stock outstanding, the ratio of
earnings to fixed charges and preferred stock dividends is the same as the
ratio of earnings to fixed charges.
(E) Amounts shown include the effects of reporting fixed maturity securities at
fair value and recording the unrealized appreciation or depreciation on such
securities as a component of stockholders' equity, net of tax and other
adjustments. Such adjustments are in accordance with Statement of Financial
Accounting Standards 115, "Accounting for Certain Investments in Debt and
Equity Securities," which the Company adopted December 31, 1993.
(F) Adjusted operating income reflects net income adjusted to eliminate certain
items (net of applicable income taxes) which management believes are not
necessarily indicative of overall operating trends. For example, net
realized capital gains or losses on investments, excluding gains or losses
on convertible debt which are considered core earnings, are eliminated.
Different items are likely to occur in each period presented and others may
have different opinions as to which items may warrant adjustment. The
adjusted operating income shown does not constitute net income computed in
accordance with GAAP. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition -- Adjusted Operating Income" in the
accompanying Prospectus.
S-14
<PAGE> 38
RISK FACTORS
Before purchasing any of the Units offered hereby, prospective purchasers
of Units should consider, in addition to the other information with respect to
the Company and its business contained herein or in the Prospectus or
incorporated herein by reference, the following risk factors, as well as those
in the Prospectus.
RISK OF DECLINE IN EQUITY VALUE
The market value of the Common Stock receivable upon settlement of the
Purchase Contracts may be materially different than the purchase price payable
for such Common Stock. If the Applicable Market Value of the Common Stock on the
Stock Purchase Date is less than the Stated Amount (i.e., less than the Closing
Price of the Common Stock on the date of this Prospectus Supplement), each
holder of Units will, on the Stock Purchase Date, be required to purchase shares
of Common Stock for an amount greater than the aggregate Applicable Market Value
of such shares. Accordingly, a holder of Units assumes the risk that the market
value of the Common Stock may decline, and such decline could be substantial.
See "Prospectus Summary -- Settlement Rate" for a tabular presentation of the
Settlement Rate and the approximate market value of the Common Stock receivable
upon settlement of the Units at certain assumed Applicable Market Values.
LIMITATION ON EQUITY APPRECIATION POTENTIAL
Since the number of shares of Common Stock issuable upon settlement of each
Purchase Contract may decline by up to % as the Applicable Market Value
increases, the opportunity for equity appreciation afforded by an investment in
the Units is less than that afforded by a direct investment in the Common Stock.
Assuming the Applicable Market Value accurately reflects fair market value, the
Applicable Market Value on the Stock Purchase Date must exceed the Threshold
Appreciation Price of $ per share before a holder of the Units realizes any
appreciation.
LIMITATION ON VALUE OF QUIPS (OR JUNIOR SUBORDINATED DEBENTURES) AS A RESULT OF
CALL OPTIONS
If the value of the QUIPS (or Junior Subordinated Debentures) underlying
the Normal Units is greater than the value of the Aggregate Call Option Exercise
Consideration (as expected), it is likely that the Call Option Holder will
exercise its Call Options. In that case, the Call Option Holder rather than
holders of Normal Units will realize the benefit of that greater value. The
QUIPS (or Junior Subordinated Debentures) may increase in value due to, among
other things, a decrease in interest rates, an increase in the perceived credit
quality of the Company or an increase in the QUIPS and Debenture Rate.
LIMITATIONS ON RIGHT TO CREATE STRIPPED UNITS
Each holder of Normal Units will have the right to substitute, as Pledged
Securities, Treasury Securities that will generate payments matching such
holder's obligations under the underlying Purchase Contracts, in return for the
securities that theretofore had been the Pledged Securities. For so long as the
Call Options underlying such Normal Units remain exercisable, such right may be
exercised only if the holder obtains an instrument from the Call Option Holder
releasing its security interest in the Pledged Securities securing such Call
Options and agreeing that such Call Options no longer underlie such Units. The
holder might obtain such an instrument by separately documenting such Call
Options with the Call Option Holder (and, if required by the Call Option Holder,
entering into credit support arrangements satisfactory to the Call Option Holder
backing such Call Options), paying the Call Option Holder to cancel such Call
Options or otherwise. However, the Call Option Holder will be under no
obligation to deliver such an instrument, and there can be no assurance that a
holder will be able to induce the Call Option Holder to do so. Therefore,
investors may not be able to capitalize on any appreciation of the QUIPS through
this means. Goldman, Sachs & Co. have advised the Company that, while they are
the Call Option Holder, they will evaluate requests to
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<PAGE> 39
release their security interests in the Pledged Securities on a case-by-case
basis, taking into account the market value of the Pledged Securities as
compared to the cost to the Call Option Holder of exercising the Call Options,
the availability and amount of credit support, any payments to be made in
connection therewith and other factors pertaining at the time of any requested
release. In doing so, Goldman, Sachs & Co. would expect that they would not
grant such a request unless the value of the payments and other new rights
offered by the holder were no less valuable to Goldman, Sachs & Co. than the
rights they had before granting such request.
PLEDGED SECURITIES ENCUMBERED
Although holders of Units will be beneficial owners of the underlying
Pledged Securities, those Pledged Securities will be pledged with the Collateral
Agent to secure the obligations of the holders under the Purchase Contracts and
the Call Options. Thus, for so long as the Purchase Contracts remain in effect,
holders will not be entitled to withdraw their Pledged Securities from this
pledge arrangement except in the limited circumstances described herein.
SUBORDINATION OF COMPANY OBLIGATIONS
The ability of the Trust to pay amounts due on the QUIPS (including,
without limitation, the ability of the Trust to pay amounts due upon exercise of
any Junior Subordinated Debenture Put Options) is dependent upon the Company
making payments on the Junior Subordinated Debentures as and when required.
The obligations of the Company under the Junior Subordinated Debentures and
the Guarantee will be unsecured and subordinate and rank junior in right of
payment to all present and future Senior Indebtedness of the Company to the
extent and in the manner set forth in the Indenture and the Guarantee,
respectively. No payments on account of principal of, premium, if any, or
interest on the Junior Subordinated Debentures(including payments on exercise of
Junior Subordinated Debenture Put Options)may be made if there shall have
occurred and be continuing a default in any payment with respect to Senior
Indebtedness, or an event of default with respect to any Senior Indebtedness
resulting in the acceleration of the maturity thereof, or if any judicial
proceeding shall be pending with respect to any default. In the event of the
acceleration of the maturity of Junior Subordinated Debentures, the holders of
all Senior Indebtedness outstanding at the time of such acceleration will first
be entitled to receive payment in full of all amounts due in respect of such
Senior Indebtedness before the holders of Junior Subordinated Debentures will be
entitled to receive or retain any payment in respect of Junior Subordinated
Debentures. Notwithstanding the foregoing, amounts that would be due and payable
by the Company to holders of Units in the absence of the foregoing subordination
provisions may be applied by such holders to offset their obligations under
their respective Purchase Contracts.
None of the Indenture, the Guarantee, the Declaration or the Master Unit
Agreement places any limitation on the amount of secured or unsecured debt,
including Senior Indebtedness, that may be incurred by the Company or any of its
subsidiaries. At March 31, 1998, the Company had $ million of Senior
Indebtedness outstanding.
See "Description of the Units -- Description of the Junior Subordinated
Debentures -- Subordination" and "Description of the Guarantee -- Status".
OPTION TO DEFER PAYMENTS
The Company will generally have the right to defer payments of interest on
the Junior Subordinated Debentures at any time or from time to time for a period
not extending beyond the QUIPS and Debenture Maturity Date. Upon any such
deferral, quarterly distributions on the QUIPS by the Trust will be deferred.
However, deferred payments of interest on the Junior Subordinated Debentures and
deferred distributions on the QUIPS will bear additional interest or
distributions at a rate per annum equal to the Deferral Rate (compounding on
each succeeding Quarterly Payment
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<PAGE> 40
Date) until paid. See "Description of the Units -- Description of the
QUIPS -- Distributions" and "-- Description of the Junior Subordinated
Debentures -- Option to Extend Interest Payment Date".
If Contract Fees are payable by the Company on the Purchase Contracts, the
Company will generally have the right to defer the payment of such Contract Fees
at any time or from time to time for a period not extending beyond the Stock
Purchase Date. However, deferred payments of Contract Fees will bear additional
Contract Fees at a rate per annum equal to the Deferral Rate (compounding on
each succeeding Quarterly Payment Date) until paid. If the Purchase Contracts
are terminated (upon the occurrence of certain events of bankruptcy, insolvency,
or reorganization with respect to the Company), the right to receive Contract
Fees, including deferred Contract Fees, will terminate.
Should the Company elect to exercise its right to defer payments of
interest on the Junior Subordinated Debentures or Contract Fees, the market
price of the QUIPS or Junior Subordinated Debentures or, for so long as the
Purchase Contracts remain in effect, the Units is likely to be affected. A
holder that disposes of its QUIPS, Junior Subordinated Debentures or Units
during such deferral period, therefore, might not receive the same return on its
investment as a holder that continues to hold its QUIPS, Junior Subordinated
Debentures or Units. In addition, the mere existence of the Company's right to
defer such payments may cause the market price of the QUIPS, Junior Subordinated
Debentures or Units to be more volatile than the market prices of other
securities that are not subject to such deferrals.
For information about the taxation of holders in the event that the Company
exercises its right to defer payments, see "-- Tax Matters" and "Certain Federal
Income Tax Consequences -- Interest Receivable on the QUIPS".
MASTER UNIT AGREEMENT NOT QUALIFIED UNDER TRUST INDENTURE ACT; LIMITED
OBLIGATIONS OF UNIT AGENT
Although the QUIPS constituting a part of the Normal Units will be issued
pursuant to a Declaration qualified as an indenture under the Trust Indenture
Act, the Master Unit Agreement relating to the Units and the appointment of the
Unit Agent (as defined herein) as the agent and attorney-in-fact for the holders
of the Units will not be qualified as an indenture under the Trust Indenture
Act, and the Unit Agent will not be required to qualify as a trustee thereunder.
Accordingly, holders of the Units will not have the benefits of the protections
of the Trust Indenture Act. Under the terms of the Master Unit Agreement, the
Unit Agent will have only limited obligations to the holders of the Units.
See"Description of the Units -- Certain Provisions of the Principal
Agreements -- Information Concerning the Unit Agent".
RIGHTS UNDER THE GUARANTEE
The Guarantee will guarantee payments due in respect of the QUIPS to the
holders of the QUIPS (including holders of Normal Units so long as the Normal
Units include QUIPS), but only to the extent that the Trust has funds on hand
legally available therefor. If the Company defaults on its obligation to pay
amounts payable in respect of the Junior Subordinated Debentures, the Trust will
not have sufficient funds to make the corresponding payments due in respect of
the QUIPS, and, in such event, holders of the QUIPS (including holders of Normal
Units so long as the Normal Units include QUIPS) will not be able to rely upon
the Guarantee for payment of such amounts.
ENFORCEMENT RIGHTS IN RESPECT OF JUNIOR SUBORDINATED DEBENTURES
In the event a Debenture Event of Default (as defined herein) shall have
occurred and be continuing and such event is attributable to the failure of the
Company to pay principal or interest on the Junior Subordinated Debentures on
the respective dates such principal or interest is payable (after giving effect
to any permitted deferral), then a holder of record of QUIPS (or, for so long as
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<PAGE> 41
QUIPS underlie Normal Units, a holder of record of Normal Units) may institute a
legal proceeding directly against the Company for enforcement of payment to such
holder of the portion of such principal or interest attributable to Junior
Subordinated Debentures having a principal amount equal to the aggregate QUIPS
Liquidation Amount of the QUIPS held by such holder (or underlying such holder's
Normal Units) (a "Direct Action"). Except as described herein, holders of QUIPS
will not be able to exercise directly any other remedy available to the holders
of the Junior Subordinated Debentures or to assert directly any other rights in
respect of the Junior Subordinated Debentures. See "Description of the
Units -- Description of the Junior Subordinated Debentures -- Enforcement of
Certain Rights by Holders of the QUIPS" and "-- Debenture Events of Default" and
"-- Description of the Guarantee". The Declaration will provide that each holder
of QUIPS (including each holder of Normal Units for so long as Normal Units
include QUIPS) by acceptance thereof agrees to the provisions of the Indenture
and the Guarantee.
LIMITED VOTING AND OTHER RIGHTS
Holders of QUIPS (including holders of Normal Units for so long as Normal
Units include QUIPS) generally will have voting rights with respect to the QUIPS
relating only to the modification of the terms of the QUIPS and the exercise of
the Trust's rights as holder of the Junior Subordinated Debentures. Holders of
QUIPS will not be entitled to vote to appoint, remove or replace, or to increase
or decrease the number of, the Issuer Trustees or Administrators, which voting
rights are vested exclusively in the holder of the Common Trust Securities,
except as described under "Description of the Units -- Description of the
QUIPS -- Removal of Issuer Trustees and Administrators". See "Description of the
Units -- Description of the QUIPS -- Voting Rights; Amendment of the
Declaration".
Holders of Units will not be entitled to any rights with respect to the
Common Stock (including, without limitation, voting rights or rights to receive
any dividends or other distributions in respect thereof) until such time as the
Company shall have delivered shares of Common Stock upon settlement of the
Purchase Contracts on the Stock Purchase Date.
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET
The Units are securities for which there is currently no secondary market.
It is not possible to predict how the Units will trade in the secondary market
or whether the market for the Units will be liquid or illiquid. Application will
be made to list the Normal Units on the NYSE. The Underwriters have advised the
Company and the Trust that the Underwriters intend to make a market for the
Normal Units; however, the Underwriters are not obligated to do so and any
market making may be discontinued at any time.
TAX MATTERS
For United States federal income tax purposes, the Junior Subordinated
Debentures will be classified as contingent debt instruments. Consequently, they
will be considered to be issued with original issue discount ("OID"), which each
holder of QUIPS (including each holder of Normal Units for so long as Units
include QUIPS) will be required to include in income during the holder's period
of ownership of the QUIPS, subject to certain adjustments. Additionally, holders
may be required to recognize ordinary income on all or a portion of any gain
realized on the sale of QUIPS or gain attributable to the QUIPS on a sale of
Units before maturity. See "Certain Federal Income Tax Consequences -- Interest
Received on the QUIPS."
Should the Company exercise its right to defer payments of interest on the
Junior Subordinated Debentures, each holder of QUIPS (including each holder of
Normal Units for so long as Normal Units include QUIPS) will continue to be
required to accrue OID in respect of the deferred stated interest allocable to
its QUIPS for United States federal income tax purposes. As a result, during a
deferral period, each holder of QUIPS will recognize income for United States
federal income tax
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<PAGE> 42
purposes but will not receive cash attributable to such income prior to the
conclusion of such deferral period. In addition, a holder will not receive any
cash related to the income accrued during a deferral period if the holder
disposes of the QUIPS prior to the record date for the payment of distributions.
Assuming, however, that the Company does not exercise its right to defer
payments, the Company believes that the amount of taxable income required to be
recognized each year with respect to the QUIPS will not exceed the amount of
cash distributed each year with respect to the QUIPS. See "Certain Federal
Income Tax Consequences -- Interest Received on the QUIPS".
In the event that holders of Units are required to pay Contract Fees to the
Company, it is unlikely that such holders will be entitled to a current
deduction for such payments. As a result, although the amount of cash actually
distributed to holders will be reduced by the amount of Contract Fees payable to
the Company, holders will nevertheless recognize income each quarter equal to
the full amount of OID accrued with respect to the QUIPS, subject to certain
adjustments. See "Certain Federal Income Tax Consequences -- Contract Fees".
Because income with respect to the QUIPS will not be considered dividends
for United States federal income tax purposes, corporate holders of Normal Units
or QUIPS will not be entitled to a dividends-received deduction in respect of
such income.
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<PAGE> 43
THE TRUST
AmerUs Capital II is a statutory business trust created under the laws of
the State of Delaware pursuant to (i) a declaration of trust, dated as of April
14, 1998, executed by the Company, as Sponsor, and certain of the Issuer
Trustees and (ii) the filing of a certificate of trust with the Secretary of
State of the State of Delaware on April 14, 1998. Such declaration of trust will
be amended and restated in its entirety by the Declaration. The Declaration will
be qualified as an indenture under the Trust Indenture Act. The Trust exists for
the exclusive purposes of (i) issuing the Trust Securities representing
undivided beneficial interests in the assets of the Trust, (ii) investing the
proceeds of the Trust Securities in the Junior Subordinated Debentures and (iii)
engaging in only those other activities necessary or incidental thereto.
Accordingly, the Junior Subordinated Debentures will be the sole assets of the
Trust and payments under the Junior Subordinated Debentures will be the sole
revenues of the Trust. The Trust has a term of approximately seven (7) years,
but may dissolve earlier as provided in the Declaration. All of the Common Trust
Securities will be directly or indirectly owned by the Company. The Common Trust
Securities will rank pari passu, and payments will be made thereon pro rata,
with the QUIPS, except that, if an event of default under the Declaration has
occurred and is continuing, the rights of the holders of the Common Trust
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 QUIPS. Although, upon issuance of the QUIPS, the holders of the Units will
be beneficial owners of the underlying QUIPS, the QUIPS will be pledged with the
Collateral Agent to secure the obligations of the holders under the Purchase
Contracts and Call Options. The Company will directly or indirectly acquire all
of the Common Trust Securities; such Common Trust Securities will have an
aggregate liquidation amount equal to 3% of the total capital of the Trust.
The Trust's business and affairs will be conducted by the Issuer Trustees
and Administrators appointed by the Company as the holder of the Common Trust
Securities. The Issuer Trustees will be First Union National Bank, as the
Property Trustee (the "Property Trustee"), and First Union Trust Company, as the
Delaware Trustee (the "Delaware Trustee"), and the Administrators will be three
individuals who are employees of the Company (the "Administrators"). First Union
National Bank, as the Property Trustee, will act as sole indenture trustee under
the Declaration for purposes of compliance with the provisions of the Trust
Indenture Act. First Union National Bank will also act as indenture trustee (the
"Guarantee Trustee") under the Guarantee and the Indenture, until removed or
replaced by the holder of the Common Trust Securities. See "Description of the
Units -- Description of the Guarantee" and "Description of the
Units -- Description of Junior Subordinated Debentures". The Company, as the
direct or indirect holder of the Common Trust Securities, or if an event of
default under the Declaration has occurred and is continuing, the holders of a
majority in Liquidation Amount of the Trust Securities, will be entitled to
appoint, remove or replace the Property Trustee and/or the Delaware Trustee. In
no event will the holder of the QUIPS (or Units) have the right to vote to
appoint, remove or replace the Administrators; such voting rights will be vested
exclusively in the Company, as the direct or indirect holder of the Common Trust
Securities. The duties and obligations of each Issuer Trustee and Administrator
are governed by the Declaration. The Company will pay directly all fees,
expenses, debts and obligations (other than the Trust Securities) related to the
Trust and the offering of the Units, including all ongoing costs, expenses,
taxes and other liabilities of the Trust. Under the Declaration, all parties to
the Declaration will agree, and the holders of the Units upon purchase of their
Units will be deemed to have agreed, for United States federal income tax
purposes, to treat the Trust as a grantor trust, the Junior Subordinated
Debentures as indebtedness and the Trust Securities as evidence of indirect
beneficial ownership in the Junior Subordinated Debentures. See "Description of
the Units -- Description of the Guarantee" and "-- Description of the QUIPS".
The Property Trustee will hold title to the Junior Subordinated Debentures
for the benefit of the holders of the Trust Securities and the Property Trustee
will have the power to exercise all rights, powers and privileges under the
Indenture as the holder of the Junior Subordinated Debentures. In
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addition, the Property Trustee will maintain exclusive control of a segregated
non-interest bearing bank account (the "Property Account") to hold all payments
made in respect of the Junior Subordinated Debentures for the benefit of the
holders of the Trust Securities. The Property Trustee will make payments of
distributions and payments on liquidation, redemption and otherwise to the
holders of the Trust Securities out of funds from the Property Account. The
Guarantee Trustee will hold the Guarantee for the benefit of the holders of the
QUIPS. See "Description of the Units -- Description of the Junior Subordinated
Debentures".
The rights of the holders of the QUIPS, including economic rights, rights
to information and voting rights, are set forth in the Declaration, the Delaware
Business Trust Act and the Trust Indenture Act. See "Description of the
Units -- Description of the QUIPS".
The principal place of business of the Trust is AmerUs Capital II, c/o
AmerUs Life Holdings, Inc., 699 Walnut, Des Moines, Iowa 50309-3948 and its
telephone number is (515) 362-3600.
USE OF PROCEEDS
The net proceeds to be received by the Trust from the sale of the QUIPS,
after deducting estimated underwriting discounts and expenses of the offering
payable by the Company, are expected to be $ million, of which
$ million will be from the sale of the Call Options to the Call Option
Holder (approximately $ million, of which $ will be from the
sale of the Call Options, if the Underwriters' over-allotment option is
exercised in full). The proceeds to be received by the Trust from the sale of
the QUIPS will be invested by the Trust in the Junior Subordinated Debentures of
the Company. The Company intends to use such proceeds to repay the remaining
outstanding Bank Debt, to partially fund a stock repurchase of up to $75 million
of the Company's Class A Common Stock and for general corporate purposes.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock of the Company has been listed for trading on the NYSE
since February 20, 1998 under the symbol AMH and was listed on the Nasdaq
National Market System from the date of the Company's initial public offering on
January 28, 1997 until February 19, 1998 under the symbol AMRS. Based upon
information reported in the Bloomberg consolidated transaction reporting system,
the high and low sales prices for each quarterly period from January 28, 1997 to
the date hereof were:
<TABLE>
<CAPTION>
PRICE RANGE
-------------------
HIGH LOW
-------- --------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Second quarter............................................
Third quarter.............................................
Fourth quarter............................................
YEAR ENDED DECEMBER 31, 1998
First quarter
</TABLE>
As of March 31, 1998, there were approximately holders of
the outstanding shares of Common Stock, including individual participants in
securities position listings. The last reported sales price of the Common Stock
on the NYSE on March 31, 1998 was $ per share.
Since the second quarter of 1997, the Company's Board of Directors has
declared a quarterly cash dividend of $0.10 per share to shareholders of its
Class A Common Stock. The declaration and payment of future dividends to holders
of its Common Stock by the Company will be at the discretion of the Board of
Directors and will depend upon the Company's earnings and financial condition,
capital requirements of its Subsidiaries, regulatory considerations and other
factors the
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<PAGE> 45
Board of Directors deems relevant. The Company's general policy is to retain
most of its earnings to finance the growth and development of its business.
Because the Company is a holding company, it is dependent upon its
Subsidiaries to provide funding for the Company's operating expenses and for the
payment by the Company of debt service and dividends. State insurance laws
applicable to the Company's Subsidiaries limit the payment of dividends and
other distributions by such Subsidiaries to the Company and may therefore limit
the ability of the Company to make dividend payments. See "Risk Factors --
Holding Company Structure -- Limitations on Dividends" and "Reorganization and
Recent Acquisitions" in the Prospectus and "Prospectus Summary -- Recent
Acquisitions".
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<PAGE> 46
CAPITALIZATION
The following table summarizes the actual capitalization of the Company and
its consolidated subsidiaries at March 31, 1998 and such capitalization adjusted
on a pro forma basis to reflect the sale by the Company of the Units
offered hereby (at an assumed initial public offering price of $ and
assuming the Underwriters' over-allotment option is not exercised) [and the sale
by the Company of $125,000,000 aggregate principal amount of its Senior Notes
due 2008], and an assumed application of the proceeds from such sale, after
underwriting commissions and estimated expenses of this offering, to repay
indebtedness. This table should be read in conjunction with the Company's
Quarterly Report on Form 10-Q for the three months ended March 31, 1998 which is
incorporated by reference in the Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------------------
PRO FORMA FOR
THE ISSUANCE
ACTUAL OF THE UNITS
---------- -------------
(IN THOUSANDS)
<S> <C> <C>
Commercial paper and notes payable:
Bank Debt................................................. $ 266,341 $ 16,341
Notes..................................................... -- 125,000
---------- ----------
Total Debt........................................ 266,341 141,341
Capital Securities.......................................... 86,000 236,000
---------- ----------
Shareholders' equity:
Class A Common Stock(1)................................... 29,735 29,735
Class B Common Stock...................................... 5,000 5,000
Accumulated other comprehensive income, net of deferred
income taxes.............................................. 54,099 54,099
Additional paid-in capital.................................. 383,686 383,686
Retained earnings........................................... 472,108 472,108
---------- ----------
Total shareholders' equity.................................. 944,628 944,628
---------- ----------
Total capitalization and debt..................... $1,296,969 $1,321,969
========== ==========
</TABLE>
- ---------------
(1) Does not include up to shares ( if the Underwriters'
over-allotment option is exercised in full) of Class A Common Stock issuable
on the Stock Purchase Date of , 2001 upon settlement of the
Purchase Contracts.
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<PAGE> 47
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The information appearing below has been extracted from Management's
Discussion and Analysis of Results of Operations and Financial Condition
contained in the Company's Report on Form 10-Q for the three-month period ended
March 31, 1998 (which is incorporated by reference in the Prospectus) and should
be read in conjunction with the more complete information contained therein.
RESULTS OF OPERATIONS -- FIRST QUARTER 1998 COMPARED TO FIRST QUARTER 1997
Revenues
Individual life and annuity premiums and product charges increased by $14.3
million, or 73.8%, to $33.6 million for the first quarter of 1998 from $19.3
million for the first quarter of 1997. Included in the 1998 increase were $6.3
million of insurance and annuity premiums and product charges from Delta and
AmVestors. Insurance premiums increased by $9.1 million to $17.3 million for the
first quarter of 1998 compared to $ 8.2 million for the first quarter of 1997.
Included in the increased insurance premiums in 1998 was $2.0 million from the
acquisitions. Traditional life insurance premiums increased by $5.6 million
primarily as a result of growth in renewal premiums on traditional life
insurance policies not included in the Closed Block (as defined below).
Immediate annuity deposits and supplementary contract premiums were $3.5 million
higher in 1998 than in 1997 with $1.8 million from the recent acquisitions of
Delta and AmVestors and $1.7 million from increased immediate annuity and
supplementary contract premium sales of AmerUs Life.
Universal life product charges increased by $0.6 million for the first
quarter of 1998 primarily due to increased cost of insurance charges as a result
of the normal aging of the block of business.
Annuity product charges for first quarter 1998 increased by $4.5 million
from 1997 amounts. The increase includes $4.3 million of annuity product charges
from Delta and AmVestors.
Net investment income increased by $82.2 million to $133.1 million for
first quarter 1998. Included in the 1998 increase in net investment income was
$82.6 million of net investment income from Delta and AmVestors. The remaining
$0.4 million decrease in net investment income was attributable to a decrease in
average invested assets (excluding market value adjustments, the Closed Block,
and Delta and AmVestors) partially offset by an increase in effective yields on
average invested assets. Average invested assets (excluding market value
adjustments, the Closed Block and Delta and AmVestors) in the first quarter of
1998 decreased by $56.8 million from the first quarter of 1997, primarily as a
result of the continued runoff of AmerUs Life's individual deferred annuity
business. Effective May, 1996 substantially all new sales of individual deferred
annuities by AmerUs Life's distribution network have been made through the joint
venture (the "Ameritas Joint Venture") with Ameritas Life Insurance Corp.
pursuant to which AmerUs Life markets fixed annuities issued by Ameritas
Variable Life Insurance Company ("AVLIC") and sells AVLIC's variable life
insurance and variable annuity products. The effective yield on average invested
assets (excluding market value adjustments, the Closed Block and Delta and
AmVestors) increased from 7.22% for the first quarter of 1997 to 7.26% for the
first quarter of 1998.
Realized gains on investments were $6.2 million for the first quarter of
1998 compared to gains of $5.2 million for the first quarter of 1997. Included
in the first quarter amounts were $1.9 million of gains from Delta and
AmVestors.
The Closed Block
The Closed Block was established on June 30, 1996. Insurance policies which
had a dividend scale in effect as of June 30, 1996 were included in the Closed
Block (as defined in the Prospectus). The Closed Block was designed to provide
reasonable assurance to owners of insurance policies included therein that,
after the Company's reorganization, assets would be
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<PAGE> 48
available to maintain the dividend scales and interest credits in effect prior
to the Company's reorganization if the experience underlying such scales and
credits continues.
The contribution to the operating income of the Company from the Closed
Block is reported as a single line item in the income statement. Accordingly,
premiums, product charges, investment income, realized gains or losses on
investments, policyowner benefits and dividends attributable to the Closed
Block, less certain minor expenses including amortization of deferred policy
acquisition costs, are shown as a net number under the caption the "Contribution
from the Closed Block." This results in material reductions in the respective
line items in the income statement while having no effect on net income. The
expenses associated with the administration of the policies included in the
Closed Block and the renewal commissions on these policies are not charged
against the Contribution from the Closed Block, but rather are grouped with
underwriting, acquisition and insurance expenses. Also, all assets allocated to
the Closed Block are grouped together and shown as a separate item entitled
"Closed Block Assets." Likewise, all liabilities attributable to the Closed
Block are combined and disclosed as the "Closed Block Liabilities."
The contribution from the Closed Block for the first quarter of 1998 was
$9.0 million compared to $9.3 million for the same period in 1997.
Closed Block insurance premiums decreased by $4.5 million to $50.4 million
for the first quarter of 1998 compared to $54.9 million for the same period in
1997. Insurance policies which had a dividend scale in effect as of June 30,
1996 were included in the Closed Block. The decrease in insurance premiums
reflects a reduction in the Closed Block's traditional life insurance business
in force as a result of the lapse of such business. Similarly, the decrease in
product charges on universal life policies included in the Closed Block is
primarily the result of the reduction of such business in force.
Net investment income for the Closed Block increased by $2.9 million to
$29.2 million for the first quarter of 1998 compared to $26.3 million for the
first quarter of 1997 due primarily to higher average invested assets (excluding
market value adjustments) partially offset by lower effective yields. Average
invested assets (excluding market value adjustments) increased by $125.6 million
and average effective yields decreased by 19 basis points for the Closed Block.
Realized gains on investments of the Closed Block were $0.9 million for the
first quarter of 1998 compared to a $0.6 million realized loss for the same
period in 1997.
Closed Block policyowner benefits were $49.0 million for the first quarter
of 1998 compared to $49.7 million a year ago. The decrease in benefits was
largely the result of lower death benefits on the Closed Block policies.
Insurance expenses for the Closed Block were $1.4 million for the first
quarter of 1998 compared to $1.5 million for the first quarter of 1997. The
decrease in expenses is the result of reduced premium taxes on such business due
to the lower insurance premiums.
The amortization of deferred policy acquisition costs for the Closed Block
increased by $1.2 million to $8.0 million for the first quarter of 1998.
Deferred policy acquisition costs are generally amortized in proportion to gross
margins, including realized capital gains. Lower death benefits and increased
realized capital gains in the first quarter of 1998, compared to the same period
in 1997, contributed to higher gross margins in 1998 on those policies included
in the Closed Block for which deferred costs are amortized, resulting in the
increased amortization in 1998.
Closed Block dividends to policyowners were $16.6 million for the first
quarter of 1998 compared to $17.1 million for the same period in 1997.
Policyowner Benefits
Total policyowner benefits were $107.3 million for the first quarter of
1998 compared to $45.5 million for the first quarter of 1997, an increase of
$61.8 million. Included in the first quarter
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<PAGE> 49
1998 amounts were $63.0 million of benefits of acquired companies primarily
consisting of interest credited to deferred annuity account balances.
Traditional life insurance benefits increased by $1.0 million in 1998 primarily
due to the growth and aging of such business in force. Universal life insurance
benefits were $1.3 million lower in 1998 primarily due to decreased death
benefits as a result of lower mortality.
Annuity benefits increased by $62.0 million for the first quarter of 1998
to $85.8 million compared to $23.8 million for the first quarter of 1997.
Included in the first quarter 1998 annuity benefits were $62.0 million
attributable to the recent acquisitions of Delta and AmVestors. AmerUs Life's
annuity benefits were $23.8 million for both the first quarters of 1998 and
1997. Interest credited to AmerUs Life's policyowner account balances decreased
by $1.8 million to $13.6 million for the first quarter of 1998 compared to $15.4
million for the same period in 1997. The weighted average crediting rate for
AmerUs Life's individual deferred annuity liabilities decreased by 19 basis
points from 5.48% for the first quarter of 1997 to 5.29% for the first quarter
of 1998, and AmerUs Life's average deferred annuity liabilities decreased by
$110.4 million from the first quarter of 1997 to the same period in 1998 also
contributing to the lower credited amounts in 1998. Other annuity benefits for
AmerUs Life increased by $1.8 million to $10.2 million for the first quarter of
1998 compared to $8.4 million for the first quarter of 1997, primarily as a
result of increased immediate annuity and supplementary contract premium sales.
Expenses
The Company's commission expense, net of deferrals, increased by $1.0
million to $3.1 million for the first quarter of 1998 compared to $2.1 million
for the first quarter of 1997. Included in the increase is $0.4 million of
commission expense, net of deferrals, from the recent acquisitions. Other
underwriting, acquisition and insurance expenses, net of deferrals, increased by
$16.0 million to $24.9 million for the first quarter of 1998. Included in the
1998 amounts is $15.7 million of expenses for the recently acquired companies,
including $1.8 million of goodwill amortization and $6.7 million of amortization
of value of business acquired. Excluding recently acquired companies, other
underwriting, acquisition and insurance expenses, net of deferrals, increased by
$0.3 million.
The amortization of deferred policy acquisition costs increased by $3.1
million to $8.2 million in the first quarter of 1998 compared to $5.1 million in
the first quarter of 1997. Deferred policy acquisition costs are generally
amortized in proportion to gross margins, including realized capital gains.
Lower death benefits and increased realized capital gains in the first quarter
of 1998, compared to the first quarter of 1997, contributed to higher gross
margins in 1998 on products for which deferred costs are amortized, resulting in
the increased amortization in 1998.
Income from Operations
Income from operations increased by $15.1 million to $38.2 million for the
first quarter of 1998 compared to $23.1 million for the same period in 1997,
with the recent acquisitions of Delta and AmVestors adding $11.7 million of
income from operations during the first quarter of 1998. Improved product
margins, in large part due to the result of better mortality, contributed to the
remaining increase in income from operations in 1998.
Interest Expense
Interest expense increased by $3.7 million in the first quarter of 1998 to
$6.7 million compared to $3.0 million for the first quarter of 1997. The
increased interest expense in the first quarter of 1998 was due to increased
interest expense on the capital securities issued by the Company on February 3,
1997 and increased interest expense on the revolving line of credit as a result
of increased debt levels.
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Income Before Income Tax Expense
Income before income tax expense and equity in earnings of unconsolidated
subsidiary increased by $11.4 million to $31.5 million for the first quarter of
1998 compared to $20.1 million for the first quarter of 1997, with the recent
acquisitions of Delta and AmVestors adding $11.7 million to such income for the
first quarter of 1998.
Income Tax Expense
Income tax expense increased by $4.4 million to $10.1 million for the first
quarter of 1998 compared to $5.7 million for the same period of 1997. The
increase in income tax expense was primarily due to the higher pre-tax income
including income from the recent acquisitions of Delta and AmVestors. The
effective income tax rate for the first quarter of 1998 was 32.3% compared to
28.5% for the first quarter of 1997. The higher effective tax rate in 1998 was
in part attributable to the non-deductibility of the amortization of goodwill
resulting from the recent acquisitions. In addition, relatively similar amounts
of tax credits in 1998 and 1997 had a greater impact on reducing the effective
tax rate for the first quarter of 1997 due to the lower income in the first
quarter of 1997.
Net Income
Net income increased by $7.2 million to $21.8 million for the first quarter
of 1998 compared to $14.6 million for the same period in 1997, with the recent
acquisitions of Delta and AmVestors adding $6.5 million of net income for the
first quarter of 1998.
ACCOUNTING TREATMENT
The financial statements of the Trust will be reflected in the Company's
consolidated financial statements, with the QUIPS shown on the Company's balance
sheet under the caption "Company-obligated mandatorily redeemable capital
securities of subsidiary trust". The financial statement footnotes to the
Company's consolidated financial statements will reflect that the sole asset of
the Trust will be the Junior Subordinated Debentures. Distributions on the QUIPS
will be reflected as a charge to the Company's consolidated income, identified
as "Distributions on capital securities", whether paid or accrued.
The Purchase Contracts are forward transactions in the Company's Common
Stock. Under generally accepted accounting principles, the Purchase Contracts
will not be recorded on the Company's consolidated balance sheets but will be
disclosed in the notes to the Company's consolidated financial statements. Upon
settlement of a Purchase Contract, the Company will receive the Stated Amount on
such Purchase Contract and will issue the requisite number of shares of Common
Stock. The Stated Amount thus received will be credited to shareholders' equity
allocated between the common stock and paid-in capital accounts.
Prior to the issuance of shares of Common Stock upon settlement of the
Purchase Contracts, it is anticipated that the Units will be reflected in the
Company's diluted earnings per share calculations using the treasury stock
method. Under this method, the number of shares of Common Stock used in
calculating diluted earnings per share is deemed to be increased by the excess,
if any, of the number of shares issuable upon settlement of the Purchase
Contracts over the number of shares that could be purchased by the Company in
the market (at the average market price during the period) using the proceeds
receivable upon settlement. Consequently, it is anticipated there will be no
dilutive effect on the Company's diluted earnings per share except during
periods when the average market price of Common Stock is above the Threshold
Appreciation Price.
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<PAGE> 51
DESCRIPTION OF THE UNITS
The summaries of certain provisions of documents described below are not
necessarily complete, and in each instance reference is hereby made to the
description of the Units contained in the Prospectus and the copies of such
documents (including the definitions therein of certain terms) which are on file
with the Commission. Wherever particular sections of, or terms defined in, such
documents are referred to herein, such sections or defined terms are
incorporated by reference herein. Capitalized terms not defined herein have the
meanings assigned to such terms in the Principal Agreements (as defined herein).
GENERAL
Each Unit will have a Stated Amount of $ (equal to the last
reported per share sale price of the Common Stock on the NYSE on the date of
this Prospectus Supplement). Each Unit will initially consist of (a) a Purchase
Contract under which (i) the holder will purchase from the Company on the Stock
Purchase Date of , 2001, for cash in an amount equal to the
Stated Amount, between of a share and one share of Common Stock
of the Company (depending on the Applicable Market Value of the Common Stock on
the Stock Purchase Date, as described below), subject to adjustment in certain
circumstances, and (ii) Contract Fees will be payable at the Contract Fee Rate
of % of the Stated Amount per annum as described below (see "-- Description
of the Purchase Contracts"), and (b) a QUIPS having a Liquidation Amount equal
to the Stated Amount, a distribution rate of % of the Stated Amount per
annum and a mandatory redemption date of , 2003 (see
"-- Description of the QUIPS"), subject to a transferrable Call Option granted
by the holder of the Unit to the Call Option Holder which (when aggregated with
the Call Options underlying all other Units) will entitle the Call Option Holder
to acquire the QUIPS underlying the Units (or the Junior Subordinated Debentures
substituted therefor), on or before, the last Quarterly Payment Date prior to
the Stock Purchase Date (or, if such date is not a Trading Day, the next
succeeding Trading Day) (i.e., the Call Option Expiration Date) in exchange for
the Aggregate Consideration Deliverable on Exercise of the Call Options (see
"-- Description of the Call Options"). For so long as a Purchase Contract
remains in effect, such Purchase Contract and the QUIPS or other Pledged
Securities securing it (and, for so long as the Call Option relating to such
Pledged Securities is exercisable, the obligations of the holder to the Call
Option Holder thereunder) will not be separable and may be transferred only as
an integrated Unit.
For the period from the date of issuance of the Units to the Stock Purchase
Date, each holder of a Unit (other than a Stripped Unit) will be entitled to
receive cash payments of % of the Stated Amount per annum, payable in
arrears on the Quarterly Payment Dates of , ,
and of each year (unless deferred as described
herein). Such payments will consist of payments on the QUIPS or other Pledged
Securities plus Contract Fees payable by the Company or net of Contract Fees
payable by the holders, as the case may be. See "-- Description of the
QUIPS -- Distributions", "-- Description of the Call Options" and
"-- Description of the Purchase Contracts -- Contract Fees". If a holder of a
Unit does not provide cash to settle the underlying Purchase Contract in the
manner described herein, cash proceeds from the QUIPS or other Pledged
Securities underlying such Unit will be applied on the Stock Purchase Date to
the purchase of Common Stock pursuant to such Purchase Contract.
The QUIPS underlying a Normal Unit will constitute Pledged Securities that
will be pledged to the Collateral Agent to secure the holder's obligations to
the Company and the Call Option Holder under the Purchase Contract and Call
Option underlying such Unit. If Treasury Securities are exchanged for Pledged
Securities upon exercise of the Call Options or Junior Subordinated Debentures
are distributed in respect of Pledged Securities upon dissolution of the Trust,
the Treasury Securities so exchanged or the Junior Subordinated Debentures so
distributed will automatically be substituted as Pledged Securities in place of
the securities that theretofore had been Pledged Securities.
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<PAGE> 52
Each holder of Units, by acceptance thereof, will, under the terms of the
Principal Agreements and any of the Purchase Contracts and Call Options
underlying such Units, be deemed to have (a) irrevocably agreed to be bound by
the terms of the Principal Agreements and such Purchase Contracts and Call
Options for so long as such holder remains a holder of such Units, and (b) duly
appointed the Unit Agent as such holder's agent and attorney-in-fact to enter
into and perform such Purchase Contracts and Call Options on behalf of and in
the name of such holder.
Subject to applicable law (including, without limitation, United States
federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding Units by tender, in the open market or by
private agreement.
FORMATION OF THE UNITS
At the closing of the offering made hereby, the Underwriters will (a) enter
into Purchase Contracts with the Company and (b) purchase QUIPS from the Trust
for cash. The Underwriters will fund that cash in part by the sale of the Units
offered hereby to the initial investors thereof and in part by the sale of Call
Options (on behalf of such investors) to the Call Option Holder. The Trust will
use the cash received from the sale of the QUIPS to purchase Junior Subordinated
Debentures from the Company. The QUIPS will then be pledged to the Collateral
Agent to secure the obligations owed to the Company under the Purchase Contracts
and the obligations owed to the Call Option Holder under the Call Options. The
rights to purchase Common Stock under a Purchase Contract, together with the
QUIPS or other Pledged Securities pledged to secure the obligations referred to
in (a) and (b) below, subject to (a) the obligations owed to the Company under
such Purchase Contract,(b) the obligations owed to the Call Option Holder under
the Call Option relating to such QUIPS or other Pledged Securities and (c) the
pledge arrangements securing the foregoing obligations, are collectively
referred to herein as a "Normal Unit".
Each holder of Normal Units will have the right, at any time on or prior to
the second Business Day immediately preceding the Stock Purchase Date, to
substitute, as Pledged Securities, Treasury Securities that will generate
payments matching such holder's obligations under the underlying Purchase
Contracts, in return for the securities that theretofore had been the Pledged
Securities underlying such Units. For so long as the Call Options underlying
such Units remain exercisable, such right may be exercised only if the holder
obtains an instrument from the Call Option Holder releasing its security
interest in the Pledged Securities securing such Call Options and agreeing that
such Call Options no longer underlie such Units. The holder might obtain such an
instrument by separately documenting such Call Options with the Call Option
Holder (and, if required by the Call Option Holder, entering into credit support
arrangements satisfactory to the Call Option Holder backing such Call Options),
paying the Call Option Holder to cancel such Call Options or otherwise. However,
the Call Option Holder will be under no obligation to deliver such an
instrument, and there can be assurance that a holder will be able to induce the
Call Option Holder to do so. Therefore, investors may not be able to capitalize
on any appreciation of the QUIPS through this means.
Goldman, Sachs & Co. has advised the Company that, while they are the Call
Option Holder, they will evaluate requests to release their security interests
in the Pledged Securities on a case-by-case basis, taking into account the
market value of the Pledged Securities as compared to the cost to the Call
Option Holder of exercising the Call Options, the availability and amount of
credit support, any payments to be made in connection therewith and other
factors pertaining at the time of any requested release. In doing so, Goldman,
Sachs & Co. would expect that they would not grant such a request unless the
value of the payments and other new rights offered by the holder were no less
valuable to Goldman, Sachs & Co. than the rights they had before granting such
request.
If a holder of Normal Units exercises such holder's right to substitute
Treasury Securities for Pledged Securities in the manner described herein, the
securities that theretofore had been the Pledged Securities underlying such
Normal Units will be released from the pledge arrangement described herein and
delivered to such holder, and such holder's remaining rights and obligations
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<PAGE> 53
under such Normal Units will thereupon become "Stripped Units" that will no
longer generate cash payments to such holder (other than Contract Fees, if any,
payable by the Company pursuant to the underlying Purchase Contracts) and will
no longer be listed on the NYSE or be fungible with Normal Units.
A holder of Normal Units may exercise the right referred to above by
presenting and surrendering the certificate evidencing such Normal Units, at the
offices of the Unit Agent, together with the "Request to Create Stripped Units"
thereon completed and executed as indicated, and concurrently delivering to the
Collateral Agent (a) Treasury Securities that will generate, on the Stock
Purchase Date, an amount of cash equal to the aggregate Stated Amount of such
Normal Units, (b) Treasury Securities that will generate, on each Quarterly
Payment Date falling after the date of delivery and on or before the Stock
Purchase Date, an amount of cash equal to the aggregate Contract Fees that are
scheduled to be payable by the holder, if any, in respect of the Purchase
Contracts underlying such Normal Units (assuming for this purpose that no
Contract Fees will then have been deferred), (c) if such holder is, at the date
of delivery, deferring Contract Fees payable by such holder in respect of such
Normal Units, an amount of cash equal to (i) the aggregate unpaid amount of such
Contract Fees accrued to the date of delivery, if such date is a Quarterly
Payment Date, and (ii) the aggregate unpaid amount of such Contract Fees accrued
to the Quarterly Payment Date immediately preceding such date of delivery plus
interest thereon at the Deferral Rate for the period from and including such
Quarterly Payment Date to but excluding such date of delivery, if such date is
not a Quarterly Payment Date and (d) if the Call Options underlying any Normal
Units remain exercisable, the instrument from the Call Option Holder referred to
above; provided, however, that if Treasury Securities are the Pledged Securities
underlying such Normal Units, such right must be exercised with respect to a
number of Normal Units that will result in the release of Treasury Securities in
denominations of $1,000 and integral multiples thereof. A certificate
representing the Stripped Units that such Normal Units have become will then be
issued and delivered to such holder or such holder's designee and the securities
that theretofore had been the Pledged Securities underlying such Normal Units
will then be released from the pledge under the Pledge Agreement and delivered
to such holder or such holder's designee, upon payment by the holder of any
transfer or similar taxes payable in connection with the transfer of Units or
the securities that theretofore had been Pledged Securities to any person other
than such holder.
The Normal Units and any Stripped Units are collectively referred to herein
as the "Units."
The Company will enter into (x) an agreement (the "Master Unit Agreement")
with First Union National Bank, as unit agent (together with any successor
thereto in such capacity, the "Unit Agent"), governing the appointment of the
Unit Agent as the agent and attorney-in-fact for the holders of the Units, the
Purchase Contracts, the transfer, exchange or replacement of certificates
representing the Units and certain other matters relating to the Units and (y)
an agreement (the "Pledge Agreement") among the Company, the Collateral Agent
and the Call Option Holder creating a pledge and security interest for the
benefit of the Company to secure the obligations of holders of Units under the
Purchase Contracts and a pledge and security interest for the benefit of the
Call Option Holder to secure the obligations of the holders of Units under the
Call Options. In addition the Unit Agent will enter into an agreement (the "Call
Option Agreement") with the Call Option Holder governing the Call Options. The
Master Unit Agreement, the Pledge Agreement and the Call Option Agreement are
collectively referred to herein as the "Principal Agreements".
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<PAGE> 54
DESCRIPTION OF THE PURCHASE CONTRACTS
General
The Purchase Contracts will be governed by the Master Unit Agreement.
Each Purchase Contract underlying a Unit (unless earlier terminated) will
require the holder of such Unit to purchase, and the Company to sell, on the
Stock Purchase Date, for cash in an amount equal to the Stated Amount, a number
of newly issued shares of Common Stock equal to the Settlement Rate. The
Settlement Rate will be calculated as follows (subject to adjustment under the
circumstances described below under "-- Anti-Dilution Adjustments"):
(a) if the Applicable Market Value is greater than or equal to the
Threshold Appreciation Price of $ (i.e., approximately % higher
than the Stated Amount), the Settlement Rate will be ;
(b) if the Applicable Market Value is less than the Threshold Appreciation
Price but greater than the Stated Amount, the Settlement Rate will equal the
Stated Amount divided by the Applicable Market Value (i.e., the Settlement Rate
will be calculated so that the Applicable Market Value of the Common Stock
purchasable under each Purchase Contract would equal the Stated Amount payable
therefor) rounded to the nearest 1/10,000th of a share; and
(c) if the Applicable Market Value is less than or equal to the Stated
Amount, the Settlement Rate will be one.
"Applicable Market Value" means the average of the Closing Prices per share
of Common Stock on each of the twenty consecutive Trading Days ending on the
last Trading Day immediately preceding the Stock Purchase Date. "Closing Price"
of the Common Stock on any date of determination means the closing sale price
(or, if no closing price is reported, the last reported sale price) of the
Common Stock on the NYSE on such date, or if the Common Stock is not listed for
trading on the NYSE on any such date, as reported in the composite transactions
for the principal United States securities exchange on which the Common Stock is
so listed, or if the Common Stock is not so listed on a United States national
or regional securities exchange, as reported by The Nasdaq Stock Market, or if
the Common Stock is not so reported, the last quoted bid price of the Common
Stock in the over-the-counter market as reported by the National Quotation
Bureau or similar organization, or if such bid price is not available, the
market value of the Common Stock on such date as determined by a nationally
recognized investment banking firm retained for this purpose by the Company. A
"Trading Day" means a day on which the Common Stock (a) is not suspended from
trading on any national or regional securities exchange or association or
over-the-counter market at the close of business and (b) has traded at least
once on the national or regional securities exchange or association or
over-the-counter market that is the primary market for the trading of the Common
Stock.
No fractional shares of Common Stock will be issued by the Company pursuant
to the Purchase Contracts. In lieu of a fraction of a share otherwise issuable
in respect of Purchase Contracts being settled by a holder of Units, the holder
will be entitled to receive an amount of cash equal to such fraction times the
Applicable Market Value.
Prior to the Stock Purchase Date, the Common Stock purchasable on
settlement of Purchase Contracts will not be deemed to be outstanding for any
purpose and no holder of Units will have any voting rights, rights to dividends
or other distributions or other rights or privileges of a stockholder of the
Company by virtue of holding such Units.
Settlement
In order to settle the Purchase Contracts underlying any Units, the holder
of such Units shall, by no later than 10:00 a.m., New York City time, on the
Stock Purchase Date, deliver payment (in the
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<PAGE> 55
form of a certified or cashier's check payable to the order of the Company in
immediately available funds), at the offices of the Unit Agent, of an amount
equal to the aggregate Stated Amount of such Units (plus, if there are unpaid
Contract Fees accrued on such Purchase Contracts and payable by the holder on
the Stock Purchase Date and the cash received by the Collateral Agent on such
date in respect of the Pledged Securities securing such Purchase Contracts is
less than the amount of such unpaid Contract Fees, an amount sufficient to cover
such short-fall), provided, however, that the holder's obligation to satisfy
such Purchase Contracts may be offset by any amounts due and owing by the
Company to such holder. The Common Stock purchased on settlement of such
Purchase Contracts will then be issued and delivered to such holder or such
holder's designee and the Pledged Securities securing such Purchase Contracts
(or, in the case of Treasury Securities, the proceeds from the payment of such
Treasury Securities at maturity, net of any unpaid Contract Fees payable by the
holder accrued thereon to the Stock Purchase Date) will then be released from
the pledge under the Pledge Agreement and delivered to such holder or such
holder's designee, upon presentation and surrender of the certificate evidencing
such Units and payment by the holder of any transfer or similar taxes payable in
connection with the issuance of Common Stock or the transfer of Pledged
Securities to any person other than such holder.
On the Stock Purchase Date, if a holder of Units has not delivered cash to
settle the underlying Purchase Contracts in the manner described above and no
event described under "-- Termination" below has occurred, then (a) the Unit
Agent will notify the Collateral Agent and (i) if QUIPS underlie such Units, the
Collateral Agent, on behalf of such holder, will exercise such holder's right to
require the Trust to distribute Junior Subordinated Debentures having an
aggregate principal amount equal to the aggregate Liquidation Amount of such
QUIPS, in exchange for such QUIPS, and, upon receiving such Junior Subordinated
Debentures, will thereupon, as Put Agent, exercise the Junior Subordinated
Debenture Put Option with respect thereto (see "-- Description of the QUIPS --
Right to Exercise Junior Subordinated Debenture Put Options" and "-- Description
of the Junior Subordinated Debentures -- Junior Subordinated Debenture Put
Options") and (ii) if Junior Subordinated Debentures underlie such Units, the
Collateral Agent, on behalf of such holder, will, as Put Agent, exercise the
Junior Subordinated Debenture Put Option with respect thereto (see " Description
of the Junior Subordinated Debentures -- Junior Subordinated Debenture Put
Options"), (b) a portion of the proceeds from the exercise of such Junior
Subordinated Debenture Put Option (or, if Treasury Securities underlie such
Units, a portion of the proceeds from the payment of such Treasury Securities at
maturity) will be applied to satisfy in full such holder's obligation to
purchase Common Stock under such Purchase Contracts and to pay any unpaid
Contract Fees payable by such holder accrued thereon to the Stock Purchase Date
(it being understood that the holder's obligation to satisfy any unpaid Contract
Fees may be offset by any amounts due and owing by the Company to such holder)
and (c) the remainder of such proceeds, if any, will be paid to such holder.
Such Common Stock will then be issued and delivered to such holder or such
holder's designee, upon presentation and surrender of the certificate evidencing
such Units and payment by the holder of any transfer or similar taxes payable in
connection with the issuance of Common Stock to any person other than such
holder.
Contract Fees
The holders of Units may be required to pay Contract Fees to the Company,
or the Company may be required to pay Contract Fees to the holders of Units, as
specified in the final Prospectus Supplement for the offering made hereby.
Any obligation of the holders of Units to pay Contract Fees to the Company
will be funded out of payments made in respect of the Pledged Securities. If
payments made in respect of the Pledged Securities are insufficient to cover the
obligation of the holders of the Units to pay Contract Fees, such obligation
will be deferred until the earlier of the date sufficient cash is available and
the Stock Purchase Date. In the event that holders of Units are required to pay
Contract Fees to the Company, it is unlikely such holders will be entitled to a
current deduction for such payments. As a result,
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<PAGE> 56
although the amount of cash distributions made to holders will be reduced by the
amount of Contract Fees payable to the Company, holders will nevertheless
recognize income each quarter equal to the full amount of OID accrued with
respect to the QUIPS, subject to certain adjustments. See "Certain Federal
Income Tax Consequences -- Contract Fees".
Any obligation of the Company to pay Contract Fees to the holder of Units
will be subordinated and junior in right of payment to the Company's obligations
under its Senior Indebtedness, in a manner substantially similar to the manner
in which the Junior Subordinated Debentures are subordinated as described under
"-- Description of the Junior Subordinated Debentures" below. So long as no
default in the Company's obligations under the Principal Agreements has occurred
and is continuing, the Company will have the right to defer the payment of
Contract Fees at any time or from time to time for a period not extending beyond
the Stock Purchase Date; provided, however, that in order to exercise such
right, the Company must give the Unit Agent notice at least five Business Days
prior to the earlier of (a) the date such payment would otherwise have been
payable, (b) the date the Company is required to give notice to any securities
exchange or to holders of Units of the record date or the date such payment is
payable and (c) such record date. During any such deferral period, the Company
may not take any of the actions that it would be prohibited from taking during
an Extension Period as described under "-- Description of the Junior
Subordinated Debentures -- Option to Extend Interest Payment Date" below.
Contract Fees will be payable at the Contract Fee Rate set forth under
"-- General" above. Any deferred Contract Fees will bear additional Contract
Fees at the Deferral Rate (compounding on each succeeding Quarterly Payment
Date) until paid. Contract Fees payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. Contract Fees will accrue from
and including the date of issuance of the Units to but excluding the Stock
Purchase Date and will be payable in arrears on the Quarterly Payment Dates
(unless deferred as described above). If the Purchase Contracts are terminated,
the right of holders of Units to receive Contract Fees or the obligation of
holders of Units to pay Contract Fees (including any deferred Contract Fees)
will also terminate.
Anti-Dilution Adjustments
The formula for determining the Settlement Rate will be subject to
adjustment upon the occurrence of certain events, including: (a) the payment of
dividends (and other distributions) of Common Stock on Common Stock; (b) the
issuance to all holders of Common Stock of rights, warrants or options entitling
them, for a period of up to 45 days, to subscribe for or purchase Common Stock
at less than the Current Market Price (as defined) thereof; (c) subdivisions and
combinations of Common Stock; (d) distributions to all holders of Common Stock
of evidences of indebtedness of the Company, securities, cash or other assets
(excluding any dividend or distribution covered by clause (a) or (b) above and
any dividend or distribution paid exclusively in cash); (e) distributions
consisting exclusively of cash to all holders of Common Stock in an aggregate
amount that, when combined with (i) other all-cash distributions made within the
preceding 12 months and (ii) the cash and the fair market value, as of the date
of expiration of the tender or exchange offer referred to below, of the
consideration paid in respect of any tender or exchange offer by the Company or
a subsidiary for the Common Stock concluded within the preceding 12 months,
exceeds % of the Company's aggregate market capitalization (such aggregate
market capitalization being the product of the Current Market Price of the
Common Stock multiplied by the number of shares of Common Stock then
outstanding) on the date fixed for the determination of stockholders entitled to
receive such distribution; and (f) the successful completion of a tender or
exchange offer made by the Company or any subsidiary for the Common Stock which
involves an aggregate consideration that, when combined with (i) any cash and
the fair market value of other consideration payable in respect of any tender or
exchange offer by the Company or a subsidiary for the Common Stock concluded
within the preceding 12 months and (ii) the aggregate amount of any all-cash
distributions to all holders of the Company's Common
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Stock made within the preceding 12 months, exceeds % of the Company's
aggregate market capitalization on of the date of expiration of such tender or
exchange offer. The "Current Market Price" per share of Common Stock on any day
means the average of the daily Closing Prices for the five consecutive Trading
Days selected by the Company commencing not more than 20 Trading Days before,
and ending not later than, the earlier of the day in question and the day before
the "ex date" with respect to the issuance or distribution requiring such
computation. For purposes of this paragraph, the term "ex date", when used with
respect to any issuance or distribution, shall mean the first date on which the
Common Stock trades on such exchange or in such market without the right to
receive such issuance or distribution.
In the case of certain reclassifications, consolidations, mergers, sales or
transfers of assets or other transactions pursuant to which the Common Stock is
converted into the right to receive other securities, cash or property, each
Purchase Contract then outstanding would, without the consent of the holders of
Units, become a contract to purchase only the kind and amount of securities,
cash and other property receivable upon consummation of the transaction by a
holder of the number of shares of Common Stock which would have been received by
the holder of the related Unit immediately prior to such transaction if such
holder had then settled such Purchase Contract.
If at any time the Company makes a distribution of property to its
stockholders which would be taxable to such stockholders as a dividend for
United States federal income tax purposes (i.e., distributions of evidences of
indebtedness or assets of the Company, but generally not stock dividends or
rights to subscribe to capital stock) and, pursuant to the Settlement Rate
adjustment provisions of the Master Unit Agreement, the Settlement Rate is
increased, such increase may be deemed to be the receipt of taxable income to
holders of Units. See "Certain Federal Income Tax Consequences -- Adjustment of
Settlement Rate".
In addition, the Company may make such increases in the Settlement Rate as
the Board of Directors of the Company deems advisable to avoid or diminish any
income tax to holders of shares of Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income tax purposes or for any other reasons.
Adjustments to the Settlement Rate will be calculated to the nearest
1/10,000th of a share. No adjustment in the Settlement Rate shall be required
unless such adjustment would require an increase or decrease of at least one
percent in the Settlement Rate; provided, however, that any adjustments which by
reason of the foregoing are not required to be made shall be carried forward and
taken into account in any subsequent adjustment.
The Company will be required, within ten Business Days following the
occurrence of an event that requires or permits an adjustment in the Settlement
Rate, to provide written notice to the holders of Units of the occurrence of
such event and a statement in reasonable detail setting forth the method by
which the adjustment to the Settlement Rate was determined and setting forth the
revised Settlement Rate.
Termination
The Purchase Contracts, and the rights and obligations of the Company and
of the holders of the Units thereunder (including the right to receive and the
obligation to pay Contract Fees or deferred Contract Fees thereunder and the
right and obligation of the holders to purchase and the Company to sell Common
Stock thereunder), will automatically terminate upon the occurrence of certain
events of bankruptcy, insolvency or reorganization with respect to the Company.
Upon such termination, the Call Options will terminate and the Pledged
Securities will be distributed in the manner described under "-- Pledged
Securities and Pledge Agreement -- Termination of Purchase Contracts".
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DESCRIPTION OF THE CALL OPTIONS
At the closing of the Offering made hereby, the Underwriters (on behalf of
the initial investors in the Units) will sell the Call Options to the Call
Option Holder at a price equal to $ per Call Option. The Call Options will
be governed by the Call Option Agreement.
Each Call Option underlying a Normal Unit (unless earlier terminated), when
aggregated with the Call Options underlying all other Normal Units, will entitle
the Call Option Holder to acquire the QUIPS underlying the Normal Units (or the
Junior Subordinated Debentures substituted therefor), on or before the Call
Option Expiration Date, in exchange for the Aggregate Call Option Exercise
Consideration. The Aggregate Call Option Exercise Consideration will be
comprised of:
(a) Treasury Securities that will generate, by each Quarterly Payment Date
falling after the Settlement Date for the Call Options (the "Call Settlement
Date") and on or before the Stock Purchase Date, an amount of cash equal to the
aggregate distributions or interest payments that are scheduled to be payable in
respect of the QUIPS or Junior Subordinated Debentures underlying the Normal
Units on such Quarterly Payment Date (assuming for this purpose, even if not
true, that (i) no distributions or interest payments will then have been
deferred and (ii) the distribution or interest rate thereon remains at the
initial QUIPS and Debenture Rate);
(b) Treasury Securities that will generate, by the Stock Purchase Date, an
amount of cash equal to the aggregate Stated Amount of the Normal Units; and
(c) if the Company is, at the Call Settlement Date, deferring distributions
on the QUIPS or interest payments on the Junior Subordinated Debentures (see
"-- Description of the QUIPS -- Distributions" and "-- Description of the Junior
Subordinated Debentures -- Option to Extend Interest Payment Date"), an amount
in cash equal to (i) the aggregate unpaid distributions on the QUIPS or interest
payments on the Junior Subordinated Debentures underlying the Normal Units
accrued to the Call Settlement Date, if the Call Settlement Date is a Quarterly
Payment Date, and (ii) the aggregate unpaid distributions on the QUIPS or
interest payments on the Junior Subordinated Debentures underlying the Normal
Units accrued to the Quarterly Payment Date immediately preceding the Call
Settlement Date plus interest thereon at the Deferral Rate for the period from
and including such Quarterly Payment Date to but excluding such Call Settlement
Date, if the Call Settlement Date is not a Quarterly Payment Date.
The Call Option Holder may exercise all of its Call Options (but not less
than all) by (a) delivering to the Unit Agent and the Collateral Agent, on or
prior to the Call Settlement Date, a notice stating that the Call Option Holder
is exercising its Call Options and specifying the Call Settlement Date therefor
(which may not be after the Call Option Expiration Date) and (b) delivering to
the Collateral Agent, by Noon, New York City time, on the Call Settlement Date,
the Aggregate Call Option Exercise Consideration. Pursuant to the Pledge
Agreement, upon receipt by the Collateral Agent of the Aggregate Call Option
Exercise Consideration, the Collateral Agent will transfer the QUIPS (or Junior
Subordinated Debentures) underlying the Normal Units to the Call Option Holder
or its designee free and clear of the pledge and security interest created by
the Pledge Agreement and the Treasury Securities included in the Aggregate Call
Option Exercise Consideration shall automatically be substituted for the QUIPS
(or Junior Subordinated Debentures) as Pledged Securities, whereupon the Call
Option Holder shall cease to have a security interest in the Pledged Securities.
If the Call Options are exercised, the Unit Agent shall, not later than
three Business Days following the Call Settlement Date, mail notice of such
exercise to the holders of the Normal Units.
The Call Options, and the rights and obligations of the Call Option Holder
and of the holders of the Units thereunder, will automatically terminate upon
the occurrence of certain events of bankruptcy, insolvency or reorganization
with respect to the Company. See "-- Description of the
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Purchase Contracts -- Termination" and "-- Pledged Securities and Pledge
Agreement -- Termination of Purchase Contracts".
PLEDGED SECURITIES AND PLEDGE AGREEMENT
General
Pursuant to the Pledge Agreement, the Pledged Securities will be pledged to
the Collateral Agent, for the benefit of the Company and the Call Option Holder,
to secure (a) the obligations of holders of Units to purchase Common Stock under
the Purchase Contracts, (b) the obligations, if any, of the holders of Units to
pay Contract Fees to the Company and (c) the obligations of holders of Normal
Units to deliver the underlying QUIPS (or Junior Subordinated Debentures) to the
Call Option Holder if the Call Options are exercised. The Pledged Securities
will initially consist of the QUIPS. If Treasury Securities are exchanged for
Pledged Securities upon exercise of the Call Options or in connection with the
creation of Stripped Units or Junior Subordinated Debentures are distributed in
respect of Pledged Securities upon dissolution of the Trust, the Treasury
Securities so exchanged or the Junior Subordinated Debentures so distributed
will automatically be substituted as Pledged Securities in place of the
securities that theretofore had been Pledged Securities and the securities that
theretofore had been Pledged Securities will automatically be released from the
pledge and security interest created by the Pledge Agreement.
The rights of the holders of the Units to the underlying Pledged Securities
will be subject to the pledge and security interest created by the Pledge
Agreement; no holder of Units will be permitted to withdraw the Pledged
Securities underlying such Units from the pledged arrangement except upon the
settlement or termination of the Purchase Contracts or as described under
"-- Formation of the Units" above. Subject to such pledge and security interest,
however, each holder of Units will have full beneficial ownership of the
underlying Pledged Securities and will be entitled (directly or through the
Collateral Agent) to all of the rights provided by such Pledged Securities, and
the Company and Call Option Holder will have no rights with respect to Pledged
Securities other than their respective security interests therein.
Quarterly Payments on Pledged Securities
The Collateral Agent will, upon receipt of any quarterly distributions or
payments of interest on the Pledged Securities, (a) pay to the Company an amount
therefrom equal to the aggregate Contract Fees, if any, then due from the
holders of the Units to the Company and (b) pay the remainder to the Unit Agent,
which will in turn distribute that amount to the holders of Units on the Record
Date. As long as the Units remain in book-entry only form, the Record Date for
any payment will be one Business Day prior to such payment date.
Substitution of Pledged Securities
For a description of the right of a holder of Units to substitute Treasury
Securities for Pledged Securities, see "-- Formation of the Units" above.
Settlement of Purchase Contracts
On the Stock Purchase Date, the Pledged Securities (or, in the case of
Treasury Securities, the proceeds from the payment of such Treasury Securities
at maturity) will be released from the pledge and security interest created by
the Pledge Agreement and distributed or delivered as specified under
"-- Description of the Purchase Contracts -- Settlement".
Termination of Purchase Contracts
Upon termination of the Purchase Contacts (see "-- Description of the
Purchase Contracts -- Termination"), the Collateral Agent will release the
Pledged Securities underlying the Units to the
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Unit Agent for distribution to the holders of such Units, upon presentation and
surrender of the certificates evidencing such Units. If upon such termination
any holder would otherwise be entitled to receive a principal amount of Treasury
Securities of any series that is not an integral multiple of $1,000, the Unit
Agent will distribute to such holder Treasury Securities of such series in a
principal amount equal to the next lower integral multiple of $1,000, will sell
the Treasury Securities of such series not otherwise distributed to such holder
(together with the Treasury Securities of such series not otherwise distributed
to other holders) and will distribute to all such holders (in accordance with
their respective interests therein) the net proceeds therefrom.
BOOK ENTRY-SYSTEM
The Depository Trust Company (the "Depositary") will act as securities
depositary for the Units. The Units will be issued only as fully-registered
securities registered in the name of Cede & Co. or another nominee of the
Depositary. Fully-registered global security certificates ("Global Security
Certificates"), representing the total aggregate number of Units, will be
issued, will be deposited with the Depositary and will bear a legend regarding
the restrictions on exchanges and registration of transfer thereof referred to
below.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the Units so long as
such Units are represented by Global Security Certificates.
The Depositary 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 Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Depositary holds
securities that its participants ("Participants") deposit with the Depositary.
The Depositary also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities 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").The Depositary is owned by a number of its Direct Participants
and by the NYSE, the American Stock Exchange, Inc., and the National Association
of Securities Dealers, Inc. Access to the Depositary system is also available to
others, such as securities brokers and dealers, banks and trust companies that
clear transactions through or maintain a direct or indirect custodial
relationship with a Direct Participant either directly or indirectly ("Indirect
Participants"). The rules applicable to the Depositary and its Participants are
on file with the Commission.
No Units represented by Global Security Certificates may be exchanged in
whole or in part for Units registered, and no transfer of Global Security
Certificates in whole or in part may be registered, in the name of any person
other than the Depositary or a nominee of the Depositary unless the Depositary
has notified the Company that it is unwilling or unable to continue as
depositary for such Global Security Certificates or has ceased to be qualified
to act as such as required by the Master Unit Agreement or there shall have
occurred and be continuing a default by the Company in respect of its
obligations under one or more Principal Agreements. All Units represented by
Global Security Certificates or any portion thereof will be registered in such
names as the Depositary may direct.
As long as the Depositary or its nominee is the registered owner of the
Global Security Certificates, such Depositary or such nominee, as the case
maybe, will be considered the sole owner and holder of the Global Security
Certificates and all Units represented thereby for all purposes under the Units,
Purchase Contracts, Call Options and Principal Agreements. Except in the limited
circumstances referred to above, owners of beneficial interests in Global
Security
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Certificates will not be entitled to have such Global Security Certificates or
the Units represented thereby registered in their names, will not receive or be
entitled to receive physical delivery of certificates in exchange therefor and
will not be considered to be owners or holders of such Global Security
Certificates or any Units represented thereby for any purpose under the Units,
Purchase Contracts, Call Options and Principal Agreements. All payments on the
Units represented by the Global Security Certificates and all deliveries of
Pledged Securities or Common Stock to the holders thereof will be made to the
Depositary or its nominee, as the case may be, as the holder thereof.
Ownership of beneficial interests in the Global Security Certificates will
be limited to Participants or persons that may hold beneficial interests through
institutions that have accounts with the Depositary. Ownership of beneficial
interests in Global Security Certificates will be shown only on, and the
transfer of those ownership interests will be effected only through, records
maintained by the Depositary or its nominee (with respect to Participants'
interests) or any such Participant (with respect to interests of persons held by
such Participants on their behalf). Procedures for settlement of Purchase
Contracts on the Stock Purchase Date will be governed by arrangements among the
Depositary, Participants and persons that may hold beneficial interests through
Participants designed to permit such settlement without the physical movement of
certificates. Payments, transfers, deliveries, exchanges and other matters
relating to beneficial interests in Global Security Certificates may be subject
to various policies and procedures adopted by the Depositary from time to time.
The Depositary has advised the Company that it will take any action permitted to
be taken by a holder of Units only at the direction of one or more Participants
to whose account with the Depositary interests in the Global Security
Certificates are credited and only in respect of such number of Units as to
which such Participant or Participants has or have given such direction. None of
the Company, the Trust, the Unit Agent or any agent of the Company, the Trust or
the Unit Agent will have any responsibility or liability for any aspect of the
Depositary's or any Participant's records relating to, or for payments made on
account of, beneficial interests in Global Security Certificates, or for
maintaining, supervising or reviewing any of the Depositary's records or any
Participant's records relating to such beneficial ownership interests.
The information in this section concerning the Depositary and its
book-entry system has been obtained from sources that the Company and the Trust
believe to be reliable, but neither the Company nor the Trust takes
responsibility for the accuracy thereof.
CERTAIN PROVISIONS OF THE PRINCIPAL AGREEMENTS
General
Distributions on the Units will be payable, Purchase Contracts (and
documents related thereto) will be settled and transfers of the Units will be
registrable at the office of the Unit Agent in the Borough of Manhattan, The
City of New York. In addition, in the event that the Units do not remain in
book-entry form, payment of distributions on the Units may be made, at the
option of the Company, by check mailed to the address of the persons entitled
thereto as shown on the Unit Register.
In the event that any Quarterly Payment Date, the Call Settlement Date, the
Stock Purchase Date or any Put Date is not a Business Day, then payment of the
Contract Fees payable on any such Quarterly Payment Date or settlement of the
Call Options, the Purchase Contracts or the Junior Subordinated Debenture Put
Option, as the case may be, will be made on the next succeeding day which is a
Business Day (and so long as such payment is made on such next succeeding
Business Day, 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 or settlement will be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
payment date. A "Business Day" shall mean any day other than Saturday, Sunday or
any other day on which banking institutions in The City of New York are
authorized or obligated by law or executive order to be closed.
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If a holder of Units fails to present and surrender the certificate
evidencing such Units to the Unit Agent on the Stock Purchase Date, the shares
of Common Stock issuable in settlement of the related Purchase Contracts will be
registered in the name of the Unit Agent and, together with any distributions
thereon, shall be held by the Unit Agent as agent for the benefit of such
holder, until such certificate is presented and surrendered or the holder
provides satisfactory evidence that such certificate has been destroyed, lost or
stolen, together with any indemnity that may be required by the Unit Agent and
the Company.
If the Purchase Contracts have terminated prior to the Stock Purchase Date,
the related Pledged Securities have been transferred to the Unit Agent for
distribution to the holders entitled thereto and a holder of Units fails to
present and surrender the certificate evidencing such Units to the Unit Agent,
the Pledged Securities otherwise deliverable to such holder and payments thereon
shall be held by the Unit Agent as agent for the benefit of such holder, until
such certificate is presented and surrendered or the holder provides the
evidence and indemnity described above.
The Unit Agent will have no obligation to invest or to pay interest on any
amounts held by the Unit Agent pending distribution.
No service charge will be made for any registration of transfer or exchange
of the Units, except for any tax or other governmental charge that maybe imposed
in connection therewith.
Modification
The Principal Agreements will contain provisions permitting the parties
thereto, with the consent of the holders of in excess of 50% of the Units at the
time outstanding (or, in the case of modifications affecting only holders of
Normal Units or Stripped Units, the consent of the holders of in excess of 50%
of the Normal Units or Stripped Units, as the case may be), to modify the terms
of the Principal Agreements, the Purchase Contracts and the Call Options, except
that no such modification may, without the consent of the holder of each
outstanding Unit affected thereby, (a) change any payment date, (b) change the
amount or type of Pledged Securities required to be pledged to secure
obligations under the Units, impair the right of the holder of any Units to
receive distributions on the Pledged Securities underlying such Units or
otherwise adversely affect the holder's rights in or to such Pledged Securities,
(c) change the place or currency of payment for any Contract Fees or other
amounts payable in respect of the Units, increase any Contract Fees or other
amounts payable by holders in respect of Units or decrease any other amounts
receivable by holders in respect of Units, (d) impair the right to institute
suit for the enforcement of any Purchase Contract, (e) reduce the amount of
Common Stock purchasable under any Purchase Contract, increase the price to
purchase Common Stock on settlement of any Purchase Contract, change the Stock
Purchase Date or otherwise adversely affect the holder's rights under any
Purchase Contract, (f) reduce the amount payable on exercise of any Call Option,
extend the Call Option Expiration Date or otherwise adversely affect the
holder's rights under any Call Option or (g) reduce the above-stated percentage
of outstanding Units the consent of whose holders is required for the
modification or amendment of the provisions of the Principal Agreements, the
Purchase Contracts or the Call Options.
Consolidation, Merger, Sale or Conveyance
The Company will covenant in the Master Unit Agreement that it will not
merge with or into or consolidate with any other entity or sell, assign,
transfer, lease or convey all or substantially all of its properties and assets
to any person, firm or corporation unless the Company is the continuing
corporation or the successor corporation is a corporation organized under the
laws of the United States of America or a state thereof and such corporation
expressly assumes the obligations of the Company under the Principal Agreements
and the Purchase Contracts, and the Company or such successor corporation is
not, immediately after such merger, consolidation, sale, assignment, transfer,
lease or conveyance, in default in the performance of any of its obligations
thereunder.
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Title
The Company, the Unit Agent, the Collateral Agent and the Call Option
Holder may treat the registered holder of any Units as the absolute owner
thereof for the purpose of making payment and settling the related Purchase
Contracts or Call Options and for all other purposes.
Replacement of Units Certificates
In the event that physical certificates have been issued, any mutilated
certificate evidencing Units will be replaced by the Company at the expense of
the holder upon surrender of such certificate to the Unit Agent. Certificates
that become destroyed, lost or stolen will be replaced by the Company at the
expense of the holder upon delivery to the Company and the Unit Agent of
evidence of the destruction, loss or theft thereof satisfactory to the Company
and the Unit Agent. In the case of a destroyed, lost or stolen certificate, an
indemnity satisfactory to the Unit Agent and the Company may be required at the
expense of the holder of the Units evidenced by such certificate before a
replacement will be issued.
Notwithstanding the foregoing, the Company will not be obligated to issue
any Units on or after the Stock Purchase Date or after the Purchase Contracts
have terminated. In lieu of the delivery of a replacement certificate following
the Stock Purchase Date, the Unit Agent, upon delivery of the evidence and
indemnity described above, will deliver the Common Stock issuable pursuant to
the Purchase Contracts included in the Units evidenced by such certificate, or,
if the Purchase Contracts have terminated prior to the Stock Purchase Date,
transfer the Pledged Securities related to the Units evidenced by such
certificate.
Governing Law
The Principal Agreements, the Purchase Contracts and the Call Options will
be governed by, and construed in accordance with, the laws of the State of New
York.
Information Concerning the Unit Agent
First Union National Bank will initially act as Unit Agent. The Unit Agent
will act as the agent for the holders of Units from time to time. The Master
Unit Agreement will not obligate the Unit Agent to exercise any discretionary
actions in connection with a default under the terms of the Principal
Agreements, the Purchase Contracts, the Call Options or the Pledged Securities.
The Master Unit Agreement will contain provisions limiting the liability of
the Unit Agent. The Master Unit Agreement will contain provisions under which
the Unit Agent may resign or be replaced. Such resignation or replacement would
be effective upon the appointment of a successor.
Information Concerning the Collateral Agent
will initially act as Collateral Agent. The Collateral Agent
will act solely as the agent of the Company or the Call Option Holder and will
not assume any obligation or relationship of agency or trust for or with any of
the holders of the Units except for the obligations owed by a pledgee of
property to the owner thereof under the Pledge Agreement and applicable law.
The Pledge Agreement will contain provisions limiting the liability of the
Collateral Agent. The Pledge Agreement will contain provisions under which the
Collateral Agent may resign or be replaced. Such resignation or replacement
would be effective upon the appointment of a successor.
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DESCRIPTION OF THE QUIPS
General
The QUIPS will be issued by the Trust, a statutory business trust created
under Delaware law pursuant to the Declaration. The Trust's affairs are
conducted by the Issuer Trustees, which are currently First Union National Bank,
as the Property Trustee, and First Union Trust Company, as the Delaware Trustee,
and the three Administrators, who are employees of the Company. The Trust exists
for the exclusive purposes of (a) issuing and selling the Trust Securities
consisting of the QUIPS and the Common Trust Securities, (b) using the proceeds
from the sale of the Trust Securities to acquire the Junior Subordinated
Debentures issued by the Company and (c) engaging in only those other activities
necessary or incidental thereto. Accordingly, the Junior Subordinated Debentures
will be the sole assets of the Trust, and payments under the Junior Subordinated
Debentures will be the sole revenue of the Trust. All of the Common Trust
Securities will be owned by the Company.
The QUIPS will represent preferred undivided beneficial interests in the
assets of the Trust and the holders thereof will be entitled to a preference
over the Common Trust Securities in certain circumstances with respect to
distributions and amounts payable on redemption of the Trust Securities or
liquidation of the Trust. See "-- Subordination of Common Trust Securities"
below. The QUIPS will be issued pursuant to, and be governed by, the
Declaration. The Declaration will be qualified under the Trust Indenture Act.
Each QUIPS will have a Liquidation Amount that is equal to the Stated
Amount. The QUIPS will rank pari passu, and payments will be made thereon pro
rata, with the Common Trust Securities except as described under
"-- Subordination of Common Trust Securities" below. Legal title to the Junior
Subordinated Debentures will be held by the Property Trustee in trust for the
benefit of the holders of the QUIPS and the Common Trust Securities.
The QUIPS will be subject to mandatory redemption on the QUIPS and
Debenture Maturity Date of , 2003, at a redemption price equal to
the aggregate Liquidation Amount thereof plus unpaid distributions accrued
thereon to but excluding such date, out of the proceeds of the repayment of the
Junior Subordinated Debentures at maturity. The Junior Subordinated Debentures
are not redeemable at the option of the Company prior to the QUIPS and Debenture
Maturity Date.
Distributions
Distributions on the QUIPS will be cumulative, will accumulate from the
first date of issuance of the QUIPS at an initial rate of % per annum (i.e.,
the initial QUIPS and Debenture Rate, which rate is subject to increase in the
manner described under "-- Description of the Junior Subordinated Debentures --
Market Rate Increase" below) as applied to the Liquidation Amount thereof and
will be payable quarterly in arrears on each Quarterly Payment Date (subject to
the deferral provisions described below), to the holders of record on the
relevant record dates. Unless the QUIPS are not Pledged Securities and are
issued in certificated form, the record date for any payment of Distributions
will be one Business Day prior to such payment date. The amount of Distributions
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months. In the event that any date on which Distributions are payable on
the QUIPS is not a Business Day, payment of the Distributions 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 will be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on the date such payment was originally payable (each date on
which Distributions are payable in accordance with the foregoing, a
"Distribution Date").
So long as no Debenture Event of Default shall have occurred and be
continuing, the Company will have the right under the Indenture to elect to
defer the payment of interest on the Junior
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Subordinated Debentures at any time and from time to time for a period not
extending beyond the QUIPS and Debenture Maturity Date (each such period of
deferral, an "Extension Period"). See "-- Description of the Junior Subordinated
Debentures -- Option to Extend Interest Payment Date" and "Certain Federal
Income Tax Consequences -- Interest Received on the QUIPS". Upon any such
election, quarterly Distributions on the QUIPS will be deferred by the Trust
during such Extension Period. Distributions to which holders of the QUIPS are
entitled during any such Extension Period will accumulate additional
Distributions thereon at the Deferral Rate, compounded on each succeeding
Distribution Date. The term "Distributions", as used in this Description of the
QUIPS, shall include any such additional Distributions and any Additional Sums
(as defined herein) paid on the Junior Subordinated Debentures.
During any Extension Period, the Company may not take any of the prohibited
actions described under "-- Description of the Junior Subordinated
Debentures -- Certain Covenants of the Company".
Although the Company may in the future exercise its option to defer
payments of interest on the Junior Subordinated Debentures, the Company has no
such current intention.
The revenue of the Trust available for distribution to holders of the QUIPS
will be limited to payments under the Junior Subordinated Debentures. If the
Company does not make interest payments on the Junior Subordinated Debentures,
the Property Trustee will not have funds available to pay Distributions on the
QUIPS. The payment of Distributions (if and to the extent the Trust has funds on
hand legally available for the payment of such Distributions) will be guaranteed
by the Company on a limited basis as set forth herein under "-- Description of
the Guarantee".
Mandatory Redemption
Upon the repayment of the Junior Subordinated Debentures, the proceeds from
such repayment shall be applied by the Property Trustee to redeem a Like Amount
(as defined herein) of the Trust Securities, at a redemption price (the "Final
Redemption Price") which shall be equal to the principal of, and accrued and
unpaid interest on, the Junior Subordinated Debentures.
"Like Amount" means (i) with respect to the redemption of the Trust
Securities, Trust Securities having an aggregate Liquidation Amount equal to the
principal amount of Junior Subordinated Debentures to be paid in accordance with
their terms and (ii) with respect to a distribution of Junior Subordinated
Debentures upon the liquidation of the Trust, Junior Subordinated Debentures
having a principal amount equal to the aggregate Liquidation Amount of the Trust
Securities of the holder to whom such Junior Subordinated Debentures are
distributed.
Right to Exercise Junior Subordinated Debenture Put Options
Each holder of QUIPS will have the right to require the Trust to distribute
Junior Subordinated Debentures having an aggregate principal amount equal to the
aggregate Liquidation Amount of such QUIPS to the Put Agent, on the Stock
Purchase Date, in exchange for such QUIPS, in connection with the concurrent
exercise by the Put Agent on behalf of each such holder of the Junior
Subordinated Debenture Put Option related thereto, but only if the cash received
on the exercise of such option is used to settle the Purchase Contracts secured
thereby.
A holder of QUIPS may exercise the right referred to above by presenting
and surrendering the certificate evidencing such QUIPS, at the offices of the
Property Trustee, with the form of "Notice to Require Exercise of Junior
Subordinated Debenture Put Option" on the reverse side of the certificate
completed and executed as indicated, by 10:00 a.m., New York City time, on the
Stock Purchase Date. If such right is properly exercised, the applicable Junior
Subordinated Debentures will be distributed to an agent for the holder appointed
by the Company for such purpose (the "Put Agent", who shall be the Collateral
Agent), and the Put Agent will then exercise the Junior Subordinated Debenture
Put Option related thereto on behalf of the holder.
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Liquidation of the Trust and Distribution of Junior Subordinated Debentures
The Company will have the right at any time to dissolve the Trust and,
after satisfaction of liabilities to creditors of the Trust as required by
applicable law, cause the Junior Subordinated Debentures to be distributed to
the holders of the Trust Securities in liquidation of the Trust.
The Trust shall automatically dissolve upon the first to occur of: (a)
certain events of bankruptcy, dissolution or liquidation of the Company or the
Trust; (b) the distribution of a Like Amount of the Junior Subordinated
Debentures to the holders of the Trust Securities, if the Company, as Sponsor,
has given written direction to the Property Trustee to dissolve the Trust (which
direction is optional and wholly within the discretion of the Company, as
Sponsor); (c) redemption of all of the Trust Securities as described under
"-- Mandatory Redemption"; (d) expiration of the term of the Trust; and (e) the
entry of an order for the dissolution of the Trust by a court of competent
jurisdiction.
If a dissolution occurs as described in clauses (a), (b), (d) or (e) of the
preceding paragraph, the Trust shall be liquidated by the Administrators as
expeditiously as practicable by distributing, after satisfaction of liabilities
to creditors of the Trust as provided by applicable law, to the holders of the
Trust Securities a Like Amount of the Junior Subordinated Debentures (such
amount being the "Liquidation Distribution"). If the Liquidation Distribution
can be paid only in part because the Trust has insufficient assets on hand
legally available to pay in full the aggregate Liquidation Distribution, then
the amounts payable directly by the Trust on the QUIPS and the Common Trust
Securities shall be paid on a pro rata basis, except that if a Debenture Event
of Default has occurred and is continuing, the QUIPS shall have a priority over
the Common Trust Securities. See "-- Subordination of Common Trust Securities"
below.
After the liquidation date is fixed for any distribution of Junior
Subordinated Debentures to holders of the Trust Securities, (a) the Trust
Securities will no longer be deemed to be outstanding, (b) each registered
global certificate, if any, representing Trust Securities and held by the
Depositary or its nominee will receive a registered global certificate or
certificates representing the Junior Subordinated Debentures to be delivered
upon such distribution and (c) any certificates representing Trust Securities
not held by the Depositary or its nominee will be deemed to represent Junior
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of such Trust Securities, and bearing accrued and unpaid
interest in an amount equal to the accumulated and unpaid Distributions on such
Trust Securities until such certificates are presented to the Administrators or
their agent for cancellation, whereupon the Company will issue to such holder,
and the Debenture Trustee will authenticate, a certificate representing such
Junior Subordinated Debentures.
Redemption Procedures
The QUIPS shall be redeemed at the Final Redemption Price with the proceeds
from the contemporaneous repayment of the Junior Subordinated Debentures. The
redemption of QUIPS shall be made and the Final Redemption Price shall be
payable on the QUIPS and Debenture Maturity Date only to the extent that the
Trust has funds legally available for the payment of such Redemption Price.
If the Trust gives a notice of redemption in respect of the QUIPS, then, by
noon, New York City time, on the QUIPS and Debenture Maturity Date, to the
extent funds are legally available, with respect to the QUIPS held by the
Depositary or its nominees, the Property Trustee will give irrevocable
instructions and authority to the Depositary and will irrevocably deposit with
the Depositary for the QUIPS funds sufficient to pay the Final Redemption Price
to the holders thereof. With respect to the QUIPS held in certificated form, the
Property Trustee, to the extent funds are legally available, will give
irrevocable instructions and authority to the Paying Agent and will irrevocably
deposit with the Paying Agent funds sufficient to pay the Final Redemption Price
to the holders of the QUIPS. If a notice of redemption shall have been given and
funds deposited as
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required to pay the Final Redemption Price, then all rights of the holders of
the QUIPS will cease, except the right of the holders of QUIPS to receive the
Final Redemption Price, but without interest on the Final Redemption Price, and
the QUIPS will cease to be outstanding. In the event that the QUIPS and
Debenture Maturity Date is not a Business Day, then the Final Redemption Price
payable on such date will be paid on the next succeeding day that is a Business
Day (and so long as such payment is made on the next succeeding Business Day
without any interest or other payment in respect of any such delay). In the
event that payment of the Final Redemption Price is improperly withheld or
refused and not paid either by the Trust or by the Company pursuant to the
Guarantee as described under "-- Description of the Guarantee", Distributions on
the QUIPS will accumulate on the Final Redemption Price at the QUIPS
Distribution Rate from the QUIPS and Debenture Maturity Date to the date the
Final Redemption Price is actually paid.
Subordination of Common Trust Securities
Payment of Distributions on, and the Final Redemption Price of, the QUIPS
and the Common Trust Securities, as applicable, shall be made pro rata based on
the Liquidation Amount of the QUIPS and Common Trust Securities; provided,
however, that if on any Distribution Date or QUIPS and Debenture Maturity Date a
Debenture Event of Default (solely as the result of an event described in
clauses (a), (b) or (c) thereto) shall have occurred and be continuing, no
payment of any Distribution on, or Final Redemption Price of, any of the Common
Trust Securities, and no other payment on account of the redemption, liquidation
or other acquisition of the Common Trust Securities, shall be made unless
payment in full in cash of all accumulated and unpaid Distributions on all of
the outstanding QUIPS for all Distribution periods terminating on or prior
thereto or, in the case of the QUIPS and Debenture Maturity Date, the full
amount of the Final Redemption Price therefor, 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 on, or Final Redemption Price
of, the QUIPS then due and payable.
In the case of any Event of Default, the Company as holder of the Common
Trust Securities will be deemed to have waived any right to act with respect to
such Event of Default until the effect of such Event of Default shall have been
cured, waived or otherwise eliminated. Until any such Event of Default has been
so cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the holders of the QUIPS, and only the holders of the QUIPS will
have the right to direct the Property Trustee to act on their behalf.
Events of Default; Notice
The occurrence of a Debenture Event of Default (see "-- Description of the
Junior Subordinated Debentures -- Debenture Events of Default") constitutes an
"Event of Default" under the Declaration; provided that pursuant to the
Declaration, the holder of the Common Trust Securities will be deemed to have
waived any Event of Default with respect to such Common Trust Securities until
all Events of Default with respect to the QUIPS have been cured, waived or
otherwise eliminated. Until such Events of Default have been so cured, waived or
otherwise eliminated, the Property Trustee will be deemed to be acting solely on
behalf of the holders of the QUIPS and only the holders of such QUIPS will have
the right to direct the Property Trustee with respect to certain matters under
the Declaration, and therefore the Indenture. The holders of a majority in
Liquidation Amount of the QUIPS will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Property
Trustee or to direct the exercise of any trust or power conferred upon the
Property Trustee under the Declaration, including the right to direct the
Property Trustee to exercise the remedies available to it as holder of the
Junior Subordinated Debentures. If the Property Trustee fails to enforce its
rights under the Junior Subordinated Debentures after the holders of a majority
in Liquidation Amount of QUIPS have so directed the Property Trustee, a holder
of record of such QUIPS (or, for so long as QUIPS underlie Normal Units, a
holder of record of Normal Units) may, to the fullest extent permitted by law,
institute a legal
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proceeding against the Company to enforce the Property Trustee's rights under
the Junior Subordinated Debentures without first instituting any legal
proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing, and such event is attributable to the failure of the Company to pay
interest or principal on the Junior Subordinated Debentures on the respective
dates such interest or principal is payable (after giving effect to any
Extension Period), then a holder of record of QUIPS (or, for so long as QUIPS
underlie Normal Units, a holder of record of Normal Units) may institute a
Direct Action against the Company for payment to such holder of the portion of
such principal or interest attributable to Junior Subordinated Debentures having
a principal amount equal to the aggregate Liquidation Amount of the QUIPS held
by such holder (or underlying such holder's Normal Units). In connection with
such Direct Action, the Company will be subrogated to the rights of such holder
of QUIPS (or Normal Units) under the Declaration to the extent of any payment
made by the Company to such holder of QUIPS (or Normal Units) in such Direct
Action; provided, however, that no such subrogation right may be exercised so
long as an Event of Default has occurred and is continuing. The holders of QUIPS
will not be able to exercise directly any other remedy available to the holders
of the Junior Subordinated Debentures.
Upon occurrence of an Event of Default, the Property Trustee, so long as it
is the sole holder of Junior Subordinated Debentures, will have the right under
the Indenture to declare the principal of (or premium, if any) and interest on
the Junior Subordinated Debentures to be immediately due and payable.
Within ten Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the QUIPS, the Administrators
and the Company, as Sponsor, unless such Event of Default shall have been cured
or waived. The Company, as Sponsor, and the Administrators are required to file
annually with the Property Trustee a certificate as to whether or not they are
in compliance with all the conditions and covenants applicable to them under the
Declaration.
If a Debenture Event of Default has occurred and is continuing, the QUIPS
shall have a preference over the Common Trust Securities as described under
"-- Liquidation of the Trust and Distribution of Junior Subordinated Debentures"
and "-- Subordination of Common Trust Securities".
Removal of Issuer Trustees and Administrators
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common Trust
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
holders of a majority in Liquidation Amount of the outstanding QUIPS. In no
event will the holders of the QUIPS have the right to vote to appoint, remove or
replace the Administrators, which voting rights are vested exclusively in the
Company as the holder of the Common Trust Securities. No resignation or removal
of an Issuer Trustee and no appointment of a successor trustee shall be
effective until the acceptance of appointment by the successor Trustee in
accordance with the provisions of the Declaration.
Merger or Consolidation of Issuer Trustees
Any Person into which the Property Trustee or the Delaware Trustee that is
not a natural person may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which such Issuer Trustee shall be a party, or any Person
succeeding to all or substantially all the corporate trust business of such
Issuer Trustee, shall be the successor of such Issuer Trustee under the
Declaration, provided such Person shall be otherwise qualified and eligible.
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Mergers, Conversions, Consolidations, Amalgamations or Replacements of the
Trust
The Trust may not merge or convert with or into, consolidate, amalgamate,
or be replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any Person, except as described
below or as otherwise described under "-- Liquidation of the Trust and
Distribution of Junior Subordinated Debentures". The Trust may, at the request
of the Company, as Sponsor and holder of the Common Trust Securities, but
without the consent of the holders of the QUIPS, merge or convert with or into,
consolidate, amalgamate, or be replaced by or convey, transfer or lease its
properties and assets as an entirety or substantially as an entirety to a trust
organized as such under the laws of any State; provided, that (a) such successor
entity either (i) expressly assumes all of the obligations of the Trust with
respect to the QUIPS or (ii) substitutes for the QUIPS other securities having
substantially the same terms as the QUIPS (the "Successor Securities") so long
as the Successor Securities rank the same as the QUIPS rank in priority with
respect to distributions and payments upon liquidation, redemption and
otherwise, (b) the Company expressly appoints a trustee of such successor entity
possessing the same powers and duties as the Property Trustee with respect to
the Junior Subordinated Debentures, (c) the Successor Securities are listed, or
any Successor Securities will be listed upon notification of issuance, on any
national securities exchange or other organization on which the QUIPS are then
listed or quoted, if any, (d) such merger, conversion, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause the
QUIPS (including any Successor Securities) or Units to be downgraded by any
nationally recognized statistical rating organization, if then so rated,(e) such
merger, conversion, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences and
privileges of the holders of the QUIPS (including any Successor Securities) in
any material respect, (f) such successor entity has a purpose substantially
identical to that of the Trust, (g) prior to such merger, conversion,
consolidation, amalgamation, replacement, conveyance, transfer or lease, the
Company has received an opinion from independent counsel to the Trust
experienced in such matters to the effect that (i) such merger, conversion,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
QUIPS (including any Successor Securities) in any material respect, (ii)
following such merger, conversion, 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 Investment Company
Act of 1940, as amended (the "Investment Company Act") and (iii) following such
merger, conversion, consolidation, amalgamation, replacement, conveyance,
transfer or lease, the Trust or the successor entity will continue to be
classified as a grantor trust for United States Federal income tax purposes and
(h) the Company or any permitted successor or assignee owns all of the common
trust 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 Trust
Securities, consolidate, amalgamate, merge or convert with or into, or be
replaced by or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any other entity or permit any other
entity to consolidate, amalgamate, merge or convert with or into, or replace it
if such consolidation, amalgamation, merger, conversion, replacement,
conveyance, transfer or lease would cause the Trust or the successor entity to
be classified as an association taxable as a corporation or as other than a
grantor trust for United States Federal income tax purposes.
Voting Rights; Amendment of the Declaration
Except as provided below and under "-- Mergers, Conversions,
Consolidations, Amalgamations or Replacements of the Trust" above and
"-- Description of the Guarantee -- Amendments and Assignment" and as otherwise
required by law and the Declaration, the holders of the QUIPS will have no
voting rights.
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The Declaration may be amended from time to time by the Company and the
Property Trustee, without the consent of the holders of the QUIPS, (a) to cure
any ambiguity, correct or supplement any provisions in the Declaration that may
be inconsistent with any other provision, or make any other provisions with
respect to matters or questions arising under the Declaration, which shall not
be inconsistent with the other provisions of the Declaration, or (b) to modify,
eliminate or add to any provisions of the Declaration 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 or as other than an association taxable
as a corporation 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; provided, however, that in each case,
such action shall not adversely affect in any material respect the interests of
the holders of the Trust Securities. Any amendments of the Declaration pursuant
to the foregoing shall become effective when notice thereof is given to the
holders of the Trust Securities. The Declaration may be amended by the Issuer
Trustees and the Company (x) with the consent of holders of QUIPS (or Normal
Units) representing a majority (based upon Liquidation Amount) of the
outstanding QUIPS and (y) upon receipt by the Property Trustee of an opinion of
counsel to the effect that such amendment or the exercise of any power granted
to the Issuer Trustees in accordance with such amendment will not cause the
Trust to be classified as an association taxable as a corporation or 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, provided that, without the consent of each holder of
Trust Securities, the Declaration may not be amended to (i) change the amount or
timing of any Distribution or other payment on the Trust Securities (including
payment of the Put Price) or otherwise adversely affect the amount of any
Distribution or other payment (including payment of the Put Price) 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.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not (a) 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 Property Trustee with respect to
the Junior Subordinated Debentures, (b) waive certain past defaults under the
Indenture, (c) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Junior Subordinated
Debentures or (d) 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
QUIPS (or Normal Units) representing a majority in Liquidation Amount of all
outstanding QUIPS; 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 approval of each holder of the QUIPS (or Normal Units). The Issuer
Trustees shall not revoke any action previously authorized or approved by a vote
of the holders of the QUIPS (or Normal Units) except by subsequent vote of such
holders. The Property Trustee shall notify each holder of Trust Securities (or
Normal Units) of any notice of default with respect to the Junior Subordinated
Debentures. In addition to obtaining the foregoing approvals of such holders,
prior to taking any of the foregoing actions, the Issuer Trustees shall obtain
an opinion of counsel experienced in such matters to the effect that the Trust
will not be classified as an association taxable as a corporation or as other
than a grantor trust for United States Federal income tax purposes on account of
such action.
Any required approval of holders of QUIPS (or Normal Units) may be given at
a meeting of such holders convened for such purpose or pursuant to written
consent. The Property Trustee will cause a notice of any meeting at which
holders of QUIPS (or Normal Units) 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 QUIPS (or Normal Units) in the manner set forth in the
Declaration.
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No vote or consent of the holders of QUIPS (or Normal Units) will be
required for the Trust to redeem and cancel the QUIPS in accordance with the
Declaration.
Notwithstanding that holders of the QUIPS (or Normal Units) are entitled to
vote or consent under any of the circumstances described above, any of the QUIPS
(or Normal Units) that are owned by the Company or any affiliate of the Company
shall, for purposes of such vote or consent, be treated as if they were not
outstanding.
Form and Book-Entry Procedures
As long as the QUIPS constitute Pledged Securities, the QUIPS will be
represented by a single certificate and held for the benefit of the holders of
the Normal Units. If the QUIPS cease to constitute Pledged Securities, the QUIPS
may be represented by one or more QUIPS in registered, global form registered in
the name of the Depositary or its nominee. The depositary arrangements for the
QUIPS are expected to be substantially similar to those in effect for the Units.
For a description of the Depositary and the terms of the depositary
arrangements, see "-- Book-Entry System".
Payment and Paying Agency
If the QUIPS cease to constitute Pledged Securities, payments in respect of
the QUIPS held in global form shall be made to the Depositary, which shall
credit the relevant accounts at the Depositary on the applicable Distribution
Dates or in respect of the QUIPS that are not held by the Depositary, such
payments shall be made by check mailed to the address of the holder entitled
thereto as such address shall appear on the register. The paying agent (the
"Paying Agent") shall initially be the Property Trustee and any additional
paying agent chosen by the Property Trustee and acceptable to the Company. The
Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written
notice to the Property Trustee (if not the Paying Agent) and the Administrators.
In the event that the Property Trustee shall no longer be the Paying Agent, the
Administrators shall appoint a successor to act as Paying Agent.
Registrar and Transfer Agent
The Property Trustee will initially act as registrar and transfer agent for
the QUIPS.
Registration of transfers of the QUIPS will be effected without charge by
or on behalf of the Trust but upon payment of any tax or other governmental
charges that may be imposed in connection with any transfer or exchange. The
Trust will not be required to register or cause to be registered the transfer of
any QUIPS after they have been called for redemption.
Information Concerning the Property Trustee
The Property Trustee, other than during the occurrence and continuance of
an Event of Default, undertakes to perform only such duties as are specifically
set forth in the Declaration and, after such Event of Default, must exercise the
same degree of care and skill as a prudent person would exercise or use in the
conduct of his or her affairs. Subject to this provision, the Property Trustee
is under no obligation to exercise any of the powers vested in it by the
Declaration at the request of any holder of Trust Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby. The Property Trustee is not required to expend or
risk its own funds or otherwise incur personal financial liability in the
performance of its duties if repayment or adequate indemnity is not reasonably
assured to the Property Trustee.
Miscellaneous
The Administrators are authorized and directed to conduct the affairs of
and to operate the Trust in such a way that the Trust will not be deemed to be
an "investment company" required to be
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registered under the Investment Company Act or classified as an association
taxable as a corporation or as other than a grantor trust for United States
Federal income tax purposes and so that the Junior Subordinated Debentures will
be treated as indebtedness of the Company for United States federal income tax
purposes. In this connection, the Company and the Administrators are authorized
to take any action, not inconsistent with applicable law, the certificate of
trust of the Trust or the Declaration, that the Company and the Administrators
determine in their discretion to be necessary or desirable for such purposes, as
long as such action does not materially adversely affect the interests of the
holders of the Trust Securities.
Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
General
The Junior Subordinated Debentures are to be issued under the Indenture.
First Union National Bank will initially act as Debenture Trustee under the
Indenture. The Indenture will be qualified under the Trust Indenture Act.
The Junior Subordinated Debentures will be unsecured and subordinate and
rank junior in right of payment to the extent and in the manner set forth in the
Indenture to all Senior Indebtedness of the Company. See "Risk
Factors -- Holding Company Structure; Reliance on Dividends from Insurance
Subsidiaries" above and "-- Subordination" below.
The Junior Subordinated Debentures will mature on the QUIPS and Debenture
Maturity Date of , 2003. The Junior Subordinated Debentures will
not be redeemable at the option of the Company prior to the QUIPS and Debenture
Maturity Date.
Interest
Interest on the Junior Subordinated Debentures will accrue from the first
date of issuance of the Junior Subordinated Debentures at a rate per annum equal
to the QUIPS and Debenture Rate referred to under " --Description of the
QUIPS -- Distributions" above and will be payable quarterly in arrears on each
Quarterly Payment Date (each, an "Interest Payment Date"), subject to the
deferral provisions described below, to the holders of the Junior Subordinated
Debentures on the relevant record dates, which, unless the Junior Subordinated
Debentures are distributed upon liquidation of the Trust and are issued in
certificated form, will be one Business Day prior to the relevant Interest
Payment Date. Until the liquidation, if any, of the Trust, each Junior
Subordinated Debenture will be held in the name of the Property Trustee in trust
for the benefit of the holders of the Trust 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. 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 on the next succeeding day that is a
Business Day (and to the extent such payment is made on the next succeeding
Business Day 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 such payment was
originally payable. The term "interest", as used in this Description of the
Junior Subordinated Debentures, shall include any Additional Sums (as defined
herein) payable on the Junior Subordinated Debentures.
Market Rate Increase
By 9:30 a.m., New York City time, on the Call Option Expiration Date, the
Rate Increase Agent will determine whether the then current aggregate market
value of the QUIPS (or, if the QUIPS are no longer outstanding, Junior
Subordinated Debentures) underlying the Normal Units is at least
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equal to 100.25% of the Cash Equivalent of the Aggregate Call Option Exercise
Consideration. If the Rate Increase Agent determines that it is (or the QUIPS
and Debenture Rate is already equal to or greater than the Maximum QUIPS and
Debenture Rate), interest on the Junior Subordinated Debentures (and, if the
QUIPS remain outstanding, distributions on the QUIPS) will continue to accrue at
the initial QUIPS and Debenture Rate. If the Rate Increase Agent determines that
it is not (and the QUIPS and Debenture Rate is less than the Maximum QUIPS and
Debenture Rate), the Rate Increase Agent will, by 9:30 a.m., New York City time,
on the Call Option Expiration Date, select an increased rate equal to the lower
of (a) the rate that it determines is sufficient to cause the then current
aggregate market value of such QUIPS (or, if the QUIPS are no longer
outstanding, such Junior Subordinated Debentures) to be at least equal to
100.25% of the Cash Equivalent of the Aggregate Call Option Exercise
Consideration and (b) the Maximum QUIPS and Debenture Rate (and notify the
Company and the Call Option Holder of such increased rate), and the QUIPS and
Debenture Rate will thereupon become that increased rate.
"Cash Equivalent of the Aggregate Call Option Exercise Consideration" means
the cash value on the Call Option Expiration Date of the Aggregate Call Option
Exercise Consideration, assuming for this purpose that (a) the Call Options are
exercised on the Call Option Expiration Date, (b) the Treasury Securities
included in the Aggregate Call Option Exercise Consideration are highly liquid
Treasury Securities maturing on or within 35 days prior to the Stock Purchase
Date (as designated in good faith by the Call Option Holder in a notice
delivered to the Rate Increase Agent by 8:30 a.m., New York City time, on the
Call Option Expiration Date or, if the Call Option Holder fails to so designate
such Treasury Securities, as designated in good faith by the Rate Increase
Agent, in either case in a manner intended to minimize the Cash Equivalent of
the Aggregate Call Option Exercise Consideration) and (c) such Treasury
Securities are valued based on the ask-side price thereof at 9:00 a.m., New York
City time, on the Call Option Expiration Date (as determined on a same day
settlement basis by a reasonable and customary means selected in good faith by
the Rate Increase Agent and notified to the Call Option Holder prior thereto)
plus interest accrued thereon to such date.
"Maximum QUIPS and Debenture Rate" means (a) the yield to maturity
(calculated in accordance with standard market practice) corresponding to the
bid-side price at 9:00 a.m., New York City time, on the Call Option Expiration
Date (as determined by a reasonable and customary means selected in good faith
by the Rate Increase Agent and notified to the Call Option Holder prior thereto)
of highly liquid Treasury Securities maturing on or around the QUIPS and
Debenture Maturity Date as selected in good faith by the Rate Increase Agent
plus (b) 350 basis points (3.5%).
It is currently anticipated that [Salomon Smith Barney] will be the Rate
Increase Agent. See "-- Description of the Junior Subordinated Debentures."
Option to Extend Interest Payment Date
So long as no Debenture Event of Default has occurred and is continuing,
the Company will have the right under the Indenture at any time during the term
of the Junior Subordinated Debentures to defer the payment of interest at any
time or from time to time for a period not extending beyond the QUIPS and
Debenture Maturity Date. At the end of an Extension Period, the Company must pay
all interest then accrued and unpaid (together with interest thereon accrued at
the Deferral Rate compounded on each succeeding Interest Payment Date). During
an Extension Period, interest will continue to accrue and, if the Junior
Subordinated Debentures have been distributed to holders of the Trust
Securities, holders of Junior Subordinated Debentures (or holders of the Trust
Securities while Trust Securities are outstanding) will be required to accrue
interest income for United States Federal income tax purposes prior to the
receipt of cash attributable to such income. See "Certain Federal Income Tax
Consequences -- Interest Received on the QUIPS".
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During any such Extension Period, the Company may not take any of the
prohibited actions described in the first paragraph under "-- Certain Covenants
of the Company".
Prior to the expiration of any such Extension Period, the Company may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to extend beyond the QUIPS and Debenture Maturity
Date. Upon the termination of any such Extension Period and the payment of all
amounts then due on any Interest Payment Date, 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 must give the Property Trustee, the Administrators and the Debenture
Trustee written notice of its election of any Extension Period (or an extension
thereof) at least five Business Days prior to the earlier of (a) the date the
Distributions on the Trust Securities would have been payable except for the
election to begin or extend such Extension Period, (b) the date the Trustees are
required to give notice to any securities exchange or to holders of QUIPS of the
record date or the date such Distributions are payable and (c) such record date.
The Debenture Trustee shall give notice of the Company's election to begin or
extend a new Extension Period to the holders of the QUIPS. There is no
limitation on the number of times that the Company may elect to begin an
Extension Period.
Additional Sums
If the Trust is required to pay any additional taxes, duties or other
governmental charges, the Company will pay as additional amounts on the Junior
Subordinated Debentures the Additional Sums.
"Additional Sums" means such additional amounts as may be necessary in
order that the amount of Distributions then due and payable by the Trust on the
outstanding QUIPS and Common Trust Securities shall not be reduced as a result
of any additional taxes, duties or other governmental charges to which the Trust
has become subject.
In lieu of paying Additional Sums on the Junior Subordinated Debentures the
Company may dissolve the Trust and cause the Junior Subordinated Debentures to
be distributed to the holders of the Trust Securities in liquidation of the
Trust. See "-- Description of the QUIPS -- Liquidation of the Trust and
Distribution of Junior Subordinated Debentures".
Junior Subordinated Debenture Put Options
Each holder of Junior Subordinated Debentures will have the right (a
"Junior Subordinated Debenture Put Option") to require the Company to repurchase
such Junior Subordinated Debentures, on the Stock Purchase Date, for a purchase
price (the "Put Price") for such Junior Subordinated Debentures equal to the
aggregate principal amount thereof plus unpaid interest accrued thereon to but
not including the Stock Purchase Date, but only if the cash received on the
exercise of such option is used to settle the Purchase Contracts secured
thereby. The Trust will covenant in the Declaration that it will not exercise
any Junior Subordinated Debenture Put Option (although it may distribute Junior
Subordinated Debentures to a Put Agent in connection with the exercise by a
holder of QUIPS or the Put Agent on behalf of such holder of such holder's right
to require the Trust to do so, as contemplated under "-- Description of the
QUIPS -- Right to Exercise Junior Subordinated Debenture Put Options" above).
Each holder of Junior Subordinated Debentures or the Put Agent on behalf of
such holder may exercise the Junior Subordinated Debenture Put Option related to
such securities by presenting and surrendering the certificate evidencing such
securities, at the offices of the Debenture Trustee, with the form of "Notice of
Exercise of Put Right" on the reverse side of the certificate completed and
executed as indicated, by 10:00 a.m., New York City time, on the Stock Purchase
Date.
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Certain Covenants of the Company
The Company will covenant that it will not (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 capital stock, (b) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Company that rank pari passu with or junior in right of
payment to the Junior Subordinated Debentures or (c) make any guarantee payments
with respect to any guarantee by the Company of any securities of any subsidiary
of the Company if such guarantee ranks pari passu or junior in right of payment
to the Junior Subordinated Debentures (other than, in the case of clauses (a),
(b) and (c), (i) dividends or distributions in shares of, or options, warrants
or rights to subscribe for or purchase shares of, common stock of the Company,
(ii) any declaration of a dividend in connection with the implementation of a
stockholder's rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto,
(iii) payments under the Guarantee, (iv) as a result of a reclassification of
the Company's capital stock solely into shares of one or more classes or series
of the Company's capital stock or the exchange or conversion of one class or
series of the Company's capital stock for another class or series of the
Company's capital stock, (v) the purchase of fractional interests in shares of
the Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged and (vi)
purchases of common stock in connection with the satisfaction by the Company of
its obligations under any of the Company's benefit plans for its and its
subsidiaries' directors, officers or employees or any of the Company's dividend
reinvestment plans) if at such time (x) a Debenture Event of Default shall have
occurred and be continuing, (y) the Company shall be in default with respect to
its payment of any obligations under the Guarantee or (z) the Company shall have
given notice of its election of an Extension Period, or any extension thereof,
as provided in the Indenture and shall not have rescinded such notice, and such
Extension Period, or any extension thereof, shall have commenced and not yet
terminated.
The Company will also covenant (a) to maintain 100 percent ownership of the
Common Trust Securities; provided, however, that any permitted successor of the
Company under the Indenture may succeed to the Company's ownership of the Common
Trust Securities, (b) to use its reasonable efforts to cause the Trust (i) to
remain a statutory business trust, except in connection with the distribution of
Junior Subordinated Debentures to the holders of Trust Securities in liquidation
of the Trust, the redemption of all of the Trust Securities of the Trust, or
certain mergers, consolidations or amalgamations, each as permitted by the
Declaration of the Trust and (ii) to continue not to be classified as an
association taxable as a corporation or a partnership for United States federal
income tax purposes and (c) to use its reasonable efforts to cause each holder
of Trust Securities (or, for so long as Trust Securities constitute Pledged
Securities, Units) to be treated as owning an undivided beneficial interest in
the Junior Subordinated Debentures.
Debenture Events of Default
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures constitutes a
"Debenture Event of Default" (whatever the reason for such Debenture 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) failure for 30 days to pay any interest on the Junior Subordinated
Debentures when due (subject to the deferral of any due date in the case of an
Extension Period); or
(b) failure to pay any principal on the Junior Subordinated Debentures when
due whether at maturity, by declaration of acceleration of maturity or
otherwise; or
(c) failure to pay the Put Price when due upon exercise of a Junior
Subordinated Debenture Put Option; or
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(d) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice to the
Company from the Debenture Trustee or the holders of at least 25% in aggregate
outstanding principal amount of Junior Subordinated Debentures; or
(e) certain events of bankruptcy, insolvency or reorganization of the
Company.
Prior to any declaration accelerating the maturity of the Junior
Subordinated Debentures, the holders of a majority in aggregate outstanding
principal amount of the 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. The Debenture Trustee or the holders of not less than
25% in aggregate outstanding principal amount of the Junior Subordinated
Debentures may declare the principal due and payable immediately upon a
Debenture Event of Default. The holders of a majority in aggregate outstanding
principal amount of the Junior Subordinated Debentures may annul such
declaration and waive the default if the default (other than the nonpayment of
the principal of the Junior Subordinated Debentures which has become due solely
by such acceleration) 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.
Prior to any declaration accelerating maturity of the Junior Subordinated
Debentures, the holder or holders of a majority in aggregate outstanding
principal amount of the Junior Subordinated Debentures (which, prior to any
liquidation or dissolution of the Trust, will be the Property Trustee) 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, premium, if
any, interest or Put Price in respect of Junior Subordinated Debentures (unless
such default has been cured and a sum sufficient to pay all matured installments
of interest and premium, if any, and principal due otherwise than by
acceleration and any payments of the Put Price in respect of the Junior
Subordinated Debentures 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.
The Indenture requires the annual filing by the Company with the Debenture
Trustee of a certificate as to the absence of certain defaults under the
Indenture.
The Indenture provides that the Debenture Trustee may withhold notice of a
Debenture Event of Default from the holders of the Junior Subordinated
Debentures (except a Debenture Event of Default in payment of principal,
premium, if any, interest or Put Price in respect of Junior Subordinated
Debentures) if the Debenture Trustee considers it in the interest of such
holders to do so.
Enforcement of Certain Rights by Holders of QUIPS
If a Debenture Event of Default shall have occurred and be continuing and
shall be attributable to the failure of the Company to pay interest or premium,
if any, on or principal of the Junior Subordinated Debentures on the due date
(after giving effect to any Extension Period), a holder of record of QUIPS (or,
for so long as QUIPS underlie Normal Units, a holder of record of Normal Units)
may institute a Direct Action. See "-- Description of the QUIPS -- Events of
Default; Notice". The Company 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 QUIPS (or, for so long as QUIPS underlie Normal Units,
the holders of all the Normal Units).
The holders of the QUIPS will 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.
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Consolidation, Merger, Sale of Assets and Other Transactions
The Indenture provides that the Company shall not consolidate with or merge
into any other Person or convey, transfer or lease its properties and assets as
an entirety or substantially as an entirety to any Person, and no Person shall
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets as an entirety or substantially as an entirety to the
Company, unless: (i) in case the Company consolidates with or merges into
another Person or conveys or transfers its properties and assets substantially
as an entirety to any Person, the successor Person is organized under the laws
of the United States or any State or the District of Columbia, and such
successor Person expressly assumes the Company's obligations on the Junior
Subordinated Debentures; (ii) immediately after giving effect thereto, no
Debenture Event of Default, and no event which, after notice or lapse of time or
both, would become a Debenture Event of Default, shall have occurred and be
continuing; and (iii) certain other conditions as prescribed in the Indenture
are met.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Company that may adversely affect holders of the
Junior Subordinated Debentures.
Modification of the Indenture
From time to time the Company and the Debenture Trustee may, without the
consent of the holders of Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies (provided that any such action
does not materially adversely affect the interest of the holders of Junior
Subordinated Debentures). The Indenture contains provisions permitting the
Company and the Debenture Trustee, with the consent of the holders of a majority
in principal amount of the Junior Subordinated Debentures, to modify the
Indenture in a manner affecting the rights of the holders of Junior Subordinated
Debentures; provided that no such modification may, without the consent of the
holders of each outstanding Junior Subordinated Debenture so affected, (a)
change the QUIPS and Debenture Maturity Date, or reduce the principal amount of
the Junior Subordinated Debentures or reduce the rate or extend the time of
payment of interest thereon (other than a permitted deferral of interest during
an Extension Period), (b) change any of the terms or conditions of the Junior
Subordinated Debenture Put Options or the Put Price, or (c) reduce the
percentage of principal amount of Junior Subordinated Debentures the holders of
which are required to consent to any such modification of the Indenture.
Satisfaction and Discharge
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (a) have become due and payable or (b) will become due and payable
at maturity within one year and the Company deposits or causes to be deposited
with the Debenture Trustee funds, in trust, for the purpose and in an amount
sufficient to pay and discharge the entire indebtedness on the Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation, for the principal and interest to the QUIPS and Debenture Maturity
Date, then the Indenture will cease to be of further effect (except as to the
Company's obligations to pay all other sums due pursuant to the Indenture and to
provide the officers' certificates and opinions of counsel described therein),
and the Company will be deemed to have satisfied and discharged the Indenture.
Subordination
The obligations of the Company under the Junior Subordinated Debentures
will be unsecured and subordinate and rank junior in right of payment to all
present and future Senior Indebtedness to the extent provided in the Indenture.
Upon any payment or distribution of assets to creditors upon
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any liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Company, the holders of Senior Indebtedness will
first be entitled to receive payment in full of all Senior Indebtedness before
the holders of Junior Subordinated Debentures will be entitled to receive or
retain any payment in respect thereof.
No payments on account of principal of, premium, if any, or interest on the
Junior Subordinated Debentures (including payments on exercise of Junior
Subordinated Debenture Put Options) may be made if there shall have occurred and
be continuing a default in any payment with respect to Senior Indebtedness, or
an event of default with respect to any Senior Indebtedness resulting in the
acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default.
In the event of the acceleration of the maturity of Junior Subordinated
Debentures, the holders of all Senior Indebtedness outstanding at the time of
such acceleration will first be entitled to receive payment in full of all
amounts due in respect of such Senior Indebtedness before the holders of Junior
Subordinated Debentures will be entitled to receive or retain any payment in
respect of the Junior Subordinated Debentures.
Notwithstanding the foregoing, amounts that would be due and payable by the
Company to holders of Units in the absence of the foregoing subordination
provisions may be applied by such holders to offset their obligations under
their respective Purchase Contracts.
"Senior Indebtedness" shall mean, with respect to the Company, (a) the
principal, premium, if any, and interest in respect of (i) indebtedness of the
Company for money borrowed and (ii) indebtedness evidenced by securities,
debentures, notes, bonds or other similar instruments issued by the Company,
including, without limitation, any current or future indebtedness under any
indenture (other than the Indenture) to which the Company is party, (b) all
capital lease obligations of the Company, (c) all obligations of the Company
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of the Company and all obligations of the Company under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business), (d) all obligations of the Company for the
reimbursement on any letter of credit, any banker's acceptance, any security
purchase facility, any repurchase agreement or similar arrangement, any interest
rate swap, any other hedging arrangement, any obligation under options or any
similar credit or other transaction, (e) all obligations of the type referred to
in clauses (a) through (d) above of other persons for the payment of which the
Company is responsible or liable as obligor, guarantor or otherwise and (f) all
obligations of the type referred to in clauses (a) through (e) above of other
persons secured by any lien on any property or asset of the Company (whether or
not such obligation is assumed by the Company), except for (x) any indebtedness
between or among the Company or any affiliate of the Company, (y) any other debt
securities issued pursuant to the Indenture and guarantees in respect of those
debt securities and (z) any indebtedness that is by its terms subordinated to or
pari passu with the Junior Subordinated Debentures, including any junior
subordinated debt securities issued in the future with subordination terms
substantially similar to the Junior Subordinated Debentures. Senior Indebtedness
shall continue to be Senior Indebtedness and be entitled to the benefits of the
subordination provisions irrespective of any amendment, modification or waiver
of any term of such Senior Indebtedness.
Because the Company is a holding company, the Junior Subordinated
Debentures are effectively subordinated to all existing and future liabilities
of the Company's subsidiaries, except to the extent the Company is a creditor of
the subsidiary recognized as such. See "Risk Factors -- Holding Company
Structure; Limitations on Dividends" in the Prospectus.
The Indenture places no limitation on the amount of Senior Indebtedness
that may be incurred by the Company. The Company expects from time to time to
incur indebtedness constituting Senior Indebtedness.
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Form and Book-Entry Procedures
If the Junior Subordinated Debentures are distributed to the holders of the
Trust Securities and do not constitute Pledged Securities with respect to the
Units, the Junior Subordinated Debentures may be represented by one or more
global certificates registered in the name of the Depositary or its nominee. The
depositary arrangements for such Junior Subordinated Debentures are expected to
be substantially similar to those in effect for the Units. For a description of
the Depositary and the terms of the depositary arrangements, see "-- Book-Entry
System".
Payment and Paying Agents
Payment of principal of and premium, if any, and any interest on Junior
Subordinated Debentures will be made at the office of the Debenture Trustee in
The City of New York or at the office of such paying agent or paying agents as
the Company may designate from time to time, except that at the option of the
Company 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 register for
Junior Subordinated Debentures or (ii) by transfer to an account maintained by
the Person entitled thereto as specified in such register, provided that proper
transfer instructions have been received by the relevant Record Date. Payment of
any interest on any Junior Subordinated Debenture will be made to the Person in
whose name such Junior Subordinated Debenture is registered at the close of
business on the Record Date for such interest, except in the case of defaulted
interest. The Company may at any time designate additional paying agents or
rescind the designation of any paying agent; however the Company will at all
times be required to maintain a paying agent in each place of payment for the
Junior Subordinated Debentures.
Any moneys deposited with the Debenture 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 Junior Subordinated Debenture (or the Put
Price therefor) and remaining unclaimed for two years after such principal and
premium, if any, or interest (or Put Price) has become due and payable shall, at
the request of the Company, be repaid to the Company and the holder of such
Junior Subordinated Debenture shall thereafter look, as a general unsecured
creditor, only to the Company for payment thereof.
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.
Information Concerning the Debenture Trustee
Subject to such provisions, the Debenture Trustee is under no obligation to
exercise any of the powers vested in it by the Indenture at the request of any
holder of Junior Subordinated Debentures, unless offered reasonable indemnity by
such holder against the costs, expenses and liabilities which might be incurred
thereby. The Debenture Trustee is not required to expend or risk its own funds
or otherwise incur personal financial liability in the performance of its duties
if the Debenture Trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it.
DESCRIPTION OF THE GUARANTEE
General
The Guarantee will be executed and delivered by the Company concurrently
with the issuance by the Trust of the QUIPS for the benefit of the holders from
time to time of the QUIPS. First Union National Bank will initially act as
Guarantee Trustee under the Guarantee. The Guarantee will be qualified under the
Trust Indenture Act. The Guarantee Trustee will hold the Guarantee for the
benefit of the holders of the QUIPS.
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The Company will irrevocably and unconditionally agree to pay in full on a
subordinated basis, to the extent set forth herein, the Guarantee Payments (as
defined herein) to the holders of the QUIPS, as and when due, regardless of any
defense, right of set-off or counterclaim that the Trust may have or assert
other than the defense of payment. The following payments with respect to the
QUIPS, to the extent not paid by or on behalf of the Trust (the "Guarantee
Payments"), will be subject to the Guarantee: (a) any accumulated and unpaid
Distributions required to be paid on QUIPS, to the extent the Trust has funds on
hand legally available therefor and (b) the Final Redemption Price with respect
to the QUIPS, to the extent that the Trust has funds on hand legally available
therefor. The Company's obligation to make a Guarantee Payment may be satisfied
by direct payment of the required amounts by the Company to the holders of the
QUIPS or by causing the Trust to pay such amounts to such holders.
The Guarantee will be unsecured and subordinate and rank junior in right of
payment to the extent and in the manner provided therein to all Senior
Indebtedness. See "Risk Factors -- Holding Company Structure; Reliance on
Dividends from Insurance Subsidiaries" above and "-- Status" below.
The Guarantee, when taken together with the Company's obligations under the
Declaration, the Junior Subordinated Debentures and the Indenture, including its
obligations to pay costs, expenses, debt, taxes and other liabilities of the
Trust (other than with respect to the Trust Securities), will provide in the
aggregate, a full, irrevocable and unconditional guarantee of all of the Trust's
obligations of payments due under the QUIPS. See "-- Relationship Among the
QUIPS, the Junior Subordinated Debentures and the Guarantee".
The Company also has agreed separately to irrevocably and unconditionally
guarantee the obligations of the Trust with respect to Common Trust Securities
issued by the Trust to the same extent as the Guarantee, except that upon an
Event of Default under the Declaration, holders of QUIPS shall have priority
over holders of Common Trust Securities with respect to Distributions and
payments on liquidation, redemption or otherwise.
Status
The Guarantee will be unsecured and subordinate and rank junior in right of
payment to all Senior Indebtedness to the extent and in the manner provided
therein, which is similar to extent and manner of subordination of the Junior
Subordinated Debentures as described under "-- Description of the Junior
Subordinated Debentures -- Subordination" above.
Because the Company is a holding company, the Guarantee is effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, except to the extent the Company is a creditor of the subsidiary
recognized as such. See "Risk Factors -- Holding Company Structure; Limitations
on Dividends" in the Prospectus.
The Guarantee will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Company to enforce its rights under the Guarantee without first instituting
a legal proceeding against any other person or entity). The Guarantee will be
held for the benefit of the holders of the QUIPS. The Guarantee will not be
discharged except by payment of the Guarantee Payments in full to the extent not
paid by the Trust or upon distribution to the holders of the QUIPS of the Junior
Subordinated Debentures. The Guarantee does not place a limitation on the amount
of Senior Indebtedness that may be incurred by the Company. The Company expects
from time to time to incur indebtedness constituting Senior Indebtedness.
Events of Default
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of a majority in Liquidation Amount
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of the QUIPS will have the right to (a) waive any past event of default under
the Guarantee and its consequences, whereby such event of default shall cease to
exist and any event of default under the Guarantee arising therefrom shall be
deemed to have been cured for every purpose of the Guarantee and (b) 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 the QUIPS may institute a legal proceeding directly against
the Company to enforce its rights under the Guarantee without first instituting
a legal proceeding against the Trust, the Guarantee Trustee or any other person
or entity.
The Company, as guarantor, will be required to file annually with the
Guarantee Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
Certain Covenants of the Company
In the Guarantee, the Company will covenant that, so long as any QUIPS
remain outstanding, if there shall have occurred any event that is or would
constitute an event of default under the Guarantee, that is continuing, or the
Declaration, then the Company will not take any of the prohibited actions
described under "-- Description of the Junior Subordinated Debentures -- Certain
Covenants of the Company".
Amendments and Assignment
Except with respect to any changes that do not adversely affect the rights
of holders of the QUIPS in any material respect (in which case no approval will
be required), the Guarantee may not be amended without the prior approval of the
holders of a majority in Liquidation Amount of such outstanding QUIPS. The
manner of obtaining any such approval will be as set forth under "-- Description
of the QUIPS -- Voting Rights; Amendment of the Declaration". All guarantees and
agreements contained in the Guarantee Agreement shall bind the successors,
assigns, receivers, trustees and representatives of the Company and shall inure
to the benefit of the holders of the QUIPS then outstanding.
Termination
The Guarantee will terminate and be of no further force and effect upon
full payment of the Final Redemption Price of the QUIPS, upon full payment of
the amounts payable upon liquidation of the Trust or upon distribution of the
Junior Subordinated Debentures to the holders of the QUIPS or at such other time
when there are no longer any QUIPS outstanding. The Guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any
holder of the QUIPS must restore payment of any sums paid under the QUIPS or the
Guarantee.
Information Concerning the Guarantee Trustee
The Guarantee Trustee may be appointed or removed by the Guarantor without
cause at any time, except during an event of default under the Guarantee. 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 QUIPS, unless offered
reasonable indemnity against the costs, expenses and liabilities which might be
incurred thereby. The Guarantee Trustee is not required to expend or risk its
own funds or otherwise incur personal financial liability in the performance of
its duties if it reasonably believes that repayment or adequate indemnity is not
reasonably assured to it.
The Company or its affiliates maintain certain business relationships with
the Guarantee Trustee and its affiliates in the ordinary course of business.
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Governing Law
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
RELATIONSHIP AMONG THE QUIPS, THE JUNIOR SUBORDINATION DEBENTURES AND THE
GUARANTEE
Full and Unconditional Guarantee
Payments of Distributions and other amounts due on the QUIPS (to the extent
the Trust has funds on hand legally available for the payment of such
Distributions) will be irrevocably guaranteed by the Company as and to the
extent set forth under "Description of the Guarantee". If and to the extent that
the Company does not make the required payments on the Junior Subordinated
Debentures, the Trust will not have sufficient funds to make the related
payments, including Distributions, on the QUIPS. The Guarantee will not cover
any such payment unless and until the Trust has sufficient funds for the payment
therefor. The Guarantee, when taken together with the Company's obligations
under the Junior Subordinated Debentures, the Indenture and the Declaration,
including its obligations to pay costs, expenses, debts, taxes and other
liabilities of the Trust (other than with respect to the Trust Securities), will
provide, in the aggregate, a full, irrevocable and unconditional guarantee of
payments of Distributions and other amounts due on the QUIPS. The obligations of
the Company under the Guarantee will be unsecured and subordinate and rank
junior in right of payment to all Senior Indebtedness.
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 QUIPS, primarily because: (a) the
aggregate principal amount of the Junior Subordinated Debentures will be equal
to the aggregate Liquidation Amount of the QUIPS and Common Trust Securities;
(b) 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 Trust Securities; (c) the Company shall pay for all
and any costs, expenses, taxes and other liabilities of the Trust except the
Trust's obligations to holders of Trust Securities under such Trust Securities;
and (d) the Declaration will provide that the Trust is not authorized to engage
in any activity that is not consistent with the limited purposes thereof.
Enforcement of Rights of Holders of QUIPS
If the Company fails to make interest or other payments on the Junior
Subordinated Debentures when due (after giving effect to any Extension Period),
the Declaration provides a mechanism whereby the holders of the QUIPS (or, for
so long as QUIPS underlie Normal Units, the holders of the Normal Units) may
direct the Property Trustee to enforce its rights under the Junior Subordinated
Debentures. If the Property Trustee fails to enforce its rights under the Junior
Subordinated Debentures after a majority in Liquidation Amount of QUIPS have so
directed the Property Trustee, a holder of record of the QUIPS (or, for so long
as QUIPS underlie Normal Units, a holder of record of Normal Units) may, to the
fullest extent permitted by law, institute a legal proceeding against the
Company to enforce the Property Trustee's rights under the Junior Subordinated
Debentures without first instituting any legal proceedings against the Property
Trustee or any other person or entity. Notwithstanding the foregoing, if an
Event of Default has occurred and is continuing and such event is attributable
to the failure of the Company to pay principal or interest on the Junior
Subordinated Debentures on the respective dates such principal or interest is
payable, after giving effect to any Extension Period, then a holder of record of
QUIPS (or, for so long as QUIPS underlie Normal Units, a holder of record of
Normal Units) may institute a Direct Action for payment to such holder of the
portion of such principal or interest attributable to Junior Subordinated
Debentures having a principal amount equal to the aggregate Liquidation Amount
of the QUIPS held by such
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holder (or underlying such holder's Normal Units). In connection with such
Direct Action, the Company will be subrogated to the rights of such holder of
QUIPS (or Normal Units) under the Declaration to the extent of any payment made
by the Company to such holder of QUIPS in such Direct Action; provided, however,
that no such subrogation right may be exercised so long as an Event of Default
has occurred and is continuing.
In addition, a holder of QUIPS may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, the Trust or any
other person or entity.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Declaration. However, in the
event of payment defaults under, or acceleration of, Senior Indebtedness, the
subordination provisions of the Indenture will provide that no payments may be
made in respect of the Junior Subordinated Debentures until such Senior
Indebtedness 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 Declaration.
Limited Purpose of the Trust
The QUIPS will represent preferred undivided beneficial interests in the
assets of the Trust, and the Trust exists for the sole purpose of issuing and
selling the Trust Securities, using the proceeds from the sale of the Trust
Securities to acquire the Junior Subordinated Debentures and engaging in only
those other activities necessary or incidental thereto.
Rights Upon Dissolution
Upon any voluntary or involuntary liquidation or bankruptcy of the Company,
the Property Trustee, as holder of the Junior Subordinated Debentures, would be
a subordinated creditor of the Company, subordinated in right of payment to all
Senior Indebtedness as set forth in the Indenture, but entitled to receive
payment in full of principal (and premium, if any) and interest, before any
stockholders of the Company receive payments or distributions. Since the Company
will be the guarantor under the Guarantee and will agree to pay for all costs,
expenses and liabilities of the Trust (other than the Trust's obligations to the
holders of its Trust Securities), the positions of a holder of QUIPS and a
holder of Junior Subordinated Debentures relative to other creditors and to
stockholders of the Company in the event of liquidation or bankruptcy of the
Company are expected to be substantially the same.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of the principal United States federal income tax
consequences of the purchase, ownership and disposition of Units, QUIPS and
Common Stock is based on the views of Sidley & Austin, counsel to the Company.
No statutory, judicial or administrative authority directly addresses the tax
treatment of Units or instruments similar to Units for United States federal
income tax purposes. As a result, no assurance can be given that the Internal
Revenue Service (the "IRS") will agree with the tax consequences described
herein or that these consequences will not be successfully challenged. This
summary deals only with Units, QUIPS and Common Stock held as capital assets by
purchasers who purchase Units in the initial offering at the issue price and who
or which are (i) citizens or residents of the United States, (ii) corporations
or partnerships created or organized in or under the laws of the United States
or any state thereof or the District of Columbia,(iii) estates the income of
which is subject to United States federal income taxation without regard to
source, or (iv) trusts that are United States persons for federal income tax
purposes. It does not address consequences to special classes of holders,
including dealers in securities or currencies, financial institutions, insurance
companies, tax-exempt entities, taxpayers subject to the alternative minimum
tax, non-United States persons or taxpayers holding the Purchase Contracts,
QUIPS or Common Stock as part of a "straddle" or a hedging or conversion
transaction or other integrated investment. Moreover, the effect of any
applicable estate and gift tax laws or state, local or foreign tax laws is not
discussed. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS CONCERNING
THE TAX CONSEQUENCES OF AN INVESTMENT IN THE UNITS, INCLUDING THE APPLICATION OF
STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN
FEDERAL OR OTHER TAX LAWS.
This summary is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury regulations issued thereunder, published rulings and
court decisions, each as currently in effect and all of which are subject to
change. Any such changes may be applied retroactively in a manner that could
cause the tax consequences to vary substantially from the consequences described
below, possibly adversely affecting a holder of Units, QUIPS or Common Stock.
This discussion assumes that, in connection with the formation of the
Units, the Underwriters will be acting on behalf of the holders and will (a)
sell the Call Options to the Call Option Holder and apply the proceeds from such
sale (the "Call Premium") together with the amount paid directly by the holders
to the Underwriters (the "Purchase Price") to the purchase of the Units and (b)
enter into the Purchase Contracts with the Company and that holders will assume
the rights and obligations arising from these actions undertaken on their
behalf.
CLASSIFICATION OF THE TRUST
The Trust will, for United States federal income tax purposes, be
classified as a grantor trust and not as an association taxable as a
corporation. As a result, each holder of QUIPS will be treated as owning an
undivided beneficial interest in the Junior Subordinated Debentures, and each
holder will be required to include in gross income the items of income realized
with respect to the holder's allocable share of the Junior Subordinated
Debentures.
TREATMENT OF THE CALL PREMIUM
A holder will not be subject to tax in respect of the receipt of the Call
Premium at the time the Call Premium is received. Rather, the amount of the Call
Premium will be included in the amount realized by a holder when the Call Option
is exercised (see "-- Exercise of the Call Option and Ownership of Treasury
Securities," below) or the Units are sold (see "-- Sale or Disposition of
Units," below). If the Call Option expires unexercised, the amount of the Call
Premium will be taxable to the holder as short-term capital gain.
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INITIAL TAX BASIS OF QUIPS
The amount paid by a holder for a Unit, which, for United States federal
income tax purposes, will equal the sum of the Purchase Price plus the amount of
the Call Premium deemed to have been received by such holder and paid to the
Company in partial payment for the Units, will be allocated between the QUIPS
and the Purchase Contract included in such Unit in proportion to their
respective fair market values at the time of purchase. Such allocation will
establish each holder's initial tax basis in the QUIPS (which is to say, the
undivided beneficial interest in the Junior Subordinated Debentures which the
QUIPS represent) and the Purchase Contract. Consistent with the documentation,
and reasonably consistent with the facts and circumstances, the Company intends
to take the position that, at the time of issuance of the Unit, the fair market
value of the Purchase Contract (including the holder's obligation to pay
Contract Fees to, or right to receive Contract Fees from, the Company) equals
zero, and the entire amount paid for the Unit, including the Call Premium, is
allocable to the QUIPS. Under Treasury regulations dealing with determination of
the issue price of a debt instrument that is part of an investment unit, the
Company's position will be binding upon each holder unless the holder explicitly
discloses a contrary position on a statement attached to the holder's timely
filed United States federal income tax return for the taxable year in which
Units are acquired by such holder.
Assuming the above allocation, the holder's basis in the QUIPS will exceed
the amount payable at maturity with respect to the QUIPS by the amount of the
Call Premium. Because the Junior Subordinated Debentures will be classified as
contingent debt instruments for United States federal income tax purposes, this
excess will not be treated as "bond premium" that is amortizable at the holder's
election. Instead, this excess will be taken into account in determining the
issue price of the Junior Subordinated Debentures and in determining the yield
at which holders will be required to accrue income. See "-- Interest Received on
the QUIPS," below.
INTEREST RECEIVED ON THE QUIPS
Because of the ability of the Rate Increase Agent to increase the QUIPS and
Debenture Rate, the Junior Subordinated Debentures will be classified as
contingent debt instruments subject to the "noncontingent bond method" as set
forth in applicable Treasury regulations. As discussed below, the Company does
not believe that classification of the Junior Subordinated Debentures as
contingent debt instruments will require holders to recognize taxable income in
excess of the cash payments of interest on the QUIPS. As also discussed below,
however, as a result of classification of the Junior Subordinated Debentures as
contingent debt instruments, any gain realized on sale or exchange of the QUIPS
generally will be treated as ordinary income.
Under the noncontingent bond method, the yield on the Junior Subordinated
Debentures is projected based on the yield on a hypothetical noncontingent bond
with similar terms. Based on that yield (the "comparable yield"), a projected
schedule of payments is determined. In general, holders of QUIPS will be
required to accrue interest income from the Junior Subordinated Debentures under
the rules applicable to debt instruments with OID, on the assumption that the
projected amounts will actually be paid, and then to take into account
adjustments if the payments are fixed at amounts that differ from their
projected amounts. Under these rules, none of the stated interest on the Junior
Subordinated Debentures will be "qualified stated interest" and, accordingly,
all payments of stated interest will be treated as payments of OID or as return
of principal.
Based upon information provided by Goldman, Sachs & Co., the Company has
determined the comparable yield to be [ %]. The projected amounts of the twenty
quarterly payments on the Junior Subordinated Debentures, per $100 of Stated
Amount, are [ ] (for each of the first 12 payments), [ ] (for each of the
next seven payments) and [ ] (for the final payment). The foregoing comparable
yield and projected payment schedule will be used by the Company for purposes of
determining its own taxable income and for any required information reporting.
Based
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on this schedule, the amount of taxable income from the Junior Subordinated
Debentures for any quarter will not exceed the cash payments of interest on the
Junior Subordinated Debentures.
If a holder of QUIPS does not use this projected payment schedule to
determine interest accruals, such holder must apply the foregoing rules using
its own projected payment schedule. A holder that determines its own projected
payment schedule must explicitly disclose this fact and the reason why the
holder has used its own schedule (e.g., why the Company's projected payment
schedule is unreasonable). In general, this disclosure must be made on a
statement attached to the timely filed federal income tax return of the holder
for the taxable year that includes the date of its acquisition of the QUIPS.
The foregoing projected payment schedule is supplied by the Company solely
for computing income under the noncontingent bond method for federal income tax
purposes, and does not constitute a projection or representation as to the
amounts that holders of QUIPS will actually receive.
Holders of QUIPS will not be required to take into account any adjustments
from the projected payment schedule with respect to payments due on or before
the Call Option Expiration Date, because no such payments are contingent.
Because all contingent payments are fixed substantially contemporaneously on the
Call Option Expiration Date, Treasury regulations require that, on that date, a
determination be made of the differences between all remaining payments as
originally projected and all remaining payments as fixed. Any differences
between these amounts are positive or negative adjustments that are to be taken
into account in any reasonable manner over the period to which they relate. The
Company believes that a reasonable manner for taking into account these
differences would be to take each adjustment into account on the date that the
payment to which it relates is due. The Company intends to adopt this approach
for purposes of tax reporting.
Holders of QUIPS will be required to treat any net positive adjustment
taken into account for a taxable year as additional interest income for the
year. Net negative adjustments, if any, are expected to be negligible and
generally will be applied to reduce interest income for the taxable year.
Because income with respect to the QUIPS will constitute interest for
United States federal income tax purposes, corporate holders of Units will not
be entitled to a dividends-received deduction in respect of such income.
ADJUSTMENTS TO TAX BASIS OF QUIPS
The initial tax basis of a holder of QUIPS (see "-- Initial Tax Basis of
QUIPS," above) will be (a) increased by the amount of any interest recognized
under the noncontingent bond method, determined as though the actual amounts of
the contingent payments were equal to their projected amounts and without regard
to the adjustments made when the actual amount of a contingent payment differs
from its projected amount, and (b) reduced by the projected amounts of any
contingent payments and the actual amounts of any noncontingent payments
(including payments of interest) received with respect to the Junior
Subordinated Debentures. Based on the Company's belief (described in "--
Interest Received on the QUIPS," above) that the taxable income from the Junior
Subordinated Debentures will not exceed cash payments of interest, the Company
believes that the adjusted tax basis of a holder in the QUIPS as of the end of
each quarter ending on or before the Call Option Expiration Date will not be
greater than the initial tax basis.
CONTRACT FEES
The holders of Units may be required to pay Contract Fees to the Company,
or the Company may be required to pay Contract Fees to the holders of the Units,
as specified in the final Prospectus for the offering made hereby.
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There is no authority for the tax treatment of the Contract Fees under
current law. In the event that the Company is required to pay Contract Fees to
holders, the Company intends to file information returns on the basis that the
Contract Fees are ordinary income to holders for the taxable year of receipt.
Because any Contract Fees received by a holder will not constitute dividends for
United States federal income tax purposes, corporate holders will not be
entitled to a dividends-received deduction as a result of receiving such fees.
Holders should consult their own tax advisors concerning the treatment of the
Contract Fees, including the possibility that the Contract Fees may not be
treated as current income to holders, but would instead reduce a holder's basis
in the Common Stock received upon exercise of the Purchase Contracts, by analogy
to the treatment of rebates. In the event the Company is required to pay
Contract Fees to holders, the Company does not intend to deduct the Contract
Fees, because it views them as a cost of issuing the Common Stock. Contract Fees
received by a regulated investment company should be treated as income derived
with respect to such company's business of investing in stock and securities.
In the event that holders are required to pay Contract Fees to the Company,
it is unlikely that holders will be entitled to a current deduction in respect
of such payments. As a result, although the amount of cash distributions made to
holders in respect of the QUIPS will be reduced by the amount of Contract Fees
payable to the Company, holders will nevertheless recognize ordinary income each
quarter equal to the full amount of OID accrued, subject to the adjustments
described in "-- Interest Received on the QUIPS," above, without a corresponding
deduction for payment of the Contract Fees. Payment of the Contract Fees by
holders will, however, effectively increase the basis of the Common Stock
received under the Purchase Contract. See "-- Purchase of Common Stock under the
Purchase Contract," below.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES UPON LIQUIDATION OF THE TRUST
If the Company were to exercise its right to liquidate the Trust and cause
the Junior Subordinated Debentures to be distributed, on a pro rata basis, to
holders of QUIPS (or to the Collateral Agent on behalf of such holders), such
distribution, under current law, would not be taxable to such holders and each
holder's aggregate tax basis in the Junior Subordinated Debentures would be
equal to such holder's aggregate tax basis in the QUIPS. A holder's holding
period for the Junior Subordinated Debentures would include the period during
which the QUIPS were held by such holder.
EXERCISE OF THE CALL OPTION AND OWNERSHIP OF TREASURY SECURITIES
Exercise of the Call Option will be a taxable event to holders of the
Units. As a result, holders will recognize gain or loss equal to the difference
between the amount realized from exercise of the Call Option and their adjusted
tax basis in the QUIPS. The amount treated as the amount realized from exercise
of the Call Option will equal the aggregate of the Call Premium and the fair
market value of the Treasury Securities received. Based on the Company's belief
that a holder's adjusted tax basis in the QUIPS on the Call Option Expiration
Date will not be greater than the initial tax basis (see "-- Adjusted Tax Basis
of QUIPS," above), it is expected that the holder will not realize loss (and may
realize some gain) on the exercise of the Call Option. The rules that govern
determination of the character of gain or loss on sale of the QUIPS (including
pursuant to the exercise of the Call Option) are summarized under "-- Sale or
Disposition of Units," below.
A holder's basis in the Treasury Securities received as a result of the
exercise of the Call Option will be equal to the fair market value of such
Treasury Securities, determined as of the Call Settlement Date. Except to the
extent the Treasury Securities are "stripped" Treasury securities ("Stripped
Treasury Securities"), the treatment of which is discussed in the immediately
succeeding paragraph, (a) interest with respect to a holder's portion of the
Treasury Securities will be taxable as ordinary income to such holder as it is
received or accrued, in accordance with such holder's normal method of
accounting for United States federal income tax purposes, and (b) any gain
realized by a holder at maturity of the Treasury Securities will generally be
treated as capital
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gain, unless the Treasury Securities are considered to have more than a "de
minimis" amount of market discount.
A holder will be required to treat a Stripped Treasury Security received by
such holder as a bond that was originally issued on the date received by such
holder. Stripped Treasury Securities (other than Stripped Treasury Securities
with a remaining term of one year or less) will be considered to have OID in an
amount equal to the difference between the amount payable on such security and
the holder's initial basis in such security (determined as described in the
immediately preceding paragraph). As a result, a holder who receives a Stripped
Treasury Security (other than a Stripped Treasury Security with a remaining term
of one year or less) will be required to include OID in income as ordinary
income over the remaining term of such security and will increase its basis in
the Stripped Treasury Security by the amount of OID included in income with
respect to such security.
Stripped Treasury Securities with a remaining term of one year or less
("Short-term Stripped Treasury Securities") generally should be considered to
have "acquisition discount" in an amount equal to the difference between the
principal amount of the Short-term Stripped Treasury Security and the taxpayer's
basis in the Short-term Stripped Treasury Security. A holder (other than a
holder on the accrual method of accounting or a holder who elects to accrue such
acquisition discount into income over the remaining term of the Short-term
Stripped Treasury Security) generally will recognize ordinary income upon
maturity of the Short-term Stripped Treasury Security equal to the amount of
such acquisition discount.
SALE OR DISPOSITION OF UNITS
A holder will generally recognize gain or loss upon the sale or other
disposition of Units. Such gain or loss will be separately calculated with
respect to the QUIPS or Treasury Securities, as the case may be, and the related
Purchase Contract composing such Units by allocating the sum of any cash and the
fair market value of any property received between the two components in
proportion to their respective fair market values. (For this purpose, and for
purposes of the remainder of this discussion of the consequences of sale or
disposition of Units, reference to the QUIPS includes reference to the undivided
beneficial interest in the Junior Subordinated Debentures represented by the
QUIPS or the Junior Subordinated Debentures received by holders in the event of
a liquidation of the Trust.) The amount considered to be received by a holder
with respect to the sale of the QUIPS will include the value of the assumption
of the holder's obligations under the Call Option, which, in the absence of any
means of independent valuation, will likely be deemed to equal the amount of the
Call Premium previously received by such holder. See "-- Treatment of the Call
Premium," above.
The amount of gain or loss with respect to each component will equal the
difference between the consideration so allocated to each component (reduced, in
the case of certain Treasury Securities, by any amount attributable to accrued
but unpaid interest, which will be taxable as ordinary income) and the holder's
adjusted tax basis in the respective components. Except in the case of gain or
loss with respect to QUIPS, such gain or loss will be capital gain or loss.
The rules for determining the character of gain or loss on a sale or
disposition of QUIPS depend on whether such sale or disposition occurs prior to
the Call Option Expiration Date. If such sale or disposition occurs prior to the
Call Option Expiration Date, any gain recognized will be ordinary interest
income. Any loss will be ordinary to the extent of prior interest inclusions
with respect to the QUIPS. If, however, such sale or disposition occurs on or
after the Call Option Expiration Date, any gain recognized will be treated as
ordinary interest income to the extent of any positive adjustments that have not
yet been accrued and included in income by the holder. Any loss, and any gain in
excess of positive adjustments that have not yet been accrued and included in
income, recognized on such a sale or disposition will be treated as capital gain
or loss.
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SALE OR RETIREMENT OF QUIPS
If the Call Option is not exercised by the Call Option Holder, a holder
will recognize gain or loss on the sale or retirement of the QUIPS (including a
sale pursuant to the exercise of a Junior Subordinated Debentures Put Option) in
an amount equal to the difference between the amount realized on the sale or
retirement of the QUIPS and the holder's adjusted tax basis in the QUIPS at such
time. Any gain recognized will be treated as ordinary interest income to the
extent of any positive adjustments that have not yet been accrued and included
in income by the holder. Any loss, and any gain in excess of positive
adjustments that have not yet been accrued and included in income, recognized on
such a disposition will be treated as capital gain or loss.
PURCHASE OF COMMON STOCK UNDER THE PURCHASE CONTRACT
Assuming that the initial basis of the Purchase Contract will be zero (see
"Initial Tax Basis of QUIPS" above), the tax basis of the Common Stock acquired
under a Purchase Contract will equal the amount of cash paid to purchase such
Common Stock (including cash applied by the Collateral Agent upon maturity of
the Treasury Securities), increased by the amount of any Contract Fees paid by
the holder (as discussed above under "-- Contract Fees") and decreased by (a)
the amount of any Contract Fees received by the holder and not previously
included in income and (b) the amount of any cash received in lieu of fractional
shares of Common Stock. A holder will recognize capital gain or loss upon
receipt of cash in lieu of fractional shares of Common Stock equal to the
difference between the amount of cash received and the holder's basis in such
fractional shares. A holder's holding period in the Common Stock purchased
pursuant to the Purchase Contract will begin on the day after the purchase of
such Common Stock.
OWNERSHIP OF COMMON STOCK ACQUIRED UNDER THE PURCHASE CONTRACT
Assuming that the Company has current or accumulated earnings and profits
at least equal to the amount of the dividends, a holder will include a dividend
on the Common Stock in income when paid, and the dividend will be eligible for
the dividends-received deduction if received by an otherwise qualifying
corporate holder which meets the holding period and other requirements for such
deduction.
Upon the sale, exchange or other disposition of Common Stock, the holder
will recognize gain or loss equal to the difference between the holder's tax
basis in the Common Stock and the amount realized on the disposition. The gain
or loss will be capital gain or loss.
ADJUSTMENT OF SETTLEMENT RATE
Holders of Units might be treated as receiving a constructive distribution
from the Company if (a) the Settlement Rate is adjusted and, as a result of such
adjustment, the proportionate interest of holders of Units in the assets or
earnings and profits of the Company is increased, and (b) the adjustment is not
made pursuant to a reasonable antidilution formula. An adjustment in the
Settlement Rate would not be considered made pursuant to such a formula if the
adjustment were made to compensate for certain taxable distributions with
respect to Common Stock. Thus, under certain circumstances, an increase in the
Settlement Rate is likely to be taxable to holders of Units as a dividend to the
extent of the current or accumulated earnings and profits of the Company.
Holders of Units would be required to include their allocable share of such
constructive dividends in gross income but would not receive any cash related
thereto.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, (a) the
Company has agreed to enter into the Purchase Contracts with each of the
Underwriters named below (the "Underwriters") underlying the respective number
of Units set forth opposite its name below, (b) the Company and the Trust have
agreed to sell to each of the Underwriters the QUIPS underlying the respective
number of Units set forth opposite its name below, and (c) each of such
Underwriters, for whom Goldman, Sachs & Co. and Salomon Brothers Inc. are acting
as representatives, has severally agreed to enter into such Purchase Contracts
with the Company, purchase such QUIPS from the Company and the Trust, pledge
under the Pledge Agreement such QUIPS and sell (on behalf of the initial
investors in the Units) to the Call Option Holder the Call Options with respect
to such Units:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF UNITS
----------- ---------------
<S> <C>
Goldman, Sachs & Co. .......................................
--------
Salomon Brothers Inc .......................................
--------
Total.............................................
========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to enter into Purchase Contracts, purchase and pledge
QUIPS and sell Call Options with respect to all of the Units offered hereby, if
any Purchase Contracts are entered into, QUIPS are taken and Call Options sold.
The Underwriters propose to offer the Units in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain securities dealers at such price
less a concession of $ per Unit. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per Unit to certain
brokers and dealers. After the Units 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 Company and the Trust have granted the Underwriters an option
exercisable for 30 days after the date of this Prospectus to enter into Purchase
Contracts and purchase QUIPS underlying up to an aggregate of
additional Units solely to cover over-allotments, if any. If Purchase Contracts
underlying any such additional Units are entered into and QUIPS are purchased,
the Underwriters would pledge under the Pledge Agreement such QUIPS and would
sell to the Call Option Holder the Call Options underlying such Units. If the
Underwriters exercise their over-allotment option, each of the Underwriters has
severally agreed, subject to certain conditions, to effect the foregoing
transactions with respect to approximately the same percentage of such Units
that the respective number of Units set forth opposite its name in the foregoing
table bears to the Units offered hereby.
The Company has agreed, subject to certain exceptions, that during the
period beginning from the date of this Prospectus and continuing to and
including the date 180 days after the date of this Prospectus, it will not
offer, sell, contract to sell or otherwise dispose of any Units, QUIPS or Common
Stock (other than pursuant to employee stock option or purchase plans existing,
or on the conversion or exchange of convertible or exchangeable securities
outstanding, on the date of this Prospectus Supplement) or any securities of the
Company which are substantially similar to the Common Stock, or which are
convertible into or exchangeable for, or otherwise represent the right to
receive, Common Stock or any such other similar securities, without the prior
written consent of the representatives.
The Units will be a new issue of securities with no established trading
market. Application will be made to list the Normal Units on the NYSE. The
Underwriters have advised the Company that they intend to make a market in the
Normal Units, but they are not obligated to do so and may
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discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Units.
In connection with the Offering, the Underwriters may purchase and sell the
Units or Common Stock in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover short
positions created by the Underwriters in connection with the Offering.
Stabilizing transactions consist of certain bids or purchases for the purpose of
preventing or retarding a decline in the market price of the Units or Common
Stock, as applicable; and short positions created by the Underwriters involve
the sale by the Underwriters of a greater number of Units than they are required
to purchase from the Company and the Trust in the Offering. The Underwriters
also may impose a penalty bid, whereby selling concessions allowed to
broker-dealers in respect of the Units sold in the Offering may be reclaimed by
the Underwriters if such Units are repurchased by the Underwriters in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Units or the Common Stock, which may
be higher than the price that might otherwise prevail in the open market, and
these activities, if commenced, may be discontinued at any time. These
transactions may be effected on the NYSE, in the over-the-counter market or
otherwise.
The Company and the Trust have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933.
VALIDITY OF THE SECURITIES
The validity of the QUIPS, the Purchase Contracts, the Common Stock
issuable upon settlement thereof, the Junior Subordinated Debentures and the
Guarantee being offered hereby will be passed upon for the Company by Sidley &
Austin, Chicago, Illinois and for the Trust by Morris, James, Hitchens &
Williams of Delaware. The validity of the Purchase Contracts, the Common Stock
issuable upon settlement thereof, the Junior Subordinated Debentures and the
Guarantee being offered hereby will be passed upon for the Underwriters by
Sullivan & Cromwell, New York, New York. Certain matters relating to United
States Federal income considerations will be passed upon for the Company by
Sidley & Austin, special tax counsel to the Company, and by Sullivan & Cromwell,
special tax counsel to the Underwriters. Sidley & Austin and Sullivan & Cromwell
will rely on the opinion of Joseph K. Haggerty, Esq., Senior Vice President and
General Counsel of the Company, as to matters of Iowa law.
S-68
<PAGE> 92
INDEX OF DEFINED TERMS
Set forth below is a list of the defined terms used in this Prospectus
Supplement and the pages on which the definition of such terms may be found.
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Additional Sums............................................. S-
Administrators.............................................. S-
Aggregate Call Option Exercise Consideration Deliverable on
Exercise of the Call Options.............................. S-
Aggregate Effective Call Option Exercise Price.............. S-
Applicable Market Value..................................... S-
Bank Debt................................................... S-
Business Day................................................ S-
Call Option................................................. S-
Call Option Agreement....................................... S-
Call Option Expiration Date................................. S-
Call Option Holder.......................................... S-
Call Premium................................................ S-
Call Settlement Date........................................ S-
Closed Block................................................ S-
Closing Price............................................... S-
Code........................................................ S-
Collateral Agent............................................ S-
Common Trust Securities..................................... S-
Company..................................................... S-
Comparable Yield............................................ S-
Contract Fee Rate........................................... S-
Contract Fees............................................... S-
Current Market Price........................................ S-
Debenture Event of Default.................................. S-
Debenture Trustee........................................... S-
Declaration................................................. S-
Deferral Rate............................................... S-
Delaware Trustee............................................ S-
Depositary.................................................. S-
Direct Action............................................... S-
Direct Participants......................................... S-
Distribution Date........................................... S-
Distributions............................................... S-
Exchange Act................................................ S-
Extension Period............................................ S-
Final Redemption Price...................................... S-
Global Security Certificates................................ S-
Guarantee................................................... S-
Guarantee Payments.......................................... S-
Guarantee Trustee........................................... S-
Indenture................................................... S-
Indirect Participants....................................... S-
Interest Payment Date....................................... S-
Investment Company Act...................................... S-
IRS......................................................... S-
Issuer Trustees............................................. S-
Issuers..................................................... S-
Junior Subordinated Debenture Put Option.................... S-
Junior Subordinated Debentures.............................. S-
</TABLE>
S-69
<PAGE> 93
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Like Amount................................................. S-
Liquidation Distribution.................................... S-
Master Unit Agreement....................................... S-
Normal Unit................................................. S-
Notes Offering.............................................. S-
NYSE........................................................ S-
Offerings................................................... S-
OID......................................................... S-
Participants................................................ S-
Paying Agent................................................ S-
Payments on the Units....................................... S-
Pledge Agreement............................................ S-
Pledged Securities.......................................... S-
Principal Agreements........................................ S-
Property Account............................................ S-
Property Trustee............................................ S-
Prospectus.................................................. S-
Purchase Contract........................................... S-
Purchase Price.............................................. S-
Put Agent................................................... S-
Put Price................................................... S-
Quarterly Payment Dates..................................... S-
QUIPS....................................................... S-
QUIPS and Debenture Maturity Date........................... S-
QUIPS and Debenture Rate.................................... S-
QUIPS Distribution Date..................................... S-
QUIPS Distribution Rate..................................... S-
QUIPS Liquidation Agent..................................... S-
Rate Increase Agent......................................... S-
Refinancing Plan............................................ S-
Securities Offered.......................................... S-
Senior Indebtedness......................................... S-
Settlement.................................................. S-
Settlement Rate............................................. S-
Short-term Stripped Treasury Securities..................... S-
Sponsor..................................................... S-
Stated Amount............................................... S-
Stock Purchase Date......................................... S-
Stripped Treasury Securities................................ S-
Stripped Units.............................................. S-
Successor Securities........................................ S-
Termination................................................. S-
Threshold Appreciation Price................................ S-
Trading Day................................................. S-
Treasury Securities......................................... S-
Trust....................................................... S-
Trust Indenture Act......................................... S-
Trust Securities............................................ S-
Underwriters................................................ S-
Unit Agent.................................................. S-
Units....................................................... S-
Units Offering.............................................. S-
UST Value................................................... S-
Yield to Maturity........................................... S-
</TABLE>
S-70
<PAGE> 94
======================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS SUPPLEMENT 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 SUPPLEMENT OR
THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Summary...................... S-3
Selected Consolidated Financial and
Operating Data........................ S-13
Risk Factors............................ S-15
The Trust............................... S-20
Use of Proceeds......................... S-21
Price Range of Common Stock and Dividend
Policy................................ S-21
Capitalization.......................... S-23
Management's Discussion and Analysis of
Results of Operations and Financial
Condition............................. S-24
Description of the Units................ S-28
Accounting Treatment.................... S-27
Certain Federal Income Tax
Consequences.......................... S-61
Underwriting............................ S-67
Validity of the Securities.............. S-68
PROSPECTUS
Available Information................... 4
Incorporation of Certain Documents by
Reference............................. 4
The Company............................. 6
The AmerUs Trusts....................... 8
Selected Consolidated Financial and
Operating Data........................ 11
Risk Factors............................ 13
Use of Proceeds......................... 18
Reorganization and Recent Acquisitions..
Management's Discussion and Analysis of
Results of Operations and Financial
Condition............................. 19
Business................................ 34
Description of Debt Securities.......... 43
Description of Capital Stock............ 53
Description of Warrants................. 59
Description of Capital Securities of the
AmerUs Trusts........................... 60
Description of Guarantees............... 61
Description of the Purchased Contracts
and the Units......................... 64
Plan of Distribution.................... 64
Validity of Securities.................. 65
Experts................................. 66
</TABLE>
======================================================
======================================================
UNITS
AMERUS LIFE HOLDINGS, INC.
AMERUS CAPITAL TRUST II
% ADJUSTABLE
CONVERSION-RATE
EQUITY SECURITY UNITS
---------------------------
PROSPECTUS SUPPLEMENT
---------------------------
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
======================================================
<PAGE> 95
SUBJECT TO COMPLETION, DATED JUNE 8, 1998
PROSPECTUS
$750,000,000
AMERUS LIFE HOLDINGS, INC.
DEBT SECURITIES, PREFERRED STOCK, CLASS A COMMON STOCK, PURCHASE CONTRACTS,
UNITS AND WARRANTS
AMERUS CAPITAL II
AMERUS CAPITAL III
CAPITAL SECURITIES FULLY AND UNCONDITIONALLY GUARANTEED
BY AMERUS LIFE HOLDINGS, INC. AND UNITS
------------------
AmerUs Life Holdings, Inc., an Iowa corporation (the "Company"), may offer
and sell from time to time, in one or more series, (i) its debt securities,
consisting of debentures, notes and/or other evidences of indebtedness
representing unsecured obligations of the Company (the "Debt Securities"), (ii)
shares of its preferred stock, no par value per share ("Preferred Stock"), (iii)
shares of its Class A Common Stock, no par value per share ("Class A Common
Stock"), (iv) Purchase Contracts ("Purchase Contracts") to purchase shares of
Class A Common Stock, (v) Units, each representing ownership of a Purchase
Contract and Capital Securities (as defined herein) or debt obligations of third
parties, including U.S. Treasury securities, securing the holder's obligation to
purchase Class A Common Stock under the Purchase Contracts ("Units"), including
but not limited to, Adjustable Conversion-rate Equity Security Units and (vi)
warrants to purchase Debt Securities, Preferred Stock, Class A Common Stock or
other securities or rights ("Warrants").
AmerUs Capital II and AmerUs Capital III (each, an "AmerUs Trust"),
statutory business trusts formed under the laws of the State of Delaware, may
offer, from time to time, Capital Securities, representing preferred undivided
beneficial interests in the assets of the respective AmerUs Trusts ("Capital
Securities"). The payment of periodic cash distributions ("Distributions") with
respect to Capital Securities out of moneys held by each of the AmerUs Trusts,
and payments on liquidation, redemption or otherwise with respect to such
Capital Securities, will be guaranteed by the Company to the extent described
herein (each, a "Guarantee"). See "Description of Capital Securities of the
AmerUs Trusts" and "Description of Guarantees." The Company's obligations under
the Guarantees will rank junior and subordinate in right of payment to the
Senior Indebtedness (as defined herein) of the Company. See "Description of
Guarantees -- Status of the Guarantees." Junior subordinated debt ("Junior
Subordinated Debt") may be issued and sold by the Company in one or more series
to an AmerUs Trust or a trustee of such AmerUs Trust in connection with the
investment of the proceeds from the offering of Capital Securities and Common
Securities (as defined herein) of such AmerUs Trust. The Junior Subordinated
Debt purchased by an AmerUs Trust may be subsequently distributed pro rata to
holders of Capital Securities and Common Securities in connection with the
dissolution of such AmerUs Trust. The Junior Subordinated Debt will rank junior
and subordinate in right of payment to the Senior Indebtedness of the Company.
The Debt Securities, Preferred Stock, Class A Common Stock, Purchase Contracts,
Units, Warrants and Capital Securities are herein collectively referred to as
the "Securities."
Certain specific terms of the particular Securities in respect of which this
Prospectus is being delivered will be set forth in an accompanying supplement to
this Prospectus (the "Prospectus Supplement"), which will describe, without
limitation and where applicable, the following: (i) in the case of Debt
Securities, the specific designation, aggregate principal amount, ranking as
senior or subordinated Debt Securities, denomination, maturity, premium, if any,
interest rate (which may be fixed or variable), time and method of calculating
interest, if any, place or places where principal of, premium, if any, and
interest, if any, on such Debt Securities will be payable, the currencies or
currency units in which principal of, premium, if any, and interest, if any, on
such Debt Securities will be payable, any terms of redemption or conversion, any
sinking fund provisions, the purchase price, any listing on a securities
exchange, any right of the Company to defer payment of interest on the Junior
Subordinated Debt and the maximum length of such deferral period, the method of
distribution and other special terms; (ii) in the case of Preferred Stock, the
specific designation, stated value and liquidation preference per share and
number of shares offered, the initial public offering or purchase price,
dividend rate (which may be fixed or variable), method of calculating payment of
dividends, place or places where dividends on such Preferred Stock will be
payable, any terms of redemption, dates on which dividends shall be payable and
dates from which dividends shall accrue, any listing on a securities exchange,
voting and other rights, including conversion or exchange rights, if any, the
method of distribution, and other special terms; (iii) in the case of Class A
Common Stock, the number of shares offered, the initial offering price, market
price and dividend information and the method of distribution; (iv) in the case
of Purchase Contracts, the number of shares of Class A Common Stock issuable
thereunder, the purchase price of the Class A Common Stock, the date or dates on
which the Class A Common Stock is required to be purchased by the holders of the
Purchase Contracts, any periodic payments or contract fees required to be paid
by the Company to the holders of the Purchase Contracts or vice versa, and the
terms of the offering and sale thereof; (v) in the case of Units, the specific
terms of the Purchase Contracts and any Capital Securities or debt obligations
of third parties held by a holder securing such holder's obligation to purchase
the Class A Common Stock under the Purchase Contracts, and the terms of the
offering and sale thereof; (vi) in the case of Warrants, the specific
designation, the number, purchase price, exercise price and other terms thereof,
any listing of the Warrants or the underlying Securities on a securities
exchange or any other terms in connection with the offering, sale and exercise
of the Warrants, as well as the terms on which and the Securities for which such
Warrants may be exercised; and (vii) in the case of Capital Securities, the
specific designation, number of securities, liquidation amount per security, the
purchase price, any listing on a securities exchange, distribution rate (or
method of calculation thereof), dates on which distributions shall be payable
and dates from which distributions shall accrue, any voting rights, terms for
any conversion or exchange into other securities, any redemption, exchange or
sinking fund provisions, any rights of the applicable Trust to defer payment of
interest on the Capital Securities and the maximum length of such deferral, any
other rights, preferences, privileges, limitations or restrictions relating to
the Capital Securities, the specific terms and provisions of the applicable
Guarantee and the terms upon which the proceeds of the sale of the Capital
Securities shall be used to purchase a specific series of Junior Subordinated
Debt of the Company.
The offering price to the public of the Securities will be limited to U.S.
$750,000,000 in the aggregate (or its equivalent (based on the applicable
exchange rate at the time of issue), if Securities are offered for consideration
denominated in one or more foreign currencies, currency units or composite
currencies as shall be designated by the Company and indicated in the applicable
Prospectus Supplement). The Debt Securities may be denominated in United States
dollars or, at the option of the Company if so specified in the applicable
Prospectus Supplement, in one or more foreign currencies or currency units. The
Debt Securities may be issued in registered form or bearer form, or both. If so
specified in the applicable Prospectus Supplement, Securities of one or more
classes or series may be issued in whole or in part in the form of one or more
temporary or permanent global securities.
The Class A Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the symbol "AMH."
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN ANY OF THE SECURITIES OFFERED HEREBY.
The Securities may be sold to or through underwriters, dealers or agents or
directly to purchasers, to AmerUs Group Co., the Company's parent (the "AmerUs
Group") or through a combination of such methods. See "Plan of Distribution."
The names of any underwriters, dealers or agents involved in the sale of the
Securities in respect of which this Prospectus is being delivered and any
applicable fee, commission or discount arrangements will be set forth in a
Prospectus Supplement. See "Plan of Distribution" for possible indemnification
arrangements for dealers, underwriters and agents.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
------------------
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.
The date of this Prospectus is , 1998.
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> 96
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE IOWA
COMMISSIONER OF INSURANCE NOR HAS THE IOWA COMMISSIONER OF INSURANCE RULED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
-------------------------
THE COMPANY IS AN INDIRECT SUBSIDIARY OF AMERICAN MUTUAL HOLDING COMPANY,
AN IOWA MUTUAL INSURANCE HOLDING COMPANY ("AMHC"). IOWA LAW REQUIRES THAT AMHC
AT ALL TIMES OWN DIRECTLY, OR INDIRECTLY THROUGH ONE OR MORE INTERMEDIATE
HOLDING COMPANY SUBSIDIARIES, SHARES OF CAPITAL STOCK OF AMERUS LIFE INSURANCE
COMPANY ("AMERUS LIFE") WHICH CARRY THE RIGHT TO CAST A MAJORITY OF THE VOTES
ENTITLED TO BE CAST BY ALL OF THE OUTSTANDING SHARES OF AMERUS LIFE'S CAPITAL
STOCK. ANY ATTEMPT TO EFFECT ANY TRANSACTION PURSUANT TO WHICH AMHC WOULD NO
LONGER HAVE SUCH VOTING MAJORITY WOULD BE NULL AND VOID AND INEFFECTUAL TO
TRANSFER SUCH VOTING RIGHTS.
-------------------------
THE IOWA INSURANCE HOLDING COMPANY SYSTEMS STATUTE APPLICABLE TO THE
COMPANY PROVIDES THAT NO PERSON MAY SEEK TO ACQUIRE CONTROL OF THE COMPANY, AND
THUS INDIRECT CONTROL OF AMERUS LIFE, WITHOUT THE PRIOR APPROVAL OF THE IOWA
COMMISSIONER OF INSURANCE. GENERALLY, ANY PERSON WHO DIRECTLY OR INDIRECTLY
OWNS, CONTROLS, HOLDS WITH POWER TO VOTE OR HOLDS PROXIES REPRESENTING 10% OR
MORE OF THE COMPANY'S VOTING SECURITIES (CONSISTING OF THE COMBINED OUTSTANDING
SHARES OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK) WOULD BE PRESUMED TO
HAVE ACQUIRED SUCH CONTROL, UNLESS SUCH PRESUMPTION IS REBUTTED BY A SHOWING
THAT SUCH CONTROL DOES NOT EXIST IN FACT.
-------------------------
FOR NORTH CAROLINA INVESTORS: THE COMMISSIONER OF INSURANCE OF THE STATE OF
NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING NOR HAS SUCH
COMMISSIONER RULED UPON THE ACCURACY OR THE ADEQUACY OF THE PROSPECTUS.
-------------------------
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES A SAFE HARBOR
FOR FORWARD-LOOKING STATEMENTS. A NUMBER OF MATTERS AND SUBJECT AREAS DISCUSSED
IN THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE AND IN THE SECTIONS OF THIS
PROSPECTUS ENTITLED "REORGANIZATION AND RECENT ACQUISITIONS," "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION" AND
"BUSINESS" AND ELSEWHERE IN THIS PROSPECTUS AND THE APPLICABLE PROSPECTUS
SUPPLEMENT ARE NOT LIMITED TO HISTORICAL OR CURRENT FACTS AND DEAL WITH
POTENTIAL FUTURE CIRCUMSTANCES AND DEVELOPMENTS. FACTORS THAT MAY CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED OR PROJECTED IN SUCH
FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES:
(I) HEIGHTENED COMPETITION, INCLUDING THE ENTRY OF NEW COMPETITORS AND THE
DEVELOPMENT OF NEW PRODUCTS BY COMPETITORS; (II) ADVERSE STATE AND FEDERAL
LEGISLATION AND REGULATION, INCLUDING INCREASES IN MINIMUM CAPITAL AND RESERVES,
AND OTHER FINANCIAL VIABILITY REQUIREMENTS AND ADDITIONAL REGULATIONS OF MUTUAL
INSURANCE HOLDING COMPANIES; (III) FAILURE TO MAINTAIN EFFECTIVE DISTRIBUTION
CHANNELS IN ORDER TO OBTAIN NEW CUSTOMERS OR FAILURE TO RETAIN EXISTING
CUSTOMERS; (IV) INABILITY TO CARRY OUT MARKETING AND SALES PLANS, INCLUDING,
AMONG OTHERS, CHANGES TO CERTAIN PRODUCTS AND ACCEPTANCE OF THE REVISED PRODUCTS
IN THE MARKET; (V) LOSS OF
2
<PAGE> 97
KEY EXECUTIVES; (VI) CHANGES IN INTEREST RATES CAUSING A REDUCTION OF INVESTMENT
INCOME OR A REDUCTION IN DEMAND FOR CERTAIN OF THE COMPANY'S PRODUCTS; (VII)
GENERAL ECONOMIC AND BUSINESS CONDITIONS WHICH ARE LESS FAVORABLE THAN EXPECTED;
(VIII) UNANTICIPATED CHANGES IN INDUSTRY TRENDS; (IX) INACCURACIES IN
ASSUMPTIONS REGARDING FUTURE PERSISTENCY, MORTALITY AND INTEREST RATES USED IN
CALCULATING RESERVE AMOUNTS; (X) ADVERSE CHANGES IN RATINGS ASSIGNED BY RATING
AGENCIES; (XI) CHANGES IN TAX LAWS WHICH NEGATIVELY AFFECT DEMAND FOR THE
COMPANY'S PRODUCTS OR THE APPLICABILITY OF CERTAIN TAXES TO THE COMPANY
(INCLUDING 1998 TAX PROPOSALS OF THE CLINTON ADMINISTRATION RELATING TO
ANNUITIES); (XII) THE RISK FACTORS OR UNCERTAINTIES LISTED HEREIN OR LISTED FROM
TIME TO TIME IN ANY PROSPECTUS SUPPLEMENT OR ANY DOCUMENT INCORPORATED BY
REFERENCE HEREIN; AND (XIII) WITH RESPECT TO COST SAVINGS THAT ARE EXPECTED TO
BE REALIZED FROM, AND COSTS ASSOCIATED WITH, THE RECENT ACQUISITIONS OF DELTA
LIFE CORPORATION ("DELTA") AND AMVESTORS FINANCIAL CORPORATION ("AMVESTORS"),
THE FOLLOWING POSSIBILITIES: (A) THE ESTIMATED COST SAVINGS TO BE REALIZED
THROUGH COMBINING CERTAIN FUNCTIONS OF THE COMPANY, DELTA AND AMVESTORS TO
ELIMINATE REDUNDANCIES AND BETTER SERVE THE COMBINED BUSINESSES' CUSTOMERS, AND
REDUCTIONS IN STAFF CANNOT BE FULLY REALIZED BECAUSE THE CHANGES ARE NOT MADE OR
UNANTICIPATED ADDED COSTS ARE INCURRED; AND (B) COSTS OR DIFFICULTIES RELATED TO
THE INTEGRATION OF THE BUSINESSES OF DELTA AND AMVESTORS WITH THE COMPANY'S
OTHER BUSINESSES ARE GREATER THAN EXPECTED. A VARIETY OF FACTORS COULD CAUSE THE
COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE EXPECTED RESULTS
EXPRESSED IN THE COMPANY'S FORWARD-LOOKING STATEMENTS, INCLUDING THOSE SET FORTH
IN THE RISK FACTORS AND ELSEWHERE IN THIS PROSPECTUS AND IN THE COMPANY'S OTHER
FILINGS WITH THE COMMISSION.
NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, ANY
ACCOMPANYING PROSPECTUS SUPPLEMENT OR THE DOCUMENTS INCORPORATED OR DEEMED
INCORPORATED BY REFERENCE HEREIN. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN
THE REGISTERED SECURITIES TO WHICH IT RELATES, OR AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THOSE SECURITIES TO WHICH IT RELATES, IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
3
<PAGE> 98
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by the
Company with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the regional offices of the Commission located
at: 7 World Trade Center, 13th Floor, New York, New York 10048; and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of
the prescribed rates. In addition, the Commission maintains a Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants, including the Company, that file
electronically with the Commission. The Company's reports are also on file at
the offices of the NYSE, 20 Broad Street, New York, New York 10005.
The Company and the AmerUs Trusts have filed with the Commission a
Registration Statement on Form S-3 under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Securities offered hereby. This
Prospectus, which constitutes part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement and the
exhibits thereto, certain parts of which are omitted in accordance with the
rules and regulations of the Commission. Statements contained herein or in any
Prospectus Supplement concerning the provisions of any document do not purport
to be complete and, in each instance, are qualified in all respects by reference
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. For further information with respect to
the Company, the AmerUs Trusts and the Securities, reference is hereby made to
such Registration Statement, including the exhibits thereto and the documents
incorporated therein by reference, which can be examined at the Commission's
principal office, 450 Fifth Street, N.W., Washington, D.C. 20549, or copies of
which can be obtained from the Commission at such office upon payment of the
fees prescribed by the Commission.
No separate financial statements of the AmerUs Trusts have been included or
incorporated by reference herein. The Company does not consider such financial
statements material to holders of the Capital Securities because the AmerUs
Trusts are newly formed special purpose entities, have no operating history or
independent operations and are not engaged in, and do not propose to engage in,
any activity other than their holding as trust assets the Junior Subordinated
Debt of the Company and their issuance of the Capital Securities and Common
Securities. See "The Company," "Description of the Capital Securities of the
AmerUs Trusts," "Description of Guarantees," "Description of Debt Securities"
and "Description of Purchase Contracts and Units." The AmerUs Trusts are
statutory business trusts formed under the laws of the State of Delaware. The
Company, as of the date hereof, beneficially owns all of the beneficial
interests in the Trust. The Company's and the AmerUs Trusts' principal executive
offices are located at 699 Walnut Street, Des Moines, Iowa 50309-3948, telephone
number (515) 362-3600.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by this reference:
1. Annual Report on Form 10-K for the fiscal year ended December 31,
1997;
2. The description of the Company's Class A Common Stock contained in
the Registration Statement on Form 8-A filed by the Company with the
Commission on January 3, 1997, including any amendments or reports filed
for the purpose of updating such description;
3. The Company's report on Form 8-K filed on October 23, 1997, as
amended by Form 8-K/A filed January 6, 1998 reporting the acquisition of
Delta and certain related financial statements; and
4. The Company's report on Form 8-K filed on December 19, 1997, as
amended by Form 8-K/A filed on March 3, 1998 reporting the acquisition of
AmVestors and certain related financial statements;
5. Proxy Statement on Schedule 14A filed by the Company with the
Commission, dated April 13, 1998;
4
<PAGE> 99
6. Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1998; and
7. Report on Form 10-K/A for the fiscal year ended December 31, 1997
filed with the Commission on June 4, 1998.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering made hereby shall be deemed to be incorporated by
reference in this Prospectus or any Prospectus Supplement and to be part hereof
from the date of filing of such documents.
Any statement contained herein, or in a document all or a portion of which
is incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or any Prospectus Supplement. To the extent
that any proxy statement is incorporated by reference herein, such incorporation
shall not include any information contained in such proxy statement that is not,
pursuant to the Commission's rules, deemed to be "filed" with the Commission or
subject to the liabilities of Section 18 of the Exchange Act.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents incorporated herein by reference (other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference into such documents). Any such request should be directed to James A.
Smallenberger, Senior Vice President and Secretary, AmerUs Life Holdings, Inc.,
699 Walnut Street, Des Moines, Iowa 50309-3948 (telephone number (515)
362-3600).
5
<PAGE> 100
THE COMPANY
GENERAL
The Company is an insurance holding company engaged through its
subsidiaries in the business of marketing, underwriting and distributing a broad
range of individual life insurance and annuity products to individuals and
businesses in 49 states, the District of Columbia and the U.S. Virgin Islands.
The Company's primary product offerings consist of whole life, universal life
and term life insurance policies and fixed annuities. In addition, through a
joint venture (the "Ameritas Joint Venture") with Ameritas Life Insurance Corp.
("Ameritas"), the Company's subsidiary, AmerUs Life Insurance Company ("AmerUs
Life"), markets fixed annuities issued by Ameritas Variable Life Insurance
Company ("AVLIC") and sells AVLIC's variable life insurance and variable annuity
products. As of December 31, 1997, the Company had approximately 573,000 life
insurance policies and annuity contracts outstanding and individual life
insurance in force, net of reinsurance, of approximately $26.7 billion with life
insurance reserves of $2.4 billion and annuity reserves of $6.1 billion. As of
December 31, 1997, the Company had total assets of $10.3 billion and total
shareholders' equity of $928.0 million.
The Company was formed in 1996 as a result of the creation of American
Mutual Holding Company ("AMHC") the first mutual insurance holding company in
the United States. AMHC owns 100% of AmerUs Group Co. ("AmerUs Group"), the
Company's controlling shareholder. The Company's principal subsidiaries are
AmerUs Life, Delta Life Corporation ("Delta") and AmVestors Financial
Corporation ("AmVestors"). AmerUs Life was originally incorporated in 1896 as a
mutual life insurance company.
AmerUs Life's target customers 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
AmerUs Life is not licensed to do business), and it primarily serves suburban
and rural areas. Efforts are currently underway to expand AmerUs Life's
territory into the states of Connecticut, Maine, New Hampshire and Vermont.
AmerUs Life 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 35 career general agencies, with approximately
570 career agents. The PPGA system is comprised of approximately 425 PPGA's, who
have approximately 1,100 agents. As of December 31, 1997, AmerUs Life had
approximately 408,000 life insurance policies and annuity contracts outstanding
and individual life insurance in force, net of reinsurance, of approximately
$26.6 billion. Variable life insurance products and the fixed and variable
annuities offered by the Ameritas Joint Venture are marketed through AmerUs
Life's distribution systems and the distribution systems of Ameritas and AVLIC,
which consist of approximately 160 agents and 540 independent broker-dealers
(with approximately 9,000 registered representatives), respectively.
The Company made two major acquisitions in 1997. The Company acquired Delta
on October 23 for approximately $165 million in cash (the "Delta Acquisition")
and AmVestors on December 19 in a stock exchange valued at approximately $350
million (the "AmVestors Acquisition"). These acquisitions, along with the growth
of AmerUs Life, increased the Company's assets from $4.4 billion at December 31,
1996 to $10.3 billion at December 31, 1997.
The principal asset of Delta is its wholly-owned subsidiary, Delta Life and
Annuity Company ("Delta Life"), an Iowa domiciled life insurance company. Delta
Life is licensed in the District of Columbia and in all states except New York,
and specializes in the sale of individual single and flexible premium deferred
annuities, primarily in the southeastern, western, southwestern and midwestern
regions of the United States. Sales are made primarily through a network of over
3,300 independent agents. Delta Life's strategy is to structure its fixed
annuity products to appeal to the conservative retirement saver who is seeking
principal preservation and consistency of earnings. Most of Delta Life's
products are innovative in that they incorporate a fixed contractual management
fee. Approximately 58% of Delta's 1997 direct collected premiums were derived
from retirement-oriented tax-qualified annuities. As of December 31, 1997, Delta
Life had approximately 52,000 annuity contracts outstanding.
6
<PAGE> 101
AmVestors' principal operating subsidiaries are American Investors Life
Insurance Company, Inc. ("American"), a Kansas domiciled life insurance company
licensed in 48 states and the District of Columbia, and Financial Benefit Life
Insurance Company ("FBL"), a Kansas domiciled life insurance company doing
business in 40 states, the District of Columbia and the U.S. Virgin Islands.
AmVestors specializes in the sale of annuity products, further strengthening the
Company's presence in the rapidly growing asset accumulation and retirement and
savings markets. AmVestors utilizes product features intended to enhance the
potential for profit by encouraging persistency and reducing premature
withdrawal during the first five to fourteen years of an annuity contract.
AmVestors distributes its products through a national network of approximately
7,800 licensed independent agents recruited through its wholly-owned
subsidiaries as well as through almost 60 independent marketing organizations.
As of December 31, 1997, AmVestors had approximately 104,000 annuity contracts
outstanding.
The Company's principal executive offices are located at 699 Walnut Street,
Des Moines, Iowa 50309-3948; telephone (515) 362-3600.
BUSINESS STRATEGY
The business strategy of the Company is to focus on providing individual
retail consumers in the United States with superior financial services and
products that will meet their financial planning, risk protection, and asset
accumulation needs. Target markets of the Company include individuals in the
middle and upper income brackets and small businesses. Its geographic focus is
national in scope (except for New York, in which the Company is not licensed to
do business), and it primarily serves suburban and rural areas.
The Company seeks to effect this strategy by focusing on life insurance and
asset accumulation products distributed through a variety of distribution
systems. In particular, the Company has developed a very strong position in the
distribution of fixed annuities through independent agents and has a long
established reputation as a provider of whole life insurance products,
distributed through career and PPGA agency distribution systems, that are among
the most attractively priced products to consumers in the industry.
The Company's strategy emphasizes effective management of certain operating
fundamentals -- mortality, expenses, persistency and investment results -- where
the Company's results have historically compared favorably to the industry. The
Company's operating strengths have enabled it to provide attractively priced
products to consumers while also generating profitability for its shareholders.
Growth through a combination of internal growth, mergers and acquisitions
and strategic alliances is a key element of the Company's strategy. In the life
insurance market, the Company presently has less than one half of one percent of
new life insurance sales nationwide, which provides substantial opportunity for
increased growth through improved marketing and sales execution even in a
generally flat business environment.
In the fixed annuity area, the Company is presently a leader in the
distribution of fixed annuities through independent agents. Independent agents
have increased their share of fixed annuity sales in recent years and the
Company's goal is to consistently rank among the top 3 to 5 providers in this
segment.
The Company continues to seek to both deepen and diversify its distribution
channels. Primarily as a result of the acquisitions of AmVestors and Delta, the
Company's distribution channels have grown significantly in recent years. As of
December 31, 1997, the Company had over 15,000 distributors as compared to
approximately 3,700 distributors as of December 31, 1996. While continuing to
expand its existing channels, the Company is in the process of developing
additional bank and major independent marketing organization distribution
channels.
CONTROLLING SHAREHOLDER
AMHC is the indirect controlling shareholder of the Company through its
ownership of AmerUs Group. As of March 31, 1998 AmerUs Group owned all 5,000,000
of the outstanding shares of Class B Common Stock and 12,380,300 of the
outstanding shares of Class A Common Stock, representing approximately 50.04% of
the combined voting power of the Class A Common Stock and Class B Common Stock.
AMHC acquired its ownership interest in the Company as a result of the
reorganization, pursuant to which American
7
<PAGE> 102
Mutual Life formed AMHC as a mutual insurance holding company and American
Mutual Life was converted into a stock life insurance company as a wholly owned
subsidiary of AMHC (the "Reorganization"). See "Reorganization and Recent
Acquisitions -- Background and Description of the Reorganization."
THE AMERUS TRUSTS
Each AmerUs Trust is a statutory business trust formed under Delaware law
pursuant to (i) a separate declaration of trust (each a "Trust Agreement")
executed by the Company, as sponsor (the "Sponsor"), and certain trustees of
such trust (the "Issuer Trustees") and (ii) the filing of a certificate of trust
with the Secretary of State of the State of Delaware. Each such declaration of
trust will be amended and restated in its entirety (as so amended and restated,
the "Declaration") substantially in the form filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, as of the date the
Capital Securities of such AmerUs Trust are initially issued. Each Declaration
will be qualified as an indenture under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). Each AmerUs Trust exists for the exclusive
purposes of (i) issuing and selling the Capital Securities and the Common
Securities representing undivided beneficial interests in the assets of such
AmerUs Trust, (ii) investing the proceeds of the sale of the Capital Securities
and the Common Securities in certain Junior Subordinated Debt (as defined
herein), and (iii) engaging in only those other activities necessary or
incidental thereto.
All of the Common Securities of each AmerUs Trust will be owned directly or
indirectly by the Company. The Common Securities will rank pari passu in right
of payment, and payments will be made thereon pro rata, with the Capital
Securities, except that upon the occurrence and continuance of an Event of
Default under the Declarations (as defined therein) resulting from an Event of
Default (as defined in the Indenture (as defined herein)), the rights of the
Company 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 Capital Securities. See
"Description of the Capital Securities of the AmerUs Trusts." The Company will
acquire Common Securities in an aggregate liquidation amount equal to
approximately 3% of the total capital of each AmerUs Trust.
Unless otherwise specified in the applicable Prospectus Supplement, each
AmerUs Trust has a term of approximately 55 years, but may terminate earlier as
provided in its Declaration. The Trust's business and affairs will be conducted
by the Issuer Trustees and Administrators appointed by the Company as the holder
of the Common Securities of each AmerUs Trust. The Issuer Trustees will be First
Union National Bank ("First Union Bank") and First Union Trust Company, National
Association ("First Union Trust"), First Union Bank, as the Property Trustee
(the "Property Trustee"), and First Union Trust, as the Delaware Trustee (the
"Delaware Trustee"), and the Administrators will be three individuals who are
employees of the Company (the "Administrators"). First Union Bank, as the
Property Trustee, will act as sole indenture trustee under the Declaration for
purposes of compliance with the provisions of the Trust Indenture Act. First
Union Bank will also act as indenture trustee (the "Guarantee Trustee") under
the Guarantee and the Indenture, until removed or replaced by the holder of the
Common Securities of each AmerUs Trust. See "Description of Guarantees." The
Company, as the direct or indirect holder of the Common Securities of each
AmerUs Trust, or if an event of default under the Declaration has occurred and
is continuing, the holders of a majority in liquidation amount of the Capital
Securities of each AmerUs Trust, will be entitled to appoint, remove or replace
the Property Trustee and/or the Delaware Trustee. In no event will the holders
of the Capital Securities (or Units) have the right to vote to appoint, remove
or replace the Administrators; such voting rights will be vested exclusively in
the Company, as the direct or indirect holder of the Common Securities of each
AmerUs Trust. The duties and obligations of each Issuer Trustee and
Administrator is governed by such Declaration. Under the Declaration, all
parties to the Declaration will agree, and the holders of the Units upon
purchase of their Units will be deemed to have agreed, for United States Federal
income tax purposes, to treat the Trust as a grantor trust, the Junior
Subordinated Debt as indebtedness and the Capital Securities of each AmerUs
Trust as evidence of indirect beneficial ownership in the Junior Subordinated
Debt. See "Description of the Guarantees" and "Description of the Capital
Securities of the AmerUs Trusts."
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<PAGE> 103
The Property Trustee will hold title to the Junior Subordinated Debt for
the benefit of the holders of the Capital Securities of each AmerUs Trust and
the Property Trustee will have the power to exercise all rights, powers and
privileges under the Indenture as the holder of the Junior Subordinated Debt. In
addition, the Property Trustee will maintain exclusive control of a segregated
non-interest bearing bank account (the "Property Account") to hold all payments
made in respect of the Junior Subordinated Debt for the benefit of the holders
of the Capital Securities of each AmerUs Trust. The Property Trustee will make
payments of distributions and payments on liquidation, redemption and otherwise
to the holders of the Capital Securities of each AmerUs Trust out of funds from
the Property Account. The Guarantee Trustee will hold the Guarantee for the
benefit of the holders of the Capital Securities. See "Description of the
Purchase Contracts and the Units."
The rights of the holders of the Capital Securities, including economic
rights, rights to information and voting rights, are set forth in the
Declaration, the Delaware Business Trust Act and the Trust Indenture Act. See
"Description of the Capital Securities of the AmerUs Trusts." The Company will
pay all fees and expenses related to the AmerUs Trust and the offering of the
Capital Securities and Units and will pay, directly or indirectly, all ongoing
costs, expenses and liabilities of the AmerUs Trusts.
The principal executive office of each AmerUs Trust is located at 699
Walnut Street, Des Moines, Iowa 50309-3948; telephone (515) 362-3600.
9
<PAGE> 104
ORGANIZATIONAL STRUCTURE
The following chart illustrates as of April 15, 1998 the general
organization of AMHC and its subsidiaries, including the Company:
ORGANIZATIONAL CHART
10
<PAGE> 105
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 five
years ending December 31, 1997 are derived from the Consolidated Financial
Statements of the Company, which financial statements have been audited by KPMG
Peat Marwick LLP, independent auditors. During 1997, the Company acquired Delta
and AmVestors in transactions that were accounted for using the purchase method
of accounting. As a result, the Consolidated Income Statement Data includes the
results of Delta and AmVestors from their respective acquisition dates and the
Consolidated Balance Sheet Data includes year-end data for Delta and AmVestors.
<TABLE>
<CAPTION>
AS OF OR FOR THE YEAR ENDED
DECEMBER 31,
----------------------------------------------------------
1997(A)(B) 1996(B) 1995 1994(C) 1993(C)
---------- ------- ---- ------- -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Revenues:
Insurance premiums................................ $ 48.1 $ 138.5 $ 244.1 $ 237.9 $ 226.4
Product charges................................... 43.4 49.3 57.3 56.3 57.4
Net investment income............................. 224.4 228.7 285.2 275.7 269.9
Realized gains (losses) on investments............ 13.8 66.0 51.4 (19.9) 15.5
Contribution from the Closed Block................ 31.1 19.9 -- -- --
--------- --------- --------- --------- ---------
Total revenues...................................... 360.8 502.4 638.0 550.0 569.2
--------- --------- --------- --------- ---------
Benefits and expenses:
Total policyowner benefits........................ 193.2 261.9 374.6 369.9 364.3
Total expenses.................................... 72.6 95.1 101.1 103.5 96.6
Dividends to policyowners......................... 1.6 26.3 49.4 45.0 45.5
--------- --------- --------- --------- ---------
Total benefits and expenses......................... 267.4 383.3 525.1 518.4 506.4
--------- --------- --------- --------- ---------
Income from operations.............................. 93.4 119.1 112.9 31.6 62.8
Interest expense.................................... 15.0 2.1 2.4 5.5 7.0
--------- --------- --------- --------- ---------
Income before income tax expense and equity in
earnings of unconsolidated subsidiary............. 78.4 117.0 110.5 26.1 55.8
Income tax expense.................................. 22.0 43.8 41.2 19.4 21.4
--------- --------- --------- --------- ---------
Income before equity in earnings of unconsolidated
subsidiary........................................ 56.4 73.2 69.3 6.7 34.4
Equity in earnings of unconsolidated subsidiary..... 1.7 1.0
Cumulative effect of a change in accounting
principle, net of tax............................. -- -- -- -- (3.2)
--------- --------- --------- --------- ---------
Net income.......................................... $ 58.1 $ 74.2 $ 69.3 $ 6.7 $ 31.2
========= ========= ========= ========= =========
Earnings per common share
Basic(D).......................................... $ 2.47 $ 3.20 $ 2.99 -- --
Diluted(E)........................................ $ 2.46 $ 3.20 $ 2.99 -- --
Dividends declared per common share................. $ 0.30 -- -- -- --
Ratios of earnings to fixed charges(F)(G):.......... 2.07 2.73 2.37 1.31 1.62
CONSOLIDATED BALANCE SHEET DATA:
Total invested assets............................... $ 7,695.5 $ 2,880.8 $ 3,965.0 $ 3,491.7 $ 3,639.3
Total assets........................................ 10,254.0 4,384.2 4,371.9 4,036.9 4,030.7
Total liabilities................................... 9,240.0 3,926.7 3,832.0 3,618.6 3,524.8
Company-obligated mandatorily redeemable preferred
securities........................................ 86.0 -- -- -- --
Total stockholders' equity(H)....................... 928.0 457.5 539.9 418.3 505.9
OTHER OPERATING DATA:
Adjusted operating income(I)........................ $ 49.1 $ 37.6 $ 38.5 $ 27.5 $ 24.2
Adjusted operating income per common share (basic
and diluted)...................................... $ 2.08 $ 1.62 $ 1.66 -- --
Individual life insurance in force, net of
reinsurance....................................... $ 26,703 $ 25,725 $ 25,157 $ 25,282 $ 24,698
Annuity account balances(J)......................... 6,134 1,363 1,467 1,473 1,410
Number of employees................................. 692 412 406 457 489
STATUTORY DATA:
Premiums and deposits:
Individual life................................... $ 319.1 $ 312.7 $ 307.1 $ 296.4 $ 286.3
Annuities(J)...................................... 75.5 81.4 197.1 187.8 90.4
</TABLE>
- -------------------------
(A) Consolidated Income Statement Data includes the results for Delta subsequent
to October 23, 1997 and the results for AmVestors subsequent to December 19,
1997, and Consolidated Balance Sheet Data includes year-end data for Delta
and AmVestors.
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<PAGE> 106
(B) The Company formed the Closed Block on June 30, 1996 as a part of the
Reorganization. Invested assets allocated to the Closed Block are classified
as Closed Block assets. Revenues and expenses associated with the Closed
Block are shown net as a single line item. Accordingly, the individual
income statement components for 1997 are not fully comparable with those of
1996 and 1995, due to the establishment of the Closed Block on June 30,
1996. See "Management's Discussion and Analysis of Results of Operations and
Financial Condition -- Combined Results of Operations."
(C) The merger of the two predecessor entities of the Company, which was
consummated in 1994, has been accounted for as a pooling of interests
transaction.
(D) Retroactively reflects the pro-forma effect of the issuance of 18.16 million
shares of the Company's Class A Common Stock and 5.0 million shares of
AmerUs Class B Common Stock at the beginning of 1995. The 1997 calculation
reflects 18.54 million weighted average shares of Class A Common Stock and 5
million shares of Class B Common Stock outstanding, respectively.
(E) Diluted earnings per common share for 1997 is calculated using 18.57 million
weighted average shares of Class A Common Stock and 5 million shares of
Class B Common Stock outstanding.
(F) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consist of income from operations before federal income taxes, fixed charges
and pre-tax earnings required to cover preferred stock dividend
requirements. "Fixed charges" consist of interest expense on debt and
capital securities, amortization of debt expense and interest credited on
deferred annuities.
(G) Since the Company currently has no preferred stock outstanding, the ratio of
earnings to fixed charges and preferred stock dividends is the same as the
ratio of earnings to fixed charges.
(H) Amounts shown include the effects of reporting fixed maturity securities at
fair value and recording the unrealized appreciation or depreciation on such
securities as a component of stockholders' equity, net of tax and other
adjustments. Such adjustments are in accordance with Statement of Financial
Accounting Standards 115, "Accounting for Certain Investments in Debt and
Equity Securities," which the Company adopted December 31, 1993. Amounts
reported prior to December 31, 1996 reflect policyowners' equity. In
addition, 1996 stockholder's equity was reduced by a capital contribution
from the Company to AmerUs Group in the amount of $79 million. Amounts
reported for the year ended December 31, 1997 include the Delta and
AmVestors Acquisitions.
(I) Adjusted operating income 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. Different items are likely to occur in each
period presented and others may have different opinions as to which items
may warrant adjustment. The adjusted operating income shown does not
constitute net income computed in accordance with GAAP. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition --
Adjusted Operating Income."
(J) Effective May 1996, substantially all individual deferred annuity sales by
AmerUs Life distribution systems are made through the Ameritas Joint
Venture. See "Reorganization and Recent Acquisitions -- Ameritas Joint
Venture."
12
<PAGE> 107
RISK FACTORS
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 competitors have greater financial resources and offer
alternative products. 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. Banks, with their pre-existing customer base for financial services
products, may pose increasing competition in the future to life insurers.
Congress is considering changing the laws which regulate banks, insurance
companies and other financial institutions. These changes may permit banks to
own insurance companies and vice versa. None of these proposals has yet been
enacted. 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 the services provided to, and
relationships developed with, these agents in addition to compensation and
product structure.
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
investors in the Company's or an AmerUs Trust's securities.
Future downgrades in the ratings of the Company's life insurance
subsidiaries could significantly affect sales of life insurance and annuity
products and could have a material adverse affect on the results of operations
of the Company. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition."
ADVERSE TAX LEGISLATION AND ADMINISTRATIVE PRONOUNCEMENTS
Congress has from time to time considered legislation that would reduce or
eliminate the benefits to policyowners of the deferral of taxation on the
appreciation in value of certain annuities and life insurance products. In 1998,
President Clinton made a budget proposal concerning the taxation of certain
exchanges between annuities, including the reallocation of assets within a
variable annuity. Other proposals affect the taxation of annuities and life
insurance products and insurance companies. A federal tax law enacted in 1997
reduced the rate of taxation on certain long-term capital gains for individuals.
This legislation, along with other possible proposals or administrative
pronouncements, including those relating to the dividends received deduction,
the applicability of the equity add-on tax, and ordinary versus capital gain
treatment for corporations, could adversely affect the taxation of the Company
or the sale of annuities and life insurance products. Similarly, there can be no
certainty as to what, if any, future laws or administrative pronouncements on
these issues might be enacted or promulgated or whether any such laws or
pronouncements would have any adverse effects on the Company.
INTEREST RATE FLUCTUATIONS; RISK OF IMPACT OF FORCED LIQUIDATION OF INVESTMENT
PORTFOLIO
Severe interest rate fluctuations could adversely affect the ability of the
Company's life insurance subsidiaries to pay policyowner benefits with operating
and investment cash flows, cash on hand and other cash sources. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition."
Interest rate fluctuations may also have an impact on policyowner behavior.
If the Company does not maintain competitive interest rates with those credited
in the marketplace, increased policy terminations may
13
<PAGE> 108
be experienced. A reduction in interest rates could depress the market for the
Company's fixed annuity products. While policyowners may pay surrender charges
to terminate policies, such terminations would reduce the Company's future
income.
The Company's actual cash flows from investments may differ from those
anticipated at the time of investment. Some of the Company's corporate bond
investments have provisions which could cause the Company to reinvest the
proceeds received at maturity of such investments at lower interest rates if
such bond investments were prepaid prior to their stated maturities. The
Company's collateralized mortgage obligations and other asset-backed securities
are purchased based on assumptions regarding rates of prepayments. If 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 prepayments
are expected to be influenced by interest rates available for new mortgages as
well as general economic conditions.
Most of the Company's insurance and annuity products provide for guaranteed
minimum yields. Accordingly, a significant drop in market rates of interest
could have a material impact on the Company's future results of operations.
HOLDING COMPANY STRUCTURE; LIMITATIONS ON DIVIDENDS
The Company is an insurance holding company whose assets consist primarily
of all of the outstanding stock of AmerUs Life, Delta and AmVestors. The
Company's ongoing ability to pay dividends to its shareholders and meet its
other obligations, including its obligations in respect of the Securities on
which it is an obligor, depends primarily upon receipt of sufficient funds from
its subsidiaries in the form of dividends or interest payments.
The payment of dividends to the Company by its insurance subsidiaries is
regulated under state insurance laws. Under Iowa law, AmerUs Life and Delta Life
may pay dividends only from the earned surplus arising from their respective
businesses. Each must receive the prior approval of the Iowa Commissioner to pay
a dividend if such dividend would exceed certain statutory limitations. Based on
these limitations and 1997 results, AmerUs Life could pay approximately $58
million in dividends in 1998 and Delta Life could pay approximately $8 million
in dividends in 1998 without obtaining the Iowa Commissioner's approval. The
payment of dividends by AmVestors' insurance subsidiaries is regulated under
Kansas law. Kansas has statutory limitations similar to those of Iowa. Based
upon these limitations and 1997 results, AmVestors' insurance subsidiaries could
pay approximately $15 million in dividends in 1998 without obtaining prior
regulatory approval. In February 1998 AmerUs Life paid the Company $5 million in
dividends. Based upon the cumulative limitations and 1997 results, the Company's
insurance subsidiaries could pay an additional $75 million in dividends in 1998
without obtaining regulatory approval. If AmerUs Life, Delta or AmVestors cannot
pay dividends or interest to the Company in the future, it could have a material
adverse effect on the Company and the market value of the Securities. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition -- Liquidity and Capital Resources."
Under the terms of its existing credit agreement with its banks, the
Company is prohibited from paying cash dividends on the Company's capital stock
in excess of an amount equal to 3% of the Company's consolidated net worth as of
the last day of the preceding fiscal year. Accordingly, the Company would be
permitted by its existing credit agreement to pay a cash dividend up to
approximately $28 million in 1998. The Company has also pledged to the banks
which are party to the Credit Agreement (as defined herein) approximately 49.9%
of the outstanding common stock of AmerUs Life owned by the Company, 100% of the
outstanding common stock of Delta and a $50 million 9% note payable to the
Company by AmerUs Life.
In connection with the 8.85% Capital Securities, Series A (the "Series A
Capital Securities"), issued in February, 1997 by AmerUs Capital I, the
Company's subsidiary trust, the Company has agreed not to declare or pay any
dividends on the Company's capital stock, including the Class A Common Stock,
during any period of time in which dividends on such Capital Securities are
suspended, except for stock dividends. Other
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<PAGE> 109
dividends in respect of the Company's capital stock cannot be paid until all
accrued dividends on the Series A Capital Securities have been paid.
CONTROL BY AMHC; ANTI-TAKEOVER EFFECTS OF IOWA LAW AND THE COMPANY'S ARTICLES OF
INCORPORATION AND BY-LAWS
Under Iowa law and the Company's Amended and Restated Articles of
Incorporation (the "Articles of Incorporation"), AMHC, as a mutual insurance
holding company, is required to own, directly or indirectly, 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 AmerUs Life's capital
stock. Consequently, AMHC may, without the approval of the other shareholders of
the Company, elect all of the directors of the Company and approve matters
submitted for shareholder approval. In addition, unless AMHC is demutualized, an
action beyond the Company's control, the Company cannot be the subject of a
successful takeover bid. Certain provisions in the Company's Articles of
Incorporation and By-laws may delay, defer or prevent a takeover attempt that a
shareholder might consider in his or her best interests. These provisions
include supermajority voting rights for the Company's Class B common stock no
par value (the "Class B Common Stock"), the ability of the board of directors to
issue so-called "blank check" preferred stock and a classified board of
directors. Such provisions may adversely affect the prevailing market price of
the Class A Common Stock. See "Description of Capital Stock -- Certain
Provisions of the Articles of Incorporation and the By-laws of the Company."
RELATIONSHIP WITH AMHC; POTENTIAL CONFLICTS OF INTEREST
AMHC is a mutual insurance holding company which is operated for the
benefit of its members. The members of AMHC are policyowners of AmerUs Life.
AMHC (or certain of its wholly-owned subsidiaries) have entered into agreements
with the Company and/or AmerUs Life in which the Company and/or AmerUs Life will
provide to such subsidiaries or affiliates certain management, data processing,
legal and other services, or such subsidiaries or affiliates will provide
services to the Company and/or AmerUs Life. The Company's management believes
the terms of such agreements are fair and reasonable. However, none of these
contracts were the result of arms' length negotiations between independent
parties. These agreements may be modified in the future. Additional agreements
or transactions may be entered into between AMHC or subsidiaries of AMHC and the
Company and its subsidiaries.
As a result of these arrangements, there may be a number of potential
conflicts of interest between the Company and AMHC. In an effort to address such
potential conflicts, regulations of the Iowa Commissioner require the Company to
have three outside directors who are not directors of AMHC. Currently, the
Company has four outside directors who are not directors of AMHC or any of
AMHC's subsidiaries. These outside directors comprise the Company's Intercompany
Transactions Committee which reviews intercompany transactions involving
potential conflicting interests. However, there can be no assurance that
decisions made by AMHC will not adversely affect the Company.
The National Association of Insurance Commissioners has formed a working
group to review mutual insurance holding company legislation and regulations.
The working group's review could address, among other things, potential
restrictions on stock ownership by directors and officers, the utilization of
non-voting or low voting stock, standards for affiliate transactions, and
regulation of potential conflicts of interests. It is unclear what effect, if
any, this review would have, but it is possible that insurance regulators,
including Iowa, could propose additional laws or regulations which would affect
or inhibit transactions between affiliates, future stock issuances, the ability
of officers and directors to secure significant ownership positions in the
Company or otherwise restrict the ability of the Company to take advantage of
new business opportunities.
RESTRICTIONS ON RATIO OF THE COMPANY'S STOCK CLASSES
The Company's Articles of Incorporation provide that the number of
outstanding shares of Class A Common Stock (excluding shares of Common Stock
owned by AMHC or another Permitted Class B Holder (as defined herein)) shall
exceed the number of outstanding shares of the Company's Class B common stock
plus the shares of Class A Common Stock beneficially owned by AMHC or another
Permitted Class B Holder
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<PAGE> 110
only as authorized by law and not by a ratio of more than three to one. As a
result, the Company's ability to issue additional shares of Class A Common Stock
for any reason, including raising additional equity capital, for stock options
or in connection with acquisitions may be restricted if such condition should
occur. As of March 1, 1998, the ratio was approximately 1:1.
UNCERTAINTIES IN INTEGRATING OPERATIONS AND ACHIEVING COST SAVINGS
As a result of the acquisitions of Delta and AmVestors, the Company has
substantially increased in size. While the Company has integrated the investment
operations of both AmVestors and Delta with those of AmerUs Life, there can be
no assurance as to the cost savings and efficiencies that will be achieved. The
success of the acquisition of Delta depends in part on the ability of the
Company to combine operations, integrate departments, systems and procedures and
obtain cost savings from these acquisitions. While the operations of Delta have
been integrated with those of AmerUs Life, and certain integration steps have
been taken with respect to AmVestors, there can be no assurance as to the cost
savings and efficiencies that will be achieved. See "Business -- Integration of
Recently Acquired Subsidiaries."
FUTURE POLICY BENEFITS EXPOSURE
The liability established by the Company for future life insurance and
annuity policy benefits is based upon assumptions concerning a number of
factors. Such factors include interest rates, mortality, duration of the
policies and expenses. Actual experience will likely differ from assumed
experience. If the Company's provision for future policy benefits proves
inadequate, future earnings will be adversely affected.
REGULATORY AND RELATED RISKS
The Company's life insurance subsidiaries are subject to regulation by
state regulators under the insurance laws of states in which they conduct
business. The Company, AmerUs Group, AMHC, AmerUs Life and Delta Life are
regulated by the Iowa Insurance Division. Both the Iowa and Kansas Departments
regulate transactions with affiliates. In addition, AmVestors and its
subsidiaries are regulated by the Kansas Department of Insurance. 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
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. In addition, the Iowa
Commissioner of Insurance has adopted rules regulating the issuance of stock by
the Company in equity offerings and the issuance of convertible securities.
Insurance regulators have in recent years investigated allegations of
improper sales practices by insurance agents, including churning and misleading
sales presentations. The National Association of Insurance Commissioners 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 in a number of states. The
Company expects that similar laws will eventually be enacted in additional
states in which its subsidiaries sell individual life insurance products. There
can be no assurance as to whether any such changes will have a material adverse
impact on sales of such products by the industry as a whole or by the Company.
Certain of the Company's insurance and annuity products are innovative and
relatively new. The Company is operating within a new regulatory framework as a
subsidiary of a mutual holding company which, in turn, has a converted stock
insurer as a subsidiary. The regulatory framework at the state and federal level
applicable to insurance and annuity products and the mutual holding company
structure is evolving. The changing regulatory framework could affect the design
or profitability of such products and the Company's ability to sell certain
products. For example, in August 1997, the SEC requested information and
comments about the structure of equity index insurance products, the manner in
which they are marketed and the federal securities law issues raised by equity
index insurance products. It is possible that the SEC may propose new
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regulations or policies with respect to equity index insurance products which
may affect the marketing of such products or impose requirements that some or
all such products be registered with the SEC.
RISKS OF CLASS ACTION LITIGATION
In recent years, a number of life insurance companies, including AmerUs
Life, have been named defendants in class action lawsuits arising out of their
business practices. AmerUs Life recently settled one such class action lawsuit,
although the exact amount of such settlement is yet to be determined. Although
AmerUs Life has denied all allegations against it and has vigorously defended
against the remaining class action lawsuit which has been brought against AmerUs
Life, there can be no assurance that such litigation, or similar litigation
filed in the future, will not have a material adverse affect on the life
insurance industry generally or on the Company. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition."
RISKS RELATING TO THE CLOSED BLOCK
In connection with the Reorganization, AmerUs Life was required to allocate
specific assets for the benefit of insurance policies and annuities existing at
the time of the Reorganization that pay dividends or provide interest credits.
This is known as a "Closed Block." The Closed Block is designed to provide
reasonable assurance to owners of policies included therein that, after the
Reorganization, assets would 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 investment performance of the
assets in the Closed Block and the performance of the policies covered by the
Closed Block will affect future dividends and interest credits. Any excess of
cumulative favorable experience for Closed Block policies over unfavorable
experience 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
"Reorganization and Recent Acquisitions -- The Reorganization -- Establishment
and Operation of the Closed Block."
RISKS RELATING TO YEAR 2000 COMPLIANCE
As the year 2000 approaches, an important business issue has emerged
regarding how existing application software programs and operating systems can
accommodate the date value "2000." Many existing application software products
were designed to only accommodate a two digit date position which represents the
year (e.g., the number "95" is stored on the system and represents the year
1995). As a result, the year 1999 (i.e., "99") is the maximum date value many
systems will be able to accurately process. The Company formed a year 2000
working group to address potential problems posed by this development to assure
that the Company is prepared for year 2000. Total estimated costs are in a range
of $4 to $6 million with approximately $3 million to be incurred in 1998.
However, if modifications and conversions to deal with year 2000 issues are not
completed on a timely basis or are not fully effective, such issues may have a
material adverse effect on the operations of the Company. All costs associated
with year 2000 modifications and conversions will be expensed as incurred. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition -- Year 2000 Compliance."
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CLASS A COMMON STOCK ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Class A Common Stock (including shares of
the Company's Class B common stock converted into Class A Common Stock), or the
perception that such sales could occur, could have an adverse effect on the
price of the Class A Common Stock. As of December 31, 1997, AMHC beneficially
owned 12,380,300 shares of Class A Common Stock. All of the shares of Class A
Common Stock which are currently beneficially owned by AMHC are eligible for
sale under SEC rules, subject to certain volume and timing limitations and
restrictions imposed on AMHC, as a mutual holding company, by Iowa law.
USE OF PROCEEDS
Unless otherwise indicated in the accompanying Prospectus Supplement, the
net proceeds received by the Company from the sale of the Securities offered
hereby are expected to be used for general corporate purposes. The proceeds from
the sale of Capital Securities by the AmerUs Trusts will be invested in the
Junior Subordinated Debt of the Company. Except as may otherwise be described in
the Prospectus Supplement relating to such Capital Securities, the Company
expects to use the net proceeds from the sale of such Junior Subordinated Debt
to the AmerUs Trusts for general corporate purposes. Any specific allocation of
the proceeds to a particular purpose that has been made at the date of any
Prospectus Supplement will be described therein.
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REORGANIZATION AND RECENT ACQUISITIONS
THE REORGANIZATION
BACKGROUND AND DESCRIPTION OF THE REORGANIZATION
On October 27, 1995, the Board of Directors of American Mutual Life adopted
the plan of reorganization (the "AmerUs Reorganization Plan"), pursuant to which
AMHC was formed 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, all of the shares of capital stock of AmerUs
Life were issued to AMHC. Subsequently, AMHC contributed all of its shares of
capital stock of AmerUs Life to AmerUs Group, which contributed such shares to
the Company, AmerUs Group's then wholly-owned subsidiary. Under this structure,
the Company is an intermediate holding company, with AmerUs Group as its direct
controlling shareholder and AmerUs Life as its wholly-owned subsidiary. Under
Iowa law, AMHC is required to retain direct or indirect ownership and control of
shares which carry the right to cast a majority of the votes entitled to be cast
by holders of the outstanding capital stock of AmerUs Life.
Iowa legislation permits AMHC 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 of AMHC, 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 Capital Stock." AMHC has advised the Company that AMHC has no
present plans to demutualize.
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.
Pursuant to the AmerUs Reorganization 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 policies in the
Closed Block, are expected to be sufficient to support the Closed Block
business, including provision for payment of claims, taxes and certain other
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 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
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as part of the assets allocated to the Closed Block. Any increase in such costs
in the future would be borne by AmerUs Life.
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 AmerUs Reorganization 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.
At December 31, 1997, the Closed Block had assets of $1,391.8 million and
liabilities of $1,623.4 million. The excess of Closed Block Liabilities over
Closed Block Assets represents the expected future after-tax contributions
(before certain other 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, only the expected contribution would be
recognized in income from continuing operations for that period. Any excess of
the actual contribution over the expected contribution is 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 the actual contribution from the Closed Block in any given period is
less than the expected contribution for that period, because 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.
ACQUISITION OF DELTA LIFE CORPORATION
On October 23, 1997, the Company acquired all of the outstanding capital
stock of Delta for approximately $165 million in cash. The principal asset of
Delta is its wholly-owned subsidiary, Delta Life, a Tennessee-domiciled life
insurance company and, following its acquisition by the Company, redomiciled to
Iowa in 1998. Delta Life is licensed in the District of Columbia and in all
states except New York, and specializes in the sale of individual single and
flexible premium deferred annuities, primarily in the southeastern, western,
southwestern and midwestern regions of the United States. Sales are made
primarily through a network of over 3,300 independent agents. Approximately 58%
of Delta Life's 1997 direct collected premiums were derived from
retirement-oriented tax-qualified annuities. As of December 31, 1997, Delta Life
had approximately 52,000 annuity contracts outstanding.
Delta Life's strategy is to structure its fixed annuity products to appeal
to the conservative retirement saver who is seeking principal preservation and
consistency of earnings. Most of Delta Life's products are innovative in that
they incorporate a fixed contractual management fee. In addition to offering a
lifetime guaranteed minimum interest crediting rate and an annual guaranteed
interest crediting rate, these annuities also require the crediting of the
interest rate earned on the assets supporting the respective policies after
deducting the contractual management fee. Over 70% of policyowners' assets are
invested in securities issued, secured or guaranteed by the U.S. Government,
government agencies or government instrumentalities.
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The Delta Acquisition increased the Company's presence in the rapidly
growing asset accumulation business, significantly expanded the Company's
distribution capacity, provided the Company access to Delta's extensive
marketing capabilities, expanded the Company's presence in the south and
southeast and expanded the Company's offering of competitive products that meet
the demands of consumers. By integrating the operations of Delta Life with those
of AmerUs Life, the Company substantially reduced the unit costs of both AmerUs
Life's and Delta Life's general insurance expenses and investment expenses by
spreading fixed costs over a larger revenue base. The Delta Acquisition also
increased and diversified the Company's distribution channels.
ACQUISITION OF AMVESTORS FINANCIAL CORPORATION
On December 19, 1997 the Company acquired AmVestors in a stock exchange
valued at approximately $350 million. AmVestors' principal operating
subsidiaries are American, a Kansas domiciled life insurance company licensed in
48 states and the District of Columbia and FBL, a Kansas domiciled life
insurance company doing business in 40 states, the District of Columbia and the
U.S. Virgin Islands. AmVestors distributes its products through a national
network of approximately 7,800 licensed independent agents. As of December 31,
1997, AmVestors had approximately 104,000 annuity contracts outstanding.
AmVestors specializes in the sale of annuity products, further
strengthening the Company's presence in the rapidly growing asset accumulation
and retirement savings markets. AmVestors' strategy is to focus on the dynamics
of the growing retirement market and the need for easily-administered, low-risk
annuities. AmVestors continually enhances its products based on market
conditions. The time frame for new product releases is generally less than two
months from conceptualization to rollout. Outstanding service to its
policyholders, including easy-to-read statements; quick delivery of policies and
turnaround on customer service calls; 24-hour-a-day product and customer
information availability and systematic withdrawal represent other areas of
strategic focus of AmVestors.
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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 the Consolidated
Financial Statements of the Company and related notes included elsewhere or
incorporated by reference in this Prospectus.
OVERVIEW
The Company is a holding company engaged through its subsidiaries in the
business of marketing, underwriting and distributing a broad range of individual
life insurance and annuity products to individuals and businesses in 49 states,
the District of Columbia and the U.S. Virgin Islands. 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, through which it markets fixed
annuities and sells variable annuities and variable life insurance products. See
"Business -- Products."
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 primarily 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 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, persistency 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 OPERATING 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. Different items are likely to occur in each period presented and
others
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may have different opinions as to which items may warrant adjustment. The
adjusted operating income shown below does not constitute net income computed in
accordance with GAAP.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net income.................................. $58,059 $ 74,173 $ 69,348 $ 6,667 $ 31,209
Net realized (gains) losses on
investments(A)............................ (9,008) (42,552) (32,244) 11,223 (10,187)
Equity add-on tax(B)........................ -- 4,480 -- 9,585 --
Reorganization costs(C)..................... -- 1,522 1,426 -- --
Adoption of SFAS 106(D)..................... -- -- -- -- 3,214
------- -------- -------- ------- --------
Adjusted operating income................... $49,051 $ 37,623 $ 38,530 $27,475 $ 24,236
======= ======== ======== ======= ========
Adjusted operating income per common
share..................................... $2.08 $1.62 $1.66 -- --
</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. Realized gains may vary widely between periods. Such
amounts are determined by management's timing of individual transactions and
do not necessarily correspond to the underlying operating trends.
(B) Represents the mutual life insurance company equity add-on tax, which is
applicable only to mutual life insurance companies and which the Company
believes is not applicable to the Company after June 30, 1996 due to AmerUs
Life's conversion into a stock company.
(C) Represents costs directly related to the Reorganization consisting primarily
of printing, postage, legal and consulting costs adjusted for income taxes
on such amounts. These costs were not of a continuing nature and were not
expected to have any effect on future operations.
(D) 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.
RECENT ACQUISITIONS
The Company acquired all of the outstanding stock of Delta on October 23,
1997, for approximately $165 million in cash. The transaction was accounted for
as a purchase and accordingly, the Company's results of operations include Delta
from the date of purchase. The Company acquired all of the outstanding stock of
AmVestors on December 19, 1997, in a stock exchange valued at approximately $350
million. This transaction was also accounted for as a purchase and the Company's
results of operations include AmVestors from the date of purchase. See
"Reorganization and Recent Acquisitions -- Acquisition of Delta Life Corporation
and -- Acquisition of AmVestors Financial Corporation".
THE CLOSED BLOCK
The Closed Block was established on June 30, 1996. 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 owners
of insurance policies included therein that, after the Reorganization, assets
would 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. See "Risk Factors -- Risks Relating to the Closed Block" and
"Reorganization and Recent Acquisitions -- Establishment and Operation of the
Closed Block".
The contribution to the operating income of the Company from the Closed
Block is reported as a single line item in the income statement. Accordingly,
premiums, product charges, investment income, realized gains (losses) on
investments, policyowner benefits and dividends attributable to the Closed
Block, less certain
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minor expenses including amortization of deferred policy acquisition costs, are
shown as a net number under the caption the "Contribution from the Closed
Block." This results in material reductions in the respective line items in the
income statement while having no effect on net income. The expenses associated
with the administration of the policies included in the Closed Block and the
renewal commissions on these policies are not charged against the Contribution
from the Closed Block, but rather are grouped with underwriting, acquisition and
insurance expenses. Also, all assets allocated to the Closed Block are grouped
together and shown as a separate item entitled "Closed Block Assets." Likewise,
all liabilities attributable to the Closed Block are combined and disclosed as
the "Closed Block Liabilities."
COMBINED RESULTS OF OPERATIONS
Since the operating results from the Closed Block are reported on one line
of the income statement, "Contribution from the Closed Block," individual income
statement components are not fully comparable with those prior to the
establishment of the Closed Block. Management believes that the presentation of
the results of operations for 1997 on a combined basis as if the Closed Block
had not been formed facilitates comparability with the results of operations for
1996 prior to the formation of the Closed Block and for 1995. Accordingly, the
combined presentation set forth below includes certain revenues and expenses
associated with policies included in the Closed Block. Such presentation does
not, however, affect the Company's reported net income.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
--------------------------------
AS CLOSED
REPORTED BLOCK COMBINED
-------- ------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues
Insurance premiums........................................ $ 48,127 $206,145 $254,272
Product charges........................................... 43,441 17,464 60,905
Net investment income..................................... 224,431 113,759 338,190
Realized gains on investments............................. 13,791 718 14,509
Contribution from the Closed Block........................ 31,045 (31,045) --
-------- -------- --------
Total revenues....................................... 360,835 307,041 667,876
Benefits and expenses
Policyowner benefits...................................... 193,237 209,377 402,614
Underwriting, acquisition and insurance expenses.......... 51,663 6,603 58,266
Amortization of deferred policy acquisition costs......... 20,987 31,470 52,457
Dividends to policyowners................................. 1,587 59,591 61,178
-------- -------- --------
Total benefits and expenses.......................... 267,474 307,041 574,515
Income from operations...................................... 93,361 -- 93,361
Interest expense............................................ 14,980 -- 14,980
-------- -------- --------
Income before income tax expense and equity in earnings of
unconsolidated subsidiary................................. 78,381 -- 78,381
Income tax expense.......................................... 22,022 -- 22,022
-------- -------- --------
Income before equity in earnings of unconsolidated
subsidiary................................................ 56,359 -- 56,359
Equity in earnings of unconsolidated subsidiary............. 1,700 -- 1,700
-------- -------- --------
Net income........................................... $ 58,059 $ -- $ 58,059
======== ======== ========
</TABLE>
24
<PAGE> 119
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------
AS CLOSED
REPORTED BLOCK COMBINED
-------- ------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues
Insurance premiums........................................ $138,476 $108,315 $246,791
Product charges........................................... 49,347 9,324 58,671
Net investment income..................................... 228,625 56,329 284,954
Realized gains on investments............................. 65,983 481 66,464
Contribution from the Closed Block........................ 19,909 (19,909) --
-------- -------- --------
Total revenues....................................... 502,340 154,540 656,880
Benefits and expenses
Policyowner benefits...................................... 261,869 103,951 365,820
Underwriting, acquisition and insurance expenses.......... 54,857 2,969 57,826
Amortization of deferred policy acquisition costs......... 40,160 18,412 58,572
Dividends to policyowners................................. 26,324 29,208 55,532
-------- -------- --------
Total benefits and expenses.......................... 383,210 154,540 537,750
Income from operations...................................... 119,130 -- 119,130
Interest expense............................................ 2,142 -- 2,142
-------- -------- --------
Income before income tax expense and equity in earnings of
unconsolidated subsidiary................................. 116,988 -- 116,988
Income tax expense.......................................... 43,859 -- 43,859
-------- -------- --------
Income before equity in earnings of unconsolidated
subsidiary................................................ 73,129 -- 73,129
Equity in earnings of unconsolidated subsidiary............. 1,044 -- 1,044
-------- -------- --------
Net income........................................... $ 74,173 $ -- $ 74,173
======== ======== ========
</TABLE>
1997 COMPARED TO 1996
A summary of the Company's combined revenues, including revenues associated
with the Closed Block, follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Insurance premiums
Traditional life insurance premiums.................... $236,878 $228,986
Immediate annuity and supplementary contract
premiums............................................ 17,238 16,082
Other premiums......................................... 156 1,723
-------- --------
Total insurance premiums.......................... 254,272 246,791
Universal life product charges........................... 59,236 57,834
Annuity product charges.................................. 1,669 837
-------- --------
Total product charges............................. 60,905 58,671
Net investment income.................................... 338,190 284,954
Realized gains on investments............................ 14,509 66,464
-------- --------
Total revenues.................................... $667,876 $656,880
======== ========
</TABLE>
In 1997, individual life and annuity premiums and product charges increased
by $11.2 million to $315.0 million, or 3.7%, from $303.8 million in 1996.
Included in this increase was $1.2 million of premium and product charges earned
in the fourth quarter resulting primarily from Delta. Insurance premiums
increased by $7.5 million to $254.3 million in 1997 compared to $246.8 million
in 1996. Traditional life
25
<PAGE> 120
insurance premiums increased by $7.9 million in 1997. The increase in
traditional life insurance premiums in 1997 was primarily the result of
continued growth in renewal premiums and also the increased sales of term life
insurance products. Changes in the level of immediate annuity deposits and
supplementary contract premiums were primarily the result of fluctuations in
immediate annuity and supplementary contract sales. Other premiums decreased in
1997 primarily due to the sale of the Company's remaining group life operation
in 1996.
Universal life product charges increased slightly in 1997 primarily due to
increased cost of insurance charges as a result of the normal aging of that
block of business. Annuity product charges for 1997 included $0.7 million earned
in the fourth quarter by recently acquired companies.
Net investment income increased by $53.3 million to $338.2 million in 1997
compared to $284.9 million in 1996. Included in the 1997 increase in net
investment income was $30.2 million of net investment income from recently
acquired companies during the fourth quarter. The remaining $23.1 million
increase in 1997 was attributable to an increase in average invested assets and
effective yields on average invested assets. Average invested assets (excluding
market value adjustments and acquisitions) in 1997 increased by $111.5 million
from 1996, and the effective yield on average invested assets (excluding market
value adjustments and acquisitions) increased to 7.89% in 1997 from 7.55% in
1996. Contributing to the higher yields in 1997 was investment income of $10.1
million from equity in earnings of certain investment partnerships.
Realized gains on investments were $14.5 million in 1997 compared to gains
of $66.4 million in 1996. Included in the amounts for 1996 were approximately
$51.1 million of gains from the sale of common stock as a result of the
liquidation of the Company's equity portfolio primarily during the first quarter
of 1996.
A summary of the Company's combined policyowner benefits, including
policyowner benefits associated with the Closed Block, follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Traditional life insurance
Death benefits............................................ $ 40,821 $ 32,251
Change in liability for future policy benefits and other
policy benefits........................................ 170,275 160,036
-------- --------
Total traditional life insurance benefits.............. 211,096 192,287
Universal life insurance
Death benefits in excess of cash value.................... 24,682 23,871
Interest credited to policyowner account balances......... 45,232 43,203
Other policy benefits..................................... 3,453 3,026
-------- --------
Total universal life insurance benefits................ 73,367 70,100
Annuities
Interest credited to deferred annuity account balances.... 80,440 66,254
Other annuity benefits.................................... 37,133 34,334
-------- --------
Total annuity benefits................................. 117,573 100,588
Miscellaneous benefits...................................... 578 2,845
-------- --------
Total policyowner benefits............................. $402,614 $365,820
======== ========
</TABLE>
Total policyowner benefits were $402.6 million in 1997 compared to $365.8
million in 1996 or an increase of $36.8 million. The 1997 amount included fourth
quarter benefits of acquired companies of $23.4 million consisting primarily of
interest credited to annuity account balances and other annuity benefits.
Traditional life insurance benefits increased by $18.8 million in 1997. The
increase in 1997 was primarily due to the growth and aging of the business in
force and increased death benefits as a result of higher mortality. Universal
life insurance benefits increased by $3.3 million in 1997. The increased
benefits in 1997 were due to increased interest credited to policyowner account
balances and increased death benefits due to
26
<PAGE> 121
higher mortality. While the weighted average crediting rate for AmerUs Life's
universal life liabilities decreased four basis points to 6.23% in 1997 from
6.27% in 1996, AmerUs Life's average liabilities increased by $33.7 million from
1996 to 1997, resulting in the increased credited amounts in 1997.
Annuity benefits, including the fourth quarter results of recent
acquisitions, were $117.6 million, an increase of $17.0 million compared to
1996. The annuity benefits of recent acquisitions amounted to $23.2 million
which were partially offset by a $6.2 million decrease in AmerUs Life's annuity
benefits in 1997 to $94.4 million compared to $100.6 million in 1996. The
decrease in AmerUs Life's annuity benefits during 1997 was due to reduced
interest credited to policyowner account balances. The weighted average
crediting rate for AmerUs Life's individual deferred annuity liabilities
decreased eleven basis points to 5.25% in 1997 compared to 5.36% in 1996 and
AmerUs Life's average deferred annuity liabilities decreased by $119.1 million
from 1996 to 1997, also contributing to the lower interest credited amounts in
1997 for AmerUs Life. Most annuity sales after May, 1996 have been recorded by
the Ameritas Joint Venture, resulting in a decrease in the average deferred
annuity liabilities at AmerUs Life.
Miscellaneous benefits decreased in 1997 primarily due to the sale of the
Company's remaining group life operation in 1996.
A summary of the Company's combined expenses, including expenses associated
with the Closed Block, follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1997 1996
---- ----
<S> <C> <C>
Commission expense, net of deferrals..................... $ 8,252 $ 7,892
Other underwriting, acquisition and insurance expenses,
net of deferrals....................................... 50,014 49,934
Amortization of deferred policy acquisition costs........ 52,457 58,572
-------- --------
Total expenses...................................... $110,723 $116,398
======== ========
</TABLE>
The Company's commission expense, net of deferrals, increased by $0.4
million to $8.3 million in 1997, compared to $7.9 million in 1996. The increase
in 1997 was primarily the result of the fourth quarter commission expense, net
of deferrals, of the Company's recent acquisitions. Other underwriting,
acquisition and insurance expenses, net of deferrals, were $50.0 million in
1997, compared to $49.9 million in 1996. Included in the 1997 expenses were $4.1
million of fourth quarter expenses, net of deferrals, attributable to the
recently acquired companies.
Excluding recently acquired companies, other underwriting, acquisition and
insurance expenses, net of deferrals, decreased by $4.0 million to $45.9 million
in 1997. This decrease in expenses during 1997 was primarily due to the
establishment of a $5.0 million litigation reserve during 1996 in connection
with certain class action litigation, partially offset by a $1.3 million
write-off of expenses during 1997 related to the former bank credit facility
which was replaced by a new agreement in the fourth quarter of 1997.
The amortization of deferred policy acquisition costs decreased by $6.1
million in 1997. Deferred policy acquisition costs are generally amortized in
proportion to gross margins, including realized capital gains. Higher death
benefits and lower realized capital gains in 1997, compared to 1996, contributed
to lower gross margins in 1997 on products for which deferred costs are
amortized, resulting in the lower amortization in 1997.
Dividends to policyowners increased by $5.7 million, to $61.2 million in
1997 compared to $55.5 million in 1996. The increase in dividends was primarily
the result of the growth and aging of in force business. Traditional life
reserves grew 8.1% to the end of 1997, to $1.31 billion. The weighted average
dividend interest rate credited to these policies was 7.19% in 1997 compared to
7.17% in 1996.
Income from operations decreased by $25.7 million, to $93.4 million in 1997
compared to $119.1 million in 1996. Recent acquisitions added $3.3 million of
income from operations during the fourth quarter. However,
27
<PAGE> 122
the overall decrease in 1997 income from operations was primarily due to the
decrease in realized gains on investments in 1997.
Interest expense increased by $12.9 million in 1997 to $15.0 million
compared to $2.1 million in 1996. The increase in interest expense in 1997 was
primarily due to the interest expense on the capital securities issued by the
Company during 1997 and interest expense on the revolving line of credit. This
added interest expense was largely offset by investment of the borrowed funds
which contributed to the growth in invested assets and the higher investment
earnings of 1997.
Income before income tax expense and equity in earnings of unconsolidated
subsidiary decreased by $38.6 million to $78.4 million in 1997 compared to
$117.0 million in 1996. While acquisitions added $3.3 million of income before
income tax expense during the fourth quarter, the overall decrease in 1997
income resulted primarily from the decrease in realized gains on investments in
1997.
Income tax expense decreased by $21.8 million in 1997 to $22.0 million
compared to $43.8 million in 1996. The decrease in 1997 was primarily due to the
lower pre-tax income as a result of the lower realized gains on investments, a
$4.5 million provision for the equity add-on tax included in the first half of
1996, and increased tax credits of $3.9 million in 1997. The equity add-on tax
is applicable only to mutual life insurance companies and the Company believes
such tax is not applicable to the Company after June 30, 1996 due to the
conversion of AmerUs Life into a stock company.
Net income decreased by $16.1 million in 1997 to $58.1 million compared to
$74.2 million in 1996. Net income for 1997 included $1.8 million resulting from
acquisitions during the fourth quarter. The overall lower net income for 1997
was primarily due to lower realized gains on investments.
1996 COMPARED TO 1995
A summary of the Company's combined revenues, including revenues associated
with the Closed Block, follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
Insurance premiums
Traditional life insurance premiums.................... $228,986 $219,732
Immediate annuity and supplementary contract
premiums............................................ 16,082 17,659
Other premiums......................................... 1,723 6,696
-------- --------
Total insurance premiums............................ 246,791 244,087
Universal life product charges........................... 57,834 56,763
Annuity product charges.................................. 837 607
-------- --------
Total product charges............................... 58,671 57,370
Net investment income.................................... 284,954 285,244
Realized gains on investments............................ 66,464 51,387
-------- --------
Total revenues...................................... $656,880 $638,088
======== ========
</TABLE>
In 1996, individual life and annuity premiums and product charges increased
by $9.0 million to $303.8 million, or 3.1%, from $294.8 million in 1995.
Insurance premiums increased by $2.7 million to $246.8 million in 1996 compared
to $244.1 million in 1995. Traditional life insurance premiums increased by $9.3
million in 1996. The increase in traditional life insurance premiums in 1996 was
primarily the result of continued growth in renewal premiums. Changes in the
level of immediate annuity deposits and supplementary contract premiums were
primarily the result of fluctuations in immediate annuity and supplementary
contract sales. Other premiums decreased significantly in 1996 primarily due to
the Company's exit from several group life and long-term disability reinsurance
pools in the second half of 1995 and the sale of the Company's remaining group
life operation in the third quarter of 1996.
28
<PAGE> 123
Universal life product charges increased slightly in 1996 primarily due to
increased cost of insurance charges as a result of the normal aging of that
block of business.
Net investment income decreased by $0.3 million to $284.9 million in 1996
compared to $285.2 million in 1995. The decrease in net investment income in
1996 was attributable to an increase in average invested assets more than offset
by declines in the effective yields on average invested assets. Average invested
assets (excluding market value adjustments) increased by $171.8 million largely
as a result of the investment of the $175.0 million proceeds from bank
borrowings late during the year. The effective yield on average invested assets
(excluding market value adjustments) decreased to 7.55% in 1996 from 7.88% in
1995. The decrease in effective yield in 1996 was primarily due to lower bond
yields and the timing of the investment of the proceeds from the bank borrowing.
Realized gains on investments were $66.4 million in 1996 compared to gains
of $51.4 million in 1995. Included in the amounts for 1996 were approximately
$51.1 million of gains from the sale of common stock as a result of the
liquidation of the Company's equity portfolio which commenced in 1995. The
increase in gains of $15.0 million in 1996 resulted primarily from increased
sales of common stock in the investment portfolio. The sale of common stock in
1996 and 1995 was a direct result of the Company's decision to reduce the level
of equity securities as a percentage of its investment portfolio on a long-term
basis. Proceeds from these sales were invested primarily in fixed maturity
securities.
A summary of the Company's combined policyowner benefits, including
policyowner benefits associated with the Closed Block, follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
Traditional life insurance
Death benefits......................................... $ 32,251 $ 32,196
Change in liability for future policy benefits and
other policy benefits............................... 160,036 152,742
-------- --------
Total traditional life insurance benefits......... 192,287 184,938
Universal life insurance
Death benefits in excess of cash value................. 23,871 20,802
Interest credited to policyowner account balances...... 43,203 41,532
Other policy benefits.................................. 3,026 5,218
-------- --------
Total universal life insurance benefits........... 70,100 67,552
Annuities
Interest credited to deferred annuity account
balances............................................ 66,254 78,120
Other annuity benefits................................. 34,334 35,582
-------- --------
Total annuity benefits............................ 100,588 113,702
Miscellaneous benefits................................... 2,845 8,428
-------- --------
Total policyowner benefits........................ $365,820 $374,620
======== ========
</TABLE>
Total policyowner benefits were $365.8 million in 1996 compared to $374.6
million in 1995. Traditional life insurance benefits increased by $7.3 million
in 1996 primarily due to the growth and aging of the business in force.
Universal life insurance benefits increased by $2.5 million in 1996. The
increased benefits in 1996 were due to increased interest credited to
policyowner account balances and increased death benefits due to higher
mortality. While the weighted average crediting rate for AmerUs Life's universal
life liabilities decreased 19 basis points to 6.27% in 1996 from 6.46% in 1995,
the AmerUs Life's average liabilities increased by $39.8 million from 1995 to
1996, resulting in the increased interest credited amounts in 1996.
Annuity benefits decreased $13.1 million in 1996 to $100.6 million compared
to $113.7 million in 1995, primarily due to reduced interest credited to
policyowner account balances. The weighted average crediting
29
<PAGE> 124
rate for AmerUs Life's individual deferred annuity liabilities decreased 80
basis points to 5.36% in 1996 compared to 6.16% in 1995 and AmerUs Life's
average deferred annuity liabilities decreased by $71.0 million from 1995 to
1996, also contributing to the lower interest credited amounts in 1996.
Miscellaneous benefits decreased significantly in 1996 primarily due to the
Company's exit from several group life and long-term disability reinsurance
pools in the second half of 1995 and the sale of the Company's remaining group
life operation in the third quarter of 1996.
A summary of the Company's combined expenses, including expenses associated
with the Closed Block, follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
Commission expense, net of deferrals..................... $ 7,892 $ 10,448
Other underwriting, acquisition and insurance expenses,
net of deferrals....................................... 49,934 40,461
Amortization of deferred policy acquisition costs........ 58,572 50,239
-------- --------
Total expenses...................................... $116,398 $101,148
======== ========
</TABLE>
The Company's commission expense, net of deferrals, decreased by $2.5
million to $7.9 million in 1996 compared to $10.4 million in 1995. The reduction
in 1996 was primarily due to a decrease in gross commission expense as a result
of lower life insurance sales in 1996 and the transfer of new annuity sales to
the Ameritas Joint Venture in May 1996. Other underwriting, acquisition and
insurance expenses, net of deferrals, increased to $49.9 million in 1996 from
$40.5 million in 1995. The increase in expenses in 1996 was due to increased
settlements and associated legal fees of $4.7 million, primarily due to the $5.0
million class action litigation reserve; expenses related to changing the name
of the Company of $0.7 million; higher premium taxes of $1.1 million due to a
one-time adjustment to the amortization of the guaranty association asset and an
increased accrual for estimated future assessments; combined with a gain of $3.1
million recorded against 1995 expenses resulting from the curtailment of the
Company's defined benefit pension plans effective December 31, 1995.
The amortization of deferred policy acquisition costs increased by $8.3
million in 1996. The increased amortization in 1996 was primarily due to higher
gross margins, including increased realized capital gains in 1996, on products
for which deferred costs are amortized.
Dividends to policyowners increased by $6.1 million, or 12.3%, to $55.5
million in 1996 compared to $49.4 million in 1995. The increase in dividends was
primarily the result of the growth and aging of in force business. Traditional
life reserves grew 7.7% from the end of 1995 to the end of 1996. The weighted
average dividend rate credited to these policies was 7.17% in 1996 compared to
7.14% in 1995.
Income from operations increased to $119.1 million in 1996, compared to
$112.9 million in 1995. The increase in 1996 resulted primarily from the
increase in realized gains on investments.
Income before income tax expense and equity in earnings of unconsolidated
subsidiary increased by $6.5 million to $117.0 million in 1996 compared to
$110.5 million in 1995. The increase in 1996 resulted primarily from the
increase in realized gains on investments.
Income tax expense increased by $2.6 million in 1996 to $43.8 million
compared to $41.2 million in 1995. The increase in 1996 income taxes was
primarily the result of the higher pre-tax income due primarily to the increased
realized gains on investments and a $4.5 million provision for the equity add-on
tax in the first half of 1996, partially offset by $2.7 million of low-income
housing tax credits in 1996. The equity add-on tax is applicable only to mutual
life insurance companies and the Company believes such tax is not applicable to
the Company after June 30, 1996 due to the conversion of AmerUs Life into a
stock company.
30
<PAGE> 125
Net income increased by $4.9 million in 1996 to $74.2 million compared to
$69.3 million in 1995. The increased net income in 1996 was primarily due to
higher realized gains on investments.
LIQUIDITY AND CAPITAL RESOURCES
THE COMPANY
The Company's cash flows from operations consist of dividends from
subsidiaries, if declared and paid, interest income on loans and advances to its
subsidiaries (including a surplus note issued to the Company by AmerUs Life),
investment income on assets held by the Company and fees which the Company
charges its subsidiaries 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
its life insurance subsidiaries in order to make dividend payments to its
shareholders. The payment of dividends by its life insurance subsidiaries is
regulated under various state laws. Under Iowa law, AmerUs Life and Delta Life
may pay dividends only from the earned surplus arising from their respective
businesses and must receive the prior approval of the Iowa Commissioner to pay
any dividend that would exceed certain statutory limitations. The current
statutory limitation is the greater of (i) 10% of the respective company's
policyowners' 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 these limitations and 1997 results, AmerUs Life and Delta Life would
have been able to pay approximately $58 million and $8 million in dividends in
1998 respectively without obtaining the Iowa Commissioner's approval. The
payment of dividends by American and FBL is regulated under Kansas law, which
has statutory limitations similar to those in place in Iowa. Based on these
limitations and 1997 results, AmVestors' subsidiaries could pay approximately
$15 million in dividends in 1998. On February 26, 1998 AmerUs Life paid the
Company $5 million in dividends. Based upon the cumulative limitations and 1997
results, the Company's subsidiaries could pay an estimated $75 million in
additional dividends in 1998 without obtaining regulatory approval.
On October 23, 1997, the Company entered into a $250 million revolving
credit facility with a syndicate of lenders (the "Bank Credit Facility") to be
used to replace its existing revolving credit facility, to finance the
acquisition of Delta, to finance permitted mergers and acquisitions and for
other general corporate purposes. The Bank Credit Facility is secured by a
pledge of approximately 49.9% of the outstanding common stock of AmerUs Life,
100% of the outstanding common stock of Delta and a $50 million 9% surplus note
payable to the Company by AmerUs Life. As of December 31, 1997, there was an
outstanding loan balance of $250 million under the facility. The Bank Credit
Facility provides for typical events of default and covenants with respect to
the conduct of the business of the Company and its subsidiaries and requires the
maintenance of various financial levels and ratios. Among other covenants, the
Company (a) cannot have a leverage ratio greater than 0.35:1.0 or an interest
coverage ratio less than 2.5:1.0, (b) is prohibited from paying cash dividends
on its common stock in excess of an amount equal to 3% of its consolidated net
worth as of the last day of the preceding fiscal year, and (c) must cause
certain of its subsidiaries, including AmerUs Life and Delta Life, to maintain
certain ratings from A.M. Best and certain levels of adjusted capital and
surplus and risk-based capital.
The Company may from time to time review other potential acquisition
opportunities. The Company anticipates that funding for any such acquisition may
be provided from available cash resources, from debt or equity financing or
stock-for-stock acquisitions. In the future, the Company anticipates that its
liquidity and capital needs will be met through interest and dividends from its
life insurance subsidiaries, accessing the public equity and debt markets
depending upon market conditions, or alternatively from bank financing.
LIFE INSURANCE SUBSIDIARIES
The cash inflows of the Company's life insurance subsidiaries 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
31
<PAGE> 126
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 the anticipated short-term
cash obligations of the Company's life insurance subsidiaries.
The Company and its subsidiaries generated cash flows from operating
activities of $224.4 million, $147.6 million and $189.1 million for the years
ended December 31, 1997, 1996 and 1995 respectively. Excess operating cash flows
were primarily used to increase the Company'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. The Company continuously monitors
benefits and surrenders to provide projections of future cash requirements. As
part of this monitoring process, the Company performs cash flow testing of its
assets and liabilities under various scenarios to evaluate the adequacy of
reserves. In developing its investment strategy, the Company 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 the claims-paying and financial
strength ratings of the Company's life insurance subsidiaries.
The Company takes into account asset-liability management considerations in
the product development and design process. Contract terms for the Company'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, 1997 (dollars in millions):
<TABLE>
<S> <C>
Not subject to discretionary withdrawal..................... $ 412.9
Subject to discretionary withdrawal with adjustments:
Specified surrender charges(A)............................ 4,546.9
Market value adjustments.................................. 1,319.2
--------
Subtotal............................................... 5,866.1
--------
Subject to discretionary withdrawal without adjustments..... 711.5
--------
Total.................................................. $6,990.5
========
</TABLE>
- -------------------------
(A) Includes $1,674.3 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 ("FHLB") of Des
Moines, AmerUs Life is eligible to borrow on a line of credit available to
provide it with additional liquidity. Interest is payable at a current rate at
the time of any advance. As of December 31, 1997, AmerUs Life had a $25.0
million open secured line of credit against which there were no borrowings. In
addition to the line of credit, AmerUs Life has long-term advances from the FHLB
outstanding of $16.4 million at December 31, 1997.
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The Company's life insurance subsidiaries may also obtain liquidity through
sales of investments or borrowings collateralized by their investment
portfolios. The Company's investment portfolio as of December 31, 1997 had a
carrying value of $8.9 billion, including Closed Block investments. As of
December 31, 1997, fixed maturity securities were $7.9 billion or 88.9% of
invested assets, with public and private fixed maturity securities constituting
$7.5 billion, or 95.4%, and $0.4 billion, or 4.6%, of total fixed maturity
securities, respectively.
At December 31, 1997, the statutory surplus of AmerUs Life, Delta Life,
American and FBL were approximately $325 million, $83 million, $112 million and
$41 million, respectively. The Company believes that these levels of statutory
capital are more than adequate as each life insurance subsidiary's risk-based
capital is significantly in excess of required levels.
In the future, in addition to their cash flows from operations and
borrowing capacity, the life insurance subsidiaries would anticipate obtaining
their required capital from the Company as the Company will have access to the
public debt and equity markets.
YEAR 2000 COMPLIANCE
As the year 2000 approaches, an important business issue has emerged
regarding how existing application software programs and operating systems can
accommodate the date value "2000." Many existing application software products
were designed to only accommodate a two digit date position which represents the
year (e.g., the number "95" is stored on the system and represents the year
1995). As a result, the year 1999 (i.e., "99") is the maximum date value many
systems will be able to accurately process. The Company formed a year 2000
working group to address potential problems posed by this development to assure
that the Company is prepared for the year 2000. The Company has already made
significant progress in accomplishing the necessary modifications and
conversions to deal with year 2000 issues and anticipates that the majority of
the required efforts will be completed by the end of 1998. Management does not
anticipate that the Company will incur significant operating expenses or be
required to invest heavily in computer system improvements to address year 2000
issues. Total estimated costs are in a range of $4 to $6 million with
approximately $3 million to be incurred in 1998. However, if modifications and
conversions to deal with year 2000 issues are not completed on a timely basis or
are not fully effective, such issues may have a material adverse effect on the
operations of the Company. All costs associated with year 2000 modifications and
conversions will be expensed as incurred.
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BUSINESS
OVERVIEW
GENERAL
The Company is an insurance holding company engaged through its
subsidiaries in the business of marketing, underwriting and distributing a broad
range of individual life insurance and annuity products to individuals and
businesses in 49 states, the District of Columbia and the U.S. Virgin Islands.
The Company's primary product offerings consist of whole life, universal life
and term life insurance policies and fixed annuities. As of December 31, 1997,
the Company had approximately 573,000 life insurance policies and annuity
contracts outstanding and individual life insurance in force, net of
reinsurance, of approximately $26.7 billion with life insurance reserves of $2.4
billion and annuity reserves of $6.1 billion. As of December 31, 1997, the
Company had total assets of $10.3 billion and total shareholders' equity of
$928.0 million. In addition, through the Ameritas Joint Venture with Ameritas,
AmerUs Life markets fixed annuities issued by AVLIC and sells AVLIC's variable
life insurance and variable annuity products.
THE COMPANY'S PRINCIPAL SUBSIDIARIES
The Company's principal subsidiaries are AmerUs Life, Delta and AmVestors.
AmerUs Life was originally incorporated in 1896 as a mutual insurance company.
AmerUs Life's target customers 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 AmerUs
Life is not licensed to do business), and it primarily serves suburban and rural
areas. Efforts are currently underway to expand AmerUs Life's territory into the
states of Connecticut, Maine, New Hampshire and Vermont. AmerUs Life distributes
its products primarily through a combination of career general agency and PPGA
distribution systems, as well as a network of independent brokers. The career
general agency system consists of a network of 35 career general agencies, with
approximately 570 career agents. The PPGA system is comprised of approximately
425 PPGA's, who have approximately 1,100 agents. As of December 31, 1997, AmerUs
Life had approximately 408,000 life insurance policies and annuity contracts
outstanding and individual life insurance in force, net of reinsurance, of
approximately $26.6 billion. Variable life insurance products and the fixed and
variable annuities offered by the Ameritas Joint Venture are marketed through
AmerUs Life's distribution systems and the distribution systems of Ameritas and
AVLIC, which consist of approximately 160 agents and 540 independent
broker-dealers (with approximately 9,000 registered representatives),
respectively.
The Company made two major acquisitions in 1997. The Company acquired Delta
on October 23 for approximately $165 million in cash and AmVestors on December
19 in a stock exchange valued at approximately $350 million. These acquisitions,
along with the growth of AmerUs Life, increased the Company's assets from $4.4
billion at December 31, 1996 to $10.3 billion at December 31, 1997.
The principal asset of Delta is its wholly-owned subsidiary, Delta Life, an
Iowa domiciled life insurance company. Delta Life is licensed in the District of
Columbia and in all states except New York, and specializes in the sale of
individual single and flexible premium deferred annuities, primarily in the
southeastern, western, southwestern and midwestern regions of the United States.
Sales are made primarily through a network of over 3,300 independent agents.
Delta Life's strategy is to structure its fixed annuity products to appeal to
the conservative retirement saver who is seeking principal preservation and
consistency of earnings. Most of Delta Life's products are innovative in that
they incorporate a fixed contractual management fee. Approximately 58% of
Delta's 1997 direct collected premiums were derived from retirement-oriented
tax-qualified annuities. Delta had direct collected premiums of $192.6 million
in 1997 and as of December 31, 1997 had annuity reserves of $1.8 billion. See
"Reorganization and Recent Acquisitions -- Acquisition of Delta Life
Corporation".
AmVestors' principal operating subsidiaries are American, a Kansas
domiciled life insurance company licensed in 48 states and the District of
Columbia; and FBL, a Kansas domiciled life insurance company doing business in
40 states, the District of Columbia and the U.S. Virgin Islands. AmVestors
specializes in the sale of annuity products, further strengthening the Company's
presence in the rapidly growing asset accumulation
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and retirement and savings markets. AmVestors utilizes product features intended
to enhance the potential for profit by encouraging persistency and reducing
premature withdrawal during the first five to fourteen years of an annuity
contract. AmVestors distributes its products through a national network of
approximately 7,800 licensed independent agents recruited through its
wholly-owned subsidiaries, as well as through almost 60 independent marketing
organizations. As of December 31, 1997, AmVestors had approximately 104,000
annuity contracts outstanding. AmVestors had direct collected premiums of $583.4
million in 1997 and as of December 31, 1997 had annuity reserves of $3.1
billion. See "Reorganization and Recent Acquisitions -- Acquisition of AmVestors
Financial Corporation."
AMERITAS JOINT VENTURE
On April 1, 1996 the Company commenced the Ameritas Joint Venture with
Ameritas. The Company participates in the Ameritas Joint Venture through AmerUs
Life's 34% ownership interest in AMAL. AMAL's operations are conducted through
AVLIC and Ameritas Investment Corp. ("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. AIC is a registered broker-dealer which
is licensed to do business in all states except New York. As of December 31,
1997, AMAL had total consolidated assets of $1.5 billion and total consolidated
shareholder's equity of $72.0 million on a GAAP basis. AVLIC had $3.8 billion of
insurance in force and $45.3 million in surplus as of December 31, 1997, on a
statutory basis. AmerUs Life's partner in the Ameritas Joint Venture, Ameritas,
is a Nebraska life insurance company which has been in existence for more than
100 years. The distribution systems of Ameritas and AVLIC consist of
approximately 160 agents and 540 independent broker-dealers with approximately
9,000 registered representatives. On a statutory basis, Ameritas had $1.9
billion in assets, $8.2 billion of insurance in force and $311.3 million in
surplus as of December 31, 1997.
AmerUs Life's investment in the Ameritas Joint Venture affords AmerUs Life
access to a line of existing variable life insurance and annuity products.
AmerUs Life and Ameritas have equal membership on the board of directors of
AMAL, AVLIC and AIC. 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. Under the terms of
the Joint Venture Agreement, AmerUs Life has an option to purchase an additional
5% to 15% of AMAL if certain premium growth targets are met.
STRATEGY
The business strategy of the Company is to focus on providing individual
retail consumers in the United States with superior financial services and
products that will meet their financial planning, risk protection, and asset
accumulation needs. Target markets of the Company include individuals in the
middle and upper income brackets and small businesses. Its geographic focus is
national in scope (except for New York, in which the Company is not licensed to
do business), and it primarily serves suburban and rural areas.
The Company seeks to effect this strategy by focusing on life insurance and
asset accumulation products distributed through a variety of distribution
systems. In particular, the Company has developed a very strong position in the
distribution of fixed annuities through independent agents and has a long
established reputation as a provider of whole life insurance products,
distributed through career and PPGA agency distribution systems, that are among
the most attractively priced products to consumers in the industry.
The Company's strategy emphasizes effective management of certain operating
fundamentals -- mortality, expenses, persistency and investment results -- where
the Company's results have historically compared favorably to the industry. The
Company's operating strengths have enabled it to provide attractively priced
products to consumers while also generating profitability for its shareholders.
Growth through a combination of internal growth and mergers, acquisitions
and strategic alliances is a key element of the Company's strategy. In the life
insurance market, the Company presently has only 0.3% of new life insurance
sales nationwide, which provides substantial opportunity for increased growth
through improved marketing and sales execution even in a generally flat business
environment.
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In the fixed annuity area, the Company is presently a leader in the
distribution of fixed annuities through independent agents. Independent agents
have increased their share of fixed annuity sales in recent years and the
Company's goal is to consistently rank among the top 3 to 5 providers in this
segment.
The Company continues to seek to both deepen and diversify its distribution
channels. Primarily as a result of the acquisitions of AmVestors and Delta, the
Company's distribution channels have grown significantly in recent years. As of
December 31, 1997, the Company had over 15,000 distributors as compared to
approximately 3,700 distributed as of December 31, 1996. While continuing to
expand its existing channels, the Company is in the process of developing
additional bank and major independent marketing organization distribution
channels.
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 will continue to seek new business
opportunities through mergers, acquisitions and strategic alliances.
INTEGRATION OF RECENTLY ACQUIRED SUBSIDIARIES
The Company made two major acquisitions in 1997, acquiring Delta on October
13, 1997 for approximately $165 million in cash and AmVestors on December 19,
1997 in a stock exchange valued at approximately $350 million. These
acquisitions, along with the growth of AmerUs Life, increased the Company's
assets from $4.4 billion at December 31, 1996 to $10.3 billion at December 31,
1997.
The Company believes it has been successful in completing its integration
plans in respect of both Delta and AmVestors. The operations of Delta have been
integrated with those of AmerUs Life and the investment operations of AmVestors
have been merged with the investment management operations of the Company.
Delta's operations have been integrated with AmerUs Life's operations
except for Delta's marketing, sales management and customer services functions
and the distribution system which will remain separate. Delta's offices in
Memphis, Tennessee have been closed and all of Delta's operations have been
relocated to AmerUs Life's facilities in Des Moines, Iowa. By integrating most
of Delta's operations with those of AmerUs Life, Delta has reduced the number of
employees by over 50%, and the Company currently projects that general insurance
and investment expenses of Delta, before deferrals, will be reduced by
approximately 48% or $10 million on an annualized basis following integration of
operations with AmerUs Life at the end of March, 1998. The Company believes that
additional expense reductions will be attainable as AmerUs Life's technology
enhancements, such as imaging, are applied to Delta Life's operations.
The investment operations of AmVestors have been merged with those of the
Company. In addition, the Company intends to move towards the use of common
administrative systems and platforms for all of its annuity businesses. While
various other functions are also likely to be integrated (e.g. audit;
asset-liability management and some product development) the Company intends to
maintain AmVestors as a separate administrative as well as marketing and sales
entity. Savings from elimination of public company costs and reductions in
management personnel, when added to savings from integration of AmVestors'
investment operations with those of AmerUs, have produced initial savings
consistent with original expectations. Other staff reductions at AmVestors
completed during the first quarter of 1998 will probably produce savings in 1998
in excess of those anticipated at the time of the transactions. While AmVestors'
operations will be maintained, expense savings relating to the AmVestors
Acquisition are expected to exceed original expectations. Continued growth in
1999 and beyond should allow the estimated cost savings projected for later
years to be realized without the need for a potentially disruptive back office
integration.
PRODUCTS
GENERAL
The Company offers a diverse line of individual life insurance products
which are tailored to its markets. In addition, the Company recently acquired
Delta and AmVestors, through which it now offers additional
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annuity products. The Company also 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.
The pricing of the Company's products is generally determined by reference
to actuarial calculations and statistical assumptions principally relating to
mortality, persistency, investment yield assumptions, estimates of expenses and
management's judgment as to market and competitive conditions. The premiums and
deposits received, together with assumed investment earnings, are designed to
cover policy benefits, expenses and policyowner dividends plus return a profit
to the Company. These profits arise from the margin between mortality charges
and insurance benefits paid, the margin between actual investment results and
the investment income credited to policies (either directly or through dividends
to policyowners) and the margin between expense charges and actual expenses. The
level of profits also depends on persistency because business acquisition costs,
particularly agent commissions, are recovered over the life of the policy.
Dividends and interest credited on policies (including policies included in the
Closed Block) may vary from time to time reflecting changes in investment,
mortality, persistency, expenses and other factors. Interest rate fluctuations
have an effect on investment income and may have an impact on policyowner
behavior. Increased lapses in policies may be experienced if the Company does
not maintain interest rates and dividend scales that are competitive with other
products in the marketplace.
AMERUS LIFE PRODUCTS
Traditional life insurance and universal life insurance have accounted for
approximately 70% and 30%, respectively, of AmerUs Life's total individual life
insurance premiums over the last three years. In addition, AmerUs Life has
historically offered a broad line of fixed annuity products.
TRADITIONAL LIFE INSURANCE PRODUCTS. AmerUs Life's traditional life
insurance products have a long history of being highly competitive within the
industry. 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. AmerUs Life also offers a second to die whole life insurance
product which insures two lives and provides benefits upon the death of the
second insured. AmerUs Life targets its second to die products primarily to
potential customers seeking to achieve estate planning goals.
AmerUs Life also offers a portfolio of term 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. Term life insurance is a highly competitive and
quickly changing market. During 1997, AmerUs Life introduced new 10 and 20 year
term products. As a result, AmerUs Life's first year annualized premiums for
term insurance sales increased by 85% from 1996 to 1997.
Since 1989, AmerUs Life 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. 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, 1997, sales of participating whole life and
term life insurance products represented 55% and 16%, respectively, of first
year annualized premiums for all individual life insurance products sold by
AmerUs Life.
UNIVERSAL LIFE INSURANCE PRODUCTS. AmerUs Life offers universal life
insurance products, pursuant to which 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
AmerUs Life. Specific charges are made against the account for the cost of
insurance and for expenses. The universal life
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policy provides flexibility as to the amount and timing of premium payments and
the level of death benefits provided.
AmerUs Life's universal life insurance products provide benefits for the
life of the insured. Within limits established by AmerUs Life 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. Interest is credited to the policy at
a rate determined from time to time by AmerUs Life. During 1997, AmerUs Life
introduced a new second to die universal life product for the estate planning
market, enhancing universal life production for the year. The weighted average
crediting rate for AmerUs Life's universal life insurance liabilities was 6.23%
for the year 1997, 6.27% for the year 1996 and 6.46% for the year 1995. For the
year ended December 31, 1997, sales of universal life insurance products
represented 29% of first year annualized premiums for all individual life
insurance products sold by AmerUs Life.
FIXED ANNUITY PRODUCTS. Historically, AmerUs Life has offered a broad
portfolio of fixed annuity products. Annuities provide for the payment of
periodic benefits over 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.
Since the formation of the Ameritas Joint Venture in May 1996,
substantially all individual deferred annuity sales by AmerUs Life's
distribution systems are made through the Ameritas Joint Venture, resulting in a
significant decline in the sale of such products by AmerUs Life. However, AmerUs
Life retained the right to continue to issue replacement business to its fixed
annuity customers in existence prior to the effective date of the Joint Venture
Agreement.
DELTA PRODUCTS
Delta specializes in the sale of deferred fixed and equity index annuities
to individuals. Delta's product offerings differ from those of many of its
competitors in two ways. First, Delta offers an interest rate crediting strategy
on almost all of its single and flexible premium deferred annuities that credits
the policy with a return generally based upon the interest rates it earns on
assets supporting the respective policies less contractual management fees. In
addition, these policies offer a lifetime guaranteed minimum interest crediting
rate and an annual guaranteed interest crediting rate. Second, Delta's current
investment policy provides for no less than 70% of policyowners' assets be
invested in securities issued, secured or guaranteed by the U.S. Government,
government agencies or government instrumentalities. The balance of these funds
is invested primarily in investment grade corporate bonds and commercial
mortgages.
In 1996 and 1997 Delta introduced and commenced marketing two single
premium equity index annuity products that are based either on Standard & Poor's
500 Composite Stock Price Index(TM), or a basket of five international stock
market indices from France, Germany, Japan, Switzerland and the United Kingdom.
Earnings credited to these products are linked to increases in the anniversary
date values of the applicable index, less management fees. The policyowner is
guaranteed to receive at least 110% of the original premium at the end of the
seven year term of the policy, assuming no withdrawals.
AMVESTORS PRODUCTS
AmVestors specializes in the sale of fixed deferred annuity products to
individuals. During each of the past three years, sales of deferred annuities
have accounted for approximately 97% of AmVestors' premiums received, while
sales of single premium immediate annuities and flexible premium universal life
insurance have accounted for virtually all remaining premiums received. As of
December 31, 1997, AmVestors had total annuity reserves of $3.1 billion.
AmVestors' deferred annuities have an initial credited interest rate
guaranteed for a period of one to five years. Following the initial guarantee
period, AmVestors may adjust the credited interest rate annually, subject to the
guaranteed minimum interest rates specified in the contracts. Such minimum
guaranteed rates currently range from 3% to 6%.
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AmVestors designs its products and directs its marketing efforts towards
the savings and retirement market. Historically, the 50 and older age group has
accounted for over 86% of all annuity premiums received by AmVestors. AmVestors
continues to target this age group because management believes that as this
group ages, it will have an increasing interest in saving for retirement,
nursing home care and unanticipated medical costs. The portfolio of products is
continuously reviewed with new plans added and others discontinued in an effort
to remain competitive.
AMERITAS JOINT VENTURE PRODUCTS
The Ameritas Joint Venture offers fixed annuity products which are
substantially similar to those previously marketed by AmerUs Life. In addition,
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, owners of variable annuities and life insurance
policies are able to choose from a range of investment funds offered by each
manager.
Under the terms of the Joint Venture Agreement governing the Ameritas Joint
Venture, AmerUs Life and Ameritas write their new single and flexible premium
deferred fixed annuities and variable annuities and variable life insurance
through the Ameritas Joint Venture. AmerUs Life has retained the right to
continue to issue replacement business to its fixed annuity customers in
existence prior to the effective date of the Joint Venture Agreement.
The variable life insurance products and the fixed and variable annuities
offered by the Ameritas Joint Venture are distributed through AmerUs Life's
career general agency and PPGA distribution systems, as well as through the
distribution systems of Ameritas and AVLIC.
In response to customer demand, AmerUs Life developed an equity index
annuity which it began offering through the Ameritas Joint Venture in the fourth
quarter of 1996. An equity index annuity provides a minimum baseline fixed rate
of return in addition to sharing in a portion of the appreciation realized from
an investment in an indexed investment fund, such as the S&P 500 stock index.
AmerUs Life retained the right to issue this type of contract to certain of its
customers in existence prior to the effective date of the Joint Venture
Agreement and through certain other distribution systems. Sales of such products
amounted to 15% of AmerUs Life's total fixed annuity production in 1997.
DISTRIBUTION SYSTEMS
AMERUS LIFE
AmerUs Life markets its insurance products on a national basis primarily
through a career general agency system, a PPGA system, independent insurance
brokers and certain of AmerUs Life's affiliates. AmerUs Life currently employs
ten regional vice presidents who are responsible for supervising the career
general agencies and/or PPGA agents within their assigned geographic regions.
CAREER GENERAL AGENCY SYSTEM AND BROKERS. Under the career general agency
system, AmerUs Life 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 receiving a percentage of 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, AmerUs Life
has 35 career general agents in 23 states, through which approximately 570
career agents sell AmerUs Life's products. While career agents in the career
general agency system are non-exclusive, AmerUs Life believes most agents use
AmerUs Life's products for a majority of their new business of the type of
products offered by AmerUs
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Life. No single career general agency accounts for more than 10% of the total
first year commissions paid by AmerUs Life.
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.
AmerUs Life also sells its products through a network of approximately
1,900 insurance brokers in all jurisdictions in which AmerUs Life 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, AmerUs
Life 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 AmerUs Life rather than AmerUs Life's full line of
insurance products. The PPGA system is comprised of approximately 425 PPGA's,
with approximately 1,100 agents.
PPGA's 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, PPGA's may earn bonus commissions on their
business, graded by production and persistency.
DELTA
Delta's annuity products are sold through independent agents who are
supervised by regional vice presidents and regional directors with specified
geographic supervisory responsibilities. The regional vice presidents and
regional directors are primarily responsible for recruiting agents and providing
marketing support to those agents in an effort to promote Delta's products. The
regional vice presidents' and regional directors' marketing support activities
include informational mailings, seminars, and case consultations, all of which
are designed to educate agents about annuities in general and Delta in
particular. Regional vice presidents and regional directors are paid a base
salary plus incentive compensation based on the business produced by agents
within their territory. There are currently ten regional vice presidents and
regional directors.
The regional vice presidents and regional directors are responsible for
over 3,300 licensed, independent agents, who may also sell insurance products
for other companies. Of these agents, approximately 1,400 wrote annuity business
for Delta in 1997. No single agent was responsible for more than 1.6% of Delta's
1997 annuity premiums. No significant amount of Delta's business is produced by
stock brokerage firms, banks or large national insurance brokerage agencies.
AMVESTORS
AmVestors endeavors to attract agents to sell its products by offering a
broad selection of fixed annuity products and by providing timely, comprehensive
services to agents and customers. AmVestors markets its products through
independent agents. AmVestors currently has approximately 7,800 independent
agents licensed to sell its products. AmVestors also maintains contact with
approximately 50,000 agents that are not currently licensed, but have either
sold the AmVestors' annuities in the past or have expressed an interest in doing
so. These agents continue to receive periodic mailings related to interest rate
and commission changes, and new product introductions, and are reappointed as
required in order to represent AmVestors in selling its products. However, in
order to save costs associated with reappointing agents, AmVestors does not
automatically relicense an agent that has not written business for twelve
months.
No single agent accounted for more than 1.2% of American's annuity sales in
1997, and no single agent accounted for more than 3.0% of FBL's annuity sales in
1997. AmVestors does not have exclusive agency
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agreements with its agents and management believes most of these agents sell
products for other insurance companies similar to those sold by American and
FBL.
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 Board of Directors of each of the
life insurance companies and are overseen by the Investment Committee of the
Board of Directors of the Company. Management regularly monitors individual
assets and asset groups, in addition to monitoring the overall asset mix. In
addition, the insurance company boards and the Investment Committee review
investment guidelines and monitor 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.
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.
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 December 31, 1997 fixed maturity
securities were $7,927.5 million, or 88.9% of the carrying value of invested
assets with public and private fixed maturity securities constituting $7,561.9
million, or 95.4%, and $365.6 million, or 4.6%, of total fixed maturity
securities, respectively.
The Company's portfolio of investment grade fixed maturity securities is
diversified by number and type of issuer. As of December 31, 1997, investment
grade fixed maturity securities included the securities of over 617 issuers,
with 2,222 different issues of securities. No issuer represents more than 2.8%
of investment grade fixed maturity securities.
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Below-investment grade fixed maturity securities as of December 31, 1997
represented 4.6% of total invested assets, with the largest being a $10.6
million investment.
As of December 31, 1997, 88.7% of total invested assets were investment
grade fixed maturity securities.
Mortgage backed securities ("MBS") comprise a core position within the
Company's fixed maturity securities investments. MBS investments include
residential, commercial MBS, home equity loans (including home equity loans
purchased from one of the Company's affiliates), manufactured housing, FHA Title
I and CMBS. Residential mortgage pass-throughs and collateralized mortgage
obligations ("CMOs") total $2,794.9 million or 31.8% of total invested assets.
As of December 31, 1997, MBS were $3,450.3 million or 38.7%, of total invested
assets. MBS guaranteed by the United States government or an agency of the
United States government were $2,793.6 million, or 81.0% of MBS, and other MBS
were $656.7 million, or 19.0%, of MBS as of December 31, 1997. At December 31,
1997 the Company's MBS investment portfolio composition was approximately 54%
fixed rate pass-throughs backed by seasoned loan pools, 5% floating rate
pass-throughs and 41% CMOs with some form of explicit prepayment protection. 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.
Management believes that the quality of assets in the MBS portfolio is generally
high, with 91.7% 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 December 31, 1997,
amounted to $1,100.2 million. The swaps had no carrying value at December 31,
1997 and a fair value which amounted to a net payable position of $0.1 million
at December 31, 1997. The carrying value and fair value of interest rate caps
and swaptions amounted to $2.1 million and $2.0 million, respectively, and are
reflected as "other investments" on the Company's consolidated financial
statements as of December 31, 1997. The net amount payable or receivable from
interest rate swaps and caps is accrued as an adjustment to interest income.
MORTGAGE LOANS
As of December 31, 1997, mortgage loans in the Company's investment
portfolio were $462.5 million, or 5.2% of the aggregate carrying value of
invested assets, including the Closed Block. As of December 31, 1997, commercial
mortgage loans and residential mortgage loans comprised 96.4% and 3.6%,
respectively, of the mortgage loans in the Company's investment portfolio.
Commercial mortgage loans consist primarily of fixed-rate mortgage loans.
As of December 31, 1997, the Company held 435 individual commercial mortgage
loans with an average balance of $1.1 million.
As of December 31, 1997, only five loans aggregating $2.0 million, or 0.4%,
of the Company's loan portfolio (as measured by principal balance) were
classified as delinquent or in foreclosure. As of the same date, only $4.4
million, or 0.9%, of the Company's loan portfolio (as measured by principal
balance) was classified as restructured. During 1997, the Company had no
foreclosures.
EQUITY REAL ESTATE
In recent years the Company has significantly reduced its equity real
estate portfolio. As of December 31, 1997, the carrying value of investment real
estate, including the Closed Block, was $8.7 million.
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OTHER
The Company held $286.2 million of policy loans on individual insurance and
annuity products as of December 31, 1997. Policy loans are permitted to the
extent of a policy's contractual limits and are fully collateralized by policy
cash values.
As of December 31, 1997, the Company held equity securities of $61.5
million. The largest holding of equity securities, Federal Home Loan Bank, had a
carrying value of $28.1 million as of December 31, 1997.
The Company held $172.0 million of other invested assets (including
short-term investments) on December 31, 1997. Other invested assets consist
primarily of various joint venture and limited partnership investments.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities offered hereby, consisting of notes, debentures and
other evidences of indebtedness, are to be issued in one or more series
constituting either senior Debt Securities ("Senior Debt Securities") or junior
subordinated Debt Securities ("Junior Subordinated Debt"). Unless otherwise
specified in the applicable Prospectus Supplement, the Debt Securities will be
issued pursuant to indentures described below (as applicable, the "Senior
Indenture" or the "Subordinated Indenture", each, an "Indenture" and, together,
the "Indentures"), in each case between the Company and the trustee identified
therein (each an "Indenture Trustee"), the forms of which have been filed as
exhibits to the Registration Statement of which this Prospectus forms a part.
Except as provided in the applicable Prospectus Supplement and except for the
subordination provisions of the Subordinated Indenture, for which there are no
counterparts in the Senior Indenture, the provisions of the Subordinated
Indenture are substantively identical to the provisions of the Senior Indenture
that bear the same section numbers.
The statements herein relating to the Debt Securities and the following
summaries of certain general provisions of the Indentures do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Indentures (as they may be amended or supplemented
from time to time), including the definitions therein of certain terms
capitalized in this Prospectus. All article and section references appearing
herein are to articles and sections of the applicable Indenture and whenever
particular Sections or defined terms of the Indentures (as they may be amended
or supplemented from time to time) are referred to herein or in a Prospectus
Supplement, such Sections or defined terms are incorporated herein or therein by
reference.
GENERAL
The Debt Securities will be unsecured obligations of the Company. The
Indentures do not limit the aggregate amount of Debt Securities which may be
issued thereunder, nor do they limit the incurrence or issuance of other secured
or unsecured debt of the Company. The Debt Securities issued under the Senior
Indenture will be unsecured and will rank pari passu in right of payment with
all other unsecured and unsubordinated debt obligations of the Company. The Debt
Securities issued under the Subordinated Indenture will be subordinate and
junior in right of payment, to the extent and in the manner set forth in the
Subordinated Indenture, to all Senior Indebtedness of the Company. See "--
Subordination under the Subordinated Indenture."
Reference is made to the applicable Prospectus Supplement which will
accompany this Prospectus for a description of the specific series of Debt
Securities being offered thereby, including, but not limited to, the following:
(1) the title of such Debt Securities, including whether the Debt Securities are
Senior Debt Securities or Junior Subordinated Debt and whether such Debt
Securities will be issued under the Senior Indenture, the Subordinated Indenture
or another indenture set forth in the Prospectus Supplement; (2) any limit upon
the aggregate principal amount of such Debt Securities; (3) the date or dates on
which the principal of and premium, if any, on such Debt Securities will mature
or the method of determining such date or dates; (4) the rate or rates (which
may be fixed or variable) at which such Debt Securities will bear interest, if
any, or the method of calculating such rate or rates; (5) the date or dates from
which interest, if any, will accrue or the method by which such date or dates
will be determined; (6) the date or dates on which
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interest, if any, will be payable and the record date or dates therefor; (7) the
place or places where principal of, premium, if any, and interest, if any, on
such Debt Securities will be payable; (8) with respect to Junior Subordinated
Debt Securities, the right, if any, of the Company to defer payment of interest
on such Debt Securities, the maximum length of any such deferral period and any
related terms, conditions or covenants; (9) the period or periods within which,
the price or prices at which, the currency or currencies (including currency
unit or units) in which, and the terms and conditions upon which, such Debt
Securities may be redeemed, in whole or in part, at the option of the Company;
(10) the obligation, if any, of the Company to redeem or purchase such Debt
Securities pursuant to any sinking fund or analogous provisions or upon the
happening of a specified event and the period or periods within which, the price
or prices at which and the other terms and conditions upon which, such Debt
Securities shall be redeemed or purchased, in whole or in part, pursuant to such
obligations; (11) the denominations in which such Debt Securities are authorized
to be issued if other than $1,000 and any integral multiple thereof, in the case
of registered Debt Securities and if other than $5,000 and any integral multiple
thereof, in the case of bearer Debt Securities; (12) if other than Dollars, the
currency or currencies (including currency units) in which Debt Securities may
be denominated and/or the currency or currencies (including currency units) in
which principal of, premium, if any, and interest, if any, on such Debt
Securities will be payable and whether the Company or the holders of any such
Debt Securities may elect to receive payments in respect of such Debt Securities
in a currency or currency unit other than that in which such Debt Securities are
stated to be payable; (13) if other than the principal amount thereof, the
portion of the principal amount of such Debt Securities which will be payable
upon declaration of the acceleration of the maturity thereof or the method by
which such portion shall be determined; (14) the person to whom any interest on
any such Debt Security shall be payable if other than the person in whose name
such Debt Security is registered on the applicable record date; (15) any
addition to, or modification or deletion of, any Event of Default or any
covenant of the Company specified in the Indenture with respect to such Debt
Securities; (16) the application, if any, of such means of defeasance or
covenant defeasance as may be specified for such Debt Securities; (17) whether
such Debt Securities are to be issued in whole or in part in the form of one or
more temporary or permanent global securities and, if so, the identity of the
depositary for such global security or securities; (18) under what
circumstances, if any, the Company will pay additional amounts on the Debt
Securities of that series held by a Person who is not a U.S. Person in respect
of taxes or similar charges withheld or deducted ("Additional Amounts") and, if
so, whether the Company will have the option to redeem such Debt Securities
rather than pay such Additional Amounts (and the terms of any such option); (18)
if the amount of payments of principal of, premium, if any, and interest, if any
shall be determined by reference to an index, formula or other method, the
index, formula, or other method by which such amounts shall be determinable;
(19) if the principal amount payable at stated maturity will not be determinable
as of any one or more dates prior to the stated maturity, the amount which shall
be deemed to be the principal amount thereof as of any date for any purpose;
(20) whether such Debt Securities shall be Registered or Bearer or both and any
restrictions as to the offering, sale, delivery or exchange of Bearer
Securities; (21) the forms of the Debt Securities and coupons, if any; and (22)
any other special terms pertaining to such Debt Securities. Unless otherwise
specified in the applicable Prospectus Supplement, the Debt Securities will not
be listed on any securities exchange. (Section 3.01.)
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities will be issued in fully-registered form without coupons. Where Debt
Securities of any series are issued in bearer form, the special restrictions and
considerations, including special offering restrictions and special Federal
income tax considerations, applicable to any such Debt Securities and to payment
on and transfer and exchange of such Debt Securities will be described in the
applicable Prospectus Supplement. Bearer Debt Securities will be transferable by
delivery. (Section 3.05.)
Debt Securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which at the time of
issuance is below market rates. Certain Federal income tax consequences and
special considerations applicable to any such Debt Securities, or to Debt
Securities issued at par that are treated as having been issued at a discount,
will be described in the applicable Prospectus Supplement.
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If the purchase price of any of the Debt Securities is payable in one or
more foreign currencies or currency units or if any Debt Securities are
denominated in one or more foreign currencies or currency units or if the
principal of, premium, if any, or interest, if any, on any Debt Securities is
payable in one or more foreign currencies or currency units, or by reference to
commodity prices, equity indices or other factors, the restrictions, elections,
certain Federal income tax considerations, specific terms and other information
with respect to such issue of Debt Securities and such foreign currency or
currency units or commodity prices, equity indices or other factors will be set
forth in the applicable Prospectus Supplement. In general, holders of such
series of Debt Securities may receive a principal amount on any principal
payment date, or a payment of premium, if any, on any premium interest payment
date or a payment of interest on any interest payment date, that is greater than
or less than the amount of principal, premium, if any, or interest otherwise
payable on such dates, depending on the value on such dates of the applicable
currency, commodity, equity index or other factor.
PAYMENT, REGISTRATION, TRANSFER AND EXCHANGE
Unless otherwise provided in the applicable Prospectus Supplement, payments
in respect of the Debt Securities will be made in the designated currency at the
office or agency of the Company maintained for that purpose as the Company may
designate from time to time. (Section 9.02.) Unless otherwise indicated in the
applicable Prospectus Supplement, payment of any installment of interest on Debt
Securities in registered form will be made to the person in whose name such Debt
Security is registered at the close of business on the regular record date for
such interest. (Section 3.07 (a).)
Payment in respect of Debt Securities in bearer form will be made in the
currency and in the manner designated in the applicable Prospectus Supplement,
subject to any applicable laws and regulations, at such paying agencies outside
the United States as the Company may appoint from time to time. The paying
agents outside the United States initially appointed by the Company for a series
of Debt Securities will be named in the Prospectus Supplement. The Company may
at any time designate additional paying agents or rescind the designation of any
paying agents, except that, if Debt Securities of a series are issuable as
Registered Securities, the Company will be required to maintain at least one
paying agent in each Place of Payment for such series and, if Debt Securities of
a series are issuable as Bearer Securities, the Company will be required to
maintain a paying agent in a Place of Payment outside the United States where
Debt Securities of such series and any coupons appertaining thereto may be
presented and surrendered for payment. (Section 9.02.)
Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities in registered form will be transferable or exchangeable at the agency
of the Company maintained for such purpose as designated by the Company from
time to time. (Sections 3.05 and 9.02.) Debt Securities may be transferred or
exchanged without service charge, other than any tax or other governmental
charge imposed in connection therewith. (Section 3.05.)
GLOBAL DEBT SECURITIES
Unless otherwise specified in the applicable Prospectus Supplement, the
Debt Securities of a series may be issued in whole or in part in the form of one
or more fully registered global securities (a "Registered Global Security") that
will be deposited with a depository (the "Depository") or with a nominee for the
Depository identified in the applicable Prospectus Supplement. In such a case,
one or more Registered Global Securities will be issued in a denomination or
aggregate denominations equal to the portion of the aggregate principal amount
of outstanding Debt Securities of the series to be represented by such
Registered Global Security or Securities. (Section 3.03.) Unless and until it is
exchanged in whole or in part for Debt Securities in definitive certificated
form, a Registered Global Security may not be registered for transfer or
exchange except as a whole by the Depository for such Registered Global Security
to a nominee of such Depository or by a nominee of such Depository to such
Depository or another nominee of such Depository or by such Depository or any
such nominee to a successor Depository for such series or a nominee of such
successor Depository and except in the circumstances described in the applicable
Prospectus Supplement. (Section 3.05.)
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The specific terms of the depository arrangement with respect to any
portion of a series of Debt Securities to be represented by a Registered Global
Security will be described in the applicable Prospectus Supplement. Unless
otherwise specified in the applicable Prospectus Supplement, the Company expects
that the following provisions will apply to such depository arrangements.
Ownership of beneficial interests in a Registered Global Security will be
limited to participants or persons that may hold interests through participants
(as such term is defined below). Upon the issuance of any Registered Global
Security, and the deposit of such Registered Global Security with or on behalf
of the Depository for such Registered Global Security, the Depository will
credit, on its book-entry registration and transfer system, the respective
principal amounts of the Debt Securities represented by such Registered Global
Security to the accounts of institutions ("participants") that have accounts
with the Depository or its nominee. The accounts to be credited will be
designated by the underwriters or agents engaging in the distribution of such
Debt Securities or by the Company, if such Debt Securities are offered and sold
directly by the Company. Ownership of beneficial interests by participants in
such Registered Global Security will be shown on, and the transfer of such
beneficial interests will be effected only through, records maintained by the
Depository for such Registered Global Security or by its nominee. Ownership of
beneficial interests in such Registered Global Security by persons that hold
through participants will be shown on, and the transfer of such beneficial
interests within such participants will be effected only through, records
maintained by such participants. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
certificated form. The foregoing limitations and such laws may impair the
ability to transfer beneficial interests in such Registered Global Security.
So long as the Depository for a Registered Global Security, or its nominee,
is the registered owner of such Registered Global Security, such Depository or
such nominee, as the case may be, will be considered the sole owner or holder of
the Debt Securities represented by such Registered Global Security for all
purposes under the applicable Indenture. Unless otherwise specified in the
applicable Prospectus Supplement and except as specified below, owners of
beneficial interests in such Registered Global Security will not be entitled to
have Debt Securities of the series represented by such Registered Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of Debt Securities of such series in certificated form and
will not be considered the holders thereof for any purposes under the relevant
Indenture. (Section 3.08.) Accordingly, each person owning a beneficial interest
in such Registered Global Security must rely on the procedures of the Depository
and, if such person is not a participant, on the procedures of the participant
through which such person owns its interest, to exercise any rights of a holder
under the relevant Indenture. The Depository may grant proxies and otherwise
authorize participants to give or take any request, demand, authorization,
direction, notice, consent, waiver or other action which a holder is entitled to
give or take under the relevant Indenture. The Company understands that, under
existing industry practices, if the Company requests any action of holders or if
any owner of a beneficial interest in such Registered Global Security desires to
give any notice or take any action which a holder is entitled to give or take
under the relevant Indenture, the Depository would authorize the participants to
give such notice or take such action, and such participants would authorize
beneficial owners owning through such participants to give such notice or take
such action or would otherwise act upon the instructions of beneficial owners
owning through them.
Unless otherwise specified in the applicable Prospectus Supplement,
payments with respect to principal, premium, if any, and interest, if any, on
Debt Securities represented by a Registered Global Security registered in the
name of a Depository or its nominee will be made to such Depository or its
nominee, as the case may be, as the registered owner of such Registered Global
Security.
The Company expects that the Depository for any Debt Securities represented
by a Registered Global Security, upon receipt of any payment of principal,
premium or interest, will immediately credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Registered Global Security as shown on the records
of such Depository. The Company also expects that payments by participants to
owners of beneficial interests in such Registered Global Security held through
such participants will be governed by standing instructions and customary
practices, as is now the case with the securities held for the accounts of
customers registered in "street names," and will be the responsibility of such
participants. None of the Company, the respective Trustees or any agent of the
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Company or the respective Trustees shall have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial interests of a Registered Global Security, or for maintaining,
supervising or reviewing any records relating to such beneficial interests.
(Section 3.08.)
Unless otherwise specified in the applicable Prospectus Supplement, if the
Depository for any Debt Securities represented by a Registered Global Security
is at any time unwilling or unable to continue as Depository or ceases to be a
clearing agency registered under the Exchange Act and a duly registered
successor Depository is not appointed by the Company within 90 days, the Company
will issue such Debt Securities in definitive certificated form in exchange for
such Registered Global Security. In addition, the Company may at any time and in
its sole discretion determine not to have any of the Debt Securities of a series
represented by one or more Registered Global Securities and, in such event, will
issue Debt Securities of such series in definitive certificated form in exchange
for all of the Registered Global Security or Securities representing such Debt
Securities. (Section 3.05.)
The Debt Securities of a series may also be issued in whole or in part in
the form of one or more bearer global securities (a "Bearer Global Security")
that will be deposited with a depository, or with a nominee for such depository,
identified in the applicable Prospectus Supplement. Any such Bearer Global
Security may be issued in temporary or permanent form. (Section 3.04.) The
specific terms and procedures, including the specific terms of the depository
arrangement, with respect to any portion of a series of Debt Securities to be
represented by one or more Bearer Global Securities will be described in the
applicable Prospectus Supplement.
CONSOLIDATION, MERGER OR SALE BY THE COMPANY
Unless otherwise specified in the applicable Prospectus Supplement, the
Company shall not consolidate with or merge with or into any other corporation
or sell its assets substantially as an entirety, unless: (i) the corporation
formed by such consolidation or into which the Company is merged or the
corporation which acquires its assets is organized and existing under the laws
of the United States or any state thereof; (ii) the corporation formed by such
consolidation or into which the Company is merged or which acquires the
Company's assets substantially as an entirety expressly assumes by supplemental
indenture the due and punctual payment of the principal of, premium, if any, and
any Additional Amounts or interest on, the Debt Securities and the performance
or observance of every covenant of the Company under each Indenture and the Debt
Securities; (iii) immediately after giving effect to such transaction, and
treating any indebtedness which becomes an obligation of the Company or a
Subsidiary of the Company as a result of such transaction as having been
incurred by the Company or such Subsidiary at the time of such transaction, no
Default or Event of Default exists and is continuing; and (iv) if, as a result
of such transaction, properties or assets of the Company would become subject to
an encumbrance which would not be permitted by the terms of any series of Debt
Securities, the Company or the successor corporation, as the case may be, shall
take such steps as are necessary to secure such Debt Securities equally and
ratably with all indebtedness secured thereunder. Upon any such consolidation,
merger or sale, the successor corporation formed by such consolidation, or into
which the Company is merged or to which such sale is made, shall succeed to, and
be substituted for the Company under each Indenture. (Section 7.01.)
EVENTS OF DEFAULT, NOTICE AND CERTAIN RIGHTS ON DEFAULT
Each Indenture provides that, if an Event of Default specified therein
occurs with respect to the Debt Securities of any series and is continuing, the
Trustee for such series or the holders of 25% in aggregate principal amount of
all of the outstanding Debt Securities of that series, by written notice to the
Company (and to the Trustee for such series, if notice is given by such holders
of Debt Securities), may declare the principal of (or, if the Debt Securities of
that series are Original Issue Discount Securities or Indexed Securities, such
portion of the principal amount specified in the Prospectus Supplement) and
accrued interest on all the Debt Securities of that series to be due and payable
(provided, with respect to any Debt Securities issued under the Subordinated
Indenture, that the payment of principal and interest on such Debt Securities
shall remain subordinated to the extent provided in the Subordinated Indenture).
(Section 5.02.)
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Unless otherwise specified in the applicable Prospectus Supplement, Events
of Default with respect to Debt Securities of any series are defined in each
Indenture as being: (a) default in payment of any interest on any Debt Security
of that series or any coupon appertaining thereto or any Additional Amount
payable with respect to Debt Securities of such series as specified in the
applicable Prospectus Supplement when the same becomes due and payable and the
same continues for 30 days; (b) default in payment of principal, or premium, if
any, at maturity or on redemption or otherwise, or in the making of a mandatory
sinking fund payment of any Debt Securities of that series when due; (c) default
continuing for 60 days after notice to the Company by the Indenture Trustee for
such series, or by the holders of 25% in aggregate principal amount of the Debt
Securities of such series then outstanding to the Company and the Indenture
Trustee, in the performance of any other agreement or covenant (other than an
agreement or covenant for which non-compliance is elsewhere specifically dealt
with in this paragraph) in the Debt Securities of that series, in the Indenture
or in any supplemental indenture or board resolution referred to therein under
which the Debt Securities of that series may have been issued; (d) a default
under any mortgage, agreement, indenture or instrument under which there may be
issued, or by which there may be evidenced any Debt of the Company, whether
existing now or in the future, in an aggregate principal amount then outstanding
of $25 million or more, which default (i) shall constitute a failure to pay any
portion of the principal of such Debt when due and payable after the expiration
of an applicable grace period with respect thereto or (ii) shall result in such
Debt becoming or being declared due and payable, and such acceleration shall not
be rescinded or annulled, or such Debt shall not be paid in full within a period
of 30 days after there has been given, to the Company by the Indenture Trustee
or to the Company and the Indenture Trustee by the holders of at least 25% in
aggregate principal amount of the Outstanding Debt Securities of such series
provided that such Event of Default will be remedied, cured or waived if the
default that resulted in the acceleration of such other indebtedness is
remedied, cured or waived; and (e) certain events of bankruptcy, insolvency or
reorganization of the Company. (Section 5.01.) The definition of "Event of
Default" in each Indenture specifically excludes a default under a secured debt
under which the obligee has recourse (exclusive of recourse for ancillary
matters such as environmental indemnities, misapplication of funds, costs of
enforcement, etc.) only to the collateral pledged for repayment, and where the
fair market value of such collateral does not exceed two percent of Total Assets
(as defined in the Indenture) at the time of the default. Events of Default with
respect to a specified series of Debt Securities may be added to the Indenture
and, if so added, will be described in the applicable Prospectus Supplement.
(Sections 3.01 and 5.01(7).)
At any time after a declaration of acceleration has been made with respect
to Debt Securities of any series but before a judgment or decree for payment has
been obtained by the applicable Indenture Trustee, the Holders of a majority in
principal amount of Outstanding Debt Securities of that series may rescind any
declaration of acceleration and its consequences, provided that all payments due
(other than those due as a result of acceleration) have been made and all Events
of Default have been cured or waived. (Section 5.02)
Each Indenture provides that the Indenture Trustee will, within 90 days
after the occurrence of a Default with respect to the Debt Securities of any
series, give to the holders of the Debt Securities of that series notice of all
Defaults known to it unless such Default shall have been cured or waived;
provided that except in the case of a Default in payment on the Debt Securities
of that series, the Indenture Trustee may withhold the notice if and so long as
a committee of its Responsible Officers in good faith determines that
withholding such notice is in the interests of the holders of the Debt
Securities of that series. (Section 6.06.) "Default" means any event which is,
or after notice or passage of time or both, would be, an Event of Default.
(Section 1.01.)
Each Indenture provides that the holders of a majority in aggregate
principal amount of the Debt Securities of each series affected (with each such
series voting as a class) may, subject to certain limited conditions, direct the
time, method and place of conducting any proceeding for any remedy available to
the Indenture Trustee for such series, or exercising any trust or power
conferred on such Indenture Trustee. (Section 5.08.)
Each Indenture includes a covenant that the Company will file annually with
the Indenture Trustee a certificate as to the Company's compliance with all
conditions and covenants of such Indenture. (Section 9.05.)
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The holders of a majority in aggregate principal amount of any series of
Debt Securities by notice to the Indenture Trustee for such series may waive, on
behalf of the holders of all Debt Securities of such series, any past Default or
Event of Default with respect to that series and its consequences except a
Default or Event of Default in the payment of the principal of, premium, if any,
or interest, if any, or any Additional Amounts on any Debt Security, and except
in respect of an Event of Default resulting from the breach of a covenant or
provision of either Indenture which, pursuant to the applicable Indenture,
cannot be amended or modified without the consent of the holders of each
outstanding Debt Security of such series affected. (Section 5.07.)
OPTION TO DEFER INTEREST PAYMENTS
If provided in the applicable Prospectus Supplement, the Company shall have
the right at any time and from time to time during the term of any series of
Junior Subordinated Debt to defer the payment of interest on such series for
such number of consecutive interest payment periods as may be specified in the
applicable Prospectus Supplement (each, an "Extension Period"), subject to the
terms, conditions and covenants, if any, specified in such Prospectus
Supplement, provided that such Extension Period may not extend beyond the stated
maturity of such Junior Subordinated Debt. Certain material United States
Federal income tax consequences and special considerations applicable to any
such Junior Subordinated Debt will be described in the applicable Prospectus
Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, at the
end of such Extension Period, the Company shall pay all interest then accrued
and unpaid together with interest thereon compounded semiannually at the rate
specified for the Junior Subordinated Debt of such series to the extent
permitted by applicable law ("Compound Interest"); provided, that during any
such Extension Period, (a) the Company shall not declare or pay dividends on,
make distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock (other than (i)
purchases or acquisitions of Common Stock of the Company in connection with the
satisfaction by the Company of its obligations under any employee or agent
benefit plans or the satisfaction by the Company of its obligations pursuant to
any contract or security outstanding on the date of such event requiring the
Company to purchase Common Stock of the Company, (ii) as a result of a
reclassification of the Company's capital stock or the exchange or conversion of
one class or series of the Company's capital stock for another class or series
of the Company's capital stock, (iii) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
(iv) dividends or distributions in Common Stock of the Company (or rights to
acquire capital stock) or repurchases or redemptions of capital stock solely
from the issuance or exchange of capital stock or (v) redemptions or repurchases
of any rights outstanding under a shareholder rights plan), (b) the Company
shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities issued by the Company that rank
pari passu in right of payment with or junior to the Junior Subordinated Debt of
such series, and (c) the Company shall not make any guarantee payments with
respect to the foregoing (other than payments pursuant to the Guarantee or the
Common Guarantee. Prior to the termination of any such Extension Period, the
Company may further defer payments of interest by extending the interest payment
period; provided, however, that, such Extension Period may not extend beyond the
maturity of the Junior Subordinated Debt of such series. Upon the termination of
any Extension Period and the payment of all amounts then due, the Company may
commence a new Extension Period, subject to the terms set forth in this section.
No interest during an Extension Period, except at the end thereof, shall be due
and payable, but the Company may prepay at any time all or any portion of the
interest accrued during an Extension Period. If the applicable Property Trustee
shall be the sole holder of the Junior Subordinated Debt of such series subject
to an Extension Period, the Company shall give the applicable Administrative
Trustee, the applicable Indenture Trustee and the applicable Property Trustee
notice of its selection of such Extension Period one Business Day prior to the
earlier of (i) the date distributions on the Capital Securities are payable or
(ii) the date the applicable Administrative Trustee is required to give notice
to the New York Stock Exchange (or other applicable self-regulatory
organization) or to holders of the Capital Securities of record or payment date
of such distribution. The applicable Administrative Trustee shall give notice of
the Company's selection of such Extension Period to the holders of the Capital
Securities. If the applicable Property Trustee shall not be the sole holder of
the Junior Subordinated Debt of such series subject to the Extension Period, the
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Company shall give the holders of the Junior Subordinated Debt of such series
subject to the Extension Period notice of its selection of such Extension Period
ten Business Days prior to the earlier of (i) the Interest Payment Date for the
series of Junior Subordinated Debt subject to the Extension Period or (ii) the
date upon which the Company is required to give notice to the New York Stock
Exchange (or other applicable self-regulatory organization) or to holders of the
Junior Subordinated Debt of such series subject to the Extension Period of the
record or payment date of such related interest payment.
MODIFICATION OF THE INDENTURES
Unless otherwise specified in the applicable Prospectus Supplement, each
Indenture contains provisions permitting the Company and the Indenture Trustee
to enter into one or more supplemental indentures without the consent of the
holders of any of the Debt Securities in order (i) to evidence the succession of
another corporation to the Company and the assumption of the covenants and
obligations of the Company under the Indenture and the Debt Securities by a
successor to the Company; (ii) to add to the covenants of the Company or
surrender any right or power of the Company; (iii) to add additional Events of
Default with respect to any series of Debt Securities; (iv) to add or change any
provisions to such extent as necessary to permit or facilitate the issuance of
Debt Securities in bearer form; (v) to change or eliminate any provision
affecting only Debt Securities not yet issued; (vi) to secure the Debt
Securities; (vii) to establish the form or terms of Debt Securities; (viii) to
evidence and provide for successor Indenture Trustees; (ix) if allowed without
penalty under applicable laws and regulations, to permit payment in respect of
Debt Securities in bearer form in the United States; (x) to correct any defect
or supplement any inconsistent provisions or to make any other provisions with
respect to matters or questions arising under such Indenture, provided that such
action does not adversely affect the interests of any holder of Debt Securities
of any series; or (xi) to cure any ambiguity or correct any mistake. The
Subordinated Indenture also permits the Company and the Indenture Trustee
thereunder to enter into such supplemental indentures to modify the
subordination provisions contained in the Subordinated Debenture except in a
manner adverse to any outstanding Debt Securities. (Section 8.01.)
Unless otherwise specified in the applicable Prospectus Supplement, each
Indenture also contains provisions permitting the Company and the Indenture
Trustee, with the consent of the holders of a majority in aggregate principal
amount of the outstanding Debt Securities of each series affected by such
supplemental indenture (with the Debt Securities of each series voting as a
class), to execute supplemental indentures adding any provisions to or changing
or eliminating any of the provisions of such Indenture or any supplemental
indenture or modifying the rights of the holders of Debt Securities of such
series, except that, without the consent of the holder of each Debt Security so
affected, no such supplemental indenture may: (i) change the time for payment of
principal or premium, if any, or interest or any Additional Amounts on any Debt
Security; (ii) reduce the principal of, or any installment of principal of, or
premium, if any, or interest or any Additional Amounts on any Debt Security, or
change the manner in which the amount of any of the foregoing is determined;
(iii) reduce the amount of premium, if any, payable upon the redemption of any
Debt Security; (iv) reduce the amount of principal payable upon acceleration of
the maturity of any Original Issue Discount or Index Security; (v) change the
currency or currency unit in which any Debt Security or any premium or interest
or any Additional Amounts thereon is payable; (vi) impair the right to institute
suit for the enforcement of any payment on or with respect to any Debt Security;
(vii) reduce the percentage in principal amount of the outstanding Debt
Securities affected thereby the consent of whose holders is required for
modification or amendment of such Indenture or for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults; (viii)
change the obligation of the Company to maintain an office or agency in the
places and for the purposes specified in such Indenture; (ix) modify the
provisions relating to the subordination of outstanding Debt Securities of any
series in a manner adverse to the holders thereof; or (x) modify the provisions
relating to waiver of certain defaults or any of the foregoing provisions.
(Section 8.02.)
SUBORDINATION UNDER THE SUBORDINATED INDENTURE
The Subordinated Indenture provides that any Junior Subordinated Debt
issued thereunder are subordinate and junior in right of payment to all Senior
Indebtedness to the extent provided in the
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Subordinated Indenture. (Section 12.01 of the Subordinated Indenture.) The
Subordinated Indenture defines the term "Senior Indebtedness" as: (i) all
indebtedness of the Company, whether outstanding on the date of the Subordinated
Indenture or thereafter created, incurred or assumed, which is for money
borrowed, or which is evidenced by a note or similar instrument given in
connection with the acquisition of any business, properties or assets, including
securities; (ii) any indebtedness of others of the kinds described in the
preceding clause (i) the payment of which the Company is responsible or liable
as guarantor or otherwise; and (iii) amendments, renewals, extensions and
refundings of any such indebtedness, unless in any instrument or instruments
evidencing or securing such indebtedness or pursuant to which the same is
outstanding, it is provided that such indebtedness is not senior in right of
payment to, or that such indebtedness is pari passu in right of payment with or
junior to, the Junior Subordinated Debt. The Senior Indebtedness shall continue
to be Senior Indebtedness and entitled to the benefits of the subordination
provisions irrespective of any amendment, modification or waiver of any term of
the Senior Indebtedness or extension or renewal of the Senior Indebtedness.
Senior Indebtedness does not include (A) any indebtedness of the Company to any
of its subsidiaries, (B) liabilities of the Company incurred in the ordinary
course of its business or (C) any indebtedness which by its terms is expressly
made pari passu in right of payment with or subordinated to the 8.85% Capital
Securities and the Guarantees. (Section 1.01 of the Subordinated Indenture.)
In the event and during the continuation of (i) a Company default in the
payment of any principal, interest, if any or premium, if any, or any Additional
Amounts on any Senior Indebtedness when the same becomes due and payable,
whether at maturity or at a date fixed for prepayment or declaration or
otherwise or (ii) an event of default with respect to any Senior Indebtedness
permitting the holders thereof to accelerate the maturity thereof and written
notice of such event of default (requesting that payments on Junior Subordinated
Debt cease) is given to the Company by the holders of Senior Indebtedness, then
unless and until such default in payment or event of default shall have been
cured or waived or shall have ceased to exist, no direct or indirect payment (in
cash, property or securities, by set-off or otherwise) shall be made or agreed
to be made on account of the Junior Subordinated Debt or interest thereon or in
respect of any repayment, redemption, retirement, purchase or other acquisition
of Junior Subordinated Debt. (Section 12.03 of the Subordinated Indenture.)
In the event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to the Company or its property, (ii) any proceeding for the liquidation,
dissolution or other winding-up of the Company, voluntary or involuntary,
whether or not involving insolvency or bankruptcy proceedings, (iii) any
assignment by the Company for the benefit of creditors or (iv) any other
marshaling of the assets and liabilities of the Company, all Senior Indebtedness
(including, without limitations interest accruing after the commencement of any
such proceeding, assignment or marshaling of assets) shall first be paid in full
or provision must be made for such payment in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of Senior Indebtedness before
any payment or distribution, whether in cash, securities or other property,
shall be made by the Company on account of Junior Subordinated Debt. In any such
event, any payment or distribution, whether in cash, securities or other
property (other than securities of the Company or any other corporation provided
for by a plan of reorganization or readjustment, the payment of which is
subordinate, at least to the extent provided in the subordination provisions of
the Subordinated Indenture with respect to the indebtedness evidenced by Junior
Subordinated Debt, to the payment of all Senior Indebtedness at the time
outstanding and to any securities issued in respect thereof under any such plan
of reorganization or readjustment), which would otherwise (but for the
subordination provisions) be payable or deliverable in respect of Junior
Subordinated Debt (including any such payment or distribution which may be
payable or deliverable by reason of the payment of any other indebtedness of the
Company being subordinated to the payment of Junior Subordinated Debt) shall be
paid or delivered directly to the holders of Senior Indebtedness, or to their
representative or trustee, in accordance with the priorities then existing among
such holders until all Senior Indebtedness shall have been paid in full.
(Section 12.02 of the Subordinated Indenture.) No present or future holder of
any Senior Indebtedness shall be prejudiced in the right to enforce
subordination of the indebtedness evidenced by Junior Subordinated Debt by any
act or failure to act on the part of the Company. (Section 12.11 of the
Subordinated Indenture.)
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Senior Indebtedness shall not be deemed to have been paid in full unless
the holders thereof shall have received cash, securities or other property equal
to the amount of such Senior Indebtedness then outstanding (Section 12.01 of the
Subordinated Indenture). Upon the payment in full of all Senior Indebtedness,
the holders of Junior Subordinated Debt shall be subrogated to all the rights of
any holders of Senior Indebtedness to receive any further payments or
distributions applicable to the Senior Indebtedness until all Junior
Subordinated Debt shall have been paid in full, and such payments or
distributions received by any holder of Junior Subordinated Debt, by reason of
such subrogation, of cash, securities or other property which otherwise would be
paid or distributed to the holders of Senior Indebtedness, shall, as between the
Company and its creditors other than the holders of Senior Indebtedness, on the
one hand, and the holders of Junior Subordinated Debt, on the other, be deemed
to be a payment by the Company on account of Senior Indebtedness, and not on
account of Junior Subordinated Debt. (Section 12.06 of the Subordinated
Indenture.)
The Subordinated Indenture provides that the foregoing subordination
provisions, insofar as they relate to any particular issue of Junior
Subordinated Debt, may be changed prior to such issuance. Any such change would
be described in the applicable Prospectus Supplement relating to such Junior
Subordinated Debt.
DEFEASANCE AND COVENANT DEFEASANCE
If indicated in the applicable Prospectus Supplement, the Company may elect
either (i) to defease and be discharged from any and all obligations with
respect to the Debt Securities of or within any series (except as otherwise
provided in the relevant Indenture) ("defeasance") or (ii) to be released from
its obligations with respect to certain covenants applicable to the Debt
Securities of or within any series ("covenant defeasance"), upon the deposit
with the relevant Indenture Trustee (or other qualifying trustee), in trust for
such purpose, of money and/or Government Obligations which through the payment
of principal, interest, premium, if any, and any Additional Amounts in
accordance with their terms will provide money in an amount sufficient, without
reinvestment, to pay the principal of, any premium or interest on and any
Additional Amounts on such Debt Securities and any coupons appertaining thereto
on the Maturity or redemption, as the case may be, and any mandatory sinking
fund or analogous payments thereon. As a condition to defeasance or covenant
defeasance, the Company must deliver to the Indenture Trustee an Opinion of
Counsel to the effect that the Holders of such Debt Securities will not
recognize income, gain or loss for Federal income tax purposes as a result of
such defeasance or covenant defeasance and will be subject to Federal income tax
on the same amounts and in the same manner and at the same times as would have
been the case if such defeasance or covenant defeasance had not occurred. Such
Opinion of Counsel, in the case of defeasance under clause (i) above, must refer
to and be based upon a ruling of the Internal Revenue Service or a change in
applicable Federal income tax law occurring after the date of the relevant
Indenture. (Article IV.) If indicated in the applicable Prospectus Supplement,
in addition to obligations of the United States or an agency or instrumentality
thereof, Government Obligations may include obligations of the government or an
agency or instrumentality of the government issuing the currency or currency
unit in which Debt Securities of such series are payable. (Section 3.01.)
In addition, with respect to the Subordinated Indenture, in order to be
discharged no event or condition shall exist that, pursuant to certain
provisions described under "-- Subordination under the Subordinated Indenture"
above, would prevent the Company from making payments of principal of (and
premium, if any) and interest, if any, and any Additional Amounts on Junior
Subordinated Debt at the date of the irrevocable deposit referred to above.
(Section 4.06 of the Subordinated Indenture.)
The Company may exercise its defeasance option with respect to such Debt
Securities notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its defeasance option, payment of such Debt Securities
may not be accelerated because of a Default or an Event of Default. (Section
4.04.) If the Company exercises its covenant defeasance option, payment of such
Debt Securities may not be accelerated by reason of a Default or an Event of
Default with respect to the covenants to which such covenant defeasance is
applicable. However, if such acceleration were to occur by reason of another
Event of Default, the realizable value at the acceleration date of the money and
Government Obligations in the defeasance trust could be less than the principal
and interest then due on such Debt Securities, in that the
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required deposit in the defeasance trust is based upon scheduled cash flow
rather than market value, which will vary depending upon interest rates and
other factors.
THE TRUSTEES
Unless otherwise specified in the applicable Prospectus Supplement, First
Union Bank will be the Indenture Trustee under the Senior Indenture, and First
Union Bank will be the Indenture Trustee under the Subordinated Indenture. The
Company may also maintain banking and other commercial relationships with each
of the Trustees and their affiliates in the ordinary course of business.
DESCRIPTION OF CAPITAL STOCK
The following description does not purport to be complete and is qualified
in its entirety by reference to the Company's Articles of Incorporation and the
Company's By-laws.
GENERAL
The Company is currently authorized to issue 75,000,000 shares of Class A
Common Stock, no par value, and 50,000,000 shares of Class B Common Stock, no
par value. On May 8, 1998, the Company's shareholders approved an amendment to
its Articles of Incorporation to increase the Company's authorized Class A
Common Stock from 75,000,000 shares to 180,000,000 shares. The Company will be
authorized to issue 180,000,000 shares of Class A Common Stock upon approval of
such amendment by the Iowa Commissioner of Insurance and the Iowa Attorney
General and upon filing such amendment with the Iowa Secretary of State. As of
December 31, 1997 there were 29,734,918 shares of Class A Common Stock
outstanding and 5,000,000 shares of Class B Common Stock outstanding, of which
12,380,300 of the Class A Common Stock and 5,000,000 of the Class B Common Stock
were held by AmerUs Group. In addition, 1,400,000 and 150,000 shares of Class A
Common Stock are reserved for issuance under options granted or available for
grant under the Stock Plan and Director Plan, respectively, and 5 million shares
of Class A Common Stock are reserved for issuance upon conversion of Class B
Common Stock. At its meeting on February 19, 1998 the Board of Directors
approved a resolution recommending that the Company solicit shareholder approval
to increase the authorized issuance of Class A Common Stock, no par value, from
75,000,000 to 180,000,000 shares. The Company intends to seek such approval at
its annual meeting of stockholders scheduled for May 8, 1998. The Company is
also authorized to issue 20 million shares of preferred stock on such terms as
determined by its Board of Directors (the "Preferred Stock"). See "-- Preferred
Stock."
The Class B Common Stock (or any interest therein) may only be owned by
AMHC or a mutual insurance holding company or intermediate holding company which
is expressly authorized by applicable law to own or have a beneficial interest
in the Class B Common Stock (a "Permitted Class B Holder"). Under current Iowa
law, a Permitted Class B Holder must at all times possess the right to cast at
least a majority of the votes of the outstanding shares of the capital stock of
the Company.
The Company's Articles of Incorporation provide that the number of
outstanding shares of Class A Common Stock (excluding shares of Class A Common
Stock owned by AMHC or another Permitted Class B Holder) shall exceed the number
of outstanding shares of Class B Common Stock plus the shares of Class A Common
Stock owned by AMHC or another Permitted Class B Holder only as authorized by
law and never by a ratio of more than three to one.
COMMON STOCK
Each share of Class A Common Stock will entitle its holder to one vote per
share on all matters upon which shareholders are entitled to vote (including
election of directors, mergers, sales of assets, dissolution and amendments to
the Articles of Incorporation). Each share of Class B Common Stock will entitle
its holder to one vote per share on all such matters except that, if on the
record date for determining shares eligible to vote, the number of outstanding
shares of Class A Common Stock (excluding shares of Class A Common Stock owned
by a Permitted Class B Holder) and any outstanding shares of Preferred Stock
having voting rights, if
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any (excluding shares of Preferred Stock owned by a Permitted Class B Holder),
equals or exceeds the number of outstanding shares of Class B Common Stock plus
the number of outstanding shares of Class A Common Stock owned by a Permitted
Class B Holder, the voting rights for each share of Class B Common Stock shall
be equal to the aggregate number of shares of Class A Common Stock (excluding
shares of Class A Common Stock owned by a Permitted Class B Holder) and
Preferred Stock having voting rights, if any, then outstanding (excluding shares
of Preferred Stock owned by a Permitted Class B Holder) plus one divided by the
number of outstanding shares of Class B Common Stock. Accordingly, even if the
number of outstanding shares of Class A Common Stock (excluding shares of Class
A Common Stock owned by a Permitted Class B Holder) exceeds the number of
outstanding shares of Class B Stock, the Permitted Class B Holder will always
have a majority of the votes.
Both classes of Common Stock will generally vote together as a single class
on all matters; however, the holders of Class A Common Stock and the holders of
Class B Common Stock will vote separately as a class with respect to certain
matters for which class voting is required under Iowa law, including (i)
approval of proposed amendments to the Company's Articles of Incorporation that,
among other things, would alter the designation, rights, preferences or
limitations of all or part of the shares of their respective class, increase or
decrease the aggregate number of authorized shares of such class, effect an
exchange or reclassification or create a right of exchange of all or part of the
shares of one class into shares of another class, create a new class of shares
or increase the rights, preferences, or number of authorized shares of any
existing class so that it would have rights or preferences with respect to
distribution or to dissolution that are prior, superior, or substantially equal
to, the shares of such class, provided that the Class A Common Stock and Class B
Common Stock are not affected by such amendment in the same or a substantially
similar way; (ii) approval of a proposed plan of merger or consolidation if such
plan contains any provisions which, if contained in a proposed amendment to the
Articles of Incorporation, would entitle such class of shares to vote as a class
(with certain limited exceptions for shareholders of the surviving corporation);
and (iii) approval of a plan of share exchange (to be voted upon by each class
included in the exchange).
There is no provision in the Company's Articles of Incorporation permitting
cumulative voting in the election of directors.
No cash dividends may be declared in any fiscal year on the Class B Common
Stock until and unless a cash dividend has been declared on the Class A Common
Stock. Any cash dividends will be declared and paid equally on both classes of
Common Stock.
The classes of Common Stock will rank equally and have equal rights with
respect to distributions and all other rights, including distributions upon
liquidation of the Company. However, in the case of dividends or other
distributions payable on the Common Stock in shares of such stock, including
distributions pursuant to stock splits or stock dividends, only Class A Common
Stock will be distributed with respect to Class A Common Stock and only Class B
Common Stock will be distributed with respect to Class B Common Stock. In no
event will either class of Common Stock be split, divided or combined unless the
other is split, divided or combined equally.
So long as the number of outstanding shares of Class A Common Stock
(excluding shares of Class A Common Stock owned by a Permitted Class B Holder)
shall exceed the number of outstanding shares of Class B Common Stock plus the
outstanding shares of Class A Common Stock owned by AMHC or another Permitted
Class B Holder only as authorized by law and never by a ratio of more than three
to one, the Class B Common Stock will be convertible at all times into Class A
Common Stock on a share-for-share basis by surrender of certificates to the
transfer agent for the Company. Such conversion will be without cost to the
shareholder, except for any transfer taxes which may be payable if certificates
for Class A Common Stock are issued in a name other than the one in which the
surrendered certificate is registered. Therefore, shareholders who subsequently
desire to sell some or all of their shares of Class B Common Stock may convert
those shares into an equal number of shares of Class A Common Stock and sell the
shares of Class A Common Stock in the public market. The Company will be
required to reserve shares of Class A Common Stock sufficient for issuance upon
conversion of Class B Common Stock. All shares of Class B Common Stock
surrendered upon conversion will have the status of authorized but unissued
shares of Class B Common Stock.
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The Articles of Incorporation provide that a Permitted Class B Holder has
the preemptive right to purchase Common Stock to the extent necessary to
maintain the ratio of Class A Common Stock to Class B Common Stock set forth in
the preceding paragraph. The Amended and Restated Intercompany Agreement dated
as of December 1, 1996 among AMHC, AmerUs Group and the Company also affords the
AmerUs Affiliated Group certain equity purchase rights.
In the event that AMHC (or any successor mutual insurance holding company)
is demutualized and is converted into a stock company pursuant to Iowa law, then
immediately upon such conversion each share of the Class B Common Stock shall
automatically be converted into one share of Class A Common Stock. AMHC has no
present plans to demutualize.
A Permitted Class B Holder may pledge, subject to a security interest or
lien, encumber, or otherwise hypothecate shares of Class B Common Stock in
excess of the number of shares of Class B Common Stock which carry the right to
cast at least a majority of the votes of the outstanding shares of capital stock
of the Company having voting rights. However, except for a transfer to a
Permitted Class B Holder, a conversion of Class B Common Stock into Class A
Common Stock and except as described in the preceding sentence, no shares of
Class B Common Stock may be conveyed, pledged or otherwise transferred. Any
conveyance, transfer, assignment, pledge, security interest, lien, encumbrance
or hypothecation or alienation by AMHC or any intermediate holding company, in
or on the majority of the voting shares of AmerUs Life 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 a majority
of such voting shares.
All shares of Common Stock offered hereby, or issuable upon conversion,
exchange or exercise of Securities, will, when issued, be fully paid and
non-assessable. The Class A Common Stock is listed on the New York Stock
Exchange under the symbol "AMH."
The Prospectus Supplement relating to an offering of Common Stock will
describe terms relevant thereto, including the number of shares offered, the
initial offering price, market price and dividend information.
PREFERRED STOCK
The Board of Directors of the Company is authorized, subject to any
limitations prescribed by law, from time to time to issue up to an aggregate of
20 million shares of Preferred Stock in one or more series, each of such series
to have such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other special
rights, and such qualifications, limitations or restrictions thereof, as shall
be determined by the Board of Directors in a resolution or resolutions providing
for the issue of such Preferred Stock and as shall be described in the
Prospectus Supplement relating to a particular series of Preferred Stock offered
thereby; provided, however, that no Preferred Stock may have more than one vote
per share. Thus, any series may, if so determined by the Board of Directors,
have full voting rights with the Class A Common Stock or superior or limited
voting rights, be convertible into Class A Common Stock or another security of
the Company, and have such other relative rights, preferences and limitations as
the Company's Board of Directors shall determine; provided, however, that no
Preferred Stock may have more than one vote per share.
The applicable Prospectus Supplement will describe the following terms of
any series of Preferred Stock in respect of which this Prospectus is being
delivered (to the extent applicable to such Preferred Stock): (i) the specific
designation, number of shares, seniority and initial public offering or purchase
price; (ii) any liquidation preference per share; (iii) any date of maturity;
(iv) any redemption, repayment or sinking fund provisions; (v) any dividend rate
or rates and the dates on which any such dividends will be payable (or the
method by which such rates or dates will be determined) and whether such
dividends will be cumulative or non-cumulative; (vi) any voting rights (which
may not exceed one vote per share); (vii) if other than the currency of the
United States of America, the currency or currencies, including currency units
and composite currencies, in which such Preferred Stock is denominated and/or in
which payments will or may be payable; (viii) the method by which amounts in
respect of such Preferred Stock may be calculated and any commodities,
currencies or indices, or value, rate or price, relevant to such calculation;
(ix) whether the
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Preferred Stock is convertible or exchangeable and, if so, the securities or
rights into which such Preferred Stock is convertible or exchangeable (which may
include other Preferred Stock, Debt Securities, Common Stock or other securities
or rights of the Company (including rights to receive payment in cash or
securities based on the value, rate or price of one or more specified
commodities, currencies or indices) or a combination of the foregoing), and the
terms and conditions upon which such conversions or exchanges will be effected,
including the initial conversion or exchange prices or rates, the conversion or
exchange period and any other related provisions; (x) the place or places where
dividends and other payments on the Preferred Stock will be payable; and (xi)
any additional voting, dividend, liquidation, redemption and other rights,
preferences, privileges, limitations and restrictions.
As described under "Description of Depositary Shares", the Company may, at
its option, elect to offer Depositary Shares evidenced by depositary receipts
("Depositary Receipts"), each representing an interest (to be specified in the
applicable Prospectus Supplement relating to the particular series of the
Preferred Stock) in a share of the particular series of the Preferred Stock
issued and deposited with a Preferred Stock Depositary (as defined herein) in
lieu of offering full shares of such series of Preferred Stock.
All shares of Preferred Stock offered hereby, or issuable upon conversion,
exchange or exercise of Securities, will, when issued, be fully paid and
non-assessable.
CAPITAL SECURITIES OF AMERUS CAPITAL I
AmerUs Capital I, a Delaware business trust and a wholly-owned subsidiary
of the Company, issued $86 million of 8.85% Capital Securities (the "8.85%
Capital Securities") in 1997 as part of the Company's financing plan. The assets
of such trust are invested in Subordinated Debt Securities of the Company, which
debt securities have a stated maturity of thirty years from their date of
issuance. If the Company redeems all or a portion of the Subordinated Debt
Securities, AmerUs Capital I must redeem a corresponding amount of the 8.85%
Capital Securities.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND BY-LAWS OF THE COMPANY
The following discussion is a summary of certain provisions of the Articles
of Incorporation and By-laws of the Company relating to shareholder voting
rights, advance notice requirements and other provisions which may be deemed to
have an "anti-takeover" effect. In addition to these provisions, regulatory
restrictions on dispositions of Common Stock by the Company's parent corporation
as well as the inability of the holders of the Class A Common Stock to elect a
majority of the Company's Board of Directors may also deter attempts to effect,
or prevent the consummation of, a change in control of the Company. See
"Description of Capital Stock -- Common Stock." These and other provisions
affect shareholder rights and should be given careful attention. The following
description of certain of these provisions is necessarily general and is
qualified in its entirety by reference to the Company's Articles of
Incorporation and By-laws, copies of which are included as exhibits to the
Registration Statement of which this Prospectus is a part.
ISSUANCE OF CLASS A COMMON STOCK, PREFERRED STOCK AND OTHER RIGHTS
The Company believes that its ability to issue, by action of a majority of
the Company's entire Board of Directors, and without shareholder consent, the
authorized but unissued shares of Class A Common Stock, shares of Preferred
Stock and other rights will provide the Company with the flexibility necessary
to meet its future needs without experiencing the time delay of having to seek
shareholder approval. Unissued shares of Class A Common Stock and Preferred
Stock will be issuable from time to time for any corporate purpose, including,
without limitation, stock splits, stock dividends, employee benefit and
compensation plans, acquisition and public or private sales for cash as a means
of raising capital. It is possible that the Company's Board of Directors might
use its authority (subject to the restrictions referred to above) to issue Class
A Common Stock, Preferred Stock or other rights in a way that could deter or
impede the completion of a tender offer or other attempt to gain control of the
Company of which the Company's Board of Directors does not approve. The Company
does not have any predetermined plans or commitments to use its authority to
effect
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any such issuance, but reserves the right to take any action in the future which
the Company's Board of Directors deems to be in the best interests of the
shareholders and the Company under the circumstances.
It is not possible to state the actual effect of any issuance of Preferred
Stock upon the rights of holders of Class A Common Stock because the Company's
Board of Directors has not determined any issuance price or prices, terms or
rights relating to Preferred Stock. However, such effects might include (i)
restrictions on Class A Common Stock dividends if Preferred Stock dividends have
not been paid; (ii) dilution of the voting power and equity interest of existing
holders of Class A Common Stock to the extent that any Preferred Stock series
has voting rights or would acquire voting rights upon the occurrence of certain
events (such as the failure to pay dividends for a specified period) or that any
Preferred Stock series is convertible into Class A Common Stock; and (iii)
current holders of Class A Common Stock not being entitled to share in the
Company's assets upon liquidation, dissolution or winding-up until satisfaction
of any liquidation preferences granted to any series of Preferred Stock.
BOARD OF DIRECTORS
The Articles of Incorporation provide that the number of Company directors
will be determined pursuant to the By-laws, but will not be less than seven or
more than 21 directors (subject to the rights of the holders of any series of
Preferred Stock). The By-laws provide that the exact number of directors will be
determined from time to time by the affirmative vote of a majority of the
Company's entire Board of Directors. At any meeting of the Company's Board of
Directors, a majority of the Company's entire Board of Directors will constitute
a quorum for the transaction of business, and subject to certain exceptions, at
any meeting at which a quorum is present the affirmative vote of a majority of
the directors present will constitute the act of the Company's Board of
Directors. The Company's Board of Directors is divided into three classes,
designated Classes I, II and III, which must be as nearly equal in number as
possible. Directors of Class I hold office for a term expiring at the annual
meeting of shareholders to be held in 2000, directors of Class II hold office
for a term expiring at the annual meeting of shareholders to be held in 1998 and
directors of Class III hold office for a term expiring at the annual meeting of
shareholders to be held in 1999. At each annual meeting of shareholders
following such initial classification and election, the respective successors of
each class shall be elected for three-year terms, and each director will hold
office until such annual meeting and until his or her successor is elected and
qualified, unless the director dies, resigns, is disqualified or is removed from
office. Thus, approximately two-thirds of the members of the Board of Directors
at any time will have had prior board experience. With such a staggered Board of
Directors, at least two annual meetings will normally be required to effect a
change in the composition of a majority of the Board of Directors.
Under the Iowa Business Corporation Act (the "IBCA") and the Company's
Articles of Incorporation, and subject to the rights of the holders of any
series of Preferred Stock, a majority of the Board of Directors though less than
a quorum, or the sole remaining director, may fill vacancies on the Board of
Directors or newly created directorships resulting from any increase in the
authorized number of directors. The Articles of Incorporation provide that the
election of directors need not be by written ballot unless the By-laws so
provide. The By-laws do not require the use of such a written ballot. The
By-laws provide that the holders of a majority of shares then entitled to vote
if an election of directors were held may remove any director or the entire
Board of Directors, with or without cause.
LIMITATIONS ON CALLING SPECIAL MEETINGS OF SHAREHOLDERS
Under Iowa law, special meetings of shareholders may be called by the Board
of Directors or by such other persons as may be authorized by the articles of
incorporation or the by-laws. In the case of the Company, the By-laws provide
that special meetings may be called by the Chairman, the President, the
Company's Board of Directors pursuant to a resolution adopted by not less than a
majority of the total number of directors or at the request of the holders of
not less than 10% of the combined voting power of the then outstanding stock of
the Company entitled to vote generally in the election of directors. The notice
for a special meeting must set forth the purpose or purposes of the meeting and,
except as otherwise required by law or the Articles of Incorporation, no
business will be transacted at any special meeting of shareholders other than
the items of business stated in the notice.
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ADVANCE NOTICE REQUIREMENTS
The By-laws establish advance notice procedures with regard to (i) the
nomination, other than by or at the direction of the Company's Board of
Directors, of candidates for election to the Company's Board of Directors (the
"Nomination Provision") and (ii) certain business to be brought before an annual
meeting of shareholders of the Company (the "Business Provision").
The Nomination Provision, by requiring advance notice of nominations by
shareholders, affords the Company's Board of Directors a meaningful opportunity
to consider the qualifications of the proposed nominees and, to the extent
deemed necessary or desirable by the Company's Board of Directors, to inform
shareholders about such qualifications.
The Business Provision, by requiring advance notice of business proposed to
be brought before an annual meeting, provides a more orderly procedure for
conducting annual meetings of shareholders and provides the Company's Board of
Directors with a meaningful opportunity prior to the meeting to inform
shareholders, to the extent deemed necessary or desirable by the Company's Board
of Directors, of any business proposed to be conducted at such meeting, together
with any recommendation of the Company's Board of Directors. The Business
Provision does not affect the right of shareholders to make shareholder
proposals for inclusion in proxy statements for the Company's annual meetings of
shareholders pursuant to the rules of the Commission. In addition, neither the
Nomination Provision nor the Business Provision will prevent any shareholder or
shareholders holding at least 10% of the shares entitled to vote on a particular
matter from requesting a special meeting with respect to such matter as
described above in "-- Limitations on Calling Special Meetings of Shareholders."
Although these By-law provisions do not give the Company's Board of
Directors any power to approve or disapprove of shareholder nominations for the
election of directors or of any other business desired by shareholders to be
conducted at an annual meeting, they may make it difficult for a third party to
conduct a solicitation of proxies to elect its own slate of directors or
otherwise attempt to obtain control of the Company, even if such a solicitation
or attempt might be beneficial to the Company and its shareholders.
AMENDMENT OF ARTICLES OF INCORPORATION AND BY-LAWS
Except to the extent the Articles of Incorporation or By-laws otherwise
provide, the Company's Board of Directors may, upon the affirmative vote of a
majority of the entire Board, amend or repeal any By-law. The Articles of
Incorporation may be amended with the affirmative vote of the holders of a
majority of the outstanding voting securities of the Company having the right to
vote generally in the election of directors; provided, that any proposed
amendment to the Articles of Incorporation which would alter the provision
relating to the ratio of outstanding shares of Class A Common Stock to
outstanding shares of Class B Common Stock would require the approval of a
majority of the outstanding shares of Class A Common Stock and Class B Common
Stock and a majority of the outstanding shares of Class A Common Stock
(excluding shares owned by the Permitted Class B Holders). Under Iowa law,
certain proposed amendments to the Articles of Incorporation which adversely
affect the rights of a particular class of stock must be approved by a majority
of such class.
STATE STATUTORY PROVISIONS
Any merger or acquisition of the Company by another entity or the
acquisition or attempted acquisition of more than 10% of the stock of the
Company is subject to regulatory approval by the Iowa Commissioner.
Section 490.1108 of the IBCA provides that in considering acquisition
proposals, directors may consider, in addition to the consideration of the
effects of any action on shareholders, the effects on the Company's employees,
suppliers, creditors, customers and the communities in which it operates, as
well as the long-term and short-term interests of the Company. Consideration of
any or all community interest factors is not a violation of the business
judgment rule, even if the directors reasonably determine that effects on a
community or other factors outweigh the financial or other benefits to the
Company or a shareholder or group of shareholders. Section 490.624A of the IBCA
also includes authorization of "poison pills" which include,
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without limitation, terms and conditions of stock rights or options issued by a
corporation that preclude or limit the exercise, transfer or receipt of stock
rights by persons owning or offering to acquire a specified number or percentage
of a corporation's outstanding shares. Unlike most states, Iowa does not
presently have a "business combination" law prohibiting business combinations
with a shareholder who holds over a specified percentage of stock for less than
a specified period after crossing the threshold.
The foregoing provisions of state law could have the effect of delaying,
deferring or preventing a change in control of the Company if the Board of
Directors determines that a change of control is not in the best interests of
the Company, its shareholders and other constituencies. In addition, the
regulatory restrictions on the acquisition of securities of the Company may also
deter attempts to effect, or prevent the consummation of, a change in control of
the Company.
Certain provisions of the Articles of Incorporation and the By-laws may
make it more difficult to effect a change in control of the Company if the Board
of Directors determines that such action would not be in the best interests of
the shareholders. It could be argued, contrary to the belief of the Board of
Directors, that such provisions are not in the best interests of the
shareholders to the extent that they will have the effect of tending to
discourage possible takeover bids, which might be at prices involving a premium
over then recent market quotations for the Common Stock. The most important of
those provisions are described below.
The Articles of Incorporation authorize the establishment of a classified
Board of Directors pursuant to the By-laws. The By-laws, in turn, provide that
the Directors serve staggered three-year terms, with the members of only one
class being elected in any year. A classified Board of Directors may increase
the difficulty of removing incumbent directors, providing such directors with
enhanced ability to retain their positions. A classified Board of Directors may
also make the acquisition of control of the Company by a third party by means of
a proxy contest more difficult. In addition, the classification may make it more
difficult to replace a majority of directors for business reasons unrelated to a
change in control.
As discussed above, Preferred Stock may be issued from time to time in one
or more series with such rights, preferences, limitations and restrictions as
may be determined by the Board of Directors. The issuance of Preferred Stock
could be used, under certain circumstances, as a method of delaying or
preventing a change of control of the Company and could have a detrimental
effect on the rights of holders of Common Stock, including loss of voting
control.
The provisions of the Articles of Incorporation regarding the classified
Board of Directors and certain business combination transactions may not be
amended without the affirmative approval of holders of not less than 80% of the
outstanding voting stock of the Company.
The By-laws may be amended by majority vote of the Board of Directors.
DESCRIPTION OF WARRANTS
The Company may issue Warrants to purchase Debt Securities, Preferred
Stock, Common Stock or any combination thereof, and such Warrants may be issued
independently or together with any such Securities and may be attached to or
separate from such Securities. Each series of Warrants will be issued under a
separate warrant agreement (each a "Warrant Agreement") to be entered into
between the Company and a warrant agent ("Warrant Agent"). The Warrant Agent
will act solely as an agent of the Company in connection with the Warrants of
each such series and will not assume any obligation or relationship of agency
for or with holders or beneficial owners of Warrants. The following sets forth
certain general terms and provisions of the Warrants offered hereby. Further
terms of the Warrants and the applicable Warrant Agreement will be set forth in
the applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of any series
of Warrants in respect of which this Prospectus is being delivered, including
the following: (i) the title of such Warrants; (ii) the aggregate number of such
Warrants; (iii) the price or prices at which such Warrants will be issued; (iv)
the currency or currencies, including currency units or composite currencies, in
which the price of such Warrants may be payable; (v) the designation and terms
of the Securities (other than Capital Securities and Common
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Securities) purchasable upon exercise of such Warrants; (vi) the price at which
and the currency or currencies, including currency units or composite
currencies, in which the Securities (other than Capital Securities and Common
Securities) purchasable upon exercise of such Warrants may be purchased; (vii)
the date on which the right to exercise such Warrants shall commence and the
date on which such right shall expire; (viii) whether such Warrants will be
issued in registered form or bearer form; (ix) if applicable, the minimum or
maximum amount of such Warrants which may be exercised at any one time; (x) if
applicable, the designation and terms of the Securities (other than Capital
Securities and Common Securities) with which such Warrants are issued and the
number of such Warrants issued with each such Security; (xi) if applicable, the
date on and after which such Warrants and the related Securities (other than
Capital Securities and Common Securities) will be separately transferable; (xii)
information with respect to book-entry procedures, if any; (xiii) if applicable,
a discussion of certain United States Federal income tax considerations; and
(xiv) any other terms of such Warrants, including terms, procedures and
limitations relating to the exchange and exercise of such Warrants.
DESCRIPTION OF CAPITAL SECURITIES OF THE AMERUS TRUSTS
Each AmerUs Trust may issue, from time to time, only one series of Capital
Securities having terms described in the Prospectus Supplement relating thereto.
The Declaration of each AmerUs Trust will authorize the Administrative Trustees
of such AmerUs Trust to issue on behalf of such AmerUs Trust one series of
Capital Securities. Each Declaration will be qualified as an indenture under the
Trust Indenture Act. The Property Trustee, an independent trustee, will act as
indenture trustee for the Capital Securities for purposes of compliance with the
provisions of the Trust Indenture Act. The Capital Securities will have such
terms, including distributions, redemption, voting, liquidation rights and such
other preferred, deferred or other special rights or such restrictions as shall
be established by the Administrative Trustees in accordance with the applicable
Declaration or as shall be set forth in the Declaration or made part of the
Declaration by the Trust Indenture Act. Reference is made to any Prospectus
Supplement relating to the Capital Securities of an AmerUs Trust for specific
terms of the Capital Securities, including, to the extent applicable, (i) the
distinctive designation of such Capital Securities, (ii) the number of Capital
Securities issued by such AmerUs Trust, (iii) the annual distribution rate (or
method of determining such rate) for Capital Securities issued by such AmerUs
Trust and the date or dates upon which such distributions shall be payable
(provided, however, that distributions on such Capital Securities shall, subject
to any deferral provisions, and any provisions for payment of defaulted
distributions, be payable on a quarterly basis to holders of such Capital
Securities as of a record date in each quarter during which such Capital
Securities are outstanding), (iv) any right of such AmerUs Trust to defer
quarterly distributions on the Capital Securities as a result of an interest
deferral right exercised by the Company on any Junior Subordinated Debt held by
such AmerUs Trust, (v) whether distributions on Capital Securities shall be
cumulative, and, in the case of Capital Securities having such cumulative
distribution rights, the date or dates or method of determining the date or
dates from which distributions on Capital Securities shall be cumulative, (vi)
the amount or amounts which shall be paid out of the assets of such AmerUs Trust
to the holders of Capital Securities upon voluntary or involuntary dissolution,
winding-up or termination of such AmerUs Trust, (vii) the obligation or option,
if any, of such AmerUs Trust to purchase or redeem Capital Securities and the
price or prices at which, the period or periods within which and the terms and
conditions upon which Capital Securities shall be purchased or redeemed, in
whole or in part, pursuant to such obligation or option with such redemption
price to be specified in the applicable Prospectus Supplement, (viii) the voting
rights, if any, of Capital Securities in addition to those required by law,
including the number of votes per Capital Security and any requirement for the
approval by the holders of Capital Securities as a condition to specified action
or amendments to the Declaration, (ix) the terms and conditions, if any, upon
which Junior Subordinated Debt held by such AmerUs Trust may be distributed to
holders of Capital Securities, and (x) any other relevant rights, preferences,
privileges, limitations or restrictions applicable to Capital Securities
consistent with the Declaration or with applicable law. All Capital Securities
offered hereby will be guaranteed by the Company to the extent set forth below
under "Description of Guarantees." The Guarantee issued for the benefit of the
holders of the Capital Securities, when taken together with the Company's
back-up undertakings, consisting of its obligations under each Declaration
(including the obligation to pay expenses of each AmerUs Trust), the
Subordinated
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Indenture and any applicable supplemental indentures thereto and the Junior
Subordinated Debt issued to any AmerUs Trust will provide in the aggregate a
full and unconditional guarantee by the Company of amounts due on the Capital
Securities issued by each AmerUs Trust. The payment terms of the Capital
Securities will be the same as the Junior Subordinated Debt issued to the
applicable AmerUs Trust by the Company.
Each Declaration will authorize the Administrative Trustees to issue on
behalf of the applicable AmerUs Trust one series of Common Securities having
such terms including distributions, redemption, voting, liquidation rights or
such restrictions as shall be established by the Administrative Trustees in
accordance with such Declaration or as shall otherwise be set forth therein. The
terms of the Common Securities issued by each AmerUs Trust will be substantially
identical to the terms of the Capital Securities issued by such AmerUs Trust,
and the Common Securities will rank pari passu in right of payment, and payments
will be made thereon pro rata, with the Capital Securities except that, if an
event of default under such Declaration has occurred and is continuing, 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 Capital Securities. The Common
Securities will also carry the right to vote and to appoint, remove or replace
any of the Administrative Trustees of such AmerUs Trust. All of the Common
Securities of each AmerUs Trust will be directly or indirectly owned by the
Company.
The financial statements of any AmerUs Trust that issues Capital Securities
will be reflected in the Company's consolidated financial statements with the
Capital Securities shown as Company-obligated mandatorily-redeemable Capital
Securities of a subsidiary trust under minority interest in consolidated
subsidiaries. In a footnote to the Company's audited financial statements there
will be included statements that the applicable AmerUs Trust is wholly-owned by
the Company and that the sole asset of such AmerUs Trust is the Junior
Subordinated Debt (indicating the principal amount, interest rate and maturity
date thereof).
DESCRIPTION OF GUARANTEES
Set forth below is a summary of information concerning the Guarantees that
will be executed and delivered by the Company for the benefit of the holders,
from time to time, of Capital Securities. Each Guarantee will be qualified as an
indenture under the Trust Indenture Act. Unless otherwise specified in the
applicable Prospectus Supplement, First Union Bank will act as indenture trustee
for Trust Indenture Act purposes under each Guarantee (the "Guarantee Trustee").
The terms of each Guarantee will be those set forth in such Guarantee and those
made part of such Guarantee by the Trust Indenture Act. The following summary
does not purport to be complete and is subject to and qualified in its entirety
by reference to the provisions of the form of Guarantee, a copy of which has
been filed as an exhibit to the Registration Statement of which this Prospectus
is a part, and the Trust Indenture Act. Each Guarantee will be held by the
Guarantee Trustee for the benefit of the holders of the Capital Securities of
the applicable AmerUs Trust.
GENERAL
Unless otherwise specified in the applicable Prospectus Supplement,
pursuant to each Guarantee, the Company will agree, to the extent set forth
therein, to pay in full to the holders of the Capital Securities, the Guarantee
Payments (as defined below) (except to the extent paid by such AmerUs Trust), as
and when due, regardless of any defense, right of set-off or counterclaim which
such AmerUs Trust may have or assert. The following payments or distributions
with respect to the Capital Securities (the "Guarantee Payments"), to the extent
not paid by such AmerUs Trust, will be subject to the Guarantee (without
duplication): (i) any accrued and unpaid distributions that are required to be
paid on such Capital Securities, to the extent such AmerUs Trust shall have
funds available therefor, and (ii) the redemption price, including all accrued
and unpaid distributions to the date of redemption (the "Redemption Price"), to
the extent such AmerUs Trust has funds available therefor, with respect to any
Capital Securities called for redemption by such AmerUs Trust. The Company's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Company to the holders of Capital Securities or by
causing the applicable AmerUs Trust to pay such amounts to such holders.
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Each Guarantee will not apply to any payment of distributions except to the
extent the applicable AmerUs Trust shall have funds available therefor. If the
Company does not make interest or principal payments on the Junior Subordinated
Debt purchased by such AmerUs Trust, such AmerUs Trust will not pay
distributions on the Capital Securities issued by such AmerUs Trust and will not
have funds available therefor.
The Company has also agreed to guarantee the obligations of each AmerUs
Trust with respect to the Common Securities (the "Common Guarantee") issued by
such AmerUs Trust to the same extent as the Guarantee, except that, if an Event
of Default under the Subordinated Indenture has occurred and is continuing,
holders of Capital Securities under the Guarantee shall have priority over
holders of the Common Securities under the Common Guarantee with respect to
distributions and payments on liquidation, redemption or otherwise.
STATUS OF THE GUARANTEES
The Guarantees will constitute an unsecured obligation of the Company and
will rank (i) subordinate and junior in right of payment to the Senior
Indebtedness of the Company, except those liabilities of the Company made pari
passu or subordinate by their terms, (ii) pari passu with the most senior
preferred or preference stock now or hereafter issued by the Company and with
any guarantee now or hereafter entered into by the Company in respect of any
preferred or preference stock of any affiliate of the Company and (iii) senior
to the Common Stock. The terms of the Capital Securities provide that each
holder of Capital Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Guarantee relating thereto.
Each Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly against
the Company to enforce its rights under such Guarantee without instituting a
legal proceeding against any other person or entity).
CERTAIN COVENANTS OF THE COMPANY
Unless otherwise specified in the applicable Prospectus Supplement, in each
Guarantee the Company will covenant that, so long as any Capital Securities
issued by the applicable AmerUs Trust remain outstanding, if there shall have
occurred any event of default under such Guarantee or under the Declaration of
such AmerUs Trust, then (a) the Company will not declare or pay any dividend on,
make any distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock (other than (i)
purchases or acquisitions of capital stock of the Company in connection with the
satisfaction by the Company of its obligations under any employee or agent
benefit plans or the satisfaction by the Company of its obligations pursuant to
any contract or security outstanding on the date of such event requiring the
Company to purchase capital stock of the Company, (ii) as a result of a
reclassification of the Company's capital stock or the exchange or conversion of
one class or series of the Company's capital stock for another class or series
of the Company's capital stock, (iii) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
(iv) dividends or distributions in capital stock of the Company (or rights to
acquire capital stock) or repurchases or redemptions of capital stock solely
from the issuance or exchange of capital stock or (v) redemptions or repurchases
of any rights outstanding under a shareholder rights plan); (b) the Company
shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities issued by the Company which rank
junior to the Junior Subordinated Debt issued to the applicable AmerUs Trust and
(c) the Company shall not make any guarantee payments with respect to the
foregoing (other than pursuant to a Guarantee).
MODIFICATION OF THE GUARANTEES; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Capital Securities (in which case no consent of such holders will
be required), each Guarantee may be amended only with the prior approval of the
holders of not less than a majority in liquidation amount of the outstanding
Capital
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Securities of such AmerUs Trust. The manner of obtaining any such approval of
holders of such Capital Securities will be set forth in the accompanying
Prospectus Supplement. All guarantees and agreements contained in a Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Company and shall inure to the benefit of the holders of the Capital
Securities of the applicable AmerUs Trust then outstanding.
EVENTS OF DEFAULT
An event of default under a Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of a majority in liquidation amount of the Capital Securities to which
such Guarantee relates 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 such Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under such Guarantee.
If the Guarantee Trustee fails to enforce such Guarantee, any record holder
of Capital Securities to which such Guarantee relates may institute a legal
proceeding directly against the Company to enforce the Guarantee Trustee's
rights under such Guarantee without first instituting a legal proceeding against
the applicable AmerUs Trust, the Guarantee Trustee or any other person or
entity. Notwithstanding the foregoing, if the Company has failed to make a
Guarantee Payment under a Guarantee, a record holder of Capital Securities to
which such Guarantee relates may directly institute a proceeding against the
Company for enforcement of such Guarantee for such payment to the record holder
of the Capital Securities to which such Guarantee relates of the principal of or
interest on the applicable Junior Subordinated Debt on or after the respective
due dates specified in the Junior Subordinated Debt, and the amount of the
payment will be based on the holder's pro rata share of the amount due and owing
on all of the Capital Securities to which such Guarantee relates. The Company
has waived any right or remedy to require that any action be brought first
against the applicable AmerUs Trust or any other person or entity before
proceeding directly against the Company. The record holder in the case of the
issuance of one or more global Capital Securities certificates will be The
Depository Trust Company acting at the direction of the beneficial owners of the
Capital Securities.
The Company will be required to provide annually to the Guarantee Trustee a
statement as to the performance by the Company of certain of its obligations
under each outstanding Guarantee and as to any default in such performance.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default to a Guarantee,
undertakes to perform only such duties as are specifically set forth in such
Guarantee and, after default with respect to such Guarantee, shall exercise the
same degree of care as a prudent individual would exercise in the conduct of his
or her own affairs. Subject to such provision, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by a Guarantee at the
request of any holder of Capital Securities to which such Guarantee relates
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby.
TERMINATION
Each Guarantee will terminate as to the Capital Securities issued by the
applicable AmerUs Trust upon full payment of the Redemption Price of all Capital
Securities of such AmerUs Trust, upon distribution of the Junior Subordinated
Debt held by such AmerUs Trust to the holders of all of the Capital Securities
of such AmerUs Trust or upon full payment of the amounts payable in accordance
with the Declaration of such AmerUs Trust upon liquidation of such AmerUs Trust.
Each Guarantee will continue to be effective or will be reinstated, as the case
may be, if at any time any holder of Capital Securities issued by the applicable
AmerUs Trust must restore payment of any sums paid under such Capital Securities
or such Guarantee.
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<PAGE> 158
GOVERNING LAW
The Guarantees will be governed by and construed in accordance with the law
of the State of New York.
DESCRIPTION OF THE PURCHASE CONTRACTS AND THE UNITS
The Company may issue Purchase Contracts, including contracts obligating
holders to purchase from the Company, and the Company to sell to the holders, a
specified number of shares of Common Stock or Preferred Stock at a future date
or dates. The consideration per share of Common Stock or Preferred Stock may be
fixed at the time the Purchase Contracts are issued or may be determined by
reference to a specific formula set forth in the Purchase Contracts. The
Purchase Contracts may be issued separately or as a part of units ("Units"),
including, but not limited to, adjustable conversion-rate equity security units.
Each Unit consists of a Purchase Contract and Debt Securities, Capital
Securities or debt obligations of third parties, including U.S. Treasury
securities, securing the holders' obligations to purchase the Common Stock or
Preferred Stock under the Purchase Contracts. The Purchase Contracts may require
the Company to make periodic payments to the holders of the Units or vice versa,
and such payments may be unsecured or refunded on some basis. The Purchase
Contracts may require holders to secure their obligations thereunder in a
specified manner.
The applicable Prospectus Supplement will describe the terms of any
Purchase Contracts or Units. The description in the Prospectus Supplement will
not necessarily be complete, and reference will be made to the Purchase
Contracts, and, if applicable, collateral arrangements and depositary
arrangements, relating to such Purchase Contracts or Units.
PLAN OF DISTRIBUTION
The Company and/or any AmerUs Trust may sell any of the Securities being
offered hereby in any one or more of the following ways from time to time: (i)
through agents; (ii) to or through underwriters; (iii) through dealers; or (iv)
directly to purchasers.
The Prospectus Supplement with respect to the Securities will set forth the
terms of the offering of the Securities, including the name or names of any
underwriters, dealers or agents; the purchase price of the Securities and the
proceeds to the Company and/or an AmerUs Trust from such sale; any underwriting
discounts and commissions or agency fees and other items constituting
underwriters' or agents' compensation; any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers and any
securities exchange on which such Securities may be listed. Any initial public
offering price, discounts or concessions allowed or reallowed or paid to dealers
may be changed from time to time.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices.
Offers to purchase Securities may be solicited by agents designated by the
Company from time to time. Any such agent involved in the offer or sale of the
Securities in respect of which this Prospectus is delivered will be named, and
any commissions payable by the Company and/or the applicable AmerUs Trust to
such agent will be set forth, in the applicable Prospectus Supplement. Unless
otherwise indicated in such Prospectus Supplement, any such agent will be acting
on a reasonable best efforts basis for the period of its appointment. Any such
agent may be deemed to be an underwriter, as that term is defined in the
Securities Act, of the Securities so offered and sold.
If Securities are sold by means of an underwritten offering, the Company
and/or the applicable AmerUs Trust will execute an underwriting agreement with
an underwriter or underwriters at the time an agreement for such sale is
reached, and the names of the specific managing underwriter or underwriters, as
well as any other underwriters, and the terms of the transaction, including
commissions, discounts and any other compensation of the underwriters and
dealers, if any, will be set forth in the applicable Prospectus Supplement which
will be used by the underwriters to make resales of the Securities in respect of
which this Prospectus is
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<PAGE> 159
delivered to the public. If underwriters are utilized in the sale of the
Securities in respect of which this Prospectus is delivered, the Securities will
be acquired by the underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated transactions, at
fixed public offering prices or at varying prices determined by the underwriter
at the time of sale. Securities may be offered to the public either through
underwriting syndicates represented by managing underwriters or directly by the
managing underwriters. If any underwriter or underwriters are utilized in the
sale of the Securities, unless otherwise indicated in the Prospectus Supplement,
the underwriting agreement will provide that the obligations of the underwriters
are subject to certain conditions precedent and that the underwriters with
respect to a sale of Securities will be obligated to purchase all such
Securities of a series if any are purchased.
If a dealer is utilized in the sales of the Securities in respect of which
this Prospectus is delivered, the Company and/or the applicable AmerUs Trust
will sell such Securities to the dealer as principal. The dealer may then resell
such Securities to the public at varying prices to be determined by such dealer
at the time of resale. Any such dealer may be deemed to be an underwriter, as
such term is defined in the Securities Act, of the Securities so offered and
sold. The name of the dealer and the terms of the transaction will be set forth
in the Prospectus Supplement relating thereto.
Offers to purchase Securities may be solicited directly by the Company
and/or the applicable AmerUs Trust and the sale thereof may be made by the
Company and/or the applicable AmerUs Trust directly to institutional investors
or others, who may be deemed to be underwriters within the meaning of the
Securities Act with respect to any resale thereof. The terms of any such sales
will be described in the Prospectus Supplement relating thereto.
Agents, underwriters and dealers may be entitled under relevant agreements
to indemnification or contribution by the Company and/or the applicable AmerUs
Trust against certain liabilities, including liabilities under the Securities
Act.
Agents, underwriters and dealers may be customers of, engage in
transactions with, or perform services for, the Company and its subsidiaries in
the ordinary course of business.
Securities may also be offered and sold, if so indicated in the applicable
Prospectus Supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment pursuant to their terms, or otherwise,
by one or more firms ("remarketing firms"), acting as principals for their own
accounts or as agents for the Company and/or the applicable AmerUs Trust. Any
remarketing firm will be identified and the terms of its agreement, if any, with
its compensation will be described in the applicable Prospectus Supplement.
Remarketing firms may be deemed to be underwriters, as such term is defined in
the Securities Act, in connection with the Securities remarketed thereby.
Remarketing firms may be entitled under agreements which may be entered into
with the Company and/or the applicable AmerUs Trust to indemnification or
contribution by the Company and/or the applicable AmerUs Trust against certain
civil liabilities, including liabilities under the Securities Act, and may be
customers of, engage in transactions with or perform services for AmerUs and its
subsidiaries in the ordinary course of business.
If so indicated in the applicable Prospectus Supplement, the Company and/or
the applicable AmerUs Trust may authorize agents, underwriters or dealers to
solicit offers by certain types of institutions to purchase Securities from the
Company and/or the applicable AmerUs Trust at the public offering prices set
forth in the applicable Prospectus Supplement pursuant to delayed delivery
contracts ("Contracts") providing for payment and delivery on a specified date
or dates in the future. A commission indicated in the applicable Prospectus
Supplement will be paid to underwriters, dealers and agents soliciting purchases
of Securities pursuant to Contracts accepted by the Company and/or the
applicable AmerUs Trust.
If so indicated in the applicable Prospectus Supplement, in connection with
the offering of Class A Common Stock or any Securities issued by the Company or
any AmerUs Trust, convertible or exchangeable into Class A Common Stock, the
Company's parent and majority shareholder, AmerUs Group, may be offered the
opportunity to purchase such Securities concurrently with a public offering at
the public offering price less any applicable underwriting discounts and
commissions.
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<PAGE> 160
VALIDITY OF SECURITIES
Unless otherwise indicated in the applicable Prospectus Supplement, the
validity of Securities (other than the Capital Securities) will be passed upon
for the Company by Joseph K. Haggerty, Esq., Senior Vice President and General
Counsel of the Company and Sidley & Austin, Chicago, Illinois. Sidley & Austin
will rely as to matters governed by the laws of the State of Iowa upon the
opinion of Joseph K. Haggerty, Esq.
Certain matters of Delaware law relating to the validity of the Capital
Securities will be passed upon for the AmerUs Trusts by Morris, James, Hitchens
& Williams, special Delaware counsel to the AmerUs Trusts.
EXPERTS
The consolidated financial statements of the Company, as of December 31,
1997 and 1996, and for each of the years in the three-year period ended December
31, 1997, have been incorporated by reference herein in reliance upon the
reports of KPMG Peat Marwick LLP, independent accountants, which reports are
also incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
The consolidated financial statements and schedules of Delta as of December
31, 1996 and 1995, and for each of the years in the three-year period ended
December 31, 1996, have been incorporated by reference herein in reliance upon
the reports of Coopers & Lybrand L.L.P., independent accountants, which reports
are also incorporated by reference herein, and upon the authority of said firm
as experts in accounting and auditing.
The consolidated financial statements and schedules of AmVestors as of
December 31, 1996 and 1995, and for each of the years in the three-year period
ended December 31, 1996, have been incorporated by reference herein in reliance
upon the reports of Deloitte & Touche LLP, independent accountants, which
reports are also incorporated by reference herein, and upon the authority of
said firm as experts in accounting and auditing.
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<PAGE> 161
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC registration fee........................................ $ 221,250
New York Stock Exchange listing fee......................... 29,500
Legal fees and expenses..................................... 250,000
Accounting fees and expenses................................ 150,000
Printing and engraving expenses............................. 200,000
Trustee's fees and expenses................................. 100,000
Rating agencies' fees....................................... 300,000
Blue Sky fees............................................... 20,000
Miscellaneous............................................... 129,250
----------
Total..................................................... $1,400,000
==========
</TABLE>
Except for the SEC registration fee, all of the foregoing fees and expenses
are estimates and will vary depending upon the Securities issued pursuant to
this Registration Statement.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
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 By-laws 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 addition, 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.
The Declaration for each of AmerUs Capital II and AmerUs Capital III (the
"Trusts") provides that no Property Trustee or any of its Affiliates, Delaware
Trustee or any of its Affiliates, or any officer, director, shareholder, member,
partner, employee, representative, custodian, nominee or agent of the Property
Trustee or the Delaware Trustee (each a "Fiduciary Indemnified Person"), and no
Administrative Trustee, Affiliate of any Administrative Trustee, or any officer,
director, shareholder, member, partner, employee, representative or agent of any
Administrative Trustee or any Affiliate thereof, or any employee or agent of any
of the Trusts or any of their Affiliates (each a "Company Indemnified Person")
shall be liable, responsible or accountable in damages or otherwise to any of
such Trusts or any officer, director, shareholder, partner, member,
representative, employee or agent of any such Trust or its Affiliates or to any
holder of Capital Securities for
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<PAGE> 162
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Fiduciary Indemnified Person or Company Indemnified Person in
good faith on behalf of any of such Trusts and in a manner such Fiduciary
Indemnified Person or Company Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Fiduciary Indemnified Person
or Company Indemnified Person by such Declaration or by law, except that a
Fiduciary Indemnified Person or Company Indemnified Person shall be liable for
any such loss, damage or claim incurred by reason of such Fiduciary Indemnified
Person's or Company Indemnified Person's gross negligence or willful misconduct
with respect to such acts or omissions.
The Declaration for each of such Trusts also provides that to the full
extent permitted by law, the Company shall indemnify any Company Indemnified
Person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of any such Trust) by reason of the fact that he is or was a Company
Indemnified Person against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of any such Trust, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful. Each of the Declarations also provides that to the full
extent permitted by law, the Company shall indemnify any Company Indemnified
Person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of any such
trust to procure a judgment in its favor by reason of the fact that such person
is or was a Company Indemnified Person against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit if such person acted in good faith
and in a manner such person reasonably believed to be in or not opposed to the
best interests of any such trust and except that no such indemnification shall
be made in respect of any claim, issue or matter as to which such Company
Indemnified Person shall have been adjudged to be liable to any such trust
unless and only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which such Court of Chancery or such other court shall deem proper. The
Declaration for each such AmerUs Trust further provides that expenses (including
attorneys' fees) incurred by a Company Indemnified Person in defending a civil,
criminal, administrative or investigative action, suit or proceeding referred to
in the immediately preceding two sentences shall be paid by the Company in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such Company Indemnified Person to repay
such amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the Company as authorized in any such Declaration.
The Declaration for each Trust also provides that the Company shall
indemnify each Fiduciary Indemnified Person against any loss, 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 or trusts under
any such Trust, including the costs and expenses (including reasonable legal
fees and expenses) of defending itself against or investigating any claim or
liability in connection with the exercise or performance of any of its powers or
duties thereunder.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
1.1** Form of Underwriting Agreement -- Debt Securities.
1.2*** Form of Underwriting Agreement -- Equity Securities.
1.3*** Form of Concurrent Offering Purchase Agreement between the
Company and AmerUs Group Co.
3.1 Amended and Restated Articles of Incorporation of the
Company are incorporated herein by reference to Exhibit 3.5
to the Company's Registration Statement on Form S-1 (No.
333-12239).
</TABLE>
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<PAGE> 163
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
3.2 By-laws of the Company are incorporated herein by reference
to Exhibit 3.2 to the Company's Registration Statement on
Form S-1 (No. 333-12239).
4.1 Form of Certificate for shares of Class A Common Stock of
the Company is incorporated herein by reference to Exhibit
4.1 to the Registration Statement on Form S-1 of the Company
(No. 333-12239).
4.2** Form of Senior Indenture by and between the Company and
First Union National Bank, as Indenture Trustee, pursuant to
which the Senior Debt Securities are to be issued.
4.3* Form of Subordinated Indenture by and between the Company
and First Union National Bank, as Indenture Trustee,
pursuant to which the Junior Subordinated Debt is to be
issued.
4.4* Certificate of Trust of AmerUs Capital II.
4.5* Trust Agreement of AmerUs Capital II.
4.6* Form of Amended and Restated Declaration of Trust of AmerUs
Capital II.
4.7* Certificate of Trust of AmerUs Capital III.
4.8* Trust Agreement of AmerUs Capital III.
4.9* Form of Amended and Restated Declaration of Trust of AmerUs
Capital III.
4.10* Form of Common Trust Securities Guarantee Agreement by the
Company.
4.11* Form of QUIPS Guarantee Agreement by the Company.
4.12* Form of Master Unit Agreement between the Company and First
Union National Bank.
4.13* Form of Call Option Agreement between Goldman, Sachs & Co.
and First Union National Bank.
4.14* Form of Pledge Agreement among the Company, Goldman, Sachs &
Co. and First Union National Bank.
4.15*** Form of Debt Security. The form or forms of such Debt
Securities with respect to each particular offering will be
filed as an exhibit subsequently included or incorporated by
reference herein.
4.16*** Form of Preferred Stock. Any amendment to the Company's
Amended and Restated Articles of Incorporation authorizing
the creation of any series of Preferred Stock or Depositary
Shares representing such shares of Preferred Stock and
setting forth the rights, preferences and designations
thereof will be filed as an exhibit subsequently included or
incorporated by reference herein.
4.17*** Form of Warrant Agreement.
4.18*** Form of Preferred Security.
4.19 Amended and Restated Intercompany Agreement dated as of
December 1, 1996 among American Mutual Holding Company,
AmerUs Group Co. and the Company is incorporated herein by
reference to Exhibit 10.81 to the Company's Registration
Statement on Form S-1 (No. 333-12239).
5.1** Opinion of Joseph K. Haggerty, Esq.
5.2** Opinion of Morris, James, Hitchens & Williams regarding
AmerUs Capital II.
5.3** Opinion of Morris, James, Hitchens & Williams regarding
AmerUs Capital III.
12.1 Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends is incorporated herein by
reference to Exhibit 12.1 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997.
23.1** Consent of Joseph K. Haggerty, Esq. (included in Exhibit 5.1
hereto).
23.2** Consent of Morris, James, Hitchens & Williams (included in
Exhibit 5.2 and 5.3 hereto).
23.3*** Consent of KPMG Peat Marwick LLP with respect to the
financial statements of AmerUs Life Holdings, Inc.
23.4*** Consent of Coopers & Lybrand, L.L.P. with respect of the
financial statements of Delta Life Corporation.
</TABLE>
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<PAGE> 164
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
23.5*** Consent of Deloitte & Touche LLP with respect of the
financial statements of AmVestors Financial Corporation.
24.1** Powers of Attorney (included in the signature page hereto).
25.1* Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of First Union National
Bank, as Indenture Trustee under the Senior Indenture.
25.2* Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of First Union National
Bank, as Indenture Trustee under the Subordinated Indenture.
25.3*** Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of First Union National
Bank, as Trustee of the Guarantees for the benefit of the
holders of Capital Securities of AmerUs Capital II and
AmerUs Capital III.
25.4* Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of First Union National
Bank, as Trustee under the Amended and Restated Trust
Agreement.
25.5* Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of First Union National
Bank, as Trustee under the Amended and Restated Trust
Agreement.
</TABLE>
- -------------------------
* Previously filed.
** Filed herewith.
*** To be filed either by amendment or as an exhibit to an Exchange Act Report
and incorporated herein by reference.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) under the Securities Act of 1933 if, in the aggregate,
the changes in volume and price represent no more than a 20% change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
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<PAGE> 165
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of a
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement 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.
(c) The undersigned Registrants hereby undertake to supplement the
prospectus, after the expiration of the subscription period with regard to the
warrants, if any, to set forth the results of the subscription offer, the
transactions by the underwriters during the subscription period, the amount of
unsubscribed securities to be purchased by the underwriters, and the terms of
any subsequent reoffering thereof. If any public offering by the underwriters is
to be made on terms differing from those set forth on the cover page of the
prospectus, a post effective amendment will be filed to set forth the terms of
such offering.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the foregoing provisions, or otherwise, each of the
Registrants has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of the Registrants
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 Registrants 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 Act and will be governed by the final
adjudication of such issue.
(e) The undersigned Registrants hereby undertake that (1) for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a 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 of 1933, 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.
(f) The undersigned Registrants hereby undertake to file, if necessary, an
application for the purpose of determining the eligibility of the Trustee to act
under subsection (a) of Section 310 of the Trust Indenture Act of 1939 in
accordance with the rules and regulations prescribed by the Securities and
Exchange Commission under Section 305(b)(2) of such Act.
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<PAGE> 166
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, AmerUs Life
Holdings, Inc. certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Pre-Effective Amendment No. 2 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Des Moines,
State of Iowa, on June 8, 1998.
AMERUS LIFE HOLDINGS, INC.
BY: /s/ ROGER K. BROOKS
-----------------------------------
Roger K. Brooks,
Chairman of the Board, President
and Chief Executive Officer
We, the undersigned officers and directors of AmerUs Life Holdings, Inc.,
hereby severally and individually constitute and appoint Michael E. Sproule,
Michael G. Fraizer and James A. Smallenberger, and each of them, the true and
lawful attorneys and agents of each of us to execute in the name, place and
stead of each of us (individually and in any capacity stated below) any and all
amendments to this Form S-3 and all instruments necessary or advisable in
connection therewith including, without limitation, a registration statement
under Rule 462, and to file the same with the Securities and Exchange
Commission, each of said attorneys and agents to have the power to act with or
without the others and to have full power and authority to do and perform in the
name and on behalf of each of the undersigned every act whatsoever necessary or
advisable to be done on the premises as fully and to all intents and purposes as
any of the undersigned might or could do in person, and we hereby ratify and
confirm our signatures as they may be signed by or said attorneys and agents or
each of them to any and all such amendments and instruments.
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to the Registration Statement has been signed by
the following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director, Chairman of the Board, June 8, 1998
- ------------------------------------------------ President and Chief Executive
Roger K. Brooks Officer
(Principal Executive Officer of
AmerUs Life Holdings, Inc.)
* Executive Vice President and Chief June 8, 1998
- ------------------------------------------------ Financial Officer
Michael E. Sproule (Principal Financial Officer of
AmerUs Life Holdings, Inc.)
* Senior Vice President Accounting June 8, 1998
- ------------------------------------------------ Officer and Controller/Treasurer
Michael G. Fraizer (Principal Accounting Officer of
AmerUs Life Holdings, Inc.)
* Director June 8, 1998
- ------------------------------------------------
John R. Albers
* Director June 8, 1998
- ------------------------------------------------
Malcolm Candlish
</TABLE>
II-6
<PAGE> 167
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director June 8, 1998
- ------------------------------------------------
Maureen M. Culhane
* Director June 8, 1998
- ------------------------------------------------
Thomas F. Gaffney
* Director June 8, 1998
- ------------------------------------------------
Ilene B. Jacobs
* Director June 8, 1998
- ------------------------------------------------
Sam C. Kalainov
* Director June 8, 1998
- ------------------------------------------------
Ralph W. Laster, Jr.
* Director June 8, 1998
- ------------------------------------------------
John W. Norris, Jr.
* Director June 8, 1998
- ------------------------------------------------
Jack C. Pester
* Director June 8, 1998
- ------------------------------------------------
John A. Wing
</TABLE>
- -------------------------
* James A. Smallenberger, attorney-in-fact
II-7
<PAGE> 168
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, AmerUs Capital
II certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Pre-Effective
Amendment No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Des Moines, State of
Iowa, on June 8, 1998.
AMERUS CAPITAL II
By: AMERUS LIFE HOLDINGS, INC.,
as Depositor
By: /s/ MICHAEL E. SPROULE
------------------------------------
Michael E. Sproule
Executive Vice President and
Chief Financial Officer
II-8
<PAGE> 169
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, AmerUs Capital
III certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Pre-Effective
Amendment No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Des Moines, State of
Iowa, on June 8, 1998.
AMERUS CAPITAL III
By: AMERUS LIFE HOLDINGS, INC.,
as Depositor
By: /s/ MICHAEL E. SPROULE
------------------------------------
Michael E. Sproule
Executive Vice President and
Chief Financial Officer
II-9
<PAGE> 170
EXHIBIT INDEX
TO REGISTRATION STATEMENT
ON FORM S-3
AMERUS LIFE HOLDINGS, INC.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1.1** Form of Underwriting Agreement -- Debt Securities.
1.2*** Form of Underwriting Agreement -- Equity Securities.
1.3*** Form of Concurrent Offering Purchase Agreement between the
Company and AmerUs Group Co.
3.1 Amended and Restated Articles of Incorporation of the
Company are incorporated herein by reference to Exhibit 3.5
to the Company's Registration Statement on Form S-1 (No.
333-12239).
3.2 By-laws of the Company are incorporated herein by reference
to Exhibit 3.2 to the Company's Registration Statement on
Form S-1 (No. 333-12239).
4.1 Form of Certificate for shares of Class A Common Stock of
the Company is incorporated herein by reference to Exhibit
4.1 to the Registration Statement on Form S-1 of the Company
(No. 333-12239).
4.2** Form of Senior Indenture by and between the Company and
First Union National Bank, as Indenture Trustee, pursuant to
which the Senior Debt Securities are to be issued.
4.3* Form of Subordinated Indenture by and between the Company
and First Union National Bank, as Indenture Trustee,
pursuant to which the Junior Subordinated Debt is to be
issued.
4.4* Certificate of Trust of AmerUs Capital II.
4.5* Trust Agreement of AmerUs Capital II.
4.6* Form of Amended and Restated Declaration of Trust of AmerUs
Capital II.
4.7* Certificate of Trust of AmerUs Capital III.
4.8* Trust Agreement of AmerUs Capital III.
4.9* Form of Amended and Restated Declaration of Trust of AmerUs
Capital III.
4.10* Form of Common Trust Securities Guarantee Agreement by the
Company.
4.11* Form of QUIPS Guarantee Agreement by the Company.
4.12* Form of Master Unit Agreement between the Company and First
Union National Bank.
4.13* Form of Call Option Agreement between Goldman, Sachs & Co.
and First Union National Bank.
4.14* Form of Pledge Agreement among the Company, Goldman, Sachs &
Co. and First Union National Bank.
4.15*** Form of Debt Security. The form or forms of such Debt
Securities with respect to each particular offering will be
filed as an exhibit subsequently included or incorporated by
reference herein.
4.16*** Form of Preferred Stock. Any amendment to the Company's
Amended and Restated Articles of Incorporation authorizing
the creation of any series of Preferred Stock or Depositary
Shares representing such shares of Preferred Stock and
setting forth the rights, preferences and designations
thereof will be filed as an exhibit subsequently included or
incorporated by reference herein.
4.17*** Form of Warrant Agreement.
</TABLE>
<PAGE> 171
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
4.18*** Form of Preferred Security.
4.19 Amended and Restated Intercompany Agreement dated as of
December 1, 1996 among American Mutual Holding Company,
AmerUs Group Co. and the Company is incorporated herein by
reference to Exhibit 10.81 to the Company's Registration
Statement on Form S-1 (No. 333-12239).
5.1** Opinion of Joseph K. Haggerty, Esq.
5.2** Opinion of Morris, James, Hitchens & Williams regarding
AmerUs Capital II.
5.3** Opinion of Morris, James, Hitchens & Williams regarding
AmerUs Capital III.
12.1 Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends is incorporated herein by
reference to Exhibit 12.1 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997.
23.1** Consent of Joseph K. Haggerty, Esq. (included in Exhibit 5.1
hereto).
23.2** Consent of Morris, James, Hitchens & Williams (included in
Exhibit 5.2 and 5.3 hereto).
23.3*** Consent of KPMG Peat Marwick LLP with respect to the
financial statements of AmerUs Life Holdings, Inc.
23.4*** Consent of Coopers & Lybrand, L.L.P. with respect of the
financial statements of Delta Life Corporation.
23.5*** Consent of Deloitte & Touche LLP with respect of the
financial statements of AmVestors Financial Corporation.
24.1** Powers of Attorney (included in the signature page hereto).
25.1* Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of First Union National
Bank, as Indenture Trustee under the Senior Indenture.
25.2* Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of First Union National
Bank, as Indenture Trustee under the Subordinated Indenture.
25.3*** Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of First Union National
Bank, as Trustee of the Guarantees for the benefit of the
holders of Capital Securities of AmerUs Capital II and
AmerUs Capital III.
25.4* Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of First Union National
Bank, as Trustee under the Amended and Restated Trust
Agreement.
25.5* Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of First Union National
Bank, as Trustee under the Amended and Restated Trust
Agreement.
</TABLE>
- -------------------------
* Previously filed.
** Filed herewith.
*** To be filed either by amendment or as an exhibit to an Exchange Act Report
and incorporated herein by reference.
<PAGE> 1
EXHIBIT 1.1
AMERUS LIFE HOLDINGS, INC.
DEBT SECURITIES
---------------------------
UNDERWRITING AGREEMENT
................, 19....
TO THE REPRESENTATIVES OF THE
SEVERAL UNDERWRITERS NAMED IN THE
RESPECTIVE PRICING AGREEMENTS
HEREINAFTER DESCRIBED.
Ladies and Gentlemen:
From time to time AmerUs Life Holdings, Inc., an Iowa corporation (the
"Company"), proposes to enter into one or more Pricing Agreements (each a
"Pricing Agreement") in the form of Annex I hereto, with such additions and
deletions as the parties thereto may determine, and, subject to the terms and
conditions stated herein and therein, to issue and sell to the firms named in
Schedule I to the applicable Pricing Agreement (such firms constituting the
"Underwriters" with respect to such Pricing Agreement and the securities
specified therein) certain of its debt securities (the "Securities") specified
in Schedule II to such Pricing Agreement (with respect to such Pricing
Agreement, the "Designated Securities"). The Company was formed in connection
with a Plan of Reorganization (the "Plan"), pursuant to which American Mutual
Life Insurance Company, an Iowa mutual life insurance company ("American
Mutual") was reorganized into a mutual insurance holding company structure on
June 30, 1996. The Company is the sole shareholder of AmerUs Life Insurance
Company, an Iowa stock life insurance company ("AmerUs Life"), which is the
successor company of American Mutual. When the context requires, references
herein to AmerUs Life shall be deemed to be references to American Mutual prior
to the date AmerUs Life was formed. On October 23, 1997, the Company acquired
Delta Life Corporation ("Delta") and on December 19, 1997, the Company acquired
AmVestors Financial Corporation ("AmVestors"). The acquisition of Delta and the
acquisition of AmVestors are hereinafter referred to as the "Acquisition".
Following the offering of the Designated Securities, and subject to obtaining
the approval of the Iowa Insurance Commissioner, the Company intends to offer up
to $150 million of its unit securities, consisting of the Company's subordinated
debt securities and a contract to purchase shares of Class A Common Stock, no
par value ("Class A Common Stock") of the Company. Such unit securities are
hereinafter referred to as the "Units" and the offering of the Units is
hereinafter referred to as the "Units Offering". The consummation of the
offering of the Designated Securities and the Units Offering are not conditioned
on one another.
The terms and rights of any particular issuance of Designated
Securities shall be as specified in the Pricing Agreement relating thereto and
in or pursuant to the indenture (the "Indenture") identified in such Pricing
Agreement.
1. Particular sales of Designated Securities may be made from
time to time to the Underwriters of such Securities, for whom the firms
designated as representatives of the Underwriters of such Securities in the
Pricing Agreement relating thereto will act as representatives (the
"Representatives"). The term "Representatives" also refers to a single firm
acting as sole
<PAGE> 2
representative of the Underwriters and to an Underwriter or Underwriters who act
without any firm being designated as its or their representatives. This
Underwriting Agreement shall not be construed as an obligation of the Company to
sell any of the Securities or as an obligation of any of the Underwriters to
purchase the Securities. The obligation of the Company to issue and sell any of
the Securities and the obligation of any of the Underwriters to purchase any of
the Securities shall be evidenced by the Pricing Agreement with respect to the
Designated Securities specified therein. Each Pricing Agreement shall specify
the aggregate principal amount of such Designated Securities, the initial public
offering price of such Designated Securities, the purchase price to the
Underwriters of such Designated Securities, the names of the Underwriters of
such Designated Securities, the names of the Representatives of such
Underwriters and the principal amount of such Designated Securities to be
purchased by each Underwriter and the commission, if any, payable to the
Underwriters with respect thereto and shall set forth the date, time and manner
of delivery of such Designated Securities and payment therefor. The Pricing
Agreement shall also specify (to the extent not set forth in the Indenture and
the registration statement and prospectus with respect thereto) the terms of
such Designated Securities. A Pricing Agreement shall be in the form of an
executed writing (which may be in counterparts), and may be evidenced by an
exchange of facsimile communications or any other rapid transmission device
designed to produce a written record of communications transmitted. The
obligations of the Underwriters under this Agreement and each Pricing Agreement
shall be several and not joint.
2. The Company represents and warrants to, and agrees with, each
of the Underwriters that:
(a) A registration statement on Form S-3 (File No.
333-... ) (the "Initial Registration Statement") in respect of the
Securities and the Units has been filed with the Securities and
Exchange Commission (the "Commission"); the Initial Registration
Statement and any post-effective amendment thereto, each in the form
heretofore delivered or to be delivered to the Representatives and,
excluding exhibits to the Initial Registration Statement, but including
all documents incorporated by reference in the prospectus contained
therein, to the Representatives for each of the other Underwriters,
have been declared effective by the Commission in such form; other than
a registration statement, if any, increasing the size of the offering
(a "Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended (the "Act"), which became
effective upon filing, no other document with respect to the Initial
Registration Statement or document incorporated by reference therein
has heretofore been filed or transmitted for filing with the Commission
(other than prospectuses filed pursuant to Rule 424(b) of the rules and
regulations of the Commission under the Act, each in the form
heretofore delivered to the Representatives); and no stop order
suspending the effectiveness of the Initial Registration Statement, any
post-effective amendment thereto or the Rule 462(b) Registration
Statement, if any, has been issued and no proceeding for that purpose
has been initiated or threatened by the Commission (any preliminary
prospectus included in the Initial Registration Statement or filed with
the Commission pursuant to Rule 424(a) under the Act, is hereinafter
called a "Preliminary Prospectus"; the various parts of the Initial
Registration Statement, any post-effective amendment thereto and the
Rule 462(b) Registration Statement, if any, including all exhibits
thereto and the documents incorporated by reference in the prospectus
contained in the Initial Registration Statement at the time such part
of the Initial Registration Statement became effective but excluding
Form T-1, each as amended at the time such part of the Initial
Registration Statement became effective or such part of the Rule 462(b)
Registration Statement, if any, became or hereafter becomes effective,
are hereinafter collectively called the "Registration Statement"; the
prospectus relating to the Securities, in the form in which it has most
2
<PAGE> 3
recently been filed, or transmitted for filing, with the Commission on
or prior to the date of this Agreement, being hereinafter called the
"Prospectus"; any reference herein to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to the applicable form under
the Act, as of the date of such Preliminary Prospectus or Prospectus,
as the case may be; any reference to any amendment or supplement to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to
and include any documents filed after the date of such Preliminary
Prospectus or Prospectus, as the case may be, under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated
by reference in such Preliminary Prospectus or Prospectus, as the case
may be; any reference to any amendment to the Initial Registration
Statement shall be deemed to refer to and include any annual report of
the Company filed pursuant to Sections 13(a) or 15(d) of the Exchange
Act after the effective date of the Initial Registration Statement that
is incorporated by reference in the Registration Statement; and any
reference to the Prospectus as amended or supplemented shall be deemed
to refer to the Prospectus as amended or supplemented in relation to
the applicable Designated Securities in the form in which it is filed
with the Commission pursuant to Rule 424(b) under the Act in accordance
with Section 5(a) hereof, including any documents incorporated by
reference therein as of the date of such filing);
(b) The documents incorporated by reference in the
Prospectus, when they became effective or were filed with the
Commission, as the case may be, conformed in all material respects to
the requirements of the Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder, and none of such
documents contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and any further documents
so filed and incorporated by reference in the Prospectus or any further
amendment or supplement thereto, when such documents become effective
or are filed with the Commission, as the case may be, will conform in
all material respects to the requirements of the Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission
thereunder and will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter of
Designated Securities through the Representatives expressly for use in
the Prospectus as amended or supplemented relating to such Securities;
(c) The Registration Statement and the Prospectus conform,
and any further amendments or supplements to the Registration Statement
or the Prospectus will conform, in all material respects to the
requirements of the Act and the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act") and the rules and regulations of the
Commission thereunder and do not and will not, as of the applicable
effective date as to the Registration Statement and any amendment
thereto and as of the applicable filing date as to the Prospectus and
any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter of Designated Securities through the Representatives
expressly for use in the Prospectus as amended or supplemented relating
to such Securities;
3
<PAGE> 4
(d) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus any material
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and, since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the
capital stock or long-term debt of the Company or any of its
subsidiaries or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, shareholders' equity
or results of operations of the Company or any of its subsidiaries,
otherwise than as set forth or contemplated in the Prospectus;
(e) The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them, in each case
free and clear of all liens, encumbrances and defects except such as
are described in the Prospectus or such as do not materially affect the
value of the Company and its subsidiaries, taken as a whole, and do not
interfere with the use made and proposed to be made of such property by
the Company and its subsidiaries; and any real property and buildings
held under lease by the Company and its subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to
be made of such property and buildings by the Company and its
subsidiaries;
(f) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Iowa; each subsidiary of the Company has been duly incorporated and
is validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation; and each of the Company and its
subsidiaries has the power and authority (corporate and other) to own
its properties and conduct its business as described in the Prospectus,
and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification, or is subject to no
material liability or disability by reason of the failure to be so
qualified in any such jurisdiction;
(g) Each of the Company and the Company's subsidiaries that
are required to be organized and licensed as insurance companies or
insurance holding companies (the "Insurance Companies") is duly
organized and licensed as an insurance or insurance holding company in
its respective jurisdiction of organization or incorporation, as the
case may be, and is duly licensed or authorized in each other
jurisdiction where it is required to be so licensed or authorized to
conduct its business as described in the Prospectus, in each case with
such exceptions, individually or in the aggregate, as would not have a
material adverse effect on the general affairs, management, financial
position, shareholders' equity or results of operations of the Company
(such individual or aggregate effect being herein referred to as a
"Material Adverse Effect"); each of the Insurance Companies is in
compliance with the requirements of the insurance laws and regulations
of its respective jurisdiction of organization or incorporation, as the
case may be, and the insurance laws and regulations of other
jurisdictions which are applicable to it, and has filed all notices,
reports, documents or other information ("Notices") required to be
filed thereunder, in each case, with such exceptions, individually or
in the aggregate, as would not have a Material Adverse Effect; and,
except as otherwise specifically described in the Prospectus, no
4
<PAGE> 5
Insurance Company has received any notification from any insurance
regulatory authority to the effect that any additional authorization,
approval, order, consent, license, certificate, permit, registration or
qualification ("Approvals") from such insurance regulatory authority is
needed to be obtained by any of the Insurance Companies in any case
where it could be reasonably expected that obtaining such Approvals or
the failure to obtain such Approvals would have a Material Adverse
Effect;
(h) Without limiting the foregoing, each of the Insurance
Companies has filed all Notices pursuant to, and has obtained all
Approvals required to be obtained under, and has otherwise complied
with all requirements of, all applicable insurance laws and regulations
(excluding insurance securities laws other than those of the State of
Iowa), in connection with the issuance and sale of the Designated
Securities or the Units, in each case with the exception of the
approval of the Iowa Insurance Commissioner (the "Commissioner") in
connection with the Units Offering under Section 46.10 of Division 191
under the Iowa Administrative Code ("191 IAC 46.10" or the "191 IAC
46.10 Exception")) and with such other exceptions (other than the
insurance laws and regulations of the State of Iowa, as to which no
exception, other than the 191 IAC 46.10 Exception, is taken),
individually or in the aggregate, as would not affect the validity of
the Designated Securities, their issuance or the transactions
contemplated hereby or have a Material Adverse Effect; and no such
Notices or Approvals are required to be filed or obtained by any of the
Insurance Companies in connection with the issuance and sale of the
Designated Securities or the Units, in each case with the exception of
the approval of the Commission in connection with the Units Offering
under 191 IAC 46.10 and with such other exceptions (other than the
insurance laws of the State of Iowa, as to which no exception, other
than the 191 IAC 46.10 Exception, is taken), individually or in the
aggregate, as would not affect the validity of the Designated
Securities or the Units, their issuance or the transactions
contemplated hereby or have a Material Adverse Effect;
(i) The Company and its subsidiaries previously filed all
Notices required to be filed pursuant to, and previously obtained all
Approvals required to be obtained under, and have otherwise complied
with all requirements of, all applicable insurance laws and regulations
in connection with the Acquisition, in each case (other than the
insurance laws and regulations of the State of Iowa, in the case of the
acquisition of Delta, and other than the laws and regulations of the
State of Kansas and the State of Iowa, in the case of the acquisition
of AmVestors, as to which no exception is taken in either case) with
such exceptions as (i) would not have a Material Adverse Effect and
(ii) would not affect the validity, performance or consummation of the
Acquisition;
(j) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital stock
of the Company have been duly and validly authorized and issued and are
fully paid and non-assessable; all of the issued shares of capital
stock of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and except as
disclosed in the Prospectus are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims;
(k) The Securities and the Units have been duly authorized
by the Company and the AmerUs Capital Trust II, as applicable, and,
when Designated Securities are issued and delivered pursuant to this
Agreement, the Indenture and the Pricing Agreement with respect to such
Designated Securities, such Designated Securities will have been duly
executed, authenticated, issued and delivered and will constitute valid
and legally binding obligations of the Company entitled to the benefits
provided by the Indenture, which will be substantially
5
<PAGE> 6
in the form filed as an exhibit to the Registration Statement; the
Indenture has been duly authorized and duly qualified under the Trust
Indenture Act and, at the Time of Delivery for such Designated
Securities (as defined in Section 4 hereof), the Indenture will
constitute a valid and legally binding instrument, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles; and the Indenture conforms, and the Designated Securities
will conform, to the descriptions thereof contained in the Prospectus
as amended or supplemented with respect to such Designated Securities;
(l) Except as disclosed in the Prospectus with resepct to
the Units, the issue and sale of the Securities and the Units by the
Company, the compliance by the Company with all of the provisions of
the Securities and the Indenture, the compliance by the Company with
this Agreement and any Pricing Agreement, and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, nor will such action
result in any violation of the provisions of the charter or other
organizational documents or bylaws of the Company or any of its
subsidiaries, any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or
any of its subsidiaries or any of their properties; and no consent,
approval, authorization, order, registration or qualification (each, a
"Consent") of or with any such court or governmental agency or body is
required for the issue and sale of the Securities and the Units or the
consummation by the Company of the transactions contemplated by this
Agreement or any Pricing Agreement or the consummation by the Company
of the transactions contemplated by the Indenture, except (i) the
registration under the Act of the Securities; (ii) such as have been,
or will have been prior to the Time of Delivery, obtained under the
Trust Indenture Act; (iii) approvals required under the Iowa insurance
laws and regulations, all of which approvals, with the exception of the
approval of the Commission in connection with the Units Offering under
191 IAC 46.10, have been obtained; (iv) such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws (including insurance securities
laws other than the insurance securities laws of the State of Iowa) in
connection with the purchase and distribution of the Securities by the
Underwriters; and (v) except as disclosed in the Prospectus;
(m) The statements set forth in the Prospectus under the
captions "Description of Debt Securities" and "Description of Notes",
insofar as they purport to constitute a summary of the terms of the
Securities, and under the caption "Risk Factors -- Regulatory and
Related Risks"; "-- Risks Relating to the Closed Block";
"Reorganization and Recent Acquisitions"; "Plan of Distribution" and
"Underwriting", insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate, complete and
fair;
(n) Neither the Company nor any of its subsidiaries is (i)
in violation of its charter or other organizational documents or bylaws
or (ii) in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or instrument
to which
6
<PAGE> 7
it is a party or by which it or any of its properties may be bound
which default would have a Material Adverse Effect;
(o) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of the Company
or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, would individually
or in the aggregate have a Material Adverse Effect on the Company and
its subsidiaries taken as a whole; and, to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(p) Neither the Company nor any of its subsidiaries is and,
after giving effect to the offering and sale of the Securities, will be
an "investment company" or an entity "controlled" by an "investment
company", as such terms are defined in the Investment Company Act of
1940, as amended (the "Investment Company Act");
(q) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida
Statutes;
(r) KPMG Peat Marwick L.L.P., who have certified certain
financial statements of the Company and its subsidiaries, Coopers &
Lybrand, L.L.P., who have certified certain financial statements of
Delta and its subsidiaries, and Deloitte & Touche, L.L.P., who have
certified certain financial statements of AmVestors and its
subsidiaries, are each independent public accountants as required by
the Act and the rules and regulations of the Commission thereunder; and
(s) This Agreement and the Pricing Agreement applicable to
any Designated Securities have each been duly authorized, executed and
delivered by the Company.
3. Upon the execution of the Pricing Agreement applicable to any
Designated Securities and authorization by the Representatives of the release of
such Designated Securities, the several Underwriters propose to offer such
Designated Securities for sale upon the terms and conditions set forth in the
Prospectus as amended or supplemented.
4. (a) Designated Securities to be purchased by each Underwriter
pursuant to the Pricing Agreement relating thereto, in the form specified in
such Pricing Agreement, and in such authorized denominations and registered in
such names as the Representatives may request upon at least forty-eight hours'
prior notice to the Company, shall be delivered by or on behalf of the Company
to the Representatives for the account of such Underwriter, against payment by
such Underwriter or on its behalf of the purchase price therefor to the Company
in funds specified in such Pricing Agreement, all in the manner and at the place
and time and date specified in such Pricing Agreement or at such other place and
time and date as the Representatives and the Company may agree upon in writing,
such time and date being herein called the "Time of Delivery" for such
Securities.
(b) The documents to be delivered at the Time of Delivery for the
Designated Securities specified in the applicable Pricing Agreement by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the cross
receipt for the Designated Securities specified in the applicable Pricing
Agreement and any additional documents requested by the Underwriters pursuant to
Section 7(j) hereof, will be delivered at the offices of Sullivan & Cromwell,
125 Broad Street, New York, New York 10004 (the "Closing Location"), and the
Designated Securities will be delivered at the Closing Location, all at such
Time of Delivery. A meeting will be held at the Closing
7
<PAGE> 8
Location at 2:30 p.m., New York City time, on the New York Business Day next
preceding such Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Agreement "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York are generally
authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters of any
Designated Securities:
(a) To prepare the Prospectus as amended or supplemented in
relation to the applicable Designated Securities in a form approved by
the Representatives and to file such Prospectus pursuant to Rule 424(b)
under the Act not later than the Commission's close of business on the
second business day following the execution and delivery of the Pricing
Agreement relating to the applicable Designated Securities or, if
applicable, such earlier time as may be required by Rule 424(b) under
the Act; to make no further amendment or any supplement to the
Registration Statement or Prospectus as amended or supplemented after
the date of the Pricing Agreement relating to such Designated
Securities and prior to the Time of Delivery for such Designated
Securities which shall be disapproved by the Representatives for such
Securities promptly after reasonable notice thereof; to advise the
Representatives promptly of any such amendment or supplement after such
Time of Delivery and furnish the Representatives with copies thereof;
to file promptly all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act for
so long as the delivery of a prospectus is required in connection with
the offering or sale of such Securities, and during such same period to
advise the Representatives, promptly after it receives notice thereof,
of the time when any amendment to the Registration Statement has been
filed or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed with the Commission, of the issuance
by the Commission of any stop order or of any order preventing or
suspending the use of any prospectus relating to the Securities, of the
suspension of the qualification of such Securities for offering or sale
in any jurisdiction, of the initiation or threatening of any proceeding
for any such purpose, or of any request by the Commission for the
amending or supplementing of the Registration Statement or Prospectus
or for additional information; and, in the event of the issuance of any
such stop order or of any such order preventing or suspending the use
of any prospectus relating to the Securities or suspending any such
qualification, to promptly use its best efforts to obtain the
withdrawal of such order;
(b) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify such Securities for
offering and sale under the securities laws of such jurisdictions as
the Representatives may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the
distribution of such Securities, provided that in connection therewith
the Company shall not be required to qualify as a foreign corporation
or to file a general consent to service of process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New
York Business Day next succeeding the date of this Agreement and from
time to time, to furnish the Underwriters with copies of the Prospectus
in New York City as amended or supplemented in such quantities as the
Representatives may reasonably request, and, if the delivery of a
prospectus is required at any time in connection with the offering or
sale of the Securities and if at such time any event shall have
occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or
8
<PAGE> 9
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading, or, if for
any other reason it shall be necessary during such same period to amend
or supplement the Prospectus or to file under the Exchange Act any
document incorporated by reference in the Prospectus in order to comply
with the Act, the Exchange Act or the Trust Indenture Act, to notify
the Representatives and upon their request to file such document and to
prepare and furnish without charge to each Underwriter and to any
dealer in securities as many copies as the Representatives may from
time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or
omission or effect such compliance;
(d) To make generally available to its securityholders as
soon as practicable, but in any event not later than eighteen months
after the effective date of the Registration Statement (as defined in
Rule 158(c) under the Act), an earnings statement of the Company and
its subsidiaries (which need not be audited) complying with Section
11(a) of the Act and the rules and regulations of the Commission
thereunder (including, at the option of the Company, Rule 158);
(e) During the period beginning from the date of the
Pricing Agreement for such Designated Securities and continuing to and
including the later of (i) the termination of trading restrictions for
such Designated Securities, as notified to the Company by the
Representatives and (ii) the Time of Delivery for such Designated
Securities, not to offer, sell, contract to sell or otherwise dispose
of any debt securities of the Company which mature more than one year
after such Time of Delivery and which are substantially similar to such
Designated Securities, without the prior written consent of Salomon
Brothers Inc and Goldman, Sachs & Co.;
(f) If the Company elects to rely upon Rule 462(b), the
Company shall file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) by 10:00 P.M., Washington,
D.C. time, on the date of this Agreement, and the Company shall at the
time of filing either pay to the Commission the filing fee for the Rule
462(b) Registration Statement or give irrevocable instructions for the
payment of such fee pursuant to Rule 111(b) under the Act;
(g) During a period of five years from the effective date
of the Registration Statement, to furnish Salomon Brothers Inc and to
Goldman, Sachs & Co. copies of all reports or other communications
(financial or other) furnished to shareholders, and deliver to Salomon
Brothers Inc and Goldman, Sachs & Co. (i) as soon as they are
available, copies of any reports and financial statements furnished to
or filed with the Commission or any national securities exchange on
which any class of securities of the Company is listed; and (ii) such
additional information concerning the business and financial condition
of the Company as the Underwriters may from time to time reasonably
request (such financial statements to be on a consolidated basis to the
extent the accounts of the Company and its subsidiaries are
consolidated in reports furnished to its shareholders generally or to
the Commission);
(h) To use the net proceeds received by it from the sale of
the Designated Securities in the manner specified in the Prospectus
under the caption "Use of Proceeds"; and
(i) Not to invest, reinvest or otherwise use the proceeds
received by the Company in such a manner, or take any action, or omit
to take any action, that would cause
9
<PAGE> 10
the Company to become an "investment company" as that term is defined
in the Investment Company Act.
6. The Company covenants and agrees with the several Underwriters
that the Company will pay or cause to be paid the following: (a) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Securities under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (b) the cost of printing or producing
any Agreement among Underwriters, this Agreement, any Pricing Agreement, any
Indenture, any Blue Sky and Legal Investment Memoranda, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Designated Securities; (c) all
expenses in connection with the qualification of the Securities for offering and
sale under state securities laws as provided in Section 5(b) hereof, including
the fees and disbursements of counsel for the Underwriters in connection with
such qualification; (d) all fees and expenses in connection with listing the
Securities on a national securities exchange; (e) any fees charged by securities
rating services for rating the Securities; (f) the filing fees incident to, and
the fees and disbursements of counsel for the Underwriters in connection with,
any required review by the National Association of Securities Dealers, Inc. of
the terms of the sale of the Securities; (g) the cost of preparing the
Securities; (h) the fees and expenses of any Trustee and any agent of any
Trustee and the fees and disbursements of counsel for any Trustee in connection
with any Indenture and the Securities; and (i) all other costs and expenses
incident to the performance of the Company's obligations hereunder which are not
otherwise specifically provided for in this Section. It is understood, however,
that, except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, transfer taxes on resale of any of the Securities by them, and
any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters of any Designated
Securities under the Pricing Agreement relating to such Designated Securities
shall be subject, in the discretion of the Representatives, to the condition
that all representations and warranties and other statements of the Company in
or incorporated by reference in the Pricing Agreement relating to such
Designated Securities are, at and as of the Time of Delivery for such Designated
Securities, true and correct, the condition that the Company shall have
performed all of its obligations hereunder theretofore to be performed, and the
following additional conditions:
(a) The Prospectus as amended or supplemented in relation to the
applicable Designated Securities shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for such
filing by the rules and regulations under the Act and in accordance with Section
5(a) hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 P.M.,
Washington, D.C. time, on the date of this Agreement; no stop order suspending
the effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to the Representatives'
reasonable satisfaction;
(b) Counsel for the Underwriters shall have furnished to the
Representatives such written opinion or opinions, dated the Time of Delivery for
such Designated Securities, with respect to the incorporation of the Company,
this Agreement, the validity of the Designated Securities being delivered at
such time of delivery, the Registration Statement, the Prospectus and such other
10
<PAGE> 11
related matters as the Representatives may reasonably request, and such counsel
shall have received such papers and information as they may reasonably request
to enable them to pass upon such matters;
(c) Counsel for the Company satisfactory to the Representatives
shall have furnished to the Representatives their written opinion (a draft of
such opinion is attached as Annex II(b) hereto), dated the Time of Delivery for
such Designated Securities, in form and substance satisfactory to the
Representatives, to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Iowa, with power and authority (corporate
and other) to own its properties and conduct its business as
described in the Prospectus as amended or supplemented;
(ii) The Company has an authorized capitalization as
set forth in the Prospectus as amended or supplemented and
all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued and are fully
paid and non-assessable;
(iii) To such counsel's knowledge and other than as set
forth in the Prospectus as amended or supplemented, there are
no legal or governmental proceedings pending to which the
Company or any of its subsidiaries is a party or of which any
property of the Company or any of its subsidiaries is the
subject which, if determined adversely to the Company or any
of its subsidiaries, would individually or in the aggregate
have a Material Adverse Effect; and, to the best of such
counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by
others;
(iv) This Agreement and the Pricing Agreement with
respect to the Designated Securities have been duly
authorized, executed and delivered by the Company;
(v) The Designated Securities and the Units have been
duly authorized; the Designated Securities have been duly
executed, authenticated, issued and delivered and constitute
valid and legally binding obligations of the Company entitled
to the benefits provided by the Indenture and enforceable in
accordance with their terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization, fraudulent transfer,
fraudulent conveyance, moratorium and other laws of general
applicability relating to or affecting creditors' rights and
to general equity principles (whether such principles are
considered in a proceeding in equity or in law); and the
Designated Securities and the Indenture conform to the
descriptions thereof in the Prospectus as amended or
supplemented;
(vi) The Indenture has been duly authorized, executed
and delivered by the parties thereto and, assuming due
authorization, execution and delivery by the Trustee,
constitutes a valid and legally binding instrument,
enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization,
fraudulent transfer, fraudulent conveyance, moratorium and
other laws of general applicability relating to or affecting
creditors' rights and to general equity principles (whether
such principles are considered in a proceeding in equity or in
law); and the Indenture has been duly qualified under the
Trust Indenture Act;
11
<PAGE> 12
(vii) The statements set forth in the Prospectus as
amended or supplemented under the captions "Description of
Debt Securities", and "Description of Notes" insofar as they
purport to constitute a summary of the terms of the Designated
Securities, and under the captions "Risk Factors -- Regulatory
and Related Risks"; "-- Risks Relating to the Closed Block";
"Reorganization and Recent Acquisitions"; "Plan of
Distribution" and "Underwriting", insofar as they purport to
describe the provisions of the laws and documents referred to
therein, are accurate, complete and fair in all material
respects;
(viii) Neither the Company nor any of its subsidiaries is
an "investment company" or an entity "controlled" by an
"investment company", as such terms are defined in the
Investment Company Act;
(ix) The documents incorporated by reference in the
Prospectus as amended or supplemented (other than the
financial statements and related schedules therein, as to
which such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may
be, complied as to form in all material respects with the
requirements of the Act or the Exchange Act, as applicable,
and the rules and regulations of the Commission thereunder;
and they have no reason to believe that any of such documents,
when they became effective or were so filed, as the case may
be, contained, in the case of a registration statement which
became effective under the Act, an untrue statement of a
material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein
not misleading, or, in the case of other documents which were
filed under the Act or the Exchange Act with the Commission,
an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made when such documents were so filed, not misleading;
and
(x) The Registration Statement, the Prospectus as
amended or supplemented and any further amendments and
supplements thereto made by the Company prior to the Time of
Delivery for the Designated Securities (other than the
financial statements, financial data and related schedules
therein and Form T-1, as to which such counsel need express no
opinion) comply as to form in all material respects with the
requirements of the Act and the Trust Indenture Act and the
rules and regulations thereunder; although they do not assume
any responsibility for the accuracy, completeness or fairness
of the statements contained in the Registration Statement or
the Prospectus, except for those referred to in the opinion in
subsection (vi) of this Section 7(c), nothing has come to
their attention which would cause them to believe that, as of
its effective date, the Registration Statement or any further
amendment thereto made by the Company prior to the Time of
Delivery (other than the financial statements, financial data
and related schedules therein and Form T-1, as to which such
counsel need express no opinion) contained an untrue statement
of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading or that, as of its date, the
Prospectus as amended or supplemented or any further amendment
or supplement thereto made by the Company prior to the Time of
Delivery (other than the financial statements, financial data
and related schedules therein and Form T-1, as to which such
counsel need express no opinion) contained an untrue statement
of a material fact or omitted to state a material fact
necessary
12
<PAGE> 13
to make the statements therein, in the light of the
circumstances under which they were made, not misleading or
that, as of the Time of Delivery, either the Registration
Statement or the Prospectus as amended or supplemented or any
further amendment or supplement thereto made by the Company
prior to the Time of Delivery (other than the financial
statements and related schedules therein and Form T-1, as to
which such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and
they do not know of any amendment to the Registration
Statement required to be filed or any contracts or other
documents of a character required to be filed as an exhibit to
the Registration Statement or required to be incorporated by
reference into the Prospectus as amended or supplemented or
required to be described in the Registration Statement or the
Prospectus as amended or supplemented which are not filed or
incorporated by reference or described as required;
In rendering such opinion, such counsel may state that insofar
as their opinion under clause (x) above relates to the accuracy and
completeness of the Prospectus and Registration Statement and
amendments or supplements thereto, it is based upon a general review
with representatives of the Company, AmerUs Life, Delta and AmVestors,
and their independent accountants, of the information contained
therein, without independent verification by such counsel of the
accuracy or completeness of such information. Such counsel may also
rely upon the opinions of other competent counsel and, as to factual
matters, on certificates of officers of the Company, AmerUs Life, Delta
or AmVestors and of state officials, in which case their opinion is to
state that they are so doing and copies of such opinions or
certificates are to be attached to the opinion unless such opinions or
certificates (or, in the case of certificates, the information therein)
have been furnished to the Representatives otherwise.
In rendering such opinion, such counsel may also state that
they have relied as to facts necessary to the determination of
materiality, to a certain extent, upon the judgment of officers and
representatives of the Company, Delta, AmVestors or AmerUs Life.
Any opinion or statement expressed or made pursuant to this
Section 7(c) which is expressed or made to be "to our knowledge" or is
otherwise qualified by words of like import means that the lawyers in
the firm of such counsel who have served as counsel to the Company,
AmerUs Group, AMHC, AmerUs Life (or, at any time prior to the date
AmerUs Life was formed, American Mutual) or any other subsidiary of the
Company have no current conscious awareness of any facts or information
contrary to such opinion or statement.
(d) Joseph K. Haggerty, Esq., Senior Vice President and General
Counsel of the Company, shall have furnished to you his written opinion, dated
the Time of Delivery for such Designated Securities, in form and substance
satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Iowa, AmerUs Life and Delta have each
been duly incorporated and are validly existing as a stock
life insurance company in good standing under the laws of the
State of Iowa, and American Investors Life Insurance Company
("American") and Financial Benefit Life
13
<PAGE> 14
Insurance Company ("FBL") have each been duly incorporated and
are validly existing as stock insurance companies in good
standing under the laws of the State of Kansas, each with
power and authority (corporate and other) to own its
properties and conduct its business as described in the
Prospectus as amended or supplemented;
(ii) The Company has an authorized capitalization as
set forth in the Prospectus as amended or supplemented, and
all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued and are fully paid
and non-assessable;
(iii) Each of the Company and its subsidiaries not
listed in paragraph 7(d)(i) has been duly qualified as a
foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in
which it owns or leases properties or conducts any business so
as to require such qualification or is subject to no material
liability or disability by reason of failure to be so
qualified in any such jurisdiction (such counsel being
entitled to rely in respect of the opinion in this clause upon
opinions of local counsel and in respect of matters of fact
upon certificates of officers of the Company or any of its
subsidiaries, provided that such counsel shall state that he
believes that both you and he are justified in relying upon
such opinions and certificates);
(iv) Each of the Company's subsidiaries not listed in
paragraph 7(d)(i) has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
its jurisdiction of incorporation; and all of the issued
shares of capital stock of each subsidiary of the Company have
been duly and validly authorized and issued, are fully paid
and non-assessable, and, except as disclosed in the
Prospectus, are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims
(such counsel being entitled to rely in respect of the opinion
in this clause upon opinions of local counsel and in respect
to matters of fact upon certificates of officers of the
Company or any of its subsidiaries, provided that such counsel
shall state that he believes that both you and he are
justified in relying upon such opinions and certificates);
(v) The Company and its subsidiaries have good and
marketable title in fee simple to all real property owned by
them, in each case free and clear of all liens, encumbrances
and defects except such as are described in the Prospectus as
amended or supplemented or such as do not materially affect
the value of the Company and its subsidiaries, taken as a
whole, and do not interfere with the use made and proposed to
be made of such property by the Company and its subsidiaries;
and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are
not material and do not interfere with the use made and
proposed to be made of such property and buildings by the
Company and its subsidiaries (in giving the opinion in this
clause, such counsel may state that no examination of record
titles for the purpose of such opinion has been made, and that
he is relying upon a general review of the titles of the
Company and its subsidiaries, upon opinions of local counsel
and abstracts, reports and policies of title companies
rendered or issued at or subsequent to the time of acquisition
of such property by the Company or its subsidiaries, upon
opinions of counsel to the
14
<PAGE> 15
lessors of such property and, in respect to matters of fact,
upon certificates of officers of the Company or its
subsidiaries, provided that such counsel shall state that he
believes that both you and he are justified in relying upon
such opinions, abstracts, reports, policies and certificates);
(vi) Except as disclosed in the Prospectus with respect
to the Units, the issue and sale of the Designated Securities
and the Units by the Company, the compliance by the Company
with all of the provisions of the Designated Securities and
the Indenture, the compliance by the Company with this
Agreement and the Pricing Agreement with respect to the
Designated Securities, and the consummation of the
transactions herein and therein contemplated will not conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument known to such counsel to which the Company or any
of its subsidiaries is a party or by which the Company or any
of its subsidiaries is bound or to which any of the property
or assets of the Company or any of its subsidiaries is
subject, nor will such actions result in any violation of the
provisions of the Certificate of Incorporation or By-laws of
the Company or any statute or any order, rule or regulation
known to such counsel of any court or governmental agency or
body having jurisdiction over the Company or any of its
subsidiaries or any of their properties except that in order
to commence the Units Offering, the Company must obtain the
approval of the Commissioner under 191 IAC 46.10;
(vii) To the best of such counsel's knowledge and other
than as set forth in the Prospectus as amended or
supplemented, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a
party or of which any property of the Company or any of its
subsidiaries is the subject which, if determined adversely to
the Company or any of its subsidiaries, would individually or
in the aggregate have a Material Adverse Effect; and, to the
best of such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or
threatened by others;
(viii) This Agreement and the Pricing Agreement with
respect to the Designated Securities have been duly
authorized, executed and delivered by the Company;
(ix) The Company and its subsidiaries previously filed
all Notices required to be filed pursuant to, and previously
obtained all Approvals required to be obtained under, and have
otherwise complied with all requirements of, all applicable
insurance laws and regulations in connection with the
Acquisition, in each case (other than the insurance laws and
regulations of the State of Iowa, in the case of the
acquisition of Delta, and other than the laws and regulations
of the State of Kansas, in the case of the acquisition of
AmVestors, as to which no exception is taken in either case)
with such exceptions as (i) would not have a Material Adverse
Effect and (ii) would not affect the validity, performance or
consummation of the Acquisition;
(x) Each of the Insurance Companies is duly organized
and licensed, or qualifies, as an insurance or insurance
holding company in its respective jurisdiction of organization
or incorporation, as the case may be, and is duly licensed or
authorized in each other jurisdiction where it is required to
be so licensed or authorized to conduct its business as
described in the Prospectus as amended or
15
<PAGE> 16
supplemented, in each case with such exceptions, individually
or in the aggregate, as would not have a Material Adverse
Effect; each of the Insurance Companies is in compliance with
the requirements of the insurance laws and regulations of its
respective jurisdiction of organization or incorporation, as
the case may be, and the insurance laws and regulations of
other jurisdictions which are applicable to it, and has filed
all Notices required to be filed thereunder, in each case,
with such exceptions as would not have a Material Adverse
Effect; and, except as otherwise specifically described in the
Prospectus as amended or supplemented and except pursuant to
the approval of the Commission in connection with the Units
Offering under 191 IAC 46.10, no Insurance Company has
received any notification from any insurance regulatory
authority to the effect that any additional Approvals from
such insurance regulatory authority are needed to be obtained
by any of the Insurance Companies in any case where it could
be reasonably expected that obtaining such Approvals or the
failure to obtain such Approvals would have a Material Adverse
Effect;
(xi) Without limiting the foregoing, each of the
Insurance Companies has filed all Notices pursuant to, and has
obtained all Approvals required to be obtained under, and has
otherwise complied with all requirements of, all applicable
insurance laws and regulations (excluding insurance securities
laws other than those of the State of Iowa), in connection
with the issuance and sale of the Designated Securities and
the Units, in each case with the exception of the approval of
the Commission in connection with the Units Offering under 191
IAC 46.10 and such other exceptions (other than the insurance
laws of the State of Iowa, as to which no exception, other
than the 191 IAC 46.10 Exception, is taken), individually or
in the aggregate, as would not affect the validity of the
Designated Securities, their issuance or the transactions
contemplated hereby or have a Material Adverse Effect; and no
such Notices or Approvals are required to be filed or obtained
by any of the Insurance Companies in connection with the
issuance and sale of the Designated Securities or the Units,
in each case with the exception of the approval of the
Commission in connection with the Units Offering under 191 IAC
46.10 and such other exceptions (other than the insurance laws
and regulations of the State of Iowa, as to which no
exception, other than the 191 IAC 46.10 Exception, is taken),
individually or in the aggregate, as would not affect the
validity of the Designated Securities, their issuance or the
transactions contemplated hereby or have a Material Adverse
Effect;
(xii) No Consent of or with any court or governmental
agency or body having jurisdiction over the Company, any of
its subsidiaries or any of their properties is required for
the issue and sale of the Designated Securities or the Units
or the consummation by the Company of the transactions
contemplated by this Agreement or the Pricing Agreement or the
consummation by the Company of the transactions contemplated
by the Indenture, except (i) the registration under the Act of
the Designated Securities, (ii) such as have been obtained
under the Trust Indenture Act, (iii) such Consents as may be
required under state securities, insurance securities or Blue
Sky laws in connection with the purchase and distribution of
the Designated Securities or the Units by the Underwriters and
(iv) approvals required under the Iowa insurance laws and
regulations, all of which approvals, with the exception of the
approval of the Commission in connection with the Units
Offering under 191 IAC 46.10, have been obtained;
16
<PAGE> 17
(xiii) Neither the Company nor any of its subsidiaries is
in violation of its charter or other organizational documents
or bylaws or in default in the performance or observance of
any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it
is a party or by which it or any of its properties may be
bound;
(xiv) The statements set forth in the Prospectus as
amended or supplemented under the captions "Description of the
Debt Securities" and "Description of the Notes"; "Risk Factors
-- Regulatory and Related Risks"; "-- Risks Relating to the
Closed Block"; "Reorganization and Recent Acquisitions"; "Plan
of Distribution" and "Underwriting", insofar as they purport
to describe the provisions of the laws and documents referred
to therein; are in each case accurate, complete and fair in
all material respects; and
(xv) Although he does not assume any responsibility for
the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus as
amended or supplemented, except for those referred to in the
opinion in subsection (xiv) of this Section 7(d), he has no
reason to believe that, as of its effective date, the
Registration Statement or any further amendment thereto made
by the Company prior to such Time of Delivery (other than the
financial statements, financial data and related schedules
therein and Form T-1, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or
that, as of their respective dates, the Prospectus as amended
or supplemented or any further amendment or supplement thereto
made by the Company prior to such Time of Delivery (other than
the financial statements, financial data and related schedules
therein and Form T-1, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading or that, as of such Time
of Delivery, any of the Registration Statement and the
Prospectus as amended or supplemented or any further amendment
or supplement thereto made by the Company prior to such Time
of Delivery (other than the financial statements, financial
data and related schedules therein and Form T-1, as to which
such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and
he does not know of any amendment to the Registration
Statement required to be filed or of any contracts or other
documents of a character required to be filed as an exhibit to
the Registration Statement or required to be described in the
Registration Statement or the Prospectus as amended or
supplemented which are not filed or described as required.
In rendering such opinion, such counsel may state that insofar
as his opinion under clause (xv) above relates to the accuracy and
completeness of the Prospectus and Registration Statement and
amendments or supplements thereto, it is based upon a general review
with representatives of the Company and AmerUs Life, and their
independent accountants, of the information contained therein, without
independent verification by such counsel of the accuracy or
completeness of such information. Such
17
<PAGE> 18
counsel may also rely upon the opinions of other competent counsel and,
as to factual matters, on certificates of officers of the Company or
AmerUs Life and of state officials, in which case his opinion is to
state that he is so doing and copies of such opinions or certificates
are to be attached to the opinion unless such opinions or certificates
(or, in the case of certificates, the information therein) have been
furnished to the Representatives otherwise.
(e) On the date of the Pricing Agreement for such Designated
Securities at a time prior to the execution of the Pricing Agreement with
respect to such Designated Securities and at the Time of Delivery for such
Designated Securities, the independent accountants of the Company who have
certified the financial statements of the Company and its subsidiaries included
or incorporated by reference in the Registration Statement shall have furnished
to the Representatives a letter, dated the effective date of the Registration
Statement or the date of the most recent report filed with the Commission
containing financial statements and incorporated by reference in the
Registration Statement, if the date of such report is later than such effective
date, and a letter dated such Time of Delivery, respectively, to the effect set
forth in Annex II hereto, and with respect to such letter dated such Time of
Delivery, as to such other matters as the Representatives may reasonably request
and in form and substance satisfactory to the Representatives (the executed copy
of the letter delivered prior to the execution of this Agreement is attached as
Annex III hereto and a draft of the form of letter to be delivered on the
effective date of any post-effective amendment to the Registration Statement and
as of each Time of Delivery is attached as Annex IV hereto);
(f) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus as amended prior to the date of the
Pricing Agreement relating to the Designated Securities any loss or interference
with its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the Prospectus
as amended prior to the date of the Pricing Agreement relating to the Designated
Securities, and (ii) since the respective dates as of which information is given
in the Prospectus as amended prior to the date of the Pricing Agreement relating
to the Designated Securities there shall not have been any change in the capital
stock or long-term debt of the Company or any of its subsidiaries or any change,
or any development involving a prospective change, in or affecting the general
affairs, management, financial position, shareholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus as amended prior to the date of the Pricing
Agreement relating to the Designated Securities, the effect of which, in any
such case described in Clause (i) or (ii), is in the judgment of the
Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Designated Securities on the terms and in the manner contemplated in the
Prospectus as first amended or supplemented relating to the Designated
Securities;
(g) On or after the date of the Pricing Agreement relating to the
Designated Securities (i) no downgrading shall have occurred in the rating
accorded AmerUs Life's, Delta Life and Annuity Company's ("Delta Life"),
American or FBL's financial strength or claims paying ability by A.M. Best or by
any "nationally recognized statistical rating organization", as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Act (a
"Rating Organization"); and (ii) no such Rating Organization shall have publicly
announced that it has under surveillance or review, with possible negative
implications, its rating of AmerUs Life's, Delta Life's, American's or FBL's
financial strength or claims paying ability; and (iii) no downgrading shall have
occurred in the rating accorded the Company's debt securities or preferred stock
or the Company's financial strength or
18
<PAGE> 19
claims paying ability by any Rating Organization, and (iv) no Rating
Organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company's
debt securities or preferred stock or the Company's financial strength or claims
paying ability;
(h) On or after the date of the Pricing Agreement relating to the
Designated Securities there shall not have occurred any of the following: (i) a
suspension or material limitation in trading in securities generally on the New
York Stock Exchange or on the National Association of Securities Dealers
Automated Quotations National Market ("NASDAQ"); (ii) a suspension or material
limitation in trading in the Company's securities on NASDAQ; (iii) a general
moratorium on commercial banking activities declared by either Federal or New
York State authorities; or (iv) the outbreak or escalation of hostilities
involving the United States or the declaration by the United States of a
national emergency or war, if the effect of any such event specified in this
Clause (iv) in the judgment of the Representatives makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Designated Securities on the terms and in the manner contemplated in the
Prospectus as first amended or supplemented relating to the Designated
Securities;
(i) The Company shall have complied with the provisions of Section
5(c) hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement; and
(j) The Company shall have furnished or caused to be furnished
to the Representatives at the Time of Delivery for the Designated Securities a
certificate or certificates of officers of the Company satisfactory to the
Representatives as to the accuracy of the respective representations and
warranties of the Company herein at and as of such Time of Delivery, as to the
performance by the Company of all of its obligations hereunder to be performed
at or prior to such Time of Delivery, as to the matters set forth in subsections
(a) and (f) of this Section and as to such other matters as the Representatives
may reasonably request.
8. (a) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, any
preliminary prospectus supplement, the Registration Statement, the Prospectus as
amended or supplemented and any other prospectus relating to the Securities, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such action or claim as such expenses are incurred; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any Preliminary
Prospectus, any preliminary prospectus supplement, the Registration Statement,
the Prospectus as amended or supplemented and any other prospectus relating to
the Securities, or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by the
Representatives expressly for use in the Prospectus as amended or supplemented
relating to such Securities.
(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or
19
<PAGE> 20
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, any
preliminary prospectus supplement, the Registration Statement, the Prospectus as
amended or supplemented and any other prospectus relating to the Securities, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, any preliminary prospectus supplement, the Registration
Statement, the Prospectus as amended or supplemented and any other prospectus
relating to the Securities, or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through the Representatives expressly for use therein; and will
reimburse the Company for any legal or other expenses reasonably incurred by the
Company in connection with investigating or defending any such action or claim
as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof), referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
of the Designated Securities on the other from the offering of the Designated
Securities. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law or if the indemnified party failed
to give the notice required under subsection (c) above, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company on the one hand and the Underwriters
of the
20
<PAGE> 21
Designated Securities on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and such Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from such offering (before deducting expenses)
received by the Company bear to the total underwriting discounts and commissions
received by such Underwriters. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or such
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this Subsection (d) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this subsection (d),
no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the applicable Designated Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
obligations of the Underwriters of Designated Securities in this subsection (d)
to contribute are several in proportion to their respective underwriting
obligations with respect to such Securities and not joint.
(e) The obligations of the Company under this Section 8 shall be
in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and to each
person, if any, who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to
purchase the Designated Securities which it has agreed to purchase under the
Pricing Agreement relating to such Designated Securities, the Representatives
may in their discretion arrange for themselves or another party or other parties
to purchase such Designated Securities on the terms contained herein. If within
thirty-six hours after such default by any Underwriter the Representatives do
not arrange for the purchase of such Designated Securities, then the Company
shall be entitled to a further period of thirty-six hours within which to
procure another party or other parties satisfactory to the Representatives to
purchase such Designated Securities on such terms. In the event that, within the
respective prescribed periods, the Representatives notify the Company that they
have so arranged for the purchase of such Designated Securities, or the Company
notifies the Representatives that it has so arranged for the purchase of such
Designated Securities, the Representatives or the Company shall have the right
to postpone the Time of Delivery for such Designated Securities for a period of
not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus as amended or
supplemented, or in any other documents or arrangements, and the Company agrees
21
<PAGE> 22
to file promptly any amendments or supplements to the Registration Statement or
the Prospectus which in the opinion of the Representatives may thereby be made
necessary. The term "Underwriter" as used in this Agreement shall include any
person substituted under this Section with like effect as if such person had
originally been a party to the Pricing Agreement with respect to such Designated
Securities.
(b) If, after giving effect to any arrangements for the purchase
of the Designated Securities of a defaulting Underwriter or Underwriters by the
Representatives and the Company as provided in subsection (a) above, the
aggregate principal amount of such Designated Securities which remains
unpurchased does not exceed one-eleventh of the aggregate principal amount of
the Designated Securities, then the Company shall have the right to require each
non-defaulting Underwriter to purchase the principal amount of Designated
Securities which such Underwriter agreed to purchase under the Pricing Agreement
relating to such Designated Securities and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the
principal amount of Designated Securities which such Underwriter agreed to
purchase under such Pricing Agreement) of the Designated Securities of such
defaulting Underwriter or Underwriters for which such arrangements have not been
made; but nothing herein shall relieve a defaulting Underwriter from liability
for its default.
(c) If, after giving effect to any arrangements for the purchase
of the Designated Securities of a defaulting Underwriter or Underwriters by the
Representatives and the Company as provided in subsection (a) above, the
aggregate principal amount of Designated Securities which remains unpurchased
exceeds one-eleventh of the aggregate principal amount of the Designated
Securities, as referred to in subsection (b) above, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Designated Securities of a defaulting Underwriter or
Underwriters, then the Pricing Agreement relating to such Designated Securities
shall thereupon terminate, without liability on the part of any non-defaulting
Underwriter or the Company, except for the expenses to be borne by the Company
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company and the several Underwriters, as
set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof) made by or on
behalf of any Underwriter or any controlling person of any Underwriter, or the
Company, or any officer or director or controlling person of the Company, and
shall survive delivery of and payment for the Securities.
Anything herein to the contrary notwithstanding, the indemnity
agreement of the Company in subsection (a) of Section 8 hereof, the
representations and warranties in subsections (b) and (c) of Section 2 hereof
and any representation or warranty as to the accuracy of the Registration
Statement or the Prospectus contained in any certificate furnished by the
Company pursuant to Section 7 hereof, insofar as they may constitute a basis for
indemnification for liabilities (other than payment by the Company of expenses
incurred or paid in the successful defense of any action, suit or proceeding)
arising under the Act, shall not extend to the extent of any interest therein of
a controlling person or partner of an Underwriter who is a director, officer or
controlling person of the Company when the Registration Statement has become
effective, except in each case to the extent that an interest of such character
shall have been determined by a court of appropriate jurisdiction as not against
public policy as expressed in the Act. Unless in the opinion of counsel for the
22
<PAGE> 23
Company the matter has been settled by controlling precedent, the Company will,
if a claim for such indemnification is asserted, submit to a court of
appropriate jurisdiction the question of whether such interest is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
11. If any Pricing Agreement shall be terminated pursuant to
Section 9 hereof, the Company shall not then be under any liability to any
Underwriter with respect to the Designated Securities covered by such Pricing
Agreement except as provided in Sections 6 and 8 hereof; but, if for any other
reason Designated Securities are not delivered by or on behalf of the Company as
provided herein, the Company will reimburse the Underwriters through the
Representatives for all out-of-pocket expenses approved in writing by the
Representatives, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of such Designated Securities, but the Company shall then be under no
further liability to any Underwriter with respect to such Designated Securities
except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, the Representatives of the
Underwriters of Designated Securities shall act on behalf of each of such
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by such Representatives jointly or by such of the Representatives, if any,
as may be designated for such purpose in the Pricing Agreement.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Representatives as set forth in the
Pricing Agreement; and if to the Company shall be delivered or sent by mail,
telex or facsimile transmission to the address of the Company set forth in the
Registration Statement: Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' questionnaire, or telex constituting such
questionnaire, which address will be supplied to the Company by the
Representatives upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.
13. This Agreement and each Pricing Agreement shall be binding
upon, and inure solely to the benefit of, the Underwriters, the Company and, to
the extent provided in Sections 8 and 10 hereof, the officers and directors of
the Company and each person who controls the Company or any Underwriter, and
their respective heirs, executors, administrators, successors and assigns, and
no other person shall acquire or have any right under or by virtue of this
Agreement or any such Pricing Agreement. No purchaser of any of the Securities
from any Underwriter shall be deemed a successor or assign by reason merely of
such purchase.
14. Time shall be of the essence of each Pricing Agreement. As
used herein, the term "business day" shall mean any day when the Commission's
office in Washington, D.C. is open for business.
15. THIS AGREEMENT AND EACH PRICING AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
23
<PAGE> 24
16. This Agreement and each Pricing Agreement may be executed by
any one or more of the parties hereto and thereto in any number of counterparts,
each of which shall be deemed to be an original, but all such respective
counterparts shall together constitute one and the same instrument.
Very truly yours,
AmerUs Life Holdings, Inc.
By:
------------------------------
Name:
Title:
24
<PAGE> 25
ANNEX I
Pricing Agreement
Salomon Brothers Inc
Goldman, Sachs & Co.,
As Representatives of the several
Underwriters named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
.................., 19..
Ladies and Gentlemen:
AmerUs Life Holdings, Inc., an Iowa corporation (the "Company"),
proposes, subject to the terms and conditions stated herein and in the
Underwriting Agreement, dated . . . . . . . . . . . ., 19 . . (the "Underwriting
Agreement"), to issue and sell to the Underwriters named in Schedule I hereto
(the "Underwriters") the Securities specified in Schedule II hereto (the
"Designated Securities"). Each of the provisions of the Underwriting Agreement
is incorporated herein by reference in its entirety, and shall be deemed to be a
part of this Agreement to the same extent as if such provisions had been set
forth in full herein; and each of the representations and warranties set forth
therein shall be deemed to have been made at and as of the date of this Pricing
Agreement, except that each representation and warranty which refers to the
Prospectus in Section 2 of the Underwriting Agreement shall be deemed to be a
representation or warranty as of the date of the Underwriting Agreement in
relation to the Prospectus (as therein defined), and also a representation and
warranty as of the date of this Pricing Agreement in relation to the Prospectus
as amended or supplemented relating to the Designated Securities which are the
subject of this Pricing Agreement. Each reference to the Representatives herein
and in the provisions of the Underwriting Agreement so incorporated by reference
shall be deemed to refer to you. Unless otherwise defined herein, terms defined
in the Underwriting Agreement are used herein as therein defined. The
Representatives designated to act on behalf of the Representatives and on behalf
of each of the Underwriters of the Designated Securities pursuant to Section 12
of the Underwriting Agreement and the address of the Representatives referred to
in such Section 12 are set forth at the end of Schedule II hereto.
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Designated Securities, in the
form heretofore delivered to you is now proposed to be filed with the
Commission.
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement incorporated herein by reference, the Company agrees to
issue and sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at the time and place
and at the purchase price to the Underwriters set forth in Schedule II hereto,
the principal amount of Designated Securities set forth opposite the name of
such Underwriter in Schedule I hereto.
If the foregoing is in accordance with your understanding, please sign
and return to us [six] counterparts hereof, and upon acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof,
including the provisions of the Underwriting Agreement
<PAGE> 26
incorporated herein by reference, shall constitute a binding agreement between
each of the Underwriters, on the one hand, and the Company and AmerUs Life
Insurance Company, on the other hand. It is understood that your acceptance of
this letter on behalf of each of the Underwriters is or will be pursuant to the
authority set forth in a form of Agreement among Underwriters, the form of which
shall be submitted to the Company for examination upon request, but without
warranty on the part of the Representatives as to the authority of the signers
thereof.
Very truly yours,
AmerUs Life Holdings, Inc.
By:
--------------------------
Name:
Title:
Accepted as of the date hereof:
Salomon Brothers Inc
Goldman, Sachs & Co.
Salomon Brothers Inc
By:
--------------------------------
Name:
Title:
----------------------------------------
On behalf of each of the Underwriters
2
<PAGE> 27
SCHEDULE I
PRINCIPAL
AMOUNT OF
DESIGNATED
SECURITIES
TO BE
UNDERWRITER PURCHASED
Salomon Brothers Inc............................................. $
Goldman, Sachs & Co. ...........................................
------------
Total............................................ $
============
3
<PAGE> 28
SCHEDULE II
TITLE OF DESIGNATED SECURITIES:
[ %] [Floating Rate] [Zero Coupon] [Notes]
[Debentures] due ,
AGGREGATE PRINCIPAL AMOUNT:
[$]
PRICE TO PUBLIC:
% of the principal amount of the Designated Securities, plus
accrued interest[, if any,] from to [and accrued amortization
[, if any,] from to ]
PURCHASE PRICE BY UNDERWRITERS:
% of the principal amount of the Designated Securities, plus
accrued interest from to [and accrued amortization[, if
any,] from to ]
FORM OF DESIGNATED SECURITIES:
[Definitive form to be made available for checking and packaging at
least twenty-four hours prior to the Time of Delivery at the office of
[The Depository Trust Company or its designated custodian] [the
Representatives]]
[Book-entry only form represented by one or more global securities
deposited with The Depository Trust Company ("DTC") or its designated
custodian, to be made available for checking by the Representatives at
least twenty-four hours prior to the Time of Delivery at the office of
DTC.]
SPECIFIED FUNDS FOR PAYMENT OF PURCHASE PRICE:
Federal (same day) funds
TIME OF DELIVERY:
a.m. (New York City time), , 19
INDENTURE:
Indenture dated , 19 , between the Company and
, as Trustee
MATURITY:
INTEREST RATE:
[ %] [Zero Coupon] [See Floating Rate Provisions]
INTEREST PAYMENT DATES:
[months and dates, commencing ....................., 19..]
REDEMPTION PROVISIONS:
[No provisions for redemption]
[The Designated Securities may be redeemed, otherwise than through the
sinking fund, in whole or in part at the option of the Company, in the
amount of [$ ] or an integral multiple thereof,
4
<PAGE> 29
[on or after , at the following redemption prices (expressed in
percentages of principal amount). If [redeemed on or before , %,
and if] redeemed during the 12-month period beginning ,
Redemption
Year Price
---- -----
and thereafter at 100% of their principal amount, together in each case
with accrued interest to the redemption date.]
[on any interest payment date falling on or after , , at the
election of the Company, at a redemption price equal to the principal
amount thereof, plus accrued interest to the date of redemption.]]
[Other possible redemption provisions, such as mandatory redemption
upon occurrence of certain events or redemption for changes in tax law]
[Restriction on refunding]
SINKING FUND PROVISIONS:
[No sinking fund provisions]
[The Designated Securities are entitled to the benefit of a sinking
fund to retire [$ ] principal amount of Designated Securities on
in each of the years through at 100% of their principal amount plus
accrued interest[, together with [cumulative] [noncumulative]
redemptions at the option of the Company to retire an additional [$ ]
principal amount of Designated Securities in the years through
at 100% of their principal amount plus accrued interest.]
[If Designated Securities are extendable debt securities, insert--
EXTENDABLE PROVISIONS:
Designated Securities are repayable on , [insert date
and years], at the option of the holder, at their principal amount with
accrued interest. The initial annual interest rate will be %, and
thereafter the annual interest rate will be adjusted on , and
to a rate not less than % of the effective annual interest
rate on U.S. Treasury obligations with -year maturities as
of the [insert date 15 days prior to maturity date] prior to such
[insert maturity date].]
[If Designated Securities are floating rate debt securities, insert--
FLOATING RATE PROVISIONS:
Initial annual interest rate will be % through [and
thereafter will be adjusted [monthly] [on each , ,
and ] [to an annual rate of % above the average
rate for -year [month][securities][certificates of deposit]
issued by and [insert names of banks].] [and the annual
interest rate [thereafter] [from through ] will be the
interest yield equivalent of the weekly average per annum market
discount rate for -month Treasury bills plus % of
Interest Differential (the excess, if any, of (i) the then current
weekly average per annum secondary market yield for -month
5
<PAGE> 30
certificates of deposit over (ii) the then current interest yield
equivalent of the weekly average per annum market discount rate for
-month Treasury bills); [from and thereafter the rate will be
the then current interest yield equivalent plus % of Interest
Differential].]
DEFEASANCE PROVISIONS:
CLOSING LOCATION FOR DELIVERY OF DESIGNATED SECURITIES:
ADDITIONAL CLOSING CONDITIONS:
Paragraph 7(h) of the Underwriting Agreement will be modified in the
event that the Securities are denominated in, indexed to, or principal
or interest are paid in, a currency other than the U.S. dollar, more
than one currency or in a composite currency. The country or countries
issuing such currency should be added to the banking moratorium and
hostilities clauses and the following additional clause should be added
to the paragraph (the entire paragraph should be restated, as amended):
"; ( ) the imposition of the proposal of exchange controls by
any governmental authority in [insert the country or countries issuing
such currency, currencies or composite currency]".
NAMES AND ADDRESSES OF REPRESENTATIVES:
Designated Representatives:
Address for Notices, etc.:
[OTHER TERMS]*:
- -----------------
*A description of particular tax, accounting or other unusual features (such as
the addition of event risk provisions) of the Designated Securities should be
set forth, or referenced to an attached and accompanying description, if
necessary, to ensure agreement as to the terms of the Designated Securities to
be purchased and sold. Such a description might appropriately be in the form in
which such features will be described in the Prospectus Supplement for the
offering.
6
<PAGE> 31
ANNEX II
Pursuant to Section 7(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to the
Company and its subsidiaries within the meaning of the Act and the applicable
published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules audited (and, if applicable, financial
forecasts and/or pro forma financial information) examined by them and included
or incorporated by reference in the Registration Statement or the Prospectus
comply as to form in all material respects with the applicable accounting
requirements of the Act or the Exchange Act, as applicable, and the related
published rules and regulations thereunder; and, if applicable, they have made a
review in accordance with standards established by the American Institute of
Certified Public Accountants of the consolidated interim financial statements,
selected financial data, pro forma financial information, financial forecasts
and/or condensed financial statements derived from audited financial statements
of the Company for the periods specified in such letter, as indicated in their
reports thereon, copies of which have been furnished to the representative or
representatives of the Underwriters (the "Representatives") such term to include
an Underwriter or Underwriters who act without any firm being designated as its
or their representatives and are attached hereto;
(iii) They have made a review in accordance with standards established by
the American Institute of Certified Public Accountants of the unaudited
condensed consolidated statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the Prospectus and/or included
in the Company's quarterly report on Form 10-Q incorporated by reference into
the Prospectus as indicated in their reports thereon copies of which are
attached hereto; and on the basis of specified procedures including inquiries of
officials of the Company who have responsibility for financial and accounting
matters regarding whether the unaudited condensed consolidated financial
statements referred to in paragraph (vi)(A)(i) below comply as to form in all
material respects with the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations, nothing came to
their attention that caused them to believe that the unaudited condensed
consolidated financial statements do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the Exchange
Act and the related published rules and regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company for the
five most recent fiscal years included in the Prospectus and included or
incorporated by reference in Item 6 of the Company's Annual Report on Form 10-K
for the most recent fiscal year agrees with the corresponding amounts (after
restatement where applicable) in the audited consolidated financial statements
for five such fiscal years which were included or incorporated by reference in
the Company's Annual Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under selected
captions with the disclosure requirements of Regulation S-K and on the basis of
limited procedures specified in such letter nothing came to their attention as a
result of the foregoing procedures that caused them to believe that this
information does not conform in all material respects with the disclosure
requirements of Items 301, 302, 402 and 503(d), respectively, of Regulation S-K;
<PAGE> 32
(vi) On the basis of limited procedures, not constituting an examination in
accordance with generally accepted auditing standards, consisting of a reading
of the unaudited financial statements and other information referred to below, a
reading of the latest available interim financial statements of the Company and
its subsidiaries, inspection of the minute books of the Company and its
subsidiaries since the date of the latest audited financial statements included
or incorporated by reference in the Prospectus, inquiries of officials of the
Company and its subsidiaries responsible for financial and accounting matters
and such other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) (i) the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus and/or included or incorporated by reference
in the Company's Quarterly Reports on Form 10-Q incorporated by reference
in the Prospectus do not comply as to form in all material respects with
the applicable accounting requirements of the Exchange Act and the
related published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed consolidated
statements of income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus or included in the
Company's Quarterly Reports on Form 10-Q incorporated by reference in the
Prospectus for them to be in conformity with generally accepted
accounting principles;
(B) any other unaudited income statement data and balance sheet items
included in the Prospectus do not agree with the corresponding items in
the unaudited consolidated financial statements from which such data and
items were derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial statements
included or incorporated by reference in the Company's Annual Report on
Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not included in the
Prospectus but from which were derived the unaudited condensed financial
statements referred to in clause (A) and any unaudited income statement
data and balance sheet items included in the Prospectus and referred to
in Clause (B) were not determined on a basis substantially consistent
with the basis for the audited financial statements included or
incorporated by reference in the Company's Annual Report on Form 10-K for
the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Prospectus do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the published rules and regulations
thereunder or the pro forma adjustments have not been properly applied to
the historical amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to the date
of such letter, there have been any changes in the consolidated capital
stock (other than issuances of capital stock upon exercise of options and
stock appreciation rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which were
outstanding on the date of the latest balance sheet included or
incorporated by reference in the Prospectus) or any increase in the
consolidated long-term debt of the Company and its subsidiaries, or any
decreases in consolidated net current assets or stockholders' equity or
other items specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as compared with
amounts shown
2
<PAGE> 33
in the latest balance sheet included or incorporated by reference in
the Prospectus, except in each case for changes, increases or decreases
which the Prospectus discloses have occurred or may occur or which are
described in such letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the Prospectus to
the specified date referred to in Clause (E) there were any decreases
in consolidated net revenues or operating profit or the total or per
share amounts of consolidated net income or other items specified by
the Representatives, or any increases in any items specified by the
Representatives, in each case as compared with the comparable period of
the preceding year and with any other period of corresponding length
specified by the Representatives, except in each case for increases or
decreases which the Prospectus discloses have occurred or may occur or
which are described in such letter; and
(vii) In addition to the audit referred to in their report(s) included
or incorporated by reference in the Prospectus and the limited procedures,
inspection of minute books, inquiries and other procedures referred to in
paragraphs (iii) and (vi) above, they have carried out certain specified
procedures, not constituting an audit in accordance with generally accepted
auditing standards, with respect to certain amounts, percentages and financial
information specified by the Representatives which are derived from the general
accounting records of the Company and its subsidiaries, which appear in the
Prospectus (excluding documents incorporated by reference), or in Part II of, or
in exhibits and schedules to, the Registration Statement specified by the
Representatives or in documents incorporated by reference in the Prospectus
specified by the Representatives, and have compared certain of such amounts,
percentages and financial information with the accounting records of the Company
and its subsidiaries and have found them to be in agreement.
All references in this Annex II to the Prospectus shall be deemed to
refer to the Prospectus (including the documents incorporated by reference
therein) as defined in the Underwriting Agreement as of the date of the letter
delivered on the date of the Pricing Agreement for purposes of such letter and
to the Prospectus as amended or supplemented (including the documents
incorporated by reference therein) in relation to the applicable Designated
Securities for purposes of the letter delivered at the Time of Delivery for such
Designated Securities.
3
<PAGE> 1
EXHIBIT 4.2
================================================================================
INDENTURE
between
AMERUS LIFE HOLDINGS, INC.
and
FIRST UNION NATIONAL BANK
as Trustee
Dated as of ____________ __, 1998
Providing for the Issuance of
Senior Debt Securities in Series
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE I
Definitions and Other Provisions
of General Application
<S> <C> <C>
Section 1.01. Definitions...............................................................................1
Section 1.02. Compliance Certificate and Opinions......................................................11
Section 1.03. Forms of Documents Delivered to Trustee..................................................12
Section 1.04. Acts of Holders..........................................................................12
Section 1.05. Notices, Etc., to Trustee and Company....................................................15
Section 1.06. Notice to Holders; Waiver................................................................15
Section 1.07. Headings and Table of Contents...........................................................16
Section 1.08. Successors and Assigns...................................................................17
Section 1.09. Separability.............................................................................17
Section 1.10. Benefits of Indenture....................................................................17
Section 1.11. Governing Law............................................................................17
Section 1.12. Legal Holidays...........................................................................17
ARTICLE II
Security Forms
Section 2.01. Forms Generally..........................................................................18
Section 2.02. Form of Trustee's Certificate of
Authentication.......................................................18
Section 2.03. Securities in Global Form................................................................19
Section 2.04. Form of Legend for Securities in
Global Form..........................................................20
ARTICLE III
The Securities
Section 3.01. Amount Unlimited; Issuable in Series.....................................................20
Section 3.02. Denominations............................................................................24
Section 3.03. Execution, Authentication, Delivery
and Dating...........................................................24
Section 3.04. Temporary Securities.....................................................................28
Section 3.05. Registration, Transfer and Exchange......................................................29
Section 3.06. Replacement Securities...................................................................33
Section 3.07. Payment of Interest; Interest
Rights Preserved.....................................................34
Section 3.08. Persons Deemed Owners....................................................................37
Section 3.09. Cancellation.............................................................................37
Section 3.10. Computation of Interest..................................................................38
Section 3.11. CUSIP Numbers............................................................................38
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 3.12. Currency and Manner of Payment in
Respect of Securities................................................38
Section 3.13. Appointment and Resignation of
Exchange Rate Agent..................................................43
ARTICLE IV
Satisfaction, Discharge and Defeasance
Section 4.01. Termination of Company's Obligations
Under the Indenture..................................................44
Section 4.02. Application of Trust Funds...............................................................45
Section 4.03. Applicability of Defeasance Provisions;
Company's Option to Effect
Defeasance or Covenant Defeasance....................................45
Section 4.04. Defeasance and Discharge.................................................................46
Section 4.05. Covenant Defeasance......................................................................46
Section 4.06. Conditions to Defeasance or Covenant
Defeasance...........................................................47
Section 4.07. Deposited Money and Government
Obligations to Be Held in Trust......................................49
Section 4.08. Repayment to Company.....................................................................50
Section 4.09. Indemnity for Government Obligations.....................................................50
Section 4.10. Reinstatement............................................................................50
ARTICLE V
Defaults and Remedies
Section 5.01. Events of Default........................................................................51
Section 5.02. Acceleration; Rescission and
Annulment............................................................53
Section 5.03. Collection of Indebtedness and
Suits for Enforcement by Trustee.....................................54
Section 5.04. Trustee May File Proofs of Claim.........................................................55
Section 5.05. Trustee May Enforce Claims Without
Possession of Securities.............................................56
Section 5.06. Delay or Omission Not Waiver.............................................................56
Section 5.07. Waiver of Past Defaults..................................................................56
Section 5.08. Control by Majority......................................................................56
Section 5.09. Limitation on Suits by Holders...........................................................57
Section 5.10. Rights of Holders to Receive Payment.....................................................58
Section 5.11. Application of Money Collected...........................................................58
Section 5.12. Restoration of Rights and Remedies.......................................................58
Section 5.13. Rights and Remedies Cumulative...........................................................59
Section 5.14. Waiver of Usury, Stay or Extension Laws..................................................59
Section 5.15. Undertaking for Costs....................................................................59
Section 5.16. Judgment Currency........................................................................59
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
ARTICLE VI
The Trustee
<S> <C> <C>
Section 6.01. Certain Duties and Responsibilities
of the Trustee.......................................................60
Section 6.02. Rights of Trustee........................................................................60
Section 6.03. Trustee May Hold Securities..............................................................62
Section 6.04. Money Held in Trust......................................................................62
Section 6.05. Trustee's Disclaimer.....................................................................62
Section 6.06. Notice of Defaults.......................................................................62
Section 6.07. Reports by Trustee to Holders............................................................63
Section 6.08. Securityholder Lists.....................................................................63
Section 6.09. Compensation and Indemnity...............................................................63
Section 6.10. Replacement of Trustee...................................................................64
Section 6.11. Acceptance of Appointment by Successor...................................................66
Section 6.12. Eligibility; Disqualification............................................................67
Section 6.13. Merger, Conversion, Consolidation or
Succession to Business...............................................67
Section 6.14. Appointment of Authenticating Agent......................................................68
ARTICLE VII
Consolidation, Merger or Sale by the Company
Section 7.01. Consolidation, Merger or Sale of
Assets Permitted.....................................................70
ARTICLE VIII
Supplemental Indentures
Section 8.01. Supplemental Indentures Without
Consent of Holders...................................................71
Section 8.02. Supplemental Indentures with Consent
of Holders...........................................................72
Section 8.03. Compliance with Trust Indenture Act......................................................74
Section 8.04. Execution of Supplemental Indentures.....................................................74
Section 8.05. Effect of Supplemental Indentures........................................................74
Section 8.06. Reference in Securities to Supplemental
Indentures...........................................................74
ARTICLE IX
Covenants
Section 9.01. Payment of Principal, Premium,
if any, and Interest.................................................74
Section 9.02. Maintenance of Office or Agency..........................................................75
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 9.03. Money for Securities Payments to
be Held in Trust; Unclaimed Money....................................76
Section 9.04. Corporate Existence......................................................................78
Section 9.05. Reports by the Company...................................................................78
Section 9.06. Annual Review Certificate; Notice
of Defaults or Events of Default.....................................79
Section 9.07. Books of Record and Account..............................................................79
ARTICLE X
Redemption
Section 10.01. Applicability of Article................................................................79
Section 10.02. Election to Redeem Notice to Trustee....................................................79
Section 10.03. Selection of Securities to be Redeemed..................................................80
Section 10.04. Notice of Redemption....................................................................80
Section 10.05. Deposit of Redemption Price.............................................................82
Section 10.06. Securities Payable on Redemption Date...................................................82
Section 10.07. Securities Redeemed in Part.............................................................83
ARTICLE XI
Sinking Funds
Section 11.01. Applicability of Article................................................................83
Section 11.02. Satisfaction of Sinking Fund
Payments with Securities.............................................84
Section 11.03. Redemption of Securities for Sinking
Fund.................................................................84
</TABLE>
iv
<PAGE> 6
INDENTURE, dated as of , 1998 from AMERUS LIFE HOLDINGS, INC.,
an Iowa corporation (the "Company"), to FIRST UNION NATIONAL BANK (the
"Trustee").
RECITALS
The Company has duly authorized the execution and delivery of
this Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness ("Securities") to be issued
in one or more series as herein provided.
All things necessary to make this Indenture a valid agreement
of the Company, in accordance with its terms, have been done.
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually covenanted and agreed as
follows for the equal and ratable benefit of the Holders of the Securities:
ARTICLE I
Definitions and Other Provisions
of General Application
Section 1.01. Definitions. (a) 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 GAAP (as hereinafter
defined); and
(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.
"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 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
<PAGE> 7
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent" means any Paying Agent or Registrar.
"Authenticating Agent" means any authenticating agent
appointed by the Trustee pursuant to Section 6.14.
"Authorized Newspaper" means a newspaper of general
circulation, in the official language of the country of publication or in the
English language, customarily published on each Business Day whether or not
published on Saturdays, Sundays or holidays. Whenever successive publications in
an Authorized Newspaper are required hereunder they may be made (unless
otherwise expressly provided herein) on the same or different days of the week
and in the same or different Authorized Newspapers.
"Bearer Security" means any Security issued hereunder
which is payable to bearer.
"Board" or "Board of Directors" means the Board of Directors
of the Company or any duly authorized committee of the Board of Directors of the
Company.
"Board Resolution" means a copy of a resolution of the Board
of Directors, certified by the Secretary or an Assistant Secretary of the
Company to have been duly adopted by the Board of Directors and to be in full
force and effect on the date of the certificate, and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment
or any other particular location referred to in this Indenture or in the
Securities, means, unless otherwise specified with respect to any Securities
pursuant to Section 3.01, each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in that Place of Payment or
particular location are authorized or obligated by law or executive order to
close.
"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 Indenture 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.
"Company" means the party named as the Company in the first
paragraph of this Indenture until a successor corporation shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter means
such successor.
2
<PAGE> 8
"Company Order" and "Company Request" mean, respectively, a
written order or request signed in the name of the Company by two Officers, one
of whom must be the Chairman of the Board, the President, the Chief Financial
Officer, the Treasurer, the Assistant Treasurer, the Controller or a Vice
President of the Company.
"Conversion Event" means the cessation of use of (i) a Foreign
Currency both by the issuer of such currency and for the settlement of
transactions by a central bank or other public institutions of or within the
international banking community, (ii) the ECU both within the European Monetary
System and for the settlement of transactions by public institutions of or
within the European Communities or (iii) any currency unit other than the ECU
for the purposes for which it was established.
"Corporate Trust Office" means the office of the
Trustee in which at any particular time its corporate trust
business shall be principally administered, which office at the
date hereof is located at 230 South Tryon Street, 9th Floor,
Charlotte, North Carolina 28288-1179, Attention: Corporate Trust
Dept.
"Currency Unit" or "currency unit" for all purposes of this
Indenture shall mean any composite currency.
"Debt" means indebtedness for money borrowed.
"Default" means any event which is, or after notice or passage
of time, or both, would be, an Event of Default.
"Depository" when used with respect to the Securities of or
within any series issuable or issued in whole or in part in global form, means
the Person designated as Depository by the Company pursuant to Section 3.01
until a successor Depository shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter shall mean or include each Person
which is then a Depository hereunder, and if at any time there is more than one
such Person, shall be a collective reference to such Persons.
"Dollar" means the currency of the United States as at the
time of payment is legal tender for the payment of public and private debts.
"ECU" means the European Currency Unit as defined and revised
from time to time by the Council of the European Communities.
"European Communities" means the European Economic
Community, the European Coal and Steel Community and the European
Atomic Energy Community.
3
<PAGE> 9
"European Monetary System" means the European Monetary System
established by the Resolution of December 5, 1978 of the Council of the European
Communities.
"Exchange Rate Agent", when used with respect to Securities of
or within any series, means, unless otherwise specified with respect to any
Securities pursuant to Section 3.01, a bank designated pursuant to Section 3.01
or Section 3.13 (which may include any such bank acting as Trustee hereunder).
"Exchange Rate Officer's Certificate" means a certificate
setting forth (i) the applicable Market Exchange Rate or the applicable bid
quotation and (ii) the Dollar or Foreign Currency amounts of principal (and
premium, if any) and interest, if any (on an aggregate basis and on the basis of
a Security having the lowest denomination principal amount in the relevant
currency or currency unit), payable with respect to a Security of any series on
the basis of such Market Exchange Rate or the applicable bid quotation, signed
by the Chief Financial Officer, the Treasurer, the Controller, any Vice
President or the Assistant Treasurer of the Company.
"Foreign Currency" means any currency issued by the government
of one or more countries other than the United States or by any recognized
confederation or association of such governments.
"GAAP" means United States generally accepted accounting
principles, in effect as of the date of this Indenture, as set forth in the
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as is approved by a significant
segment of the accounting profession.
"Government Obligations" means securities which are (i) direct
obligations of the United States or, if specified as contemplated by Section
3.01, the government which issued the currency in which the Securities of a
particular series are payable, for the payment of which its full faith and
credit is pledged or (ii) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States or, if specified
as contemplated by Section 3.01, such government which issued the foreign
currency in which the Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States or such other government, which, in either case, are not callable
or redeemable at the option of the issuer thereof, and shall also include a
depository receipt issued by a bank or trust company 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 a depository receipt;
4
<PAGE> 10
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 evidenced by such depository receipt.
"Holder" means, with respect to a Bearer Security, a bearer
thereof or of a coupon appertaining thereto and, with respect to a Registered
Security, a person in whose name a Security is registered on the Register.
"Indenture" means this Indenture as originally executed or as
amended or supplemented from time to time and shall include the forms and terms
of particular series of Securities established as contemplated hereunder.
"Indexed Security" means a Security the terms of which provide
that the principal amount thereof payable at Stated Maturity may be more or less
than the principal face amount thereof at original issuance.
"Interest", when used with respect to an Original Issue
Discount Security which by its terms bears interest only after Maturity, means
interest payable after Maturity.
"Interest Payment Date", when used with respect to any
Security, means the Stated Maturity of an installment of interest on such
Security.
"Market Exchange Rate" means, unless otherwise specified with
respect to any Securities pursuant to Section 3.01, (i) for any conversion
involving a currency unit on the one hand and Dollars or any Foreign Currency on
the other, the exchange rate between the relevant currency unit and Dollars or
such Foreign Currency calculated by the method specified pursuant to Section
3.01 for the Securities of the relevant series, (ii) for any conversion of
Dollars into any Foreign Currency, the noon buying rate for such Foreign
Currency for cable transfers quoted in New York City as certified for customs
purposes by the Federal Reserve Bank of New York and (iii) for any conversion of
one Foreign Currency into Dollars or another Foreign Currency, the spot rate at
noon local time in the relevant market at which, in accordance with normal
banking procedures, the Dollars or Foreign Currency into which conversion is
being made could be purchased with the Foreign Currency from which conversion is
being made from major banks located in New York City, London or any other
principal market for Dollars or such purchased Foreign Currency, in each case
determined by the Exchange Rate Agent. Unless otherwise specified with respect
to any Securities pursuant to Section 3.01, in the event of the unavailability
of any of the exchange rates provided for in the foregoing clauses (i), (ii) and
(iii), the Exchange Rate Agent shall use, in its sole
5
<PAGE> 11
discretion and without liability on its part, such quotation of the Federal
Reserve Bank of New York as of the most recent available date, or quotations
from one or more major banks in New York City, London or other principal market
for such currency or currency unit in question (which may include any such bank
acting as Trustee under this Indenture), or such other quotations as the
Exchange Rate Agent shall deem appropriate. If there is more than one market for
dealing in any currency or currency unit by reason of foreign exchange
regulations or otherwise, the market to be used in respect of such currency or
currency unit shall be that upon which a nonresident issuer of securities
designated in such currency or currency unit would purchase such currency or
currency unit in order to make payments in respect of such securities.
"Maturity", when used with respect to any Security, means the
date on which the principal of such Security or an installment of principal
becomes due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, call for redemption or otherwise.
"Officer" means the Chairman of the Board, the
President, any Vice President, the Chief Financial Officer, the
Treasurer, the Assistant Treasurer, the Controller, the Secretary
or any Assistant Secretary of the Company.
"Officers' Certificate", when used with respect to the
Company, means a certificate signed by two Officers, one of whom must be the
Chairman of the Board, the President, the Chief Financial Officer, the
Treasurer, the Assistant Treasurer, the
Controller or a Vice President of the Company.
"Opinion of Counsel" means a written opinion from the general
counsel of the Company or other legal counsel who is reasonably acceptable to
the Trustee. Such counsel may be an employee of or counsel to the Company.
"Original Issue Discount Security" means any Security which
provides for an amount less than the stated principal amount thereof to be due
and payable upon declaration of acceleration of the Maturity thereof pursuant to
Section 5.02.
"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, or portions thereof, for whose payment or
redemption money in the necessary amount and in the
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<PAGE> 12
required currency or Currency Unit has been theretofore deposited with
the Trustee or any Paying Agent (other than the Company) in trust or
set aside and segregated in trust (if the Company shall act as its own
Paying Agent) for the Holders of such Securities and any coupons
appertaining thereto, provided that, if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant to
this Indenture or provisions therefor satisfactory to the Trustee have
been made;
(iii) Securities, except to the extent provided in Sections
4.04, with respect to which the Company has effected defeasance as
provided in Article IV; and
(iv) Securities which have been paid pursuant to Section 3.06
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 which there shall have been presented to the
Trustee proof satisfactory to it that such Securities are held by a
bona fide purchaser in whose hands such Securities are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, or whether
sufficient funds are available for redemption or for any other purpose and for
the purpose of making the calculations required by Section 313 of the Trust
Indenture Act, (W) the principal amount of any Original Issue Discount
Securities that may be counted in making such determination or calculation and
that shall be deemed to be outstanding for such purpose shall be equal to the
amount of principal thereof that would be (or shall have been declared to be)
due and payable, at the time of such Determination, upon a declaration of
acceleration of the maturity thereof pursuant to Section 5.02, (X) the principal
amount of any Security denominated in a Foreign Currency that may be counted in
making such determination or calculation and that shall be deemed Outstanding
for such purpose shall be equal to the Dollar equivalent, determined as of the
date such Security is originally issued by the Company as set forth in an
Exchange Rate Officer's Certificate delivered to the Trustee, of the principal
amount (or, in the case of an Original Issue Discount Security, the Dollar
equivalent as of such date of original issuance of the amount determined as
provided in clause (W) above) of such Security, (Y) the principal amount of any
Indexed Security that may be counted in making such determination or calculation
and that shall be deemed Outstanding for such purpose shall be equal to the
principal face amount of such Indexed Security at original issuance, unless
otherwise provided with respect to such security pursuant to Section 3.01, and
(Z) Securities owned by the Company
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<PAGE> 13
or any other obligor upon the Securities or any Affiliate of the Company or of
such other obligor shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Trustee shall be protected in making such
calculation or in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Securities which the Trustee actually
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 of such
other obligor.
"Paying Agent" means any Person authorized by the Company to
pay the principal of, premium, if any, or interest and any other payments on any
Securities on behalf of the Company.
"Periodic Offering" means an offering of Securities of a
series from time to time the specific terms of which Securities, including,
without limitation, the rate or rates of interest or formula for determining the
rate or rates of interest thereon, if any, the Maturity thereof and the
redemption provisions, if any, with respect thereto, are to the determined by
the Company upon the issuance of such Securities.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Place of Payment", when used with respect to the Securities
of or within any series, means the place or places where the principal of,
premium, if any, and interest and any other payments on such Securities are
payable as specified as contemplated by Sections 3.01.
"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 3.06 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.
"Principal Amount", when used with respect to any Security,
means the amount of principal, if any, payable in respect thereof at Maturity;
provided, however, that when used with respect to an Indexed Security in any
context other than the making of payments at Maturity, "principal amount" means
the
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<PAGE> 14
principal face amount of such Indexed Security at original
issuance.
"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, in whole or in part, means the price at which it is to be redeemed
pursuant to this Indenture.
"Registered Security" means any Security issued hereunder and
registered as to principal and interest in the Register.
"Regular Record Date" for the interest payable on any Interest
Payment Date on the Securities of or within any series means the date specified
for that purpose as contemplated by Section 3.01.
"Responsible Officer", when used with respect to the Trustee,
shall mean the chairman or any vice chairman of the board of directors, the
chairman or any vice-chairman of the executive committee of the board of
directors, the chairman of the trust committee, the president, any senior vice
president, any vice president, any assistant vice president, the secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
senior trust officer, any trust officer, the controller, any assistant
controller, or any officer of the Trustee customarily performing functions
similar to those performed by the persons who at the time shall be such
officers, respectively, or to whom any corporate trust matter is referred
because of his knowledge of and familiarity with a particular subject.
"Security" or "Securities" has the meaning stated in the first
recital of this Indenture and more particularly means a Security or Securities
of the Company issued, authenticated and delivered under this Indenture.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 3.07.
"Stated Maturity", when used with respect to any Security or
any installment of principal thereof or interest thereon, means the date
specified on such Security or on a coupon representing such installment of
interest as the fixed date on which the principal of such Security or such
installment of principal or interest is due and payable.
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<PAGE> 15
"Subsidiary" means, with respect to any Person, (i) a
corporation more than 50% of the combined voting power of the outstanding Voting
Stock of which is owned, directly or indirectly, by such Person or by one or
more other Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof, (ii) any other Person (other than a corporation) in which
such Person, or one or more other Subsidiaries of such Person or such Person and
one or more other Subsidiaries thereof, directly or indirectly, has at least a
majority ownership and power to direct the policies, management and affairs
thereof, or (iii) any other Person which is otherwise controlled by such Person
or by one or more other Subsidiaries of such Person or by such Person and one or
more other Subsidiaries of such Person.
"Total Assets" means, at any date, the total assets appearing
on the most recently prepared consolidated balance sheet of the Company and its
consolidated Subsidiaries as of the end of a fiscal quarter of the Company,
prepared in accordance with GAAP.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as
in effect on the date of this Indenture, except as provided in Section 8.03.
"Trustee" means the party named as such in the first paragraph
of this Indenture until a successor Trustee replaces it pursuant to the
applicable provisions of this Indenture, and thereafter means such successor
Trustee and if, at any time, there is more than one Trustee, "Trustee" as used
with respect to the Securities of any series shall mean the Trustee with respect
to the Securities of that series.
"United States" means, unless otherwise specified with respect
to the Securities of any series as contemplated by Section 3.01, the United
States of America (including the States and the District of Columbia), its
territories, its possessions and other areas subject to its jurisdiction.
"U.S. Person" means, unless otherwise specified with respect
to the Securities of any series as contemplated by Section 3.01, a citizen,
national or resident of the United States, a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, or an estate or trust, the income of which is
subject to United States federal income taxation regardless of its source.
"Voting Stock" of any Person means capital stock of such
Person which ordinarily has voting power for the election of directors (or
persons performing similar functions) of such Person, whether at all times or
only so long as no senior class of securities has such voting power by reason of
any contingency.
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(b) The following terms shall have the meanings specified in
the Sections referred to opposite such term below:
<TABLE>
<CAPTION>
TERM Section
<S> <C>
"Act" 1.04(a)
"Additional Amount" 3.01(17)
"Bankruptcy Law" 5.01
"Component Currency" 3.12(h)
"Conversion Date" 3.12(d)
"Custodian" 5.01
"Defaulted Interest" 3.07(b)
"Election Date" 3.12(h)
"Event of Default" 5.01
"Judgment Date" 5.16
"Notice of Default" 5.01(3)
"Register" 3.05
"Registrar" 3.05
"Substitute Date" 5.16
"Valuation Date" 3.12(c)
</TABLE>
Section 1.02. Compliance Certificate and Opinions. Upon any
application or request by the Company to the Trustee to take an action under any
provision of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions 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 such
conditions 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 with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Sections 2.03 and 9.06) shall include:
(a) a statement that each individual signing such certificate
or opinion has read such condition or covenant and the definitions
herein relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as
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<PAGE> 17
to whether or not such condition or covenant has been
complied with; and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 1.03. Forms 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 as to such matters are
erroneous.
Any certificate, statement or opinion of an Officer of the
Company or of counsel may be based, insofar as it relates to accounting matters,
upon a certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Company, unless such Officer or counsel, as the
case may be, knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to the accounting matters
upon which his certificate, statement or opinion is based are erroneous.
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 1.04. Acts of Holders. (a) Any request,
demand, authorization, direction, notice, consent, waiver or
other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more
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<PAGE> 18
instruments of substantially similar tenor signed by such Holders in person or
by 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 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 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 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 ownership of Bearer Securities may be proved by the
production of such Bearer Securities or by a certificate executed by any trust
company, bank, banker or other depository, wherever situated if such certificate
shall be deemed by the Trustee to be satisfactory, showing that at the date
therein mentioned such Person had on deposit with such depository, or exhibited
to it, the Bearer Securities therein described; or such facts may be proved by
the certificate or affidavit of the Person holding such Bearer Securities, if
such certificate or affidavit is deemed by the Trustee to be satisfactory. The
Trustee and the Company may assume that such ownership of any Bearer Security
continues until (i) another such certificate or affidavit bearing a later date
issued in respect of the same Bearer Security is produced, (ii) such Bearer
Security is produced to the Trustee by some other Person, (iii) such Bearer
Security is surrendered in exchange for a Registered Security or (iv) such
Bearer Security is no longer Outstanding. The ownership of Bearer Securities may
also be proved in any other manner which the Trustee deems sufficient; and the
Trustee may in any instance require further proof with respect to any of the
matters referred to in this Section.
(d) The ownership of Registered Securities shall be proved by
the Register.
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<PAGE> 19
(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.
(f) If the Company shall solicit from the Holders of any
series any request, demand, authorization, direction, notice, consent, waiver or
other Act, the Company may, at its option, by or pursuant to a Board Resolution,
fix in advance a record date for the determination of Holders of such series
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Company shall have no obligation to do so,
provided that the Company may not set a record date for, and the provisions of
this paragraph shall not apply with respect to, the giving or making of any
notice, declaration, request or direction referred to in the next paragraph. If
such a record date is fixed, such request, demand, authorization, direction,
notice, consent, waiver or other Act may be given before or after such record
date, but only the Holders of record at the close of business on such record
date shall be deemed to be Holders for the purposes of determining whether
Holders of the requisite proportion of Outstanding Securities have authorized or
agreed or consented to such request, demand, authorization, direction, notice,
consent, waiver or other Act, and for that purpose the Outstanding Securities
shall be computed as of such record date; provided that no such authorization,
agreement or consent by the Holders on such record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Indenture not later than six months after the record date.
(g) The Trustee may set any day as a record date for the
purpose of determining the Holders of any series entitled to join in the giving
or making of (i) any Notice of Default, (ii) any declaration of acceleration
referred to in Section 5.02, (iii) any direction referred to in Section 5.08 or
(iv) any request to institute proceedings referred to in Section 5.09(2), and
(v) any waiver of past defaults pursuant to Section 5.07, in each case with
respect to Securities of such series. If such a record date is fixed pursuant to
this paragraph, the relevant action may be taken or given before or after such
record date, but only the Holders of record at the close of business on such
record date shall be deemed to be holders of a series for the purpose of
determining whether Holders of the requisite proportion of Outstanding
Securities of such series have authorized or agreed or consented to such action,
and for that purpose the Outstanding Securities of such series shall be computed
as of such record date; provided that no such action by Holders on such record
date shall be deemed effective unless it
14
<PAGE> 20
shall become effective pursuant to the provisions of this Indenture not later
than six months after the record date. Nothing in this paragraph shall be
construed to prevent the Trustee from setting a new record date for any action
for which a record date has previously been set pursuant to this paragraph
(whereupon the record date previously set shall automatically and with no action
by any Person be canceled and of no effect), and nothing in this paragraph shall
be construed to render ineffective any action taken by Holders of the requisite
principal amount of Outstanding Securities of the relevant series on the date
such action is taken. Promptly after any record date is set pursuant to this
paragraph, the Trustee, at the Company's expense, shall cause notice of such
record date and the proposed action by Holders to be given to the Company in
writing and to each Holder of Securities of the relevant series in the manner
set forth in Section 1.06.
Section 1.05. Notices, Etc., to Trustee and 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,
(a) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) in writing and mailed, first-class postage prepaid,
to the Trustee at its Corporate Trust Office at 230 South Tryon Street,
9th Floor, Charlotte, North Carolina 28288-1179, Attention: Corporate
Trust Department, or
(b) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) in writing and mailed, first-class postage prepaid,
to the Company addressed to it at AmerUs Life Holdings, Inc., 699
Walnut Street, Des Moines, Iowa 50309, Attention: General Counsel or at
any other address previously furnished in writing to the Trustee by the
Company.
Section 1.06. Notice to Holders; Waiver. Where this Indenture
provides for notice to Holders of an event (i) if any of the Securities affected
by such event are Registered Securities, such notice to the Holders thereof
shall be sufficiently given unless otherwise herein expressly provided) if in
writing and mailed first-class postage prepaid to each such Holder affected by
such event, at his address as it appears in the Register within the time
prescribed for the giving of such notice and, (ii) if any of the Securities
affected by such event are Bearer Securities, notice to the Holders thereof
shall be sufficiently given (unless otherwise herein or in the terms of such
Bearer Securities expressly provided) if published once in
15
<PAGE> 21
an Authorized Newspaper in New York, New York, and in such other city or cities,
if any, as may be specified as contemplated by Section 3.01.
In any case where notice to Holders of Registered Securities
is given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder of a Registered Security shall affect
the sufficiency of such notice with respect to other Holders of Registered
Securities or the sufficiency of any notice to Holders of Bearer Securities
given as provided herein. In any case where notice is given to Holders of Bearer
Securities by publication, neither the failure to publish such notice, nor any
defect in any notice so published, shall affect the sufficiency of such notice
with respect to other Holders of Bearer Securities or the sufficiency of any
notice with respect to any Holders of Registered Securities given as provided
herein. Any notice mailed to a Holder in the manner herein prescribed shall be
conclusively deemed to have been received by such Holder, whether or not such
Holder actually receives such notice.
If by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice as
provided above, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose hereunder
with respect to a Holder of Registered Securities. If it is impossible or, in
the opinion of the Trustee, impracticable to give any notice by publication in
the manner herein required, then such publication in lieu thereof as shall be
made with the approval of the Trustee shall constitute a sufficient publication
of such notice with respect to a Holder of Bearer Securities.
Any request, demand, authorization, direction, notice, consent
or waiver required or permitted under this Indenture shall be in the English
language, except that any published notice may be in an official language of the
country of publication.
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 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.
Section 1.07. 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.
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<PAGE> 22
Section 1.08. Successors and Assigns. All covenants
and agreements in this Indenture by the Company shall bind its
successors and assigns, whether so expressed or not.
Section 1.09. Separability. In case any provision of this
Indenture or 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 1.10. Benefits of Indenture. Nothing in this Indenture
or in the Securities, expressed or implied, shall give to any Person, other than
the parties hereto and their successors hereunder and the Holders, any benefit
or any legal or equitable right, remedy or claim under this Indenture.
Section 1.11. Governing Law. This Indenture, the Securities
and any coupons appertaining thereto shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of laws. This Indenture is subject to the Trust Indenture Act and
if any provision hereof limits, qualifies or conflicts with any provision of the
Trust Indenture Act, which 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 which
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. Whether or
not this Indenture is required to be qualified under the Trust Indenture Act,
the provisions of the Trust Indenture Act required to be included in an
indenture in order for such indenture to be so qualified shall be deemed to be
included in this Indenture with the same effect as if such provisions were set
forth herein and any provisions hereof which may not be included in an indenture
which is so qualified shall be deemed to be deleted or modified to the extent
such provisions would be required to be deleted or modified in an indenture so
qualified.
Section 1.12. Legal Holidays. In any case where any Interest
Payment Date, Redemption Date, sinking fund payment date, Stated Maturity or
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of any Security
or coupon other than a provision in the Securities of an series which
specifically states that such provision shall apply in lieu of this Section)
payment of principal, premium, if any, or interest need not be made at such
Place of Payment on such date, but may be made on the next succeeding Business
Day at such Place of Payment with the same force and effect as if made on such
date; provided that to the extent such payment is made on such next succeeding
Business Day, no interest shall accrue on the amount
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<PAGE> 23
so payable for the period from and after such Interest Payment Date, Redemption
Date, sinking fund payment date, Stated Maturity or Maturity, as the case may
be.
ARTICLE II
Security Forms
Section 2.01. Forms Generally. The Securities of each series
and the coupons, if any, to be attached thereto shall be in substantially such
form as shall be established by or pursuant to a Board Resolution or in one or
more indentures supplemental hereto, in each case 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 the rules of any securities exchange or Depository
therefor or as may, consistently herewith, be determined by the officers
executing such Securities and coupons, if any, as evidenced by their execution
of the Securities and coupons, if any. If temporary Securities of any series are
issued as permitted by Section 3.04, the form thereof also shall be established
as provided in the preceding sentence. If the forms of Securities and coupons,
if any, of any series are established by, or by action taken pursuant to, a
Board Resolution, a copy of the Board Resolution together with an appropriate
record of any such action taken pursuant thereto, including a copy of the
approved form of Securities or coupons, if any, shall be certified by the
Secretary or an Assistant Secretary of the Company and delivered to the Trustee
at or prior to the delivery of the Company Order contemplated by Section 3.03
for the authentication and delivery of such Securities.
Unless otherwise specified as contemplated by Section 3.01,
Bearer Securities shall have interest coupons attached.
The definitive Securities and coupons, if any, shall be
printed, lithographed or engraved on steel engraved boarders or may be produced
in any other manner, all as determined by the officers executing such Securities
and coupons, if any, as evidenced by their execution of such Securities and
coupons, if any.
Section 2.02. Form of Trustee's Certificate of
Authentication. The Trustee's certificate of authentication
shall be in substantially the following form:
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This is one of the Securities of the series described in the
within-mentioned Indenture.
------------------------------------------,
as Trustee
By:
----------------------------------------
Authorized Signatory
Section 2.03. Securities in Global Form. If Securities of or
within a series are issuable in whole or in part in global form, any such
Security of such series may provide that it shall represent the aggregate or
specified amount of Outstanding Securities of such series from time to time
endorsed thereon and may also provide that the aggregate amount of Outstanding
Securities of such series represented thereby may from time to time be reduced
or increased to reflect exchanges. Any endorsement of a Security in global form
to reflect the amount, or any increase or decrease in the amount, or changes in
the rights of Holders, of Outstanding Securities represented thereby, shall be
made in such manner and by such Person or Persons as shall be specified therein
or in the Company Order to be delivered to the Trustee pursuant to Section 3.03
or 3.04. Subject to the provisions of Section 3.03 and, if applicable, Section
3.04, the Trustee shall deliver and redeliver any Security in permanent global
form in the manner and upon instructions given by the Person or Persons
specified therein or in the applicable Company Order. Any instructions by the
Company with respect to endorsement or delivery or redelivery of a Security in
global form shall be in writing but need not comply with Section 1.02 hereof and
need not be accompanied by an Opinion of Counsel.
The provisions of the last paragraph of Section 3.03 shall
apply to any Security in global form if such Security was never issued and sold
by the Company and the Company delivers to the Trustee the Security in global
form together with written instructions (which need not comply with Section 1.02
and need not be accompanied by an Opinion of Counsel) with regard to the
reduction in the principal amount of Securities represented thereby, together
with the written statement contemplated by the last paragraph of Section 3.03.
Notwithstanding the provisions of Section 2.01 and 3.07,
unless otherwise specified as contemplated by Section 3.01, payment of principal
of, premium, if any, and interest on any Security in permanent global form shall
be made to the Person or Persons specified therein.
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Section 2.04. Form of Legend for Securities in Global Form.
Any Registered Security in global form authenticated and delivered hereunder
shall bear a legend in substantially the following form with such changes as may
be required by the Depository:
THIS SECURITY IS IN GLOBAL FORM WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE
NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY. UNLESS AND
UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
CERTIFICATED FORM IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT 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 OR BY THE DEPOSITORY OR ANY SUCH
NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITORY.
ARTICLE III
The Securities
Section 3.01. Amount Unlimited; Issuable in Series.
(a) The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued from time to time in one or more
series.
(b) The following matters shall be established with respect to
each series of Securities issued hereunder (i) by a Board Resolution, (ii) by
action taken pursuant to a Board Resolution and (subject to Section 3.03) set
forth, or determined in the manner provided, in an Officers' Certificate or
(iii) in one or more indentures supplemental hereto:
(1) the title of the Securities of the series (which title
shall distinguish the Securities of the series from all other series of
Securities);
(2) any limit upon the aggregate principal amount of the
Securities of the series which may be authenticated and delivered under
this Indenture (which limit shall not pertain to Securities
authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other securities of the series pursuant to
Section 3.04, 3.05, 3.06, 8.06, or 10.07);
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(3) the date or dates on which the principal of and premium,
if any, on the Securities of the series is payable or the method of
determination thereof;
(4) the rate or rates at which the Securities of the series
shall bear interest, if any, or the method of calculating such rate or
rates of interest, the date or dates from which such interest shall
accrue or the method by which such date or dates shall be determined,
the Interest Payment Dates on which any such interest shall be payable
and, with respect to Registered Securities, the Regular Record Date, if
any, for the interest payable on any Registered Security on any
Interest Payment Date;
(5) the place or places where the principal of, premium, if
any, and interest, if any, on Securities of the series shall be
payable;
(6) the period or periods within which, the price or prices at
which, the currency or currencies (including currency unit or units) in
which, and the other terms and conditions upon which, Securities of the
series may be redeemed, in whole or in part, at the option of the
Company and, if other than as provided in Section 10.03, the manner in
which the particular Securities of such series (if less than all
Securities of such series are to be redeemed) are to be selected for
redemption;
(7) the obligation, if any, of the Company to redeem or
purchase Securities of the series pursuant to any sinking fund or
analogous provisions or upon the happening of a specified event or at
the option of a Holder thereof and the period or periods within which,
the price or prices at which, and the other terms and conditions upon
which, Securities of the series shall be redeemed or purchased, in
whole or in part, pursuant to such obligation;
(8) if other than denominations of $1,000 and any integral
multiple thereof, if Registered Securities, and if other than the
denomination of $5,000 and any integral multiple thereof, if Bearer
Securities, the denominations in which Securities of the series shall
be issuable;
(9) if other than Dollars, the currency or currencies
(including currency unit or units) in which the principal of, premium,
if any, and interest, if any, on the Securities of the series shall be
payable, or in which the Securities of the series shall be denominated,
and the particular provisions applicable thereto in accordance with, in
addition to, or in lieu of the provisions of Section 3.12;
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(10) if the payments of principal of, premium, if any, or
interest, if any, on the Securities of the series are to be made, at
the election of the Company or a Holder, in a currency or currencies
(including currency unit or units) other than that in which such
Securities are denominated or designated to be payable, the currency or
currencies (including currency unit or units) in which such payments
are to be made, the terms and conditions of such payments and the
manner in which the exchange rate with respect to such payments shall
be determined, and the particular provisions applicable thereto in
accordance with, in addition to, or in lieu of the provisions of
Section 3.12;
(11) if the amount of payments of principal of, premium, if
any, and interest, if any, on the Securities of the series shall be
determined with reference to an index, formula or other method (which
index, formula or method may be based, without limitation, on a
currency or currencies (including currency unit or units) other than
that in which the Securities of the series are denominated or
designated to be payable), the index, formula or other method by which
such amounts shall be determined;
(12) if other than the principal amount thereof, the portion
of the principal amount of such Securities of the series which shall be
payable upon declaration of acceleration thereof pursuant to Section
5.02 or the method by which such portion shall be determined;
(13) if the principal amount payable at the Stated Maturity of
any Securities of the series will not be determinable as of any one or
more dates prior to the Stated Maturity, the amount which shall be
deemed to be the principal amount of such Securities as of any such
date for any purpose thereunder or hereunder, including the principal
amount thereof which shall be due and payable upon any Maturity other
than the Stated Maturity or which shall be deemed to be Outstanding as
of any date prior to the Stated Maturity (or, in any such case, the
manner in which such amount deemed to be the principal amount shall be
determined);
(14) if other than as provided in Section 3.07, the Person to
whom any interest on any Registered Security of the series shall be
payable and the manner in which, or the Person to whom, any interest on
any Bearer Securities of the series shall be payable;
(15) provisions, if any, granting special rights to the
Holders of Securities of the series upon the occurrence of such events
as may be specified;
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(16) any deletions from, modifications of or additions to the
Events of Default set forth in Section 5.01 or covenants of the Company
set forth in Article IX pertaining to the Securities of the series;
(17) under what circumstances, if any, the Company will pay
additional amounts on the Securities of that series held by a Person
who is not a U.S. Person in respect of taxes or similar charges
withheld or deducted ("Additional Amounts") and, if so, whether the
Company will have the option to redeem such Securities rather than pay
such additional amounts (and the terms of any such option);
(18) whether Securities of the series shall be issuable as
Registered Securities or Bearer Securities (with or without interest
coupons), or both, and any restrictions applicable to the offering,
sale or delivery of Bearer Securities and, if other than as provided in
Section 3.05, the terms upon which Bearer Securities of a series may be
exchanged for Registered Securities of the same series and vice versa;
(19) the date as of which any Bearer Securities of the series
and any temporary global Security representing Outstanding Securities
of the series shall be dated if other than the date of original
issuance of the first Security of the series to be issued;
(20) the forms of the Securities and coupons, if any,
of the series;
(21) the applicability, if any, to the Securities of or within
the series of Sections 4.04 and 4.05, or such other means of defeasance
or covenant defeasance as may be specified for the Securities and
coupons, if any, of such series, and, if the Securities are payable in
a currency other than Dollars, whether, for the purpose of such
defeasance or covenant defeasance the term "Government Obligations"
shall include obligations referred to in the definition of such term
which are not obligations of the United States or an agency or
instrumentality of the United States;
(22) if other than the Trustee, the identity of the
Registrar and any Paying Agent;
(23) the designation of the initial Exchange Rate
Agent, if any;
(24) if the Securities of the series shall be issued in whole
or in part in global form (i) the Depository for such global
Securities, (ii) the form of any legend in addition
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to or in lieu of that in Section 2.04 which shall be borne by such
global Security, (iii) whether beneficial owners of interests in any
Securities of the series in global form may exchange such interests for
certificated Securities of such series and of like tenor of any
authorized form and nomination, and (iv) if other than as provided in
Section 3.05, the circumstances under which any such exchange may
occur; and
(25) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture) including any terms
which may be required by or advisable under United States laws or
regulations or advisable (as determined by the Company) in connection
with the marketing of Securities of the series.
(c) All Securities of any one series and coupons, if any,
appertaining to any Bearer Securities of such series shall be substantially
identical except, in the case of Registered Securities, as to denomination and
except as may otherwise be provided (i) by a Board Resolution, (ii) by action
taken pursuant to a Board Resolution and (subject to Section 3.03) set forth or
determined in the manner provided, in the related Officers' Certificate or (iii)
in an indenture supplemental hereto. All Securities of any one series need not
be issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the Holders, for issuances of additional
Securities of such series.
(d) If any of the terms of the Securities of any series are
established by action taken pursuant to a Board Resolution, a copy of such Board
Resolution shall be certified by the Corporate Secretary or an Assistant
Secretary of the Company and delivered to the Trustee at or prior to the
delivery of the Officers' Certificate setting forth, or providing the manner for
determining, the terms of the Securities of such series, and an appropriate
record of any action taken pursuant thereto in connection with the issuance of
any Securities of such series shall be delivered to the Trustee prior to the
authentication and delivery thereof.
Section 3.02. Denominations. Unless otherwise provided as
contemplated by Section 3.01, any Registered Securities of a series shall be
issuable in denominations of $1,000 and any integral multiple thereof and any
Bearer Securities of a series shall be issuable in the denomination of $5,000
and any integral multiples thereof.
Section 3.03. Execution, Authentication, Delivery and
Dating. Securities shall be executed on behalf of the Company by
two Officers. The Company's seal shall be reproduced on the
Securities. The signatures of any of these officers on the
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Securities may be manual or facsimile. The coupons, if any, of Bearer Securities
shall bear the facsimile signature of two Officers.
Securities and coupons 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, the Company may deliver
Securities, together with any coupons appertaining thereto, of any series
executed by the Company to the Trustee for authentication, together with a
Company Order for the authentication and delivery of such Securities, and the
Trustee in accordance with the Company Order shall authenticate and deliver such
Securities; provided, however, that in the case of Securities offered in a
Periodic Offering, the Trustee shall authenticate and deliver such Securities
from time to time in accordance with such other procedures (including without
limitation, the receipt by the Trustee of oral or electronic instructions from
the Company or its duly authorized agents, promptly confirmed in writing)
acceptable to the Trustee as may be specified by or pursuant to a Company Order
delivered to the Trustee prior to the time of the first authentication of
Securities of such series.
If the form or terms of the Securities of a series have been
established by or pursuant to one or more Board Resolutions as permitted by
Sections 2.01 and 3.0l, in authenticating such Securities and accepting the
additional responsibilities under this Indenture in relation to such Securities,
the Trustee shall be entitled to receive, and (subject to Section 315(a) through
(d) of the Trust Indenture Act) shall be fully protected in relying upon, an
Opinion of Counsel stating,
(1) if the forms of such Securities and any coupons have been
established by or pursuant to a Board Resolution as permitted by
Section 2.01, that such forms have been established in conformity with
the provisions of this Indenture;
(2) if the terms of such Securities and any coupons have been
established by or pursuant to a Board Resolution as permitted by
Section 3.01, that such terms have been, or in the case of Securities
of a series offered in a Periodic Offering, will be, established in
conformity with the provisions of this Indenture, subject in the case
of Securities offered in a Periodic Offering, to any conditions
specified in such Opinion of Counsel; and
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(3) that such Securities together with any coupons
appertaining thereto, when authenticated and delivered by the trustee
and issued by the Company in the manner and subject to any conditions
specified in such Opinion of Counsel, will constitute valid and legally
binding obligations of the Company, enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws of general
applicability relating to or affecting the enforcement of creditors'
rights and to general equity principles and except further as
enforcement thereof may be limited by (A) requirements that a claim
with respect to any Securities denominated other than in Dollars (or a
Foreign Currency or currency unit judgment in respect of such claim) be
converted into Dollars at a rate of exchange prevailing on a date
determined pursuant to applicable law or (B) governmental authority to
limit, delay or prohibit the making of payments in Foreign Currencies
or currency units or payments outside the United States.
Notwithstanding that such form or terms have been so
established, the Trustee shall have the right to decline to authenticate such
Securities if, in the written opinion of counsel to the Trustee (which counsel
may be an employee of the Trustee) reasonably acceptable to the Company, the
issue of such Securities pursuant to this Indenture will adversely affect the
Trustee's own rights, duties or immunities under this Indenture or otherwise in
a manner which is not reasonably acceptable to the Trustee. Notwithstanding the
generality of the foregoing, the Trustee will not be required to authenticate
Securities denominated in a Foreign Currency if the Trustee reasonably believes
that it would be unable to perform its duties with respect to such Securities.
Notwithstanding the provisions of Section 3.01 and of the two
preceding paragraphs, if all of the Securities of any series are not to be
issued at one time, it shall not be necessary to deliver the Officers'
Certificate otherwise required pursuant to Section 3.01 or the Company Order and
Opinion of Counsel otherwise required pursuant to the two preceding paragraphs
in connection with the authentication of each Security of such series if such
documents, with appropriate modifications to cover such future issuances, are
delivered at or prior to the authentication upon original issuance of the first
Security of such series to be issued.
With respect to Securities of a series offered in a Periodic
Offering, the Trustee may rely, as to the authorization by the Company of any of
such securities, the form and terms thereof and the legality, validity, binding
effect and enforceability thereof, upon the Opinion of Counsel and the other
documents delivered pursuant to Sections 2.01 and 3.01 and this
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Section, as applicable, in connection with the first authentication of
Securities of such series.
If the Company shall establish pursuant to Section 3.01 that
the Securities of a series are to be issued in whole or in part in global form,
then the Company shall execute and the Trustee shall, in accordance with this
Section and the Company Order with respect to such series, authenticate and
deliver one or more Securities of such series in global form that (i) shall
represent and shall be denominated in an amount equal to the aggregate principal
amount of the Outstanding Securities of such series to be represented by such
Security or Securities in global form, (ii) shall be registered, if a Registered
Security, in the name of the Depository for such Security or Securities in
global form or the nominee of such Depository, (iii) shall be delivered by the
Trustee to such Depository or pursuant to such Depository's instruction and (iv)
shall bear the legends set forth in Section 2.04 and the terms of the Board
Resolution or supplemental indenture relating to such series.
Each Depository designated pursuant to Section 3.01 for a
Registered Security in global form must, at the time of its designation and at
all times while it serves as Depository, be a clearing agency registered under
the Securities Exchange Act of 1934, as amended, and any other applicable
statute or regulation. The Trustee shall have no responsibility to determine if
the Depository is so registered. Each Depository shall enter into an agreement
with the Trustee and the Company governing the respective duties and rights of
such Depository, the Company and the Trustee with regard to Securities issued in
global form.
Each Registered Security shall be dated the date of its
authentication and each Bearer Security shall be dated as of the date specified
as contemplated by Section 3.01.
No Security or coupon appertaining thereto shall be entitled
to any benefits under this Indenture or be valid or obligatory for any purpose
until the certificate of authentica tion substantially in the form provided
herein is executed by the manual signature of one of the authorized signatories
of the Trustee or an Authenticating Agent and no coupon shall be valid until the
Security to which it appertains has been so authenticated. Such signature upon
any Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered under this Indenture and is
entitled to the benefits of this Indenture. Except as permitted by Section 3.06
or 3.07, the Trustee shall not authenticate and deliver any Bearer Security
unless all appurtenant coupons for interest then matured have been detached and
canceled.
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Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 3.09 together with a written statement (which need not
comply with Section 1.02 and need not be accompanied by an Opinion of Counsel)
stating that such Security has never been issued and sold by the Company, for
all purposes of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall not be entitled to the benefits
of this Indenture.
Section 3.04. Temporary Securities. Pending the preparation of
definitive Securities of any series, the Company may execute and, upon Company
Order, the Trustee shall authenticate and deliver temporary Securities of such
series which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor and form,
with or without coupons, 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
conclusively evidenced by their execution of such Securities and coupons, if
any. In the case of Securities of any series, such temporary Securities may be
in global form, representing all or a portion of the Outstanding Securities of
such series.
Except in the case of temporary Securities in global form,
each of which shall be exchanged in accordance with the provisions thereof, if
temporary Securities of any series are issued, the Company will cause definitive
Securities of such series to be prepared without unreasonable delay. After
preparation of definitive Securities of such series, the temporary Securities of
such series shall be exchangeable for definitive Securities of such series upon
surrender of the temporary Securities of such series at the office or agency of
the Company pursuant to Section 9.02 in a Place of Payment for such series,
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities of any series (accompanied by any unmatured coupons
appertaining thereto), the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of the same series of authorized denominations and of like
tenor; provided, however, that no definitive Bearer Security, except as may be
provided pursuant to Section 3.01, shall be delivered in exchange for a
temporary Registered Security; and provided further that no definitive Bearer
Security shall be delivered in exchange for a temporary Bearer Security unless
the Trustee shall have received from the person entitled to receive the
definitive Bearer Security a certificate substantially in the form approved in
or pursuant to
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the Board Resolutions relating thereto and such delivery shall occur only
outside the United States. Until so exchanged, the temporary Securities of any
series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of such series except as otherwise specified
as contemplated by Section 3.01.
Section 3.05. Registration, Transfer and Exchange. The Company
shall cause to be kept at the Corporate Trust Office of the Trustee or in any
office or agency to be maintained by the Company in accordance with Section 9.02
in a Place of Payment a register (the "Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Registered Securities and the registration of transfers of
Registered Securities. The Register shall be in written form or any other form
capable of being converted into written form within a reasonable time. The
Trustee is hereby appointed "Registrar" for the purpose of registering
Registered Securities and transfers of Registered Securities as herein provided.
Upon surrender for registration of transfer of any Registered
Security of any series at the office or agency maintained pursuant to Section
9.02 in a Place of Payment for that series, the Company shall execute and the
Trustee shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Registered Securities of the same series, of any
authorized denominations and of a like aggregate principal amount containing
identical terms and provisions.
Bearer Securities or any coupons appertaining thereto shall be
transferable by delivery.
At the option of the Holder, Registered Securities of any
series (except a Registered Security in global form) may be exchanged for other
Registered Securities of the same series, of any authorized denominations and of
a like aggregate principal amount containing identical terms and provisions,
upon surrender of the Registered Securities to be exchanged at such office or
agency. Whenever any Registered Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Registered Securities which the Holder making the exchange is entitled to
receive. Unless otherwise specified as contemplated by Section 3.01, Bearer
Securities may not be issued in exchange for Registered Securities.
Unless otherwise specified as contemplated by Section 3.01, at
the option of the Holder, Bearer Securities of such series may be exchanged for
Registered Securities (if the Securities of such series are issuable in
registered form) or
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Bearer Securities (if Bearer Securities of such series are issuable in more than
one denomination and such exchanges are permitted by such series) of the same
series, of any authorized denominations and of like tenor and aggregate
principal amount, upon surrender of the Bearer Securities to be exchanged at any
such office or agency, with all unmatured coupons and all matured coupons in
default thereto appertaining. If the Holder of a Bearer Security is unable to
produce any such unmatured coupon or coupons or matured coupon or coupons in
default, such exchange may be effected if the Bearer Securities are accompanied
by payment in funds acceptable to the Company and the Trustee in an amount equal
to the face amount of such missing coupon or coupons, or the surrender of such
missing coupon or coupons may be waived by the Company and the Trustee if there
be furnished to them such security or indemnity as they may require to save each
of them and any Paying Agent harmless. If thereafter the Holder of such Security
shall surrender to any Paying Agent any such missing coupon in respect of which
such a payment shall have been made, such Holder shall be entitled to receive
the amount of such payment; provided, however, that, except as otherwise
provided in Section 9.02, interest represented by coupons shall be payable only
upon presentation and surrender of those coupons at an office or agency located
outside the United States.
Notwithstanding the foregoing, in case any Bearer Security of
any series is surrendered at any such office or agency in exchange for a
Registered Security of the same series after the close of business at such
office or agency on (i) any Regular Record Date and before the opening of
business at such office or agency on the relevant Interest Payment Date, or (ii)
any Special Record Date and before the opening of business at such office or
agency on the related date for payment of Defaulted Interest, such Bearer
Security shall be surrendered without the coupon relating to such Interest
Payment Date or proposed date of payment, as the case may be (or, if such coupon
is so surrendered with such Bearer Security, such coupon shall be returned to
the person so surrendering the Bearer Security), and interest or Defaulted
Interest, as the case may be, will not be payable on such Interest Payment Date
or proposed date for payment, as the case may be, in respect of the Registered
Security issued in exchange for such Bearer Security, but will be payable only
to the Holder of such coupon, when due in accordance with the provisions of this
Indenture.
Each Security issued in global form authenticated under this
Indenture shall be registered in the name of the Depository designated for such
series or a nominee thereof and delivered to such Depository or a nominee
thereof or custodian therefor, and each such Security issued in global form
shall constitute a single Security for all purposes of this Indenture.
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Notwithstanding any other provision of this Section, unless
and until it is exchanged in whole or in part for Securities in certificated
form in the circumstances described below, a Security in global form
representing all or a portion of the Securities of a series may not be
transferred except as a whole by the Depository for such series to a nominee of
such Depository or by a nominee of such Depository to such Depository or another
nominee of such Depository or by such Depository or any such nominee to a
successor Depository for such series or a nominee of such successor Depository.
If at any time the Depository for the Securities of a series
notifies the Company that it is unwilling or unable to continue as Depository
for the Securities of such series or defaults in the performance of its duties
as Depository or if at any time the Depository for the Securities of such series
shall no longer be eligible under Section 3.03, the Company shall appoint a
successor Depository with respect to the Securities of such series. If a
successor Depository for the Securities of such series is not appointed by the
Company within 90 days after the Company receives such notice or becomes aware
of such ineligibility, the Company selection pursuant to Section 3.01(b)(24)
shall no longer be effective with respect to the Securities of such series and
the Company shall execute, and the Trustee, upon receipt of a Company Order for
the authentication and delivery of certificated Securities of such series of
like tenor, shall authenticate and deliver Securities of such series of like
tenor in certificated form, in authorized denominations and in an aggregate
principal amount equal to the principal amount of the Security or Securities of
such series of like tenor in global form in exchange for such Security or
Securities in global form.
The Company may at any time in its sole discretion determine
that Securities issued in global form shall no longer be represented by such a
Security or Securities in global form. In such event the Company shall execute,
and the Trustee, upon receipt of a Company Order for the authentication and
delivery of certificated Securities of such series of like tenor, shall
authenticate and deliver, Securities of such series of like tenor in
certificated form, in authorized denominations and in an aggregate principal
amount equal to the principal amount of the Security or Securities of such
series of like tenor in global form in exchange for such Security or Securities
in global form.
If specified by the Company pursuant to Section 3.01 with
respect to a series of Securities, the Depository for such series may surrender
a Security in global form of such series in exchange in whole or in part for
Securities of such series in certificated form on such terms as are acceptable
to the Company and such Depository. Thereupon, the Company shall execute, and
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the Trustee shall authenticate and deliver, without service charge,
(i) to each Person specified by such Depository a new
certificated Security or Securities of the same series of like tenor,
of any authorized denomination as requested by such Person in aggregate
principal amount equal to and in exchange for such Person's beneficial
interest in the Security in global form; and
(ii) to such Depository a new Security in global form of like
tenor in a denomination equal to the difference, if any, between the
principal amount of the surrendered Security in global form and the
aggregate principal amount of certificated Securities delivered to
Holders thereof.
Upon the exchange of a Security in global form for Securities
in certificated form, such Security in global form shall be canceled by the
Trustee. Unless expressly provided with respect to the Securities of any series
that such Security may be exchanged for Bearer Securities, Securities in
certificated form issued in exchange for a Security in global form pursuant to
this Section shall be registered in such names and in such authorized
denominations as the Depository for such Security in global form, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such Securities to the Persons
in whose names such Securities are so registered.
Whenever any Securities are surrendered for exchange, the
Company shall 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
upon any 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 Registered Security presented or surrendered for
registration of transfer or for exchange shall (if so required by the Company,
the Registrar or the Trustee) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company, the Registrar and
the Trustee duly executed by the Holder thereof or his attorney duly authorized
in writing.
No service charge shall be made for any registration of
transfer or for any exchange of Securities, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any
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registration or transfer or exchange of Securities, other than exchanges
pursuant to Section 3.04, 8.06 or 10.07 not involving any transfer.
If the Securities of any series (or of any series and
specified tenor) are to be redeemed in part, the Company shall not be required
(i) to issue, register the transfer of, or exchange any Securities of that
series for a period beginning at the opening of business 15 days before the day
of the mailing of a notice of redemption of any such Securities selected for
redemption under Section 10.03 and ending at the close of business on the day of
such mailing; (ii) to register the transfer of or exchange any Registered
Security so selected for redemption, in whole or in part, except the unredeemed
portion of any Security being redeemed in part; or (iii) to exchange any Bearer
Security so selected for redemption, except that such a Bearer Security may be
exchanged for a Registered Security of that series and like tenor; provided that
such Registered Security shall be simultaneously surrendered for redemption.
The foregoing provisions relating to registration, transfer
and exchange may be modified, supplemented or superseded with respect to any
series of Securities by a Board Resolution or in one or more indentures
supplemental hereto.
Section 3.06. Replacement Securities. If a mutilated Security
or a Security with a mutilated coupon appertaining to it is surrendered to the
Trustee, together with, in proper cases, 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 a
replacement Registered Security, if such surrendered Security was a Registered
Security, or a replacement Bearer Security with coupons corresponding to the
coupons appertaining to the surrendered Security, if such surrendered Security
was a Bearer Security, of the same series and date of maturity, if the Trustee's
requirements are met, containing identical terms and of like tenor and of like
principal amount.
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
or coupon 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 or coupon has been
acquired by a bona fide purchaser, the Company shall execute and the Trustee
shall authenticate and deliver in lieu of any such destroyed, lost or stolen
Security or in exchange for the Security to which a destroyed, lost or stolen
coupon appertains (with all appurtenant coupons not destroyed, lost or stolen),
a replacement Registered Security, if such Holder's Claim appertains to a
Registered Security, or a replacement Bearer
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Security with coupons corresponding to the coupons appertaining to the
destroyed, lost or stolen Bearer Security or the Bearer Security to which such
lost, destroyed or stolen coupon appertains, if such Holder's claim appertains
to a Bearer Security, of the same series and principal amount, containing
identical terms and provisions and bearing a number not contemporaneously
outstanding with coupons corresponding to the coupons, if any, appertaining to
the destroyed, lost or stolen Security.
In case any such mutilated, destroyed, lost or stolen Security
or coupon has become or is about to become due and payable, the Company in its
discretion may, instead of issuing a new Security or coupon, pay such Security
or coupon; provided, however, that payment of principal of and any premium or
interest on Bearer Securities shall, except as otherwise provided in Section
9.02, be payable only at an office or agency located outside the United States
and, unless otherwise specified as contemplated by Section 3.01, any interest on
Bearer Securities shall be payable only upon presentation and surrender of the
coupons appertaining thereto.
Upon the issuance of any new Security under this Section, the
Company may require that 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, its agents and
counsel) connected therewith.
Every new Security of any series with its coupons, if any,
issued pursuant to this Section in lieu of any destroyed, lost or stolen
Security, or in exchange for a Security to which a destroyed, lost or stolen
coupon appertains, shall constitute an original additional contractual
obligation of the Company, whether or not the destroyed, lost or stolen Security
and its coupon, if any, or the destroyed, lost or stolen coupon, 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 of that
series and their coupons, if any, 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 or
coupons.
Section 3.07. Payment of Interest; Interest Rights Preserved.
(a) Unless otherwise provided as contemplated by Section 3.01 with respect to
any series of Securities, interest, if any, on any Registered 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
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one or more Predecessor Securities) is registered at the close of business on
the Regular Record Date.
Unless otherwise provided as contemplated by Section 3.01 with
respect to any series of Securities, (i) interest, if any, on Bearer Securities
shall be paid only against presentation and surrender of the coupons for such
interest installments as are evidenced thereby as they mature and (ii) original
issue discount, if any, on Bearer Securities shall be paid only against
presentation and surrender of such Securities; in either case at the office of a
Paying Agent located outside the United States, unless the Company shall have
otherwise instructed the Trustee in writing, provided that any such instruction
for payment in the United States does not cause any Bearer Security to be
treated as a "registration-required obligation" under United States laws and
regulations. The interest, if any, on any temporary Bearer Security shall be
paid, as to any installment of interest evidenced by a coupon attached thereto
only upon presentation and surrender of such coupon and, as to other
installments of interest, only upon presentation of such Security for notation
thereon of the payment of such interest. If at the time a payment of principal
of or interest, if any, on a Bearer Security or coupon shall become due, the
payment of the full amount so payable at the office or offices of all the Paying
Agents outside the United States is illegal or effectively precluded because of
the imposition of exchange controls or other similar restrictions on the payment
of such amount in Dollars, then the Company may instruct the Trustee in writing
to make such payments at a Paying Agent located in the United States, provided
that provision for such payment in the United States would not cause such Bearer
Security to be treated as a "registration-required obligation" under United
States laws and regulations.
(b) Unless otherwise provided as contemplated by Section 3.01
with respect to any series of Securities, any interest on Registered Securities
of any series which is payable, but is not punctually paid or duly provided for,
on any Interest Payment Date for such Registered Securities (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holders on the
relevant Regular Record Date by virtue of their having been such Holders, 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 such
Defaulted Interest to the Persons in whose names such
Registered 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 deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid
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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 (1)
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 of such
Registered Securities at his address as it appears in the
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 such Registered 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). In case a Bearer
Security of any series is surrendered at the office or agency
in a Place of Payment for such series in exchange for a
Registered Security of such series after the close of business
at such office or agency on the related proposed date for
payment of Defaulted Interest, such Bearer Security shall be
surrendered without the coupon relating to such proposed date
of payment in respect of the Registered Security issued in
exchange for such Bearer Security, but will be payable only to
the Holder of such coupon when due in accordance with the
provisions of this Indenture.
(2) The Company may make payment of such Defaulted
Interest to the Persons in whose names such Registered
Securities (or their respective Predecessor Securities) are
registered at the close of business on a specified date in any
other lawful manner not inconsistent with the requirements of
any securities exchange on which such Registered Securities
may be listed, and upon such notice as may be required by such
exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this clause (2), such
manner of payment shall be deemed practicable by the Trustee.
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(c) Subject to the foregoing provisions of this Section and
Section 3.05, 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, which were carried by such
other Security.
Section 3.08. Persons Deemed Owners. Prior to due presentment
of any Registered Security for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the Person in
whose name such Registered Security is registered as the owner of such
Registered Security for the purpose of receiving payment of principal of,
premium, if any, and (subject to Sections 3.05 and 3.07) interest on and
Additional Amounts with respect to such Registered Security and for all other
purposes whatsoever, whether or not such Registered 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.
The Company, the Trustee and any agent of the Company or the
Trustee may treat the bearer of any Bearer Security and the bearer of any coupon
as the absolute owner of such Bearer Security or coupon for the purpose of
receiving payment thereof or on account thereof and for all other purposes
whatsoever, whether or not such Bearer Security or coupon 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.
None of the Company, the Trustee or any agent of the Company
or the Trustee shall have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a Security in global form, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
Notwithstanding the foregoing, with respect to any Security in global form,
nothing herein shall prevent the Company or the Trustee, or any agent of the
Company or the Trustee, from giving effect to any written certification, proxy
or other authorization furnished by any Depository (or its nominee) as a Holder,
with respect to such Security in global form or impair, as between such
Depository and owners of beneficial interests in such Security in global form,
the operation of customary practices governing the exercise of the rights of
such Depository (or its nominee) as Holder of such Security in global form.
Section 3.09. Cancellation. The Company at any time may
deliver Securities and coupons to the Trustee for cancellation. The Registrar
and any Paying Agent shall forward to the Trustee any Securities and coupons
surrendered to them for replacement, for registration of transfer, or for
exchange or payment. The Trustee shall cancel all Securities and coupons
surrendered for replacement, for registration of transfer, or for
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exchange, payment, redemption or cancellation and may, but shall not be required
to, dispose of canceled Securities and coupons and issue a certificate of
destruction to the Company. The Company may not issue new Securities to replace
Securities that it has paid or delivered to the Trustee for cancellation.
Section 3.10. Computation of Interest. Except as otherwise
specified as contemplated by Section 3.01, interest on the Securities of each
series shall be computed on the basis of a 360-day year of twelve 30-day months.
Section 3.11. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use), and, in such
case, 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.
Section 3.12. Currency and Manner of Payment in Respect of
Securities. (a) Unless otherwise specified with respect to any Securities
pursuant to Section 3.01, with respect to Registered Securities of any series
not permitting the election provided for in paragraph (b) below or the Holders
of which have not made the election provided for in paragraph (b) below, and
with respect to Bearer Securities of any series, except as provided in paragraph
(d) below, payment of the principal of, premium, if any, and interest, if any,
on any Registered or Bearer Security of such series will be made in the currency
or currencies or currency unit or units in which such Registered Security or
Bearer Security, as the case may be, is payable. The provisions of this Section
3.12 may be modified or superseded pursuant to Section 3.01 with respect to any
Securities.
(b) It may be provided pursuant to Section 3.01, with respect
to Registered Securities of any series, that Holders shall have the option,
subject to paragraphs (d) and (e) below, to receive payments of principal of,
premium, if any, or interest, if any, on such Registered Securities in any of
the currencies or currency units which may be designated for such election by
delivering to the Trustee (or the applicable Paying Agent) a written election
with signature guarantees and in the applicable form established pursuant to
Section 3.01, not later than the close of business on the Election Date
immediately preceding the applicable payment date. If a Holder so elects to
receive such payments in any such currency or currency unit, such election will
remain in effect for such Holder or any transferee of such Holder until changed
by such Holder or such transferee by
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written notice to the Trustee (or any applicable Paying Agent) for such series
of Registered Securities (but any such change must be made not later than the
close of business on the Election Date immediately preceding the next payment
date to be effective for the payment to be made on such payment date, and no
such change of election may be made with respect to payments to be made on any
Registered Security of such series with respect to which an Event of Default has
occurred or with respect to which the Company has deposited funds pursuant to
Article IV or with respect to which a notice of redemption has been given by or
on behalf of the Company pursuant to Article X). Any Holder of any such
Registered Security who shall not have delivered any such Election to the
Trustee (or any applicable Paying Agent) not later than the close of business on
the applicable Election Date will be paid the amount due on the applicable
payment date in the relevant currency or currency unit as provided in Section
3.12(a). The Trustee (or the applicable Paying Agent) shall notify the Exchange
Rate Agent as soon as practicable after the Election Date of the aggregate
principal amount of Registered Securities for which Holders have made such
written election.
(c) If the election referred to in paragraph (b) above has
been provided for with respect to any Registered Securities of a series pursuant
to Section 3.01, then, unless otherwise specified pursuant to Section 3.01 with
respect to any such Registered Securities, not later than the fourth Business
Day after the Election Date for each payment date for such Registered
Securities, the Exchange Rate Agent will deliver to the Company a written notice
specifying, in the currency or currencies or currency unit or units in which
Registered Securities of such series are payable, the respective aggregate
amounts of principal of, premium, if any, and interest, if any, on such
Registered Securities to be paid on such payment date, and specifying the
amounts in such currency or currencies or currency unit or units so payable in
respect of such Registered Securities as to which the Holders of Registered
Securities denominated in any currency or currencies or currency unit or units
shall have elected to be paid in another currency or currency unit as provided
in paragraph (b) above. If the election referred to in paragraph (b) above has
been provided for with respect to any Registered Securities of a series pursuant
to Section 3.01, and if at least one Holder has made such election, then, unless
otherwise specified pursuant to Section 3.01, on the second Business Day
immediately preceding such payment date the Company will deliver to the Trustee
(or the applicable Paying Agent) an Exchange Rate Officers' Certificate in
respect of the Dollar, Foreign Currency or Currencies, ECU or other currency
unit payments to be made on such payment date. Unless otherwise specified
pursuant to Section 3.01, the Dollar, Foreign Currency or Currencies, ECU or
other currency unit amount receivable by Holders of Registered Securities who
have elected payment in a currency or currency unit as provided in paragraph (b)
above shall be determined by
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the Company on the basis of the applicable Market Exchange Rate in effect on the
second Business Day (the "Valuation Date") immediately preceding each payment
date, and such determination shall be conclusive and binding for all purposes,
absent manifest error.
(d) If a Conversion Event occurs with respect to a Foreign
Currency, ECU or any other currency unit in which any of the Securities are
denominated or payable otherwise than pursuant to an election provided for
pursuant to paragraph (b) above, then, with respect to each date for the payment
of principal of, premium, if any, and interest, if any, on the applicable
Securities denominated or payable in such Foreign Currency, ECU or such other
currency unit occurring after the last date on which such Foreign Currency, ECU
or such other currency unit was used (the "Conversion Date"), the Dollar shall
be the currency of payment for use on each such payment date (but such Foreign
Currency, ECU or such other currency unit that was previously the currency of
payment shall, at the Company's election, resume being the currency of payment
on the first such payment date preceded by 15 Business Days during which the
circumstances which gave rise to the Dollar becoming such currency no longer
prevail). Unless otherwise specified pursuant to Section 3.01, the Dollar amount
to be paid by the Company to the Trustee or any applicable Paying Agent and by
the Trustee or any applicable Paying Agent to the Holders of such Securities
with respect to such payment date shall be, in the case of a Foreign Currency
other than a currency unit, the Dollar Equivalent of the Foreign Currency or in
the case of a Foreign Currency that is a currency unit, the Dollar Equivalent of
the Currency limit, in each case as determined by the Exchange Rate Agent in the
manner provided in paragraph (f) or (g) below.
(e) Unless otherwise specified pursuant to Section 3.01, if
the Holder of a Registered Security denominated in any currency or currency unit
shall have elected to be paid in another currency or currency unit or in other
currencies as provided in paragraph (b) above, and (i) a Conversion Event occurs
with respect to any such elected currency or currency unit, such Holder shall
receive payment in the currency or currency unit in which payment would have
been made in the absence of such election and (ii) if a Conversion Event occurs
with respect to the currency or currency unit in which payment would have been
made in the absence of such election, such Holder shall receive payment in
Dollars as provided in paragraph (d) of this Section 3.12 (but, subject to any
contravening valid election pursuant to paragraph (b) above, the elected payment
currency or currency unit, in the case of the circumstances described in clause
(i) above, or the payment currency or currency unit in the absence of such
election, in the case of the circumstances described in clause (ii) above,
shall, at the Company's election, resume being the currency or currency unit of
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payment with respect to Holders who have so elected, but only with respect to
payments on payment dates preceded by 15 Business Days during which the
circumstances which gave rise to such currency or currency unit, in the case of
the circumstances described in clause (i) above, or the Dollar, in the case of
the circumstances described in clause (ii) above, as applicable, becoming the
currency or currency unit of payment, no longer prevail).
(f) The "Dollar Equivalent of the Foreign Currency" shall be
determined by the Exchange Rate Agent and shall be obtained for each subsequent
payment date by the Exchange Rate Agent by converting the specified Foreign
Currency into Dollars at the Market Exchange Rate on the Conversion Date.
(g) The "Dollar Equivalent of the Currency Unit" shall be
determined by the Exchange Rate Agent and, subject to the provisions of
paragraph (h) below, shall be the sum of each amount obtained by converting the
specified amount of each Component Currency (as each such term is defined in
paragraph (h) below) into Dollars at the Market Exchange Rate for such Component
Currency on the Valuation Date with respect to each payment.
(h) For purposes of this Section 3.12 the following terms
shall have the following meanings:
A "Component Currency" shall mean any currency which,
on the Conversion Date, was a component currency of the
relevant currency unit, including, but not limited to, ECU.
"Election Date" shall mean the Regular Record Date
for the applicable series of Registered Securities as
specified pursuant to Section 3.01 by which the written
election referred to in Section 3.12(b) may be made.
A "Specified Amount" of a Component Currency shall
mean the number of units of such Component Currency or
fractions thereof which such Component Currency represented in
the relevant currency unit, including, but not limited to,
ECU, on the Conversion Date. If after the Conversion Date the
official unit of any Component Currency is altered by way of
combination or subdivision, the Specified Amount of such
Component Currency shall be divided or multiplied in the same
proportion. If after the Conversion Date two or more Component
Currencies are consolidated into a single currency, the
respective Specified Amounts of such Component Currencies
shall be replaced by an amount in such single currency equal
to the sum of the respective specified Amounts of such
consolidated Component
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Currencies expressed in such single currency, and such amount
shall thereafter be a Specified Amount and such single
currency shall thereafter be a Component Currency. If after
the Conversion Date any Component Currency shall be divided
into two or more currencies, the Specified Amount of such
Component Currency shall be replaced by specified amounts of
such two or more currencies, the sum of which, at the Market
Exchange Rate of such two or more currencies on the date of
such replacement, shall be equal to the Specified Amount of
such former Component Currency and such amounts shall
thereafter be Specified Amounts and such currencies shall
thereafter be Component Currencies. If, after the Conversion
Date of the relevant currency unit, including, but not limited
to, ECU, a Conversion Event (other than any event referred to
above in this definition of "Specified Amount") occurs with
respect to any Component Currency of such currency unit and is
continuing on the applicable Valuation Date, the Specified
Amount of such Component Currency shall, for purposes of
calculating the Dollar Equivalent of the Currency Unit, be
converted into Dollars at the Market Exchange Rate in effect
on the Conversion Date of such Component Currency.
All decisions and determinations of the Exchange Rate Agent
regarding the Dollar Equivalent of the Foreign Currency, the Dollar Equivalent
of the Currency Unit, the Market Exchange Rate and changes in the Specified
Amounts as specified above shall be in its sole discretion and shall, in the
absence of manifest error, be conclusive for all purposes and irrevocably
binding upon the Company, the Trustee (and any applicable Paying Agent) and all
Holders of Securities denominated or payable in the relevant currency,
currencies or currency units. The Exchange Rate Agent shall promptly give
written notice to the Company and the Trustee of any such decision or
determination.
In the event that the Company determines in good faith that a
Conversion Event has occurred with respect to a Foreign Currency, the Company
will promptly give written notice thereof to the Trustee of the appropriate
series of Securities (or any applicable Paying Agent) and to the Exchange Rate
Agent (and the Trustee (or such Paying Agent) will promptly thereafter give
notice in the manner provided in Section 1.06 to the affected Holders)
specifying the Conversion Date. In the event the Company so determines that a
Conversion Event has occurred with respect to ECU or any other currency unit in
which Securities are denominated or payable, the Company will promptly give
written notice thereof to the Trustee (or any applicable Paying Agent) and to
the Exchange Rate Agent (and the Trustee (or such Paying Agent) will promptly
thereafter give notice in the manner provided in Section 1.06 to the affected
Holders) specifying the
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Conversion Date and the Specified Amount of each Component Currency on the
Conversion Date. In the event the Company determines in good faith that any
subsequent change in any Component Currency as set forth in the definition of
Specified Amount above has occurred, the Company will similarly give written
notice to the Trustee (or any applicable Paying Agent) and to the Exchange Rate
Agent.
The Trustee of the appropriate series of Securities shall be
fully justified and protected in relying and acting upon information received by
it from the Company and the Exchange Rate Agent and shall not otherwise have any
duty or obligation to determine the accuracy or validity of such information
independent of the Company or the Exchange Rate Agent.
Section 3.13. Appointment and Resignation of Exchange Rate
Agent. (a) Unless otherwise specified pursuant to Section 3.01, if and so long
as the Securities of any series (i) are denominated in a currency other than
Dollars or (ii) may be payable in a currency other than Dollars, or so long as
it is required under any other provision of this Indenture, then the Company
will maintain with respect to each such series of Securities, or as so required,
at least one Exchange Rate Agent. The Company will cause the Exchange Rate Agent
to make the necessary foreign exchange determinations at the time and in the
manner specified pursuant to Section 3.12 for the purpose of determining the
applicable rate of exchange and, if applicable, for the purpose of converting
the issued currency or currencies or currency unit or units into the applicable
payment currency or currency unit for the payment of principal, premium, if any,
and interest, if any, pursuant to Section 3.12.
(b) No resignation of the Exchange Rate Agent and no
appointment of a successor Exchange Rate Agent pursuant to this Section shall
become effective until the acceptance of appointment by the successor Exchange
Rate Agent as evidenced by a written instrument delivered to the Company and the
Trustee of the appropriate series of Securities accepting such appointment
executed by the successor Exchange Rate Agent.
(c) If the Exchange Rate Agent shall resign, be removed or
become incapable of acting, or if a vacancy shall occur in the office of the
Exchange Rate Agency for any cause, with respect to the Securities of one or
more series, the Company, by or pursuant to a Board Resolution, shall promptly
appoint a successor Exchange Rate Agent or Exchange Rate Agents with respect to
the Securities of that or those series (it being understood that any such
successor Exchange Rate Agent may be appointed with respect to the Securities of
one or more or all of such series and that, unless otherwise specified pursuant
to Section 3.01 at any time there shall only be one Exchange Rate Agent with
respect to the Securities of any particular series that are originally issued by
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the Company on the same date and that are initially denominated and/or payable
in the same currency or currencies or currency unit or units).
ARTICLE IV
Satisfaction, Discharge and Defeasance
Section 4.01. Termination of Company's Obligations Under the
Indenture. This Indenture shall upon a Company Request cease to be of further
effect with respect to Securities of or within any series and any coupons
appertaining thereto (except as to any surviving rights of registration of
transfer or exchange of such Securities and replacement of such Securities which
may have been lost, stolen or mutilated as herein expressly provided for) and
the Trustee, at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture with respect to such
Securities and any coupons appertaining thereto when (1) either
(A) all such Securities previously authenticated and delivered
and all coupons appertaining thereto (other than (i) such coupons
appertaining to Bearer Securities surrendered in exchange for
Registered Securities and maturing after such exchange, surrender of
which is not required or has been waived as provided in Section 3.05,
(ii) such Securities and coupons which have been destroyed, lost or
stolen and which have been replaced or paid, as provided in Section
3.06, (iii) such coupons appertaining to Bearer Securities called for
redemption and maturing after the relevant Redemption Date, surrender
of which has been waived as provided in Section 10.06 and (iv) such
Securities and coupons 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 9.03) have been delivered to the Trustee for
cancellation; or
(B) all Securities of such series and, in the case of (i) or
(ii) below, any coupons appertaining thereto 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, 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 irrevocably deposited or caused
to be deposited with the Trustee as trust funds in trust for the
purpose an amount in the currency or currencies or currency
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unit or units in which the Securities of such series are payable,
sufficient to pay and discharge the entire indebtedness on such
Securities and such coupons not theretofore delivered to the Trustee
for cancellation, for principal, premium, if any, and interest, and any
Additional Amounts payable as specified pursuant to Section 3.01(b)(17)
with respect thereto, 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 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 as to such series have been complied with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligation of the Company to the Trustee and any predecessor
Trustee under Section 6.09, the obligations of the Company to any Authenticating
Agent under Section 6.14 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 4.02 and the last paragraph of Section 9.03 shall
survive.
Section 4.02. Application of Trust Funds. Subject to the
provisions of the last paragraph of Section 9.03, all money deposited with the
Trustee pursuant to Section 4.01 shall be held in trust and applied by it, in
accordance with the provisions of the Securities, the coupons 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, premium, if any,
and any interest for whose payment such money has been deposited with or
received by the Trustee, but such money need not be segregated from other funds
except to the extent required by law.
Section 4.03. Applicability of Defeasance Provisions;
Company's Option to Effect Defeasance or Covenant Defeasance. If pursuant to
Section 3.01 provision is made for either or both of (i) defeasance of the
Securities of or within a series under Section 4.04 or (ii) covenant defeasance
of the Securities of or within a series under Section 4.05, then the provisions
of such Section or Sections, as the case may be, together with the provisions of
Sections 4.06 through 4.09 inclusive, with such modifications thereto as may be
specified pursuant to Section 3.01 with respect to any Securities, shall be
applicable to such Securities and any coupons appertaining thereto, and the
Company
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may at its option by or pursuant to Board Resolution, at any time, with respect
to such Securities and any coupons appertaining thereto, elect to have Section
4.04 (if applicable) or Section 4.05 (if applicable) be applied to such
Outstanding Securities and any coupons appertaining thereto upon compliance with
the conditions set forth below in this Article.
Section 4.04. Defeasance and Discharge. Upon the Company's
exercise of the option specified in Section 4.03 applicable to this Section with
respect to the Securities of or within a series, the Company shall be deemed to
have been discharged from its obligations with respect to such Securities and
any coupons appertaining thereto on and after the date the conditions set forth
in Section 4.06 are satisfied (hereinafter "defeasance"). For this purpose, such
defeasance means that the Company shall be deemed to have paid and discharged
the entire indebtedness represented by such Securities and any coupons
appertaining thereto which shall thereafter be deemed to be "Outstanding" only
for the purposes of Section 4.07 and the other Sections of this Indenture
referred to in clause (ii) of this Section, and to have satisfied all its other
obligations under such Securities and any coupons appertaining thereto and this
Indenture insofar as such Securities and any coupons appertaining thereto are
concerned (and the Trustee, at the expense of the Company, shall on a Company
Order execute proper instruments acknowledging the same), except the following
which shall survive until otherwise terminated or discharged hereunder: (i) the
rights of Holders of such Securities and any coupons appertaining thereto to
receive solely from the trust funds described in Section 4.06(a) and as more
fully set forth in such Section, payments in respect of the principal of,
premium, if any, and interest, if any, on such Securities or any coupons
appertaining thereto when such payments are due; (ii) the Company's obligations
with respect to such Securities under Sections 3.04, 3.05, 3.06, 9.02 and 9.03
and with respect to the payment of additional amounts, if any, payable with
respect to such Securities as specified pursuant to Section 3.01(b)(17); (iii)
the rights, powers trusts, duties and immunities of the Trustee hereunder and
(iv) this Article IV. Subject to compliance with this Article IV, the Company
may exercise its option under this Section notwithstanding the prior exercise of
its option under Section 4.05 with respect to such Securities and any coupons
appertaining thereto. Following a defeasance, payment of such Securities may not
be accelerated because of an Event of Default.
Section 4.05. Covenant Defeasance. Upon the Company's exercise
of the option specified in Section 4.03 applicable to this Section with respect
to any Securities of or within a series, the Company shall be released from its
obligations under Sections 7.01(3), 7.01(4) and 9.07 and, if specified pursuant
to Section 3.01, its obligations under any other covenant, with respect to such
Securities and any coupons appertaining thereto
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on and after the date the conditions set forth in Section 4.06 are satisfied
(hereinafter, "covenant defeasance"), and such Securities and any coupons
appertaining thereto shall thereafter be deemed to be not "Outstanding" for the
purposes of any direction, waiver, consent or declaration or Act of Holders (and
the consequences of any thereof) in connection with Sections 7.01(3), 7.01(4)and
9.07 or such other covenant but shall continue to be deemed "Outstanding" for
all other purposes hereunder. For this purpose, such covenant defeasance means
that, with respect to such Securities and any coupons appertaining thereto, the
Company may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such Section or such other
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such Section or such other covenant or by reason of reference in
any such Section or such other covenant to any other provision herein or in any
other document and such omission to comply shall not constitute a Default or an
Event of Default under Section 5.01(3) or 5.01(7), or otherwise, as the case may
be, but, except as specified above, the remainder of this Indenture and such
Securities and any coupons appertaining thereto shall be unaffected thereby.
Section 4.06. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of Section 4.04 or Section
4.05 to any Securities of or within a series and any coupons appertaining
thereto:
(a) The Company shall have deposited or caused to be deposited
irrevocably with the Trustee (or another trustee satisfying the
requirements of Section 6.12 who shall agree to comply with and shall
be entitled to the benefits of, the provisions of Sections 4.03 through
4.09 inclusive and the last paragraph of Section 9.03 applicable to the
Trustee, for purposes of such Sections also a "Trustee") as trust funds
in trust for the purpose of making the payments referred to in clauses
(x) and (y) of this Section 4.06(a), specifically pledged as security
for, and dedicated solely to, the benefit of the Holders of such
Securities and any coupons appertaining thereto, with instructions to
the Trustee as to the application thereof, (A) money in an amount (in
such currency, currencies or currency unit or units in which such
Securities and any coupons appertaining thereto are then specified as
payable at Maturity), or (B) if Securities of such series are not
subject to repayment at the option of Holders, Government Obligations
which through the payment of interest, principal, premium, if any, and
any Additional Amounts in respect thereof in accordance with their
terms will provide not later than one day before the due date of any
payment referred to in clause (x) or (y) of this Section 4.06(a), money
in an amount or (C) a combination thereof in an amount, sufficient,
without
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reinvestment, in the opinion of a nationally recognized firm of
independent certified public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge,
and which shall be applied by the Trustee to pay and discharge (x) the
principal of, premium, if any, and interest, if any, and any Additional
Amounts on such Securities and any coupons appertaining thereto on the
Maturity of such principal or installment of principal or interest and
(y) any mandatory sinking fund payments applicable to such Securities
on the day on which such payments are due and payable in accordance
with the terms of this Indenture and such Securities and any coupons
appertaining thereto. Before such a deposit, the Company may make
arrangements satisfactory to the Trustee for the redemption of
Securities at a future date or dates in accordance with Article X which
shall be given effect in applying the foregoing.
(b) Such defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a Default or Event of Default
under, this Indenture or result in a breach or violation of, or
constitute a default under, any other agreement or instrument to which
the Company is a party or by which it is bound.
(c) In the case of an election under Section 4.04, the Company
shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel to the effect that (i) the Company has received
from, or there has been published by, the Internal Revenue Service a
ruling, or (ii) since the date of execution of this Indenture, there
has been a change in the applicable Federal income tax law, in either
case to the effect that, and based thereon such opinion shall confirm
that, the Holders of such Securities and any coupons appertaining
thereto will not recognize income, gain or loss for Federal income tax
purposes as a result of such defeasance and will be subject to Federal
income tax on the same amount and in the same manner and at the same
times, as would have been the case if such deposit, defeasance and
discharge had not occurred.
(d) In the case of an election under Section 4.05, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of such Securities and any coupons appertaining
thereto will not recognize income, gain or loss for Federal income tax
purposes as a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such covenant defeasance had
not occurred.
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(e) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent to the defeasance under Section 4.04 or the
covenant defeasance under Section 4.05 (as the case may be) including
those contained in this Section 4.06 other than the 90 day period
specified in Section 4.06(g), have been complied with.
(f) The Company shall have delivered to the Trustee an
Officer's Certificate to the effect that neither such Securities nor
any other Securities of the same series, if then listed on any
securities exchange, will be delisted as a result of such deposit.
(g) No event which is, or after notice or lapse of time or
both would become, an Event of Default with respect to such Securities
or any other Securities shall have occurred and be continuing at the
time of such deposit or, with regard to any such event specified in
Sections 5.01(5) and (6), at any time on or prior to the 90th day after
the date of such deposit (it being understood that this condition shall
not be deemed satisfied until after such 90th day).
(h) Such defeasance or covenant defeasance shall not result in
the trust arising from such deposit constituting an investment company
within the meaning of the Investment Company Act of 1940 unless such
trust shall be registered under such Act or exempt from registration
thereunder.
(i) Such defeasance or covenant defeasance shall be effected
in compliance with any additional or substitute terms, conditions or
limitations which may be imposed on the Company in connection therewith
as contemplated by Section 3.01.
Section 4.07. Deposited Money and Government Obligations to Be
Held in Trust. Subject to the provisions of the last paragraph of Section 9.03,
all money and Government Obligations (or other property as may be provided
pursuant to Section 3.01) (including the proceeds thereof) deposited with the
Trustee pursuant to Section 4.06 in respect of any Securities of any series and
any coupons appertaining thereto shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and any coupons
appertaining thereto 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 Holders of such Securities and any coupons
appertaining thereto of all sums due and to become due thereon in respect of
principal, premium, if any, and interest, if any, and any Additional Amounts,
but such money need not be segregated from other funds except to the extent
required by law.
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Unless otherwise specified with respect to any Security
pursuant to Section 3.01, if, after a deposit referred to in Section 4.06(a) has
been made, (i) the Holder of a Security in respect of which such deposit was
made is entitled to, and does, elect pursuant to Section 3.12(b) or the terms of
such Security to receive payment in a currency or currency unit other than that
in which the deposit pursuant to Section 4.06(a) has been made in respect of
such Security, or (ii) a Conversion Event occurs as contemplated in Section
3.12(d) or 3.12(e) or by the terms of any Security in respect of indebtedness
which the deposit pursuant to Section 4.06(a) has been made, the indebtedness
represented by such Security and any coupons appertaining thereto shall be
deemed to have been, and will be, fully discharged and satisfied through the
payment of the principal of, premium, if any, and interest, if any, on such
Security as the same becomes due out of the proceeds yielded by converting (from
time to time as specified below in the case of any such election) the amount or
other property deposited in respect of such Security into the currency or
currency unit in which such Security becomes payable as a result of such
election or Conversion Event based on the applicable Market Exchange Rate for
such currency or currency unit in effect on the second Business Day prior to
each payment date, except, with respect to a Conversion Event, for such currency
or currency unit in effect (as nearly as feasible) at the time of the Conversion
Event.
Section 4.08. Repayment to Company. Subject to the last
paragraph of Section 9.03, the Trustee (and any Paying Agent) shall promptly pay
to the Company upon Company Request any excess money or securities held by them
at any time.
Section 4.09. Indemnity for Government Obligations. The
Company shall pay, and shall indemnify the Trustee against, any tax, fee or
other charge imposed on or assessed against Government Obligations deposited
pursuant to this Article or the principal and interest and any other amount
received on such Government Obligations.
Section 4.10. Reinstatement. If the Trustee or the Paying
Agent is unable to apply any money or Government Obligations, as the case may
be, in accordance with this Article with respect to any Securities by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, then the obligations
under this Indenture, such Securities and any coupons appertaining thereto from
which the Company has been discharged or released pursuant to Section 4.04 or
4.05 shall be revived and reinstated as though no deposit had occurred pursuant
to this Article with respect to such Securities, until such time as the Trustee
or Paying Agent is permitted to apply all money or Government Obligations, as
the case may be, held in trust pursuant to Section 4.07 with respect to such
Securities and any
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coupons appertaining thereto in accordance with this Article; provided, however,
that if the Company makes any payment of principal of or any premium or interest
on any such Security following such reinstatement of its obligations, the
Company shall be subrogated to the rights (if any) of the Holders of such
Securities or coupons to receive such payment from the money or Government
Obligations, as the case may be, so held in trust.
ARTICLE V
Defaults and Remedies
Section 5.01. Events of Default. An "Event of Default" occurs
with respect to the Securities of any series if (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 payment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) the Company defaults in the payment of interest
on any Security of that series or any coupon appertaining
thereto or any additional amount payable with respect to any
Security of that series as specified pursuant to Section
3.01(b)(17) when the same becomes due and payable and such
default continues for a period of 30 days;
(2) the Company defaults in the payment of the
principal of or any premium on any Security of that series
when the same becomes due and payable at its Maturity or on
redemption or otherwise, or in the payment of a mandatory
sinking fund payment when and as due by the terms of the
Securities of that series;
(3) the Company fails to comply in any material
respect with any of its agreements or covenants in, or any of
the provisions of, this Indenture with respect to any Security
of that series (other than an agreement, covenant or provision
for which non-compliance is elsewhere in this Section
specifically dealt with), and such non-compliance continues
for a period of 60 days after there has been given by
registered or certified mail, to the Company by the Trustee or
to the Company and the Trustee by the Holders of at least 25%
in principal amount of the Outstanding Securities of the
series, 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;
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(4) a default under any mortgage, agreement,
indenture or instrument under which there may be issued, or by
which there may be secured, guaranteed or evidenced any Debt
of the Company (including this Indenture) whether such Debt
now exists or shall hereafter be created, in an aggregate
principal amount then outstanding of $25,000,000 or more,
which default (a) shall constitute a failure to pay any
portion of the principal of such Debt when due and payable
after the expiration of an applicable grace period with
respect thereto or (b) shall result in such Debt becoming or
being declared due and payable prior to the date on which it
would otherwise become due and payable, and such acceleration
shall not be rescinded or annulled, or such Debt shall not be
paid in full within a period of 30 days after there has been
given, by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the Holders of at
least 25% in aggregate principal amount of the Outstanding
Securities of that series a written notice specifying such
event of default and requiring the Company to cause such
acceleration to be rescinded or annulled or to pay in full
such Debt and stating that such notice is a "Notice of
Default" hereunder; (it being understood however, that the
Trustee shall not be deemed to have knowledge of such default
under such agreement or instrument unless either (A) a
Responsible Officer of the Trustee shall have actual knowledge
of such default or (B) a Responsible Officer of the Trustee
shall have received written notice thereof from the Company,
from any Holder, from the holder of any such indebtedness or
from the trustee under any such agreement or other
instrument); provided, however, that if such default under
such agreement or instrument is remedied or cured by the
Company or waived by the holders of such indebtedness, then
the Event of Default hereunder by reason thereof shall be
deemed likewise to have been thereupon remedied, cured or
waived without further action upon the part of either the
Trustee or any of such Holders; provided, further, that the
foregoing shall not apply to any secured Debt under which the
obligee has recourse (exclusive of recourse for ancillary
matters such as environmental indemnities, misapplication of
funds, costs of enforcement and the like) only to the
collateral pledged for repayment so long as the fair market
value of such collateral does not exceed 2% of Total Assets at
the time of the default;
(5) the Company, pursuant to or within the meaning of
any Bankruptcy Law, (A) commences a voluntary case or
proceeding, (B) consents to the entry of an order
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for relief against it in an involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property, (D) makes a general
assignment for the benefit of its creditors, (E) makes an
admission in writing of its inability to pay its debts
generally as they become due or (F) takes corporate action in
furtherance of any such action;
(6) a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that (A) is for relief
against the Company, in an involuntary case, (B) adjudges the
Company as bankrupt or insolvent, or approves as properly
filed a petition seeking reorganization, arrangement, and
adjustment or composition of or in respect of the Company, or
appoints a Custodian of the Company, or for all or
substantially all of its property, or (C) orders the
liquidation of the Company and the decree remains unstayed and
in effect for 60 days; or
(7) any other Event of Default provided as
contemplated by Section 3.01 with respect to Securities of
that series.
The Company shall deliver to the Trustee, within 90 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any event which is or with the giving of notice or the lapse of time would
become an event which is or with the giving of notice or the lapse of time would
become an Event of Default, its status and what action the Company is taking or
proposes to take with respect thereto.
As used in the Indenture, the term "Bankruptcy Law" means
Title 11, U.S. Code, or any similar federal or state bankruptcy, insolvency,
reorganization or other law for the relief of debtors. As used in the Indenture,
the term "Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
Section 5.02. Acceleration; Rescission and Annulment. If an
Event of Default with respect to the Securities of any series at the time
Outstanding occurs and is continuing, the Trustee or the Holders of at least 25%
in aggregate principal amount of all of the Outstanding Securities of that
series by written notice to the Company (and if given by the Holders, to the
Trustee), may declare the principal (or, if the Securities of that series are
Original Issue Discount Securities or Indexed Securities, such portion of the
Original principal amount as may be specified in the terms of that series) of
and accrued interest, if any, on all the Securities of that series to be due and
payable and upon any such declaration such principal (or, in
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the case of Original Issue Discount Securities or Indexed Securities, such
specified amount) and interest, if any, shall be immediately due and payable.
At any time after such a declaration of acceleration with
respect to Securities of any series has been made and before a judgement or
decree for payment of the money due has been obtained by the Trustee as
hereinafter in this Article provided, the Holders of a majority in aggregate
principal amount of the Outstanding Securities of that series, by written notice
to 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) in the currency or currency unit in which that
series of Securities is payable, all overdue interest on all
Securities of that series and any related coupons and any
Additional Amounts,
(B) in the currency or currency unit in which that
series of Securities is payable, the principal of (and
premium, if any, on) any Securities of that series which have
become due otherwise than by such declaration of acceleration
and any interest thereon at the rate or rates prescribed
therefor in such Securities,
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate or rates
prescribed therefor in such Securities and any Additional
Amounts payable, and
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel;
and
(2) all existing Defaults and Events of Default with respect
to Securities of that series, other than the non-payment of the
principal of Securities of that series which have become due solely by
such declaration of acceleration, have been cured or waived as provided
in Section 5.07. No such rescission shall affect any subsequent default
or impair any right consequent thereon.
Section 5.03. Collection of Indebtedness and Suits for
Enforcement by Trustee. The Company covenants that if
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(1) default is made in the payment of any interest on
any Security or coupon, if any, when such interest or any
Additional Amounts 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 (or premium, if any, on) any Security at the Maturity
thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities and coupons, if any, the whole amount then due and
payable on such Securities and coupons for principal, premium, if any, and
interest and any Additional Amounts, and, to the extent that payment of such
interest shall be legally enforceable, interest on any overdue principal,
premium, if any, and on any overdue interest and any Additional Amounts, at the
rate or rates prescribed therefor in such Securities or coupons, if any, and, in
addition thereto, such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If an Event of Default with respect to Securities of any
series occurs and is continuing, the Trustee may in its discretion proceed to
protect and enforce its rights and the rights of the Holders of Securities of
such series 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 secure any other proper remedy.
Section 5.04. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents and take such
actions authorized under the Trust Indenture Act as may be necessary or
advisable in order to have the claims of the Trustee and the Holders of
Securities allowed in any judicial proceedings relating to the Company, its
creditors or its property. In particular, the Trustee shall be authorized to
collect and receive any moneys 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
Trustee 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 it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 6.09.
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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 of a Security or coupon 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 of a Security or coupon 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 5.05. 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, in its own name as an
express trust, without the possession of any of the Securities or coupons or the
production thereof in any proceeding relating thereto and any recovery of
judgment shall, after provision for the reasonable fees and expenses of the
Trustee and its counsel, be for the ratable benefit of the Holders of the
Securities and coupons in respect to which judgment was recovered.
Section 5.06. Delay or Omission Not Waiver. No delay or
omission by the Trustee or any Holder of any Securities to exercise any right or
remedy accruing upon an Event of Default shall impair any such right or remedy
or constitute a waiver of or acquiescence in any such Event of Default. Every
right and remedy given by this Article or by law to the Trustee or to the
Holders of Securities or coupons may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders of Securities
or coupons, as the case may be.
Section 5.07. Waiver of Past Defaults. The Holders of a
majority in aggregate principal amount of Outstanding Securities of any series
by written notice to the Trustee may waive on behalf of the Holders of all
Securities of such series and any related coupons a past Default or Event of
Default with respect to that series and its consequences except (i) a Default or
Event of Default in the payment of the principal of, premium, if any, or
interest or any Additional Amounts on any Security of such series or any coupon
appertaining thereto or (ii) in respect of a covenant or provision hereof which
pursuant to Section 8.02 cannot be amended or modified without the consent of
the Holder of each Outstanding Security of such series affected. 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.
Section 5.08. Control by Majority. The Holders of a majority
in aggregate principal amount of the Outstanding Securities of each series
affected (with each such series voting as a class) shall have the right to
direct the time, method and
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place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it with respect to Securities of that
series; provided, however, that (i) the Trustee may refuse to follow any
direction that conflicts with law or this Indenture (ii) the Trustee may refuse
to follow any direction that is unduly prejudicial to the rights of the Holders
of Securities of such series not consenting or of any other series for which the
Trustee is trustee, or that would in the good faith judgment of the Trustee have
a substantial likelihood of involving the Trustee in personal liability and
(iii) the Trustee may take any other action deemed proper by the Trustee which
is not inconsistent with such direction. Prior to the taking of any action
hereunder, the Trustee shall be entitled to reasonable indemnification
satisfactory to the Trustee against all losses and expenses caused by taking or
not taking such action. This paragraph shall be in lieu of Section 316(a)(1)(A)
of the Trust Indenture Act and such Section 316(a)(1)(A) is hereby expressly
excluded from this Indenture, as permitted By the Trust Indenture Act.
Section 5.09. Limitation on Suits by Holders. No Holder of any
Security of any series or any coupons appertaining thereto shall have any right
to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(1) the Holder has previously given written notice to
the Trustee of a continuing Event of Default with respect to
the Securities of that series;
(2) the Holders of at least 25% in aggregate
principal amount of the Outstanding Securities of that series
have made a 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 indemnity satisfactory to the Trustee against any
loss, liability or expense to be, or which may be, incurred by
the Trustee in pursuing the remedy;
(4) the Trustee for 60 days after its receipt of such
notice, request and the offer of indemnity has failed to
institute any such proceedings; and
(5) during such 60 day period, the Holders of a
majority in aggregate principal amount of the Outstanding
Securities of that series have not given to the Trustee a
direction inconsistent with such written request.
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No one or more Holders shall have any right in any manner
whatever by virtue of, or by availing of any provision of this Indenture to
affect, disturb or prejudice the rights of any other of such Holders, or to
obtain or to seek to obtain priority or preference over any other of such
Holders or to enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all of such Holders.
Section 5.10. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
of a Security or coupon to receive payment of principal of, premium, if any,
and, subject to Sections 3.05 and 3.07, interest on the Security and any
Additional Amounts, on or after the respective due dates expressed in the
Security (or, in case of redemption, on the redemption dates), and the right of
any Holder of a coupon to receive payment of interest due as provided in such
coupon, or, subject to Section 5.09, to bring suit for the enforcement of any
such payment on or after such respective dates, shall not be impaired or
affected without the consent of such Holder.
Section 5.11. Application of Money Collected. If the Trustee
collects any money pursuant to this Article, it shall pay out the money in the
following order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money on account of principal, premium, if any, or
interest, and any Additional Amounts upon presentation of the Securities or
coupon or both and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:
FIRST: to the Trustee for amounts due under
Section 6.09;
SECOND: to Holders of Securities and coupons in
respect of which or for the benefit of which such money has been
collected for amounts due and unpaid on such Securities for principal
of, premium, if any, and interest or any Additional Amounts, ratably,
without preference or priority of any kind, according to the amounts
due and payable on such Securities for principal, premium, if any, and
interest, respectively; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any
payment to Holders pursuant to this Section 5.11. At least 15 days before such
record date, the Trustee shall mail to each Holder and the Company a notice that
states the record date, the payment date and the amount to be paid.
Section 5.12. Restoration of Rights and Remedies. If
the Trustee or any Holder of a Security or coupon has instituted
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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 of Securities and coupons shall continue as though no such
proceeding had been instituted.
Section 5.13. Rights and Remedies Cumulative. Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities or coupons in the last paragraph of Section
3.06, no right or remedy herein conferred upon or reserved to the Trustee or 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
existing right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Section 5.14. 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.
Section 5.15. Undertaking for Costs. 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, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorney's fees, against any party
litigant in the suit having due regard to the merits and good faith of the
claims or defenses made by the party litigant provided that neither this Section
nor the Trust Indenture Act shall be deemed to authorize any court to require
such an undertaking or to make such an assessment in any suit instituted by the
Company or by the Trustee.
Section 5.16. Judgment Currency. If, for the purpose
of obtaining a judgment in any court with respect to any
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obligation of the Company hereunder or under any Security or any related coupon,
it shall become necessary to convert into any other currency or currency unit
any amount in the currency or currency unit due hereunder or under such Security
or coupon, then such conversion shall be made by the Exchange Rate Agent at the
Market Exchange Rate as in effect on the date of entry of the judgment (the
"Judgment Date"). If pursuant to any such judgment, conversion shall be made on
a date (the "Substitute Date") other than the Judgment Date and there shall
occur a change between the Market Exchange Rate as in effect on the Judgment
Date and the Market Exchange Rate as in effect on the Substitute Date, the
Company agrees to pay such additional amounts (if any) as may be necessary to
ensure that the amount paid is equal to the amount in such other currency or
currency unit which, when converted at the Market Exchange Rate as in effect on
the Judgment Date, is the amount due hereunder or under such Security or coupon.
Any amount due from the Company, under this Section 5.16 shall be due as a
separate debt and is not to be affected by or merged into any judgment being
obtained for any other sums due hereunder or in respect of any Security or
coupon. In no event, however, shall the Company be required to pay more in the
currency or currency unit due hereunder under such Security or coupon at the
Market Exchange Rate as in effect on the Judgment Date than the amount of
currency or currency unit stated to be due hereunder or under such Security or
coupon so that in any event the Company's obligations hereunder or under such
Security or coupon will be effectively maintained as obligations in such
currency or currency unit, and the Company shall be entitled to withhold (or be
reimbursed for, as the case may be) any excess of the amount actually realized
upon any such conversion on the Substitute Date over the amount due and payable
on the Judgment Date.
ARTICLE VI
The Trustee
Section 6.01. Certain Duties and Responsibilities of
the Trustee. (a) The Trustee's duties and responsibilities under
this Indenture shall be governed by the Trust Indenture Act.
(b) In case an Event of Default has occurred and is
continuing, the Trustee shall exercise the rights and powers vested in it by
this Indenture and shall use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
Section 6.02. Rights of Trustee. Subject to the
provisions of the Trust Indenture Act:
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(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any document believed by it to be genuine and to
have been signed or presented by the proper party or parties. The Trustee need
not investigate any fact or matter stated in the document.
(b) Any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order (other
than delivery of any Security, together with any coupons appertaining thereto,
to the Trustee for authentication and delivery pursuant to Section 3.03 which
shall be sufficiently evidenced as provided therein) and any resolution of the
Board of Directors may be sufficiently evidenced by a Board Resolution.
(c) Before the Trustee acts or refrains from acting, it may
consult with counsel of its selection and/or require an Officers' Certificate.
The Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on a Board Resolution, the written or oral advice of counsel
reasonably acceptable to the Company and the Trustee (which advice, if oral,
counsel shall promptly confirm in writing to the Trustee), a certificate of an
Officer or Officers delivered pursuant to Section 1.02, an Officers' Certificate
or an Opinion of Counsel.
(d) The Trustee may act through agents or attorneys and shall
not be responsible for the misconduct or negligence of any agent or attorney
appointed with due care.
(e) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers.
(f) The Trustee shall not be required 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 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.
(g) 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,
debenture, 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 seem fit, and, if the 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.
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(h) 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.
(i) 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 6.02.
Section 6.03. Trustee May Hold Securities. The Trustee, any
Paying Agent, any Registrar or any other agent of the Company, in its in
individual or any other capacity, may become the owner or pledgee of Securities
and coupons and, subject to Sections 310(b) and 311 of the Trust Indenture Act,
may otherwise deal with the Company, an Affiliate or Subsidiary with the same
rights it would have if it were not Trustee, Paying Agent, Registrar or such
other agent.
Section 6.04. 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 upon in writing with
the Company.
Section 6.05. Trustee's Disclaimer. The recitals contained
herein and in the Securities, except the Trustee's certificate of
authentication, shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for their correctness. The Trustee makes no
representation as to the validity or accuracy of this Indenture or the
Securities or any coupon. The Trustee shall not be accountable for the Company's
use of the proceeds from the Securities or for monies paid over to the Company
pursuant to the Indenture.
Section 6.06. Notice of Defaults. If a Default occurs and is
continuing with respect to the Securities of any series and if it is known to a
Responsible Officer of the Trustee, the Trustee shall, within 90 days after it
occurs, transmit by mail to the Holders of Securities of such series, in the
manner and to the extent provided in Section 313(c) of the Trust Indenture Act,
notice of all Defaults known to it unless such Default shall have been cured or
waived; provided, however, that except in the case of a Default in payment on
the Securities of any series, the Trustee may withhold the notice if and so long
as the board of directors, the executive committee or a committee of its
Responsible Officers in good faith determines that withholding such notice is in
the interests of Holders of Securities of that
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series; and provided, further, that in the case of any Default of the character
specified in Section 5.01(3) with respect to Securities of such series, no such
notice to Holders shall be given until at least 30 days after the occurrence
thereof.
Section 6.07. Reports by Trustee to Holders. Within 60 days
after each May 15 of each year commencing with the first May 15 after the first
issuance of Securities pursuant to this Indenture, the Trustee shall transmit by
mail to all Holders of Securities as provided in Section 313(c) of the Trust
Indenture Act a brief report dated as of such May 15 if required by and in
compliance with Section 313(a) of the Trust Indenture Act. A copy of each such
report shall, at the time of such transmission to Holders, be filed by the
Trustee with each stock exchange, if any, upon which the Securities are listed,
with the Commission and with the Company. The Company will promptly notify the
Trustee when the Securities are listed on any stock exchange.
Section 6.08. Securityholder Lists. The Trustee shall preserve
in as current a form as is reasonably practicable the most recent list available
to it of the names and addresses of Holders of Securities of each series. If the
Trustee is not the Registrar, the Company shall furnish to the Trustee
semiannually on or before the last day of June and December in each year, and at
such other times as the Trustee may request in writing, a list, in such form and
as of such date as the Trustee may reasonably require containing all the
information in the possession or control of the Registrar, the Company or any of
its Paying Agents other than the Trustee as to the names and addresses of
Holders of Securities of each such series. If there are Bearer Securities of any
series Outstanding, even if the Trustee is the Registrar, the Company shall
furnish to the Trustee such a list containing such information with respect to
Holders of such Bearer Securities only.
Section 6.09. Compensation and Indemnity. (a) The Company
shall pay to the Trustee from time to time such reasonable compensation for its
services as the Company and the Trustee shall agree in writing from time to
time. The Trustee's compensation shall not be limited by any law on compensation
of a trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred by it in connection
with the performance of its duties under this Indenture, except any such expense
as may be attributable to its negligence or bad faith. Such expenses shall
include the reasonable compensation and expenses of the Trustee's agents and
counsel.
(b) The Company shall indemnify the Trustee and any
Predecessor Trustee, for and hold it harmless against, any loss or liability
damage, claim or reasonable expense including taxes (other than taxes based upon
or determined or measured by the
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income of the Trustee) incurred by it arising out of or in connection with its
acceptance or administration of the trust or trusts hereunder, including the
reasonable 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 Trustee shall notify the Company promptly of any claim for which
it may seek indemnity. The Company shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel. The Company need not
pay for any settlement made without its consent, which consent shall not be
unreasonably withheld.
(c) The Company need not reimburse any expense or indemnify
against any loss or liability incurred by the Trustee through negligence or bad
faith.
(d) To secure the payment obligations of the Company pursuant
to this Section, the Trustee shall have a lien prior to the Securities of any
series on all money or property held or collected by the Trustee, except that
held in trust to pay principal, premium, if any, any interest and any Additional
Amounts, on particular Securities.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 5.01(5) or Section
5.01(6), the expenses (including the reasonable charges and expenses of its
counsel) and the compensation for the services are intended to constitute
expenses of administration under any applicable Federal or state bankruptcy,
insolvency or other similar law.
The provisions of this Section shall survive the termination
of this Indenture or the resignation or removal of the Trustee.
Section 6.10. Replacement of Trustee. (a) The resignation
or removal of the Trustee and the appointment of a successor Trustee shall
become effective only upon the successor Trustee's acceptance of appointment
as provided in Section 6.11.
(b) The Trustee may resign at any time with respect to the
Securities of any series by giving written notice thereof to the Company.
(c) The Holders of a majority in aggregate principal amount of
the Outstanding Securities of any series may remove the Trustee with respect to
that series by so notifying the Trustee and the Company and may appoint a
successor Trustee for such series with the Company's consent.
(d) If at any time:
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(1) the Trustee fails to comply with Section 310(b)
of the Trust Indenture Act after written request therefor by the
Company or by any Holder who has been a bona fide Holder of a Security
for any least six months, or
(2) the Trustee shall cease to be eligible under
Section 6.12 of this Indenture or Section 310(a) of the Trust Indenture
Act and shall fail to resign after written request therefor by the
Company or by any Holder of a Security who has been a bona fide Holder
of a Security for at least six months; or
(3) the Trustee becomes incapable of acting, is
adjudged a bankrupt or an insolvent or a receiver or public officer
takes charge of the Trustee or its property or affairs for the purpose
of rehabilitation, conservation or liquidation, then, in any such case,
(i) the Company by or pursuant to a Board Resolution may remove the
Trustee with respect to all Securities, or (ii) subject to Section
315(e) of the Trust Indenture Act, 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 with respect to all
Securities and the appointment of a successor Trustee or Trustees.
(e) If the instrument of acceptance by a successor Trustee
required by Section 6.11 shall not have been delivered to the Trustee within 30
days after the giving of such notice of resignation or removal, the Trustee
resigning or being removed may petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.
(f) If the Trustee resigns or is removed or if a vacancy
exists in the office of Trustee for any reason, with respect to Securities of
one or more series, the Company, by or pursuant to Board Resolution, shall
promptly appoint a successor Trustee with respect to the Securities to that or
those series (it being understood that any such successor Trustee may be
appointed with respect to the Securities of one or more or all of such series
and that at any time there shall be only one Trustee with respect to the
Securities of any particular series) and shall comply with the applicable
requirements of Section 6.11. If, within one year after such resignation,
removal or incapability, or the occurrence of such vacancy, a successor Trustee
with respect to the Securities of any series shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities of such
series delivered to the Company and the retiring Trustee, the successor Trustee
so appointed shall, forthwith upon its acceptance of such appointment in
accordance with the applicable requirements of
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Section 6.11, become the successor Trustee with respect to the Securities of
such series and to that extent supersede the successor Trustee appointed by the
Company. If no successor Trustee with respect to the Securities of any series
shall have been so appointed by the Company or the Holders and accepted
appointment in the manner required by Section 6.11, any Holder who has been a
bona fide Holder of a Security of such series 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 Trustee with respect
to the Securities of such series.
Section 6.11. Acceptance of Appointment by Successor. (a) In
case of the appointment hereunder of a successor Trustee with respect to all
Securities, every such successor Trustee shall execute, acknowledge and deliver
to the Company and to the retiring Trustee an instrument accepting such
appointment. Thereupon, the resignation or removal of the retiring Trustee shall
become effective, and the successor Trustee, without further act, deed or
conveyance, shall become vested with all the rights, powers and duties of the
retiring Trustee; but, on the 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.
(b) In case of the appointment hereunder of a successor
Trustee with respect to the Securities of one or more (but not all) series, the
Company, the retiring Trustee and such successor Trustee shall execute and
deliver an indenture supplemental hereto wherein such successor Trustee shall
accept such appointment and which (i) shall contain such provisions as shall be
necessary or desirable to transfer and confirm to, and to vest in, such
successor Trustee all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Securities of that or those series to which the
appointment of such successor Trustee relates, (ii) if the retiring Trustee is
not retiring with respect to all Securities, shall contain such provisions as
shall be deemed necessary or desirable to confirm that all the rights, powers,
trusts and duties or the retiring Trustee with respect to the Securities of that
or those series as to which the retiring Trustee is not retiring shall continue
to be vested in the retiring Trustee, and (iii) shall add to or change any of
the provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one Trustee,
it being understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by another such
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Trustee and upon the execution and delivery of such supplemental indenture the
resignation or removal of the retiring Trustee shall become effective to the
extent provided therein and each 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 with respect to the Securities of that or
those series to which the appointment of such successor Trustee relates; but, on
request of the Company or any successor Trustee, such retiring Trustee shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder with respect to the Securities of
that or those series to which the appointment of such successor Trustee relates.
(c) 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 the successor Trustee all such rights, powers and trusts
referred to in paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless
at the time of such acceptance such successor Trustee shall be qualified and
eligible under the Trust Indenture Act.
(e) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any series
in the manner provided for notices to the Holders of Securities in Section 1.06.
Each notice shall include the name of the successor Trustee with respect to the
Securities of such series and the address of its Corporate Trust Office.
Section 6.12. Eligibility; Disqualification. There shall at
all times be a Trustee hereunder which shall be eligible to act as Trustee under
Section 310(a)(1) of the Trust Indenture Act and shall have a combined capital
and surplus of at least $100,000,000. If such Trustee publishes reports of
condition at least annually, pursuant to law or the requirements of Federal,
State, Territorial or District of Columbia supervising or examining authority,
then, for the purposes of this Section, the combined capital and surplus of such
Trustee 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 heretofore specified
in this Article.
Section 6.13. 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
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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 to 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 with the same effect
as if such successor Trustee had itself authenticated such Securities.
Section 6.14. Appointment of Authenticating Agent. The Trustee
may appoint an Authenticating Agent or Agents with respect to one or more series
of Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities of such series issued upon original issue, exchange,
registration of 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. Any such appointment shall be evidenced by an instrument in writing
signed by a Responsible Officer of the Trustee, a copy of which Instrument shall
be promptly furnished to the Company. 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 and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and, except as may otherwise be provided pursuant to
Section 3.01, shall at all times be a bank or trust company or corporation
organized and doing business and in good standing under the laws of the United
States of America or of any State 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 authorities. If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or the requirements of the
aforesaid 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 published. In case 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.
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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 the
corporate agency or corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided such corporation shall be
otherwise eligible under this Section, without the execution or filing of any
paper or further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent for any series of Securities may at
any time resign by giving written notice of resignation to the Trustee for such
series and to the Company. The Trustee for any series of Securities may at any
time terminate the agency of an Authenticating Agent by giving written notice of
termination 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 for such series may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall give
notice of such appointment to all Holders of Securities of the series with
respect to which such Authenticating Agent will serve in the manner set forth in
Section 1.06. 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 herein. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from
time to time reasonable compensation including reimbursement of its reasonable
expenses for its services under this Section.
If an appointment with respect to one or more series is made
pursuant to this Section, the Securities of such series may have endorsed
thereon, in addition to or in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication substantially in the
following form:
This is one of the Securities of the series described in the
within-mentioned Indenture.
-----------------------------------
as Trustee
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By:
-------------------------------
as Authenticating Agent
By:
-------------------------------
Authorized Signatory
ARTICLE VII
Consolidation, Merger or Sale by the Company
Section 7.01. Consolidation, Merger or Sale of Assets
Permitted. The Company shall not consolidate with or merge with or into, or
transfer or lease all or substantially all of its assets to, any Person unless:
(1) the Person formed by or surviving any such
consolidation or any merger (if other than the Company), or to which
such transfer or lease shall have been made, is a corporation organized
and existing under the laws of the United States, any State thereof or
the District of Columbia;
(2) the Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such
transfer or lease shall have been made, expressly assumes by
supplemental indenture hereto executed and delivered to the Trustee,
inform satisfactory to the Trustee, the due and punctual payment of the
principal, premium, if any, interest, if any and any Additional
Amounts, with respect to all of the Securities and the performance or
observance of every covenant under this Indenture and the Securities on
the part of the Company to be performed under the Securities, the
coupons and this Indenture;
(3) immediately after giving effect to the
transaction and treating any indebtedness which becomes an obligation
of the Company or a Subsidiary of the Company as a result of such
transaction as having been incurred by the Company or such Subsidiary
at the time of such transaction no Default or Event of Default exists
and is continuing; and
(4) if, as a result of any such consolidation or
merger or such conveyance, transfer or lease, properties or assets of
the Company would become subject to a mortgage, pledge, lien, security
interest or other encumbrance which would not be permitted by the
Securities of any series, the Company or such successor Person, as the
case may be, shall take such steps as shall be necessary effectively to
secure
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such Securities equally and ratably with all indebtedness
secured thereby.
The Company shall deliver to the Trustee prior to the proposed
transaction an Officers' Certificate to the foregoing effect and an Opinion of
Counsel stating that the proposed transaction and such supplemental indenture
comply with this Indenture and that all conditions precedent to the consummation
of the transaction under this Indenture have been met.
In the event of the assumption by a successor corporation as
provided in clause (2) above, such successor corporation shall succeed to and be
substituted for the Company hereunder and under the Securities with the same
effect as if it had been named hereunder and thereunder and, except in the case
of a lease, any coupons appertaining thereto and all such obligations of the
Company shall terminate.
ARTICLE VIII
Supplemental Indentures
Section 8.01. 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 indentures supplemental hereto, in form reasonably satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation
to the Company and the assumption by any such successor of the
covenants and obligations of the Company herein and in the Securities;
or
(2) to add to the covenants of the Company for the
benefit of the Holders of all or any series of Securities (and if such
covenants are to be for the benefit less than all series of Securities,
stating that such covenants are expressly being included solely for the
benefit of such series) or to surrender any right or power herein
conferred upon the Company; or
(3) to add any additional Events of Default with
respect to all or any series of Securities (and if such Events of
Default are to be for the benefit of less than all series of
Securities, stating that such Events of Default are expressly included
solely for the benefit of such series); or
(4) to add to or change any of the provisions of this
Indenture to such extent as shall be necessary to
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facilitate the issuance of Bearer Securities (including, without
limitation to provide that Bearer Securities may be registrable as to
principal only) or to facilitate the issuance of Securities in global
form; or
(5) to change or eliminate any of the provisions of
this Indenture, provided that any such change or elimination shall
become effective only when there is no Security Outstanding of any
series created prior to the execution of such supplemental indenture
which is entitled to the benefit of such provision; or
(6) to secure the Securities; or
(7) to establish the form or terms of Securities of
any series as permitted by Sections 2.01 and 3.01; or
(8) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect to the
Securities of one or more series and to add to or change any of the
provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one
Trustee, pursuant to the requirements of Section 6.11; or
(9) if allowed without penalty under applicable laws
and regulations, to permit payment in the United states (including any
of the States and District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction of principal,
premium, if any, or interest, if any, on Bearer Securities or coupons,
if any; or
(10) 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, provided such action shall not adversely affect the
interests of the Holders of Securities of any series; or
(11) to cure an ambiguity or correct any mistake,
provided such action shall not adversely affect the interests of the
Holders of Securities of any series.
Section 8.02. Supplemental Indentures with Consent of Holders.
With the written consent of the Holders of a majority of the aggregate principal
amount of the Outstanding Securities of each series adversely affected by such
supplemental indenture (with the Securities of each series voting as a class),
the Company, when authorized by a Board Resolution, and the Trustee may enter
into an indenture or indentures supplemental hereto to add any provisions to or
to change or eliminate any provisions of this Indenture or of any other
indenture supplemental hereto or
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to modify the rights of the Holders of such Securities; provided, however, that
without the consent of the Holder of each Outstanding Security affected thereby,
a supplemental indenture under this Section may not:
(1) change the Stated Maturity of the principal of,
or premium, if any, on, or any installment of principal of or premium,
if any, or interest on, or any Additional Amounts on, any Security, or
reduce the principal amount thereof or the rate of interest thereon or
any premium payable upon the redemption, repurchase or repayment
thereof, or change the manner in which the amount of any principal
thereof or premium, if any, or interest or Additional Amounts thereon
is determined or reduce the amount of the principal of any Original
Issue Discount Security or Indexed Security that would be due and
payable upon a declaration of acceleration of the Maturity thereof
pursuant to Section 5.02, or change the Place of Payment where or the
currency in which any Securities or any premium or the interest or
Additional Amounts 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);
(2) reduce the percentage in principal amount of the
Outstanding Securities affected thereby, the consent of whose Holders
is required for any such supplemental indenture, or the consent of
whose Holders is required for any waiver (of compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture;
(3) change any obligation of the Company to maintain
an office or agency in the places and for the purposes specified in
Section 9.02; or
(4) make any change in Section 5.07 or this 8.02
except to increase any percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived with the
consent of the Holders of each Outstanding Security affected thereby.
A supplemental indenture which changes or eliminates any
covenant or other provision of this Indenture which has expressly been included
solely for the benefit of one or more particular series of Securities, or which
modifies the rights of the Holders of Securities of such series with respect to
such covenant or other provision shall be deemed not to affect the rights under
this Indenture of the Holders of Securities of any other series.
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It is not necessary under this Section 8.02 for the Holders to
consent to the particular form of any proposed supplemental indenture, but it is
sufficient if they consent to the substance thereof.
Section 8.03. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Securities of one or more series shall be set
forth in a supplemental indenture that complies with the Trust Indenture Act as
then in effect.
Section 8.04. Execution of Supplemental Indentures. In
executing, or accepting the additional trusts created by, any supplemental
indenture permitted by this Article or the modification thereby of the trusts
created by this Indenture, the Trustee shall be entitled to receive, and shall
be fully protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or permitted by this
Indenture. 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 8.05. 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
part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder and of any
coupon appertaining thereto shall be bound thereby.
Section 8.06. Reference in Securities to Supplemental
Indentures. Securities, including any coupons, of any series authenticated and
delivered after the execution of any supplemental indenture pursuant to this
Article may, and shall if required by the Trustee, bear a notation in form
approved by the Trustee as to any matter provided for in such supplemental
indenture. If the Company shall so determine, new Securities including any
coupons of any series so modified as to conform, in the opinion of the Trustee
and 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 including any coupons of such series.
ARTICLE IX
Covenants
Section 9.01. Payment of Principal, Premium, if any, and
Interest. The Company covenants and agrees for the benefit of the Holders of
each series of Securities that it will duly and
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punctually pay the principal of, premium, if any, and interest together with
Additional Amounts, if any, on the Securities of that series in accordance with
the terms of the Securities of such series, any coupons appertaining thereto and
this Indenture. An installment of principal, premium, if any, or interest, if
any, of any Additional Amounts shall be considered paid on the date it is due if
the Trustee or Paying Agent holds on that date money designated for and
sufficient to pay the installment.
Section 9.02. Maintenance of Office or Agency. If Securities
of a series are issued as Registered Securities, the Company will maintain in
each Place of Payment for any series of Securities an office or agency where
Securities of that series may be presented or surrendered for payment, where
securities of that series may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Securities of that series and this Indenture may be served. If Securities of a
series are issuable as Bearer Securities, the Company will maintain, (i) subject
to any laws or regulations applicable thereto, an office or agency in a Place of
Payment for that series which is located outside the United States where
Securities of that series and related coupons may be presented and surrendered
for payment; provided, however, that if the Securities of that series are
listed on The International Stock Exchange of the United Kingdom and the
Republic of Ireland Limited, the Luxembourg Stock Exchange or any other stock
exchange located outside the United States and such stock exchange shall so
require, the Company will maintain a Paying Agent for the Securities of that
series in London, Luxembourg or any other required city located outside the
United States, as the case may be, so long as the Securities of that series are
listed on such exchange, and (ii) subject to any laws or regulations applicable
thereto, an office or agency in a Place by Payment for that series which is
located outside the United States, where Securities of that series may be
surrendered for exchange and where notices and demands to or upon the Company
in respect of the Securities of that series and this Indenture maybe served.
The Company will give prompt written notice to the Trustee of the location, and
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 Company hereby appoints the Trustee as its agent to receive
all such presentations, surrenders, notices and demands.
Unless otherwise specified as contemplated by Section 3.01, no
payment of principal, premium or interest on Bearer Securities shall be made at
any office or agency of the Company in the United States, by check mailed to any
address in United States, by transfer to an account located in the United States
or
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upon presentation or surrender in the United States of a Bearer Security or
coupon for payment, even if the payment would be credited to an account located
outside the United States; provided, however, that, if the Securities of a
series are denominated and payable in Dollars, payment of principal of and any
premium or interest on any such Bearer Security shall be made at the office of
the Company's Paying Agent located within the United States, if (but only if)
payment in Dollars of the full amount of such principal, premium or interest, as
the case may be, at all offices or agencies outside the United States maintained
for the purpose by the Company in accordance with this Indenture is illegal or
effectively precluded by exchange controls or other similar restrictions.
The Company may also from time to time designate one or more
other offices or agencies where the Securities (including any coupons, if any)
of one or more series may be presented or surrendered for any or all 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 an agency in each Place of Payment
for Securities (including any coupons, if any) of any series for such purposes.
The Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency. Unless otherwise specified as contemplated by Section 3.01,
the Trustee shall initially serve as Paying Agent.
If and so long as the Securities of any series (i) are
denominated in a currency other than Dollars or (ii) may be payable in currency
other than Dollars, or so long as it is required under any other provision of
this Indenture, then the Company will maintain with respect to each such series
of Securities or as so required, an Exchange Rate Agent.
Section 9.03. Money for Securities Payments to be Held in
Trust; Unclaimed Money. If the Company shall at any time act as its own Paying
Agent with respect to any series of Securities, it will, on or before each due
date of the principal of, premium, if any, or interest or any Additional Amount,
on any of the Securities of that series, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal,
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 in writing of its action or failure so to act.
The Company will cause each Paying Agent for any series of
Securities 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:
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(1) hold all sums held by it for the payment of the
principal of, premium, if any, or interest or Additional Amounts on
Securities of that series 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;
(2) give the Trustee notice of any default by the
Company (or any other obligor upon the Securities of that series) in
the making to any payment of principal, premium, if any, or interest or
Additional Amounts on the Securities; and
(3) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge or defeasance 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 terms as those upon which such sums were held by
the Company or such Paying Agent; and, upon such payment by 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 any principal, premium or
interest on any Security of any series and remaining unclaimed for two years
after such principal, premium, if any, or interest or Additional Amount has
become due and payable shall be paid to the Company on Company Request or (if
then held by the Company) shall be discharged from such trust; and the Holder of
such Security and coupon, if any, 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; provided, however,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in a
newspaper published in the English language, customarily published on each
Business Day and of general circulation in The City of New York, or cause to be
mailed to such Holder, notice that such money remains unclaimed and that, after
a date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
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Section 9.04. Corporate Existence. Subject to Article VII, the
Company will at all times do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence and its
rights and franchises; provided that nothing in this Section 9.04 shall prevent
the abandonment or termination of any right or franchise of the Company if, in
the opinion of the Company, such abandonment or termination is in the best
interests of the Company and not prejudicial in any material respect to the
Holders of the Securities.
Section 9.05. Reports by the Company. The Company covenants:
(a) to file with the Trustee, within 30 days after the Company
is required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such portions
of any of the foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Company may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934, as amended; or, if the Company is not required to file information,
documents or reports pursuant to either of such Sections, then to file with the
Trustee and the Commission, in accordance with rules and regulations prescribed
from time to time by the Commission, such of the supplementary and periodic
information, documents and reports which may be required pursuant to Section 13
of the Securities Exchange Act of 1934, as amended, in respect of a security
listed and registered on a national securities exchange as may be prescribed
from time to time in such rules and regulations;
(b) to file with the Trustee and the Commission, in accordance
with the rules and regulations prescribed from time to time by the Commission,
such additional information, documents and reports with respect to compliance by
the Company with the conditions and covenants provided for in this Indenture as
may be required from time to time by such rules and regulations; and
(c) to transmit to all Holders of Securities, within 30 days
after the filing thereof with the Trustee, in the manner and to the extent
provided in Section 313(c) of the Trust Indenture Act, such summaries of any
information, documents and reports required to be filed by the Company pursuant
to subsections (a) and (b) of this Section 9.05, as may be required by rules and
regulations prescribed from time to time by the Commission.
Delivery of such reports, information and documents to the Trustee is for
informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information
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contained therein, including information concerning the Company's compliance
with any of its covenants hereunder, provided that the foregoing shall not
relieve the Trustee of any of its responsibilities hereunder.
Section 9.06. Annual Review Certificate; Notice of Defaults or
Events of Default. The Company covenants and agrees to deliver to the Trustee,
within 120 days after the end of each fiscal year of the Company ending after
the date hereof, a certificate from the principal executive officer, principal
financial officer or principal accounting officer of the Company, covering the
preceding calendar year, stating whether or not to the best knowledge of the
signer(s) thereof the Company is in default in the performance, observance or
fulfillment of or compliance with any of the terms, provisions, covenants and
conditions of this Indenture, and if the Company shall be in default, specifying
all such defaults and the nature and status thereof of which they may have
knowledge. For the purposes of this Section 9.06, compliance shall be determined
without regard to any grace period or requirement of notice provided pursuant to
the terms of this Indenture.
Section 9.07. Books of Record and Account. The Company will
keep proper books of record and account, either on a consolidated or individual
basis. The Company shall cause its books of record and account to be examined
either on a consolidated or individual basis, by one or more firms of
independent public accountants not less frequently than annually. The Company
shall prepare its financial statements in accordance with GAAP.
ARTICLE X
Redemption
Section 10.01. Applicability of Article. Securities (including
coupons, if any) of any series which are redeemable before their Stated Maturity
shall be redeemable in accordance with their terms and (except as otherwise
specified as contemplated by Section 3.01 for Securities of any series) in
accordance with this Article.
Section 10.02. Election to Redeem Notice to Trustee. The
election of the Company to redeem any Securities, including coupons, if any,
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 the Securities or
coupons, if any, of any series, the Company shall, at least 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
Redemption Price, of the principal amount of Securities of such series to be
redeemed and, if applicable, of
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the tenor of the Securities to be redeemed. In the case of any redemption of
Securities (i) prior to the expiration of any restriction on such redemption
provided in the terms of such Securities or elsewhere in this Indenture or (ii)
pursuant to an election of the Company which is subject to a condition specified
in the terms of such Securities, the Company shall furnish the Trustee with an
Officers' Certificate evidencing compliance with such restriction or condition.
Section 10.03. Selection of Securities to be Redeemed. Unless
otherwise specified as contemplated by Section 3.01, if less than all the
Securities (including coupons, if any) of a series with the same terms are to be
redeemed, the Trustee, not more than 45 days prior to the redemption date, shall
select the Securities of the series to be redeemed in such manner 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 of such series,
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. The Trustee shall make the selection
from Securities of the series that are Outstanding and that have not previously
been called for redemption and may provide for the selection for redemption of
portions (equal to the minimum authorized denomination for Securities, including
coupons, if any, of that series or any integral multiple thereof) of the
principal amount of Securities, including coupons, if any, of such series of a
denomination larger than the minimum authorized denomination for Securities of
that series. The Trustee shall promptly notify the Company in writing of the
Securities selected by the Trustee for redemption and, in the case of any
Securities selected for partial redemption, the principal amount thereof 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. If less than all the Securities of any
series with differing issue dates, interest rates and stated maturities are to
be redeemed, the Company in its sole discretion shall select the particular
Securities to be redeemed and shall notify the Trustee in writing thereof at
least 45 days prior to the relevant redemption date.
For purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities (including
coupons, if any) shall relate, in the case of any Securities (including coupons,
if any) redeemed or to be redeemed only in part, to the portion of the principal
amount of such Securities (including coupons, if any) which has been or is to be
redeemed.
Section 10.04. Notice of Redemption. Unless otherwise
specified as contemplated by Section 3.01, notice of redemption
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shall be given in the manner provided in Section 1.06 not less than 30 days nor
more than 60 days prior to the Redemption Date to the Holders of the Securities
to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) if less than all the Outstanding Securities of a
series are to be redeemed, the identification (and in the case of
partial redemption, the principal amounts) of the particular Security
or Securities to be redeemed;
(4) in case any Security is to be redeemed in part
only, the notice which relates to such Security shall state that on and
after the Redemption Date, upon surrender of such Security, the Holder
will receive, without a charge, a new Security or Securities of
authorized denominations for the principal amount thereof remaining
unredeemed;
(5) the Place or Places of Payment where such
Securities, together in the case of Bearer Securities with all coupons
appertaining thereto, if any, maturing after the Redemption Date, are
to surrendered for payment for the Redemption Price;
(6) that Securities of the series called for
redemption and all unmatured coupons, if any, appertaining thereto must
be surrendered to the Paying Agent to collect the Redemption Price;
(7) that, on the Redemption Date, the Redemption
Price will become due and payable upon each such Security, or the
portion thereof, to be redeemed and, if applicable, that interest
thereon will cease to accrue on and after said date;
(8) that the redemption is for a sinking fund, if
such is the case;
(9) that unless otherwise specified in such notice,
Bearer Securities of any series, if any, surrendered for redemption
must be accompanied by all coupons maturing subsequent to the
Redemption Date or the amount of any such missing coupon or coupons
will be deducted from the Redemption Price, unless security or
indemnity satisfactory to the Company, the Trustee and any Paying Agent
is furnished; and
(10) the CUSIP number, if any, of the Securities.
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Notice of redemption of Securities to be redeemed 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.
Section 10.05. Deposit of Redemption Price. On or prior to any
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, which it may not do
in the case of a sinking fund payment under Article XI, segregate and hold in
trust as provided in Section 9.03) an amount of money in the currency or
currencies (including currency unit or units) in which the Securities of such
series are payable (except as otherwise specified pursuant to Section 3.01 for
the Securities of such series) sufficient to pay on the Redemption Date the
Redemption Price of, and (unless the Redemption Date shall be an Interest
Payment Date) interest accrued to the Redemption Date on, all Securities or
portions thereof which are to be redeemed on that date.
Unless any Security by its terms prohibits any sinking fund
payment obligation from being satisfied by delivering and crediting Securities
(including Securities redeemed otherwise than through a sinking fund), the
Company may deliver such Securities to the Trustee for crediting against such
payment obligation in accordance with the terms of such Securities and this
Indenture.
Section 10.06. Securities Payable on Redemption Date. Notice
of redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable 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 and the coupons for any such interest
appertaining to any Bearer Security so to be redeemed, except to the extent
provided below, shall be void. Except as provided in the next succeeding
paragraph, upon surrender of any such Security, including coupons, if any, for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price, together with accrued interest (and any
Additional Amounts) to the Redemption Date; provided, however, that installments
of interest on Bearer Securities whose Stated Maturity is on or prior to the
Redemption Date shall be payable only at an office or agency located outside the
United States and its possessions (except as otherwise provided in Section 9.02)
and, unless otherwise specified as contemplated by Section 3.01, only upon
presentation and surrender to coupons for such interest; and provided, further
that, unless otherwise specified as contemplated by Section 3.01, installments
of interest on Registered Securities whose Stated Maturity is on or prior to the
Redemption Date shall be payable to the Holders of such Securities, or one or
more Predecessor
82
<PAGE> 88
Securities, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 3.07.
If any Bearer Security surrendered for redemption shall not be
accompanied by all appurtenant coupons maturing after the Redemption Date, such
Bearer Security may be paid after deducting from the Redemption Price an amount
equal to the face amount of all such missing coupons, or the surrender of such
missing coupon or coupons may be waived by the Company and the Trustee if there
be furnished to them such security or indemnity as they may require to save each
of them and any Paying Agent harmless. If thereafter the Holder of such Bearer
Security shall surrender to the Trustee or any Paying Agent any such missing
coupon in respect of which a deduction shall have been made from the Redemption
Price, such Holder shall be entitled to receive the amount so deducted;
provided, however, that interest (and any Additional Amounts) represented by
coupons shall be payable only at an office or agency located outside of the
United States (except as otherwise specified pursuant to Section 9.02) and,
unless otherwise provided as contemplated by Section 3.01, only upon
presentation and surrender of those coupons.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal (and premium, if any)
shall, until paid, bear interest from the Redemption Date at the rate prescribed
therefor in the Security.
Section 10.07. Securities Redeemed in Part. Upon surrender of
a Registered Security that is redeemed in part at any Place of Payment therefor
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly authorized in
writing), the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of that Security, without service charge a new Registered
Security or Securities of the same series, having the same form, terms and
Stated Maturity, in any authorized denomination equal in aggregate principal
amount to the unredeemed portion of the principal amount of the Security
surrendered.
ARTICLE XI
Sinking Funds
Section 11.01. Applicability of Article. The provisions of
this Article shall be applicable to any sinking fund for the retirement of
Securities of a series except as otherwise specified as contemplated by Section
3.01 for Securities of such series.
83
<PAGE> 89
The minimum amount of any sinking fund payment provided for by
the terms of Securities of any series is herein referred to as a "mandatory
sinking fund payment", and any payment in excess of such minimum amount provided
for by the terms of Securities of any series is herein referred to as an
"optional sinking fund payment". If provided for by the terms of Securities of
any series, the cash amount of any sinking fund payment may be subject to
reduction as provided in Section 11.02. Each sinking fund payment shall be
applied to the redemption of Securities of any series as provided for by the
terms of Securities of such series.
Section 11.02. Satisfaction of Sinking Fund Payments with
Securities. The Company (i) may deliver Outstanding Securities of a series
(other than any previously called for redemption) together, in the case of
Bearer Securities of such series, with all unmatured coupons appertaining
thereto and (ii) may apply as a credit Securities of a series which have been
redeemed either at the election of the Company pursuant to the terms of such
Securities or through the application of permitted optional sinking fund
payments pursuant to the terms of such Securities, in each case in satisfaction
of all or any part of any sinking fund payment with respect to the Securities of
such series required to be made pursuant to the terms of such Securities as
provided for by the terms of such series; provided that such Securities have not
been previously so credited. Such Securities shall be received and credited for
such purpose by the Trustee at the Redemption Price specified in such Securities
for redemption through operation of the sinking fund and the amount of such
sinking fund payment shall be reduced accordingly.
Section 11.03. Redemption of Securities for Sinking Fund. Not
less than 60 days prior to each sinking fund payment date for any series of
Securities, the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing sinking fund payment for that series
pursuant to the terms of that series, the portion thereof, if any, which is to
be satisfied by payment of cash and the portion thereof, if any, which is to be
satisfied be delivering and crediting Securities of that series pursuant to
Section 11.02 and will also deliver to the Trustee any Securities to be so
delivered to the extent it has not previously done so. Not less than 30 days
before each such sinking fund payment date the Trustee shall select the
Securities to be redeemed upon such sinking fund payment date in the manner
specified in Section 10.03 and cause notice of the redemption thereof to be
given in the name of and at the expense of the Company in the manner provided in
Section 10.04. Such notice having been duly given, the redemption of such
Securities shall be made upon the terms and in the manner stated in Sections
10.06 and 10.07.
84
<PAGE> 90
This Indenture may be executed in any number of counterparts,
each of which shall be an original, but such counterparts shall together
constitute but one 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:
{Seal}
Attest:
By:
------------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK
By:
-------------------------------------
Name:
Title:
{Seal}
Attest:
By:
-----------------------------------
Name:
Title:
85
<PAGE> 1
EXHIBIT 5.1
June 8, 1998
Board of Directors
AmerUs Life Holdings, Inc.
699 Walnut Street
Des Moines, Iowa 50309-3948
RE: Registration Statement on Form S-3 (No. 333-50249)
Ladies and Gentlemen:
I am Senior Vice President and General Counsel of AmerUs Life Holdings,
Inc. At your request, I have examined or caused to be examined the Registration
Statement on Form S-3 (the "Registration Statement") filed by AmerUs Life
Holdings, Inc. (the "Corporation") with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "Securities
Act") relating to (i) debt securities which may be unsecured senior debt
securities (the "Senior Indebtedness"), or unsecured subordinated debt
securities (the "Junior Subordinated Debt") (ii) shares of preferred stock, no
par value (the "Preferred Stock"), (iii) shares of common stock, no par value
(the "Common Stock") (iv) units, (v) purchase contracts relating to the purchase
and sale of Common Stock ("Purchase Contracts") and (vi) warrants to purchase
Senior Indebtedness, Junior Subordinated Debt, Preferred Stock or Common Stock
or any combination thereof, as shall be designated by the Corporation at the
time of the offering (the "Warrants"), in amounts, at prices and on terms to be
determined at the time of the offering. The Registration Statement also relates
to the guarantees by the Corporation of capital securities of AmerUs Capital II
and AmerUs Capital III (each a "Guarantee") pursuant to guarantee agreements to
be entered into by the Corporation (the "Guarantee Agreements"). Unless
otherwise specified in the applicable prospectus supplement, the Senior
Indebtedness will be issued under the Senior Indenture (the "Senior Indenture")
between the Corporation and First Union National Bank as Trustee in the form to
be filed as an exhibit to the Registration Statement and the Junior Subordinated
Debt will be issued under the Subordinated Indenture (the "Subordinated
Indenture") between the Corporation and First Union National Bank as Trustee in
the form to be filed as an exhibit to the Registration Statement.
In rendering this opinion, I, or attorneys under my supervision, have
examined and relied upon a copy of the Registration Statement. I have also
examined or caused to be examined originals, or copies of originals certified to
my satisfaction, of such agreements, documents,
<PAGE> 2
certificates and statements of government officials and other instruments, and
have examined such questions of law and have satisfied myself as to such matters
of fact, as I have considered relevant and necessary as a basis for this
opinion. I have assumed the authenticity of all documents submitted to me as
originals, the genuineness of all signatures, the legal capacity of all natural
persons and the conformity with the original documents of any copies thereof
submitted to us for examination.
Based on the foregoing, and subject to the qualifications and
limitations hereinafter set forth, I am of the opinion that:
1. With respect to any series of Senior Indebtedness, when (i)
the Registration Statement, as finally amended (including any necessary
post-effective amendments), shall have become effective under the
Securities Act and the Senior Indenture, (including any necessary
supplemental indenture), shall have been duly qualified under the Trust
Indenture Act of 1939, as amended, and duly executed and delivered by
the Company and the Trustee; (ii) a prospectus supplement with respect
to such series of Senior Indebtedness shall have been filed with the
Commission in compliance with the Securities Act and the rules and
regulations thereunder; (iii) the Corporation's Board of Directors or a
duly authorized committee thereof (the "Corporation's Board") shall
have duly adopted final resolutions authorizing the issuance and sale
of such series of Senior Indebtedness; (iv) such series of Senior
Indebtedness shall have been duly executed and authenticated as
provided in the Senior Indenture and shall have been duly delivered to
the purchasers thereof against payment of the agreed consideration
therefor; and (v) any consents required pursuant to the Company's
credit facilities ("Bank Consents") shall have been obtained, each such
series of Senior Indebtedness will be legally issued and binding
obligations of the Corporation (except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
or other similar laws affecting the enforcement of creditors' rights
generally and by the effect of general principles of equity, regardless
of whether considered in a proceeding in equity or at law).
2. With respect to any series of Subordinated Indebtedness
when (i) the Registration Statement, as finally amended (including any
necessary post-effective amendments), shall have become effective under
the Securities Act and the Subordinated Indenture, (including any
necessary supplemental indenture), shall have been duly qualified under
the Trust Indenture Act of 1939, as amended, and duly executed and
delivered by the Company and the Trustee; (ii) a prospectus supplement
with respect to such series of Junior Subordinated Debt shall have been
filed with the Commission in compliance with the Securities Act and the
rules and regulations thereunder; (iii) the Corporation's Board shall
have duly adopted final resolutions authorizing the issuance and sale
of such series of Junior Subordinated Debt; (iv) such series of Junior
Subordinated Debt shall have been duly executed and authenticated as
provided in the Subordinated Indenture and shall have been delivered to
purchasers thereof against payment of the agreed consideration
therefor; and (v) any required Bank Consents shall have been obtained,
each series of Junior Subordinated Debt will be legally issued and
binding obligations of the Corporation (except as may be limited by
applicable bankruptcy, insolvency, reorganization,
<PAGE> 3
moratorium, fraudulent transfer or other similar laws affecting the
enforcement of creditors' rights generally and by the effect of general
principles of equity, regardless of whether considered in a proceeding
in equity or at law).
3. With respect to any series of Preferred Stock, when (i) the
Registration Statement, as finally amended (including any necessary
post-effective amendments), shall have become effective under the
Securities Act; (ii) a prospectus supplement with respect to the sale
of such series of Preferred Stock shall have been filed with the
Commission in compliance with the Securities Act and the rules and
regulations thereunder; (iii) the Corporation's Board shall have duly
adopted resolutions specifying the terms and conditions of such series
of Preferred Stock and authorizing its issuance; (iv) the Corporation
shall have filed with the Iowa Secretary of State articles of
amendment with respect to such series of Preferred Stock; (v) the
Iowa Insurance Commissioner shall have authorized and approved the
public offering and sale of such series of Preferred Stock pursuant to
Section 191 IAC 46.10; and (vi) certificates representing such series
of Preferred Stock shall have been duly executed, countersigned and
registered and duly delivered to the purchasers thereof against
payment of the agreed consideration therefor, such series of Preferred
Stock will be legally issued, fully paid and nonassessable.
4. With respect to Common Stock, when (i) the Registration
Statement, as finally amended (including any necessary post-effective
amendments), shall have become effective under the Securities Act; (ii)
a prospectus supplement with respect to the sale of Common Stock shall
have been filed with the Commission in compliance with the Securities
Act and the rules and regulations thereunder; (iii) the Corporation's
Board shall have duly adopted final resolutions authorizing the
issuance and sale of the Common Stock; (iv) the Iowa Insurance
Commissioner shall have authorized and approved the public offering and
sale of the Common Stock pursuant to Section 191 IAC 46.10; and (v)
certificates representing the Common Stock shall have been duly
executed, countersigned and registered and duly delivered to the
purchasers thereof against payment of the agreed consideration
therefor, the Common Stock will be legally issued, fully paid and
nonassessable.
5. With respect to Purchase Contracts when (i) the
Registration Statement, as finally amended (including any necessary
post-effective amendments), shall have become effective under the
Securities Act; (ii) a prospectus supplement with respect to the
Purchase Contracts shall have been filed with the Commission in
compliance with the Securities Act and the rules and regulations
thereunder; (iii) the Corporation's Board shall have adopted final
resolutions authorizing the issuance and sale of the Common Stock which
is the subject of the Purchase Contracts and the terms of the Purchase
Contracts; (iv) if such purchase contract includes the right to
purchase Preferred Stock or Common Stock, the Iowa Insurance
Commissioner shall have authorized and approved the public offering and
sale of the Purchase Contracts pursuant to Section 191 IAC 46.10; and
(v)
<PAGE> 4
the Purchase Contracts have been duly executed and delivered and sold
in the form and manner contemplated in the Registration Statement and
any prospectus supplement thereto, the Purchase Contracts (whether
issued separately or as part of a unit consisting of a capital security
of AmerUs Capital II or of AmerUs Capital III and a Purchase Contract)
will be legally binding obligations of the Corporation (except as may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws affecting the
enforcement of creditors' rights generally and by the effect of general
principles of equity, regardless of whether considered in a proceeding
in equity or at law).
6. With respect to Warrants, when (i) the Registration
Statement, as finally amended (including any necessary post-effective
amendments) shall have become effective under the Securities Act; (ii)
a prospectus supplement with respect to the Warrants shall have been
filed with the Commission in compliance with the Securities Act and the
rules and regulations thereunder; (iii) the Warrant Agreement relating
to the Warrants (the "Warrant Agreement") has been duly executed and
delivered; (iv) the Corporation's Board shall have adopted final
resolutions authorizing the issuance and sale of the Warrants; (v) the
terms of the Warrants and of their issuance and sale have been duly
established in conformity with the Warrant Agreement relating to such
Warrants so as not to violate any applicable law or result in a default
under or breach of any agreement or instrument binding upon the
Corporation and so as to comply with any requirement or restriction
imposed by any court or governmental or regulatory body having
jurisdiction over the Corporation; (vi) if such Warrants are to
purchase Preferred Stock or Common Stock, the Iowa Insurance
Commissioner shall have authorized and approved the public offering and
sale of the Warrants pursuant to Section 191 IAC 46.10; (vii) if such
Warrants are to purchase Senior Indebtedness or Junior Subordinated
Debt, such series of Senior Indebtedness or Junior Subordinated Debt,
as the case may be, shall have been duly executed and authenticated as
provided in the Senior Indenture or the Supplemental Indenture,
respectively, shall have been duly delivered to the purchasers thereof
against payment of the agreed consideration therefor and any required
Bank Consents shall have been obtained, and (viii) the Warrants have
been duly executed and countersigned in accordance with the Warrant
Agreement relating to such Warrants, and issued and sold in the form
and manner contemplated in the Registration Statement and any
prospectus supplement relating thereto, such Warrants will be legally
issued and binding obligations of the Corporation (except as may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws affecting the
enforcement of creditors' rights generally and by the effect of general
principles of equity, regardless of whether considered in a proceeding
in equity or at law).
7. With respect to the Guarantee, when (i) the Registration
Statement, as finally amended (included any necessary post-effect
amendments), shall have become effective under the Securities Act; (ii)
a prospectus supplement with respect to such Guarantee shall have been
filed with the Commission in compliance with the Securities Act and the
rules and regulations thereunder; (iii) the terms of such Guarantee
have been duly established by the Corporation's Board; (iv) such
Guarantee has been duly executed and
<PAGE> 5
delivered by the Corporation and such guarantee trustee; and (v) any
required Bank Consents shall have been obtained; and (v) any required
Bank Consents shall have been obtained, such Guarantee will constitute
the legal and binding obligation of the Corporation (except as may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws affecting the
enforcement of creditors' rights generally and by the effect of general
principles of equity, regardless of whether considered in a proceeding
in equity or at law).
I do not find it necessary for the purposes of this opinion to cover,
and accordingly I express no opinion as to, the application of the securities or
blue sky laws of the various states to the sale of the securities to be
registered pursuant to the Registration Statement. Without limiting the
generality of the foregoing, I express no opinion in connection with the matters
contemplated by the Registration Statement, and no opinion may be implied or
inferred, except as expressly set forth herein.
This opinion is limited to the laws of the State of Iowa and of the
United States of America to the extent applicable. If any of the securities
included in the Registration Statement are governed by the laws of a state other
than Iowa, I have assumed for purposes of this opinion that the laws of such
other state are the same as those of the State of Iowa.
I hereby consent to the inclusion of this opinion as Exhibit 5.1 to the
Registration Statement and to all references to me in the Registration Statement
or the Prospectus included therein.
Very truly yours,
/s/ Joseph K. Haggerty
Joseph K. Haggerty
Senior Vice President and
General Counsel
<PAGE> 1
EXHIBIT 5.2
[Letterhead of Morris, James, Hitchens & Williams]
June 4, 1998
AmerUs Capital II
c/o AmerUs Life Holdings, Inc.
699 Walnut Street
Des Moines, Iowa 50309-3948
Re: AmerUs Capital II
Ladies and Gentlemen:
We have acted as special Delaware counsel for AmerUs Capital II, a
Delaware business trust (the "Trust"), in connection with the matters set forth
herein. This opinion is being furnished to you at your request.
For purposes of giving the opinions hereinafter set forth, our examination
of documents has been limited to the examination of originals or copies
furnished to us of the following:
(a) The Trust Agreement of the Trust, dated as of April 14, 1998,
between AmerUs Life Holdings, Inc., an Iowa corporation (the "Company"), and the
trustee of the Trust named therein;
(b) The Certificate of Trust of the Trust, as filed in the office of
the Secretary of State of the State of Delaware (the "Secretary of State") on
April 14, 1998 (the "Certificate");
(c) Amendment No. 1 to the Registration Statement (the "Registration
Statement") on Form S-3, including a prospectus supplement (the "Prospectus")
relating to the Adjustable Conversion-rate Equity Security Units ("Units") of
the Company, which Units include the __% Quarterly Income Preferred Securities
of the Trust representing preferred undivided beneficial
<PAGE> 2
AmerUs Capital II
June 4, 1998
Page 2
- -----------------------------
interests in the assets of the Trust (each _% Quarterly Income Preferred
Security of the Trust is herein referred to as a "Capital Security", and
collectively, the "Capital Securities"), as proposed to be filed by the
Company, the Trust and others as set forth therein with the Securities and
Exchange Commission on or about June 5, 1998;
(d) A form of Amended and Restated Declaration of Trust, to be entered
into among the Company, as Sponsor, the trustees of the Trust named therein, and
the holders, from time to time, of undivided beneficial interests in the assets
of the Trust (including Annex I, Exhibit A-1 and Exhibit A-2 thereto) (the
"Declaration"), attached as an exhibit to the Registration Statement; and
(e) A Certificate of Good Standing for the Trust, dated June 4, 1998,
obtained from the Secretary of State.
Unless otherwise defined herein, all capitalized terms used in this
opinion letter shall have the respective meanings provided in the Declaration,
except that reference herein to any document shall mean such document as in
effect on the date hereof.
For the purposes of this opinion letter, we have not reviewed any
documents other than the documents listed in paragraphs (a) through (e) above.
In particular, we have not reviewed any document (other than the documents
listed in paragraphs (a) through (e) above) that is referred to in or
incorporated by reference into the documents reviewed by us. We have assumed
that there exists no provision in any document that we have not reviewed that is
inconsistent with the opinions stated herein. We have conducted no independent
factual investigation of our own but rather have relied solely upon the
foregoing documents, the statements and information set forth therein and the
additional matters recited or assumed herein, all of which we have assumed to be
true, complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, (iii) the genuineness of all signatures, and (iv) such documents
submitted to us in final or execution form have not been and will not be altered
or amended in any respect material to our opinions as expressed in this letter
and conform in all material respects to the final, executed originals of such
documents.
For purposes of this opinion letter, we have assumed (i) that the
Declaration constitutes the entire agreement among the parties thereto with
respect to the creation, operation, and termination of the Trust, and that the
Declaration and the Certificate are in full force and effect and have not been
amended, (ii) that there are no proceedings, pending or contemplated, for the
merger, consolidation, liquidation, dissolution or termination of the Trust,
(iii) except to the
<PAGE> 3
AmerUs Capital II
June 4, 1998
Page 3
- -----------------------------
extent provided in paragraph 1 below, the due creation, due formation or due
organization, as the case may be, and valid existence in good standing of each
party to the documents examined by us under the laws of the jurisdiction
governing its creation, formation or organization, (iv) the legal capacity of
each natural person who is a party to the documents examined by us, (v) that
each of the parties to the documents examined by us has the power and authority
to execute and deliver, and to perform its obligations under, such documents,
(vi) that each of the parties to the documents examined by us has duly
authorized, executed and delivered such documents, (vii) the receipt by each
Person to whom a Capital Security is to be issued by the Trust (collectively,
the "Capital Securities Holders") of an appropriate certificate for such Capital
Security, and the payment for the Capital Security acquired by it, in accordance
with the Declaration and the Registration Statement, and (viii) that the Capital
Securities are issued to the Capital Securities Holders in accordance with the
Declaration and the Registration Statement. We have not participated in the
preparation of the Registration Statement and assume no responsibility for its
contents.
The opinions in this letter are limited to the laws of the State of
Delaware (excluding the securities laws of the State of Delaware), and we have
not considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto.
Based upon the foregoing, and subject to the assumptions,
qualifications, limitations and exceptions set forth herein, we are of the
opinion that:
1. The Trust has been duly formed and is validly existing in good
standing as a business trust under the Delaware Business Trust Act
(12 Del. C. Section 3801, et seq).
2. The Capital Securities will represent valid and, subject to the
qualifications set forth in paragraph 3 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust.
3. The Capital Securities Holders, as beneficial owners of the Trust,
will 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. We note that the Capital Securities
Holders may be obligated to make payments as provided in the Declaration.
We consent to the filing of this opinion letter with the Securities and
Exchange Commission as an exhibit to the Registration Statement. In addition, we
hereby consent to the use of our name under the heading "Validity of Securities"
in the Prospectus. In giving the foregoing consents, we do not thereby admit
that we come within the category of Persons whose
<PAGE> 4
AmerUs Capital II
June 4, 1998
Page 4
- -----------------------------
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder. Except as stated above, without our prior written consent, this
opinion letter may not be furnished or quoted to, or relied upon by, any other
Person for any purpose.
Very truly yours,
/s/ Morris, James, Hitchens & Williams
Morris, James, Hitchens & Williams
RLS/MJO:par
<PAGE> 1
EXHIBIT 5.3
[Letterhead of Morris, James, Hitchens & Williams]
June 4, 1998
AmerUs Capital III
c/o AmerUs Life Holdings, Inc.
699 Walnut Street
Des Moines, Iowa 50309-3948
Re: AmerUs Capital III
Ladies and Gentlemen:
We have acted as special Delaware counsel for AmerUs Capital III, a
Delaware business trust (the "Trust"), in connection with the matters set forth
herein. This opinion is being furnished to you at your request.
For purposes of giving the opinions hereinafter set forth, our examination
of documents has been limited to the examination of originals or copies
furnished to us of the following:
(a) The Trust Agreement of the Trust, dated as of April 14, 1998,
between AmerUs Life Holdings, Inc., an Iowa corporation (the "Company"), and the
trustee of the Trust named therein;
(b) The Certificate of Trust of the Trust, as filed in the office of
the Secretary of State of the State of Delaware (the "Secretary of State") on
April 14, 1998 (the "Certificate");
(c) Amendment No. 1 to the Registration Statement (the "Registration
Statement") on Form S-3, including a prospectus supplement (the "Prospectus")
relating to the Adjustable Conversion-rate Equity Security Units ("Units") of
the Company, which Units include the __% Quarterly Income Preferred Securities
of the Trust representing preferred undivided beneficial
<PAGE> 2
AmerUs Capital III
June 4, 1998
Page 2
- -----------------------------
interests in the assets of the Trust (each _% Quarterly Income Preferred
Security of the Trust is herein referred to as a "Capital Security", and
collectively, the "Capital Securities"), as proposed to be filed by the
Company, the Trust and others as set forth therein with the Securities and
Exchange Commission on or about June 5, 1998;
(d) A form of Amended and Restated Declaration of Trust, to be entered
into among the Company, as Sponsor, the trustees of the Trust named therein, and
the holders, from time to time, of undivided beneficial interests in the assets
of the Trust (including Annex I, Exhibit A-1 and Exhibit A-2 thereto) (the
"Declaration"), attached as an exhibit to the Registration Statement; and
(e) A Certificate of Good Standing for the Trust, dated June 4, 1998,
obtained from the Secretary of State.
Unless otherwise defined herein, all capitalized terms used in this
opinion letter shall have the respective meanings provided in the Declaration,
except that reference herein to any document shall mean such document as in
effect on the date hereof.
For the purposes of this opinion letter, we have not reviewed any
documents other than the documents listed in paragraphs (a) through (e) above.
In particular, we have not reviewed any document (other than the documents
listed in paragraphs (a) through (e) above) that is referred to in or
incorporated by reference into the documents reviewed by us. We have assumed
that there exists no provision in any document that we have not reviewed that is
inconsistent with the opinions stated herein. We have conducted no independent
factual investigation of our own but rather have relied solely upon the
foregoing documents, the statements and information set forth therein and the
additional matters recited or assumed herein, all of which we have assumed to be
true, complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, (iii) the genuineness of all signatures, and (iv) such documents
submitted to us in final or execution form have not been and will not be altered
or amended in any respect material to our opinions as expressed in this letter
and conform in all material respects to the final, executed originals of such
documents.
For purposes of this opinion letter, we have assumed (i) that the
Declaration constitutes the entire agreement among the parties thereto with
respect to the creation, operation, and termination of the Trust, and that the
Declaration and the Certificate are in full force and effect and have not been
amended, (ii) that there are no proceedings, pending or contemplated, for the
merger, consolidation, liquidation, dissolution or termination of the Trust,
(iii) except to the
<PAGE> 3
AmerUs Capital III
June 4, 1998
Page 3
- -----------------------------
extent provided in paragraph 1 below, the due creation, due formation or due
organization, as the case may be, and valid existence in good standing of each
party to the documents examined by us under the laws of the jurisdiction
governing its creation, formation or organization, (iv) the legal capacity of
each natural person who is a party to the documents examined by us, (v) that
each of the parties to the documents examined by us has the power and authority
to execute and deliver, and to perform its obligations under, such documents,
(vi) that each of the parties to the documents examined by us has duly
authorized, executed and delivered such documents, (vii) the receipt by each
Person to whom a Capital Security is to be issued by the Trust (collectively,
the "Capital Securities Holders") of an appropriate certificate for such Capital
Security, and the payment for the Capital Security acquired by it, in accordance
with the Declaration and the Registration Statement, and (viii) that the Capital
Securities are issued to the Capital Securities Holders in accordance with the
Declaration and the Registration Statement. We have not participated in the
preparation of the Registration Statement and assume no responsibility for its
contents.
The opinions in this letter are limited to the laws of the State of
Delaware (excluding the securities laws of the State of Delaware), and we have
not considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto.
Based upon the foregoing, and subject to the assumptions,
qualifications, limitations and exceptions set forth herein, we are of the
opinion that:
1. The Trust has been duly formed and is validly existing in good
standing as a business trust under the Delaware Business Trust Act
(12 Del. C. Section 3801, et seq).
2. The Capital Securities will represent valid and, subject to the
qualifications set forth in paragraph 3 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust.
3. The Capital Securities Holders, as beneficial owners of the Trust,
will 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. We note that the Capital Securities
Holders may be obligated to make payments as provided in the Declaration.
We consent to the filing of this opinion letter with the Securities and
Exchange Commission as an exhibit to the Registration Statement. In addition, we
hereby consent to the use of our name under the heading "Validity of Securities"
in the Prospectus. In giving the foregoing consents, we do not thereby admit
that we come within the category of Persons whose
<PAGE> 4
AmerUs Capital III
June 4, 1998
Page 4
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consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder. Except as stated above, without our prior written consent, this
opinion letter may not be furnished or quoted to, or relied upon by, any other
Person for any purpose.
Very truly yours,
/s/ Morris, James, Hitchens & Williams
Morris, James, Hitchens & Williams
RLS/MJO:par
