<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 June 30, 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 August 6, 1999 was as follows:
Class A, Common Stock 25,426,170 shares
Class B, Common Stock 5,000,000 shares
Exhibit index - Page 45
Page 1 of 51
1
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I - FINANCIAL INFORMATION................................................................... 3
Item 1. Financial Statements............................................................... 3
Consolidated Balance Sheets June 30, 1999
(Unaudited) and December 31, 1998.................................................. 3
Consolidated Statements of Income (Unaudited)
For the Three Months Ended June 30, 1999 and 1998
and the Six Months Ended June 30, 1999 and 1998.................................... 5
Consolidated Statements of Comprehensive Income (Unaudited)
For the Three Months Ended June 30, 1999 and 1998
and the Six Months Ended June 30, 1999 and 1998.................................... 6
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended June 30, 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 ............................................................... 20
Item 3. Quantitative and Qualitative Disclosures About Market Risk......................... 41
PART II - OTHER INFORMATION...................................................................... 42
Item 1. Legal Proceedings.................................................................. 42
Item 4. Submission of Matters to a Vote of Security Holders................................ 43
Item 6. Exhibits and Reports on Form 8-K................................................... 43
Signatures....................................................................................... 44
Exhibit Index.................................................................................... 45
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------------------------
(unaudited)
<S> <C> <C>
Assets
Investments:
Securities available for sale at fair value:
Fixed maturity securities $ 6,782,652 $ 6,710,246
Equity securities 41,834 68,483
Short-term investments 255 22,428
Mortgage loans on real estate 599,590 566,403
Real estate 431 633
Policy loans 110,809 110,786
Other investments 208,573 205,790
--------------------------
Total investments 7,744,144 7,684,769
Cash and cash equivalents 35,674 60,090
Accrued investment income 84,442 79,921
Premiums and fees receivable 4,331 4,385
Reinsurance receivables 9,397 6,174
Deferred policy acquisition costs 426,549 246,030
Value of business acquired 260,508 224,540
Investment in unconsolidated subsidiaries 30,351 29,602
Goodwill 211,746 215,506
Property and equipment 24,121 23,249
Deferred income taxes 14,562 --
Other assets 360,795 401,239
Closed Block assets 1,424,379 1,453,305
--------------------------
Total assets $10,630,999 $10,428,810
=========================
</TABLE>
3
<PAGE> 4
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------------------------
(unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
Policy reserves and policyowner funds:
Future life and annuity policy benefits $ 7,207,705 $ 7,185,417
Policyowner funds 313,183 95,974
7,520,888 7,281,391
----------------------------
Accrued expenses 32,143 41,323
Dividends payable to policyowners 1,878 1,168
Policy and contract claims 6,155 13,433
Income taxes payable 14,157 9,574
Deferred income taxes -- 11,398
Other liabilities 133,080 159,350
Debt 146,307 141,051
Closed Block liabilities 1,736,519 1,703,195
----------------------------
Total liabilities 9,591,127 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; 25,424,174
shares (net of 4,309,279 treasury shares) in 1999 and
25,425,983 (net of 4,308,936 treasury shares) in 1998 25,424 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 290,025 290,091
Accumulated other comprehensive income (27,550) 26,711
Unearned compensation (425) (240)
Retained earnings 530,669 503,210
----------------------------
Total stockholders' equity 823,143 850,198
----------------------------
Total liabilities and stockholders' equity $ 10,630,999 $ 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 Six Months Ended
June 30, June 30,
1999 1998 1999 1998
------------------------- --------------------------
<S> <C> <C> <C> <C>
Revenues:
Insurance premiums $ 20,385 $ 21,432 $ 44,220 $ 38,726
Universal life and annuity product charges 18,900 17,872 36,086 34,252
Net investment income 130,378 126,822 260,696 259,995
Realized gains on investments 1,415 4,564 4,019 10,783
Contribution from the Closed Block 6,372 7,861 12,914 16,836
------------------------- -------------------------
177,450 178,551 357,935 360,592
------------------------- -------------------------
Benefits and expenses:
Policyowner benefits 101,277 111,930 210,696 219,286
Underwriting, acquisition, and insurance expenses 23,584 17,234 44,640 38,449
Amortization of deferred policy acquisition costs
and value of business acquired 19,586 15,731 36,571 30,688
Dividends to policyowners 1,047 395 2,023 710
------------------------- -------------------------
145,494 145,290 293,930 289,133
------------------------- -------------------------
Income from operations 31,956 33,261 64,005 71,459
Interest expense 7,541 5,928 14,770 12,610
------------------------- -------------------------
Income before income tax expense and equity in
earnings of unconsolidated subsidiary 24,415 27,333 49,235 58,849
Income tax expense 8,324 7,142 16,695 17,319
------------------------- -------------------------
Income before equity in earnings of unconsolidated
subsidiary 16,091 20,191 32,540 41,530
Equity in earnings of unconsolidated subsidiary 500 673 1,008 1,091
------------------------- -------------------------
Net income $ 16,591 $ 20,864 $ 33,548 $ 42,621
========================= =========================
Earnings per common share:
Basic $ 0.55 $ 0.60 $ 1.10 $ 1.23
========================= =========================
Diluted $ 0.54 $ 0.60 $ 1.10 $ 1.21
========================= =========================
Weighted average common shares outstanding
Basic 30,432,794 34,732,514 30,432,145 34,733,710
========================= =========================
Diluted 30,522,586 35,021,958 30,495,083 35,086,382
========================= =========================
</TABLE>
5
<PAGE> 6
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
-------------------- --------------------
<S> <C> <C> <C> <C>
Net Income $ 16,591 $ 20,864 $ 33,548 $ 42,621
Other comprehensive income (loss), before tax
Unrealized gains (losses) on securities
Unrealized holding gains (losses) arising during period (53,268) 3,656 (83,427) 8,715
Less: reclassification adjustment for gains included
in net income (3,276) 2,864 52 10,458
-------------------- --------------------
Other comprehensive income (loss), before tax (49,992) 792 (83,479) (1,743)
Income tax (expense) benefit related to items of other
comprehensive income 17,497 (277) 29,218 610
-------------------- --------------------
Other comprehensive income (loss), net of tax (32,495) 515 (54,261) (1,133)
-------------------- --------------------
Comprehensive income (loss) $(15,904) $ 21,379 $(20,713) $ 41,488
==================== ====================
</TABLE>
6
<PAGE> 7
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1999 1998
-----------------------------
<S> <C> <C>
Cash flows from operating activities
Net Income $ 33,548 $ 42,621
Adjustments to reconcile net income to net cash
provided by operating activities:
Policyowner assessments on universal life
and annuity products (26,876) (34,252)
Interest credited to policyowner account
balances 173,413 179,090
Realized investment (gains) losses (4,019) (10,783)
Goodwill amortization 3,760 3,645
VOBA amortization 16,058 14,048
Change in:
Accrued investment income (4,521) 2,912
Reinsurance ceded receivables (3,223) 1,170
Deferred policy acquisition costs (53,565) (36,875)
Liabilities for future policy benefits 250,952 (4,133)
Policy and contract claims and other
policyowner funds (8,510) 1,868
Income taxes:
Current 4,583 16,433
Deferred 12,225 (6,465)
Other, net 9,934 (10,831)
Change in Closed Block assets and
liabilities, net 34,189 109,318
-----------------------------
Net cash provided by operating activities 437,948 267,766
-----------------------------
Cash flows from investing activities
Purchase of fixed maturities available-for-sale (4,198,887) (3,160,567)
Maturities, calls, and principal reductions of
fixed maturities available for sale 3,950,066 3,312,538
Purchase of equity securities (113,066) (112,055)
Proceeds from sale of equity securities 102,327 119,296
Proceeds from repayment and sale of
mortgage loans 67,383 44,265
</TABLE>
7
<PAGE> 8
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1999 1998
------------------------
<S> <C> <C>
Purchase of mortgage loans (70,968) (99,077)
Purchase of real estate and other invested assets (50,780) (65,796)
Proceeds from sale of real estate and other
invested assets 19,688 15,317
Change in policy loans, net (23) 6,272
Tax on capital gains (5,994) 12,507
Other assets, net (2,863) 16,379
Change in Closed Block investments, net (30,241) (106,115)
----------------------
Net cash (used in) investing activities (331,359) (15,038)
----------------------
Cash flows from financing activities:
Deposits to policyowner account balances 458,220 421,044
Withdrawals from policyowner account balances (586,141) (570,647)
Change in debt, net 5,257 9,421
Purchase of treasury stock (408) (1,622)
Issuance of treasury stock 155 --
Dividends to shareholders (6,089) (6,946)
----------------------
Net cash (used in) financing activities (129,006) (148,750)
----------------------
Net increase (decrease) in cash (22,417) 103,978
Cash and cash equivalents at beginning of period 60,090 58,081
----------------------
Cash and cash equivalents at end of period $ 37,673 $ 162,059
======================
Supplemental disclosure of cash activities:
Interest paid $ 14,692 $ 12,069
======================
Income taxes paid $ 9,020 $ 24,541
======================
</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 and six months ended June 30, 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. In
June 1999, the FASB issued SFAS No. 137 "Accounting for Derivative Instruments
and Hedging Activities Deferral of the Effective Date of FASB Statement No.
133." SFAS No. 137 delays the effective date of SFAS No. 133 for all fiscal
quarters until fiscal years beginning after June 15, 2000. 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 changes of codification 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 June 30, 1999 and December 31, 1998 and statements of income for the three
months and six months ended June 30, 1999 and 1998 are as follows (in
thousands):
10
<PAGE> 11
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-----------------------
<S> <C> <C>
Assets:
Securities available for sale at fair value
Fixed maturity securities $1,099,261 $1,116,540
Short-term investments -- 8,875
Policy loans 182,986 181,866
Other investments -- 3,027
Cash and cash equivalents 7,156 4
Accrued investment income 15,510 14,445
Premiums and fees receivable 1,631 3,385
Deferred policy acquisition costs 104,889 117,479
Other assets 12,946 7,684
-----------------------
Total Assets $1,424,379 $1,453,305
=======================
Liabilities:
Future life and annuity policy benefits $1,552,226 $1,517,162
Policyowner funds 6,466 6,350
Accrued expenses 1,303 3,887
Dividends payable to policyowners 153,587 149,487
Policy and contract claims 5,023 8,395
Other liabilities 17,914 17,914
-----------------------
Total Liabilities $1,736,519 $1,703,195
=======================
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30,
1999 1998
---------------------------
<S> <C> <C>
Revenues and expenses:
Insurance premiums $ 49,638 $ 49,516
Universal life and annuity product charges 3,166 3,745
Net investment income 26,355 28,156
Realized gains on investments 210 7,308
Policyowner benefits (47,651) (50,341)
Underwriting, acquisition and insurance expenses (1,010) (1,525)
Amortization of deferred policy acquisition costs (5,037) (4,784)
Dividends to policyowners (19,299) (24,214)
--------------------
Contribution from the Closed Block before income taxes $ 6,372 $ 7,861
====================
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
Six Months Ended June 30,
1999 1998
-------------------------
<S> <C> <C>
Revenues and expenses:
Insurance premiums $ 98,598 $ 99,932
Universal life and annuity product charges 6,570 7,266
Net investment income 56,006 57,339
Realized gains on investments 662 8,177
Policyowner benefits (98,972) (99,372)
Underwriting, acquisition and insurance expenses (2,821) (2,886)
Amortization of deferred policy acquisition costs (12,590) (12,818)
Dividends to policyowners (34,539) (40,802)
--------------------
Contribution from the Closed Block before income taxes $ 12,914 $ 16,836
====================
</TABLE>
12
<PAGE> 13
(3) DEBT AND CAPITAL SECURITIES
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
June 30, 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
June 30, 1999
$ 16,307 $ 16,051
Revolving credit agreement 5,000 --
Senior Notes bearing interest at 6.95%
due June, 2005 125,000 125,000
-------- ---------
$146,307 $ 141,051
======== =========
</TABLE>
<TABLE>
<CAPTION>
June 30, 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 years ending June 30, 1999 and
1998 was lower than the prevailing corporate rate primarily as a result of
earned low income housing and historic rehabilitation credits which totaled $2.3
million and $2.8 million, respectively.
13
<PAGE> 14
(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 June 30, 1999, AVLIC had statutory assets of $2.24 million,
liabilities of $2,197.5 million, and surplus of $43.6 million.
The Company, AmerUs Life and their direct and indirect majority
shareholders AmerUs Group and American Mutual Holding Company (collectively
"AmerUs"), were 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, alleged 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, sought 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
denied 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.
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. No appeal has been filed and the time for filing an appeal has
expired.
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 six months ended June 30, 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:
14
<PAGE> 15
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 with the exception of the elimination of certain
items which management believes are not necessarily indicative of overall
operating trends. These items are explained further in the Adjusted Operating
section of Management's Discussion and Analysis of Results of Operations and
Financial Condition. Operating segment income is generally income before
non-core realized gains and losses, 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 core
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.
There are no significant intersegment transactions.
There have been no material changes in segment assets since December
31, 1998.
Operating segment income is as follows:
15
<PAGE> 16
Operating Segment Income
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999
Life Total
Insurance Annuities Other Consolidated
--------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Insurance premiums $ 15,396 $ 4,933 $ 56 $ 20,385
Universal life and annuity product charges 11,786 7,114 -- 18,900
Net investment income 22,864 106,676 838 130,378
Core realized gains on investments -- 2,857 -- 2,857
Contribution from the Closed Block 6,372 -- -- 6,372
------------------------------------------------
56,418 121,580 894 178,892
Benefits and expenses:
Policyowner benefits 24,000 77,257 20 101,277
Underwriting, acquisition, and insurance expenses 13,683 7,616 2,285 23,584
Amortization of deferred policy acquisition costs
and value of business acquired, net of
adjustment of $1,170 5,711 12,705 -- 18,416
Dividends to policyowners 1,047 -- -- 1,047
------------------------------------------------
44,441 97,578 2,305 144,324
------------------------------------------------
Adjusted income from operations $ 11,977 $ 24,002 (1,411) 34,568
======================
Non-core realized gains (losses) on investments (1,442) (1,442)
Amortization of deferred policy acquisition costs due
to realized gains or losses (1,170) (1,170)
Interest (expense) (7,541) (7,541)
Income tax (expense) (8,324) (8,324)
Equity in earnings of unconsolidated subsidiary 500 500
---------
Net income $ 16,591
=========
</TABLE>
16
<PAGE> 17
Operating Segment Income
(in thousands)
<TABLE>
<CAPTION>
Life Total
Three Months Ended June 30, 1998 Insurance Annuities Other Consolidated
--------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Insurance premiums $ 12,103 $ 9,242 $ 87 $ 21,432
Universal life and annuity product charges 11,621 6,251 -- 17,872
Net investment income 17,427 108,802 593 126,822
Core realized gains on investments -- 2,694 -- 2,694
Contribution from the Closed Block 7,861 -- -- 7,861
------------------------------------------------
49,012 126,989 680 176,681
Benefits and expenses:
Policyowner benefits 21,834 89,221 875 111,930
Underwriting, acquisition, and insurance expenses 10,543 7,228 (537) 17,234
Amortization of deferred policy acquisition costs --
and value of business acquired, net of
adjustment of $514 4,082 11,135 -- 15,217
Dividends to policyowners 395 -- -- 395
------------------------------------------------
36,854 107,584 338 144,776
------------------------------------------------
Adjusted income from operations $ 12,158 $ 19,405 342 31,905
======================
Non-core realized gains (losses) on investments 1,870 1,870
Amortization of deferred policy acquisition costs due
to realized gains or losses (514) (514)
Interest (expense) (5,928) (5,928)
Income tax expense (7,142) (7,142)
Equity in earnings of unconsolidated subsidiary 673 673
---------
Net income $ 20,864
=========
</TABLE>
17
<PAGE> 18
Operating Segment Income
(in thousands)
<TABLE>
<CAPTION>
Life Total
Six Months Ended June 30, 1999 Insurance Annuities Other Consolidated
--------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Insurance premiums $ 30,721 $ 13,403 $ 96 $ 44,220
Universal life and annuity product charges 23,607 12,479 -- 36,086
Net investment income 43,487 214,877 2,332 260,696
Core realized gains on investments -- 5,826 -- 5,826
Contribution from the Closed Block 12,914 -- -- 12,914
-----------------------------------------------
110,729 246,585 2,428 359,742
Benefits and expenses:
Policyowner benefits 48,586 162,002 108 210,696
Underwriting, acquisition, and insurance expenses 26,592 15,921 2,127 44,640
Amortization of deferred policy acquisition costs
and value of business acquired, net of
adjustment of $1,682 10,728 24,161 -- 34,889
Dividends to policyowners 2,023 -- -- 2,023
-----------------------------------------------
87,929 202,084 2,235 292,248
-----------------------------------------------
Adjusted income from operations $ 22,800 $ 44,501 193 67,494
======================
Non-core realized gains (losses) on investments (1,807) (1,807)
Amortization of deferred policy acquisition costs due
to realized gains or losses (1,682) (1,682)
Interest (expense) (14,770) (14,770)
Income tax (expense) (16,695) (16,695)
Equity in earnings of unconsolidated subsidiary 1,008 1,008
---------
Net income $ 33,548
=========
</TABLE>
18
<PAGE> 19
Operating Segment Income
(in thousands)
<TABLE>
<CAPTION>
Life Total
Six Months Ended June 30, 1998 Insurance Annuities Other Consolidated
--------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Insurance premiums $ 22,244 $ 16,319 $ 163 $ 38,726
Universal life and annuity product charges 23,281 10,971 -- 34,252
Net investment income 37,221 221,076 1,698 259,995
Core realized gains on investments -- 5,517 -- 5,517
Contribution from the Closed Block 16,836 -- -- 16,836
-----------------------------------------------
99,582 253,883 1,861 355,326
Benefits and expenses:
Policyowner benefits 42,814 175,540 932 219,286
Underwriting, acquisition, and insurance expenses 20,617 17,317 515 38,449
Amortization of deferred policy acquisition costs --
and value of business acquired, net of
adjustment of $1,293 9,956 19,439 -- 29,395
Dividends to policyowners 710 -- -- 710
-----------------------------------------------
74,097 212,296 1,447 287,840
-----------------------------------------------
Adjusted income from operations $ 25,485 $ 41,587 414 67,486
======================
Non-core realized gains (losses) on investments 5,266 5,266
Amortization of deferred policy acquisition costs due
to realized gains or losses (1,293) (1,293)
Interest (expense) (12,610) (12,610)
Income tax (expense) (17,319) (17,319)
Equity in earnings of unconsolidated subsidiary 1,091 1,091
---------
Net income $ 42,621
=========
</TABLE>
19
<PAGE> 20
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.
20
<PAGE> 21
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 For the Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
--------------------- --------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net Income $ 16,591 $ 20,864 $ 33,548 $ 42,621
Net realized (gains) losses on investments (A) (920) (2,967) (2,613) (7,573)
Core realized gains (losses) (B) 1,857 1,751 3,787 3,586
Amortization of deferred policy acquisition
costs due to realized gains or losses (C) 761 334 1,093 840
-------------------- --------------------
Adjusted Operating Income $ 18,289 $ 19,982 $ 35,815 $ 39,474
==================== ====================
Adjusted Operating Income per common share:
Basic (D) $ 0.60 $ 0.58 $ 1.18 $ 1.14
Diluted (E) $ 0.60 $ 0.57 $ 1.17 $ 1.13
</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
non-core 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 three months
and six months ended June 30, 1999 and 1998 is calculated using 30.43
million and 34.73 million shares, respectively.
(E) Diluted adjusting operating income per common share for the three
months ended June 30, 1999 and 1998 is calculated using 30.52 million
and 35.02 million shares, respectively. Diluted adjusted operating
income per common share for the six months ended June 30, 1999 and 1998
is calculated using 30.50 million and 35.09 million shares,
respectively.
21
<PAGE> 22
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 with the exception of the
elimination of certain items which management believes are not necessarily
indicative of overall operating trends. These items are explained further in the
Adjusted Operating Income section of Management's Discussion and Analysis of
Results of Operations and Financial Condition. Revenues and benefits and
expenses are primarily attributed directly to each operating segment. Net
investment income and core 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, non-core realized gains
(losses), and holding company revenues and expenses.
22
<PAGE> 23
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 For the Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
--------------------------- -------------------
<S> <C> <C> <C> <C>
($ in thousands)
Traditional life insurance:
Participating whole life $ 4,739 $ 4,904 $ 9,644 $ 8,474
Term Life 1,036 1,638 2,448 3,094
Universal Life 3,795 2,149 7,005 4,325
----------------------- -----------------
Total (A) $ 9,570 $ 8,691 $19,097 $15,893
======================= =================
</TABLE>
(A) Direct first year annualized premiums.
Life insurance sales as measured by annualized premiums increased 10.1%
to $9.6 million for the second quarter of 1999 compared to $8.7 million for the
second quarter of 1999 and 20.2% to $19.1 million for the first half of 1999
compared to $15.9 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 six months of 1999
increased by $2.7 million from the same period in 1998. Increased sales of
universal life were primarily attributable to a new universal life product
introduced in the fourth quarter of 1998.
23
<PAGE> 24
The following table sets forth the Company's life insurance collected
premiums, including collected premiums associated with the Closed Block, for the
periods indicated:
<TABLE>
<CAPTION>
Collected Premiums by Product
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
----------------------------- --------------------
<S> <C> <C> <C> <C>
($ in thousands)
Individual life premiums collected:
Traditional life:
First year and single $ 20,539 $ 19,791 $ 42,760 $ 39,302
Renewal 43,914 41,961 90,538 86,973
---------------------- ----------------------
Total 64,453 61,752 133,298 126,275
Universal life:
First year and single 5,828 4,655 10,926 8,733
Renewal 18,209 18,329 36,980 37,408
---------------------- ----------------------
Total 24,037 22,984 47,906 46,141
Total individual life 88,490 84,736 181,204 172,416
Reinsurance assumed 472 311 821 408
Reinsurance ceded (3,223) (2,587) (7,525) (5,423)
---------------------- ----------------------
Total individual life, net of reinsurance $ 85,739 $ 82,460 $ 174,500 $ 167,401
====================== ======================
</TABLE>
Traditional life insurance premiums collected were $64.5 million for
the second quarter of 1999 compared to $61.8 million for the same period in 1998
and $133.3 million for the first half of 1999 compared to $126.3 million for the
first half of 1998. The increase in collected premiums was primarily the result
of increased whole life sales. Renewal direct collected premium was $3.6 million
higher in the first half of 1999 as compared to the same period in 1998
primarily due to continued favorable persistency and the compound effect of
higher sales in earlier periods.
Universal life insurance premiums collected were $24.0 million for the
second quarter of 1999 compared to $23.0 million for the second quarter of 1998.
Year-to-date universal life insurance premiums were $47.9 million in the first
half of 1999 compared to $46.1 million for the same period in 1998. The increase
in 1999 was primarily due to the new product introduced in the fourth quarter of
1998.
24
<PAGE> 25
The following table sets forth information regarding the Company's life
insurance in force for each date presented:
<TABLE>
<CAPTION>
Life Insurance in Force
As of June 30,
1999 1998
------------------------------
<S> <C> <C>
($ in thousands)
Individual life insurance:
Traditional life
Number of policies 251,820 255,767
GAAP life reserves $ 1,600,408 $ 1,509,998
Face amounts $20,196,000 $18,764,000
Universal life
Number of policies 113,695 116,409
GAAP life reserves $ 908,059 $ 881,951
Face amounts $12,161,000 $12,116,000
Total life insurance
Number of policies 365,515 372,176
GAAP life reserves $ 2,508,467 $ 2,391,949
Face amounts $32,357,000 $30,880,000
</TABLE>
While the total policy count continues to decline consistent with
industry trends, the average size of policy continues to increase from $83,000
in 1998 to $88,400 in 1999. As a result, total insurance in force has grown to
$32.3 billion as of June 30, 1999.
25
<PAGE> 26
ANNUITIES
The following table sets forth annuity collected premiums for the
periods indicated:
<TABLE>
<CAPTION>
Collected Premiums by Product
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
---------------------- ----------------------
<S> <C> <C> <C> <C>
($ in thousands)
Fixed annuities $ 181,384 $ 205,959 $ 415,060 $ 373,920
Equity-index fixed annuities 4,576 9,076 9,215 15,811
---------------------- ----------------------
Total 185,960 215,035 424,275 389,731
Reinsurance ceded (122) (91) (187) (1,058)
---------------------- ----------------------
Total annuities, net of reinsurance $ 185,838 $ 214,944 $ 424,088 $ 388,673
====================== ======================
</TABLE>
The Company markets its annuity products on a national basis through
networks of independent agents who 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 $185.8 million for the second quarter of 1999 compared to $214.9 million
for the same period in 1998. Although the pace of annuity sales declined in the
second quarter due to consumer reaction to the interest rate environment,
year-to-date annuity collected premiums increased 9.1% to $424.1 million for the
first half of 1999 compared to $388.7 million for the first half of 1998. The
Company's acquisition of an IMO in the second half of 1998 and the Company's
investment in an IMO in the first quarter of 1999 contributed to the increase in
collected premiums.
26
<PAGE> 27
The following table sets forth information regarding annuities in force
for each date presented:
<TABLE>
<CAPTION>
Annuities in Force
As of June 30,
1999 1998
--------------------------
<S> <C> <C>
($ in thousands)
Deferred fixed annuities
Number of policies 174,134 183,763
GAAP life reserves $5,960,581 $5,950,672
Equity-index fixed annuities
Number of policies 6,484 5,516
GAAP life reserves $ 271,700 $ 209,223
Total annuities
Number of policies 180,618 189,279
GAAP life reserves $6,232,281 $6,159,895
</TABLE>
The total number of annuity policies declined between periods while the
GAAP reserves on annuity policies increased. These changes between periods were
primarily attributable to an increase in the average size of policies sold
combined with surrenders of smaller average size policies.
27
<PAGE> 28
RESULTS OF OPERATIONS
A summary of the Company's revenue follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
($ in thousands)
Insurance premiums
Life insurance - traditional $ 15,396 $ 12,103 $ 30,721 $ 22,244
Annuities - Immediate annuity &
supplementary contract premiums 4,933 9,242 13,403 16,319
Other 56 87 96 163
---------------------- ----------------------
Total insurance premiums 20,385 21,432 44,220 38,726
Product charges
Life insurance - universal life 11,786 11,621 23,607 23,281
Annuities 7,114 6,251 12,479 10,971
---------------------- ----------------------
Total product charges 18,900 17,872 36,086 34,252
Net investment income
Life insurance 22,864 17,427 43,487 37,221
Annuities 106,676 108,802 214,877 221,076
Other 838 593 2,332 1,698
---------------------- ----------------------
Total net investment income 130,378 126,822 260,696 259,995
Realized gains (losses) on investments
Life insurance - Core -- -- -- --
Annuities - Core 2,857 2,694 5,826 5,517
Other - All Non-Core (1,442) 1,870 (1,807) 5,266
---------------------- ----------------------
Total realized gains (losses) on investments 1,415 4,564 4,019 10,783
Contribution from the Closed Block 6,372 7,861 12,914 16,836
---------------------- ----------------------
Total revenues $ 177,450 $ 178,551 $ 357,935 $ 360,592
====================== ======================
</TABLE>
28
<PAGE> 29
Traditional life insurance premiums were $15.4 million for the second
quarter of 1999 compared to $12.1 million for the same period in 1998.
Year-to-date traditional life insurance premiums increased by $8.5 million to
$30.7 million for 1999 compared to $22.2 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 whole life insurance
products.
Immediate annuity and supplementary contract premiums decreased by $4.3
million to $4.9 million for the second quarter of 1999 compared to $9.2 million
for the second quarter of 1998. Year-to-date, immediate annuity and
supplementary contract premiums were $13.4 million for 1999 compared to $16.3
million for the same period in 1998. The decrease in contract premiums in 1999
was primarily due to decreased immediate annuity sales.
Universal life product charges were $0.2 million higher in the second
quarter of 1999 compared to the same period in 1998 and $0.3 million higher for
the first six months of 1999 compared to the first six months of 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 $7.1 million for the second quarter of
1999 compared to $6.3 million for the same period in 1998. Year-to-date, annuity
product charges increased by $1.5 million to $12.5 million for 1999 compared to
$11.0 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 $130.4 million for the second quarter
of 1999 compared to $126.8 million for the second quarter of 1998 and $260.7
million for the first six months of 1999 compared to $260.0 million for the same
period in 1998. The increase in 1999 net investment income was primarily
attributable to higher average invested assets (excluding market value
adjustments). Average invested assets (excluding market value adjustments) were
approximately $56.7 million higher in the first half of 1999 as compared to
1998. Partially offsetting the higher average invested assets was a lower
effective yield. The effective yield of the entire portfolio in the first half
of 1999 was 7.18% compared to 7.21% in 1998. The effective yield of the annuity
portion of the portfolio decreased 24 basis points to 6.70% for the first half
of 1999 as compared to 6.94% in 1998. The decrease in effective yields primarily
resulted from lower reinvestment rates throughout 1998 and in the first half of
1999 as compared to the portfolio rate at the beginning of the prior year
period.
Realized gains on investments were $1.4 million for the second quarter
of 1999 and $4.0 million for the first half of 1999 compared to $4.6 million and
$10.8 million, respectively, for the same periods in 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.
29
<PAGE> 30
The Contribution from the Closed Block was $6.3 million for the second
quarter of 1999 compared to $7.9 million for the same period in 1998.
Year-to-date, the Contribution from the Closed Block was $12.9 million compared
to $16.8 million for 1998. The following table sets forth the operating results
of the Closed Block for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
($ in thousands)
Revenues
Insurance premiums $ 49,638 $ 49,516 $ 98,598 $ 99,932
Universal life and annuity product charges 3,166 3,745 6,570 7,266
Net investment income 26,355 28,156 56,006 57,339
Realized gains (losses) on investments 210 7,308 662 8,177
----------------------- ---------------------
Total revenues 79,369 88,725 161,836 172,714
Benefits and expenses
Policyowner benefits 47,651 50,341 98,972 99,372
Underwriting, acquisition and insurance expenses 1,010 1,525 2,821 2,886
Amortization of deferred policy acquisition costs 5,037 4,784 12,590 12,818
Dividends to policyowners 19,299 24,214 34,539 40,802
----------------------- ---------------------
Total benefits and expenses 72,997 80,864 148,922 155,878
----------------------- ---------------------
Contribution from the Closed Block $ 6,372 $ 7,861 $ 12,914 $ 16,836
======================= =====================
</TABLE>
Closed Block insurance premiums remained constant for the second
quarter of 1999 compared to the same period in 1998. Year-to-date, Closed Block
insurance premiums decreased by $1.3 million to $98.6 million compared to $99.9
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 $26.4 million for the
second quarter of 1999 and $56.0 million for the first half of 1999 compared to
$28.2 million and $57.3 million, respectively, for the same periods in 1998. The
decrease was primarily attributable to lower effective yields, partially offset
by higher average invested assets (excluding market value adjustments).
Realized gains on investments of the Closed Block were $7.1 million
lower in the second quarter of 1999 compared to the second quarter of 1998 and
$7.5 million lower for the first half of 1999 compared to the same period in
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 $2.7 million lower in the second
quarter of 1999 and $0.4 million lower for the first half of 1999 compared to
the same periods in 1998. The decrease was primarily due to decreased death
benefits.
30
<PAGE> 31
The amortization of deferred policy acquisition costs for the Closed
Block increased by $0.3 million to $5.0 million for the second quarter of 1999
compared to $4.8 million for the second quarter of 1998. Year-to-date, the
amortization of deferred policy acquisition costs for the Closed Block decreased
$0.2 million. Deferred policy acquisition costs are generally amortized in
proportion to gross margins. The increase in the quarter to quarter comparisons
primarily resulted from the restatement of the estimated future margins on the
Closed Block in the second quarter of 1998 which reduced 1998 amortization. The
decrease in the amortization of deferred policy acquisition costs year-to-date
corresponds to lower gross margins which resulted from lower realized gains in
the first half of 1999 as compared to the same period in 1998.
Closed Block dividends to policyowners decreased by $4.9 million to
$19.3 million for the second quarter of 1999 compared to $24.2 million for the
same period in 1998 and decreased $6.3 million to $34.5 million for the first
half of 1999 compared to $40.8 million for 1998. The decrease in 1999 was
primarily due to the decrease in deferred dividends resulting from lower
realized gains in 1999 as compared to the same periods in 1998.
31
<PAGE> 32
A summary of the Company's policyowner benefits follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
--------------------------- -------------------------
<S> <C> <C> <C> <C>
Life Insurance:
Traditional:
Death benefits $ 1,723 $ 643 $ 2,416 $ 1,040
Change in liability for future policy
benefits and other policy benefits 9,875 7,773 20,167 14,288
-------------------------- -------------------------
Total traditional 11,598 8,416 22,583 15,328
Universal:
Death benefits in excess of cash value 4,182 3,055 10,471 7,715
Interest credited on policyowner
account balances 7,686 9,632 15,217 17,572
Other 534 731 315 2,199
-------------------------- -------------------------
Total universal 12,402 13,418 26,003 27,486
-------------------------- -------------------------
Total life insurance benefits 24,000 21,834 48,586 42,814
Annuities
Interest credited to deferred annuity
account balances 68,280 71,572 138,020 147,314
Other annuity benefits 8,977 17,649 23,982 28,226
-------------------------- -------------------------
Total annuity benefits 77,257 89,221 162,002 175,540
Other benefits 20 875 108 932
-------------------------- -------------------------
Total policyowner benefits $ 101,277 $ 111,930 $ 210,696 $219,286
========================== ========================
</TABLE>
Total life insurance benefits were $24.0 million for the second quarter
of 1999 compared to $21.8 million for the second quarter of 1998. Year-to-date,
total life insurance benefits increased $5.8 million to $48.6 million in 1999
compared to $42.8 million in 1998. The increase in life insurance benefits was
as expected as the traditional block of business continues to grow and as the
universal block of business ages. Partially offsetting the increases in death
benefits and higher policy reserves was a reduction in interest credited.
Interest credited on universal policyowner account balances decreased $1.9
million for the second quarter of 1999 and $2.4 million for the first half of
1999 compared to the same periods in 1998 primarily due to lower crediting
rates. The weighted average interest crediting rate on policyowner account
balances for 1999 was 5.75% compared to 6.18% for 1998.
32
<PAGE> 33
Annuity benefits were $77.3 million for the second quarter of 1999
compared to $89.2 million for the same period in 1998. Year-to-date, annuity
benefits were $162.0 million in 1999 compared to $175.5 million in 1998. The
decrease is partially attributable to a lower weighted average crediting rate on
annuity account balances in 1999 compared to 1998, somewhat offset by higher
average liabilities. The weighted average crediting rate on deferred annuity
account balances was decreased 28 basis points to 5.00% for the first half of
1999 compared to 5.28% for the same period in 1998. Crediting rates were
decreased in response to the decrease in effective yields on the annuity
investment portfolio resulting in GAAP spreads widening 11 basis points for the
second quarter of 1999 as compared to the same period in 1998. Year-to-date,
GAAP spreads widened 4 basis points in 1999 as compared to 1998. Other annuity
benefits decreased for the second quarter and year-to-date periods in 1999 as
compared to the same periods in 1998 which corresponds to the change in
immediate annuity reserves and benefit payments on immediate annuities.
33
<PAGE> 34
A summary of the Company's expenses follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
-------------------------- -------------------------
<S> <C> <C> <C> <C>
($ in thousands)
Life Insurance
Underwriting, acquisition and
insurance expenses $ 13,683 $ 10,543 $ 26,592 $ 20,617
Amortization of deferred policy acquisition costs
and value of business acquired (VOBA), net
of adjustment of $389 and $1,197 for the
three months ended June 30, 1999 and
1998, respectively, and $704 and $1,471
for the six months ended June 30, 1999
and 1998, respectively 5,711 4,082 10,728 9,956
------------------- -------------------
Total life insurance 19,394 14,625 37,320 30,573
Annuities
Underwriting, acquisition and
insurance expenses 7,616 7,228 15,921 17,317
Amortization of deferred policy acquisition
and value of business acquired (VOBA), net
of adjustment of $781 and ($683) for the
three months ended June 30, 1999 and
1998, respectively, and $978 and ($178)
for the six months ended June 30, 1999
and 1998, respectively 12,705 11,135 24,161 19,439
------------------- -------------------
Total annuities 20,321 18,363 40,082 36,756
Amortization of deferred policy acquisition costs due
to realized gains or losses 1,170 514 1,682 1,293
Other 2,285 (537) 2,127 515
------------------- -------------------
Total expenses $ 43,170 $ 32,965 $ 81,211 $ 69,137
=================== ===================
</TABLE>
Total life insurance expenses were $19.4 million for the second quarter
of 1999 compared to $14.6 million for the second quarter of 1998 and $37.3
million for the first half of 1999 compared to $30.6 million for the same period
in 1998. Underwriting, acquisition and insurance expenses were higher in 1999
compared to the same periods in 1998 primarily due to costs related to the Year
2000 Compliance Project and costs associated with the Company's enhancement of
its distribution systems. Amortization of deferred policy acquisition costs and
value of business acquired (VOBA) increased $1.6 million for the second quarter
of 1999 compared to the same period in 1998 and increased $0.7 million for the
first half of 1999 compared to the first half of 1998. Deferred policy
acquisition costs are generally amortized in proportion to gross margins. Higher
interest margins on those policies for which deferred costs are amortized
contributed to higher gross margins in 1999 as compared to 1998, resulting in
the increased amortization.
34
<PAGE> 35
Total annuity expenses increased by $1.9 million to $20.3 million for
the second quarter of 1999 compared to $18.4 million for the second quarter of
1998. Year-to-date, total annuity expenses were $40.1 million compared to $36.8
million for the same period in 1998. Underwriting, acquisition and insurance
expenses decreased approximately $1.4 million in the first half of 1999 compared
to the same period in 1998 primarily due to cost savings realized from the
consolidation of acquired subsidiary operations. Amortization of deferred policy
acquisition costs and VOBA increased $1.6 million in the second quarter of 1999
and $4.7 million in the first half of 1999 as compared to the same periods in
1998. Gross margins increased due to higher interest margins and the reduced
expenses, resulting in the increased amortization.
Other expenses increased by $2.8 million for the second quarter of 1999
and $1.6 million for the first half of 1999 compared to the same periods in
1998. Expenses in 1998 were reduced by one-time benefits and 1999 expenses
included the amortization of the debt issuance costs on the capital securities
and senior notes issued in mid-1998. These two factors primarily contributed to
the increased other expenses in 1999.
A summary of the Company's income from operations by operating segment
follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1999 1998 1999 1998
--------------------------- -------------------------
<S> <C> <C> <C> <C>
Life Insurance:
Open Block:
Revenues $ 50,046 $ 41,151 $ 97,815 $ 82,746
Benefits and Expenses (43,394) (36,459) (85,906) (73,387)
Dividends to policyowners (1,047) (395) (2,023) (710)
Closed Block contribution 6,372 7,861 12,914 16,836
---------------------- ----------------------
Adjusted pre-tax income from operations 11,977 12,158 22,800 25,485
Annuities:
Revenues 121,580 126,989 246,585 253,883
Benefits and Expenses (97,578) (107,584) (202,084) (212,296)
---------------------- ----------------------
Adjusted pre-tax income from operations 24,002 19,405 44,501 41,587
Other (1,411) 342 193 414
---------------------- ----------------------
Total adjusted pre-tax income from operations $ 34,568 $ 31,905 $ 67,494 $ 67,486
====================== ======================
</TABLE>
Adjusted income from Life Insurance operations was $12.0 million for
the second quarter of 1999 compared to $12.2 million for the second quarter of
1998. Year-to-date, adjusted income from Life Insurance operations was $22.8
million in 1999 compared to $25.5 million in 1998. The decrease in adjusted
income in 1999 compared to 1998 was primarily due to increased costs related to
the Year 2000 Compliance Project and a decreased contribution from the Closed
Block.
Adjusted income from Annuity operations increased $4.6 million to $24.0
million for the second quarter of 1999 compared to $19.4 million for the same
period in 1998 and $2.9 million to $44.5 million for the first half of 1999
compared to $41.6 million in 1998. The increase in 1999 was primarily due to
increased interest spreads.
35
<PAGE> 36
Interest expense increased by $1.6 million in the second quarter of
1999 to $7.5 million compared to $5.9 million in the second quarter of 1998.
Year-to-date, interest expense increased $2.2 million in 1999 compared to 1998.
The increased interest expense in 1999 was primarily due to higher interest
rates on the senior notes and adjustable conversion-rate equity security units
outstanding during 1999 as compared to the revolving credit agreement borrowings
outstanding during 1998.
Income tax expense was $8.3 million for the second quarter of 1999
compared to $7.1 million for the second quarter of 1998 and $16.7 million for
the first half of 1999 compared to $17.3 million for the same period in 1998.
The effective tax rate in 1999 was 33.2% compared to 28.9% in 1998. The increase
in the effective tax rate in 1999 was primarily due to a decrease in tax credits
generated by affordable housing and historic rehabilitation investments.
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 $16.6 million for the second quarter of 1999 compared to
$20.9 million for the same period in 1998. Year-to-date, net income was $33.5
million in 1999 compared to $42.6 million in 1998. Pre-tax adjusted operating
income increased $2.7 million between second quarter periods and was level
between year-to-date periods, with decreases in the Life Insurance operations
being offset by increases in the Annuity operations. However, increased interest
expense, higher effective income tax rates, decreased realized gains, and the
reduction in net investment income resulting from the common stock buyback
program primarily contributed to the decrease in net income between the second
quarter periods and year-to-date periods.
36
<PAGE> 37
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. Based on these
limitations and 1998 results, the Company's subsidiaries could pay an estimated
$60.7 million in dividends in 1999 without obtaining regulatory approval. Of
this amount, the Company's subsidiaries paid the Company $28 million in
dividends during the first six months of 1999.
The Company and its subsidiaries generated cash flows from operating
activities of $437.9 million and $267.8 million for the six months ended June
30, 1999 and 1998, respectively. Excess operating cash flows were primarily used
to increase the Company's investment portfolio and fund policyowner account
withdrawals.
The Company has a $150 million revolving credit facility with a
syndicate of lenders (the "Bank Credit Facility"). As of June 30, 1999, there
was a $5 million 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 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.
37
<PAGE> 38
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 the third quarter
1999.
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-
38
<PAGE> 39
sensitive life products and annuities by their contractual withdrawal provisions
at June 30, 1999 (including liabilities in both the Closed Block and the general
account):
(dollars in millions)
<TABLE>
<S> <C>
Not subject to discretionary withdrawal $ 368.8
Subject to discretionary withdrawal with adjustments
Specified surrender charges (A) 4,145.8
Market value adjustments 1,582.2
---------
Subtotal 5,728.0
Subject to discretionary withdrawal without adjustments 1,276.0
---------
Total $ 7,372.8
=========
</TABLE>
(A) Includes $1,171.9 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 June 30, 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 $16.3 million at June 30, 1999.
The Company's life insurance subsidiaries may also obtain liquidity
through sales of investments. The Company's investment portfolio as of June 30,
1999 had a carrying value of $9 billion, including Closed Block investments.
At June 30, 1999, the statutory surplus of the Company's subsidiaries
was approximately $430.7 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.
39
<PAGE> 40
The Company has essentially completed the Year 2000 modifications and
conversions and testing will continue throughout the year. 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. The mainframe remediation and the personal computer and network
remediation/replacement efforts are on schedule and substantially complete.
Individual systems testing was completed as part of the remediation efforts, and
the Company has completed full integration testing of mission critical systems.
Nonetheless, we will continue to test these systems throughout the year.
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 is
substantially complete. We will continue testing these systems throughout the
year.
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 third
quarter of 1999.
Despite efforts to address all Year 2000 needs in a timely and
effective manner, there are risks that some Year 2000 effects could cause
significant 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 six months ended June 30, 1999, the Company has incurred $3.8 million in
Year 2000 expenses, and $8.0 million since the beginning of the Year 2000
Project.
40
<PAGE> 41
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 table below provides information about the Company's fixed maturity
investments and mortgage loans at June 30, 1999. The table presents cash flows
of principal amounts and related weighted average interest rates by expected
maturity dates. The cash flows are based on the earlier of the call date or the
maturity date or, for mortgage-backed securities, expected payment patterns.
Actual cash flows could differ from the expected amounts.
EXPECTED CASH FLOWS
(Dollars in millions)
<TABLE>
<CAPTION>
6 mos
Amortized 1999 2000 2001 2002 2003 2004 Thereafter Cost
--------- ---- ---- ---- ---- ---- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Maturity
Securities $ 179 $ 382 $ 483 $ 572 $ 839 $ 654 $ 3,821 $6,930
Average interest
rate 7.2% 7.2% 7.1% 7.0% 6.7% 6.6% 7.1%
Mortgage loans $ 4 $ 25 $ 21 $ 3 $ 4 $ 16 $ 527 $ 600
Average interest
rate 10.4% 9.4% 9.6% 9.5% 9.4% 9.8% 8.5%
Total $ 183 $ 407 $ 504 $ 575 $ 843 $ 670 $ 4,348 $7,530
====== ====== ====== ====== ====== ====== ======= ======
</TABLE>
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
41
<PAGE> 42
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 7.5 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.
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"), were 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, alleged 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, sought 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
denied 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.
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. No appeal has been filed and the time for filing an appeal has
expired.
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.
42
<PAGE> 43
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of its shareholders on May 14,
1999. There were two matters voted upon at the meeting. The first was the
election of directors. The nominees, Messrs. Roger K. Brooks, Jack C. Pester and
John A. Wing and Ms. Maureen M. Culhane were elected to three-year terms. Other
directors continuing to serve are John R. Albers, Malcolm Candlish, Thomas F.
Gaffney, Sam C. Kalainov, Ralph W. Laster, Jr., and John W. Norris, Jr.
The second matter voted upon resulted in the ratification of the
appointment of KPMG LLP as independent auditors for the Company.
The results of the balloting were as follows:
<TABLE>
<CAPTION>
AGAINST OR ABSTENTIONS
FOR WITHHELD BROKER NON-VOTES
--- -------- ----------------
<S> <C> <C> <C>
Election of Directors:
Roger K. Brooks 26,883,462 1,218,444
Maureen M. Culhane 26,883,380 1,218,526
Jack C. Pester 26,879,392 1,222,514
John A. Wing 26,882,998 1,218,908
Ratification of KPMG LLP 28,070,192 12,512 19,202
</TABLE>
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
June 30, 1999:
None.
43
<PAGE> 44
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: August 13, 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)
44
<PAGE> 45
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.
45
<PAGE> 46
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.
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 AlloAmerUs 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.
46
<PAGE> 47
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.
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.
47
<PAGE> 48
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.
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, filed as Exhibit 10.34 on Form 10-Q dated May 14,
1999, is hereby incorporated by reference.
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, filed as Exhibit
10.39 on Form 10-Q dated May 14, 1999, is hereby incorporated by
reference.
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, filed as Exhibit 10.40 on Form 10-Q dated May 14, 1999, is
hereby incorporated by reference.
10.41 Amendment No. 1 to Facility Agreement, dated March 23, 1999, among
The First National Bank of Chicago and the Registrant, filed as
Exhibit 10.41 on Form 10-Q dated May 14, 1999, is hereby
incorporated by reference.
10.42 1999 Non-Employee Stock Option Plan, dated April 19, 1999, filed on
Form S-3, Registration Number 333-72643, is hereby incorporated by
reference.
10.43* Fifth Waiver and Amendment to Credit Agreement dated as of October
1, 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.
48
<PAGE> 49
10.44* Sixth Amendment to Credit Agreement dated as of May 18, 1999 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.
11* Statement Re: Computation of Per Share Earnings.
27.1* Financial Data Schedule.
99.1 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.
99.2 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.
99.3 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.
99.4* First Amendment to Employment Agreement, dated as of April 15, 1999,
to the 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.,
American Investors Sales Group, Inc., and the Registrant.
99.5* Supplemental Benefit Agreement, dated as of April 15, 1999, among
Roger K. Brooks and the Registrant.
99.6* Form of Supplemental Benefit Agreement, dated as of April 15, 1999,
among the Registrant and Victor N. Daley, Michael G. Fraizer, Thomas
C. Godlasky and Gary R. McPhail.
99.7* Amended and Restated Employment Agreement, dated as of April 15,
1999, among Marcia S. Hanson and the Registrant.
- ----------------------
* included herein
49
<PAGE> 1
EXHIBIT 10.43
FIFTH WAIVER AND AMENDMENT TO CREDIT AGREEMENT
FIFTH WAIVER AND AMENDMENT TO CREDIT AGREEMENT (this
"Amendment"), dated as of October 1, 1998, among AMERUS LIFE HOLDINGS, INC., an
Iowa corporation (the "Borrower"), the various Banks from time to time party to
the Credit Agreement referred to below (the "Banks"), BANK ONE, INDIANA, NA and
ABN AMRO BANK, N.V., as Co-Arrangers (the "Co-Arrangers") and THE CHASE
MANHATTAN BANK, as Administrative Agent (the "Administrative Agent"). All
capitalized terms used herein and not otherwise defined shall have the
respective meanings assigned to such terms in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Borrower, the Banks, the Co-Arrangers and the
Administrative Agent are parties to a Credit Agreement, dated as of October 23,
1997 (as amended, modified or supplemented to the date hereof, the "Credit
Agreement");
WHEREAS, the Borrower has requested the Banks to waive certain
provisions of the Credit Agreement as described herein and has further requested
that the Banks agree to amend the Credit Agreement as herein provided; and
WHEREAS, the Banks have agreed to the waivers and amendments
the Credit Agreement as herein provided subject to the terms and conditions set
forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. Notwithstanding Section 7.12(a) of the Credit Agreement,
the Banks hereby agree to waive, from October 1, 1998 to but not including the
Fifth Amendment Effective Date (such period being herein referred to as the
"Waiver Period"), compliance by the Borrower and AmerUs Life with Section
7.12(a) of the Credit Agreement, and the Banks further agree to waive any
Default or Event of Default which may exist as a result of any failure of the
Borrower or AmerUs Life to comply with said Section 7.12(a) during the Waiver
Period, including with respect to the giving of any Notice of Borrowing during
the Waiver Period or the making of any representation or warranty pursuant to
Section 4.02(a) during the Waiver Period.
2. Section 7.12 of the Credit Agreement is hereby amended by
deleting clause (a) of said Section in its entirety and inserting the following
new clause (a) in lieu thereof:
(a) Subject to Section 7.12(d) below, the Borrower shall not
permit AmerUs Life to have an Adjusted Capital and Surplus of less than
(x) at any time on or after the Fifth Amendment Effective Date to but
excluding December 31, 1999, $240,000,000, (y) at
<PAGE> 2
any time on or after December 31, 1999 to but excluding December 31,
2000, $275,000,000 and (z) at any time thereafter, $300,000,000.
3. Section 9 of the Credit Agreement is hereby amended by
inserting the following new definition in appropriate alphabetical order:
"Fifth Amendment Effective Date" shall have the meaning
provided in the Fifth Amendment to this Agreement.
4. In order to induce the Banks to enter into this Amendment,
the Borrower hereby represents and warrants that (x) all representations and
warranties contained in Section 5 of the Credit Agreement are true and correct
in all material respects on and as of the Fifth Amendment Effective Date (as
defined below) after giving effect to this Amendment (unless such
representations and warranties relate to a specific earlier date, in which case
such representations and warranties shall be true and correct as of such earlier
date) and (y) there exists no Default or Event of Default on the Fifth Amendment
Effective Date, after giving effect to this Amendment.
5. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any provision of the Credit
Agreement or any other Credit Document except as expressly set forth herein.
6. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument. A complete set
of counterparts shall be lodged with the Borrower and the Administrative Agent.
7. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.
8. This Amendment shall become effective as of the date hereof
on the date (the "Fifth Amendment Effective Date") when each of the Borrower and
the Required Banks shall have signed a counterpart hereof (whether the same or
different counterparts) and shall have delivered (including by way of facsimile
transmission) the same to the Administrative Agent at its Notice Office.
9. From and after the Fifth Amendment Effective Date, all
references in the Credit Agreement and each of the Credit Documents to the
Credit Agreement shall be deemed to be references to the Credit Agreement after
giving effect to this Amendment.
* * *
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
AMERUS LIFE HOLDINGS, INC.
By /s/ Joseph K. Haggerty
-------------------------------------------
Title: Senior Vice President
THE CHASE MANHATTAN BANK, Individually and as
Administrative Agent
By /s/ Peter Platten
-------------------------------------------
Title: Vice President
BANK ONE, INDIANA, NA, Individually and as
a Co-Arranger
By /s/ Deborah A. Pyne
-------------------------------------------
Title: First Vice President
ABN AMRO BANK N.V., Individually and as a
Co-Arranger
By /s/ Bruce D. Ballentine
-------------------------------------------
Title: Group Vice President
By /s/ Parker H. Douglas
-------------------------------------------
Title: Group Vice President
BANK OF MONTREAL
By /s/ Robert C. Meyer
-------------------------------------------
Title: Director
BANK OF TOKYO MITSUBISHI TRUST COMPANY
By
-------------------------------------------
Title:
<PAGE> 4
BANQUE NATIONALE DE PARIS
By
-------------------------------------------
Title:
CIBC INC.
By
-------------------------------------------
Title:
DRESDNER BANK AG, NEW YORK BRANCH AND GRAND
CAYMAN BRANCH
By
-------------------------------------------
Title:
By
-------------------------------------------
Title:
FIRST UNION NATIONAL BANK
By /s/ Thomas L. Stitchberry
-------------------------------------------
Title: Senior Vice President
FLEET NATIONAL BANK
By /s/ David A. Bosselait
-------------------------------------------
Title: Vice President
MELLON BANK, N.A.
By /s/ Susan M Whitewood
-------------------------------------------
Title: Vice President
NATIONSBANK OF TEXAS, N.A.
By /s/ Gary R. Peet
-------------------------------------------
Title: Managing Director
<PAGE> 5
NORWEST BANK IOWA, NATIONAL ASSOCIATION
By /s/ Diane S. Ramsey
-------------------------------------------
Title: Vice President
ROYAL BANK OF CANADA
By /s/ Vivian Abdelmessih
-------------------------------------------
Title: Senior Manager
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION
By
-------------------------------------------
Title:
<PAGE> 1
EXHIBIT 10.44
SIXTH AMENDMENT TO CREDIT AGREEMENT
SIXTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated
as of May 18, 1999, among AMERUS LIFE HOLDINGS, INC., an Iowa corporation (the
"Borrower"), the various Banks from time to time party to the Credit Agreement
referred to below (the "Banks"), BANK ONE, INDIANA, NA and ABN AMRO BANK, N.V.,
as Co-Arrangers (the "Co-Arrangers") and THE CHASE MANHATTAN BANK, as
Administrative Agent (the "Administrative Agent"). All capitalized terms used
herein and not otherwise defined shall have the respective meanings assigned to
such terms in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Borrower, the Banks, the Co-Arrangers and the
Administrative Agent are parties to a Credit Agreement, dated as of October 23,
1997 (as amended, modified or supplemented to the date hereof, the "Credit
Agreement");
WHEREAS, the Borrower has requested that the Banks agree to
amend the Credit Agreement as herein provided; and
WHEREAS, the Banks have agreed to the amendments to the Credit
Agreement as herein provided subject to the terms and conditions set forth
herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 7.02 of the Credit Agreement is hereby amended by
inserting the text "or otherwise dispose of" immediately following the word
"sell" appearing in the first line of clause (f) thereof.
2. Section 7.03 of the Credit Agreement is hereby amended by:
(i) deleting the text "equipment and motor vehicles" appearing
in clause (k) thereof, and inserting in lieu thereof the text "any tangible
assets";
(ii) deleting the figure "$10,000,000" appearing in clause (r)
thereof, and inserting in lieu thereof the figure "$20,000,000;
(iii) deleting the period appearing at the end of clause (s)
thereof, and inserting in lieu thereof the text "; and"; and
(iv) inserting the following new clause (t) immediately
following clause (s):
<PAGE> 2
"(t) Liens created on assets of any Regulated Insurance
Company in connection with the establishment, sale, issuance or
maintenance of Policies issued by such Regulated Insurance Company or
the holding or investment of assets for such Policies, including but
not limited to those incident to separate accounts or funding
agreements."
3. Section 7.04 of the Credit Agreement is hereby amended by:
(i) deleting the figure "$15,000,000" appearing in clause (b)
thereof, and inserting in lieu thereof the figure "$30,000,000";
(ii) amending clause (j) thereof by (a) deleting the text
"AmerUs Life" in each instance where such text appears and inserting in lieu
thereof the text "any Regulated Insurance Company"; and (b) deleting the figure
"$75,000,000" appearing therein and inserting in lieu thereof the figure
"$125,000,000"; and
(iii) deleting the figure "$15,000,000" appearing in clause
(m) thereof, and inserting in lieu thereof the figure "$25,000,000".
4. Section 7.06 of the Credit Agreement is hereby amended by
inserting the following text immediately preceding the semicolon in clause (a)
thereof:
", provided, that, in addition to the purchases consented to prior to
the Sixth Amendment Effective Date, the Borrower may make voluntary or
optional payments or prepayments or redemptions or acquisitions for
value of or exchanges of any Permitted Subordinated Debt Securities or
Trust Preferred Related Debt Securities after the issuance thereof, so
long as the aggregate amount paid by the Borrower in respect of such
payments, when added to the purchases permitted pursuant to Section
7.07(vi) of this Agreement, does not exceed $100,000,000".
5. Section 7.07 of the Credit Agreement is hereby amended by
(i) deleting the text "and" appearing at the end of clause (iv) thereof; (ii)
deleting the period appearing at the end of clause (v) and inserting in lieu
thereof the text "; and"; and (iii) inserting the following new clause (vi)
immediately following clause (v) thereof:
"(vi) in addition to the purchases consented to prior
to the Sixth Amendment Effective Date, the Borrower may make
purchases of its capital stock and options thereon (including
in the form of convertible equity units), so long as the
aggregate amount paid by the Borrower in respect of such
purchases, when added to the payments made pursuant to the
proviso to Section 7.06(a) of this Agreement, does not exceed
$100,000,000."
6. Section 7.09 of the Credit Agreement is hereby amended by:
(i) deleting the word "and" appearing at the end of clause (v)
thereof;
2
<PAGE> 3
(ii) deleting the period appearing at the end of clause (vi)
and inserting in lieu thereof the text "; and"; and
(iii) inserting the following new clause (vii) immediately
following clause (vi):
"(vii) transactions in connection with and related to the
demutualization of AMHC shall not be subject to this Section 7.09."
7. Section 7.12 of the Credit Agreement is hereby amended by
deleting such Section 7.12 in its entirety and inserting in lieu thereof the
following new Section 7.12:
"7.12 Minimum Consolidated Net Worth. The Borrower
will not permit Consolidated Net Worth at any time to be less
than the Minimum Consolidated Net Worth at such time."
8. Section 9 of the Credit Agreement is hereby amended by:
(i) amending the definition of "Affiliate" by (a) deleting the
parenthetical appearing therein in its entirety and (b) inserting the following
proviso immediately preceding the period ending the first sentence thereof: ",
provided, that a Person shall not be deemed to be an Affiliate solely as a
result of a title or position held by such Person";
(ii) amending the definition of "Change of Control" appearing
therein by (a) inserting the text "(other than as a result of a demutualization
of AMHC in connection with which Group is merged with AMHC)" immediately prior
to the comma ending clause (ii) thereof; (b) deleting the word "or" appearing
immediately prior to clause (iii) thereof; and (c) inserting the following text
immediately following, but prior to the period ending, clause (iii) thereof:
"; or (iv) any Person or "group" (within the meaning of
Sections 13(d) and 14(d) under the Securities Exchange Act, as
in effect on the Sixth Amendment Effective Date), shall have
(A) acquired beneficial ownership of 25% or more on a fully
diluted basis of the voting and/or economic interest in the
Borrower's capital stock or (B) obtained the power (whether or
not exercised) to elect a majority of the Borrower's
directors; provided that this clause (iv) shall only be
applicable after a demutualization of AMHC"
(iii) inserting the following new definitions in appropriate
alphabetical order:
"AMHC" shall mean American Mutual Holding Company, an Iowa
corporation.
"Minimum Consolidated Net Worth" shall mean, at any time,
$650,000,000.
"Sixth Amendment" shall mean the Sixth Amendment, dated as of
May 18, 1999, to this Agreement.
3
<PAGE> 4
"Sixth Amendment Effective Date" shall have the meaning
provided in the Sixth Amendment to this Agreement.
"Unrestricted Subsidiary" shall mean each Subsidiary of the
Borrower created or acquired after the Sixth Amendment Effective Date
and designated by the Borrower as an Unrestricted Subsidiary in
accordance with the terms of the Sixth Amendment.
(iv) deleting the definition of "Adjusted Capital and Surplus"
in its entirety.
9. Section 11 of the Credit Agreement is hereby amended by
deleting subsection 11.14 in its entirety and inserting the following new
subsection 11.14 in lieu thereof:
"11.14 Domicile of Loans. (a) Each Bank may transfer
and carry its Loans at, to or for the account of any office, Subsidiary
or Affiliate of such Bank. In addition, each Bank (each, a "Designating
Bank") may, with the prior written consent of the Administrative Agent
and the Borrower (each of which consents shall not be unreasonably
withheld) and on terms and conditions reasonably satisfactory to the
Administrative Agent and the Borrower, designate a special purpose
corporation (each, a "Designated Bank") to make Loans in respect of
such Designating Bank's Commitment, provided that (i) such Designating
Bank shall remain the "Bank" for all purposes of this Agreement and the
other Credit Documents, shall not otherwise be relieved of any of its
obligations under this Agreement or any such other Credit Document
(including, without limitation, its obligations under Sections 1.01 and
10.07) and shall be liable for any losses, claims, damages or expenses
incurred by the Borrower, the Administrative Agent or any Bank as a
result of such Designating Bank's designation of any such special
purpose corporation as a Designated Bank, (ii) all payments entitled to
be received by such Designated Bank with respect to the Loans made by
it in respect of such Designating Bank's Commitment shall be made
directly to such Designating Bank for the distribution to such
Designated Bank, (iii) the Borrower and the Administrative Agent shall
continue to deal solely with the respective Designating Bank and such
Designated Bank shall not have any right to approve any amendment,
modification or waiver to this Agreement or any other Credit Document,
and all amendments, waivers, consents and/or modifications to this
Agreement and the other Credit Documents which are binding on such
Designating Bank also shall be binding on such Designated Bank
regardless of whether or not such Designated Bank actually had notice
of any such amendment, waiver, consent and/or other modification and
(iv) each Designating Bank may only designate one Designated Bank at
any time to make Loans in respect of such Designating Bank's
Commitment. In addition, each party hereto hereby agrees that prior to
the date that is one year and one day after the payment in full of all
outstanding senior indebtedness of any Designated Bank, no party will
institute against, or join any other Person in instituting against,
such Designated Bank any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings under any federal or state
bankruptcy or similar law arising from any actions of such Designated
Bank under this Agreement.
4
<PAGE> 5
(b) Notwithstanding anything to the contrary contained herein,
to the extent that a transfer of Loans pursuant to this Section 11.14
would, at the time of such transfer, result in increased costs under
Section 1.10, 1.11 or 3.04 from those being charged by the respective
Bank prior to such transfer, then the Borrower shall not be obligated
to pay such increased costs (although the Borrower shall be obligated
to pay any other increased costs of the type described above resulting
from changes after the date of the respective transfer).
10. Notwithstanding anything to the contrary contained in the
Credit Agreement, (i) after the Sixth Amendment Effective Date, the Borrower may
create or acquire one or more Subsidiaries and designate (by written notice to
the Administrative Agent and each Bank) such Subsidiary or Subsidiaries as an
"Unrestricted Subsidiary" (which Unrestricted Subsidiaries may include, without
limitation, any Person which is a Subsidiary of Group as of the Sixth Amendment
Effective Date, but in no event may the Borrower designate as an Unrestricted
Subsidiary any Person which is a Subsidiary of the Borrower as of the Sixth
Amendment Effective Date, except for ACM Properties, Inc., which may be
designated as an Unrestricted Subsidiary), (ii) such Unrestricted Subsidiaries
shall not be subject to Sections 5, 6, 7 or 8 of the Credit Agreement (and the
operations, assets and liabilities of such Unrestricted Subsidiaries shall not
be included in determining compliance with the financial covenants set forth in
Sections 7.10, 7.11 and 7.12 of the Credit Agreement, except that the carrying
value of such Unrestricted Subsidiaries recorded in accordance with GAAP shall
be included in the definition of Net Worth), (iii) the financial reports
provided pursuant to the Credit Agreement (including, without limitation, those
provided pursuant to Section 6.01) shall be prepared in a manner (reasonably
satisfactory to the Administrative Agent) which distinguishes the operations,
assets and liabilities of the Unrestricted Subsidiaries from those of the
Borrower and its other Subsidiaries, and (iv) the sum of (x) the aggregate
amount paid by the Borrower and its Subsidiaries in connection with the
acquisitions of all Unrestricted Subsidiaries plus (y) the aggregate amount of
liability of and recourse to the Borrower and its Subsidiaries (other than
Unrestricted Subsidiaries) relating to the business and operations of all
Unrestricted Subsidiaries (whether pursuant to Contingent Obligations or
otherwise) plus (z) the aggregate amount of investments (including loans,
advances and capital contributions) by the Borrower and its Subsidiaries (other
than Unrestricted Subsidiaries) in all Unrestricted Subsidiaries, shall not
exceed $100,000,000 at any time."
11. In order to induce the Banks to enter into this Amendment,
the Borrower hereby represents and warrants that (x) all representations and
warranties contained in Section 5 of the Credit Agreement are true and correct
in all material respects on and as of the Sixth Amendment Effective Date (as
defined below) after giving effect to this Amendment (unless such
representations and warranties relate to a specific earlier date, in which case
such representations and warranties shall be true and correct as of such earlier
date) and (y) there exists no Default or Event of Default on the Sixth Amendment
Effective Date, after giving effect to this Amendment.
5
<PAGE> 6
12. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any provision of the Credit
Agreement or any other Credit Document except as expressly set forth herein.
13. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument. A complete set
of counterparts shall be lodged with the Borrower and the Administrative Agent.
14. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.
15. This Amendment shall become effective as of the date
hereof on the date (the "Sixth Amendment Effective Date") when each of the
Borrower and the Required Banks shall have signed a counterpart hereof (whether
the same or different counterparts) and shall have delivered (including by way
of facsimile transmission) the same to the Administrative Agent at its Notice
Office.
16. From and after the Sixth Amendment Effective Date, all
references in the Credit Agreement and each of the Credit Documents to the
Credit Agreement shall be deemed to be references to the Credit Agreement after
giving effect to this Amendment.
17. The Borrower hereby covenants and agrees that, so long as
the Sixth Amendment Effective Date occurs, it shall pay each Bank which executes
and delivers to the Administrative Agent a counterpart hereof by the later to
occur of (x) the close of business on the Sixth Amendment Effective Date or (y)
5:00 p.m. (New York time) on June 8, 1999, a cash fee in an amount equal to 10
basis points (.10%) of an amount equal to the Commitment of such Bank, in each
case as same is in effect on the Sixth Amendment Effective Date. All fees
payable pursuant to this Section 17 shall be paid by the Borrower to the
Administrative Agent for distribution to the Banks not later than the first
Business Day following the Sixth Amendment Effective Date.
* * *
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
AMERUS LIFE HOLDINGS, INC.
By /s/ Michael G. Fraizer
-----------------------------------------
Title: Senior Vice President &
Chief Financial Officer
THE CHASE MANHATTAN BANK,
Individually and as Administrative Agent
By /s/ Peter Platten
-----------------------------------------
Title: Vice President
BANK ONE, INDIANA, NA, Individually and as
a Co-Arranger
By /s/ Deborah A. Pyne
-----------------------------------------
Title: First Vice President
ABN AMRO BANK N.V., Individually and as a
Co-Arranger
By
-----------------------------------------
Name:
Title:
<PAGE> 8
BANK OF MONTREAL
By /s/ L.A. Durning
-----------------------------------------
Title: Portfolio Manager
BANQUE NATIONALE DE PARIS
By /s/ Arnaud Collin du Bocage
-----------------------------------------
Title: Executive Vice President and
General Manager
CIBC INC.
By
-----------------------------------------
Name:
Title:
<PAGE> 9
DRESDNER BANK AG, NEW YORK
BRANCH AND GRAND CAYMAN BRANCH
By /s/ Lisa Kim-Cantello
-----------------------------------------
Title: Vice President
By /s/ Lloyd C. Stevens
-----------------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK
By /s/ Thomas L. Stitchberry
-----------------------------------------
Title: Senior Vice President
FLEET NATIONAL BANK
By /s/ David A. Bosselait
-----------------------------------------
Title: Vice President
MELLON BANK, N.A.
By /s/ Susan M. Whitewood
-----------------------------------------
Title: Vice President
<PAGE> 10
NATIONSBANK OF TEXAS, N.A.
By /s/ Gary R. Peet
-----------------------------------------
Title: Managing Director
NORWEST BANK IOWA, NATIONAL ASSOCIATION
By /s/ Diane S. Ramsey
-----------------------------------------
Title: Vice President
ROYAL BANK OF CANADA
By /s/ Y. J. Bernard
-----------------------------------------
Title: Manager
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION
By
-----------------------------------------
Name:
Title:
<PAGE> 1
AmerUs Life Holdings, Inc.
Exhibit 11 - Statement Re: Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1999 June 30, 1999
------------------------------------------------------------------------------------
Net Number of Per Share Number of Per Share
Income Shares Amount Net Income Shares Amount
------------------------------------------------------------------------------------
(in thousands, except per share amounts) (in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Net Income $ 16,591 30,433 $ 0.55 $ 33,548 30,432 $ 1.10
Effect of dilutive
securities -- 90 (0.01) -- 63 --
Options
------------------------------------------------------------------------------------
Diluted EPS $ 16,591 30,523 $ 0.54 $ 33,548 30,495 $ 1.10
====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1998 June 30, 1998
------------------------------------------------------------------------------------
Net Number of Per Share Number of Per Share
Income Shares Amount Net Income Shares Amount
------------------------------------------------------------------------------------
(in thousands, except per share amounts) (in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Net Income $ 20,864 34,733 $ 0.60 $ 42,621 34,734 $ 1.23
Effect of dilutive
securities
Options -- 258 -- -- 290 (0.01)
Warrants -- 31 -- -- 62 (0.01)
====================================================================================
Diluted EPS $ 20,864 35,022 $ 0.60 $ 42,621 35,086 $ 1.21
====================================================================================
</TABLE>
50
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<DEBT-HELD-FOR-SALE> 6,782,652
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 41,834
<MORTGAGE> 599,590
<REAL-ESTATE> 431
<TOTAL-INVEST> 7,744,144
<CASH> 35,674
<RECOVER-REINSURE> 9,397
<DEFERRED-ACQUISITION> 426,549
<TOTAL-ASSETS> 10,630,099
<POLICY-LOSSES> 7,207,705
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 6,155
<POLICY-HOLDER-FUNDS> 313,183
<NOTES-PAYABLE> 146,307
216,729
0
<COMMON> 30,424
<OTHER-SE> 792,719
<TOTAL-LIABILITY-AND-EQUITY> 10,630,999
80,306
<INVESTMENT-INCOME> 260,696
<INVESTMENT-GAINS> 4,019
<OTHER-INCOME> 0
<BENEFITS> 210,696
<UNDERWRITING-AMORTIZATION> 36,571
<UNDERWRITING-OTHER> 44,640
<INCOME-PRETAX> 49,235
<INCOME-TAX> 16,695
<INCOME-CONTINUING> 33,548
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,548
<EPS-BASIC> 1.10
<EPS-DILUTED> 1.10
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
<PAGE> 1
Exhibit 99.4
FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
Reference is hereby made to that certain Employment Agreement dated as
of September 19, 1997 (the "Employment Agreement"), by and between AmVestors
Financial Corporation ("AmVestors"), American Investors Life Insurance Company,
Inc., AmVestors Investment Group, Inc. and American Investors Sales Group, Inc.,
all Kansas corporations (collectively, the "Companies") and Mark V. Heitz, an
individual ("Mr. Heitz"). AmerUs Life Holdings, Inc., an Iowa corporation
("ALH"), joined the Employment Agreement for the purposes set forth therein.
This First Amendment to Employment Agreement (this "Amendment") is made and
entered into by and among the Companies, Mr. Heitz and ALH and shall amend and
supplement the Employment Agreement as set forth below. In the event of any
inconsistency between the Employment Agreement and this Amendment, this
Amendment shall govern. Terms used in this Amendment and not defined herein
shall have the meanings ascribed to them in the Employment Agreement.
In consideration of the promises and covenants contained herein, the
receipt and sufficiency of which are hereby acknowledged, the Companies, Mr.
Heitz and ALH hereby agree as follows:
1. The Employment Agreement shall amended by inserting the following
provision as a new Paragraph 3.1 thereof:
"3.1. Special Change of Control Provisions.
a. Termination of Employment by Mr. Heitz for Good
Cause.
(i) If the employment of Mr. Heitz is terminated by
Mr. Heitz for Good Cause (as that term is defined in Paragraph
3.1.g hereof), Mr. Heitz shall be entitled to the severance
payment described in Paragraph 3.1.c hereof and the benefits
described in Paragraph 3.1.d hereof.
(ii) Any offer of Comparable Employment (as that term
is defined in Paragraph 3.1.g hereof) following a Change of
Control (as that term is defined in Paragraph 3.1.g hereof)
shall remain open for at least fifteen (15) days after such
offer is extended to Mr. Heitz. If Mr. Heitz does not accept
an offer of Comparable Employment following a Change in
Control within fifteen (15) days after it is offered, all
rights of Mr. Heitz under this Agreement shall cease.
(iii) If Mr. Heitz timely accepts an offer of
Comparable Employment following a Change in Control and if
within two (2) years following the date such offer of
Comparable Employment is accepted either (i) the employment of
Mr. Heitz is terminated by AmVestors without cause (as such
term is described in Paragraph 3.b hereof) or (ii) a Material
Event (as that term is defined in Paragraph 3.1.g hereof)
occurs and Mr. Heitz elects to terminate his employment with
AmVestors (which will also be considered a termination of
employment by
<PAGE> 2
Mr. Heitz for Good Cause for purposes hereof), then Mr. Heitz
shall be entitled to the severance payment described in
Paragraph 3.1.c hereof and the benefits described in Paragraph
3.1.d hereof.
b. Termination of Employment by AmVestors Following Change in
Control. If the employment of Mr. Heitz is terminated by AmVestors
following a Change in Control, and such termination is not for cause as
described in Paragraph 3.b hereof, Mr. Heitz shall be entitled to the
severance payment described in Paragraph 3.1.c hereof and the benefits
described in Paragraph 3.1.d hereof; provided, however, that if Mr.
Heitz accepts an offer of Comparable Employment, the provisions of
Paragraph 3.1.a(iii) shall apply rather than this Paragraph 3.1.b.
c. Severance Payment. In the event the employment of Mr. Heitz
is terminated by Mr. Heitz for Good Cause as described in Paragraph
3.1.a(i) or by AmVestors following a Change of Control as described in
Paragraph 3.1.b hereof, AmVestors shall pay to Mr. Heitz the following
severance payment, which shall be paid in a lump sum within thirty-five
(35) days following the Termination Date (as that term is defined in
Paragraph 3.1.g hereof):
(i) Any amount of Mr. Heitz's Base Compensation
earned but unpaid through the Termination Date; and
(ii) In lieu of any further salary, bonus,
compensation or other payments of any kind to Mr. Heitz for
periods after the Termination Date, an amount equal to:
(a) the sum of:
(A) Mr. Heitz's Base Compensation,
plus
(B) the greater of (I) the amount of
Mr. Heitz's bonuses (whether in cash, stock
or otherwise) under the AmerUs Group
Management Incentive Plan, the AmerUs Group
MIP Deferral Plan and any similar or
successor plans providing bonuses on
deferred compensation during the twelve (12)
months immediately preceding the Termination
Date (including any portion of such bonuses
that were deferred by Mr. Heitz, but not
including any employer match on any such
deferred amount); (II) the amount of such
bonuses (as described in clause (I)) during
the twenty-four (24) months immediately
preceding the Termination Date divided by
the number two (2); or (III) the amount of
the bonuses (as described in clause (A))
that would have been paid during the
twenty-four (24) months immediately
preceding the Termination Date if the Plan
Target Level (as defined by the Plans) had
been achieved divided by the number two (2);
(b) multiplied by the number two (2); and
2
<PAGE> 3
(iii) An amount equal to the contributions from
AmVestors Mr. Heitz would have otherwise been entitled to
under the Plans if Mr. Heitz had remained an employee of
AmVestors until and including December 31 of the calendar year
in which Mr. Heitz's employment terminates and Mr. Heitz had
earned the amounts set forth in Section 3.1.c(ii) above
through said December 31st;
provided, however, if Section 280G(a) of the Internal Revenue Code of
1986, as amended (the "Code"), is applicable, amount of all payments
made under this Agreement shall be limited to the extent necessary so
that, within the meaning of Section 280G(b)(2)(A)(ii) of the Code, the
aggregate present value of the payments in the nature of compensation
to (or for the benefit of) Mr. Heitz which are contingent on a Change
of Control (with a Change of Control for this purpose being defined in
terms of a "change" described in either Section 280G(b)(2)(A)(i)(I) or
(II) of the Code) are limited to an amount equal to 2.999 multiplied by
the "base amount," as such term is defined in Section 280G(b)(3) of the
Code.
d. Continued Benefits. In the event the employment of Mr.
Heitz is terminated by Mr. Heitz for Good Cause as described in
Paragraph 3.1.a(i) hereof or by AmVestors following a Change of Control
as described in Paragraph 3.1.b hereof, AmVestors shall continue to
provide to Mr. Heitz the benefits described in this Paragraph 3.1.d.
AmVestors shall maintain in full force and effect, for the benefit of
Mr. Heitz for two (2) years after the Termination Date, all employee
welfare benefit plans and programs or arrangements in which Mr. Heitz
was entitled to participate immediately prior to the Termination Date;
provided, however, that Mr. Heitz's continued participation is possible
under the general terms and provisions of such plans, programs and
arrangements. In the event that Mr. Heitz's continued participation in
any such plan, program or arrangement is not possible, AmVestors shall
arrange to provide Mr. Heitz with substantially equivalent benefits. At
the end of the period of coverage, Mr. Heitz shall have the option to
have assigned to Mr. Heitz at no cost and with no apportionment of
prepaid premiums any assignable insurance policy owned by AmVestors and
relating specifically to Mr. Heitz. Notwithstanding the foregoing, Mr.
Heitz's period of continued coverage under any such plan, program or
arrangement (or any Companies-arranged provision of such benefits)
shall terminate as of the date Mr. Heitz becomes eligible to
participate in a similar plan, program or arrangement of another
employer. Mr. Heitz shall be deemed to be "eligible to participate" for
this purpose even if Mr. Heitz is required to pay an employee premium
and even if the new plan, program or arrangement imposes preexisting
condition limitations or restrictions. In addition, Mr. Heitz shall be
fully vested in all of his account in the All*AmerUs Savings &
Retirement Plan and the All*AmerUs Supplemental Executive Retirement
Plan.
e. No Mitigation. Mr. Heitz shall not be required to mitigate
the amount of any severance payment or continued benefits by seeking
other employment or otherwise, nor shall the amount of any severance
payment or continued benefits (other than the earlier termination of
certain employee benefits as described in Paragraph 3.1.d hereof) be
reduced by any compensation earned by Mr. Heitz as a result of
employment by another employer after termination of this Agreement or
otherwise. AmVestors' obligation to pay Mr. Heitz the compensation and
make the arrangements provided herein shall be absolute and
unconditional and, following any Change in Control, shall not be
3
<PAGE> 4
affected by any circumstances, including without limitation any set-off
(except as provided in Paragraph 3.1.f hereof), counterclaim,
recoupment, defense or other rights which AmVestors may have. Except as
otherwise provided herein, all amounts payable by AmVestors shall be
paid without notice or demand.
f. Any termination of the employment of Mr. Heitz shall be
communicated by a Notice of Termination to the other party hereto. If
there is any dispute or controversy under this Agreement with respect
to Mr. Heitz's entitlement to the severance payment described in
Paragraph 3.1.c hereof) or the benefits described in Paragraph 3.1.d
hereof, or the amount of same, except in the event of a termination for
cause by AmVestors, AmVestors shall continue to pay Mr. Heitz the full
compensation and benefits in effect when the Notice of Termination was
given (including without limitation Base Compensation and payments
under any bonus and incentive plans in which Mr. Heitz participates),
until the earlier of the date when the dispute is finally resolved or
twelve (12) months from the date when the Notice of Termination was
given. Amounts paid under the preceding sentence shall be offset
against and shall reduce any other amounts due under this Agreement,
including any severance payment or benefits and any arbitration award
under Paragraph 13 hereof.
g. Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(i) "Affiliated Company" shall mean with respect to
any Person, any Person which, directly or indirectly, through
one or more intermediaries, controls, is controlled by or is
under common control with such entity; provided, however, that
any Person which owns directly or indirectly ten percent (10%)
or more of the securities having ordinary voting power for the
election of directors or any other governing body of a
corporation or ten percent (10%) or more of the partnership or
other ownership interests of any other Person (other than as a
limited partner of such Person) will be deemed to control such
Person.
(ii) "AMHC" shall mean American Mutual Holding
Company.
(iii) "Base Compensation" shall mean the greater of
(i) the semi-monthly salary paid to Mr. Heitz by AmVestors
which was in effect immediately prior to the Termination Date
or (ii) the semi-monthly salary paid to Mr. Heitz by AmVestors
which was in effect prior to any reduction thereof made
without the written consent of Mr. Heitz, in either case
multiplied by twenty-four (24).
(iv) "Change of Control" shall mean any Transaction
or series of Transactions involving AmVestors or any
Affiliated Company of AmVestors which results in either (i)
AMHC not directly or indirectly owning or controlling shares
of stock of ALH sufficient to cast a majority of the votes
necessary to elect members of the Board of Directors of ALH
("Voting Control"); (ii) the individuals who, prior to such
Transaction, constituted the board of directors of AMHC
ceasing to constitute at least a majority thereof, unless the
election, or the nomination for election of each director of
AMHC for a period of two (2) years
4
<PAGE> 5
following the consummation of such Transaction was approved by
a vote of at least two-thirds of the directors of AMHC then
still in office who were directors of AMHC prior to such
Transaction; (iii) the individuals who, prior to such
Transaction, constituted the board of directors of ALH ceasing
to constitute at least a majority thereof, unless the
election, or the nomination for election of each director of
ALH for a period of two (2) years following the consummation
of such Transaction was approved by a vote of at least
two-thirds of the directors of ALH then still in office who
were directors of ALH prior to such Transaction; or (iv) the
acquisition by any Person other than AMHC or its subsidiaries
of the beneficial ownership, as defined in Rule 13d-3 of the
Securities Exchange Act of 1934, of more than twenty-five
percent (25%) of the shares of stock of ALH which are entitled
to elect the board of directors of ALH at any time that AMHC
does not have beneficial ownership of the Voting Control of
ALH; provided, however, that in the case of (i), (ii) and
(iii), a Transaction which is a Demutualization shall not
constitute a Change of Control if the directors elected or
nominated for election to either AMHC's or ALH's respective
board of directors by AMHC's or ALH's respective stockholders
following the Demutualization were the directors of AMHC or
ALH, respectively, prior to such Demutualization, or if the
election, or the nomination for election, by AMHC's or ALH's
respective stockholders, of each director of AMHC or ALH,
respectively, for a period of two (2) years following the
consummation of such Demutualization was approved by a vote of
at least two-thirds of the directors of AMHC or ALH then still
in office who were the respective directors of AMHC or ALH
prior to such Demutualization.
(v) "Comparable Employment" shall mean employment
with AmVestors, an Affiliated Company thereof or a third party
involved in any Change of Control on terms and conditions
(including without limitation geographic location) which in
the aggregate are at least substantially comparable to the
terms and conditions of employment prevailing with respect to
Mr. Heitz immediately preceding a Change of Control.
(vi) "Demutualization" shall mean any transaction in
which more than fifty percent (50%) of the assets of AMHC are
(i) distributed or otherwise transferred to the members of
AMHC or (ii) are offered to the members of AMHC.
(vii) "Good Cause" shall mean the occurrence of both
(i) a Change of Control without Mr. Heitz being offered
Comparable Employment and (ii) a Material Event.
(viii) "Material Event" shall mean the occurrence of
any one of the following events following a Change of Control
without Mr. Heitz's express written consent:
(a) The assignment to Mr. Heitz of duties
substantially inconsistent with Mr. Heitz's position,
duties, responsibility or status with AmVestors or a
substantial reduction of Mr. Heitz's duties or
5
<PAGE> 6
responsibilities, as compared with Mr. Heitz's duties
or responsibilities prior to such reduction, or any
removal of Mr. Heitz from, or any failure to re-elect
Mr. Heitz to, the position Mr. Heitz held at the time
of such removal or failure to re-elect, except in
connection with termination of employment for cause;
or
(b) A reduction in the amount of Mr. Heitz's
Base Compensation, a material reduction in payments
received by Mr. Heitz under any bonus or incentive
plans in which Mr. Heitz participates or a material
reduction in any other employee perquisites to which
Mr. Heitz is entitled; or
(c) The relocation of Mr. Heitz's principal
office to a location more than thirty-five (35) miles
from the location of such office immediately prior to
such relocation; or
(d) Any material breach by AmVestors of any
of the provisions of this Agreement.
(viii) "Notice of Termination" shall mean written
notice of the termination of the employment of Mr. Heitz.
(ix) "Person" shall mean an individual, corporation,
partnership, joint venture, association, joint-stock company,
limited liability company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
(x) "Plans" shall mean, collectively, the All*AmerUs
Savings & Retirement Plan, the All*AmerUs Supplemental
Executive Retirement Plan, the All*AmerUs Excess Benefit Plan,
the Interim Benefit Supplement, any trust agreements related
to the foregoing and any successor plans.
(xi) "Termination Date" shall mean the date on which
the employment of Mr. Heitz with AmVestors terminates.
(xii) "Transaction" shall mean any merger,
consolidation, tender or exchange offer, dissolution,
liquidation, sale or exchange of stock, business combination,
sale or exchange of all or substantially all assets,
demutualization or other similar transaction or combination of
the foregoing by or between persons who were not under common
control prior to such transaction."
2. The Employment Agreement shall be amended by deleting Paragraph 12
thereof and inserting in lieu thereof the following eight new provisions as
Paragraphs 12, 13, 14, 15, 16, 17, 18 and 19 thereof:
6
<PAGE> 7
"12. Indemnification.
a. AmVestors shall pay, and indemnify Mr. Heitz
against, all costs and expenses, including without limitation
the fees and expenses of attorneys, arbitrators, experts and
witnesses, incurred by or on behalf of Employee in connection
with any arbitration or legal claim or proceeding arising from
this Agreement or the interpretation thereof, to the extent
that Employee is successful, on the merits or otherwise, in
any such claim or proceeding. If Employee is not wholly
successful in such claim or proceeding but is successful, on
the merits or otherwise, as to one or more but less than all
claims, issues or matters in such claim or proceeding, then
AmVestors shall indemnify Employee against all such costs and
expenses incurred by Employee or on Employee's behalf in
connection with each successfully resolved claim, issue or
matter.
b. AmVestors shall advance all such costs and
expenses incurred by or on behalf of Employee in connection
with any such claim or proceeding referred to in Section 9.a.
hereof within twenty (20) days after receipt by AmVestors of a
statement or statements from Employee requesting such advance
or advances, whether prior to or after final disposition of
such claim or proceeding. Such statement or statements shall
reasonably evidence the costs and expenses incurred by
Employee and shall be preceded or accompanied by an
undertaking by or on behalf of Employee to repay any costs and
expenses advanced if it shall ultimately be determined that
Employee is not entitled to be indemnified against such costs
and expenses and, furthermore, if Employee fails to repay any
costs and expenses that are advanced, then such amounts shall
be offset against and shall reduce any other amounts due to
Employee under this Agreement.
13. Arbitration. Any dispute, disagreement or other question
arising from this Agreement or the interpretation thereof shall be
settled by arbitration in accordance with the commercial rules then in
effect of the American Arbitration Association, except that the
arbitrator(s) shall be selected in accordance with the following
procedure: such dispute, disagreement or other question shall be
referred to and decided by a single arbitrator if the parties can agree
upon one within fifteen (15) days after either of the parties shall
notify the other, as provided in Paragraph 3.1.f of this Agreement,
that it wishes to avail itself of the provisions of this Paragraph 13;
otherwise, such dispute, disagreement or other question shall be
referred to and decided by three arbitrators, one to be appointed by
AmVestors and one to be appointed by Mr. Heitz, each such appointment
to be made within ten (10) days after the expiration of the fifteen
(15) day period referred to above, and the third arbitrator to be
appointed by the first two arbitrators within twenty (20) days after
the expiration of such ten (10) day period. If the first two
arbitrators cannot reach agreement on the third arbitrator within said
twenty (20) day period, the third arbitrator shall be an impartial
arbitrator appointed by the President of the American Arbitration
Association within thirty (30) days after the expiration of said twenty
(20) day period. Hearings of the arbitrator(s) shall be held in Topeka,
Kansas, unless the parties agree otherwise. Judgment upon an award
rendered by the arbitrator(s) may be entered in any court of competent
jurisdiction, including courts in the State of Kansas. Any award so
rendered shall be final and binding upon the parties
7
<PAGE> 8
hereto. Except as otherwise provided in Paragraph 12 hereof all costs
and expenses of the arbitrator(s) shall be paid as determined by such
arbitrator(s), and all costs and expenses of experts, witnesses and
other persons retained by the parties shall be borne by them
respectively.
14. End of Employment Period. Notwithstanding anything
contained in this Agreement to the contrary, on January 1, 2001, the
provisions contained in Paragraphs 1, 2, 4 and 11 hereof shall cease to
have any force or effect and shall be deleted (except for any
definitions contained therein and used elsewhere in this Agreement),
and Paragraph 3 hereof shall be deleted and replaced with the following
new Paragraph 3:
"3. Termination of Mr. Heitz Without Good Cause. Mr.
Heitz is an "at-will" employee and his employment may be
terminated at any time with or without cause and unless the
employment of Mr. Heitz is terminated for Good Cause pursuant
to Paragraph 3.1.a(i) hereof or by AmVestors following a
Change of Control as described in Paragraph 3.1.b hereof, he
will not be entitled to any compensation, payments or benefits
under this Agreement."
The remaining provisions of this Agreement shall continue for so long
as Mr. Heitz continues to be an employee of AmVestors.
15. Tax Withholding. AmVestors shall have the right to
withhold from any transfer or payment made to Mr. Heitz or to any other
Person hereunder, whether such payment is to be made in cash or other
property, all applicable federal, state, city or other taxes or foreign
taxes as shall be required in the determination of AmVestors pursuant
to any statute or governmental regulation or ruling.
16. Interest. AmVestors shall pay Mr. Heitz interest at a rate
of ten percent (10%) per annum on any benefits payable to Mr. Heitz
hereunder not paid by the date provided for herein from such date until
the date of payment.
17. General Creditor. Nothing contained in this Agreement and
no action taken pursuant to the provisions of this Agreement shall
create or be construed to create a trust of any kind or a fiduciary
relationship between AmVestors and Mr. Heitz or any other Person, nor
shall any money or property of AmVestors be segregated for the benefit
of Mr. Heitz to satisfy the obligations of AmVestors hereunder. To the
extent that Mr. Heitz acquires a right to receive payments hereunder,
such rights shall be no greater than the right of any general unsecured
creditor of AmVestors. Except as expressly provided herein, each
payment shall be made in cash from the general assets of AmVestors.
18. No Waiver. The failure of either party to require the
performance of any term or condition of this Agreement, or the waiver
by either party of any breach of this Agreement, shall not prevent a
subsequent enforcement of any term or condition nor be deemed to be a
waiver of any subsequent breach by either party.
19. Employer After A Change of Control. Following a Change of
Control and the acceptance by Mr. Heitz of an offer of Comparable
Employment, the term
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<PAGE> 9
AmVestors shall be deemed to mean the actual employer of Mr. Heitz
(which may be AmVestors, an affiliate thereof or some other Person
involved in the Change of Control)."
3. The Employment Agreement shall be amended by deleting the paragraph
entitled "Deferred Compensation" contained in the letter to Mr. Heitz from ALH
dated September 18, 1997 and inserting in lieu thereof the following paragraph:
"Deferred Compensation: To the extent you receive an annual
incentive payout and elect to defer up to
$150,000 each year pursuant to the AmerUs
Group MIP Deferral Plan (the "MIP Deferral
Plan"), the Company will make a 100 percent
Employer Match at the end of each
Restricted Period (as those terms are used
in the MIP Deferral Plan) provided the
terms and conditions set forth in the MIP
Deferral Plan are satisfied."
4. Except as expressly set forth in this Amendment, the execution and
delivery of this Amendment by the Companies, Mr. Heitz and ALH shall not be
deemed to amend or supplement the Employment Agreement and shall not be deemed a
waiver of any rights or remedies thereunder, and the rights, obligations and
liabilities of the Companies, Mr. Heitz and ALH under the Employment Agreement
shall remain in full force and effect. Upon execution and delivery of this
Amendment, references to the Employment Agreement shall be deemed to be
references to the Employment Agreement as amended and supplemented by this
Amendment.
5. This Amendment may be executed in any number of counterparts, and by
different parties on separate counterpart signature pages, and all such
counterparts taken together shall be deemed to constitute one and the same
instrument.
6. The invalidity of any portion of this Amendment shall not affect the
validity of any other provision. If any provision of this Amendment is
determined to be invalid or unenforceable, the remaining provisions of this
Amendment shall not be affected thereby and shall be binding on the parties
thereto, and shall be enforceable, as though said invalid or unenforceable
provision were not contained herein.
7. This Amendment shall be binding upon the parties hereto, their
successors, assigns, heirs, legatees and personal representatives.
8. This Amendment shall be governed by, and construed in accordance
with, the laws of the State of Kansas.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereof have executed this Amendment as
of the 15th day of April, 1999.
AMVESTORS FINANCIAL CORPORATION
By /s/ Michael M. Miller
---------------------------------------
Its Executive Vice President
AMERCIAN INVESTORS LIFE INSURANCE COMPANY,
INC.
By /s/ Michael M. Miller
---------------------------------------
Its Executive Vice President
AMVESTORS INVESTMENT GROUP, INC.
By /s/ Michael M. Miller
---------------------------------------
Its Executive Vice President
AMERICAN INVESTORS SALES GROUP, INC.
By /s/ Michael M. Miller
---------------------------------------
Its Executive Vice President
/s/ Mark V. Heitz
------------------------------------------
MARK V. HEITZ
AMERUS LIFE HOLDINGS, INC.
By /s/ Roger K. Brooks
----------------------------------------
Its Chairman
10
<PAGE> 1
Exhibit 99.5
SUPPLEMENTAL BENEFIT AGREEMENT
THIS SUPPLEMENTAL BENEFIT AGREEMENT (this "Agreement") is entered into
and made effective as of the 15th day of April, 1999, by and between Roger K.
Brooks, an individual residing at 300 Walnut Street, #183, Des Moines, Iowa
50309 ("Employee"), and AmerUs Life Holdings, Inc., an Iowa corporation having
its principal place of business at 699 Walnut, Des Moines, Iowa 50309
("Employer").
WHEREAS, Employer currently employs Employee as Chairman, President and
Chief Exeuctive Officer of Employer; and
WHEREAS, Employer and Employee wish to enter into an agreement
concerning a certain aspect of their employment relationship;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
Section 1. Definitions. Whenever used herein, capitalized words and
phrases, unless the context otherwise requires, shall have the meanings ascribed
in the text, or as set forth on Exhibit A, which is attached hereto and made a
part hereof.
Section 2. Termination of Employment by Employee for Good Reason.
a. If the employment of Employee is terminated by Employee for
Good Reason, Employee shall be entitled to the Severance Payment and the
Continued Benefits.
b. Any offer of Comparable Employment following a Change of
Control shall remain open for at least fifteen (15) days after such offer is
extended to Employee. If Employee does not accept an offer of Comparable
Employment following a Change of Control within fifteen (15) days after it is
offered, all rights of Employee under this Agreement shall cease.
c. If Employee timely accepts an offer of Comparable
Employment following a Change of Control and if within two (2) years following
the date such offer of Comparable Employment is accepted either (i) the
employment of Employee is terminated by Employer without Cause (as such term is
described in Section 4 hereof) or (ii) a Material Event occurs and Employee
elects to terminate his or her employment with Employer (which will also be
considered a termination of employment by Employee for Good Reason for purposes
hereof), then Employee shall be entitled to the Severance Payment and the
Continued Benefits.
Section 3. Termination of Employment by Employer Following Change of
Control. If the employment of Employee is terminated by Employer following a
Change of Control, and such
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<PAGE> 2
termination is not for Cause as described in Section 4 hereof, Employee shall be
entitled to the Severance Payment and the Continued Benefits; provided, however,
that if the Employee accepts an offer of Comparable Employment, the provisions
of Section 2(c) shall apply rather than this Section 3.
Section 4. Termination of Employment by Employer for Cause. Employer
may terminate the employment of Employee at any time for Cause. Employer shall
have "Cause" to terminate Employee's employment for Employee's personal
dishonesty, gross negligence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, or
willful violation of any law, rule, regulation (other than traffic violations or
similar offenses) or final cease-and-desist order. Upon termination for Cause,
all rights of Employee under this Agreement shall cease as of the Termination
Date.
Section 5. Notice of Termination. Any termination of the employment of
Employee shall be communicated by a Notice of Termination to the other party
hereto. If there is any dispute or controversy under this Agreement with respect
to Employee's entitlement to the Severance Payment or Continued Benefits, or the
amount of same, except in the event of a termination for Cause by Employer,
Employer shall continue to pay Employee the full compensation and benefits in
effect when the Notice of Termination was given (including without limitation
Base Compensation and payments under any bonus and incentive plans in which
Employee participates), until the earlier of the date when the dispute is
finally resolved or twelve (12) months from the date when the Notice of
Termination was given. Amounts paid under the preceding sentence shall be offset
against and shall reduce any other amounts due under this Agreement, including
any Severance Payment or Continued Benefits and any arbitration award under
Section 11 hereof.
Section 6. Severance Payment.
a. In the event the employment of Employee is terminated by
Employee for Good Reason as described in Section 2 hereof or by Employer
following a Change of Control as described in Section 3 hereof, Employer shall
pay to Employee the following Severance Payment, which shall be paid in a lump
sum within thirty-five (35) days following the Termination Date:
(i) Any amount of Employee's Base Compensation earned but
unpaid through the Termination Date; and
(ii) In lieu of any further salary or other payments of any
kind to Employee for periods after the Termination Date, an amount equal to:
(1) the sum of:
(A) Employee's Base Compensation, plus
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<PAGE> 3
(B) the greater of (I) the amount of Employee's
bonuses (whether in cash, stock or otherwise)
under Employer's Management Incentive Plan,
the AmerUs Group MIP Deferral Plan and any
similar or successor plans providing bonuses
or deferred compensation during the twelve
(12) months immediately preceding the
Termination Date (including any portion of
such bonuses that were deferred by Employee,
but not including any Employer match on any
such deferred amount); (II) the amount of
such bonuses (as described in clause (I))
during the twenty-four (24) months
immediately preceding the Termination Date
divided by the number two (2); or (III) the
amount of the bonuses (as described in clause
(A)) that would have been paid during the
twenty-four (24) months immediately preceding
the Termination Date if the Plan Target Level
(as defined by the Plans) had been achieved
divided by the number two (2);
(2) multiplied by the number three (3); and
(iii) An amount equal to the contributions from the
Employer the Employee would have otherwise been entitled to under the Plans if
Employee had remained an employee of Employer until and including December 31 of
the calendar year in which Employee's employment terminates and Employee had
earned the amounts set forth in Section 6.a.(ii) above through said December
31st.
b. (i) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Employer to the Employee (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 6.b.) (a "Payment") is subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or
any interest or penalties are incurred by the Employee with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Employer
shall pay to the Employee an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Employee of all taxes (including any
interest or penalties imposed with respect to such taxes), including without
limitation, any federal, state or local income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Employee retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
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<PAGE> 4
(ii) Subject to the provisions of Section 6.b.(iii), all
determinations required to be made regarding whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination shall be made by the Employer's
public accounting firm (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Employer and the Employee as soon as
possible following a request made by the Employee or the Employer. In the event
that the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Employer shall appoint
another nationally recognized public accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Employer. Any Gross-Up Payment shall be paid by the
Employer to the Employee within five (5) days of the receipt of the Accounting
Firm's determination. If the Accounting Firm determines that no Excise Tax is
payable by the Employee, it shall furnish the Employee with a written opinion
that failure to report the Excise Tax on the Employee's applicable federal
income tax return would not result in the imposition of a negligence or similar
penalty. Any determination by the Accounting Firm shall be binding upon the
Employer and the Employee. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Employer should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Employer exhausts its remedies pursuant to Section 6.b.(iii), and the
Employee thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Employer to or for the
benefit of the Employee.
(iii) The Employee shall notify the Employer in writing of
any claim by the Internal Revenue Service that, if successful, would require the
payment by the Employer of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten (10) business days after the
Employee is informed in writing of such claim and shall apprise the Employer of
the nature of such claim and the date on which such claim is requested to be
paid. The Employee shall not pay such claim prior to the expiration of the
30-day period following the date on which the Employee gives such notice to the
Employer (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Employer notifies the Employee in
writing prior to the expiration of such period that it desires to contest such
claim, the Employee shall:
(1) give the Employer any information reasonably
requested by the Employer relating to such claim,
(2) take such action in connection with contesting
such claim as the Employer shall reasonably
request in writing from time to time, including,
without limitation, accepting legal representation
with respect to such claim by an attorney
reasonably selected by the Employer,
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<PAGE> 5
(3) cooperate with the Employer in good faith to
effectively contest such claim, and
(4) permit the Employer to participate in any
proceedings relating to such claim;
provided, however, that the Employer shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 6.b.(iii), the Employer shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Employee to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Employer shall
determine; provided further, that if the Employer directs the Employee to pay
such claim and sue for a refund, the Employer shall advance the amount of such
payment to the Employee on an interest-free basis and shall indemnify and hold
the Employee harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and provided further, that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Employee with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Employer's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Employer shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(iv) If, after the receipt by the Employee of an
amount advanced by the Employer pursuant to Section 6.b.(iii), the Employee
becomes entitled to receive, and receives, any refund with respect to such
claim, the Employee shall (subject to the Employer's complying with the
requirements of Section 6.b.(iii)) promptly pay to the Employer the amount of
such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Employee of any amount
advanced by the Employer pursuant to Section 6.b.(iii), a determination is made
that the Employee shall not be entitled to any refund with respect to such claim
and the Employer does not notify the Employee in writing of its intent to
contest such denial of refund prior to the expiration of thirty (30) days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
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<PAGE> 6
Section 7. Continued Benefits. In the event the employment of Employee
is terminated by Employee for Good Reason as described in Section 2 hereof or by
Employer following a Change of Control as described in Section 3 hereof,
Employer shall continue to provide to Employee the Continued Benefits described
in this Section 7. Employer shall maintain in full force and effect, for the
benefit of Employee for 3 years after the Termination Date, all employee welfare
benefit plans and programs or arrangements in which Employee was entitled to
participate immediately prior to the Termination Date (the "Continued
Benefits"); provided, however, that Employee's continued participation is
possible under the general terms and provisions of such plans, programs and
arrangements. In the event that Employee's continued participation in any such
plan, program or arrangement is not possible, Employer shall arrange to provide
Employee with substantially equivalent benefits. At the end of the period of
coverage, Employee shall have the option to have assigned to Employee at no cost
and with no apportionment of prepaid premiums any assignable insurance policy
owned by Employer and relating specifically to Employee. Notwithstanding the
foregoing, Employee's period of continued coverage under any such plan, program
or arrangement (or any Employer-arranged provision of such benefits) shall
terminate as of the date Employee becomes eligible to participate in a similar
plan, program or arrangement of another employer. Employee shall be deemed to be
"eligible to participate" for this purpose even if Employee is required to pay
an employee premium and even if the new plan, program or arrangement imposes
preexisting condition limitations or restrictions. In addition, Employee shall
be fully vested in all of his or her account in the AllHAmerUs Savings &
Retirement Plan and the AllHAmerUs Supplemental Executive Retirement Plan.
Section 8. No Mitigation. Employee shall not be required to mitigate
the amount of any Severance Payment or Continued Benefits by seeking other
employment or otherwise, nor shall the amount of any Severance Payment or
Continued Benefits (other than the earlier termination of certain employee
benefits as described in Section 7 hereof) be reduced by any compensation earned
by Employee as a result of employment by another employer after termination of
this Agreement or otherwise. Employer's obligation to pay Employee the
compensation and make the arrangements provided herein shall be absolute and
unconditional and, following any Change of Control, shall not be affected by any
circumstances, including without limitation any set-off (except as provided in
Sections 5 and 9.b. hereof), counterclaim, recoupment, defense or other rights
which Employer may have. Except as otherwise provided herein, all amounts
payable by Employer shall be paid without notice or demand.
Section 9. Indemnification.
a. In addition to the costs and expenses to be borne by
Employer pursuant to the provisions of Section 6.b. herein, Employer shall pay,
and indemnify Employee against, all costs and expenses, including without
limitation the fees and expenses of attorneys, arbitrators, experts and
witnesses, incurred by or on behalf of Employee in connection with any
arbitration or legal claim or proceeding arising from this Agreement or the
interpretation thereof, to the extent that Employee is successful, on the merits
or otherwise, in any such claim or proceeding. If Employee is not wholly
successful in such claim or proceeding but is successful, on the merits or
otherwise, as to one or
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<PAGE> 7
more but less than all claims, issues or matters in such claim or proceeding,
then Employer shall indemnify Employee against all such costs and expenses
incurred by Employee or on Employee's behalf in connection with each
successfully resolved claim, issue or matter.
b. Employer shall advance all such costs and expenses incurred
by or on behalf of Employee in connection with any such claim or proceeding
referred to in Section 9.a. hereof within twenty (20) days after receipt by
Employer of a statement or statements from Employee requesting such advance or
advances, whether prior to or after final disposition of such claim or
proceeding. Such statement or statements shall reasonably evidence the costs and
expenses incurred by Employee and shall be preceded or accompanied by an
undertaking by or on behalf of Employee to repay any costs and expenses advanced
if it shall ultimately be determined that Employee is not entitled to be
indemnified against such costs and expenses and, furthermore, if Employee fails
to repay any costs and expenses that are advanced, then such amounts shall be
offset against and shall reduce any other amounts due to Employee under this
Agreement.
Section 10. Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telecopier or commercial courier guaranteeing next day
delivery to the respective addresses provided for Employer and Employee in the
introductory paragraph of this Agreement. Notices to Employer shall be addressed
to the attention of the Chairman of the Human Resources Committee for the Board
of Directors and the Senior Vice President, Chief Administration and Human
Resources Officer of Employer. All such notices and communications shall be
deemed to have been duly given; at the time delivered by hand, if personally
delivered; five (5) business days after being deposited in the mail, postage
prepaid, if mailed; when receipt is acknowledged, if telecopied; and the next
business day after timely delivery to the courier, if sent by commercial courier
guaranteeing next day delivery.
Section 11. Arbitration. Employer and Employee agree that any disputes
arising out of or relating to this Agreement shall be arbitrated in accordance
with the rules of the American Arbitration Association and the Federal
Arbitration Act. Such arbitration shall be held in Des Moines, Iowa. No party
shall initiate arbitration unless, at least thirty (30) days prior thereto, such
party has given the other party written notice of the intent to initiate
arbitration and a detailed description of the basis of the dispute. A single
arbitrator (or, in any matter in which the amount in controversy exceeds
$500,000, a panel of three (3) arbitrators) shall interpret this Agreement in
accordance with Iowa laws and shall conduct proceedings in accordance with the
Federal Rules of Civil Procedure. Punitive damages, if any, awarded by the
arbitrator(s) shall not exceed two (2) times compensatory damages awarded. Any
award of the arbitrator(s) shall be deemed final, and judgment upon such award
may be entered and enforced in any Iowa District Court and transferred to any
other jurisdiction.
Section 12. Tax Withholding. Employer shall have the right to withhold
from any transfer or payment made to Employee or to any other Person hereunder,
whether such payment is to be made in cash or other property, all applicable
federal, state, city or other taxes or foreign taxes as shall be required in the
determination of Employer pursuant to any statute or governmental regulation or
ruling.
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<PAGE> 8
Section 13. Interest. Employer shall pay Employee interest at a rate of
ten percent (10%) per annum on any benefits payable to Employee hereunder not
paid by the date provided for herein from such date until the date of payment.
Section 14. General Creditor. Nothing contained in this Agreement and
no action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind or a fiduciary relationship between
Employer and Employee or any other Person, nor shall any money or property of
Employer be segregated for the benefit of Employee to satisfy the obligations of
Employer hereunder. To the extent that Employee acquires a right to receive
payments hereunder, such rights shall be no greater than the right of any
general unsecured creditor of Employer. Except as expressly provided herein,
each payment shall be made in cash from the general assets of Employer.
Section 15. No Waiver. The failure of either party to require the
performance of any term or condition of this Agreement, or the waiver by either
party of any breach of this Agreement, shall not prevent a subsequent
enforcement of any term or condition nor be deemed to be a waiver of any
subsequent breach by either party.
Section 16. Binding Effect. This Agreement shall be binding on and
inure to the benefit of the successors and assigns of Employer. This Agreement
shall inure to the benefit of and be enforceable by Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
Section 17. No Assignment. The right of Employee or any other Person to
the payment of amounts or other benefits under this Agreement shall not be
assigned, alienated, hypothecated, placed in trust, disposed of, transferred,
pledged or encumbered (except as provided in Section 16 herein) and, to the
extent permitted by law, no such amount or payment shall in any way be subject
to any legal process to subject the same to the payments of any claim against
Employee or any other Person.
Section 18. Paragraphs and Other Headings. The paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
the interpretation of this Agreement.
Section 19. Governing Law. This Agreement and all transactions
contemplated by this Agreement shall be governed by, and construed and enforced
in accordance with, the laws of the State of Iowa, without regard to principles
of conflicts of laws.
Section 20. Severability. If any one or more of the provisions
contained in this Agreement shall for any reason be held invalid, illegal or
unenforceable, such invalidity, illegality or unenforceability shall not affect
any other provisions of this Agreement, which shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein. It
is the intention of the parties that if any provision of this Agreement is
capable of two constructions, one
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<PAGE> 9
of which would render the provision void and the other of which would render the
provision valid, then the provision shall have the meaning that renders it
valid.
Section 21. At-Will Employment. Nothing in this Agreement shall alter
the "at-will" nature of Employee's employment with Employer, it being understood
that the "at-will" nature of Employee's employment with Employer shall in no way
alter the benefits to which Employee is otherwise entitled under this Agreement.
Section 22. Survivability. The obligations of Employer and Employee
under this Agreement shall survive the termination of this Agreement.
Section 23. Employer After A Change of Control. Following a Change of
Control and the acceptance by Employee of an offer of Comparable Employment, the
term "Employer" shall be deemed to mean the actual employer of Employee (which
may be Employer, an affiliate thereof or some other Person involved in the
Change of Control).
Section 24. Entire Agreement. This Agreement sets forth the entire
understanding of the parties and supersedes all other representations,
agreements and understandings, oral or otherwise, between or among the parties
with respect to the matters contained herein.
IN WITNESS WHEREOF, the parties have set their respective signatures as
of the day and year first above written.
Roger K. Brooks AmerUs Life Holdings, Inc.
By: /s/ Roger K. Brooks By: /s/ John W. Norris, Jr.
----------------------------- ----------------------------------
Printed Name: Roger K. Brooks Its: Chairman of the Human Resources
Committee for the Board of Directors
-9-
<PAGE> 10
EXHIBIT A
DEFINITIONS
"Affiliate" shall mean with respect to any Person, any Person which,
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with such entity; provided, however,
that any Person which owns directly or indirectly ten percent (10%) or more of
the securities having ordinary voting power for the election of directors or any
other governing body of a corporation or ten percent (10%) or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such Person) will be deemed to control such Person.
"AMHC" shall mean American Mutual Holding Company.
"Base Compensation" shall mean the greater of (i) the semi-monthly
salary paid to Employee by Employer which was in effect immediately prior to the
Termination Date or (ii) the semi-monthly salary paid to Employee by Employer
which was in effect prior to any reduction thereof made without the written
consent of Employee, in either case multiplied by twenty-four (24).
"Change of Control" shall mean any Transaction or series of
Transactions involving Employer or any Affiliate of Employer which results in
either (i) AMHC not directly or indirectly owning or controlling shares of stock
of the Employer sufficient to cast a majority of the votes necessary to elect
members of the Board of Directors of the Employer ("?Voting Control"); (ii) the
individuals who, prior to such Transaction, constituted the board of directors
of AMHC ceasing to constitute at least a majority thereof, unless the election,
or the nomination for election of each director of AMHC for a period of two (2)
years following the consummation of such Transaction was approved by a vote of
at least two-thirds of the directors of AMHC then still in office who were
directors of AMHC prior to such Transaction; (iii) the individuals who, prior to
such Transaction, constituted the board of directors of Employer ceasing to
constitute at least a majority thereof, unless the election, or the nomination
for election of each director of the Employer for a period of two (2) years
following the consummation of such Transaction was approved by a vote of at
least two-thirds of the directors of Employer then still in office who were
directors of Employer prior to such Transaction; or (iv) the acquisition by any
Person other than AMHC or its subsidiaries of the beneficial ownership, as
defined in Rule 13d-3 of the Securities Exchange Act of 1934, of more than
twenty-five percent (25%) of the shares of stock of the Employer which are
entitled to elect the board of directors of the Employer at any time that AMHC
does not have beneficial ownership of the Voting Control of the Employer;
provided, however, that in the case of (i), (ii) and (iii), a Transaction which
is a Demutualization shall not constitute a Change of Control if the directors
elected or nominated for election to either AMHC's or Employer's respective
board of directors by AMHC's or Employer's respective stockholders following the
Demutualization were the directors of AMHC or Employer respectively prior to
such Demutualization, or if the election, or the nomination for election, by
AMHC's or Employer's respective stockholders, of each director of
-10-
<PAGE> 11
AMHC or Employer respectively for a period of two (2) years following the
consummation of such Demutualization was approved by a vote of at least
two-thirds of the directors of AMHC or Employer then still in office who were
the respective directors of AMHC or the Employer prior to such Demutualization.
"Comparable Employment" shall mean employment with Employer, an
Affiliate thereof or a third party involved in any Change of Control on terms
and conditions (including without limitation geographic location) which in the
aggregate are at least substantially comparable to the terms and conditions of
employment prevailing with respect to Employee immediately preceding a Change of
Control.
"Continued Benefits" shall mean the benefits described in Section 7
hereof.
"Demutualization" shall mean any transaction in which more than fifty
(50%) of the assets of AMHC are (i) distributed or otherwise transferred to the
members of AMHC or (ii) are offered to the members of AMHC.
"Good Reason" shall mean the occurrence of both (i) a Change of Control
without Employee being offered Comparable Employment and (ii) a Material Event.
"Material Event" shall mean the occurrence of any one of the following
events following a Change of Control without Employee's express written consent:
(1) The assignment to Employee of duties substantially
inconsistent with Employee's position, duties, responsibility
or status with Employer or a substantial reduction of
Employee's duties or responsibilities, as compared with
Employee's duties or responsibilities prior to such reduction,
or any removal of Employee from, or any failure to re-elect
Employee to, the position Employee held at the time of such
removal or failure to re-elect, except in connection with
termination of employment for Cause; or
(2) A reduction in the amount of Employee's Base Compensation, a
material reduction in payments received by Employee under any
bonus or incentive plans in which Employee participates or a
material reduction in any other employee perquisites to which
Employee is entitled; or
(3) The relocation of Employee's principal office to a location
more than thirty-five (35) miles from the location of such
office immediately prior to such relocation; or
(4) Any material breach by Employer of any of the provisions of
this Agreement.
"Notice of Termination" shall mean written notice of the termination of
the employment of Employee.
-11-
<PAGE> 12
"Person" shall mean an individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Plans" shall mean, collectively, the AllHAmerUs Savings & Retirement
Plan, the AllHAmerUs Supplemental Executive Retirement Plan, the AllHAmerUs
Excess Benefit Plan, the Interim Benefit Supplement, any trust agreements
related to the foregoing and any successor plans.
"Severance Payment" shall mean the payment described in Section 6
hereof.
"Termination Date" shall mean the date on which the employment of
Employee with Employer terminates.
"Transaction" shall mean any merger, consolidation, tender or exchange
offer, dissolution, liquidation, sale or exchange of stock, business
combination, sale or exchange of all or substantially all assets,
demutualization or other similar transaction or combination of the foregoing by
or between persons who were not under common control prior to such transaction.
-12-
<PAGE> 1
Exhibit 99.6
SUPPLEMENTAL BENEFIT AGREEMENT
THIS SUPPLEMENTAL BENEFIT AGREEMENT (this "Agreement") is entered into
and made effective as of the 15th day of April, 1999, by and between
_____________, an individual residing at_________________________ ("Employee"),
and AmerUs Life _______________, an Iowa corporation having its principal place
of business at _____________, Des Moines, Iowa 50309 ("Employer").
WHEREAS, Employer currently employs Employee as _____________________
of Employer; and
WHEREAS, Employer and Employee wish to enter into an agreement
concerning a certain aspect of their employment relationship;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
Section 1. Definitions. Whenever used herein, capitalized words and
phrases, unless the context otherwise requires, shall have the meanings ascribed
in the text, or as set forth on Exhibit A, which is attached hereto and made a
part hereof.
Section 2. Termination of Employment by Employee for Good Reason.
a. If the employment of Employee is terminated by Employee for
Good Reason, Employee shall be entitled to the Severance Payment and the
Continued Benefits.
b. Any offer of Comparable Employment following a Change of
Control shall remain open for at least fifteen (15) days after such offer is
extended to Employee. If Employee does not accept an offer of Comparable
Employment following a Change of Control within fifteen (15) days after it is
offered, all rights of Employee under this Agreement shall cease.
c. If Employee timely accepts an offer of Comparable
Employment following a Change of Control and if within two (2) years following
the date such offer of Comparable Employment is accepted either (i) the
employment of Employee is terminated by Employer without Cause (as such term is
described in Section 4 hereof) or (ii) a Material Event occurs and Employee
elects to terminate his or her employment with Employer (which will also be
considered a termination of employment by Employee for Good Reason for purposes
hereof), then Employee shall be entitled to the Severance Payment and the
Continued Benefits.
Section 3. Termination of Employment by Employer Following Change of
Control. If the employment of Employee is terminated by Employer following a
Change of Control, and such termination is not for Cause as described in Section
4 hereof, Employee shall be entitled to the Severance Payment and the Continued
Benefits; provided, however, that if the Employee accepts
<PAGE> 2
an offer of Comparable Employment, the provisions of Section 2(c) shall apply
rather than this Section 3.
Section 4. Termination of Employment by Employer for Cause. Employer
may terminate the employment of Employee at any time for Cause. Employer shall
have "Cause" to terminate Employee's employment for Employee's personal
dishonesty, gross negligence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, or
willful violation of any law, rule, regulation (other than traffic violations or
similar offenses) or final cease-and-desist order. Upon termination for Cause,
all rights of Employee under this Agreement shall cease as of the Termination
Date.
Section 5. Notice of Termination. Any termination of the employment of
Employee shall be communicated by a Notice of Termination to the other party
hereto. If there is any dispute or controversy under this Agreement with respect
to Employee's entitlement to the Severance Payment or Continued Benefits, or the
amount of same, except in the event of a termination for Cause by Employer,
Employer shall continue to pay Employee the full compensation and benefits in
effect when the Notice of Termination was given (including without limitation
Base Compensation and payments under any bonus and incentive plans in which
Employee participates), until the earlier of the date when the dispute is
finally resolved or twelve (12) months from the date when the Notice of
Termination was given. Amounts paid under the preceding sentence shall be offset
against and shall reduce any other amounts due under this Agreement, including
any Severance Payment or Continued Benefits and any arbitration award under
Section 11 hereof.
Section 6. Severance Payment. In the event the employment of Employee
is terminated by Employee for Good Reason as described in Section 2 hereof or by
Employer following a Change of Control as described in Section 3 hereof,
Employer shall pay to Employee the following Severance Payment, which shall be
paid in a lump sum within thirty-five (35) days following the Termination Date:
a. Any amount of Employee's Base Compensation earned but unpaid
through the Termination Date; and
b. In lieu of any further salary or other payments of any kind to
Employee for periods after the Termination Date, an amount equal to:
i. the sum of:
(1) Employee's Base Compensation, plus
(2) the greater of (A) the amount of Employee's bonuses
(whether in cash, stock or otherwise) under Employer's
Management Incentive Plan, the AmerUs Group MIP
Deferral Plan and any similar or successor plans
providing bonuses or deferred compensation during the
twelve (12) months immediately preceding the
Termination Date (including any portion of such
bonuses that were deferred by Employee, but not
including any Employer match on any such deferred
<PAGE> 3
amount); (B) the amount of such bonuses (as described
in clause (A)) during the twenty-four (24) months
immediately preceding the Termination Date divided by
the number two (2); or (C) the amount of such bonuses
(as described in clause (A)) that would have been paid
during the twenty-four (24) months immediately
preceding the Termination Date if the Plan Target
Level (as defined by the Plans) had been achieved
divided by the number two (2);
ii. multiplied by the number ___________; and
c. An amount equal to the contributions from the Employer the Employee
would have otherwise been entitled to under the Plans if Employee had remained
an employee of Employer until and including December 31 of the calendar year in
which Employee's employment terminates and Employee had earned the amounts set
forth in Section 6.b.i above through said December 31st; provided, however, if
Section 280G(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
is applicable, the amount of Severance Payment described herein shall be limited
to the extent necessary so that, within the meaning of Section 280G(b)(2)(A)(ii)
of the Code, the aggregate present value of the payments in the nature of
compensation to (or for the benefit of) the Employee which are contingent on a
Change of Control (with a Change of Control for this purpose being defined in
terms of a "change" described in either Section 280G(b)(2)(A)(i)(I) or (II) of
the Code) are limited to an amount equal to 2.999 multiplied by the "base
amount," as such term is defined in Section 280G(b)(3) of the Code.
Section 7. Continued Benefits. In the event the employment of Employee
is terminated by Employee for Good Reason as described in Section 2 hereof or by
Employer following a Change of Control as described in Section 3 hereof,
Employer shall continue to provide to Employee the Continued Benefits described
in this Section 7. Employer shall maintain in full force and effect, for the
benefit of Employee for two (2) years after the Termination Date, all employee
welfare benefit plans and programs or arrangements in which Employee was
entitled to participate immediately prior to the Termination Date (the
"Continued Benefits"); provided, however, that Employee's continued
participation is possible under the general terms and provisions of such plans,
programs and arrangements. In the event that Employee's continued participation
in any such plan, program or arrangement is not possible, Employer shall arrange
to provide Employee with substantially equivalent benefits. At the end of the
period of coverage, Employee shall have the option to have assigned to Employee
at no cost and with no apportionment of prepaid premiums any assignable
insurance policy owned by Employer and relating specifically to Employee.
Notwithstanding the foregoing, Employee's period of continued coverage under any
such plan, program or arrangement (or any Employer-arranged provision of such
benefits) shall terminate as of the date Employee becomes eligible to
participate in a similar plan, program or arrangement of another employer.
Employee shall be deemed to be "eligible to participate" for this purpose even
if Employee is required to pay an employee premium and even if the new plan,
program or arrangement imposes preexisting condition limitations or
restrictions. In addition, Employee shall be fully vested in all of his or her
account in the AlHAmerUs Savings & Retirement Plan and the AllHAmerUs
Supplemental Executive Retirement Plan.
3
<PAGE> 4
Section 8. No Mitigation. Employee shall not be required to mitigate
the amount of any Severance Payment or Continued Benefits by seeking other
employment or otherwise, nor shall the amount of any Severance Payment or
Continued Benefits (other than the earlier termination of certain employee
benefits as described in Section 7 hereof) be reduced by any compensation earned
by Employee as a result of employment by another employer after termination of
this Agreement or otherwise. Employer's obligation to pay Employee the
compensation and make the arrangements provided herein shall be absolute and
unconditional and, following any Change of Control, shall not be affected by any
circumstances, including without limitation any set-off (except as provided in
Sections 5 and 9.b. hereof), counterclaim, recoupment, defense or other rights
which Employer may have. Except as otherwise provided herein, all amounts
payable by Employer shall be paid without notice or demand.
Section 9. Indemnification.
a. Employer shall pay, and indemnify Employee against, all
costs and expenses, including without limitation the fees and expenses of
attorneys, arbitrators, experts and witnesses, incurred by or on behalf of
Employee in connection with any arbitration or legal claim or proceeding arising
from this Agreement or the interpretation thereof, to the extent that Employee
is successful, on the merits or otherwise, in any such claim or proceeding. If
Employee is not wholly successful in such claim or proceeding but is successful,
on the merits or otherwise, as to one or more but less than all claims, issues
or matters in such claim or proceeding, then Employer shall indemnify Employee
against all such costs and expenses incurred by Employee or on Employee's behalf
in connection with each successfully resolved claim, issue or matter.
b. Employer shall advance all such costs and expenses incurred
by or on behalf of Employee in connection with any such claim or proceeding
referred to in Section 9.a. hereof within twenty (20) days after receipt by
Employer of a statement or statements from Employee requesting such advance or
advances, whether prior to or after final disposition of such claim or
proceeding. Such statement or statements shall reasonably evidence the costs and
expenses incurred by Employee and shall be preceded or accompanied by an
undertaking by or on behalf of Employee to repay any costs and expenses advanced
if it shall ultimately be determined that Employee is not entitled to be
indemnified against such costs and expenses and, furthermore, if Employee fails
to repay any costs and expenses that are advanced, then such amounts shall be
offset against and shall reduce any other amounts due to Employee under this
Agreement.
Section 10. Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telecopier or commercial courier guaranteeing next day
delivery to the respective addresses provided for Employer and Employee in the
introductory paragraph of this Agreement. Notices to Employer shall be addressed
to the attention of the Chief Executive Officer and the Corporate Secretary of
Employer. All such notices and communications shall be deemed to have been duly
given; at the time delivered by hand, if personally delivered; five (5) business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged, if telecopied; and the next business day after timely delivery
to the courier, if sent by commercial courier guaranteeing next day delivery.
4
<PAGE> 5
Section 11. Arbitration. Employer and Employee agree that any disputes
arising out of or relating to this Agreement shall be arbitrated in accordance
with the rules of the American Arbitration Association and the Federal
Arbitration Act. Such arbitration shall be held in Des Moines, Iowa. No party
shall initiate arbitration unless, at least thirty (30) days prior thereto, such
party has given the other party written notice of the intent to initiate
arbitration and a detailed description of the basis of the dispute. A single
arbitrator (or, in any matter in which the amount in controversy exceeds
$500,000, a panel of three (3) arbitrators) shall interpret this Agreement in
accordance with Iowa laws and shall conduct proceedings in accordance with the
Federal Rules of Civil Procedure. Punitive damages, if any, awarded by the
arbitrator(s) shall not exceed two (2) times compensatory damages awarded. Any
award of the arbitrator(s) shall be deemed final, and judgment upon such award
may be entered and enforced in any Iowa District Court and transferred to any
other jurisdiction.
Section 12. Tax Withholding. Employer shall have the right to withhold
from any transfer or payment made to Employee or to any other Person hereunder,
whether such payment is to be made in cash or other property, all applicable
federal, state, city or other taxes or foreign taxes as shall be required in the
determination of Employer pursuant to any statute or governmental regulation or
ruling.
Section 13. Interest. Employer shall pay Employee interest at a rate of
ten percent (10%) per annum on any benefits payable to Employee hereunder not
paid by the date provided for herein from such date until the date of payment.
Section 14. General Creditor. Nothing contained in this Agreement and
no action taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind or a fiduciary relationship between
Employer and Employee or any other Person, nor shall any money or property of
Employer be segregated for the benefit of Employee to satisfy the obligations of
Employer hereunder. To the extent that Employee acquires a right to receive
payments hereunder, such rights shall be no greater than the right of any
general unsecured creditor of Employer. Except as expressly provided herein,
each payment shall be made in cash from the general assets of Employer.
Section 15. No Waiver. The failure of either party to require the
performance of any term or condition of this Agreement, or the waiver by either
party of any breach of this Agreement, shall not prevent a subsequent
enforcement of any term or condition nor be deemed to be a waiver of any
subsequent breach by either party.
Section 16. Binding Effect. This Agreement shall be binding on and
inure to the benefit of the successors and assigns of Employer. This Agreement
shall inure to the benefit of and be enforceable by Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
5
<PAGE> 6
Section 17. No Assignment. The right of Employee or any other Person to
the payment of amounts or other benefits under this Agreement shall not be
assigned, alienated, hypothecated, placed in trust, disposed of, transferred,
pledged or encumbered (except as provided in Section 16 herein) and, to the
extent permitted by law, no such amount or payment shall in any way be subject
to any legal process to subject the same to the payments of any claim against
Employee or any other Person.
Section 18. Paragraphs and Other Headings. The paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
the interpretation of this Agreement.
Section 19. Governing Law. This Agreement and all transactions
contemplated by this Agreement shall be governed by, and construed and enforced
in accordance with, the laws of the State of Iowa, without regard to principles
of conflicts of laws.
Section 20. Severability. If any one or more of the provisions
contained in this Agreement shall for any reason be held invalid, illegal or
unenforceable, such invalidity, illegality or unenforceability shall not affect
any other provisions of this Agreement, which shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein. It
is the intention of the parties that if any provision of this Agreement is
capable of two constructions, one of which would render the provision void and
the other of which would render the provision valid, then the provision shall
have the meaning that renders it valid.
Section 21. At-Will Employment. Nothing in this Agreement shall alter
the "at-will" nature of Employee's employment with Employer, it being understood
that the "at-will" nature of Employee's employment with Employer shall in no way
alter the benefits to which Employee is otherwise entitled under this Agreement.
Section 22. Survivability. The obligations of Employer and Employee
under this Agreement shall survive the termination of this Agreement.
Section 23. Employer After A Change of Control. Following a Change of
Control and the acceptance by Employee of an offer of Comparable Employment, the
term "Employer" shall be deemed to mean the actual employer of Employee (which
may be Employer, an affiliate thereof or some other Person involved in the
Change of Control).
Section 24. Entire Agreement. This Agreement sets forth the entire
understanding of the parties and supersedes all other representations,
agreements and understandings, oral or otherwise, between or among the parties
with respect to the matters contained herein.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have set their respective signatures as
of the day and year first above written.
EMPLOYEE AMERUS LIFE INSURANCE COMPANY
By: By:
----------------------------- -------------------------------
Print Name: Its:
--------------------- ------------------------------
7
<PAGE> 8
EXHIBIT A
DEFINITIONS
"Affiliate" shall mean with respect to any Person, any Person which,
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with such entity; provided, however,
that any Person which owns directly or indirectly ten percent (10%) or more of
the securities having ordinary voting power for the election of directors or any
other governing body of a corporation or ten percent (10%) or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such Person) will be deemed to control such Person.
"AMHC" shall mean American Mutual Holding Company.
"Base Compensation" shall mean the greater of (i) the semi-monthly
salary paid to Employee by Employer which was in effect immediately prior to the
Termination Date or (ii) the semi-monthly salary paid to Employee by Employer
which was in effect prior to any reduction thereof made without the written
consent of Employee, in either case multiplied by twenty-four (24).
"Change of Control" shall mean any Transaction or series of
Transactions involving Employer or any Affiliate of Employer which results in
either (i) AMHC not directly or indirectly owning or controlling shares of stock
of the Employer sufficient to cast a majority of the votes necessary to elect
members of the Board of Directors of the Employer ("Voting Control"); (ii) the
individuals who, prior to such Transaction, constituted the board of directors
of AMHC ceasing to constitute at least a majority thereof, unless the election,
or the nomination for election of each director of AMHC for a period of two (2)
years following the consummation of such Transaction was approved by a vote of
at least two-thirds of the directors of AMHC then still in office who were
directors of AMHC prior to such Transaction; (iii) the individuals who, prior to
such Transaction, constituted the board of directors of Employer ceasing to
constitute at least a majority thereof, unless the election, or the nomination
for election of each director of the Employer for a period of two (2) years
following the consummation of such Transaction was approved by a vote of at
least two-thirds of the directors of Employer then still in office who were
directors of Employer prior to such Transaction; or (iv) the acquisition by any
Person other than AMHC or its subsidiaries of the beneficial ownership, as
defined in Rule 13d-3 of the Securities Exchange Act of 1934, of more than
twenty-five percent (25%) of the shares of stock of the Employer which are
entitled to elect the board of directors of the Employer at any time that AMHC
does not have beneficial ownership of the Voting Control of the Employer;
provided, however, that in the case of (i), (ii) and (iii), a Transaction which
is a Demutualization shall not constitute a Change of Control if the directors
elected or nominated for election to either AMHC's or Employer's respective
board of directors by AMHC's or Employer's respective stockholders following the
Demutualization were the directors of AMHC or Employer, respectively, prior to
such Demutualization, or if the election, or the nomination for election, by
AMHC's or Employer's respective stockholders, of each director of AMHC or
Employer, respectively, for a period of two (2) years following the consummation
of such
1
<PAGE> 9
Demutualization was approved by a vote of at least two-thirds of the directors
of AMHC or Employer then still in office who were the respective directors of
AMHC or the Employer prior to such Demutualization.
"Comparable Employment" shall mean employment with Employer, an
Affiliate thereof or a third party involved in any Change of Control on terms
and conditions (including without limitation geographic location) which in the
aggregate are at least substantially comparable to the terms and conditions of
employment prevailing with respect to Employee immediately preceding a Change of
Control.
"Continued Benefits" shall mean the benefits described in Section 7
hereof.
"Demutualization" shall mean any transaction in which more than fifty
percent (50%) of the assets of AMHC are (i) distributed or otherwise transferred
to the members of AMHC or (ii) are offered to the members of AMHC.
"Good Reason" shall mean the occurrence of both (i) a Change of Control
without Employee being offered Comparable Employment and (ii) a Material Event.
"Material Event" shall mean the occurrence of any one of the following
events following a Change of Control without Employee's express written consent:
(1) The assignment to Employee of duties substantially
inconsistent with Employee's position, duties, responsibility
or status with Employer or a substantial reduction of
Employee's duties or responsibilities, as compared with
Employee's duties or responsibilities prior to such reduction,
or any removal of Employee from, or any failure to re-elect
Employee to, the position Employee held at the time of such
removal or failure to re-elect, except in connection with
termination of employment for Cause; or
(2) A reduction in the amount of Employee's Base Compensation, a
material reduction in payments received by Employee under any
bonus or incentive plans in which Employee participates or a
material reduction in any other employee perquisites to which
Employee is entitled; or
(3) The relocation of Employee's principal office to a location
more than thirty-five (35) miles from the location of such
office immediately prior to such relocation; or
(4) Any material breach by Employer of any of the provisions of
this Agreement.
"Notice of Termination" shall mean written notice of the termination of
the employment of Employee.
2
<PAGE> 10
"Person" shall mean an individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Plans" shall mean, collectively, the AllHAmerUs Savings & Retirement
Plan, the AllHAmerUs Supplemental Executive Retirement Plan, the AllyHAmerUs
Excess Benefit Plan, the Interim Benefit Supplement, any trust agreements
related to the foregoing and any successor plans.
"Severance Payment" shall mean the payment described in Section 6
hereof.
"Termination Date" shall mean the date on which the employment of
Employee with Employer terminates.
"Transaction" shall mean any merger, consolidation, tender or exchange
offer, dissolution, liquidation, sale or exchange of stock, business
combination, sale or exchange of all or substantially all assets,
demutualization or other similar transaction or combination of the foregoing by
or between persons who were not under common control prior to such transaction.
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<PAGE> 1
Exhibit 99.7
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement"),
dated as of the 15th day of April, 1999, by and between AmerUs Life Holdings,
Inc., an Iowa corporation ("AMH"), and Marcia S. Hanson, a resident of Clive,
Iowa ("Employee").
W I T N E S S E T H:
WHEREAS, AmerUs Group Co. ("AmerUs Group"), Employee and AmerUs Bank
were parties to that certain Employment Agreement dated as of November 21, 1997,
as amended (the "Prior Agreement"); and
WHEREAS, on August 1, 1998, Employee became an employee of AMH in
connection with AmerUs Group's sale of AmerUs Bank; and
WHEREAS, in consideration of the value of Employee to AMH, AMH desires
to employ and retain Employee as its Executive Vice President, and AMH and
Employee desire to amend and restate the Prior Agreement to reflect changes in
the employment relationship between AMH and Employee, on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
contained hereinbelow, and other good and valuable considerations, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. EMPLOYMENT. AMH hereby agrees to employ Employee as its Executive
Vice President, and Employee hereby agrees to accept such employment and to
perform the services specified herein upon the terms and conditions hereinafter
set forth.
2. TERM. The term of employment hereunder shall commence as of April
15, 1999, and continue until November 20, 2000, unless sooner terminated in
accordance with the provisions hereof. Notwithstanding anything contained in
this Agreement to the contrary, on November 21, 2000, the provisions contained
Paragraphs 3, 4, 7.1, 8.1, 8.2, 8.5, 21, 22 and 23 and the first sentence of
Paragraph 7.2(a) hereof shall cease to have any force or effect and shall be
deleted (except for any definitions contained therein and used elsewhere in this
Agreement), and Paragraph 8.3 hereof shall be deleted and replaced with the
following new Paragraph 8.3:
"8.3. Termination of Employee Without Good Reason.
Employee is an "at-will" employee and her employment may be
terminated at any time with or without Cause and unless the
employment of Employee is terminated for Good Reason as
described in Paragraph 7.3 hereof or by AMH following a Change
of Control as described in Paragraph 7.4(a) hereof, she will
not be entitled to any compensation, payments or benefits
under this Agreement."
The remaining provisions of this Agreement shall continue for so long as
Employee continues to be an employee of AMH.
<PAGE> 2
3. COMPENSATION.
3.1 Base Compensation. Employee shall receive as compensation
for her services hereunder an annual salary of $240,000, which sum
shall be payable in equal semimonthly installments (the "Base
Compensation") during the term hereof. Employee's Base Compensation
shall be reviewed at least annually by the Board of Directors of AMH
(the "Board of Directors"), and Employee shall be entitled to such
increases in her Base Compensation as the Board of Directors may
determine based on her performance and other relevant criteria.
3.2 Bonus and Related Matters. Employee shall also be entitled
to participate in any bonus, incentive, and/or supplemental retirement
plans or arrangements that AMH may establish and maintain from time to
time. Employee's benefits under such plans and arrangements shall be
determined pursuant to the terms of such plans and arrangements and
shall be commensurate with her position within AMH vis-a-vis other
members of executive management of AMH. Upon the submission of properly
documented expense account reports, AMH shall reimburse Employee for
legitimate expenses incurred in the course of her employment.
4. VACATION, INSURANCE AND AUTOMOBILE ALLOWANCE. Employee shall be
entitled to participate in any life and health insurance benefits which are
generally extended, from time to time, to the employees of AMH, to reasonable
vacations, consistent with AMH's policies, and to an automobile allowance in
such amount as determined from time to time by the Board of Directors.
5. DUTIES. Employee shall faithfully and diligently perform her duties
under this Agreement as prescribed, from time to time, by the Chief Executive
Officer of AMH.
6. EXTENT OF SERVICE. Employee shall devote substantially all of her
business time, attention and energy to AMH and its Affiliates (as that term is
defined in Paragraph 7.4(c) hereof) and shall not, during the term of her
employment, be actively engaged in any managerial or employment capacity in any
other business activity for gain, profit or other pecuniary advantage which
detracts significantly from Employee's performance of her duties and
responsibilities to AMH and its Affiliates.
7. TERMINATION.
7.1. Death or Disability. This Agreement shall terminate
automatically upon the death of Employee or if her employment ceases as
a result of "Termination by Disability." For purposes herein,
Termination by Disability shall be deemed to occur if Employee's
employment with AMH is terminated because of her "disability" as
determined under AMH's primary long-term disability plan (the "LTD
Plan"). The effective date of Employee's Termination by Disability
hereunder shall be the effective date of her "disability" under the LTD
Plan.
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<PAGE> 3
7.2. Cause or Without Cause.
(a) Cause. AMH may terminate the employment of
Employee under this Agreement for "Cause." AMH shall have
"Cause" to terminate Employee's employment for Employee's
personal dishonesty, gross negligence, willful misconduct,
breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful
violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist
order, or material breach of any provision of this Agreement.
(b) Without Cause. Employee agrees and understands
that she is employed by AMH on an "at will" basis and that the
Board of Directors may terminate her employment at any time
without Cause.
7.3 Termination by Employee for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean the occurrence of both (i) a
"Change of Control," as defined in Paragraph 7.3(c) below, without
Employee being offered "Comparable Employment," as provided in
Paragraph 7.4 hereof, and (ii) a "Material Event," as defined in
Paragraph 7.3(d) below:
(a) If the employment of Employee is terminated by
Employee for Good Reason, Employee shall be entitled to the
severance payment and benefits provided in Paragraph 8.4
hereof.
(b) Any offer of Comparable Employment following a
Change of Control shall remain open for at least fifteen (15)
days after such offer is extended to Employee. If Employee
does not accept an offer of Comparable Employment following a
Change of Control within fifteen (15) days after it is
offered, all rights of Employee under this Agreement shall
cease.
(c) For purposes of this Agreement, a "Change of
Control" shall mean any Transaction or series of Transactions
involving AMH or any Affiliate of AMH which results in either
(i) AMHC not directly or indirectly owning or controlling
shares of stock of AMH sufficient to cast a majority of the
votes necessary to elect members of the Board of Directors of
AMH ("Voting Control"); (ii) the individuals who, prior to
such Transaction, constituted the board of directors of AMHC
ceasing to constitute at least a majority thereof, unless the
election, or the nomination for election of each director of
AMHC for a period of two (2) years following the consummation
of such Transaction was approved by a vote of at least
two-thirds of the directors of AMHC then still in office who
were directors of AMHC prior to such Transaction; (iii) the
individuals who, prior to such Transaction, constituted the
board of directors of AMH ceasing to constitute at least a
majority thereof, unless the election, or the nomination for
election of each director of AMH for a period of two (2) years
following the consummation of such Transaction was approved by
a vote of at
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<PAGE> 4
least two-thirds of the directors of AMH then still in office
who were directors of AMH prior to such Transaction; or (iv)
the acquisition by any Person other than AMHC or its
subsidiaries of the beneficial ownership, as defined in Rule
13d-3 of the Securities Exchange Act of 1934, of more than
twenty-five percent (25%) of the shares of stock of AMH which
are entitled to elect the board of directors of AMH at any
time that AMHC does not have beneficial ownership of the
Voting Control of AMH; provided, however, that in the case of
(i), (ii) and (iii), a Transaction which is a Demutualization
shall not constitute a Change of Control if the directors
elected or nominated for election to either AMHC's or AMH's
respective board of directors by AMHC's or AMH's respective
stockholders following the Demutualization were the directors
of AMHC or AMH, respectively, prior to such Demutualization,
or if the election, or the nomination for election, by AMHC's
or AMH's respective stockholders, of each director of AMHC or
AMH, respectively, for a period of two (2) years following the
consummation of such Demutualization was approved by a vote of
at least two-thirds of the directors of AMHC or AMH then still
in office who were the respective directors of AMHC or AMH
prior to such Demutualization.
(d) For purposes of this Agreement, "Material Event"
shall mean the occurrence of any one of the following events
without Employee's express written consent:
(1) The assignment to Employee of any duties
substantially inconsistent with her current position,
duties, responsibilities or status with AMH or a
substantial reduction of her duties or
responsibilities, as compared with her duties or
responsibilities prior to such reduction, or any
removal of Employee from, or any failure to re-elect
her to, the position she held at the time of such
removal or failure to re-elect, except in connection
with termination of her employment for Cause;
(2) A reduction in the amount of Employee's
Base Compensation, a material reduction in payments
received by Employee under any bonus or incentive
plans in which Employee participates or a material
reduction in any other employee perquisites to which
Employee is entitled;
(3) The relocation of Employee's principal
office to a location more than thirty-five (35) miles
from the location of such office immediately prior to
such relocation;
(4) Any breach by AMH of any of the
provisions of this Agreement, any executive severance
agreement between AMH and Employee, or any failure by
AMH to carry out any of its obligations hereunder.
(e) For purposes of this Agreement, "AMHC" shall mean
American Mutual Holding Company; "Transaction" shall mean any
merger, consolidation,
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<PAGE> 5
tender or exchange offer, dissolution, liquidation, sale or
exchange of stock, business combination, sale or exchange of
all or substantially all assets, demutualization or other
similar transaction or combination of the foregoing by or
between persons who were not under common control prior to
such transaction; and "Demutualization" shall mean any
transaction in which more than fifty percent (50%) of the
assets of AMHC are (i) distributed or otherwise transferred to
the members of AMHC or (ii) are offered to the members of
AMHC.
7.4. Termination of Employment by AMH Following Change of
Control.
(a) If the employment of Employee is terminated by
AMH following a Change of Control, and such termination is not
for Cause, Employee shall be entitled to the severance payment
and benefits provided in Paragraph 8.4 hereof; provided,
however, that if Employee accepts an offer of Comparable
Employment, the provisions of Paragraph 7.4(b) hereof shall
apply rather than this Paragraph 7.4(a).
(b) If Employee timely accepts an offer of Comparable
Employment following a Change of Control and if within two (2)
years following the date such offer of Comparable Employment
is accepted either (i) the employment of Employee is
terminated by AMH without Cause or (ii) a Material Event
occurs and Employee elects to terminate her employment with
AMH (which will also be considered a termination of employment
by Employee for Good Reason for purposes hereof), then
Employee shall be entitled to the severance payment and
benefits provided in Paragraph 8.4 hereof.
(c) For purposes of this Agreement, "Comparable
Employment" shall mean employment with AMH, an Affiliate
thereof or a third party involved in any Change of Control on
terms and conditions (including without limitation geographic
location) which in the aggregate are at least substantially
comparable to the terms and conditions of employment
prevailing with respect to Employee immediately preceding a
Change of Control (without regard to the benefit provided in
Paragraph 8.4(a)(ii) hereof). For purposes of this Agreement,
"Affiliate" shall mean with respect to any Person, any Person
which, directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common
control with such entity; provided, however, that any Person
which owns directly or indirectly ten percent (10%) or more of
the securities having ordinary voting power for the election
of directors or any other governing body of a corporation or
ten percent (10%) or more of the partnership or other
ownership interests of any other Person (other than as a
limited partner of such Person) will be deemed to control such
Person. For purposes of this Agreement, "Person" shall mean an
individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company,
trust, unincorporated organization or government or any agency
or political subdivision thereof.
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<PAGE> 6
(d) If Employee accepts the offer of Comparable
Employment, all references to AMH contained in this Agreement
shall, where appropriate, be considered references to
Employee's new employer.
7.5. Notice of Termination. Any termination of the employment
of Employee shall be communicated by a Notice of Termination to the
other party hereto. If there is any dispute or controversy under this
Agreement with respect to Employee's entitlement to the severance
payment and benefits provided in Paragraph 8.4 hereof, or the amount of
same, except in the event of a termination for Cause by AMH, AMH shall
continue to pay Employee the full compensation and benefits in effect
when the Notice of Termination was given (including without limitation
Base Compensation and payments under any bonus and incentive plans in
which Employee participates), until the earlier of the date when the
dispute is finally resolved or twelve (12) months from the date when
the Notice of Termination was given. Amounts paid under the preceding
sentence shall be offset against and shall reduce any other amounts due
under this Agreement, including any severance payment or benefits
provided in Paragraph 8.4 hereof and any arbitration award under
Paragraph 14 hereof. For purposes of this Agreement, "Notice of
Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Employee's employment under the provision so
indicated. For purposes of this Agreement, "Termination Date" shall
mean the date on which the employment of Employee with AMH terminates.
8. COMPENSATION DURING DISABILITY OR UPON TERMINATION OF EMPLOYMENT.
8.1. Disability. During any period that Employee fails to
perform her duties hereunder as a result of incapacity due to physical
or mental illness, she shall continue to receive her Base Compensation
at the rate then in effect until a Termination by Disability occurs as
defined in Paragraph 7.1 hereof. Thereafter, Employee's benefits shall
be determined in accordance with AMH's LTD Plan, including any
supplemental plan for other members of executive management in which
Employee participates or any substitute plans then in effect, and AMH
shall have no further obligations to her under this Agreement.
8.2. Death. If the employment of Employee is terminated
because of her death prior to the expiration of the term of this
Agreement, then her estate, heirs or beneficiaries shall not be
entitled to any benefits pursuant to this Agreement, but they shall be
entitled to any benefits payable to them pursuant to the terms of
applicable employee benefit plans or insurance arrangements sponsored
by AMH.
8.3. Voluntary Termination Without Good Reason or Termination
for Cause. In the event Employee voluntarily ceases employment with AMH
without Good Reason prior to expiration of the term of this Agreement
or in the event her employment is terminated for Cause by AMH prior to
the expiration of the term of this Agreement, AMH shall pay her Base
Compensation through the Termination Date at the rate in effect
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at the time the Notice of Termination is given and AMH shall have no
further obligation to her under this Agreement.
8.4 Termination for Good Reason or Without Cause.
(a) In the event the employment of Employee is
terminated by Employee for Good Reason as described in
Paragraph 7.3 hereof or by AMH following a Change of Control
as described in Paragraph 7.4(a) hereof, AMH shall pay to
Employee the following severance payment and benefits, which
severance payment shall be paid in a lump sum within
thirty-five (35) days following the Termination Date:
(i) Any amount of Employee's Base
Compensation earned but unpaid through the
Termination Date; and
(ii) In lieu of any further salary, bonus,
compensation or other payments of any kind to
Employee for periods after the Termination Date, an
amount equal to:
(A) the sum of:
(I) Employee's Base
Compensation, plus
(II) the greater of (a) the
amount of Employee's bonuses
(whether in cash, stock or
otherwise) under AMH's Management
Incentive Plan, the AmerUs Group MIP
Deferral Plan and any similar or
successor plans providing bonuses on
deferred compensation during the
twelve (12) months immediately
preceding the Termination Date
(including any portion of such
bonuses that were deferred by
Employee, but not including any
employer match on any such deferred
amount); (b) the amount of such
bonuses (as described in clause (a))
during the twenty-four (24) months
immediately preceding the
Termination Date divided by the
number two (2); or (c) the amount of
the bonuses (as described in clause
(a)) that would have been paid
during the twenty-four (24) months
immediately preceding the
Termination Date if the Plan Target
Level (as defined by the Plans (as
that term is defined in Paragraph
8.4(c) below)) had been achieved
divided by the number two (2);
B) multiplied by the number two (2);
and
(iii) An amount equal to the contributions
from AMH Employee would have otherwise been entitled
to under the Plans if Employee had remained an
employee of AMH until and including December 31 of
the calendar year in which Employee's employment
terminates and Employee
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<PAGE> 8
had earned the amounts set forth in Paragraph
8.4(a)(ii)(A) hereof through said December 31st;
provided, however, if Section 280G(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), is applicable, the
amount of all payments made under this Agreement shall be
limited to the extent necessary so that, within the meaning of
Section 280G(b)(2)(A)(ii) of the Code, the aggregate present
value of the payments in the nature of compensation to (or for
the benefit of) Employee which are contingent on a Change of
Control (with a Change of Control for this purpose being
defined in terms of a "change" described in either Section
280G(b)(2)(A)(i)(I) or (II) of the Code) are limited to an
amount equal to 2.999 multiplied by the "base amount," as such
term is defined in Section 280G(b)(3) of the Code.
(b) In the event the employment of Employee is
terminated by Employee for Good Reason as described in
Paragraph 7.3 hereof or by AMH following a Change of Control
as described in Paragraph 7.4(a) hereof, AMH shall continue to
provide to Employee the benefits described in this Paragraph
8.4(b). AMH shall maintain in full force and effect, for the
benefit of Employee for two (2) years after the Termination
Date, all employee welfare benefit plans and programs or
arrangements in which Employee was entitled to participate
immediately prior to the Termination Date; provided, however,
that Employee's continued participation is possible under the
general terms and provisions of such plans, programs and
arrangements. In the event that Employee's continued
participation in any such plan, program or arrangement is not
possible, AMH shall arrange to provide Employee with
substantially equivalent benefits. At the end of the period of
coverage, Employee shall have the option to have assigned to
Employee at no cost and with no apportionment of prepaid
premiums any assignable insurance policy owned by AMH and
relating specifically to Employee. Notwithstanding the
foregoing, Employee's period of continued coverage under any
such plan, program or arrangement (or any AMH-arranged
provision of such benefits) shall terminate as of the date
Employee becomes eligible to participate in a similar plan,
program or arrangement of another employer. Employee shall be
deemed to be "eligible to participate" for this purpose even
if Employee is required to pay an employee premium and even if
the new plan, program or arrangement imposes preexisting
condition limitations or restrictions. In addition, Employee
shall be fully vested in all of her account in the All*AmerUs
Savings & Retirement Plan and the All*AmerUs Supplemental
Executive Retirement Plan.
(c) Except as provided in Paragraph 8.4(b) hereof,
Employee shall not be entitled to any benefits under the
All*AmerUs Savings & Retirement Plan, the All*AmerUs
Supplemental Executive Retirement Plan, the All*AmerUs Excess
Benefit Plan, the Interim Benefit Supplement or the American
Mutual Life Insurance Company Performance Share Plan
(collectively, the "Plans") as of the
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Termination Date other than the benefits earned pursuant to
the specific terms of said Plans.
(d) Employee shall not be required to mitigate the
amount of any payment provided for in this Paragraph 8.4 by
seeking other employment or otherwise, nor shall the amount of
any payment provided in this Paragraph 8.4 (other than the
earlier termination of certain employee benefits as described
in Paragraph 8.4(b) above) be reduced by any compensation
earned by Employee as the result of employment by another
employer after the Termination Date, or otherwise. AMH's
obligations to pay Employee the compensation and make the
arrangements provided herein shall be absolute and
unconditional and shall not be affected by any circumstances
including, without limitation, any set-off (except as provided
in Paragraphs 7.5 and 15.2 hereof) counterclaim, recoupment,
defense or other right which AMH may have. All amounts payable
by AMH hereunder shall be paid without notice and demand.
8.5 Indemnification. Employee shall be entitled throughout the
term of this Agreement and thereafter to indemnification by AMH in
respect of any actions or omissions as an employee, officer or director
of AMH (or any successor pursuant to Paragraph 9 hereof) or of any
Affiliate of AMH to the fullest extent permitted by law.
9. SUCCESSORS; BINDING AGREEMENT. This Agreement shall be binding on
and inure to the benefit of the successors and assigns of AMH. This Agreement
shall inure to the benefit of and be enforceable by Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
10. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when hand delivered or mailed by registered mail,
return receipt requested, postage prepaid, addressed to the respective addresses
set forth below, provided that all notices to AMH shall be directed to the
attention of the Chief Executive Officer of AMH, with a copy to the Secretary of
AMH, or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
AMH: Chief Executive Officer
AmerUs Life Holdings, Inc.
699 Walnut Street
Des Moines, Iowa 50309
Secretary
AmerUs Life Holdings, Inc.
699 Walnut Street
Des Moines, Iowa 50309
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EMPLOYEE: Marcia S. Hanson
13080 Cedarcrest Lane
Clive, IA 50325
11. AMENDMENT; WAIVER. No provisions of this Agreement may be modified,
waived or amended unless such waiver, modification or amendment is agreed to in
writing and signed by (i) Employee, and (ii) such officer as may be specifically
designated by the Board of Directors to act on behalf of AMH for such purpose,
and such provisions shall be modified, waived or amended only to the extent set
forth in such writing.
12. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not effect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. ARBITRATION. Any dispute, disagreement or other question arising
from this Agreement or the interpretation thereof shall be settled by
arbitration in accordance with the commercial rules then in effect of the
American Arbitration Association, except that the arbitrator(s) shall be
selected in accordance with the following procedure: such dispute, disagreement
or other question shall be referred to and decided by a single arbitrator if the
parties can agree upon one within fifteen (15) days after either of the parties
shall notify the other, as provided in Paragraph 7.5 of this Agreement, that it
wishes to avail itself of the provisions of this Paragraph 14; otherwise, such
dispute, disagreement or other question shall be referred to and decided by
three arbitrators, one to be appointed by AMH and one to be appointed by
Employee, each such appointment to be made within ten (10) days after the
expiration of the fifteen (15) day period referred to above, and the third
arbitrator to be appointed by the first two arbitrators within twenty (20) days
after the expiration of such ten (10) day period. If the first two arbitrators
cannot reach agreement on the third arbitrator within said twenty (20) day
period, the third arbitrator shall be an impartial arbitrator appointed by the
President of the American Arbitration Association within thirty (30) days after
the expiration of said twenty (20) day period. Hearings of the arbitrator(s)
shall be held in Des Moines, Iowa, unless the parties agree otherwise. Judgment
upon an award rendered by the arbitrator(s) may be entered in any court of
competent jurisdiction, including courts in the State of Iowa. Any award so
rendered shall be final and binding upon the parties hereto. Except as otherwise
provided in Paragraph 15 hereof all costs and expenses of the arbitrator(s)
shall be paid as determined by such arbitrator(s), and all costs and expenses of
experts, witnesses and other persons retained by the parties shall be borne by
them respectively.
15. INDEMNIFICATION FOR EXPENSES; ADVANCEMENT OF EXPENSES.
15.1. Indemnification. AMH shall pay, and indemnify Employee
against, all costs and expenses, including without limitation the fees
and expenses of attorneys, arbitrators, experts and witnesses, incurred
by or on behalf of Employee in connection
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with any arbitration or legal claim or proceeding arising from this
Agreement or the interpretation thereof, to the extent that Employee is
successful, on the merits or otherwise, in any such claim or
proceeding. If Employee is not wholly successful in such claim or
proceeding but is successful, on the merits or otherwise, as to one or
more but less than all claims, issues or matters in such claim or
proceeding, then AMH shall indemnify Employee against all such costs
and expenses incurred by her or on her behalf in connection with each
successfully resolved claim, issue or matter.
15.2. Advance of Expenses. AMH shall advance all such costs
and expenses incurred by or on behalf of Employee in connection with
any such claim or proceeding referred to in Paragraph 15.1 hereof
within twenty (20) days after the receipt by AMH of a statement or
statements from Employee requesting such advance or advances, whether
prior to or after final disposition of such claim or proceeding. Such
statement or statements shall reasonably evidence the costs and
expenses incurred by Employee and shall be preceded or accompanied by
an undertaking by or on behalf of Employee to repay any costs and
expenses advanced if it shall ultimately be determined that Employee is
not entitled to be indemnified against such costs and expenses, and,
furthermore, if Employee fails to repay any costs and expenses that are
advanced, then such amounts shall be offset against and shall reduce
any other amounts due under this Agreement.
16. INTEREST. AMH shall pay Employee interest at a rate of ten percent
(10%) per annum on any benefits payable to Employee hereunder not paid on the
date provided for herein from such date until the date of payment.
17. GENERAL CREDITOR. Nothing contained in this Agreement and no action
taken pursuant to the provisions of this Agreement shall create or be construed
to create a trust of any kind or a fiduciary relationship between AMH and
Employee or any other person, nor shall any money or property of AMH be
segregated for the benefit of Employee to satisfy the obligations of AMH
hereunder. To the extent that Employee acquires a right to receive payments
hereunder, such rights shall be no greater than the right of any general
unsecured creditor of AMH. Except as expressly provided herein, each payment
shall be made in cash from the general assets of AMH.
18. NO ASSIGNMENT. The right of Employee or any other person to the
payment of amounts or other benefits under this Agreement shall not be assigned,
alienated, hypothecated, placed in trust, disposed of, transferred, pledged or
encumbered (except by will or by the laws of descent and distribution), and, to
the extent permitted by law, no such amount or payment shall in any way be
subject to any legal process to subject the same to the payments of any claim
against Employee or any other person.
19. NONVESTED RIGHTS. The rights and benefits of Employee under this
Agreement are nonvested rights and benefits of Employee.
20. TAX WITHHOLDING. AMH will have the right to withhold from any
transfer or payment made to Employee or to any other person hereunder, whether
such payment is to be made in cash or other property, all applicable federal,
state, city or other taxes or foreign taxes as
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shall be required in the determination of AMH, pursuant to any statute or
governmental regulation or ruling.
21. DISCLOSURE OF INFORMATION. Employee hereby acknowledges that she
will have access to confidential information of AMH and of corporations
affiliated with AMH and that such information may constitute valuable, special
and unique property of AMH and such other corporations. Employee will not,
during or after the term of her employment hereunder, disclose any such
confidential information to any person or entity for any reason or purpose
whatsoever, including, without limitation, the disclosure of the terms and
conditions of this Agreement, except as may be required by law. If Employee
becomes legally compelled to disclose any confidential information, Employee
will provide AMH prompt notice thereof so that AMH may seek a protective order
or other appropriate remedy and Employee will cooperate with AMH in that effort.
If such protective order or other remedy is not obtained, Employee (a) will
furnish only that portion of the confidential information that Employee is
advised by written opinion of counsel is legally required and (b) will exercise
her best effort to obtain reliable assurance that confidential treatment will be
accorded such confidential information.
22. AGREEMENT NOT TO SOLICIT EMPLOYEES OR AGENTS. Employee agrees that,
for a period of three (3) years following the termination of her employment with
AMH, neither she nor any affiliate shall, either alone or on behalf of any
business engaged in competition with AMH, solicit or induce, or in any manner
attempt to solicit or induce any person employed by, or an agent of, AMH to
terminate his or her contract or employment or agency, as the case may be, with
AMH.
23. NON-DISPARAGEMENT. Employee agrees that during and after the term
of this Agreement she will not (a) take any action that will demean, disparage,
or criticize AMH, its subsidiaries, divisions, or affiliates or any of their
respective officers, employees, agents, directors, or stockholders, or (b) make
any negative or adverse remarks whatsoever to any third party, including without
limitation, actual or potential customers, investors of AMH, and past, current,
or future employees, agents, and/or consultants of AMH, concerning the business,
operations, technologies, products, services, marketing strategies, pricing
policies, management, affairs and financial condition of AMH, its subsidiaries,
divisions, affiliates, and/or their successors, assigns, stockholders, officers,
directors, and employees; provided, however, that nothing contained in this
Paragraph shall be deemed to prohibit Employee from truthfully responding to
inquiries pursuant to legal process, providing information as required by law,
conducting internal employee performance appraisals, providing information to
the Board of Directors or AMH's officers, employees, and investors as necessary
in the performance by Employee of her duties.
24. RETURN OF DOCUMENTS. Employee agrees that upon her termination from
AMH, whether voluntary or otherwise, Employee shall deliver to AMH all notes,
letters, documents, and records which may contain proprietary information which
are then in her possession or control and shall destroy any and all copies and
summaries thereof not returned to AMH.
25. INJUNCTIVE RELIEF. Notwithstanding the provisions of Paragraph 14
hereof, in the event of a breach or threatened breach by Employee of the
provisions of this Agreement,
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AMH shall be entitled to an injunction to prevent irreparable injury to AMH. In
this regard, Employee understands and agrees that any breach by Employee of the
provisions of this Agreement will result in serious and irreparable injury to
AMH and its business and that the remedy at law alone will be an inadequate
remedy for such breach.
26. GOVERNING LAW. The terms and provisions of this Agreement,
including without limitation the provisions for arbitration under Paragraph 14
hereof, shall be construed in accordance with, and governed by, the laws of the
State of Iowa, except to the extent federal law applies.
27. AMENDMENT AND RESTATEMENT; ENTIRETY. This Agreement amends,
restates and replaces in its entirety the Prior Agreement. This Agreement
represents the entire understanding and agreement between the parties hereto
with respect to the subject matter hereto, and upon the execution and delivery
of this Agreement, neither AMH nor Employee shall have any further rights,
obligations or liabilities under the Prior Agreement or any other written or
oral agreement relating to the subject matter hereof.
28. IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above set forth.
AMERUS LIFE HOLDINGS, INC.
By: /s/ Roger K. Brooks
------------------------
Name: Roger K. Brooks
Title: CEO
/s/ Marcia Hanson
---------------------------
MARCIA S. HANSON
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