<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
----------------------------------------
(Mark One)
/ x / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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 May 5, 2000 was as follows:
Class A, Common Stock 25,003,422 shares
Class B, Common Stock 5,000,000 shares
Exhibit index - Page 44
Page 1 of 51
1
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I - FINANCIAL INFORMATION................................................................... 4
Item 1. Financial Statements............................................................... 4
Consolidated Balance Sheets
March 31, 2000 (Unaudited) and December 31, 1999................................... 4
Consolidated Statements of Income (Unaudited)
For the Three Months Ended March 31, 2000 and 1999................................. 6
Consolidated Statements of Comprehensive Income (Unaudited)
For the Three Months Ended March 31, 2000 and 1999................................. 7
Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended March 31, 2000 and 1999................................. 8
Notes to Consolidated Financial Statements
(Unaudited) ....................................................................... 10
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition ............................................................... 19
Item 3. Quantitative and Qualitative Disclosures About Market Risk......................... 40
PART II - OTHER INFORMATION...................................................................... 41
Item 1. Legal Proceedings.................................................................. 41
Item 6. Exhibits and Reports on Form 8-K................................................... 41
Signatures....................................................................................... 43
Exhibit Index.................................................................................... 44
</TABLE>
2
<PAGE> 3
SAFE HARBOR STATEMENT
All statements, trend analyses and other information contained in this
report relative to markets for the Company's products and trends in the
Company's operations or financial results, as well as other statements including
words such as "anticipate", "believe", "plan", "estimate", "expect", "intend",
and other similar expressions, constitute forward-looking statements under the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to known and unknown risks, uncertainties and other
factors which may cause actual results to be materially different from those
contemplated by the forward-looking statements. Such factors include, among
other things: (1) general economic conditions and other factors, including
prevailing interest rate levels and stock market performance, which may affect
the ability of the Company to sell its products, the market value of the
Company's investments and the lapse rate and profitability of policies; (2) the
Company's ability to achieve anticipated levels of operational efficiencies and
cost-saving initiatives and to meet cash requirements based upon projected
liquidity sources; (3) customer response to new products, distribution channels
and marketing initiatives; (4) mortality, morbidity, and other factors which may
affect the profitability of the Company's insurance products; (5) changes in the
Federal income tax laws and regulations which may affect the relative tax
advantages of some of the Company's products; (6) increasing competition in the
sale of insurance and annuities; (7) regulatory changes or actions, including
those relating to regulation of insurance products and of insurance companies;
(8) ratings assigned to the Company and its subsidiaries by independent rating
organizations which the Company believes are particularly important to the sale
of its products; and (9) unanticipated litigation. There can be no assurance
that other factors not currently anticipated by management will not also
materially and adversely affect the Company's results of operations.
3
<PAGE> 4
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
($ in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------------------------------
(unaudited)
<S> <C> <C>
Assets
Investments:
Securities available-for-sale at fair value:
Fixed maturity securities $ 6,806,131 $ 6,680,755
Equity securities 16,242 14,585
Short-term investments 155 155
Mortgage loans on real estate 489,899 615,186
Real estate 1,533 1,538
Policy loans 108,796 109,864
Other investments 285,654 269,158
--------------------------------
Total investments 7,708,410 7,691,241
Cash and cash equivalents 45,121 23,090
Accrued investment income 100,037 91,591
Premiums and fees receivable 4,329 6,910
Reinsurance receivables 6,449 17,535
Deferred policy acquisition costs 574,588 529,663
Value of business acquired 224,102 230,542
Investment in unconsolidated subsidiary 31,740 30,683
Goodwill 222,254 206,324
Property and equipment 23,669 23,046
Deferred income taxes 59,003 72,691
Other assets 399,224 383,415
Closed Block assets 1,432,196 1,412,622
--------------------------------
Total assets $ 10,831,122 $10,719,353
================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
($ in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------------------------
(unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
Policy reserves and policyowner funds:
Future life and annuity policy benefits $ 7,439,491 $ 7,390,991
Policyowner funds 295,264 282,026
------------------------------
7,734,755 7,673,017
Accrued expenses 28,864 36,309
Dividends payable to policyowners 2,373 2,248
Policy and contract claims 7,587 12,221
Income taxes payable 1,407 16,532
Other liabilities 136,945 102,083
Debt (note 3) 188,975 173,088
Closed Block liabilities 1,767,550 1,756,064
------------------------------
Total liabilities 9,868,456 9,771,562
------------------------------
Company-obligated mandatorily redeemable preferred
capital securities of subsidiary trusts holding solely
junior subordinated debentures of the Company (note 3) 214,791 214,791
------------------------------
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; 24,997,902
shares (net of 4,735,257 treasury shares) in 2000 and
25,070,854 shares (net of 4,662,305 treasury shares) in 1999 24,998 25,071
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 281,433 282,831
Accumulated other comprehensive income (loss) (132,389) (135,964)
Unearned compensation (270) (323)
Unallocated ESOP shares (1,378) (1,378)
Retained earnings 570,481 557,763
------------------------------
Total stockholders' equity 747,875 733,000
------------------------------
Total liabilities and stockholders' equity $10,831,122 $10,719,353
==============================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
-------------------------------
<S> <C> <C>
Revenues:
Insurance premiums $ 20,151 $ 23,835
Universal life and annuity product charges 20,185 17,186
Net investment income 139,854 129,965
Realized gains (losses) on investments (3,028) 2,604
Other income 4,665 1,715
Contribution from the Closed Block 5,860 6,542
-------------------------------
187,687 181,847
-------------------------------
Benefits and expenses:
Policyowner benefits 108,986 109,419
Underwriting, acquisition, and other expenses 24,158 22,417
Amortization of deferred policy acquisition costs
and value of business acquired 22,320 16,985
Dividends to policyowners 1,136 976
-------------------------------
156,600 149,797
-------------------------------
Income from operations 31,087 32,050
Interest expense 7,298 7,229
-------------------------------
Income before income tax expense and equity in
earnings of unconsolidated subsidiary 23,789 24,821
Income tax expense (note 4) 8,852 8,194
-------------------------------
Income before equity in earnings of unconsolidated
subsidiary 14,937 16,627
Equity in earnings of unconsolidated subsidiary,
net of tax 781 330
-------------------------------
Net income $ 15,718 $ 16,957
===============================
Earnings per common share:
Basic $ 0.52 $ 0.56
===============================
Diluted $ 0.52 $ 0.56
===============================
Weighted average common shares outstanding
Basic 29,967,997 30,432,955
===============================
Diluted 30,031,206 30,469,673
===============================
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
------------------------------
<S> <C> <C>
Net Income $ 15,718 $ 16,957
Other comprehensive income (loss), before tax
Unrealized gains (losses) on securities
Unrealized holding gains (losses) arising during period 1,057 (30,158)
Less: reclassification adjustment for gains (losses)
included in net income (4,443) 3,328
------------------------------
Other comprehensive income (loss), before tax 5,500 (33,486)
Income tax (expense) benefit related to items of other
comprehensive income (1,925) 11,720
------------------------------
Other comprehensive income (loss), net of tax 3,575 (21,766)
------------------------------
Comprehensive income (loss) $ 19,293 $ (4,809)
==============================
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE> 8
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
----------------------------
<S> <C> <C>
Cash flows from operating activities
Net Income $ 15,718 $ 16,957
Adjustments to reconcile net income to net cash
provided by operating activities:
Policyowner assessments on universal life
and annuity products (13,545) (13,381)
Interest credited to policyowner account
balances 75,875 77,271
Realized investment (gains) losses 3,028 (2,604)
Goodwill amortization 2,062 1,880
VOBA amortization 8,984 7,410
Change in:
Accrued investment income (8,446) (5,464)
Reinsurance receivables 11,086 (2,048)
Deferred policy acquisition costs (35,167) (27,961)
Liabilities for future policy benefits 17,776 (44,583)
Policy and contract claims and other
policyowner funds (1,476) (4,001)
Income taxes:
Current (15,814) (2,358)
Deferred 12,577 1,414
Other, net (25,685) 30,070
Change in Closed Block assets and
liabilities, net 13,341 37,431
----------------------------
Net cash provided by operating activities 60,314 70,033
----------------------------
Cash flows from investing activities
Purchase of fixed maturities available-for-sale 550,469 (1,126,910)
Maturities, calls and principal reductions of
fixed maturities available for sale 434,583 1,069,617
Purchase of equity securities (7,316) (69,880)
Proceeds from sale of equity securities 3,463 58,078
Change in short-term investments, net - (19,800)
Purchase of mortgage loans (23,950) (47,986)
</TABLE>
8
<PAGE> 9
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
------------------------
<S> <C> <C>
Proceeds from repayment and sale of
mortgage loans 150,795 37,579
Purchase of real estate and other invested assets (32,709) (46,267)
Proceeds from sale of real estate and other
invested assets 16,299 36,915
Change in policy loans, net 1,068 (345)
Other assets, net (1,754) (1,387)
Change in Closed Block investments, net (20,257) (12,724)
------------------------
Net cash (used in) investing activities (30,247) (123,110)
------------------------
Cash flows from financing activities:
Change in checks written in excess of balance - 17,764
Deposits to policyowner account balances 325,060 288,780
Withdrawals from policyowner account balances (344,565) (304,047)
Change in debt, net 15,887 364
Purchase of treasury stock (1,523) -
Issuance of treasury stock 105 67
Dividends to shareholders (3,000) (3,042)
------------------------
Net cash provided by (used in) financing activities (8,036) (114)
------------------------
Net increase (decrease) in cash 22,031 (53,191)
Cash and cash equivalents at beginning of period 23,090 60,090
------------------------
Cash and cash equivalents at end of period $ 45,121 $ 6,899
========================
Supplemental disclosure of cash activities:
Interest paid $ 7,377 $ 7,196
========================
Income taxes paid $ 11,613 $ 120
========================
</TABLE>
9
<PAGE> 10
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for annual
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. All adjustments were of a
normal recurring nature, unless otherwise noted in Management's Discussion and
Analysis and the Notes to Financial Statements. Operating results for the three
months ended March 31, 2000 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2000. 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, 1999.
Certain amounts in the 1999 financial statements have been reclassified to
conform to the 2000 financial statement presentation.
SFAS 133 AND 137
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.
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.
10
<PAGE> 11
EARNINGS PER COMMON SHARE
Basic earnings per share of common stock are computed by dividing net
income by the weighted-average number of common shares outstanding during the
period. Diluted earnings per share assumes the issuance of common shares
applicable to stock options and warrants calculated using the treasury stock
method.
(2) CLOSED BLOCK
Summarized financial information of the Closed Block balance sheet as of
March 31, 2000 and December 31, 1999 and statements of income for the three
months ended March 31, 2000 and 1999 are as follows:
11
<PAGE> 12
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------------------------------
(unaudited)
($ in thousands)
<S> <C> <C>
Assets:
Securities available-for-sale at fair value
Fixed maturity securities $ 1,108,628 $ 1,087,672
Policy loans 193,293 188,035
Other investments - 602
Cash and cash equivalents 1,727 5,910
Accrued investment income 16,084 14,949
Premiums and fees receivable 752 957
Deferred policy acquisition costs 93,415 97,141
Other assets 18,297 17,356
----------------------------------
Total Assets $ 1,432,196 $ 1,412,622
==================================
Liabilities:
Future life and annuity policy benefits $ 1,598,804 $ 1,581,923
Policyowner funds 6,792 8,905
Dividends payable to policyowners 151,167 152,984
Policy and contract claims 4,880 4,670
Other liabilities 5,907 7,582
----------------------------------
Total Liabilities $ 1,767,550 $ 1,756,064
==================================
<CAPTION>
Three Months Ended March 31,
2000 1999
----------------------------------
<S> <C> <C>
Revenues and expenses:
Insurance premiums $ 48,974 $ 48,960
Universal life and annuity product charges 3,091 3,404
Net investment income 27,294 29,651
Realized gains (losses) on investments 40 452
Policyowner benefits (53,951) (51,321)
Underwriting, acquisition and other expenses (828) (1,811)
Amortization of deferred policy acquisition costs (3,727) (7,553)
Dividends to policyowners (15,033) (15,240)
Contribution from the Closed Block ----------------------------------
before income taxes $ 5,860 $ 6,542
==================================
</TABLE>
12
<PAGE> 13
(3) DEBT AND CAPITAL SECURITIES
Debt consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
(unaudited)
<S> <C> <C>
($ in thousands)
Federal Home Loan Bank community investment
long-term advances with a weighted average
interest rate of 6.29% at March 31, 2000 (A) $ 15,975 $ 16,088
Revolving credit agreement 48,000 32,000
Senior notes bearing interest at 6.95%
due June, 2005 125,000 125,000
------------ ------------
$ 188,975 $ 173,088
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 128,791 128,791
------------ ------------
$ 214,791 $ 214,791
============ ============
</TABLE>
(A) The Company has multiple credit arrangements with the Federal Home Loan
Bank (FHLB). In addition to the long-term advances disclosed above, the Company
is eligible to borrow under variable-rate short term fed funds arrangements of
which no amount was outstanding at March 31, 2000. These borrowings are secured
and interest is payable at the current rate at the time of any advance.
For an additional discussion of the terms of the above indebtedness refer
to the Company's consolidated financial statements as of December 31, 1999.
(4) FEDERAL INCOME TAXES
The effective income tax rate for the three months ending March 31, 2000
and 1999 varied from the prevailing corporate rate primarily as a result of
goodwill amortization and low income housing and rehabilitation credits.
13
<PAGE> 14
(5) COMMITMENTS AND CONTINGENCIES
The Company has entered into agreements with various partnerships in which
a subsidiary of AMHC has an interest. Pursuant to these agreements the Company
is obligated to make future capital contributions to the partnerships of up to
$48.4 million.
The Company is party to financial instruments in the normal course of
business to meet the financing needs of its customers having risk exposure not
reflected in the balance sheet. These financial instruments include commitments
to extend credit, guarantees and standby letters of credit. Commitments to
extend credit are agreements to lend to customers. Commitments generally have
fixed expiration dates and may require payment of a fee. Since many commitments
expire without being drawn upon, the total amount of commitments does not
necessarily represent future cash requirements. The Company has also guaranteed
two loans for a fee. At March 31, 2000, outstanding commitments to extend credit
totaled approximately $11.6 million and loan guarantees totaled approximately
$6.5 million.
The Company has an agreement with Bank One, N.A. whereby the Company
guarantees the payment of loans made to certain of the Company's managers and
executives for the purpose of purchasing Common Stock and ACES pursuant to the
Stock Purchase Program. The liability of the Company in respect of the principal
amount of loans is limited to $25 million. The Company has also guaranteed
interest and all other fees and obligations owing on the loans. Each participant
in the program has agreed to repay the Company for any amounts paid by the
Company under the guarantee in accordance with a reimbursement agreement entered
into between the participant and the Company.
AmerUs Life Insurance Company ("AmerUs Life") and its joint venture partner
are contingently liable in the event the joint venture, Ameritas Variable Life
Insurance Company ("AVLIC"), cannot meet its policyholder obligations. At March
31, 2000, AVLIC had statutory assets of $2,724.8 million, liabilities of
$2,682.5 million, and surplus of $42.3 million.
In the ordinary course of business, the Company and its subsidiaries are
engaged in certain other litigation, none of which management believes is
material to the Company's results of operations.
(6) REORGANIZATION
On December 20, 1999 the Company and the Company's controlling shareholder,
American Mutual Holding Company, AMHC, announced that their respective boards of
directors had approved plans for the demutualization of AMHC and the merger of
the Company into AMHC following the demutualization. Upon completion of the
demutualization, AMHC would be a public company and will change its name to
AmerUs Group Co. (AmerUs Group). Members of AMHC will receive approximately 17
million shares of AmerUs Group and cash or policy credits in excess of $300
million as a result of the demutualization. Shareholders of the Company will
receive shares in AmerUs Group in a one-for-one exchange. Upon completion of the
demutualization, AmerUs Group will consist of the Company and AMHC's non-life
subsidiaries, principally AmerUs Properties, Inc. and AmerUs Home Equity, Inc.
Approval for the demutualization and merger is needed from the members of
AMHC, the Iowa Insurance Commissioner and shareholders of the Company. The
Company expects to ask for approval of these transactions during the second
quarter of 2000.
On February 18, 2000, the Company, AMHC and Indianapolis Life Insurance Co.
(ILICO) entered into a definitive agreement for a combination of the companies.
Under these terms, AMHC will proceed with its previously announced
demutualization. ILICO will demutualize separately and ILICO's members will
receive cash, policy credits and stock equivalent to the value of 11.25 million
shares of
14
<PAGE> 15
stock of AmerUs Group. Upon demutualization, ILICO will become a subsidiary of
AmerUs Group and will continue operations as a stock life insurance company.
As part of the transaction, the Company made an investment of $100 million
in a downstream holding company of ILICO.
ILICO is a 95-year old mutual life insurance and annuity company based in
Indianapolis, Indiana. ILICO and its subsidiaries are licensed to do business in
all 50 states and the District of Columbia. At March 31, 2000, ILICO had total
assets of $6.2 billion and insurance in force of $30.0 billion.
The contemplated transactions are subject to normal closing conditions,
including appropriate policyholder/member, shareholder and regulatory approvals.
The Company expects the demutualization of ILICO and combination into AmerUs
Group to take place in the fourth quarter of 2000.
(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:
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 individual fixed annuities on a national basis
primarily through independent brokers and marketing companies. The Annuity
segment also includes one insurance contract issued to a commercial paper
conduit.
The Company uses the same accounting policies and procedures to measure
operating segment income and assets as it uses to measure its consolidated
income from operations and assets with the exception of the elimination of
certain items 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 not included as part of operating segment income. These items
are shown between adjusted pre-tax operating income and income from operations
on the following operating segment income tables. Operating segment income is
generally income before non-core realized gains and losses, interest expense,
income tax and equity earnings of the Company's unconsolidated subsidiary, AMAL.
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 which are deemed not to be associated
with any specific segment are grouped together in the All other category. These
items
15
<PAGE> 16
primarily consist of discontinued product lines such as group and health and
holding company revenues and expenses. The contribution to the operating income
of the life insurance segment from the Closed Block is reported as a single line
item.
Assets are segmented based on policy liabilities directly attributable to
each segment. All assets allocated to the Closed Block are grouped together and
shown as a separate item entitled "Closed Block Assets."
There are no significant intersegment transactions.
There have been no material changes in segment assets since December
31, 1999.
Operating segment income is as follows:
16
<PAGE> 17
Operating Segment Income
($ in thousands)
Three Months Ended March 31, 2000
<TABLE>
<CAPTION>
Life Insurance Annuities All Other Consolidated
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Insurance premiums $ 14,307 $ 5,883 $ (39) $ 20,151
Universal life and annuity product charges 11,695 8,490 - 20,185
Net investment income 24,848 113,301 1,705 139,854
Core realized gains on investments - 1,528 - 1,528
Other income - 4,165 500 4,665
Contribution from the Closed Block 5,860 - - 5,860
-----------------------------------------------------------------
56,710 133,367 2,166 192,243
Benefits and expenses:
Policyowner benefits 22,005 86,808 173 108,986
Underwriting, acquisition, and other expenses 9,784 11,391 2,533 23,708
Amortization of deferred policy acquisition costs
and value of business acquired, net of
non-core adjustment of $620 5,810 15,890 - 21,700
Dividends to policyowners 1,136 - - 1,136
-----------------------------------------------------------------
38,735 114,089 2,706 155,530
-----------------------------------------------------------------
Adjusted pre-tax operating income (loss) $ 17,975 $ 19,278 $ (540) 36,713
================================================
Non-core realized gains (losses) on investments (4,556)
Amortization of deferred policy acquisition costs
due to non-core realized gains or losses (620)
Reorganization costs (450)
---------------
Income from operations 31,087
Interest (expense) (7,298)
Income tax (expense) (8,852)
Equity in earnings of unconsolidated subsidiary, net of tax 781
---------------
Net income $ 15,718
===============
</TABLE>
17
<PAGE> 18
Operating Segment Income
($ in thousands)
Three Months Ended March 31, 1999
<TABLE>
<CAPTION>
Total
Life Insurance Annuities All Other Consolidated
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Insurance premiums $15,326 $ 8,470 $ 39 $ 23,835
Universal life and annuity product charges 11,821 5,365 - 17,186
Net investment income 20,623 108,201 1,141 129,965
Core realized gains on investments - 2,969 - 2,969
Other income - 1,362 353 1,715
Contribution from the Closed Block 6,542 - - 6,542
------------------------------------------------------------------
54,312 126,367 1,533 182,212
Benefits and expenses:
Policyowner benefits 24,586 84,745 88 109,419
Underwriting, acquisition, and other expenses 12,175 9,576 666 22,417
Amortization of deferred policy acquisition costs
and value of business acquired, net of
non-core adjustment of $511 5,017 11,457 - 16,474
Dividends to policyowners 976 - - 976
------------------------------------------------------------------
42,754 105,778 754 149,286
------------------------------------------------------------------
Adjusted pre-tax operating income $11,558 $ 20,589 $ 779 32,926
================================================
Non-core realized gains (losses) on investments (365)
Amortization of deferred policy acquisition costs
due to non-core realized gains or losses (511)
--------------
Income from operations 32,050
Interest (expense) (7,229)
Income tax (expense) (8,194)
Equity in earnings of unconsolidated subsidiary, net of tax 330
--------------
Net income $ 16,957
==============
</TABLE>
18
<PAGE> 19
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
Selected Consolidated Financial and Operating Data and 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 policy acquisition costs, are deferred. The method of
amortizing deferred policy acquisition costs for life insurance products varies,
dependent upon whether the contract is participating or non-participating.
Participating contracts are those which are expected to pay dividends to
policyowners in proportion to their relative contribution to the Company's
statutory surplus. Non-participating life insurance deferred policy acquisition
costs are amortized over the premium-paying period of the related policies in
proportion to the ratio of annual premium revenues to total anticipated premium
revenues using assumptions consistent with those used in computing policy
benefit reserves. Deferred policy acquisition costs for participating policies
are 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.
19
<PAGE> 20
ADJUSTED NET OPERATING INCOME
The following table reflects net income adjusted to eliminate certain items
(net of applicable income taxes and minority interest) which management believes
do not necessarily indicate 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. Net realized capital
gains or losses on investments may be realized at the sole discretion of
management and are often realized in accordance with tax planning strategies.
Therefore, net realized capital gains or losses do not reflect the Company's
ongoing earnings capacity. Different items are likely to occur in each period
presented and others may have different opinions as to which items may warrant
adjustment. Adjusted net operating income is the basis used by the Company in
assessing its overall performance. Adjusted net operating income as described
here may not be comparable to similarly titled measures reported by other
companies. The adjusted net operating income shown below does not constitute net
income computed in accordance with GAAP.
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
2000 1999
-----------------------------------
<S> <C> <C>
($ in thousands, except per share data)
Net Income $ 15,718 $ 16,957
Net non-core realized (gains) losses (A) 2,962 237
Net amortization of deferred policy
acquisition costs due to non-core
realized gains or losses (B) 403 332
Reorganization costs (C) 450 -
-----------------------------------
Adjusted Net Operating Income $ 19,533 $ 17,526
===================================
Adjusted Net Operating Income
per common share:
Basic (D) $ 0.65 $ 0.58
Diluted (E) $ 0.65 $ 0.58
</TABLE>
(A) Represents total realized gains or losses on investments less core realized
gains or losses (defined as gains or losses on the convertible preferred
stock and bond portfolio, and gains on loans held for sale) adjusted for
income taxes on such amounts. Non-core 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 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.
20
<PAGE> 21
C) Represents costs directly related to the Company's proposed merger with its
controlling shareholder, American Mutual Holding Company (AMHC), following
the proposed demutualization of AMHC. These costs consist primarily of
legal and consulting expenses. See further discussion of the proposed
reorganization plans in the Liquidity and Capital Resources section of
Management's Discussion and Analysis of Results of Operations and Financial
Condition.
(D) Basic adjusted net operating income per common share for the first quarters
of 2000 and 1999 is calculated using 29.97 million and 30.43 million
shares, respectively.
(E) Diluted adjusted net operating income per common share for the first
quarters of 2000 and 1999 is calculated using 30.03 million and 30.47
million shares, respectively.
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 and (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 other 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 reportable 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 income from operations 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 Net 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 and (losses) on investments are
allocated based on the directly-related asset portfolios. Other revenues and
expenses which are deemed not to be associated with any specific reportable
segment are grouped together in the All Other category. These items primarily
consist of discontinued product lines such as group and health and holding
company revenues and expenses. The Company assesses the performance of its
operating segments before interest expense, income taxes, and equity in earnings
of its unconsolidated subsidiary, AMAL Corporation (AMAL).
21
<PAGE> 22
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
Direct First Year Annualized Premiums
For the Three Months Ended
March 31,
2000 1999
-----------------------------------
<S> <C> <C>
($ in thousands)
Traditional life insurance:
Participating whole life $ 3,768 $ 4,905
Term life 2,879 1,412
Universal life 4,563 3,210
-----------------------------------
Total $ 11,210 $ 9,527
===================================
</TABLE>
Life insurance sales as measured by annualized premiums increased 17.7% to
$11.2 million for the first quarter of 2000 compared to $9.5 million for the
same period in 1999. Sales of participating whole life insurance decreased in
the first quarter of 2000 compared to the first quarter of 1999 which was
consistent with the general industry decline of sales of this product. Term life
insurance sales increased $1.5 million to $2.9 million for the first quarter of
2000 compared to $1.4 million for the same period in 1999. The increase in term
life insurance sales was primarily the result of product repricing completed in
mid-1999 along with an increase in consumer demand for the product. Sales of
universal life insurance for the first three months of 2000 increased by $1.3
million from the same period in 1999. Increased sales of universal life were
primarily attributable to new universal life products introduced in mid-1999.
22
<PAGE> 23
The following table sets forth the Company's life insurance collected
premiums, including collected premiums associated with the Closed Block, for the
periods indicated:
<TABLE>
<CAPTION>
Collected Premiums by Product
For the Three Months Ended
March 31,
2000 1999
-----------------------------------
<S> <C> <C>
($ in thousands)
Individual life premiums collected:
Traditional life:
First year and single $ 21,552 $ 22,222
Renewal 47,497 46,624
---------------------------------
Total 69,049 68,846
Universal life:
First year and single 7,612 5,098
Renewal 19,239 18,771
---------------------------------
Total 26,851 23,869
Total individual life 95,900 92,715
Reinsurance assumed 372 349
Reinsurance ceded (5,912) (4,302)
---------------------------------
Total individual life, net of reinsurance $ 90,360 $ 88,762
=================================
</TABLE>
Traditional life insurance premiums collected were $69.0 million for the
first quarter of 2000 compared to $68.8 million for the first quarter of 1999.
Although repetitive premiums were higher in the first quarter of 2000 as
compared to the first quarter of 1999, first year and single premium decreased
between periods due to decreased discretionary premium contributions.
Discretionary premium contributions are largely impacted by alternative
investment rates available. Renewal direct collected premium was $0.9 million
higher in the first quarter of 2000 as compared to the same period in 1999
primarily due to continued favorable persistency and the continued growth of the
block of business.
Universal life insurance premiums collected were $26.9 million in the first
quarter of 2000 compared to $23.9 million for the same period in 1999. The
increase in 2000 was primarily due to new products introduced in mid-1999.
Effective January 1, 2000, the Company entered into additional reinsurance
agreements which effectively reduced the Company's retention limit to $100,000
for the majority of policies issued since July 1, 1996 and for the majority of
new business going forward. As a result of these new agreements, reinsurance
ceded was $1.6 million higher for the first quarter of 2000 as compared to the
same period in 1999.
23
<PAGE> 24
The following table sets forth information regarding the Company's life
insurance in force for each date presented:
<TABLE>
<CAPTION>
Individual Life Insurance in Force
As of March 31,
2000 1999
-----------------------------------------------
<S> <C> <C>
($ in thousands)
Traditional life
Number of policies 249,600 252,975
GAAP life reserves $ 1,664,907 $ 1,578,053
Face amounts $ 22,594,000 $ 19,843,000
Universal life
Number of policies 112,779 114,397
GAAP life reserves $ 927,749 $ 900,756
Face amounts $ 12,387,000 $ 12,114,000
Total life insurance
Number of policies 362,379 367,372
GAAP life reserves $ 2,592,656 $ 2,478,809
Face amounts $ 34,981,000 $ 31,957,000
</TABLE>
While the total policy count continues to decline consistent with industry
trends, the average policy size continues to increase, from $87,000 in 1999 to
$96,500 in 2000. As a result, total insurance in force has grown to almost $35
billion as of March 31, 2000.
24
<PAGE> 25
ANNUITIES
The following table sets forth annuity collected premiums for the periods
indicated:
<TABLE>
<CAPTION>
Collected Premiums by Product
For the Three Months Ended
March 31,
2000 1999
----------------------------------
<S> <C> <C>
($ in thousands)
Fixed annuities $ 206,324 $ 233,675
Multi-choice annuities 20,206 -
Equity-index annuities 70,931 4,639
----------------------------------
Total 297,461 238,314
Reinsurance assumed - -
Reinsurance ceded (54) (66)
----------------------------------
Total annuities, net of reinsurance $ 297,407 $ 238,248
==================================
</TABLE>
The Company markets its annuity products on a national basis through
networks of independent agents whom are supervised by regional vice presidents
and directors or Independent Marketing Organizations (IMO's). The Company's
IMO's consist of approximately 70 contracted organizations and three
wholly-owned organizations. Annuity collected premiums were $297.5 million for
the first quarter of 2000 compared to $238.3 million for the same period in
1999. The increase in collected premiums was primarily attributable to the
introduction of new equity-index and multi-choice annuity products in late-1999
and first quarter 2000. The multi-choice annuity product provides for various
earnings strategies under one product, such as a long-term equity index, an
annual equity index, an investment grade bond index, and a guaranteed one-year
rate. Earnings are credited to this product based on the increases in the
applicable indices, less management fees, and funds may be moved between
investment alternatives.
25
<PAGE> 26
The following table sets forth information regarding annuities in force for
each date presented:
<TABLE>
<CAPTION>
Annuities in Force
As of March 31,
2000 1999
--------------------------------------------------
<S> <C> <C>
($ in thousands)
Deferred fixed and immediate annuities
Number of policies 166,607 177,032
GAAP life reserves $ 5,886,865 $ 5,982,979
Multi-choice annuities
Number of policies 389 -
GAAP life reserves $ 22,146 $ -
Equity-index annuities
Number of policies 10,673 6,369
GAAP life reserves $ 519,931 $ 254,059
Total annuities
Number of policies 177,669 183,401
GAAP life reserves $ 6,428,942 $ 6,237,038
</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.
RESULTS OF OPERATIONS
A summary of the Company's revenue follows:
26
<PAGE> 27
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
------------------------------
<S> <C> <C>
($ in thousands)
Insurance premiums
Life insurance - traditional $ 14,307 $ 15,326
Annuities - Immediate annuity &
supplementary contract premiums 5,883 8,470
All other (39) 39
------------------------------
Total insurance premiums 20,151 23,835
Product charges
Life insurance - universal life 11,695 11,821
Annuities 8,490 5,365
------------------------------
Total product charges 20,185 17,186
Net investment income
Life insurance 24,848 20,623
Annuities 113,301 108,201
All other 1,705 1,141
------------------------------
Total net investment income 139,854 129,965
Realized gains (losses) on investments
Life insurance - core - -
Annuities - core 1,528 2,969
All other - non-core (4,556) (365)
------------------------------
Total realized gains (losses) on investments (3,028) 2,604
Other income
Life insurance - -
Annuities 4,165 1,362
All other 500 353
------------------------------
Total other income 4,665 1,715
Contribution from the Closed Block 5,860 6,542
------------------------------
Total revenues $ 187,687 $ 181,847
==============================
</TABLE>
27
<PAGE> 28
Traditional life insurance premiums were $14.3 million for the first
quarter of 2000 compared to $15.3 million for the same period in 1999. Effective
January 1, 2000, the Company entered into reinsurance agreements which
effectively reduced the Company's retention limit to $100,000 for the majority
of new business. The decrease in traditional life insurance premiums was
primarily the result of approximately $1.0 million of additional premium ceded
to reinsurers and approximately $1.3 million of lower discretionary premium
contributions, partially offset by increased renewal premium of approximately
$1.3 million.
Immediate annuity and supplementary contract premiums decreased by $2.6
million to $5.9 million for the first quarter of 2000 compared to $8.5 million
for the first quarter of 1999. A decrease in immediate annuity premiums in 2000
was anticipated as a result of pricing adjustments made on immediate annuity
products.
Universal life product charges were $0.1 million lower in the first quarter
of 2000 compared with the same period in 1999. The decrease in product charges
in 2000 was primarily due to higher reinsurance costs partially offset by
increased cost of insurance charges as a result of the normal aging of the block
of business.
Annuity product charges were $8.5 million for the first quarter of 2000
compared to $5.4 million for the same period in 1999. The increase in product
charges was primarily due to increased surrender charges resulting from the
larger annuity block of business in force and an increase in withdrawals.
Annuity withdrawal rates averaged 16.9% in the first quarter of 2000 compared to
14.7% in the first quarter of 1999. Based on the current interest rate
environment, withdrawal rates for the near term are expected to run at a higher
level as compared to a year ago. Although withdrawal rates were up, internal
replacement rates were also up as some of the surrendered policies were rolled
over to other AmerUs products.
Total net investment income was $139.9 million for the first quarter of
2000 compared to $130.0 million for the first quarter of 1999. The increase in
2000 net investment income was primarily attributable to higher average invested
assets (excluding market value adjustments) and a higher effective yield as
compared to 1999. Average invested assets (excluding market value adjustments)
increased approximately $325.4 million in the first quarter of 2000 as compared
to the same period in 1999 primarily due to the Company's increased investment
funds from a structured asset-backed commercial paper vehicle entered into in
the third quarter of 1999 and the growth of the Company's life insurance and
annuity business since last year. The effective yield of the entire portfolio in
the first quarter of 2000 was 7.34% compared to 7.09% in the first quarter of
1999. The effective yield of the annuity portion of the portfolio increased 4
basis points to 6.77% for the first quarter of 2000 as compared to 6.73% for the
same period in 1999. The increase in effective yields primarily resulted from
higher reinvestment rates near the end of 1999 and in the first quarter of 2000
as compared to the portfolio rate at the beginning of the prior year period.
Realized losses on investments were $3.0 million for the first quarter of
2000 compared to realized gains of $2.6 million for the first quarter of 1999.
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.
All other income primarily consists of structured finance fees from
affordable housing programs and third party annuity commissions received by
wholly-owned IMO's. Other income increased approximately $3.0 million in the
first quarter of 2000 as compared to the same period in 1999 primarily due to
the acquisition of another IMO in February, 2000.
28
<PAGE> 29
The Contribution from the Closed Block was $5.9 million for the first
quarter of 2000 compared to $6.5 million for the same period in 1999. The
following table sets forth the operating results of the Closed Block for the
periods indicated:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
-------------------------
<S> <C> <C>
($ in thousands)
Revenues
Insurance premiums $ 48,974 $ 48,960
Universal life and annuity product charges 3,091 3,404
Net investment income 27,294 29,651
Realized gains (losses) on investments 40 452
------------------------
Total revenues 79,399 82,467
Benefits and expenses
Policyowner benefits 53,951 51,321
Underwriting, acquisition and insurance expenses 828 1,811
Amortization of deferred policy acquisition costs 3,727 7,553
Dividends to policyowners 15,033 15,240
------------------------
Total benefits and expenses 73,539 75,925
------------------------
Contribution from the Closed Block $ 5,860 $ 6,542
========================
</TABLE>
Closed Block insurance premiums were approximately $49.0 million for the
first quarter of 2000 and the first quarter of 1999. Closed Block insurance
premiums are expected to decline as the Closed Block's life insurance in force
declines over the life of the Block. However, due to an increase in paid-up
additions to life insurance policies from dividend distributions, life insurance
premiums for the first quarter of 2000 remained at the same level as the first
quarter of 1999.
Product charges on universal life policies included in the Closed Block
decreased $0.3 million to $3.1 million for the first quarter of 2000 compared to
$3.4 million for the same period in 1999. The decrease in product charges on
universal life policies was primarily the result of the reduction of such
business in force due to deaths and surrenders.
Net investment income for the Closed Block was $27.3 million for the first
quarter of 2000 compared to $29.7 million for the same period in 1999. The
decrease was primarily attributable to lower effective yields, partially offset
by higher average invested assets (excluding market value adjustments).
There were minimal realized gains on investments of the Closed Block in the
first quarter of 2000 compared to $0.4 million of realized gains in the first
quarter of 1999. 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.
29
<PAGE> 30
Closed Block policyowner benefits were $2.6 million higher in the first
quarter of 2000 compared to the same period in 1999. The increase was primarily
due to increased death benefits.
The amortization of deferred policy acquisition costs for the Closed Block
decreased by $3.9 million to $3.7 million for the first quarter of 2000 compared
to $7.6 million for the first quarter of 1999. Deferred policy acquisition costs
are generally amortized in proportion to gross margins. The decrease in the
amortization of deferred policy acquisition costs for the first quarter of 2000
compared to the first quarter of 1999 is consistent with the projected reduction
in the gross margins of the Closed Block as the life insurance in force
declines.
Closed Block dividends to policyowners decreased by $0.2 million to $15.0
million for the first quarter of 2000 compared to $15.2 million for the same
period in 1999. The decrease in 2000 was primarily due to the decrease in the
deferred dividends resulting from lower margins as compared to the same period
in 1999.
30
<PAGE> 31
A summary of the Company's policyowner benefits follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
------------------------
<S> <C> <C>
($ in thousands)
Life Insurance
Traditional:
Death benefits $ 770 $ 694
Change in liability for future policy
benefits and other policy benefits 4,314 10,291
------------------------
Total traditional 5,084 10,985
Universal:
Death benefits in excess of cash value 8,313 6,289
Interest credited on policyowner
account balances 7,654 7,531
Other 954 (219)
------------------------
Total universal 16,921 13,601
------------------------
Total life insurance benefits 22,005 24,586
Annuities
Interest credited to deferred annuity
account balances 68,221 69,740
Other annuity benefits 18,587 15,005
------------------------
Total annuity benefits 86,808 84,745
All other benefits 173 88
------------------------
Total policyowner benefits $ 108,986 $ 109,419
========================
</TABLE>
Total life insurance benefits were $22.0 million for the first quarter of
2000 compared to $24.6 million for the first quarter of 1999. The Company
entered into additional reinsurance agreements which effectively reduced the
Company's retention limit to $100,000 for the majority of new business. The
decrease in traditional life insurance benefits was primarily due to increased
reserve credits associated with the new reinsurance agreements and lower
premiums. Universal life insurance benefits increased in the first quarter of
2000 as compared to the same period in 1999 primarily due to increased death
benefits corresponding to the expected growth of the business in force. In
addition, the Company experienced higher than expected death benefits in the
first quarter of 2000. The Company does not believe that this is
31
<PAGE> 32
an indication of a change in long-term mortality trends but more of a
fluctuation which is not unusual from time to time. Interest credited on
universal policyowner account balances increased $0.1 million to $7.6 million
for the first quarter of 2000 compared to $7.5 million for the same period in
1999 primarily due to higher policyowner account balances. Policyowner account
balances were approximately $5.8 million higher in the first quarter of 2000 as
compared to the first quarter of 1999. Partially offsetting the increase in
policyowner account balances was a decrease in crediting rates. The weighted
average interest crediting rate on policyowner account balances for the first
quarter of 2000 was 5.62% compared to 5.75% for the same period in 1999.
Annuity benefits were $86.8 million for the first quarter of 2000 compared
to $84.7 million for the same period in 1999. The increase was primarily in
other annuity benefits which included approximately $3.9 million of interest
expense on an insurance contract issued to a commercial paper conduit in
mid-1999. Partially offsetting this increase in other annuity benefits was a
decrease in interest credited to deferred annuity account balances. This
decrease was primarily attributable to a lower weighted average crediting rate
in the first quarter of 2000 compared to the first quarter of 1999. The weighted
average crediting rate on deferred annuity account balances was decreased 19
basis points to 4.87% for the first quarter of 2000 compared to 5.06% for the
first quarter of 1999. As a result of the crediting rate decrease combined with
the increase in annuity investment portfolio yields, GAAP spreads widened 23
basis points in the first quarter of 2000 as compared to the same period in
1999.
32
<PAGE> 33
A summary of the Company's expenses follows:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
1999 1998
--------------------------------
<S> <C> <C>
($ in thousands)
Life Insurance
Underwriting, acquisition and
other expenses $ 9,784 $ 12,175
Amortization of deferred policy acquisition costs
and value of business acquired (VOBA), net
of non-core adjustment of $21 and $315
for the three months ended March 31,
2000 and 1999, respectively 5,810 5,017
--------------------------------
Total life insurance 15,594 17,192
Annuities
Underwriting, acquisition and
other expenses 11,391 9,576
Amortization of deferred policy acquisition costs
and value of business acquired (VOBA), net
of non-core adjustment of $599 and $196
for the three months ended March 31,
2000 and 1999, respectively 15,890 11,457
--------------------------------
Total annuities 27,281 21,033
Amortization of deferred policy acquisition costs due
to non-core realized gains or losses 620 511
All other expenses 2,533 666
Reorganization costs 450 --
--------------------------------
Total expenses $ 46,478 $ 39,402
================================
</TABLE>
Total life insurance expenses were $15.6 million for the first quarter of
2000 compared to $17.2 million for the first quarter of 1999. Underwriting,
acquisition and other expenses were $2.4 million lower in the first quarter of
2000 compared to the same period in 1999 primarily due to decreased technology
costs primarily related to the Year 2000 Compliance Project. Partially
offsetting this decrease was a $0.8 million increase in the amortization of
deferred policy acquisition costs and value of business acquired (VOBA),
resulting primarily from the growth in the deferred policy acquisition cost
asset as the block of business in force continues to grow.
33
<PAGE> 34
Total annuity expenses increased by $6.3 million to $27.3 million for the
first quarter of 2000 compared to $21.0 million for the first quarter of 1999.
Underwriting, acquisition and other expenses increased approximately $1.8
million in the first quarter of 2000 compared to the same period in 1999
primarily due to the additional operating costs associated with the new IMO
acquired in the first quarter of 2000. This increase in expense was more than
offset by the increase in other income from the IMO as discussed previously.
Amortization of deferred policy acquisition costs and VOBA increased
approximately $4.4 million in the first quarter of 2000 compared to the same
period in 1999. The increase in amortization was primarily attributable to the
general growth in the deferred policy acquisition cost asset associated with the
continued growth in annuity sales. In addition, VOBA amortization increased in
the first quarter of 2000 as surrenders of those policies associated with the
VOBA asset increased during the period.
All other expenses increased by $1.8 million in the first quarter of 2000
compared to the same period in 1999 primarily due to increased incentive
compensation at the holding company.
The 2000 reorganization costs consist of legal and consulting expenses
associated with the Company's proposed merger with its controlling shareholder,
AMHC, following the proposed demutualization of AMHC. See further discussion of
these proposed reorganization plans in the Liquidity and Capital Resources
section. As these costs are not of a continuing nature, they have been excluded
from the Operating Segment amounts.
34
<PAGE> 35
A summary of the Company's adjusted pre-tax operating income by operating
segment follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
-------------------------------
<S> <C> <C>
($ in thousands)
Life Insurance
Open Block:
Revenues $ 50,850 $ 47,770
Benefits and expenses (37,599) (41,778)
Dividends to policyowners (1,136) (976)
Closed Block contribution 5,860 6,542
-------------------------------
Adjusted pre-tax operating income 17,975 11,558
Annuities
Revenues 133,367 126,367
Benefits and expenses (114,089) (105,778)
-------------------------------
Adjusted pre-tax operating income 19,278 20,589
All other adjusted pre-tax operating (loss) (540) 779
-------------------------------
Total adjusted pre-tax operating income $ 36,713 $ 32,926
===============================
</TABLE>
Adjusted pre-tax operating income from Life Insurance operations was $18.0
million for the first quarter of 2000 compared to $11.6 million for the first
quarter of 1999. The increase in the first quarter of 2000 compared to the first
quarter of 1999 was primarily due to increased investment income and decreased
other expenses, which were partially offset by a decreased contribution from the
Closed Block.
Adjusted pre-tax operating income from Annuity operations was $19.3 million
for the first quarter of 2000 compared to $20.6 million for the same period in
1999. The decrease in 2000 was primarily due to increased amortization of the
VOBA asset related to the increased surrenders of the associated block of
business, which was partially offset by increased surrender charge income and
interest spreads.
All other adjusted pre-tax operating loss was $0.5 million for the first
quarter of 2000 compared to income of $0.8 million for the same period in 1999.
The decrease in 2000 was primarily due to increased holding company expenses.
Interest expense increased by $0.1 million in the first quarter of 2000 to
$7.3 million compared to $7.2 million in the first quarter of 1999. The
increased interest expense in 2000 was primarily due to higher average
outstanding borrowings during the first quarter of 2000 as compared to the first
quarter of 1999. The additional borrowings were primarily used to support
insurance company operations, affordable housing investments and fund the
acquisition of the new IMO.
35
<PAGE> 36
Income tax expense was $8.9 million for the first quarter of 2000 compared
to $8.2 million for the first quarter of 1999. The effective tax rate in 2000
was 37.2% compared to 33.0% in 1999. The increase in the effective tax rate in
2000 was primarily due to a $0.8 million decrease in tax credits generated by
affordable housing and historic rehabilitation investments. Tax credits
generated from these investments totaled $0.4 million in 2000 compared to $1.2
million in 1999.
The equity in earnings of unconsolidated subsidiary represents 34% of the
net income of AMAL Corporation, net of goodwill amortization and income taxes.
AMAL Corporation is the parent company of Ameritas Variable Life Insurance
Company, the joint venture partner that markets variable life, and variable and
select fixed annuity products.
Net income was $15.7 million for the first quarter of 2000 compared to
$17.0 million for the same period in 1999. The decrease in net income in the
first quarter of 2000 as compared to the first quarter of 1999 was primarily due
to higher realized losses on investments and higher effective income tax rates,
partially offset by increased Life Insurance operating income.
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 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 1999 results, the Company's subsidiaries could pay an estimated
$61.1 million in dividends in 2000 without obtaining regulatory approval. Of
this amount, the Company's subsidiaries paid the Company $10 million in
dividends during the first three months of 2000.
The Company and its subsidiaries generated cash flows from operating
activities of $60.3 million and $70.0 million for the three months ended March
31, 2000 and 1999, respectively. Excess operating cash flows were primarily used
to increase the Company's investment portfolio, fund policyowner account
withdrawals and purchase common stock for the treasury.
The Company has a $150 million revolving credit facility with a syndicate
of lenders (the "Bank Credit Facility"). As of March 31, 2000, there was a $48
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
36
<PAGE> 37
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 is a party to a $250 million separate account funding
agreement. Under this agreement, a five-year floating rate insurance contract is
issued to a commercial paper conduit. The funding agreement is secured by assets
in the Company's separate account and is further backed by the general account
assets. The separate account assets are legally segregated and are not subject
to claims that arise out of any other business of the Company. The separate
account assets and liabilities are included with general account assets in the
financial statements. The funding agreement may not be cancelled by the
commercial paper conduit unless there is a default under the agreement, but the
Company may terminate at any time.
During the first quarter of 2000, the Company purchased 75,000 shares of
common stock for the treasury at a total cost of $1.5 million.
On December 20, 1999, the Company and the Company's controlling
shareholder, AMHC, announced that their respective boards of directors had
approved plans for the demutualization of AMHC and the merger of the Company
into AMHC following the demutualization. Upon completion of the demutualization,
AMHC would be a public company. AMHC will change its name to AmerUs Group Co.
(AmerUs Group) and be traded on the New York Stock Exchange under the symbol
"AMH". Members of AMHC will receive approximately 17 million shares of AmerUs
Group and cash or policy credits in excess of $300 million as a result of the
demutualization. Shareholders of the Company will receive shares in AmerUs Group
in a one-for-one exchange. To complete the demutualization and merger, approval
is needed from the members of AMHC, the Iowa Commissioner of Insurance and
shareholders of the Company. Members of AMHC and shareholders of the Company
will be asked to approve the proposed demutualization and merger plans during
the second quarter of 2000.
On February 18, 2000, the Company, AMHC and Indianapolis Life Insurance Co.
(ILICO) entered into a definitive agreement for a combination of the companies.
Under these terms, AMHC will proceed with its previously announced
demutualization. ILICO will demutualize separately and ILICO's members will
receive cash, policy credits and stock equivalent to the value of 11.25 million
shares of stock of AmerUs Group. Upon demutualization, ILICO will become a
subsidiary of AmerUs Group and will continue operations as a stock life
insurance company. As part of the transaction, the Company made an investment of
$100 million in a downstream holding company of ILICO. ILICO is a 95-year old
mutual life insurance and annuity company based in Indianapolis, Indiana. ILICO
and its subsidiaries are licensed to do business in all 50 states and the
District of Columbia. At March 31, 2000, ILICO had total assets of $6.2 billion
and insurance in force of $30.0 billion. The contemplated transactions are
subject to normal closing conditions, including appropriate policyholder/member,
shareholder and regulatory approvals. The Company expects the demutualization of
ILICO and combination with AmerUs Group to take place in the fourth quarter of
2000.
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.
37
<PAGE> 38
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-sensitive life products
and annuities by their contractual withdrawal provisions at March 31, 2000
(including liabilities in both the Closed Block and the general account):
<TABLE>
<S> <C>
($ in millions)
Not subject to discretionary withdrawal $ 367.9
Subject to discretionary withdrawal with adjustments:
Specified surrender charges (A) 4,419.3
Market value adjustments 1,433.4
----------------------
Subtotal 5,852.7
----------------------
Subject to discretionary withdrawal without adjustments 1,448.8
----------------------
Total $ 7,669.4
======================
</TABLE>
(A) Includes $1,210.6 million of statutory liabilities with a contractual
surrender charges of less than five percent of the account balance.
38
<PAGE> 39
AmerUs Life and its joint venture partner are contingently liable in the
event the joint venture, AVLIC, cannot meet its policyholder obligations. At
March 31, 2000, AVLIC had statutory assets of $2,724.8 million, liabilities of
$2,682.5 million and surplus of $42.3 million.
Through its membership in the Federal Home Loan Bank (FHLB) of Des Moines,
AmerUs Life is eligible to borrow under variable-rate short term fed funds
arrangements to provide additional liquidity. These borrowings are secured and
interest is payable at the current rate at the time of any advance. There were
no borrowings under these arrangements outstanding at March 31, 2000. In
addition, AmerUs Life has long-term advances from FHLB outstanding of $16.0
million at March 31, 2000.
The Company's life insurance subsidiaries may also obtain liquidity through
sales of investments. The Company's investment portfolio as of March 31, 2000
had a carrying value of $9 billion, including Closed Block investments.
At March 31, 2000, the statutory surplus of the Company's subsidiaries was
approximately $433.4 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
In connection with the year 2000, an important business issue emerged
regarding how existing application software programs and operating systems could
accommodate the date value "2000". Many existing application software products
were designed to accommodate only a two-digit date position which represents the
year (i.e., 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 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 was prepared for the year
2000. The Company's overall Year 2000 compliance initiatives included 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.
The Company completed the Year 2000 modifications, conversions and testing
and, to date, has not experienced any significant operational difficulties in
2000.
Total costs associated with Year 2000 modifications and conversions were
approximately $8.5 million. These costs were expensed as incurred.
39
<PAGE> 40
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 March 31, 2000. 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
($ in millions)
<TABLE>
<CAPTION>
9 mos
Amortized 2000 2001 2002 2003 2004 2005 Thereafter Cost
--------- ---- ---- ---- ---- ---- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed maturity securities $ 215,000 $ 361,000 $ 427,000 $ 830,000 $ 677,000 $ 744,000 $3,552,000 $6,806,000
Average interest rate 7.3% 6.9% 6.9% 6.6% 6.5% 6.4% 7.5%
Mortgage loans $ 42,000 $ 50,000 $ 24,000 $ 26,000 $ 38,000 $ 28,000 $ 282,000 $ 490,000
Average interest rate 9.2% 9.4% 9.5% 9.1% 9.2% 9.7% 8.5%
Total $ 257,000 $ 411,000 $ 451,000 $ 856,000 $ 715,000 $ 772,000 $3,834,000 $7,296,000
=======================================================================================================
</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 maturity securities are comprised of U.S.
Treasury, government agency, mortgage-backed and corporate securities.
Approximately 68% 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 7.56 years.
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<PAGE> 41
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.
In the ordinary course of business, the Company and its subsidiaries are
parties to certain other litigation, none of which management believes is
material to the Company's results of operations.
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 reports on Form 8-K were filed during the quarter
ended March 31, 2000:
1. Form 8-K dated January 12, 2000, announcing the combination of the
Company, AMHC and ILICO.
2. Form 8-K/A dated January 13, 2000, amending Form 8-K dated January
12, 2000, to include conformed signature page.
3. Form 8-K dated February 21, 2000, announcing the definitive
agreement between the Company, AMHC and ILICO.
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<PAGE> 42
4. Form 8-K/A dated March 6, 2000, amending Form 8-K dated February
21, 2000, to include Combination and Investment Agreement among
AMHC, the Company, ILICO and The Indianapolis Life Group of
Companies, Inc. and the Investment Advisory Agreements between
AmerUs Capital Management Group, Inc. and ILICO, Bankers Life
Insurance Company of New York, IL Annuity and Insurance Company and
Western Security Life Insurance Company.
5. Form 8-K/A dated March 24, 2000 amending Form 8-K dated February
21, 2000 to include the Consolidated Financial Statements of
Indianapolis Life Insurance Company.
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<PAGE> 43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
DATED: May 15, 2000 AMERUS LIFE HOLDINGS, INC.
By /s/ Michael G. Fraizer
----------------------------------
Executive Vice President and
Chief Financial Officer
By /s/ Brenda J. Cushing
----------------------------------
Vice President and Controller
(Principal Accounting Officer)
43
<PAGE> 44
AMERUS LIFE HOLDINGS, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
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.
2.4 Combination and Investment Agreement, dated February 18, 2000, among
American Mutual Holding Company, the Registrant, Indianapolis Life
Insurance Company and The Indianapolis Life Group of Companies,
Inc., filed as Exhibit 2.1 to the Registrant's report on Form 8-K/A
on March 6, 2000, is hereby incorporated by reference.
2.5 Purchase Agreement, dated as of February 18, 2000, by and between
American Mutual Holding Company and the Registrant, filed as Exhibit
2.5 on Form 10-K, dated March 8, 2000, is hereby incorporated by
reference.
2.6 Agreement and Plan of Merger, dated December 17, 1999, by and between
American Mutual Holding Company and the Registrant, filed as Exhibit
2.6 on Form 10-K, dated March 8, 2000, is hereby incorporated by
reference.
2.7 Amendment No. 1 to Agreement and Plan of Merger, dated February 18,
2000, by and between American Mutual Holding Company and the
Registrant, filed as Exhibit 2.7 on Form 10-K, dated March 8, 2000,
is hereby incorporated by reference.
2.8 Letter agreement, dated December 17, 1999, by and between American
Mutual Holding Company and the Registrant, filed as Exhibit 2.8 on
Form 10-K, dated March 8, 2000, is hereby incorporated by reference.
2.9 Notification Agreement, dated as of February 18, 2000, by and among
American Mutual Holding Company, the Registrant and Bankers Trust
Company, filed as Exhibit 2.9 on Form 10-K, dated March 8, 2000, is
hereby incorporated by reference.
2.10* Amendment No. 2 to Agreement and Plan of Merger, dated April 3, 2000,
by and between American Mutual Holding Company and the Registrant.
2.11* Amendment No. 1 to the Purchase Agreement, dated April 3, 2000, by
and between American Mutual Holding Company and the Registrant.
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.
</TABLE>
44
<PAGE> 45
<TABLE>
<S> <C>
4.2 Indenture dated as of February 3, 1997 between the Registrant and
Wilmington Trust Company relating to the Company's 8.85% Junior
Subordinated Debentures, Series A, filed as Exhibit 4.1 to the
registration statement of the Registrant and AmerUs Capital I on
Form S-1, Registration Number, 333-13713, is hereby incorporated by
reference.
4.3 Guaranty Agreement dated as of February 3, 1997 between the
Registrant, as guarantor, and Wilmington Trust Company, as trustee,
relating to the 8.85% Capital Securities, Series A, issued by AmerUs
Capital I, filed as Exhibit 4.4 to the registration statement on
Form S-1, Registration Number, 333-13713, is hereby incorporated by
reference.
4.4 Common Stock Purchase Warrant, filed as Exhibit (10)(v) to Form 10-Q
of AmVestors Financial Corporation dated May 13, 1992, is hereby
incorporated by reference.
4.5 Amended and Restated Declaration of Trust of AmerUs Capital II, dated
as of July 27, 1998, among the Registrant, First Union Trust Company
and the administrative trustees named therein, relating to the
Registrant's 7.0% ACES Units, filed as Exhibit 4.5 on Form 10-Q,
dated August 13, 1998, is hereby incorporated by reference.
4.6 Certificate of Trust of AmerUs Capital III filed as Exhibit 4.7 to
the registration statement of the Registrant, AmerUs Capital II and
AmerUs Capital III, on Form S-3 (No. 333-50249), is hereby
incorporated by reference.
4.7 Common Trust Securities Guarantee Agreement, dated as of July 27,
1998, by the Registrant, relating to the Registrant's 7.0% ACES
Units, filed as Exhibit 4.7 on Form 10-Q, dated August 13, 1998, is
hereby incorporated by reference.
4.8 QUIPS Guarantee Agreement, dated as of July 27, 1998, by the
Registrant, relating to the Registrant's 7.0% ACES Units, filed as
Exhibit 4.8 on Form 10-Q, dated August 13, 1998, is hereby
incorporated by reference.
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.
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10.5 All*AmerUs Supplemental Executive Retirement Plan, effective January
1, 1996, filed as Exhibit 10.6 to the registration statement of the
Registrant on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.6 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.
10.7 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.
10.8 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.
10.9 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.
10.10 Form of Indemnification Agreement executed with directors and certain
officers, filed as Exhibit 10.33 to the registration statement of the
Registrant on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.11 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.
10.12 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.
10.13 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.
10.14 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.
10.15 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.
10.16 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.
10.17 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.
10.18 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.
10.19 Lease - Business Property, dated December 1, 1999, between AmerUs
Properties, Inc. and AmerUs Life Insurance Company, property 611
Fifth Avenue, Des Moines, Iowa, filed as Exhibit 10.19 on Form 10-K,
dated March 8, 2000, is hereby incorporated by reference.
10.20 Lease - Assignment & Assumption Agreement - Business Property, dated
December 15, 1999, between AmerUs Properties, Inc. and 611 Fifth
Avenue, L.L.C., property 611 Fifth Avenue, Des Moines, Iowa, filed as
Exhibit 10.20 on Form 10-K, dated March 8, 2000, is hereby
incorporated by reference.
10.21 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.
10.22 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.
</TABLE>
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10.23 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.
10.24 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.
10.25 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.
10.26 Servicing Agreement, dated March 5, 1997, between AmerUs Life
Insurance Company and AmerUs Properties, Inc., filed as Exhibit 10.64
on Form 10-K, dated March 25, 1998, is hereby incorporated by
reference.
10.27 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.
10.28 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.
10.29 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.
10.30 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.
10.31 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.
10.32 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.
10.33 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.
10.34 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.
10.35 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.
10.36 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.
10.37 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.
</TABLE>
47
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10.38 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.
10.39 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.
10.40 1999 Non-Employee Stock Option Plan, dated April 19, 1999, filed on
Form S-3, Registration Number 333-72643, is hereby incorporated by
reference.
10.41 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, filed as Exhibit 10.43
on Form 10-Q dated August 13, 1999, is hereby incorporated by
reference.
10.42 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, filed as Exhibit 10.44 on Form 10-Q
dated August 13, 1999, is hereby incorporated by reference.
10.43 Administrative Services Agreement, dated as of January 1, 2000, among
American Mutual Holding Company, the Registrant, AmerUs Group Co.,
AmerUs Home Equity, Inc. AmerUs Mortgage, Inc., AmerUs Properties,
Inc., American Capital Management Group, Inc., AmerUs Life Insurance
Company, AmVestors Financial Corporation, and Delta Life and Annuity
Company, filed as Exhibit 10.43 on Form 10-K, dated March 8, 2000, is
hereby incorporated by reference.
10.44 Amendment No. 2 to Facility Agreement, dated January 25, 2000, among
The First National Bank of Chicago and the Registrant, filed as
Exhibit 10.44 on Form 10-K, dated March 8, 2000, is hereby
incorporated by reference.
10.45 Irrevocable Standby Letter of Credit Application and Terms Agreement,
dated February 1, 2000, between Federal Home Loan Bank of Des Moines
and AmerUs Life Insurance Company, filed as Exhibit 10.45 on Form
10-K, dated March 8, 2000, is hereby incorporated by reference.
10.46 Seventh Amendment to Credit Agreement dated as of December 23, 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, filed as Exhibit 10.46
on Form 10-K, dated March 8, 2000, is hereby incorporated by
reference.
10.47 Investment Advisory Agreements, dated as of February 18, 2000, by and
between Indianapolis Life Insurance Company, Bankers Life Insurance
Company of New York, IL Annuity and Insurance Company, Western
Security Life Insurance Company and AmerUs Capital Management Group,
Inc. filed as Exhibits 10.1,10.3, 10.4 and 10.2, respectively, to the
Registrant's report on Form 8-K/A on March 6, 2000, are hereby
incorporated by reference.
10.48* Advance, Pledge and Security Agreement, dated April 12, 2000, by and
between the Federal Home Loan Bank of Topeka and American Investors
Life Insurance Company, Inc.
10.49* Institutional Custody Agreement, dated April 12, 2000, by and between
the Federal Home Loan Bank of Topeka and American Investors Life
Insurance Company, Inc.
10.50* Line of Credit Application, dated April 12, 2000, by and between the
Federal Home Loan Bank of Topeka and American Investors Life
Insurance Company, Inc.
10.51* Stock Purchase Agreement, dated February 1, 2000, by and among
AmVestors Financial Corporation, Creative Marketing International
Corporation and the Stockholders of Creative Marketing International
Corporation.
10.52* Stock Purchase Agreement, dated February 23, 2000, by and among
American Investors Sales Group, Inc., Community Bank Marketing, Inc.
and Community Financial Services, Inc.
10.53* Agreement for Advances, Pledge and Security Agreement, dated March
12, 1992, by and between Central Life Assurance Company and the
Federal Home Loan Bank of Des Moines.
10.54* Agreement for Advances, Pledge and Security Agreement, dated
September 1, 1995, by and between American Vanguard Life Insurance
Company and the Federal Home Loan Bank of Des Moines.
10.55* Agreement and Plan of Merger, dated September 30, 1998, by and among
AmVestors Financial Corporation, Senior Benefit Services of Kansas,
Inc., Senior Benefit Services Insurance Agency, Inc., National Senior
Benefit Services, Inc. and Richard McCarter.
</TABLE>
48
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11* Statement Re: Computation of Earnings Per Share.
27.1* Financial Data Schedule.
99.1 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.
99.2 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, filed as
Exhibit 99.4 on Form 10-Q dated August 13, 1999, is hereby
incorporated by reference.
99.3 Supplemental Benefit Agreement, dated as of April 15, 1999, among
Roger K. Brooks and the Registrant, filed as Exhibit 99.5 on Form
10-Q dated August 13, 1999, is hereby incorporated by reference.
99.4 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, filed as Exhibit 99.6 on Form 10-Q
dated August 13, 1999, is hereby incorporated by reference.
99.5 Amended and Restated Employment Agreement, dated as of April 15,
1999, among Marcia S. Hanson and the Registrant, filed as Exhibit
99.7 on Form 10-Q dated August 13, 1999, is hereby incorporated by
reference.
99.6 Agreement and Release, dated as of December 31, 1999, by and between
Marcia S. Hanson, Registrant, AmerUs Group Co., American Mutual
Holding Company, and all of their respective subsidiaries and
affiliates, filed as Exhibit 99.6 on Form 10-K, dated March 8, 2000,
is hereby incorporated by reference.
99.7 Form of Supplemental Benefit Agreement, dated as of February 7, 2000,
among the Registrant and Victor N. Daley, Michael G. Fraizer, Thomas
C. Godlasky and Gary R. McPhail, filed as Exhibit 99.7 on Form 10-K,
dated March 8, 2000, is hereby incorporated by reference.
99.8* Retirement Agreement, dated March 14, 2000, by and between Victor N.
Daley and Registrant.
</TABLE>
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* included herein
49
<PAGE> 1
EXHIBIT 2.10
AMENDMENT NO. 2
TO
AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. 2 dated as of April 3, 2000, is made to the
Agreement and Plan of Merger dated December 17, 1999, as amended on
February 18, 2000, between American Mutual Holding Company ("AMHC") and
AmerUs Life Holdings, Inc. ("AMH").
WHEREAS, the respective Boards of Directors of AMHC and AMH have
approved and will recommend to its members and stockholders, respectively, the
approval of the Merger Agreement and this Amendment whereby AMH shall merge with
and into AMHC, subject to the terms set forth therein and herein (the "Merger");
WHEREAS, subsequent to the date of the Merger Agreement, AMHC and AMH
entered into a Combination and Investment Agreement (the "Combination
Agreement"), by and among AMHC, AMH, Indianapolis Life Insurance Company, an
Indiana mutual insurance company ("Indianapolis Life") and The Indianapolis Life
Group of Companies, Inc., an Indiana corporation ("ILGC");
WHEREAS, pursuant to the Combination Agreement, AMHC invested $100
million in ILGC in return for 105.96 shares of non-voting common stock of ILGC
("ILGC Stock");
WHEREAS, AMHC and AMH entered into a Purchase Agreement to permit AMHC
to sell and require AMH to purchase the ILGC Stock;
WHEREAS, AMH fulfilled its obligation under the Purchase Agreement and
purchased the ILGC stock for the Purchase Price (as defined in the Purchase
Agreement) (the "Stock Purchase");
WHEREAS, the Purchase Agreement is no longer a component of the Plan,
the Merger Agreement and related transactions following the Stock Purchase; and
WHEREAS, the parties desire to amend the Merger Agreement to reflect
the Stock Purchase.
NOW, THEREFORE, the parties agree as follows:
1. Section 6.2(d) of the Agreement shall be deleted in its entirety.
2. Section 8.7 of the Agreement shall be deleted in its entirety.
3. Except as set forth herein, the Agreement remains in full force and
effect and unmodified.
4. Capitalized terms used but not defined herein shall have the
meanings given such terms in the Merger Agreement.
-1-
<PAGE> 2
IN WITNESS WHEREOF, each of AMH and AMHC has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
AMERICAN MUTUAL HOLDING COMPANY
By: /s/ Roger K. Brooks
------------------------------
Name: Roger K. Brooks
Title: Chairman, President
and Chief Executive Officer
AMERUS LIFE HOLDINGS, INC.
By: /s/ Michael G. Fraizer
------------------------------
Name: Michael G. Fraizer
Title: Executive Vice President
and Chief Financial Officer
-2-
<PAGE> 1
EXHIBIT 2.11
AMENDMENT NO. 1
TO THE
PURCHASE AGREEMENT
BETWEEN
AMERICAN MUTUAL HOLDING COMPANY
AND
AMERUS LIFE HOLDINGS, INC.
THIS AMENDMENT NO. 1 ("Amendment") is made as of this 3rd day of April, 2000, to
the Purchase Agreement dated February 18, 2000, by and between American Mutual
Holding Company, an Iowa mutual insurance holding company ("AMHC"), and AmerUs
Life Holdings, Inc., an Iowa corporation ("AMH") ("the Purchase Agreement").
RECITALS
WHEREAS, the respective Boards of Directors of AMHC and AMH have approved of the
Purchase Agreement and this Amendment whereby AMH grants AMHC the right and
option to cause AMH to purchase 105.96 shares of non-voting common stock of the
Indianapolis Life Group of Companies, Inc. ("ILGC Stock") held by AMHC;
WHEREAS, AMHC desires to sell and AMH is willing to purchase the ILGC Stock
pursuant to the Purchase Agreement at any time;
WHEREAS, the parties desire to amend the Purchase Agreement to provide for the
purchase of the ILGC Stock at any time.
NOW, THEREFORE, the parties agree as follows:
1. The fourth "Whereas" recital shall be deleted in its entirety.
2. The phrase "upon the occurrence of a Trigger Event" in Section 1.1 of the
Agreement shall be deleted and replaced with "at any time".
3. The phrase "on or after the occurrence of a Trigger Event" in Section 1.2
of the Agreement shall be deleted.
4. The phrase "On or before the 30th day (or on the Plan Effective Date (as
defined in the Plan), in the case of a Five-Day Notice Trigger Event)" in
Section 1.3 of the Agreement shall be deleted and replaced with "On the
earlier of (i) the date of purchase of the ILGCO Stock by AMH or (ii) on or
before the 30th day".
5. The phrase "Until the Closing Date" in Section 3.1 of the Agreement shall
be deleted and replaced with "until the date of purchase".
<PAGE> 2
6. Except as set forth herein, the Agreement remains in full force and effect
and unmodified.
7. Capitalized terms used but not defined herein shall have the meanings given
such terms in the Purchase Agreement.
IN WITNESS WHEREOF, each of AMH and AMHC has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
AMERICAN MUTUAL HOLDING
COMPANY
By: s/ Roger K. Brooks
----------------------------------
Name: Roger K. Brooks
Title: President and Chief Executive
Officer
AMERUS LIFE HOLDINGS, INC.
By: s/ Michael G. Fraizer
----------------------------------
Name: Michael G. Fraizer
Title: ExecutiveVice President and
Chief Financial
Officer
<PAGE> 1
EXHIBIT 10.48
[FEDERAL HOME LOAN BANK OF TOPEKA LOGO]
Advance, Pledge and Security Agreement
(Specific Pledge)
- --------------------------------------------------------------------------------
Effective Date: 4-12-00
------------
Institution: American Investors Life Insurance Company, Inc.
----------------------------------------------------
Address: 555 South Kansas Avenue
-----------------------------
Topeka, KS 66603
-----------------------------
This Advance, Pledge and Security Agreement (Agreement) is made as of the
effective date set forth above by and between the Federal Home Loan Bank of
Topeka (Bank) and the above-described institution (Institution).
CONTENTS
DEFINITIONS 4.3 Power of Attorney
1.1 Defined Terms 4.4 Payment of Prepayment Charges
ADVANCES 4.5 Default Rate
2.1 Advance Procedures; Demand 4.6 Sale of Collateral
Deposit Account MISCELLANEOUS
2.2 Estoppel 5.1 General Representations and
2.3 Interest Warranties
2.4 Funding Commitments; Ineligibility 5.2 FIRREA Covenant
SECURITY AGREEMENT 5.3 Good Faith; Liability of Bank
3.1 Specific Pledge; Required Collateral 5.4 Assignment of Indebtedness
Amount 5.5 Discretion to Deny Advances
3.2 Perfection of Security Interest 5.6 Access to Bank Records
3.3 Institution's Representations and
Warrants Concerning Collateral 5.7 Amendments; Waivers
3.4 Release of Collateral 5.8 Jurisdiction; Legal Fees
3.5 Reports, Audits and Access 5.9 Applicable Law; Severability
3.6 Bank's Responsibility as to Collateral 5.10 Successors and Assigns
3.7 Application of Payments 5.11 Notices
DEFAULT; REMEDIES; POWER OF ATTORNEY 5.12 Entire Agreement
4.1 Events of Default; Acceleration 5.13 Counterparts
4.2 Remedies
THE BANK AND THE INSTITUTION AGREE AS FOLLOWS:
DEFINITIONS
1.1 DEFINED TERMS. The following terms shall have the following meanings:
a. "Act" means the Federal Home Loan Bank Act, as amended, 12 U.S.C.
1421, et. seq.
b. "Advance" or "Advances" means any and all loans or other extensions
of credit, including without limitation Swap Transactions, letters of
credit, guarantees, insurance company funding agreements, or other
arrangements intended to facilitate transactions between the
Institution and third parties (but excluding any obligations that the
Bank may now or hereafter have to honor such as items or transfer
orders under a depository or similar agreement between the
Institution and the Bank), and irrespective of whether the Bank's
obligation under such agreement is contingent upon the occurrence or
nonoccurrence of any condition, and including all loans or extensions
of credit by the Bank to the Institution prior to the date hereof.
c. "Business Day" means any day that the Federal Reserve Bank of Kansas
City is open for business.
Page 1 of 9
<PAGE> 2
d. "Capital Stock" means all of the capital stock of the Bank owned by
the Institution and all payments that have been or hereafter are made
on account of any subscription for such capital stock and all unpaid
dividends on such capital stock.
e. "Collateral" means all property, including the proceeds thereof,
previously assigned, transferred or pledged to the Bank by the
Institution as collateral for Advances and all property assigned,
transferred or pledged to the Bank pursuant to Section 3.1 of the
Agreement or otherwise.
f. "Collateral Policy" means the collateral policy of the Bank as
published from time to time.
g. "Commitment" or "Commitments" means any agreement under which the
Bank is obligated to make an Advance to the Institution.
h. "Confirmation" means a written or machine-readable electronic
transmission issued by the Bank from time to time confirming an
Advance, including the notation of the Advance on the Institution's
demand deposit account statement and schedules to insurance company
funding agreements.
i. "Credit Policy" means the credit policy of the Bank as published from
time to time.
j. "Eligible Collateral" means Collateral, other than Capital Stock,
which: (1) qualifies as security for Advances under the terms and
conditions of the Act and the Regulations and satisfies the
requirements that may be established by the Bank from time to time;
and (2) is owned by the Institution free and clear of any liens,
encumbrances or interests other than the interest of the Bank
hereunder.
k. "Indebtedness" means all indebtedness of the Institution to the Bank,
whether now outstanding or hereafter incurred, including all Advances
and any other sums owed by the Institution to the Bank pursuant to
any provision hereof, and all other obligations and liabilities of
the Institution to the Bank.
l. "Lending Value" means the value of the Bank shall from time to time,
in its sole discretion, ascribe to the various type of Collateral.
m. "Regulations" means the regulations of the Federal Housing Finance
Board or its successor, as amended, 12 CFR Chapter IX.
n. "Required Collateral Amount" means the aggregate dollar amount that
the Bank may specify from time to time with respect to each Advance
and any other obligation or liability of the Institution to the Bank.
The Bank may increase or decrease the Required Collateral Amount at
any time.
o. "Swap Transaction" or "Swap Transactions" means any and all interest
rate swaps, interest rate caps, floors or collars, currency exchange
transactions or similar transactions entered into between the Bank
and the Institution.
ADVANCES
2.1 ADVANCE PROCEDURES; DEMAND DEPOSIT ACCOUNT. All Advances are subject to
and governed by the Credit Policy and the Collateral Policy, both of which
are incorporated in and made a part of this Agreement. Periodically, the
Institution may apply to the Bank for Advances in accordance with the
procedures established by the Bank. Each Advance shall be evidenced by a
Confirmation. Unless otherwise agreed to in writing by the Bank, each
Advance shall be made by crediting a demand deposit account of the
Institution with the Bank and payments of interest, principal or other
amounts owed the Bank shall be made by debiting such account. The
Institution shall maintain sufficient available balances in the account to
fund all payments due the Bank.
2.2 ESTOPPEL. Failure of the Institution to deliver a written notice to the
Bank specifying any disputed term or condition of an Advance within ten
(10) Business Days after the Bank mails by first-class mail or transmits
electronically a Confirmation to the Institution shall constitute the
agreement and acknowledgment by the Institution that the terms and
conditions of the Advance as stated in the Confirmation are valid and are
those that the Institution requested and by which the Institution agreed
to be bound. The Institution shall thereafter be estopped from asserting
any claim or defense with respect to the repayment of such Advance and
all interest, fees and other charges thereon or in connection therewith.
2.3 INTEREST. The Institution agrees to pay interest on each Advances at the
applicable rate per annum provided in the Confirmation pertaining thereto,
as specified in the Bank's Credit Policy for such type of Advance and as
otherwise specified herein. Accrued interest on each Advance shall be due
and payable at the times specified in the Bank's Credit Policy,
Confirmation or as otherwise specified in writing by the Bank.
2.4 FUNDING COMMITMENTS; INELIGIBILITY. In the event the Institution's
access to Advances is restricted by any applicable law or regulatory
directive, the Bank shall not fund outstanding Commitments to the
Institution. The
Page 2 of 9
<PAGE> 3
Institution shall immediately notify the Bank if it becomes ineligible for
Advances under any applicable law or regulatory directive.
SECURITY AGREEMENT
3.1 SPECIFIC PLEDGE; REQUIRED COLLATERAL AMOUNT.
a. As security for all present and future indebtedness, the Institution
hereby assigns, transfers and pledges to the Bank, and grants to the
Bank a security interest in, the following: (1) all Capital Stock now
or hereafter owned by the Institution; (2) all deposit accounts held by
the Institution at the Bank; (3) all property specified and described
by the Institution from time to time on schedules or forms prescribed
by the Bank; (4) all property delivered from time to time by the
Institution to the Bank or the Bank's custodian; and (5) the proceeds
of any of the foregoing.
b. The institution shall at all times have granted the Bank a security
interest in an amount of Eligible Collateral that has a Lending Value
at least equal to the Required Collateral Amount applicable to the
Institution.
c. While the Institution may, except as provided below, retain the
documents evidencing any Collateral it has pledged to the Bank, it is
specifically understood and agreed that the holding of such documents
is solely for the benefit, and subject to the direction and control, of
the Bank.
d. The Institution shall not assign, pledge, transfer, create any security
interest in, sell or otherwise dispose of any Collateral without the
prior written consent of the Bank.
3.2 PERFECTION OF SECURITY INTEREST.
a. Immediately upon the Bank's request, and from time to time thereafter,
the Institution shall take all actions as the Bank shall reasonably
deem necessary or appropriate to perfect the Bank's security interest
in the Collateral, including but not limited to the making, execution
and delivery to the Bank of such assignments, listings, powers,
financing statements or other instruments and documents as the Bank may
require.
b. The Institution agrees to pay to the Bank upon demand such fees and
charges as may be assessed by the Bank to cover overhead and other
costs relating to the perfection of the Bank's security interest in the
Collateral (including without limitation the receipt, holding and
redelivery of Collateral and to reimburse the Bank upon request for all
recording fees) and other reasonable expenses, disbursements and
advances incurred or made by the Bank in connection therewith
(including the reasonable compensation and the expenses and
disbursements of any bailee that may be appointed by the Bank
hereunder, and the agents and legal counsel of the Bank and of such
bailee).
c. In the event any Collateral that was Eligible Collateral ceases to be
Eligible Collateral, the Institution will promptly notify the Bank in
writing of the reason such Collateral has ceased to be Eligible
Collateral and request the release of such Collateral pursuant to
Section 3.4.
d. The form and sufficiency of all documents pertaining to the Collateral
shall be satisfactory to the Bank. Any Collateral that is not
satisfactory to the Bank may be rejected by the Bank or may have a
value ascribed thereto that shall be less than the value normally
ascribed thereto under the Bank's Collateral Policy, or as the Bank may
otherwise specify.
e. The Bank may take such steps as it reasonably deems necessary to
protect its security position with respect to outstanding Advances,
including requiring the pledging and/or perfection of additional
collateral whether or not such additional collateral is Eligible
Collateral.
3.3 INSTITUTION'S REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL. The
Institution represents and warrants to the Bank, as of the date hereof and
as of each date on which there shall be an outstanding Advance or
Commitment, as follows:
a. The Institution owns and has title to the Collateral and has the right
and authority to grant a security interest to the Bank in the
Collateral and to subject all of the Collateral to this Agreement.
b. All the Collateral that the Institution represents to be Eligible
Collateral meets the standards and requirements with respect thereto
from time to time established by the Bank, the Act and the Regulations.
c. The Institution has not conveyed or otherwise created, and there does
not otherwise exist, any participation interest or other direct,
indirect, legal or beneficial interest in any Collateral in favor of
anyone or any entity other than the Bank and the Institution except as
specifically communicated in writing to the Bank.
3.4 RELEASE OF COLLATERAL. Upon receipt by the Bank of a written request from
the Institution asking for the release of any Collateral, the Bank shall
promptly release to the Institution, at the Institution's expense, the
Collateral specified
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in said written request. Notwithstanding anything to the contrary herein,
while an Event of Default hereunder shall have occurred and be continuing,
or at any time that the Bank's records indicate that such release would
reduce the Lending Value of the Institution's Collateral below the Required
Collateral Amount, or at any time that the Bank reasonably and in good
faith deems itself insecure, the Bank may refuse such request.
3.5 REPORTS, AUDITS AND ACCESS.
a. The Institution shall provide the Bank with written periodic reports
containing such information on the Collateral as the Bank shall require
from time to time, including listings of mortgages and securities,
unpaid principal balances thereof and certifications concerning the
status of payments of mortgages and of taxes and insurance on property
securing mortgages. The Institution shall give the Bank access at all
reasonable times to Collateral in the possession of the Institution and
to the books and records of account of the Institution relating to the
Collateral for the purpose of permitting the Bank to examine, verify or
reconcile the Collateral and the reports of the Institution to the Bank
thereon.
b. All Collateral and the satisfaction by the Institution of the Required
Collateral Amount shall be subject to periodic audit and verification
by or on behalf of the Bank. Such audits and verifications may occur
without notice during the Institution's normal business hours or upon
reasonable notice at such other time as the Bank may reasonably
request. The Institution shall provide access to, and shall make
adequate working facilities available to, the representations or agents
of the Bank for purposes of such audits and verifications. The
Institution agrees to pay to the Bank such reasonable fees and charges
as may be assessed by the Bank to cover overhead and other costs
relating to such audits and verifications.
c. The Institution shall furnish to the Bank annually, if the Bank
requests, an audit report prepared by an external independent auditor
of the Institution in such form as the Bank may require certifying the
accuracy of any or all information required to be given to the Bank by
the Institution with respect to the Collateral.
d. The Institution shall also furnish to the Bank, on an annual basis,
copies of any available audited financial statements, management
letters and directors' exams in regard to the Institution.
e. If the Lending Value of the Eligible Collateral pledged by the
Institution shall at any time fall below the Required Collateral
Amount, the Institution shall immediately notify the Bank.
3.6 BANK'S RESPONSIBILITY AS TO COLLATERAL. In the event that the Bank shall
take possession of any Collateral hereunder, the Bank's duty as to such
Collateral shall be solely to use reasonable care in the custody and
preservation of the Collateral in its possession. This duty shall not
require the Bank to take any steps necessary to preserve rights against
prior parties or the duty to send notices, perform services or take any
action in connection with the management of the Collateral. The Institution
shall make and maintain copies, microfilm or other recordings of all
Collateral delivered to the Bank.
3.7 APPLICATION OF PAYMENTS. The Bank may, in its sole discretion, apply any
payments by or recovery from the Institution, which are received by the
Bank without any designation from the Institution (at the time of such
payment or recovery) as to the intended application thereof, at such time
and in such manner and order of priority as the Bank shall deem fit.
DEFAULT; REMEDIES; POWER OF ATTORNEY
4.1 EVENTS OF DEFAULT; ACCELERATION. Upon the occurrence of and during the
continuation of any of the following events or conditions of default
(Event of Default), the Bank may at its option and notwithstanding any
other provision hereof, by a notice to the Institution, declare all
Indebtedness, including but not limited to any accrued interest and any
prepayment charges that are provided for upon payment of an Advance before
the date(s) scheduled for repayment, to be immediately due and payable,
without presentment, demand, protest or any further notice:
a. Failure of the Institution to keep sufficient available balances on
deposit with the Bank to pay any interest, principal or other amount
then due and owing to the Bank one (1) Business Day after the Bank
gives notice to the Institution that its available balances on deposit
with the Bank are insufficient to pay amounts then due and owing; or
b. Continued failure of the Institution to perform any promise or
obligation or to satisfy any condition or liability contained herein
for five (5) Business Days after the Bank gives notice to the
Institution of such failure; or
c. Continued failure of the Institution to provide adequate Eligible
Collateral as required by the Bank for three (3) Business Days after
the Bank gives notice to the Institution of such failure unless the
Institution shall
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<PAGE> 5
reduce its Required Collateral Amount during such three (3) Business
Day period such that the Institution has sufficient Eligible
Collateral; or
d. Any suspension of payment by the Institution to any creditor of sums
due or the occurrence of any event that results (or which with the
giving of notice or passage of time or both will result) in
acceleration of the maturity of any indebtedness of the Institution to
others under any security agreement, indenture, loan agreement or other
undertaking, provided that such indebtedness is a material amount with
respect to the Institution and is not subject to a good faith dispute;
or
e. Appointment of a trustee, conservator, receiver, liquidator, custodian
or similar official for the Institution, or for substantially all of
the Institution's property, or the notice of a judgment, decree or
administrative decision adjudicating the Institution insolvent or
bankrupt; or
f. Sale by the Institution of all or substantially all of the
Institution's assets or the taking of any action by the Institution to
liquidate or dissolve; or
g. Termination of the Institution's membership in the Bank or the
Institution's ceasing to be a type of financial institution that is
eligible under the Act to become a member of the Bank; or
h. Merger, consolidation or other combination of the Institution with an
entity that is not a member of the Bank if the nonmember entity is the
surviving entity in such transaction.
4.2 REMEDIES. Upon the occurrence of any Event of Default, the Bank shall
have all of the rights and remedies provided by applicable law, which shall
include, but not be limited to, all of the remedies of a secured party
under the Uniform Commercial Code as in effect in the State of Kansas. The
Bank may take immediate possession of any of the Collateral or any part
thereof wherever the same may be found. The Bank may sell, assign and
deliver the Collateral or any part thereof to public or private sale for
such price as the Bank deems appropriate without any liability for any loss
due to decrease in the market value of the Collateral during the period
held. The Bank shall have the right to purchase all or part of the
Collateral at such sale. If the Collateral includes instruments or
securities that will be redeemed by the issuer upon surrender, or any
accounts or deposits in the possession of the Bank, the Bank may realize
upon such Collateral without notice to the Institution. If any notification
of intended disposition of any of the Collateral is required by applicable
law, such notification shall be deemed reasonable and properly given if
mailed, postage prepaid, at least ten (10) Business Days before any such
disposition to the address of the Institution appearing on the records of
the Bank. Upon the occurrence of any Event of Default, the Bank may, in its
sole discretion, apply any payment by or recovery from the Institution or
any sum realized from Collateral, at such time and in such manner and order
of priority as the Bank shall deem fit, irrespective of any manifestation
of any contrary intention or desire on the part of the Institution or the
provisions of any other agreement between the Bank and the Institution. The
Institution agrees that the Bank may exercise its right of setoff upon the
occurrence of an Event of Default in the same manner as if the Advances and
Commitments were unsecured. Notwithstanding any other provision hereof,
upon the occurrence of any Event of Default at any time when all or part of
the obligations of the Institution to the Bank hereunder shall be the
subject of any guarantee by a third party for the Bank's benefit and there
shall be other outstanding obligations of the Institution to the Bank that
are not so guaranteed but that are secured by the Collateral, then any sums
realized by the Bank from the Collateral, or from any other Collateral
pledged or furnished to the Bank by the Institution under any other
agreement, shall be applied first to the satisfaction of such other
nonguaranteed obligations and then to the Institution's guaranteed
obligations hereunder. The Institution agrees to pay all the costs and
expenses of the Bank in the collection of the Indebtedness and enforcement
and preservation of the Bank's rights and remedies in case of default,
including, without limitation, reasonable attorneys' fees. The Bank in its
discretion may apply any surplus after payment of Indebtedness, provision
for repayment to the Bank of any amounts to be paid under outstanding
Commitments and all costs of collection and enforcement, to third parties
claiming a secondary security interest in the Collateral, with any
remaining surplus paid to the Institution. The Institution shall be liable
to the Bank for any deficiency remaining.
4.3 POWER OF ATTORNEY. After the occurrence of a default, the Bank may in its
discretion; in its own name or in the name of its nominee or of the
Institution, do any or all things and take any and all actions that are
pertinent to the protection of the Bank's Interest hereunder and, if such
actions are subject to the laws of a state, are lawful under the laws of
the State of Kansas, including the following:
a. Terminate any consent given hereunder;
b. Notify obligors on any Collateral to make payments thereon directly to
the Bank;
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<PAGE> 6
c. Endorse any Collateral that is in the Institution's name or that has
been endorsed by others to the Institution's name;
d. Enter into any extension, compromise, settlement or other agreement
relating to or affecting any Collateral;
e. Take any action the Institution is required to take or that is
otherwise necessary to: (1) sign and record a financing statement or
otherwise perfect a security interest in any or all of the Collateral;
or (2) to obtain, preserve, protect, enforce or collect the Collateral;
f. Take control of any funds or other proceeds generated by or arising
from the Collateral and use the same to reduce indebtedness as it
becomes due; and
g. Cause the Collateral to be transferred to the Bank's name or the name
of its nominee.
The Institution hereby appoints the Bank as its true and lawful attorney,
for and on behalf of the Institution and in its name, place and stead, to
prepare, execute and record endorsements and assignments to the Bank of all
or any item of Collateral (including the identification and listing, by
exhibit prepared by the Bank or otherwise, of mortgage loans constituting
such Collateral), giving or granting to the Bank, as such attorney, full
power and authority to do or perform every lawful act necessary or proper
in connection therewith as fully as the Institution could or might do. The
Institution hereby ratifies and confirms all that the Bank shall lawfully
do or cause to be done by virtue of this special power of attorney. This
special power of attorney is granted for a period commencing on the date of
Institution's default and continuing until the discharge of all
Indebtedness and all obligations of the Institution hereunder, is coupled
with an interest and is irrevocable for the period granted. As the
Institution's true and lawful attorney-in-fact, the Bank shall have no
responsibility to take any steps necessary to preserve rights against prior
parties or the duty to send notices, perform services or take any action in
connection with the management of the Collateral.
4.4 PAYMENT OF PREPAYMENT CHARGES. Any prepayment fees or charges for which
provision is made, whether under a Confirmation or otherwise, with respect
to any Advance shall be payable at the time of any voluntary or involuntary
payment of the principal of such Advance prior to the originally scheduled
maturity thereof. This shall include, without limitation, payments that are
made in connection with the liquidation of the Institution or that become
due as a result of an acceleration by the Bank pursuant to Section 4.1,
whether such payment is made by the Institution, by a trustee, conservator,
receiver, liquidator, custodian or similar official, of or for the
Institution or by any successor to or any assignee of the Institution. The
Institution acknowledges and agrees that the damages incurred by the Bank
due to a prepayment of an Advance will be difficult to ascertain at the
time of such prepayment and, in lieu thereof, the Institution and the Bank
agree that the formula for calculation of the prepayment fee set forth in
the Confirmation or in the Credit Policy at the time the Advance is issued
constitutes a fair, reasonable and good faith estimate of the damages
suffered by the Bank because of such prepayment and is therefore payable as
a prepayment fee or charge.
4.5 DEFAULT RATE. Any payment of principal or interest or any other sum due
hereunder, if not paid when due (whether at stated maturity, by
acceleration or otherwise) shall bear interest, to the maximum extent
permitted by law, at a rate per annum for each day during the period
commencing on the due date thereof until such amount shall be paid in full
equal to 315 basis points above the previous business day's daily effective
federal funds rate as published in Federal Reserve Statistical Release
H.15, or any equivalent successor rate, release or publication.
4.6 SALE OF COLLATERAL. In view of the possibility that federal and state
securities and other laws may impose certain restrictions on the method by
which sale of the Collateral may be effected, the Bank and the Institution
agree that any sale of the Collateral as a result of an Event of Default
shall be deemed "commercially reasonable" irrespective of whether the
notice or manner of such sale contains provisions or imposes, or is subject
to, conditions or restrictions deemed appropriate to comply with the
Securities Act of 1933 or any other applicable federal or state securities
or other law. It is further agreed that from time to time the Bank may
attempt to sell the Collateral by means of private placement. In so doing,
the Bank may restrict the bidders and prospective purchasers to those who
will represent and agree that they are purchasing for investment only and
not for distribution or otherwise impose restrictions deemed appropriate by
the Bank for the purpose of complying with the requirements of applicable
securities laws. The Bank may solicit offers to buy such Collateral, for
cash or otherwise, from a limited number of investors deemed by the Bank to
be responsible parties who might be interested in purchasing such
Collateral. If the Bank solicits offers from at least three (3) such
investors, then the acceptance by the Bank of the highest offer obtained
therefrom (whether or not three (3) offers are obtained) shall be deemed to
be a commercially reasonable method of disposing of the Collateral.
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<PAGE> 7
MISCELLANEOUS
5.1 GENERAL REPRESENTATIONS AND WARRANTIES. The Institution hereby represents
and warrants that to the best of its knowledge as of the date hereof and
as of each date on which there shall be an outstanding Advance or
Commitment:
a. The Institution is not now, and neither the execution of nor the
performance of any of the transactions or obligations of the
Institution under the Agreement shall, with the passage of time, the
giving of notice, or otherwise, cause the Institution to be: (1) in
violation of its charter or articles of incorporation, by-laws, the
Act or the Regulations, any other law or administrative regulation,
any court decree or any order of a regulatory authority; or (2) in
default under or in breach of any Indenture, contract, or other
instrument or agreement to which the Institution is a party or by
which the Institution or any of its property may be bound; so as to
materially affect the Institution's ability to perform its
obligations under this Agreement.
b. The Institution has full corporate power and authority and has
received all corporate and governmental authorizations and approvals
as may be required to enter into and perform its obligations under
this Agreement and to borrow each Advance.
c. The information given by the Institution in any document provided, or
in any oral statement made, in connection with an application or
request for an Advance or a Commitment, a pledge, specification or
delivery of Collateral, is true, accurate and complete in all
material respects.
5.2 FIRREA COVENANT. If the Institution is an insured depository institution,
it further represents and warrants to, and covenants and agrees with, the
Bank that the necessary action to authorize the delivery of this Agreement
and the performance of its obligations hereunder includes all
authorizations required for insured depository institutions under the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989 and
the Institution will at all times during the term of this Agreement
continuously include and maintain this Agreement, including all exhibits,
attachments, supplements, Confirmations incorporated herein and evidence
of all necessary approvals, as part of its official written books and
records. In addition to any other remedies which the Bank may have under
this Agreement or otherwise, if the Institution breaches or defaults on
any of its obligations set forth in this paragraph, the Bank shall be
entitled to apply to any court of competent jurisdiction for an order
requiring specific performance by the Institution of such obligations, and
the Institution shall not contest any such application and shall comply
with any such order.
5.3 GOOD FAITH; LIABILITY OF BANK. The Institution and the Bank shall have an
obligation of good faith in the performance and enforcement of every duty
or right imposed or granted by this Agreement, and any other actions or
inactions taken or not taken with respect to this Agreement. "Good Faith"
shall mean honesty in fact (i.e., a subjective standard rather than an
objective standard). The Bank shall not be liable for any costs, expenses,
damages, liabilities or claims (including attorneys' and accountants'
fees) incurred by the Institution, except those costs, expenses, damages,
liabilities or claims arising out of the gross negligence or willful
misconduct of the Bank or any of its employees or duly appointed agents.
In no event shall the Bank be liable to the Institution or any third party
for special, indirect or consequential damages, or lost profits or loss of
business, arising under or in connection with this Agreement, even if
previously informed of the possibility of such damages and regardless of
the form of action.
5.4 ASSIGNMENT OF INDEBTEDNESS. The Institution hereby gives the Bank the
full right, power and authority to pledge or assign to any party all or
part of the Indebtedness, together with a proportionate amount of the
Collateral, as security for Consolidated Federal Home Loan Bank
Obligations, issued pursuant to the provisions of the Act or for any other
purpose authorized by the Act, the Regulations or the Federal Housing
Finance Board. In the case of any such pledge or assignment, the Bank
shall have no further responsibility with respect to Collateral transferred
to the pledgee or assignee, and all references herein to "the Bank" shall
be read to refer instead to the pledgee or assignee with respect to such
Collateral. The Institution may not voluntarily or involuntarily or by
operation of law or otherwise assign or transfer any of its rights or
obligations hereunder or with respect to any Advances or Commitments
without the express prior written consent of the Bank.
5.5 DISCRETION TO DENY ADVANCES. Nothing contained herein or in any documents
describing or setting forth the Bank's Credit Policy or other policies
shall be construed as an agreement or commitment on the part of the Bank
to grant Advances hereunder, or to enter into any other transaction, the
right and power of the Bank in its discretion to either
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<PAGE> 8
grant (with or without conditions) or deny any Advance or other
transaction requested hereunder being expressly reserved.
5.6 ACCESS TO BANK RECORDS. The Bank shall grant to all governmental
regulatory agencies having jurisdiction over the Institution, to the
Institution's independent public accountants (to be named by written
notice delivered to the Bank) and to the Institution's internal auditors
the right at any reasonable time to examine and audit the Institution's
records in the Bank's possession, the right to request directly from the
Bank any reports, summaries or information of the Bank relating to the
Institution and the right to observe the processing of reports or examine
the Institution's documents at the Bank; provided, however, the Bank's
obligations hereunder shall not apply to the extent that the records,
reports, summaries, information or documents sought or requested are
contained in or derived from data not provided by the Bank in the
Institution or the Institution to the Bank pursuant to this Agreement.
5.7 AMENDMENT; WAIVERS. No modification, amendment or waiver of any provision
of this Agreement or consent to any departure therefrom shall be effective
unless executed by the party against whom such change is asserted and
shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand on the Institution in any case shall
entitle the Institution to any other or further notice or demand in the
same, or similar or other circumstance. Any forbearance, failure or delay
by the Bank in exercising any right, power or remedy hereunder shall not
be deemed to be a waiver thereof, and any single or partial exercise by
the Bank of any right, power or remedy hereunder shall not preclude the
further exercise thereof. Every right, power and remedy of the Bank shall
continue in full force and effect until specifically waived by the Bank
in writing.
5.8 JURISDICTION; LEGAL FEES. In any action or proceeding brought by the Bank
or the Institution in order to enforce any right or remedy under this
Agreement, the parties hereby consent to, and agree that they will submit
to, the jurisdiction of the United States District Court for the District
of Kansas, or if such action or proceeding may not be brought in federal
court, the jurisdiction of the District Court of the County of Shawnee,
State of Kansas, to the exclusion of all other courts. The Institution
agrees that if any action or proceeding is brought by the Institution
seeking to obtain any legal or equitable relief against the Bank under or
arising out of this Agreement or any transaction contemplated hereby, and
such relief is not granted by the final decision after any and all appeals
of a court of competent jurisdiction, the Institution will pay all
attorneys' fees and other costs incurred by the Bank in connection
therewith. The Institution agrees to reimburse the Bank for all costs and
expenses (including reasonable fees and out-of-pocket expenses of counsel
for the Bank) incurred by the Bank in connection with the enforcement or
preservation of the Bank's rights under this Agreement including, but not
limited to, its rights in respect of any Collateral and the audit or
possession thereof.
5.9 APPLICABLE LAW; SEVERABILITY. This Agreement and all Advances granted
under this Agreement shall be governed by the statutory and common law of
the United States and, to the extent federal law incorporates or defers to
state law, the laws (exclusive of choice of law provisions) of the State
of Kansas. In the event that any portion of this Agreement conflicts with
applicable law, such conflict shall not affect other provisions of this
Agreement that can be given effect without the conflicting provision, and
to this end the provisions of the Agreement are declared to be severable.
5.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to
the benefit of the successors and permitted assignees of the Institution
and the Bank.
5.11 NOTICES. Any notice, advice, request, consent or direction given, made or
withdrawn pursuant to this Agreement shall be in writing or by
machine-readable electronic transmission, and shall be deemed to have been
duly given to and received by a party hereto three (3) Business Days after
it shall have been mailed to such party at its address herein provided,
if delivered by first-class mail, or if delivered by hand or by
machine-readable electronic transmission, when actually received by such
party at its principal office.
5.12 ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto relating to the subject matter
hereof and supersedes all prior agreements between such parties, and all
oral and written statements by either party, that relate to such subject
matter. Notwithstanding the above, Advances made by the Bank to the
Institution prior to the execution of this Agreement shall continue to be
governed by the terms of the Confirmation pursuant to which such Advances
were made, and otherwise by the terms and conditions of this Agreement.
5.13 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
all of which shall constitute but one Agreement.
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IN WITNESS WHEREOF, the Bank and the Institution have caused this Agreement to
be signed in their names by their duly authorized officers.
INSTITUTION FEDERAL HOME LOAN BANK OF TOPEKA
2 Township Plaza, P.O. Box 176
Topeka, KS 66601-0176
By: /s/ Michael H. Miller By: /s/ Steven D. Reichle
---------------------------- ------------------------------
Authorized Signature Authorized Signature
Michael H. Miller, Exec. V.P. & General Counsel Steven D. Reichle, SVP
- -------------------------------- ------------------------------
Typed Name and Title Typed Name and Title
Date: April 12, 2000 Date: April 17, 2000
------------------ ------------------
State of: Kansas )
----------------
) ss:
County of: Shawnee )
----------------
On this 12th day of April, 2000, before me came Michael H. Miller (name)
personally known to me, who being by me duly sworn, did depose and state that
he/she is the Exec. V.P. and General Counsel (title) of the Institution
described in and which executed the above instrument; that he/she signed
his/her name thereto by order of the board of directors or other governing body
of said Institution and that he/she acknowledged the execution of said
instrument to be the voluntary act and deed of said Institution.
(Notary Seal) /s/ Cara P. Christianson
--------------------------------------
Notary Public Signature
Cara P. Christianson
Notary Public My appointment expires: April 24, 2002
State of Kansas
My Appt. Expires 4/24/2002
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<PAGE> 1
EXHIBIT 10.49
[FEDERAL HOME LOAN BANK OF TOPEKA LETTERHEAD]
American Investors Life Insurance Company (Customer) and the Federal Home Loan
Bank of Topeka (Custodian) hereby agree on April 12, 2000, that the Custodian
shall hold and dispose of all securities and other property of the Customer
deposited with, delivered to or received by the Custodian, subject to the
following terms and conditions:
1. (a) The Custodian will hold the securities in one or more custodial
accounts (referred to as Custodial Account, whether one or more) which the
Custodian will open and maintain in such name(s) as may be agreed upon from
time to time with the Customer.
(b) The Customer authorizes and instructs the Custodian to maintain the
securities in the Custodial Account directly in its offices or indirectly
through custody accounts which have been established by the Custodian with
the following other securities intermediaries: (i) another bank or trust
company located within the United States (Subcustodian); and (ii) a
securities depository or clearing agency or system in which the Custodian or
Subcustodian participates (Depository). The Custodian may, at any time in
its discretion, terminate any custody account at any Subcustodian or
Depository.
(c) Subject to the aforesaid provision, securities are to be held in the
Custodial Account in coupon bearer form; with respect to securities that are
received in registered form, the Custodian is authorized to reregister such
securities in the name of its nominee or the nominee of a Subcustodian or
Depository, unless alternate registration instructions are furnished.
(d) In consideration of the registration of any stocks, bonds, securities
or other property in the name of a nominee, the Customer agrees to pay on
demand to the Custodian or nominee the amount of any loss or liability
claimed or asserted against the Custodian or its nominee by reason of such
registration, including any liability for stockholders' assessments.
(e) Should any securities that are forwarded to the Custodian by the
Customer, and that are subsequently deposited with a Depository, not be
deemed acceptable for deposit by the Depository for any reason, the Customer
shall immediately furnish the Custodian with like securities in acceptable
form or, in the alternative, the Custodian is authorized to charge the
Customer's account for the cost of replacing such securities and for any
other fees or charges as may be payable to such Depository as a result of
such unacceptable deposit.
(f) The Custodian is authorized to accept, act upon and rely upon each of
the following (Instructions): (i) all signed, written statements given by
one or more of the officers, employees or agents of the Customer as are
designated by resolution of the Customer's board of directors, as provided
to the Custodian, and any amendments thereto, from time to time; and (ii)
all statements received by telephone, facsimile transmission, bank wire or
other teleprocess acceptable to the Custodian which it believes in good
faith to have been given by such authorized person or which are transmitted
with proper testing or authentication pursuant to terms and conditions which
the Custodian may specify. The Custodian shall incur no liability to the
Customer, or otherwise, as a result of any act by the Custodian in
accordance with instructions on which the Custodian is authorized to rely
pursuant to the provisions of this paragraph.
(g) In complying with Instructions for delivery of securities, the
Custodian will make deliveries through (i) the Federal Reserve system,
pursuant to applicable regulations and operating circulars of the Federal
Reserve Banks, all as amended from time to time; or (ii) the facilities of
any Depository pursuant to the Kansas Uniform Commercial Code and the rules
and procedures of such Depository, and any subsequent amendments thereto.
Page 1 of 7
<PAGE> 2
(h) The Customer acknowledges familiarity with the current securities
industry practice of delivering physical securities against later payment
on delivery date. Notwithstanding instructions to deliver securities
against payment the Custodian is authorized to make delivery against a
temporary receipt (sometimes called a "window ticket") in lieu of payment.
The Custodian will use its best efforts to obtain payment thereof during
the same business day, but the Customer solely assumes all risks of payment
for such deliveries. The Custodian may accept checks, whether certified or
not, in payment for securities delivered, and the Customer assumes sole
responsibility for the risks of collectibility of such checks.
2. Unless instructed otherwise in writing, the proceeds of sales,
redemptions, collections and other receipts, and dividend and interest
income will be credited to the Customer's account. The term "account" shall
be deemed to mean any one or more of the Customer's deposit accounts
maintained with the Custodian at the time of the transaction referred to.
3. (a) In no event shall the Custodian be responsible to ascertain or to
take any action concerning any puts, calls, conversions, exchanges,
reorganizations, offers, tenders or similar matters relating to securities
held in the Custodial Account other than to transmit to the Customer, in a
timely manner, all information relating to any such action received by the
Custodian from any offerors or otherwise. All Instructions to the Custodian
with respect to tender offers must be in writing and delivered to the
Custodian within sufficient time for the Custodian to act thereon if any
action is required. As used herein, "sufficient time" shall mean at least
one business day before the last permissible date for action by the
Custodian, and the Custodian shall have no liability to the Customer for
failure to act upon Instructions received by the Custodian at any time
after such date.
(b) All proxies and material pertaining thereto received by the Custodian
in connection with stocks, bonds, securities and other property held in the
Custodial Account will be forwarded to the Customer.
(c) Should any securities held by a Depository be called for a partial
redemption by the issuer of such securities, the Custodian is authorized to
accept allocation as determined pursuant to the program then in effect at
such Depository or, in the absence of any such program, in the Custodian's
sole discretion to allot the called portion to the respective holders in
any manner deemed to be fair and equitable in its judgment.
(d) Recapitalizations and stock distributions will be credited to the
Custodial Account within five (5) business days after the Stock Exchange
due bill redeemable date (ten [10] business days after payable date) in
order to comply with the normal course of settling the Custodian's position
at the Depository and sufficient time to allocate these shares to the
Custodial Account. Stock dividends will be credited on the payable date.
(e) The Custodian is authorized to exchange temporary for definitive
certificates and old certificates for new or overstamped certificates
evidencing a change therein.
4. (a) With respect to foreign securities or securities for which
adequate financial information is not readily available, the Custodian's
responsibility is expressly limited to safekeeping. With respect to such
securities, the Custodian assumes no responsibility for coupon payments,
redemptions, exchanges or similar matters affecting such securities.
(b) Collections of monies in foreign currency, to the extent possible, are
to be converted to U.S. dollars at customary rates. All risk and expense
incident to such foreign collections and conversions are for the Customer's
account, and the Custodian shall have no responsibilty for fluctuations in
exchange rates affecting such collections or conversions.
Page 2 of 7
<PAGE> 3
5. The Customer acknowledges its responsibility as a principal for all of
its obligations arising under or in connection with this Agreement,
notwithstanding that the Customer may be acting on behalf of other persons.
The Customer warrants its authority to deposit in the Custodial Account
and any other account of the Customer any securities and funds which the
Custodian or its agents receive from the Customer and to give Instructions
relative thereto: The Custodian shall not be subject to, nor shall its
rights and obligations with respect to this Agreement and the Custodial
Account be affected by, any agreement between the Customer and any other
person. The Custodian assumes no liability to any customer of the Customer
or to any beneficiary for which the Customer may be acting as agent, bailee
or fiduciary.
6. (a) The Custodian shall be responsible for the performance of only
such duties as are set forth herein or contained in Instructions given to
the Custodian which are not contrary to the provisions of this Agreement.
The Custodian will use reasonable care with respect to the safekeeping of
securities in the Custodial Account and, except as otherwise expressly
provided herein, in carrying out its obligations under this Agreement. So
long as and to the extent that it has exercised reasonable care, the
Custodian shall not be responsible for the title, validity or genuineness
of any securities or evidence of title thereto received by it or delivered
by it pursuant to this Agreement and shall be held harmless in acting upon,
and may conclusively rely on, without liability for any loss resulting
therefrom, any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed or furnished by
the proper party or parties, including, without limitation, Instructions,
and shall be indemnified by the Customer for any losses, damages, costs and
expenses (including, without limitation, the fees and expenses of counsel)
incurred by the Custodian and arising out of action taken or omitted with
reasonable care by the Custodian hereunder or under any Instructions. With
respect to a Depository, the Custodian shall only be responsible or liable
for losses arising from employment of such Depository caused by the
Custodian's own failure to exercise reasonable care. In the event of any
loss to the Customer by reason of the failure of the Custodian or a
Subcustodian to exercise reasonable care, the Custodian shall be liable to
the Customer to the extent of the Customer's actual damages at the time
such loss was discovered, without reference to any special conditions or
circumstances. In no event shall the Custodian be liable for any
consequential or special damages. The Custodian shall be entitled to rely,
and may act, on any advice provided by counsel for the Customer on any
matters relating to this Agreement, and the Custodian shall be without
liability for any action reasonably taken or omitted pursuant to such
advice.
(b) In the event the Customer subscribes to an electronic on-line service
and communications system offered by the Custodian, the Customer shall be
fully responsible for the security of the Customer's connecting terminal,
access thereto and the proper and authorized use thereof and the initiation
and application of continuing effective safeguards with respect thereto and
agrees to defend and indemnify the Custodian and hold the Custodian
harmless from and against any and all losses, damages, costs and expenses
(including the fees and expenses of counsel) incurred by the Custodian as a
result of any improper or unauthorized use of such terminal by the Customer
or by any others.
(c) Subject to the exercise of reasonable care, the Custodian shall have
no liability for any loss occasioned by delay in the actual receipt of
notice by the Custodian or by a Subcustodian of any payment, redemption or
other transaction regarding securities in the Custodial Account in respect
of which the Custodian has agreed to take action under this Agreement. The
Custodian shall not be liable for any loss resulting from, or caused by,
acts of governmental authorities (whether de jure or de facto), including,
without limitation, nationalization, expropriation and the imposition of
currency restrictions; devaluations of or fluctuations in the value of
currencies; changes in laws and regulations applicable to the banking or
securities industry; market conditions that prevent the orderly execution
of securities transactions or affect the value of securities; acts of war,
terrorism, insurrection or revolution; strikes or work stoppages; the
inability of a local clearing and settlement system to settle transactions
for reasons beyond the control of the Custodian; nuclear fusion, fission or
radioactivity, or hurricane, tornado, cyclone, earthquake, volcanic
eruption or other acts of God.
Page 3 of 7
<PAGE> 4
(d) The Custodian shall have no liability in respect of any loss, damage
or expense suffered by the Customer, insofar as such loss, damage or
expense arises from the performance of the Custodian's duties hereunder by
reason of the Custodian's reliance upon records that were maintained for
the Customer by entities other than the Custodian prior to engagement of
the Custodian under this Agreement.
(e) The Custodian shall not be liable to the Customer, and the Customer
agrees to indemnify the Custodian and its nominees, for any loss, damage or
expense suffered or incurred by the Custodian or its nominees arising out
of any violation of any investment restriction or other restriction or
limitation applicable to the Customer pursuant to any contract or any law
or regulation.
(f) The provisions of this section shall survive termination of this
Agreement.
7. The Custodian may charge any account of the Customer for all costs incurred
by the Custodian in connection with its receipt of securities for the
Custodial Account. The Custodian is not obligated to effect any transaction
or make any payment in connection therewith unless there are sufficient
available funds on deposit in the Customer's account or funds have
otherwise been made available to the Custodian to its satisfaction. The
amount by which payments made by the Custodian with respect to property in,
or to be received for, the Custodial Account, or with respect to other
transactions pursuant to this Agreement, exceed available funds and result
in an account overdraft shall be deemed a loan from the Custodian to the
Customer in the amount of such overdraft, payable on demand. Such overdraft
loan shall bear interest, to the maximum extent permitted by law, at a rate
per annum for each day during the period commencing on the due date thereof
until such amount shall be paid in full equal to 315 basis points above the
previous business day's daily effective federal funds rate as published in
Federal Reserve Statistical Release H.15, or any equivalent successor rate,
release or publication. Any such overdraft loans shall be based on the
Custodian's sole determination to make (or refrain from making) the
underlying advance in each case.
8. In order to secure the payment and performance of all of the Customer's
liabilities to the Custodian at any time outstanding, the Customer hereby
grants a lien and right of setoff as to the balance in any non-custodial
account of the Customer, from time to time, and the Custodian may, at any
time, in its sole discretion and without notice, appropriate and apply
toward the payment of liabilities to the Custodian the balance of each such
account and or take such other action(s) or exercise any other options,
powers and rights which the Custodian now or hereafter has as a secured
party under the Kansas Uniform Commercial Code or any other applicable law.
The term "liabilities" shall include all of the Customer's liabilities
arising hereunder, including, but not limited to, loans, other advances,
interest, fees, charges, expenses and attorneys' fees and expenses.
9. The Custodian agrees to provide the Customer with regular monthly reports
of holdings in the Custodial Account, or at such more frequent intervals as
the parties may agree. To the extent that the Custodian reports the market
value of the Custodial Account holdings, the Customer acknowledges that the
Custodian now obtains and will in the future obtain such information from
outside sources that it deems to be reliable, and confirms that the
Custodian does not verify or represent or warrant either the accuracy or
the completeness of any such information furnished to the Customer.
10. (a) The Custodian shall be under no duty to take any action with respect
to any property held in any Custodial Account except to the extent of any
Instructions properly issued by the Customer.
(b) In the event that the Custodian agrees, at the request of the
Customer, to appear on behalf of the Customer, and prosecute or defend any
legal or equitable proceeding, the Customer agrees to indemnify the
Custodian for any and all costs and expenses including, without limitation
attorneys' fees and expenses.
Page 4 of 7
<PAGE> 5
(c) The Custodian is authorized and empowered, in the name and on
behalf of the Customer, to execute any certificates of ownership or
other reports, declarations or affidavits that the Custodian is or may
hereafter be required to execute and furnish under any regulation of
the Internal Revenue Service, or other authority of the United States,
so far as the same are required in connection with any property that
is now or may hereafter be held in the Custodial Account, claiming no
exceptions on behalf of the Customer. The Customer shall notify the
Custodian immediately in writing of any material change in the
Customer's status that may affect any such certificates, reports or
other required documents, or on the contents thereof.
11. The Customer agrees to pay the Custodian, as compensation for its
services hereunder, its applicable fees in effect from time to time,
of which the Custodian will provide the Customer with notice.
12. The Customer agrees to and does hereby indemnify and hold harmless
the Custodian from any and all loss, liability (excluding any liabi-
lity occasioned by the negligence or misconduct of the Custodian's
employees, or by robbery, burglary, theft or other disappearance of
any securities while in the Custodian's physical possession), claims,
damages and expenses (including, without limitation, attorneys' fees
and expenses) arising from the Custodian's performance of services as
Custodian hereunder, including matters arising out of a settlement of
any dispute prior to the Custodian's being named as a defendant in
any litigation or proceeding, and whether or not the Custodian is a
party to such litigation or proceeding.
13. This Agreement shall continue until terminated by either party upon
at least sixty (60) days' prior written notice to the other. In the
event of the termination of this Agreement at the Customer's request,
the Custodian may transfer to the Customer all stocks, bonds,
securities and other property registered in the name of the
Custodian's or Subcustodian's nominee or a Depository, and the
Custodian shall charge all expenses incident to such transfer to the
Customer's account. If termination of this Agreement is made at the
Custodian's request, the above-described charges shall be at the
Custodian's expense. Notwithstanding the foregoing, if the Customer
fails to pay any amount when due under this Agreement, and fails to
make such payment within twenty (20) days after the Custodian sends
the Customer written notice of nonpayment, the Custodian may terminate
this Agreement upon at least seven (7) days' prior written notice to
the Customer and charge all expenses incident to such transfer to the
Customer's account.
14. Any notice, request, consent or Instruction given, made or withdrawn
pursuant to this Agreement shall be in writing or by machine-readable
electronic transmission, and shall be deemed to have been duly given
to and received by a party hereto three (3) business days after it
shall have been mailed to such party at its address herein provided,
postage prepaid, if delivered by first-class mail, or, if delivered
by hand or by machine-readable electronic transmission, when actually
received by such party at its principal office.
15. This Agreement embodies the entire agreement and understanding
between the parties relating to the subject matter hereof and super-
sedes all prior agreements between such parties, and all oral and
written statements by either party, that relate to such subject
matter. No modification, amendment or waiver of any provision of this
Agreement, or consent in any departure therefrom, shall be effective
unless executed by the party against whom such change is asserted,
and any consent or waiver shall be effective only in the specific
instance and for the purpose for which given.
16. This Agreement shall be governed by the laws of the State of Kansas
(without reference to choice of law doctrine) and shall be binding
upon, and inure to the benefit of, the parties and their successors
and assigns.
17. The federal and state courts within the State of Kansas shall have
sole and exclusive jurisdiction over any claim or dispute which may
arise hereunder or which either party may allege or assert against the
other and/or any transactions contemplated hereunder.
18. If any provision of this Agreement is deemed to be invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other provisions of this Agreement.
Page 5 of 7
CusiAgreeAminvest.doc
<PAGE> 6
19. Kansas Insurance Department Requirements
To the extent any provision in this Section is inconsistent with any other
provisions of this Agreement, the provisions of this Section shall govern.
All other terms of the Agreement shall remain in full force and effect.
(a) The Custodian will indemnify the Customer for any loss of securities
of Customer in the Custodian's custody occasioned by the negligence or
dishonesty of the Custodian's officers or employees, or burglary, robbery,
holdup, theft, or mysterious disappearance, including loss by damage or
destruction.
(b) In the event that there is a loss of the securities for which the
Custodian is obligated to indemnify the Customer, the securities shall be
promptly replaced or the value of the securities and the value of any loss
of rights or privileges resulting from said loss or securities shall be
promptly replaced.
(c) The Custodian shall not be liable for any failure to take any action
required to be taken hereunder in the event and to the extent that the
taking of such action is prevented or delayed by war (whether declared or
not and including existing wares), revolution, insurrection, riot, civil
commotion, act of God, accident, fire, explosion, stoppage of labor,
strikes or other differences with employees, laws, regulations, orders or
other acts of any governmental authority, or any other cause whatever
beyond its reasonable control.
(d) Securities held in physical form will be located at Bankers Trust
Company, 130 Liberty Street, New York, New York 10006.
(e) The Custodian's records shall identify the name of the clearing
corporation, securities depository or United States Bank, the location of
the securities, and if held through an agent, the name of the agent.
(f) All securities held in custody that are registered must be registered
in the name of the Customer; in the name of a nominee of the Customer; in
the name of the Custodian or its nominee, if held in a securities
depository, in the name of the securities depository or its nominee; or if
held in an authorized clearing corporation, in the name of the clearing
corporation or its nominee as provided in K.S.A. 40-2b20.
(g) The obligations of the Custodian under this Agreement shall not be
released as a result of a clearing corporation or securities depository
holding the securities held in custody.
(h) The Custodian may utilize the Federal Reserve System book entry
program.
(i) The Custodian may utilize the facilities of a securities depository or
authorized clearing corporation.
Page 6 of 7
<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed in
their names by their duly authorized officers as of the date first
above-written.
American Investors Life Insurance Company, Inc.
555 S. Kansas Avenue
P.O. Box 2039
Topeka, KS 66601-2039
By: /s/ Mark V. Heitz
----------------------------------------------
Authorized Signature
Mark v. Heitz, President
----------------------------------------------
Typed Name and Title
Attest: /s/ Michael H. Miller
-----------------------
Michael H. Miller
- --------------------------------
Secretary
Federal Home Loan Bank of Topeka
2 Townsite Plaza
P.O. Box 176
Topeka, KS 66601-0176
Date: April 17, 2000 By: /s/ Steven D. Reichle
------------------------ -----------------------------------------
Steven D. Reichle, SVP
-----------------------------------------
Typed Name and Title
Attest: /s/ Tad Kramer
-----------------------
Tad Kramer
- --------------------------------
Secretary
Page 7 of 7
<PAGE> 1
EXHIBIT 10.50
[FEDERAL HOME LOAN BANK OF TOPEKA LETTERHEAD] LINE OF CREDIT APPLICATION
- --------------------------------------------------------------------------------
STOCKHOLDER: American Investors Life Insurance Company, Inc.
-------------------------------------------------------
ADDRESS: 555 South Kansas Avenue
-------------------------------------------------------
Topeka, KS 66603
-------------------------------------------------------
The above-mentioned stockholder hereby applies to the Federal Home Loan Bank of
Topeka (FHLBank) for a line of credit. This line of credit, as with all other
credit transactions, is subject to the maximum amount of credit available under
the FHLBank's Credit Policy. A stockholder's maximum credit availability with
the FHLBank is based on the lesser of the following:
- FHLBank borrowings to total assets may not exceed 40 percent (55 percent
with prior approval of the FHLBank president);
- FHLBank credit obligations may not exceed the collateral lending value
of loan assets identified on the Qualifying Collateral Determination
(QCD) form, plus the lending value of the securities collateral
delivered to the FHLBank or FHLBank-approved third-party custodian on
behalf of the FHLBank;
- Long-term borrowings from the FHLBank (original term greater than five
years) may not exceed residential housing finance assets (RHFAs); and
- Non-QTL stockholders are further limited in that total credit
obligations may not exceed their RHFAs.
The line of credit, including the making of draws and amounts borrowed
hereunder, is subject to and governed by the Advance, Pledge and Security
Agreement between the FHLBank and the stockholder and the FHLBank's credit and
collateral policies as published from time to time. All requests for draws or
repayments must be processed through the FHLBank's Lending department. Failure
to contact the Lending department could result in the request not being
processed.
A request for a draw made after the cutoff time established by the FHLBank may
be denied if, in the sole opinion of the FHLBank, insufficient funds are
available to fully meet the draw. NOTWITHSTANDING THIS LINE OF CREDIT, THE
FHLBANK WILL REFUSE TO HONOR A DRAW IF THE STOCKHOLDER WOULD NOT BE IN
COMPLIANCE WITH THE FHLBANK'S CREDIT AND COLLATERAL POLICIES IMMEDIATELY AFTER
THE DRAW WAS HONORED.
Amounts outstanding under this line of credit shall bear interest at the line
of credit rate established by the FHLBank from time to time.
The undersigned representative has read and understands the credit and
collateral policies of the FHLBank and certifies this stockholder to be in full
compliance with the policies. Furthermore, the stockholder agrees to maintain
full compliance with the policies, including any revisions and changes to same,
while any debt extended under this line is outstanding.
BY: /s/ Michael Miller
----------------------------
Authorized Signature
Michael H. Miller, Exec. V.P.
& General Counsel
-----------------------------
Typed Name and Title
DATE: April 12, 2000
-----------------------------
<PAGE> 1
EXHIBIT 10.51
STOCK PURCHASE AGREEMENT
BY AND AMONG
AMVESTORS FINANCIAL CORPORATION,
CREATIVE MARKETING INTERNATIONAL CORPORATION
AND
THE STOCKHOLDERS OF
CREATIVE MARKETING INTERNATIONAL CORPORATION
FEBRUARY 1, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1: DEFINITIONS...........................................................................................1
ARTICLE 2: PURCHASE AND SALE.....................................................................................3
2.1. Purchase and Sale.................................................................................3
2.2. Purchase Price....................................................................................3
ARTICLE 3: CLOSING...............................................................................................4
3.1. Time and Place of Closing.........................................................................4
3.2. Deliveries at Closing.............................................................................4
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF SELLERS.............................................................5
4.1. Organization and Standing.........................................................................5
4.2. Capital Stock; Options............................................................................5
4.3. Authorization.....................................................................................6
4.4. Subsidiaries and Affiliates.......................................................................6
4.5. No Violation......................................................................................6
4.6. Governmental Authorities..........................................................................6
4.7. Financial Statements..............................................................................6
4.8. No Undisclosed Liabilities, Claims, etc...........................................................6
4.9. Absence of Certain Changes........................................................................6
4.10. Contracts.........................................................................................7
4.11. True and Complete Copies..........................................................................7
4.12. Title and Related Matters.........................................................................7
4.13. Litigation........................................................................................9
4.14. Tax Matters.......................................................................................9
4.15. Government Contracts.............................................................................11
4.16. Compliance with Law..............................................................................11
4.17. Absence of Certain Business Practices............................................................11
4.18. ERISA and Related Employee Benefit Matters.......................................................12
4.19. Intellectual Property............................................................................14
4.20. Labor Relations..................................................................................14
4.21. Insurance........................................................................................15
4.22. Environmental....................................................................................15
4.23. Capital Expenditures.............................................................................17
4.24. Suppliers........................................................................................17
4.25. Dealings with Affiliates.........................................................................17
4.26. Bank Accounts....................................................................................17
4.27. Compensation.....................................................................................17
4.28. Insurance Licenses...............................................................................17
4.29. Consultants, Brokers and Finders.................................................................17
ARTICLE 5: REPRESENTATIONS AND WARRANTIES OF BUYER..............................................................17
5.1. Organization and Standing........................................................................18
5.2. No Violation.....................................................................................18
5.3. Governmental Authorities.........................................................................18
5.4. Consultants, Brokers and Finders.................................................................18
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 6: CONDITIONS TO CLOSING................................................................................18
6.1. Conditions to Obligation of Buyer................................................................18
6.2. Conditions to Obligation of Sellers..............................................................19
ARTICLE 7: INDEMNIFICATION; REMEDIES............................................................................19
7.1. Investigations; Survival of Warranties and Indemnification Obligations...........................19
7.2. Indemnification by Sellers.......................................................................20
7.3. Indemnification By Buyer.........................................................................20
7.4. Notice of Claim; Payment.........................................................................20
7.5. Construction.....................................................................................22
7.6 Limitations on Indemnity.........................................................................22
ARTICLE 8: MISCELLANEOUS........................................................................................22
8.1. Payment of Expenses..............................................................................22
8.2. Announcements....................................................................................22
8.3. Assignment and Binding Effect....................................................................22
8.4. Waivers..........................................................................................22
8.5. Notices..........................................................................................23
8.6. Kansas Law to Govern.............................................................................23
8.7. No Benefit to Others.............................................................................23
8.8. Entire Agreement; Amendments.....................................................................24
8.9. Exhibits and Schedules...........................................................................24
8.10. Cooperation......................................................................................24
8.11. Severability.....................................................................................24
8.12. Counterparts.....................................................................................24
8.13. Representation By Counsel; Interpretation........................................................24
8.14. No Contribution; Indemnity.......................................................................24
</TABLE>
ii
<PAGE> 4
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
February 1, 2000, is made by and among AMVESTORS FINANCIAL CORPORATION, a Kansas
corporation ("Buyer"), CREATIVE MARKETING INTERNATIONAL CORPORATION, a Kansas
corporation (the "Company"), and the stockholders of the Company identified on
the signature page hereto (each a "Seller" and collectively, "Sellers").
RECITALS
WHEREAS, as of January 31, 2000, all of the 4% Convertible
Debentures Due 2004 issued by the Company to Buyer on March 5, 1999 (the
"Debentures") were converted into shares of common stock, $1.00 par value, of
the Company (the "Common Stock"), representing 45% of the then issued and
outstanding shares of Common Stock; and
WHEREAS, Sellers own 70,800 shares of Common Stock,
representing 55% of the shares of Common Stock issued and outstanding at the
time of execution hereof (the "Shares"); and
WHEREAS, Sellers desire to sell, and Buyer desires to
purchase, the Shares for the consideration and on the terms and conditions set
forth in this Agreement; and
WHEREAS, following the conversion of the Debentures into
shares of Common Stock and the purchase of the Shares from Sellers, Buyer will
own 100% of the issued and outstanding shares of Common Stock;
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and
respective covenants, representations and warranties herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto agree
as follows:
ARTICLE 1:
DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Article 1:
"Affiliates" shall have the meaning set forth in Section 4.4.
"Agreement" shall have the meaning set forth in the preamble
of this Agreement.
"Balance Sheet(s)" shall have the meaning set forth in Section
4.7.
1
<PAGE> 5
"Base Amount" shall have the meaning set forth in Section 2.2.
"Buyer" shall have the meaning set forth in the preamble of
this Agreement.
"Buyer Closing Deliveries" shall have the meaning set forth in
Section 3.2.
"Closing" shall have the meaning set forth in Section 3.1.
"Closing Date" shall have the meaning set forth in Section
3.1.
"Code" shall have the meaning set forth in Section 4.14.
"Common Stock" shall have the meaning set forth in the
Recitals of this Agreement.
"Company" shall have the meaning set forth in the preamble of
this Agreement.
"Contracts" shall have the meaning set forth in Section 4.10.
"Damages" shall have the meaning set forth in Section 7.2.
"Debentures" shall have the meaning set forth in the Recitals
of this Agreement.
"Earnout Amount" shall have the meaning set forth in Schedule
2.2.
"Employment Agreements" shall have the meaning set forth in
Section 3.2.
"Encumbrances" shall mean all mortgages, security interests,
liens, pledges, claims, escrows, options, rights of first refusal, indentures,
easements, licenses, security agreements or other agreements, arrangements,
contracts, commitments, understandings, obligations, charges or encumbrances of
any kind or character.
"Environmental Laws and Regulations" shall have the meaning
set forth in Section 4.22.
"ERISA" shall have the meaning set forth in Section 4.18.
"GAAP" means generally accepted accounting principles.
"Hazardous Materials" shall have the meaning set forth in
Section 4.22.
"Income Statements" shall have the meaning set forth in
Section 4.7.
"Indemnified Persons" shall have the meaning set forth in
Section 7.2.
"IRS" shall have the meaning set forth in Section 4.14.
"Intellectual Property Rights" shall have the meaning set
forth in Section 4.19.
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"Key Employees" means employees of the Company who have
material relationships with the Company's customers.
"Knowledge" means the actual knowledge of the subject person
and that knowledge that would be obtained or realized upon the subject person's
reasonable and prudent inquiry into the matter after having been put on notice
(including constructive notice provided for under applicable statutory or
regulatory provisions) of the need to so inquire.
"Laws" shall include, without limitation, all foreign,
federal, state and local laws, statutes, rules, regulations, codes, ordinances,
plans, orders, judicial decrees, writs, injunctions, notices, decisions or
demand letters issued, entered or promulgated pursuant to any foreign, federal,
state or local law.
"Lease Restrictions" shall have the meaning set forth in
Section 4.12.
"Licenses" shall have the meaning set forth in Section 4.28.
"Matter" shall have the meaning set forth in Section 4.13
"Objected Claim" shall have the meaning set forth in Section
7.4.
"Pension Benefit Plan" shall have the meaning set forth in
Section 4.18.
"Purchase Price" shall have the meaning set forth in Section
2.2.
"Seller(s)" shall have the meaning set forth in the preamble
of this Agreement.
"Seller Closing Deliveries" shall have the meaning set forth
in Section 3.2.
"Shares" shall have the meaning set forth in the Recitals of
this Agreement.
"Taxes" shall have the meaning set forth in Section 4.14.
"Threshold Amount" shall have the meaning set forth in Section
7.6.
"Welfare Benefit Plan" shall have the meaning set forth in
Section 4.18.
ARTICLE 2:
PURCHASE AND SALE
2.1. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, and for the consideration specified in Section 2.2
hereof, at the Closing, Sellers shall sell and transfer the Shares to Buyer and
Buyer shall purchase and acquire the Shares from Sellers.
2.2. Purchase Price. The aggregate total purchase price for
the Shares (the "Purchase Price") shall be (i) $8,000,000 (the "Base Amount")
plus (ii) the Earnout Amount.
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The Base Amount shall be paid to Sellers at the Closing and the Earnout Amount,
if any, shall be paid to Sellers in accordance with the terms and conditions set
forth in Schedule 2.2. Both the Base Amount and the Earnout Amount shall be paid
to Sellers in the proportions set forth in Schedule 2.2.
ARTICLE 3:
CLOSING
3.1. Time and Place of Closing. The consummation of the
transactions contemplated hereby (the "Closing") shall take place on or before
February 1, 2000, at the offices of Bryan Cave LLP, 1200 Main Street, Suite
3500, Kansas City, Missouri 64105. Each party shall cooperate, as to matters
under such party's control, in the satisfaction of conditions to the obligations
of the parties at Closing; provided that the foregoing shall not require any
party to waive any condition herein to its obligations at Closing or to incur
any substantial cost not otherwise required hereunder. The date that the Closing
occurs is hereinafter sometimes referred to as the "Closing Date."
3.2. Deliveries at Closing.
(a) At the Closing, the Company and Sellers shall deliver
or cause to be delivered to Buyer (the "Seller Closing Deliveries"):
(i) fully executed, sealed and proper certificates
evidencing the Shares in negotiable form;
(ii) the release substantially in the form attached
hereto as Exhibit 3.2(a)(ii), duly executed by each Seller and
dated the Closing Date;
(iii) the opinion of counsel to the Company and
Sellers substantially in the form attached hereto as Exhibit
3.2(a)(iii), duly executed by such counsel and dated the
Closing Date;
(iv) the certificate of the chief executive officer,
chief financial officer and secretary, respectively, of the
Company and Sellers certifying the satisfaction of the closing
conditions set forth in Sections 6.1(a), 6.1(b) and 6.1(c)
hereof, and the signatures and incumbency of such persons, and
dated the Closing Date;
(v) employment, noncompetition and confidentiality
agreements, duly executed by each of the Sellers and dated the
Closing Date (the "Employment Agreements");
(vi) resignations of all current directors of the
Company, effective upon the Closing; and
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(vii) such other documents, instruments and
certificates, duly executed by appropriate persons and dated
appropriately, as reasonably requested in writing by Buyer.
(b) At the Closing, Buyer shall deliver or cause to be
delivered to Sellers the following (the "Buyer Closing Deliveries"):
(i) the Base Amount, in immediately available funds,
by wire transfer to such accounts as have been designated by
Sellers in writing to Buyer not less than five (5) business
days before Closing;
(ii) the certificate of the duly authorized officer of
Buyer who signed this Agreement on behalf of Buyer and the
secretary of Buyer, respectively, certifying the satisfaction
of the closing conditions set forth in Sections 6.2(a), 6.2(b)
and 6.2(c), and the signatures and incumbency of such persons,
dated the Closing Date; and
(iii) the Employment Agreements duly executed by the
Company and dated the Closing Date.
ARTICLE 4:
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each of Sellers, jointly and severally, represents and
warrants to Buyer that the following representations and warranties are true and
correct as of the date hereof (unless specifically stated to be as of a
different date) and will be true and correct as of the Closing Date:
4.1. Organization and Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Kansas with all requisite corporate power and authority to carry on its
business as it is now being conducted and to own, operate and lease its
properties and assets. Schedule 4.1 lists each of the states where the Company
is qualified as a foreign corporation. The conduct of its business and its
ownership or use of property do not require the Company to be qualified or
licensed to do business as a foreign corporation in any state except those
listed in Schedule 4.1. The Company has all federal, state, local and foreign
licenses, permits or other approvals required for the operation of its business
as now being conducted.
4.2. Capital Stock; Options. The authorized capital stock of
the Company consists of 200,000 shares of Common Stock and 8,000 shares of
convertible preferred stock, par value $1.00 per share, and the only shares of
capital stock of the Company issued and outstanding are the 70,800 shares of
Common Stock owned by Sellers of record and beneficially and the shares of
Common Stock issued to Buyer upon the conversion of the Debentures. The Company
has no treasury stock. All the Shares are validly issued, fully paid and
nonassessable and are owned by Sellers, free and clear of all Encumbrances.
Except as set forth in Schedule 4.2, there are no issued and outstanding
options, warrants, rights, securities, contracts, commitments, understandings or
arrangements by which the Company or any Seller is bound
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<PAGE> 9
with respect to the Shares (with regard to voting, transfer, sale or otherwise)
or to issue any additional shares of its capital stock or equity equivalents.
4.3. Authorization. The Company and Sellers have full power
and authority to enter into this Agreement and to carry out the transactions
contemplated hereby.
4.4. Subsidiaries and Affiliates. Except as set forth in
Schedule 4.4, the Company has no subsidiaries, Affiliates (as defined below) or
investments in any other entity or business operation. The term "Affiliates"
includes each stockholder, director and officer of a party, and any corporation,
partnership or other entity in which such party or a director or officer of such
party has any financial interest or is a controlling person, as that term is
used in connection with the federal securities laws, if any such person or
entity has, or in the past had, a contractual relationship with or transacted
business with such party.
4.5. No Violation. Except as set forth in Schedule 4.5, the
Company is not subject to or obligated under any article of incorporation,
bylaw, Law, or any agreement or instrument, or any license, franchise or permit,
which would be breached or violated by the execution, delivery and performance
of this Agreement by the Company or any Seller. The Company and Sellers have
complied with all applicable Laws in connection with their execution, delivery
and performance of this Agreement and the transactions contemplated hereby.
4.6. Governmental Authorities. Neither the Company nor any
Seller is required to submit any notice, report or other filing with, and no
consent, approval or authorization is required by, any governmental or
regulatory authority in connection with their execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for such notices, reports, other filings, consents, approvals or other
authorizations which have been made or obtained.
4.7. Financial Statements. Schedule 4.7 contains the Company's
balance sheet at December 31, 1998 and at December 31, 1999 (the "Balance
Sheets") and Statements of Revenue and Expenses for the fiscal years ended
December 31, 1998 and December 31, 1999 (the "Income Statements"). The Balance
Sheets are complete and accurate and fairly present the financial position of
the Company as of the dates thereof, and the Income Statements fairly and
accurately present the results of operations for the fiscal years then ended.
The Company's balance sheet at December 31, 1999 is hereinafter sometimes
referred to as the "Balance Sheet."
4.8. No Undisclosed Liabilities, Claims, etc. Except for (a)
liabilities fully reflected or reserved against in the Balance Sheet; and (b)
regular and usual liabilities and obligations incurred in the ordinary course of
business consistent with past practices after December 31, 1999, the Company has
no liabilities, obligations or claims (absolute, accrued, fixed or contingent,
matured or unmatured, or otherwise), including liabilities, obligations or
claims which may become known or which arise only after the Closing and which
result from actions, omissions or occurrences of the Company prior to the
Closing.
4.9. Absence of Certain Changes. Except as set forth in
Schedule 4.9, since December 31, 1999, (a) there has not been (i) any adverse
change in the business, financial
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<PAGE> 10
condition, earnings, operations or prospects of the Company's business; (ii) any
damage, destruction or loss, whether covered by insurance or not, adversely
affecting the Company's properties, business or prospects; (iii) any increase in
the compensation payable or to become payable by the Company to its directors,
officers or Key Employees, or any adoption of or increase in any bonus,
insurance, pension or other employee benefit plan, payment or arrangement made
to, for or with any such party; (iv) any entry into any commitment or
transaction outside the ordinary course of the Company's business, including,
without limitation, any borrowing or capital expenditure; (v) any change by the
Company in accounting methods, practices or principles; (vi) any termination or
waiver of any rights of value to the business of the Company; (vii) any
transaction or event involving receipt or payment of more than $5,000 not in the
ordinary course of the Company's business; (viii) any adoption or amendment of
any collective bargaining, bonus, profit sharing, compensation, stock option,
pension, retirement, deferred compensation, or other plan, agreement, trust,
fund or arrangement for the benefit of employees; or (ix) any agreement or
understanding made or entered into to do any of the foregoing; and
(b) the Company has (i) operated its business and promoted and
maintained the Accounts in the ordinary course, diligently and in good faith,
consistent with past management practices; and (ii) maintained all of its
properties in customary repair, order and condition, reasonable wear and tear
excepted.
4.10. Contracts. Schedule 4.10 contains a list of all
Contracts to which the Company is a party. The term "Contracts" shall include,
but shall not be limited to, all oral (which shall be summarized in Schedule
4.10) and written contracts, agreements, loan agreements, mortgages, indentures,
deeds of trust, guarantees, commitments, joint venture agreements, purchase
and/or sale agreements, collective bargaining, union, consulting and/or
employment contracts, leases of real or personal property, easements,
distribution or dealer agreements, service agreements, license agreements and
advertising agreements (except there shall not be included any license
agreements, brokers agreement with insurance agents or agreements which do not
exceed, in the case of any one agreement, an obligation of $50,000, and in the
case of all such agreements, an aggregate obligation of $100,000). The Company
is not in default or alleged to be in default under any Contract nor is the
Company aware of any default by any other party to any Contract, and there
exists no event, condition or occurrence which, after notice or lapse of time,
or both, would constitute a default by the Company under any Contract. All the
Contracts are in full force and effect and constitute legal, valid and binding
obligations of the parties thereto in accordance with their terms.
4.11. True and Complete Copies. Copies of all agreements,
contracts and documents delivered and to be delivered hereunder by the Company
are true and complete copies of such agreements, contracts and documents. All
written summaries of oral agreements are materially correct.
4.12. Title and Related Matters. Except as set forth in
Schedule 4.12, the Company has good and marketable title to (or in the case of
indicated leases, valid leasehold interest) in all the properties and assets
reflected in the Balance Sheet or acquired after the date
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<PAGE> 11
thereof (except properties sold or otherwise disposed of since the date thereof
in the ordinary course of business and consistent with past practices)
including, without limitation, the specific assets referred to in paragraphs
(a), (b) and (c) below, free and clear of all Encumbrances, except as reflected
on the Balance Sheet. The Company owns or leases, directly or indirectly, all
the assets and properties, and is a party to all licenses and other agreements,
presently used or necessary to carry on the business or operations of the
Company as presently conducted.
(a) Real Property
(i) The Company has good and marketable title in fee
simple to the land, including buildings and improvements thereon,
shown on the Balance Sheet. All such land, buildings and
improvements of the Company are owned free and clear of all
Encumbrances of every kind and character, except as set forth on
Schedule 4.12.
(ii) The Company is not a tenant under any lease(s) of
real property used by the Company except as described on Schedule
4.10. With respect to the leased real property described on
Schedule 4.10 and except as set forth on Schedule 4.12: (A) all
such leases are in full force and effect and constitute valid and
binding obligations of the respective parties thereto; (B) there
have not been and there currently are not any defaults thereunder
by any party thereto; (C) no event has occurred which (whether
with or without notice, lapse of time or the happening or
occurrence of any other event) would constitute a default
thereunder entitling the lessor to terminate the lease; and (D)
the continuation, validity and effectiveness of all such leases
under the current rentals and other current terms thereof will in
no way be affected by the transactions contemplated by this
Agreement or, if any would be affected, Sellers shall use all
necessary means at their disposal to cause an appropriate consent
to such transactions to be delivered to Buyer prior to the
Closing Date at no cost or other adverse consequence to the
Company or Buyer ((A) through (D) are hereinafter collectively
referred to as "Lease Restrictions").
(iii) The Company does not currently have, and in the past
has not had, any ownership interest in any real property except
as disclosed on Schedule 4.12.
(b) Personal Property. The Company has good and marketable
title to all the personal property and assets, tangible or intangible, shown on
the Balance Sheet, except to the extent sold or disposed of in transactions
entered into in the ordinary course of business consistent with past practices
since December 31, 1999. The personal property in the aggregate is in good
condition and working order, and each individual item of personal property which
would cost in excess of $5,000 to replace is in good condition and working
order. None of such assets are subject to any (i) contracts of sale or lease,
except contracts for the sale of inventory in the ordinary and regular course of
business; or (ii) Encumbrances, except as set forth
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<PAGE> 12
in Schedule 4.12. Except as set forth in Schedule 4.12, there are no
Lease Restrictions with respect to the personal property leased by the
Company.
(c) No Disposition of Assets. There has not been since
December 31, 1999, any sale, lease or any other disposition or
distribution by the Company of any of its assets or properties and any
other assets now or hereafter owned by it, except transactions in the
ordinary and regular course of business consistent with past practices
or as otherwise consented to by Buyer.
4.13. Litigation. Except as set forth in Schedule 4.13, (a)
there is no suit, action, investigation or proceeding pending or threatened
against the Company or any of the Company's directors, officers or Key Employees
(a "Matter"), (b) there are no Matters pertaining to the Licenses, and (c)
without limiting the generality of the foregoing, there are no Attorney General,
department of insurance or other matters pending or threatened which, if
adversely determined, would adversely affect the business prospects, operations,
earnings, properties or the condition, financial or otherwise, of the Company.
Except as set forth on Schedule 4.13, there is not any judgment, decree,
injunction, ruling or order of any court, governmental department, commission,
agency, instrumentality or arbitrator outstanding against the Company having, or
which, insofar as can be reasonably foreseen, in the future may have, any such
effect.
4.14. Tax Matters. The term "Taxes" means all net income,
capital gains, gross income, gross receipts, sales, use, transfer, ad valorem,
franchise, profits, license, capital, withholding, payroll, employment, excise,
goods and services, severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, fees or assessments, or other
governmental charges of any kind whatsoever, together with any interest, fines
and any penalties, additions to tax or additional amounts incurred or accrued
under applicable Laws or assessed, charged or imposed by any governmental
authority, domestic or foreign, provided that any interest, penalties, additions
to tax or additional amounts that relate to Taxes for any taxable period
(including any portion of any taxable period ending on or before the Closing
Date) shall be deemed to be Taxes for such period, regardless of when such items
are incurred, accrued, assessed or charged. For purposes of this Section 4.14,
the Company shall be deemed to include any predecessor of the Company or any
person or entity from which the Company incurs a liability for Taxes as a result
of transferee liability. Except as stated in Schedule 4.14:
(a) the Company has duly and timely filed (and prior to
the Closing Date will duly and timely file) true, correct and complete
tax returns, reports or estimates, all prepared in accordance with
applicable Laws, for all years and periods (and portions thereof) and
for all jurisdictions (whether federal, state, local or foreign) in
which any such returns, reports or estimates were due. All Taxes shown
as due and payable on such returns, reports and estimates have been
paid, and there is no current liability for any Taxes due and payable
in connection with any such returns. All Taxes not yet due and payable
have been fully accrued on the books of the Company and the Balance
Sheet and adequate reserves have been established therefor; the
charges, accruals and reserves for Taxes provided for on the financial
statements delivered pursuant to Section 4.7 are adequate; and there
are no unpaid assessments for additional Taxes for any period nor is
<PAGE> 13
there any basis therefor. Copies of all federal, state and foreign tax
returns filed by the Company for the past two (2) years have been
delivered to Buyer.
(b) the Company is not, and never has been, a member of
any consolidated, combined or unitary group for federal, state, local
or foreign tax purposes. the Company is not a party to any joint
venture, partnership or other arrangement that could be treated as a
partnership for federal income tax purposes.
(c) the Company has (i) withheld all required amounts
from its employees, agents, contractors and nonresidents and remitted
such amounts to the proper agencies, (ii) paid all employer
contributions and premiums and (iii) filed all federal, state, local
and foreign returns and reports with respect to employee income tax
withholding, and social security and unemployment taxes and premiums,
all in compliance with the withholding tax provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), as in effect for the
applicable year or any prior provision thereof and other applicable
Laws.
(d) The federal income tax returns of the Company have
been examined by the Internal Revenue Service (the "IRS"), or have
been closed by the applicable statute of limitations, for all periods
through December 31, 1994; and the state tax returns of the Company
have been examined by the relevant state agencies or such returns have
been closed by the applicable statute of limitations for all periods
through December 31, 1994; and no deficiencies or reassessments for
any Taxes have been proposed, asserted or assessed against the Company
by any federal, state, local or foreign taxing authority. Schedule
4.14 describes the status of any federal, state, local or foreign tax
audits or other administrative proceedings, discussions or court
proceedings that are presently pending with regard to any Taxes or tax
returns of the Company (including a description of all issues raised
by the taxing authorities in connection with any such audits or
proceedings), and no additional issues are being asserted against the
Company in connection with any existing audits or proceedings.
(e) the Company has not executed or filed any agreement
or other document extending the period for assessment, reassessment or
collection of any Taxes, and no power of attorney granted by the
Company with respect to any Taxes is currently in force.
(f) the Company has not entered into any closing or
other agreement with any taxing authority which affects any taxable
year of the Company ending after the Closing Date. The Company is not
a party to any tax sharing agreement or similar arrangement for the
sharing of tax liabilities or benefits.
(g) the Company has not agreed to and is not required to
make any adjustment by reason of a change in accounting methods that
affects any taxable year ending after the Closing Date. The IRS has
not proposed to the Company any such adjustment or change in
accounting methods that affects any taxable year ending after the
Closing Date. The Company has no application pending with any taxing
authority
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requesting permission for any changes in accounting methods that
relate to its business or operations and that affects any taxable
year ending after the Closing Date.
(h) Neither Buyer nor the Company will be liable for any
federal, state, local, foreign and other sales, use, documentary,
recording, stamp, transfer or similar Taxes applicable to, imposed
upon or arising out of prior tax returns or obligations and the
transactions contemplated by this Agreement.
4.15. Government Contracts. No Contract or other aspect of the
business of the Company is subject to the Armed Services Procurement Regulations
or other regulations of any governmental agency. The Company has not bid on or
been awarded any "small business set aside contract," any other "set aside
contract" or other order or contract requiring small business or other special
status at any time during the last three (3) years.
4.16. Compliance with Law.
(a) To the Knowledge of the Sellers, the Company has not
previously failed and is not currently failing to comply with any
applicable Laws relating to the business of the Company or the
operation of its assets. In particular, but without limiting the
generality of the foregoing, to the Knowledge of the Sellers, the
Company is in compliance with all applicable Laws relating to
deceptive trade practices, unauthorized practice of law, unfair
competition, unfair claims settlement practices, rebating,
anti-competitive practices, price fixing, health and safety,
environmental, employment and discrimination matters. There are no
proceedings of record and no proceedings are pending or threatened,
nor has the Company received any written notice regarding any
violation of any Law, including, without limitation, any requirement
of OSHA or any pollution or environmental control agency (including
air and water).
(b) Schedule 4.16 contains copies of all reports,
orders, consent agreements and findings of inspections by
representatives of any federal, state or local governmental entity or
agency of the Company's business and properties from January 1, 1997
through the date hereof. The deficiencies, if any, noted on such
reports or any deficiencies noted by such inspections through the
Closing Date shall be corrected by the Closing Date. Neither the
Company nor any Seller knows or has reason to know of any other
safety, health, environmental, anti-competitive or discrimination
problems relating to the financial condition, business, assets,
operations, prospects, earnings or employment practices of the
Company.
4.17. Absence of Certain Business Practices. Except as set
forth on Schedule 4.17, none of the Company, any director, officer, employee or
agent of the Company, any Seller, any other person or entity acting on behalf of
the Company or any Seller, nor any other entity directly or indirectly owned or
controlled by the Company or any Seller, acting alone or together, has (a)
received, directly or indirectly, any payments, promotional allowances or any
other economic benefit, regardless of its nature or type, from any customer,
supplier, trading company, shipping company, governmental employee or other
entity or individual with whom the
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Company has done business directly or indirectly, other than commissions, fees
and rebates for the Company's normal business operations, or (b) directly or
indirectly, given or agreed to give any gift or similar benefit to any customer,
supplier, trading company, shipping company, governmental employee or other
person or entity who is or may be in a position to help or hinder the business
of the Company (or assist the Company in connection with any actual or proposed
transaction) any of which (i) might subject the Company to any damage or penalty
in any civil, criminal or governmental litigation or proceeding, (ii) if not
given in the past, might have had an adverse effect on the assets, business or
operations of the Company as reflected in the financial statements set forth in
Schedule 4.7, or (iii) if not continued in the future, might adversely affect
the assets, business operations or prospects of the Company or which might
subject the Company to suit or penalty in any private or governmental litigation
or proceeding.
4.18. ERISA and Related Employee Benefit Matters.
(a) Welfare Benefit Plans. Schedule 4.18(a) lists each
"employee welfare benefit plan" (within the meaning of Section 3(1) of
the Employee Retirement Income Security Act of 1974 ("ERISA"))
maintained by the Company or to which the Company contributes or is
required to contribute, including any multiemployer plan ("Welfare
Benefit Plan") and sets forth as of the most recent valuation date (i)
the amount of any liability of the Company for payments due with
respect to any Welfare Benefit Plan, (ii) the amount of any payment
made and to be made, stated separately, by the Company with respect to
any Welfare Benefit Plan for the current plan year, and (iii) with
respect to any Welfare Benefit Plan to which Section 505 of the Code
applies, a statement of assets and liabilities for such Welfare
Benefit Plan as of the most recent valuation date. Without limiting
the foregoing, Schedule 4.18(a) discloses any obligations of the
Company to provide retiree health benefits to current or former
employees of the Company.
(b) Pension Benefit Plans. Schedule 4.18(b) lists each
"employee pension benefit plan" (within the meaning of Section 3(2) of
ERISA) maintained by the Company or to which the Company contributes
or is required to contribute, including any multiemployer plan
("Pension Benefit Plan"). All costs of each Pension Benefit Plan have
been provided for on the basis of consistent methods and, if
applicable, in accordance with sound actuarial assumptions and
practices that are acceptable under ERISA. The Company does not
maintain or contribute to any Pension Benefit Plan that is subject to
Title I, Part 3 of ERISA (concerning "funding"). With respect to each
Pension Benefit Plan that is not subject to Title I, Part 3 of ERISA,
Schedule 4.18(b) sets forth as of the valuation date (i) the amount of
any liability of the Company for any contributions due with respect to
such Pension Benefit Plan and (ii) the amount of any contribution paid
and to be paid, stated separately, by the Company with respect to such
Pension Benefit Plan for the current plan year.
(c) Compliance with Applicable Law. Each of the Pension
Benefit Plans, Welfare Benefit Plans, any related trust agreements,
insurance contracts, annuity contracts, and other funding
arrangements, comply in all respects with the provisions of ERISA and
the Code and all other statutes, orders, governmental rules and
regulations
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applicable to such Welfare Benefit Plans and Pension Benefit Plans.
The Company has performed all of its obligations currently required to
have been performed under all Welfare Benefit Plans and Pension
Benefit Plans. There are no actions, suits or claims (other than
routine claims for benefits) pending or threatened against or with
respect to any Welfare Benefit Plans, Pension Benefit Plans or the
assets of such plans, and no facts exist that could give rise to any
actions, suits or claims (other than routine claims for benefits)
against such plans or the assets of such plans. Each Pension Benefit
Plan is qualified in form and operation under section 401(a) of the
Code. The IRS has issued a favorable determination letter with respect
to each Pension Benefit Plan and no event has occurred that will or
could give rise to a disqualification of any Pension Benefit Plan
under Code Section 401(a). No event has occurred that will or could
subject any Welfare Benefit Plan or Pension Benefit Plan to tax under
Section 511 of the Code.
(d) Administration of Plans. Each Welfare Benefit Plan
and each Pension Benefit Plan has been administered to date in
compliance with the requirements of ERISA and the Code. No fiduciary
of any Welfare Benefit Plan or Pension Benefit Plan has engaged in (i)
any transaction in violation of Section 406(a) or (b) of ERISA, or
(ii) any "prohibited transaction" (within the meaning of Section
4975(c)(1) of the Code) for which no exemption exists under Section
408 of ERISA or Section 4975(d) of the Code. No trust agreement,
insurance contract, annuity contract, or other funding arrangement
would impose a penalty, discount, or other reduction on account of the
withdrawal of assets from such agreement, contract, or arrangement or
a change in investment of such assets. There is no pending or
threatened litigation concerning any Welfare Benefit Plan or Pension
Benefit Plan, and there have been no written or oral communications
concerning any such Plan with the IRS, Department of Labor, or any
other federal, state, or local governmental entity.
(e) Other Employee Benefit Plans and Agreements.
Schedule 4.18(e) lists each fringe benefit, cafeteria, profit sharing,
deferred compensation, bonus, stock option, stock purchase, pension,
retainer, consulting, retirement, welfare, or other incentive plan or
agreement, or employment agreement not terminable on 30 days or less
written notice, and any other employee benefit plan, agreement,
arrangement, or commitment not previously listed on the Schedules to
this Section that is maintained by the Company or to which the Company
contributes or is required to contribute.
(f) Copies of Plans. Schedule 4.18(a) lists: each
Welfare Benefit Plan; each Pension Benefit Plan, related trust
agreements, annuity contracts, insurance contracts, and other funding
arrangements; each plan, agreement, arrangement, and commitment
referred to in subsection (e) of this Section; favorable determination
letters; annual reports (Form 5500 series) required to be filed with
any governmental agency for each Welfare Benefit Plan and each Pension
Benefit Plan for the most recent three plan years, including, without
limitation, all schedules thereto and all financial statements with
attached opinions of independent accountants; current summary plan
descriptions; and actuarial reports as of the last valuation date for
each Pension Benefit Plan that is subject to Title IV of ERISA.
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(g) Continuation Coverage Requirements for Health Plans.
Each group health plan of the Company (including any plans of
Affiliates of the Company that must be taken into account under
Section 4980B of the Code) has been operated in compliance with the
group health plan continuation coverage requirements of Section 4980B
of the Code and Title I, Part 6 of ERISA.
(h) Valid Obligations. Each Welfare Benefit Plan,
Pension Benefit Plan, related trust agreement, annuity contract or
other funding instrument, and each plan, agreement, arrangement and
commitment referred to in subsection (e) of this Section is legal,
valid and binding and in full force and effect, and there are no
defaults thereunder. Except as specified in Schedule 4.18(h), none of
the rights of the Company thereunder will be impaired by the
consummation of the transactions contemplated by this Agreement, and
all of the rights of the Company thereunder will be enforceable by
Buyer at and after the Closing without the consent or agreement of any
other party other than consents and agreements specifically listed in
Schedule 4.18(h).
4.19. Intellectual Property. The Company has good and
marketable title to each copyright, trademark, trade name, service mark, trade
dress, patent, franchise, trade secret, product designation, formula, process,
know-how, right of publicity, design and other similar rights used in, or
necessary for, the operation of its business as currently conducted. Schedule
4.19 contains a detailed listing of each copyright registered with the U. S.
Copyright Office, each trademark, trade name, service mark, trade dress, and
patent registered with the U. S. Patent and Trademark Office, and all pending
applications therefor, owned by the Company (collectively "Intellectual Property
Rights"). Except as otherwise set forth on Schedule 4.19, all of said
Intellectual Property Rights are free and clear of all Encumbrances. The Company
has the exclusive right to use all Intellectual Property Rights used in, or
necessary for, the operation of its business as currently conducted. The Company
and Sellers have taken all action necessary to protect against and defend
against, and have no Knowledge of, any conflicting use of any such Intellectual
Property Rights. The Company does not have nor does the Company utilize any
Intellectual Property Rights except those which are set forth in Schedule 4.19.
Except as set forth in Schedule 4.19, the Company is not a party in any capacity
to any franchise, license, royalty or other agreement respecting or restricting
any Intellectual Property Rights, and the Intellectual Property Rights used by
the Company in the conduct of the Company's business do not conflict with the
Intellectual Property Rights of any third party. No service provided by the
Company, violates any license or infringes any Intellectual Property Rights of
any third party, and there are no pending claims or demands by any third party
to the contrary.
4.20. Labor Relations. The Company is in compliance with all
Laws respecting employment and employment practices, terms and conditions of
employment and wages and hours, including, without limitation, the Fair Labor
Standards Act, the Family and Medical Leave Act of 1993, the Americans with
Disabilities Act of 1990, the Veterans Reemployment Rights Act, the Equal
Employment Opportunities Act as amended by the Civil Rights Act of 1991, the
Occupational Safety and Health Act, the Employee Retirement Income Security Act,
the Immigration Reform and Control Act of 1986, the Age Discrimination in
Employment Act, Title VII of the Civil Rights Act of 1964, the Older Workers
Benefit Protective Act, and all other
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<PAGE> 18
Laws, each as amended to date, relating to employer/employee rights and
obligations. The Company currently has satisfactory relationships with its
employees.
4.21. Insurance. Schedule 4.21 lists all of the Company's
existing insurance policies, the premiums therefor and the coverage of each
policy, including errors and omissions, fidelity and crime coverages. Such
policies and the amount of coverage and the risks insured are, in the aggregate,
sufficient to protect and insure the Company against perils which good business
practice demands be insured against or which are normally insured against by
other industry members similarly situated.
4.22. Environmental.
(a) For purposes of this Section:
(i) "Hazardous Materials" means any hazardous,
infectious or toxic substance, chemical, pollutant,
contaminant, emission or waste which is or becomes regulated
by any local, state, federal or foreign authority. Hazardous
Materials include, without limitation, anything which is: (i)
defined as a "pollutant" pursuant to 33 U.S.C. ss. 1362(6);
(ii) defined as a "hazardous waste" pursuant to 42 U.S.C. ss.
6921; (iii) defined as a "regulated substance" pursuant to 42
U.S.C. ss. 6991; (iv) defined as a "hazardous substance"
pursuant to 42 U.S.C. ss. 9601(14); (v) defined as a
"pollutant or contaminant" pursuant to 42 U.S.C. ss. 9601(33);
(vi) petroleum; (vii) asbestos; and (viii) polychlorinated
biphenyl.
(ii) "Environmental Laws and Regulations" means
all limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and
timetables contained in any Laws relating to pollution,
nuisance, or the environment including, without limitation,
(i) the Federal Clean Air Act, 42 U.S.C. ss. 7401 et seq.;
(ii) the Comprehensive Environmental Response, Compensation,
and Liability Act, 42 U.S.C. ss. 9601 et seq.; (iii) the
Federal Emergency Planning and Community Right-to-Know Act, 42
U.S.C. ss. 1101 et seq.; (iv) the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. ss. 136 et seq.; (v)
the Federal Water Pollution Control Act, 33 U.S.C. ss. 1251
et seq.; (vi) the Solid Waste Disposal Act, 42 U.S.C. ss.
6901 et seq.; (vii) the Toxic Substances Control Act, 15
U.S.C. ss. 2601 et seq.; (viii) Laws relating in whole or
part to emissions, discharges, releases, or threatened
releases of any Hazardous Material; and (ix) Laws relating in
whole or part to the manufacture, processing, distribution,
use, coverage, disposal, transportation, storage or handling
of any Hazardous Material.
(b) The operations and activities of the Company comply,
and have in the past complied, in all respects, with all Environmental
Laws and Regulations. There are no pending or currently proposed
changes to any Environmental Laws and Regulations which, when
implemented or effective, may affect the operations of the Company.
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<PAGE> 19
(c) The Company has obtained and is and has been in full
compliance with all requirements, permits, licenses and other
authorizations which are required with respect to the Company's
operations, as well as the transactions contemplated hereby under all
Environmental Laws and Regulations. Schedule 4.22 lists each such
permit, license or other authorization. There are no other such
permits, licenses or other authorizations which are required by any
Environmental Laws and Regulations to be obtained after the Closing.
(d) There is no civil, criminal, administrative or other
action, suit, demand, claim, hearing, notice of violation, proceeding,
investigation, notice or demand pending, received or threatened
against the Company relating in any way to any Environmental Laws and
Regulations.
(e) The Company has not caused or experienced any past
or present events, conditions, circumstances, plans or other matters
which: (i) are not in compliance with all Environmental Laws and
Regulations; (ii) may give rise to any statutory, common law, or other
legal liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, notice of violation or
investigation based on or relating to Hazardous Materials including,
without limitation, such matters relating to any property owned,
leased or utilized by the Company at any time; (iii) arise from
inventory of or waste from Hazardous Materials; or (iv) arise from any
off-site disposal, release or threatened release of Hazardous
Materials.
(f) No asbestos, polychlorinated biphenyls, lead-based
paints, or radon are on any real property or in any building now or
previously owned, operated, leased or utilized by the Company.
(g) No employee or former employee of the Company has
been exposed to any Hazardous Material owned, produced or utilized by
the Company or any former subsidiary.
(h) Neither the Company nor any Seller has received any
notice or indication from any governmental agency or private or public
entity advising that the Company is or may be responsible for any
investigation or response costs with respect to a release, threatened
release or cleanup of chemicals or materials produced by or resulting
from any business, commercial or industrial activities, operations or
processes, including, without limitation, any Hazardous Materials.
Neither the Company nor any Seller is aware of any facts which might
give rise to such notices.
(i) No underground tanks, piping or subsurface
structures of any type exist or have existed on any real property now
or previously owned, operated, leased or utilized by the Company.
(j) Schedule 4.22 contains complete copies of all
environmental investigations, assessments, audits, studies, tests and
related materials in possession of the Company or any Seller or known
to the Company or any Seller to exist, which relate
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<PAGE> 20
to the current or prior operations of the Company or any real property
now or previously owned, operated, leased or utilized by the Company.
4.23. Capital Expenditures. The Company has no outstanding
commitments for capital expenditures in excess of $50,000 in aggregate.
4.24. Suppliers. No suppliers of goods or services to the
Company that has made sales or provided services representing, individually or
in the aggregate, more than $5,000 in payments or commitments by the Company
since January 1, 1998, has (i) ceased, or indicated any intention to cease,
doing business with the Company, or (ii) changed or indicated any intention to
change any terms or conditions for future supply or sale of products or services
from the terms or conditions that existed with respect to the supply or sale of
such products or services during the twelve (12) month period ending on the date
hereof.
4.25. Dealings with Affiliates. Schedule 4.25 sets forth a
complete list (including the parties) of all oral or written contracts,
arrangements or other agreements (excluding any contract listed on Schedule
4.27) to which the Company is, will be or has been a party at any time from
January 1, 1997, to the Closing Date, and to which any Affiliate was or is also
a party.
4.26. Bank Accounts. Schedule 4.26 is a list of all bank
accounts, lock boxes, safe deposit boxes and post office boxes, and the
combinations, codes or location of keys thereto, maintained in the name of or
controlled by the Company and the names of the persons having access thereto.
4.27. Compensation. Schedule 4.27 lists the current job title
and total remuneration (including, without limitation, salary, commissions and
bonuses) for each officer, director, employee or consultant of the Company who
received total remuneration in excess of $80,000 from the Company during either
of the past two (2) calendar years or who is expected to receive total
remuneration in excess of such amount during the current calendar year.
4.28. Insurance Licenses. the Company and each of its
stockholders, directors, officers and employees required by law to do so has
obtained and currently maintains in good standing all required licenses from the
Kansas Insurance Department and all other similar agencies by which they are
required to be licensed (the "Licenses"). Schedule 4.28 contains an accurate
list of the Licenses, including the number of each License.
4.29. Consultants, Brokers and Finders. Neither the Company
nor any Seller has retained any consultant, broker or finder in connection with
the transactions contemplated by this Agreement
ARTICLE 5:
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
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<PAGE> 21
5.1. Organization and Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Kansas and has all requisite corporate power and authority to enter into and
perform its obligations under this Agreement.
5.2. No Violation. Buyer is not subject to or obligated under
any article of incorporation, bylaw, Law, or any agreement or instrument, or any
license, franchise or permit, which would be breached or violated by the
execution, delivery and performance of this Agreement by Buyer. Buyer has
complied with all applicable Laws in connection with its execution, delivery and
performance of this Agreement and the transactions contemplated hereby.
5.3. Governmental Authorities. Buyer is not required to submit
any notice, report or other filing with, and no consent, approval or
authorization is required by, any governmental or regulatory authority in
connection with its execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for such notices, reports, other
filings, consents, approvals or authorizations which have been made or obtained.
5.4. Consultants, Brokers and Finders. Buyer has not retained
any consultant, broker or finder in connection with the transactions
contemplated by this Agreement.
ARTICLE 6:
CONDITIONS TO CLOSING
6.1. Conditions to Obligation of Buyer. The obligation of
Buyer to consummate the transactions contemplated by this Agreement is subject
to satisfaction, at or prior to the Closing, of each of the following conditions
unless Buyer shall have waived such satisfaction pursuant to Section 8.4:
(a) Each of the representations and warranties of Sellers
set forth in this Agreement shall be true and correct as of the
Closing;
(b) On or prior to the Closing Date, Sellers and the
Company shall have performed and complied with all of the covenants
set forth in this Agreement to be performed or complied with by them
or it at or prior to the Closing Date;
(c) No proceeding, regulation or legislation shall have
been instituted, threatened in writing or proposed before, nor any
court order issued by, any governmental authority to enjoin, restrain,
prohibit or obtain substantial damages (i) in respect of, or which is
related to, or arises out of, this Agreement or the consummation of
the transactions contemplated hereby, or (ii) which, in the reasonable
judgment of Buyer, could have an adverse effect on the Company or its
assets;
(d) The Company shall have delivered to Buyer a
certificate issued by the Secretary of State of Kansas, evidencing the
corporate good standing of the Company in Kansas as of a date not more
than one (1) business day prior to the Closing Date;
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<PAGE> 22
(e) The Debentures shall have been converted into shares
of Common Stock representing 45% of the issued and outstanding shares
of Common Stock and the Debentures and agreements related thereto
shall have been terminated, as reasonably requested by counsel to
Buyer; and
(f) The Board of Directors of Buyer shall have approved
the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby.
6.2. Conditions to Obligation of Sellers. The obligation of
Sellers to consummate the transactions contemplated by this Agreement is subject
to satisfaction, at or prior to the Closing, of each of the following conditions
unless Sellers shall have waived such satisfaction pursuant to Section 8.4:
(a) Each of the representations and warranties of Buyer
set forth in this Agreement shall be true and correct as of the
Closing;
(b) On or prior to the Closing Date, Buyer shall have
performed and complied with all of the covenants set forth in this
Agreement to be performed or complied with by it at or prior to the
Closing Date; and
(c) There shall not be any injunction, judgment, order,
decree, ruling or charge in effect preventing consummation of any
transactions contemplated by this Agreement.
ARTICLE 7:
INDEMNIFICATION; REMEDIES
7.1. Investigations; Survival of Warranties and
Indemnification Obligations. The respective representations and warranties of
Sellers and Buyer contained herein or in any certificates or other documents
delivered at the Closing are true, accurate and correct and shall not be deemed
waived (except to the extent waived in writing pursuant to Section 8.4) or
otherwise affected by any investigation made by any party hereto or by the
occurrence of the Closing. Except to the extent set forth herein to the
contrary, each and every such representation and warranty and indemnification
obligation of any party hereunder shall survive until September 30, 2001;
provided, however, that:
(a) all representations and warranties under Sections 4.1
[Organization and Standing], 4.2 [Capital Stock; Options] and 4.3
[Authorization], and the provisions, covenants and obligations of
Articles 8 [Indemnification; Remedies] and 9 [Miscellaneous] shall
survive the Closing without expiration; and
(b) all representations and warranties under Sections 4.8
[No Undisclosed Liabilities, Claims, etc.] and 4.14 [Tax Matters]
shall survive the Closing for the applicable statute of limitations
for matters arising thereunder, plus ninety (90) days.
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Any claim made in accordance with Article 8 within the applicable survival
period shall survive the Closing until finally resolved notwithstanding
expiration of the applicable survival period.
7.2. Indemnification by Sellers. Sellers shall indemnify and
hold harmless Buyer, the Company and their respective directors, officers,
agents and attorneys (collectively, the "Indemnified Persons"), and shall
reimburse the Indemnified Persons for, any loss, liability, claim, damage,
expense (including, but not limited to, costs of investigation and defense and
reasonable attorneys' and accountants', consultants' and experts' fees and
expenses that would not have otherwise been expended but for the breach),
whether or not involving a third-party claim (collectively, "Damages") for which
a claim is made prior to the expiration of the survival period, if any, under
Section 7.1, arising from or based on any of the following:
(a) any inaccuracy or omission in any of the
representations and warranties of Sellers in this Agreement or in any
document, agreement, instrument or certificate delivered by Sellers at
the Closing pursuant to this Agreement; or
(b) any failure by Sellers (or to the extent it is under
Sellers' control, the Company) to perform or comply with any agreement
or covenant in this Agreement, or under any document, agreement,
instrument or certificate delivered at the Closing by Sellers pursuant
to this Agreement.
Sellers agree that they shall have no rights of any nature whatsoever against
the Company from any and all claims arising out of, in connection with or
relating to the assertion by an Indemnified Person of a right to
indemnification.
7.3. Indemnification By Buyer. Buyer shall indemnify and hold
harmless Sellers and shall reimburse them for any Damages for which a claim is
made prior to the expiration of the survival period, if any, under Section 7.1,
arising from or based on any of the following:
(a) any inaccuracy in any of the representations and
warranties of Buyer in this Agreement or in any document, agreement,
instrument or certificate delivered by Buyer at the Closing pursuant
to this Agreement; or
(b) any failure by Buyer (or to the extent it is under
Buyer's control, the Company) to perform or comply with any agreement
or covenant in this Agreement or under any document, agreement,
instrument, or certificate delivered at the Closing by Buyer pursuant
to this Agreement.
7.4. Notice of Claim; Payment.
(a) Notice. In the event that any party hereunder
determines that it is entitled to an indemnity payment pursuant to
this Article 7, such party shall deliver a written notice to the
indemnifying party.
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(b) Disputed Claim. If the indemnifying party disputes
all or any portion of the claim, the indemnifying party must provide
written notice of its objection (detailing the objection) to the
indemnified party within fifteen (15) business days after the receipt
of the claim from the indemnified party (an "Objected Claim").
(c) Defense by the Indemnifying Parties. In connection
with any claim giving rise to indemnity hereunder resulting from or
arising out of any claim or legal proceeding by a person other than
the indemnified parties, the indemnifying parties, at their sole cost
and expense, may, upon written notice to the indemnified parties
assume the defense of any such claim or legal proceeding provided that
the indemnifying parties acknowledge their obligation to indemnify the
indemnified parties in respect of the entire amount ( subject to the
maximum amount set forth in Section 7.6 (b), if applicable) of all of
the claims asserted therein. If the indemnifying parties assume the
defense of any such claim or legal proceeding, the indemnifying
parties shall select counsel reasonably acceptable to the indemnified
parties to conduct the defense of such claims or legal proceedings
and, at their sole cost and expense, shall take all steps necessary in
the defense or settlement thereof. The indemnifying parties shall not
consent to a settlement of, or the entry of any judgment arising from,
any such claim or legal proceeding, without the prior written consent
of the indemnified parties, unless the indemnifying parties admit in
writing their liability to hold the indemnified parties harmless from
and against any losses, damages, expenses and liabilities arising out
of such settlement and concurrently with such settlement the
indemnifying parties pay into court the full amount of all losses,
damages, expenses and liabilities to be paid by the indemnifying
parties in connection with such settlement. The indemnified parties
shall be entitled to participate in (but not control) the defense of
any such action, with their own counsel and at their own expense. If
the indemnifying parties do not assume the defense of any such claim
or litigation resulting therefrom in accordance with the terms hereof,
the indemnified parties may defend against such claim or litigation in
such manner as they may deem appropriate, including, but not limited
to, settling such claim or litigation, after giving notice of the same
to the indemnifying parties, on such terms as the indemnified parties
may deem appropriate. The indemnifying parties shall be entitled to
participate in the defense of any action by the indemnified parties,
which participation shall be limited to contributing information to
the defense and being advised of its status. In any action by the
indemnified parties seeking indemnification from the indemnifying
parties in accordance with the provisions of this subsection, the
indemnifying parties shall not be entitled to question the manner in
which the indemnified parties defended such claim or litigation or the
amount of or nature of any such settlement.
(d) Interest on Unpaid Claims. If all or part of any
indemnification obligation under this Agreement is not paid when due,
then the indemnifying party or parties shall pay the indemnified party
or parties interest on the unpaid amount of the obligation, at the
fluctuating rate per annum announced in The Wall Street Journal as the
prime rate on the Closing Date, for each day from the date the amount
was originally due until payment in full.
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7.5. Construction. The parties intend that each
representation, warranty and covenant herein shall have independent
significance. If any party has breached any representation, warranty or covenant
contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty or covenant, as the case may be.
7.6. Limitations on Indemnity.
(a) Tipping Basket. No indemnification payments shall be
payable pursuant to the indemnification obligations of Sellers
pursuant to Section 7.2 or the indemnification obligations of Buyer
pursuant to Section 7.3, respectively, unless the total aggregate
indemnification obligations under either such Section, as applicable
to the indemnifying party, exceeds $10,000 (the "Threshold Amount").
Once the Threshold Amount is satisfied against an indemnifying party,
the indemnifying party shall pay to the indemnified party the
Threshold Amount plus the amount of all indemnification obligations in
excess of the Threshold Amount, subject to the provisions of Section
7.6(b) below.
(b) Maximum. The maximum amount of Damages payable by
Buyer on one hand, and Sellers, on the other hand, under this Article
7 shall be the Purchase Price.
ARTICLE 8:
MISCELLANEOUS
8.1. Payment of Expenses. Except as otherwise specifically
provided herein, each of the Sellers and Buyer will pay all legal, accounting,
investment banking and other fees and expenses which such party incurs in
connection with this Agreement and the transactions contemplated hereby.
8.2. Announcements. No party to this Agreement shall make any
announcement in connection with the transactions contemplated hereby that has
not been previously approved in writing by Buyer and Sellers, except for such
announcement that it reasonably deems advisable or appropriate in connection
with its responsibilities under the applicable securities laws.
8.3. Assignment and Binding Effect. This Agreement may not be
assigned prior to the Closing by any party hereto without the prior written
consent of the other parties, except that Buyer may assign this Agreement to any
direct or indirect wholly-owned affiliate.
8.4. Waivers. Any term or provision of this Agreement may be
waived at any time by the party entitled to the benefit thereof by a written
instrument executed by such party. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or
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<PAGE> 26
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder, or affect in any way rights arising by virtue of any prior or
subsequent such occurrence.
8.5. Notices. Any notice, request, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given only if delivered personally to the
address set forth below (to the attention of the person identified below) or
sent by registered or certified mail, postage prepaid, or by Federal Express or
other express delivery service as follows:
If to Buyer, to:
----------------
AmVestors Financial Corporation
555 South Kansas Avenue
Topeka, KS 66601
Attention: Michael Miller
with a copy to:
Bryan Cave LLP
1200 Main Street, 35th Floor
Kansas City, MO 64105
Attention: Morris K. Withers, Esq.
If to Sellers, to:
------------------
Ronald S. Essary
c/o Creative Marketing International Corporation
7415 West 130th Street, Suite 300
Overland Park, KS 66213
with a copy to:
Robert O. Jester, Esq.
Ensz & Jester P.C.
2121 City Center Square
1100 Main Street
Kansas City, MO 64105
or to such other address as the addressee may have specified in a notice duly
given to the sender and to counsel as provided herein. Such notice, request,
demand, waiver, consent, approval or other communication will be deemed to have
been given as of the date so delivered or, if mailed, three business days after
the date so mailed, or if sent by Federal Express or express delivery service,
when received by the addressee.
8.6. Kansas Law to Govern. This Agreement shall be governed by
and interpreted and enforced in accordance with the substantive laws of the
State of Kansas without regard to the conflicts of law provisions thereof.
8.7. No Benefit to Others. The representations, warranties,
covenants and agreements contained in this Agreement are for the sole benefit of
the parties hereto and their heirs, executors, legal representatives, successors
and permitted assigns, and they shall not be construed as conferring and are not
intended to confer any rights on any other persons.
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8.8. Entire Agreement; Amendments. This Agreement, together
with any documents referred to herein, sets forth the entire agreement of the
parties hereto with respect to transactions contemplated hereby and supersedes
and replaces any prior written or oral agreements relating thereto. This
Agreement may only be amended or modified by a subsequently dated writing signed
by all parties hereto.
8.9. Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof. An item disclosed in a Schedule in response to one Section or
subsection of this Agreement shall not be deemed disclosed in response to any
other Section or subsection unless otherwise specifically provided in this
Agreement.
8.10. Cooperation. Subject to the provisions hereof, the
parties hereto shall use commercially reasonable efforts to take or cause to be
taken such actions to execute and deliver or cause to be delivered such
additional documents and instruments, and to do or cause to be done all things
necessary, proper or advisable under the provisions of this Agreement and under
applicable Law to consummate and make effective the transactions contemplated by
this Agreement.
8.11. Severability. Any provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall be ineffective to the extent
of such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining provisions hereof, and any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.12. Counterparts. This Agreement may be executed in two or
more counterparts, each of which is an original and all of which together shall
be deemed to be one and the same instrument. This Agreement shall become binding
when one or more counterparts taken together shall have been executed and
delivered by all of the parties. It shall not be necessary in making proof of
this Agreement or any counterpart hereof to produce or account for any of the
other counterparts.
8.13. Representation By Counsel; Interpretation. The parties
hereto each acknowledge that each party to this Agreement has been represented
by counsel in connection with this Agreement and the transactions contemplated
by this Agreement. Accordingly, any rule of law, or any legal decision that
would require interpretation of any claimed ambiguities in this Agreement
against the party that drafted it has no application and is expressly waived.
8.14. No Contribution; Indemnity. Sellers shall have no right
of contribution, indemnity or other similar right against the Company whatsoever
with regard to claims asserted by Buyer pursuant to this Agreement or amounts
payable thereunder.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement by persons thereunto duly authorized as of the date first written
above.
BUYER:
AMVESTORS FINANCIAL CORPORATION
By: s/ Mark V. Heitz
------------------------------
Title: President & CEO
COMPANY:
CREATIVE MARKETING INTERNATIONAL
CORPORATION
By: s/ Ronald S. Essary
------------------------------
Title: President
SELLERS:
s/ Ronald S. Essary s/ Bradley B. Smith
- ------------------------- ----------------------------------
Ronald S. Essary Bradley B. Smith
s/ Michael R. Tripses s/ Philip A. Poje
- ------------------------- ----------------------------------
Michael R. Tripses Philip A. Poje
s/ William H. Moneymaker
- -------------------------
William H. Moneymaker
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<PAGE> 1
EXHIBIT 10.52
STOCK PURCHASE AGREEMENT
BY AND AMONG
AMERICAN INVESTORS SALES GROUP, INC.,
COMMUNITY BANK MARKETING, INC.
AND
COMMUNITY FINANCIAL SERVICES, INC.
FEBRUARY 23, 2000
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TABLE OF CONTENTS
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ARTICLE 1: PURCHASE AND SALE.....................................................................................1
1.1. Purchase and Sale of Purchased Shares.............................................................1
1.2. Purchase Price....................................................................................2
ARTICLE 2: CLOSING...............................................................................................2
2.1. Closing Date......................................................................................2
2.2. Deliveries........................................................................................3
ARTICLE 3: REPRESENTATIONS AND WARRANTIES OF SELLER..............................................................4
3.1. Organization and Good Standing....................................................................4
3.2. Authority and Binding Effect......................................................................4
3.3. Capitalization and Share Ownership................................................................4
3.4. Corporate Documents and Minute Books..............................................................5
3.5. Validity of Contemplated Transactions; Consents...................................................5
3.6. Ownership of Assets; Condition and Sufficiency....................................................6
3.7. Absence of Certain Changes Subsequent to September 30, 1999.......................................6
3.8. Returns and Reports; Taxes........................................................................7
3.9 Employee Matters; Officers and Directors..........................................................8
3.10 Compliance with Law...............................................................................8
3.11. Claims............................................................................................9
3.12. Financial Statements..............................................................................9
3.13. Undisclosed Liabilities...........................................................................9
3.14. Pension Plans; Employee Benefit Plans............................................................10
3.15. Real Property and Leaseholds.....................................................................11
3.16 Contracts........................................................................................11
3.17 Transactions With Affiliates.....................................................................11
3.18. Certain Information..............................................................................12
3.19. No Other Obligations.............................................................................12
3.20 No Brokers.......................................................................................12
3.21 No Guarantees....................................................................................12
3.22 Company's Files..................................................................................12
3.23 No Misrepresentation.............................................................................12
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF BUYER..............................................................13
4.1 Organization and Standing........................................................................13
4.2 Authority and Binding Effect.....................................................................13
ARTICLE 5: CERTAIN COVENANTS....................................................................................13
5.1 Election of Board of Directors...................................................................13
5.2 Rights and Restrictions Concerning Seller Shares.................................................13
ARTICLE 6: CONDITIONS TO CLOSING................................................................................15
6.1 Conditions to Obligation of Buyer................................................................15
6.2 Conditions to Obligations of Seller..............................................................15
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ARTICLE 7: INDEMNIFICATION; REMEDIES............................................................................16
7.1. Investigations; Survival of Warranties and Indemnification Obligations...........................16
7.2. Indemnification by Seller........................................................................16
7.3. Indemnification by Buyer.........................................................................17
7.4. Notice of Claim; Payment.........................................................................17
7.5. Construction.....................................................................................17
7.6 Limitations on Indemnity.........................................................................18
ARTICLE 8: MISCELLANEOUS........................................................................................18
8.1. Payment of Expenses..............................................................................18
8.2. Announcements....................................................................................18
8.3. Assignment and Binding Effect....................................................................18
8.4. Waivers..........................................................................................18
8.5. Notices..........................................................................................18
8.6. Kansas Law to Govern.............................................................................19
8.7. No Benefit to Others.............................................................................20
8.8. Entire Agreement; Amendments.....................................................................20
8.9. Schedule and Exhibits............................................................................20
8.10. Cooperation......................................................................................20
8.11. Severability.....................................................................................20
8.12. Counterparts.....................................................................................20
8.13. Representation By Counsel; Interpretation........................................................20
8.14. No Contribution; Indemnity.......................................................................20
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
February 23, 2000, is made by and among AMERICAN INVESTORS SALES GROUP, INC., a
Kansas corporation ("Buyer") and a wholly-owned subsidiary of AMVESTORS
FINANCIAL CORPORATION, a Kansas corporation ("AmVestors"), COMMUNITY BANK
MARKETING, INC., a Georgia corporation (the "Company"), and COMMUNITY FINANCIAL
SERVICES, INC., a Georgia corporation and sole shareholder of the Company
("Seller").
RECITALS
WHEREAS, Seller owns 100,000 shares of the common stock, $.01
par value, of the Company (the "Common Stock"), which is all of the shares of
Common Stock issued and outstanding as of the time immediately prior to the date
of this Agreement (the "Seller Shares");
WHEREAS, the parties each desire to enter into, and this
Agreement contemplates, a transaction in which Buyer will purchase from the
Company and Seller, respectively, and the Company will issue and sell 100,000
shares of Common Stock (the "Company Portion") and Seller will sell and transfer
to Buyer 60,000 shares of the Seller Shares (the "Seller Portion" and, together
with the Company Portion, the "Purchased Shares"), for the consideration and on
the terms and conditions set forth herein (such transactions are collectively
referred to herein as the "Purchase"); and
WHEREAS, the parties each desire to enter into, and this
Agreement contemplates , certain covenants related to the governance of the
Company and future transfers of the outstanding Common Stock after closing of
the Purchase.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing premises and
respective covenants, representations and warranties herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto agree
as follows:
ARTICLE 1:
PURCHASE AND SALE
1.1. Purchase and Sale of Purchased Shares. Upon the terms
and subject to the conditions of this Agreement and for the consideration
specified in Section 1.2 hereof, at the Closing, the Purchase will be
consummated in which:
(a) the Company will issue, sell, transfer, convey
and deliver to Buyer, free and clear of any mortgage, lien, security
interest, pledge, encumbrance, restriction on transferability, defect
of title, charge or claim of any nature whatsoever on any property or
<PAGE> 5
property interest, except for Permitted Liens ("Liens"), all of the
Company Portion of the Purchased Shares;
(b) Seller will sell, transfer, assign, convey and
deliver to Buyer, free and clear of any Liens, all of the Seller
Portion of the Purchased Shares.
1.2. Purchase Price. Subject to the terms and conditions of
this Agreement, and in consideration of the sale of the Purchased Shares by the
Company and Seller and the Company's and Seller's performance of this Agreement,
Buyer shall pay (i) to the Company $1,700,000 (the "Company Purchase Price") and
(ii) to Seller $500,000 (the "Seller Purchase Price" and, together with the
Company Purchase Price, the "Purchase Price"), payable as follows:
(a) 1,700,000 payable to the Company, as follows:
(i) $900,000 at Closing in immediately
available funds;
(ii) $400,000 on January 1, 2001(the "First
Deferred Payment");
(iii) $400,000 on January 1, 2002 (the "Second
Deferred Payment").
(b) $500,000 payable to Seller at Closing in
immediately available funds.
The First Deferred Payment and the Second Deferred Payment shall be evidenced by
a promissory note of Buyer in the form of Exhibit 1.2-1 hereto (the "Buyer
Note"). AmVestors shall guaranty all the obligations of Buyer under the Buyer
Note pursuant to the guaranty in the form of Exhibit 1.2-2 hereto (the "Parent
Guaranty").
ARTICLE 2:
CLOSING
2.1. Time and Place of Closing. The consummation (the
"Closing") of the Purchase shall take place on or before February 24, 2000, at
the offices of Bryan Cave LLP, 1200 Main Street, Suite 3500, Kansas City,
Missouri 64105, and commence upon the execution and delivery by the parties of
this Agreement on the date hereof. The date of the Closing is hereinafter
sometimes referred to as the "Closing Date." Each party shall cooperate, as to
matters under such party's control, in the satisfaction of the conditions to the
obligations of the parties at Closing; provided that the foregoing shall not
require any party to waive any condition herein to its obligations at the
Closing or to incur any substantial cost not otherwise required hereunder.
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2.2. Deliveries at Closing.
(a) At the Closing, the Company and Seller shall deliver
or cause to be delivered to Buyer (the "Seller Closing Deliveries"):
(i) fully executed, sealed and proper
certificates evidencing the Purchased Shares in negotiable
form;
(ii) the release substantially in the form
attached hereto as Exhibit 2.2(a)(ii), duly executed by Seller
and dated as of the Closing Date;
(iii) the opinion of counsel to the Company and
Seller substantially in the form attached hereto as Exhibit
2.2(a)(iii), duly executed by such counsel and dated as of the
Closing Date;
(iv) the certificate of the chief executive
officer, chief financial officer and secretary, respectively,
of Seller and the Company certifying the satisfaction of the
closing conditions set forth in Sections 6.1(a), 6.1(b) and
6.1(c) hereof, and the signatures and incumbency of such
persons, and dated as of the Closing Date;
(v) the employment, noncompetition and
confidentiality agreement of Charles Daniel substantially in
the form attached hereto as Exhibit 2.2(a)(v) (the "Employment
Agreement"), duly executed by Charles Daniel and the Company
and dated as of the Closing Date;
(vi) resignations of all current directors of the
Company, effective upon the Closing; and
(vii) such other documents, instruments and
certificates, duly executed by appropriate persons and dated
appropriately, as reasonably requested in writing by Buyer in
connection with the Purchase.
(b) at the Closing, Buyer shall deliver or cause to be
delivered to Seller and/or the Company, as the case may be, the following
(the "Buyer Closing Deliveries"):
(i) $1,400,000.00 in immediately available funds,
payable $500,000 to Seller and $900,000 to the Company, by wire
transfer to such account or accounts as have been designated by
Seller and the Company, respectively, in writing to Buyer no
less than one (1) business day before Closing;
(ii) the Buyer Note, executed by a duly authorized
officer of Buyer;
(iii) the Parent Guaranty, executed by a duly
authorized officer of AmVestors; and
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(iv) the certificates of the duly authorized
officer of Buyer who signed this Agreement on behalf of Buyer
and the secretary of Buyer, respectively and certifying the
satisfaction of the closing conditions set forth in Sections
6.2(a), 6.2(b) and 6.2(c), and the signatures and incumbency of
such persons, dated the Closing Date.
ARTICLE 3:
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
3.1. Organization and Good Standing. Each of Seller and the
Company is a corporation duly incorporated, validly existing, and in good
standing under the laws of the State of Georgia, having full power and authority
to carry on its business as it is now being conducted and to own, lease and
operate its assets. The Company has no subsidiaries. The Company has no stock or
other equity or ownership interest (whether controlling or not) in any business
or other entity. The Company is duly qualified to do business and is in good
standing in all states and jurisdictions in which it is required to be so
qualified, except where the failure to be so qualified would not have an adverse
effect on the business of the Company. The Company has all state and local
licenses required for the operation of its business as it is now being
conducted. The Company is not a partner, venturer, guarantor or obligor in any
joint venture, partnership or other arrangement or contract.
3.2. Authority and Binding Effect. Each of Seller and the
Company has the full power, authority and capacity to execute, deliver and
perform (or cause to be delivered and performed) its respective obligations
under this Agreement and the other agreements, certificates, instruments, and
other documents necessary to consummate any of the transactions contemplated by
this Agreement ("Transaction Documents") to be executed by them. This Agreement
constitutes, and each of the Transaction Documents to be executed by Seller and
the Company when executed and delivered pursuant hereto will constitute, the
legal, valid and binding obligation of each of them, as the case may be,
enforceable against each of them, as the case may be, in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally and remedies of specific enforcement and injunctive relief and other
forms of equitable relief and remedies.
3.3. Capitalization and Share Ownership. The Company's
authorized capital stock consists of 500,000 shares of Common Stock
(collectively, the "Company Stock"). Without giving effect to the issuance of
the Purchased Shares, there are 100,000 shares of Common Stock issued and
outstanding, all of which shares are held by Seller of record and beneficially,
free and clear of any Liens. The Seller Portion has been, and when issued at the
Closing pursuant to this Agreement the Company Portion shall be, duly
authorized, validly issued, fully paid and nonassessable. The Seller Portion has
not, and the Company Portion when issued at the Closing pursuant to this
Agreement will not have been, issued in violation of (i) the terms of
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any written or oral contract, agreement, lease, plan, instrument or other
document, commitment, arrangement, undertaking or authorization ("Contract")
binding upon the Company or Seller or (ii) the Articles of Incorporation and
Bylaws of the Company and any applicable statute, law, ordinance, regulation,
decision, order or rule of any Governmental Authority ("Law"), including,
without limitation, the Securities Act of 1933, as amended, and the rules and
regulations thereunder and all federal and state securities or "blue sky" laws
and regulations. Other than the Seller Portion, and immediately prior to the
issuance of the Company Portion at the Closing pursuant to this Agreement, there
have been no issuances by the Company of Company Stock. There are, and have
been, no preemptive rights with respect to the issuance of the Company Stock.
There are no Contracts, subscriptions, convertible debt obligations, options,
warrants, calls, rights of first refusal, commitments or rights of any character
to purchase or otherwise acquire any Company Stock, equity, capital shares or
other securities of the Company, whether or not presently issued, outstanding or
exercisable, from Seller or the Company.
3.4. Corporate Documents and Minute Books. The Company has
given Buyer reasonable access to, true, correct and complete copies of:
(a) The minute books of the Company which are
current and contain correct and complete copies of the Articles of
Incorporation and Bylaws of the Company, including all amendments
thereto and restatements thereof, and of all minutes of meetings,
resolutions and other actions and proceedings of its shareholders and
board of directors and all committees thereof; and
(b) The stock record book of the Company which is
current, correct and complete and reflects the issuance of all shares
of Company Stock, including the issuance of the Seller Shares to
Seller, and subsequent transfers, redemptions and/or cancellations
thereof.
3.5. Validity of Contemplated Transactions; Consents.
(a) Neither the execution and delivery of this
Agreement by Seller or the Company, nor the execution and delivery of
the Transaction Documents by Seller or the Company, nor the
consummation by them of the transactions contemplated hereby or
thereby will directly or indirectly (except as set forth on Schedule
3.5 hereof):
(i) Contravene, conflict with or result
(with or without notice or lapse of time) in violation of (i)
any of the provisions of the Articles of Incorporation or
Bylaws of the Company; or (ii) any resolution adopted by the
Board of Directors or the shareholders of the Company that is
in effect on the date hereof;
(ii) Contravene, conflict with or result
(with or without notice or lapse of time) in a violation of
any Law or any judgment, decree, injunction, order or ruling
of any federal, state, local, foreign, national, or
provincial, governmental agency, body, authority, district,
board, commission, court, tribunal, political subdivision or
other governmental instrumentality or any self-regulatory
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organization ("Governmental Authority") that is binding on
Seller or the Company or their property under applicable Law
("Court Order") to which the Company or Seller is subject;
(iii) Contravene, conflict with or result
(with or without notice or lapse of time) in a violation or
breach of any of the provisions of, or give any natural person
or business or other entity ("Person") the right (with or
without notice or lapse of time) to declare a breach of or
default under any Contract ("Default") or exercise any right
or remedy under, or to accelerate the maturity or performance
of or cancel, terminate or modify, any Contract that involves
or pertains to (i) the payment, receipt or obligation for
payment of money, property or benefits equal to, totaling or
exceeding $25,000 singularly (or in the aggregate for similar
or related Contracts), (ii) the liquidated obligation or
payment of damages equal to or exceeding $25,000 upon default
or termination, (iii) an obligation enforceable through
equitable remedies, including injunction, (iv) a covenant of
non-competition, non-solicitation or confidentiality or (v)
any prohibition or restriction of business activities
("Material Contract") to which the Company or Seller is a
party or under which the Company has any rights, or by which
the Company, or any of the assets owned or used by the Company
may be bound; or
(iv) Result (with or without notice or lapse
of time) in the imposition or creation of any Lien upon or
with respect to any of the assets of the Company.
(b) The Company is not or will not be required to
give any notice to or obtain any consent from, and Seller is not and
will not be required to give any notice to or obtain any consent from,
any Person under any Contract or Governmental Authority in connection
with the execution and delivery of this Agreement or any of the
Transaction Documents or the consummation or performance by Seller or
the Company of the provisions thereof, including the Purchase.
3.6. Ownership of Assets; Condition and Sufficiency. The
Company has good and valid title to all of the assets reflected on the Latest
Balance Sheet. The Company owns all of its assets free and clear of all Liens,
except for Liens securing purchase money obligations or described in Schedule
3.6 hereof ("Permitted Liens"). Taken as a whole, the tangible assets and
properties which are part of the Company's assets reflected on the Latest
Balance Sheet are in good operating condition and repair (ordinary wear and tear
excepted), are adequate to operate the Company's business as currently conducted
and are useable in the ordinary course of business of the Company consistent
with its past and reasonably prudent customs and practice ("Ordinary Course of
Business").
3.7. Absence of Certain Changes Subsequent to September 30,
1999. Except as set forth on Schedule 3.7 hereto, since the date of the Latest
Balance Sheet there has not been any adverse change in the business, prospects,
conditions (financial or otherwise), earnings, assets or operations of the
Company or its business involving (if a financial change) more than $25,000.
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3.8. Returns and Reports; Taxes.
(a) The Company has filed or caused to be filed on
a timely basis all returns (including any information return), reports,
statements, declarations, schedules, notices, notifications, forms or
other document or information filed with or submitted to, or required
to be filed by the Company prior to the Closing with or submitted to,
any Governmental Authority in connection with the determination,
assessment, collection or payment of any tax or in connection with the
administration, implementation or enforcement of or compliance with any
Law relating to any tax ("Tax Returns") that are or were required to be
filed by or with respect to it pursuant to the Law of each Governmental
Authority with taxing power over it or its assets. The Company has paid
all taxes that have or may have become due pursuant to those Tax
Returns, or otherwise, or pursuant to any assessment received by the
Company or Seller, except such taxes, if any, as are set forth in
Schedule 3.8, and are being contested in good faith and (with respect
to the Company) as to which adequate reserves (determined in accordance
with generally accepted accounting principles consistently applied
("GAAP")) have been provided in the books of account of the Company and
on the Latest Balance Sheet.
(b) The federal and state Tax Returns previously
filed by the Company have not been audited by the Internal Revenue
Service or relevant state tax authorities. Neither Seller nor the
Company has given or been requested to give waivers or extensions (or
is or would be subject to a waiver or extension given by any other
Person) of any statute of limitations relating to the payment of taxes
of the Company now due or for which the Company may be liable.
(c) The charges, accruals, receivables and reserves
with respect to taxes on the books of the Company are adequate
(determined in accordance with GAAP) and are at least equal to the
Company's direct or indirect liability, indebtedness, obligation,
expense, claim, deficiency or guaranty of or by any person of any type,
whether accrued, absolute, contingent, matured or unmatured
("Liability") for taxes. To the actual knowledge of each and any of the
directors and officers of Seller and the Company ("Seller's
Knowledge"), there exists no proposed tax assessment against the
Company. All taxes that the Company is or was required by Law to
withhold or collect have been duly withheld or collected and, to the
extent required, have been paid to the proper Governmental Authority or
other Person.
(d) All Tax Returns filed by the Company are true,
correct and complete. There are no tax liens (other than any lien for
current taxes not yet due and payable) on any of the assets or
properties of the Company. There is no basis for any additional
assessment of any taxes. The Company has made all deposits required by
law to be made with respect to the Company's employees' withholding and
other employment taxes, including, without limitation, the portion of
such deposits relating to taxes imposed upon the Company.
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3.9. Employee Matters; Officers and Directors.
(a) The Company is not a party to any employment or
consulting agreement with any Person or to any restrictive covenant
agreement with any employee or with any former owner of the Company's
business, which is currently in effect;
(b) To Seller's knowledge, no employee or former
employee of the Company is in Default under any term of any employment
contract, agreement or arrangement relating to any intellectual
property owned by the Company or noncompetition, nonsolicitation or
nondisclosure arrangement, or any other Contract or any restrictive
covenant relating to the right of any such employee to be employed by
the Company because of the nature of the business conducted by the
Company or relating to the use of any intellectual property of others;
(c) To Seller's Knowledge, the Company is in full
compliance with all Laws respecting employment and employment
practices, terms and conditions of employment and wages and hours
including, without limitation, the Fair Labor Standards Act, the Family
and Medical Leave Act of 1993, the Americans with Disabilities Act of
1990, the Veterans Reemployment Rights Act, the Occupational Safety and
Health Act, the Employee Retirement Income Security Act of 1974, the
Immigration Reform and Control Act of 1986, the Age Discrimination in
Employment Act, Title VII of the Civil Rights Act of 1964, the Civil
Rights Act of 1991, the Older Workers Benefit Protection Act each as
amended to date. No severance obligations of any nature (whether
accrued vacation pay, other accrued employment benefit or otherwise) is
presently due to any employee of the Company or will be due to any
employee of the Company upon consummation of the Purchase;
(d) There are no claims against the Company now
pending before any Governmental Authority. No present or former
employee of the Company has given written or oral notice to the Company
of, and, to Seller's Knowledge, there is no claim or any basis for any
claim against the Company (whether under Law, any employment agreement
or otherwise) on account of or for (i) overtime pay, other than
overtime pay for the current payroll period, (ii) wages or salary
(excluding current bonus, accruals and amounts accruing under pension
and profit-sharing plans) for any period other than the current payroll
period, (iii) vacation, time off or pay in lieu of vacation or time
off, other than that earned in respect of the current fiscal year, or
(iv) any violation of any Law relating to minimum wages or maximum
hours of work;
(e) The sole member of the Board of Directors of
the Company is Bruce P. Leonard. The only officer of the Company is
Charles R. Daniel who holds the offices of President and Secretary.
3.10. Compliance with Law.
(a) The Company is not in violation of any Court
Order or, to Seller's Knowledge, any Law. The assets of the Company
have not been used or operated by the
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Company or any other Person in violation of any Court Order or, to
Seller's Knowledge, any Law. To Seller's Knowledge, the Company has not
previously failed and is not currently failing to comply with any
applicable Laws relating to the business of the Company or the
operation of its assets where such failure or failures could have
individually, or in the aggregate, an adverse effect on the Company or
its business. Except as described on Schedule 3.10 hereof, there are no
proceedings of record pending or, to Seller's Knowledge, threatened in
writing against the Company or Seller. Neither the Company nor Seller
has received any written notice or any oral notice regarding any
existing or unresolved violation by the Company of any Law, including,
without limitation, any requirement of any Governmental Authority.
(b) The Company has delivered to Buyer, or properly
identified and provided Buyer with reasonable access to, copies of all
reports and other filings required to be filed by the Company with all
Governmental Authorities since January 1, 1998. All such reports and
filings were at the time of filing true and accurate, and were prepared
in compliance with all applicable Laws.
3.11. Claims. There is no lawsuit, action, arbitration,
administrative or other proceeding, criminal prosecution or governmental
investigation or inquiry or examination or audit involving the Company, its
business or any Contracts to which the Company is a party or by which it or any
of the assets of the Company or its business may be bound ("Proceeding") now
pending or, to Seller's Knowledge, threatened in writing before any court, grand
jury, administrative or regulatory body, Governmental Authority, arbitration or
mediation panel or similar body to which the Company or Seller is a party, nor
is there any judgment, decree, injunction, rule or order of any court,
Governmental Authority, commission, agency, instrumentality or arbitrator
outstanding against the Company, in an amount (awarded or sought, as the case
may be) greater than $25,000.
3.12. Financial Statements. The Company has provided to
Buyer copies of its (i) unaudited balance sheet and statement of income, changes
in shareholders' equity, and cash flow for the Company (collectively, "Financial
Statements") as of and for the fiscal year ending December 31, 1998, and (ii)
unaudited Financial Statements as of and for the interim period ending September
30, 1999. All Liabilities of the Company at December 31, 1998, required to be
reflected or reserved for by GAAP are fairly reflected or reserved for in the
Company's balance sheet at December 31, 1998 (the "Latest Balance Sheet").
December 31, 1998 is referred to as the "Latest Balance Sheet Date" in other
parts of this Agreement. The Financial Statements are true, complete, and
accurate in all material respects and were prepared in accordance with GAAP
(except as otherwise disclosed therein) and fairly present the financial
position and results of operations of the Company at the dates and for the
periods covered, except adjustments that are necessary for a fair presentation
of the information shown, none of which are material.
3.13. Undisclosed Liabilities. The Company has no Liability
except:
(a) Those Liabilities set forth or adequately
reserved for on the Latest Balance Sheet and not heretofore paid or
discharged;
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(b) Those Liabilities arising in the Ordinary
Course of Business consistent with past practice under any Contract;
and
(c) Those Liabilities incurred in the Ordinary
Course of Business consistent with past practice since the Latest
Balance Sheet Date and not heretofore paid or discharged.
3.14. Pension Plans; Employee Benefit Plans.
(a) Pension Benefit Plans. There is no "employee
pension benefit plan" (within the meaning of Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended, and the
rules and regulations thereunder ("ERISA")) maintained by the Company
or to which the Company contributes or is required to contribute,
including any multiemployer plan ("Pension Benefit Plan").
(b) Compliance with Applicable Law. Each "employee
welfare benefit plan" (within the meaning of Section 3(1) of ERISA)
maintained by the Company or to which the Company contributes or is
required to contribute, including any multiemployer plan ("Welfare
Benefit Plan"), any related trust agreements, annuity contracts, and
other funding instruments, if any, comply in all material respects with
the provisions of ERISA and the Internal Revenue Code of 1986, as
amended (the "Code"), and the rules and regulations thereunder and all
other Laws applicable to such Welfare Benefit Plans. The Company has
performed all of its obligations currently required to have been
performed under all Welfare Benefit Plans. There are no Proceedings
(other than routine claims for benefits) pending or threatened in
writing against or with respect to any Welfare Benefit Plans or the
assets of such plans. No facts exist that could give rise to any
Proceedings (other than routine claims for benefits) against such plans
or the assets of such plans which if decided adversely could have an
adverse effect on the Company or its business. No event has occurred
that will or would reasonably be expected to subject any Welfare
Benefit Plan to any tax under Section 511 of the Code.
(c) Administration of Plans. Each Welfare Benefit
Plan has been administered to date in compliance in all material
respects with the requirements of ERISA and the Code. No plan fiduciary
of any Welfare Benefit Plan has engaged in (i) any transaction in
violation of Section 406(a) or (b) of ERISA, or (ii) any "prohibited
transaction" (within the meaning of Section 4975(c)(1) of the Code) for
which no exemption exists under Section 408 of ERISA or Section 4975(d)
of the Code.
(d) Other Employee Benefit Plans and Agreements.
Schedule 3.14 lists each fringe benefit, profit sharing, deferred
compensation, bonus, stock option, stock purchase, pension, retainer,
consulting, retirement, welfare, or other incentive plan or agreement
or employment agreement and any other employee benefit plan, agreement,
arrangement, or commitment that is maintained by the Company or to
which the Company contributes or is required to contribute.
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(e) Continuation Coverage Requirements for Health
Plans. All group health plans of the Company (including any plans of
affiliates of the Company that must be taken into account under Section
4980B of the Code) have been operated in compliance with the group
health plan continuation coverage requirements of Section 4980B of the
Code and Title I, Part 6 of ERISA.
(f) Valid Obligations. All Welfare Benefit Plans,
related trust agreements, annuity contracts or other funding
instruments, and all related plans, agreements, arrangements and
commitments referred to in the Disclosure Schedule are legal, valid and
binding and in full force and effect, and there are no defaults
thereunder. None of the rights of the Company thereunder will be
impaired by the consummation of the Purchase and the transactions
contemplated by this Agreement, and all of the rights of the Company
thereunder will be enforceable by Buyer at and after the Closing
without the consent or agreement of any other party.
(g) Severance or Vesting. Other than by reason of
actions taken by Buyer following the Closing, the consummation of the
Purchase and the transactions contemplated by this Agreement will not
(A) entitle any current or former employee of the Company to severance
pay, unemployment compensation or any other payment, except as
expressly provided in this Agreement, (B) accelerate the time of
payment or vesting, or increase the amount of compensation due to any
such employee or former employee, (C) result in any prohibited
transaction described in Section 406 of ERISA or Section 4975 of the
Code for which an exemption is not available, or (D) give rise to the
payment of any amount that would not be deductible pursuant to the
terms of Section 280G of the Code.
3.15. Real Property and Leaseholds. The Company does not
own in fee simple or otherwise any land, including buildings and improvement
thereon.
3.16. Contracts. The Company's Material Contracts are in
full force and effect and are valid, binding and enforceable in accordance with
their terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally and remedies of specific enforcement and injunctive
relief and other forms of equitable relief and remedies.
3.17. Transactions With Affiliates. Except with respect to
the ownership of the Seller Shares by Seller:
(a) No director or officer of the Company has any
direct or indirect financial interest in any competitor with, or
supplier or customer of, the Company; provided, however, that for this
purpose ownership of corporate securities having no more than 5% of the
outstanding voting power of any competitor, supplier or customer, which
securities are listed on any national securities exchange or authorized
for quotation on the NASDAQ National Market, shall not be deemed to be
such a financial interest, provided that such director or officer has
no other connection or relationship with such competitor, supplier or
customer;
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<PAGE> 15
(b) Neither Seller nor any director or officer of
the Company, or any of its, his or her affiliates, owns or has an
ownership interest in any corporation or other entity that is a party
to, or in any property which is the subject of, Contracts, business
arrangements or relationships of any kind with the Company;
(c) The Company is not indebted to Seller or any
director, officer, employee or agent of the Company except for amounts
due as normal salaries, wages, employee benefits and bonuses and in
reimbursement of ordinary expenses on a basis consistent with the past
practices of the Company;
(d) Neither Seller nor any director, officer,
employee or agent of the Company is indebted to the Company except for
advances for ordinary business expenses on a basis consistent with the
past practices of the Company.
3.18. Certain Information. Schedule 3.18 lists:
(a) all bank accounts, lock boxes, post office boxes and
safe deposit boxes maintained in the name of or controlled by the Company and
the names of the persons having access thereto; and
(b) the location and name of the safekeeper of all safe,
security and computer passwords, codes, log-ins, combinations and similar
information necessary to avail, access or use Company property.
3.19. No Other Obligations. Except as provided in this
Agreement or as described in Schedule 3.19 hereof, neither the Company nor
Seller has any legal or contractual obligation, absolute or contingent, to sell
all or any part of the assets of the Company (other than in the Ordinary Course
of Business), or any equity interest in the Company or to effect any merger,
consolidation or reorganization of the Company or to enter into any agreement
with respect thereto.
3.20. No Brokers. Neither the Company, Seller, nor anyone
acting on their behalf has directly or indirectly engaged the services of a
broker or finder or other person who may be entitled to any brokerage fee or
commission in connection with the transaction referenced herein.
3.21. No Guarantees. The Company is not a guarantor,
indemnitor, surety or accommodation party or otherwise liable for any
indebtedness of any other person, firm or corporation, except as endorser of
checks received and deposited in the Ordinary Course of Business.
3.22. Company's Files. Buyer and its representatives have
been given access to all books, records and files relating to the Company and
its business, property rights, assets and liabilities.
3.23. No Misrepresentation. No representation or warranty
made by Seller or the Company in this Agreement (including the Schedules
attached hereto) or in any of the
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<PAGE> 16
Transaction Documents contains any untrue statement of a fact or omits to state
a fact necessary to make the statements herein and therein not false or
misleading in light of the circumstances in which they are made.
ARTICLE 4:
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller and the Company
as follows:
4.1. Organization and Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Kansas and has all requisite corporate power and authority to perform its
obligations under this Agreement.
4.2. Authority and Binding Effect. Buyer has the corporate
power and authority to execute, deliver and perform this Agreement and all of
the Transaction Documents to which it is a party. The execution, delivery and
performance of this Agreement and the Transaction Documents to which it is a
party and the consummation of the Purchase by Buyer have been duly authorized by
all necessary corporate action and will neither contravene nor violate the
Articles of Incorporation or Bylaws of Buyer. This Agreement constitutes, and
each of the Transaction Documents to which it is a party when executed and
delivered pursuant hereto will constitute, the legal, valid and binding
obligation of Buyer, enforceable against it in accordance with their terms.
ARTICLE 5:
CERTAIN COVENANTS
5.1. Election of Board of Directors Immediately after
consummation of the Purchase, Seller and Buyer shall each execute and deliver,
and the Company shall accept and include in its minute book and otherwise give
effect to, a unanimous consent of shareholders to (i) establish the number of
directors of the Company to be eight and (ii) elect a new Board of Directors of
the Company consisting of five persons nominated by Buyer (initially, Mark
Heitz, Steve Hinrichs, Al Atha, Tom Fogt and Mike Miller) and three persons
nominated by Seller (initially, Dan Speight, Charles Daniel and Kevin Tweddle).
Thereafter with respect to elections of directors and for so long as Seller
shall own at least 10% of the outstanding shares of Common Stock, Buyer shall be
entitled to nominate five directors, and Seller shall be entitled to nominate
three directors, and Buyer and Seller shall each vote their shares of Common
Stock in favor of those nominated to effect their election. In the event that a
director resigns, is removed, dies or becomes disabled and is no longer able to
serve, then the party nominating such director shall be entitled to name a new
director to fill such vacancy for the unexpired remaining term.
5.2. Rights and Restrictions Concerning Seller Shares
(a) Right of First Refusal. In the event that (i)
Seller desires to sell, transfer, assign, pledge, encumber, hypothecate
or otherwise dispose of any of the Seller Shares (a "Transfer of Seller
Shares") during the ten-year period beginning on the date hereof and
ending ten years after the date hereof (the "Refusal Period") and (ii)
a third
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<PAGE> 17
party makes a bona fide offer (an "Offer") for such Seller Shares,
Seller shall first offer the Seller Shares to Buyer on the same terms
and conditions as the Offer received. The terms and conditions of any
Offers received shall be set forth in writing, and a copy of such Offer
shall promptly be provided by Seller to Buyer, together with reasonable
financial and business information concerning the proposed
purchaser(s). Buyer shall then have thirty (30) days from the date a
copy of the Offer is delivered (the "Option Exercise Period") in which
to advise Seller in writing whether it elects to purchase the Seller
Shares on the terms and conditions of such Offer. If Buyer does not
timely elect to purchase the Seller Shares covered by the Offer, then
such Seller Shares may be sold to the third party on the terms of the
Offer for a period of twenty (20) days after expiration of the Option
Exercise Period and such third party shall not be bound by the terms of
this Agreement with respect to such Seller Shares; provided however,
that if Seller desires to sell for a lesser price, or on terms more
favorable to the purchaser, or after the 20-day period, then a new
written Offer shall be submitted to Buyer in the same manner and
subject to Buyer's right of refusal again as provided herein.
(b) No Transfer of Seller Stock to Third Party.
Seller shall not engage in, nor shall the Company permit recordation on
its books of, any Transfer of Seller Shares during the Refusal Period
without full compliance with the provisions of this Agreement. Any
Transfer of Seller Shares in violation of this Agreement shall be void.
(c) Put Right. If in the future Seller is not
permitted under then applicable laws, rules, regulations and approvals
to maintain its ownership of all of the Seller Shares held by Seller on
the Closing Date, Seller shall have the right to require Buyer to
purchase all or a portion of such shares (the "Put Shares") on a date
not less than 90 days after the date Seller gives notice to that effect
to Buyer. The purchase price per share for the Put Shares shall be an
amount equal to 1.2 times the book value per share of the Put Shares as
reflected in the regularly prepared financial statements of the Company
or, if such book value is in dispute, as determined by an independent
auditor mutually acceptable to Buyer and Seller.
(d) Share Rights and Legend. Seller shall be
entitled to vote the Seller Shares and receive dividends on the Seller
Shares, and shall have all other rights of a shareholder during the
Refusal Period and prior to any permitted Transfer of Seller Shares
done in conformity with the provisions of this Agreement. Any shares of
Company Stock hereafter acquired by Seller during the Refusal Period
shall also be covered by this Agreement automatically. Seller shall
submit the certificates representing the Seller Shares to the Company,
and the Company shall place the following legend on the certificate(s)
for Seller Shares issued to Seller:
"The shares represented by this certificate are
subject to certain restrictions on transfer pursuant
to the provisions of the Stock Purchase Agreement
dated February 23, 2000 among American Investors
Sales Group, Inc., Community Bank Marketing, Inc. and
Community Financial Services, Inc. and may be
transferred only in accordance with the provisions
thereof."
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<PAGE> 18
ARTICLE 6:
CONDITIONS TO CLOSING
6.1. Conditions to Obligation of Buyer. The obligation of
Buyer to consummate the transactions contemplated by this Agreement is subject
to satisfaction, at or prior to the Closing of each of the following conditions
unless Buyer shall have waived such satisfaction pursuant to Section 8.4:
(a) Each of the representations and warranties of
Seller set forth in this Agreement shall be true and correct as of the
Closing;
(b) On or prior to the Closing Date, Seller and the
Company shall have performed and complied with all of the covenants set
forth in this Agreement to be performed or complied with by them or it
at or prior to the Closing Date;
(c) No Proceeding or regulation or legislation
shall have been instituted, threatened in writing or proposed before,
nor any Court Order issued by, any Governmental Authority to enjoin,
restrain, prohibit or obtain substantial damages (i) in respect of, or
which is related to, or arises out of, this Agreement or the
consummation of the Purchase, or (ii) which, in the reasonable judgment
of Buyer, could have a material adverse effect on the Company, its
business or the assets of the Company;
(d) The Company shall have delivered to Buyer a
certificate issued by the Secretary of State of Georgia, evidencing the
corporate good standing of the Company in Georgia as of a date not more
than five (5) business days prior to the Closing Date;
(e) The Board of Directors of Buyer shall have
approved the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby; and
(f) Seller shall have delivered to Buyer duplicate
counterparts of the Distribution and Services Agreement in the form of
Exhibit 6.1(f) hereto duly executed by The Bankers Bank, a Georgia
banking corporation.
6.2. Conditions to Obligations of Seller. The obligations
of Seller and the Company to consummate the transactions contemplated by this
Agreement is subject to satisfaction, at or prior to the Closing of each of the
following conditions unless the Company and Seller shall have waived such
satisfaction pursuant to Section 8.4:
(a) Each of the representations and warranties of
Buyer set forth in this Agreement shall be true and correct as of the
Closing;
(b) On or prior to the Closing Date, Buyer shall
have performed and complied with all of the covenants set forth in this
Agreement to be performed or complied with by it at or prior to the
Closing Date;
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(c) There shall not be any injunction, judgment,
order, decree, ruling or charge in effect preventing consummation of
any transactions contemplated by this Agreement;
(d) The Board of Directors of Seller and the
Company shall have approved the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby;
and
(e) Buyer shall have delivered to Seller duplicate
counterparts of the Distribution and Services Agreement in the form of
Exhibit 6.1(f) hereto duly executed by Buyer.
ARTICLE 7:
INDEMNIFICATION; REMEDIES
7.1. Investigations; Survival of Warranties and
Indemnification Obligations. The respective representations and warranties of
Seller, the Company and Buyer contained herein or in any certificates or other
documents delivered at the Closing are true, accurate and correct and shall not
be deemed waived (except to the extent waived in writing pursuant to Section
8.4) or otherwise affected by any investigation made by any party hereto or by
the occurrence of the Closing. Except to the extent set forth herein to the
contrary, each and every such representation and warranty and indemnification
obligation of any party hereunder shall survive until September 30, 2001;
provided, however, that:
(a) all representations and warranties under
Sections 3.1 [Organization and Good Standing], 3.2 [Authority and
Binding Effect] and 3.3 [Capitalization and Share Ownership], and the
provisions, covenants and obligations of Articles 5 [Certain
Covenants], 7 [Indemnification; Remedies] and 8 [Miscellaneous] shall
survive the Closing without expiration; and
(b) all representations and warranties under
Sections 3.8 [Returns and Reports; Taxes] and 3.13 [Undisclosed
Liabilities] shall survive the Closing for the applicable statute of
limitations for matters thereunto arising, plus ninety (90) days.
Any claim made in accordance with Article 7 within the applicable survival
period shall survive the Closing until finally resolved notwithstanding
expiration of the applicable survival period.
7.2. Indemnification by Seller. Seller shall indemnify and
hold harmless Buyer, the Company and their respective directors, officers,
agents and attorneys (collectively, the "Indemnified Persons"), and shall
reimburse the Indemnified Persons for, any loss, Liability, claim, damage,
expense (including, but not limited to, costs of investigation and defense and
reasonable attorneys' and accountants', consultants' and experts' fees and
expenses that would not have otherwise been expended but for the breach) whether
or not involving a third-party claim (collectively, "Damages") for which a claim
is made prior to the expiration of the survival period, if any, under Section
7.1, arising from or based on any of the following:
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<PAGE> 20
(a) any inaccuracy or omission in any of the
representations and warranties of Seller or the Company in this
Agreement or in any document, agreement, instrument or certificate
delivered by Seller at the Closing pursuant to this Agreement;
(b) any failure by Seller (or to the extent it is
under Seller's control, the Company) to perform or comply with any
agreement or covenant in this Agreement, or under any document,
agreement, instrument or certificate delivered at the Closing by Seller
pursuant to this Agreement.
Seller agrees that it shall have no rights of any nature whatsoever against the
Company from any and all claims arising out of, in connection with or relating
to the assertion by an Indemnified Person of a right to indemnification.
7.3. Indemnification by Buyer. Buyer shall indemnify and
hold harmless Seller and shall reimburse it for any Damages for which a claim is
made prior to the expiration of the survival period, if any, under Section 7.1,
arising from or based on any of the following:
(a) any inaccuracy in any of the representations
and warranties of Buyer in this Agreement or in any document,
agreement, instrument or certificate delivered by Buyer at the Closing
pursuant to this Agreement, or
(b) any failure by Buyer (or to the extent it is
under Buyer's control, the Company) to perform or comply with any
agreement or covenant in this Agreement or under any document,
agreement, instrument, or certificate delivered at the Closing by Buyer
pursuant to this Agreement.
7.4. Notice of Claim; Payment.
(a) Notice. In the event that any party hereunder
determines that it is entitled to an indemnity payment pursuant to this
Article 7, such party shall deliver a written notice to the
indemnifying party.
(b) Disputed Claim. If the indemnifying party
disputes all or any portion of the claim, the indemnifying party must
provide written notice of its objection (detailing the objection) to
the indemnified party within fifteen (15) business days after the
receipt of the claim from the indemnified party (an "Objected Claim").
(c) Interest on Unpaid Claims. If all or part of
any indemnification obligation under this Agreement is not paid when
due, then the indemnifying party or parties shall pay the indemnified
party or parties interest on the unpaid amount of the obligation, at
the fluctuating rate per annum announced in The Wall Street Journal as
the prime rate on the Closing Date, for each day from the date the
amount was originally due until payment in full.
7.5. Construction. The parties intend that each
representation, warranty and covenant herein shall have independent
significance. If any party has breached any representation, warranty or covenant
contained herein in any respect, the fact that there exists another
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<PAGE> 21
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty or covenant, as the case may be.
7.6. Limitations on Indemnity.
(a) Tipping Basket. No indemnification payments
shall be payable pursuant to the indemnification obligations of Seller
pursuant to Section 7.2 or the indemnification obligations of Buyer
pursuant to Section 7.3, respectively, unless the total aggregate
indemnification obligations under either such Section, as applicable to
the indemnifying party, exceeds $50,000 (the "Threshold Amount"). Once
the Threshold Amount is satisfied against an indemnifying party, the
indemnifying party shall pay to the indemnified party the Threshold
Amount plus the amount of all indemnification obligations in excess of
the Threshold Amount, subject to the provisions of Section 7.6(b)
below.
(b) Maximum. The maximum amount of Damages payable
by Buyer on one hand, and Seller, on the other hand, under this Article
7 shall be the Seller Purchase Price.
ARTICLE 8:
MISCELLANEOUS
8.1. Payment of Expenses. Except as otherwise specifically
provided herein, each of Seller, the Company and Buyer will pay all legal,
accounting, investment banking and other fees and expenses which such party
incurs in connection with this Agreement and the transactions contemplated
hereby.
8.2. Announcements. No party to this Agreement shall make
any announcement in connection with the Purchase that has not been previously
approved in writing by Buyer and Seller, except for such announcement that it
reasonably deems advisable or appropriate in connection with its
responsibilities under the applicable securities laws.
8.3. Assignment and Binding Effect. This Agreement may not
be assigned prior to the Closing by any party hereto without the prior written
consent of the other parties, except that Buyer may assign this Agreement to any
direct or indirect wholly-owned affiliate of AmVestors.
8.4. Waivers. Any term or provision of this Agreement may
be waived at any time by the party entitled to the benefit thereof by a written
instrument executed by such party. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way rights arising by virtue of any prior or subsequent such
occurrence.
8.5. Notices. Any notice, request, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given only if delivered personally to the
address set forth below (to the attention of the
18
<PAGE> 22
person identified below) or sent by registered or certified mail, postage
prepaid, or by Federal Express or other express delivery service as follows:
If to Buyer, to:
American Investors Sales Group, Inc.
555 S. Kansas Avenue
Topeka, KS 66601
Attention: Michael Miller
with a copy to:
Bryan Cave LLP
1200 Main Street, 35th Floor
Kansas City, MO 64105
Attention: Morris K. Withers, Esq.
If to the Company, to:
Community Bank Marketing, Inc.
2410 Paces Summit
Atlanta, GA 30339
Attention: Charles R. Daniel
If to Seller, to:
Community Financial Services, Inc.
2410 Paces Summit
Atlanta, GA 30339
Attention: Kevin M. Tweddle
with a copy to:
Morris, Manning & Martin, LLP
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, GA 30326
Attention: T. Daniel Brannan, Esq.
or to such other address as the addressee may have specified in a notice duly
given to the sender and to counsel as provided herein. Such notice, request,
demand, waiver, consent, approval or other communication will be deemed to have
been given as of the date so delivered or, if mailed, three business days after
the date so mailed, or if sent by Federal Express or express delivery service,
when received by the addressee.
8.6. Kansas Law to Govern. This Agreement shall be governed
by and interpreted and enforced in accordance with the substantive laws of
Kansas without regard to the conflicts of law provisions thereof.
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<PAGE> 23
8.7. No Benefit to Others. The representations, warranties,
covenants and agreements contained in this Agreement are for the sole benefit of
the parties hereto and their heirs, executors, legal representatives, successors
and permitted assigns, and they shall not be construed as conferring and are not
intended to confer any rights on any other persons.
8.8. Entire Agreement; Amendments. This Agreement, together
with any documents referred to herein, sets forth the entire agreement of the
parties hereto with respect to transactions contemplated hereby and supersedes
and replaces any prior written or oral agreements relating thereto. This
Agreement may only be amended or modified by a subsequently dated writing signed
by all parties hereto.
8.9. Schedules and Exhibits. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof. An item disclosed in a Schedule in response to one Section or
subsection of this Agreement shall not be deemed disclosed in response to any
other Section or subsection unless otherwise specifically provided in this
Agreement.
8.10. Cooperation. Subject to the provisions hereof, the
parties hereto shall use commercially reasonable efforts to take or cause to be
taken such actions to execute and deliver or cause to be delivered such
additional documents and instruments, and to do or cause to be done all things
necessary, proper or advisable under the provisions of this Agreement and under
applicable law to consummate and make effective the transactions contemplated by
this Agreement.
8.11. Severability. Any provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall be ineffective to the
extent of such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining provisions hereof, and any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.12. Counterparts. This Agreement may be executed in two
or more counterparts, each of which is an original and all of which together
shall be deemed to be one and the same instrument. This Agreement shall become
binding when one or more counterparts taken together shall have been executed
and delivered by all of the parties. It shall not be necessary in making proof
of this Agreement or any counterpart hereof to produce or account for any of the
other counterparts.
8.13. Representation By Counsel; Interpretation. The
parties hereto each acknowledge that each party to this Agreement has been
represented by counsel in connection with this Agreement and the transactions
contemplated by this Agreement. Accordingly, any rule of law, or any legal
decision that would require interpretation of any claimed ambiguities in this
Agreement against the party that drafted it has no application and is expressly
waived.
8.14. No Contribution; Indemnity. Seller shall have no
right of contribution, indemnity or other similar right against the Company
whatsoever with regard to this Agreement or amounts payable thereunder.
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<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement by persons thereunto duly authorized as of the date first written
above.
COMPANY:
COMMUNITY BANK MARKETING, INC.
By: s/ Charles R. Daniel
------------------------------------
Title: President
BUYER:
AMERICAN INVESTORS SALES GROUP, INC.:
By: s/ Mark V. Heitz
------------------------------------
Title: President and CEO
SELLER:
COMMUNITY FINANCIAL SERVICES, INC.
By: s/ Kevin Tweedle
------------------------------------
Title: Secretary
21
<PAGE> 1
EXHIBIT 10.53
FEDERAL HOME LOAN BANK OF DES MOINES
DES MOINES, IOWA
AGREEMENT FOR ADVANCES, PLEDGE AND SECURITY AGREEMENT
SPECIFIC PLEDGE
This Agreement for Advances, Pledge and Security Agreement ("Agreement"),
effective the 12th day of March, 1992, is entered between Central Life Assurance
Company ("Member"), with principal offices at 611 5th Avenue, Des Moines, IA
50309 and the Federal Home Loan Bank of Des Moines ("Bank"), with principal
offices at 907 Walnut, Des Moines, Iowa 50309.
WHEREAS, The Bank in accordance with the Federal Home Loan Bank Act,
regulations and directives of the Federal Housing Finance Board and policies
promulgated by its own Board, makes available advances to its members. The
available advances are set forth by the Bank in a statement of "Credit Policy,"
as may be amended from time to time.
WHEREAS, The Member may, from time to time, apply for an advance or
advances which may be available to it.
NOW THEREFORE, For valuable consideration and with respect to each and
every such advance, the Parties agree as follows:
SECTION 1. CONFIRMATION OF ADVANCE. To be bound by the terms and
conditions set forth herein, in the confirmation of advance issued with respect
to each advance, and in the Bank's Credit Policy as may be amended from time to
time. A confirmation of advance shall mean a writing or machine readable
electronic transmission in such form or forms as may be determined by the Bank
from time to time.
SECTION 2. PAYMENT TO THE BANK. To repay each and any advance together
with interest thereon according to the confirmation of each such advance
communicated to the Member by the Bank, together with any unpaid costs and
expenses in connection therewith. Such payment shall be made at the office of
the Bank in Des Moines, Iowa, or at such other place as the Bank, or its
successors or assigns, may from time to time appoint in writing.
The default rate on past due principal and interest may, at the option of
the Bank, be at a rate 1% per annum higher than the then current rate being
charged by the Bank for advances.
SECTION 3. ASSIGNMENT TO BANK OF SECURITY INTEREST IN BANK STOCK. The
Member hereby assigns, transfers and pledges to the Bank, its successors or
assigns, all stock of the Federal Home Loan Bank of Des Moines owned by the
Member as collateral security for payment of any and all indebtedness, whether
in the nature of an advance or otherwise, of the Member to the Bank, its
successors and assigns.
SECTION 4. ASSIGNMENT OF SECURITY INTEREST IN OTHER COLLATERAL. As
additional collateral security for any and all such advances, Member assigns,
transfers, and pledges to the Bank, its successors or assigns, property of
Member as described in Exhibit A hereof (the "Collateral"). With respect to
such Collateral, Member undertakes and agrees as follows:
A. That Member shall be at liberty to use, commingle and dispose of all or
part of the Collateral, and to collect, compromise and dispose of the proceeds
of the Collateral without being required to account for the proceeds or replace
the Collateral subject only to its obligation to maintain the Collateral as
herein provided;
B. To keep and maintain such Collateral free and clear of pledges, liens
and encumbrances to others at the required collateral maintenance level. The
"required collateral maintenance level" means the amount of collateral the
member is required to maintain free and clear of pledge, liens and encumbrances
to others as set forth from time to time in the Bank's Credit Policy;
<PAGE> 2
C. To assemble and deliver Collateral to the Bank or its authorized agents
immediately upon demand of the Bank; and as specified by the Bank in its Credit
Policy from time to time, and to pay for the safekeeping collateral as
established by the Bank;
D. To make, execute and deliver to the Bank such assignments,
endorsements, listings, powers, financing statements or other instruments as
the Bank may reasonably request respecting such Collateral.
SECTION 5. DUTY TO USE REASONABLE CARE. In the event Member delivers
security to the Bank or its Agent pursuant to section 4 above, the duty of the
Bank with respect to said security shall be solely to use reasonable care in
the custody and preservation of the security in its possession.
SECTION 6. ADDITIONAL SECURITY. Member shall assign additional or
substituted Collateral for such advances at any time the Bank shall deem it
necessary for the Bank's protection.
SECTION 7. EVENTS OF DEFAULT. The Bank may consider the Member in
default hereunder upon the occurrences of any of the following events or
conditions:
A. Failure of the Member to pay any interest, or repay any principal, of
any advances as herein required; or
B. Breach or failure to perform by the Member of any covenant, promise,
condition, obligation, or liability contained or referred to herein, or any
other agreement to which the Member and the Bank are parties; or
C. Proof being made that any representations, statements, or warranty
made or furnished in any manner to the Bank by or on behalf of the Member in
connection with all or part of any advance was false in any material respect
when made or furnished; or
D. Loss, theft, damage, destruction, sale or encumbrance to or of any of
the Collateral except as herein permitted, or the making of any levy, seizure
or attachment thereof or therein; or
E. Any tax levy, attachment, garnishment, levy of execution, or other
process issued against the Member or the Collateral; or
F. Any suspension of payment by the Member to any creditor or any events
which result in acceleration to the maturity of any indebtedness of the Member
to others under any indenture, agreement or undertaking; or
G. Application for, or appointment of, a receiver of any part of the
property of the Member, or in case of adjudication of insolvency, or assignment
for benefit of creditors, or general transfer of assets by the Member, of if
management of the Member is taken over by any supervisory authority, or in case
of any other form of liquidation, merger, sale of assets, or voluntary
dissolution, or upon termination of the membership of the Member in the Federal
Home Loan Bank of Des Moines, or in the case of advances made under the
provisions of 19 U.S.C. ss. 1491(g)(4), if at any time thereafter the
creditor liabilities of the Member, excepting its liabilities to the Bank, are
increased in any manner to an amount exceeding 5% of its net assets; or
H. Determination by the Bank that a material adverse change has occurred
in the financial condition of the Member from that disclosed at the time of the
making of any advance, or from the condition of the Member as theretofore most
recently disclosed to the Bank in any manner; or
I. If the Bank reasonably and in good faith deems itself insecure even
though the Member is not otherwise in default.
SECTION 8. BANK REMEDIES IN THE EVENT OF DEFAULT. At any time after any
default as herein before provided, the Bank may, at its option, declare the
entire amount of any and all advances to be immediately due and payable. The
Bank shall have all of the remedies of a secured party under the Uniform
Commercial Code of the State of Iowa. In addition thereto, the Bank may take
immediate possession of any of the Collateral or any part thereof wherever the
same may be found. The Member agrees to pay all the costs and expenses of the
Bank in the collection of the secured indebtedness and enforcement of the
Bank's rights hereunder including, without limitation, reasonable attorney's
fees. The Bank may sell the Collateral or any part thereof in such manner and
for such price as the Bank deems appropriate without any lability for any loss
2
<PAGE> 3
due to decrease in the market value of the Collateral during the period
held. The Bank shall have the right to purchase all or part of the Collateral at
public or private sale. If any notification of intended disposition of any of
the Collateral is required by law, such notification shall be deemed reasonable
and properly given if mailed, postage prepaid, at least five days before any
such disposition in the address of the Member appearing on the records of the
Bank. The proceeds of any sale shall be applied in the following order: First,
to pay all costs and expenses of every kind for the care, collection,
safekeeping, sale, foreclosure, delivery or otherwise respecting the Collateral
(including expenses incurred in the protection of the Bank's title to or lien
upon or right in any of the Collateral, expenses for legal services of any kind
in connection therewith or in making any such sale or sales, insurance,
commission for sales, and guaranty); then to interest on all indebtedness of the
Member to the Bank; then to the principal amount of any such indebtedness
whether or not such indebtedness is due or accrued. The Bank, at its discretion,
may apply any surplus to indebtedness of Member to third parties claiming a
secondary security interest in the Collateral. Any remaining surplus shall be
paid to the Member.
SECTION 9. APPOINTMENT OF BANK AS ATTORNEY-IN-FACT. In the event of
default, and without limiting any other rights the Bank might have as a secured
party under the Uniform Commercial Code of Iowa, or the laws of any
jurisdiction under which the Bank might be exercising rights hereunder, and
under this Agreement, Member does hereby make, constitute, and appoint Bank its
true and lawful attorney-in-fact to deal with the Collateral and, in its name
and stead to release, collect, compromise, settle, and release or record any
mortgage of deed or trust which is a part of such Collateral as fully as the
Member could do if acting for itself. The powers herein granted are coupled
with an interest, and are irrevocable, and full power of substitution is
granted to the Bank in the premises.
SECTION 10. AUDIT AND VERIFICATION OF COLLATERAL. In extension and not in
limitation of all requirements of law respecting examination of the Member by
or on behalf of the Bank, the Member agrees that all Collateral pledged
hereunder shall always be subject to audit and verification by or on behalf of
the Bank in its corporate capacity.
SECTION 11. RESOLUTION TO BE FURNISHED BY MEMBER. Member agrees to furnish
to the Bank from time to time a certified copy of resolution of its Board of
Directors or other governing body authorizing such of the Member's officers as
the Member shall select to apply for advances from the Bank. Unless the Bank
shall be otherwise notified in writing; the Bank may honor applications made by
such officers other than in writing; but, in such event the Member shall
confirm such application for advance in writing on forms furnished by the Bank.
But the Member shall forever be stopped to deny its obligations to repay such
advances whether or not an application in writing is ever received by the Bank
so long only as the advance is made in good faith by the Bank on the request of
an officer of employee so authorized by the Member.
SECTION 12. APPLICABILITY OF BANK ACT. In addition to the terms and
conditions herein specifically set forth, all advances are subject to the
rights, powers, privileges and duties conferred upon the Federal Housing
Finance Board, the Federal Home Loan Banks, and on member institutions by the
Act of Congress entitled, 'Federal Home Loan Bank Act, as amended.'
SECTION 13. JURISDICTION. In any action or proceeding brought by the Bank
or the Member in order to enforce any right or remedy under this Agreement,
Member will submit to the jurisdiction or the United States District Court for
the Southern District of Iowa, or if such action or proceeding may not be
brought in Federal Court, the jurisdiction of the Iowa District Court in Polk
County.
If any action or proceeding is brought by the Member seeking to obtain
relief against the Bank arising out of this Agreement and such relief is not
granted by a court of competent jurisdiction, the Member will pay all
attorney's fees and court costs incurred by the Bank in connection therewith.
SECTION 14. CHOICE OF LAW. This Agreement shall be construed and enforced
according to the laws of the State of Iowa, except that the rate of interest on
advances hereunder shall be governed by the provisions of 12 U.S.C. ss. 1430 (as
amended).
SECTION 15. AGREEMENT CONSTITUTES ENTIRE AGREEMENT. This Agreement embodies
the entire Agreement and understanding between the parties hereto relating to
the subject matter hereof and supersedes all prior agreements between such
parties that relate to the subject matter except that: The Credit Policy as
duly adopted by the Bank's Board of Directors from time to time shall be
incorporated herein, unless agreed to in writing by both parties. Advances made
by the Bank to Member prior to the execution of this Agreement shall continue
to be governed exclusively by the terms of the prior agreements pursuant to
which
3
<PAGE> 4
such advances were made, except that (i) any default thereunder shall
constitute default hereunder, (ii) Collateral furnished as security
hereunder shall also secure such prior advances, and (iii) the rights and
obligations with respect to such Collateral shall be governed by the terms
of this Agreement.
SECTION 16. SECTION HEADINGS. Section headings are not to be considered
part of this Agreement. Section headings are solely for convenience of
reference, and shall not affect the meaning or interpretation of this
Agreement or any of its provisions.
SECTION 17. SEVERABILITY OF SECTIONS. If any section or portion thereof
is deemed void in any legal proceeding, the remainder of the Agreement shall
remain in full, force and effect.
SECTION 18. The person signing this document on behalf of the Member
represents that its execution was authorized by appropriate action of the
directors of the Member which was completed on the 12th day of March, 1992,
and that such action is duly reflected in the records of the Member.
Central Life Assurance Company FEDERAL HOME LOAN BANK OF DES
- --------------------------------------- MOINES
(Full Corporate Name of Member)
By: /s/ Keith Gunzenhauser By: /s/ George A. Katterman
------------------------------------ -----------------------------
Keith Gunzenhauser Title: Senior Vice President
Title: Executive Vice President-Finance --------------------------
--------------------------------- Date: March 13, 1992
Date: March 12, 1992 --------------------------
---------------------------------- By: /s/ Jerry R. Ferguson
By: /s/ James A. Smallenberger -----------------------------
------------------------------------ Title: Vice President
James A. Smallenberger --------------------------
Title: Vice President, General Counsel Date: March 13, 1992
& Secretary ---------------------------
---------------------------------
Date: March 12, 1992
----------------------------------
<PAGE> 1
EXHIBIT 10.54
FEDERAL HOME LOAN BANK OF DES MOINES
DES MOINES, IOWA
AGREEMENT FOR ADVANCES PLEDGE AND SECURITY AGREEMENT
SPECIFIC PLEDGE
This Agreement for Advances, Pledge and Security Agreement
("Agreement"), effective the 1st day of September, 1995 is entered between
American Vanguard Life Insurance Company ("Member"), with principal offices at
511 5th Avenue, Des Moines and the Federal Home Loan Bank of Des Moines
("Bank"), with principal offices at 907 Walnut, Des Moines, Iowa 50309.
WHEREAS, The Bank in accordance with the Federal Home Loan Bank Act,
regulations and directives of the Federal Housing Finance Board and policies
promulgated by its own Board, makes available advances to its members. The
available advances are set forth by the Bank in a statement of "Credit Policy,"
as may be amended from time to time.
WHEREAS, The Member may, from time to time, apply for an advance or
advances which may be available to it.
NOT THEREFORE, For valuable consideration and with respect to each and
every such advance, the Parties agree as follows:
SECTION 1. CONFIRMATION OF ADVANCE. To be bound by the terms and
conditions set forth herein, in the confirmation of advance issued with respect
to each advance, and in the Bank's Credit Policy as may be amended from time to
time. A confirmation of advance shall mean a writing or machine readable
electronic transmission in such form or forms as may be determined by the Bank
from time to time.
SECTION 2. PAYMENT TO THE BANK. To repay each and any advance together
with interest thereon according to the confirmation of each such advance
communicated to the Member by the Bank, together with any unpaid costs and
expenses in connection therewith. Such payment shall be made at the office of
the Bank in Des Moines, Iowa, or at such other place as the Bank, or its
successors or assigns, may from time to time appoint in writing.
The default rate on past due principal and interest may, at the option of
the Bank, be at a rate 1% per annum higher than the then current rate being
charged by the Bank for advances.
SECTION 3. ASSIGNMENT TO BANK OF SECURITY INTEREST IN BANK STOCK. The
Member hereby assigns, transfers and pledges to the Bank, its successors or
assigns, all stock of the Federal Home Loan Bank of Des Moines owned by the
Member as collateral security for payment of any and all indebtedness, whether
in the nature of an advance or otherwise, of the Member to the Bank, its
successors and assigns.
SECTION 4. ASSIGNMENT OF SECURITY INTEREST IN OTHER COLLATERAL. As
additional collateral security for any and all such advances, Member assigns,
transfers, and pledges to the Bank, its successors or assigns, property of
Member as described in Exhibit A hereof (the "Collateral"). With respect to
such Collateral, Member undertakes and agrees as follows:
A. To keep and maintain such Collateral free and clear of pledges,
liens and encumbrances to others at the required collateral maintenance
level. The "required collateral maintenance level" means the amount of
collateral the member is required to maintain free and clear of pledge,
liens and encumbrances to others as set forth from time to time in the
Bank's Credit Policy;
<PAGE> 2
B. To assemble and deliver Collateral to the Bank or its authorized
agents immediately upon demand of the Bank; and as specified by the Bank in
its Credit Policy from time to time, and to pay for the safekeeping
collateral as established by the Bank;
C. To make, execute and deliver to the Bank such assignments,
endorsements, listings, powers, financing statements or other instruments
as the Bank may reasonably request respecting such Collateral.
SECTION 5. DUTY TO USE REASONABLE CARE. In the event Member delivers
security to the Bank or its Agent pursuant to section 4 above, the duty of the
Bank with respect to said security shall be solely to use reasonable care in
the custody and preservation of the security in its possession.
SECTION 6. ADDITIONAL SECURITY. Member shall assign additional or
substituted Collateral for such advances at any time the Bank shall deem it
necessary for the Bank's protection.
SECTION 7. EVENTS OF DEFAULT. The Bank may consider the Member in default
hereunder upon the occurrence of any of the following events or conditions:
A. Failure of the Member of pay any interest, or repay any principal,
of any advances as herein required; or
B. Breach or failure to perform by the Member of any covenant,
promise, condition, obligation, or liability contained or referred to
herein, or any other agreement to which the Member and the Bank are
parties; or
C. Proof being made that any representations, statements, or warranty
made or furnished in any manner to the Bank by or on behalf of the Member
in connection with all or part of any advance was false in any material
respect when made or furnished; or
D. Loss, theft, damage, destruction, sale or encumbrance to or of any
of the Collateral except as herein permitted, or the making of any levy,
seizure or attachment thereof or therein; or
E. Any tax levy, attachment, garnishment, levy of execution, or other
process issued against the Member or the Collateral; or
F. Any suspension of payment by the Member to any creditor or any
events which result in acceleration to the maturity of any indebtedness of
the Member to others under any indenture, agreement or undertaking; or
G. Application for, or appointment of, a receiver of any part of the
property of the Member, or in case of adjudication of insolvency, or
assignment for benefit of creditors, or general transfer of assets by the
Member, or if management of the Member is taken over by any supervisory
authority, or in case of any other form of liquidation, merger, sale of
assets, or voluntary dissolution, or upon termination of the membership of
the Member in the Federal Home Loan Bank of Des Moines, or in the case of
advances made under the provisions of 12 U.S.C. - ss. 1431(g)(4), if at
any time thereafter the creditor liabilities of the Member, excepting its
liabilities to the Bank, are increased in any manner to an amount exceeding
5% of its net assets; or
H. Determination by the Bank that a material adverse change has
occurred in the financial condition of the Member from that disclosed at
the time of the making of any advance, or from the condition of the Member
as theretofore most recently disclosed to the Bank in any manner; or
2
<PAGE> 3
I. If the Bank reasonably and in good faith deems itself insecure
even though the Member is not otherwise in default.
SECTION 8. BANK REMEDIES IN THE EVENT OF DEFAULT. At any time after any
default as herein before provided, the Bank may, at its option, declare the
entire amount of any and all advances to be immediately due and payable. The
Bank shall have all of the remedies of a secured party under the Uniform
Commercial Code of the State of Iowa. In addition thereto, the Bank may take
immediate possession of any of the Collateral or any part thereof wherever the
same may be found. The Member agrees to pay all the costs and expenses of the
Bank in the collection of the secured indebtedness and enforcement of the
Bank's rights hereunder including, without limitation, reasonable attorney's
fees. The Bank may sell the Collateral or any part thereof in such manner and
for such price as the Bank deems appropriate without any liability for any loss
due to decrease in the market value of the Collateral during the period held.
The Bank shall have the right to purchase all or part of the Collateral at
public or private sale. If any notification of intended disposition of any of
the Collateral is required by law, such notification shall be deemed reasonable
and properly given if mailed, postage prepaid, at least five days before any
such disposition to the address of the Member appearing on the records of the
Bank. The proceeds of any sale shall be applied in the following order: First,
to pay all costs and expenses of every kind for the care, collection,
safekeeping, sale, foreclosure, delivery or otherwise respecting the Collateral
(including expenses incurred in the protection of the Bank's title to or lien
upon or right in any of the Collateral, expenses for legal services of any kind
in connection therewith or in making any such sale or sales, insurance,
commission for sales, and guaranty); then to interest on all indebtedness of
the Member to the Bank; then to the principal amount of any such indebtedness
whether or not such indebtedness is due or accrued. The Bank, at its
discretion, may apply any surplus to indebtedness of Member to third parties
claiming a secondary security interest in the Collateral. Any remaining surplus
shall be paid to the Member.
SECTION 9. APPOINTMENT OF BANK AS ATTORNEY-IN-FACT. In the event of
default, and without limiting any other rights the Bank might have as a secured
party under the Uniform Commercial Code of Iowa, or the laws of any
jurisdiction under which the Bank might be exercising rights hereunder, and
under this Agreement, Member does hereby make, constitute, and appoint Bank its
true and lawful attorney-in-fact to deal with the Collateral and, in its name
and stead to release, collect, compromise, settle, and release or record any
mortgage of deed or trust which is a part of such Collateral as fully as the
Member could do if acting for itself. The powers herein granted are coupled
with an interest, and are irrevocable, and full power of substitution is
granted to the Bank in the premises.
SECTION 10. AUDIT AND VERIFICATION OF COLLATERAL. In extension and not in
limitation of all requirements of law respecting examination of the Member by
or on behalf of the Bank, the Member agrees that all Collateral pledged
hereunder shall always be subject to audit and verification by or on behalf of
the Bank in its corporate capacity.
SECTION 11. RESOLUTION TO BE FURNISHED BY MEMBER. Member agrees to furnish
to the Bank from time to time a certified copy of resolution of its Board of
Directors or other governing body authorizing such of the Member's officers as
the Member shall select to apply for advances from the Bank. Unless the Bank
shall be otherwise notified in writing, the Bank may honor applications made by
such officers other than in writing; but, in such event the Member shall
confirm such application for advance in writing on forms furnished by the
Bank. But the member shall forever be estopped to deny its obligation to repay
such advance whether or not an application in writing is ever received by the
Bank so long only as the advance is made in good faith by the Bank on the
request of an officer or employee so authorized by the Member.
SECTION 12. APPLICABILITY OF BANK ACT. In addition to the terms and
conditions herein specifically set forth, all advances are subject to the
rights, powers, privileges and duties conferred upon the Federal Housing
Finance Board, the Federal Home Loan Banks, and on member institutions by the
Act of Congress entitled, "Federal Home Loan Bank Act, as amended."
SECTION 13. JURISDICTION. In any action or proceeding brought by the Bank
or the Member in order to enforce any right or remedy under this Agreement,
Member will submit to the jurisdiction of the United States District Court for
the Southern District of Iowa, or if such action or proceeding may not be
brought in Federal Court, the jurisdiction of the Iowa District Court in Polk
County.
3
<PAGE> 4
If any action or proceeding is brought by the Member seeking to obtain
relief against the Bank arising out of this Agreement and such relief is not
granted by a court of competent jurisdiction, the Member will pay all
attorney's fees and court costs incurred by the Bank in connection therewith.
SECTION 14. CHOICE OF LAW. This Agreement shall be construed and
enforced according to the laws of the State of Iowa, except that the rate of
interest on advances hereunder shall be governed by the provisions of 12 U.S.C.
ss. 1430 as amended).
SECTION 15. AGREEMENT CONSTITUTES ENTIRE AGREEMENT. This Agreement
embodies the entire Agreement and understanding between the parties hereto
relating to the subject matter hereof and supersedes all prior agreements
between such parties that relate to the subject matter except that: The Credit
Policy as duly adopted by the Bank's Board of Directors from time to time shall
be incorporated herein, unless agreed to in writing by both parties. Advances
made by the Bank to Member prior to the execution of this Agreement shall
continue to be governed exclusively by the terms of the prior agreements
pursuant to which such advances were made, except that (i) any default
thereunder shall constitute default hereunder, (ii) Collateral furnished as
security hereunder shall also secure such prior advances, and (iii) the rights
and obligations with respect to such Collateral shall be governed by the terms
of this Agreement.
SECTION 16. SECTION HEADINGS. Section headings are not to be considered
part of this Agreement. Section headings are solely for convenience of
reference, and shall not effect the meaning or interpretation of this Agreement
or any of its provisions.
SECTION 17. SEVERABILITY OF SECTIONS. If any section or portion thereof
is deemed void in any legal proceeding, the remainder of the Agreement shall
remain in full force and affect.
SECTION 18. The person signing this document on behalf of the Member
represents that its execution was authorized by appropriate action of the
directors of the Member which was completed on the day of
, 19 , and that such action is duly reflected in the
records of the Member.
American Vanguard Life Insurance Company
- ----------------------------------------
(Full Corporate Name of Member) FEDERAL HOME LOAN BANK OF DES MOINES
By: /s/ Michael G. Fraizer By: /s/ Jerry R. Ferguson
------------------------------------- ---------------------------------
Title: Vice President Title: First Vice President
---------------------------------- ------------------------------
Date: 9-7-95 Date: 9/7/95
----------------------------------- -------------------------------
By: /s/ James A. Smallenberger By: /s/ Julie F. Spiker
------------------------------------- ---------------------------------
Title: Secretary Title: Vice President
---------------------------------- ------------------------------
Date: 9-7-95 Date: 9/7/95
----------------------------------- -------------------------------
4
<PAGE> 1
EXHIBIT 10.55
AGREEMENT AND PLAN OF MERGER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE I. THE MERGER.............................................................................................4
1.1. Structure of the Merger................................................................................4
1.2. Effect of the Merger...................................................................................5
1.3. Delivery of Cash; Exchange Procedures..................................................................5
1.4 Reserve Amount.........................................................................................5
1.5. Certain Definitions....................................................................................6
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER.........................................................8
2.1. Corporate Organization, etc............................................................................8
2.2. Capital Stock; Options.................................................................................9
2.3. Subsidiaries and Affiliates............................................................................9
2.4. Authorization, etc.....................................................................................9
2.5. No Violation...........................................................................................9
2.6. Governmental Authorities...............................................................................9
2.7. Financial Statements..................................................................................10
2.8. No Undisclosed Liabilities, Claims, etc...............................................................10
2.9. Absence of Certain Changes............................................................................10
2.10. Contracts............................................................................................11
2.11. True and Complete Copies.............................................................................11
2.12. Title and Related Matters............................................................................11
2.13. Litigation...........................................................................................12
2.14. Tax Matters..........................................................................................13
2.15. Government Contracts.................................................................................15
2.16. Compliance with Law..................................................................................15
2.17. Absence of Certain Business Practices................................................................16
2.18. ERISA and Related Employee Benefit Matters...........................................................16
2.19. Intellectual Property................................................................................18
2.20. Warranties...........................................................................................19
2.21. Labor Relations......................................................................................19
2.22. Insurance............................................................................................19
2.23. Environmental........................................................................................19
2.24. Capital Expenditures.................................................................................21
2.25. Suppliers............................................................................................21
2.26. Dealings with Affiliates.............................................................................22
2.27. Bank Accounts........................................................................................22
2.28. Compensation.........................................................................................22
2.29. Insurance Licenses...................................................................................22
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
2.30. Disclosure...........................................................................................22
2.31 Consultants, Brokers and Finders......................................................................22
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF ACQUIROR..........................................................22
3.1. Authorization, etc....................................................................................23
3.2. No Violation..........................................................................................23
3.3. Governmental Authorities..............................................................................23
3.4. Consultants, Brokers and Finders......................................................................23
ARTICLE IV. CERTAIN COVENANTS....................................................................................23
4.1. Further Assurances....................................................................................23
4.2. Employment Agreements.................................................................................23
4.3. Reserved..............................................................................................23
4.4. Opinion of Counsel....................................................................................23
4.5. Release...............................................................................................23
ARTICLE V. CLOSING............................................................................................. 24
5.1. Effective Time........................................................................................24
5.2. Closing...............................................................................................24
5.3. Deliveries at Closing.................................................................................24
ARTICLE VI. TERMINATION AND ABANDONMENT..........................................................................24
6.1. Methods of Termination................................................................................24
6.2. Procedure Upon Termination............................................................................25
ARTICLE VII. INDEMNIFICATION.....................................................................................25
7.1. Indemnification by Shareholder........................................................................25
7.2. Indemnification by Acquiror...........................................................................26
7.3. Transfer of Defense for Damages.......................................................................26
7.4. Survival of Warranties................................................................................27
7.5. Determination of Damages..............................................................................27
7.6. Exclusivity...........................................................................................27
ARTICLE VIII. MISCELLANEOUS PROVISIONS...........................................................................27
8.1. Amendment and Modification............................................................................27
8.2. Waiver of Compliance; Consents........................................................................27
8.3. Expenses..............................................................................................27
8.4. Notices...............................................................................................28
8.5. Binding Effect........................................................................................29
8.6. Governing Law.........................................................................................29
8.7. Counterparts..........................................................................................29
8.8. Neutral Interpretation................................................................................29
</TABLE>
2
<PAGE> 4
<TABLE>
<S> <C> <C>
8.9. Headings..............................................................................................29
8.10. Entire Agreement.....................................................................................29
</TABLE>
3
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made
effective as of the 30th day of September, 1998, by and among AMVESTORS
FINANCIAL CORPORATION, a Kansas corporation ("Acquiror"), SENIOR BENEFIT
SERVICES OF KANSAS, INC., a Kansas corporation ("Merger Sub"), SENIOR BENEFIT
SERVICES INSURANCE AGENCY, INC., a Texas corporation f/k/a "Senior Benefit
Services Agency, Inc." ("SBS"), NATIONAL SENIOR BENEFIT SERVICES, INC., a Texas
corporation and wholly-owned subsidiary of SBS ("SBS Sub") and Richard McCarter
(the "Shareholder").
R E C I T A L S
WHEREAS, the Boards of Directors of Acquiror, Merger Sub and
SBS deem it advisable and in the best interests of their respective
shareholder(s) that Acquiror acquire SBS, and such Boards of Directors have
approved the merger of SBS with and into Merger Sub upon the terms and subject
to the conditions set forth herein; and
WHEREAS, Shareholder, as the sole shareholder of SBS, SBS, as
the sole shareholder of SBS Sub, and the Acquiror, as the sole stockholder of
Merger Sub, have approved the merger and the transactions contemplated herein.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and
respective representations, warranties and covenants set forth herein and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follow:
ARTICLE I.
THE MERGER
1.1. Structure of the Merger. At the effective time of the
Merger (the "Effective Time") as provided in Section 5.1, SBS will merge with
and into Merger Sub (the "Merger") pursuant to the provisions of, and with the
effect provided in, Section 17-6702 of the Kansas General Corporation Code and
Section 5.01 of the Texas Business Corporation Act, whereupon the separate
existence of SBS shall cease, and Merger Sub shall be the surviving corporation
(the "Surviving Corporation"). At the Effective Time, the articles of
incorporation and by-laws of Merger Sub in effect immediately prior to the
Effective Time shall be the articles of incorporation and by-laws of the
Surviving Corporation, the directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, and the
officers of Merger Sub immediately prior to the Effective Time shall be the
officers of the Surviving Corporation. The articles of incorporation of Merger
Sub are attached as Exhibit 1.1.
4
<PAGE> 6
1.2. Effect of the Merger.
(a) By virtue of the Merger, automatically and without any
action on the part of the holder thereof, the shares of SBS common stock, par
value $0.10 per share (the "Common Stock") issued and outstanding at the
Effective Time (the "Shares") shall, at the Effective Time, be cancelled and
cease to be issued and outstanding shares of Common Stock and shall be converted
into the right to receive the Merger Consideration.
(b) At the Effective Time, pursuant to and as permitted by
applicable Kansas and Texas corporate law, all of the rights, privileges,
powers, franchises, property and assets of Merger Sub and SBS and all debts and
liabilities due or to become due to Merger Sub and SBS, including every interest
or asset of conceivable value or benefit, shall be deemed fully and finally and
without any right of reversion or impairment vested in the Surviving Corporation
without further act or deed, and without any assignment or transfer having
occurred, and the Surviving Corporation shall have and hold the same in its own
right as fully as the same was possessed and held by Merger Sub or SBS. All
debts, liabilities, and obligations due or to become due of, and all claims or
demands for any cause existing against, Merger Sub or SBS shall be and become
the debts, liabilities, obligations of, and the claims and demands against, the
Surviving Corporation in the same manner as if the Surviving Corporation had
itself incurred or become liable for them; all rights or creditors of Merger Sub
or SBS and all liens upon the property of Merger Sub or SBS shall be preserved
unimpaired, and any action or proceeding pending by or against Merger Sub or SBS
shall not be deemed to have been abated or have been discontinued, but may be
prosecuted to judgment with the right of appeal or review as in other cases as
if the Merger had not taken place and the Surviving Corporation may be
substituted for Merger Sub or SBS, as the case may be.
1.3. Delivery of Cash; Exchange Procedures. Subject to the
terms and conditions of this Agreement and in reliance on the representations,
warranties and covenants of SBS and Shareholder herein contained, and in
consideration of the Merger, Acquiror or Merger Sub agrees to pay to Shareholder
as follows (the "Merger Consideration"):
(a) At the Closing, $2,135,000 plus simple interest accrued
thereon at the rate of 7% per annum from July 1, 1998 through the Closing Date
by wire transfer in immediately available funds to Shareholder's account (the
"Initial Merger Payment");
(b) on or before January 31, 2004, the amount, if any, of
Net Reserve Amount (hereinafter defined), as determined in accordance with
Section 1.4.
1.4. Reserve Amount. As part of the Merger Consideration, on
February 1, 2004 Acquiror shall be obligated to pay to Shareholder the sum of
$1,220,000 (the "Reserve Amount"), subject to dollar for dollar (i) deduction
for any offsets or deductions against the Reserve Amount which Acquiror may
apply to satisfy any claims for Damages made pursuant to Section 7.1 and (ii)
addition for simple interest accrued thereon at the rate of 7% per annum from
July 1, 1998 through the date of payment. The amount of the Reserve Amount, net
of such
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deductions and additions, at January 31, 2004 is referred to herein as the "Net
Reserve Amount" and shall be paid by Acquiror to Shareholder on February 1, 2004
(or if such day is a holiday or weekend, on the next banking day) by wire
transfer in immediately available funds. The Reserve Amount shall be a
nonexclusive source of funds and nonexclusive remedy for claims for Damages
under Section 7.1 and shall not in any way limit or cap the amount of claims for
such Damages.
1.5. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings set forth below:
"Accounts" means all of SBS's and SBS Sub's (as the case may
be) customer accounts and records pertaining to such accounts, including
accounts and records relating to all lines of insurance, employee benefits and
any related types of business or service written or offered by SBS or SBS Sub,
as the case may be.
"Acquiror" shall have the meaning set forth in the preamble of
this Agreement.
"Affiliates" shall have the meaning set forth in Section 2.3.
"Balance Sheets" shall have the meaning set forth in Section
2.7.
"Closing" shall have the meaning set forth in Section 5.2.
"Closing Balance Sheet" means the balance sheet of SBS (on a
consolidated basis) as of the close of business on the Effective Date prepared
in accordance with GAAP.
"Closing Date" shall have the meaning set forth in Section 5.2.
"Code" shall have the meaning set forth in Section 2.14.
"Contracts" shall have the meaning set forth in Section 2.10.
"Damages" shall have the meaning set forth in Section 7.1.
"Effective Time" shall have the meaning set forth in Section
5.1.
"Encumbrances" shall mean all mortgages, security interests,
liens, pledges, claims, escrows, options, rights of first refusal, indentures,
easements, licenses, security agreements or other agreements, arrangements,
contracts, commitments, understandings, obligations, charges or encumbrances of
any kind or character.
"Environmental Laws and Regulations" shall have the meaning set
forth in Section 2.23.
"ERISA" shall have the meaning set forth in Section 2.18.
"GAAP" means generally accepted accounting principles.
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"Hazardous Materials" shall have the meaning set forth in
Section 2.23.
"Income Statements" shall have the meaning set forth in Section
2.7. "Initial Merger Payment" shall have the meaning set forth in Section 1.3.
"IRS" shall have the meaning set forth in Section 2.14.
"Intellectual Property Rights" shall have the meaning set forth
in Section 2.19.
"Key Employees" means employees of SBS or SBS Sub who have
material relationships with SBS's or SBS Sub's respective customers.
"Knowledge" means the actual knowledge of the subject person
and that knowledge that would be obtained or realized upon the subject person's
reasonable and prudent inquiry into the matter after having been put on notice
(including constructive notice provided for under applicable statutory or
regulatory provisions) of the need to so inquire.
"Last Fiscal Year-End Date" shall have the meaning set forth in
Section 2.7.
"Last Interim Period-End Date" shall have the meaning set forth
in Section 2.7.
"Laws" shall include, without limitation, all foreign, federal,
state and local laws, statutes, rules, regulations, codes, ordinances, plans,
orders, judicial decrees, writs, injunctions, notices, decisions or demand
letters issued, entered or promulgated pursuant to any foreign, federal, state
or local law.
"Lease Restrictions" shall have the meaning set forth in
Section 2.12.
"Licenses" shall have the meaning set forth in Section 2.29.
"Merger" shall have the meaning set forth in Section 1.1.
"Merger Consideration" shall have the meaning set forth in
Section 1.3.
"Merger Sub" shall have the meaning set forth in the preamble
of this Agreement.
"Net Reserve Amount" shall have the meaning set forth in
Section 1.4.
"Notice" shall have the meaning set forth in Section 8.4.
"Operating Earnings" means for any given period and on a
consolidated basis, the gross revenues of SBS less the operating expenses of
SBS, excluding expenses related to any Agent Bonus Plan, any SBS Management
Bonus Plan, SBS Profit Sharing Plan, employment and non-competition agreements
with George Richards and Richard McCarter, respectively, Goodwill amortization
and federal income taxes, and determined in accordance with GAAP.
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"Pension Benefit Plan" shall have the meaning set forth in
Section 2.18.
"Reserve Amount" shall have the meaning set forth in Section
1.4.
"SBS" shall have the meaning set forth in the preamble of this
Agreement.
"SBS Sub" shall mean National Senior Benefit Services, Inc., a
Texas corporation, a wholly-owned direct subsidiary of SBS.
"Shareholder" shall have the meaning set forth in the preamble
of this Agreement.
"Shares" shall have the meaning set forth in Section 1.2.
"Surviving Corporation" shall have the meaning set forth in
Section 1.1.
"Taxes" shall have the meaning set forth in Section 2.14.
"Threshold" shall have the meaning set forth in Section 7.1.
"Welfare Benefit Plan" shall have the meaning set forth in
Section 2.18.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
Shareholder and SBS acknowledge that Acquiror and Merger Sub
are unwilling to proceed with the Merger and transactions contemplated under
this Agreement without the representations and warranties provided by
Shareholder in this Article II. Shareholder hereby represents and warrants to
Acquiror and Merger Sub as follows:
2.1. Corporate Organization, etc. SBS and SBS Sub are
corporations duly organized, validly existing and in good standing under the
laws of the State of Texas with all requisite corporate power and authority to
carry on their respective business as it is now being conducted and to own,
operate and lease their respective properties and assets. Exhibit 2.1 lists each
of the states where SBS and SBS Sub is qualified as a foreign corporation. To
Shareholder's Knowledge (after reasonable investigation made), the conduct of
its business and its ownership or use of property do not require SBS or SBS Sub
to be qualified or licensed to do business as a foreign corporation in any state
except those listed in Exhibit 2.1. SBS and SBS Sub have all federal, state,
local and foreign licenses, permits or other approvals required for the
operation of their respective businesses as now being conducted, except as would
not have a material adverse effect on SBS's or SBS Sub's business or prospects,
respectively.
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2.2. Capital Stock; Options.
(a) The authorized capital stock of SBS consists of 10,000
shares of Common Stock and the only shares of capital stock of SBS issued and
outstanding are the 10,000 shares of Common Stock held by Shareholder of record
and beneficially. SBS has no treasury stock. All the Shares are validly issued,
fully paid and nonassessable and are owned by Shareholder, free and clear of all
Encumbrances.
(b) The authorized capital stock of SBS Sub consists of
1,000,000 shares of common stock, par value $0.10 per share, and the only shares
of capital stock of SBS Sub issued and outstanding are the 10,000 shares of
common stock held by SBS of record and beneficially (the "Sub Shares").
(c) There are no issued and outstanding options, warrants,
rights, securities, contracts, commitments, understandings or arrangements by
which SBS, SBS Sub or Shareholder is bound with respect to the Shares or the Sub
Shares (with regard to voting, transfer, sale or otherwise) or to issue any
additional shares of its capital stock or equity equivalents.
2.3. Subsidiaries and Affiliates. SBS has a single subsidiary,
SBS Sub. SBS Sub has no subsidiaries. Except as set forth in Exhibit 2.3,
neither SBS nor SBS Sub has any other subsidiaries, Affiliates (as defined
below) or investments in any other entity or business operation. The term
"Affiliates" includes each shareholder, director and officer of a party, and any
corporation, partnership or other entity in which such party or a director or
officer of such party has any financial interest or is a controlling person, as
that term is used in connection with the federal securities laws, if any such
person or entity has, or in the past had, a contractual relationship with or
transacted business with such party.
2.4. Authorization, etc. SBS and Shareholder each have full
power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby.
2.5. No Violation. Except as set forth on Exhibit 2.5, neither
SBS nor SBS Sub is subject to or obligated under any article or certificate of
incorporation or bylaw or, to Shareholder's Knowledge, any Law, agreement,
instrument, license, franchise or permit, which would be breached or violated by
SBS's execution, delivery and performance of this Agreement. SBS, SBS Sub and
Shareholder have complied with all applicable Laws in connection with the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby.
2.6. Governmental Authorities. Neither Shareholder, SBS nor SBS
Sub is required to submit any notice, report or other filing with, and no
consent, approval or authorization is required, by any governmental or
regulatory authority in connection with their execution, delivery, consummation
or performance of this Agreement or the consummation of the transactions
contemplated hereby, except as otherwise expressly provided herein.
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2.7. Financial Statements. Exhibit 2.7 contains SBS's
consolidated balance sheet at December 31, 1997 and at June 30, 1998 (the
"Balance Sheets") and consolidated Statements of Revenue and Expenses for the
fiscal year ended December 31, 1997 and for the period ended as of June 30, 1998
(the "Income Statements"). The Balance Sheets are complete and accurate and
fairly present the financial position of SBS as of the dates thereof, and the
Income Statements fairly and accurately present the results of operations for
the periods referred to therein. The Balance Sheets and the Income Statements
have been prepared in accordance with GAAP consistently applied. December 31,
1997 is referred to herein as the "Last Fiscal Year-End Date" and June 30, 1998
is referred to herein as the "Last Interim Period-End Date."
2.8. No Undisclosed Liabilities, Claims, etc. To Shareholder's
Knowledge (after reasonable investigation made) and except for (a) liabilities
fully reflected or reserved against in the Balance Sheet; and (b) regular and
usual liabilities and obligations incurred in the ordinary course of business
consistent with past practices after the Last Interim Period-End Date, neither
SBS nor SBS Sub has any liabilities, obligations or claims (absolute, accrued,
fixed or contingent, matured or unmatured, or otherwise), including liabilities,
obligations or claims which may become known or which arise only after the
Closing and which result from actions, omissions or occurrences of SBS or SBS
Sub prior to the Closing.
2.9. Absence of Certain Changes. Except as set forth in Exhibit
2.9, since the Last Interim Period-End Date and with references herein being
deemed to include SBS Sub:
(a) here has not been (i) any adverse change in the business,
financial condition, earnings, operations or prospects of SBS's business; (ii)
any damage, destruction or loss, whether covered by insurance or not, adversely
affecting SBS's properties, business or prospects; (iii) any increase in the
compensation payable or to become payable by SBS to its directors, officers or
Key Employees, or any adoption of or increase in any bonus, insurance, pension
or other employee benefit plan, payment or arrangement made to, for or with any
such party (except for the payment of cash at closing to Shareholder and/or
employees of SBS as is expressly agreed by the parties hereto in writing prior
thereto); (iv) any entry into any commitment or transaction outside the ordinary
course of SBS's business, including, without limitation, any borrowing or
capital expenditure (except for the new telephone system installed in
August/September 1998); (v) any change by SBS in accounting methods, practices
or principles; (vi) any termination or waiver of any rights of value to the
business of SBS; (vii) any transaction or event involving receipt or payment of
more than $5,000 not in the ordinary course of SBS's business; (viii) any
adoption or amendment of any collective bargaining, bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation, or other
plan, agreement, trust, fund or arrangement for the benefit of employees; or
(ix) any agreement or understanding made or entered into to do any of the
foregoing; and
(b) SBS has (i) operated its business and promoted and
maintained the Accounts in the ordinary course, diligently and in good faith,
consistent with past management practices; and (ii) maintained all of its
properties in customary repair, order and condition, reasonable wear and tear
excepted.
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2.10. Contracts. Exhibit 2.10 contains a schedule of all
Contracts to which SBS or SBS Sub is a party. The term "Contracts" shall
include, but shall not be limited to, all oral (which shall be summarized in
Exhibit 2.10) and written contracts, agreements, loan agreements, mortgages,
indentures, deeds of trust, guarantees, commitments, joint venture agreements,
purchase and/or sale agreements, collective bargaining, union, consulting and/or
employment contracts, leases of real or personal property, easements,
distribution or dealer agreements, service agreements, license agreements and
advertising agreements (except there shall not be included any license
agreements, brokers agreement with insurance agents or agreements which do not
exceed, in the case of any one agreement, an obligation of $5,000, and in the
case of all such agreements, an aggregate obligation of $15,000). To the
Knowledge of Shareholder, neither SBS nor SBS Sub is in default or alleged to be
in default under any Contract nor is SBS or SBS Sub aware of any default by any
other party to any Contract, and there exists no event, condition or occurrence
which, after notice or lapse of time, or both, would constitute SBS's or SBS
Sub's default under any Contract. To the Knowledge of Shareholder, all the
Contracts are in full force and effect and constitute legal, valid and binding
obligations of the parties thereto in accordance with their terms.
2.11. True and Complete Copies. Copies of all agreements,
contracts and documents delivered and to be delivered hereunder by SBS or SBS
Sub are true and complete copies of such agreements, contracts and documents.
All written summaries of oral agreements are materially correct.
2.12. Title and Related Matters. Except as set forth in Exhibit
2.12, SBS and SBS Sub have good and marketable title to (or in the case of
indicated leases, valid leasehold interest) in all their respective properties
and assets reflected in the Balance Sheet or acquired after the date thereof
(except properties sold or otherwise disposed of since the date thereof in the
ordinary course of business and consistent with past practices) including,
without limitation, the specific assets referred to in paragraphs (a), (b) and
(c) below, free and clear of all Encumbrances, except as reflected on the
Balance Sheet. SBS or SBS Sub, as the case may be, owns or leases, directly or
indirectly, all the assets and properties, and is a party to all licenses and
other agreements, presently used or necessary to carry on the business or
operations of SBS or SBS Sub, respectively, as presently conducted.
(a) Real Property
(i) SBS has good and marketable title in fee simple to
the land, including buildings and improvements thereon, shown on
the Balance Sheet. All such land, buildings and improvements of
SBS are owned free and clear of all Encumbrances of every kind and
character, except as set forth on Exhibit 2.12.
(ii) Neither SBS nor SBS Sub is a tenant under any
lease(s) of real property used by SBS or SBS Sub except as
described on Exhibit 2.10. With respect to the leased real
property described on Exhibit 2.10 and except as set forth on
Exhibit 2.12: (A) all such leases are in full force and effect and
constitute
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valid and binding obligations of the respective parties thereto;
(B) there have not been and there currently are not any defaults
thereunder by any party thereto; (C) no event has occurred which
(whether with or without notice, lapse of time or the happening or
occurrence of any other event) would constitute a default
thereunder entitling the lessor to terminate the lease; and (D)
the continuation, validity and effectiveness of all such leases
under the current rentals and other current terms thereof will in
no way be affected by the transactions contemplated by this
Agreement or, if any would be affected, Shareholder shall use all
necessary means at its disposal to cause an appropriate consent to
such transactions to be delivered to Acquiror prior to the Closing
Date at no cost or other adverse consequence to SBS, SBS Sub,
Merger Sub or Acquiror ((A) through (D) are hereinafter
collectively referred to as "Lease Restrictions").
(iii) Neither SBS nor SBS Sub currently has, and in the
past has not had, any ownership interest in any real property
except as disclosed on Exhibit 2.12.
(b) Personal Property. SBS (or SBS Sub, if so indicated)
has good and marketable title to all the personal property and assets, tangible
or intangible, shown on the Balance Sheet, except to the extent sold or disposed
of in transactions entered into in the ordinary course of business consistent
with past practices since the Last Fiscal Year-End Date. The personal property
in the aggregate is in good condition and working order, and each individual
item of personal property which would cost in excess of $2,500 to replace is in
good condition and working order. None of such assets are subject to any (i)
contracts of sale or lease, except contracts for the sale of inventory in the
ordinary and regular course of business; or (ii) security interests,
encumbrances, liens or charges of any kind or character, except as set forth in
Exhibit 2.12. Except as set forth in Exhibit 2.12, there are no Lease
Restrictions with respect to the personal property leased by SBS.
(c) No Disposition of Assets. There has not been since the
Last Fiscal Year-End Date any sale, lease or any other disposition or
distribution by SBS or SBS Sub of any of their respective assets or properties
and any other assets now or hereafter owned by it, except transactions in the
ordinary and regular course of business consistent with past practices or as
otherwise consented to by Acquiror.
2.13. Litigation. Except as set forth in Exhibit 2.13, (a) there
is no suit, action, investigation or proceeding pending or, to the Knowledge of
Shareholder, threatened against Shareholder or SBS or SBS Sub or any of SBS's or
SBS Sub's directors, officers or Key Employees (a "Matter"), (b) there are no
Matters pertaining to the Licenses, and (c) without limiting the generality of
the foregoing, there are no Attorney General, department of insurance or other
matters pending or, to the Knowledge of Shareholder, threatened which, if
adversely determined, would adversely affect the business, prospects,
operations, earnings, properties or the condition, financial or otherwise, of
SBS or SBS Sub. There is not any judgment, decree, injunction, ruling or order
of any court, governmental department, commission, agency,
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instrumentality or arbitrator outstanding against SBS or SBS Sub having, or
which, insofar as can be reasonably foreseen, in the future may have, any such
effect.
2.14. Tax Matters. The term "Taxes" means all net income, capital
gains, gross income, gross receipts, sales, use, transfer, ad valorem,
franchise, profits, license, capital, withholding, payroll, employment, excise,
goods and services, severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, fees or assessments, or other
governmental charges of any kind whatsoever, together with any interest, fines
and any penalties, additions to tax or additional amounts incurred or accrued
under applicable Laws or assessed, charged or imposed by any governmental
authority, domestic or foreign, provided that any interest, penalties, additions
to tax or additional amounts that relate to Taxes for any taxable period
(including any portion of any taxable period ending on or before the Closing
Date) shall be deemed to be Taxes for such period, regardless of when such items
are incurred, accrued, assessed or charged. For purposes of this Section 2.14,
SBS shall be deemed to include SBS Sub and any predecessor of SBS or SBS Sub or
any person or entity from which SBS or SBS Sub incurs a liability for Taxes as a
result of transferee liability. Except as stated in Exhibit 2.14:
(a) SBS and SBS Sub have duly and timely filed (and prior
to the Closing Date will duly and timely file) true, correct and complete tax
returns, reports or estimates, all prepared in accordance with applicable laws,
for all years and periods (and portions thereof) and for all jurisdictions
(whether federal, state, local or foreign) in which any such returns, reports or
estimates were due. All Taxes shown as due and payable on such returns, reports
and estimates have been paid, and there is no current liability for any Taxes
due and payable in connection with any such returns. All Taxes not yet due and
payable have been fully accrued on the books of SBS and SBS Sub and the Balance
Sheets and adequate reserves have been established therefor; the charges,
accruals and reserves for Taxes provided for on the financial statements
delivered or to be delivered pursuant to Section 2.7 are adequate; and there are
no unpaid assessments for additional Taxes for any period nor is there any basis
therefor. Copies of all federal, state and foreign tax returns filed by SBS and
SBS Sub for the past five (5) years have been delivered to Acquiror.
(b) Neither SBS or SBS Sub is, or has been, a member of any
consolidated, combined or unitary group for federal, state, local or foreign tax
purposes. Neither SBS nor SBS Sub is a party to any joint venture, partnership
or other arrangement that could be treated as a partnership for federal income
tax purposes.
(c) SBS and SBS Sub have (i) withheld all required amounts
from its employees, agents, contractors and nonresidents and remitted such
amounts to the proper agencies, (ii) paid all employer contributions and
premiums and (iii) filed all federal, state, local and foreign returns and
reports with respect to employee income tax withholding, and social security and
unemployment taxes and premiums, all in compliance with the withholding tax
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), as in
effect for the applicable year or any prior provision thereof and other
applicable Laws.
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(d) The federal income tax returns of SBS and SBS Sub have
been examined by the Internal Revenue Service (the "IRS"), or have been closed
by the applicable statute of limitations, for all periods through December 31,
1994; neither SBS nor SBS Sub has any state income tax liability or reporting
requirements; and no deficiencies or reassessments for any Taxes have been
proposed, asserted or assessed against SBS or SBS Sub by any federal, state,
local or foreign taxing authority. Exhibit 2.14 describes the status of any
federal, state, local or foreign tax audits or other administrative proceedings,
discussions or court proceedings that are presently pending with regard to any
Taxes or tax returns of SBS or SBS Sub (including a description of all issues
raised by the taxing authorities in connection with any such audits or
proceedings), and no additional issues are being asserted against SBS or SBS Sub
in connection with any existing audits or proceedings.
(e) Neither SBS nor SBS Sub have executed or filed any
agreement or other document extending the period for assessment, reassessment or
collection of any Taxes, and no power of attorney granted by SBS or SBS Sub with
respect to any Taxes is currently in force.
(f) Neither SBS nor SBS Sub has entered into any closing or
other agreement with any taxing authority which affects any taxable year of SBS
or SBS Sub ending after the Closing Date. Neither SBS nor SBS Sub is a party to
any tax sharing agreement or similar arrangement for the sharing of tax
liabilities or benefits.
(g) Neither SBS nor SBS Sub has agreed to and is not
required to make any adjustment by reason of a change in accounting methods that
affects any taxable year ending after the Closing Date. The IRS has not proposed
to SBS or SBS Sub any such adjustment or change in accounting methods that
affects any taxable year ending after the Closing Date. Neither SBS nor SBS Sub
has any application pending with any taxing authority requesting permission for
any changes in accounting methods that relate to their respective business or
operations and that affects any taxable year ending after the Closing Date.
(h) Neither SBS nor SBS Sub has consented to the
application of Code Section 341(f).
(i) There is no contract, agreement, plan or arrangement
covering any employee or former employee of SBS or SBS Sub that, individually or
collectively, could give rise to the payment by SBS or SBS Sub of any amount
that would not be deductible by reason of Code Section 280G.
(j) No asset of SBS or SBS Sub is tax exempt use property
under Code Section 168(h). No portion of the cost of any asset of SBS or SBS Sub
has been financed directly or indirectly from the proceeds of any tax exempt
state or local government obligation described in Code Section 103(a).
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(k) No asset of SBS or SBS Sub is property that SBS or SBS
Sub is required to treat as being owned by any other person pursuant to the safe
harbor lease provision of former Code Section 168(f)(8).
(l) Neither SBS nor SBS Sub has or has had a permanent
establishment in any foreign country and does not and has not engaged in a trade
or business in any foreign country. Neither SBS nor SBS Sub is a foreign person
within the meaning of Code Section 1445.
(m) Neither Acquiror, Merger Sub, SBS nor SBS Sub will be
liable for any federal, state, local, foreign or other sales, use, documentary,
recording, stamp, transfer or similar Taxes applicable to, imposed upon or
arising out of prior tax returns or obligations, of SBS or SBS Sub which could
arise because of the Merger and the transactions contemplated by this Agreement.
2.15. Government Contracts. No Contract or other aspect of the
business of SBS and SBS Sub is subject to the Armed Services Procurement
Regulations or other regulations of any governmental agency. Neither SBS nor SBS
Sub has bid on or been awarded any "small business set aside contract," any
other "set aside contract" or other order or contract requiring small business
or other special status at any time during the last three (3) years.
2.16. Compliance with Law.
(a) To the Knowledge of Shareholder (after reasonable
investigation made), neither (i) SBS nor SBS Sub has previously failed or is
currently failing to comply with any applicable Laws relating to the business of
SBS or SBS Sub or the operation of their respective businesses and assets and
(ii) SBS nor SBS Sub has previously failed and is not currently failing to
comply with any applicable Laws relating to the business of SBS or SBS Sub or
the operation of their respective businesses and assets where such failure or
failures would individually or in the aggregate have an adverse effect on the
financial condition, business, operations of SBS taken as a whole. In
particular, but without limiting the generality of the foregoing, each of SBS
and SBS Sub is in compliance with all applicable Laws relating to deceptive
trade practices, unauthorized practice of law, unfair competition, unfair claims
settlement practices, rebating, anti-competitive practices, price fixing, health
and safety, environmental, employment and discrimination matters. There are no
proceedings of record and no proceedings are pending or threatened, nor has SBS
or SBS Sub received any written notice regarding any violation of any Law,
including, without limitation, any requirement of OSHA or any pollution or
environmental control agency (including air and water).
(b) Exhibit 2.16 contains copies of all reports, orders,
consent agreements and findings of inspections by representatives of any
federal, state or local governmental entity or agency of SBS's or SBS Sub's
respective businesses and properties from January 1, 1994 through the date
hereof. The deficiencies, if any, noted on such reports or any deficiencies
noted by such inspections through the Closing Date shall be corrected by the
Closing
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Date. Neither SBS, SBS Sub nor Shareholder knows or has reason to know of any
other safety, health, environmental, anti-competitive or discrimination problems
relating to the financial condition, business, assets, operations, prospects,
earnings or employment practices of SBS or SBS Sub.
2.17. Absence of Certain Business Practices. None of SBS, SBS
Sub, any director, officer, employee or agent of SBS or SBS Sub, Shareholder,
any other person or entity acting on behalf of or associated with SBS, SBS Sub
or Shareholder, nor any other entity directly or indirectly owned or controlled
by SBS, SBS Sub or Shareholder, acting alone or together, has (a) received,
directly or indirectly, any payments, promotional allowances or any other
economic benefit, regardless of its nature or type, from any customer, supplier,
trading company, shipping company, governmental employee or other entity or
individual with whom SBS or SBS Sub has done business directly or indirectly,
other than commissions, fees and rebates for SBS's or SBS Sub's normal business
operations, or (b) directly or indirectly, given or agreed to give any gift or
similar benefit to any customer, supplier, trading company, shipping company,
governmental employee or other person or entity who is or may be in a position
to help or hinder the business of SBS or SBS Sub (or assist SBS or SBS Sub in
connection with any actual or proposed transaction) any of which (i) might
subject SBS or SBS Sub to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (ii) if not given in the past, might have
had an adverse effect on the assets, business or operations of SBS or SBS Sub as
reflected in the financial statements set forth in Exhibit 2.7, or (iii) if not
continued in the future, might adversely affect the assets, business operations
or prospects of SBS taken as a whole or which might subject SBS or SBS Sub to
suit or penalty in any private or governmental litigation or proceeding.
2.18. ERISA and Related Employee Benefit Matters. References in
this Section to "SBS" shall be deemed to include SBS Sub.
(a) Welfare Benefit Plans. Exhibit 2.18(a) lists each
"employee welfare benefit plan" (within the meaning of Section 3(1) of the
Employee Retirement Income Security Act of 1974 ("ERISA")) maintained by SBS or
to which SBS contributes or is required to contribute, including any
multiemployer plan ("Welfare Benefit Plan") and sets forth as of the most recent
valuation date (i) the amount of any liability of SBS for payments due with
respect to any Welfare Benefit Plan, (ii) the amount of any payment made and to
be made, stated separately, by SBS with respect to any Welfare Benefit Plan for
the plan year during which the Closing is to occur, and (iii) with respect to
any Welfare Benefit Plan to which Section 505 of the Code applies, a statement
of assets and liabilities for such Welfare Benefit Plan as of the most recent
valuation date. Without limiting the foregoing, Exhibit 2.18(a) discloses any
obligations of SBS to provide retiree health benefits to current or former
employees of SBS.
(b) Pension Benefit Plans. Exhibit 2.18(b) lists each
"employee pension benefit plan" (within the meaning of Section 3(2) of ERISA)
maintained by SBS or to which SBS contributes or is required to contribute,
including any multiemployer plan ("Pension Benefit Plan"). All costs of each
Pension Benefit Plan have been provided for on the basis of consistent methods
and, if applicable, in accordance with sound actuarial assumptions and practices
that are
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acceptable under ERISA. SBS does not maintain or contribute to any Pension
Benefit Plan that is subject to Title I, Part 3 of ERISA (concerning "funding"),
With respect to each Pension Benefit Plan that is not subject to Title I, Part 3
of ERISA, Exhibit 2.18(b) sets forth as of the valuation date (i) the amount of
any liability of SBS for any contributions due with respect to such Pension
Benefit Plan and (ii) the amount of any contribution paid and to be paid, stated
separately, by SBS with respect to such Pension Benefit Plan for the plan year
during which the Closing is to occur.
(c) Compliance with Applicable Law. Each of the Pension
Benefit Plans, Welfare Benefit Plans, any related trust agreements, insurance
contracts, annuity contracts, and other funding arrangements, comply in all
respects with the provisions of ERISA and the Code and all other statutes,
orders, governmental rules and regulations applicable to such Welfare Benefit
Plans and Pension Benefit Plans. SBS has performed all of its obligations
currently required to have been performed under all Welfare Benefit Plans and
Pension Benefit Plans. There are no actions, suits or claims (other than routine
claims for benefits) pending or, to the Knowledge of Shareholder, threatened
against or with respect to any Welfare Benefit Plans, Pension Benefit Plans or
the assets of such plans, and no facts exist that could give rise to any
actions, suits or claims (other than routine claims for benefits) against such
plans or the assets of such plans. Each Pension Benefit Plan is qualified in
form and operation under section 401(a) of the Code, the Internal Revenue
Service has issued a favorable determination letter with respect to each Pension
Benefit Plan, and no event has occurred that will or could give rise to a
disqualification of any Pension Benefit Plan under Code Section 401(a). To the
Knowledge of Shareholder, no event has occurred that will or could subject any
Welfare Benefit Plan or Pension Benefit Plan to tax under Section 511 of the
Code.
(d) Administration of Plans. Each Welfare Benefit Plan and
each Pension Benefit Plan has been administered to date in compliance with the
requirements of ERISA and the Code. No fiduciary of any Welfare Benefit Plan or
Pension Benefit Plan has engaged in (i) any transaction in violation of Section
406(a) or (b) of ERISA, or (ii) any "prohibited transaction" (within the meaning
of Section 4975(c)(1) of the Code) for which no exemption exists under Section
408 of ERISA or Section 4975(d) of the Code. No trust agreement, insurance
contract, annuity contract, or other funding arrangement would impose a penalty,
discount, or other reduction on account of the withdrawal of assets from such
agreement, contract, or arrangement or a change in investment of such assets.
There is no pending or threatened litigation concerning any Welfare Benefit Plan
or Pension Benefit Plan, and there have been no written or oral communications
concerning any such Plan with the Internal Revenue Service, Department of Labor,
or any other federal, state, or local governmental entity.
(e) Other Employee Benefit Plans and Agreements. Exhibit
2.18(e) lists each fringe benefit, cafeteria, profit sharing, deferred
compensation, bonus, stock option, stock purchase, pension, retainer,
consulting, retirement, welfare, or other incentive plan or agreement, or
employment agreement not terminable on 30 days or less written notice, and any
other employee benefit plan, agreement, arrangement, or commitment not
previously listed on the Exhibits to this Section that is maintained by SBS or
to which SBS contributes or is required to
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contribute. Exhibit 2.18(e) contains a complete list of all employees of SBS and
the number of vacation days currently accrued to each such employee.
(f) Copies of Plans. Exhibit 2.18(a) lists: each Welfare
Benefit Plan; each Pension Benefit Plan, related trust agreements, annuity
contracts, insurance contracts, and other funding arrangements; each plan,
agreement, arrangement, and commitment referred to in subsection (e) of this
Section; favorable determination letters; annual reports (Form 5500 series)
required to be filed with any governmental agency for each Welfare Benefit Plan
and each Pension Benefit Plan for the most recent three plan years, including,
without limitation, all schedules thereto and all financial statements with
attached opinions of independent accountants; current summary plan descriptions;
and actuarial reports as of the last valuation date for each Pension Benefit
Plan that is subject to Title IV of ERISA.
(g) Continuation Coverage Requirements for Health Plans.
Each group health plan of SBS (including any plans of Affiliates of SBS that
must be taken into account under Section 4980B of the Code) has been operated in
compliance with the group health plan continuation coverage requirements of
Section 4980B of the Code and Title I, Part 6 of ERISA.
(h) Valid Obligations. Each Welfare Benefit Plan, Pension
Benefit Plan, related trust agreement, annuity contract or other funding
instrument, and each plan, agreement, arrangement and commitment referred to in
subsection (e) of this Section is legal, valid and binding and in full force and
effect, and there are no defaults thereunder. Except as specified in Exhibit
2.18(h), none of the rights of SBS thereunder will be impaired by the
consummation of the transactions contemplated by this Agreement, and all of the
rights of SBS thereunder will be enforceable by Acquiror at and after the
Closing without the consent or agreement of any other party other than consents
and agreements specifically listed in Exhibit 2.18(h).
2.19. Intellectual Property. SBS and SBS Sub has good and
marketable title to each copyright, trademark, trade name, service mark, trade
dress, patent, franchise, trade secret, product designation, formula, process,
know-how, right of publicity, design and other similar rights used in, or
necessary for, the operation of their respective businesses as currently
conducted. Exhibit 2.19 contains a detailed listing of each copyright registered
with the U. S. Copyright Office, each trademark, trade name, service mark, trade
dress, and patent registered with the U. S. Patent and Trademark Office, and all
pending applications therefor, owned by SBS or SBS Sub (collectively
"Intellectual Property Rights"). Except as otherwise set forth on Exhibit 2.19,
all of said Intellectual Property Rights are free and clear of all royalty
obligations, security interests, liens and encumbrances. SBS or SBS Sub, as the
case may be, has the exclusive right to use all Intellectual Property Rights
used in, or necessary for, the operation of their respective businesses as
currently conducted. SBS, SBS Sub and Shareholder have taken all action
necessary to protect against and defend against, and has no knowledge of, any
conflicting use of any such Intellectual Property Rights. Neither SBS nor SBS
Sub has or intends to utilize any Intellectual Property Rights except those
which are set forth in Exhibit 2.19. Except as set forth in Exhibit 2.19,
neither SBS nor SBS Sub is a party in any capacity to any franchise, license,
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royalty or other agreement respecting or restricting any Intellectual Property
Rights, and the Intellectual Property Rights used by SBS or SBS Sub in the
conduct of their respective businesses do not conflict with the Intellectual
Property Rights of any third party. No service provided by SBS or SBS Sub
violates any license or infringes any Intellectual Property Rights of any third
party, and there are no pending claims or demands by any third party to the
contrary. Exhibit 2.19, which shall be provided to Acquiror at Closing, lists
all computer and telephone passcodes, passwords, log in identities and other
relevant information needed to access and use the equipment of SBS and SBS Sub.
2.20. Warranties. Except as set forth in Exhibit 2.20, to
Shareholder's Knowledge, there are no claims existing or threatened under or
pursuant to any warranty, whether expressed or implied, on products or services
sold by SBS or SBS Sub.
2.21. Labor Relations. To Shareholder's Knowledge, SBS and SBS
Sub is in compliance with all Laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including,
without limitation, the Fair Labor Standards Act, the Family and Medical Leave
Act of 1993, the Americans with Disabilities Act of 1990, the Veterans
Reemployment Rights Act, the Equal Employment Opportunities Act as amended by
the Civil Rights Act of 1991, the Occupational Safety and Health Act, the
Employee Retirement Income Security Act, the Immigration Reform and Control Act
of 1986, the Age Discrimination in Employment Act, Title VII of the Civil Rights
Act of 1964, the Older Workers Benefit Protective Act, and all other Laws, each
as amended to date, relating to employer/employee rights and obligations. SBS
and SBS Sub currently have satisfactory relationships with its employees.
Exhibit 2.21 lists (i) current employees, officers and directors of SBS and SBS
Sub, respectively, and their respective compensation levels and (ii) each former
employee and/or officer of SBS or SBS Sub whose aggregate annualized
compensation (including all bonuses), exceeded $40,000 and whose employment by
SBS or SBS Sub has ceased for any reasons since January 1, 1994. Set forth
opposite the name of each such employee and/or officer listed pursuant to clause
(ii) above are: the positions held; the beginning and ending employment dates;
and the reason for the cessation of employment.
2.22. Insurance. Exhibit 2.22 lists all of SBS's and SBS Sub's
existing insurance policies, the premiums therefor and the coverage of each
policy, including errors and omissions, fidelity and crime coverages. Such
policies and the amount of coverage and the risks insured are, in the aggregate,
sufficient to protect and insure SBS and SBS Sub against perils which good
business practice demands be insured against or which are normally insured
against by other industry members similarly situated.
2.23. Environmental.
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(a) For purposes of this Section:
(i) "Hazardous Materials" means any hazardous,
infectious or toxic substance, chemical, pollutant, contaminant,
emission or waste which is or becomes regulated by any local,
state, federal or foreign authority. Hazardous Materials
include, without limitation, anything which is: (i) defined as a
"pollutant" pursuant to 33 U.S.C.ss.1362(6); (ii) defined as a
"hazardous waste" pursuant to 42 U.S.C.ss.6921; (iii) defined as
a "regulated substance" pursuant to 42 U.S.C. ss. 6991; (iv)
defined as a "hazardous substance" pursuant to 42 U.S.C.ss.
9601(14); (v) defined as a "pollutant or contaminant" pursuant
to 42 U.S.C.ss. 9601(33); (vi) petroleum; (vii) asbestos; and
(viii) polychlorinated biphenyl.
(ii) "Environmental Laws and Regulations" means all
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in
any Laws relating to pollution, nuisance, or the environment
including, without limitation, (i) the Federal Clean Air Act, 42
U.S.C.ss.ss.7401 et seq.; (ii) the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C.ss.ss.9601
et seq.; (iii) the Federal Emergency Planning and Community
Right-to-Know Act, 42 U.S.C.ss.ss. 1101 et seq.; (iv) the
Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C.ss.ss. 136 et seq.; (v) the Federal Water Pollution
Control Act, 33 U.S.C.ss.ss. 1251 et seq.; (vi) the Solid Waste
Disposal Act, 42 U.S.C. ss.ss. 6901 et seq.; (vii) the Toxic
Substances Control Act, 15 U.S.C.ss.ss. 2601 et seq.; (viii)
Laws relating in whole or part to emissions, discharges,
releases, or threatened releases of any Hazardous Material; and
(ix) Laws relating in whole or part to the manufacture,
processing, distribution, use, coverage, disposal,
transportation, storage or handling of any Hazardous Material.
(iii) "SBS" shall be deemed to include SBS Sub.
(b) The operations and activities of SBS comply, and have
in the past complied, in all respects, with all Environmental Laws and
Regulations. There are no pending or currently proposed changes to any
Environmental Laws and Regulations which, when implemented or effective, may
affect the operations of SBS.
(c) SBS has obtained and is and has been in full compliance
with all requirements, permits, licenses and other authorizations which are
required with respect to SBS's operations, as well as the transactions
contemplated hereby under all Environmental Laws and Regulations. Exhibit 2.23
lists each such permit, license or other authorization. There are no other such
permits, licenses or other authorizations which are required by any
Environmental Laws and Regulations to be obtained after the Closing.
(d) There is no civil, criminal, administrative or other
action, suit, demand, claim, hearing, notice of violation, proceeding,
investigation, notice or demand pending,
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received or threatened against SBS relating in any way to any Environmental Laws
and Regulations.
(e) SBS has not caused or experienced any past or present
events, conditions, circumstances, plans or other matters which: (i) are not in
compliance with all Environmental Laws and Regulations; (ii) may give rise to
any statutory, common law, or other legal liability, or otherwise form the basis
of any claim, action, demand, suit, proceeding, hearing, notice of violation or
investigation based on or relating to Hazardous Materials including, without
limitation, such matters relating to any property owned, leased or utilized by
SBS at any time; (iii) arise from inventory of or waste from Hazardous
Materials; or (iv) arise from any off-site disposal, release or threatened
release of Hazardous Materials.
(f) No asbestos, polychlorinated biphenyls, lead-based
paints, or radon are on any real property or in any building now or previously
owned, operated, leased or utilized by SBS.
(g) No employee or former employee of SBS has been exposed
to any Hazardous Material owned, produced or utilized by SBS or any former
subsidiary.
(h) Neither SBS nor Shareholder has received any notice or
indication from any governmental agency or private or public entity advising
that SBS is or may be responsible for any investigation or response costs with
respect to a release, threatened release or cleanup of chemicals or materials
produced by or resulting from any business, commercial or industrial activities,
operations or processes, including, without limitation, any Hazardous Materials.
Neither SBS nor Shareholder is aware of any facts which might give rise to such
notices.
(i) No underground tanks, piping or subsurface structures
of any type exist or have existed on any real property now or previously owned,
operated, leased or utilized by SBS.
(j) Exhibit 2.23 contains complete copies of all
environmental investigations, assessments, audits, studies, tests and related
materials in possession of SBS or Shareholder or known to SBS or Shareholder to
exist, which relate to the current or prior operations of SBS or any real
property now or previously owned, operated, leased or utilized by SBS.
2.24. Capital Expenditures. Neither SBS nor SBS Sub has any
outstanding commitments for capital expenditures in excess of $5,000 in
aggregate.
2.25. Suppliers. No suppliers of goods or services to SBS or SBS
Sub that has made sales or provided services representing, individually or in
the aggregate, more than $25,000 in payments or commitments by SBS or SBS Sub
since August 31, 1997 has (i) ceased, or indicated any intention to cease, doing
business with SBS or SBS Sub, or (ii) changed or
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indicated any intention to change any terms or conditions for future supply or
sale of products or services from the terms or conditions that existed with
respect to the supply or sale of such products or services during the twelve
(12) month period ending on the date hereof.
2.26. Dealings with Affiliates. Exhibit 2.26 sets forth a
complete list (including the parties) of all oral or written contracts,
arrangements or other agreements (excluding any contract listed on Exhibit 2.28)
with any Affiliate to which SBS or SBS Sub is, will be or has been a party at
any time from January 1, 1994, to the Closing Date.
2.27. Bank Accounts. Exhibit 2.27 is a list of all bank accounts,
lock boxes, safe deposit boxes and post office boxes, and the combinations,
codes or location of keys thereto, maintained in the name of or controlled by
SBS and/or SBS Sub and the names of the persons having access thereto.
2.28. Compensation. Exhibit 2.28 lists the current job title and
total remuneration (including, without limitation, salary, commissions and
bonuses) for each officer, director, employee or consultant of SBS or SBS Sub
who received total remuneration in excess of $40,000 from SBS or SBS Sub,
respectively, during either of the past two (2) calendar years or who is
expected to receive total remuneration in excess of such amount during the
current calendar year.
2.29. Insurance Licenses. SBS, SBS Sub and each of their
respective shareholders, directors, officers and employees required by law to do
so has obtained and currently maintains in good standing all required licenses
from the Texas Insurance Department and all other similar agencies by which they
are required to be licensed (the "Licenses"). Exhibit 2.29 contains an accurate
list of the Licenses, including the number of each License.
2.30. Disclosure. No representation or warranty made by SBS, SBS
Sub or Shareholder in this Agreement or in any agreement, instrument, document,
certificate, statement or letter furnished to Acquiror, by or on behalf of SBS,
SBS Sub or Shareholder in connection with any of the transactions contemplated
by this Agreement contains any untrue statement of fact or omits to state a fact
necessary in order to make the statements herein or therein not misleading in
light of the circumstances in which they are made
2.31. Consultants, Brokers and Finders. Neither SBS, SBS Sub nor
Shareholder have retained any consultant, broker or finder in connection with
the transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror hereby represents and warrants to SBS and Shareholder
as follows:
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3.1. Authorization, etc. Acquiror and Merger Sub each have, or,
in the case of Merger Sub, will have, prior to the Effective Time, full
corporate power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby.
3.2. No Violation. Neither Acquiror nor Merger Sub is subject to
or obligated under any certificate of incorporation, bylaw, Law, or any
agreement or instrument, or any license, franchise or permit, which would be
breached or violated by the execution, delivery or performance of this Agreement
unless appropriate consents or waivers to such actions have been previously
obtained. Acquiror has complied with all Laws in connection with its execution,
delivery and performance of this Agreement and the transactions contemplated
hereby.
3.3. Governmental Authorities. Neither Acquiror nor Merger Sub is
required to submit any notice, report or other filing with and no consent,
approval or authorization is required by any governmental or regulatory
authority in connection with Acquiror 's execution or delivery of this Agreement
or the consummation of the transactions contemplated hereby except for (i) the
filing of the Certificate of Merger with the Secretary of State of Kansas, (ii)
the filing of the Articles of Merger with the Secretary of State of Texas (such
Certificate of Merger and Articles of Merger are sometimes jointly referred to
as the "Certificates of Merger"), (iii) the filing of notice with the Texas
Insurance Commission, and (iv) such notices, reports, other filings, consents,
approvals or authorizations which have been made or obtained.
3.4. Consultants, Brokers and Finders. Acquiror has not retained
any consultant, broker or finder in connection with the transactions
contemplated by this Agreement.
ARTICLE IV
CERTAIN COVENANTS
4.1. Further Assurances. SBS, SBS Sub, Shareholder and SBS's and
Shareholder's respective counsel will furnish Acquiror with such other and
further documents, certificates, opinions, consents and information as Acquiror
shall reasonably request to evidence compliance with the terms and conditions of
any credit agreement in existence or to be entered into between Acquiror and a
bank and/or other lending entities or individuals.
4.2. Employment Agreements. At the Closing, each party to the
respective Employment Agreements substantially in the form attached hereto as
Exhibits 4.2(a) and 4.2 (b) shall execute and deliver such Employment
Agreements.
4.3. Reserved.
4.4. Opinion of Counsel. At the Closing, Shareholder and SBS
shall cause Acquiror to have received an opinion of their respective counsel,
dated as of the Closing Date, substantially in the form attached hereto as
Exhibit 4.4.
4.5. Release.. At the Closing, Shareholder shall execute and
deliver the Release substantially in the form attached hereto as Exhibit 4.5.
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ARTICLE V
CLOSING
5.1. Effective Time. The Merger shall become effective upon the
filing and acceptance of the Certificates of Merger in proper form for filing
with the Secretaries of State of Kansas and Texas or as of such later time as
specified in the Certificates of Merger, such time herein called the "Effective
Time."
5.2. Closing. Unless this Agreement shall have been terminated or
the Merger abandoned pursuant to the provisions of Article VI hereof, a closing
(the "Closing") shall be held on September 30, 1998 or on such other date
mutually agreed upon by the parties (the "Closing Date") at the offices of
Acquiror or such place or places as mutually agreed upon by the parties.
5.3. Deliveries at Closing.
(a) At the Closing, Shareholder shall deliver to Acquiror
and Merger Sub all the Common Stock by delivering the Certificates and the other
agreements, certifications and other documents required to be executed and
delivered hereunder at the Closing shall be duly and validly executed and
delivered.
(b) At the Closing, SBS and SBS Sub shall deliver to
Acquiror and Merger Sub, in form reasonably satisfactory to counsel for
Acquiror, such bills of sale, assignments or other conveyances and all third
party consents obtained as may be appropriate or necessary to effect the Merger.
(c) From time to time after the Closing, at Acquiror's
request and without further consideration from Acquiror, SBS and SBS Sub shall
execute and deliver such other instruments of conveyance and transfer and take
such other action as Acquiror reasonably may require to consummate the
transactions contemplated by this Agreement.
(d) Acquiror shall deliver to Shareholder the Initial Merger
Payment.
(e) The respective parties to the Employment Agreements,
Opinion and Release shall deliver signed originals of such documents.
ARTICLE VI
TERMINATION AND ABANDONMENT
6.1. Methods of Termination. This Agreement may be terminated and
the Merger abandoned at any time prior to the Effective Time:
(a) by mutual written consent of Acquiror and SBS; or
(b) by either SBS or Acquiror, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise
prohibited, or if a judgment,
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injunction, order or decree enjoining Acquiror or SBS from consummating the
Merger is entered and such judgment, injunction, order or decree shall become
final and nonappealable.
6.2. Procedure Upon Termination. In the event of termination and
abandonment pursuant to Section 6.1 hereof, this Agreement shall terminate and
the Merger shall be abandoned without further action by any of the parties
hereto. If this Agreement is terminated as provided herein:
(a) each party will upon request redeliver all documents,
Merger Consideration and other materials of any other party relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same; and
(b) each party shall bear its own expenses.
ARTICLE VII
INDEMNIFICATION
7.1. Indemnification by Shareholder. Shareholder agrees to
indemnify Acquiror and Merger Sub against any loss, damage, or expense
(including but not limited to reasonable attorneys' fees) ("Damages"), incurred
or sustained by Acquiror or Merger Sub as a result of (a) any breach of any
term, provision, covenant or agreement contained in this Agreement by SBS, SBS
Sub or Shareholder; (b) any inaccuracy in any of the representations or
warranties made by SBS, SBS Sub or Shareholder in Article II of this Agreement;
(c) any loss, claim or obligation arising from or related to the business or
operation of the Company conducted prior to the Closing (to the extent such
business and/or operation, or the existence, nature or extent of any such loss,
claim or obligation, has been misrepresented by SBS, SBS Sub or Shareholder);
(d) any loss, claim or obligation arising from or related to tax obligations
(and related fines, penalties and interest) of the Company or Shareholder for
periods ending on or prior to the Closing Date; or (e) any inaccuracy or
misrepresentation in any certificate or other document or instrument delivered
by SBS, SBS Sub or Shareholder in accordance with any provision of this
Agreement. The obligations of Shareholder as set forth in this Section shall be
subject to and limited by the following:
(a) No claim for Damages shall be made until the cumulative
amount of such Damages shall equal or exceed $10,000 (the "Threshold") at which
time a claim for Damages in excess thereof can be made on a dollar-for-dollar
basis; provided, however, the maximum aggregate amount of Shareholder's
liability hereunder or otherwise shall not exceed the Merger Consideration. Such
limitations, however, shall not apply to any Damages resulting from fraudulent
actions, intentional misrepresentations or breaches of covenants;
(b) Acquiror shall give written notice to Shareholder
stating specifically the basis for the claim for Damages, the amount thereof and
if relating to a pending claim by a
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third party to which Acquiror is entitled to indemnification, Acquiror shall
tender defense thereof to Shareholder as provided in Section 7.3; and
(c) Acquiror shall first use the Reserve Amount to satisfy
any claims for Damages. Thereafter, Acquiror shall have the option to (A) offset
such claims for Damages against any obligation of Acquiror to Shareholder now or
hereafter existing, or (B) require Shareholder to promptly pay to Acquiror such
amounts in cash.
7.2. Indemnification by Acquiror. Acquiror agrees to indemnify
Shareholder against Damages incurred or sustained by Shareholder as a result of
(a) any breach of any term, provision, covenant or agreement contained in this
Agreement by Acquiror or Merger Sub; (b) any inaccuracy in any of the
representations or warranties made by Acquiror or Merger Sub in Article III of
this Agreement; (c) any loss, claim or obligation arising from or related to the
business or operation of the Company conducted after the Closing Date (but
except for the effect, damage or loss upon such business or operation arising
from or related to any claim for Damages asserted under Section 7.1); or (d) any
inaccuracy or misrepresentation in any certificate or other document or
instrument delivered by Acquiror or Merger Sub in accordance with any provision
of this Agreement. The obligations of Acquiror as set forth in this Section
shall be subject to and limited by the following:
(a) No claim for Damages shall be made until the cumulative
amount of such Damages shall equal or exceed $10,000 (the "Threshold") at which
time a claim for Damages in excess thereof can be made on a dollar for dollar
basis; provided, however, the maximum aggregate amount of Acquiror's liability
hereunder shall not exceed the Merger Consideration. Such limitations, however,
shall not apply to any Damages resulting from fraudulent actions, intentional
misrepresentations, breaches of covenants; and
(b) Shareholder shall give written notice to Acquiror
stating specifically the basis for the claim for Damages, the amount thereof
and, if relating to a pending claim by a third party to which Acquiror is
entitled to indemnification, shall tender defense thereof to Acquiror as
provided in Section 7.3.
7.3. Transfer of Defense for Damages. Promptly upon receipt by
the indemnitee of a notice of a claim by a third party which may give rise to a
claim for Damages, the indemnitee shall give written notice thereof to the
indemnitor. No failure or delay of the indemnitee in the performance of the
foregoing shall relieve, reduce or otherwise affect the indemnitor's obligations
and liability to indemnify the indemnitee pursuant to this Agreement, except to
the extent that such failure or delay shall have adversely affected the
indemnitor's ability to defend against such claim for Damages. If the indemnitor
gives to the indemnitee an agreement in writing, in a form reasonably
satisfactory to the indemnitee's counsel, to defend such claim for Damages, the
indemnitor may, at its sole expense, undertake the defense against such claim
and may contest such claim and the indemnitee shall execute such documents and
take such steps as may be reasonably necessary in the opinion of counsel for the
indemnitor, to enable the indemnitor to conduct the defense of such claim for
Damages. If the indemnitor fails or refuses to defend any
26
<PAGE> 28
claim for Damages, the indemnitor may nevertheless, at its own expense,
participate in the defense of such claim by the indemnitee and in any and all
settlement negotiations relating thereto. In any and all events, the indemnitor
shall have such access to the records and files of the indemnitee relating to
any claim for Damages as may be reasonably necessary to effectively defend or
participate in the defense thereof. No party shall settle any claim for Damages
without the consent of the other, which consent shall not be unreasonably
withheld. In order to achieve a reasonable and speedy resolution of third party
claims, the parties hereto agree to reasonably cooperate with each other in such
regard.
7.4. Survival of Warranties. The respective representations and
warranties of SBS, SBS Sub, Shareholder, Acquiror and Merger Sub contained
herein or in any certificates shall not be deemed waived or otherwise affected
by any investigation made by any party hereto or the occurrence of the Merger.
Each and every such representation and warranty shall survive for a period of
four (4) years from the Closing Date, and any claim for Damages not commenced
during such period shall be waived; provided, however, all claims for Damages
based on intentionally wrongful or fraudulent actions or misrepresentations
("Fraud") shall survive for four (4) years after the claiming party has actual
knowledge of such Fraud.
7.5. Determination of Damages. The parties shall make appropriate
adjustments for tax benefits and insurance coverage and take into account the
time and cost of money in determining Damages for purposes of this Article VII.
7.6. Exclusivity. Redress under the indemnity provisions
contained in this Article shall be the exclusive remedy available to the parties
hereto for the matters covered by such provision, except in the cases of
fraudulent actions or intentional misrepresentations.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1. Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented only by written agreement of
the parties hereto.
8.2. Waiver of Compliance; Consents. Any failure of SBS, SBS Sub
or Shareholder on the one hand, or Acquiror or Merger Sub on the other hand, to
comply with any obligation, covenant, agreement or condition herein may be
waived in writing by Acquiror or by SBS, respectively, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such consent shall be given
in writing.
8.3. Expenses. Each party will pay its own legal, accounting and
other expenses incurred by such party or on its behalf in connection with this
Agreement and the transactions contemplated herein.
27
<PAGE> 29
8.4. Notices. Any notice, request, consent or communication
(collectively a "Notice") under this Agreement shall be effective only if it is
in writing and (i) personally delivered, (ii) sent by a nationally recognized
overnight delivery service, with delivery confirmed, or (iii) telexed or
telecopied, with receipt confirmed, addressed as follows:
If to SBS, SBS Sub or Shareholder:
Richard McCarter
Senior Benefit Services Insurance Agency, Inc.
6833 Dan Danciger Road
Fort Worth, Texas 76133-4909
Telecopier: (817) 370-0857
Telephone: (817) 370-0585
with a copy to:
Mack Ed Swindle, Esq.
Michener, Larimore, Swindle, Whitaker, Flowers, Sawyer,
Reynolds & Chalk, L.L.P.
3500 City Center Tower II
301 Commerce Street
Fort Worth, TX 76102
Telecopier: (817) 335-6935
Telephone: (817) 335-4417
If to Acquiror or Merger Sub to:
Thomas M. Fogt and Michael H. Miller
AmVestors Financial Corporation
555 S. Kansas Avenue
Topeka, Kansas 66603
Telecopier: (785) 295-4345
Telephone: (785) 232-6945
with a copy to:
Gregory G. Johnson, Esq.
Bryan Cave LLP
1200 Main Street, Suite 3500
Kansas City, Missouri 64105
Telecopier: (816) 374-3300
Telephone: (816) 374-3227
28
<PAGE> 30
or such other persons or addresses as shall be furnished in writing by any party
to the other party. A Notice shall be deemed to have been given as of the date
when (i) personally delivered, (ii) when receipt of a Notice sent by an
overnight delivery service is confirmed by such overnight delivery service, or
(iii) when receipt of the telex or telecopy is confirmed, as the case may be,
unless the sending party has actual knowledge that a Notice was not received by
the intended recipient.
8.5. Binding Effect. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective heirs, successors and permitted assigns.
8.6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF KANSAS (REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER
APPLICABLE TEXAS PRINCIPLES OF CONFLICTS OF LAW OF THE STATE OF KANSAS) AS TO
ALL MATTERS INCLUDING, BUT NOT LIMITED TO, MATTERS OF VALIDITY, CONSTRUCTION,
EFFECT, PERFORMANCE AND REMEDIES.
8.7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.8. Neutral Interpretation. This Agreement constitutes the
product of the negotiation of the parties hereto and the enforcement hereof
shall be interpreted in a neutral manner, and not more strongly for or against
any party based upon the source of the draftsmanship hereof.
8.9. Headings. The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
8.10. Entire Agreement. This Agreement, which term as used
throughout includes the Exhibits hereto, embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, representations, warranties,
covenants or undertakings other than those expressly set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
29
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement as of the date first hereinabove set forth.
ACQUIROR:
AMVESTORS FINANCIAL CORPORATION
By: /s/ Thomas M. Fogt
-------------------------------------------
Name: Thomas M. Fogt
Title: Executive Vice President
MERGER SUB:
SENIOR BENEFIT SERVICES OF KANSAS, INC.
By: /s/ Michael H. Miller
-------------------------------------------
Name: Michael H. Miller
Title: Executive Vice President
SBS:
SENIOR BENEFIT SERVICES INSURANCE AGENCY, INC.
By: /s/ Richard McCarter
-------------------------------------------
Name: Richard McCarter
Title: Chairman of the Board
30
<PAGE> 32
SBS SUB:
NATIONAL SENIOR BENEFIT SERVICES, INC.
By: s/ Richard McCarter
---------------------------------------
Name: Richard McCarter
Title: President
SHAREHOLDER:
/s/ Richard McCarter
-------------------------------------------
Richard McCarter
31
<PAGE> 33
SCHEDULE OF EXHIBITS
TO
AGREEMENT AND PLAN OF MERGER
Exhibits Title
-------- -----
Exhibit 1.1 Merger Sub's Articles of Incorporation
Exhibit 1.6 Merger Consideration Allocation
Exhibit 2.1 Foreign Qualifications
Exhibit 2.3 Schedule of Subsidiaries and Affiliates
Exhibit 2.5 Restrictions on Ability to Perform
Exhibit 2.7 Financial Statements
Exhibit 2.9 Certain Changes
Exhibit 2.10 Schedule of Contracts
Exhibit 2.12 Title and Related Matters
Exhibit 2.13 Legal Proceedings and Judgments
Exhibit 2.14 Certain Tax Matters
Exhibit 2.16 Copies of Reports and Inspections
Exhibit 2.18(a) ERISA and Related Employee Benefit Matters
Exhibit 2.18(b) Accrued Vacation Days
Exhibit 2.19 Schedule of Intellectual Property Rights
Exhibit 2.20 Warranties and Claims Under Warranties
Exhibit 2.21 Labor Relations
Exhibit 2.22 Schedule of Insurance
1
<PAGE> 34
Exhibit 2.26 Schedule of Contracts with Affiliates
Exhibit 2.27 List of all Bank Accounts, Lock Boxes, Safe
Deposit Boxes and Post Office Boxes
Exhibit 2.28 Compensation Schedule
Exhibit 2.29 Licenses
Exhibit 4.2(a) Employment Agreement with Richard McCarter
Exhibit 4.2(b) Employment Agreement with George Richards
Exhibit 4.4 Opinion
Exhibit 4.5 Release
2
<PAGE> 1
AmerUs Life Holdings, Inc.
Exhibit 11 - Statement Re: Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------------------------------------------------------------
2000 1999
------------------------------------------- ----------------------------------------
Number of Per Share Number of Per Share
Net Income Shares Amount Net Income Shares Amount
------------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
($ in thousands, except per share data)
Basic EPS
Net Income $ 15,718 29,968 $ 0.52 $ 16,957 30,433 $ 0.56
Effect of dilutive securities
Options - 63 - - 37 -
Warrants - - - - - -
Stock appreciation rights - - - - -
------------------------------------------- ---------------------------------------
Diluted EPS $ 15,718 30,031 $ 0.52 $ 16,957 30,470 $ 0.56
=========================================== =======================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<DEBT-HELD-FOR-SALE> 6806131
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 16242
<MORTGAGE> 489899
<REAL-ESTATE> 1533
<TOTAL-INVEST> 7708410
<CASH> 45121
<RECOVER-REINSURE> 6449
<DEFERRED-ACQUISITION> 574588
<TOTAL-ASSETS> 10831122
<POLICY-LOSSES> 7439491
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 7587
<POLICY-HOLDER-FUNDS> 295264
<NOTES-PAYABLE> 188975
214791
0
<COMMON> 29998
<OTHER-SE> 717877
<TOTAL-LIABILITY-AND-EQUITY> 10831122
40336
<INVESTMENT-INCOME> 139854
<INVESTMENT-GAINS> (3028)
<OTHER-INCOME> 4665
<BENEFITS> 108986
<UNDERWRITING-AMORTIZATION> 22320
<UNDERWRITING-OTHER> 24158
<INCOME-PRETAX> 23789
<INCOME-TAX> 8852
<INCOME-CONTINUING> 15718
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15718
<EPS-BASIC> 0.52
<EPS-DILUTED> 0.52
<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 99.8
RETIREMENT AGREEMENT
This Agreement dated as of 14th day of March, 2000 between AmerUs Life
Holdings, Inc., an Iowa Corporation ("AmerUs") and Victor N. Daley, Executive
Vice President, Chief Administration and Human Resources Officer of AmerUs and
certain of its affiliates ("Mr. Daley") hereby confirms and formalizes certain
understandings between Mr. Daley and AmerUs which were agreed to by Mr. Daley
and AmerUs at the time Mr. Daley agreed to undertake his duties on behalf of
AmerUs and its affiliates and predecessors and which have thereafter been
updated to reflect certain changed circumstances.
IN CONSIDERATION of Mr. Daley's agreement to accept the aforementioned
position with AmerUs and the continuing performance of those duties and in
consideration of the promises and covenants made hereunder, AmerUs and Mr. Daley
agree as follows.
1. Beginning August 31, 2008, AmerUs agrees to pay to Mr. Daley, or his
spouse in the event that Mr. Daley should predecease her, a monthly amount equal
to the Retirement Amount as calculated below. These amounts shall be payable
monthly on the last day of each month beginning August 31, 2008, until the later
of the death of Mr. Daley or his spouse.
2. The "Retirement Amount" means the amount calculated by (A)
multiplying .2693% by the number of months that Mr. Daley has been and is
employed on a full time basis by AmerUs and its predecessor companies, (B)
multiplying the product derived in clause (A) by sum of (i) the result of (a)
multiplying $3,000 times the number of months that Mr. Daley has been employed
on a full-time basis by AmerUs minus 37 months and (b) dividing the product
derived in
<PAGE> 2
clause (i)(a) by the number of months that Mr. Daley has been
employed on a full-time basis; plus (ii) Mr. Daley's average monthly income as
derived from his Pensionable Earnings, as defined in Article I Subsection (17)
of the All*AmerUs Savings and Retirement Plan (without regard to the last
sentence in such Subsection (17)), excluding income from stock options, stock
grants and other awards under the AmerUs Stock Incentive Plan, and then (C)
subtracting the "Monthly Base Amount" (as hereinafter defined) from the product
of clauses A and B. The Monthly Base Amount is an amount calculated by (i)
adding the maximum amount which AmerUs would be permitted to contribute in the
aggregate as its "matching", "core" and "interim benefit supplement"
contributions (as those terms are used in the Plans) for each month that Mr.
Daley has been employed on a full time basis by AmerUs to Mr. Daley's accounts
in the All*AmerUs Savings and Retirement Plan and the All*AmerUs Supplemental
Executive Retirement Plan, All*AmerUs Excess Benefit Plan and the Non-Qualified
Non-Funded Deferred Compensation Agreement of October 1, 1998 (together the
"Plans") assuming that Mr. Daley would make the maximum permitted deferral; (ii)
deducting from the amounts determined under clause (i) two percent (2%) of the
sum of Mr. Daley's Pensionable Earnings for each month that he is employed on a
full time basis after January 1, 1996 and $3000 per month for each month that he
is employed on a full time basis after October 1, 1998, and then (iii) crediting
the amount of the remainder determined pursuant to the subtraction of clause
(ii) from the amount determined in clause (i) with an 8% per annum compound
interest rate; and (iv) adding (a) the amount of the remainder determined
pursuant to the subtraction of clause (ii) from the amount determined in clause
(i) and (b) the amount calculated in accordance with clause (iii) as of August
8, 2008
2
<PAGE> 3
(together the "Final Amount") and then determining the monthly amount
that would be payable under a net single premium life annuity purchased on that
date with the Final Amount, with an initial payment on August 31, 2008, which
utilizes the method of determining assumptions present in the 1/1/96 American
Mutual Life Insurance Pension Plan which monthly amount shall be the "Monthly
Base Amount."
3. In the event (i) (a) there is a Change of Control and (b) Mr.
Daley's employment with AmerUs or any successor thereof is terminated, and such
termination is neither by Mr. Daley nor for Cause (as defined in Section 4), and
(ii) no Comparable Employment (as defined in Section 4) is offered to Mr. Daley,
then the Retirement Amount shall be calculated as if Mr. Daley had continued his
employment with AmerUs on a full time basis until August 31st of 2008 with (1)
the number of months in Section 2 (A)-(B) of this Agreement becoming 152 and (2)
the average monthly income for each month from the date of his initial
employment until his termination date being calculated pursuant to Section
2(B)(ii) and the average monthly income for each month from the date of
termination until August 31, 2008 being equal to the average monthly income for
the full fiscal year ended on the December 31st prior to his termination
calculated for that period pursuant to Section 2(B)(ii), and the Monthly Base
Amount being the amount calculated pursuant to Section 2.
4. The following definitions shall apply to this Agreement.
"Cause" shall mean Mr. Daley'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
3
<PAGE> 4
final cease-and-desist order, or material breach of any provision of this
Agreement.
"Change of Control" shall mean any Transaction or series of
Transactions involving the Company or any Affiliate of the Company which results
in either (i) AMHC not directly or indirectly owning or controlling shares of
stock of the Company sufficient to cast a majority of the votes necessary to
elect members of the Board of Directors of the Company ("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 the Company
ceasing to constitute at least a majority thereof, unless the election, or the
nomination for election of each director of the Company 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 the Company then still in office who
were directors of the Company 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 Company which are
entitled to elect the board of directors of the Company at any time that AMHC
does not have beneficial ownership of the Voting Control of the Company;
provided, however, that in the case of (i), (ii), and (iii), a Transaction
4
<PAGE> 5
which is a Demutualization shall not constitute a Change of Control if the
directors elected or nominated for election to either AMCH's or the Company's
respective board of directors by AMHC's or the Company's respective stockholders
following the Demutualization were the directors of AMHC or the Company,
respectively, prior to such Demutualization, or if the election, or the
nomination for election, by AMHC's or the Company's respective stockholders, of
each director of AMHC or the Company, 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 the Company then still in
office who were the respective directors of AMHC or the Company 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.
"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.
"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 the transaction.
5
<PAGE> 6
5. This Agreement does not constitute an agreement of employment or the
promise to employ Mr. Daley for any specified period of time. It continues to be
the understanding between AmerUs and Mr. Daley that Mr. Daley is and will
continue to be an employee at will.
6. This Agreement may not be amended or modified in any way except in a
writing signed by both parties.
7. This Agreement shall be binding upon and inure to the benefit of the
respective successors and assigns of the parties.
8. AmerUs and Mr. Daley designate the AmerUs Benefit and Pension
Committee, as appointed by the Board of Directors, to administer and interpret
this Agreement with all necessary discretion. The determinations of the AmerUs
Benefit and Pension Committee shall be binding on the parties hereto.
9. This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes all prior agreements and
understandings, written and oral, among the parties with respect to the subject
matter hereof including the agreement of June 27, 1997.
Executed as of the 14th day of March, 2000.
AmerUs Life Holdings, Inc.
3-14-2000 By /s/ Roger K. Brooks
- ------------------- ----------------------------
Date
3-14-2000 /s/ Victor N. Daley
- ------------------- ------------------------------
Date Victor N. Daley
6
