<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
----------------------------------------
(Mark One)
/ x / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
COMMISSION FILE NUMBER 0-21459
AMERUS LIFE HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
699 WALNUT STREET
DES MOINES, IOWA 50309-3948
(Address of principal executive offices)
IOWA 42-1459712
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (515) 362-3600
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes / x / No / /
The number of shares outstanding of each of the Registrant's classes of common
stock on April 30, 1999 was as follows:
Class A, Common Stock 25,436,174 shares
Class B, Common Stock 5,000,000 shares
Exhibit index - Page 39
Page 1 of 44
1
<PAGE> 2
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION............................................. 3
Item 1. Financial Statements......................................... 3
Consolidated Balance Sheets March 31, 1999
(Unaudited) and December 31, 1998............................ 3
Consolidated Statements of Income (Unaudited)
For the Three Months Ended March 31, 1999 and 1998........... 5
Consolidated Statements of Comprehensive Income
(Unaudited) For the Three Months Ended March 31, 1999
and 1998..................................................... 6
Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended March 31, 1999 and 1998........... 7
Notes to Consolidated Financial Statements
(Unaudited) ................................................. 9
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition ......................... 17
Item 3. Quantitative and Qualitative Disclosures About
Market Risk.................................................. 36
PART II - OTHER INFORMATION................................................ 37
Item 1. Legal Proceedings............................................ 37
Item 6. Exhibits and Reports on Form 8-K............................. 37
Signatures................................................................. 38
Exhibit Index.............................................................. 39
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------------------------------
(unaudited)
<S> <C> <C>
Assets
Investments:
Securities available for sale at fair value:
Fixed maturity securities $ 6,692,231 $ 6,710,246
Equity securities 31,330 68,483
Short-term investments 42,228 22,428
Mortgage loans on real estate 586,034 566,403
Real estate 628 633
Policy loans 111,131 110,786
Other investments 206,368 205,790
--------------------------------
Total investments 7,669,950 7,684,769
Cash 6,899 60,090
Accrued investment income 85,385 79,921
Premiums and fees receivable 4,114 4,385
Reinsurance receivables 8,222 6,174
Deferred policy acquisition costs 326,893 246,030
Value of business acquired 240,212 224,540
Investment in unconsolidated subsidiaries 30,111 29,602
Goodwill 213,626 215,506
Property and equipment 24,034 23,249
Deferred income taxes 529 -
Other assets 358,289 401,239
Closed Block assets 1,459,712 1,453,305
--------------------------------
Total assets $ 10,427,976 $ 10,428,810
================================
</TABLE>
3
<PAGE> 4
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------------------------------
(unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
Policy reserves and policyowner funds:
Future life and annuity policy benefits $ 7,193,427 $ 7,185,417
Policyowner funds 87,881 95,974
--------------------------------
7,281,308 7,281,391
Checks written in excess of bank balance 17,764 -
Accrued expenses 28,757 41,323
Dividends payable to policyowners 1,457 1,168
Policy and contract claims 8,062 13,433
Income taxes payable 7,216 9,574
Deferred income taxes - 11,398
Other liabilities 148,545 159,350
Debt 141,415 141,051
Closed Block liabilities 1,734,309 1,703,195
--------------------------------
Total liabilities 9,368,833 9,361,883
--------------------------------
Company-obligated mandatorily redeemable preferred
capital securities of subsidiary trusts holding solely
junior subordinated debentures of the Company 216,729 216,729
--------------------------------
Stockholders' equity:
Preferred Stock, no par value, 20,000,000 shares
authorized, none issued - -
Common Stock, Class A, no par value, 180,000,000
shares authorized: issued and outstanding; 25,436,039
shares (net of 4,298,880 treasury shares) in 1999 and
25,425,983 (net of 4,308,936 treasury shares) in 1998 25,436 25,426
Common Stock, Class B, no par value, 50,000,000 shares
authorized; 5,000,000 shares issued and outstanding 5,000 5,000
Paid-in capital 290,242 290,091
Accumulated other comprehensive income 4,945 26,711
Unearned compensation (334) (240)
Retained earnings 517,125 503,210
--------------------------------
Total stockholders' equity 842,414 850,198
--------------------------------
Total liabilities and stockholders' equity $ 10,427,976 $ 10,428,810
================================
</TABLE>
4
<PAGE> 5
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
---------------------------
<S> <C> <C>
Revenues:
Insurance premiums $ 23,835 $ 17,294
Universal life and annuity product charges 17,186 16,380
Net investment income 130,318 133,173
Realized gains on investments 2,604 6,219
Contribution from the Closed Block 6,542 8,975
---------------------------
180,485 182,041
---------------------------
Benefits and expenses:
Policyowner benefits 109,419 107,356
Underwriting, acquisition, and insurance expenses 21,055 21,215
Amortization of deferred policy acquisition costs
and value of business acquired 16,985 14,957
Dividends to policyowners 976 315
---------------------------
148,435 143,843
---------------------------
Income from operations 32,050 38,198
Interest expense 7,229 6,682
---------------------------
Income before income tax expense and equity in
earnings of unconsolidated subsidiary 24,821 31,516
Income tax expense 8,372 10,177
---------------------------
Income before equity in earnings of unconsolidated
subsidiary 16,449 21,339
Equity in earnings of unconsolidated subsidiary 508 418
---------------------------
Net income $ 16,957 $ 21,757
===========================
Earnings per common share:
Basic $ 0.56 $ 0.63
===========================
Diluted $ 0.56 $ 0.62
===========================
Weighted average common shares outstanding
Basic 30,432,955 34,734,918
===========================
Diluted 30,469,673 34,831,363
===========================
</TABLE>
5
<PAGE> 6
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
---------------------
<S> <C> <C>
Net Income $ 16,957 $ 21,757
Other comprehensive income (loss), before tax
Unrealized gains (losses) on securities
Unrealized holding gains (losses) arising during period (30,158) 3,369
Less: reclassification adjustment for gains included
in net income 3,328 7,594
---------------------
(33,486) (4,225)
Minimum pension liability adjustment - -
---------------------
Other comprehensive (loss), before tax (33,486) (4,225)
Income tax benefit related to items of other
comprehensive income 11,720 2,577
---------------------
Other comprehensive (loss), net of tax (21,766) (1,648)
---------------------
Comprehensive income (loss) $ (4,809) $ 20,109
=====================
</TABLE>
6
<PAGE> 7
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
----------------------------------
Cash flows from operating activities:
<S> <C> <C>
Net Income $ 16,957 $ 21,757
Adjustments to reconcile net income to net cash
provided by operating activities:
Policyowner assessments on universal life
and annuity products (13,381) (16,381)
Interest credited to policyowner account balances 86,254 46,819
Realized investment (gains) (2,604) (6,220)
Goodwill amortization 1,880 1,795
VOBA amortization 7,410 6,388
Change in:
Accrued investment income (5,464) (2,161)
Reinsurance ceded receivables (2,048) (39)
Deferred policy acquisition costs (27,961) (15,352)
Liabilities for future policy benefits (53,566) (46,669)
Policy and contract claims and other policyowner funds (4,001) 1,022
Income taxes:
Current (2,358) 7,243
Deferred 1,414 (4,182)
Other, net 30,070 (19,695)
Change in Closed Block assets and liabilities, net 37,431 53,003
----------------------------------
Net cash provided by operating activities 70,033 27,328
----------------------------------
</TABLE>
7
<PAGE> 8
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
----------------------------------
<S> <C> <C>
Cash flows from investing activities:
Purchase of fixed maturities available-for-sale (1,192,379) (604,573)
Maturities, calls, and principal reductions of
fixed maturities available for sale 1,115,286 577,195
Purchase of equity securities (69,880) (61,798)
Proceeds from sale of equity securities 58,078 53,946
Proceeds from repayment and sale of mortgage loans 37,579 20,089
Purchase of mortgage loans (47,986) (43,872)
Purchase of real estate and other invested assets (46,267) (25,971)
Proceeds from sale of real estate and invested assets 36,915 2,898
Change in policy loans, net (345) (1,899)
Other assets, net (1,387) 39,685
Change in Closed Block investments, net (12,724) (50,010)
----------------------------------
Net cash (used in) investing activities (123,110) (94,310)
----------------------------------
Cash flows from financing activities:
Change in checks written in excess of balance, net 17,764 -
Deposits to policyowner account balances 288,780 191,598
Withdrawals from policyowner account balances (304,047) (157,204)
Change in debt, net 364 (94)
Issuance of treasury stock 67 -
Dividends to shareholders (3,042) (3,472)
----------------------------------
Net cash provided by (used in) financing activities (114) 30,828
----------------------------------
Net (decrease) in cash (53,191) (36,154)
Cash at beginning of period 60,090 58,081
----------------------------------
Cash at end of period $ 6,899 $ 21,927
==================================
Supplemental disclosure of cash activities:
Interest paid $ 7,196 $ 6,419
==================================
Income taxes paid $ 120 $ 2,189
==================================
</TABLE>
8
<PAGE> 9
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for annual financial statements. In the opinion of
management, all adjustments considered necessary for a fair
presentation have been included. All adjustments were of a normal
recurring nature, unless otherwise noted in Management's Discussion and
Analysis and the Notes to Financial Statements. Operating results for
the three months ended March 31, 1999 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1999.
For further information and for capitalized terms not defined in this
10-Q, refer to the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
Certain amounts in the 1998 financial statements have been reclassified
to conform to the 1999 financial statement presentation.
SFAS 133
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 defines derivative
instruments and provides comprehensive accounting and reporting
standards for the recognition and measurement of derivative and hedging
activities (including certain instruments embedded in other contracts).
It requires derivatives to be recorded in the Consolidated Balance
Sheet at fair value and establishes criteria for hedges of changes in
the fair value of assets, liabilities or firm commitments, hedges or
variable cash flows or forecasted transactions, and hedges of foreign
currency exposures of net investments in foreign operations. Changes in
the fair value of derivatives not meeting specific hedge accounting
criteria would be recognized in the Consolidated Statement of
Operations. SFAS No. 133 is effective for all fiscal quarters of all
years beginning after December 31, 1999. The Company is evaluating SFAS
No. 133 and has not determined its effect on the Consolidated Financial
Statements.
SOP 97-3
On January 1, 1999, the Company adopted the American Institute of
Certified Public Accountants (AICPA) Statement of Position (SOP) 97-3,
"Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments." This statement provides guidance on when an insurance or
other enterprise should recognize a liability for guaranty fund and
other assessments and on how to measure such liability. The adoption of
SOP 97-3 has no material impact on the financial position or results of
operations as the Company currently estimates assessment liabilities
when a determination of an insolvency has occurred.
9
<PAGE> 10
SOP 98-1
On January 1, 1999, the Company adopted the AICPA SOP 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use."
This SOP provides guidance for determining whether costs of software developed
or obtained for internal use should be capitalized or expensed as incurred. In
the past, the Company has expensed such costs as they were incurred. The
adoption of SOP 98-1 has no material impact on the financial position or
results of operations of the Company.
STATUTORY ACCOUNTING CODIFICATION
The NAIC has codified statutory accounting practices, which are expected
to constitute the only source of prescribed statutory accounting practices and
are effective in 2001. Codification will change prescribed statutory
accounting practices and may result in changes to the accounting practices
that insurance enterprises use to prepare their statutory financial
statements. The Company is currently evaluating the impact of codification to
its statutory financial statements, however the changes will not have a
material impact on statutory surplus.
EARNINGS PER COMMON SHARE
Basic earnings per share of common stock are computed by dividing net
income by the weighted-average number of common shares outstanding during the
period. Diluted earnings per share assumes the issuance of common shares
applicable to stock options and warrants calculated using the treasury stock
method.
(2) CLOSED BLOCK
Summarized financial information of the Closed Block balance sheet as
of March 31, 1999 and December 31, 1998 and statements of income for the three
months ended March 31, 1999 and 1998 are as follows (in thousands):
10
<PAGE> 11
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------------------------------
<S> <C> <C>
Assets:
Securities available for sale at fair value
Fixed maturity securities $ 1,137,953 $ 1,116,540
Short-term investments 683 8,875
Policy loans 181,757 181,866
Other investments 642 3,027
Cash 2,001 4
Accrued investment income 17,917 14,445
Premiums and fees receivable 784 3,385
Deferred policy acquisition costs 109,926 117,479
Other assets 8,049 7,684
----------------------------------
Total Assets $ 1,459,712 $ 1,453,305
==================================
Liabilities:
Future life and annuity policy benefits $ 1,542,367 $ 1,517,162
Policyowner funds 7,118 6,350
Accrued expenses 5,184 3,887
Dividends payable to policyowners 149,529 149,487
Policy and contract claims 5,346 8,395
Other liabilities 24,765 17,914
----------------------------------
Total Liabilities $ 1,734,309 $ 1,703,195
==================================
<CAPTION>
Three Months Ended March 31,
1999 1998
----------------------------------
<S> <C> <C>
Revenues and expenses:
Insurance premiums $ 48,960 $ 50,416
Universal life and annuity product charges 3,404 3,521
Net investment income 29,651 29,183
Realized gains on investments 452 869
Policyowner benefits (51,321) (49,031)
Underwriting, acquisition and insurance expenses (1,811) (1,361)
Amortization of deferred policy acquisition costs (7,553) (8,034)
Dividends to policyowners (15,240) (16,588)
----------------------------------
Contribution from the Closed Block before income taxes $ 6,542 $ 8,975
==================================
</TABLE>
11
<PAGE> 12
(3) DEBT AND CAPITAL SECURITIES
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------------- ---------------------------
(Unaudited)
<S> <C> <C>
Federal Home Loan Bank
community investment long-term
advances with a weighted
average interest rate of 6.29% at
March 31, 1999 $ 16,415 $ 16,051
Revolving credit agreement - -
Senior Notes bearing interest at 6.95%
due June, 2005 125,000 125,000
------- -------
$ 141,415 $ 141,051
======= =======
<CAPTION>
March 31, 1999 December 31, 1998
-------------------- ---------------------------
(Unaudited)
<S> <C> <C>
AmerUs Capital I 8.85% Capital
Securities Series A due
February 1, 2007 $ 86,000 $ 86,000
AmerUs Capital II 7.00%
Adjustable Conversion-rate
Equity Security Units due
July 27, 2003 130,729 130,729
------- -------
$ 216,729 $ 216,729
======= =======
</TABLE>
For an additional discussion of the terms of the above indebtedness
refer to the Company's consolidated financial statements as of December 31,
1998.
(4) FEDERAL INCOME TAXES
The effective income tax rate for the periods ending March 31, 1999 and
1998 were lower than the prevailing corporate rate primarily as a result of
earned low income housing and historic rehabilitation credits which totaled $1.2
million and $1.7 million, respectively.
12
<PAGE> 13
(5) COMMITMENTS AND CONTINGENCIES
AmerUs Life Insurance Company ("AmerUs Life") and its joint venture
partner are contingently liable in the event the joint venture, Ameritas
Variable Life Insurance Company ("AVLIC"), cannot meet its policyholder
obligations. At March 31, 1999, AVLIC had statutory assets of $2,042.9 million,
liabilities of $1,992.0 million, and surplus of $50.9 million.
The Company, AmerUs Life and their direct and indirect majority
shareholders AmerUs Group and American Mutual Holding Company (collectively
"AmerUs"), are defendants in a class action lawsuit, Bhat v. AmerUs Life
Insurance Company, which was filed in December 1996 in the United States
District Court for the Northern District of California. The complaint, as
amended in 1998, alleges that the defendants breached the terms of certain
universal life policies, breached certain other duties owed to policyowners and
violated RICO in setting their cost of insurance rates and credited interest
rates. These allegations include a claim that the defendants passed an increase
in corporate income taxes (known as the deferred acquisition cost, or DAC, tax)
through to owners of those policies. The plaintiff, an insured under a universal
life policy issued by AmerUs Life, seeks unspecified actual and punitive damages
and injunctive relief on a universal life policy issued by AmerUs Life, seeks
unspecified actual and punitive damages and injunctive relief on behalf of
himself and all similarly situated policyowners of AmerUs Life with universal
life insurance policies. AmerUs denies the allegations contained in the
complaint, including the existence of a legitimate class. An earlier companion
case filed in the same court in June 19996 was dismissed in October 1997. This
litigation has been vigorously defended by AmerUs Life.
The parties have entered into a nationwide class settlement of certain
contract and related issues for a substantial block of AmerUs Life's life
insurance policies. The settlement was approved by the court by order dated
April 2, 1999. The order will become final and unappealable approximately 60
days after the date of the order if no appeal is filed.
Due to pending settlement negotiations, the Company incurred a charge
to income for 1998. Based upon current estimates of the costs associated with
the settlement, the Company established a reserve of $1.2 million at that time.
In the ordinary course of business, the Company and its subsidiaries
are also engaged in certain other litigation, none of which management believes
is material to the Company's results of operations.
(6) RELATED PARTY TRANSACTIONS
AmerUs Life has a master agreement of purchase and sale with AmerUs
Home Equity whereby AmerUs Life agrees to purchase whole loans from AmerUs Home
Equity from time to time. AmerUs Life also has a loan servicing agreement with
AmerUs Home Equity, whereby AmerUs Home Equity acts as servicer of the loans and
receives a servicing fee of 50 basis points of the outstanding principal
balances of the loans. During the quarter ended March 31, 1999, AmerUs Life
purchased loans with a total outstanding principal balance of $13.1 million at
par.
(7) OPERATING SEGMENTS
The Company has two operating segments: Life Insurance and Annuities.
Products generally distinguish a segment. A brief description of each segment
follows:
13
<PAGE> 14
LIFE INSURANCE
Open Block: The primary product offerings consist of whole life,
universal life and term life insurance policies. These products are
marketed on a national basis primarily through a Preferred Producer
agency system and a Personal Producing General Agent ("PPGA")
distribution system.
Closed Block: The Closed Block was established for insurance policies
which had a dividend scale in effect as of June 30, 1996. The Closed
Block was designed to provide reasonable assurance to owners of
insurance policies included therein that, after the Reorganization of
AmerUs Life, 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 primary
products included in the Closed Block are whole life, certain universal
life policies and term life insurance policies.
ANNUITIES
The Annuity segment markets fixed annuities on a national basis
primarily through independent brokers and marketing companies.
The Company uses the same accounting policies and procedures to measure
operating segment income and assets as it uses to measure its consolidated
operating income and assets. Operating segment income is generally income before
interest expense and income tax. Premiums, product charges, policyowner
benefits, insurance expenses, amortization of deferred policy acquisition costs
and VOBA and dividends to policyowners are attributed directly to each operating
segment. Net investment income and realized gains and losses on investments are
allocated based on directly-related assets required for transacting the business
of that segment. Other revenues and benefits and expenses are deemed not to be
associated with any specific segment. The contribution to the operating income
of the life insurance segment from the Closed Block is reported as a single line
item.
Intersegment transactions for the first quarter of 1999 primarily
consisted of holding company charges to the life and annuity operating segments
for investment management services in the amounts of $2.9 million and $3.8
million, respectively, and for information technology services in the amounts of
$6.0 million and $0.4 million, respectively. Intersegment transactions for the
first quarter of 1998 primarily consisted of holding company charges to the life
and annuity operating segments for investment management services in the amounts
of $2.4 million and $2.2 million, respectively. There have been no material
changes in segment assets since December 31, 1998.
Operating segment income is as follows:
14
<PAGE> 15
Operating Segment Income
(in thousands)
Three Months Ended March 31, 1999
<TABLE>
<CAPTION>
Total
Life Insurance Annuities Other Consolidated
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Insurance premiums $ 15,326 $ 8,470 $ 39 $ 23,835
Universal life and annuity product charges 11,821 5,365 - 17,186
Net investment income 19,524 104,800 5,994 130,318
Realized gains on investments 116 2,386 102 2,604
Contribution from the Closed Block 6,542 - - 6,542
---------------------------------------------------------------
53,329 121,021 6,135 180,485
Benefits and expenses:
Policyowner benefits 24,586 84,745 88 109,419
Underwriting, acquisition, and insurance expenses 12,909 8,305 (159) 21,055
Amortization of deferred policy acquisition costs
and value of business acquired 5,332 11,653 - 16,985
Dividends to policyowners 976 - - 976
---------------------------------------------------------------
43,803 104,703 (71) 148,435
---------------------------------------------------------------
Income from operations $ 9,526 $ 16,318 6,206 32,050
=================================
Interest expense 7,229 7,229
Income tax expense 8,372 8,372
Equity in earnings of unconsolidated subsidiary 508 508
------------
Net income $ 16,957
============
</TABLE>
15
<PAGE> 16
Operating Segment Income
(in thousands)
Three Months Ended March 31, 1998
<TABLE>
<CAPTION>
Total
Life Insurance Annuities Other Consolidated
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Insurance premiums $ 10,141 $ 7,077 $ 76 $ 17,294
Universal life and annuity product charges 11,660 4,720 - 16,380
Net investment income 18,704 111,957 2,512 133,173
Realized gains on investments 1,756 6,554 (2,091) 6,219
Contribution from the Closed Block 8,975 - - 8,975
----------------------------------------------------------------
51,236 130,308 497 182,041
Benefits and expenses:
Policyowner benefits 20,980 86,319 57 107,356
Underwriting, acquisition, and insurance expenses 10,074 10,089 1,052 21,215
Amortization of deferred policy acquisition costs -
and value of business acquired 6,148 8,809 - 14,957
Dividends to policyowners 315 - - 315
----------------------------------------------------------------
37,517 105,217 1,109 143,843
----------------------------------------------------------------
Income from operations $ 13,719 $ 25,091 (612) 38,198
================================
Interest expense 6,682 6,682
Income tax expense 10,177 10,177
Equity in earnings of unconsolidated subsidiary 418 418
------------
Net income $ 21,757
============
</TABLE>
16
<PAGE> 17
ITEM 2. 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
Consolidated Financial Statements and related notes.
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 has
two operating segments: Life Insurance and Annuities. The Life Insurance
segment's primary product offerings consist of whole life, universal life and
term life insurance policies. The primary product offerings of the Annuity
segment are fixed annuities.
In accordance with Generally Accepted Accounting Principals (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.
17
<PAGE> 18
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. 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
below does not constitute net income computed in accordance with GAAP.
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
1999 1998
----------------------------------------
(In thousands, except per share amounts)
<S> <C> <C>
Net Income $ 16,957 $ 21,757
Net realized (gains) losses on investments (A) (1,693) (4,606)
Core realized gains (losses) (B) 1,930 1,835
Amortization of deferred policy acquisition
costs due to realized gains or losses (C) 332 506
----------------------------------------
Adjusted Operating Income $ 17,526 $ 19,492
=======================================
Adjusted Operating Income per common share:
Basic (D) $ 0.58 $ 0.56
Diluted (E) $ 0.58 $ 0.56
</TABLE>
(A) Represents realized gains or losses on investments adjusted for income
taxes on such amounts. Realized gains or losses 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 gains on the convertible preferred stock and bond portfolio,
net of income taxes.
(C) Represents amortization of deferred policy acquisition costs due to
realized gains or losses being included in product margins adjusted for
income taxes on such amounts.
(D) Basic adjusted operating income per common share for the first quarters
of 1999 and 1998 is calculated using 30.43 million and 34.73 million
shares, respectively.
(E) Diluted adjusted operating income per common share for the first
quarters of 1999 and 1998 is calculated using 30.47 million and 34.83
million shares, respectively.
18
<PAGE> 19
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 of AmerUs Life, 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 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 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
titled "Closed Block Assets". Likewise, all liabilities attributable to the
Closed Block are combined and disclosed as the "Closed Block Liabilities".
OPERATING SEGMENTS
The Company has two operating segments: Life Insurance and
Annuities. Products generally distinguish a segment. The Company uses the same
accounting policies and procedures to measure operating segment income as it
uses to measure its consolidated operating income. Revenues and benefits and
expenses are primarily attributed directly to each operating segment. Net
investment income and realized gains (losses) on investments are allocated based
on the directly-related asset portfolios. Other revenues and expenses are deemed
not to be associated with any specific segment and primarily consist of
discontinued product lines such as group and health, and holding company
revenues and expenses not directly associated with a segment.
19
<PAGE> 20
SALES
LIFE INSURANCE
The following table sets forth information regarding the Company's life
insurance sales activity by product:
<TABLE>
<CAPTION>
Sales Activity by Product
For the Three Months Ended March 31,
1999 1998
------------------------------------
<S> <C> <C>
($ in thousands)
Traditional life insurance:
Participating whole life $ 4,905 $ 3,570
Term Life 1,412 1,456
Universal Life 3,210 2,176
------------------------------------
Total (A) $ 9,527 $ 7,202
====================================
</TABLE>
(A) Direct first year annualized premiums.
Life insurance sales as measured by annualized premiums increased 32.3%
to $9.5 million for the first quarter of 1999 compared to $7.2 million for the
same period in 1998. Sales of participating whole life insurance continued at a
strong pace that commenced during the second half of 1998. Sales of universal
life insurance for the first three months of 1999 increased by $1.0 million from
the same period in 1998. Increased sales of universal life were primarily
attributable to a new universal life product introduced in the fourth quarter of
1998.
20
<PAGE> 21
The following table sets forth the Company's life insurance collected
premiums, including collected premiums associated with the Closed Block, for the
periods indicated:
<TABLE>
<CAPTION>
Collected Premiums by Product
For the Three Months Ended March 31,
1999 1998
------------------------------------
<S> <C> <C>
($ in thousands)
Individual life premiums collected:
Traditional life:
First year and single $ 22,222 $ 19,511
Renewal 46,624 45,012
------------------------------------
Total 68,846 64,523
Universal life:
First year and single 5,098 4,078
Renewal 18,771 19,079
------------------------------------
Total 23,869 23,157
Total individual life 92,715 87,680
Reinsurance assumed 349 97
Reinsurance ceded (4,302) (2,836)
------------------------------------
Total individual life, net of reinsurance $ 88,762 $ 84,941
====================================
</TABLE>
Traditional life insurance premiums collected were $68.8 million for
the first quarter of 1999 compared to $64.5 million for the first quarter of
1998. Whole life production was up approximately 47.5% in the first quarter of
1999 as compared to the same period in 1998 while term production was down
approximately 3.0% between the periods. Renewal direct collected premium was
$1.6 million higher in the first quarter of 1999 as compared to the same period
in 1998 primarily due to continued favorable persistency.
Universal life insurance premiums collected were $23.9 million in the
first quarter of 1999 compared to $23.2 million for the same period in 1998. The
increase in 1999 was primarily due to the new product introduced in the fourth
quarter of 1998.
21
<PAGE> 22
The following table sets forth information regarding the Company's life
insurance in force for each date presented:
<TABLE>
<CAPTION>
Life Insurance in Force
As of March 31,
1999 1998
-----------------------------------
<S> <C> <C>
($ in thousands)
Individual life insurance:
Traditional life
Number of policies 252,975 256,688
GAAP life reserves $ 1,578,053 $ 1,493,263
Face amounts $ 19,843,000 $ 18,333,000
Universal life
Number of policies 114,397 117,044
GAAP life reserves $ 900,756 $ 876,030
Face amounts $ 12,114,000 $ 12,104,000
Total life insurance
Number of policies 367,372 373,732
GAAP life reserves $ 2,478,809 $ 2,369,293
Face amounts $ 31,957,000 $ 30,437,000
</TABLE>
While the total policy count continues to decline consistent with
industry trends, the average size of policy continues to increase from $81,400
in 1998 to $87,000 in 1999. As a result, total insurance in force has grown to
almost $32 billion as of March 31, 1999.
22
<PAGE> 23
ANNUITIES
The following table sets forth annuity collected premiums for the
periods indicated:
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
1999 1998
----------------------------------------
<S> <C> <C>
($ in thousands)
Fixed annuities $ 233,675 $ 167,961
Equity-index fixed annuities 4,639 6,735
----------------------------------------
Total 238,314 174,696
Reinsurance ceded (66) (965)
----------------------------------------
Total annuities, net of reinsurance $ 238,248 $ 173,731
========================================
</TABLE>
The Company markets its annuity products on a national basis through
networks of independent agents whom are supervised by regional vice presidents
and directors or Independent Marketing Organizations (IMO's). The Company's
IMO's consist of approximately 60 contracted organizations, two wholly-owned
organizations, and one partially-owned organization. Annuity collected premiums
were $238.2 million for the first quarter of 1999 compared to $173.7 million for
the same period in 1998. The Company's acquisition of an IMO in the second half
of 1998 and the Company's investment in an IMO in the first quarter of 1999
contributed to the increase in collected premiums.
The following table sets forth information regarding annuities in force
for each date presented:
<TABLE>
<CAPTION>
Annuities in Force
As of March 31,
1999 1998
-----------------------------------
<S> <C> <C>
($ in thousands)
Deferred fixed annuities
Number of policies 177,032 188,593
GAAP life reserves $ 5,982,980 $ 5,930,407
Equity-index fixed annuities
Number of policies 6,369 4,734
GAAP life reserves $ 254,059 $ 229,180
Total annuities
Number of policies 183,401 193,327
GAAP life reserves $ 6,237,039 $ 6,159,587
</TABLE>
23
<PAGE> 24
RESULTS OF OPERATIONS
A summary of the Company's revenue follows:
<TABLE>
<CAPTION>
Three Months Ended, March 31,
1999 1998
-----------------------------
<S> <C> <C>
($ in thousands)
Insurance premiums
Life insurance - traditional $ 15,326 $ 10,141
Annuities - Immediate annuity &
supplementary contract premiums 8,470 7,077
Other 39 76
-----------------------------
Total insurance premiums 23,835 17,294
Product charges
Life insurance - universal life 11,821 11,660
Annuities 5,365 4,720
-----------------------------
Total product charges 17,186 16,380
Net investment income
Life insurance 19,524 18,704
Annuities 104,800 111,957
Other 5,994 2,512
-----------------------------
Total net investment income 130,318 133,173
Realized gains (losses) on investments
Life insurance 116 1,756
Annuities 2,386 6,554
Other 102 (2,091)
-----------------------------
Total realized gains on investments 2,604 6,219
Contribution from the Closed Block 6,542 8,975
-----------------------------
Total revenues $ 180,485 $ 182,041
==============================
</TABLE>
24
<PAGE> 25
Traditional life insurance premiums were $15.3 million for the first
quarter of 1999 compared to $10.1 million for the same period in 1998. The
increase in traditional life insurance premiums was primarily the result of
continued favorable persistency and increased sales of participating whole life
insurance products.
Immediate annuity and supplementary contract premiums increased by $1.4
million to $8.5 million for the first quarter of 1999 compared to $7.1 million
for the first quarter of 1998. The increase in contract premiums in 1999 was
primarily due to increased immediate annuity sales.
Universal life product charges were $0.1 million higher in the first
quarter of 1999 compared with the same period in 1998. The increase in product
charges in 1999 was primarily due to increased cost of insurance charges as a
result of the normal aging of the block of business, partially offset by higher
reinsurance costs.
Annuity product charges were $5.4 million for the first quarter of 1999
compared to $4.7 million for the same period in 1998. The increase in product
charges was primarily due to increased surrender charges resulting from an
increase in lapses.
Total net investment income was $130.3 million for the first quarter of
1999 compared to $133.2 million for the first quarter of 1998. The decrease in
1999 net investment income was primarily attributable to lower effective yields
on average invested assets (excluding market value adjustments). Average
invested assets (excluding market value adjustments) were approximately $134.6
million higher in the first quarter of 1999 as compared to the same period in
1998. Offsetting the higher average invested assets was a lower effective yield.
The effective yield of the entire portfolio in the first quarter of 1999 was
7.09% compared to 7.38% in the first quarter of 1998. The effective yield of the
annuity portion of the portfolio decreased 51 basis points to 6.47% for the
first quarter of 1999 as compared to 6.98% for the same period in 1998. The
decrease in effective yields primarily resulted from lower reinvestment rates
throughout 1998 and in the first quarter of 1999 as compared to the portfolio
rate at the beginning of the prior year period. Other net investment income was
$3.5 million higher for the first quarter 1999 compared to the same period in
1998. The increase in 1999 other net investment income was primarily
attributable to increased investment management services fees to the operating
segments and to other affiliates and third parties. Insurance segment and
Annuity segment fees increased approximately $0.5 million and $1.6 million,
respectively, in first quarter 1999 as compared to the same period in 1998. The
remainder of the increased fees were from other affiliates and third parties.
Realized gains on investments were $2.6 million for the first quarter
of 1999 compared to $6.2 million for the first quarter of 1998. The level of
realized gains and losses will fluctuate from period to period depending on the
prevailing interest rate and economic environment and the timing of the sale of
investments.
25
<PAGE> 26
The Contribution from the Closed Block was $6.5 million for the first
quarter of 1999 compared to $9.0 million for the same period in 1998. The
following table sets forth the operating results of the Closed Block for the
periods indicated:
<TABLE>
<CAPTION>
Three Months Ended March 31,
($ in thousands) 1999 1998
-----------------------------
<S> <C> <C>
Revenues
Insurance premiums $ 48,960 $ 50,416
Universal life and annuity product charges 3,404 3,521
Net investment income 29,651 29,183
Realized gains on investments 452 869
-----------------------------
Total revenues 82,467 83,989
Benefits and expenses
Policyowner benefits 51,321 49,031
Underwriting, acquisition and insurance expenses 1,811 1,361
Amortization of deferred policy acquisition costs 7,553 8,034
Dividends to policyowners 15,240 16,588
-----------------------------
Total benefits and expenses 75,925 75,014
-----------------------------
Contribution from the Closed Block $ 6,542 $ 8,975
=============================
</TABLE>
Closed Block insurance premiums decreased by $1.4 million to $49.0
million for the first quarter of 1999 compared to $50.4 million for the same
period in 1998. The decrease in insurance premiums is consistent with the
reduction of the Closed Block's life insurance in force that is expected to
continue over the life of the Block. 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 was $29.7 million for the
first quarter of 1999 compared to $29.2 million for the same period in 1998. The
increase was primarily attributable to approximately $25 million higher average
invested assets (excluding market value adjustments). The effective yield on
average invested assets (excluding market value adjustments) was 7.41% for both
the first quarters of 1999 and of 1998.
Realized gains on investments of the Closed Block were $0.4 million
lower in the first quarter of 1999 compared to the first quarter of 1998. The
level of realized gains is subject to fluctuation from period to period
depending on the prevailing interest rate and economic environment and the
timing of the sale of investments.
Closed Block policyowner benefits were $2.3 million higher in the first
quarter of 1999 compared to the same period in 1998. The increase was primarily
due to increased death benefits. The increased death benefits were partially
offset by the reduction of life reserves, which is consistent with the reduction
of the Closed Block's life insurance in force that is expected over the life of
the Block.
26
<PAGE> 27
The amortization of deferred policy acquisition costs for the Closed
Block decreased by $0.4 million to $7.6 million for the first quarter of 1999
compared to $8.0 million for the first quarter of 1998. Deferred policy
acquisition costs are generally amortized in proportion to gross margins. The
decrease in the amortization of deferred policy acquisition costs corresponds to
lower gross margins which resulted from higher death benefits in the first
quarter of 1999 as compared to the same period in 1998.
Closed Block dividends to policyowners decreased by $1.4 million to
$15.2 million for the first quarter of 1999 compared to $16.6 million for the
same period in 1998. The decrease in 1999 was primarily due to the decrease in
the deferred dividend liability resulting from increased policyowner benefits as
compared to the same period in 1998.
27
<PAGE> 28
A summary of the Company's policyowner benefits follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
------------------------------
<S> <C> <C>
($ in thousands)
Life Insurance:
Traditional:
Death benefits $ 694 $ 397
Change in liability for future policy
benefits and other policy benefits 10,291 6,514
------------------------------
Total traditional 10,985 6,911
Universal:
Death benefits in excess of cash value 6,289 4,660
Interest credited on policyowner
account balances 7,531 7,941
Other (219) 1,468
------------------------------
Total universal 13,601 14,069
------------------------------
Total life insurance benefits 24,586 20,980
Annuities
Interest credited to deferred annuity
account balances 69,740 75,742
Other annuity benefits 15,005 10,577
------------------------------
Total annuity benefits 84,745 86,319
Other benefits 88 57
------------------------------
Total policyowner benefits $ 109,419 $ 107,356
==============================
</TABLE>
Total life insurance benefits were $24.6 million for the first quarter
of 1999 compared to $21.0 million for the first quarter of 1998. The increase in
life insurance benefits was primarily due to increased death benefits and the
growth in liability for future policy benefits and other policy benefits
(reserves) in the traditional life insurance line of business as expected from
the growth of the business in force. Interest credited on universal policyowner
account balances decreased $0.4 million to $7.5 million for the first quarter of
1999 compared to $7.9 million for the same period in 1998 primarily due to lower
crediting rates. The weighted average interest crediting rate on policyowner
account balances for the first quarter of 1999 was 5.75% compared to 6.23% for
the same period in 1998. Partially offsetting the decrease in crediting rates
was an increase in policyowner account balances of approximately $11.4 million.
28
<PAGE> 29
Annuity benefits were $84.7 million for the first quarter of 1999
compared to $86.3 million for the same period in 1998. The decrease is primarily
due to a lower weighted average crediting rate in the first quarter of 1999
compared to the first quarter of 1998, partially offset by higher average
liabilities. The weighted average crediting rate on deferred annuity account
balances was decreased 28 basis points to 5.06% for the first quarter of 1999
compared to 5.34% for the first quarter of 1998. Crediting rates were decreased
in response to the decrease in effective yields on the annuity investment
portfolio. Although crediting rates were decreased, GAAP spreads narrowed 8
basis points (adjusted for inter-segment charges) in the first quarter of 1999
as compared to the same period in 1998 due to the larger reduction in effective
portfolio yields. Partially offsetting the decrease in interest credited to
deferred annuity account balances was an increase in other annuity benefits
which corresponds to the change in immediate annuity reserves and benefit
payments on immediate annuities.
A summary of the Company's expenses follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
---------------------------
<S> <C> <C>
($ in thousands)
Life Insurance
Underwriting, acquisition and
insurance expenses $ 12,909 $ 10,074
Amortization of deferred policy acquisition costs
and VOBA 5,332 6,148
---------------------------
Total life insurance 18,241 16,222
Annuities
Underwriting, acquisition and
insurance expenses 8,305 10,089
Amortization of deferred policy acquisition
costs and VOBA 11,653 8,809
---------------------------
Total annuities 19,958 18,898
Other $ (159) $ 1,052
---------------------------
Total expenses $ 38,040 $ 36,172
===========================
</TABLE>
Total life insurance expenses were $18.2 million for the first quarter
of 1999 compared to $16.2 million for the first quarter of 1998. Underwriting,
acquisition and insurance expenses were $2.8 million higher in 1999 compared to
the same period in 1998 primarily due to approximately $1.8 million of costs
related to the Year 2000 Compliance Project and costs associated with the
Company's enhancement of its distribution systems and increased holding company
services. Offsetting this increase was a $0.8 million decrease in the
amortization of deferred policy acquisition costs and value of business acquired
(VOBA). Deferred policy acquisition costs are generally amortized in proportion
to gross margins, including realized capital gains. Higher death benefits on
those policies for which deferred costs are amortized contributed to lower gross
margins in the first quarter of 1999 as compared to the first quarter of 1998,
resulting in the decreased amortization.
29
<PAGE> 30
Total annuity expenses increased by $1.1 million to $20.0 million for
the first quarter of 1999 compared to $18.9 million for the first quarter of
1998. Underwriting, acquisition and insurance expenses decreased approximately
$1.8 million in the first quarter of 1999 compared to the same period in 1998
primarily due to cost savings realized from the consolidation of acquired
subsidiary operations. Offsetting this decrease in insurance expenses was a $2.9
million increase in amortization of deferred policy acquisition costs and VOBA.
Gross margins, including realized capital gains, increased due to the reduced
expenses, resulting in the increased amortization.
Other expenses decreased by $1.2 million in the first quarter of 1999
compared to the same period in 1998 primarily due to a change in charges to the
life operating segment for additional services provided by the holding company
in 1999.
A summary of the Company's income from operations by operating segment
follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
-----------------------------
<S> <C> <C>
($ in thousands)
Life Insurance:
Open Block:
Revenues $ 46,787 $ 42,261
Benefits and Expenses (42,827) (37,202)
Dividends to policyowners (976) (315)
Closed Block contribution 6,542 8,975
-----------------------------
Income from operations 9,526 13,719
Annuities:
Revenues 121,021 130,308
Benefits and Expenses (104,703) (105,217)
-----------------------------
Income from operations 16,318 25,091
Other 6,206 (612)
-----------------------------
Total income from operations $ 32,050 $ 38,198
=============================
</TABLE>
30
<PAGE> 31
Income from Life Insurance operations was $9.5 million for the first
quarter of 1999 compared to $13.7 million for the first quarter of 1998. The
decrease in the first quarter of 1999 compared to the first quarter of 1998 was
primarily due to increased death benefits, increased costs related to the Year
2000 Compliance Project and holding company services, and a decreased
contribution from the Closed Block.
Income from Annuity operations was $16.3 million for the first quarter
of 1999 compared to $25.1 million for the same period in 1998. The decrease in
1999 was primarily due to decreased spreads, lower realized gains and higher
holding company investment management charges as compared to the first quarter
of 1998.
Other income was $6.2 million for the first quarter of 1999 compared to
a loss of $0.6 million for the same period in 1998. The increase in 1999 was
primarily due to changes in the charges to the operating segments for holding
company services such as investment management, information technology, and
other administrative services.
Interest expense increased by $0.5 million in the first quarter of 1999
to $7.2 million compared to $6.7 million in the first quarter of 1998. The
increased interest expense in 1999 was primarily due to a higher interest rate
on the senior notes and adjustable conversion-rate equity security units
outstanding during the first quarter of 1999 as compared to the revolving credit
agreement borrowings outstanding during the first quarter of 1998.
Income tax expense was $8.4 million for the first quarter of 1999
compared to $10.2 million for the first quarter of 1998. The effective tax rate
in 1999 was 33.1% compared to 31.9% in 1998. The increase in the effective tax
rate in 1999 was primarily due to a $0.5 million decrease in tax credits
generated by affordable housing and historic rehabilitation investments. Tax
credits generated from these investments totaled $1.2 million in 1999 compared
to $1.7 million in 1998.
The equity in earnings of unconsolidated subsidiary represents 34% of
the net income of AMAL Corporation, net of goodwill amortization. AMAL
Corporation is the parent company of Ameritas Variable Life Insurance Company,
the joint venture partner that markets variable life, and variable and fixed
annuity products.
Net income was $17.0 million for the first quarter of 1999 compared to
$21.8 million for the same period in 1998. The decrease in net income in the
first quarter of 1999 as compared to the first quarter of 1998 was primarily due
to increased death benefits and Year 2000 compliance costs in the Life Insurance
operating segment, decreased spreads and lower realized gains in the Annuity
operating segment, and the reduction in average stockholders' equity resulting
from the common stock buyback program.
31
<PAGE> 32
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 Insurance
Commissioner to pay any dividend that would exceed certain statutory
limitations. The current statute limits any dividend, together with dividends
paid out within the preceding 12 months, to 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. The payment of dividends by AmVestors' subsidiaries,
American Investors Life Insurance Company, Inc. (American), and Financial
Benefit Life Insurance Company (FBL) is regulated under Kansas law, which has
statutory limitations similar to those in place in Iowa. During the first
quarter of 1999, the Company's subsidiaries paid the Company $10 million in
dividends. Based on these limitations and 1998 results, the Company's
subsidiaries could pay an estimated $9 million in additional dividends in 1999
without obtaining regulatory approval.
The Company and its subsidiaries generated cash flows from operating
activities of $70.0 million and $27.3 million for the first quarters ended March
31, 1999 and 1998, respectively. Excess operating cash flows were primarily used
to increase the Company's investment portfolio.
The Company has a $150 million revolving credit facility with a
syndicate of lenders (the "Bank Credit Facility"). As of March 31, 1999, there
was no outstanding loan balance 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 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.
On February 15, 1999, the Company's controlling shareholder, American
Mutual Holding Company (American Mutual), a mutual insurance holding company,
announced that its board of directors had authorized management to review the
potential benefits of a demutualization of American Mutual. American Mutual is
owned by its members who are also policyowners of AmerUs Life. American Mutual
expects to complete the study and make a final decision in mid 1999.
32
<PAGE> 33
LIFE INSURANCE SUBSIDIARIES
The cash flows 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 account balances, investment purchases, payment of policy
acquisition costs, payment of policyowner benefits, payment of debt, 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
flows 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.
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 liabilities for interest-
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<PAGE> 34
sensitive life products and annuities by their contractual withdrawal provisions
at March 31, 1999 (including liabilities in both the Closed Block and the
general account):
(dollars in millions)
<TABLE>
<S> <C>
Not subject to discretionary withdrawal $370.2
Subject to discretionary withdrawal with adjustments
Specified surrender charges (A) 4,093.3
Market value adjustments 1,641.7
--------
Subtotal 5,735.0
Subject to discretionary withdrawal without adjustments 1,213.1
--------
Total $7,318.3
--------
</TABLE>
(A) Includes $1,164.1 million of 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 additional liquidity. Interest is payable at a current rate at the
time of any advance. As of March 31, 1999, 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 March 31, 1999.
The Company's life insurance subsidiaries may also obtain liquidity
through sales of investments. The Company's investment portfolio as of March 31,
1999 had a carrying value of $9.0 billion, including Closed Block investments.
At March 31, 1999, the statutory surplus of the Company's subsidiaries
was approximately $453.7 million. The Company believes that this level of
statutory capital is 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 accommodate only 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
information technology (IT) systems will be able to process accurately.
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's overall Year 2000 compliance
initiatives include the following components: (i) assessment of all business
critical systems (business critical systems include computer and embedded
systems); processes and external interfaces and dependencies; (ii) remediation
or upgrading of business critical systems; (iii) testing of both modified and
updated systems as well as integrated systems testing; (iv) implementation of
modified and updated systems; and (v) contingency planning.
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<PAGE> 35
The Company has made significant progress in accomplishing the
necessary modifications and conversions to deal with Year 2000 issues. The Year
2000 Project has four main components: IT Systems, Non-IT Systems, Business
Partners and Contingency Planning.
The IT Systems Project has been organized into three phases as
follows: inventory, remediation/replacement and integrated testing. The
inventory phase is complete. Because mainframe systems are a major part of our
Year 2000 Project, work on these systems began in 1996. Mainframe remediation
efforts are more than 99% complete, and the remaining work is scheduled for
completion in the second quarter of 1999. Work on personal computer and network
systems began in early 1998, and the remediation/replacement phase for these
systems is substantially complete. The Company has been testing individual
systems as part of its remediation effort, and full system integration testing
of all business critical systems is scheduled for completion in the second
quarter of 1999.
Non-IT Systems include administrative systems such as faxes
and phone systems. Facilities also contain non-IT systems such as elevators,
heating and cooling systems and security systems. Work on these embedded systems
began in 1998; this project is more than 88% complete. The scheduled completion
date is the second quarter of 1999.
All entities with which the Company does business are part of
the Business Partners component of the Year 2000 Project. The Company has
completed an inventory of business partners, and has identified the significance
of various partners to the Company's business. Correspondence has been initiated
with business partners to ascertain their Year 2000 readiness, and risk/impact
analysis of service or supply disruptions have been completed. Based upon the
results of analysis, action and contingency plans are being developed for
various business partners. This project is scheduled for completion in the
second or third quarter of 1999.
Despite efforts to address all Year 2000 needs in a timely and
effective manner, there are risks that the time frames set forth above may not
be met and that some Year 2000 effects may cause operational difficulties for
the Company. Some causes of these risks are the potential for unanticipated
complications in making Year 2000 modifications, the possibility of oversights
in the remediation process, and the difficulty of hiring and retaining IT
personnel in the current business environment. While the Company does not expect
any such operational difficulties to be material, the potential for these
occurrences cannot be fully assessed at this time. For these reasons, the
Company is in the process of developing contingency plans to cover the risk of
non-compliance due to Year 2000 failures in Company systems or those of its
business partners. Contingency Planning will include an identification of
critical business processes and development of alternative methods of carrying
them out in the event of any system failure. This effort is scheduled for
completion in the third quarter of 1999.
During the second quarter of 1998 the Company engaged an
independent IT consulting firm to review its Year 2000 Project plans, priorities
and processes. This review considered the Company's efforts as compared to
industry "best practices." This review verified the appropriateness of the
Company's Year 2000 Project and provided additional direction for its
continuation. In December of 1998 the Company hired an independent consulting
firm to conduct a quality assurance review of this project. Recommendations were
evaluated and implemented as appropriate.
Total estimated costs associated with Year 2000 modifications
and conversions are approximately $9 million. These costs are expensed as
incurred. For the quarter ended March 31, 1999, the Company has incurred $2.1
million in Year 2000 expenses, and $6.3 million since the beginning of the Year
2000 Project.
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<PAGE> 36
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The main objectives in managing the investment portfolios of the
Company and its insurance subsidiaries are to maximize investment income and
total investment returns while minimizing credit risks in order to provide
maximum support to the insurance underwriting operations. Investment strategies
are developed based on many factors including asset liability management,
regulatory requirements, fluctuations in interest rates and consideration of
other market risks. Investment decisions are centrally managed by investment
professionals based on guidelines established by management and approved by the
boards of directors.
Market risk represents the potential for loss due to adverse changes in
the fair value of financial instruments. The market risks related to financial
instruments of the Company and its subsidiaries primarily relate to the
investment portfolio, which exposes the Company to risks related to interest
rates and, to a lesser extent, credit quality and prepayment variation.
Analytical tools and monitoring systems are in place to assess each of these
elements of market risk.
Interest rate risk is the price sensitivity of a fixed income security
to changes in interest rates. Management views these potential changes in price
within the overall context of asset and liability management. Company actuaries
estimate the payout pattern of our liabilities, primarily the Company's
lapsation, to determine duration, which is the present value of the fixed income
investment portfolios after consideration of the duration of these liabilities
and other factors, which management believes mitigates the overall effect of
interest rate risk for the Company.
The Company calculated the cash flows of principal amounts and related
weighted average interest rates by expected maturity dates of its fixed maturity
investments and mortgage loans as of December 31, 1998 and included this
information in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998. Through March 31, 1999, there have been no significant
changes.
The Company and its subsidiaries have consistently invested in high
quality marketable securities. As a result, management believes that the Company
has minimal credit quality risk. Fixed maturity securities are comprised of U.S.
Treasury, government agency, mortgage-backed and corporate securities.
Approximately 67% of fixed maturity securities are issued by the U.S. Treasury
or U.S. government agencies or are rated A or better by Moody's, Standard and
Poor's, or the NAIC. Less than 8% of the bond portfolio is below investment
grade. Fixed maturity securities have a weighted average maturity of
approximately 7 years.
Prepayment risk refers to the changes in prepayment patterns that can
either shorten or lengthen the expected timing of the principal repayments and
thus the average life and the effective yield of a security. Such risk exists
primarily within the Company's portfolio of mortgage-backed securities.
Management monitors such risk regularly. The Company invests primarily in those
classes of mortgage-backed securities that are less subject to prepayment risk.
The Company's use of derivatives is generally limited to hedging
purposes and has principally consisted of using interest rate swaps, caps,
swaptions and options. These instruments, viewed separately, subject the Company
to varying degrees of market and credit risk. However when used for hedging, the
expectation is that these instruments would reduce overall market risk. Credit
risk arises from the possibility that counterparties may fail to perform under
the terms of the contracts.
Equity price risk is the potential loss arising from changes in the
value of equity securities. In general, equities have more year-to-year price
variability than intermediate term grade bonds. However, returns over longer
time frames have been consistently higher. The Company's equity securities are
high quality and readily marketable.
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<PAGE> 37
All of the above risks are monitored on an ongoing basis. A combination
of in-house systems and proprietary models and externally licensed software are
used to analyze individual securities as well as each portfolio. These tools
provide the portfolio managers with information to assist them in the evaluation
of the market risks of the portfolio.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company, AmerUs Life and their direct and indirect majority
shareholders AmerUs Group and American Mutual Holding Company (collectively
"AmerUs"), are defendants in a class action lawsuit, Bhat v. AmerUs Life
Insurance Company, which was filed in December 1996 in the United States
District Court for the Northern District of California. The complaint, as
amended in 1998, alleges that the defendants breached the terms of certain
universal life policies, breached certain other duties owed to policyowners and
violated RICO in setting their cost of insurance rates and credited interest
rates. These allegations include a claim that the defendants passed an increase
in corporate income taxes (known as the deferred acquisition cost, or DAC, tax)
through to owners of those policies. The plaintiff, an insured under a universal
life policy issued by AmerUs Life, seeks unspecified actual and punitive damages
and injunctive relief on behalf of himself and all similarly situated
policyowners of AmerUs Life with universal life insurance policies. AmerUs
denies the allegations contained in the complaint, including the existence of a
legitimate class. An earlier companion case filed in the same court in June 1996
was dismissed in October 1997. This litigation has been vigorously defended by
AmerUs Life.
The parties have entered into a nationwide class settlement of certain
contract and related issues for a substantial block of AmerUs Life's life
insurance policies. The settlement was approved by the court by order dated
April 2, 1999. The order will become final and unappealable in approximately 60
days after the date of the order if no appeal is filed.
Due to pending settlement negotiations, the Company incurred a charge to
income for 1998. Based upon current estimates of the costs associated with the
settlement, the Company established a reserve of $1.2 million at that time.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
A list of exhibits included as part of this report is set forth in the
Exhibit Index which immediately precedes such exhibits and is hereby
incorporated by reference herein.
(b) The following report on Form 8-K was filed during the quarter ended
March 31, 1999:
1. Form 8-K dated February 15, 1999, announcing the
demutualization study of American Mutual Holding
Company.
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<PAGE> 38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
DATED: May 14, 1999 AMERUS LIFE HOLDINGS, INC.
By /s/ Michael G. Fraizer
-----------------------------------
Senior Vice President and
Chief Financial Officer
By /s/ Brenda J. Cushing
-----------------------------------
Vice President and Controller
(Principal Accounting Officer)
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<PAGE> 39
AMERUS LIFE HOLDINGS, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit
No. Description
- ------- -----------
2.1 Plan of Reorganization dated October 27, 1995, filed as Exhibit 2.1
to the registration statement of the Registrant on Form S-1,
Registration Number 333-12239, is hereby incorporated by reference.
2.2 Amended and Restated Agreement and Plan of Merger, dated as of
September 19, 1997 and as amended and restated as of October 8,
1997, by and among the Registrant, AFC Corp. and AmVestors Financial
Corporation ("AmVestors"), filed as Exhibit 2.2 to the Registration
Statement of the Registrant on Form S-4, Registration Number
333-40065 is hereby incorporated by reference.
2.3 Agreement and Plan of Merger, dated as of August 13, 1997 and as
amended as of September 5, 1997, among the Registrant, a wholly
owned subsidiary of the Registrant and Delta Life Corporation, filed
as Exhibit 2.2 to Form 8-K of the Registrant dated October 8, 1997,
is hereby incorporated by reference.
3.1 Amended and Restated Articles of Incorporation of the Registrant
filed as Exhibit 3.5 to the registration statement of the Registrant
on Form S-1, Registration Number 333-12239, are hereby incorporated
by reference.
3.2 Bylaws of the Registrant, filed as Exhibit 3.2 to the registration
statement of the Registrant on Form S-1, Registration Number
333-12239, are hereby incorporated by reference.
3.3 Articles of Amendment of the Registrant dated September 25, 1998,
filed as Exhibit 3.3 on Form 10-K, dated March 30, 1999, is hereby
incorporated by reference.
4.1 Amended and Restated Trust Agreement dated as of February 3, 1997
among the Registrant, Wilmington Trust Company, as property trustee,
and the administrative trustees named therein (AmerUs Capital I
business trust), filed as Exhibit 3.6 to the registration statement
of the Registrant and AmerUs Capital I on Form S-1, Registration
Number 333-13713, is hereby incorporated by reference.
4.2 Indenture dated as of February 3, 1997 between the Registrant and
Wilmington Trust Company relating to the Company's 8.85% Junior
Subordinated Debentures, Series A, filed as Exhibit 4.1 to the
registration statement of the Registrant and AmerUs Capital I on
Form S-1, Registration Number, 333-13713, is hereby incorporated by
reference.
4.3 Guaranty Agreement dated as of February 3, 1997 between the
Registrant, as guarantor, and Wilmington Trust Company, as trustee,
relating to the 8.85% Capital Securities, Series A, issued by AmerUs
Capital I, filed as Exhibit 4.4 to the registration statement on
Form S-1, Registration Number, 333-13713, is hereby incorporated by
reference.
4.4 Common Stock Purchase Warrant, filed as Exhibit (10)(v) to Form 10-Q
of AmVestors Financial Corporation dated May 13, 1992, is hereby
incorporated by reference.
4.5 Amended and Restated Declaration of Trust of AmerUs Capital II, dated
as of July 27, 1998, among the Registrant, First Union Trust Company
and the administrative trustees named therein, relating to the
Registrant's 7.0% ACES Units, filed as Exhibit 4.5 on Form 10-Q,
dated August 13, 1998, is hereby incorporated by reference.
4.6 Certificate of Trust of AmerUs Capital III filed as Exhibit 4.7 to
the registration statement of the Registrant, AmerUs Capital II and
AmerUs Capital III, on Form S-3 (No. 333-50249), is hereby
incorporated by reference.
4.7 Common Trust Securities Guarantee Agreement, dated as of July 27,
1998, by the Registrant, relating to the Registrant's 7.0% ACES
Units, filed as Exhibit 4.7 on Form 10-Q, dated August 13, 1998, is
hereby incorporated by reference.
4.8 QUIPS Guarantee Agreement, dated as of July 27, 1998, by the
Registrant, relating to the Registrant's 7.0% ACES Units, filed as
Exhibit 4.8 on Form 10-Q, dated August 13, 1998, is hereby
incorporated by reference.
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<PAGE> 40
4.9 Master Unit Agreement, dated as of July 27, 1998, between the
Registrant and First Union National Bank relating to the
Registrant's 7.0% ACES Units, filed as Exhibit 4.9 on Form 10-Q,
dated August 13, 1998, is hereby incorporated by reference.
4.10 Call Option Agreement, dated as of July 27, 1998, between Goldman,
Sachs & Co. and First Union National Bank relating to the
Registrant's 7.0% ACES Units, filed as Exhibit 4.10 on Form 10-Q,
dated August 13, 1998, is hereby incorporated by reference.
4.11 Pledge Agreement, dated as of July 27, 1998, among the Registrant,
Goldman, Sachs & Co. and First Union National Bank relating to the
Registrant's 7.0% ACES Units, filed as Exhibit 4.11 on Form 10-Q,
dated August 13, 1998, is hereby incorporated by reference.
4.12 Senior Indenture, dated as of June 16, 1998, by and between the
Registrant and First Union National Bank, as Indenture Trustee,
relating to the Registrant's 6.95% Senior Notes, filed as Exhibit
4.14 on Form 10-Q, dated August 13, 1998, is hereby incorporated by
reference.
4.13 Subordinated Indenture, dated as of July 27, 1998, by and between
the Registrant and First Union National Bank, as Indenture Trustee,
relating to the Registrant's 6.86% Junior Subordinated Deferrable
Interest Debentures, filed as Exhibit 4.15 on Form 10-Q, dated
August 13, 1998, is hereby incorporated by reference.
10.1 Amended and Restated Intercompany Agreement dated as of December 1,
1996, among American Mutual Holding Company, AmerUs Group Co. and
the Company. Filed as Exhibit 10.81 to the Registrant's registration
statement on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.2 Joint Venture Agreement, dated as of June 30, 1996, between American
Mutual Insurance Company and Ameritas Life Insurance Corp., filed as
Exhibit 10.2 on Form 10-K, dated March 25, 1998, is hereby
incorporated by reference.
10.3 Management and Administration Service Agreement, dated as of April
1, 1996, among American Mutual Life Insurance Company, Ameritas
Variable Life Insurance Company and Ameritas Life Insurance Corp.,
filed as Exhibit 10.3 to the registration statement of the
Registrant on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.4 AmerUs Life Holdings, Inc. Executive Stock Purchase Plan, dated
November 13, 1998, filed as Exhibit 4.11 to the registration
statement of the Registrant on Form S-8, Registration Number
333-72237, is hereby incorporated by reference.
10.5 All*AmerUs Supplemental Executive Retirement Plan, effective January
1, 1996, filed as Exhibit 10.6 to the registration statement of the
Registrant on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.6 American Mutual Life Insurance Company Supplemental Pension Plan
(which was curtailed as of December 31, 1995), filed as Exhibit 10.7
to the registration statement of the Registrant on Form S-1,
Registration Number 333-12239, is hereby incorporated by reference.
10.7 Central Life Assurance Company Supplemental Pension Plan (which was
curtailed as of December 31, 1995), filed as Exhibit 10.8 to the
registration statement of the Registrant on Form S-1, Registration
Number 333-12239, is hereby incorporated by reference.
10.8 Management Incentive Plan, filed as Exhibit 10.9 to the registration
statement of the Registrant on Form S-1, Registration Number
333-12239, is hereby incorporated by reference.
10.9 AmerUs Life Insurance Company Performance Share Plan, filed as
Exhibit 10.10 to the registration statement of the Registrant on
Form S-1, Registration Number 333-12239, is hereby incorporated by
reference.
10.10 AmerUs Life Stock Incentive Plan, filed as Exhibit 10.11 to the
registration statement of the Registrant on Form S-1, Registration
Number 333-12239, is hereby incorporated by reference.
10.11 AmerUs Life Non-Employee Director Stock Plan, filed as Exhibit 10.13
to the registration statement of the Registrant on Form S-1,
Registration Number 333-12239, is hereby incorporated by reference.
10.12 Form of Indemnification Agreement executed with directors and
certain officers, filed as Exhibit 10.33 to the registration
statement of the Registrant on Form S-1, Registration Number
333-12239, is hereby incorporated by reference.
10.13 Tax Allocation Agreement dated as of November 4, 1996, filed as
Exhibit 10.68 to the registration statement of the Registrant on
Form S-1, Registration Number 333-12239, is hereby incorporated by
reference.
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<PAGE> 41
10.14 Agreement and Plan of Merger, dated as of August 13, 1997 and as
amended as of September 5, 1997, among the Registrant, a
wholly-owned subsidiary of the Registrant and Delta Life
Corporation, filed as Exhibit 2.2 to the Registrant's report on Form
8-K on October 8, 1997, is hereby incorporated by reference.
10.15 Purchase Agreement between AmerUs Life and AmerUs Bank dated March
5, 1997 relating to the sale of certain loans, filed as Exhibit
10.82 to the registration statement of the Registrant on Form S-4,
Registration Number 333-40065, is incorporated by reference.
10.16 Credit Agreement, dated as of October 23, 1997, among the
Registrant, Various Lender Institutions, the Co-Arrangers and The
Chase Manhattan Bank, as Administrative Agent , filed as Exhibit
10.84 to the registration statement of the Registrant on Form S-4,
Registration Number 333-40065, is incorporated by reference.
10.17 Coinsurance Agreement, effective February 1, 1996, between Delta Life
and Annuity Company and London Life Reinsurance Company, filed as
Exhibit 10.85 to the registration statement of the Registrant on Form
S-4, Registration Number 333-40065, is incorporated by reference.
10.18 AmVestors Financial Corporation 1996 Incentive Stock Option Plan,
filed as Exhibit (4)(a) to Registration Statement of AmVestors
Financial Corporation on Form S-8, Registration Number 333-14571
dated October 21, 1996, is hereby incorporated by reference.
10.19 1989 Non-Qualified Stock Option Plan adopted March 17, 1989, filed as
Exhibit (10)(q) to Form 10-K of AmVestors Financial Corporation,
dated April 12, 1989, is hereby incorporated by reference.
10.20 Amended and Restated Miscellaneous Service Agreement, dated as of
July 21, 1997, among American Mutual Holding Company, Registrant,
AmerUs Life Insurance Company, AmerUs Group Co., AmerUs Bank, AmerUs
Mortgage, Inc., Iowa Realty Co., Inc., Iowa Title Company, AmerUs
Insurance, Inc., AmerUs Properties, Inc., AmerUs Direct, Inc., filed
as Exhibit 10.57 on Form 10-K, dated March 25, 1998, is hereby
incorporated by reference.
10.21 Lease - Business Property, dated December 1, 1996, between AmerUs
Properties, Inc. and AmerUs Life Insurance Company, property 611
Fifth Avenue, Des Moines, Iowa, filed as Exhibit 10.58 on Form 10-K,
dated March 25, 1998, is hereby incorporated by reference.
10.22 First Amendment dated February 1, 1998 to Lease Agreement dated
December 1, 1996 between AmerUs Properties, Inc. and AmerUs Life
Insurance Company, property 611 Fifth Avenue, Des Moines, Iowa, filed
as Exhibit 10.59 on Form 10-K, dated March 25, 1998, is hereby
incorporated by reference.
10.23 Lease - Business Property, dated December 1, 1996, between AmerUs
Properties, Inc. and AmerUs Life Insurance Company, 1213 Cherry
Street, Des Moines, Iowa, filed as Exhibit 10.60 on Form 10-K, dated
March 25, 1998, is hereby incorporated by reference.
10.24 Lease - Business Property, dated December 1, 1996, between AmerUs
Properties, Inc. and the Registrant, property 418 Sixth Avenue
Moines, Iowa, filed as Exhibit 10.61 on Form 10-K, dated March 25,
1998, is hereby incorporated by reference.
10.25 Revised and Restated Lease - Business Property, dated May 28, 1998,
between AmerUs Properties, Inc. and the Registrant property, 699
Walnut Street, Des Moines, Iowa, filed as Exhibit 10.26 on Form 10-K,
dated March 30, 1999, is hereby incorporated by reference.
10.26 Addendum, dated May 28, 1998 to lease dated May 28, 1998 between
AmerUs Properties and the Registrant, filed as Exhibit 10.27 on Form
10-K, dated March 30, 1999, is hereby incorporated by reference.
10.27 Addendum II, dated July 21, 1998, to lease dated May 28, 1998 between
AmerUs Properties and the Registrant, filed as Exhibit 10.28 on Form
10-K, dated March 30, 1999, is hereby incorporated by reference.
10.28 Servicing Agreement, dated March 5, 1997, between AmerUs Life
Insurance Company and AmerUs Properties, Inc., filed as Exhibit 10.64
on Form 10-K, dated March 25, 1998, is hereby incorporated by
reference.
10.29 Consent dated as of May 20, 1998 to the Credit Agreement dated as of
October 23, 1997 among the Registrant, Various Lender Institutions,
the Co-Arrangers and The Chase Manhattan Bank, as Administrative
Agent, filed as Exhibit 10.72 on Form 10-Q, dated November 12, 1998,
is hereby incorporated by reference.
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<PAGE> 42
10.30 First Amendment dated as of May 30, 1997 to the Credit Agreement
dated as of October 23, 1997 among the Registrant, Various Lender
Institutions, the Co-Arrangers and The Chase Manhattan Bank, as
Administrative Agent, filed as Exhibit 10.73 on Form 10-Q, dated
November 12, 1998, is hereby incorporated by reference.
10.31 Second Amendment dated as of June 22, 1998 to the Credit Agreement
dated as of October 23, 1997 among the Registrant, Various Lender
Institutions, the Co-Arrangers and The Chase Manhattan Bank, as
Administrative Agent, filed as Exhibit 10.74 on Form 10-Q, dated
November 12, 1998, is hereby incorporated by reference.
10.32 Second Consent and Amendment dated as of October 2, 1998 to the
Credit Agreement dated as of October 23, 1997 among the Registrant,
Various Lender Institutions, the Co-Arrangers and The Chase Manhattan
Bank, as Administrative Agent, filed as Exhibit 10.75 on Form 10-Q,
dated November 12, 1998, is hereby incorporated by reference.
10.33 MIP Deferral Plan dated as of September 1, 1998, filed as
Exhibit 10.76 on Form 10-Q, dated November 12, 1998, is hereby
incorporated by reference.
10.34* Open Line of Credit Application and Terms Agreement, dated March 5,
1999, between Federal Home Loan Bank of Des Moines and AmerUs Life
Insurance Company.
10.35 Origination Agreement, dated August 1, 1998, between AmerUs Home
Equity, Inc. and AmerUs Life Insurance Company, filed as Exhibit
10.36 on Form 10-K, dated March 30, 1999, is hereby incorporated by
reference.
10.36 Third Waiver to Credit Agreement dated as of November 16, 1998 to the
Credit Agreement dated as of October 23, 1997 among the Registrant,
Various Lender Institutions, the Co-Arrangers and The Chase Manhattan
Bank, as Administrative Agent, filed as Exhibit 10.37 on Form 10-K,
dated March 30, 1999, is hereby incorporated by reference.
10.37 Fourth Consent and Amendment, dated as of December 4, 1998 to the
Credit Agreement dated as of October 23, 1997 among the Registrant,
Various Lender Institutions, the Co-Arrangers and The Chase Manhattan
Bank, as Administrative Agent, filed as Exhibit 10.38 on Form 10-K,
dated March 30, 1999, is hereby incorporated by reference.
10.38 Administrative Services Agreement, dated as of August 1, 1998, among
American Mutual Holding Company, Registrant, AmerUs Group, AmerUs
Home Equity, Inc., AmerUs Mortgage, Inc., AmerUs Properties, Inc.,
American Capital Management Group, Inc., AmerUs Life Insurance
Company, AmVestors Financial Corporation, American Investors Life
Insurance Company, Inc., and Delta Life and Annuity Company, filed as
Exhibit 10.39 on Form 10-K, dated March 30, 1999, is hereby
incorporated by reference.
10.39* Facility and Guaranty Agreement, dated February 12, 1999, among The
First National Bank of Chicago and the Registrant.
10.40* Form of Reimbursement Agreement, dated February 15, 1999, among the
Registrant and Roger K. Brooks, Victor N. Daley, Michael G. Fraizer,
Thomas C. Godlasky, Marcia S. Hanson, Mark V. Heitz and Gary R.
McPhail.
10.41* Amendment No. 1 to Facility Agreement, dated March 23, 1999, among
The First National Bank of Chicago and the Registrant.
11* Statement Re: Computation of Per Share Earnings.
27.1* Financial Data Schedule
99.3 Employment Agreement, dated as of September 19, 1997, among Mark V.
Heitz, AmVestors Financial Corporation, American Investors Life
Insurance Company, Inc., AmVestors Investment Group, Inc. and
American Investors Sales Group, Inc., filed as Exhibit 99.3 to the
registration statement of the Registrant on Form S-4, Registration
Number 333-40065, is incorporated by reference.
99.4 Agreement of Sale, dated as of October 22, 1997, by and between R.
Rex Lee and AmerUs Group, Co., filed as Exhibit 99.4 to the
registration statement of the Registrant on Form S-4, Registration
Number 333-40065, is incorporated by reference.
99.5 Retirement Agreement, dated June 27, 1997, by and between Victor N.
Daley and Registrant filed as Exhibit 99.5 on Form 10-K, dated March
30, 1999, is hereby incorporated by reference.
- ----------------------
* included herein
42
<PAGE> 1
AmerUs Life Holdings, Inc.
Exhibit 11 - Statement Re: Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1999
--------------------------------------------------
Net Income Number of Shares Per Share Amount
--------------------------------------------------
(in thousands, except per share amounts)
Basic EPS
<S> <C> <C> <C>
Net Income $ 16,957 30,432,955 $ 0.56
Effect of dilutive securities
Options - 36,718 -
Warrants - - -
Stock appreciation rights - - -
==============================================
Diluted EPS $ 16,957 30,469,673 $ 0.56
==============================================
<CAPTION>
Three Months Ended
March 31, 1998
--------------------------------------------------
Net Income Number of Shares Per Share Amount
--------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Basic EPS
Net Income $ 21,757 34,735 $ 0.63
Effect of dilutive securities
Options - 65 (0.01)
Warrants - 31 -
Stock appreciation rights - - -
==============================================
Diluted EPS $ 21,757 34,831 $ 0.62
==============================================
</TABLE>
<PAGE> 1
EXHIBIT 10.34
[HOME LOAN BANK LOGO]
OPEN LINE OF CREDIT PROGRAM
The Bank's Open Line of Credit (OLOC) program is a highly convenient, flexible,
and inexpensive means of meeting your short-term funding needs. Upon approval,
you will receive a commitment for an amount up to fifteen percent of assets at
the time of application. The commitment term will be one year from the date
approved by the Bank. A fee of five basis points, or $500 per one million
commitment, will be charged on the date of approval. This fee will be a direct
charge to your demand account and is non-refundable.
The Open Line of Credit program uses the variable-rate advance which is an
excellent source for funding your liquidity needs. You may draw down or repay
funds at any time. The variable-rate advances is-indexed to the Bank's daily
investment return and is priced at the end of each business day. Interest is
charged to your demand account daily.
Upon the Bank's approval of your Open Line of Credit application, funds are
available by telephone request to those individuals listed on your Advances
Signature Card. No additional paperwork is necessary. HOWEVER, IF YOU CHOOSE TO
AUTHORIZE ADDITIONAL PERSONNEL ACCESS TO THE OPEN LINE OF CREDIT, THE ATTACHED
AUTHORIZATION LETTER MUST BE COMPLETED AND RETURNED TO THE BANK.
OPEN LINE OF CREDIT APPLICATION AND TERMS AGREEMENT
APPLICATION
AmerUs Life Insurance Company ("Member") hereby applies to the Federal Home
Loan Bank of Des Moines ("Bank") for an Open Line of Credit commitment
beginning on the date of approval and ending one year from the date of
approval, ("Ending Date") in the amount of $25,000,000.00.
TERMS
1. Member, through its authorized representative, may request funds by
telephone advice up to the approved Open Line of Credit limit. Funds will
be available upon advice.
2. The interest rate on advances funded under the Open Line of Credit will be
set and charged daily on the outstanding advance amount. The interest
amount will be deducted daily by the Bank from the member's demand account.
3. Advances funded under the Open Line of Credit will be available after the
approval date and will mature on the Ending Date.
4. Member represents and warrants that the Open Line of Credit amount
requested does not exceed 15% of assets.
5. The Bank shall have no obligation to make any advance under the Open Line
of Credit unless the Bank is satisfied as to Member's continued
creditworthiness and compliance with the terms of the Agreement for
Advances, Pledge and Security Agreement ("AAPSA"). If adverse facts
develop which make the member ineligible for Bank advances, the member
must provide the Bank with immediate written notification of its
ineligibility and the Bank may cancel this commitment.
6. The fee for this Open Line of Credit commitment equals .05% times the
amount of the commitment. This fee will be charged to the member's demand
account on the date this application is approved by the Bank.
<PAGE> 2
7. This Application and Terms Agreement, if approved by the Bank, will
constitute the Agreement between Member and Bank as to the Open Line of
Credit and will be wholly incorporated into and become a part of the AAPSA.
By signing this agreement, member hereby accepts the terms hereof.
AmerUs Life Insurance Company Date: March 5, 1999
- --------------------------------- --------------------------------
Member
By: Michael G. Fraizer By: Thomas C. Godlasky
------------------------------ -----------------------------
Michael G. Fraizer Thomas C. Godlasky
- --------------------------------- --------------------------------
Typed Name of Signer Typed Name of Signer
Sr. Vice President & Chief Executive Vice President &
- --------------------------------- --------------------------------
Title Financial Officer Title Chief Investment Officer
- --------------------------------------------------------------------------------
FOR FHLB USE
Date Approved: FEDERAL HOME LOAN BANK OF DES MOINES
-------------------
Expiration Date: By:
----------------- ---------------------------------
Amount Approved: By:
----------------- ---------------------------------
Commitment Number:
---------------
Commitment Fee:
------------------
Page 2 of 2
<PAGE> 1
EXECUTION COPY
EXHIBIT 10.39
================================================================================
$27,500,000
FACILITY AND GUARANTY AGREEMENT
AMONG
AMERUS LIFE HOLDINGS, INC.
THE FIRST NATIONAL BANK OF CHICAGO,
AS AGENT
AND
THE FINANCIAL INSTITUTIONS SIGNATORY HERETO
DATED AS OF
FEBRUARY 12, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I DEFINITIONS.................................................................................1
ARTICLE II AMOUNTS AND TERMS OF THE LOANS..............................................................9
2.01 The Loans...................................................................................9
2.02 Notes......................................................................................10
2.03 Disbursement of Funds......................................................................11
2.04 Distribution of Payments...................................................................11
2.05 Funding Indemnity..........................................................................11
ARTICLE III CONDITIONS PRECEDENT.......................................................................14
3.01 Conditions to Obligations to Make Initial Loans............................................14
3.02 Conditions to All Loans....................................................................16
3.03 Additional Conditions to Incremental Loans.................................................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............................................16
4.01 Representations and Warranties of the Company..............................................16
ARTICLE V COVENANTS OF THE COMPANY...................................................................19
5.01 Covenants..................................................................................19
ARTICLE VI PROGRAM EVENTS OF DEFAULT; ACCELERATION....................................................20
6.01 Program Events of Default..................................................................20
6.02 Acceleration...............................................................................23
ARTICLE VII GUARANTY...................................................................................23
7.01 Guaranty of Payment........................................................................23
7.02 Acceptance of Guaranty; No Setoffs.........................................................23
7.03 Nature of Guaranty; Continuing, Absolute and Unconditional.................................23
7.04 Dealings With Borrowers....................................................................25
7.05 Subrogation................................................................................25
7.06 No Collateral..............................................................................25
7.07 Rights To Payments, Etc....................................................................25
7.09 Miscellaneous..............................................................................26
ARTICLE VIII THE AGENT..................................................................................27
8.01 Appointment; Nature of Relationship........................................................27
8.02 Powers.....................................................................................27
8.03 General Immunity...........................................................................27
8.04 No Responsibility for Loans, Recitals, etc.................................................27
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
8.05 Action on Instructions of Lenders..........................................................28
8.06 Employment of Agents and Counsel...........................................................28
8.07 Reliance on Documents; Counsel.............................................................28
8.08 Agent's Reimbursement and Indemnification..................................................28
8.09 Notice of Default..........................................................................29
8.10 Rights as a Lender.........................................................................29
8.11 Lender Credit Decision.....................................................................29
8.12 Successor Agent............................................................................29
8.13 Notes......................................................................................30
8.14 Agent's Fee................................................................................30
8.15 Delegation to Affiliates...................................................................30
ARTICLE IX RATABLE PAYMENTS...........................................................................31
9.01 Ratable Payments...........................................................................31
ARTICLE X BENEFIT OF AGREEMENT;
ASSIGNMENTS; PARTICIPATIONS................................................................31
10.01 Successors and Assigns.....................................................................31
10.02 Participations.............................................................................31
10.03 Assignments................................................................................32
10.04 Dissemination of Information...............................................................33
10.05 Tax Treatment..............................................................................33
ARTICLE XI NOTICES....................................................................................33
11.01 Giving Notice..............................................................................33
11.02 Change of Address..........................................................................34
ARTICLE XII MISCELLANEOUS..............................................................................34
12.01 Amendments.................................................................................34
12.02 Preservation of Rights.....................................................................35
12.03 Survival of Representations................................................................35
12.04 Governmental Regulation....................................................................35
12.05 Headings...................................................................................35
12.06 Entire Agreement...........................................................................35
12.07 Several Obligations; Benefits of this Agreement............................................35
12.08 Expenses; Indemnification..................................................................35
12.09 Numbers of Documents.......................................................................37
12.10 Severability of Provisions.................................................................37
12.11 Nonliability of Lenders....................................................................37
12.12 CHOICE OF LAW..............................................................................37
12.13 CONSENT TO JURISDICTION....................................................................38
12.14 WAIVER OF JURY TRIAL.......................................................................38
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
12.15 Disclosure.................................................................................38
12.16 Withholding Tax Exemption..................................................................38
12.17 Execution in Counterparts..................................................................39
</TABLE>
iii
<PAGE> 5
PAGE
iv
<PAGE> 6
v
<PAGE> 7
EXHIBITS
Exhibit A - Promissory Note
Exhibit B - Agent Letter of Direction
Exhibit C - Roney Letter of Direction and Authorization
Exhibit D-1 - Notice of Borrowing
Exhibit D-2 - Notice of Borrowing (Conversion Date)
SCHEDULES
Schedule 1.01 - Interest Payment Dates
Schedule 2.05(A) - Fixed Reference Rates
Schedule 2.05(B) - Zero Coupon Methodology
Schedule 2.05(C) - Early Payment Fee
vi
<PAGE> 8
FACILITY AND GUARANTY AGREEMENT
THIS FACILITY AND GUARANTY AGREEMENT, dated as of February 12, 1999, is
by and among AMERUS LIFE HOLDINGS, INC., an Iowa corporation (the "Company"),
the Lenders and THE FIRST NATIONAL BANK OF CHICAGO, individually and as Agent
for the Lenders hereunder.
R E C I T A L S:
A. The Company has requested the Lenders to make advances to certain
managers and executives (the "Program Participants") of the Company and its
Subsidiaries in the aggregate principal amount of up to $27,500,000, the
proceeds of which will be used by the Program Participants to purchase Common
Stock and ACES pursuant to the Stock Purchase Program. The Company has also
requested the Lenders to make Incremental Loans to Program Participants.
B. By virtue of the Program Participants' services to the Company and
its Subsidiaries, the Company has derived and will continue to derive
substantial benefits. The Company believes that the ownership of Common Stock
and ACES by the Program Participants which will be facilitated by the Loans will
provide incentive to the Program Participants in performing their jobs so as to
more closely align the interests of the Program Participants with those of the
stockholders of the Company and thus confer significant benefits upon the
Company.
C. It is a condition precedent to the obligation of the Lenders to make
advances to the Program Participants that the Company shall have executed and
delivered this Agreement, thereby guaranteeing the Loans. The Lenders are
willing to extend the Loans in reliance upon the Guaranty and, in good faith,
have not relied upon any Margin Stock as collateral in extending or maintaining
the Loans.
D. The Company desires to execute this Agreement to satisfy the
condition described in the preceding paragraph and to induce the Lenders to make
the Loans contemplated hereby, and the Lenders desire to make the Loans to the
Program Participants only on the terms and subject to the conditions set forth
herein and in the other Loan Documents.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
<PAGE> 9
As used in this Agreement, the following terms shall have the following
meanings:
"2.05(A) Information" has the meaning set forth in Section 2.02(b).
"ACES" means the 7.00% Adjustable Conversion-rate Equity Security Units
issued by the Company pursuant to that certain Prospectus Supplement dated July
21, 1998.
"Advance" means, with respect to any Lender, such Lender's pro-rata
portion of any Loan.
"Agent" means First Chicago in its capacity as agent for the Lenders
pursuant to Article VIII hereof, and not in its individual capacity as a Lender,
and any successor Agent appointed pursuant to Article VIII hereof.
"Aggregate Commitment" means the aggregate of the Commitments of all
the Lenders.
"Agreement" means this Facility and Guaranty Agreement as from time to
time amended, supplemented, restated or otherwise modified and in effect.
"AmerUs Life" shall mean AmerUs Life Insurance Company, a stock life
insurance company.
"Authorization" means a Letter of Direction and Authorization to Roney
in the form of Exhibit C hereto executed by a Borrower.
"Authorized Officer" means the President, Chairman, Chief Executive
Officer, any other executive vice president or senior vice president of the
Company, acting singly.
"Borrower Account" has the meaning set forth in Section 4 of the Note.
"Borrower Amount" means, with respect to a Borrower, the maximum
aggregate principal amount of Loans (other than Incremental Loans) which may be
made to such Borrower, as specified by the Company pursuant to the second
sentence of Section 2.01(a), as from time to time reduced pursuant to the third
sentence of such Section.
"Borrower Base Amount" means, with respect to a Borrower, an amount
equal to its Borrower Amount minus its Borrower Option Amount.
"Borrower Event of Repayment" has the meaning set forth in Section 6 of
the Note.
"Borrower Option Amount" means, with respect to a Borrower, that
portion of the Borrower Amount of such Borrower designated by the Company in
accordance with the second sentence of Section 2.01(a) as being for the purpose
of funding the exercise of options to acquire Common Stock.
<PAGE> 10
"Borrowers" has the meaning set forth in Section 2.01(a).
"Business Day" means a day (other than a Saturday or Sunday) on which
banks generally are open in Chicago, Illinois for the conduct of substantially
all of their commercial lending activities and on which dealings in United
States Dollars are carried on in the London interbank market.
"Change of Control" shall mean the occurrence of any of the following
events: (i) the Company shall cease to own, directly, or indirectly through
Wholly-Owned Subsidiaries, 100% of the issued and outstanding voting stock of
AmerUs Life ordinarily entitled to vote for the election of directors, or any
other class of stock of AmerUs Life of which the Company owns 50% or less shall
become entitled to elect a majority of AmerUs Life's board of directors; (ii)
failure of Group at any time to own a majority of the voting shares of the
Company as determined pursuant to Section 521A.14 of the Iowa Code other than as
a result of a transaction or series of transactions effecting the
demutualization of American Mutual Holding Company; or (iii) during any period
of 25 consecutive calendar months, individuals who at the beginning of such
period constituted the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the stockholders or members, as the case may be, of the Company was
approved by a vote of a majority of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of such Board of Directors then in office;
"Closing Date" means February 16, 1999.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Commitment" means, for each Lender, the commitment of such Lender to
make Loans pursuant hereto not in the aggregate exceeding the amount set forth
opposite such Lender's name on the signature page hereto.
"Common Stock" means the Company's Class A common stock, no par value
per share.
"Company" has the meaning set forth in the introduction hereto.
"Conversion Date" has the meaning set forth in Section 2.02(b).
"Current Payment Rate" means a rate of interest, determined on the
basis of a year of 360 days, equal to $0.40 divided by the weighted average cost
of Shares of Common Stock purchased by Roney pursuant to the Authorizations.
"Dollars" and the sign $ each means lawful currency of the United
States of America.
3
<PAGE> 11
"Early Payment Fee" has the meaning set forth in Section 2.05(a).
"Eligible Assignee" shall mean (i) a commercial bank organized under
the laws of the United States of America, or any State thereof, and having total
assets in excess of $10,000,000,000; or (ii) a commercial bank which is
organized under the laws of any other country, and which has total assets in
excess of $10,000,000,000, provided that such bank is acting through a branch or
agency located in the United States of America.
"Existing Credit Agreement" means that certain Credit Agreement dated
as of October 23, 1997 by and among the Company, as borrower, the financial
institutions parties thereto in their capacities as lenders thereunder, The
Chase Manhattan Bank, as administrative agent, as in effect on the date hereof
(giving effect to the amendments and consents dated as of May 30, 1997, May 20,
1998, June 22, 1998, October 2, 1998 and December 4, 1998 but without giving
effect to any future amendments, supplements, modifications or waivers of the
terms thereof unless consented to in writing by the Required Lenders and without
giving effect to any future termination thereof).
"First Chicago" means The First National Bank of Chicago, in its
individual capacity, and its successors.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Group" shall mean AmerUs Group Co., an Iowa corporation.
"Guaranty" means the provisions of Article VII hereof and the rights
and obligations of the Company thereunder.
"Guaranteed Debt" has the meaning set forth in Section 7.01.
"Incremental Loan" means, with respect to a Borrower, the Loans to such
Borrower described in the second sentence of Section 2.01(a) in an amount not in
excess of such Borrower's Shortfall Amount, and "Incremental Loans" means all
such Loans collectively.
"Indebtedness" of any Person shall mean (a) all indebtedness of such
Person for borrowed money, (b) the deferred purchase price of assets or services
which in accordance with GAAP would be shown on the liability side of the
balance sheet of such Person, (c) the face amount of all letters of credit
issued for the account of such Person and, without duplication, all drafts drawn
thereunder, (d) all Indebtedness of a second Person secured by any Lien on any
property owned by such first Person, whether or not such Indebtedness has been
assumed, (e) all Capitalized Lease Obligations of such Person, (f) all
obligations of such Person under Interest Rate Protection Agreements and (g) all
Contingent Obligations of such Person with respect to any of the foregoing;
provided, that
4
<PAGE> 12
Indebtedness shall not include (w) obligations of the Company or any of its
Subsidiaries described in clauses (x) or (y) of the definition of "Subsidiary",
(x) trade payables (including payables under insurance contracts and reinsurance
payables) and accrued expenses, in each case arising in the ordinary course of
business and (y) obligations with respect to Policies. For purposes hereof, the
terms "GAAP", "Capitalized Lease Obligations", "Interest Rate Protection
Agreements", "Contingent Obligations", and "Policies" shall have the meanings
ascribed to them by the Ongoing Credit Agreement.
"Initial Loans" means Loans made on the Closing Date in the aggregate
amount of $4,499,750 to fund the purchase of 219,500 ACES from Morgan Stanley &
Co., Incorporated.
"Interest Payment Date" means the Conversion Date and each of the dates
set forth on Schedule 1.01 attached hereto following the Conversion Date.
"Interest Rate" means the rate of interest applicable to the Loans on
and after the Conversion Date. Such rate shall be the fixed rate of interest
agreed upon by the Company and the Lenders pursuant to the first sentence of
Section 2.02(b) unless no such rate is agreed upon, in which case the Interest
Rate shall be the floating rate of interest set forth in the third sentence of
Section 2.02(b).
"Lenders" means the lending institutions listed on the signature pages
to this Agreement and their respective successors and assigns.
"Lending Installation" means with respect to a Lender or the Agent, any
office, branch, subsidiary or affiliate of such Lender or the Agent.
"Letter of Direction" means a letter of direction to the Agent in the
form of Exhibit B hereto executed by a Borrower.
"Lien" has the meaning ascribed to it by the Ongoing Credit Agreement.
"Loan" means the sum of the amounts advanced to a Borrower by the
Lenders pursuant to Section 2.01 and "Loans" means all such Loans collectively.
"Loan Documents" means this Agreement, each Note, each Letter of
Direction, each Authorization, and any and all other documents or agreements
executed in connection with this Agreement and contemplated hereby or thereby
and executed by the Company or any Borrower in favor of the Agent or any Lender,
as the same may be amended, supplemented, restated or otherwise modified from
time to time and in effect.
"Margin Stock" has the meaning ascribed to it by Regulation U.
5
<PAGE> 13
"Material Adverse Effect" shall mean a material adverse effect on the
business, property, assets, liabilities, condition (financial or otherwise) or
prospects of the Company or of the Company and its Subsidiaries taken as a
whole.
"Material Subsidiary" means a direct or indirect Subsidiary of the
Company which meets any of the following conditions: (i) the Company's and its
other Subsidiaries' investments in and advances to the Subsidiary exceed 10
percent of the total assets of the Company and its Subsidiaries consolidated as
of the end of the Company's most recently completed fiscal year; (ii) the
Company's and its other Subsidiaries' proportionate share of the total assets
(after intercompany eliminations) of the Subsidiary exceeds 10 percent of the
total assets of the Company and its Subsidiaries consolidated as of the end of
the Company's most recently completed fiscal year; or (iii) the Company's and
its other Subsidiaries' equity in the income from continuing operations of the
Subsidiary exceeds 10 percent of such income of the Company and its Subsidiaries
consolidated for the Company's most recently completed fiscal year.
"Maturity Date" means (a) March 5, 2004 if the Conversion Date is on or
prior to June 6, 1999, (b) June 7, 2004 if the Conversion Date is between June
7, 1999 and September 7, 1999, inclusive, and (c) September 8, 2004 if the
Conversion Date is after September 7, 1999.
"Note" means a master promissory note in the form of Exhibit A hereto
executed by a Borrower in an original principal amount equal to such Borrower's
Borrower Amount, and "Notes" means, collectively, all such promissory notes, in
each case as the same may be amended, supplemented, restated or otherwise
modified from time to time and in effect.
"Notice of Assignment" has the meaning set forth in Section 10.03(b).
"Notice of Borrowing" means a notice of borrowing in the form of
Exhibit D-1 or D-2 hereto.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Notes, all accrued and unpaid fees and Early Payment Fees and
all expenses, reimbursements, indemnities and other obligations of the Company
or any Borrower to the Lenders or any Lender, the Agent or any indemnified party
hereunder or under any Loan Document if such expense, reimbursement, indemnity
or obligation arises under or pursuant to such Loan Documents.
"Ongoing Credit Agreement" means that certain Credit Agreement dated as
of October 23, 1997 by and among the Company, as borrower, the financial
institutions parties thereto in their capacities as lenders thereunder, The
Chase Manhattan Bank, as administrative agent, as in effect on the date hereof
(giving effect to the amendments and consents dated as of May 30, 1997, May 20,
1998, June 22, 1998, October 2, 1998 and December 4, 1998), as from time to time
amended or restated.
"Option Amount" means the sum of the Borrower Option Amount for all
Borrowers.
6
<PAGE> 14
"Option Loans" means Loans (other than Incremental Loans) made on the
Conversion Date, the proceeds of which are utilized to fund the exercise of
options to purchase Common Stock.
"Participants" has the meaning provided in Section 10.02(a) hereof.
"Person" means any individual, partnership, joint venture, firm,
corporation, association, limited liability company, trust or other enterprise
or any government or political subdivision or any agency, department or
instrumentality thereof.
"Program Event of Default" has the meaning set forth in Section 6.01.
"Pro-rata" means when used with respect to a Lender, and any described
aggregate or total amount, an amount equal to said Lender's pro-rata share or
portion based on its percentage of the aggregate outstanding principal amount of
outstanding Notes, or, if no such principal amount is outstanding, based on its
percentage of the Aggregate Commitment.
"Purchaser" has the meaning set forth in Section 10.03(a).
"Regulation T" means Regulation T of the Board of Governors of the
Federal Reserve System as from time to time in effect and shall include any
successor or other regulation or official interpretation of such Board of
Governors relating to the extension of credit by securities brokers and dealers
for the purpose of purchasing or carrying margin stocks.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks or other Persons for the purpose of purchasing or
carrying margin stocks.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System as from time to time in effect and shall include any
successor or other regulation or official interpretation of said Board of
Governors relating to the extension of credit by the specified lenders for the
purpose of purchasing or carrying margin stocks.
"Reimbursement Agreement" means an agreement entered into between the
Company and a Borrower in connection with his/her Loans relating to his/her
obligation to reimburse the Company for amounts paid to the Lenders in respect
of such Borrower pursuant to the Guaranty, as from time to time amended in the
sole discretion of the Company.
"Reimbursement Obligations" means, with respect to any Borrower, all
obligations of such Borrower to the Company which now exist or may arise out of
or in connection with the Guaranty or the performance by the Company of its
obligations thereunder, including all such obligations under his/her
Reimbursement Agreement.
7
<PAGE> 15
"Required Lenders" means Lenders in the aggregate having at least
66-2/3% of the then aggregate unpaid principal amount of all Loans or, if no
such principal amount is then outstanding, Lenders in the aggregate holding at
least 66-2/3% of the Aggregate Commitment.
"Roney" means Roney & Co., which has been selected by the Company in
its sole discretion as a broker to facilitate the orderly purchase of shares of
Common Stock and ACES under the Stock Purchase Program.
"Shortfall Amount" means, with respect to any Borrower, the amount of
interest which has accrued on such Borrower's Loans up to but excluding the
Conversion Date less the amount of all payments made in respect of such accrued
interest on or prior to the Business Day next following the Subscription Date.
"Stock Purchase Program" means the AmerUs Life Holdings, Inc. Executive
Stock Purchase Plan adopted by the Board of Directors of the Company on November
13, 1998, entitling certain managers and executives of the Company and its
Subsidiaries to purchase Common Stock and ACES of the Company, as such Stock
Purchase Program may be amended, supplemented, restated or otherwise modified
from time to time in the sole discretion of the Company.
"Subscription Date" has the meaning set forth in Section 2.02(b).
"Subsidiary" of any Person shall mean and include (a) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (b) any partnership, association, joint
venture or other entity in which such Person directly or indirectly through
Subsidiaries has more than a 50% equity or voting interest at the time. Unless
otherwise expressly provided, all references herein to "Subsidiary" shall mean a
Subsidiary of the Company; provided that, notwithstanding the foregoing
provisions of this definition, any grantor trust or limited liability company
established by the Company and/or its Subsidiaries in order to effectuate the
lease/leaseback transaction with Linzer Elektrizitats-, Fernwarme- und
Verkehrsbetriebe Aktiengesellschaft ("ESG") with respect to a cogeneration
facility in Linz, Austria as described in the summary of terms and structure
delivered to the Administrative Agent and the Banks prior to the Fourth
Amendment Effective Date (all as defined in the Existing Credit Agreement), and
any trust or limited liability company formed by the Company and/or its
Subsidiaries after the Fourth Amendment Effective Date to effectuate
transactions with ESG or any other Person in which the Indebtedness of the
Company and its Subsidiaries incurred in connection therewith is comprised
solely of (x) obligations which are non-recourse to the Company or any of its
Subsidiaries and (y) other obligations which are or will be 100% defeased by
U.S. Government obligations (each such
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transaction, including the lease/leaseback with ESG, a "Permitted Transaction"),
shall not constitute Subsidiaries for purposes of this Agreement.
"Transferee" has the meaning set forth in Section 10.04.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Program Event of Default.
"Wholly-Owned Subsidiary" of any Person shall mean any Subsidiary of
such Person to the extent all of the capital stock or other ownership interests
in such Subsidiary, other than directors' or nominees' qualifying shares, is
owned directly or indirectly by such Person.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms. The words "herein," "hereof" and
words of similar import as used in this Agreement shall refer to this Agreement
as a whole and not to any particular provision in this Agreement. References to
"Articles," "Sections," "subsections," "paragraphs," "Exhibits", "clauses" and
"Schedules" in this Agreement shall refer to Sections, subsections, paragraphs,
Exhibits, clauses and Schedules of this Agreement unless otherwise expressly
provided; references to Persons include their respective permitted successors
and assigns or, in the case of governmental Persons, Persons succeeding to the
relevant functions of such persons. Any term which is stated to be used herein
with the same meaning as set forth in the Existing Credit Agreement or Ongoing
Credit Agreement, as applicable, shall be deemed to incorporate herein any other
definitions from the Existing Credit Agreement or Ongoing Credit Agreement, as
applicable, which comprise part of the definition of such term.
ARTICLE II
AMOUNTS AND TERMS OF THE LOANS
2.01 The Loans.
(a) Each Lender severally (and not jointly) agrees, on the terms and
conditions set forth in this Agreement, to make Loans from time to time on and
after the Closing Date to and including the Conversion Date to individual
Program Participants (such Program Participants who request and obtain a Loan
hereunder are referred to as a "Borrower" individually and as the "Borrowers"
collectively), severally and not jointly, in amounts not to exceed in the
aggregate the amount of its respective Commitment; provided that no Loans (other
than Option Loans and Incremental Loans) may be made after the Subscription Date
and Option Loans shall be made only on the Conversion Date. Each Lender also
severally (and not jointly) agrees, on the terms and conditions set forth in
this Agreement, to make a Loan to each Borrower on the Conversion Date in an
amount not in excess of such Lender's Pro-rata share of the Shortfall Amount of
such Borrower; provided, however, that the aggregate amount of all Loans (other
than Incremental Loans) shall not exceed $25,000,000 and
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the aggregate amount of all Incremental Loans shall not exceed $2,500,000. Each
of the Borrowers and the Borrower Amount of such Borrower shall be identified in
a writing separately delivered by the Company to the Agent at least one Business
Day prior to the Closing Date, which writing shall specify that portion, if any,
of such Borrower Amount which is for the purpose of funding the exercise of
options to acquire Common Stock. Such maximum aggregate principal amount for any
Borrower may be reduced from time to time by the Company by written notice of
the amount of such reduction from the Company to the Agent delivered on or prior
to the Subscription Date. No amount of the Loans which are repaid or prepaid by
the Borrowers may be reborrowed hereunder.
(b) Except as the Company and the Lenders may otherwise agree, all
Loans shall be made in accordance herewith and with the terms of the Notes in up
to eight draws on or prior to the Subscription Date and two draws (one in
respect of Option Loans and one in respect of Incremental Loans) on the
Conversion Date. No Lender shall be obligated to make a Loan to a Borrower
unless the Borrower Amount of such Borrower is equal to or greater than
$100,000. The Loans to a Borrower hereunder shall consist of Loans made to such
Borrower from the several Lenders on a Pro-rata basis. The aggregate Loans made
by the Lenders on any borrowing date shall be allocated among the Borrowers
ratably relative to (i) the Borrower Base Amount of each Borrower in the case of
Loans made on or prior to the Subscription Date, (ii) the Borrower Option Amount
of each Borrower in the case of the Option Loans made on the Conversion Date and
(iii) the Shortfall Amount of each Borrower in the case of the Incremental Loans
made on the Conversion Date.
2.02 Notes.
(a) The Loans made to each Borrower, and such Borrower's obligation to
repay such Loans, shall be evidenced by a single Note issued by such Borrower to
the Agent (for the benefit of all of the Lenders sharing in the Loans to such
Borrower), which shall provide, among other things, that (i) such Note shall
mature, and the outstanding principal amount thereof and the unpaid accrued
interest thereon shall be due and payable, on the Maturity Date, (ii) such
Borrower shall pay interest on the unpaid principal amount of such Loans made to
such Borrower at the rates as provided in the Note from the date of such Loans
until such principal amount is paid in full, payable to the Agent, for the
benefit of the Lenders, in arrears on each Interest Payment Date, (iii) such
Note shall be prepayable at the option of the Borrower only as and to the extent
provided in the Note and (iv) any such prepayments shall be subject to the
payment of an Early Payment Fee and related fees as set forth in the Note. All
interest payments and prepayments in respect of any Loan shall be applied by the
Agent among the Lenders on a Pro-rata basis (based on each Lender's Pro-rata
share of the outstanding principal amount thereof).
(b) Promptly after the earlier to occur of (a) the date designated as
the "Subscription Date" by the Company in a writing to the Agent delivered on or
prior to such designated date or (b) September 30, 1999 (such earlier date
hereinafter being referred to as the "Subscription Date"), the Lenders and the
Company shall confer and in good faith seek to agree within three Business Days
after the Subscription Date upon the fixed rate of interest at which the Notes
shall accrue interest on
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and after the Conversion Date (which rate shall be the rate reasonably
determined by First Chicago to be the simple interest rate which is
approximately equivalent to the market yield to the Maturity Date, as agreed to
by the Company and the Lenders), the Current Payment Rate and the rates and
dates to be inserted into Schedule 2.05(A) (the "2.05(A) Information"). Subject
to the following sentence, the date designated as the "Conversion Date" by the
Agent, which date shall be no more than three Business Days after the date on
which such fixed interest rate, the Current Payment Rate and the 2.05(A)
Information are agreed upon, is hereinafter referred to as the "Conversion
Date". In the event that the Lenders and the Company do not reach agreement on
such fixed interest rate, the Current Payment Rate and the 2.05(A) Information
within three Business Days after the Subscription Date, then from and after the
fourth Business Day after the Subscription Date the rate of interest applicable
to the Notes shall be a floating rate of interest equal to the Corporate Base
Rate (as defined in the Note) per annum and such fourth Business Day shall be
the "Conversion Date". Upon the determination of the Conversion Date, the
Interest Rate and, if applicable, the Current Payment Rate and the 2.05(A)
Information pursuant to this Section, the Agent shall promptly give notice of
same to the Borrowers.
(c) Upon the occurrence and during the continuance of any Program Event
of Default, the Agent may (and at the request of any Lender, the Agent shall)
request that the Borrowers execute and deliver amended and restated Notes for
each Lender in replacement of the existing master Notes.
2.03 Disbursement of Funds. Pursuant to the Letters of Direction of the
Borrowers, (a) the proceeds of all Loans (other than Initial Loans, Option Loans
and Incremental Loans) will be disbursed directly to Roney & Co. for the account
of the applicable Borrower, (b) the proceeds of the Initial Loans shall be
disbursed directly to Morgan Stanley & Co., Incorporated for the benefit of the
Borrowers, (c) the proceeds of all Option Loans will be disbursed directly to
the Borrower Account of the applicable Borrower and then further paid from such
account to the Company for the account of the Borrower and (d) the proceeds of
all Incremental Loans will be disbursed directly to the Lenders for the account
of the Borrowers in payment of the Shortfall Amount of the Borrowers.
2.04 Distribution of Payments. The Agent agrees to make payments of
amounts received for the account of any Lender in accordance with Section 3 of
the applicable Borrower's Note.
2.05 Funding Indemnity.
(a) The Early Payment Fee payable under each Note to First Chicago in
respect of any of the principal amount thereof paid during the period from the
Conversion Date to (but not including) the Maturity Date, calculated with
respect to the principal amount of such Note to be prepaid, shall be an amount
equal to (i) the sum of (A) an amount equal to the difference, if any, between
the Present Value of the remaining fixed rate payments under the Reference Swap
(exclusive of accruals to but excluding the Break Date) minus the Present Value
of the fixed rate payments under the Redeployment Swap; provided, however, that
if the value of (i)(A) is negative, such amount shall not exceed the amount of
deferred interest (i.e. the excess of the amount of interest which has
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accrued at the Interest Rate under such Note over the amount of interest which
has accrued at the Current Payment Rate under such Note) owed on such Note plus
(B) if the Break Date is not an Interest Payment Date, an amount equal to the
positive difference, if any, between the Present Value of the Current Floating
Rate payment under the Redeployment Swap minus the Present Value of the Current
Floating Rate payment under the Reference Swap (exclusive of accruals to but
excluding the Break Date), or (ii) if the Zero Coupon Rate cannot be determined,
the amount of all Losses of First Chicago MINUS, in the case of either clause
(i) or clause (ii), the difference between interest on the principal amount of
the Note accrued and paid during the period from the Conversion Date to (but not
including) the Maturity Date accrued at the Interest Rate for the period from
and including the Conversion Date such principal amount was outstanding and
interest on such amount calculated at the applicable Current Payment Rate for
such period (the amount calculated by reference to clause (i) or (ii) above
which relates to any Note or prepayment thereof being referred to, relative to
such Note or prepayment, as the "Early Payment Fee"). An example of the
computation of the Early Payment Fee is attached as Schedule 2.05(C) hereto. In
the event of a conflict between the method of computing the Early Payment Fee as
described above and as described on such example, the methodology set forth on
such example (which is incorporated herein by reference) shall control.
Notwithstanding the foregoing, no Early Payment Fee shall be payable in respect
of any prepayment of any Loan prior to the Conversion Date or, if and only if a
fixed rate of interest has not become applicable to the Notes pursuant to
Section 2.02(b), any prepayment of any Loan on or after the Conversion Date.
(b) For purposes of this Section 2.05, the following terms shall have
the following meanings:
"Break Date" means, with respect to any Break Event, the date
on which such Break Event occurs.
"Break Event" means any voluntary or mandatory (whether as a
result of acceleration or otherwise) repayment of all or any portion of
any Loan during the period from the Conversion Date to (but not
including) the Maturity Date.
"Current Floating Rate" means, with respect to the Reference
Swap, LIBOR determined two London banking days prior to the Interest
Payment Date next preceding the Break Date, and with respect to the
Redeployment Swap, LIBOR referred to in the definition of Redeployment
Swap.
"LIBOR" means the London interbank offered rate appearing as
of 11:00 a.m. (London time) on Telerate Page 3750.
"Loss" means, with respect to First Chicago, an amount equal
to the total amount required by First Chicago, as determined in good
faith by First Chicago as of the Break Date, to compensate it for any
losses, costs and expenses that it may incur as a result of the
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occurrence of the Break Event, including, without limitation, any costs
of maintaining, terminating, hedging or deploying any fixed rate or
floating rate funding arrangements or commitments and/or any
transactions employed to hedge differences arising between the Interest
Rate of the Loans and the floating rate cost of funds, as determined
with reference to market interest rates or prices available or existing
at or about the time of such Break Event.
"Present Value" means, in respect of any amount, the value of
the amount on the Break Date after discounting such amount to present
value from its respective due date at the Zero Coupon Rate in the case
of fixed rate payments or at the Current Floating Rate of the
Redeployment Swap in the case of floating rate payments.
"Redeployment Swap" means, with respect to a Break Event, an
interest rate swap entered into at a rate per annum equal to the fixed
rate a swap dealer would bid to enter into as a fixed rate payor,
determined by First Chicago in good faith (as of 2:00 p.m., Chicago
time, two days prior to the Break Date) on the basis of the quotation
First Chicago would provide as a fixed rate payor to another swap
dealer (or if First Chicago declines to provide such quotation for
whatever reason, then on the basis of what a leading interest rate swap
dealer selected by First Chicago in good faith is willing to bid as a
fixed rate payor to enter into the Redeployment Swap as quoted to First
Chicago on such date of determination) and having the same terms as the
Reference Swap, except that it (a) commences on the Break Date, (b) has
equal fixed payments and (c) has an initial floating rate payment
calculated at LIBOR plus .80% per annum determined on the Break Date
for U.S. Dollar deposits having a maturity equal to the period from
such Break Date to the next succeeding Interest Payment Date, or, if
there exists no LIBOR rate for U.S. Dollar deposits of such maturity
maturing immediately before or immediately after such maturity,
whichever is higher. If the Redeployment Swap has a notional amount
less than $5,000,000, then the Redeployment Swap will be deemed to have
a notional amount of $5,000,000 for the sole purpose of obtaining any
such quotation.
"Reference Swap" means an interest rate swap (a) deemed to
have been entered into no later than two London banking days prior to
the Conversion Date (and confirmed in writing to the Company) and
commencing on the Conversion Date, (b) having a notional amount at any
time equal to that part of the aggregate principal amount of the Loans
outstanding on the Conversion Date and which has become subject to the
Break Event, (c) maturing on the Maturity Date and (d) obligating the
floating rate payor to make payments on each Interest Payment Date
after the Conversion Date at LIBOR determined two London banking days
before the next preceding Interest Payment Date for three-month U.S.
Dollar deposits plus .80% per annum, calculated for actual days elapsed
on a 360-day year basis, in exchange for receiving fixed rate payments
from a fixed rate payor on such dates in such amounts as set forth on
Schedule 2.05(A) (each such rate, the "Reference Fixed Rate", which the
parties agree will be the swap market rate two London banking days
before the Interest
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Rate is set, as reasonably determined by First Chicago), calculated for
actual days elapsed on a 360-day year basis.
"Telerate Page 3750" means the display designated as "Page
3750" on the Telerate Service (or such other page as may replace Page
3750 on that service or such other service as may be nominated by the
British Bankers' Association as the information vendor for the purpose
of displaying British Bankers' Association Interest Settlement Rates
for U.S. Dollar deposits).
"Zero Coupon Rate" means the rate of interest charged for a
future single payment assuming no interest payments prior to the
payment date. Each fixed payment will be discounted using the Zero
Coupon Methodology. The Zero Coupon Rate for each fixed payment date
will be determined using the appropriate LIBOR rate and the rates
implied by the "90 Day Euro$" futures contracts at the Chicago
Mercantile Exchange (IMM) at IMM Settlement (2:00 p.m. Chicago time)
two days prior to the Break Date as appropriate to the respective
payment dates.
"Zero Coupon Methodology" means the discounting methodology
set forth on Schedule 2.05(B) hereto.
(c) If for any reason any Early Payment Fee is not recoverable in full
from a Borrower or the Company pursuant to the terms of the applicable Note or
Article VII, the Company agrees, as its independent primary obligation, to pay
such amount to the applicable Lender (without duplication of amounts otherwise
paid) upon demand as additional consideration for entering into this Agreement
and funding the Loans.
(d) In the event that any Option Loan or Incremental Loan referenced in
a Notice of Borrowing delivered by the Company is not made on the Conversion
Date for any reason (other than a breach by a Lender of its obligations
hereunder), the Company will indemnify each Lender upon demand for any loss or
cost incurred by it resulting therefrom, including, without limitation, any loss
or cost incurred in liquidating or employing deposits acquired to fund or
maintain its Option Loans or in terminating or unwinding any interest rate
exchange or similar arrangement entered into by such Lender in connection with
such Loans. Such loss or cost will be calculated consistent with Section
2.05(a).
ARTICLE III
CONDITIONS PRECEDENT
3.01 Conditions to Obligations to Make Initial Loans. The obligations
of the Lenders to make the initial Loans to the Borrowers shall be subject to
the fulfillment of each of the following conditions precedent and receipt by the
Agent, with sufficient copies for each Lender, of each of the
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following (each such document to be in form and substance reasonably
satisfactory to the Agent and its counsel):
(a) Agreement. An executed original of this Agreement, which shall be
in full force and effect, together with all schedules, exhibits, certificates,
instruments, opinions, documents and financial statements required to be
delivered pursuant hereto.
(b) Notes. A Note duly executed by each Borrower evidencing the Loan to
such Borrower, dated the Closing Date, and payable to the order of the Lenders.
(c) Borrower Information. Each Borrower shall have delivered to the
Agent a personal financial statement in form satisfactory to the Agent.
(d) Legal Opinion. Written opinions of internal and outside counsel to
the Company, in form and substance satisfactory to the Agent.
(e) Agent Letter of Direction. A Letter of Direction executed by each
Borrower (and, if the applicable Borrower Account is a joint account, executed
by each joint account holder).
(f) Roney Authorization. An Authorization executed by each Borrower
(and, if the applicable Borrower Account is a joint account, executed by each
joint account holder).
(g) Roney Documents. All documents that Roney & Co. may request in
connection with the Stock Purchase Program and the Loan Documents and the
transactions to be consummated in connection therewith.
(h) Charter Documents. Copies of the certificate of incorporation of
the Company, together with all amendments thereto, both certified by the
appropriate governmental officer in its jurisdiction of incorporation, together
with a certificate of existence issued by the Secretary of State of Iowa and
such other jurisdictions as shall be requested by the Agent.
(i) Secretary's Certificate. A certificate, executed by the Secretary
or Assistant Secretary of the Company, which shall (i) identify by name and
title and bear the signature of the officers of the Company authorized to sign
the Loan Documents upon which certificate the Agent and the Lenders shall be
entitled to rely until informed of any change in writing by the Company and (ii)
attach and certify copies of the Company's bylaws and its Board of Directors'
resolutions authorizing the execution, delivery and performance of the Loan
Documents to which the Company is a party.
(j) Officer's Certificate. A certificate, dated the Closing Date,
signed by the treasurer of the Company, stating that no Default or Event of
Default has occurred
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and is continuing under the Existing Credit Agreement, that no Program Event of
Default or Unmatured Default has occurred and is continuing and that the
representations and warranties contained in Article IV are true and correct on
and as of the Closing Date.
(k) List of Borrowers and Loan Amounts. One Business Day prior to the
Closing Date, a list identifying each anticipated Borrower and the Borrower
Amount of such Borrower.
(l) Account Applications. The Agent shall have received on or prior to
the Closing Date a completed account application and such other supporting
documentation from each Borrower sufficient to open the Borrower Account of each
Borrower.
(m) Other Documents. Such other documents as the Agent or its counsel
may reasonably request.
Subject to the following sentence, if each of the conditions precedent
set forth in this Section 3.01 has not been fully satisfied or waived on the
Closing Date, then this Agreement and the other Loan Documents shall
automatically terminate and be of no further force and effect without any
further action by any party hereto or thereto, provided that all indemnification
provisions set forth in the Loan Documents shall survive such termination. If
all of the above conditions are satisfied on or before the Closing Date, except
with respect to one or more Borrowers (each a "Deficient Borrower") any
condition set forth in Section 3.01(b), (c), (e), (f), (g) or (l) is not
satisfied, the Lenders shall not be obligated to make Loans to the Deficient
Borrowers but shall remain obligated to make Loans to the other Borrowers.
Solely for purposes of Section 3.01(b), (c), (e), (f), (g) and (l) only,
required delivery shall be deemed to have been made to the Agent if arrangements
for the delivery thereof have been made which are satisfactory to the Agent.
3.02 Conditions to All Loans. The Lenders shall not be required to make
any Loan unless on the applicable borrowing date:
(a) There exists no Program Event of Default or Unmatured Default and
none would result from the Loans requested for such borrowing date.
(b) The representations and warranties contained in Article IV are true
and correct as of such borrowing date except to the extent any such
representation or warranty is stated to relate solely to an earlier date, in
which case such representation or warranty shall be true and correct on and as
of such earlier date.
Each Borrowing Notice with respect to each such Loan (even though such notice is
delivered by Roney & Co. pursuant to the Authorization) shall constitute a
representation and warranty by the Company that the conditions contained in
Sections 3.02(a) and (b) have been satisfied.
3.03 Additional Conditions to Incremental Loans. The Lenders shall not
be required to make an Incremental Loan to any Borrower unless on or prior to
the Conversion Date the applicable
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Borrower has executed and delivered to the Agent an amendment to the Note, in
form reasonably satisfactory to the Agent, reflecting an increase in the
principal amount of the Note equal to the amount of the Incremental Loan.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.01 Representations and Warranties of the Company. The Company
represents and warrants to the Agent and to each Lender as follows:
(a) Corporate Status. The Company and each of its Subsidiaries (i) is a
duly organized and validly existing corporation or business trust or other
entity in good standing under the laws of the jurisdiction of its organization
and has the corporate or other organizational power and authority to own its
property and assets and to transact the business in which it is engaged and
presently proposes to engage, except, to the extent the foregoing is applicable
to any Subsidiary, where such Subsidiary's failure to have such status or power
could not reasonably be expected to have a Material Adverse Effect and (ii) has
been duly qualified and is authorized to do business and is in good standing in
all jurisdictions where it is required to be so qualified and where the failure
to be so qualified could reasonably be expected to have a Material Adverse
Effect.
(b) Corporate Power and Authority. The Company has the corporate power
and authority to execute, deliver and carry out the terms and provisions of the
Loan Documents to which it is a party and has taken all necessary corporate
action to authorize the execution, delivery and performance of the Loan
Documents to which it is a party. The Company has duly executed and delivered
each Loan Document to which it is a party and each such Loan Document
constitutes the legal, valid and binding, obligation of the Company enforceable
against the Company in accordance with its terms, except to the extent that
enforceability thereof may be limited by applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally and general
principles of equity regardless of whether enforcement is sought in a proceeding
in equity or at law.
(c) No Contravention of Laws, Agreements or Organizational Documents.
Neither the execution, delivery and performance by the Company of the Loan
Documents to which it is a party nor compliance with the terms and provisions
thereof, nor the consummation of the transactions contemplated therein, (i) will
contravene any applicable provision of any law, statute, rule, regulation,
order, writ, injunction or decree of any court or governmental instrumentality,
(ii) will conflict or be inconsistent with or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of (or the obligation to create or impose)
any lien upon any of the property or assets of the Company or any of its
Subsidiaries pursuant to the terms of, any indenture, mortgage, deed of trust,
loan agreement, credit agreement (including without limitation the Existing
Credit Agreement) or any other material instrument to which the Company or any
of its Subsidiaries is a party or by which it or any of its property or assets
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are bound or to which it may be subject or (iii) will violate any provision of
the Certificate of Incorporation or By-Laws of the Company or any of its
Subsidiaries.
(d) Litigation and Contingent Liabilities. There are no actions, suits
or proceedings pending or threatened in writing involving the Company or any of
its Subsidiaries (including, without limitation, with respect to this Agreement
or any documentation executed in connection herewith) (i) that have or could
reasonably be expected to have a Material Adverse Effect or (ii) that could
reasonably be expected to have a material adverse effect on the rights or
remedies of the Lenders or the Agent or on the ability of the Company to perform
its respective obligations to the Lenders, the Agent hereunder and under the
other Loan Documents to which it is, or will be, a party.
(e) Approvals. No order, consent, approval, license, authorization, or
validation of, or filing, recording or registration with, or exemption by, any
Governmental Authority (including without limitation the Iowa Insurance
Division) is required to authorize or is required in connection with (i) the
execution, delivery and performance of any Loan Document or (ii) the legality,
validity, binding effect or enforceability of any Loan Document.
(f) Financial Condition; Financial Statements. (a) The December 31,
1997 audited consolidated financial statements of the Company and its
Subsidiaries and the September 30, 1998 unaudited consolidated financial
statements of the Company and its Subsidiaries previously delivered by the
Company to the Lenders present fairly in all material respects at the dates of
said statements the financial position of the Company and its Subsidiaries, as
applicable, and the results of operations for the periods covered thereby. All
such financial statements have been prepared in accordance with GAAP (as such
term is defined in the Existing Credit Agreement), as applicable, consistently
applied except to the extent provided in the notes to said financial statements.
(g) Existing Credit Agreement. There exists no Default or Event of
Default (as defined in the Existing Credit Agreement) and (ii) all
representations and warranties contained therein are true and correct in all
material respects with the same effect as though such representations and
warranties had been made on the date hereof (it being understood and agreed that
any representation or warranty which by its terms is made as of a specified date
shall be required to be true and correct in all material respects only as of
such specified date).
(h) Copy to Borrowers. The Company has furnished a copy of this
Agreement to each Borrower.
(i) Adoption of the Stock Purchase Program. The Stock Purchase Program
has been duly adopted, and the Stock Purchase Program and the purchase of the
Common Stock and ACES pursuant thereto have been duly approved, by all requisite
corporate action on behalf of the Company, and the Common Stock and ACES, when
so purchased, shall have been duly issued in compliance with all applicable laws
and shall be fully paid and non-assessable.
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(j) Borrower Event of Repayment. To the best knowledge of the Company,
no event has occurred and is continuing or would result from the making of the
Loans, that constitutes a Borrower Event of Repayment with respect to any
Borrower or would constitute a Borrower Event of Repayment with respect to any
Borrower but for the requirement that notice be given or time elapse or both.
(k) Regulation T, U and X. No part of the proceeds of any Loan will be
used in a manner which would violate, or result in a violation of, Regulation T,
Regulation U or Regulation X. Neither the making of any Loan hereunder, the
providing of the Guaranty by the Guarantors, the use of the proceeds thereof,
nor any other aspect of the transactions contemplated hereby will violate or be
inconsistent with the provisions of Regulation T, Regulation U or Regulation X.
No Margin Stock has been or will be pledged by any Borrower or by any other
Person to secure the Reimbursement Obligations of such Borrower. No
Reimbursement Obligations of any Borrower are or will be "indirectly secured"
(as defined in Regulation U) by any Margin Stock.
(l) True and Complete Disclosure. All factual information (taken as a
whole) heretofore or contemporaneously furnished by or on behalf of the Company
or any of its Subsidiaries to the Agent or any Lender (including, without
limitation, all information contained in the Loan Documents) for purposes of or
in connection with this Agreement or any transaction contemplated herein is true
and accurate in all material respects on the date as of which such information
is dated and not incomplete by omitting to state any material fact necessary to
make such information (taken as a whole) not misleading at such time in light of
the circumstances under which such information was provided.
ARTICLE V
COVENANTS OF THE COMPANY
5.01 Covenants. So long as any Note or any Obligation shall remain
unpaid (or any commitment which could give rise to any Obligations shall exist),
unless the Required Lenders shall otherwise consent in writing:
(a) Preservation of Corporate Existence, Etc. The Company shall (i)
preserve and maintain its corporate existence; and (ii) preserve and maintain,
and cause each Subsidiary to preserve and maintain, its corporate existence,
rights (charter and statutory), and franchises except where the failure to do so
could not reasonably be expected to have a Material Adverse Effect.
(b) Financial Reports and Other Information. The Company shall promptly
furnish to the Agent: (i) all financial and other information required to be
delivered by the Company by Section 6.01 of the Existing Credit Agreement not
later than the time such information is required to be delivered by such
Section; (ii) as soon as possible, and in any event within five Business Days
after the Company shall become aware of the occurrence of a Change of Control or
a Program Event of Default or an event which, with notice or lapse of time or
both, could constitute a Change of Control
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or a Program Event of Default, a statement of the chief financial officer of the
Company setting forth details of such Change of Control or Program Event of
Default or event and the action which the Company proposes to take with respect
thereto; (iii) as soon as possible, and in any event within five Business Days
after an executive officer of the Company shall have actual knowledge of the
occurrence of a Borrower Event of Repayment under any Note, a statement of an
Authorized Officer of the Company setting forth the details of such Borrower
Event of Repayment; and (iv) such other information (including non-financial
information) relating to the Company, its Subsidiaries or any Borrower as the
Agent or any Lender may reasonably request.
(c) Subordinated Debt. If at any time hereafter the Company shall incur
any Indebtedness which is contractually subordinated in right of payment to the
obligations of the Company under the Existing Credit Agreement or any successor
agreement to the Existing Credit Agreement, the Company shall cause such
subordinated obligations to also be subordinated in right of payment to the
Obligations of the Company under this Agreement to the same extent as such
subordinated obligations are subordinated to the obligations of the Company
under the Existing Credit Agreement or any successor agreement thereto.
(d) Inspection. The Company shall permit, and cause each Subsidiary to
permit, the Agent, and its representatives and agents, to inspect any of the
properties, corporate books and financial records of the Company and its
Subsidiaries, to examine and make copies of the books of account and other
financial records of the Company and its Subsidiaries, and to discuss the
affairs, finances and accounts of the Company and its Subsidiaries with, and to
be advised as to the same by, their respective officers or directors, at such
reasonable times during normal business hours and intervals as the Agent may
reasonably designate.
(e) Liens. From and after the earliest date (the "Trigger Date") upon
which (i) the Ongoing Credit Agreement is terminated, (ii) First Chicago ceases
to be a party thereto or (iii) the Ongoing Credit Agreement or any extension of
credit thereunder is secured, the Company shall not, and shall not permit any
Subsidiary to, create any Lien upon any of its assets or properties except (i)
Liens permitted by the Ongoing Credit Agreement as in effect immediately prior
to the Trigger Date and (ii) other Liens (as defined in the Ongoing Credit
Agreement immediately prior to the Trigger Date) securing aggregate Indebtedness
not in excess of $25,000.000. In the event that at any time the Company's 6.95%
Senior Notes due June 15, 2005 become secured by any assets or property, or are
guarantied by any Person, then the Company shall cause the Obligations to be
equally and ratably secured by such assets or property and equally and ratably
guarantied by such Person pursuant to documentation satisfactory to the Required
Lenders.
(f) Security. The Company will not permit any Reimbursement Obligation
of any Borrower to be secured or "indirectly secured" (within the meaning of
Regulation U) by any Margin Stock.
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(g) Use of Proceeds. The Company will apply the proceeds of the Option
Loans to each Borrower to payment of the stock option exercise price of the
Common Stock of the Company being acquired by such Borrower pursuant to the
Stock Purchase Program.
(h) Minimum Risk-Based Capital. The Company will not permit the
Risk-Based Capital for any Material Regulated Insurance Company to be less than
350%. For purposes of this Section 5.01(h), "Risk-Based Capital" and "Material
Regulated Insurance Company" shall have the meanings ascribed to them by the
Existing Credit Agreement.
ARTICLE VI
PROGRAM EVENTS OF DEFAULT; ACCELERATION
6.01 Program Events of Default. Each of the following events shall
constitute a "Program Event of Default":
(a) Any representation or warranty made by or on behalf of the Company
to the Lenders or the Agent under or in connection with this Agreement shall
prove to have been incorrect in any material respect when made;
(b) The Company shall fail to perform or observe any term, covenant or
agreement set forth in Section 5.01(b)(ii), (f), (g) or (h);
(c) The Company shall fail to perform or observe any term, covenant or
agreement set forth in Section 7.01 or 7.03 if the failure to perform or observe
such term, covenant or agreement set forth therein shall remain unremedied for
five (5) Business Days after written notice thereof shall have been given to the
Company by the Agent or any Lender;
(d) The Company shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement (other than Section 5.01(h))
or any other Loan Document to which it is a party on its part to be performed or
observed if the failure to perform or observe such term, covenant or agreement
set forth therein shall remain unremedied for thirty (30) days after written
notice thereof shall have been given to the Company by the Agent or any Lender;
(e) (i) The Company or any of its Subsidiaries shall (A) default in any
payment with respect to Indebtedness (other than the Obligations) in excess of
$5,000,000 (or such greater amount, not to exceed $25,000,000, as may be
provided in the corresponding provision of the Ongoing Credit Agreement)
individually or in the aggregate, for the Company and its Subsidiaries, beyond
the period of grace, if any, provided in the instrument or agreement under which
such Indebtedness was created or (B) default in the observance or performance of
any agreement or condition relating to any such Indebtedness (or to Indebtedness
under the Ongoing Credit Agreement) contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition
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exist, the effect of which default or other event or condition is (x) to cause,
or (y) to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause (determined without regard
to whether any notice of acceleration, or any lapse of time prior to the
effectiveness of any notice of acceleration, is required), any such Indebtedness
to become due prior to its stated maturity (provided that, in the case of (y),
no Program Event of Default shall occur unless such event or condition continues
without cure or waiver for twenty days after the Company has knowledge of such
event or condition); or (ii) any such Indebtedness of the Company or its
Subsidiaries shall be declared to be due and payable in accordance with the
terms of such Indebtedness or required to be prepaid, other than by a regularly
scheduled required prepayment or as a mandatory prepayment (unless such required
prepayment or mandatory prepayment results from a default thereunder or an event
of the type that constitutes an Event of Default under the Existing Credit
Agreement), prior to the stated maturity thereof;
(f) The Company or any of its Material Subsidiaries shall commence a
voluntary case concerning itself under Title 11 of the United States Code
entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto
(the "Bankruptcy Code"); or an involuntary case is commenced against the Company
or any of its Material Subsidiaries and the petition is not controverted within
20 days, or is not dismissed within 60 days, after commencement of the case; or
a custodian (as defined in the Bankruptcy Code) is appointed for, or takes
charge of, all or substantially all of the property of the Company or any of its
Material Subsidiaries; or the Company or any of its Material Subsidiaries
commences (including by way of applying for or consenting to the appointment of,
or the taking of possession by, a rehabilitator, receiver, custodian, trustee,
conservator or liquidator (collectively, a "conservator") of itself or all or
any substantial portion of its property) any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency, liquidation, rehabilitation, conservatorship or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company or any
of its Material Subsidiaries; or any such proceeding is commenced against (i)
any Regulated Insurance Company (as defined in the Existing Credit Agreement)
which is engaged in the business of underwriting insurance and/or reinsurance in
the United States, or (ii) the Company or any of its Material Subsidiaries
(other than (x) any Regulated Insurance Company described in the immediately
preceding clause (i) or (y) any dissolution or liquidation proceeding commenced
against any Material Subsidiary which is a non-Regulated Insurance Company), and
in the case of either clause (i) or (ii) remains undismissed for a period of 60
days; or the Company or any of its Material Subsidiaries is adjudicated
insolvent or bankrupt; or any order of relief or other order approving any such
case or proceeding is entered; or (i) any Regulated Insurance Company which is
engaged in the business of underwriting insurance and/or reinsurance in the
United States suffers any appointment of any conservator or the like for it or
any substantial part of its property, or (ii) the Company or any of its Material
Subsidiaries (other than any Regulated Insurance Company described in the
immediately preceding clause (i)) suffers any appointment of any conservator or
the like for it or any substantial part of its property either of which
continues undischarged or unstayed for a period of 60 days; or the Company or
any of its Material Subsidiaries makes a general assignment for the benefit of
creditors; or any corporate action is taken by the Company or any of its
Material Subsidiaries for the purpose of effecting any of the foregoing;
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(g) The Company shall default in the performance or observance of
Section 5.01(e) or (h) herein or Section 7.10 or 7.11 of the Existing Credit
Agreement;
(h) The Guaranty shall fail to remain in full force or effect or any
action shall be taken by the Company, any of its Subsidiaries or any
Governmental Authority to discontinue or to assert the invalidity or
unenforceability thereof, or the Company denies that it has any further
liability hereunder, or gives notice to such effect; or
(i) there shall occur a Change of Control.
provided, however, that no event described in Section 6.01(e) or (g) shall
constitute a Program Event of Default unless within five (5) Business Days after
the receipt of notice thereof from the Agent the Company fails to pledge
(pursuant to documentation reasonably satisfactory to the Agent) to the Agent,
for the benefit of the Lenders, as security for the Company's Obligations U.S.
government securities satisfactory to the Agent having a value at least equal to
one hundred and five percent (105%) of (1) the then outstanding principal amount
of all Notes plus (2) the aggregate amount of all interest which has accrued on
the Notes and is unpaid on such date plus (3) the amount of interest which would
accrue on such principal of the Notes from such date to the Maturity Date. So
long as no other Program Event of Default or Unmatured Default is pending,
collateral provided by the Company pursuant to the preceding sentence in respect
of a Program Event of Default under Section 6.01(e) shall be released upon the
waiver or cure of such Program Event of Default in accordance with the terms of
the documentation governing the applicable defaulted other Indebtedness.
6.02 Acceleration. If any Program Event of Default described in Section
6.01(f) occurs with respect to the Company, the Obligations shall become
immediately due and payable and all obligations of the Lenders to make Loans
shall immediately terminate without any election or action on the part of the
Agent or any Lender. If any other Program Event of Default occurs and is
continuing, the Agent, at the direction of the Required Lenders, may, by notice
to the Company and the Borrowers, declare the Notes, all interest thereon and
all Obligations to be forthwith due and payable, whereupon the Notes, all such
interest and all Obligations shall become and be forthwith due and payable,
without presentment, demand, protest, or further notice of any kind, or
terminate or suspend the obligations of the Lenders to make Loans, or both.
ARTICLE VII
GUARANTY
7.01 Guaranty of Payment. The Company hereby absolutely, irrevocably
and unconditionally guarantees prompt, full and complete payment when due,
whether at stated maturity, upon acceleration or otherwise, and at all times
thereafter, of (a) the principal of and interest on the
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Loans made by the Lenders to the Borrowers, (b) all other fees (including Early
Payment Fees), reimbursements, indemnities and other obligations (including,
without limitation, reasonable out-of-pocket costs and expenses (including
reasonable attorneys' fees and disbursements) incurred in connection with any
enforcement of or collection under the Guaranty) of the Borrowers from time to
time owing to the Lenders or the Agent pursuant to the Notes and (c) all
obligations of the Borrower in respect of any Overdraft (as defined in the
Notes), the proceeds of which are used to pay principal, interest or other
amounts owing in respect of the Notes (collectively, the "Guaranteed Debt").
Notwithstanding the foregoing, the liability of the Company hereunder in respect
of the principal amount of Loans shall be limited to $25,000,000.
7.02 Acceptance of Guaranty; No Setoffs. The Company waives notice of
the acceptance of this Guaranty and of the extension or incurrence of the
Guaranteed Debt or any part thereof. The Company further waives all setoffs and
counterclaims and presentment, protest, notice, filing of claims with a court in
the event of receivership, bankruptcy or reorganization of any Borrower, demand
or action on delinquency in respect of the Guaranteed Debt or any part thereof,
including any right to require the Agent or the Lenders to sue any Borrower, any
other guarantor or any other person obligated with respect to the Guaranteed
Debt or any part thereof, or otherwise to enforce payment thereof against any
collateral securing the Guaranteed Debt or any part thereof.
7.03 Nature of Guaranty; Continuing, Absolute and Unconditional. The
Company hereby agrees that, to the fullest extent permitted by law, (a) its
obligations hereunder shall be continuing, absolute and unconditional under any
and all circumstances and not subject to any reduction, limitation, impairment,
termination, defense (other than indefeasible payment in full), setoff,
counterclaim or recoupment whatsoever (all of which are hereby expressly waived
by it to the fullest extent permitted by law), whether by reason of any claim of
any character whatsoever, including, without limitation, any claim of waiver,
release, surrender, alteration or compromise (other than, with respect to any
Loan, the contractual and voluntary permanent release by the Lenders of the
obligation of the applicable Borrower to make payment of such Loan) and (b) the
validity and enforceability of this Guaranty shall not be impaired or affected
by any of the following: (i) any extension, modification or renewal of, or
indulgence with respect to, or substitution for, the Guaranteed Debt or any part
thereof or any agreement relating thereto at any time; (ii) any failure or
omission to perfect or maintain any lien on, or preserve rights to, any security
or collateral or to enforce any right, power or remedy with respect to the
Guaranteed Debt or any part thereof or any agreement relating thereto, or any
collateral securing the Guaranteed Debt or any part thereof; (iii) any waiver of
any right, power or remedy or of any default with respect to the Guaranteed Debt
or any part thereof or any agreement relating thereto or with respect to any
collateral securing the Guaranteed Debt or any part thereof; (iv) any release,
surrender, compromise, settlement, waiver, subordination or modification, with
or without consideration, of any collateral securing the Guaranteed Debt or any
part thereof, any other guaranties with respect to the Guaranteed Debt or any
part thereof, or any other obligations of any person or entity with respect to
the Guaranteed Debt or any part thereof; (v) the enforceability or validity of
the Guaranteed Debt or any part thereof or the genuineness, enforceability or
validity of any agreement relating thereto or with respect to any collateral
securing the Guaranteed Debt or
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any part thereof; (vi) the application of payments received from any source to
the payment of indebtedness other than the Guaranteed Debt, any part thereof or
amounts which are not covered by this Guaranty even though the Lenders might
lawfully have elected to apply such payments to any part or all of the
Guaranteed Debt or to amounts which are not covered by this Guaranty; (vii) the
insolvency, bankruptcy or any other change in the legal status of any Borrower;
(viii) any change in, or the imposition of, any law, decree, regulation or other
governmental act which does or might impair, delay or in any way affect the
validity, enforceability or the payment when due of the Guaranteed Debt; (ix)
the failure of any Borrower to take any action required in connection with the
performance of the Guaranteed Debt; (x) the existence of any claim, setoff or
other rights which the Company may have at any time against any Borrower or any
other guarantor in connection herewith or with any unrelated transaction; (xi)
the disallowance of all or any portion of any of the Lenders' claims for
repayment of the Guaranteed Debt under section 502 or 506 of the United States
Bankruptcy Code; or (xii) any other fact or circumstance which might otherwise
constitute grounds at law or equity for the discharge or release of the Company
from its obligations hereunder other than (A) indefeasible payment in full of
the Guaranteed Debt or (B) with respect to any Loan, the contractual and
voluntary permanent release by the Lenders of the obligation of the applicable
Borrower to make payment of such Loan, all whether or not the Company shall have
had notice or knowledge of any act or omission referred to in the foregoing
clauses (i) through (xii) of this Section. It is agreed that the Company's
liability hereunder is independent of any other guaranties or other obligations
at any time in effect with respect to the Guaranteed Debt or any part thereof
and that the Company's liability hereunder may be enforced regardless of the
existence, validity, enforcement or non-enforcement of any such other guaranties
or other obligations or any provision of any applicable law or regulation
purporting to prohibit payment by any Borrower of the Guaranteed Debt in the
manner agreed upon among the Agent, the Lenders and any Borrower. To the extent
that, by operation of Section 18 of any Note or otherwise, the Lenders are not
entitled to collect any portion of the Guaranteed Debt in the amount and manner
provided for in any Note (such portion being the "Excess Amount"), the Company
shall nevertheless be obligated to, and shall, pay such Excess Amounts to the
Lenders upon demand made on or after the date such Excess Amount was otherwise
due.
7.04 Dealings With Borrowers. Subject to Section 12.01, credit may be
granted or continued from time to time by the Lenders to the Borrowers without
notice to or authorization from the Company regardless of any Borrower's
financial or other condition at the time of any such grant or continuation.
Neither the Agent nor any Lender shall have an obligation to disclose or discuss
with the Company its assessment of the financial condition of any Borrower.
7.05 Subrogation. The Company shall be subrogated to all rights of the
Agent and the Lenders against a Borrower in respect of any amounts paid to the
Agent and the Lenders by the Company in respect of such Borrower pursuant to the
provisions hereof; provided, however, that the Company shall not be entitled to
enforce or to receive any payments arising out of, or based upon, such right of
subrogation with respect to a Borrower until all of the principal of and
interest on such Borrower's Note, if applicable, and all other Obligations of
such Borrower, have been paid in full.
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7.06 No Collateral. Notwithstanding any reference herein to any
collateral securing any of the Guaranteed Debt, it is acknowledged that, on the
date hereof, neither the Company nor any Borrower has granted, or has any
obligation to grant, any security interest in or other lien on any of its
property (including, without limitation, the Common Stock and ACES) to the
Lenders as security for the Guaranteed Debt.
7.07 Rights To Payments, Etc. In the event that acceleration of the
time for payment of any of the Guaranteed Debt is stayed upon the insolvency,
bankruptcy or reorganization of any Borrower, or otherwise, all such amounts
shall nonetheless be payable by the Company forthwith upon demand by the Agent
or the Required Lenders. The Company further agrees that, to the extent that any
Borrower makes a payment or payments to any of the Lenders on the Guaranteed
Debt, or the Agent or the Lenders receive any proceeds of collateral securing
the Guaranteed Debt, which payment or receipt of proceeds or any part thereof is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be returned or repaid to any Borrower, its estate, trustee,
receiver, debtor in possession or any other party, including, without
limitation, the Company, under any insolvency or bankruptcy law, state or
federal law, common law or equitable cause, then to the extent of such payment,
return or repayment, the obligation or part thereof which has been paid, reduced
or satisfied by such amount shall be reinstated and continued in full force and
effect as of the date when such initial payment, reduction or satisfaction
occurred.
7.08 Taxes. Any taxes (excluding federal income taxes and other income
taxes on the overall net income of the Agent or any Lender imposed by the
jurisdiction in which the Agent or such Lender is incorporated or has its
principal place of business) or other similar assessments or charges payable or
ruled payable by any governmental authority in respect of this Agreement or any
of the other Loan Documents pertaining to the Company shall be paid by the
Company, together with interest and penalties, if any. Any payments made by the
Company under this Agreement shall be made free and clear of, and without
deduction or withholding for or on account of, any present or future income,
stamp or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or assessed
by any Governmental Authority (excluding taxes imposed on its overall net income
by the jurisdiction in which the Agent or such Lender is incorporated or has its
principal place of business) ("Taxes"). If any such Taxes are required to be
withheld from any amounts payable to the Agent or any Lender hereunder, the
amounts so payable to the Agent or such Lender shall be increased to the extent
necessary to yield to the Agent or such Lender (after payment of all Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in or pursuant to this Agreement or the Notes, as applicable.
Whenever any Taxes are payable by the Company, as promptly as practicable
thereafter the Company shall send to the Agent for its own account or for the
account of such Lender, as the case may be, a certified copy of an original
official receipt received by the Company showing payment thereof. If the Company
fails to pay any Taxes when due to the appropriate taxing authority or fails to
remit the required receipts or other required documentary evidence, the Company
shall indemnify the Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable
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by the Agent or any Lender as a result of any
such failure. The agreements in this Section 7.08 shall survive the payment in
full of all amounts payable under this Agreement.
7.09 Miscellaneous.
(a) Any determination by a court of competent jurisdiction of the
amount of any Guaranteed Debt owing by any Borrower to the Lenders shall be
conclusive and binding on the Company irrespective of whether the Company was a
party to the suit or action in which such determination was made.
(b) Subject to the provisions of Section 7.07, this Guaranty shall
continue in effect until this Agreement has terminated, the Guaranteed Debt has
been paid in full and the other conditions of this Guaranty have been satisfied.
(c) In addition to and without limitation of any rights, powers or
remedies of the Agent or the Lenders under applicable law, any time after
maturity of the Guaranteed Debt, whether by acceleration or otherwise, the Agent
or the Lenders may, in their sole discretion, with notice after the fact to the
Company and regardless of the acceptance of any security or collateral for the
payment hereof, appropriate and apply toward the payment of the Guaranteed Debt
(i) any indebtedness due or to become due from any of the Lenders to the Company
and (ii) any moneys, credits or other property belonging to the Company
(including all account balances, whether provisional or final and whether or not
collected or available but excluding any Margin Stock) at any time held by or
coming into the possession of any of the Agent or any Lender whether for deposit
or otherwise.
(d) Wherever possible, each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity without invalidating the remainder of such provision or the
remaining provisions of this Guaranty.
ARTICLE VIII
THE AGENT
8.01 Appointment; Nature of Relationship. The First National Bank of
Chicago is hereby appointed by each of the Lenders as its contractual
representative (herein referred to as the "Agent") hereunder and under each
other Loan Document, and each of the Lenders irrevocably authorizes the Agent to
act as the contractual representative of such Lender with the rights and duties
expressly set forth herein and in the other Loan Documents. The Agent agrees to
act as such contractual representative upon the express conditions contained in
this Article VIII. Notwithstanding the use of the defined term "Agent," it is
expressly understood and agreed that the Agent shall not have any fiduciary
responsibilities to any Lender by reason of this Agreement or any other Loan
Document and that the Agent is merely acting as the contractual representative
of the Lenders with only those duties
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as are expressly set forth in this Agreement and the other Loan Documents. In
its capacity as the Lenders' contractual representative, the Agent (i) does not
hereby assume any fiduciary duties to any of the Lenders, (ii) is a
"representative" of the Lenders within the meaning of Section 1-201 of the
Uniform Commercial Code and (iii) is acting as an independent contractor, the
rights and duties of which are limited to those expressly set forth in this
Agreement and the other Loan Documents. Each of the Lenders hereby agrees to
assert no claim against the Agent on any agency theory or any other theory of
liability for breach of fiduciary duty, all of which claims each
8.02 Powers. The Agent shall have and may exercise such powers under
the Loan Documents as are specifically delegated to the Agent by the terms of
each thereof, together with such powers as are reasonably incidental thereto.
The Agent shall have no implied duties to the Lenders, or any obligation to the
Lenders to take any action thereunder except any action specifically provided by
the Loan Documents to be taken by the Agent.
8.03 General Immunity. Neither the Agent nor any of its directors,
officers, employees, or agents in their capacity as representatives of the Agent
shall be liable to the Company, the Lenders or any Borrower for any action taken
or omitted to be taken by it or them hereunder or under any other Loan Document
or in connection herewith or therewith except to the extent such action or
inaction is determined in a final non-appealable judgment by a court of
competent jurisdiction to have arisen from the gross negligence or willful
misconduct of such Person.
8.04 No Responsibility for Loans, Recitals, etc. Neither the Agent nor
any of its directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into, or verify (a) any statement, warranty
or representation made in connection with any Loan Document or any borrowing
hereunder; (b) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender; (c) the satisfaction of any condition specified in Article III, except
receipt of items required to be delivered solely to the Agent; (d) the existence
or possible existence of any Program Event of Default or Unmatured Default; (e)
the validity, enforceability, effectiveness, sufficiency or genuineness of any
Loan Document or any other instrument or writing furnished in connection
therewith; (f) the value, sufficiency, creation, perfection or priority of any
Lien in any collateral security; or (g) the financial condition of any Borrower
or the Company. The Agent shall have no duty to disclose to the Lenders
information that is not required to be furnished by the Company to the Agent at
such time, but is voluntarily furnished by the Company to the Agent (either in
its capacity as Agent or in its individual capacity).
8.05 Action on Instructions of Lenders. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder and under any
other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders. The Lenders hereby
acknowledge that the Agent shall be under no duty to take any discretionary
action permitted to be taken by it pursuant to the provisions of this Agreement
or any other Loan Document unless it shall
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be requested in writing to do so by the Required Lenders. The Agent shall be
fully justified in failing or refusing to take any action hereunder and under
any other Loan Document unless it shall first be indemnified to its satisfaction
by the Lenders Pro rata against any and all liability, cost and expense that it
may incur by reason of taking or continuing to take any such action.
8.06 Employment of Agents and Counsel. The Agent may execute any of its
duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and the Lenders
and all matters pertaining to the Agent's duties hereunder and under any other
Loan Document.
8.07 Reliance on Documents; Counsel. The Agent shall be entitled to
rely upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.
8.08 Agent's Reimbursement and Indemnification. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (or, if the Commitments have been terminated, in proportion to their
Commitments immediately prior to such termination) (a) for any amounts not
reimbursed by the Company or the Borrowers for which the Agent is entitled to
reimbursement by the Company or the Borrowers under the Loan Documents, (b) for
any other expenses incurred by the Agent on behalf of the Lenders, in connection
with the preparation, execution, delivery, administration and enforcement of the
Loan Documents (including, without limitation, for any expenses incurred by the
Agent in connection with any dispute between the Agent and any Lender or between
two or more of the Lenders) and (c) for any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of the Loan
Documents or any other document delivered in connection therewith or the
transactions contemplated thereby (including, without limitation, for any such
amounts incurred by or asserted against the Agent in connection with any dispute
between the Agent and any Lender or between two or more of the Lenders), or the
enforcement of any of the terms of the Loan Documents or of any such other
documents, provided that no Lender shall be liable for any of the foregoing to
the extent any of the foregoing is found in a final non-appealable judgment by a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of the Agent. The obligations of the Lenders under this
Section 8.08 shall survive payment of the Obligations and termination of this
Agreement.
8.09 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Program Event of Default, Unmatured Default
or Borrower Event of Repayment
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unless the Agent has received written notice from a Lender or the Company
referring to this Agreement describing such Program Event of Default, Unmatured
Default or Borrower Event of Repayment and stating that such notice is a "notice
of default". In the event that the Agent receives such a notice, the Agent shall
give prompt notice thereof to the Lenders.
8.10 Rights as a Lender. In the event the Agent is a Lender, the Agent
shall have the same rights and powers hereunder and under any other Loan
Document with respect to its Commitment and its Loans as any Lender and may
exercise the same as though it were not the Agent, and the term "Lender" or
"Lenders" shall, at any time when the Agent is a Lender, unless the context
otherwise indicates, include the Agent in its individual capacity. The Agent and
its Affiliates may accept deposits from, lend money to, and generally engage in
any kind of trust, debt, equity or other transaction, in addition to those
contemplated by this Agreement or any other Loan Document, with the Company, any
of its Subsidiaries or any Borrower in which the Company, or such Subsidiary or
such Borrower is not restricted hereby from engaging with any other Person. The
Agent, in its individual capacity, is not obligated to remain a Lender.
8.11 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent, the Arranger or any other
Lender and based on the financial statements prepared by the Company and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and without
reliance upon the Agent, the Arranger or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents.
8.12 Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Company, such resignation to be
effective upon the appointment of a successor Agent or, if no successor Agent
has been appointed, forty-five days after the retiring Agent gives notice of its
intention to resign. The Agent may be removed at any time with or without cause
by written notice received by the Agent from the Required Lenders, such removal
to be effective on the date specified by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint, on
behalf of the Company and the Lenders, a successor Agent. If no successor Agent
shall have been so appointed by the Required Lenders within thirty days after
the resigning Agent's giving notice of its intention to resign, then the
resigning Agent may appoint, on behalf of the Company and the Lenders, a
successor Agent. Notwithstanding the previous sentence, the Agent may at any
time without the consent of the Company or any Lender, appoint any of its
Affiliates which is a commercial bank as a successor Agent hereunder. If the
Agent has resigned or been removed and no successor Agent has been appointed,
the Lenders may perform all the duties of the Agent hereunder and the Company
shall make all payments in respect of the Obligations to the applicable Lender
and for all other purposes shall deal directly with the Lenders. No successor
Agent shall be deemed to be appointed hereunder until such successor Agent has
accepted the appointment. Any such successor Agent shall be a commercial bank
having capital and
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retained earnings of at least $100,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the resigning or removed Agent. Upon the effectiveness of the
resignation or removal of the Agent, the resigning or removed Agent shall be
discharged from its duties and obligations hereunder and under the Loan
Documents. After the effectiveness of the resignation or removal of an Agent,
the provisions of this Article VIII shall continue in effect for the benefit of
such Agent in respect of any actions taken or omitted to be taken by it while it
was acting as the Agent hereunder and under the other Loan Documents.
8.13 Notes. The Agent shall retain possession of the Notes on behalf of
the Lenders. Each Lender shall be entitled, upon request, to examine or receive
a copy of any Note. The Agent shall have only the duty to exercise reasonable
care in the custody and preservation of the Notes, which duty shall be fully
satisfied if the Agent accords such Notes treatment substantially the same as
that which it accords similar property owned by it. If any Borrower has issued
Replacement Notes (as defined in the Note) pursuant to Section 17 of his or her
Note, then upon the request of any Lender the Agent shall deliver to such Lender
the Replacement Note payable to its order.
8.14 Agent's Fee. The Company agrees to pay to the Agent, for its own
account, the fees agreed to by the Company and the Agent pursuant to that
certain letter agreement dated February 11, 1999, or as otherwise agreed from
time to time.
8.15 Delegation to Affiliates. The Company and the Lenders agree that
the Agent may delegate any of its duties under this Agreement to any of its
Affiliates. Any such Affiliate (and such Affiliate's directors, officers, agents
and employees) which performs duties in connection with this Agreement shall be
entitled to the same benefits of the indemnification, waiver and other
protective provisions to which the Agent is entitled under Articles VIII and
XII.
ARTICLE IX
RATABLE PAYMENTS
9.01 Ratable Payments. If any Lender, whether by setoff or otherwise,
has payment made to it upon its Loans (other than payments received pursuant to
Section 2.05 or Section 12.08) in a greater proportion than its Pro-rata share
of all such Loans, such Lender agrees, promptly upon demand, to purchase a
portion of the Loans held by the other Lenders so that after such purchase each
Lender will hold its ratable proportion of Loans. If any Lender, whether in
connection with setoff or amounts which might be subject to setoff or otherwise,
receives collateral or other protection for its Obligations or such amounts
which may be subject to setoff, such Lender agrees, promptly upon demand, to
take such action necessary such that all Lenders share in the benefits of such
collateral ratably in proportion to their Loans. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments shall
be made.
ARTICLE X
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BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
10.01 Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Company and the
Lenders and their respective successors and assigns, except that the Company
shall not have the right to assign its rights or obligations under the Loan
Documents, provided that any assignment by any Lender must be made in compliance
with Section 10.03. Notwithstanding the preceding sentence, any Lender may at
any time, without the consent of the Company or the Agent, assign all or any
portion of its rights under this Agreement and its Notes to a Federal Reserve
Bank; provided, however, that no such assignment to a Federal Reserve Bank shall
release the transferor Lender from its obligations hereunder. The Agent may
treat the payee of any Note as the owner thereof (to the extent of its Pro-rata
interest therein) for all purposes hereof unless and until such payee complies
with Section 10.03 in the case of an assignment thereof or, in the case of any
other transfer, a written notice of the transfer is filed with the Agent. Any
assignee or transferee of a Note agrees by acceptance thereof to be bound by all
the terms and provisions of the Loan Documents. Any request, authority or
consent of any Person, who at the time of making such request or giving such
authority or consent is the holder of any Note, shall be conclusive and binding
on any subsequent holder, transferee or assignee of such Note or of any Note or
Notes issued in exchange therefor.
10.02 Participations.
(a) Permitted Participants; Effect. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any time sell
to one or more banks or other entities ("Participants") participating interests
in any Loan owing to such Lender, any Note held by or payable to such Lender or
any other interest of such Lender under the Loan Documents. In the event of any
such sale by a Lender of participating interests to a Participant, such Lender's
obligations under the Loan Documents shall remain unchanged, such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, such Lender shall remain the holder of any such Note for all
purposes under the Loan Documents, all amounts payable by the Company under this
Agreement or by the Borrowers under the Notes shall be determined as if such
Lender had not sold such participating interests, and the Company, the Borrowers
and the Agent shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under the Loan Documents.
(b) Voting Rights. Each Lender shall retain the sole right to approve,
without the consent of any Participant, any amendment, modification or waiver of
any provision of the Loan Documents other than any amendment, modification or
waiver which effects any of the modifications referenced in clauses (a)(i)
through (v) of Section 12.01.
(c) Benefit of Setoff. The Company agrees that each Participant shall
be deemed to have the right of setoff provided in Section 7.09(c) in respect of
its participating interest in amounts owing
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under the Loan Documents to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under the Loan
Documents; provided, that each Lender shall retain the right of setoff provided
in Section 7.09(c) with respect to the amount of participating interests sold to
each Participant. The Lenders agree to share with each Participant, and each
Participant, by exercising the right of setoff provided in Section 7.09(c),
agrees to share with each Lender, any amount received pursuant to the exercise
of its right of setoff, such amounts to be shared in accordance with Section
9.01 as if each Participant were a Lender.
10.03 Assignments.
(a) Permitted Assignments. Any Lender may, in the ordinary course of
its business and in accordance with applicable law, at any time assign to one or
more banks or other entities ("Purchasers") all or any part of its rights and
obligations under the Loan Documents, provided that with respect to any partial
assignment, except as the Agent may otherwise agree, such Lender ratably assigns
its interest in all of the Notes and, in the case of an assignment to a Person
which is not a Lender or an Affiliate of a Lender, such assignment shall be in
the minimum amount of $5,000,000 or, if less, all of the assigning Lender's
interests in the Notes. Such assignment shall be substantially in the form from
time to time specified by the Agent or in such other form as may be agreed to by
the parties thereto. The consent of the Agent and, so long as no Program Event
of Default is pending, the Company shall be required prior to an assignment
becoming effective with respect to a Purchaser which is not a Lender or an
Affiliate thereof. Such consent, in each case, shall not be unreasonably
withheld in the case of an assignment to a Person which is an Eligible Assignee.
(b) Effect; Effective Date. Upon (a) delivery to the Agent of a notice
of assignment, substantially in the form from time to time specified by the
Agent (a "Notice of Assignment"), together with any consents required by Section
10.03(a), and (b) payment of a $3,500 fee to the Agent by the transferor Lender
for processing such assignment, such assignment shall become effective on the
effective date specified in such Notice of Assignment. On and after the
effective date of such assignment, (a) such Purchaser shall for all purposes be
a Lender party to this Agreement and any other Loan Document executed by the
Lenders and shall have all the rights and obligations of a Lender under the Loan
Documents, to the same extent as if it were an original party hereto, and (b)
the transferor Lender shall be released with respect to the percentage of the
Loans assigned to such Purchaser without any further consent or action by the
Company, the Borrowers, the Lenders or the Agent. Upon the consummation of any
assignment to a Purchaser pursuant to this Section 10.03(b), the transferor
Lender, the Agent, the Borrowers and the Company shall make appropriate
arrangements so that replacement Notes are issued to the Agent to be held on
behalf of such transferor Lender and new Notes or, as appropriate, replacement
Notes, are issued to the Agent to be held on behalf of such Purchaser, in each
case in principal amounts reflecting their percentage of the Loans, as adjusted
pursuant to such assignment.
10.04 Dissemination of Information. The Company authorizes each Lender
to disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by
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operation of law (each a "Transferee") and any prospective Transferee any and
all information in such Lender's possession concerning the creditworthiness of
the Company, its Subsidiaries and the Borrowers, provided such Person agrees in
writing to keep such information confidential and use the same only for the
purpose of making credit determinations in connection with the financing
contemplated hereby and to enforce rights it may have, except that such Person
shall not be restricted from disclosing such information as is (a) required to
be disclosed to any regulatory or administrative body or commission, (b)
required to be disclosed by subpoena or similar process of applicable law, (c)
disclosed to counsel, auditors, and other professional advisors used by such
Person on a need-to-know basis, or (d) deemed necessary by such Person to be
disclosed in conjunction with any litigation between the Company or any Borrower
and such Person, or relating to the financing contemplated hereby.
10.05 Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States of America or any State thereof, the
transferor Lender shall cause such Transferee, concurrently with the
effectiveness of such transfer, to comply with the provisions of Section 12.16.
ARTICLE XI
NOTICES
11.01 Giving Notice. All notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing, by facsimile, first class U.S. mail or courier and addressed or
delivered to such party at its address set forth below its signature hereto or
at such other address as may be designated by such party in a notice to the
other parties. Any notice, if mailed and properly addressed with first class
postage prepaid, return receipt requested, shall be deemed given three Business
Days after deposit in the U.S. mail; any notice, if transmitted by facsimile,
shall be deemed given when transmitted if a confirmation of transmission to the
addressee is then generated by the sender's fax machine (and a copy thereof is
simultaneously posted in first class U.S. mail); and any notice given by courier
shall be deemed given when received by the addressee.
11.02 Change of Address. The Company, the Agent and any Lender may each
change the address for service of notice upon it by a notice in writing to the
other parties hereto.
ARTICLE XII
MISCELLANEOUS
12.01 Amendments. (a) Subject to the provisions of this Section 12.01
and subject to Section 12 in each of the Notes, the Required Lenders (or the
Agent with the consent in writing of the Required Lenders) and the Company or a
Borrower, as applicable, may enter into agreements
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supplemental hereto for the purpose of adding or modifying any provisions to the
Loan Documents or changing in any manner the rights of the Lenders, the Company
hereunder or waiving any Program Event of Default hereunder; provided, however,
that no such supplemental agreement shall, without the consent of each Lender
affected thereby:
(i) Extend the final maturity of any Loan or Note or reduce
the principal amount thereof, or reduce the rate or amount, or extend
the time of payment, of interest or fees or other amounts payable
thereunder;
(ii) Reduce the percentage specified in the definition of
Required Lenders;
(iii) Release the Company from its obligations under the
Guaranty;
(iv) Amend this Section 12.01; or
(v) Permit any assignment by the Company of its Obligations
or its rights hereunder.
(b) No amendment of any provision of this Agreement relating to the
Agent shall be effective without the written consent of the Agent. The Agent may
waive payment of the fee required under Section 10.03(b) without obtaining the
consent of any other party to this Agreement. The Lenders shall not consent to
any amendment or modification of any Note increasing the principal amount
thereof or the rate of interest payable thereon without the consent of the
Company. The Company hereby consents to the Note amendments contemplated by
Section 3.03.
(c) Upon the agreement of the Company and the Lenders upon the 2.05(A)
Information, Schedule 2.05(A) shall be deemed amended to include such
information.
12.02 Preservation of Rights. No delay or omission of the Lenders or
the Agent to exercise any right under the Loan Documents shall impair such right
or be construed to be a waiver of any Program Event of Default or an
acquiescence therein. Any single or partial exercise of any such right shall not
preclude other or further exercise thereof or the exercise of any other right,
and no waiver, amendment or other variation of the terms, conditions or
provisions of the Loan Documents whatsoever shall be valid unless in writing
signed by the Lenders required pursuant to Section 12.01, and then only to the
extent in such writing specifically set forth. No waiver by the Agent or the
Lenders of any default shall operate as a waiver of any other default or the
same default on a future occasion, and no action by the Agent or the Lenders
permitted hereunder shall in any way affect or impair the Agent's or the
Lenders' rights or powers, or the obligations of the Company under this
Agreement. All remedies contained in the Loan Documents or by law afforded shall
be cumulative and all shall be available to the Agent and the Lenders until the
Obligations have been paid in full.
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12.03 Survival of Representations. All representations and warranties
of the Company contained in this Agreement or in any Loan Document shall survive
delivery of the Notes and the making of the Loans herein contemplated.
12.04 Governmental Regulation. Anything contained in this Agreement to
the contrary notwithstanding, no Lender shall be obligated to extend credit to
any Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
12.05 Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Loan Documents.
12.06 Entire Agreement. The Loan Documents embody the entire agreement
and understanding among the Company, the Agent and the Lenders and supersede all
prior agreements and understandings between the Company, the Agent and the
Lenders relating to the subject matter thereof other than the fee letter dated
February 11, 1999 between the Company and First Chicago.
12.07 Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which the
Agent is authorized to act as such). The failure of any Lender to perform any of
its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. Except as provided in Section 12.08 with respect to
"Indemnified Parties", this Agreement shall not be construed so as to confer any
right or benefit upon any Person other than the parties to this Agreement and
their respective successors and assigns. This Agreement is not intended to, and
shall not be construed to, create any rights (contractual, equitable, pursuant
to law or otherwise) in favor of any Borrower against the Agent, any Lenders or
the Company, and no Borrower in his or her individual capacity shall have the
right to enforce any rights of the Company hereunder.
12.08 Expenses; Indemnification. (a) The Company shall reimburse the
Agent for any costs and out-of-pocket expenses (including reasonable attorneys'
fees and time charges of attorneys for the Agent, which attorneys may be
employees of the Agent) paid or incurred by the Agent in connection with the
preparation, negotiation, execution, delivery, review, amendment, modification,
and administration of the Loan Documents. The Company also agrees to reimburse
the Agent and the Lenders for any costs and out-of-pocket expenses (including,
without limitation, reasonable attorneys' fees and expenses and time
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charges of attorneys for the Agent and the Lenders, which attorneys may be
employees of the Agent or the Lenders) paid or incurred by the Agent or any
Lender in connection with the collection and enforcement of the Loan Documents.
The Company further agrees to indemnify and hold harmless the Agent and each
Lender, and their respective affiliates (including, without limitation, Roney &
Co. and First Chicago Capital Markets, Inc.), agents, directors, officers and
employees (the Agent and each of the aforementioned Persons being an
"Indemnified Party") against all losses, claims, damages, penalties, judgments,
liabilities and expenses, joint or several (including, without limitation,
reasonable attorneys' fees and expenses and time charges of attorneys for the
Agent and Lenders, which attorneys may be employees of the Agent or the Lenders,
and all expenses of litigation or preparation therefor whether or not the such
Indemnified Party is a party thereto) which any of them may become subject to or
may pay or incur, whether arising under any foreign, federal or state law or
regulation, at common law or otherwise, (including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended and the regulations thereunder) arising out of or relating to this
Agreement, any Note or the other Loan Documents, the performance of Roney under
the Authorizations, the transactions contemplated hereby or thereby, the
purchase or sale of any Common Stock or ACES, any untrue statement or alleged
untrue statement of a material fact contained in the Stock Purchase Program, any
registration statement covering the Common Stock or ACES to be purchased as part
of the Stock Purchase Program or any other document related thereto, the breach
of any representation or warranty contained in this Agreement or the other Loan
Documents, the direct or indirect application or proposed application of the
proceeds of any Loan hereunder, any action brought or threatened by or on behalf
of any Borrower in connection with its Loan, any claim made against any
Indemnified Party by or on behalf of any Borrower in connection with its Loan
or, to the extent permitted by law, any breach of any consumer lending, usury or
similar law relating to the Loans; provided, however, that the Company shall not
be required to indemnify any Indemnified Party against any losses, claims,
damages, penalties, judgments, liabilities or expenses to the extent that they
arise out of the gross negligence or willful misconduct of such Person. The
obligations of the Company under this Section shall survive the termination of
this Agreement and shall be in addition to any liability the Company may
otherwise have.
(b) If the indemnification provided for in Section 12.08(a) is due in
accordance with its terms but is for any reason held by a court to be
unavailable or insufficient to indemnify and hold harmless an Indemnified Party
on grounds of public policy or otherwise, the Company shall contribute to the
aggregate amount of such losses, claims, damages penalties, judgments,
liabilities and expenses (including legal or other expenses reasonably incurred
in connection with investigating or defending same) for which such
indemnification is unavailable or insufficient (i) in such proportion as is
appropriate to reflect the relative benefits received, or sought to be received
by the Company, on the one hand, and the Indemnified Parties entitled to
contribution, on the other hand, in the matters contemplated by this Agreement,
the Notes and the Stock Purchase Program or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and the
Indemnified Parties on the other hand in connection with the events, actions,
statements, or omissions which resulted in such losses, claims, damages,
penalties, judgments, liabilities and expenses as well as any other relevant
equitable considerations. The relative benefits received, or sought to be
received, by the Company on the one hand and the Indemnified Parties on the
other hand in connection with the purchase of the Common Stock and ACES, the
Loans and this Agreement shall be deemed to be in the same proportion that the
total proceeds of the Loans received by the Program Participants in connection
with the Stock Purchase Program bears to the total fees received by the Agent
and the Lenders under this Agreement and the other Loan Documents. Any
Indemnified Party entitled to contribution will, promptly after receipt of
notice of
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commencement of any action, suit or proceeding against such Indemnified Party in
respect of which a claim for contribution may be made against another party or
parties under this Section 12.08(b), notify such party or parties from whom
contribution may be sought, but the omission to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any other obligation it or they may have hereunder or otherwise than under this
Section 12.08(b).
12.09 Numbers of Documents. All statements, notices, closing documents,
and requests hereunder shall be furnished to the Agent with sufficient
counterparts so that the Agent may furnish one to each of the Lenders.
12.10 Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable, or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable, or invalid
without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.
12.11 Nonliability of Lenders. The relationship between the Company and
the Lenders and the Agent shall be solely that of guarantor and lender. Neither
the Agent nor any Lender shall have any fiduciary responsibilities to the
Company or any Borrower. Neither the Agent nor any Lender undertakes any
responsibility to the Company or any Borrower to review or inform the Company or
any Borrower of any matter in connection with any phase of the Company's
business or operations. The Company agrees that neither the Agent nor any Lender
shall have liability to the Company or any Borrower (whether sounding in tort,
contract or otherwise) for losses suffered by the Company or any Borrower in
connection with, arising out of, or in any way related to, the transactions
contemplated and the relationship established by the Loan Documents, or any act,
omission or event occurring in connection therewith, unless it is determined by
a court of competent jurisdiction by final and non-appealable judgment that such
losses resulted from the gross negligence or willful misconduct of the party
from which recovery is sought.
12.12 CHOICE OF LAW. THE LOAN DOCUMENTS SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS, WITHOUT REGARD TO CONFLICT OF LAWS
PROVISIONS, OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKING ASSOCIATIONS AND FEDERAL AGENCIES AND BRANCHES OF
FOREIGN BANKS.
12.13 CONSENT TO JURISDICTION. THE COMPANY, THE AGENT AND EACH LENDER
HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE PARTIES HEREBY
IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
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PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVE
ANY OBJECTION THEY MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY
LENDER TO BRING PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY THE COMPANY AGAINST THE AGENT OR ANY
LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.
12.14 WAIVER OF JURY TRIAL. THE COMPANY, THE AGENT AND EACH LENDER
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.
12.15 Disclosure. The Company and each Lender hereby acknowledge and
agree that First Chicago and/or its Affiliates from time to time may hold other
investments in, make other loans to or have other relationships with the Company
or any Borrower, including, without limitation, in connection with any interest
rate hedging instruments or agreements or swap transactions.
12.16 Withholding Tax Exemption. At least five Business Days prior to
the first date on which interest or fees are payable hereunder for the account
of any Lender, each Lender that is not incorporated under the laws of the United
States of America or a state thereof, agrees that it will deliver to the Company
and the Agent two duly completed and correct copies of United States of America
Internal Revenue Service Form 1001 or 4224, certifying in either case that such
Lender is entitled to receive all payments under this Agreement and the Notes
without deduction or withholding of any United States federal income taxes. Each
Lender which so delivers a Form 1001 or 4224 further undertakes to deliver to
the Company and the Agent two additional duly completed and correct copies of
such form (or a successor form) on or before the date that such form expires
(currently, three successive calendar years for Form 1001 and one calendar year
for Form 4224) or becomes obsolete or after the occurrence of any event
requiring a change in the most recent forms so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Company or the Agent, in each case certifying that such Lender
is entitled to receive all payments under this Agreement and the Notes without
deduction or withholding of any United States of America federal income taxes,
unless a change in law (including without limitation any change in treaty,
statute or regulation) has occurred after the date hereof and prior to the date
on which any such delivery would otherwise be required which renders all such
forms inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender advises the Company
and the Agent that it is not capable of
39
<PAGE> 47
receiving payments without any deduction or withholding of United States of
America federal income tax.
12.17 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Agreement by telecopier shall
be effective as delivery of a manually executed counterpart of this Agreement.
[signature pages follow]
40
<PAGE> 48
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
AMERUS LIFE HOLDINGS, INC.
By: /s/ Michael G. Fraizer
Michael G. Fraizer
Senior Vice President and Chief
Financial Officer
Address: 699 Walnut Street
Des Moines, Iowa
50309-3948
Attn: Michael G. Fraizer
Telecopy: 515-362-3648
Telephone: 515-362-3690
Commitment: $27,500,000 THE FIRST NATIONAL BANK OF CHICAGO,
individually and as Agent
By: /s/ Cynthia W. Priest
Cynthia W. Priest
Vice President
Address: One First National Plaza
Chicago, Illinois 60670
Attn: Cynthia W. Priest
Telecopy: (312) 732-4033
Telephone: (312) 732-9565
S-1
<PAGE> 49
SCHEDULE 1.01
INTEREST PAYMENT DATES
March 5, 1999
June 7, 1999
September 8, 1999
December 7, 1999
March 7, 2000
June 7, 2000
September 8, 2000
December 7, 2000
March 7, 2001
June 7, 2001
September 10, 2001
December 7, 2001
March 7, 2002
June 7, 2002
September 9, 2002
December 6, 2002
March 7, 2003
June 6, 2003
September 8, 2003
December 5, 2003
March 5, 2004
June 7, 2004
September 8, 2004
Schedule 1.01
<PAGE> 50
SCHEDULE 2.05(A)
FIXED REFERENCE RATES
FROM TO (AND EXCLUDING)
RATE (AND INCLUDING) PAYMENT DATE
[to be agreed upon by the Company and the Lenders pursuant to Section 2.02(b)]
Schedule 2.05(A)
<PAGE> 51
SCHEDULE 2.05(B)
ZERO COUPON DISCOUNTING METHODOLOGY
-----------------------------------------------------------
Present Value of Fixed Leg = (P(1) x DF(1) + 3(N) P(i) x DF(i)
[ ] y=2
-----------------------------------------------------------
P(1) = The first remaining fixed payment as defined as the next fixed
payment outstanding in the contract
DF(1) = The first discount factor defined as 1
-------------------
[1 + (R(0) x D(0)/360)]
DF(i) = The ith discount factor for each remaining fixed payment date will
be determined using the Zero Coupon Rate derived from the
appropriate LIBOR rate and the rates implied by the "90 Day Euro$"
futures contracts traded at the Chicago Mercantile Exchange (IMM) as
applicable to each ith payment date.
R(0) = The LIBOR rate quoted on an Annual, Actual/360 basis (expressed as a
percent in decimal form) applicable for the number of days between
the Conversion Date and the first (remaining) Payment Date.
D(0) = The number of days between the Conversion Date and the next fixed
Payment Date.
P(i) = The ith fixed payment remaining as defined in the contract
Schedule 2.05(B)
<PAGE> 52
SCHEDULE 2.05(C)
EARLY PAYMENT EXAMPLE
THE FOLLOWING IS AN EXAMPLE OF THE EARLY PAYMENT FEE UNDER CERTAIN
CIRCUMSTANCES. THE ACTUAL EARLY PAYMENT FEE ASSOCIATED WITH ANY PARTICULAR NOTE
PREPAYMENT OR FAILURE TO BORROW WILL DEPEND UPON THE SPECIFIC AMOUNT, CURRENT
INTEREST RATES, AND OTHER CIRCUMSTANCES ASSOCIATED THEREWITH. IT MAY BE MORE OR
LESS THAN THE AMOUNTS COMPUTED BELOW.
The prepayment calculation example on the attached table assumes that the
Borrower has an outstanding Loan of $99,988 that was used to purchase 4210
shares of Common Stock @ an average price of $23.75 per share. The original loan
is presumed to have been a 5 year loan made on Dec. 9, 1995. The simple interest
on the Loan is approximately 7.35877% and the IRR is approximately 6.59%. The
Current Payment Rate is 1.66114% (Actual/360). The prepayment date is assumed to
be December 9, 1998, the third anniversary of setting the fixed rate with 8
quarterly payments remaining. For simplicity, our use of even dates for this
example will cause minor differences from actual payment values arising from
precise day count considerations of an actual loan. These differences would not
normally be materially different from how this example is presented The rates
assumed in this example were as of December 8, 1998.
The change in value of the Loan is captured by discounting the fixed flows of
the Loan at the prevailing implied LIBOR forward rates. The Loan Documents break
out the value into two components: the Early Payment Fee and the deferred
interest. In the attached example, the value of the Loan is $18,282, which
approximates the $17,092 deferred interest due. The balance of $1190 would be
defined as the Early Payment Fee in this example and reflects the LIBOR forward
rates on December 8, 2000 (assuming the Dec.
8, 1998 curve utilized).
COLUMN DEFINITIONS:
A.) Market Libor Swap: in this example, the market value for a 2 year
interest rate swap, which represents the remaining time to maturity
from the original transaction. This value changes with shape of yield
curve, time to maturity, swap spreads, and liquidity conditions in the
interest rate markets.
B.) Notional Amount: represents principal amount of the loan, or the number
of shares purchased multiplied by the per share price.
C.) Spread: represents the spread to the standard LIBOR curve which is used
for calculation purposes. Accounts for credit risk.
D.) Redeployment Swap Rate: Equals (Market Libor Swap) + (Spread).
Analogous to a rate where funds can be reinvested with similar credit
quality.
Schedule 2.05(C)-Page 1
<PAGE> 53
E.) Reference Swap Rate: The interest rate that the Loan carries in each
payment period. Reflects the dividend rate on the Common Stock at the
weighted average purchase price, with an assumed dividend amount
($.10/share quarterly) and payment schedule for each quarter until the
final quarter. Final quarter interest rate is a balloon payment
allowing the bank to achieve an acceptable rate of return for a loan of
this style, risk, and cost to administer. The reference swap rates give
rise to a yield-to-maturity (IRR) on the loan for the entire time
horizon. The IRR is separate and distinct from the simple interest
rate, which is a term required by the Loan Documents that reflects the
actual interest paid over the life of the loan. The simple interest
rate is a flat interest rate; it equals ((sum of all Fixed Payments
during life of loan)/(Notional Amount)) X ((360/(Actual Days of Loan)).
F.) Redeployment Payment: Equals (Notional Amount)(Redeployment Swap
Rate)(#Days in period)/360. Represents the amount of interest that
would be required in each period under normal circumstances.
G.) Fixed Payment: Equals (Notional Amount)(Reference Swap Rate)(# Days in
period)/360. Represents the amount of interest that is actually being
paid in each period.
H.) Payment Differential: Equals (Fixed Payment) - (Redeployment Payment).
Difference in interest required for each time period.
I.) PV of Differential: Equals (Payment Differential) (Discount Factor) for
each period. Turns future cash flows into present value terms to
evaluate current mark-to-market.
J.) Discount Factor: Factor applied to discount a future cash flow to a
present value. "Zero Coupon Rates" (as defined in Section 2.05(b) of
the Facility and Guaranty Agreement), will be reasonably determined by
The First National Bank of Chicago, at time of breakage.
Schedule 2.05(C)-Page 2
<PAGE> 54
THE FIRST NATIONAL BANK OF CHICAGO
Valuation Date: 9-Dec-98
Assumed Settlement Date: 11-Dec-98
Last Payment Date: 11-Dec-98
Notional Amount: $99,988
Total
Fixed PV's Float PV's Breakage % of Face
Spot Termination Cost $18,282 $0.00 $18,282 18.284%
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E) (F)
- ---------------------------------------------------------------------------------------------------------------------------
FROM: TO: (A+C) (B*D*DAYS/360)
MARKET NOTIONAL REDEPLOYMENT REFERENCE REDEPLOYMENT
LIBOR SWAP AMOUNT SPREAD SWAP RATE SWAP RATE PAYMENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11-Dec-98 11-Mar-99 Thursday 4.93879% 99,987.50 0.80% 5.73879% 1.661% 1,434.52
- ---------------------------------------------------------------------------------------------------------------------------
11-Mar-99 11-Jun-99 Friday 4.93879% 99,987.50 0.80% 5.73879% 1.661% 1,466.40
- ---------------------------------------------------------------------------------------------------------------------------
11-Jun-99 11-Sep-99 Saturday 4.93879% 99,987.50 0.80% 5.73879% 1.661% 1,466.40
- ---------------------------------------------------------------------------------------------------------------------------
11-Sep-99 11-Dec-99 Saturday 4.93879% 99,987.50 0.80% 5.73879% 1.661% 1,450.46
- ---------------------------------------------------------------------------------------------------------------------------
11-Dec-99 11-Mar-00 Saturday 4.93879% 99,987.50 0.80% 5.73879% 1.661% 1,450.46
- ---------------------------------------------------------------------------------------------------------------------------
11-Mar-00 11-Jun-00 Sunday 4.93879% 99,987.50 0.80% 5.73879% 1.661% 1,466.40
- ---------------------------------------------------------------------------------------------------------------------------
11-Jun-00 11-Sep-00 Monday 4.93879% 99,987.50 0.80% 5.73879% 1.661% 1,466.40
- ---------------------------------------------------------------------------------------------------------------------------
11-Sep-00 8-Dec-00 Friday 4.93879% 99,987.50 0.80% 5.73879% 119.500% 1,402.64
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
(G) (H) (I) (J)
- ---------------------------------------------------------------------------------------------
FROM: TO: (B*E*DAYS/360) (G-F) (H*J)
FIXED PAYMENT PV OF DISCOUNT
PAYMENT DIFFERENTIAL DIFFERENTIAL FACTOR
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
11-Dec-98 11-Mar-99 Thursday 415.23 (1,019.29) (1,006.10) 0.987060
- ---------------------------------------------------------------------------------------------
11-Mar-99 11-Jun-99 Friday 424.46 (1,041.94) (1,015.92) 0.975032
- ---------------------------------------------------------------------------------------------
11-Jun-99 11-Sep-99 Saturday 424.46 (1,041.94) (1,003.67) 0.963272
- ---------------------------------------------------------------------------------------------
11-Sep-99 11-Dec-99 Saturday 419.85 (1,030.61) (980.89) 0.951754
- ---------------------------------------------------------------------------------------------
11-Dec-99 11-Mar-00 Saturday 419.85 (1,030.61) (968.25) 0.939491
- ---------------------------------------------------------------------------------------------
11-Mar-00 11-Jun-00 Sunday 424.46 (1,041.94) (966.82) 0.927906
- ---------------------------------------------------------------------------------------------
11-Jun-00 11-Sep-00 Monday 424.46 (1,041.94) (954.83) 0.916403
- ---------------------------------------------------------------------------------------------
11-Sep-00 8-Dec-00 Friday 29,207.46 27,804.82 25,178.06 0.905529
- ---------------------------------------------------------------------------------------------
</TABLE>
POSITIVE VALUE BELOW INDICATES AMOUNT OWED BY PARTICIPANT:
PRESENT VALUE OF REDEPLOYMENT FIXED SWAP RATE MINUS PRESENT VALUE OF
REFERENCE FIXED SWAP RATE: $18,281.59
DEFERRED INTEREST* $17,091.96
EARLY PAYMENT FEE** $ 1,189.63
Schedule 2.05(C)-Page 3
<PAGE> 55
*THE THREE YEAR ACCRUED DIFFERENCE BETWEEN INTEREST RATE (7.35877% SIMPLE
INTEREST) MINUS CURRENT PAYMENT RATE (1.66114%)
**SIMULATION IMPLICITLY "STEPS DOWN" THE YIELD CURVE BY ASSUMING TODAY'S RATES
PREVAILING IN THE FUTURE.
Schedule 2.05(C)-Page 4
<PAGE> 1
EXHIBIT 10.40
REIMBURSEMENT AGREEMENT
This Reimbursement Agreement (this "Agreement") is made and entered
into as of the 15th day of February, 1999, by ___________________________ (the
"Executive Officer") in favor of AmerUs Life Holdings, Inc. (the "Company").
WHEREAS, the Executive Officer has applied for and has obtained a
variable rate draw loan from The First National Bank of Chicago (the "Bank) in
the original principal amount of up to $_________________ for the purpose of
purchasing shares of Class A Common Stock and/or 7.00% Adjustable
Conversion-Rate Equity Security Units of the Company under the AmerUs Life
Holdings, Inc. Executive Stock Purchase Plan, which loan shall convert to a
fixed rate term loan upon the completion of the Executive Officer's purchase of
such securities under such Plan (such loan being referred to as the "Executive
Officer Loan");
WHEREAS, in order to induce the Bank to make the Executive Officer
Loan, the Company executed and delivered a Facility and Guaranty Agreement of
even date herewith by and among the Company and the Bank (the "Company
Guaranty"); and
WHEREAS, in order to induce the Company to execute and deliver the
Company Guaranty, the Executive Officer has agreed to execute and deliver this
Agreement in favor of the Company, pursuant to which the Executive Officer shall
reimburse the Company on demand for all amounts paid by the Company to the Bank
pursuant to the Company Guaranty with respect to the Executive Officer Loan;
NOW, THEREFORE, based on the foregoing premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Executive Officer hereby agrees as follows:
Section 1. Absolute and Unconditional Reimbursement Obligation. The
Executive Officer hereby absolutely and unconditionally (a) agrees to reimburse
the Company fully and promptly, upon demand, for all amounts paid by the Company
to the Bank pursuant to the Company Guaranty with respect to the Executive
Officer Loan and (b) agrees to pay any and all expenses incurred by the Company
in enforcing its rights under this Agreement, including without limitation
reasonable attorneys' fees; provided, however, that the Executive Officer shall
have no obligation to reimburse the Company for any Early Payment Fee paid with
respect to the Executive Officer Loan if such Early Payment Fee is paid by the
Company as a result of the occurrence and continuance of any Program Event of
Default other than a Program Event of Default which results from any breach or
misrepresentation by the Executive Officer. This Agreement shall be a continuing
agreement, and the liability of the Executive Officer hereunder shall be
absolute and unconditional, shall be performed strictly in accordance with the
terms of this Agreement and shall not be affected, modified or diminished by
reason of: (i) any assignment, renewal, modification or extension of the
Executive Officer Loan or of the Company Guaranty; (ii) any modification,
release or waiver of or change in any of the terms, covenants, conditions or
provisions of the Executive Officer Loan or of the Company Guaranty; (iii) any
dealings or transactions occurring between the Bank and the Company, whether or
not notice thereof is given to the Executive Officer; (iv) any default or
failure of the Executive Officer fully
<PAGE> 2
to perform any of his obligations, covenants or agreements with respect to the
Executive Officer Loan or as set forth in this Agreement; (v) any substitution
of a new guaranty for the Company Guaranty; (vi) the invalidity or lack of
enforceability of the Executive Officer Loan or the Company Guaranty or any
provision of any thereof; or (vii) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the Executive Officer in
respect of the Executive Officer Loan or the Executive Officer in respect of
this Agreement.
This Agreement shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of the principal of or interest on the
Executive Officer Loan is rescinded or must otherwise be returned by the Bank
upon the insolvency or bankruptcy of the Executive Officer or otherwise, all as
though such payment had not been made.
Section 2. Right to Set-Off. Upon the occurrence and during the
continuance of any Event of Default (as hereinafter defined), the Company or any
subsidiary thereof is authorized at any time and from time to time, to set off
and apply any and all amounts owing by the Company or any subsidiary thereof to
the Executive Officer (including without limitation base salary, bonuses and
performance units) against any and all of the obligations of the Executive
Officer now or hereafter existing under this Agreement, irrespective of whether
or not the Company or such subsidiary shall have made any demand under this
Agreement and although such obligations may be unmatured. The failure by the
Company to give notice of a set-off under this provision shall not effect the
validity of such set-off and application. The rights of the Company under this
Section 2 are in addition to the other rights and remedies which the Company may
have.
Section 3. Representations and Warranties. The Executive Officer
represents and warrants to the Company as follows:
(a) The Executive Officer has all right and power to enter into this
Agreement, perform his or her obligations hereunder and consummate the
transactions contemplated hereby.
(b) This Agreement constitutes a legal, valid and binding obligation of
the Executive Officer, enforceable against the Executive Officer in
accordance with its terms.
Section 4. Remedies. All of the Company's rights and remedies under
this Agreement are intended to be distinct, separate and cumulative with all
other rights and remedies of the Company and no such right or remedy is intended
to be to the exclusion of or be a waiver of any other right or remedy.
Section 5. Amendments and Waivers. No amendment of any provision of
this Agreement shall be effective unless it is in writing and signed by the
Company and the Executive Officer. No waiver of any provision of this Agreement
shall be effective unless it is in writing and signed by the Company, and any
such waiver shall be effective only in the specific instance and for the
specific purpose for which given.
Section 6. Waiver of Notice, Etc. The Executive Officer hereby waives
promptness, diligence, notice of acceptance and any other notice with respect to
this Agreement and any
2
<PAGE> 3
requirement that the Company protect, secure, perfect or
insure any security interest or lien or any property subject thereto or exhaust
any right or take any action against any person or entity.
Section 7. Governing Law. This Agreement and the rights and remedies
of the Company and the Executive Officer shall be governed by and construed in
accordance with the laws of the State of Iowa, without regard to principles of
conflicts of law.
Section 8. Binding Effect. This Agreement shall inure to the benefit of
the Company and its successors and assigns and shall be fully binding upon the
Executive Officer, his or her heirs, executors and legal or personal
representatives.
Section 9. Term. This Agreement shall remain in full force and effect
until all obligations under this Agreement and the Company Guaranty have been
fully performed, regardless of any invalidity or unenforceability of any
provision of this Agreement or the Company Guaranty.
Section 10. Events of Default. For purposes of this Agreement, any
breach by the Executive Officer of or default by the Executive Officer under
this Agreement or any agreement between the Executive Officer and the Bank or
any representation or warranty made by the Executive Officer to the Company or
to the Bank shall prove to have been incorrect in any material respect when made
or the occurrence of any Program Event of Default or Borrower Event of Repayment
shall be an "Event of Default" under this Agreement.
Section 12. Notices. All notices and other communications permitted or
required pursuant to this Agreement shall be in writing and shall be deemed
given when delivered in person, or when deposited in the United States mail,
postage prepaid, as certified mail, return receipt requested, properly addressed
to the party for whom intended at the addresses set forth below, or to such
other address as either party hereto may designate for itself by notice in
accordance herewith to the other:
The Company: AmerUs Life Holdings, Inc.
699 Walnut Street
Des Moines, Iowa 50309
Attention: Victor N. Daley
The Executive Officer: _______________________ [Print Mailing
_______________________ Address]
Section 13. No Waiver. No delay or omission of the Company to exercise
any right, remedy or power shall impair the same or be construed to be a waiver
of any Event of Default or any acquiescence therein. No waiver of any Event of
Default shall extend to or affect any subsequent Event of Default, nor shall it
impair any right, remedy or power available to the Company. No single or partial
exercise of any right, remedy or power shall preclude any other or further
exercise thereof by the Company.
Section 14. Severability. Any provision of this Agreement that is
legally determined to be unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of the unenforceability without
invalidating the remaining provisions hereof, but no
3
<PAGE> 4
unenforceability in any jurisdiction shall invalidate or render unenforceable
the same or any other provision in any other jurisdiction.
Section 15. Consent to Jurisdiction; Waiver of Jury Trial. The
Executive Officer hereby irrevocably submits to the non-exclusive jurisdiction
of any United States federal or Iowa district court sitting in Des Moines, Iowa
in any action or proceeding arising out of or relating to this Agreement, and
the Executive Officer hereby irrevocably agrees that all claims in respect of
such action or proceeding may be heard and determined in any such United States
federal or Iowa district court. The Executive Officer irrevocably waives any
objection, including without limitation any objection to the laying of venue or
based on the grounds of forum non conveniens, which he or she may now or
hereafter have to the bringing of any such action or proceeding in any such
jurisdictions. The Executive Officer irrevocably consents to the service of any
and all process in any such action or proceeding brought in any court in or of
the State of Iowa by the delivery of copies of such process to the Executive
Officer at the address specified for notices to be given to the Executive
Officer set forth in Section 12 hereof or by certified mail directed to such
address. The Executive Officer irrevocably waives all right to trial by jury in
any action, proceeding or counterclaim arising out of or relating to this
Agreement.
Section 16. Defined Terms. Capitalized terms used in this Agreement and
not otherwise defined shall have the meanings ascribed thereto in the Company
Guaranty.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Executive Officer as of the day and year first above written.
______________________________________________
Signature of Executive Officer
Printed Name: ________________________________
4
<PAGE> 1
EXHIBIT 10.41
EXECUTION COPY
AMENDMENT NO. 1 TO FACILITY AGREEMENT
This Amendment (this "Amendment") is entered into as of March 23, 1999
by and among AmerUs Life Holdings, Inc., an Iowa corporation (the "Company"),
The First National Bank of Chicago, individually and as agent ("Agent"), and the
other financial institutions signatory hereto.
RECITALS
A. The Borrower, the Agent and the Lenders are party to that certain
facility and guaranty agreement dated as of February 12, 1999 ( the "Facility
Agreement"). Unless otherwise specified herein, capitalized terms used in this
Amendment shall have the meanings ascribed to them by the Facility Agreement.
B. The Company, the Agent and the undersigned Lenders wish to amend the
Facility Agreement and agree to certain other matters on the terms and
conditions set forth below.
Now, therefore, in consideration of the mutual execution hereof and
other good and valuable consideration, the parties hereto agree as follows:
1. Interest Rate. The fixed rate of interest at which the
Notes shall accrue interest on and after the Conversion Date is 8.23256%. The
Current Payment Rate is 1.86746%.
2. 2.05(A) Information. The 2.05(A) Information is as set
forth below, and Schedule 2.05(A) is hereby amended in its entirety to read as
follows:
FIXED REFERENCE RATES
RATE FROM AND INCLUDING: TO BUT EXCLUDING
---- ------------------- ----------------
1.86746% The Conversion Date December 5, 2003
128.4% December 5, 2003 March 5, 2004
3. Additional Loans. The Lenders shall make loans to James
Corbin, Thomas Godlasky, Steven Hinrichs, and Marty Ketelaar as more fully
described in the Letters of Direction dated March 18, 1999, executed by each of
James Corbin, Thomas Godlasky, Steven Hinrichs, and Marty Ketelaar, and that
such loans shall be deemed to be loans subject to the terms and conditions of
the Facility Agreement.
<PAGE> 2
4. Reference to and Effect Upon the Facility Agreement.
(a) Except as specifically amended, the Facility
Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(b) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy
of the Agent or any Lender under the Facility Agreement or any Loan
Document, nor constitute a waiver of any provision of the Facility
Agreement or any Loan Document, except as specifically set forth
herein. Upon the effectiveness of this Amendment, each reference in the
Facility Agreement to "this Agreement", "hereunder", "hereof", "herein"
or words of similar import shall mean and be a reference to the
Facility Agreement as amended hereby.
5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAWS
PROVISIONS) OF THE STATE OF ILLINOIS BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS.
6. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purposes.
7. Counterparts. This Amendment may be executed in any number
of counterparts, each of which when so executed shall be deemed an original but
all such counterparts shall constitute one and the same instrument.
(signature page to follow)
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
AMERUS LIFE HOLDINGS, INC.
By: /s/ Michael G. Fraizer
Michael G. Fraizer
Senior Vice President and Chief Financial Officer
THE FIRST NATIONAL BANK OF CHICAGO,
individually and as Agent
By: /s/ Cynthia W. Priest
Cynthia W. Priest
Vice President
3
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<DEBT-HELD-FOR-SALE> 6692231
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 31330
<MORTGAGE> 586034
<REAL-ESTATE> 628
<TOTAL-INVEST> 7669950
<CASH> 6899
<RECOVER-REINSURE> 8222
<DEFERRED-ACQUISITION> 326893
<TOTAL-ASSETS> 10427976
<POLICY-LOSSES> 7193427
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 8062
<POLICY-HOLDER-FUNDS> 87881
<NOTES-PAYABLE> 141415
216729
0
<COMMON> 30436
<OTHER-SE> 811978
<TOTAL-LIABILITY-AND-EQUITY> 10427976
41021
<INVESTMENT-INCOME> 130318
<INVESTMENT-GAINS> 2604
<OTHER-INCOME> 0
<BENEFITS> 109419
<UNDERWRITING-AMORTIZATION> 16985
<UNDERWRITING-OTHER> 21055
<INCOME-PRETAX> 24821
<INCOME-TAX> 8372
<INCOME-CONTINUING> 16957
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16957
<EPS-PRIMARY> 0.56
<EPS-DILUTED> 0.56
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
