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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported: February 21, 2000)
AMERUS LIFE HOLDINGS, INC.
(Exact Name of Registrant as Specified in Charter)
IOWA 0-21459 42-1459712
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
699 WALNUT STREET
DES MOINES, IOWA 50309-3948
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (515) 362-3600
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The Form 8-K of the Registrant dated February 21, 2000, and filed on February
22, 2000, is hereby amended to include the Combination and Investment Agreement
attached hereto as Exhibit 2.1 and certain Investment Advisory Agreements
attached hereto as Exhibits 10.1-10.4.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
AMERUS LIFE HOLDINGS, INC.
By: /s/ Michael G. Fraizer
-----------------------------
Michael G. Fraizer
Executive Vice President &
Chief Financial Officer
Dated: February 21, 2000
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EXHIBITS
Exhibit 2.1 Combination and Investment Agreement among American Mutual
Holding Company, AmerUs Life Holdings, Inc., Indianapolis Life
Insurance Company, and the Indianapolis Life Group of
Companies dated February 18, 2000
Exhibit 10.1 Investment Advisory Agreement by and between Indianapolis Life
Insurance Company and AmerUs Capital Management Group, Inc.
dated February 18, 2000
Exhibit 10.2 Investment Advisory Agreement by and between Western Security
Life Insurance Company and AmerUs Capital Management Group,
Inc. dated February 18, 2000
Exhibit 10.3 Investment Advisory Agreement by and between Bankers Life
Insurance Company of New York and AmerUs Capital Management
Group, Inc. dated February 18, 2000
Exhibit 10.4 Investment Advisory Agreement by and between IL Annuity and
Insurance Company and AmerUs Capital Management Group, Inc.
dated February 18, 2000
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COMBINATION AND INVESTMENT AGREEMENT
AMONG
AMERICAN MUTUAL HOLDING COMPANY,
AMERUS LIFE HOLDINGS, INC.,
INDIANAPOLIS LIFE INSURANCE COMPANY
AND
THE INDIANAPOLIS LIFE GROUP OF COMPANIES, INC.
DATED FEBRUARY 18, 2000
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This COMBINATION AND INVESTMENT AGREEMENT, dated February 18,
2000 (the "Combination and Investment Agreement"), is made by and among American
Mutual Holding Company, an Iowa mutual insurance holding company (with any
successor entity thereto, "AMHC"), AmerUs Life Holdings, Inc., an Iowa
corporation which is a publicly traded subsidiary of AMHC (with any successor
entity thereto, "AmerUs"), Indianapolis Life Insurance Company, an Indiana
mutual insurance company (with any successor entity thereto, "Indianapolis
Life") and The Indianapolis Life Group of Companies, Inc., an Indiana
corporation 61.3% of whose common shares are owned by Indianapolis Life
("ILGC").
WITNESSETH:
WHEREAS, AMHC proposes to consummate a plan of conversion
under the applicable provisions of the insurance law of the State of Iowa and a
merger of AmerUs with and into AMHC, with AMHC as the surviving company in such
merger (all of which such transactions are collectively referred to herein as
the "AMHC Demutualization"); and
WHEREAS, Indianapolis Life, AMHC and AmerUs desire to enter
into a strategic combination pursuant to a series of transactions in which AMHC
will first complete the AMHC Demutualization and Indianapolis Life will
thereafter consummate a plan of conversion under the applicable provisions of
the insurance law of the State of Indiana (the "Indianapolis Life
Demutualization"), with Indianapolis Life remaining an Indiana domiciled life
insurer while becoming an indirect wholly-owned stock insurer subsidiary of AMHC
and Indianapolis Life's policyholders becoming shareholders of AMHC upon
consummation of the Indianapolis Life Demutualization, all subject to the terms
and conditions set forth herein; and
WHEREAS, Indianapolis Life owns 61.3% of the ILGC Shares (as
defined below), and the remainder of the ILGC Shares are held by American United
Life Insurance Company ("AUL") and Legacy Marketing Group ("Legacy"); and
WHEREAS, AMHC and AmerUs desire to invest $100 million in
ILGC, subject to the terms and conditions set forth herein; and
WHEREAS, Indianapolis Life and ILGC desire to use the proceeds
of the investment by AMHC and AmerUs to repurchase the ILGC Shares currently
held by AUL and Legacy and to contribute additional capital to ILGC's current
subsidiaries;
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual promises and covenants set forth herein and in reliance upon the
represen-
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tations, warranties, conditions and covenants contained herein, and intending to
be legally bound hereby and thereby, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions. The following terms, when used in
this Combination and Investment Agreement, shall have the meanings set forth
herein. The terms defined below, which may be used in their singular or plural
forms, shall be deemed to refer to the singular or plural as the context
requires.
"Adjusted Capital and Surplus" shall mean the sum of (i) a
Person's capital and surplus as set forth in the SAP Financial Statements of
such Person as of the last day of any calendar quarter plus (ii) the amount of
any asset valuation reserve maintained by such Person at such time in accordance
with SAP.
"Affiliate" shall mean, with respect to any Person, at the
time in question any other Person directly or indirectly controlling, controlled
by, or under common control with such Person.
"American Investors Life" shall mean American Investors Life
Insurance Company, a Kansas corporation.
"AmerUs Capital Management" shall mean AmerUs Capital
Management Group, Inc., an Iowa corporation.
"AmerUs Class B Common Stock" shall have the meaning set forth
in Section 6.8.
"AmerUs Common Stock" shall have the meaning set forth in
Section 6.8.
"AmerUs Filed SEC Documents" shall mean all reports,
schedules, forms, statements and other documents (including exhibits and all
other information incorporated therein) filed with the SEC by AmerUs or AMHC.
"AmerUs Life" shall mean AmerUs Life Insurance Company, an
Iowa corporation.
"AmerUs Preferred Stock" shall have the meaning set forth in
Section 6.8.
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"AmerUs SEC Documents" shall have the meaning set forth in
Section 6.9.
"AMHC and AmerUs Facilities" shall mean any offices, buildings
and other real property that are owned or leased by AMHC, AmerUs or any of their
Subsidiaries, which are used in the operation of the business of AMHC, AmerUs or
any of their Subsidiaries.
"AMHC Assets" shall mean any assets (whether or not required
by GAAP or SAP to be reflected on a balance sheet) beneficially owned by AMHC,
AmerUs or any of their Subsidiaries, including, without limitation, REO, bonds,
notes, debentures, mortgage loans, collateral loans and all other instruments of
indebtedness, stocks, partnership or joint venture interests and all other
equity interests, certificates issued by or interests in trusts and derivatives.
"AMHC Control Event" shall have the meaning set forth in
Section 11.2(d).
"AMHC Demutualization" shall have the meaning set forth in the
recitals to this Combination and Investment Agreement.
"AMHC Insurer Subsidiaries" shall mean the Subsidiaries of
AMHC as of the date hereof engaged in the business of insurance or reinsurance
underwriting, or deemed to be engaged in the business of insurance or
reinsurance underwriting by an insurance regulatory body asserting jurisdiction
over the activities of any such Subsidiary.
"AMHC Material Insurer Subsidiaries" shall mean AmerUs Life,
Delta Life and Annuity Company and American Investors Life.
"AMHC Material Subsidiaries" shall mean the AMHC Material
Insurer Subsidiaries, AmerUs and AmerUs Capital Management.
"AMHC Offer" shall mean an amount equal to the product of (x)
11,250,000 and (y) the greater of (A) $22.61 (which represents the average
closing price per share of the AmerUs Common Stock on the five (5) Trading Days
immediately following the parties' public announcement of their intention to
enter into this Combination and Investment Agreement on January 12, 2000) and
(B) the average closing price per share of the AmerUs Common Stock on the five
(5) Trading Days immediately prior to (i) the announcement of a Competing
Transaction Proposal that forms the basis for a termination under Section 11.1
hereof, if a Termination Date has occurred thereunder or, (ii) otherwise, the
Termination Date pursuant to Section 11.5 hereof.
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"AMHC Plan" shall have the meaning set forth in Section
3.6(a).
"AMHC SEC Documents" shall mean all reports, schedules, forms,
statements and other documents (including exhibits and all other information
incorporated therein) to be filed with the SEC by AMHC in contemplation of or
following the AMHC Demutualization.
"AMHC Shares" shall mean AMHC common stock.
"AMHC Statements" shall have the meaning set forth in Section
6.6(a)(ii).
"Annual Audited GAAP Statements" shall mean, with respect to
any Person, the audited annual GAAP Financial Statements of such Person.
"Annual Audited SAP Statements" shall mean, with respect to
any Person, the audited Annual SAP Statements of such Person, including, but not
limited to, any reconciliation with the corresponding Annual SAP Statements of
such Person.
"Annual GAAP Statements" shall mean, with respect to any
Person, the unaudited annual GAAP Financial Statements of such Person.
"Annual SAP Statements" shall mean, with respect to any
Person, the annual SAP Financial Statements of such Person filed with or
submitted to the insurance regulatory body in the jurisdiction in which such
Person is domiciled on forms prescribed or permitted by such regulatory body.
"Applicable Law" shall mean any applicable order, law,
regulation, rule, ordinance, order, writ, injunction, directive, judgment,
decree, principle of common law, constitution or treaty enacted, promulgated,
issued, enforced or entered by any Governmental Entity applicable to the parties
hereto, or any of their respective Subsidiaries, properties, or assets as the
case may be.
"AUL" shall have the meaning set forth in the recitals to this
Combination and Investment Agreement.
"Bankers Life" shall mean Bankers Life Insurance Company of
New York, a New York corporation.
"Board of Directors" shall mean, with respect to any Person,
such Person's board of directors.
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"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in either Iowa or Indiana are
permitted or obligated by law to be closed for regular banking business.
"Closing Dates" shall mean the Stock Purchase Closing Date and
the Combination Closing Date.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Combination" shall have the meaning set forth in Section
3.1(b).
"Combination Closing" shall have the meaning set forth in
Section 3.2.
"Combination Closing Date" shall have the meaning set forth in
Section 3.2.
"Combination Effective Time" shall have the meaning set forth
in Section 3.3.
"Company Plans" shall have the meaning set forth in Section
4.20(a).
"Competing Transaction Proposal" shall have the meaning set
forth in Section 7.2.
"Computer Programs" shall mean (i) any and all computer
software programs, including all source and object code, (ii) databases and
compilations, including any and all data and collections of data, whether
machine readable or otherwise, (iii) all descriptions, flow-charts and other
work product used to design, plan, organize and develop any of the foregoing,
(iv) all content contained on a Person's Internet site(s), and (v) all
documentation, including user manuals and training materials, relating to any of
the foregoing.
"Confidential Material" shall have the meaning set forth in
Section 9.4(b).
"Consolidated Indebtedness" shall mean, at any time and as to
any Person, all indebtedness of such Person and its Subsidiaries at such time
determined on a consolidated basis in accordance with GAAP.
"Consolidated Total Capital" shall mean, at any time and as to
any Person, the sum of such Person's Consolidated Indebtedness and all accounts
which,
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in accordance with GAAP, constitute stockholders equity, but excluding (i)
treasury stock and (ii) the effects of Financial Accounting Standard No. 115.
"Converted Shares" shall have the meaning set forth in Section
2.1(a).
"Environmental Laws" shall mean any and all foreign, federal,
state or local statutes, laws, regulations, ordinances, rules or codes now in
effect relating to the environment, to the effect of the environment on human
health or safety or to the use, generation, manufacturing, treatment, disposal,
storage, discharge or release of Hazardous Substances into the environment,
including without limitation, ambient air, surface water, groundwater or land,
or the remediation thereof.
"Environmental Reports" shall have the meaning set forth in
Section 4.13(c).
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the regulations thereunder.
"Exchange Act" shall have the meaning set forth in Section
6.9(a).
"Exchange Date" shall have the meaning set forth in Section
2.3(a).
"Exchange Right" shall have the meaning set forth in Section
2.1(a).
"Furnishing Party" shall have the meaning set forth in Section
9.4(b).
"GAAP" shall mean United States generally accepted accounting
principles.
"GAAP Financial Statements" shall mean balance sheets and
related statements of income and statements of change in capital and surplus and
cash flows, prepared in accordance with GAAP, consistently applied, including,
but not limited to, all notes, schedules, exhibits and other attachments thereto
and any reports thereon, whether consolidated, combined or separate or audited
or unaudited, together with the consolidating balance sheet of such Person and
each of its Subsidiaries as of the end of the period covered by such statements
and the related consolidating statements of income, of stockholders' equity and
of cash flows for such period.
"Governmental Entity" shall mean any foreign, domestic,
federal, territorial, state or local U.S. or non-U.S. governmental authority,
quasi-governmental authority, instrumentality, court, government,
self-regulatory
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organization, commission, tribunal or organization or any political or other
subdivision, department, branch or Representative of any of the foregoing.
"Hazardous Substances" shall mean any toxic, radioactive,
caustic or otherwise hazardous substance, including, but not limited to,
petroleum and its derivatives and by-products, or any substance having any
constituent elements displaying any of the foregoing characteristics, regulated
under Environmental Laws.
"Holder" shall have the meaning set forth in Section 2.2(a).
"Holding Sub" shall have the meaning set forth in Section
3.1(a)(iii).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"IL/AmerUs Directors Ratio" shall have the meaning set forth
in Section 3.7(a).
"IL Annuity" shall mean IL Annuity and Insurance Company, a
Massachusetts corporation.
"IL Annuity Put Option" shall have the meaning set forth in
Section 2.4(b)(v)(A).
"IL Annuity Put Exercise Date" shall have the meaning set
forth in Section 2.4(b)(v)(A).
"IL Securities" shall mean IL Securities, Inc., an Indiana
corporation.
"ILGC Shares" shall mean the issued and outstanding voting
shares of common stock of ILGC.
"Independent Appraiser" shall have the meaning set forth in
Section 2.4(b)(v)(A).
"Indiana Commissioner" shall mean the Indiana Commissioner of
Insurance.
"Indianapolis Life and ILGC Facilities" shall mean any
offices, buildings and other real property that are owned or leased by
Indianapolis Life, ILGC or any of their Subsidiaries, which are used in the
operation of the business of Indianapolis Life, ILGC or any of their
Subsidiaries.
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"Indianapolis Life Assets" shall mean any assets (whether or
not required by GAAP or SAP to be reflected on a balance sheet) beneficially
owned by Indianapolis Life, ILGC or any of their Subsidiaries, including,
without limitation, REO, bonds, notes, debentures, mortgage loans, collateral
loans and all other instruments of indebtedness, stocks, partnership or joint
venture interests and all other equity interests, certificates issued by or
interests in trusts and derivatives.
"Indianapolis Life Demutualization" shall have the meaning set
forth in the recitals to this Combination and Investment Agreement.
"Indianapolis Life Companies" shall mean Indianapolis Life,
ILGC and their Subsidiaries.
"Indianapolis Life Company Statements" shall have the meaning
set forth in Schedule 4.6.
"Indianapolis Life Insurer Subsidiaries" shall mean the
Subsidiaries of Indianapolis Life engaged in the business of insurance or
reinsurance underwriting, or deemed to be engaged in the business of insurance
or reinsurance underwriting by an insurance regulatory body asserting
jurisdiction over the activities of any such Subsidiary.
"Insurance Contract" shall mean any contract or agreement of
insurance, together with any riders or endorsements thereto, including, but not
limited to, life insurance policies, annuity contracts, variable contracts and
reinsurance contracts.
"Intellectual Property" shall mean all intellectual property
rights used or held in, or necessary for the conduct of, the business of
Indianapolis Life, ILGC or any of their Subsidiaries, or AMHC, AmerUs or any of
their Subsidiaries (as the context requires), as currently conducted or as
presently contemplated to be conducted, including, but not limited to, all
patents and patent applications; Trademarks, copyrights, copyright registrations
and applications; Computer Programs; technology, trade secrets, know-how,
confidential information, proprietary processes and formulae.
"Investment Management Agreements" shall mean the Investment
Advisory Agreements executed concurrently herewith, respectively, between AmerUs
Capital Management and (i) Indianapolis Life and (ii) each of the Indianapolis
Life Insurer Subsidiaries.
"IRS" shall mean the Internal Revenue Service.
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"Knowledge" or "knowledge" shall mean, (i) as to any
Indianapolis Life Company, the knowledge which is or should be in the possession
of those officers, directors or employees listed on Schedule 1.1(i) hereto, and
(ii) as to AMHC and AmerUs, the knowledge which is or should be in the
possession of those officers, directors or employees listed on Schedule 1.1(ii)
hereto, in each case, assuming the exercise of reasonable diligence in the
performance of the respective functions of any such officer, director or
employee.
"Legacy" shall have the meaning set forth in the recitals to
this Combination and Investment Agreement.
"Liability" shall mean a liability, obligation, claim or cause
of action (of any kind or nature whatsoever, whether absolute, accrued,
contingent or other, and whether known or unknown), including, but not limited
to, extra-contractual liabilities and any liability, obligation, claim or cause
of action arising pursuant to or as a result of an Insurance Contract.
"License" shall mean a license, certificate of authority,
franchise, permit or other authorization to transact an activity or business,
whether granted by a Governmental Entity or by any other Person.
"Lien" shall mean any mortgage, pledge, lien, encumbrance,
charge, adverse claim (whether pending or, to the knowledge of the Person
against whom the adverse claim is being asserted, threatened) or restriction of
any kind affecting title or resulting in an encumbrance against property, real
or personal, tangible or intangible, or a security interest of any kind,
including, without limitation, any conditional sale or other title retention
agreement, any right of first refusal, any lease in the nature thereof, and any
filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statute) of any jurisdiction (other than a
financing statement which is filed or given solely to protect the interest of a
lessor).
"Material Adverse Effect" shall mean a material adverse effect
on the business, results of operations, or financial or other condition of any
Person and its Subsidiaries taken as a whole, or on the ability of a Person to
consummate the transactions contemplated by this Combination and Investment
Agreement; provided, however, that neither (i) a down-grade of one level in the
A.M. Best Company, Inc.'s rating of Indianapolis Life, Bankers Life and/or IL
Annuity or of AmerUs Life and/or American Investors Life, nor (ii) a decrease in
Indianapolis Life's or an Indianapolis Life Insurer Subsidiary's or in an AMHC
Insurer Subsidiary's sales or sales prospects during the calendar year 2000
attributable to either the announcement of the Combination or the identity or
ratings of another party hereto that is not an Affiliate of the first party
shall constitute a Material Adverse Effect as to Indianapolis Life or AMHC,
respectively; provided further,
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however, that a down-grade of two or more levels in the A.M. Best Company,
Inc.'s rating of Indianapolis Life, Bankers Life and/or IL Annuity or of AmerUs
Life and/or American Investors Life shall constitute a Material Adverse Effect
as to Indianapolis Life or AMHC, respectively.
"Member Information Statement" shall mean the information
statement developed by Indianapolis Life or AMHC in connection with their
respective demutualizations, as contemplated or referenced, as the context may
require, in this Combination and Investment Agreement, for circulation to
members or policyholders.
"Memorandum of Understanding" shall have the meaning set forth
in Section 3.7.
"Merrill Lynch" shall mean Merrill Lynch, Pierce, Fenner &
Smith Incorporated.
"MEWA" shall have the meaning set forth in Section 4.20(f).
"Mortgaged Properties" shall mean the real property (including
land and any buildings or other improvements thereon) subject to a mortgage
interest or other Lien held by or in favor of Indianapolis Life, ILGC or any of
their Subsidiaries, or AMHC, AmerUs or any of their Subsidiaries (as the context
requires).
"Non-Voting Common Stock" shall have the meaning set forth in
Section 2.1(a).
"PBGC" shall have the meaning set forth in Section
4.20(d)(iii).
"Permit" shall have the meaning set forth in Section 5.4(b).
"Person" shall mean an individual, corporation, partnership,
association, joint stock company, limited liability company, Governmental
Entity, trust joint venture, labor union, estate, unincorporated organization or
other entity.
"Plan of Conversion" shall have the meaning set forth in
Section 3.1.
"Pre-Termination Competing Transaction Proposal" shall mean
any Competing Transaction Proposal (whether in its final or a previous form)
that was the subject of any communications, substantive discussions or
negotiations, directly or indirectly, between any Person involved in making or
consummating such a Competing Transaction Proposal, or its Representatives, and
any Indianapolis Life
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Company, or its Representatives, after January 7, 2000 and prior to the
Termination Date.
"Prohibitive Transaction" shall have the meaning set forth in
Section 8.3
"Purchase Date" shall have the meaning set forth in Section
2.4(f).
"Quarterly GAAP Statements" shall mean, with respect to any
Person, the quarterly GAAP Financial Statements of such Person.
"Quarterly SAP Statements" shall mean, with respect to any
Person, the quarterly SAP Financial Statements of such Person filed with or
submitted to the insurance regulatory body in the jurisdiction in which such
Person is domiciled on forms prescribed or permitted by such regulatory body.
"Receiving Party" shall have the meaning set forth in Section
9.4(b).
"REO" shall mean the real property (including land and any
buildings or other improvements thereon) owned by Indianapolis Life, ILGC or
their Subsidiaries, or AMHC, AmerUs or their Subsidiaries (as the context
requires), but not used in the operation of their respective businesses.
"Representative" shall mean, with respect to any Person, such
Person's officers, directors, employees, agents and representatives (including,
without limitation, any investment banker, financial advisor, accountant, legal
counsel, agent, representative or expert retained by or acting on behalf of such
Person or its Subsidiaries).
"Risk-Based Capital" shall mean, for any Person, the ratio
(expressed as a percentage) of (i) the "Total Adjusted Capital" as defined by
the National Association of Insurance Commissioners or any successor
organization thereto (the "NAIC") to (ii) the "Authorized Control Level
Risk-Based Capital" as defined by the NAIC from time to time, and, in both
cases, as applied by the domiciliary state of such Person in the context of the
Risk Based Capital Guidelines promulgated by the NAIC (or any terms substituted
therefor by the NAIC).
"SAP" shall mean, with respect to any Person, the statutory
accounting principles and practices prescribed or permitted by the domiciliary
state of the relevant Person, consistently applied.
"SAP Financial Statements" shall mean balance sheets and
related statements of income and statements of change in capital and surplus and
cash flows,
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prepared in accordance with SAP, including, but not limited to, all notes,
schedules, exhibits and other attachments thereto and any reports thereon,
whether consolidated, combined or separate or audited or unaudited.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall have the meaning set forth in Section
6.9(a).
"Significant Agreements" shall have the meaning set forth in
Section 4.9(b).
"Stock Purchase Closing Date" shall have the meaning set forth
in Section 2.6(a)(ii).
"Stock Purchase Price" shall have the meaning set forth in
Section 2.1.
"Subsidiary" shall mean each of those Persons (i) of which
another Person, directly or indirectly through one or more Subsidiaries, owns
beneficially securities having more than 50% of the voting power in the election
of directors (or Persons fulfilling similar functions or duties) of the owned
Person (without giving effect to any contingent voting rights), or (ii) which
another Person, directly or indirectly through one or more Subsidiaries,
controls as the general partner, managing member or Person exercising a similar
function.
"Superior Proposal" shall have the meaning set forth in
Section 7.2(c).
"Tangible Net Worth" shall mean, for any Person, its accounts
which, in accordance with GAAP, constitute stockholders equity (excluding
treasury stock and the effects of Financial Accounting Standard No. 115), less
goodwill, deferred acquisition costs and present value of future profits, as
reflected on such Person's consolidated balance sheet, plus an amount equal to
thirty-five percent (35%) of deferred acquisition costs and present value of
future profits.
"Taxes" shall mean all taxes, charges, duties, fees, levies,
or other similar assessments or Liabilities, including without limitation all
net and gross income, gross receipts, ad valorem, premium, excise, real
property, personal property, windfall profit, sales, use, transfer, license,
withholding, employment, payroll, profit, estimated, severance, stamp,
occupation, value added, registration, environmental, workers compensation,
social security and franchise taxes imposed by the United States of America, any
possession thereof, or any state, or foreign government, or any subdivision,
agency, or other similar Person of any of the foregoing; and such term shall
include any interest, fines, penalties, correction fees,
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sanction amounts, assessments, or additions to tax relating to, resulting from,
attributable to, or incurred in connection with any such tax or any contest or
dispute thereof.
"Tax Returns" of a Person shall mean any report, return,
information return, or other document (including any related or supporting
information and any amendments thereto) filed or required to be filed with any
federal, state or foreign governmental entity or other authority in connection
with the determination, assessment or collection of any Tax (whether or not such
Tax is imposed on such Person) or the administration of any laws, regulations or
administrative requirements relating to any Tax, or any statement required to be
furnished to any Person under any Tax Law.
"Termination Date" shall have the meaning set forth in Section
11.6(b).
"Termination Notice" shall have the meaning set forth in
Section 11.6(b).
"Trading Day" shall mean any day on which the New York Stock
Exchange is open for business and the trading of securities.
"Trademarks" shall mean all United States and foreign
trademarks (including service marks and trade names, whether registered or at
common law), registrations and applications therefor, domain names, logos,
designs, slogans and general intangibles of like nature owned by Indianapolis
Life, ILGC or a Subsidiary thereof, together with the goodwill of each of the
respective businesses associated therewith, together with any and all (i)
renewals thereof and (ii) rights to sue for past, present and future
infringements or misappropriation thereof.
"Western Security" shall mean Western Security Life Insurance
Company, an Arizona corporation.
ARTICLE 2
PURCHASE AND SALE OF NONVOTING COMMON STOCK
Section 2.1 Purchase and Sale of Non-Voting Common Stock. (a)
On the terms and subject to the conditions set forth herein, ILGC agrees to
issue and sell to AMHC or AmerUs (or a Subsidiary thereof that agrees to be
bound by all of the restrictions and provisions of this Article 2), and AMHC or
AmerUs agrees to purchase (or to cause such Subsidiary thereof to purchase) from
ILGC, 105.9627
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shares of non-voting common stock of ILGC (the shares so purchased are referred
to herein as the "Non-Voting Common Stock"), each share of which shall be
authorized by ILGC's articles of incorporation and shall, upon receipt of
necessary approvals from Governmental Entities under Applicable Law, be
exchangeable, at the option of the Holder, into one newly-issued share of
authorized voting common stock of ILGC and which shall, together with the
Converted Shares, at all times collectively represent 45% of all outstanding
equity interests in ILGC on a fully diluted basis (the "Exchange Right"), after
taking into account the repurchase of ILGC Shares held by AUL and Legacy as
required under Section 2.5. The Non-Voting Common Stock and the ILGC Shares into
which such Non-Voting Common Stock is exchangeable upon exercise of the Exchange
Right (the "Converted Shares") (i) shall not, prior to the occurrence of a
Termination Date, be transferred, sold, exchanged, assigned, gifted, pledged,
made the subject of any lien or security interest or option to purchase,
hypothecated, or otherwise alienated, disposed of or encumbered, by contract or
by operation of law, except (A) to a Subsidiary of AMHC or AmerUs or (B) with
the prior written consent of ILGC and Indianapolis Life, to a Person who is not
a Subsidiary of AMHC or AmerUs, subject in the case of either (A) or (B) to
Applicable Law and the execution by the transferee or other party of an
agreement reasonably satisfactory to ILGC in which such transferee or other
party agrees to be bound by all of the restrictions and provisions of this
Combination and Investment Agreement relating to the Non-Voting Common Stock or
Converted Shares; and any attempted transfer or other alienation, disposition or
encumbrance in violation of this provision shall be void and of no effect;
provided, however, that after the occurrence of a Termination Date, such shares
shall be freely transferable except to the extent such transferability may be
limited under Applicable Law and such transferee shall have all the rights and
benefits conferred by this Agreement; and (ii) shall be subject to optional and
mandatory purchase by Indianapolis Life or repurchase by ILGC as expressly
provided in Section 2.4 hereof. The purchase price for the issuance and sale of
the Non-Voting Common Stock shall be $100,000,000 (the "Stock Purchase Price").
The sale and purchase of the Non-Voting Common Stock pursuant to this Section is
referred to herein as the "Stock Purchase."
(b) Indianapolis Life and ILGC represent and warrant to AMHC
and AmerUs as of the Stock Purchase Closing Date and assuming payment of the
Stock Purchase Price that the shares of Non-Voting Common Stock are, and as of
and following exercise of the Exchange Right each of the Converted Shares will
be, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights.
Section 2.2 Stock Purchase Covenants. (a) ILGC and
Indianapolis Life agree that the shares of Non-Voting Common Stock and/or the
Converted Shares shall at all times have a priority in any and all dividends and
other distributions made on account of the equity ownership interests in ILGC
(including,
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<PAGE> 16
but not limited to, in connection with any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of ILGC) until the Holder receives the
full amount to which it would be entitled in a purchase or repurchase as set
forth in Section 2.4(b)(i)(C) hereof if a Termination Date has not occurred
prior to the date of such purchase or repurchase (or, if a Termination Date has
occurred, the full amount set forth in the applicable subsection of Section
2.4), prior to any distribution with respect to any equity ownership interests
in ILGC owned by (i) Indianapolis Life or (ii) any other Person that becomes an
owner of any ILGC Shares or other equity ownership interest in ILGC after the
date hereof. From and after the date hereof, Indianapolis Life and ILGC shall
not initiate, solicit or enter into an agreement, instrument, transaction,
letter of intent or other arrangement providing, permitting or contemplating,
directly or indirectly, priority in any distribution of assets or capital stock
of ILGC to any holder of capital stock of ILGC over the Person or Persons who is
or are at any time and from time to time the holder of right, title and interest
to the Non-Voting Common Stock or the Converted Shares issued pursuant to this
Combination and Investment Agreement (individually or collectively, as context
may require, the "Holder"). As of the date hereof, there is no (and there is no
commitment to enter into any) agreement, instrument, transaction, letter of
intent or other arrangement which provides, permits or contemplates, directly or
indirectly, priority in any distribution on account of any other shares of ILGC
over the priority granted herein to the Non-Voting Common Stock or the Converted
Shares (after taking into account the repurchase of ILGC Shares held by AUL and
Legacy as contemplated by Section 2.5).
(b) The parties shall use their best efforts to obtain at the
earliest practicable time following the Stock Purchase Closing (as defined
below) all necessary approvals from Governmental Entities to permit the Holder
to exercise the Exchange Right. The parties shall cooperate with one another (i)
in determining whether any action by or in respect of, or filing with or
approval by, any Governmental Entity is required in connection with the exercise
of the Exchange Right and (ii) in taking such actions or making any such
filings, furnishing information required in connection therewith and reasonably
seeking to obtain in timely fashion any approval related thereto.
(c) During the period commencing as of the Stock Purchase
Closing Date until the purchase or repurchase, as the case may be, of all of the
issued and outstanding shares of Non-Voting Common Stock or Converted Shares
pursuant to the provisions of Section 2.4 hereof, except as otherwise expressly
permitted under Section 2.2(d) hereof, ILGC shall not make any issuance, sale
(or other transfer), distribution or dividend of Non-Voting Common Stock, ILGC
Shares or other debt or equity security not expressly contemplated by this
Combination and Investment Agreement. ILGC shall not at any time make any
subdivision or reclassification of the Non-Voting Common Stock or ILGC Shares,
and shall not take any action which
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<PAGE> 17
would cause each share of Non-Voting Common Stock to be exchangeable into less
than one of the ILGC Shares. The total number of shares of Non-Voting Common
Stock and Converted Shares outstanding at any time prior to the first purchase
or repurchase of the Holder's shares hereunder shall constitute at least
forty-five percent (45%) of the then issued and outstanding equity or ownership
interests in ILGC (after taking into account the repurchase of ILGC Shares held
by AUL and Legacy as required under Section 2.5) and, at all times after such
first purchase or repurchase, the percentage of the outstanding equity interests
in ILGC held by the Holder shall be equal to the product of 45% multiplied by a
fraction, the numerator of which is the number of outstanding shares of
Non-Voting Common Stock and Converted Shares that have not been repurchased by
ILGC or purchased by Indianapolis Life, as the case may be, and the denominator
of which is 105.9627 (subject in either case to any adjustment to the parties'
relative ownership interests caused by issuance of equity ownership interests as
expressly permitted under and in compliance with Section 2.2(d) below).
(d) If and after a Termination Date occurs, ILGC shall have
the right to issue, sell or distribute equity ownership interests in ILGC, so
long as (i) such equity ownership interests in ILGC are expressly subject to the
priority described in Section 2.2(a) hereof in favor of the Holder; (ii) ILGC
causes the Person to whom such equity ownership interests in ILGC are issued
(and any subsequent transferee of such interests) to execute an agreement
reasonably satisfactory to the Holder in which such Person (or transferee)
acknowledges and agrees to be bound by the priority provided in Section 2.2 and
the Holder's other rights pursuant to this Agreement; and (iii) the certificates
for any such equity ownership interests in ILGC issued and outstanding at any
time pursuant to this Section 2.2(d) (or any replacement or reissue of such
certificates) contains an express reference to such priority. If and after a
Termination Date occurs, ILGC shall have the right to issue, sell or distribute
debt securities of ILGC, subject to the covenants set forth in Section 2.8
hereof.
(e) If and after a Termination Date occurs, Indianapolis Life
shall have the right to sell, pledge, dispose of or otherwise transfer any
equity ownership interests of ILGC owned by Indianapolis Life, provided that:
(i) Indianapolis Life shall not make any such transfer of the ILGC Shares or any
other equity ownership interests it holds in ILGC except upon requiring the
transferee to execute an agreement reasonably satisfactory to the Holder in
which such transferee acknowledges and agrees to be bound by the priority
provided in Section 2.2 and the Holder's other rights pursuant to this
Agreement; and (ii) Indianapolis Life shall at all times retain ownership, free
and clear of any Liens, of that portion of the voting equity ownership interests
in ILGC that would, together with the Converted Shares owned by the Holder,
constitute a majority of the voting equity ownership interests in ILGC.
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<PAGE> 18
Section 2.3 Mechanics for Exchange of Non-Voting Common Stock.
(a) The Holder of any shares of Non-Voting Common Stock may exercise the
Exchange Right in whole or in part, by delivery of an original executed notice
of exchange and the certificate or certificates representing the shares of
Non-Voting Common Stock to be exchanged to ILGC together with the Holder's
written representation and warranty that all necessary approvals from
Governmental Entities to permit the Holder to exercise the Exchange Right have
been obtained and are in full force and effect. The Exchange Right shall be
deemed to have been effected on the date when such notice of an election to
exchange and the certificate or certificates for the number of shares to be
exchanged, together with such representation and warranty concerning approvals
by Governmental Entities, are delivered to ILGC, and such date is referred to
herein as the "Exchange Date." As promptly as practicable thereafter, ILGC shall
deliver to the Holder of the exchanged Non-Voting Common Stock certificates
representing one share of the ILGC Shares for each share of the Non-Voting
Common Stock exchanged and a new certificate, if applicable, for any
non-exchanged shares of Non-Voting Common Stock represented by the surrendered
certificate(s). The Holder of the Non-Voting Common Stock receiving the
Converted Shares shall be deemed to have become a holder of record of such ILGC
Shares on the applicable Exchange Date.
(b) Each share of Non-Voting Common Stock exchanged pursuant
to this Section 2.3 shall be canceled by ILGC as of the applicable Exchange
Date.
Section 2.4 Rights upon Termination of Combination and
Investment Agreement. (a) Upon the occurrence of any Termination Date under
Section 11.1 hereof,
(i) Indianapolis Life or ILGC shall purchase or repurchase, as the case
may be, all of the issued and outstanding shares of Non-Voting Common
Stock and the Converted Shares on or prior to the 10th Business Day
following such Termination Date. Such shares shall be purchased or
repurchased, as the case may be, for the sum of (A) the Stock Purchase
Price plus (B) an amount equal to the annually compounded interest that
would have accrued at the rate of 15% percent per annum on the Stock
Purchase Price from the Stock Purchase Closing Date until the Purchase
Date (as defined in Section 2.4(f) below);
(ii) ILGC shall pay to AMHC and/or AmerUs (as AMHC and AmerUs may
direct) in cash an amount equal to 3% of the Stock Purchase Price;
(iii) Indianapolis Life shall pay to AMHC and/or AmerUs (as AMHC and
AmerUs may direct) in cash an amount equal to 3% of the AMHC Offer; and
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<PAGE> 19
(iv) Indianapolis Life and/or ILGC shall also pay to AMHC and/or AmerUs
(as AMHC and AmerUs may direct) in cash (A) any and all out of pocket
costs and expenses incurred by AMHC and/or AmerUs in connection with
developing, negotiating or structuring, or otherwise incurred, directly
or indirectly, in connection with this Combination and Investment
Agreement and the transactions contemplated hereby, including, but not
limited to, any obligation incurred by AMHC or AmerUs to investment
bankers or other advisors in connection with the transactions
contemplated by this Combination and Investment Agreement (provided,
however, that Indianapolis Life and ILGC shall (i) reimburse only the
first $2,000,000 in fees but shall pay any other expenses or charges
payable by AMHC or AmerUs to Merrill Lynch and (ii) not be responsible
for any such obligations incurred by AMHC or AmerUs to investment
bankers or other advisors primarily engaged by AMHC, AmerUs or their
respective Boards of Directors in connection with the AMHC
Demutualization), plus (B) if applicable, any and all out of pocket
costs and expenses incurred by AMHC and/or AmerUs in collecting any
amounts due pursuant to this Section 2.4(a).
All sums to be paid under this Section 2.4(a) shall be paid
within ten (10) Business Days of the Termination Date by wire transfer of
immediately available funds; provided, however, that all sums to be paid
pursuant to Section 2.4(a)(iv) shall be paid within ten (10) Business Days
following AMHC's or AmerUs' presentation to Indianapolis Life of an itemized
summary of the costs and expenses referred to in such Section 2.4(a)(iv).
(b) Upon the occurrence of any Termination Date under Section
11.2 hereof,
(i) Indianapolis Life and ILGC shall have the right to purchase or
repurchase, as the case may be, at any time all or any portion of the
Non-Voting Common Stock and the Converted Shares, subject to following
requirements:
(A) For the portion of such shares as to which the
Purchase Date occurs on or prior to the first anniversary of
the Stock Purchase Closing, such shares shall be purchased or
repurchased, as the case may be, for the sum of (A) the Stock
Purchase Price plus (B) an amount equal to the annually
compounded interest that would have accrued at the rate of 15%
percent per annum on the Stock Purchase Price from the Stock
Purchase Closing Date until the Purchase Date, multiplied by a
fraction, the numerator of which is the number of shares to be
purchased or repurchased and the denominator of which is
105.9627;
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<PAGE> 20
(B) For the portion of such shares as to which the
Purchase Date occurs following the first anniversary of the
Stock Purchase Closing and on or prior to the second
anniversary of the Stock Purchase Closing, such shares shall
be purchased or repurchased, as the case may be, for the sum
of (A) the Stock Purchase Price plus (B) an amount equal to
the annually compounded interest that would have accrued at
the rate of 15% per annum on the Stock Purchase Price from the
Stock Purchase Closing Date until the first anniversary of the
Stock Purchase Closing Date and at the rate of 16% percent per
annum on the Stock Purchase Price from the first anniversary
of the Stock Purchase Closing Date until the Purchase Date,
multiplied by a fraction, the numerator of which is the number
of shares to be purchased or repurchased and the denominator
of which is 105.9627;
(C) For the portion of such shares as to which the
Purchase Date occurs following the second anniversary of the
Stock Purchase Closing, such shares shall be purchased or
repurchased, as the case may be, for the sum of (A) the Stock
Purchase Price plus (B) an amount equal to the annually
compounded interest that would have accrued at the rate of 15%
per annum on the Stock Purchase Price from the Stock Purchase
Closing Date until the first anniversary of the Stock Purchase
Closing Date and at the rate of 16% per annum on the Stock
Purchase Price from the first anniversary of the Stock
Purchase Closing Date to the second anniversary of the Stock
Purchase Closing Date and at the rate of 18% percent per annum
on the Stock Purchase Price from the second anniversary of the
Stock Purchase Closing Date until the Purchase Date,
multiplied by a fraction, the numerator of which is the number
of shares to be purchased or repurchased and the denominator
of which is 105.9627; and
(D) Notwithstanding the foregoing, if the Purchase
Date occurs after a Termination Date occasioned by Section
11.2(d), the shares to be purchased or repurchased pursuant to
this Section 2.4(b) shall be purchased or repurchased, as the
case may be, for the sum of (A) the Stock Purchase Price plus
(B) an amount equal to the annually compounded interest that
would have accrued at the rate of 12% percent per annum on the
Stock Purchase Price from the Stock Purchase Closing Date
until the Purchase Date, multiplied by a fraction, the
numerator of which is the number of shares to be purchased or
repurchased and the denominator of which is 105.9627;
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<PAGE> 21
(ii) If, following the occurrence of any Termination Date under Section
11.2, for any reason all of the issued and outstanding shares of
Non-Voting Common Stock and the Converted Shares have not been
purchased or repurchased, as the case may be, in full by Indianapolis
Life or ILGC, as the case may be, pursuant to the provisions of Section
2.4(b)(i) as of the earlier of (A) the end of the thirtieth (30th)
month from the Stock Purchase Closing Date and (B) the end of the
twenty-fourth (24th) month from the Termination Date, Indianapolis Life
and ILGC shall thereafter use their best efforts to sell any assets,
blocks of business or Subsidiaries, and to declare any dividends, as
may be necessary to allow Indianapolis Life and/or ILGC to purchase or
repurchase, as the case may be, such shares within twelve (12) months
of the earlier of (A) and (B) in this paragraph, and all such shares
shall be promptly purchased or repurchased, as the case may be, as
provided herein with proceeds of such sale and/or dividends pursuant to
the terms of Section 2.4(b)(i)(A), (B), (C) or (D), as applicable;
(iii) If, following the occurrence of any Termination Date under
Section 11.2, for any reason all issued and outstanding shares of
Non-Voting Common Stock and the Converted Shares have not been
purchased or repurchased, as the case may be, in full by Indianapolis
Life or ILGC pursuant to the provisions of Section 2.4(b)(i), as of the
earlier of (A) the end of the forty-second (42nd) month from the Stock
Purchase Closing Date and (B) the end of the thirty-sixth (36th) month
from the Termination Date, then, in addition to the application of
Section 2.4(b)(ii), the Holder shall have the right to designate, by
notice to the Chairman of the Board of Directors of ILGC, Persons
sufficient to constitute a majority of the directors serving on the
Board of Directors of ILGC, and ILGC and/or Indianapolis Life (and any
subsequent holders of voting equity ownership interests in ILGC) shall
promptly cause the election of such designated Persons to the Board of
Directors of ILGC, and shall maintain such Persons' membership on the
Board of Directors until all issued and outstanding shares of
Non-Voting Common Stock and the Converted Shares have been purchased or
repurchased, as the case may be; and
(iv) Notwithstanding anything in this Combination and Investment
Agreement to the contrary, following the occurrence of any Termination
Date under Section 11.2 all of the Non-Voting Common Stock and
Converted Shares shall be purchased by Indianapolis Life or repurchased
by ILGC pursuant to the terms of Sections 2.4(b)(i)(A), (B), (C) or
(D), as applicable, on or prior to the earlier of (A) the fourth (4th)
anniversary of the Stock Purchase Closing Date and (B) the date
Indianapolis Life and/or ILGC has obtained new equity or equity
equivalent which in the aggregate is sufficient to pay in full the
amount required to effect such purchase or repurchase.
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<PAGE> 22
(v) (A) On any Business Day after a Termination Date, the
occurrence of which results from the application of Section 11.2, but
prior to the purchase by Indianapolis Life or the repurchase by ILGC of
all of the Non-Voting Common Stock and the Converted Shares, the Holder
shall have the right to exchange an amount of Non-Voting Common Stock
or Converted Shares (together with any cash that may be required as
provided in clause (C) below) determined in accordance with this
Section 2.4(b)(v) for all of the issued and outstanding equity
interests of IL Annuity (the "IL Annuity Put Option"). ILGC shall take
all actions necessary to cause the IL Annuity Put Option to be
consummated, including using all reasonable efforts to assist the
Holder in obtaining any necessary regulatory approvals for such
exchange. The number of shares required to be exchanged to exercise the
IL Annuity Put Option shall be determined as set forth in Section
2.4(b)(v)(C) hereof based on the fair market value of IL Annuity as
determined by an independent appraiser (the "Independent Appraiser") to
be selected by mutual agreement of the parties hereto within ten (10)
Business Days of the Holder providing notice to Indianapolis Life that
it requires a determination of the fair market value of IL Annuity in
order to determine whether to exercise the IL Annuity Put Option. If
the parties cannot so agree, then the Independent Appraiser shall,
within ten (10) Business Days of the Holder's providing such notice to
Indianapolis Life, be selected from among the top five (5) "Leading
Financial Advisors" listed for Life and Health Deals in the most
recently published annual issue of INSURANCE Mergers & Acquisitions
(published by SNLSecurities), with Indianapolis Life striking one of
such top five (5) advisors, followed by AMHC striking another of such
top five (5), and so on, so that the last remaining advisor shall be
the Independent Appraiser. The fees of the Independent Appraiser shall
be borne equally by Indianapolis Life and the Holder. The Indianapolis
Life Companies shall provide the Independent Appraiser with full
access, pursuant to the provisions of Section 9.6 hereof, to such
information relating to IL Annuity as the Independent Appraiser deems
necessary in its sole discretion to determine the fair market value of
IL Annuity. The Independent Appraiser shall deliver to the Holder and
Indianapolis Life as promptly as practicable, but no later than
forty-five (45) days after the commencement of its review, a report
setting forth its determination of IL Annuity's fair market value.
Within twenty (20) Business Days of its receipt of the Independent
Appraiser's report, the Holder may provide Indianapolis Life notice of
its intention to exercise the IL Annuity Put Option. The date on which
the Holder transmits notice of its intention to exercise the IL Annuity
Put Option is referred to hereinafter as the "IL Annuity Put Exercise
Date."
(B) The Holder(s) of the majority of the Non-Voting Common
Stock and Converted Shares then outstanding shall have the right to
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<PAGE> 23
initiate selection of the Independent Appraiser and a determination of
the fair market value of IL Annuity pursuant to the provisions of this
Section 2.4(b)(v) once in each calendar year after the Termination Date
and prior to the purchase or repurchase of all of the Non-Voting Common
Stock and the Converted Shares.
(C) The number of shares of Non-Voting Common Stock or ILGC
Shares required to be put to exercise the IL Annuity Put Option shall
be equal to the product of (i) a fraction, the numerator of which is
the fair market value of IL Annuity as determined by the Independent
Appraiser and the denominator of which is the sum of (A) the Stock
Purchase Price plus (B) an amount equal to the annually compounded
interest that would have accrued at the rate of 15% per annum on the
Stock Purchase Price from the Stock Purchase Closing Date until the
first anniversary of the Stock Purchase Closing Date and at the rate of
16% per annum on the Stock Purchase Price from the first anniversary of
the Stock Purchase Closing Date to the second anniversary of the Stock
Purchase Closing and at the rate of 18% percent per annum on the Stock
Purchase Price from the second anniversary of the Stock Purchase
Closing Date until the IL Annuity Put Exercise Date (or, in the event
of a Termination Date occasioned by Section 11.2(d), at the rate of 12%
per annum on the Stock Purchase Price from the Stock Purchase Closing
Date until the IL Annuity Put Exercise Date) and (ii) 105.9627. The
calculation described in the foregoing sentence is referred to herein
as the "Put Formula." If the number of shares held by the Holder at the
time of the exercise of the IL Annuity Put Option is less than the
number of shares required as determined pursuant to the Put Formula
(whether due to a prior purchase or repurchase of a portion of such
shares or an increase in the value of IL Annuity or otherwise), then
the Holder shall, if it desires to exercise the IL Annuity Put Option,
supplement the available shares with cash to pay the fair market value
of IL Annuity. The amount of cash required is an amount equal to the
product of (x) a per share value determined by dividing the denominator
in the Put Formula by 105.9627 and (y) the difference between the
number of shares required to be put to exercise the IL Annuity Put
Option and the number of shares then held by the Holder. The Holder
shall not have the right to pay cash pursuant to the preceding sentence
unless it is concurrently putting to ILGC all of the shares of
Non-Voting Common Stock and Converted Shares issued and outstanding as
of the IL Annuity Put Exercise Date.
(D) Any exercise of the IL Annuity Put Option shall not affect
or extinguish any rights or remedies of AMHC or AmerUs or any other
Holder to demand compliance by Indianapolis Life and ILGC under any
other provision of this Section 2.4.
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<PAGE> 24
(c) Upon the occurrence of any Termination Date under Section
11.3 hereof, all of the Non-Voting Common Stock and Converted Shares shall be
purchased by Indianapolis Life or repurchased by ILGC no later than the 60th day
following such Termination Date. Such shares shall be purchased or repurchased,
as the case may be, for the sum of (A) the Stock Purchase Price plus (B) an
amount equal to the annually compounded interest that would have accrued at the
rate of 18% per annum on the Stock Purchase Price from the Stock Purchase
Closing Date until the Purchase Date; provided, however, that no such purchase
or repurchase following any Termination Date under Section 11.3 shall affect or
extinguish any rights or remedies of AMHC or AmerUs (or any of their
Subsidiaries or Affiliates) or any other Holder under any other provision of
this Combination and Investment Agreement or Applicable Law. If for any reason
any of the Non-Voting Common Stock and Converted Shares are not purchased by
Indianapolis Life on or prior to the 60th day following such Termination Date,
then at any time thereafter the Holder may, at its option, exercise IL Annuity
Put Option as described in Section 2.4(b)(v) (without giving effect to the
references therein to Section 11.2, and using the sum of (A) and (B) above in
place of the stated denominator in the Put Formula); provided, however, that any
such exercise of the IL Annuity Put Option shall not affect or extinguish any
rights or remedies of AMHC or AmerUs (or any of their Subsidiaries or
Affiliates) or any other Holder under any other provision of this Combination
and Investment Agreement or Applicable Law.
(d) Upon the occurrence of any Termination Date under Section
11.4 hereof, all or any portion of the Non-Voting Common Stock and the Converted
Shares may be purchased by Indianapolis Life or repurchased by ILGC at any time
following such Termination Date; provided, however, that Indianapolis Life or
ILGC shall purchase or repurchase, as the case may be, all such shares on or
prior to the earlier of (A) the fourth (4th) anniversary of the Stock Purchase
Closing Date and (B) the date Indianapolis Life and/or ILGC has obtained new
equity or equity equivalent which in the aggregate is sufficient to pay in full
the amount required to effect such purchase or repurchase. The Non-Voting Common
Stock and Converted Shares purchased or repurchased pursuant to this paragraph
shall be purchased or repurchased for the sum of (A) the Stock Purchase Price
plus (B) an amount equal to the annually compounded interest that would have
accrued at the rate of 10% percent per annum on the Stock Purchase Price from
the Stock Purchase Closing Date until the Purchase Date, multiplied by a
fraction, the numerator of which is the number of shares to be purchased or
repurchased on such Purchase Date and the denominator of which is 105.9627.
Nothing in this Section 2.4(d) is intended to extinguish any other rights or
remedies of Indianapolis Life or ILGC under any other provision of this
Combination and Investment Agreement or Applicable Law.
(e) Upon the occurrence of any Termination Date under Section
11.5 hereof,
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<PAGE> 25
(i) All of the Non-Voting Common Stock and Converted Shares shall be
purchased by Indianapolis Life or repurchased by ILGC no later than the
60th day following such Termination Date. Such shares shall be
purchased or repurchased, as the case may be, for the sum of (A) the
Stock Purchase Price plus (B) an amount equal to the annually
compounded interest that would have accrued at the rate of 15% per
annum on the Stock Purchase Price from the Stock Purchase Closing Date
until the Purchase Date. If for any reason any of the Non-Voting Common
Stock and Converted Shares are not purchased by Indianapolis Life or
repurchased by ILGC on or prior to the 60th day following such
Termination Date, the Holder may, at its option, exercise the IL
Annuity Put Option as described in Section 2.4(b)(v) hereof (without
giving effect to the references therein to Section 11.2, and using the
sum of (A) and (B) above in place of the stated denominator in the Put
Formula); and
(ii) Indianapolis Life shall also pay to AMHC and/or AmerUs (as AMHC
and AmerUs may direct) in cash an amount equal to (A) 3% of the Stock
Purchase Price plus (B) if applicable, any and all out of pocket costs
and expenses incurred by AMHC and/or AmerUs in collecting any amounts
due pursuant to Section 2.4(e).
(iii) Any action contemplated by this Section 2.4(e), including,
without limitation, exercise of the IL Annuity Put Option, shall not
affect or extinguish any rights or remedies of AMHC or AmerUs (or any
of their Subsidiaries or Affiliates) or any other Holder under any
other provision of this Combination and Investment Agreement or
Applicable Law.
All sums to be paid under clause (A) of Section 2.4(e)(ii)
shall be paid within ten (10) Business Days of the Termination Date by wire
transfer of immediately available funds; and all sums to be paid pursuant to
clause (B) of Section 2.4(e)(ii) shall be made within ten (10) Business Days
following AMHC's or AmerUs' presentation to Indianapolis Life of an itemized
summary of the costs and expenses referred to in such clause (B).
(f) Purchase or repurchase of shares of Non-Voting Common
Stock and Converted Shares may be effected by exchanging (i) the certificate or
certificates of the Holder for the shares of Non-Voting Common Stock or
Converted Shares to be purchased or repurchased and (ii) a notice from the
Holder identifying an account to which proceeds are to be remitted by wire
transfer of immediately available funds for (iii) a new certificate, if
applicable, representing any non-purchased or non-repurchased shares of the
Non-Voting Common Stock or Converted Shares represented by such certificate(s)
and (iv) payment by wire transfer of immediately available funds of ILGC or
Indianapolis Life, as directed in the Holder's notice, of
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<PAGE> 26
the full purchase or repurchase amount payable under this Section 2.4 in respect
of the purchased or repurchased shares. For full or partial purchases or
repurchases initiated by Indianapolis Life and/or ILGC, the Holder shall provide
the notice and by express courier within five (5) Business Days of written
request by Indianapolis Life or ILGC, and shall arrange to surrender the
certificate(s) when the purchase or repurchase proceeds are remitted and any new
certificate is exchanged as provided above. The date on which any purchase or
repurchase proceeds are remitted pursuant to the provisions of Sections 2.4(a),
(b), (c), (d) or (e) hereof is referred to herein as a "Purchase Date."
(g) The obligations of each of Indianapolis Life and ILGC
under this Section 2.4 are independent and are those of a primary obligor. The
inability, refusal or other failure of either Indianapolis Life or ILGC to
perform its obligations hereunder shall not affect or limit the obligations of
the other of such parties to perform its obligations hereunder, nor shall such
inability, failure or refusal of one of such parties be asserted as a defense in
any action to enforce the obligations of the other of such parties hereunder.
Section 2.5 Use of Stock Purchase Price. Indianapolis Life and
ILGC shall use the proceeds of the Stock Purchase Price to (i) repurchase the
ILGC Shares held by AUL and Legacy, in the amounts shown on Schedule 2.5 hereto,
on the Stock Purchase Date, pursuant to documentation reasonably satisfactory to
AMHC and AmerUs, and (ii) in the discretion of ILGC, following the Stock
Purchase Date, to repay a loan of up to $3 million owed by ILGC to Indianapolis
Life. The balance of the Stock Purchase Price not used as required under the
foregoing sentence shall, following discussion between ILGC and AMHC, be
contributed as additional capital to IL Securities, in an amount not to exceed
$1 million, and to the Indianapolis Life Insurer Subsidiaries as of the date
hereof.
Section 2.6 Closing of the Stock Purchase. (a) The closing of
the Stock Purchase (the "Stock Purchase Closing") shall take place on (i) the
date of this Combination and Investment Agreement if the conditions specified in
Section 2.7 are satisfied as of the date hereof or (ii) if the conditions to
closing of the Stock Purchase set forth in Section 2.7 (the "Stock Purchase
Closing Conditions") are not satisfied as of the date of this Combination and
Investment Agreement, two (2) Business Days following satisfaction of the Stock
Purchase Closing Conditions (the "Stock Purchase Closing Date"). The Stock
Purchase Closing will be held at the offices of Baker & Daniels, 300 North
Meridian Street, Suite 2700, Indianapolis, Indiana 46204 or at such other
location as the parties hereto shall agree to in writing.
(b) At the Stock Purchase Closing, (i) ILGC shall issue and
deliver to AMHC certificates, in the form attached hereto as Exhibit 2.6(b),
representing the Non-Voting Common Stock, each duly executed by ILGC and dated
the Stock
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Purchase Closing Date, in such denominations as shall be designated in writing
by AMHC and AmerUs not less than one Business Day prior to the Stock Purchase
Closing Date and registered in the name of AMHC or AmerUs (or the name of its
Subsidiary, as permitted by Section 2.1(a)), and (ii) AMHC or AmerUs (or such
Subsidiary) shall pay ILGC, in United States dollars and in immediately
available funds by wire transfer an amount equal to the Stock Purchase Price to
ILGC's account specified in writing to AMHC or AmerUs or to such other Persons
and accounts as may be specified in writing by ILGC, prior to the Stock Purchase
Closing Date.
Section 2.7 Stock Purchase Closing Conditions. (a) The
obligations of the parties to consummate the Stock Purchase Closing are subject
to the following conditions:
(i) All Permits, regulatory consents, approvals or
clearances of Governmental Entities necessary for consummation of the
Stock Purchase shall have been obtained, and no provision of any
Applicable Law shall prohibit the consummation of the Stock Purchase
Closing.
(ii) All material consents, approvals or waivers of all
non-governmental Persons necessary for the consummation of the Stock
Purchase Closing shall have been obtained.
(iii) There shall not be in effect any temporary
restraining order, preliminary injunction or permanent injunction or
other order issued by any court of competent jurisdiction preventing
the consummation of the Stock Purchase Closing; provided that the party
invoking this condition shall have used its best efforts to have such
order or injunction vacated; and no Governmental Entity or third party
shall have commenced any proceeding seeking a temporary restraining
order, preliminary or permanent injunction or other order preventing
the consummation of the transactions contemplated by this Combination
and Investment Agreement, or damages, other than any such proceeding
which would not be reasonably likely to materially interfere with the
consummation of the transactions contemplated hereby; provided that, if
applicable, the party invoking this condition shall have used its
reasonable best efforts to have such proceeding dismissed or
terminated.
(iv) Each other document necessary for consummation of the
Stock Purchase Closing, including the Investment Management Agreements,
shall have been executed and delivered by the parties thereto.
(v) This Combination and Investment Agreement and the
Investment Management Agreements shall be in full force and effect.
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(b) The obligation of AMHC and AmerUs to consummate the Stock
Purchase Closing is subject to the satisfaction of the following further
conditions:
(i) (A) Indianapolis Life and ILGC shall have performed in
all material respects all of their obligations hereunder required to be
performed by them on or prior to the Stock Purchase Closing Date, (B)
the representations and warranties of Indianapolis Life and ILGC
contained in this Combination and Investment Agreement (including, but
not limited to, those set forth in Articles 4 and 5 hereof) shall be
true at and as of the Stock Purchase Closing Date, as if made at and as
of such date and (C) AMHC and AmerUs shall have received certificates
signed by the Chief Executive Officer and Chief Financial Officer of
Indianapolis Life and ILGC to the effect that the foregoing conditions
have been satisfied.
(ii) AMHC and AmerUs shall have received all documents it
may reasonably request relating to the existence of Indianapolis Life
and ILGC and the authority of Indianapolis Life and ILGC for this
Combination and Investment Agreement and the Investment Management
Agreements, all in form and substance reasonably satisfactory to AMHC
and AmerUs.
(iii) ILGC shall have amended its articles of
incorporation to authorize the issuance of the Non-Voting Common Stock.
(iv) Since the date of this Combination and Investment
Agreement, there shall not have been any events, occurrences,
developments or state of circumstances or facts which, individually or
in the aggregate, have had or would reasonably be expected to have a
Material Adverse Effect on Indianapolis Life.
(v) A representative of AMHC shall have been elected to
the ILGC Board of Directors.
(c) The obligation of Indianapolis Life and ILGC to consummate
the Stock Purchase Closing is subject to the satisfaction of the following
further conditions:
(i) (A) AMHC and AmerUs (and, if applicable, the
Subsidiary referenced in Section 2.1(a)) shall have performed in all
material respects all of their obligations hereunder required to be
performed by them on or prior to the Stock Purchase Closing Date, (B)
the representations and warranties of AMHC and AmerUs contained in this
Combination and Investment Agreement (including, but not limited to,
those set forth in Article 6 hereof) shall be true at and as of the
Stock Purchase Closing Date, as if made at and as of such date, and (C)
Indianapolis Life and ILGC shall have
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received certificates signed by the Chief Executive Officer and Chief
Financial Officer of AMHC and AmerUs to the effect that the foregoing
conditions have been satisfied.
(ii) Indianapolis Life and ILGC shall have received all
documents it may reasonably request relating to the existence of AMHC
and AmerUs and the authority of AMHC and AmerUs for this Combination
and Investment Agreement and the Investment Management Agreements, all
in form and substance reasonably satisfactory to Indianapolis Life and
ILGC.
(iii) Since the date of this Combination and Investment
Agreement, there shall not have been any events, occurrences,
developments or state of circumstances or facts which, individually or
in the aggregate, have had or would reasonably be expected to have a
Material Adverse Effect on AMHC.
Section 2.8 Conduct of Business of Indianapolis Life and ILGC
Prior to Purchase or Repurchase. Indianapolis Life and ILGC each covenant and
agree that, on and after any Termination Date and until the purchase or
repurchase of all the shares of Non-Voting Common Stock or the Converted Shares,
as the case may be, pursuant to Section 2.4 hereof (unless AMHC and AmerUs shall
otherwise approve in writing, and except as otherwise expressly contemplated by
Article 2 of this Combination and Investment Agreement):
(a) it will, and will cause each of its Subsidiaries to,
exercise its best efforts to maintain itself at all times in all material
respects as a corporation duly organized, validly existing, and duly qualified
to conduct its business;
(b) it will not, and will not cause or permit any of its
Subsidiaries to, engage in any material business other than the life insurance
business and businesses reasonably related thereto and other businesses in which
Indianapolis Life, ILGC or any of their Subsidiaries may be engaged as of the
date of this Combination and Investment Agreement or, consistent with the terms
of this Combination and Investment Agreement, at the Termination Date; provided,
however, that the foregoing shall not be deemed to limit investment activities
in the ordinary course of business consistent with past practice and in
accordance with such Person's investment policies;
(c) it shall not (i) issue, sell (or otherwise transfer),
pledge, dispose of or encumber any shares of, or securities convertible into or
exchangeable or exercisable for, or options, warrants, calls, commitments or
rights of any kind to acquire, any shares of the capital stock or other debt or
equity security of any of the Subsidiaries of ILGC, or permit or cause such
Subsidiaries to do the same; (ii)
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amend or permit the amendment of the articles of incorporation or by-laws of any
such Subsidiary; (iii) authorize, declare, set aside or pay any policyholder
dividend payable in cash or property other than in the ordinary course of
business consistent with past practice and in accordance with approved dividend
plans; or (iv) in the case of ILGC, authorize, declare, set aside or pay any
shareholder dividend except in accordance with Section 2.2(a) hereof;
(d) except for fair value and in the exercise of reasonable
and prudent business judgment, it shall not (i) other than in the ordinary and
usual course of business consistent with past practice, transfer, lease,
license, guarantee, sell, mortgage, pledge, dispose of or encumber any other
property or assets or permit or cause its Subsidiaries to do the same; or (ii)
make or authorize or commit to any capital expenditures (including entering into
capital lease obligations) for tangible assets or enter into any lease of real
or personal property, or permit or cause its Subsidiaries to do the same;
(e) it shall not, and shall not permit or cause any of its
Subsidiaries to, effect any transactions with any Affiliates, other than
pursuant to arrangements existing as of the date hereof or as of the Termination
Date or in the ordinary course of business consistent with past practice or on
terms no less favorable to it than may be obtained from third parties;
(f) it shall not permit ILGC's leverage ratio (calculated as
the ratio of its Consolidated Indebtedness to its Consolidated Total Capital) at
any time to be greater than 20%;
(g) it shall not permit the Risk-Based Capital at any time for
any Indianapolis Life Insurer Subsidiary to be less than 325%;
(h) it shall not permit the Indianapolis Life Insurer
Subsidiaries to have at any time an Adjusted Capital and Surplus of less than
the following amounts, as applicable: IL Annuity $60 million; Bankers Life $20
million; and Western Security $5 million.
(i) it shall not permit ILGC at any time to have a Tangible
Net Worth of less than 85% of its Tangible Net Worth as of December 31, 1999;
and
(j) it shall not permit or cause any of ILGC's Subsidiaries
to, after the Termination Date, contract, create, incur or assume, or suffer to
exist any indebtedness arising on or after the Termination Date, including
without limitation reinsurance transactions in the nature of indebtedness (other
than traditional coinsurance and yearly renewable term agreements in the
ordinary course of business and consistent with past practice).
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Section 2.9 Reporting Requirements. Indianapolis Life and ILGC
will furnish to AMHC, AmerUs and any other Holder:
(i) Indianapolis Life Company Statements of the kinds
described in Section 4.6 hereof as of and for each year and quarter,
within the periods prescribed for unaudited statements in Section 9.7
hereof and, for audited statements, as follows: (A) Annual Audited GAAP
Statements shall be delivered within sixty-seven (67) days after
December 31 of each year; and (B) Annual Audited SAP Statements shall
be delivered within one hundred twenty (120) days after December 31 of
each year; and
(ii) A copy of the "Statement of Actuarial Opinion" and
"Management Discussion and Analysis" for Indianapolis Life and each
Indianapolis Life Insurer Subsidiary (prepared in accordance with SAP)
for each year ending on and after December 31, 1999 and as filed with
or submitted to the insurance regulatory body in the jurisdiction in
which such Person is domiciled in compliance with the requirements
thereof (or a report containing equivalent information for any such
Person not so required to file or submit the foregoing); and
(iii) Promptly, and in any event within five (5) Business
Days, after the Indianapolis Life Companies obtain knowledge thereof
after the Termination Date, notice of (A) the occurrence of any event
which, in itself or with notice and/or lapse of time, would breach any
representation, warranty, covenant or agreement set forth in this
Combination and Investment Agreement that remains effective after the
Termination Date pursuant to Section 11.6(a) hereof, which notice shall
specify the nature thereof, the period of existence thereof and what
action the Indianapolis Life Companies propose to take with respect
thereto; (B) any outstanding litigation or governmental or regulatory
proceeding against an Indianapolis Life Company that could have a
Material Adverse Effect; or (C) any other events, occurrences,
developments or state of circumstances or facts which have had or will
have a Material Adverse Effect.
Section 2.10 Effect of Breach. (a) An event of default shall
occur hereunder if after a Termination Date:
(i) Indianapolis Life or ILGC shall fail to deliver the
Indianapolis Life Company Statements within the time periods prescribed
in Section 2.9(i) hereof (including without limitation the references
therein to Section 9.7 hereof), and such failure shall continue
unremedied for a period of at least forty-eight (48) hours or, if
longer, one (1) Business Day, after notice by AMHC, AmerUs or any other
Holder of such failure;
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(ii) Indianapolis Life and ILGC shall default in the
payment when required of any purchase or repurchase payments as
provided in this Article 2; or
(iii) Indianapolis Life or ILGC shall default in the due
performance or observance by it of any other representation, warranty,
covenant or agreement set forth in this Combination and Investment
Agreement that remains effective after the Termination Date pursuant to
Section 11.6(a) hereof, and such default shall continue unremedied for
a period of at least thirty (30) days after notice by AMHC, AmerUs or
any other Holder of such default; provided, however, that if
Indianapolis Life or ILGC has failed to give notice as required under
Section 2.9(iii) with respect to a matter that would constitute a
breach of any term, covenant or agreement described in this Section
2.10(i), then the thirty (30) day period described in this Section
2.10(i) shall be reduced to five (5) days.
(b) If an event of default (as described in Section 2.10(a))
occurs and is continuing, AMHC, AmerUs and any other Holder shall have the
right, by notice to Indianapolis Life and ILGC, without prejudice to its rights
to enforce any other rights or claims against Indianapolis Life and ILGC, to
demand the immediate purchase by Indianapolis Life and/or repurchase by ILGC, as
the case may be, of all outstanding shares of Non-Voting Common Stock and
Converted Shares as provided in this Article 2, and immediately to enforce its
right to obtain such purchase or repurchase, as the case may be. No such action
shall affect or extinguish any other rights or remedies of any Person under any
other provision of this Combination and Investment Agreement or Applicable Law.
ARTICLE 3
COMBINATION TRANSACTIONS
Section 3.1 The Combination. (a) Upon the terms and subject to
the conditions set forth in this Combination and Investment Agreement, the
following transactions shall be consummated as soon as practicable following the
consummation of the AMHC Demutualization, and such transactions shall be
effective as of the Combination Effective Time (as defined in Section 3.3):
(i) Indianapolis Life shall demutualize pursuant to a Plan
of Conversion satisfying all the provisions of Section 3.5(a) hereof
(the "Plan of Conversion");
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(ii) The membership interests of the eligible members (as
defined under Applicable Law) of Indianapolis Life shall be exchanged
for AMHC Shares, cash and policy credits which shall have an aggregate
value equal to that of 11.25 million AMHC Shares (determined as stated
in Schedule 3.5(a) hereto, and subject to any adjustment provided for
in Section 11.2(i) hereof); provided, however, that in the event of any
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of AMHC Shares or, prior to the AMHC
Demutualization, the AmerUs Common Stock, such number of AMHC Shares
shall be correspondingly adjusted to the extent appropriate to reflect
such occurrence;
(iii) A corporation to be organized by AMHC under the
Indiana Business Corporation Law (Section 23-1 of the Indiana Code) as
its wholly owned subsidiary ("Holding Sub") shall acquire all of the
common stock of Indianapolis Life as provided in Schedule 3.5(a), in
accordance with the Indiana Demutualization Law (Section 27-15 of the
Indiana Code) and other applicable laws of the State of Indiana, and
the status of Indianapolis Life as a mutual insurance company shall
cease; and
(iv) Indianapolis Life shall become a direct wholly owned
stock insurance company subsidiary of Holding Sub domiciled in the
State of Indiana.
(b) The transactions contemplated by the Plan of Conversion
are referred to herein as the "Combination." The parties intend to effectuate
the Combination (i) on a tax free basis to AMHC, AmerUs, Indianapolis Life and
the eligible members of Indianapolis Life who receive only AMHC Shares and (ii)
with respect to individual retirement accounts and individual retirement
annuities (within the meaning of Code Section 408), tax sheltered annuities
governed by Code Section 403(b) and "employee benefit plans" (within the meaning
of Section 3(3) of ERISA), in such a manner that it does not adversely affect
the compliance thereof with the applicable requirements of ERISA or the Code.
Section 3.2 Combination Closing. The closing of the
Combination (the "Combination Closing") will take place at 10:00 a.m. on a date
to be specified by the parties (the "Combination Closing Date"), which shall be
no later than twenty (20) Business Days after satisfaction or waiver of the
conditions set forth in Article 10, unless another time or date is mutually
agreed to by the parties hereto. The Combination Closing will be held at the
offices of Baker & Daniels, 300 North Meridian Street, Suite 2700, Indianapolis,
Indiana 46204 or at such other location as the parties hereto shall agree to in
writing.
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Section 3.3 Combination Effective Time. Subject to the
conditions set forth in Article 10 of this Agreement, on the Combination Closing
Date, the parties shall cause Articles of Amendment providing for the amendment
and restatement of the Articles of Incorporation of Indianapolis Life,
consistent with the Plan of Conversion, to be filed with the Indiana Department
of Insurance and the Indiana Secretary of State and such other filings to be
made with the Iowa Commissioner of Insurance, the Iowa Secretary of State, the
Indiana Commissioner and the Indiana Secretary of State as are necessary to
bring the transactions contemplated hereby into effect, and the Combination
shall be effective at the date and time specified in such filings (the
"Combination Effective Time"). Upon the terms and subject to the conditions of
this Agreement, the parties hereto will use all reasonable efforts to assure
that the filings contemplated hereby are made, and that the Combination
Effective Time occurs, as soon as is practicable.
Section 3.4 Articles of Incorporation and By-laws. As of the
Combination Effective Time, the Amended and Restated Articles of Incorporation
and By-laws of Indianapolis Life approved by the Indiana Commissioner and, as
applicable, by the Indiana Secretary of State pursuant to Applicable Law shall
be the articles of incorporation and by-laws, respectively, of Indianapolis Life
until thereafter changed or amended as provided therein or under Applicable Law.
Section 3.5 Essential Terms of and Rights of Consultation
Relating to Indianapolis Life Plan of Conversion. (a) Schedule 3.5(a) hereto
sets forth the essential terms of the Plan of Conversion. No later than October
1, 2000, Indianapolis Life shall prepare the Plan of Conversion and shall file
with the Indiana Commissioner the Plan of Conversion in full satisfaction of all
of the requirements with respect thereto set forth in Chapters 27-15-2 and
27-15-3 of the Indiana Code, subject, however, to compliance with the following
two sentences; and thereafter shall take such additional actions, consistent
with Schedule 3.5(a), as it may be required or permitted to take under Chapters
27-15-4, 27-15-5 and 27-15-6 of the Indiana Code to complete its demutualization
pursuant to the provisions hereof and the Plan of Conversion. The Plan of
Conversion filed with the Indiana Commissioner shall be consistent with the
terms set forth in Schedule 3.5(a), except to the extent that AMHC and AmerUs
have consented in writing to any variance in such terms in their sole
discretion. The Plan of Conversion may contain additional terms that are not
addressed in any of the terms set forth in Schedule 3.5(a); provided, however,
that any such additional term that could have an adverse impact on either (A)
AMHC or AmerUs or (B) the benefits that AMHC and AmerUs reasonably expect to
derive from consummation of the transactions contemplated herein shall require
the prior written consent of AMHC and AmerUs. Any amendment or modification by
Indianapolis Life to the Plan of Conversion as filed with the Indiana
Commissioner, including, without limitation, any withdrawal or termination by
Indianapolis Life of the Plan of Conversion filed with the Indiana
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Commissioner, shall require the written consent of AMHC and AmerUs in their sole
discretion.
(b) AMHC and AmerUs shall be consulted and informed concerning
all matters pertaining to the Plan of Conversion, including preparation of the
Member Information Statement, the final version of which shall be in form and
content reasonably acceptable to AMHC and AmerUs. It is expressly understood by
the parties hereto that Representatives of AMHC and AmerUs shall have the right
to attend and participate in any hearing, proceeding, meeting, conference or
similar event before or with a Governmental Entity or rating agency relating to
the Plan of Conversion, and the parties shall confer prior to such event
concerning the content of such presentation to the extent not expressly
addressed in the Plan of Conversion prepared in compliance with Section 3.5(a).
In furtherance of the foregoing, Indianapolis Life shall provide AMHC and AmerUs
reasonable advance notice of any such hearing, proceeding, meeting, conference
or similar event. The notice required to be given under this paragraph shall be
given to the Representatives of AMHC and AmerUs entitled to receive notices
hereunder, or such other individuals as AMHC and AmerUs may designate.
(c) In the event that the Plan of Conversion filed in
accordance with Section 3.5(a) cannot be consummated due to the structure under
which Holding Sub is to acquire the common stock of Indianapolis Life as
provided in Schedule 3.5(a), despite the parties' exercise of their best efforts
to obtain regulatory approvals as provided in Section 9.1 hereof, then the
parties will proceed to consummate the Combination using a different structure,
if one exists, that is reasonably acceptable to both Indianapolis Life and AMHC
in their discretion and satisfies all other conditions to closing set forth in
Article 10 hereof.
(d) Notwithstanding any other provision of this Combination
and Investment Agreement, the Plan of Conversion shall be terminated following a
Termination Date pursuant to the provisions of Article 11 hereof.
Section 3.6 Rights of Consultation Relating to AMHC Plan. (a)
Attached hereto as Schedule 3.6 is the current version of AMHC's plan of
conversion and Agreement and Plan of Merger with AmerUs pursuant to the
provisions of Iowa Insurance Law Chapter 508B (as modified in accordance with
this Section 3.6(a), the "AMHC Plan"). No later than August 1, 2000, AMHC shall
finalize and file with the appropriate regulatory authorities the AMHC Plan,
which shall be consistent with Schedule 3.6 hereto and Iowa Insurance Law
section 521A.14(5)(B) and Chapter 508B. Any variance (including any amendment or
modification to the AMHC Plan after it has been filed with the Iowa Commissioner
of Insurance) from the version of the AMHC Plan attached as Schedule 3.6 that
could have an adverse impact on the benefits that Indianapolis Life reasonably
expects to derive from consummation of
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the transactions contemplated herein shall require the prior written consent of
Indianapolis Life and ILGC.
(b) Indianapolis Life and ILGC shall be consulted and informed
concerning all matters pertaining to the AMHC Plan that materially affect such
parties, including preparation of any portions of AMHC's Member Information
Statement that relate to the transactions contemplated hereby, which portions
shall be in form and content reasonably acceptable to Indianapolis Life and
ILGC. It is expressly understood by the parties hereto that Representatives of
Indianapolis Life and ILGC shall have the right to attend and participate in any
hearing, proceeding, meeting, conference or similar event before or with a
Governmental Entity or rating agency relating to the AMHC Plan. In furtherance
of the foregoing, AMHC shall provide Indianapolis Life and ILGC reasonable
advance notice of any such hearing, proceeding, meeting, conference or similar
event. The notice required to be given under this paragraph shall be given to
the representatives of Indianapolis Life and ILGC entitled to receive notices
hereunder, or such other individuals as Indianapolis Life and ILGC may
designate.
(c) In any matter described in this Section 3.6 in which
Indianapolis Life's or ILGC's consent or approval is or may be required, such
consent shall be deemed given if Indianapolis Life and ILGC fail to object in
writing within five (5) Business Days to any matter of which they are given
specific written notice coupled with a request for such consent or approval
which includes an express reference to this Section 3.6(c) and its consequences.
Section 3.7 Post-Combination Matters.
(a) Upon consummation of the Combination, the Board of
Directors of AMHC shall be adjusted to include the Chief Executive Officer of
Indianapolis Life as of immediately prior to the Combination Closing (as
Vice-Chairman of the AMHC Board of Directors) and at least two additional
members of the Board of Directors of Indianapolis Life as of immediately prior
to the Combination Closing (the "IL/AmerUs Directors"). AMHC shall use its best
efforts to cause its Board of Directors to appoint two of the IL/AmerUs
Directors, at the Combination Closing Date, for a term expiring at AMHC's next
Annual Meeting, and to nominate such IL/AmerUs Directors for election at such
Annual Meeting to a three-year term of membership on the Board of Directors of
AMHC. AMHC shall use its best efforts to cause its Board of Directors to appoint
the third IL/AmerUs Director for the remainder of a three-year term of office
that commenced at the Annual Meeting preceding the Combination Closing Date. The
number of IL/AmerUs Directors shall be a number sufficient to cause the ratio of
IL/AmerUs Directors to the number of directors on the AMHC Board to be
proportional (subject to conventional rounding)
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to the percentage of AMHC Shares held by Indianapolis Life policyholders upon
consummation of the Combination (the "IL/AmerUs Directors Ratio").
(b) Upon consummation of the Combination, the Board of
Directors of Indianapolis Life shall be adjusted and Indianapolis Life shall use
its best efforts to cause individuals nominated by the Chief Executive Officer
of AMHC to be elected as may be necessary to ensure that the proportion of
current Indianapolis Life directors serving on the Indianapolis Life Board of
Directors shall be inversely proportional (subject to conventional rounding) to
the IL/AmerUs Directors Ratio.
(c) The parties have exchanged a Memorandum of Understanding
setting forth the essential terms of the parties' understanding concerning the
integration, operation and leadership of AMHC's and Indianapolis Life's
respective businesses upon and following the Combination (the "Memorandum of
Understanding").
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ILGC AND INDIANAPOLIS LIFE
ILGC and Indianapolis Life represent and warrant to AMHC and
AmerUs as of the date hereof and as of each of the Closing Dates that:
Section 4.1 Corporate Existence and Power. Each Indianapolis
Life Company (i) has been duly organized and is validly existing under the laws
of its state of domicile, (ii) has all corporate powers required to carry on its
business as now conducted, (iii) has all material governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted and (iv) except where failure to so qualify or be
licensed would materially and adversely affect such Indianapolis Life Company,
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where such qualification is necessary, or is duly
licensed to do business and is in good standing in each jurisdiction where such
licensing is necessary, as the case may be. Each of ILGC and Indianapolis Life
has heretofore delivered or made available to AMHC true and complete copies,
certified by its corporate secretary, of its articles of incorporation and
bylaws, as in effect on the date hereof. Neither ILGC nor Indianapolis Life is
in violation of any of the provisions of its articles of incorporation or
bylaws.
Section 4.2 Subsidiaries. (a) Schedule 4.2(a) lists all the
Subsidiaries of ILGC and Indianapolis Life and the number and holders of all
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authorized, issued and outstanding capital stock of, or other equity ownership
interests in, each such Subsidiary.
(b) All the outstanding shares of capital stock of, or other
equity interests in, each such Subsidiary (i) have been validly issued and are
fully paid and nonassessable, (ii) except as provided in Schedule 4.2(a), are
owned directly or indirectly by ILGC and Indianapolis Life, as the case may be,
free and clear of all Liens and (iii) are free of any other restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests) other than Applicable Law.
Section 4.3 Corporate Authorization. The execution, delivery
and, subject to the receipt of the approvals referred to in Section 4.4 or
listed on Schedule 4.3, performance by ILGC and Indianapolis Life of this
Combination and Investment Agreement and, with respect to the Investment
Management Agreements, by ILGC, Indianapolis Life and their Subsidiaries, are
within ILGC's, Indianapolis Life's and their Subsidiaries' powers and have been
duly authorized by all necessary corporate action. This Combination and
Investment Agreement and the Investment Management Agreements constitute valid
and legally binding agreements, enforceable against each party thereto in
accordance with their terms, subject to (i) bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium, rehabilitation, liquidation,
conservatorship, receivership and other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and the rights of creditors
of insurance companies generally and (ii) general principles of equity
(regardless of whether considered in a proceeding at law or in equity).
Section 4.4 Governmental Authorization. The execution,
delivery and performance by ILGC and Indianapolis Life of this Combination and
Investment Agreement and, with respect to the Investment Management Agreements,
by ILGC, Indianapolis Life and their Subsidiaries, requires no action by or in
respect of, or filing with or approval by, any governmental body, agency, or
official on the part of ILGC or Indianapolis Life or their Subsidiaries other
than (i) compliance with any applicable requirements of the HSR Act, (ii)
filings and notices not required to be made or given until after either of the
Closing Dates, (iii) filings, at any time, of tax returns, tax reports and tax
information statements, (iv) the insurance regulatory approvals set forth on
Schedule 5.1, and (iv) any such other action or filing, where the failure to
take such other action or make such other filing would not, individually or in
the aggregate, materially impair the ability of any Indianapolis Life Company to
conduct its business or adversely affect its ability to consummate the
transactions contemplated hereunder.
Section 4.5 Non-Contravention. Except as set forth in Schedule
4.5, the execution, delivery and performance by ILGC and Indianapolis Life of
this to file, all Indianapolis Life Company
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Combination and Investment Agreement and, with respect to the Investment
Management Agreements, by ILGC, Indianapolis Life and their Subsidiaries, does
not and will not (i) violate the articles of incorporation or bylaws of any
Indianapolis Life Company, (ii) assuming compliance with the matters referred to
in Section 4.4, violate any Applicable Law, (iii) require any consent or other
action by any Person under, constitute a default under, or give rise to any
right of termination, cancellation or acceleration of any right or obligation of
any Indianapolis Life Company or to a loss of any benefit to which any
Indianapolis Life Company is entitled under, any material agreement or other
material instrument binding upon any Indianapolis Life Company, or any material
license, franchise, permit or other similar authorization held by any
Indianapolis Life Company, or (iv) result in the creation or imposition of any
material Lien on any asset of any Indianapolis Life Company.
Section 4.6 Financial Statements. (a) ILGC and Indianapolis
Life have delivered to AMHC true and complete copies of the following:
(i) the individual Annual Audited GAAP Statements of IL
Annuity and IL Securities and the individual and consolidated Annual
Audited GAAP Statements of Indianapolis Life and ILGC as of and for the
years ended December 31, 1996, 1997 and 1998;
(ii) the individual Annual GAAP Statements of Bankers Life
and Western Security as of and for the years ended December 31, 1996,
1997 and 1998;
(iii) the individual Annual SAP Statements and Annual
Audited SAP Statements for Indianapolis Life and each of the
Indianapolis Life Insurer Subsidiaries as of and for the years ended
December 31, 1996, 1997 and 1998; and
(iv) the individual and, where applicable as described in
Section 4.6(i) above, consolidated Quarterly GAAP Statements for each
of the Indianapolis Life Companies and the individual Quarterly SAP
Statements for Indianapolis Life and each of the Indianapolis Life
Insurer Subsidiaries as of and for the calendar quarters ended March
31, 1999, June 30, 1999, and September 30, 1999 (collectively with the
items described in Sections 4.6(a)(i), (ii) and (iii) and financial
statements of the kinds described above as of and for the annual and
quarterly periods ending on or after the dates mentioned above, the
"Indianapolis Life Company Statements").
(b) Since December 31, 1994, Indianapolis Life has filed, and
has caused each Indianapolis Life Company
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Statements required to be filed with or submitted to the appropriate regulatory
authorities.
(c) Each Indianapolis Life Company Statement complied (and, as
to Indianapolis Life Company Statements filed after the date of this Combination
and Investment Agreement, will comply) with all Applicable Laws when so filed,
and all material deficiencies with respect to any Indianapolis Life Company
Statement have been cured or corrected. Each Indianapolis Life Company Statement
was prepared (and, as to Indianapolis Life Company Statements filed after the
date of this Combination and Investment Agreement, will be prepared) in
accordance with SAP or GAAP, as applicable, and presents (and, as to
Indianapolis Life Company Statements filed after the date of this Combination
and Investment Agreement, will present) fairly the financial position of the
relevant Indianapolis Life Company, as of the respective dates thereof and the
related summaries of operations and changes in capital and surplus and cash
flows of such entity for the respective periods covered thereby (subject, in the
case of Quarterly GAAP Statements and Quarterly SAP Statements, to the absence
of notes and normal year-end adjustments and accruals).
(d) Prior to each of the Closing Dates, ILGC and Indianapolis
Life shall have delivered to AMHC and AmerUs true and complete copies of each
Indianapolis Life Company Statement prepared after the date hereof, and each
such Indianapolis Life Company Statement shall conform to the representations
and warranties contained in this Section 4.6.
Section 4.7 Absence of Certain Changes. Except as disclosed in
Schedule 4.7 or as expressly contemplated by this Combination and Investment
Agreement, since December 31, 1998, the business of each of the Indianapolis
Life Companies has been conducted in the ordinary course consistent with past
practices (including, without limitation, with regard to underwriting, pricing,
actuarial and investment policies generally) and there has not been:
(i) any events, occurrences, developments or state of
circumstances of facts which, individually or in the aggregate, have
had or would reasonably be expected to have a Material Adverse Effect
on the Indianapolis Life Companies taken as a whole;
(ii) any incurrence, assumption or guarantee by an
Indianapolis Life Company of any indebtedness in excess of $50,000 in
the aggregate, other than in the ordinary course of business and in
amounts and on terms consistent with past practices;
(iii) any transaction or commitment made, or any contract
or agreement entered into, by an Indianapolis Life Company (including
the
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acquisition or disposition of any assets) or any relinquishment by an
Indianapolis Life Company of any contract or other right, other than
transactions and commitments in the ordinary course of business
consistent with past practices;
(iv) any material change in the financial, tax or
accounting policies of an Indianapolis Life Company, except for any
such change as a result of a concurrent change in GAAP or SAP;
(v) to the extent payable, directly or indirectly, by an
Indianapolis Life Company any (A) employment, deferred compensation,
severance, retirement or other similar agreement entered into with any
director, officer or employee (or any amendment to any such existing
agreement), (B) grant of any severance or termination pay to any
director, officer or employee other than in the ordinary course of
business, (C) change in compensation or other benefits payable to any
director, officer or employee, other than (x) increases in base
compensation in the ordinary course of business consistent with past
practice, (y) with respect to directors or officers, changes in
benefits required by plans and arrangements in effect as of December
31, 1998 and (z) with respect to employees who are not directors or
officers, changes in benefits in accordance with plans or arrangements
in effect as of December 31, 1998 in the ordinary course of business
consistent with past practice or (D) loans or advances to any
directors, officers or employees, except for ordinary travel and
business expenses in the ordinary course of business consistent with
past practice;
(vi) any damage, theft or casualty loss to an Indianapolis
Life Company in an amount exceeding $500,000, without regard to
insurance coverage;
(vii) any material transaction by an Indianapolis Life
Company involving Indianapolis Life Assets other than in the ordinary
course of business consistent with past practice;
(viii) any investment of Indianapolis Life Assets other
than in accordance with the investment policies of an Indianapolis Life
Company set forth in Schedule 4.7(viii);
(ix) any agreement or commitment (contingent or otherwise)
to do any of the foregoing; or
(x) any transaction or commitment, or any contract or
agreement entered into, between an Indianapolis Life Company and any of
its
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Affiliates other than in the ordinary course of business and consistent
with past practice.
Section 4.8 No Undisclosed Material Liabilities. There are no
liabilities of an Indianapolis Life Company of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, other
than:
(i) liabilities provided for in their respective
individual and consolidated Annual SAP Statements, Annual Audited SAP
Statements, Annual GAAP Statements or Annual Audited GAAP Statements,
as applicable, in each case for the year ending December 31, 1998 or in
their respective individual and consolidated Quarterly SAP Statements
and Quarterly GAAP Statements, in each case for the quarter ended
September 30, 1999, and liabilities incurred in the ordinary course of
business consistent with past practice following the date of such
Financial Statements;
(ii) liabilities disclosed on Schedule 4.8 hereto; and
(iii) other undisclosed liabilities that are not,
individually or in the aggregate with undisclosed liabilities of all
other Indianapolis Life Companies, material to the Indianapolis Life
Companies taken as a whole.
Section 4.9 Significant Agreements. (a) Except as disclosed in
Schedule 4.9, and except as expressly contemplated by this Combination and
Investment Agreement, as of the date hereof, no Indianapolis Life Company is a
party to or bound by:
(i) any lease of real property where an Indianapolis Life
Company is a tenant (A) providing for annual base rentals of $100,000
or more, (B) expiring after December 31, 2005, or (C) where an
Indianapolis Life Company holds an equity interest in such real
property;
(ii) any agreement for the purchase of materials,
supplies, goods, services, equipment or other assets (other than an
investment of Indianapolis Life Assets in accordance with investment
policies set forth on Schedule 4.7(viii) hereto) by or from an
Indianapolis Life Company that provides for aggregate payments by or to
an Indianapolis Life Company of $300,000 or more;
(iii) any limited partnership, joint venture or other
unincorporated business organization or similar arrangement or
agreement in which an Indianapolis Life Company serves as a general
partner or otherwise
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has unlimited liability, or any other material similar agreement or
arrangement;
(iv) any agreement relating to the acquisition or
disposition of any material asset or business (without limitation,
whether by merger, sale of stock, sale of assets, commutation of
reinsurance or otherwise, but not including agreements relating to the
investment of Indianapolis Life Assets in accordance with investment
policies set forth on Schedule 4.7(viii) hereto);
(v) any agreement relating to indebtedness or any
guarantee or similar agreement or arrangement relating thereto, other
than any such agreement with, or relating to, an aggregate outstanding
principal amount or guaranteed obligation not exceeding $100,000;
(vi) any agreement that restricts or prohibits an
Indianapolis Life Company from competing with any Person in any line of
business or from competing in, engaging in or entering into any line of
business in any area and which would so restrict or prohibit an
Indianapolis Life Company after either of the Closing Dates;
(vii) any material agreement containing "change in
control" or similar provisions relating to change in control of an
Indianapolis Life Company;
(viii) any powers of attorney;
(ix) any agreements (other than Insurance Contracts issued
by Indianapolis Life or the Indianapolis Life Insurer Subsidiaries in
the ordinary course of their business) material to an Indianapolis Life
Company pursuant to which an Indianapolis Life Company is obligated to
indemnify any other person;
(x) any agreement between Indianapolis Life, ILGC or their
Subsidiaries and any of their Affiliates; or
(xi) any other agreements or contracts (other than
Insurance Contracts issued in the ordinary course of business and
consistent with past practice) that are material to the businesses or
operations of the Indianapolis Life Companies taken as a whole.
(b) Indianapolis Life and ILGC heretofore furnished or made
available to AMHC and AmerUs complete and correct copies of the contracts,
agreements and instruments listed on Schedule 4.9, each as amended or modified
to
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the date hereof (including any waivers with respect thereto) (the "Significant
Agreements"). Except as specifically disclosed on Schedule 4.9, and except to
the extent not material to an Indianapolis Life Company, each of the Significant
Agreements is in full force and effect and enforceable against the Indianapolis
Life Company party thereto and, to the knowledge of any Indianapolis Life
Company, the other party thereto in accordance with its terms, subject to (i)
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium
rehabilitation, liquidation, conservatorship, receivership and other similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally and the rights of creditors of insurance companies generally and (ii)
general principles of equity (regardless of whether considered in a proceeding
at law or in equity); no Indianapolis Life Company has received any written
notice of cancellation or termination of, or any expression or indication of an
intention or desire to cancel or terminate, any of the Significant Agreements;
no Significant Agreement is the subject of, or has been threatened to be made
the subject of, any arbitration, suit or other legal proceeding; with respect to
any Significant Agreement which by its terms will terminate as of a certain date
unless renewed or unless an option to extend such Significant Agreement is
exercised, no Indianapolis Life Company has received any written notice, or
otherwise has any knowledge, that any such Significant Agreement will not be so
renewed or that any such extension option will not be exercised; and there
exists no material event of default or occurrence, condition or act on the part
of an Indianapolis Life Company or, to the knowledge of an Indianapolis Life
Company, on the part of the other parties to the Significant Agreements, which
constitutes or would constitute (with notice or lapse of time or both) a
material breach of or material default under any of the Significant Agreements.
Section 4.10 Litigation. Except as set forth on Schedule 4.10,
there is no action, suit, investigation, judgment or proceeding pending against,
or threatened against, or affecting the properties of, an Indianapolis Life
Company or any of their respective properties before any court or arbitrator or
any governmental body, agency or official (i) which individually or together
with other claims alleging a similar course of conduct involves a claim or
claims for any injunction or similar relief or for damages exceeding $250,000 or
an unspecified amount of damages or (ii) which alleges a course of conduct that
is based on alleged facts that may give rise to a class action lawsuit or (iii)
which alleges price-fixing or (iv) which alleges bad faith and, in the case of
this clause (iv), may entail ultimate liability in excess of $250,000 over any
reserves which have been established in respect of such case, or (v) which in
the aggregate have or would reasonably be expected to have a Material Adverse
Effect on such Indianapolis Life Company. There is no action, suit,
investigation or proceeding pending against, or affecting the properties of, an
Indianapolis Life Company before any court or arbitrator or any governmental
body, agency or official which challenges or seeks to prevent the transactions
contemplated hereby. Except as disclosed in Schedule 4.10, no Indianapolis Life
Company nor any
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of its properties is subject to any order, writ, judgment, injunction, decree,
determination or award which would prevent or delay the consummation of
transactions contemplated hereby.
Section 4.11 Compliance with Laws. Except as set forth on
Schedule 4.11, no Indianapolis Life Company has received any written notice
since January 1, 1997 from any Governmental Entity alleging any material
violation of any Applicable Law or directing an Indianapolis Life Company to
take any material remedial action with respect to such Applicable Law, and there
is no proceeding or investigation pending or threatened which would reasonably
be expected to lead to the revocation, amendment, failure to renew, limitation,
modification or suspension or restriction of any licenses, authorizations,
permits, consents or approvals referred to in Section 4.1 hereof.
Section 4.12 Properties. Except as set forth on Schedule 4.12,
each Indianapolis Life Company has good title to, or in the case of leased
property has valid leasehold interests in, all of its respective property and
assets (whether real or personal, tangible or intangible), except for
imperfections in title or invalidations of leasehold interests that do not,
individually or in the aggregate, materially detract from the value reflected on
its individual and consolidated December 31, 1998 Annual GAAP Statements, Annual
Audited GAAP Statements or Annual SAP Statements, as applicable. None of such
property or assets is subject to any Liens, except:
(i) Liens reflected on its individual and consolidated
Annual GAAP Statements, Annual Audited GAAP Statements or Annual SAP
Statements, in each case as of the year ending December 31, 1998,
and/or on its individual and consolidated September 30, 1999 Quarterly
GAAP Statements, and Quarterly SAP Statements, as applicable;
(ii) Liens for taxes not yet due or being contested in
good faith (and for which adequate accruals or reserves have been
established); and
(iii) Liens which do not, individually or in the
aggregate, materially detract from the value reflected on its
individual and consolidated December 31, 1998 Annual GAAP Statements,
Annual Audited GAAP Statements or Annual SAP Statements, as applicable,
as the case may be, or materially interfere with any present or
intended use of any material property or assets.
Section 4.13 Environmental Matters. (a) Other than as may be
disclosed in the Environmental Reports or in Schedule 4.13(a), (i) there are no
Hazardous Substances present on the current or former REO, the current or former
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Mortgaged Properties or the current or former Indianapolis Life or ILGC
Facilities requiring material remediation under Environmental Laws (provided
that to the extent the foregoing representation relates to Hazardous Substances
placed on former REO, former Mortgaged Properties or former Indianapolis Life or
ILGC Facilities by any third party subsequent to the date on which such
properties were sold or otherwise transferred by Indianapolis Life, ILGC or any
of their Subsidiaries, as the case may be, to a person other than Indianapolis
Life, ILGC or any of their Subsidiaries, such representation is to the knowledge
of Indianapolis Life, ILGC and each of their Subsidiaries, as the case may be),
and (ii) Indianapolis Life, ILGC and each of their Subsidiaries are in
compliance in all material respects with all applicable Environmental Laws.
(b) Other than as may be disclosed in the Environmental
Reports, as defined below, or in Schedule 4.13(b), there has been (i) no written
notice issued or threatened to be issued of a material claim against
Indianapolis Life, ILGC or any of their Subsidiaries arising under Environmental
Laws concerning Hazardous Substances present on the current or former REO, the
current or former Mortgaged Properties or the current or former Indianapolis
Life or ILGC Facilities; (ii) no written notice issued or threatened to be
issued from a Governmental Entity alleging a material violation of Environmental
Laws by Indianapolis Life, ILGC or any of their Subsidiaries with respect to the
ownership or operation of the REO or the Indianapolis Life or ILGC Facilities;
(iii) no written notice issued or threatened to be issued of a material claim
against Indianapolis Life, ILGC or any of their Subsidiaries alleging that such
Person is liable under the Environmental Laws as a result of the treatment,
storage, release, transportation, manufacture, installation, containment or
disposal of Hazardous Substances at properties other than the current or former
REO's, the current or former Mortgaged Properties, or the current or former
Indianapolis Life or ILGC Facilities; and (iv) no written notice issued or
threatened to be issued of a material claim under any Environmental Law against
Indianapolis Life, ILGC or any of their Subsidiaries as a successor to any other
Person.
(c) Indianapolis Life, ILGC and their Subsidiaries have made
available to AMHC and AmerUs for review and copying, all environmental reports
in Indianapolis Life's, ILGC's and their Subsidiaries' possession (or reasonably
available to them) prepared by third party environmental consultants concerning
the current REO, the current Mortgaged Properties or the current Indianapolis
Life and ILGC Facilities (the "Environmental Reports").
(d) Other than as may be disclosed in Schedule 4.13(d), with
respect to the current or former Mortgaged Properties, there have been no acts
or omissions of Indianapolis Life, ILGC and their Subsidiaries in their capacity
as lenders, on the basis of which Indianapolis Life, ILGC or their Subsidiaries
has been found or would
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be found to be materially responsible or liable parties under Environmental Laws
or relating to Hazardous Substances.
(e) Other than as may be disclosed in Schedule 4.13(e), the
execution, delivery and performance by Indianapolis Life and ILGC of this
Combination and Investment Agreement and the Investment Management Agreements
require no action by or in respect of, or filing with, any Governmental Entity
on the part of Indianapolis Life, ILGC or their Subsidiaries or Affiliates
pursuant to any Environmental Law.
Section 4.14 Intercompany Accounts. Schedule 4.14 contains a
complete list of (A) all intercompany balances, including loans and advances and
commitments with respect thereto, in excess of $50,000 individually or in the
aggregate, and (b) all Liabilities in excess of $50,000 individually or in the
aggregate, in each case as of September 30, 1999, between an Indianapolis Life
Company and any of its Affiliates. Except as disclosed on Schedule 4.14, since
September 30, 1999, there has not been any incurrence or accrual of liability
(as a result of allocations or otherwise) in excess of $50,000 individually or
in the aggregate by an Indianapolis Life Company to any of its Affiliates or
other transaction between an Indianapolis Life Company and any of its
Affiliates, except (i) in the ordinary course of business in accordance with
past practice or (ii) as contemplated by this Combination and Investment
Agreement or the Investment Management Agreements.
Section 4.15 Intellectual Property. (a) Indianapolis Life,
ILGC and each of their Subsidiaries is the owner of, or has the valid right to
use, its Intellectual Property free and clear of all Liens. Schedule 4.15(a)
sets forth a complete and accurate list (including whether Indianapolis Life,
ILGC or a particular Subsidiary is the owner or licensee thereof) of all current
U.S. and foreign (i) patents and patent applications, (ii) trademark or service
mark registrations and applications, and (iii) copyright registrations and
applications, owned or licensed by an Indianapolis Life Company. Except as
specifically identified in Schedule 4.15(a), an Indianapolis Life Company is
currently listed in the records of the appropriate United States, state or
foreign agency as owner of record for each patent, trademark, service mark and
copyright application and registration listed on Schedule 4.15(a).
(b) The copyright, trademark, service mark and patent
registrations listed on Schedule 4.15(a) are valid and subsisting, in full force
and effect in all material respects, and have not been canceled, expired or
abandoned. To the knowledge of the Indianapolis Life Companies, there is no
pending, existing or threatened, opposition, interference, cancellation
proceeding or other legal or governmental proceeding before any court or
registration authority in any jurisdiction
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against or relating to the registrations listed on Schedule 4.15(a), or against
any of the Intellectual Property owned by an Indianapolis Life Company.
(c) Each material Computer Program currently used by the
Indianapolis Life Companies in connection with the operation of their businesses
as conducted on the date hereof is listed on Schedule 4.15(c) and is either (i)
owned by an Indianapolis Life Company, (ii) currently in the public domain or
otherwise available to an Indianapolis Life Company without the license, lease
or consent of any third party, or (iii) used under rights granted to an
Indianapolis Life Company pursuant to a written agreement, license or lease from
a third party, which written agreement, license or lease is identified on
Schedule 4.15(c). To the knowledge of any Indianapolis Life Company, the
Indianapolis Life Companies' use of the Computer Programs listed on Schedule
4.15(c) does not violate the rights of any third party. With respect to Computer
Programs referred to in clause (i) of the first sentence of this paragraph, all
such Computer Programs identified in Schedule 4.15(c) were either developed by
(i) employees of an Indianapolis Life Company within the scope of their
employment; (ii) third parties as "works-made-for-hire", as that term is defined
under Section 101 of the United States copyright laws, pursuant to written
agreements; or (iii) independent contractors who have assigned their rights to
an Indianapolis Life Company pursuant to written agreements.
(d) To the knowledge of the Indianapolis Life Companies, the
conduct of the business of the Indianapolis Life Companies does not infringe
upon any intellectual property right owned or controlled by any third party, no
third party is infringing upon any Intellectual Property owned by any
Indianapolis Life Company, and no such claims are pending against a third party
by Indianapolis Life, ILGC or their Subsidiaries. There are no claims or suits
pending or, to the knowledge of the Indianapolis Life Companies, threatened, and
neither Indianapolis Life, ILGC nor any of their Subsidiaries has received
written notice of a third party claim or suit that has not been resolved prior
to the date hereof (a) alleging that Indianapolis Life's, ILGC's or their
Subsidiaries activities or the conduct of its businesses infringes upon or
constitutes the unauthorized use of the proprietary rights of any third party,
or (b) challenging the ownership, use, validity or enforceability of the
Intellectual Property owned by Indianapolis Life, ILGC or their Subsidiaries.
Except as set forth on Schedule 4.15(d), to the knowledge of the Indianapolis
Life Companies there are no settlements, consents, judgments, or orders or other
agreements which restrict an Indianapolis Life Company's rights to use any
Intellectual Property, and no concurrent use or other agreements which restrict
an Indianapolis Life Company's rights to use any Intellectual Property owned by
an Indianapolis Life Company. To the knowledge of the Indianapolis Life
Companies no trade secret or confidential know-how material to the business of
an Indianapolis Life Company as currently operated or planned to be operated has
been disclosed or authorized to be disclosed to any third party, other than
pursuant to a non-disclosure
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agreement that protects such Indianapolis Life Company's proprietary interests
in and to such trade secrets and confidential know-how.
(e) The consummation of the transactions contemplated hereby
will not result in the loss or impairment of an Indianapolis Life Company's
right to own or use any of its Intellectual Property nor will it require the
consent of any Governmental Entity or third party in respect of any such
Intellectual Property.
(f) No present or former employee, officer or director of an
Indianapolis Life Company has any right, title, or interest, directly or
indirectly, in whole or in part, in any of the Intellectual Property owned by an
Indianapolis Life Company.
(g) To the knowledge of the Indianapolis Life Companies, the
computer software, computer firmware, computer hardware (whether general or
special purpose), and other similar or related items of automated, computerized,
and/or software system(s) that comprise the Computer Programs will not
malfunction, will not cease to function, will not generate incorrect data, and
will not provide incorrect results due to date-related issues during the
processing, providing, and/or receiving of (i) date-related data into and
between the twentieth and twenty-first centuries and (ii) date-related data in
connection with any valid date in the twentieth and twenty-first centuries.
Section 4.16 Loans and Advances. Except as set forth in
Schedule 4.16 with respect to the Persons, amounts and contractual commitments
listed therein, no Indianapolis Life Company has any contractual commitment to
make any loan, advance or capital contribution to, or investment (other than an
investment of Indianapolis Life Assets in accordance with investment policies
set forth in Schedule 4.7(viii) hereto) in, any other Person in excess of
$100,000 individually or in excess of $250,000 in the aggregate, or to any
officer, director or employee in excess of $10,000 individually or $50,000 in
the aggregate.
Section 4.17 All Assets Necessary. Except as set forth in
Schedule 4.17, each Indianapolis Life Company owns, leases or licenses
independently of any of their Affiliates all property and assets necessary to
carry on its businesses and operations as presently conducted, all such assets
and properties (other than as AMHC, AmerUs, Indianapolis Life and ILGC may
mutually agree) will continue to be owned, leased or licensed by an Indianapolis
Life Company independently of any Affiliate as of and after the Combination
Closing and will as of the Combination Closing permit each Indianapolis Life
Company, as the case may be, to continue to conduct such businesses and
operations in the same manner as such businesses and operations have been
conducted prior to the Combination Closing.
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Section 4.18 Solvency. Indianapolis Life, ILGC and their
Subsidiaries are solvent and are not financially impaired, such that it would be
unable to pay its debts or to meet its obligations as they mature or such that
its assets do not exceed its Liabilities plus the greater of any capital and
surplus required by Applicable Law to be constantly maintained.
Section 4.19 Taxes.
(a) All Tax Returns required to be filed with respect to each
Indianapolis Life Company or the affiliated, combined or unitary group of which
any such Person is or was a member have been duly and timely filed and all such
Tax Returns are true, correct and complete in all material respects. Each
Indianapolis Life Company (i) has duly and timely paid all Taxes that are shown
as due on such Tax Returns, or claimed or asserted by any taxing authority to be
due, from such Person for the periods covered by such Tax Returns (unless such
Taxes are being contested in good faith and adequate reserves therefor have been
established in the Indianapolis Life Company's books and records) and have made
all required estimated payments of Taxes sufficient to avoid any penalties for
underpayment, or (ii) has duly provided for all such Taxes in the Indianapolis
Life Company Statements. There are no filed Liens with respect to Taxes (except
for Liens for Taxes not yet due and owing) upon any of the Assets of any
Indianapolis Life Company.
(b) With respect to any period or portion thereof through each
of the Closing Dates for which Tax Returns have not yet been filed, or for which
Taxes are not yet due or owing, each Indianapolis Life Company has established
due and sufficient reserves for the payment of such Taxes in accordance with SAP
and GAAP, as applicable, and such current reserves through each of the Closing
Dates are duly and fully provided for in all material respects in the
Indianapolis Life Company Statements of such Person for the period then ended.
(c) Examinations of all Tax years for which (i) United States
federal income Tax Returns of each Indianapolis Life Company and of each
affiliated group (within the meaning of the Code) of which any Indianapolis Life
Company is or has been a member which have been audited or examined by the IRS,
and (ii) state, local and foreign income Tax Returns of each Indianapolis Life
Company and of each affiliated or consolidated group of which it is or has been
a member which have been audited or examined by the appropriate state, local or
foreign authority, have been completed with the exception of tax periods for
which the applicable statute of limitations has not, by its terms, expired and,
with respect to 1995, for which the statute of limitations has been extended.
All material deficiencies that have been asserted, proposed or assessed as a
result of the above referenced examinations specified in the first two sentences
of this Section 4.19(c) have been paid in full or
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finally settled or adequately reserved against to the extent there is a
reasonable possibility that the position of any of the taxing authorities
specified in the first two sentences of this Section 4.19(c) will be sustained,
and to the knowledge of the Indianapolis Life Companies, no issue has been
raised by any taxing authority in any such examination which, by application of
the same or similar principles, reasonably could be expected to result in a
material proposed deficiency for any other period not so examined, except to the
extent adequate reserves have been established in the Indianapolis Life
Companies books and records. To the knowledge of the Indianapolis Life
Companies, no state of facts exists or has existed that would constitute grounds
for the assessment of any material Tax liability with respect to any
Indianapolis Life Company for the periods that have not been audited by the
taxing authorities specified in the first two sentences of this Section 4.19(c).
Except as set forth on Schedule 4.19, there are no outstanding agreements,
waivers or arrangements extending the statutory period of limitation applicable
to any Tax Return or claim for, or the period for the collection or assessment
of, Taxes due from any Indianapolis Life Company for any taxable period.
Indianapolis Life and ILGC have previously delivered or made available to AMHC
and AmerUs copies, which are true, correct and complete in all material
respects, of each of (i) the most recent audit reports relating to the United
States federal, state, local and foreign income Taxes due from each Indianapolis
Life Company and (ii) the United States federal, state, local and foreign income
Tax Returns, for each of the last three taxable years, filed by each
Indianapolis Life Company, and the Indianapolis Life Companies have made
available to AMHC and AmerUs for inspection copies, which are true, correct and
complete in all material respects, of such Tax Returns, (insofar as such Tax
Returns relate to any Indianapolis Life Company) filed by any affiliated or
consolidated group of which any Indianapolis Life Company was then a member.
(d) No audit or other proceeding by any U.S. or foreign
governmental or regulatory authority is pending before any court with respect to
any Taxes due from any Indianapolis Life Company or any Tax Return filed or
required to be filed by or relating to any Indianapolis Life Company. Except as
provided in Section 4.19(c), no material assessment, deficiency or adjustment of
Tax has been asserted or, based on existing facts and circumstances, is
threatened against any Indianapolis Life Company or any assets or properties of
any Indianapolis Life Company.
(e) Except as set forth on Schedule 4.19, no election under
any of Section 108, 168, 338, 441, 472, 1017, 1033 or 4977 of the Code (or any
predecessor provisions) has been made or filed by or with respect to any
Indianapolis Life Company or any of their Assets. No consent to the application
of Section 341(f)(2) of the Code (or any predecessor provision) has been made or
filed by or with respect to any Indianapolis Life Company or any of their
Assets. None of the Assets of any Indianapolis Life Company is an Asset that
AMHC, AmerUs or any of their Affiliates is or will be required to treat as being
(i) owned by any other Person
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pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code of
1954, as amended and in effect immediately before the enactment of the Tax
Reform Act of 1986 or (ii) tax-exempt use property within the meaning of Section
168(h)(1) of the Code. No election has been made under Section 815(d)(1) of the
Internal Revenue Code of 1954, as amended and in effect immediately before the
enactment of the Deficit Reduction Act of 1984. No closing agreement pursuant to
Section 7121 of the Code (or any predecessor provision) or any similar provision
of any state, local or foreign Applicable Law has been entered into by or with
respect to any Indianapolis Life Company or any of their assets or properties.
(f) No Indianapolis Life Company has agreed to or is required
to make any material adjustment pursuant to Section 481(a) or 807(f)(1) of the
Code (or any predecessor provision) by reason of any change in any accounting
method or change in basis for determining the reserves of such company or
otherwise, and no Indianapolis Life Company has any application pending with any
Governmental Entity requesting permission for any changes in any accounting
method or in the basis for determining reserves of any of them. Except as may
apply to the industry generally, the IRS has not proposed any such adjustment or
change in accounting method or in the basis of determining reserves of any of
them.
(g) No Indianapolis Life Company has been or is in material
violation (or with notice or lapse of time or both, would be in violation) of
any Applicable Law relating to the payment or withholding of Taxes (including,
without limitation, withholding of Taxes pursuant to Sections 1441 and 1442 of
the Code or similar provisions under any foreign laws). Each Indianapolis Life
Company has duly and timely withheld in all material respects from employee
salaries, wages and other compensation and paid over to the appropriate taxing
authorities all amounts required to be so withheld and paid over for all periods
under all Applicable Laws.
(h) Except as disclosed in Schedule 4.19, no Indianapolis Life
Company is a party to, is bound by, or has any obligation under, any tax
allocation agreement, tax sharing agreement, or tax indemnification agreement.
(i) No Indianapolis Life Company has made any direct, indirect
or deemed distributions that have been or to the knowledge of the Indianapolis
Life Companies, could be taxed under Section 815 of the Code.
(j) For any open tax years, all ceding commission expenses
paid or accrued by each Indianapolis Life Company in connection with any
reinsurance arrangement or Contract or transaction have been capitalized and
amortized over the life or lives of such reinsurance arrangement or Contract in
accordance with the decision of the United States Supreme Court in Colonial
American Life Insurance Company v. Commissioner of Internal Revenue, 109 S.Ct.
240 (1989) or, in the case
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of any such expense incurred on or after September 30, 1990, in accordance with
Sections 848 and 197 of the Code.
(k) Each reserve item with respect to each Indianapolis Life
Company set forth in its respective 1998 federal income Tax Return was
determined in all material respects in accordance with Section 807 of the Code
or other applicable Code sections, and has been consistently applied with
respect to the filing of the federal income Tax Returns for all years through
December 31, 1998 for which the statute of limitations has not expired, and will
be consistently applied for any Tax Return filed on or prior to each of the
Closing Dates.
(l) As of December 31, 1998, no Indianapolis Life Company had
and during the period from December 31, 1998 through each of the Closing Dates
will have, any Tax Liability in respect of Taxes to any policyholder thereof, as
applicable, or any of such Person's Affiliates that resulted or will result from
a transaction with an Affiliate prior to each of the Closing Dates that would
require payment after December 31, 1998.
(m) Each of the Indianapolis Life Insurer Subsidiaries
satisfies the definition of a life insurance company under Section 816 of the
Code.
(n) All material elections with respect to federal income
Taxes affecting the Indianapolis Life Companies are set forth in Schedule 4.19.
(o) Except as set forth in Schedule 4.19, there is no valid
power of attorney given by or binding upon any of the Indianapolis Life
Companies with respect to Taxes for any period for which the statute of
limitations (including any waivers or extensions) has not yet expired.
(p) There are no intercompany transactions within the meaning
of Treasury Regulations section 1.1502-13 for which gain has been deferred, and
there are no excess loss accounts as described in Treasury Regulations section
1.1502-19 that exist with respect to any of the Indianapolis Life Companies.
(q) None of the Indianapolis Life Companies is a party to or
otherwise subject to any arrangement entered into in anticipation of either of
the Closing Dates and not required by this Combination and Investment Agreement,
(i) having the effect of or giving rise to the recognition of a deduction or
loss before either of the Closing Dates, and a corresponding recognition of
taxable income or gain after either of the Closing Dates, or (ii) that would
reasonably be expected to have the effect of or give rise to the recognition of
taxable income or gain by any Indianapolis Life Company after either of the
Closing Dates without the receipt of or entitlement to a corresponding amount of
cash.
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(r) Schedule 4.19 sets forth the amount of any existing
policyholders surplus account and shareholders surplus account with respect to
the Indianapolis Life Companies within the meaning of Section 815 of the Code.
(s) Except for federal income Tax Returns and certain Illinois
and Nebraska Tax Returns, the Indianapolis Life Companies do not file or join in
filing any consolidated, unitary, combined or similar Tax Returns with any
corporation.
(t) Indianapolis Life has filed, as a common parent
corporation of an "affiliate group" (within the meaning of Section 1504(a) of
the Code) a consolidated return for federal income tax purposes on behalf of
itself and each other Indianapolis Life Company which is an "includible
corporation" (within the meaning of Section 1504(b) of the Code). No
Indianapolis Life Company has been a member of any other affiliated group of
corporations within the meaning of Section 1504 of the Code.
(u) No Indianapolis Life Company has been a United States real
property holding company (as defined in Section 897(c)(2) of the Code) during
the applicable period specified in Section 897(c)(1)(ii) of the Code.
(v) All transactions which could give rise to a substantial
understatement of federal income Tax (within the meaning of Section 6662(d) of
the Code) were adequately disclosed (or, with respect to Tax Returns filed
before the Closing Dates will be adequately disclosed) on the Tax Returns
required in accordance with Section 6662(d)(2)(B) of the Code.
Section 4.20 Benefit Plans; ERISA. (a) Schedule 4.20 contains
a true and complete list of each "employee benefit plan" (within the meaning of
Section 3(3) of ERISA), stock purchase, stock option, severance,
change-in-control, fringe benefit, collective bargaining, bonus, incentive or
deferred compensation plan for the benefit of Indianapolis Life's and the
Indianapolis Life Companies' employees and non-employee agents, as the case may
be, and all other compensation and employee benefit plans, agreements, programs,
policies or other arrangements, whether or not subject to ERISA, under which
employees or agents of any Indianapolis Life Company have any present or future
right to compensation or benefits or under which any Indianapolis Life Company
has any present or future liability. All such plans, agreements, programs,
policies and arrangements shall be collectively referred to as the "Company
Plans."
(b) With respect to each Company Plan, Indianapolis Life and
ILGC have made available to AMHC a current, accurate and complete copy (or, to
the extent no such copy exists, an accurate written description) thereof and, to
the extent applicable, (i) any related trust agreement, annuity contract,
insurance policy or other
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funding instrument, (ii) the most recent determination letter, (iii) any summary
plan description and other written communications (or a written description of
any oral communications) by any Indianapolis Life Company to its employees or
agents since January 1, 1998 concerning the extent of the benefits provided
under a Company Plan, and (iv) for the three most recent years (A) the Form 5500
and attached Schedules, (B) audited financial statements, and (C) actuarial
valuation reports.
(c) Except as disclosed on Schedule 4.20, (i) each Company
Plan has been established and administered in accordance with its terms and in
compliance in all material respects with the applicable provisions of ERISA, the
Code and other Applicable Laws; (ii) each Company Plan that is intended to be
qualified within the meaning of Section 401(a) of the Code is so qualified and
has received a favorable determination letter as to its qualification and, to
the knowledge of the Indianapolis Life Companies, nothing has occurred, whether
by action or failure to act, that would cause the loss of such qualification;
(iii) except as listed on Schedule 4.20, with respect to any Company Plan, no
actions, suits or claims (other than routine claims for benefits in the ordinary
course) are pending or threatened that would adversely affect any Indianapolis
Life Company or their respective employees or agents and, to the knowledge of
the Indianapolis Life Companies, no facts or circumstances exist that would give
rise to any such actions, suits or claims; (iv) with respect to any Company
Plan, neither the Indianapolis Life Companies nor, to the knowledge of the
Indianapolis Life Companies, any other party has engaged in a prohibited
transaction, as such term is defined under Section 4975 of the Code or Section
406 of ERISA, that would subject Indianapolis Life, ILGC or their Subsidiaries
or AMHC or AmerUs to any Taxes, penalties or other liabilities under Section
4975 of the Code or Section 409 or Section 502(i) of ERISA; (v) to the knowledge
of the Indianapolis Life Companies, no event has occurred and no condition
exists that would subject an Indianapolis Life Company, either directly or
indirectly or by reason of its affiliation with any member of its "Controlled
Group" (defined as any organization which is a member of a controlled group of
organizations within the meaning of Sections 414(b), (c), (m) or (o) of the
Code) to any Tax, fine or penalty imposed by ERISA, the Code or other applicable
laws, rules and regulations including, but not limited to the Taxes imposed by
Sections 4971, 4972, 4976, 4977, 4979, 4980B of the Code or any fine imposed by
Section 502(c) of ERISA; (vi) all insurance premiums required to be paid with
respect to Company Plans in respect of the Indianapolis Life Company's employees
and agents as of each of the Closing Dates have been or will be paid prior
thereto and adequate reserves have been provided for on their SAP Financial
Statements or GAAP Financial Statements, as the case may be, as of each of the
Closing Dates for any premiums, administrative fees and/or claims (or portions
thereof) attributable to service on or prior to each of the Closing Dates; (vii)
all contributions required to be made prior to each of the Closing Dates under
the terms of any Company Plan, the Code, ERISA or other
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applicable laws, rules and regulations have been or will be timely made; and
(ix) except as expressly contemplated pursuant to this Combination and
Reorganization Agreement, no Company Plan provides for, and there is no binding
commitment for, an increase in the manner in which benefits are calculated under
any Company Plan on or after either of the Closing Dates.
(d) (i) No Company Plan has incurred any "accumulated funding
deficiency" as such term is defined in Section 302 of ERISA and Section 412 of
the Code (whether or not waived); (ii) no event or condition exists that would
be deemed a reportable event within the meaning of Section 4043 of ERISA (that
has not been waived) that could result in a liability to any Indianapolis Life
Company or any member of their respective Controlled Groups, and no condition
exists that could subject any Indianapolis Life Company or any member of their
respective Controlled Groups to a fine under Section 4071 of ERISA; (iii) as of
each of the Closing Dates, the Indianapolis Life Companies and each member of
their respective Controlled Groups will have made all premium payments required
to be made prior to each of the Closing Dates to the Pension Benefit Guaranty
Corporation ("PBGC"); (iv) neither the Indianapolis Life Companies nor any
member of their respective Controlled Groups is subject to any liability to the
PBGC for any plan termination occurring on or prior to either of the Closing
Date and, to the knowledge of the Indianapolis Life Companies, no condition
exists that is reasonably likely to result in any such liability; (v) the PBGC
has not instituted proceedings to terminate any Company Plan and, to the
knowledge of the Indianapolis Life Companies, no condition exists that presents
a material risk that such proceedings will be instituted; (vi) no amendment has
occurred that has required or would require any Indianapolis Life Company or any
member of their respective Controlled Groups to provide security pursuant to
Section 401(a)(29) of the Code; and (vii) neither the Indianapolis Life
Companies nor any member of their respective Controlled Groups has engaged in a
transaction that could subject it to liability under Section 4069 of ERISA.
(e) Except as disclosed on Schedule 4.20, no Company Plan is a
multiple employer plan as defined in Code section 4.13(c) or ERISA Section 4063.
(f) Except as disclosed on Schedule 4.20, no Company Plan is
part of, and no benefits under any Company Plan are provided through, a multiple
employer welfare arrangement as defined in ERISA Section 3(40) ("MEWA"). Each
MEWA associated with a Company Plan is in compliance with the terms of its
governing documents and all applicable laws, rules and regulations.
(g) There are no multiemployer plans (within the meaning of
Section 4001(a)(3) of ERISA) to which any Indianapolis Life Company or any
member of their respective Controlled Groups has or had any liability or
contributes.
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(h) (i) Each Company Plan that is intended to meet the
requirements for tax-favored treatment under Subchapter F of Chapter 1 of
Subtitle A of the Code meets such requirements; and (ii) except as listed on
Schedule 4.20, the Indianapolis Life Companies have no trusts intended to be
qualified within the meaning of Section 501(c)(9) of the Code.
(i) Except as set forth on Schedule 4.20, no Company Plan
exists that could result in the payment to any employee or agent of any
Indianapolis Life Company of any money or other property or accelerate or
provide any other rights or benefits to any employee or agent of any
Indianapolis Life Company as a result solely of any transaction contemplated
hereby, whether or not such payment would constitute a parachute payment within
the meaning of Section 280G of the Code.
(j) Except as set forth on Schedule 4.20, no Company Plan
operates within or is subject to the jurisdiction of any foreign country.
(k) Except as disclosed on Schedule 4.20, none of the amounts
payable to any employee or agent of any Indianapolis Life Company under any
Company Plan or Company Plans will be non-deductible under section 280G of the
Code.
(l) Except as set forth on Schedule 4.20, no Company Plan
provides benefits, including without limitation health or medical benefits
(whether or not insured), with respect to current or former employees or agents
beyond their retirement or other termination of service, other than (i) coverage
mandated by applicable law or (ii) death or retirement benefits under any
"employee pension plan" as defined in ERISA section 3(2).
Section 4.21 Employees.
(a) Except as set forth in Schedule 4.21(a), each Indianapolis
Life Company is in compliance with all Applicable Laws respecting employment and
employment practices, and the terms and conditions of employment and wages and
hours. No Indianapolis Life Company is a party to or bound by any collective
bargaining agreement, nor have they experienced any strikes, grievances, claims
of unfair labor practices, or other collective bargaining disputes within the
past year. There is no labor strike, dispute, arbitration, grievance, slowdown,
stoppage, organizational effort, dispute or proceeding by or with any employee
or former employee of an Indianapolis Life Company or any labor union pending
or, to the knowledge of the Indianapolis Life Companies, threatened against an
Indianapolis Life Company. No Indianapolis Life Company is the subject of any
pending claim asserting that such entity has committed any unfair labor
practice.
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(b) Except as set forth in Schedule 4.21(b), no employee of an
Indianapolis Life Company has any employment contract or other agreement or
arrangement by which such employee is employed on any basis other than as an "at
will" employee or by which an Indianapolis Life Company is restricted in any
manner from terminating the services of such employee at any time without
penalty or payment, subject only to the provisions of employee benefit plans
described herein.
Section 4.22 Books and Records. The books and records,
including, without limitation, the corporate minute books, of each of the
Indianapolis Life Companies are complete and accurate in all material respects,
have been maintained in accordance with generally accepted business practices
and have been made available as requested by AMHC.
Section 4.23 Threats of Cancellation. Except as disclosed in
Schedule 4.23, since December 31, 1998, no group of policyholders or Persons
writing, selling, or producing, either directly or through reinsurance assumed,
insurance business, that individually or in the aggregate for each such group or
Person, respectively, accounted for 3% or more of the premium or annuity income
of an Indianapolis Life Insurer Subsidiary for the year ended December 31, 1999,
has terminated or, to the knowledge of such Subsidiary, threatened to terminate
its relationship with any Indianapolis Life Insurer Subsidiary.
Section 4.24 Operations Insurance. Schedule 4.24 contains a
true and complete list and description of all liability, property, workers
compensation, directors and officers liability, and other similar insurance
contracts that insure the business, operations, or affairs of any Indianapolis
Life Company or affect or relate to the ownership, use, or operations of any of
their respective Assets and (a) that have been issued to such Indianapolis Life
Company (including without limitation the names and addresses of the insurers,
the expiration dates thereof, and the annual premiums and payment terms thereof)
or (b) that are held by any Affiliate of any Indianapolis Life Company
(including any stockholder of any Indianapolis Life Company) for the benefit of
any Indianapolis Life Company following the Closing Dates. All such insurance is
in full force and effect and (to the knowledge of the Indianapolis Life
Companies) is with financially sound and reputable insurers and, in light of the
business, operations, and affairs of the Indianapolis Life Companies, is in
amounts and provides coverage that are reasonable and customary for Persons in
similar businesses.
Section 4.25 Information Supplied. None of the information
supplied by any Indianapolis Life Company for inclusion or incorporation by
reference in (i) any AmerUs SEC Document or AMHC SEC Document will, at the time
such document is filed with the SEC, at any time it is amended or supplemented
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or at the time it becomes effective, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or (ii) the AMHC Member Information
Statement will, at the date such statement is first mailed to AMHC's members or
at the time of any meeting of such members, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
Section 4.26 Brokers; Schedule of Fees and Expenses. Goldman,
Sachs & Co. ("Goldman Sachs"), a copy of whose engagement agreement has been
provided to AMHC, is entitled to fees from Indianapolis Life in accordance with
the provisions of said engagement agreements by virtue of the transactions
contemplated hereby. Except for Goldman Sachs, there is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of any Indianapolis Life Company who might be entitled to any
fee or commission upon consummation of the transactions contemplated by this
Combination and Investment Agreement.
ARTICLE 5
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF
INDIANAPOLIS LIFE AND ILGC RELATING TO INSURANCE BUSINESS
AND RELATED MATTERS
ILGC and Indianapolis Life represent and warrant to AMHC and
AmerUs as of the date hereof and as of each of the Closing Dates that:
Section 5.1 Insurance Regulatory Approvals. The execution,
delivery and performance by ILGC and Indianapolis Life of this Combination and
Investment Agreement and the Investment Management Agreements require no action
by or in respect of, or filing with or approval by, any insurance regulatory
body, agency or official on the part of any Indianapolis Life Company other than
approvals or filings described on Schedule 5.1 under the insurance laws of the
jurisdictions referenced therein.
Section 5.2 Reserves. The aggregate reserves and other amounts
held in respect of Liabilities with respect to Insurance Contracts of
Indianapolis Life and each Indianapolis Life Insurer Subsidiary, as established
or reflected in each of their SAP Financial Statements referred to in Section
4.6 hereof (i) were computed (and, as to such SAP Financial Statements to be
filed after the date of this
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Combination and Investment Agreement, will be computed) in accordance with then
accepted actuarial standards consistently applied and are fairly stated (and, as
to such SAP Financial Statements to be filed after the date of this Combination
and Investment Agreement, will be fairly stated) in accordance with sound
actuarial principles, (ii) are (and, as to such SAP Financial Statements to be
filed after the date of this Combination and Investment Agreement, will be)
based on actuarial assumptions which produce reserves at least as great as those
called for in any policy or contract provision as to reserve basis and method,
and are (and, as to such SAP Financial Statements to be filed after the date of
this Combination and Investment Agreement, will be) in accordance with all other
policy or contract provisions, (iii) meet (and, as to such SAP Financial
Statements to be filed after the date of this Combination and Investment
Agreement, will meet) all requirements of Applicable Law and exceed the minimum
aggregate amounts required by the domiciliary state of each such subsidiary,
(iv) include (and, as to such SAP Financial Statements to be filed after the
date of this Combination and Investment Agreement, will include) provisions for
all actuarial reserves and related actuarial statement items which ought to be
established; and (v) are (and, as to such SAP Financial Statements to be filed
after the date of this Combination and Investment Agreement, will be) adequate
on a SAP basis.
Section 5.3 Absence of Certain Changes. Except as disclosed in
Schedule 5.3 or as expressly contemplated by this Combination and Investment
Agreement, since December 31, 1998, there has not been:
(i) any acquisition of assets or incurrence of liabilities
by an Indianapolis Life Company which is not primarily related to the
life insurance or annuity business of Indianapolis Life or the
Indianapolis Life Insurer Subsidiaries;
(ii) any change in any material way by Indianapolis Life
or the Indianapolis Life Insurer Subsidiaries in underwriting,
actuarial or reserving policies or standards;
(iii) any material change in the basis for establishing
reserves or rates and depreciation or amortization policies of
Indianapolis Life or the Indianapolis Life Insurer Subsidiaries, except
for any such change as a result of a concurrent change in SAP or GAAP,
as applicable;
(iv) (i) any entering into of any facultative reinsurance
contract, other than in the ordinary course of business consistent with
past practice, or (ii) any commutation of any facultative reinsurance
contract, or (iii) any entering into or any commutation of any
reinsurance treaty, by Indianapolis Life or an Indianapolis Life
Insurer Subsidiary;
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(v) in the case of Indianapolis Life or any Indianapolis
Life Insurer Subsidiary, any increase or decrease in the percentage of
its reinsured business, or any increase in its lapse ratio, or any
decrease in the amount of its in-force business which has had or would
reasonably be expected to have a Material Adverse Effect;
(vi) any material insurance transaction by Indianapolis
Life or an Indianapolis Life Insurer Subsidiary other than in the
ordinary course of business consistent with past practice;
(vii) any significant change by Indianapolis Life or an
Indianapolis Life Insurer Subsidiary in the compensation structure of,
or benefits available to, any significant agent or with respect to
agents generally;
(viii) any agreement or commitment (contingent or
otherwise) to do any of the foregoing.
Section 5.4 Regulatory Filings.
(a) To the knowledge of the Indianapolis Life Companies, the
business of the Indianapolis Life Companies is being conducted in compliance in
all material respects with all Applicable Laws, including, without limitation,
all insurance laws, ordinances, rules, regulations, decrees and orders of any
Governmental Entity, and all material notices, reports, documents and other
information required to be filed thereunder within the last three years were
properly filed in all material respects and were in compliance in all material
respects with such laws.
(b) Each Indianapolis Life Company has all material permits
and insurance and other licenses, franchises, approvals, authorizations,
exemptions, classifications, certificates, registrations, and similar documents
(each of which, a "Permit") in each jurisdiction in which the Indianapolis Life
Company requires Permits by virtue of the business conducted or the properties
owned is required and which are necessary to conduct of its business as it is
currently conducted (which jurisdictions are listed in Schedule 5.4). To the
knowledge of the Indianapolis Life Companies, all such Permits are in full force
and effect, and there is no proceeding or investigation pending or threatened
which would reasonably be expected to lead to the revocation, amendment, failure
to renew, limitation, modification, suspension or restriction of any such
Permit. No Indianapolis Life Company is operating under any formal or informal
agreement or understanding with the regulatory authority of any state which
restricts its authority to do business or requires any Indianapolis Life Company
to take, or refrain from taking, any action otherwise permitted by law. No
Indianapolis Life Company is a "commercially domiciled insurer" for purposes of
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Section 1215.13 of the California Insurance Code or is commercially domiciled in
any other state other than its state of domicile.
(c) The Indianapolis Life Companies have made available for
inspection by AMHC complete copies of all material registrations, filings and
submissions made since January 1, 1995 by the Indianapolis Life Companies with
any Governmental Entity and any material reports of examinations, including
financial, market conduct and any other exams of any kind, issued since January
1, 1995 by any such Governmental Entity that relate to the Indianapolis Life
Companies.
(d) To the knowledge of each of the Indianapolis Life
Companies, (i) all policy forms issued, reinsured or underwritten by
Indianapolis Life or such Indianapolis Life Insurer Subsidiary that represent at
least 3% of its 1999 annualized life insurance premium or at least 3% of its
annuity account values as of December 31, 1999 (i) have been identified and
delivered to AMHC and AmerUs prior to the date hereof; (ii) are, to the extent
required under Applicable Laws in all material respects, approved by the
insurance regulatory authority of the jurisdiction where issued or have been
filed with and not objected to by such authority within the period provided for
objection; and (iii) have been filed or registered as required with all other
applicable governmental authorities.
(e) To the knowledge of the Indianapolis Life Companies, no
Indianapolis Life Company has received information which would reasonably cause
it to believe that the financial condition of any other party to any material
reinsurance or coinsurance agreements, swap agreements, other derivative
instruments or contracts, or any Significant Agreement is so impaired as to
result in a default thereunder.
(f) (i) Schedule 5.4(f) contains a true and complete list of
(A) each master or prototype (as well as any individually designed) pension,
profit sharing, defined benefit, Code Section 401(k), and other retirement or
employee benefit plan or contract (including, but not limited to, simplified
employee pension plans, Code Section 403(a), (b) and (c) annuities, Keogh plans,
and individual retirement accounts and annuities) offered or sold by any
Indianapolis Life Company to, or maintained or sponsored for the benefit of any
employees of, any other Person, and (B) where applicable, each opinion letter or
determination letter, as the case may be, relating to the creation or amendment
of any such plan or contract. Each such plan or contract in all material
respects conforms with, and has been offered, sold, maintained and sponsored in
accordance with, all Applicable Laws. No Indianapolis Life Company is a
fiduciary with respect to any plan or contract referenced in this Section 5.4.
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(ii) No Indianapolis Life Company provides administrative
or other contractual services for any plan or contract referenced in
Section 5.4(f)(i), including, but not limited to, any third party
administrative services for any plan which is an "employee welfare
benefit plan" within the meaning of Section 3(1) of ERISA.
(iii) To the extent that any Indianapolis Life Company
maintains any collective or commingled funds or accounts which restrict
the Persons who may invest therein to tax-exempt entities or qualified
plans, each such fund or account (of which a true and complete list and
description is disclosed in Schedule 5.4) has been established,
maintained and operated in accordance with all Applicable Laws in all
material respects, has maintained its tax-exempt status and has no
non-qualified plans or trusts or other taxable entities investing
within it.
(iv) In addition to the representations and warranties
contained in this Section 5.4, there are no claims pending, or (to the
knowledge of the Indianapolis Life Companies) threatened against any
Indianapolis Life Company or any of their respective assets or
properties, under any fiduciary liability insurance policy issued by or
to any of them.
(g) The Insurance Contracts or insurance policies (including
without limitation annuity contracts, variable annuity contracts, and modified
guaranteed contracts) issued by any of the Indianapolis Life Insurer
Subsidiaries are in material compliance with the applicable provisions of
Sections 72, 817, 817A, 7702 and 7702A of the Code.
(h) The tax treatment under the Code of the Insurance
Contracts, investment policies, plans or contracts, financial products, employee
benefit plans, individual retirement accounts or annuities, or similar or
related policies, contracts, plans or products, whether individual, group or
otherwise, issued or sold by the Indianapolis Life Insurer Subsidiaries are and
at all times have been in all material respects the same or more favorable to
the purchaser, policyholder or intended beneficiaries thereof as the tax
treatment under the Code for which such contracts qualified or purported to
qualify at the time of its issuance or purchase, except for changes resulting
from changes to the Code effective after the date of such issuance or purchase.
For purposes of this Section 5.4(h), the provisions of the Code relating to the
tax treatment of such contracts shall include, but not be limited to, Sections
72, 101, 104, 105, 106, 401, 403, 408, 419, 419A, 457, 817, 818, 7702 and 7702A
of the Code.
Section 5.5 Reinsurance Agreements. All reinsurance agreements
to which Indianapolis Life or an Indianapolis Life Insurer Subsidiary is a
party, either
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as cedant or reinsurer, are disclosed in its Annual SAP Statement for the year
ended December 31, 1998 or, as to such agreements entered into after December
31, 1998, (i) are disclosed in Schedule 5.5 hereto, if in force as of the date
hereof, or (ii) if entered into after the date hereof, were entered into in
compliance with the provisions of Section 7.1(l) hereof and were disclosed on
the Annual SAP Statement for the year (if one has been filed) in which such
agreements were entered into. Each reinsurance agreement to which Indianapolis
Life or an Indianapolis Life Insurer Subsidiary is a party is in full force and
effect (except where any such agreement has terminated as to new business
pursuant to its terms) and neither Indianapolis Life nor an Indianapolis Life
Insurer Subsidiary is in material breach of any provision thereof and, to the
knowledge of the Indianapolis Life Companies, no other party to such reinsurance
agreements is in breach or has threatened breach of any provision thereof.
Section 5.6 Member Information Statement. As of the date
thereof, Indianapolis Life's Member Information Statement, if circulated and/or
filed on or prior to the Combination Closing Date in conjunction with the Plan
of Conversion will comply in all material respects with Applicable Law, and will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation or warranty is made by Indianapolis
Life or ILGC with respect to information supplied by AMHC or AmerUs for
inclusion or incorporation by reference in such Member Information Statement.
Section 5.7 Shares to be Issued Upon Implementation of the
Plan of Conversion. Assuming consummation of and subject to the Plan of
Conversion, upon Indianapolis Life's demutualization as contemplated by the Plan
of Conversion all outstanding shares of capital stock of Indianapolis Life will
be, and all shares which may be issued will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights, in each case as of the Combination Effective Time.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF
AMHC AND AMERUS
Except as disclosed in the AmerUs Filed SEC Documents filed
prior to the date hereof, AMHC and AmerUs represent and warrant to Indianapolis
Life and ILGC as of the date hereof and as of each of the Closing Dates that:
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Section 6.1 Corporate Existence and Power. Each of AMHC and
AmerUs (i) has been duly organized, is validly existing and is in good standing
under the laws of its state of domicile, (ii) has all corporate powers required
to carry on its business as now conducted, (iii) has all material governmental
licenses, authorizations, Permits, consents and approvals required to carry on
its business as now conducted and (iv) except where failure to so qualify or be
licensed would not materially and adversely affect such Person, is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where such qualification is necessary, or is duly licensed to
do business and is in good standing in each jurisdiction where such licensing is
necessary, as the case may be. Each of AMHC and AmerUs has heretofore delivered
or made available to Indianapolis Life true and complete copies, certified by
its corporate secretary, of its articles of incorporation and bylaws as in
effect on the date hereof. Neither AMHC nor AmerUs is in violation of any of the
provisions of its articles of incorporation or bylaws.
Section 6.2 Subsidiaries. Schedule 6.2 lists all the
Subsidiaries of AMHC and AmerUs as of the date of this Combination and
Investment Agreement and, for the AMHC Material Subsidiaries, the number and
holders of all authorized, issued and outstanding capital stock of, or other
equity ownership interests in, each such AMHC Material Subsidiary. As of such
date, except as stated on Schedule 6.2, all the outstanding shares of capital
stock of, or other equity interests in, each AMHC Material Subsidiary (i) have
been validly issued and are fully paid and nonassessable, (ii) are owned
directly or indirectly by AMHC or AmerUs, as the case may be, free and clear of
all Liens and (iii) are free of any other restriction (including any restriction
on the right to vote, sell or otherwise dispose of such capital stock or other
ownership interests).
Section 6.3 Corporate Authorization. The execution, delivery
and, subject to the receipt of the approvals referred to in Section 6.4 or
listed on Schedule 6.3, performance by AMHC and AmerUs of this Combination and
Investment Agreement and by AmerUs Capital Management of the Investment
Management Agreements are within such Persons' powers and have been duly
authorized by all necessary corporate action. This Combination and Investment
Agreement and the Investment Management Agreements constitute valid and legally
binding agreements, enforceable against AMHC, AmerUs and AmerUs Capital
Management, as the case may be, in accordance with their terms, subject to (i)
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium,
rehabilitation, liquidation, conservatorship, receivership and other similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally and the rights of creditors of insurance companies generally and (ii)
general principles of equity (regardless of whether considered in a proceeding
at law or in equity).
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Section 6.4 Governmental Authorization. Except as set forth in
Schedule 6.4, the execution, delivery and performance by AMHC and AmerUs of this
Combination and Investment Agreement and by AmerUs Capital Management of the
Investment Management Agreements requires no action by or in respect of, or
filing with or approval by, any governmental body, agency, or official on the
part of AMHC, AmerUs or AmerUs Capital Management other than (i) filing with or
approvals described on Schedule 6.4 under the insurance laws of the
jurisdictions referenced therein, (ii) compliance with any applicable
requirements of the HSR Act, (iii) filings required to be made with the SEC
under Applicable Law, (iv) filings and notices not required to be made or given
until after each of the Closing Dates, (v) filings, at any time, of tax returns,
tax reports and tax information statements and (vi) any such action or filing as
to which the failure to make or obtain would not, individually or in the
aggregate, materially impair the ability of AMHC or any AMHC Material Subsidiary
to conduct their businesses.
Section 6.5 NonContravention. Except as set forth in Schedule
6.5, the execution, delivery and performance by AMHC and AmerUs of this
Combination and Investment Agreement and by AmerUs Capital Management of the
Investment Management Agreements does not and will not (i) violate the articles
of incorporation or bylaws of AMHC, AmerUs or AmerUs Capital Management, as
presently constituted or as the same may be amended pursuant to the AMHC Plan,
(ii) assuming compliance with the matters referred to in Section 6.4, violate
any Applicable Law, (iii) require any consent or other action by any Person
under, constitute a default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of AMHC, AmerUs or
AmerUs Capital Management or to a loss of any benefit to which AMHC, AmerUs or
AmerUs Capital Management is entitled under, any material agreement or other
material instrument binding upon such Person, or any material license,
franchise, Permit or other similar authorization held by AMHC, AmerUs or AmerUs
Capital Management, or (iv) result in the creation or imposition of any material
Lien on any asset of AMHC, AmerUs or AmerUs Capital Management.
Section 6.6 Financial Statements. (a) AMHC and AmerUs have
previously made available to Indianapolis Life true and complete copies of the
following:
(i) the consolidated Annual Audited GAAP Statements for
AMHC and AmerUs and the individual Annual SAP Statements and Annual
Audited SAP Statements for each of the AMHC Insurer Subsidiaries as of
and for the years ended December 31, 1996, 1997 and 1998; and
(ii) the consolidated Quarterly GAAP Statements for AMHC
and AmerUs and the individual Quarterly SAP Statements for each of
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the AMHC Insurer Subsidiaries as of and for the calendar quarters ended
March 31, 1999, June 30, 1999, and September 30, 1999 (collectively
with the items described in Section 6.6(a)(i) and financial statements
of the kinds described above as of and for the annual and quarterly
periods ending on or after the dates mentioned above, the "AMHC
Statements").
(b) Since December 31, 1997, each of the AMHC Material Insurer
Subsidiaries has filed all material financial reports, together with any
amendments required to be made with respect thereto, that it has been required
to file with state insurance regulatory authorities (the "AMHC Insurer
Subsidiary Filings"), and all of the AMHC Insurer Subsidiary Filings prior to
the date hereof complied, and all such filings made hereafter prior to the
Combination Closing Date will comply, in all material respects with applicable
insurance laws, rules and regulations and, except as disclosed in Schedule
6.6(b), there are no material open or unresolved issues which were raised by any
insurance regulatory authority and brought to the attention of such AMHC
Material Insurer Subsidiary by such regulatory authority with respect to any of
such filings.
(c) Each AMHC Statement was prepared (and, as to AMHC
Statements to be prepared after the date of this Combination and Investment
Agreement, will be prepared) in accordance with GAAP or SAP, as applicable, and
presents (and, as to AMHC Statements to be prepared after the date of this
Combination and Investment Agreement, will present) fairly the financial
position of AMHC, AmerUs or the relevant Subsidiary, as the case may be, as of
the respective dates thereof and the related summaries of operations and changes
in capital and surplus and cash flows of such entity for the respective periods
covered thereby (subject, in the case of Quarterly GAAP Statements and Quarterly
SAP Statements, to the absence of notes and normal year-end adjustments and
accruals).
(d) Prior to each of the Closing Dates, AMHC and AmerUs shall
have delivered to Indianapolis Life and ILGC true and complete copies of each
AMHC Statement prepared after the date hereof, and each such AMHC Statement
shall conform to the representations and warranties contained in this Section
6.6.
Section 6.7 Absence of Certain Changes. Except as disclosed in
Schedule 6.7 or as expressly contemplated by this Combination and Investment
Agreement, since December 31, 1998, the business of AMHC and the AMHC Material
Subsidiaries has been conducted in the ordinary course (including, without
limitation, with regard to underwriting, pricing, actuarial and investment
policies generally) and there has not been:
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(a) any events, occurrences, developments or state of
circumstances or facts which, individually or in the aggregate, have had or
would reasonably be expected to have Material Adverse Effect with respect to
AMHC;
(b) any amendment, termination, waiver, disposal or lapse of,
or other failure to preserve, or regulatory agreement with respect to any Permit
of AMHC or any AMHC Material Subsidiary the result of which individually or in
the aggregate has or would reasonably be expected to have a Material Adverse
Effect on AMHC;
(c) any material change in the financial, tax or accounting
policies of AMHC or any AMHC Material Subsidiary, except for any such change as
a result of a concurrent change in GAAP or SAP; or
(d) any agreement or commitment (contingent or otherwise) to
do any of the foregoing.
Section 6.8 Capital Structure. (a) As of December 31, 1999,
the authorized capital stock of AmerUs consists of (i) 180,000,000 shares of
Class A Common Stock, without par value ("AmerUs Common Stock"), (ii) 50,000,000
shares of Class B Common Stock, without par value, of AmerUs ("AmerUs Class B
Common Stock") and (iii) 20,000,000 shares of Preferred Stock, without par
value, of AmerUs ("AmerUs Preferred Stock"). At the close of business on January
12, 2000: (i) 25,072,888 shares of AmerUs Common Stock were issued and
outstanding; (ii) 5,000,000 shares of AmerUs Class B Common Stock were issued
and outstanding; and (iii) no shares of AmerUs Preferred Stock were issued and
outstanding. All outstanding shares of capital stock of AmerUs are, and all
shares which may be issued will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. As of
December 31, 1999, except as set forth in Schedule 6.8 or in the AmerUs Filed
SEC Documents, there are not issued, reserved for issuance or outstanding (A)
any shares of capital stock or other voting securities of AmerUs, (B) any
securities of AmerUs convertible into or exchangeable or exercisable for shares
of capital stock or voting securities of AmerUs and (C) any warrants, calls,
options or other rights to acquire from AmerUs or any Subsidiary of AmerUs, and
no obligation of AmerUs or any Subsidiary of AmerUs to issue, any capital stock,
voting securities or securities convertible into or exchangeable or exercisable
for capital stock or voting securities of AmerUs.
(b) Assuming consummation of and subject to the AMHC Plan,
upon the AMHC Demutualization as contemplated by the AMHC Plan all outstanding
shares of capital stock of AMHC will be, and all shares which may be issued will
be, when issued, duly authorized, validly issued, fully paid
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and nonassessable and not subject to preemptive rights, in each case as of the
effective date of the AMHC Demutualization.
(c) Assuming consummation of and subject to the Plan of
Conversion, upon the Combination as contemplated by the Plan of Conversion all
outstanding shares of capital stock of AMHC will be, and all shares which may be
issued will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights, in each case as of the
Combination Effective Time.
Section 6.9 SEC Reports. (a) Except as disclosed in Schedule
6.9, AmerUs has filed all required reports, schedules, forms, statements and
other documents (including exhibits and all other information incorporated
therein) with the SEC since January 1, 1997 (the "AmerUs SEC Documents"). As of
their respective dates, the AmerUs SEC Documents complied in all material
respects with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934 (the "Exchange Act"),
as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such AmerUs SEC Documents, and none of the AmerUs SEC
Documents when filed contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Except to the extent that information contained
in any AmerUs SEC Document has been revised or superseded by a later filed
AmerUs SEC Document, none of the AmerUs SEC Documents contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of AmerUs included in the AmerUs SEC Documents comply as to form, as
of their respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all material respects the
consolidated financial position of AmerUs and its consolidated Subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal recurring year-end audit adjustments).
(b) As of their respective dates, the AMHC SEC Documents shall
comply in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such AMHC SEC Documents, and none of the
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AMHC SEC Documents shall when filed contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. Except to the extent that information
contained in any AMHC SEC Document is revised or superseded by a later filed
AMHC SEC Document, none of the AMHC SEC Documents shall contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of AMHC to be included in the AMHC SEC Documents shall comply as to
form, as of their respective dates of filing with the SEC, in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, shall have been prepared in
accordance with GAAP (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and shall fairly
present in all material respects the consolidated financial position of AMHC and
its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal recurring year-end audit
adjustments).
(c) Except as set forth in Schedule 6.9, neither AMHC nor any
AMHC Material Subsidiary has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by GAAP to be set
forth on a consolidated balance sheet of AMHC or in the notes filed as a part
thereof which, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect on AMHC.
Section 6.10 Information Supplied. None of the information
supplied by AMHC or AmerUs for inclusion or incorporation by reference in
Indianapolis Life's Member Information Statement will, at the date such
statement is first mailed to Indianapolis Life's policyholders or at the time of
any meeting of such policyholders, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
Section 6.11 Taxes. Except as disclosed in Schedule 6.11,
(a) All Tax Returns required to be filed with respect to AMHC
and each AMHC Material Insurer Subsidiary have been duly and timely filed, other
than any Tax Return the failure of which to timely file would not reasonably be
expected to have a Material Adverse Effect on AMHC. All such Tax Returns are
true, correct and complete in all material respects and AMHC and each AMHC
Material Insurer
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Subsidiary (i) has duly and timely paid all Taxes that are shown as due on such
Tax Returns, or claimed or asserted by any taxing authority to be due, from such
Person for the periods covered by such Tax Returns (unless such Taxes are being
contested in good faith and adequate reserves therefor have been established in
its books and records) and have made all required estimated payments of Taxes
sufficient to avoid any penalties for underpayment, or (ii) has duly provided
for all such Taxes in the AMHC Statements. There are no filed Liens with respect
to Taxes (except for Liens for Taxes not yet due and owing) upon any of the
Assets of AMHC or any AMHC Material Insurer Subsidiary.
(b) With respect to any period or portion thereof through each
of the Closing Dates for which Tax Returns have not yet been filed, or for which
Taxes are not yet due or owing, AMHC and each AMHC Material Insurer Subsidiary
has established due and sufficient reserves for the payment of such Taxes in
accordance with SAP and GAAP, as applicable, and such current reserves through
each of the Closing Dates are duly and fully provided for in all material
respects in the AMHC Statements of such Person for the period then ended.
(c) The United States consolidated federal income Tax Returns
in which AMHC and certain of its subsidiaries joined have been examined by the
Internal Revenue Service for taxable years through the year ended December 31,
1992 (and through the year ended December 31, 1994 with respect to Delta Life
and Annuity Company) and all material deficiencies resulting from such
examinations have been paid; taxable years through the year ended December 31,
1996 are currently before the IRS Office of Appeals or under examination.
(d) Neither AMHC nor any AMHC Material Insurer Subsidiary has
been or is in violation (or with notice or lapse of time, or both, would be in
violation) of any Applicable Law relating to the payment or withholding of Taxes
(including, without limitation, withholding of Taxes pursuant to Sections 1441
and 1442 of the Code or similar provisions under any foreign laws), other than a
violation which would not reasonably be expected to have a Material Adverse
Effect on AMHC. AMHC and each AMHC Material Insurer Subsidiary has duly and
timely withheld in all material respects from employee salaries, wages and other
compensation and paid over to the appropriate taxing authorities all amounts
required to be so withheld and paid over for all periods under all Applicable
Laws.
(e) As of December 31, 1998, neither AMHC nor any AMHC
Material Insurer Subsidiary had nor, during the period from December 31, 1998
through each of the Closing Dates will have, any Tax Liability in respect of
Taxes to any policyholder thereof, as applicable, or any of such Person's
Affiliates that resulted or will result from a transaction with an Affiliate
prior to each of the Closing
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Dates that would require payment after December 31, 1998 which would reasonably
be expected to have a Material Adverse Effect on AMHC.
Section 6.12 Litigation. Schedule 6.12 contains a list of
litigation pending as of the date hereof against AMHC, AmerUs and any Subsidiary
thereof which individually involves a claim or claims for any injunction or
similar relief or for damages exceeding $500,000 or an unspecified amount of
damages. Except as disclosed in Schedule 6.12, (i) there are no actions, suits,
investigations or proceedings pending or, to the knowledge of AMHC or AmerUs,
threatened, against AMHC or any AMHC Material Subsidiary or its Assets, at law
or in equity, in, before, or by any Person that individually or in the aggregate
have had or would reasonably be expected to have a Material Adverse Effect on
AMHC; (ii) there are no writs, judgments, decrees or similar orders of any
Governmental Entity with competent jurisdiction outstanding against AMHC or any
AMHC Material Subsidiary that individually exceed $100,000 or that individually
or in the aggregate have or would reasonably be expected to have a Material
Adverse Effect on AMHC; and (iii) as of the date hereof, there is no action,
suit, investigation or proceeding pending against, or affecting the properties
of AMHC or any AMHC Material Subsidiary before any court or arbitrator or any
governmental body, agency or official which challenges or seeks to prevent the
transactions contemplated hereby.
Section 6.13 Compliance with Laws. (a) The business of AMHC
and the AMHC Material Insurer Subsidiaries is being conducted in compliance in
all material respects with all Applicable Laws, including, without limitation,
all insurance laws, ordinances, rules, regulations, decrees and orders of any
Governmental Entity, and all notices, reports, documents and other information
required to be filed thereunder within the last three years were properly filed
in all respects and were in compliance in all respects with such laws, except
where the failure to be so conducted or filed or to be in such compliance would
not, individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect on AMHC.
(b) Except where the failure of the following to be true would
not, individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect on AMHC, (i) AMHC and the AMHC Material Insurer Subsidiaries have
all Permits the use and exercise of which are necessary for the conduct of its
business as now conducted, (ii) the business of AMHC and the AMHC Material
Insurer Subsidiaries has been and is being conducted in compliance, in all
material respects, with all such Permits, (iii) all such Permits are in full
force and effect, and (iv) there is no proceeding or investigation pending or
threatened which would reasonably be expected to lead to the revocation,
amendment, failure to renew, limitation, suspension or restriction of any such
Permit.
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(c) Except as set forth on Schedule 6.13(c), and except where
any inaccuracy in the following would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect, (i) no REO or AMHC and
AmerUs Facilities have been used for the storage, treatment, generation,
transportation, manufacture, processing, handling, production, distribution,
deposit, burial, use or disposal of any Hazardous Substance except in compliance
with Environmental Laws, (ii) neither AMHC nor any AMHC Material Subsidiary has
any liability arising out of or resulting from a release of any Hazardous
Substance on or from any such real estate and (iii) AMHC and each AMHC Material
Subsidiary has complied in all material respects with all applicable
Environmental Laws relating to such real estate and the business and activities
conducted thereon.
Section 6.14 Solvency. AMHC, AmerUs and the AMHC Material
Subsidiaries are solvent and are not financially impaired, such that they would
be unable to pay their debts or to meet their obligations as they mature or such
that their assets do not exceed their liabilities plus the greater of any
capital and surplus required by Applicable Law to be constantly maintained.
Section 6.15 Brokers; Schedule of Fees and Expenses. Merrill
Lynch, a copy of whose engagement agreement has been provided to Indianapolis
Life, is entitled to fees from AMHC in accordance with the provisions of said
engagement agreements by virtue of the transactions contemplated hereby. Except
for Merrill Lynch and any investment bankers or other advisors primarily engaged
by AMHC, AmerUs or their respective Boards of Directors in connection with the
AMHC Demutualization, there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
AMHC or any Subsidiary thereof who might be entitled to any fee or commission
upon (i) the execution of this Combination and Investment Agreement, (ii) the
consummation of the transactions contemplated by this Combination and Investment
Agreement, or (iii) the termination of this Combination and Investment
Agreement.
ARTICLE 7
COVENANTS OF INDIANAPOLIS LIFE AND ILGC
Section 7.1 Conduct of Business of Indianapolis Life and ILGC
Prior to the Combination Closing Date. Indianapolis Life and ILGC each covenant
and agree that, after the date hereof and prior to the Combination Closing Date
(unless AMHC and AmerUs shall otherwise approve in writing, and except as
otherwise expressly contemplated by this Combination and Investment Agreement or
the Investment Management Agreements):
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(a) it will, and will cause each of its Subsidiaries to,
exercise its best efforts to maintain itself at all times in all material
respects as a corporation duly organized, validly existing, and duly qualified
to conduct its business;
(b) it will, and will cause each of its Subsidiaries to,
conduct its business in the ordinary course consistent with past practice and in
accordance with sound business practices and it will, and will cause each of its
Subsidiaries to, exercise its best efforts not to commit any act, and not to
fail to take any act, which act or failure to act would constitute a material
breach of or default under any contract, agreement, plan, lease, policy, or
License or which act or failure to act would fail to comply in any material
respects with any Applicable Laws relating to it and to the conduct of its
business which breach, default or failure to comply would or would be likely to
materially and adversely affect the consummation of the transactions
contemplated hereby, it being understood and agreed that nothing herein shall
permit Indianapolis Life or ILGC or their Subsidiaries to enter into or engage
in (through acquisition, product extension or otherwise) the business of
providing any products or services materially different from existing products
or services of Indianapolis Life, ILGC or their Subsidiaries, as the case may
be, or to enter into or engage in new lines of business without AMHC's and
AmerUs' prior written approval;
(c) it will, and will cause each of its Subsidiaries to,
promptly advise AMHC and AmerUs in writing of any material adverse change in the
condition (financial or otherwise), assets, Liabilities, earnings, or business
of Indianapolis Life or of any of its Subsidiaries or of any breach, default or
failure to comply by such Person of the type referred to in subparagraph (b)
immediately above or of any litigation involving it which is of such a character
as to materially and adversely affect (or might reasonably be expected to
materially and adversely affect) any Indianapolis Life Company or the
consummation of the transactions contemplated hereby;
(d) to the extent consistent with (b) above it will, and will
cause each of its Subsidiaries to, use its best efforts to preserve its business
organization intact and maintain its existing relations and goodwill with
customers, suppliers, reinsurers, distributors, creditors, lessors, employees
and business associates;
(e) it shall not (i) issue, sell, pledge, dispose of or
encumber any equity ownership interests in any of its Subsidiaries; (ii) amend
its articles of incorporation or by-laws; (iii) authorize, declare, set aside or
pay any policyholder dividend payable in cash or property other than in the
ordinary course of business consistent with past practice and in accordance with
approved dividend plans; or (iv) in the case of ILGC, authorize, declare, set
aside or pay any shareholder dividend except in accordance with Section 2.2(a)
hereof;
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(f) with respect to any Indianapolis Life Company, it shall
not (i) issue, sell, pledge, dispose of or encumber any shares of, or securities
convertible into or exchangeable or exercisable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of its capital
stock of any class or any other property or assets, or permit or cause its
Subsidiaries to do the same; (ii) other than in the ordinary and usual course of
business consistent with past practice, transfer, lease, license, guarantee,
sell, mortgage, pledge, dispose of or encumber any other property or assets or
incur or modify any material indebtedness or other liability, or permit or cause
its Subsidiaries to do the same; (iii) make or authorize or commit to any
capital expenditures (including entering into capital lease obligations) for
tangible assets other than as set forth in Schedule 7.1(f) or in amounts not
exceeding $200,000 in the aggregate; or (iv) by any means, make any acquisition
of, or investment in, assets or stock of any other Person or entity, including
by way of assumption reinsurance (other than in connection with ordinary course
investment activities); or permit or cause its Subsidiaries to do any of the
foregoing;
(g) it shall not, and shall not permit or cause any of its
Subsidiaries to, pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction of claims,
liabilities or obligations legally due and payable and arising in the ordinary
and usual course of business, claims arising under the terms of products,
contracts or policies issued by Indianapolis Life or an Indianapolis Life
Insurer Subsidiary in the ordinary and usual course of business and such other
claims, liabilities or obligations as shall not exceed $200,000 in the
aggregate;
(h) it shall, and it shall cause its Subsidiaries to, (i)
prepare properly and file duly and validly all reports and all Tax Returns
required to be filed with any Governmental Entity with respect to its business,
operations, or affairs and (ii) pay in full and when due all Taxes indicated by
such Tax Returns or otherwise levied or assessed upon it or any of its Assets,
and withhold or collect or pay to the proper taxing authorities or hold in
separate bank accounts for such payment all Taxes that is required to so
withhold or collect and pay, unless reasonable reserves therefor have been
established and reflected in its books and records;
(i) it shall not, and shall not permit or cause any of its
Subsidiaries to, make or change any tax election, settle any material audit,
file any amended tax returns or permit any insurance policy naming it as a
beneficiary or loss-payable payee to be canceled or terminated except in the
ordinary and usual course of business;
(j) it shall not, and shall not permit or cause any of its
Subsidiaries to, enter into any agreement containing any provision or covenant
limiting in any material respect the ability to (i) sell any products or
services of or to any other
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Person, (ii) engage in any line of business or (iii) compete with or to obtain
products or services from any Person or limiting the ability of any person to
provide products or services to a Subsidiary;
(k) it shall not, and shall not permit or cause any of its
Subsidiaries to, terminate, or in any manner material thereto modify, amend or
waive compliance with, any provision of any of the Significant Agreements other
than the employment agreements between Indianapolis Life and those employees
listed on Schedule 7.1(k) hereto, in connection with entry into new employment
agreements as described and set forth on Schedule 7.1(k), and it shall not, and
shall not permit or cause any of its Subsidiaries to, terminate, or in any
manner material thereto modify, amend or waive compliance with, any Company
Plan, other than as set forth on Schedule 7.1(k); and it shall not (i) make any
representation or promise, oral or written, to any employee or agent that is
inconsistent with the terms of any Company Plan, (ii) approve any general or
company wide pay increases for its employees, (iii) make any change to, or amend
in any way, the salaries, wages, or other compensation of any employee whose
annual compensation exceeds $100,000 other than, in the case of clauses (ii) and
(iii), routine changes or amendments that are made in the ordinary course of
business and consistent with past practice and do not and will not exceed, in
the aggregate (including changes under both clauses (ii) and (iii)), 5% of the
total salaries, wages and other compensation of all its employees;
(l) it shall not, and shall not permit or cause any of its
Subsidiaries to, enter into any new quota share or other reinsurance transaction
other than in the ordinary course of business consistent with past practice, nor
to make any commutation of any reinsurance treaty or recapture of reinsured
business;
(m) it shall not make, or permit or cause any of its
Subsidiaries to make, any investment of Indianapolis Life Assets other than in
accordance with the investment policies set forth in Schedule 4.7(viii);
(n) it shall not, and shall not permit or cause any of its
Subsidiaries to, change any of its or their material accounting principles,
methods or policies (including, without limitation, any reserving methods or
policies) used by it or them, except as may be required as a result of a change
in Applicable Law, GAAP or SAP;
(o) it shall not, and shall not permit or cause any of its
Subsidiaries to, effect any transactions with any Affiliates, other than
pursuant to arrangements existing as of the date hereof or in the ordinary
course of business consistent with past practice;
(p) it shall not, and shall not permit or cause any of its
Subsidiaries to, take any actions or omit to take any actions that would cause
any of its
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representations and warranties herein to become untrue in any material respect
or that would, individually or in the aggregate, cause or reasonably be expected
to cause a Material Adverse Effect;
(q) it shall not terminate, cancel or amend any insurance
coverage maintained by it or any of its Subsidiaries with respect to any
material assets which is not replaced by a comparable amount of insurance
coverage; and
(r) it shall not, and shall not permit or cause any of its
Subsidiaries to, authorize or enter into an agreement prohibited by the
foregoing.
Section 7.2 Competing Transaction Proposals. (a) Indianapolis
Life and ILGC, will not, and will not permit or cause any of its officers and
directors to, and shall direct its Representatives not to, and will not permit
or cause any of their Subsidiaries or permit or cause their respective
Representatives to, directly or indirectly, initiate, solicit, encourage or
otherwise facilitate any inquiries or the making of any proposal or offer with
respect to (i) a merger, reorganization, affiliation, sponsored demutualization,
share exchange, consolidation or similar transaction involving, or any purchase
of 5% or more of the assets or any equity securities of, or demutualization or
conversion of, Indianapolis Life, ILGC or any of their Subsidiaries, as the case
may be, other than as expressly required under this Combination and Investment
Agreement or as expressly authorized by AMHC and AmerUs; or (ii) a transaction
involving a pooling or affiliation of the business of either Indianapolis Life,
ILGC or any of their Subsidiaries with another Person or any similar business
combination or restructuring, other than a transaction expressly provided for
herein (any of the foregoing in (i) or (ii), a "Competing Transaction
Proposal"). Subject to Section 7.2(b), Indianapolis Life and ILGC will not, and
will not permit or cause any of their Subsidiaries or any of their respective
officers and directors to, and shall direct its, and shall cause them to direct
their, employees, agents and Representatives not to, directly or indirectly,
engage in any negotiations concerning, or provide any confidential information
or data to, or have any substantive discussions with, any Person relating to a
Competing Transaction Proposal, whether made before or after the date of this
Combination and Investment Agreement, or otherwise facilitate any effort or
attempt to make or implement a Competing Transaction Proposal. Indianapolis Life
and ILGC will, and will cause each of their Subsidiaries to, immediately cease
and cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing, and
agree that they will take the necessary steps to promptly inform the individuals
or entities referred to in the first sentence hereof of the obligations
undertaken in this Section 7.2. Indianapolis Life and ILGC will notify AMHC and
AmerUs immediately if any such inquiries, proposals or offers are received by,
any such information is requested from, or any such discussions or negotiations
are sought to be initiated or continued with, any of their Representatives
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indicating, in connection with such notice, the name of such Person and the
material terms and conditions of any proposals or offers and thereafter shall
keep AMHC and AmerUs informed, on a current basis, on the status and terms of
any such proposals or offers and the status of any such negotiations or
discussions. Indianapolis Life and ILGC also will promptly request each Person
that has heretofore executed a confidentiality agreement in connection with its
consideration of a Competing Transaction Proposal to return all confidential
information heretofore furnished to such Person by or on behalf of it.
(b) Nothing contained in Section 7.2(a) shall prevent
Indianapolis Life or its Board of Directors from (A) providing information in
response to a request therefor by a Person who has made an unsolicited bona fide
written Competing Transaction Proposal; (B) engaging in any negotiations or
discussions with any Person who has made an unsolicited bona fide written
Competing Transaction Proposal; or (C) recommending such a Competing Transaction
Proposal to the policyholders of Indianapolis Life and/or permitting such
policyholders to vote on such Competing Transaction Proposal, if and only to the
extent that, (i) in each such case referred to in clause (A), (B) or (C) above,
the Board of Directors of Indianapolis Life determines in good faith that the
failure to take such action is reasonably likely to result in a breach of such
Board's fiduciary duties under, or otherwise violate, Applicable Law; and (ii)
in each case referred to in clause (B) or (C) above, the Board of Directors of
Indianapolis Life determines in good faith that such Competing Transaction
Proposal is a Superior Proposal. Indianapolis Life shall promptly inform AMHC of
any actions taken in reliance on this Section 7.2(b) and shall promptly forward
copies of any documents concerning a Competing Transaction Proposal to AMHC.
(c) For purposes of this Section 7.2, "Superior Proposal"
shall mean a Competing Transaction Proposal which, if accepted by Indianapolis
Life, ILGC or a Subsidiary thereof, is reasonably capable of being consummated,
taking into account all legal, financial and regulatory aspects of the proposal
and the Person making the proposal, and which, if consummated, would result in a
more favorable transaction for Indianapolis Life and its policyholders than the
transaction contemplated by this Combination and Investment Agreement, taking
into account all legal, financial and regulatory aspects of the proposal.
(d) Indianapolis Life shall provide AMHC ten (10) Business
Days prior written notice before any Board of Directors consideration of or the
entering into of any agreement, letter of intent or other arrangement
contemplating, directly or indirectly, a Competing Transaction Proposal or
Superior Proposal.
Section 7.3 IL Annuity Business and Capital Stock. Until the
purchase or repurchase of all of the shares of Non-Voting Common Stock or the
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Converted Shares, as the case may be, pursuant to Section 2.4 hereof,
Indianapolis Life and ILGC (i) will conduct IL Annuity's business in the
ordinary course of such annuity business, (ii) will not transfer any shares of
capital stock or any other instruments exchangeable into such stock of IL
Annuity except as expressly contemplated by this Combination and Investment
Agreement or the Investment Management Agreements, and (iii) will ensure that
the shares of capital stock of IL Annuity are free and clear of all Liens and
are free of any other restriction on transfer to the Holder (to the extent such
transfer is permitted pursuant to Section 2.1(a) hereof) other than Applicable
Law.
Section 7.4 Investment Management Agreements. (a) Indianapolis
Life shall, and Indianapolis Life and ILGC shall cause the Indianapolis Life
Insurer Subsidiaries to, consistent with the terms of the Investment Management
Agreements, terminate and/or amend any agreement under which Indianapolis Life
or a Subsidiary thereof provides investment management services (including
without limitation any services to be provided by AmerUs Capital Management
under the applicable Investment Management Agreement) to any of the Indianapolis
Life Insurer Subsidiaries.
(b) Indianapolis Life shall, and Indianapolis Life and ILGC
shall cause the Indianapolis Life Insurer Subsidiaries to, continue the term of
their respective Investment Management Agreements until all of the shares of
Non-Voting Common Stock and Converted Shares have been purchased by Indianapolis
Life and/or repurchased by ILGC, as the case may be; provided, however, that the
foregoing shall not apply in the event this Combination and Investment Agreement
is terminated pursuant to Section 11.2(d) or 11.4, so long as at least 180 days
prior written notice of termination of such Investment Management Agreements is
given after the applicable Termination Date.
ARTICLE 8
COVENANTS OF AMHC AND AMERUS
Section 8.1 Conduct of Business of AMHC and AmerUs Prior to
the Combination Closing Date. AMHC and AmerUs each covenant and agree that,
after the date hereof and prior to the Combination Closing Date (unless
Indianapolis Life and ILGC shall otherwise approve in writing, and except as
otherwise expressly contemplated by this Combination and Investment Agreement or
the Investment Management Agreements):
(a) it will, and will cause each of the AMHC Material
Subsidiaries to, exercise its best efforts to maintain itself at all times in
all material respects as a
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corporation duly organized, validly existing, in good standing, and duly
qualified to conduct its business;
(b) it will, and will cause each of the AMHC Material
Subsidiaries to exercise its best efforts to not commit any act, and will not
fail to take any act, which such act or failure to act constitutes a material
breach of or default under any material contract, agreement, plan, lease,
policy, or License or which fails to comply in any material respects with any
Applicable Laws relating to it and to the conduct of its business which breach,
default or failure to comply would or would be likely to materially and
adversely affect the consummation of the transactions contemplated hereby;
(c) it will, and will cause each of the AMHC Material
Subsidiaries to, promptly advise Indianapolis Life and ILGC in writing of any
material adverse change in the condition (financial or otherwise), earnings, or
business of AMHC or of any of the AMHC Material Subsidiaries or of any breach,
default or failure to comply by such Person of the type referred to in
subparagraph (b) immediately above or of any litigation involving it which is of
such a character as to materially and adversely affect (or might reasonably be
expected to materially and adversely affect) AMHC or the AMHC Material
Subsidiaries or the consummation of the transactions contemplated hereby;
(d) to the extent consistent with (b) above it will, and will
cause each of the AMHC Material Subsidiaries to, use its best efforts to
preserve its business organization intact and maintain its existing relations
and goodwill with customers, suppliers and employees;
(e) it shall not, and shall not permit or cause any of the
AMHC Material Subsidiaries to, change any of its or their material accounting
principles, methods or policies (including, without limitation, any material
reserving methods or policies) used by it or them, except as may be required as
a result of a change in Applicable Law, GAAP or SAP;
(f) it shall not, and shall not permit or cause any of its
Subsidiaries to, take any action or omit to take any action that would cause any
of its representations and warranties herein to become untrue in any material
respect or that would, individually or in the aggregate, cause or reasonably be
expected to cause a Material Adverse Effect;
(g) it shall not terminate, cancel or amend any insurance
coverage maintained by it or any of the AMHC Material Subsidiaries with respect
to any material assets which is not replaced by a comparable amount of insurance
coverage or is not necessary, in its reasonable judgment; and
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(h) it shall not, and shall not permit or cause any of its
Subsidiaries to, authorize or enter into an agreement prohibited by the
foregoing.
Section 8.2 Indemnification. All rights to indemnification now
existing in favor of employees, directors and officers of Indianapolis Life,
ILGC or their Subsidiaries as provided in the articles of incorporation and
bylaws of Indianapolis Life, ILGC or their Subsidiaries, as the case may be,
shall survive the Combination Effective Time for a period of no less than six
(6) years duration, subject to Applicable Law; provided, further, that the
employees, directors and officers of Indianapolis Life, ILGC or their
Subsidiaries shall also be entitled to all rights to indemnification provided by
AMHC or AmerUs to the fullest extent permitted by Applicable Law and the
articles of incorporation of AMHC or AmerUs.
Section 8.3 No Prohibitive Transactions. AMHC and AmerUs will
not, and will not permit or cause any of their Subsidiaries to, enter into (i)
any merger, reorganization, exchange, consolidation or similar transaction with
another Person (other than with an Affiliate thereof or a party to this
Combination and Investment Agreement), if AMHC, AmerUs or such Subsidiary, as
the case may be, shall not be the continuing or surviving corporation of such
transaction or if the majority of such continuing or surviving corporation's
directors shall not have been affiliated with AMHC, AmerUs or such Subsidiary
(or with an Affiliate thereof or a party to this Combination and Investment
Agreement) prior to the consummation of such merger or consolidation, or (ii)
any transaction involving a reinsurance pooling of the business of either AMHC
or its Subsidiaries with another Person (other than with an Affiliate thereof or
a party to this Combination and Investment Agreement) or any similar business
combination or restructuring, if, in the case of either (i) or (ii) above, such
transaction would prevent AMHC or AmerUs from consummating the transactions
contemplated in this Agreement (any of the foregoing in (i) or (ii), a
"Prohibitive Transaction"). AMHC or AmerUs will notify Indianapolis Life and
ILGC immediately upon determining that a proposal has been made that would, if
consummated, constitute a Prohibitive Transaction, and thereafter shall keep
Indianapolis Life and ILGC informed, on a current basis, of the status and terms
of any such proposal or offer and the status of any such negotiations or
discussions.
Section 8.4 Compliance with Federal Securities Laws. AMHC
shall use reasonable efforts to (i) take such action necessary to register under
the federal securities laws the issuance of the AMHC Shares to be received by
the policyholders of Indianapolis Life pursuant to the Combination and to
maintain the effectiveness of such registration or (ii) diligently pursue the
receipt from the SEC of assurance that the registration of the issuance of such
AMHC Shares is not required under federal securities laws.
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ARTICLE 9
COVENANTS OF AMHC, AMERUS, INDIANAPOLIS LIFE AND ILGC
AMHC, AmerUs, Indianapolis Life and ILGC agree that:
Section 9.1 Reasonable Efforts. Subject to the terms and
conditions of this Combination and Investment Agreement and the Investment
Management Agreements, AMHC, AmerUs, Indianapolis Life and ILGC will use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things reasonably necessary or desirable under Applicable
Law to consummate the transactions contemplated hereby. AMHC, AmerUs,
Indianapolis Life and ILGC will promptly prepare and file all applications,
notices, consents and other documents necessary or advisable to obtain the
regulatory approvals specified in Schedules 4.4, 5.1 and 6.4, promptly file all
supplements or amendments thereto and use best efforts to obtain the regulatory
approvals specified in Schedules 4.4, 5.1 and 6.4 as promptly as practicable;
provided, however, that the foregoing shall not require AMHC and AmerUs to
submit to any action or condition by any state insurance regulatory authority
other than the Iowa Commissioner of Insurance that would interfere with or delay
the AMHC Demutualization. AMHC, AmerUs, Indianapolis Life and ILGC will provide
each other and their counsel the opportunity to review in advance and comment on
all such filings. AMHC, AmerUs, Indianapolis Life and ILGC will keep each other
informed of the status of matters relating to obtaining the regulatory approvals
specified in Schedules 4.4, 5.1 and 6.4.
Section 9.2 Notices of Certain Events. Each party shall, and
shall cause its Subsidiaries to, promptly notify the other party of:
(a) any notice or other communication received from any Person
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated hereby;
(b) any notice or other communication received relating to the
transactions contemplated hereby and any other significant notices or other
communications from any Governmental Entity; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to such party's knowledge, threatened against, relating to or
involving or otherwise affecting such party that, if pending on the date of this
Combination and Investment Agreement, would have been required to have been
disclosed pursuant to Section 9.2 or that relate to and/or affect the
consummation of the transactions contemplated hereby.
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Section 9.3 Cooperation. Indianapolis Life, ILGC, AMHC and
AmerUs shall cooperate with one another (i) in determining whether any action by
or in respect of, or filing with, any Governmental Entity is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any contracts, in connection with the consummation of the transactions
contemplated hereby; (ii) in taking such reasonable actions or making any such
filings, furnishing information required in connection therewith and reasonably
seeking to obtain in timely fashion any such actions, consents, approvals or
waivers; and (iii) in making any presentation to, or responding to any inquiry
relating to a transaction contemplated hereby from, a rating agency or
organization. It is expressly understood by the parties hereto that the
Representatives of AMHC, AmerUs, Indianapolis Life and ILGC shall have the right
to attend and participate in any hearing, proceeding, meeting, conference or
similar event before or with a Governmental Entity or rating agency or other
organization relating to this Combination and Investment Agreement and/or the
transactions contemplated herein. In furtherance of the foregoing, AMHC, AmerUs,
Indianapolis Life and ILGC shall provide each other reasonable advance notice of
any such hearing, proceeding, meeting, conference or similar event. The notice
required to be given under this Section 9.3 shall be given to the
Representatives of Indianapolis Life and ILGC or AMHC and AmerUs entitled to
receive notices hereunder, or such other individuals as AMHC and AmerUs or
Indianapolis Life and ILGC, as the case may be, shall designate.
Section 9.4 Public Announcements; Confidentiality. (a) The
parties agree to consult with each other before issuing any press release or
making any public statement with respect to this Combination and Investment
Agreement or the Investment Management Agreements or the transactions
contemplated hereby and, except as may be required by Applicable Law, will not
make any such public statement prior to such consultation.
(b) AMHC and AmerUs, on the one hand, and Indianapolis Life
and ILGC, on the other, acknowledge that they will in connection with the
performance of this Combination and Investment Agreement receive confidential
and proprietary information concerning the business and operations of each
other. Any of such parties providing information to another of such parties
shall be referred to as a "Furnishing Party," and any of such parties receiving
information from such Furnishing Party shall be referred to as a "Receiving
Party." As a condition to such information being provided by a Furnishing Party
to a Receiving Party or its Representatives, the Receiving Party agrees to treat
any information provided by the Furnishing Party, or any Representatives,
whether before or after the date of this Combination and Investment Agreement,
by or on behalf of the Furnishing Party (herein collectively referred to as the
"Confidential Material") in accordance with
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the provisions of this Section 9.4 and to take or abstain from taking certain
other actions herein set forth. The term "Confidential Material" also shall be
deemed to include all notes, analyses, compilations, studies, interpretations or
other documents prepared by a Receiving Party or its Representatives, which
contain, reflect or are based upon, in whole or in part, the information
provided by a Furnishing Party or its Representatives pursuant hereto. The term
"Confidential Material" does not include information which (i) is already in the
Receiving Party's possession, provided that such information is not known by the
Receiving Party to be subject to another confidentiality agreement with or other
obligation of secrecy to the Furnishing Party or another person; or (ii) is or
becomes generally available to the public other than as a result of a disclosure
by the Receiving Party or its Representatives; or (iii) becomes available to a
Receiving Party on a non-confidential basis from a source other than the
Furnishing Party or its Representatives, provided that such source is not known
by the Receiving Party to be bound by a confidentiality agreement with or other
obligation of secrecy to the Furnishing Party or another Person.
(c) The Receiving Party hereby agrees that the Confidential
Material will be used solely for the purpose of performing its obligations
under, and acts contemplated by, this Combination and Investment Agreement, and
that the Confidential Material will be kept confidential and that the Receiving
Party and its Representatives will not disclose any of the Confidential Material
in any manner whatsoever, provided, however, that (i) any of such information
may be disclosed to a Receiving Party's Representatives who need to know such
information for the purpose of performing such Receiving Party's obligations
under, or acts contemplated by, the Combination and Investment Agreement (it
being understood that such Representatives shall be informed by such Receiving
Party of the confidential nature of such information and shall be directed by
such Receiving Party to treat such information confidentially and shall agree to
be bound by the terms hereof to the same extent as if they were parties hereto),
and (ii) any disclosure of such information may be made to which the Furnishing
Party consents in writing. In any event, the Receiving Party shall be
responsible for any breach of this Section 9.4 by any of its Representatives,
and such Receiving Party agrees, at its sole expense, to take all reasonable
measures (including but not limited to court proceedings) to restrain its
Representatives from prohibited or unauthorized disclosure or use of the
Confidential Material.
(d) In the event that a Receiving Party or any person to whom
such Receiving Party transmits any Confidential Material in accordance with this
Section 9.4 is requested or required (by deposition, interrogatories, requests
for information or documents in legal proceedings, subpoenas, regulatory
request, civil investigative demand or similar process), to disclose any
Confidential Material, such Receiving Party shall provide the Furnishing Party
prompt notice of such request or
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requirement so that the Furnishing Party may seek an appropriate protective
order or other remedy. In the event that such protective order or other remedy
is not obtained, the Receiving Party shall (i) furnish only the portion of the
Confidential Material which such Receiving Party deems necessary to disclose and
(ii) upon the Furnishing Party's request, use all reasonable efforts to obtain
assurances that confidential treatment will be accorded to such information. In
no event shall disclosure of Confidential Material in response to such request
or requirement in accordance with this Section 9.4(d) be deemed a breach of this
Section 9.4 by a Receiving Party or result in any liability to such Receiving
Party. Nothing in this Section 9.4 shall prohibit any party, after reasonable
advance notice to the Furnishing Party, from disclosing Confidential Material
which, in the opinion of counsel for the Receiving Party, is required to be
disclosed in compliance with any Applicable Laws. Confidential Material may be
disclosed in an action or proceeding brought by a party hereto in pursuit of its
rights or in the exercise of its remedies hereunder, provided that such party
shall use such reasonable efforts to maintain the confidentiality of the
Confidential Material as may not inhibit its ability to enforce such rights or
remedies, including without limitation requesting confidential treatment from
any court.
(e) Indianapolis Life and ILGC acknowledge that they are both
are aware, and agree to advise their Representatives who are informed as to the
matters which are the subject of this Combination and Investment Agreement, that
the United States securities laws prohibit any Person who has material,
nonpublic information concerning the subject of this Combination and Investment
Agreement or AmerUs, which is publicly traded, or AMHC which will be publicly
traded after the AMHC Demutualization, from purchasing or selling securities of
AmerUs or AMHC, or from communicating any nonpublic information about AmerUs,
AMHC or the subject of this Combination and Investment Agreement to any other
Person under circumstances in which it is reasonably foreseeable that such
Person is likely to purchase or sell such securities. Furthermore, each party
hereto agrees that, for a period of one year from any Termination Date, unless
specifically invited in writing by the Board of Directors of another party
hereto, such first party will not in any manner, directly or indirectly, effect
or seek, offer or propose (whether publicly or otherwise) to effect, or
participate in or in any way assist any other Person to effect or seek, offer or
propose (whether publicly or otherwise) to effect or participate in any
acquisition of any securities (or beneficial ownership thereof) of such other
party or any of its affiliates.
(f) In the event this Combination and Investment Agreement is
terminated, each Receiving Party shall promptly deliver to the appropriate
Furnishing Party any Confidential Material received from such Furnishing Party
or destroy all written Confidential Material and any other written material
containing or
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reflecting any information in the Confidential Material (whether prepared by the
Receiving Party, its Representatives or otherwise) and will not retain any
copies, extracts or other reproductions in whole or in part of such written
material. All documents, memoranda, notes and other writings whatsoever prepared
by the Receiving Party or its Representatives based on the information in the
Confidential Material shall be returned or destroyed. To the extent a Receiving
Party elects to destroy any Confidential Material, such destruction shall be
certified in writing to the appropriate Furnishing Party by an authorized
officer supervising such destruction. All Confidential Material not destroyed
shall be returned to the appropriate Furnishing Party. Notwithstanding the
return or destruction of the Confidential Material, the Receiving Party and its
Representatives will continue to be bound by their obligation of confidentiality
and other obligations hereunder.
(g) Until the earliest of (i) the Combination Closing Date, or
(ii) eighteen months from the Termination Date, neither AMHC or AmerUs, on the
one hand, nor Indianapolis Life or ILGC, on the other, shall, without the prior
written consent of such other parties, specifically target for solicitation for
employment or other contractual relationship any individual who is known to be
an officer, executive, manager or agent of one of such other parties or any of
their Subsidiaries; provided, however, that the use of advertisements in
publications or on-line and hiring as a result thereof shall not be deemed a
violation of this paragraph.
(h) It is further understood that any violation of this
Section 9.4 could result in irreparable damage. Accordingly, it is agreed that
money damages would not be a sufficient remedy for any breach of this Section
9.4 and that the Furnishing Party (or the party whose officer, executive,
manager or agent is targeted for solicitation in violation of Section 9.4(g)
hereof) shall be entitled to equitable relief, including an injunction and
specific performance, as a remedy for any such breach. Such remedies shall not
be deemed to be the exclusive remedies for a breach of this Section 9.4, but
shall be in addition to all other remedies available at law or equity.
Section 9.5 Supplemental Disclosure. Each of Indianapolis
Life, ILGC, AMHC and AmerUs shall have the continuing obligation promptly to
advise the other with respect to (i) any material matter hereafter arising and
(ii) any material matter hereafter discovered which, in the case of a matter
being disclosed pursuant to clause (i) hereof if existing at the date hereof or,
in the case of a matter being disclosed pursuant to clause (ii) hereof, if known
at the date hereof would have been required to be set forth or described in the
respective Schedules provided by them (provided, however, that AMHC and AmerUs
shall be deemed to have so advised Indianapolis Life and ILGC of any matter
disclosed in an AmerUs Filed SEC Document after the date hereof); provided,
however, that for the purpose of the rights and obligations of the parties
hereunder, any such supplemental or amended
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disclosure by any party shall not be deemed to have been disclosed as of the
date hereof, or constitute part of, or an amendment or supplement to, such
party's Schedules or cure any breach or inaccuracy of a representation or
warranty unless so agreed to in writing by the other party. If prior to either
of the Closing Dates, Indianapolis Life, ILGC, AMHC or AmerUs becomes aware of a
breach or inaccuracy of a representation or warranty made by it herein, such
party shall use its best efforts to cure such breach or inaccuracy as promptly
as practicable; provided, however, that no such cure will relieve such party of
any liability for such breach or inaccuracy.
Section 9.6 Access to Information. From the date hereof until
the date all of the shares of Non-Voting Common Stock and Converted Shares, as
the case may be, are purchased by Indianapolis Life or repurchased by ILGC, as
the case may be, subject to any applicable contractual restrictions and
applicable legal privileges, and to the extent Applicable Law would not thereby
be violated, each party hereto will (i) give, and will cause their Subsidiaries
to give, each other party, its counsel, financial advisors, auditors and other
authorized Representatives full access, upon reasonable prior notice and during
normal business hours, to their offices, properties, books and records, (ii)
furnish, and will cause their Subsidiaries to furnish, to each other party, its
counsel, financial advisors, auditors and other authorized Representatives such
financial and operating data and other information as such persons may
reasonably request and (iii) instruct their and their Subsidiaries' employees,
counsel and financial advisors to cooperate with each other party in relation to
the transactions contemplated hereby; provided that, to the extent contractual
restrictions limit a party's ability to take any of the actions set forth in
this paragraph, such party shall use its best efforts to obtain any necessary
contractual consent or accommodate any reasonable request by the other parties
with respect to such action by alternative means and provided, further, that to
the extent applicable legal privileges or Applicable Laws limit a party's
ability to take any of the actions set forth in this paragraph, such party shall
use reasonable efforts to accommodate any reasonable request by the other
parties with respect to such action by alternative means.
Section 9.7 Information Provided. From the date hereof until
all of the shares of Non-Voting Common Stock or Converted Shares, as the case
may be, have been purchased by Indianapolis Life or repurchased by ILGC, as the
case may be, each of the parties shall use all reasonable efforts to provide, on
a timely basis and upon reasonable request, accurate and complete information in
their possession for development of or inclusion in the other party's Member
Information Statement and/or in any other documents, including SEC filings,
reasonably necessary to obtain approvals in connection with consummation of the
transactions contemplated herein or otherwise required in connection with the
business of such other party. Indianapolis Life and ILGC understand and agree
that (i) all unaudited
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Indianapolis Life Financial Statements on a GAAP basis (which shall, for
purposes of these time periods only, consist of the balance sheet and income
statement) shall be provided to AMHC and AmerUs within the following time
periods: (A) for the first quarter of 2000, the Indianapolis Life Financial
Statements shall be provided on or before May 3, 2000; (B) for the second
quarter of 2000, the Indianapolis Life Financial Statements shall be provided
within 20 Business Days after the end of such calendar quarter; and (C) for each
quarterly and annual period thereafter, the Indianapolis Life Financial
Statements shall be provided within 20 days after the end of each calendar
quarter; and (ii) all unaudited Indianapolis Life Financial Statements on a SAP
basis shall be provided to AMHC and AmerUs within seven (7) days after the due
dates for the GAAP Financial Statements for the respective periods as set forth
in this Section 9.7. The party furnishing such information shall be solely
responsible for any untrue statement of a material fact or omission to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Section 9.8 Board Representation Until Final Purchase or
Repurchase. The parties shall, subject to Applicable Law, cause a designee of
AMHC to serve on the ILGC Board of Directors until all of the shares of
Non-Voting Common Stock or Converted Shares, as the case may be, have been
purchased by Indianapolis Life or repurchased by ILGC, as the case may be.
ARTICLE 10
CONDITIONS TO CLOSING OF THE COMBINATION
Section 10.1 Conditions to Obligations of AMHC, AmerUs,
Indianapolis Life and ILGC. The obligations of the parties to consummate the
Combination Closing are subject to the satisfaction of the following conditions:
(i) Any applicable waiting period under the HSR Act
relating to the Combination shall have expired or been terminated.
(ii) All other Permits, clearances, regulatory consents,
and Governmental Entity, policyholder and shareholder approvals, as
applicable, that are necessary for the consummation of the Combination
Closing shall have been obtained, and no provision of any Applicable
Law shall prohibit the consummation of the Combination Closing.
(iii) All material consents, approvals or waivers of all
non-governmental Persons necessary for the consummation of the
Combination Closing shall have been obtained.
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(iv) There shall not be in effect any temporary
restraining order, preliminary injunction or permanent injunction or
other order issued by any court of competent jurisdiction preventing
the consummation of the transactions contemplated hereby; provided that
the party invoking this condition shall have used its best efforts to
have such order or injunction vacated.
(v) Each other document necessary for consummation of the
transactions contemplated hereby shall have been executed and delivered
by the parties thereto in the form attached hereto together with such
amendments as may have been approved by the parties, and, to the extent
not attached hereto, in a form reasonably acceptable to the parties,
and the conditions herein and therein have been satisfied.
(vi) This Combination and Investment Agreement and the
Investment Management Agreements shall be in full force and effect.
Section 10.2 Conditions to Obligation of AMHC and AmerUs. The
obligation of AMHC and AmerUs to consummate the Combination Closing is subject
to the satisfaction of the following further conditions:
(i) All Permits, regulatory consents, approvals or
clearances necessary for or in connection with the consummation of the
Combination Closing shall have been obtained, and no Governmental
Entity having jurisdiction over the business of AMHC or its
Subsidiaries or any of the Indianapolis Life Companies shall have
imposed any condition to such approval, other than conditions that
involve solely ministerial acts and/or routine reporting requirements
and/or entry into a commitment agreement substantially identical to the
letter dated June 15, 1995 captioned "Commitment Agreement to the New
York Insurance Department" from Indianapolis Life and Bankers Life.
(ii) (A) Indianapolis Life and ILGC shall have performed
in all material respects all of their obligations hereunder required to
be performed by them on or prior to the Combination Closing Date, (B)
the representations and warranties of Indianapolis Life and ILGC
contained in this Combination and Investment Agreement shall be true at
and as of the Combination Closing Date, as if made at and as of such
date, except where the failure of such representations and warranties
to be true has not had and would not reasonably be expected to have a
Material Adverse Effect, and (C) AMHC and AmerUs shall have received
certificates, in the forms attached as Schedules 10.2(ii)(A) and (B),
signed by the Chief Executive Officers and
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Chief Financial Officers of Indianapolis Life and ILGC to the effect
that the foregoing conditions have been satisfied.
(iii) AMHC and AmerUs shall have received certificates
signed by the corporate secretaries or assistant corporate secretaries
of Indianapolis Life and ILGC certifying as to: the Articles of
Incorporation and By-Laws of Indianapolis Life and ILGC, and that the
resolutions (true and complete copies of which shall be attached to the
certificate) of the Boards of Directors of Indianapolis Life and ILGC
with respect to the Combination and the transactions contemplated
thereby have been duly and validly adopted and are in full force and
effect.
(iv) AMHC and AmerUs shall have received all documents it
may reasonably request relating to the existence of Indianapolis Life
and ILGC and the authority of Indianapolis Life and ILGC for this
Combination and Investment Agreement and the Investment Management
Agreements, all in form and substance reasonably satisfactory to AMHC
and AmerUs.
(v) The Plan of Conversion shall satisfy the provisions of
Section 3.5(a).
(vi) Since the date of this Combination and Investment
Agreement, there shall not have been any events, occurrences,
developments or state of circumstances or facts which, individually or
in the aggregate, have had or would reasonably be expected to have a
Material Adverse Effect on Indianapolis Life.
(vii) No Governmental Entity or third party shall have
commenced any proceeding seeking a temporary restraining order,
preliminary or permanent injunction or other order preventing the
consummation of the transactions contemplated hereby, or damages other
than any such proceeding which, in the judgment of AMHC and AmerUs,
would not be reasonably likely to materially interfere with the
consummation of the transactions contemplated hereby; provided that, if
applicable, AMHC and AmerUs shall have used their reasonable best
efforts to have such proceeding dismissed or terminated.
(viii) AMHC and AmerUs shall have received reasonably
acceptable opinions of tax counsel, dated as of the Combination Closing
Date, or rulings from the Internal Revenue Service, that the
Combination effected pursuant to the Plan of Conversion will be
effected on a tax free basis to AMHC and AmerUs.
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(ix) A.M. Best Company, Inc. shall not have informed any
of the Indianapolis Life Companies or otherwise announced that it will
make a reduction in the ratings of Indianapolis Life, Bankers Life or
IL Annuity if the Combination is consummated or for any other reason,
where such reduction would or would reasonably be expected to
constitute a Material Adverse Effect.
(x) AMHC and AmerUs shall have received from counsel for
Indianapolis Life and ILGC an opinion dated the Combination Closing
Date, substantially in the form set forth in Schedule 10.2(x) hereto.
(xi) AMHC designees shall have been elected to the Board
of Directors of Indianapolis Life, to be effective upon the Combination
Effective Time, in accordance with Section 3.7(b) hereof.
(xii) AMHC shall either (i) have received from the SEC
reasonable assurance that the issuance of the AMHC Shares to the
policyholders of Indianapolis Life pursuant to the Combination may be
accomplished without registration of such AMHC Shares under the federal
securities laws or (ii) have in effect a registration statement
covering issuance of such AMHC Shares.
Section 10.3 Conditions to Obligation of Indianapolis Life and
ILGC. The obligation of Indianapolis Life and ILGC to consummate the Combination
Closing is subject to the satisfaction of the following further conditions:
(i) All Permits, regulatory consents, approvals or
clearances necessary for or in connection with the consummation of the
Combination Closing shall have been obtained, and no Governmental
Entity having jurisdiction over the business of the Indianapolis Life
and ILGC shall have imposed any condition to such approval which would
materially and adversely affect the aggregate value of the AMHC Shares,
cash and policy credits to be received by Eligible Members of
Indianapolis Life upon consummation of the Combination or the authority
of AMHC to carry out the transactions contemplated hereby.
(ii) (A) AMHC and AmerUs shall have performed in all
material respects all of their obligations hereunder required to be
performed by them on or prior to the Combination Closing Date, (B) the
representations and warranties of AMHC and AmerUs contained in this
Combination and Investment Agreement shall be true at and as of the
Combination Closing Date, as if made at and as of such date, except
where the failure of such
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representations and warranties to be true has not had and would not
reasonably be expected to have a Material Adverse Effect and (C)
Indianapolis Life and ILGC shall have received a certificate, in the
form attached as Schedule 10.3(ii), signed by the Chief Executive
Officer and Chief Financial Officer of AMHC to the effect that the
foregoing conditions have been satisfied.
(iii) Indianapolis Life and ILGC shall have received
certificates signed by the corporate secretary or assistant corporate
secretary of AMHC certifying as to: the Articles of Incorporation and
By-Laws of AMHC and AmerUs, and that the resolutions (true and complete
copies of which shall be attached to the certificate) of the Boards of
Directors of AMHC and AmerUs with respect to the Combination and the
transactions contemplated thereby have been duly and validly adopted
and are in full force and effect.
(iv) Indianapolis Life and ILGC shall have received all
documents they may reasonably request relating to the existence of AMHC
and AmerUs and the authority of AMHC and AmerUs for this Combination
and Investment Agreement and the Investment Management Agreements, all
in form and substance reasonably satisfactory to Indianapolis Life and
ILGC.
(v) Since the date of this Combination and Investment
Agreement, there shall not have been any events, occurrences,
developments or state of circumstances or facts which, individually or
in the aggregate, have had or would reasonably be expected to have a
Material Adverse Effect on AMHC.
(vi) No Governmental Entity or third party shall have
commenced any proceeding seeking a temporary restraining order,
preliminary or permanent injunction or other order preventing the
consummation of the transactions contemplated hereby, or damages other
than any such proceeding which, in the judgment of Indianapolis Life
and ILGC, would not be reasonably likely to materially interfere with
the consummation of the transactions contemplated hereby; provided
that, if applicable, Indianapolis Life and ILGC shall have used their
reasonable best efforts to have such proceeding dismissed or
terminated.
(vii) Indianapolis Life and ILGC shall have received
reasonably acceptable opinions of tax counsel, dated as of the
Combination Closing Date, or rulings from the Internal Revenue Service,
that the Combination effected pursuant to the Plan of Conversion will
be effected (i) on a tax free basis to Indianapolis Life and the
Indianapolis Life
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policyholders receiving only AMHC Shares and (ii) with respect to
individual retirement accounts and individual retirement annuities
(within the meaning of Code Section 408), tax sheltered annuities
governed by Code Section 403(b) and "employee benefit plans" (within
the meaning of Section 3(3) of ERISA), in such a manner that it does
not adversely affect the compliance thereof with the applicable
requirements of ERISA or the Code.
(viii) Indianapolis Life and ILGC shall have received from
counsel for AMHC and AmerUs an opinion dated the Combination Closing
Date, substantially in the form set forth in Schedule 10.3(viii)
hereto.
(ix) A.M. Best Company, Inc. shall not have informed AMHC
or any of the AMHC Insurer Subsidiaries or otherwise announced that it
will make a reduction in the ratings of AmerUs Life or American
Investors Life if the Combination is consummated or for any other
reason, where such reduction would or would reasonably be expected to
have a Material Adverse Effect.
(x) The AMHC Demutualization shall have occurred pursuant
to the AMHC Plan in accordance with Section 3.6(a).
(xi) The IL/AmerUs Directors shall have been elected to
the Board of Directors of AMHC and the Chief Executive Officer of
Indianapolis Life shall have been elected Vice Chairman of the AMHC
Board of Directors, in accordance with Section 3.7(a) hereof, to be
effective upon the Combination Effective Time.
(xii) The Chief Executive Officer of AMHC shall have
delivered to the Chief Executive Officer of Indianapolis Life a
Post-Combination Plan which provides detail in addition to the
essential terms set forth in the Memorandum of Understanding and which
is not, except to the extent expressly otherwise agreed by the Chief
Executive Officer of Indianapolis Life, materially inconsistent with
the Memorandum of Understanding.
ARTICLE 11
TERMINATION
Section 11.1 Termination Due to Third Party Offer. This
Combination and Investment Agreement may be terminated at any time prior to the
Combination Closing:
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(a) by AMHC or AmerUs if the Board of Directors of
Indianapolis Life, in any way directly or indirectly, in connection with any
Competing Transaction Proposal, withdraws or modifies in a manner adverse to
AMHC or AmerUs a recommendation with respect to the Combination, recommends such
a Competing Transaction Proposal or votes to permit the Indianapolis Life
policyholders to consider such a Competing Transaction Proposal; or
(b) by AMHC or AmerUs if Indianapolis Life or ILGC enters into
an agreement, letter of intent or other arrangement contemplating the
effectuation of, directly or indirectly, a Competing Transaction Proposal
(provided, however, that if Indianapolis Life and ILGC comply with the last
sentence of Section 7.2(b), entry into a confidentiality agreement in connection
with a Superior Proposal as provided in Section 7.2(b) hereof shall not in
itself constitute a basis for termination under this Section 11.1(b)); or
(c) by AMHC or AmerUs if a third party obtains the right to
elect a majority of the Board of Directors of Indianapolis Life or ILGC or the
right to control 10% or more of the voting shares of capital stock of ILGC or
any of its Subsidiaries; or
(d) by Indianapolis Life or ILGC if the Board of Directors of
Indianapolis Life resolves to accept a Superior Proposal.
Section 11.2 Termination Due to Uncontrollable Event;
Termination by Mutual Agreement. This Combination and Investment Agreement may
be terminated at any time prior to the Combination Closing:
(a) by any party hereto, if consummation of the Combination
Closing becomes prohibited under any Applicable Law, and all rights of appeal
with respect thereto shall have been exhausted; or
(b) by any party hereto, if a party, as applicable, fails to
obtain any requisite policyholder, shareholder or Governmental Entity approval
necessary to consummate the Combination Closing, provided, however, that a party
may not exercise the right to terminate this Combination and Investment
Agreement under this subsection 11.2(b) if it shall not have in good faith used
all reasonable efforts to consummate the Combination Closing; or
(c) by any party hereto, if the Combination Closing shall not
have been consummated on or before June 30, 2001, unless extended by mutual
agreement of the parties; or
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(d) by Indianapolis Life or ILGC, if, except as contemplated
herein, (i)(A) AMHC accepts an offer or otherwise agrees to enter into, directly
or indirectly, a merger or consolidation with another Person (other than an
Affiliate of AMHC), in which AMHC would not be the continuing or surviving
corporation of such consolidation or merger and the majority of such continuing
or surviving corporation's directors would not have been affiliated with AMHC
prior to the consummation of such merger or consolidation, or (B) AMHC sells or
otherwise transfers (other than to an Affiliate of AMHC) substantially all of
its assets (in either case, an "AMHC Control Event") and (ii) such AMHC Control
Event is not reasonably acceptable to Indianapolis Life; or
(e) by AMHC or AmerUs, if there has been a material breach by
Indianapolis Life and ILGC of any representation, warranty, covenant or
agreement contained in this Combination and Investment Agreement that is not
curable or, if curable, is not cured within 30 days after written notice of such
breach is given by AMHC or AmerUs to Indianapolis Life and ILGC, which material
breach would not be construed by a reasonable Person to have been within the
control of Indianapolis Life, ILGC or a Subsidiary thereof; provided, however,
that AMHC and AmerUs shall not exercise their termination right under this
Section 11.2(e) for breach of any representation or warranty that occurs after
the date hereof unless the events, occurrences, developments or state of
circumstances or facts that constitute such breach have had or would reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on Indianapolis Life; or
(f) by AMHC or AmerUs if there shall have been any events,
occurrences, developments or state of circumstances or facts which would not be
construed by a reasonable Person to have been within the control of an
Indianapolis Life Company and which, individually or in the aggregate, (i) have
had a Material Adverse Effect with respect to Indianapolis Life or (ii) would
reasonably be expected to have such a Material Adverse Effect, on both the date
an initial notice thereof is given by AMHC or AmerUs to Indianapolis Life and on
the earlier of (A) the date 120 days following the date of such initial notice
or (B) June 20, 2001; or
(g) by Indianapolis Life or ILGC, if there has been a material
breach by AMHC and AmerUs of any representation, warranty, covenant or agreement
contained in this Combination and Investment Agreement that is not curable or,
if curable, is not cured within 30 days after written notice of such breach is
given by Indianapolis Life or ILGC to AMHC and AmerUs, which breach would not be
construed by a reasonable Person to have been within the control of AMHC, AmerUs
or a Subsidiary thereof; provided, however, that Indianapolis Life and ILGC
shall not exercise their termination right under this Section 11.2(g) for breach
of any representation or warranty that occurs after the date hereof unless the
events, occurrences, developments or state of circumstances or facts that
constitute such
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breach have had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on AMHC; or
(h) by Indianapolis Life or ILGC if there shall have been any
events, occurrences, developments or state of circumstances or facts which would
not be construed by a reasonable Person to have been within the control of AMHC,
AmerUs or a Subsidiary thereof and which, individually or in the aggregate, (i)
have had a Material Adverse Effect with respect to AMHC or (ii) would reasonably
be expected to have such a Material Adverse Effect, on both the date an initial
notice thereof is given by Indianapolis Life or ILGC to AMHC and on the earlier
of (A) the date 120 days following the date of such initial notice or (B) June
20, 2001; or
(i) by Indianapolis Life, by giving a Termination Notice to
AMHC at least six (6) Business Days prior to the Combination Closing Date, if
the aggregate value of the AMHC Shares, cash and policy credits projected to be
received (calculated as described below) by the Indianapolis Life members as of
the Combination Effective Time is less than $215 million, provided, however,
that such Termination Notice shall be null and void in the event that AMHC
agrees, within five (5) Business Days after receipt of such Termination Notice
under this Section 11.2(i), to increase the number of AMHC Shares and/or the
amount of cash and policy credits to be delivered so that the aggregate value of
such AMHC Shares, cash and policy credits provided to such members (calculated
as described below) equals $215 million (using, for purposes of determining the
value of the AMHC Shares as referenced in this Section 11.2(i), the average
daily closing price of the AMHC Shares over the five (5) Trading Days ending ten
(10) Business Days prior to the Combination Closing Date); or
(j) by mutual written agreement of Indianapolis Life and ILGC
and AMHC and AmerUs.
Section 11.3 Termination Due to Act Within the Control of
Indianapolis Life. This Combination and Investment Agreement may be terminated
at any time prior to the Combination Closing:
(a) by AMHC or AmerUs, if there has been a material breach by
Indianapolis Life or ILGC of any representation, warranty, covenant or agreement
contained in this Combination and Investment Agreement that is not curable or,
if curable, is not cured within 30 days after written notice of such breach is
given by AMHC or AmerUs to Indianapolis Life and ILGC, which breach would be
construed by a reasonable Person to have been within the control of Indianapolis
Life, ILGC or a Subsidiary thereof; provided, however, that AMHC and AmerUs
shall not exercise their termination right under this Section 11.3(a) for breach
of any representation or warranty that occurs after the date hereof unless the
events, occurrences,
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developments or state of circumstances or facts that constitute such breach have
had or would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Indianapolis Life; or
(b) by AMHC or AmerUs if there shall have been any events,
occurrences, developments or state of circumstances or facts which would be
construed by a reasonable Person to have been within the control of an
Indianapolis Life Company and which, individually or in the aggregate, (i) have
had a Material Adverse Effect with respect to Indianapolis Life, or (ii) would
reasonably be expected to have such a Material Adverse Effect, on both the date
an initial notice thereof is given by AMHC or AmerUs to Indianapolis Life and on
the earlier of (A) the date 120 days following the date of such initial notice
or (B) June 20, 2001; or
(c) by AMHC or AmerUs, if there has been a material breach of
a representation or warranty by Indianapolis Life or ILGC and any individual
listed on Schedule 1.1(i) hereto had actual knowledge of the material breach of
such representation or warranty as of the Stock Purchase Closing Date
(irrespective of whether such breach is within the control of Indianapolis Life,
ILGC or a Subsidiary thereof, and without limiting the rights of AMHC and AmerUs
under Section 11.3(a) or (b) hereof).
Section 11.4 Termination Due to Act Within the Control of
AMHC. This Combination and Investment Agreement may be terminated at any time
prior to the Combination Closing:
(a) by Indianapolis Life or ILGC, if there has been a material
breach by AMHC or AmerUs of any representation, warranty, covenant or agreement
contained in this Combination and Investment Agreement that is not curable or,
if curable, is not cured within 30 days after written notice of such breach is
given by Indianapolis Life or ILGC to AMHC and AmerUs, which breach would be
construed by a reasonable Person to be within the control of AMHC, AmerUs or a
Subsidiary thereof; provided, however, that Indianapolis Life and ILGC shall not
exercise their termination right under this Section 11.4(a) for breach of any
representation or warranty that occurs after the date hereof unless the events,
occurrences, developments or state of circumstances or facts that constitutes
such breach has had or would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on AMHC; or
(b) by Indianapolis Life or ILGC if there shall have been any
events, occurrences, developments or state of circumstances or facts which would
be construed by a reasonable Person to be within the control of AMHC, AmerUs or
a Subsidiary thereof and which, individually or in the aggregate, (i) have had a
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Material Adverse Effect with respect to AMHC or (ii) would reasonably be
expected to have such a Material Adverse Effect, on both the date an initial
notice thereof is given by Indianapolis Life or ILGC to AMHC and on the earlier
of (A) the date 120 days following the date of such initial notice or (B) June
20, 2001; or
(c) by Indianapolis Life or ILGC, if there has been a material
breach of a representation or warranty by AMHC or AmerUs and any individual
listed on Schedule 1.1(ii) hereto had actual knowledge of the material breach of
such representation or warranty as of the Stock Purchase Closing Date
(irrespective of whether such breach is within the control of AMHC, AmerUs or a
Subsidiary thereof, and without limiting the rights of Indianapolis Life and
ILGC under Section 11.4(a) or (b) hereof).
Section 11.5 Failure to File Plan of Conversion. This
Combination and Investment Agreement may be terminated at any time prior to the
Combination Closing by AMHC or AmerUs if the Plan of Conversion complying with
Section 3.5(a) hereof is not filed with the Indiana Commissioner because the
Board of Directors of Indianapolis Life, for any reason, has not adopted a
resolution proposing such Plan of Conversion by October 1, 2000 (including
without limitation due to failure to receive a fairness or actuarial opinion).
If the Plan of Conversion complying with Section 3.5(a) hereof is not filed with
the Indiana Commissioner for any other reason not specified in the first
sentence of this Section 11.5, or if it is withdrawn, amended, modified or
terminated except as expressly permitted under Section 3.5(a), or if there is a
breach of a covenant, agreement or other provision of Section 3.5(a) hereof not
addressed in the preceding sentence, then AMHC or AmerUs shall have the right to
terminate this Combination and Investment Agreement under Section 11.3(a)
hereof, and such breach shall be deemed to have been within the control of
Indianapolis Life.
Section 11.6 Effect of Termination; Termination Date. (a) In
the event of the termination of this Combination and Investment Agreement, there
shall be no further obligation or liability of any party hereto (or of any of
its directors, officers, employees, agents, legal and financial advisors or
other Representatives), except that (i) the provisions of Article 2 shall
continue in full force and effect notwithstanding such termination until the
purchase by Indianapolis Life or repurchase by ILGC of all of the outstanding
shares of Non-Voting Common Stock and Converted Shares, as the case may be, held
by the Holder; (ii) the provisions of Sections 7.3, 7.4, 9.4, 9.6, 9.7 and 9.8
shall continue in full force and effect in accordance with their terms; (iii) to
the extent applicable in any way to the transactions described in Article 2
(including without limitation exercise of the Exchange Right, exercise of the IL
Annuity Put Option and other rights and remedies under Section 2.4, and
effectuation of the priority described in Section 2.2 hereof),
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the provisions of Sections 9.1, 9.2 and 9.3 shall continue in full force and
effect notwithstanding such termination until the purchase by Indianapolis Life
or repurchase by ILGC of all of the outstanding shares of Non-Voting Common
Stock and Converted Shares, as the case may be, held by the Holder; and (iv) the
provisions of Section 11.6 and Article 12 shall continue in full force and
effect notwithstanding such termination. Notwithstanding the foregoing, a
termination of this Combination and Investment Agreement shall be without
prejudice to the rights of a party hereto (or any of its Subsidiaries or
Affiliates) arising out of any breach by a party (or any of its Subsidiaries or
Affiliates) of any representation or warranty or covenant or agreement contained
in this Combination and Investment Agreement and, except as otherwise expressly
provided herein, shall not relieve any party hereto of any liability or damages
resulting from any breach of this Combination and Investment Agreement.
(b) For purposes of interpreting the provisions of this
Combination and Investment Agreement, the "Termination Date" shall mean the date
on which a party hereto gives notice to the other parties pursuant to Section
12.12 hereof of its termination of this Combination and Investment Agreement
pursuant to the provisions of this Article 11. The notice given pursuant to the
foregoing sentence shall state, with particularity, the basis for such
termination and identify the section(s) and sub-section(s) of this Article 11
serving as the basis for such termination (the "Termination Notice"). For
purposes of interpreting the provisions of Article 2 and Article 11 of this
Combination and Investment Agreement, the section(s) and sub-section(s) of this
Article 11 identified in the Termination Notice shall govern (subject to the
following sentences). In the event that, within a period of three (3) Business
Days, each of the parties sends a Termination Notice to the other, then (i) if
both Termination Notices are given under Section 11.2, the first such notice
shall be deemed effective; (ii) if one Termination Notice is given under Section
11.2 and the other is given under Section 11.3, 11.4 or 11.5, then the
Termination Notice based on Section 11.3, 11.4 or 11.5, as the case may be,
shall govern; and (iii) if one Termination Notice is given under Section 11.3 or
11.5 and the other is given under Section 11.4, then the Termination Notice
shall govern that relates to the first to occur of such breach, events,
occurrences, developments or state of circumstances or facts that provides or
provide the basis for such termination under Section 11.3, 11.4 or 11.5, as the
case may be. Notwithstanding the foregoing, in the event a Termination Notice
based on a provision of Section 11.1 is given before or within five (5) Business
Days after a Termination Notice based on a provision of another Section hereof,
the Termination Notice based on Section 11.1 shall govern.
(c) In the event that (i) this Combination and Investment
Agreement is terminated pursuant to Section 11.2 or 11.3 hereof, and (ii) at any
time within 18 months following the applicable Termination Date, Indianapolis
Life accepts an offer
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or otherwise agrees to enter into a Competing Transaction Proposal which is a
Pre-Termination Competing Transaction Proposal, then (and, in the case of a
Section 11.3 termination, without prejudice to and without affecting any other
rights of AMHC or AmerUs hereunder) Indianapolis Life and/or ILGC shall pay to
AMHC in cash the amounts specified in Sections 2.4(a)(ii), (iii) and (iv) hereof
and shall purchase or repurchase, as the case may be, all issued and outstanding
shares of the Non-Voting Common Stock and the Converted Shares as provided in
Section 2.4(a)(i). All sums to be paid under this Section 11.6(c) shall be paid
within ten (10) Business Days of the date on which Indianapolis Life enters into
such an agreement, by wire transfer of immediately available funds; provided,
however, that payment of the amounts specified in clause (B) of Section
2.4(a)(iv) shall be made within ten (10) Business Days following AMHC's
presentation to Indianapolis Life of an itemized summary of the costs and
expenses referred to in such clause (B).
ARTICLE 12
MISCELLANEOUS PROVISIONS
Section 12.1 Costs and Expenses. Except as expressly otherwise
provided herein, all costs and expenses incurred in connection with this
Combination and Investment Agreement and the Investment Management Agreements
and the transactions contemplated hereby shall be the obligation of the party
incurring such costs or expenses.
Section 12.2 Liquidated Damages. (a) In the event that
Indianapolis Life breaches any covenant, agreement or other provision of Section
3.5(a) and this Combination and Investment Agreement is terminated pursuant to
Section 11.5 hereof, the parties specifically acknowledge and agree that AMHC
and AmerUs would suffer direct and substantial damages, which damages cannot be
determined with reasonable certainty. To compensate AMHC and AmerUs for such
damages, Indianapolis Life and ILGC shall pay AMHC and AmerUs, within ten (10)
Business Days of the applicable Termination Date under Section 11.5, 3% of the
AMHC Offer as liquidated damages, together with reimbursement of any and all out
of pocket costs incurred by AMHC and/or AmerUs in connection with developing,
negotiating, structuring or otherwise incurred, directly or indirectly, in
connection with this Combination and Investment Agreement and the transactions
contemplated hereby, including, but not limited to, any obligation incurred by
AMHC or AmerUs to investment bankers or other advisors in connection with the
transactions contemplated by this Combination and Investment Agreement
(provided, however, that Indianapolis Life and ILGC shall (i) reimburse only the
first $2,000,000 in fees but shall pay any other expenses or charges payable by
AMHC or AmerUs to Merrill Lynch and (ii) not be responsible for any such
obligations incurred by AMHC or
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AmerUs to investment bankers or other advisors primarily engaged by AMHC, AmerUs
or their respective Boards of Directors in connection with the AMHC
Demutualization). Indianapolis Life and ILGC shall pay such amounts to AMHC and
AmerUs by wire transfer of immediately available funds to an account designated
by AMHC and AmerUs. Indianapolis Life and ILGC each acknowledge that their
obligations under Section 3.5(a) and this paragraph are an integral part of the
transactions contemplated by this Combination and Investment Agreement, and
that, without this Section 12.2, AMHC and AmerUs would not enter into this
Combination and Investment Agreement; accordingly, if Indianapolis Life and ILGC
fail to promptly pay the amount due pursuant to this paragraph, Indianapolis
Life and ILGC shall pay to AMHC and AmerUs their out of pocket costs and
expenses (including reasonable attorneys' fees) arising in connection with the
collection of such amount, together with interest on the amounts set forth in
this paragraph at the prime rate of The Chase Manhattan Bank in effect on the
date such payment was required to be made. It is specifically agreed that the
amount to be paid pursuant to this paragraph represent liquidated damages and
not a penalty or termination fee and is in full settlement of any damages
incurred by AMHC and AmerUs as a result of the termination of this Combination
and Investment Agreement pursuant to Section 11.5 hereof.
(b) Without limiting the generality of Section 12.7 hereof, if
any provision of Section 12.2 or Section 3.5 or Article 2 shall be held invalid
or unenforceable by any court of competent jurisdiction or as a result of future
legislative action, such holding or action shall be strictly construed and shall
not prejudice to the rights of AMHC and AmerUs (or any of their Subsidiaries or
Affiliates) arising out of any breach by a party (or any of its Subsidiaries or
Affiliates) of any agreement contained in this Section 12.2 or under Section 3.5
or under Article 2. If the final judgment of a court of competent jurisdiction
or other authority declares that any term or provision of Section 12.2 or
Section 3.5 or Article 2 is invalid, void or unenforceable, the parties agree
that the court making such determination shall have the power to reduce the
scope, duration, area or applicability of the term or provision, to delete
specific words or phrases, or to replace any invalid, void or unenforceable term
or provision with a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term
or provision; provided, however, that the parties shall use reasonable efforts
to ensure that the application of Section 12.2 and Section 3.5 and Article 2
shall reflect as closely as practicable the intent of the parties hereto.
Section 12.3 Actions Subsequent to Combination Closing. From
and after the Combination Closing, each party shall, from time to time, at the
reasonable request of any other party and without further consideration (but at
the expense of the party that is requested to take such action) do, execute,
acknowledge and deliver all such further acts, deeds, assignments, transfers,
conveyances, powers
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of attorney and assurances as may be reasonably required by such other party
more effectively to effect the transactions contemplated by this Combination and
Investment Agreement or the Investment Management Agreements.
Section 12.4 Entire Agreement. This Combination and Investment
Agreement, including all Schedules and Exhibits attached hereto or thereto,
constitute the entire contract between the parties and there are no
understandings other than as expressed in this Combination and Investment
Agreement, the Investment Management Agreements and the Memorandum of
Understanding. All Schedules and Exhibits hereto are expressly made a part of
this Combination and Investment Agreement as fully as though completely set
forth herein. Any amendment or modification hereto shall be null and void unless
made by amendment to this Combination and Investment Agreement and the
Investment Management Agreements, as applicable, and signed by the parties
affected by such amendment.
Section 12.5 Binding Effect. This Combination and Investment
Agreement and the Investment Management Agreements are and shall apply to, and
inure to the benefit of and be binding upon and enforceable against, each party
hereto and its successors (including, without limitation, any successor entity
of a party resulting from consummation of the AMHC Plan and/or the Plan of
Conversion) and permitted assigns, including, without limitation, any subsequent
direct or indirect shareholder of any of the parties.
Section 12.6 No Third Party Beneficiaries. Nothing in this
Combination and Investment Agreement, the Investment Management Agreements or
the Memorandum of Understanding is intended or shall be construed to give any
person, other than the parties hereto and any successor entities thereto, any
legal or equitable right, remedy or claim under or in respect of this
Combination and Investment Agreement or the Investment Management Agreements or
the Memorandum of Understanding or any provision contained herein.
Section 12.7 Invalidity. Unless the invalidity or
unenforceability of any provision or portion thereof frustrates the intent of
the parties or the purpose of this Combination and Investment Agreement or the
Investment Management Agreements, such invalidity or unenforceability shall not
affect the validity or enforceability of the other provisions or portions
thereof. In the event that such provision shall be declared unenforceable by a
court of competent jurisdiction, such provision or portion thereof, to the
extent declared unenforceable, shall be stricken. However, in the event any such
provision or portion thereof shall be declared unenforceable due to its scope,
breadth or duration, then it shall be modified to the scope, breadth or duration
permitted by law and shall continue to the be fully enforceable as so modified.
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Section 12.8 Governing Law. This Combination and Investment
Agreement shall be deemed to have been made under and governed by the laws of
Iowa, without regard to Iowa choice of law rules.
Section 12.9 Survival. (a) The covenants and agreements herein
which, by their terms, are to have effect or be performed after the Combination
Effective Time shall survive the Combination Effective Time until expressly
provided therein.
(b) The representations and warranties herein shall terminate
at the Combination Effective Time.
Section 12.10 Counterparts. This Combination and Investment
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. This Combination and Investment Agreement shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties hereto.
Section 12.11 Headings. The headings in this Combination and
Investment Agreement are for the convenience of reference only and shall not
affect its interpretations.
Section 12.12 Construction. The terms and conditions of this
Combination and Investment Agreement represent the results of bargaining and
negotiations among the parties, each of which has been represented by counsel of
its own selection, and none of which has acted under duress or compulsion,
whether legal, economic or otherwise, and represent the results of a combined
draftsmanship effort. Consequently, the terms and conditions hereof shall be
interpreted and construed in accordance with their usual and customary meanings,
and the parties hereby expressly waive and disclaim in connection with the
interpretation and construction hereof any rule of law or procedures requiring
otherwise, specifically including but not limited to any rule of law to the
effect that ambiguous or conflicting terms or conditions contained herein shall
be interpreted or construed against the party whose counsel prepared this
Combination and Investment Agreement or any earlier draft hereof.
Section 12.13 Notices. All notices and other communications
under this Combination and Investment Agreement shall be in writing and shall be
delivered personally, telegraphed, telexed, sent by facsimile transmission or
sent by certified, registered or express mail, postage prepaid. Any such notice
or other communication shall be deemed given: (i) upon actual delivery if
presented personally or sent by prepaid telegram or telex or by facsimile
transmission, or (ii)
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three (3) Business Days following deposit in the United States mail, if sent by
certified, registered or express mail, postage prepaid, in each case to the
following addresses:
(i) If to AMHC and AmerUs:
American Mutual Holding Company
699 Walnut Street, Suite 2000
Des Moines, IA 50309
Attention: Roger K. Brooks &
Attention: General Counsel
With concurrent copies, which shall not constitute notice, to:
Jeffrey W. Tindell, Esq.
Skadden, Arps, Slate, Meagher & Flom, L.L.P.
Four Times Square
New York, NY 10036-6522
Telecopy No.: (212) 735-2000
(ii) If to Indianapolis Life and ILGC:
Indianapolis Life Insurance Company
2960 North Meridian Street
Indianapolis, IN 46208
Attention: Larry R. Prible &
Attention: General Counsel
With concurrent copies, which shall not constitute notice, to:
Tibor D. Klopfer, Esq.
Baker & Daniels
300 North Meridian Street, Suite 2700
Indianapolis, IN 46204
Telecopy No.: 317/237-1000
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IN WITNESS WHEREOF, this Combination and Investment Agreement
has been duly executed and delivered by the duly authorized officers of AMHC,
AmerUs, Indianapolis Life and ILGC as of the date first above written.
AMERICAN MUTUAL HOLDING COMPANY
By
------------------------------------------------------
Name:
---------------------------------------------------
Title:
--------------------------------------------------
AMERUS LIFE HOLDINGS, INC.
By
------------------------------------------------------
Name:
---------------------------------------------------
Title:
--------------------------------------------------
INDIANAPOLIS LIFE INSURANCE COMPANY
By
------------------------------------------------------
Name: Larry R. Prible
---------------------------------------------------
Title: Chairman, President and Chief Executive Officer
--------------------------------------------------
THE INDIANAPOLIS LIFE GROUP OF COMPANIES, INC.
By
------------------------------------------------------
Name: Larry R. Prible
---------------------------------------------------
Title: Chairman, President and Chief Executive Officer
--------------------------------------------------
105
<PAGE> 1
INVESTMENT ADVISORY
AGREEMENT
BY AND
BETWEEN
INDIANAPOLIS LIFE INSURANCE COMPANY
AND
AMERUS CAPITAL MANAGEMENT GROUP, INC.
DATED
FEBRUARY 18, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. INVESTMENT MANAGEMENT AND SERVICES ........................................................... 2
1.1 Authorization and Appointment ........................................................ 2
1.2 Services and Advice .................................................................. 2
1.3 Documentation ........................................................................ 4
1.4 Compliance With Investment Laws and Company Policies and Guidelines .................. 4
1.5 Custodian ............................................................................ 5
1.6 Reports to Boards of Directors ....................................................... 6
1.7 Supervision by Board of Directors .................................................... 6
1.8 Powers of Advisor .................................................................... 7
2. PERSONNEL, FACILITIES AND COSTS .............................................................. 8
2.1 Personnel ............................................................................ 8
2.2 Facilities ........................................................................... 8
2.3 Costs and Expenses ................................................................... 8
2.4 Brokerage ............................................................................ 9
2.5 Non-Exclusive Advisory Services ...................................................... 10
2.6 Agency Cross Transactions ............................................................ 10
2.7 Aggregation .......................................................................... 11
2.8 Conflict of Interest ................................................................. 12
3. AMOUNT AND PAYMENT OF FEES ................................................................... 12
3.1 Fees for Services .................................................................... 12
3.2 Adjustment to Fees ................................................................... 12
3.3 Proration of Fees .................................................................... 13
4. CONFIDENTIALITY, PERFORMANCE, AND RELATIONSHIP OF PARTIES .................................... 13
4.1 Disclosure of Information ............................................................ 13
4.2 Records and Reports .................................................................. 14
4.3 Inspection of Books and Records ...................................................... 14
4.4 Performance .......................................................................... 15
4.5 Relationship of Parties .............................................................. 15
4.6 Standard of Care ..................................................................... 15
4.7 Indemnification ...................................................................... 16
4.8 Arbitration of Disputes .............................................................. 17
5. REPRESENTATIONS AND WARRANTIES ............................................................... 19
5.1 Representations and Warranties of the Company ........................................ 19
5.2 Representations and Warranties of Advisor ............................................ 20
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
6. ACKNOWLEDGEMENTS AND CONSENTS ................................................................ 20
6.1 Regulatory Approvals ................................................................. 20
6.2 Rule 204-3 Notice .................................................................... 21
6.3 No Representation .................................................................... 21
6.4 Confidential Information ............................................................. 21
7. MISCELLANEOUS ................................................................................ 22
7.1 Termination and Cancellation ......................................................... 22
7.2 Notices .............................................................................. 22
7.3 Entire Agreement ..................................................................... 23
7.4 Governing Law ........................................................................ 23
7.5 Amendments ........................................................................... 23
7.6 Binding Agreement .................................................................... 23
7.7 Severable Provisions ................................................................. 23
7.8 Assignment ........................................................................... 24
7.9 Counterparts ......................................................................... 24
7.10 Required CFTC Legend ................................................................. 24
</TABLE>
ii
<PAGE> 4
THIS INVESTMENT ADVISORY AGREEMENT (the "Investment Advisory
Agreement") is dated this ___ day of February, 2000, made and entered into by
and between INDIANAPOLIS LIFE INSURANCE COMPANY, an Indiana domiciled life
insurance company (the "Company"), and AMERUS CAPITAL MANAGEMENT GROUP, INC., an
Iowa corporation (the "Advisor").
R E C I T A L S:
WHEREAS, the Company desires to have the Advisor provide
certain investment advisory services, including investment management,
investment accounting and asset/liability management services on the terms and
conditions set forth herein; and
WHEREAS, the Advisor agrees to provide such investment
advisory services on the terms and conditions set forth herein; and
WHEREAS, the Company and the Advisor acknowledge that all
investment advisory services provided under this Agreement are subject to the
applicable investment provisions of the Indiana Insurance Law as well as
oversight by the Company's Board of Directors;
NOW THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants, agreements and conditions set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
<PAGE> 5
1. INVESTMENT MANAGEMENT AND SERVICES
1.1 AUTHORIZATION AND APPOINTMENT. The Company hereby authorizes and
appoints the Advisor to act as its investment advisor and to exercise full
investment discretion subject to the terms of this Investment Advisory
Agreement, as the Company's agent and attorney-in-fact, with respect to all cash
and invested assets of the Company (consisting of all assets required to be
listed on Lines 1 through 10 of Page 2 of the NAIC Annual Statement blank for
Life and Accident and Health Companies, other than policy loans (Line 5) and
real estate properties occupied by the Company (Line 4.1)) (all of which cash
and invested assets are collectively referred to in this Investment Advisory
Agreement as the "Assets"), and to perform the investment-related services
described in this Investment Advisory Agreement.
1.2 SERVICES AND ADVICE. The Advisor agrees to manage and service the
Assets of the Company. The services to be rendered by the Advisor to the Company
pursuant to this Section 1.2 shall include:
(a) Providing a continuous investment program for the Company,
including recommending investment policies and establishing procedures and asset
allocation and investment strategies commensurate with the Company's risk,
return, income, tax and asset/liability goals and objectives;
(b) Supervising, managing and directing the investment and reinvestment
of cash, securities, loans and all other property that comprise the Assets of
the Company;
(c) Obtaining and evaluating pertinent economic, financial, and other
relevant data affecting the Assets and other investment opportunities which the
Advisor considers suitable for
2
<PAGE> 6
the Company, and purchasing and selling or otherwise disposing of Assets in the
name and on behalf of the Company;
(d) Taking or causing all supervisory and ministerial actions to be
taken which are necessary to implement, manage, and service the investment
program of the Company, including but not limited to effecting and documenting
all transactions in the Assets and obtaining legal evidence of the ownership of
all Assets purchased or otherwise acquired for the Company's account;
(e) Performing, as requested by the Company, asset/liability matching
services including, but not limited to, cash flow testing, modeling activities,
the development of asset baseline strategies commensurate with the risk
characteristics of associated liabilities and to give advice on the investment
aspects of product development for traditional as well as investment oriented
products; and
(f) Providing investment accounting services and reports as follows:
(i) providing financial reporting on all invested
asset-related accounts and all investment
income-related accounts necessary for inclusion in
the Company's general ledger, with the level of
detail deemed appropriate by the parties, and
(ii) providing additional accounting services as are
normally provided in the course of investment
management for a life insurance company, such as
providing information for regulatory reports,
industry statistics, rating agency compilations and
examination reports.
3
<PAGE> 7
1.3 DOCUMENTATION. The Advisor shall maintain, and cause any Custodian
(as herein defined) having custody of any of the Assets to furnish to the
Advisor, copies or originals of the documentation pertaining to the servicing
and management of the Assets, including trade confirmations.
1.4 COMPLIANCE WITH INVESTMENT LAWS AND COMPANY POLICIES AND
GUIDELINES. In carrying out its responsibilities under this Investment Advisory
Agreement, the Advisor agrees to comply with all applicable requirements of the
Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), the
federal securities laws and all other applicable laws and regulations, and
acknowledges that its management of the Assets is subject to the following
guidelines, limitations and restrictions:
(a) All investments shall be made in compliance with all applicable
laws and regulations, including, without limitation, the relevant investment
provisions of Indiana's Insurance Law, including the qualitative and
quantitative limitations set forth therein;
(b) All investments shall be, in addition, subject to the investment
policies and guidelines approved by the Company's Board of Directors which are
attached hereto as Schedule 1.4(b)(ii)(as such investment policies may be
amended from time to time by the Company's Board of Directors, the "Company's
Investment Policies"). The Company reserves the right, in its sole discretion,
to amend the Company's Investment Policies and agrees that any such amendments
shall take effect only upon notice to the Advisor.
(c) All hedging activity in which the Company may become involved
relating to the investments and income generation activity by means of
derivative transactions will be subject to a Derivative Use Plan to be adopted
by the Company's Board of Directors and approved by the
4
<PAGE> 8
Indiana Insurance Department (the "IID"). The Advisor will assist the Company in
developing the Derivative Use Plan after the date hereof. The Company reserves
the right, in its sole discretion, to amend such Derivative Use Plan and agrees
that any such amendments shall take effect only upon notice to the Advisor and
approval by the IID.
1.5 CUSTODIAN. (a) Assets consisting of cash and securities shall be
held by those institutions specified in writing by the Company on Schedule 1.5
hereto (the "Custodians"). The Company's list of Custodians on Schedule 1.5 may
be modified from time to time by the Company after consultation with the
Advisor. The Company hereby represents that the institutions set forth on
Schedule 1.5 have agreed to act as Custodians for its Assets.
(b) The Assets will be established and maintained with the relevant
Custodians as provided herein and will be subject to any applicable custodial
agreements. The Company agrees to cooperate with the Advisor and the Custodians
in taking all such action as may be necessary or advisable to establish the
Advisor's and the Custodians' authority with respect to the management of the
securities and other Assets held in the Company's account.
(c) The Company shall furnish such authorization as any Custodian may
require from time to time in order that the Advisor may direct such Custodian to
deliver Assets sold and to pay out of the cash portion of the Assets managed by
the Advisor for any additional Assets purchased in accordance with any relevant
custodial agreement and this Investment Advisory Agreement.
(d) The Advisor shall give the Custodians appropriate instructions in
writing or orally and confirmed in writing as soon as practicable thereafter.
The Company shall instruct the Custodians to provide the Advisor with such
periodic reports concerning the status of the Company's account as the Advisor
may reasonably request from time to time. All income, gains
5
<PAGE> 9
and accruals from or to the Assets shall be collected by the relevant Custodian
and credited to the Company's account.
(e) The Company agrees that the Advisor shall have no liability to the
Company or any other person for any loss or other harm to any property of the
Company held in the custody of a Custodian (or its nominee), including any harm
to any property of the Company resulting from the bankruptcy of the Custodian or
any acts of the agents or employees of a Custodian and whether or not the full
amount of such loss is covered by the Securities Investor Protection Corporation
("SIPC") or any other insurance which may be carried by a Custodian. The Company
understands that SIPC provides only limited protection for the loss of property
held by a broker dealer.
1.6 REPORTS TO BOARDS OF DIRECTORS. The Advisor shall furnish such
periodic reports as may be requested by the Board of Directors of the Company,
or its duly authorized committee with respect to: (i) the Advisor's investment
activities and the performance of the Assets and the Company's investment
program; (ii) the Advisor's recommended changes, if any, in the Company's
investment program; and (iii) any and all other actions taken by the Advisor
relating to the Company's investment program.
1.7 SUPERVISION BY BOARD OF DIRECTORS. The Advisor acknowledges that
the Board of Directors of the Company is vested with the power, authority and
responsibility for managing the business and affairs of the Company including,
without limitation, its investment program. The Advisor acknowledges that any
and all actions, whether supervisory or ministerial, taken pursuant to this
Section 1 by the Advisor shall be subject to the continuous supervision of said
Board of Directors.
6
<PAGE> 10
1.8 POWERS OF ADVISOR. (a)Subject to the terms of this Investment
Advisory Agreement, the Company's Investment Policies and such written
investment instructions as the Company may deliver to the Advisor from time to
time (such terms, policies and instructions are collectively referred to herein
as the "Terms and Instructions"), the Advisor shall have power to supervise,
direct and execute the investment and reinvestment of the cash, securities and
other property that comprise the Assets and engage in such transactions on the
Company's behalf as the Advisor may deem appropriate, in the Advisor's sole
discretion and without prior consultation with the Company, in any and all forms
of securities or other property as permitted by the Terms and Instructions, and
to hold temporary cash balances without liability of the Advisor to the Company
for interest thereon or to invest such temporary cash balances in money market
funds or comparable short-term investments pending reinvestment thereof. The
Company hereby ratifies and confirms any and all transactions hereafter engaged
in by the Advisor in respect of its Assets provided that such transactions
comply with the Terms and Instructions.
(b) The Advisor shall, subject to the terms of this Investment Advisory
Agreement and the Company's Investment Policies, have the exclusive right to
manage the Assets and may use and rely on such information and materials as it
may deem pertinent (including seeking advice from its affiliates). Subject to
the foregoing, the Advisor may delegate all or a portion of its responsibilities
with respect to all or a portion of the Assets to one or more sub-advisors with
the consent of the Company, each of whom shall be an agent of the Advisor;
provided, that no such delegation shall relieve the Advisor from its obligations
hereunder.
7
<PAGE> 11
(c) Subject to the Terms and Instructions, and with respect to any
Assets in the form of securities, the Advisor is authorized, but shall not be
required: (i) to vote, tender or convert any such securities: (ii) to execute
waivers, consents and other instruments with respect to such securities; and
(iii) to endorse, transfer or deliver such securities or to consent to any class
action, plan of reorganization, merger, combination, consolidation, liquidation,
or similar plan with reference to such securities.
2. PERSONNEL, FACILITIES AND COSTS
2.1 PERSONNEL. Except as otherwise provided herein, the Advisor shall
furnish all personnel necessary to provide all the services to the Company as
are required to be rendered under this Investment Advisory Agreement.
2.2 FACILITIES. The Advisor shall furnish all equipment, software and
other facilities necessary to provide all of the services to the Company as are
required to be rendered under this Investment Advisory Agreement.
2.3 COSTS AND EXPENSES. The Company shall pay directly or reimburse the
Advisor for all costs and expenses reasonably necessary or required for Advisor
to render the services provided for by this Investment Advisory Agreement,
including, without limitation, all subadvisory fees, Custodian fees, mortgage
servicing fees, brokers' fees, bank fees, legal expenses and fees for tax advice
(provided the fees for legal services and tax advice are incurred for such
services beyond those provided in the normal course of originating or acquiring
securities, mortgage loans and other Assets and, in respect to any single
request for such services that the Advisor reasonably expects will exceed
$5,000.00, with the consent of the Company) and any costs of safekeeping or
transport in connection with the acquisition and disposition of
8
<PAGE> 12
Assets, including execution costs, custody fees, margin costs and any other
transaction expenses incurred in connection with a transaction in any of the
Assets; provided, however, that no employee of the Advisor shall receive any
salary or other compensation directly from the Company in connection with the
services, advice, and assistance to be rendered by the Advisor under this
Investment Advisory Agreement.
2.4 BROKERAGE. The Advisor is authorized to use its discretion to
select the brokers or dealers that will execute transactions in securities which
are included in the Assets. The Advisor will use reasonable efforts to obtain
prompt execution of orders at the most favorable prices reasonably obtainable
and, in doing so, will consider a number of factors, including, without
limitation, the overall direct net economic result of the transaction (including
commission, which may not be the lowest available but which ordinarily will not
be higher than the generally prevailing competitive range), the financial
strength and stability of the broker, the efficiency with which the transaction
is effected, the ability to effect a transaction involving a large block, the
availability of the broker to stand ready to execute possible difficult
transactions in the future and other matters involved in the receipt of
"brokerage and research services" as defined in and in compliance with Section
28(e) of the Securities Exchange Act of 1934, as amended, and regulations
thereunder. It is further understood that any supplemental advisory or
statistical services which may be provided to the Advisor from time to time by a
broker-dealer or other person for whatever reason shall not reduce the amount of
the fees payable to the Advisor hereunder, notwithstanding that such
supplemental advisory or statistical services are being furnished in connection
with or incident to the execution of portfolio securities transactions of the
Assets.
9
<PAGE> 13
2.5 NON-EXCLUSIVE ADVISORY SERVICES. It is understood that the Advisor
performs investment advisory services for various clients including investment
companies. The Company agrees that the Advisor may give advice and take action
with respect to any of its other clients which may differ from the advice given,
or the timing or nature of action taken, with respect to the Assets, so long as
it is the Advisor's policy, to the extent practical, to allocate investment
opportunities to the Company over a period of time on a fair and equitable basis
relative to other clients. Nothing in this Investment Advisory Agreement shall
limit or restrict the Advisor or any of its directors, officers, affiliates or
employees from buying, selling or trading in any securities or other assets for
its or their own account or accounts, and the Company acknowledges that the
Advisor, its directors, officers, affiliates and employees, and other clients of
the Advisor, may at any time acquire, increase, decrease or dispose of positions
in investments which are at the same time being acquired, held or disposed of
for the Company. The Advisor will not have any obligation to initiate the
purchase or sale, or to recommend for purchase or sale, for the Company any
security or other asset which the Advisor, its directors, officers, affiliates
or employees may purchase, hold or sell for its or their own accounts or for the
accounts of any other clients of the Advisor.
2.6 AGENCY CROSS TRANSACTIONS. From time to time, the Advisor or
brokers or dealers affiliated with it may find themselves in a position to buy
for certain of their brokerage clients securities which the Advisor's investment
advisory clients wish to sell, and to sell for certain of their brokerage
clients securities which advisory clients wish to buy. Where one of the parties
is an advisory client, the Advisor or the affiliated broker or dealer cannot
participate in this type of transaction (known as a cross transaction) on behalf
of an advisory client and retain commissions
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<PAGE> 14
from both parties to the transaction without the advisory client's consent. This
is because in a situation where the Advisor is making the investment decision
(as opposed to a brokerage client which makes its own investment decisions), and
the Advisor or an affiliate is receiving commissions from one or both sides of
the transaction, there is a potential conflicting division of loyalties and
responsibilities on the Advisor's part regarding the advisory client. The
Securities and Exchange Commission has adopted a rule under the Investment
Advisers Act which permits the Advisor or its affiliates to participate on
behalf of the Company in agency cross transactions if the Company has given
written consent in advance. By execution of this Investment Advisory Agreement,
the Company authorizes the Advisor or its affiliates to participate in agency
cross transactions involving the Assets, subject to the Company's prior written
consent with respect to each particular agency cross transaction.
2.7 AGGREGATION. The Advisor is authorized, in its discretion, to
aggregate purchases and sales and other transactions made for the Company with
purchases and sales and other transactions in the same or similar securities or
instruments of the same issuer or counterparty for other clients of the Advisor
or with affiliates of the Advisor. When transactions are so aggregated, the
actual prices applicable to the aggregated transactions will be averaged, and
the Company will be deemed to have purchased or sold its proportionate share of
the instruments involved at the average price so obtained. Stock exchange
regulations may in certain instances prevent the executing broker/dealer from
delivering a separate confirmation slip with respect to the Company's
participation in the aggregated transactions and, in such event, the Advisor
will advise the Company in writing of any purchase or disposition of instruments
for the Company with respect to any such aggregated transaction.
11
<PAGE> 15
2.8 CONFLICT OF INTEREST. The Advisor shall not render any advice or
services concerning securities of companies of which any of the Advisor's, or
affiliates of the Advisor's, officers, directors, or employees are directors or
officers, or companies in which the Advisor or any of the Advisor's affiliates
or the officers, directors and employees of any of them has any substantial
economic interest, unless the Advisor discloses such conflict to the Company
prior to rendering such advice or services.
3. AMOUNT AND PAYMENT OF FEES
3.1 FEES FOR SERVICES. As consideration for the Advisor providing the
services, advice and assistance in connection with the Company's Assets and
investment program set forth in this Investment Advisory Agreement, the Company
agrees to pay the Advisor the fees set forth on Schedule 3.1 to this Investment
Advisory Agreement. The fees payable to the Advisor hereunder shall be exclusive
of the costs and expenses described in Section 2.3 incurred by the Advisor in
connection with transactions in the Assets, which shall be paid directly by the
Company or, if paid by the Advisor, reimbursed to the Advisor in addition to the
fees set forth in Schedule 3.1.
3.2 ADJUSTMENT TO FEES. The fees payable under Section 3.1 shall remain
payable each quarter for the duration of the term of this Investment Advisory
Agreement; provided, however, that if the amount of the Adjusted Assets (as
defined in Schedule 3.1) increases or decreases by at least 25% of the amount of
such Adjusted Assets as of the date of this Investment Advisory Agreement, then
the amount payable shall be subject to adjustment by the parties as set forth in
Schedule 3.1. For purposes of determining such increase or decrease, the
Adjusted Assets shall be valued as follows at the end of any calendar quarter
(each, a "Valuation Date") during the continuation of this Investment Advisory
Agreement. Bonds, debentures, notes, certificates of
12
<PAGE> 16
deposit, and other fixed income securities of a similar nature, whether or not
traded on a national securities exchange, shall be valued in accordance with any
reasonable valuation method selected by the Advisor which is based on sales
prices of the same or comparable securities on or reasonably preceding the
Valuation Date. Other securities for which market quotations are readily
available will be valued at the known current bid price reasonably believed by
the Advisor to most nearly represent current market value. Other securities and
all other assets will be valued at fair market value as determined in good faith
by the Advisor.
3.3 PRORATION OF FEES. In the event of (a) inception of this Investment
Advisory Agreement on a day other than the first day of a calendar quarter or
(b) termination of this Investment Advisory Agreement on a day other than the
last day of a calendar quarter, the fee accrued during the quarter in which such
event occurs shall be prorated on the basis of the number of days that the
Investment Advisory Agreement is in effect during such quarter relative to the
number of days in such quarter.
4. CONFIDENTIALITY, PERFORMANCE, AND RELATIONSHIP OF PARTIES
4.1 DISCLOSURE OF INFORMATION. The Advisor agrees that all information
communicated to it by the Company while this Investment Advisory Agreement is in
force shall be used by the Advisor only for the purposes of this Investment
Advisory Agreement and for the benefit of the Advisor and its affiliates in
connection with the Combination and Investment Agreement, dated as of the date
hereof, between American Mutual Holding Company, AmerUs Life Holdings, Inc.,
Indianapolis Life Insurance Company and The Indianapolis Life Group of
Companies, Inc., and that, during the term of this Investment Advisory Agreement
and thereafter, the Advisor will not
13
<PAGE> 17
disclose such information to any person who is not a director, officer, employee
or agent of the Company or the Advisor or, in furtherance of the performance of
this Investment Advisory Agreement, an affiliate thereof who shall agree to be
bound by this Section, except to the extent that such disclosure is required,
directly or indirectly, by applicable law, rule or regulation, it being
acknowledged that, to the extent such disclosure is made to any sub-advisor or
other agent of the Advisor, such agent shall be required to undertake to be
bound by the provisions of this Section.
4.2 RECORDS AND REPORTS. All forms, records, statements, reports, files
and other data and information prepared, maintained or collected by the Advisor
in the performance of this Investment Advisory Agreement shall become the sole
property of the Company and, upon request, shall be furnished to the Company or
its designee.
4.3 INSPECTION OF BOOKS AND RECORDS. The Advisor shall keep books of
account and records relating to the services performed hereunder, in which full
and correct entries will be made in accordance with generally accepted
accounting procedures. In addition, the books, records and accounts kept by
Advisor with respect to this Investment Advisory Agreement shall be so
maintained as to clearly and accurately disclose the precise nature and details
of the services, advice and assistance provided by Advisor to the Company. In
addition to the rights to have information and records furnished to it pursuant
to Section 4.2 above, the Company or its designated agents shall have, upon not
less than five (5) days prior written notice to the Advisor, the right to
inspect the books and records of the Advisor at the offices of the Advisor in
which said books and records are maintained during normal business hours for any
purpose related to the Advisor's performance under this Investment Advisory
Agreement. The Company and
14
<PAGE> 18
affiliates of the Company who are also clients of the Advisor shall coordinate
their exercise of the rights described in this paragraph in order to minimize
the impact of such inspection on the Advisor.
4.4 PERFORMANCE. The failure of any party to insist upon strict
performance of any provision of this Investment Advisory Agreement shall not
constitute a waiver of the right to insist upon strict performance of the
obligation to strictly perform thereafter.
4.5 RELATIONSHIP OF PARTIES. The Advisor assumes no responsibility
under this Investment Advisory Agreement other than to render the services,
advice, and assistance provided for hereunder in accordance with this Investment
Advisory Agreement. It is expressly understood and agreed that with respect to
and for the purposes of this Investment Advisory Agreement, that the Advisor and
the Company are not partners or joint venturers. The relationship between the
Company and the Advisor with respect to and for the purposes of this Investment
Advisory Agreement shall be that of independent contractor.
4.6 STANDARD OF CARE. (a)The Company understands that the Advisor has
assumed no responsibility under this Investment Advisory Agreement other than to
render the services provided for herein in accordance with this Investment
Advisory Agreement. The Advisor shall use its best judgment and knowledge in
carrying out its duties hereunder in good faith, and shall be liable for actions
and omissions constituting violations of the Investment Advisors Act, other
federal securities laws or any other applicable laws, but shall not be liable
for any mistake of judgment or for any other loss suffered by the Company in the
management of the Assets unless such loss results from the Advisor's willful
misfeasance, gross negligence, reckless disregard of its duties or bad faith in
connection with its performance hereunder. Without limiting the
15
<PAGE> 19
generality of the foregoing, the Advisor shall have no liability to any person
for the acts or omissions of any third party (other than its own agents).
(b) The Advisor shall use its best efforts to tender securities and
interest coupons in response to offers, calls or redemptions, or with respect to
exercise of conversion provisions, subscription rights and other options
relating to the Assets, but the Advisor shall not be liable to the Company or
otherwise for any failure to do so or to perform any act in connection therewith
or to do so on a timely basis, unless the Advisor has received written notice
thereof that refers to particular securities managed by it for the account of
the Company, in which case the Advisor shall exercise its sole discretion in
respect thereto in accordance with this Investment Advisory Agreement.
(c) The Advisor is authorized to accept and rely upon all written or
oral instructions, reports or communications given by an authorized agent of the
Company listed on Schedule 5.1(c) (as such Schedule may be amended from time to
time). The Advisor shall not be responsible for any act, omission or bankruptcy
of any broker-dealer or Custodian or any other person with whom the Advisor may
deal in respect of this Investment Advisory Agreement, including, without
limitation, actions taken in reliance on directions given by any agent of the
Company.
4.7 INDEMNIFICATION. (a) The Company shall indemnify and hold the
Advisor and each of its directors, members, managers, shareholders, officers,
controlling persons, employees, sub-advisors and agents (including any
individual who serves at the Advisor's request as director, officer, trustee or
the like of another corporation) and/or the legal representatives and
controlling persons of any of them harmless to the fullest extent permitted by
law from and against all losses,
16
<PAGE> 20
claims, liabilities and expenses of any kind (including reasonable attorneys'
fees and expenses) and amounts paid in satisfaction of judgments, in compromise
or as fines or penalties (a "Loss") resulting from any inaccuracy of any
representation made by the Company herein or arising out of or as a consequence
of, or resulting from, any matter arising under this Investment Advisory
Agreement, including without limitation, actions taken by the Advisor pursuant
to this Investment Advisory Agreement other than with respect to any Loss
resulting from any failure by the Advisor to perform its duties and
responsibilities hereunder in accordance with the terms of this Investment
Advisory Agreement (including the standard of care set forth herein). The
Company agrees that this indemnity shall survive termination of this Investment
Advisory Agreement.
(b) The Advisor shall indemnify and hold the Company harmless from and
against all Losses resulting from any inaccuracy of any representation made by
the Advisor herein or resulting from any failure by the Advisor to perform its
duties and responsibilities hereunder consistent with Section 4.6(a) of this
Investment Advisory Agreement. The Advisor agrees that this indemnity shall
survive termination of this Investment Advisory Agreement.
4.8 ARBITRATION OF DISPUTES. (a)In the event of any dispute arising
between the Company and the Advisor with reference to any provision of this
Investment Advisory Agreement, the matter shall be arbitrated in accordance with
the Rules of the American Arbitration Association and the Federal Arbitration
Act, as provided below.
(b) Neither party shall initiate arbitration unless, at least 30 days
prior thereto, the party requesting arbitration has given the other party
written notice of the intent to initiate arbitration and a detailed description
of the basis of the dispute. If the dispute remains
17
<PAGE> 21
unresolved at the end of such 30-day period, then either party may notify the
other that it is proceeding to arbitration.
(c) Within thirty (30) days following such second notification, the
Company shall appoint an arbitrator and the Advisor shall appoint an arbitrator.
In the event one of the parties fails to appoint an arbitrator within said
thirty (30) days, the other party shall appoint both arbitrators. Within fifteen
(15) days following their appointment, and before entering into arbitration, the
arbitrators shall select an umpire. In the event the arbitrators are not able to
decide upon an umpire within said fifteen (15) days, the umpire shall be
appointed by the American Arbitration Association. The arbitrators shall be
executive officers or retired officers of investment management firms. Within
sixty (60) days following the notification of the decision to arbitrate, the
arbitration panel shall begin arbitration in Chicago, Illinois unless some other
place is agreed upon by the Company and the Advisor, at which time the parties
hereto may submit their cases in writing to the arbitration panel.
(d) The arbitration panel shall interpret this Investment Advisory
Agreement in accordance with Iowa laws and shall conduct proceedings in
accordance with the Federal Rules of Civil Procedure. Within sixty (60) days
after beginning the arbitration, the arbitrators shall file their written
decision on the matter under arbitration with the Company and with the Advisor.
(e) The expenses of the arbitration shall be paid by the party or
parties in the proportion established by the arbitrators.
(f) Any award of the arbitrators shall be deemed final and judgment
upon such award may be entered and enforced in any Iowa District Court and
transferred to any other jurisdiction.
18
<PAGE> 22
5. REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants that as of the date of this Investment Advisory
Agreement:
(a) This Investment Advisory Agreement has been duly authorized,
executed and delivered by the Company and constitutes its valid and binding
obligation, enforceable against the Company in accordance with its terms;
(b) No governmental authorizations, approvals, consents or filings,
except for any filing with the Indiana State Department of Insurance, are
required in connection with the execution, delivery or performance of this
Investment Advisory Agreement by the Company; the execution, delivery and
performance of this Investment Advisory Agreement by the Company will not
violate or result in any default under the Company's certificate of
incorporation or bylaws (or equivalent constituent documents), any contract or
other agreement to which the Company is a party or by which it or its assets
(including the Assets) may be bound or any statute or any rule, regulation or
order of any government agency or body;
(c) The list of signatures attached hereto as Schedule 5.1(c) with
respect to the Company constitutes the valid signatures of all directors,
officers, employees or agents of the Company authorized to take action with
respect to the Company's Assets and the Advisor shall be entitled to
conclusively rely on any document executed by any of them;
(d) The Company is not an investment company (as that term is defined
in the Investment Company Act of 1940, as amended) and none of its Assets are
assets of an employee benefit plan subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended; and
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<PAGE> 23
(e) The Company is a "qualified eligible client" as defined in Rule
4.7(b)(1)(ii) of the Commodity Exchange Act.
5.2 REPRESENTATIONS AND WARRANTIES OF ADVISOR. The Advisor hereby
represents and warrants that as of the date of this Investment Advisory
Agreement:
(a) The Advisor hereby acknowledges that it is registered as an
investment adviser under the Investment Advisers Act.
(b) This Investment Advisory Agreement has been duly authorized,
executed and delivered by the Advisor and constitutes its valid and binding
obligation, enforceable against the Advisor in accordance with its terms; and
(c) No governmental authorizations, approvals, consents or filings are
required in connection with the execution, delivery or performance of this
Investment Advisory Agreement by the Advisor; the execution, delivery and
performance of this Investment Advisory Agreement by the Advisor will not
violate or result in any default under the Advisor's certificate of
incorporation or bylaws (or equivalent constituent documents), any contract or
other agreement to which the Advisor is a party or by which it may be bound or
any statute or any rule, regulation or order of any government agency or body.
6. ACKNOWLEDGMENTS AND CONSENTS
6.1 REGULATORY APPROVALS. The parties acknowledge that it is a
condition precedent to this Investment Advisory Agreement becoming effective
that all necessary insurance regulatory filings shall have been made and all
necessary insurance regulatory approvals shall have been obtained.
20
<PAGE> 24
6.2 RULE 204-3 NOTICE. The Advisor has delivered to the Company a copy
of the Advisor's Disclosure Statement, as required by Rule 204-3 under the
Investment Advisors Act. If the Company has not received the Advisor's
Disclosure Statement more than 48 hours prior to the date of execution of this
Investment Advisory Agreement, the Company understands that it may terminate
this Investment Advisory Agreement without penalty within five business days
after such date of execution, provided that any investment action taken by the
Advisor with respect to the Company's Assets prior to any such termination will
be at such Company's risk.
6.3 NO REPRESENTATION. The Advisor makes no representation as to the
success of any investment strategy or security recommended by the Advisor to the
Company. The Company acknowledges that it understands that no particular rate of
return on the Assets has been promised or indicated by the Advisor.
6.4 CONFIDENTIAL INFORMATION. By reason of the Advisor's investment
advisory activities and the investment banking and other activities of its
affiliates, the Advisor may acquire confidential information or be restricted
from initiating transactions in certain securities. The Company acknowledges and
agrees that the Advisor will not be free to divulge to the Company, or to act
upon, any such confidential information with respect to the Advisor's
performance of this Investment Advisory Agreement and that, due to such a
restriction, the Advisor may not initiate a transaction the Advisor otherwise
might have initiated.
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<PAGE> 25
7. MISCELLANEOUS
7.1 TERMINATION AND CANCELLATION. (a)This Investment Advisory Agreement
shall terminate automatically if it is assigned (as such term is defined in the
Investment Advisers Act and the rules thereunder) by the Advisor without the
prior written consent of the Company.
(b) This Investment Advisory Agreement may be terminated at any time by
either party by prior written notice to the other party, such termination to be
effective 60 days after receipt of such notice.
(c) Upon termination, the Company shall immediately pay the Advisor all
sums due hereunder through the date of termination and the Advisor shall deliver
to the Company or its designee, as soon as reasonably practicable, all forms,
records, statements, files, reports and other data and information prepared or
collected by the Advisor in connection with the performance of this Investment
Advisory Agreement. Termination of this Investment Advisory Agreement shall not
affect any obligation or liability on the part of the Company for any
transaction entered into or obligation incurred on the Company's behalf prior to
the effective date of such termination.
7.2 NOTICES. Any notices required or permitted under this Investment
Advisory Agreement shall be in writing and shall be deemed to have been duly
given if delivered or mailed, first class postage prepaid, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
If to the Company: Indianapolis Life Insurance Company
2960 North Meridian Street
Indianapolis, Indiana 46208
Attention: Jan Funk
22
<PAGE> 26
If to the Advisor: AmerUs Capital Management Group, Inc.
699 Walnut, Suite 2000
Des Moines, Iowa 50309-3948
Attention: Thomas C. Godlasky, President
7.3 ENTIRE AGREEMENT. This Investment Advisory Agreement contains the
entire understanding of the parties hereto and supersedes all prior agreements
of the parties with respect to the subject matter contained herein. Any
condition to a party's obligation hereunder may be waived in writing by such
party.
7.4 GOVERNING LAW. It is understood that this Investment Advisory
Agreement shall be governed by and construed in accordance with the laws of the
State of Iowa applicable to contracts to be performed entirely within this
state, without regard to Iowa choice of law rules.
7.5 AMENDMENTS. This Investment Advisory Agreement shall not be
amended, changed, modified, terminated or discharged in whole or in part, except
by an instrument in writing duly executed by the affected parties hereto, or
their respective successors or assigns, and shall be subject to any required
approval of the applicable state regulatory authority for the Company.
7.6 BINDING AGREEMENT. This Investment Advisory Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns.
7.7 SEVERABLE PROVISIONS. If any provisions of this Investment Advisory
Agreement shall be found to be invalid by any administrative agency or court of
competent jurisdiction, such finding shall not affect the remaining provisions
of this Investment Advisory Agreement and all such remaining provisions shall
remain in full force and effect.
23
<PAGE> 27
7.8 ASSIGNMENT. Any assignment, as defined by Section 202 of the
Investment Advisers Act to the extent applicable, by the Advisor shall require
the prior written consent of the Company, and any assignment by the Company or
the Advisor shall be subject to any required approval of the applicable state
regulatory authority for the Company.
7.9 COUNTERPARTS. This Investment Advisory Agreement may be executed in
two or more separate counterparts, each of which shall be deemed to be an
original hereof, but all of which shall constitute one and the same instrument.
7.10 REQUIRED CFTC LEGEND. PURSUANT TO AN EXEMPTION FROM THE COMMODITY
FUTURES TRADING COMMISSION IN CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE
CLIENTS, THIS INVESTMENT ADVISORY AGREEMENT IS NOT REQUIRED TO BE, AND HAS NOT
BEEN, FILED WITH THE COMMISSION. THE COMMODITY FUTURES TRADING COMMISSION DOES
NOT PASS UPON THE MERITS OF PARTICIPATING IN A TRADING PROGRAM OR UPON THE
ADEQUACY OF COMMODITY TRADING ADVISOR DISCLOSURE. CONSEQUENTLY, THE COMMODITY
FUTURES TRADING COMMISSION HAS NOT REVIEWED OR APPROVED THIS INVESTMENT ADVISORY
AGREEMENT.
24
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Advisory Agreement to be executed as of this 18th day of February, 2000.
AMERUS CAPITAL MANAGEMENT GROUP, INC.
By: /s/ THOMAS C. GODLASKY
-------------------------------------
Name: Thomas C. Godlasky
-----------------------------------
Title: President
----------------------------------
INDIANAPOLIS LIFE INSURANCE COMPANY
By: /s/ LARRY R. PRIBLE
-------------------------------------
Name: Larry R. Prible
-----------------------------------
Title: Chairman, President and CEO
----------------------------------
25
<PAGE> 1
INVESTMENT ADVISORY
AGREEMENT
BY AND
BETWEEN
WESTERN SECURITY LIFE INSURANCE COMPANY
AND
AMERUS CAPITAL MANAGEMENT GROUP, INC.
DATED
FEBRUARY 18, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. INVESTMENT MANAGEMENT AND SERVICES .......................................2
1.1 Authorization and Appointment ........................................2
1.2 Services and Advice ..................................................2
1.3 Documentation ........................................................4
1.4 Compliance With Investment Laws and Company Policies and Guidelines ..4
1.5 Custodian ............................................................5
1.6 Reports to Boards of Directors .......................................6
1.7 Supervision by Board of Directors ....................................6
1.8 Powers of Advisor ....................................................7
2. PERSONNEL, FACILITIES AND COSTS ..........................................8
2.1 Personnel ............................................................8
2.2 Facilities ...........................................................8
2.3 Costs and Expenses ...................................................8
2.4 Brokerage ............................................................9
2.5 Non-Exclusive Advisory Services .....................................10
2.6 Agency Cross Transactions ...........................................10
2.7 Aggregation .........................................................11
2.8 Conflict of Interest ................................................12
3. AMOUNT AND PAYMENT OF FEES ..............................................12
3.1 Fees for Services ...................................................12
3.2 Adjustment to Fees ..................................................12
3.3 Proration of Fees ...................................................13
4. CONFIDENTIALITY, PERFORMANCE, AND RELATIONSHIP OF PARTIES ...............13
4.1 Disclosure of Information ...........................................13
4.2 Records and Reports .................................................14
4.3 Inspection of Books and Records .....................................14
4.4 Performance .........................................................15
4.5 Relationship of Parties .............................................15
4.6 Standard of Care ....................................................15
4.7 Indemnification .....................................................16
4.8 Arbitration of Disputes .............................................17
5. REPRESENTATIONS AND WARRANTIES ..........................................19
5.1 Representations and Warranties of the Company .......................19
5.2 Representations and Warranties of Advisor ...........................20
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
6. ACKNOWLEDGEMENTS AND CONSENTS ..........................................20
6.1 Regulatory Approvals ...............................................20
6.2 Rule 204-3 Notice ..................................................21
6.3 No Representation ..................................................21
6.4 Confidential Information ...........................................21
7. MISCELLANEOUS ..........................................................22
7.1 Termination and Cancellation .......................................22
7.2 Notices ............................................................22
7.3 Entire Agreement ...................................................23
7.4 Governing Law ......................................................23
7.5 Amendments .........................................................23
7.6 Binding Agreement ..................................................23
7.7 Severable Provisions ...............................................23
7.8 Assignment .........................................................24
7.9 Counterparts .......................................................24
7.10 Required CFTC Legend ..............................................24
</TABLE>
ii
<PAGE> 4
THIS INVESTMENT ADVISORY AGREEMENT (the "Investment Advisory
Agreement") is dated this ___ day of February, 2000, made and entered into by
and between WESTERN SECURITY LIFE INSURANCE COMPANY, an Arizona domiciled life
insurance company (the "Company"), and AMERUS CAPITAL MANAGEMENT GROUP, INC., an
Iowa corporation (the "Advisor").
R E C I T A L S:
WHEREAS, the Company desires to have the Advisor provide certain
investment advisory services, including investment management, investment
accounting and asset/liability management services on the terms and conditions
set forth herein; and
WHEREAS, the Advisor agrees to provide such investment advisory
services on the terms and conditions set forth herein; and
WHEREAS, the Company and the Advisor acknowledge that all investment
advisory services provided under this Agreement are subject to the applicable
investment provisions of the Arizona Insurance Law as well as oversight by the
Company's Board of Directors;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
<PAGE> 5
1. INVESTMENT MANAGEMENT AND SERVICES
1.1 AUTHORIZATION AND APPOINTMENT. The Company hereby authorizes and
appoints the Advisor to act as its investment advisor and to exercise full
investment discretion subject to the terms of this Investment Advisory
Agreement, as the Company's agent and attorney-in-fact, with respect to all cash
and invested assets of the Company (consisting of all assets required to be
listed on Lines 1 through 10 of Page 2 of the NAIC Annual Statement blank for
Life and Accident and Health Companies, other than policy loans (Line 5) and
real estate properties occupied by the Company (Line 4.1)) (all of which cash
and invested assets are collectively referred to in this Investment Advisory
Agreement as the "Assets"), and to perform the investment-related services
described in this Investment Advisory Agreement.
1.2 SERVICES AND ADVICE. The Advisor agrees to manage and service the
Assets of the Company. The services to be rendered by the Advisor to the Company
pursuant to this Section 1.2 shall include:
(a) Providing a continuous investment program for the Company,
including recommending investment policies and establishing procedures and asset
allocation and investment strategies commensurate with the Company's risk,
return, income, tax and asset/liability goals and objectives;
(b) Supervising, managing and directing the investment and reinvestment
of cash, securities, loans and all other property that comprise the Assets of
the Company;
(c) Obtaining and evaluating pertinent economic, financial, and other
relevant data affecting the Assets and other investment opportunities which the
Advisor considers suitable for
2
<PAGE> 6
the Company, and purchasing and selling or otherwise disposing of Assets in the
name and on behalf of the Company;
(d) Taking or causing all supervisory and ministerial actions to be
taken which are necessary to implement, manage, and service the investment
program of the Company, including but not limited to effecting and documenting
all transactions in the Assets and obtaining legal evidence of the ownership of
all Assets purchased or otherwise acquired for the Company's account;
(e) Performing, as requested by the Company, asset/liability matching
services including, but not limited to, cash flow testing, modeling activities,
the development of asset baseline strategies commensurate with the risk
characteristics of associated liabilities and to give advice on the investment
aspects of product development for traditional as well as investment oriented
products; and
(f) Providing investment accounting services and reports as follows:
(i) providing financial reporting on all invested asset-related
accounts and all investment income-related accounts necessary
for inclusion in the Company's general ledger, with the level
of detail deemed appropriate by the parties, and
(ii) providing additional accounting services as are normally
provided in the course of investment management for a life
insurance company, such as providing information for
regulatory reports, industry statistics, rating agency
compilations and examination reports.
3
<PAGE> 7
1.3 DOCUMENTATION. The Advisor shall maintain, and cause any Custodian
(as herein defined) having custody of any of the Assets to furnish to the
Advisor, copies or originals of the documentation pertaining to the servicing
and management of the Assets, including trade confirmations.
1.4 COMPLIANCE WITH INVESTMENT LAWS AND COMPANY POLICIES AND
GUIDELINES. In carrying out its responsibilities under this Investment Advisory
Agreement, the Advisor agrees to comply with all applicable requirements of the
Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), the
federal securities laws and all other applicable laws and regulations, and
acknowledges that its management of the Assets is subject to the following
guidelines, limitations and restrictions:
(a) All investments shall be made in compliance with all applicable
laws and regulations, including, without limitation, the relevant investment
provisions of Arizona's Insurance Law, including the qualitative and
quantitative limitations set forth therein;
(b) All investments shall be, in addition, subject to the investment
policies and guidelines approved by the Company's Board of Directors which are
attached hereto as Schedule 1.4(b)(ii)(as such investment policies may be
amended from time to time by the Company's Board of Directors, the "Company's
Investment Policies"). The Company reserves the right, in its sole discretion,
to amend the Company's Investment Policies and agrees that any such amendments
shall take effect only upon notice to the Advisor.
(c) All hedging activity in which the Company may become involved
relating to the investments and income generation activity by means of
derivative transactions will be subject to a Derivative Use Plan to be adopted
by the Company's Board of Directors and approved by the
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Arizona Insurance Department (the "AID"). The Advisor will assist the Company in
developing the Derivative Use Plan after the date hereof. The Company reserves
the right, in its sole discretion, to amend such Derivative Use Plan and agrees
that any such amendments shall take effect only upon notice to the Advisor and
approval by the AID.
1.5 CUSTODIAN. (a) Assets consisting of cash and securities shall be
held by those institutions specified in writing by the Company on Schedule 1.5
hereto (the "Custodians"). The Company's list of Custodians on Schedule 1.5 may
be modified from time to time by the Company after consultation with the
Advisor. The Company hereby represents that the institutions set forth on
Schedule 1.5 have agreed to act as Custodians for its Assets.
(b) The Assets will be established and maintained with the relevant
Custodians as provided herein and will be subject to any applicable custodial
agreements. The Company agrees to cooperate with the Advisor and the Custodians
in taking all such action as may be necessary or advisable to establish the
Advisor's and the Custodians' authority with respect to the management of the
securities and other Assets held in the Company's account.
(c) The Company shall furnish such authorization as any Custodian may
require from time to time in order that the Advisor may direct such Custodian to
deliver Assets sold and to pay out of the cash portion of the Assets managed by
the Advisor for any additional Assets purchased in accordance with any relevant
custodial agreement and this Investment Advisory Agreement.
(d) The Advisor shall give the Custodians appropriate instructions in
writing or orally and confirmed in writing as soon as practicable thereafter.
The Company shall instruct the Custodians to provide the Advisor with such
periodic reports concerning the status of the Company's account as the Advisor
may reasonably request from time to time. All income, gains
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and accruals from or to the Assets shall be collected by the relevant Custodian
and credited to the Company's account.
(e) The Company agrees that the Advisor shall have no liability to the
Company or any other person for any loss or other harm to any property of the
Company held in the custody of a Custodian (or its nominee), including any harm
to any property of the Company resulting from the bankruptcy of the Custodian or
any acts of the agents or employees of a Custodian and whether or not the full
amount of such loss is covered by the Securities Investor Protection Corporation
("SIPC") or any other insurance which may be carried by a Custodian. The Company
understands that SIPC provides only limited protection for the loss of property
held by a broker dealer.
1.6 REPORTS TO BOARDS OF DIRECTORS. The Advisor shall furnish such
periodic reports as may be requested by the Board of Directors of the Company,
or its duly authorized committee with respect to: (i) the Advisor's investment
activities and the performance of the Assets and the Company's investment
program; (ii) the Advisor's recommended changes, if any, in the Company's
investment program; and (iii) any and all other actions taken by the Advisor
relating to the Company's investment program.
1.7 SUPERVISION BY BOARD OF DIRECTORS. The Advisor acknowledges that
the Board of Directors of the Company is vested with the power, authority and
responsibility for managing the business and affairs of the Company including,
without limitation, its investment program. The Advisor acknowledges that any
and all actions, whether supervisory or ministerial, taken pursuant to this
Section 1 by the Advisor shall be subject to the continuous supervision of said
Board of Directors.
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1.8 POWERS OF ADVISOR. (a) Subject to the terms of this Investment
Advisory Agreement, the Company's Investment Policies and such written
investment instructions as the Company may deliver to the Advisor from time to
time (such terms, policies and instructions are collectively referred to herein
as the "Terms and Instructions"), the Advisor shall have power to supervise,
direct and execute the investment and reinvestment of the cash, securities and
other property that comprise the Assets and engage in such transactions on the
Company's behalf as the Advisor may deem appropriate, in the Advisor's sole
discretion and without prior consultation with the Company, in any and all forms
of securities or other property as permitted by the Terms and Instructions, and
to hold temporary cash balances without liability of the Advisor to the Company
for interest thereon or to invest such temporary cash balances in money market
funds or comparable short-term investments pending reinvestment thereof. The
Company hereby ratifies and confirms any and all transactions hereafter engaged
in by the Advisor in respect of its Assets provided that such transactions
comply with the Terms and Instructions.
(b) The Advisor shall, subject to the terms of this Investment Advisory
Agreement and the Company's Investment Policies, have the exclusive right to
manage the Assets and may use and rely on such information and materials as it
may deem pertinent (including seeking advice from its affiliates). Subject to
the foregoing, the Advisor may delegate all or a portion of its responsibilities
with respect to all or a portion of the Assets to one or more sub-advisors with
the consent of the Company, each of whom shall be an agent of the Advisor;
provided, that no such delegation shall relieve the Advisor from its obligations
hereunder.
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(c) Subject to the Terms and Instructions, and with respect to any
Assets in the form of securities, the Advisor is authorized, but shall not be
required: (i) to vote, tender or convert any such securities: (ii) to execute
waivers, consents and other instruments with respect to such securities; and
(iii) to endorse, transfer or deliver such securities or to consent to any class
action, plan of reorganization, merger, combination, consolidation, liquidation,
or similar plan with reference to such securities.
2. PERSONNEL, FACILITIES AND COSTS
2.1 PERSONNEL. Except as otherwise provided herein, the Advisor shall
furnish all personnel necessary to provide all the services to the Company as
are required to be rendered under this Investment Advisory Agreement.
2.2 FACILITIES. The Advisor shall furnish all equipment, software and
other facilities necessary to provide all of the services to the Company as are
required to be rendered under this Investment Advisory Agreement.
2.3 COSTS AND EXPENSES. The Company shall pay directly or reimburse the
Advisor for all costs and expenses reasonably necessary or required for Advisor
to render the services provided for by this Investment Advisory Agreement,
including, without limitation, all subadvisory fees, Custodian fees, mortgage
servicing fees, brokers' fees, bank fees, legal expenses and fees for tax advice
(provided the fees for legal services and tax advice are incurred for such
services beyond those provided in the normal course of originating or acquiring
securities, mortgage loans and other Assets and, in respect to any single
request for such services that the Advisor reasonably expects will exceed
$5,000.00, with the consent of the Company) and any costs of safekeeping or
transport in connection with the acquisition and disposition of
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Assets, including execution costs, custody fees, margin costs and any other
transaction expenses incurred in connection with a transaction in any of the
Assets; provided, however, that no employee of the Advisor shall receive any
salary or other compensation directly from the Company in connection with the
services, advice, and assistance to be rendered by the Advisor under this
Investment Advisory Agreement.
2.4 BROKERAGE. The Advisor is authorized to use its discretion to
select the brokers or dealers that will execute transactions in securities which
are included in the Assets. The Advisor will use reasonable efforts to obtain
prompt execution of orders at the most favorable prices reasonably obtainable
and, in doing so, will consider a number of factors, including, without
limitation, the overall direct net economic result of the transaction (including
commission, which may not be the lowest available but which ordinarily will not
be higher than the generally prevailing competitive range), the financial
strength and stability of the broker, the efficiency with which the transaction
is effected, the ability to effect a transaction involving a large block, the
availability of the broker to stand ready to execute possible difficult
transactions in the future and other matters involved in the receipt of
"brokerage and research services" as defined in and in compliance with Section
28(e) of the Securities Exchange Act of 1934, as amended, and regulations
thereunder. It is further understood that any supplemental advisory or
statistical services which may be provided to the Advisor from time to time by a
broker-dealer or other person for whatever reason shall not reduce the amount of
the fees payable to the Advisor hereunder, notwithstanding that such
supplemental advisory or statistical services are being furnished in connection
with or incident to the execution of portfolio securities transactions of the
Assets.
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2.5 NON-EXCLUSIVE ADVISORY SERVICES. It is understood that the Advisor
performs investment advisory services for various clients including investment
companies. The Company agrees that the Advisor may give advice and take action
with respect to any of its other clients which may differ from the advice given,
or the timing or nature of action taken, with respect to the Assets, so long as
it is the Advisor's policy, to the extent practical, to allocate investment
opportunities to the Company over a period of time on a fair and equitable basis
relative to other clients. Nothing in this Investment Advisory Agreement shall
limit or restrict the Advisor or any of its directors, officers, affiliates or
employees from buying, selling or trading in any securities or other assets for
its or their own account or accounts, and the Company acknowledges that the
Advisor, its directors, officers, affiliates and employees, and other clients of
the Advisor, may at any time acquire, increase, decrease or dispose of positions
in investments which are at the same time being acquired, held or disposed of
for the Company. The Advisor will not have any obligation to initiate the
purchase or sale, or to recommend for purchase or sale, for the Company any
security or other asset which the Advisor, its directors, officers, affiliates
or employees may purchase, hold or sell for its or their own accounts or for the
accounts of any other clients of the Advisor.
2.6 AGENCY CROSS TRANSACTIONS. From time to time, the Advisor or
brokers or dealers affiliated with it may find themselves in a position to buy
for certain of their brokerage clients securities which the Advisor's investment
advisory clients wish to sell, and to sell for certain of their brokerage
clients securities which advisory clients wish to buy. Where one of the parties
is an advisory client, the Advisor or the affiliated broker or dealer cannot
participate in this type of transaction (known as a cross transaction) on behalf
of an advisory client and retain commissions
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from both parties to the transaction without the advisory client's consent. This
is because in a situation where the Advisor is making the investment decision
(as opposed to a brokerage client which makes its own investment decisions), and
the Advisor or an affiliate is receiving commissions from one or both sides of
the transaction, there is a potential conflicting division of loyalties and
responsibilities on the Advisor's part regarding the advisory client. The
Securities and Exchange Commission has adopted a rule under the Investment
Advisers Act which permits the Advisor or its affiliates to participate on
behalf of the Company in agency cross transactions if the Company has given
written consent in advance. By execution of this Investment Advisory Agreement,
the Company authorizes the Advisor or its affiliates to participate in agency
cross transactions involving the Assets, subject to the Company's prior written
consent with respect to each particular agency cross transaction.
2.7 AGGREGATION. The Advisor is authorized, in its discretion, to
aggregate purchases and sales and other transactions made for the Company with
purchases and sales and other transactions in the same or similar securities or
instruments of the same issuer or counterparty for other clients of the Advisor
or with affiliates of the Advisor. When transactions are so aggregated, the
actual prices applicable to the aggregated transactions will be averaged, and
the Company will be deemed to have purchased or sold its proportionate share of
the instruments involved at the average price so obtained. Stock exchange
regulations may in certain instances prevent the executing broker/dealer from
delivering a separate confirmation slip with respect to the Company's
participation in the aggregated transactions and, in such event, the Advisor
will advise the Company in writing of any purchase or disposition of instruments
for the Company with respect to any such aggregated transaction.
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2.8 CONFLICT OF INTEREST. The Advisor shall not render any advice or
services concerning securities of companies of which any of the Advisor's, or
affiliates of the Advisor's, officers, directors, or employees are directors or
officers, or companies in which the Advisor or any of the Advisor's affiliates
or the officers, directors and employees of any of them has any substantial
economic interest, unless the Advisor discloses such conflict to the Company
prior to rendering such advice or services.
3. AMOUNT AND PAYMENT OF FEES
3.1 FEES FOR SERVICES. As consideration for the Advisor providing the
services, advice and assistance in connection with the Company's Assets and
investment program set forth in this Investment Advisory Agreement, the Company
agrees to pay the Advisor the fees set forth on Schedule 3.1 to this Investment
Advisory Agreement. The fees payable to the Advisor hereunder shall be exclusive
of the costs and expenses described in Section 2.3 incurred by the Advisor in
connection with transactions in the Assets, which shall be paid directly by the
Company or, if paid by the Advisor, reimbursed to the Advisor in addition to the
fees set forth in Schedule 3.1.
3.2 ADJUSTMENT TO FEES. The fees payable under Section 3.1 shall remain
payable each quarter for the duration of the term of this Investment Advisory
Agreement; provided, however, that if the amount of the Adjusted Assets (as
defined in Schedule 3.1) increases or decreases by at least 25% of the amount of
such Adjusted Assets as of the date of this Investment Advisory Agreement, then
the amount payable shall be subject to adjustment by the parties as set forth in
Schedule 3.1. For purposes of determining such increase or decrease, the
Adjusted Assets shall be valued as follows at the end of any calendar quarter
(each, a "Valuation Date") during the continuation of this Investment Advisory
Agreement. Bonds, debentures, notes, certificates of
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deposit, and other fixed income securities of a similar nature, whether or not
traded on a national securities exchange, shall be valued in accordance with any
reasonable valuation method selected by the Advisor which is based on sales
prices of the same or comparable securities on or reasonably preceding the
Valuation Date. Other securities for which market quotations are readily
available will be valued at the known current bid price reasonably believed by
the Advisor to most nearly represent current market value. Other securities and
all other assets will be valued at fair market value as determined in good faith
by the Advisor.
3.3 PRORATION OF FEES. In the event of (a) inception of this Investment
Advisory Agreement on a day other than the first day of a calendar quarter or
(b) termination of this Investment Advisory Agreement on a day other than the
last day of a calendar quarter, the fee accrued during the quarter in which such
event occurs shall be prorated on the basis of the number of days that the
Investment Advisory Agreement is in effect during such quarter relative to the
number of days in such quarter.
4. CONFIDENTIALITY, PERFORMANCE, AND RELATIONSHIP OF PARTIES
4.1 DISCLOSURE OF INFORMATION. The Advisor agrees that all information
communicated to it by the Company while this Investment Advisory Agreement is in
force shall be used by the Advisor only for the purposes of this Investment
Advisory Agreement and for the benefit of the Advisor and its affiliates in
connection with the Combination and Investment Agreement, dated as of the date
hereof, between American Mutual Holding Company, AmerUs Life Holdings, Inc.,
Indianapolis Life Insurance Company and The Indianapolis Life Group of
Companies, Inc., and that, during the term of this Investment Advisory Agreement
and thereafter, the Advisor will not
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disclose such information to any person who is not a director, officer, employee
or agent of the Company or the Advisor or, in furtherance of the performance of
this Investment Advisory Agreement, an affiliate thereof who shall agree to be
bound by this Section, except to the extent that such disclosure is required,
directly or indirectly, by applicable law, rule or regulation, it being
acknowledged that, to the extent such disclosure is made to any sub-advisor or
other agent of the Advisor, such agent shall be required to undertake to be
bound by the provisions of this Section.
4.2 RECORDS AND REPORTS. All forms, records, statements, reports, files
and other data and information prepared, maintained or collected by the Advisor
in the performance of this Investment Advisory Agreement shall become the sole
property of the Company and, upon request, shall be furnished to the Company or
its designee.
4.3 INSPECTION OF BOOKS AND RECORDS. The Advisor shall keep books of
account and records relating to the services performed hereunder, in which full
and correct entries will be made in accordance with generally accepted
accounting procedures. In addition, the books, records and accounts kept by
Advisor with respect to this Investment Advisory Agreement shall be so
maintained as to clearly and accurately disclose the precise nature and details
of the services, advice and assistance provided by Advisor to the Company. In
addition to the rights to have information and records furnished to it pursuant
to Section 4.2 above, the Company or its designated agents shall have, upon not
less than five (5) days prior written notice to the Advisor, the right to
inspect the books and records of the Advisor at the offices of the Advisor in
which said books and records are maintained during normal business hours for any
purpose related to the Advisor's performance under this Investment Advisory
Agreement. The Company and
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affiliates of the Company who are also clients of the Advisor shall coordinate
their exercise of the rights described in this paragraph in order to minimize
the impact of such inspection on the Advisor.
4.4 PERFORMANCE. The failure of any party to insist upon strict
performance of any provision of this Investment Advisory Agreement shall not
constitute a waiver of the right to insist upon strict performance of the
obligation to strictly perform thereafter.
4.5 RELATIONSHIP OF PARTIES. The Advisor assumes no responsibility
under this Investment Advisory Agreement other than to render the services,
advice, and assistance provided for hereunder in accordance with this Investment
Advisory Agreement. It is expressly understood and agreed that with respect to
and for the purposes of this Investment Advisory Agreement, that the Advisor and
the Company are not partners or joint venturers. The relationship between the
Company and the Advisor with respect to and for the purposes of this Investment
Advisory Agreement shall be that of independent contractor.
4.6 STANDARD OF CARE. (a) The Company understands that the Advisor has
assumed no responsibility under this Investment Advisory Agreement other than to
render the services provided for herein in accordance with this Investment
Advisory Agreement. The Advisor shall use its best judgment and knowledge in
carrying out its duties hereunder in good faith, and shall be liable for actions
and omissions constituting violations of the Investment Advisors Act, other
federal securities laws or any other applicable laws, but shall not be liable
for any mistake of judgment or for any other loss suffered by the Company in the
management of the Assets unless such loss results from the Advisor's willful
misfeasance, gross negligence, reckless disregard of its duties or bad faith in
connection with its performance hereunder. Without limiting the
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generality of the foregoing, the Advisor shall have no liability to any person
for the acts or omissions of any third party (other than its own agents).
(b) The Advisor shall use its best efforts to tender securities and
interest coupons in response to offers, calls or redemptions, or with respect to
exercise of conversion provisions, subscription rights and other options
relating to the Assets, but the Advisor shall not be liable to the Company or
otherwise for any failure to do so or to perform any act in connection therewith
or to do so on a timely basis, unless the Advisor has received written notice
thereof that refers to particular securities managed by it for the account of
the Company, in which case the Advisor shall exercise its sole discretion in
respect thereto in accordance with this Investment Advisory Agreement.
(c) The Advisor is authorized to accept and rely upon all written or
oral instructions, reports or communications given by an authorized agent of the
Company listed on Schedule 5.1(c) (as such Schedule may be amended from time to
time). The Advisor shall not be responsible for any act, omission or bankruptcy
of any broker-dealer or Custodian or any other person with whom the Advisor may
deal in respect of this Investment Advisory Agreement, including, without
limitation, actions taken in reliance on directions given by any agent of the
Company.
4.7 INDEMNIFICATION. (a) The Company shall indemnify and hold the
Advisor and each of its directors, members, managers, shareholders, officers,
controlling persons, employees, sub-advisors and agents (including any
individual who serves at the Advisor's request as director, officer, trustee or
the like of another corporation) and/or the legal representatives and
controlling persons of any of them harmless to the fullest extent permitted by
law from and against all losses,
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claims, liabilities and expenses of any kind (including reasonable attorneys'
fees and expenses) and amounts paid in satisfaction of judgments, in compromise
or as fines or penalties (a "Loss") resulting from any inaccuracy of any
representation made by the Company herein or arising out of or as a consequence
of, or resulting from, any matter arising under this Investment Advisory
Agreement, including without limitation, actions taken by the Advisor pursuant
to this Investment Advisory Agreement other than with respect to any Loss
resulting from any failure by the Advisor to perform its duties and
responsibilities hereunder in accordance with the terms of this Investment
Advisory Agreement (including the standard of care set forth herein). The
Company agrees that this indemnity shall survive termination of this Investment
Advisory Agreement.
(b) The Advisor shall indemnify and hold the Company harmless from and
against all Losses resulting from any inaccuracy of any representation made by
the Advisor herein or resulting from any failure by the Advisor to perform its
duties and responsibilities hereunder consistent with Section 4.6(a) of this
Investment Advisory Agreement. The Advisor agrees that this indemnity shall
survive termination of this Investment Advisory Agreement.
4.8 ARBITRATION OF DISPUTES. (a) In the event of any dispute arising
between the Company and the Advisor with reference to any provision of this
Investment Advisory Agreement, the matter shall be arbitrated in accordance with
the Rules of the American Arbitration Association and the Federal Arbitration
Act, as provided below.
(b) Neither party shall initiate arbitration unless, at least 30 days
prior thereto, the party requesting arbitration has given the other party
written notice of the intent to initiate arbitration and a detailed description
of the basis of the dispute. If the dispute remains
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unresolved at the end of such 30-day period, then either party may notify the
other that it is proceeding to arbitration.
(c) Within thirty (30) days following such second notification, the
Company shall appoint an arbitrator and the Advisor shall appoint an arbitrator.
In the event one of the parties fails to appoint an arbitrator within said
thirty (30) days, the other party shall appoint both arbitrators. Within fifteen
(15) days following their appointment, and before entering into arbitration, the
arbitrators shall select an umpire. In the event the arbitrators are not able to
decide upon an umpire within said fifteen (15) days, the umpire shall be
appointed by the American Arbitration Association. The arbitrators shall be
executive officers or retired officers of investment management firms. Within
sixty (60) days following the notification of the decision to arbitrate, the
arbitration panel shall begin arbitration in Chicago, Illinois unless some other
place is agreed upon by the Company and the Advisor, at which time the parties
hereto may submit their cases in writing to the arbitration panel.
(d) The arbitration panel shall interpret this Investment Advisory
Agreement in accordance with Iowa laws and shall conduct proceedings in
accordance with the Federal Rules of Civil Procedure. Within sixty (60) days
after beginning the arbitration, the arbitrators shall file their written
decision on the matter under arbitration with the Company and with the Advisor.
(e) The expenses of the arbitration shall be paid by the party or
parties in the proportion established by the arbitrators.
(f) Any award of the arbitrators shall be deemed final and judgment
upon such award may be entered and enforced in any Iowa District Court and
transferred to any other jurisdiction.
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5. REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants that as of the date of this Investment Advisory
Agreement:
(a) This Investment Advisory Agreement has been duly authorized,
executed and delivered by the Company and constitutes its valid and binding
obligation, enforceable against the Company in accordance with its terms;
(b) No governmental authorizations, approvals, consents or filings,
except for any filing with the Arizona Department of Insurance, are required in
connection with the execution, delivery or performance of this Investment
Advisory Agreement by the Company; the execution, delivery and performance of
this Investment Advisory Agreement by the Company will not violate or result in
any default under the Company's certificate of incorporation or bylaws (or
equivalent constituent documents), any contract or other agreement to which the
Company is a party or by which it or its assets (including the Assets) may be
bound or any statute or any rule, regulation or order of any government agency
or body;
(c) The list of signatures attached hereto as Schedule 5.1(c) with
respect to the Company constitutes the valid signatures of all directors,
officers, employees or agents of the Company authorized to take action with
respect to the Company's Assets and the Advisor shall be entitled to
conclusively rely on any document executed by any of them;
(d) The Company is not an investment company (as that term is defined
in the Investment Company Act of 1940, as amended) and none of its Assets are
assets of an employee benefit plan subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended; and
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(e) The Company is a "qualified eligible client" as defined in Rule
4.7(b)(1)(ii) of the Commodity Exchange Act.
5.2 REPRESENTATIONS AND WARRANTIES OF ADVISOR. The Advisor hereby
represents and warrants that as of the date of this Investment Advisory
Agreement:
(a) The Advisor hereby acknowledges that it is registered as an
investment adviser under the Investment Advisers Act.
(b) This Investment Advisory Agreement has been duly authorized,
executed and delivered by the Advisor and constitutes its valid and binding
obligation, enforceable against the Advisor in accordance with its terms; and
(c) No governmental authorizations, approvals, consents or filings are
required in connection with the execution, delivery or performance of this
Investment Advisory Agreement by the Advisor; the execution, delivery and
performance of this Investment Advisory Agreement by the Advisor will not
violate or result in any default under the Advisor's certificate of
incorporation or bylaws (or equivalent constituent documents), any contract or
other agreement to which the Advisor is a party or by which it may be bound or
any statute or any rule, regulation or order of any government agency or body.
6. ACKNOWLEDGMENTS AND CONSENTS
6.1 REGULATORY APPROVALS. The parties acknowledge that it is a
condition precedent to this Investment Advisory Agreement becoming effective
that all necessary insurance regulatory filings shall have been made and all
necessary insurance regulatory approvals shall have been obtained.
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6.2 RULE 204-3 NOTICE. The Advisor has delivered to the Company a copy
of the Advisor's Disclosure Statement, as required by Rule 204-3 under the
Investment Advisors Act. If the Company has not received the Advisor's
Disclosure Statement more than 48 hours prior to the date of execution of this
Investment Advisory Agreement, the Company understands that it may terminate
this Investment Advisory Agreement without penalty within five business days
after such date of execution, provided that any investment action taken by the
Advisor with respect to the Company's Assets prior to any such termination will
be at such Company's risk.
6.3 NO REPRESENTATION. The Advisor makes no representation as to the
success of any investment strategy or security recommended by the Advisor to the
Company. The Company acknowledges that it understands that no particular rate of
return on the Assets has been promised or indicated by the Advisor.
6.4 CONFIDENTIAL INFORMATION. By reason of the Advisor's investment
advisory activities and the investment banking and other activities of its
affiliates, the Advisor may acquire confidential information or be restricted
from initiating transactions in certain securities. The Company acknowledges and
agrees that the Advisor will not be free to divulge to the Company, or to act
upon, any such confidential information with respect to the Advisor's
performance of this Investment Advisory Agreement and that, due to such a
restriction, the Advisor may not initiate a transaction the Advisor otherwise
might have initiated.
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7. MISCELLANEOUS
7.1 TERMINATION AND CANCELLATION. (a) This Investment Advisory
Agreement shall terminate automatically if it is assigned (as such term is
defined in the Investment Advisers Act and the rules thereunder) by the Advisor
without the prior written consent of the Company.
(b) This Investment Advisory Agreement may be terminated at any time by
either party by prior written notice to the other party, such termination to be
effective 60 days after receipt of such notice.
(c) Upon termination, the Company shall immediately pay the Advisor all
sums due hereunder through the date of termination and the Advisor shall deliver
to the Company or its designee, as soon as reasonably practicable, all forms,
records, statements, files, reports and other data and information prepared or
collected by the Advisor in connection with the performance of this Investment
Advisory Agreement. Termination of this Investment Advisory Agreement shall not
affect any obligation or liability on the part of the Company for any
transaction entered into or obligation incurred on the Company's behalf prior to
the effective date of such termination.
7.2 NOTICES. Any notices required or permitted under this Investment
Advisory Agreement shall be in writing and shall be deemed to have been duly
given if delivered or mailed, first class postage prepaid, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
If to the Company: Western Security Life Insurance Company
2960 North Meridian Street
Indianapolis, Indiana 46208
Attention: Jan Funk
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If to the Advisor: AmerUs Capital Management Group, Inc.
699 Walnut, Suite 2000
Des Moines, Iowa 50309-3948
Attention: Thomas C. Godlasky, President
7.3 ENTIRE AGREEMENT. This Investment Advisory Agreement contains the
entire understanding of the parties hereto and supersedes all prior agreements
of the parties with respect to the subject matter contained herein. Any
condition to a party's obligation hereunder may be waived in writing by such
party.
7.4 GOVERNING LAW. It is understood that this Investment Advisory
Agreement shall be governed by and construed in accordance with the laws of the
State of Iowa applicable to contracts to be performed entirely within this
state, without regard to Iowa choice of law rules.
7.5 AMENDMENTS. This Investment Advisory Agreement shall not be
amended, changed, modified, terminated or discharged in whole or in part, except
by an instrument in writing duly executed by the affected parties hereto, or
their respective successors or assigns, and shall be subject to any required
approval of the applicable state regulatory authority for the Company.
7.6 BINDING AGREEMENT. This Investment Advisory Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns.
7.7 SEVERABLE PROVISIONS. If any provisions of this Investment Advisory
Agreement shall be found to be invalid by any administrative agency or court of
competent jurisdiction, such finding shall not affect the remaining provisions
of this Investment Advisory Agreement and all such remaining provisions shall
remain in full force and effect.
23
<PAGE> 27
7.8 ASSIGNMENT. Any assignment, as defined by Section 202 of the
Investment Advisers Act to the extent applicable, by the Advisor shall require
the prior written consent of the Company, and any assignment by the Company or
the Advisor shall be subject to any required approval of the applicable state
regulatory authority for the Company.
7.9 COUNTERPARTS. This Investment Advisory Agreement may be executed in
two or more separate counterparts, each of which shall be deemed to be an
original hereof, but all of which shall constitute one and the same instrument.
7.10 REQUIRED CFTC LEGEND. PURSUANT TO AN EXEMPTION FROM THE COMMODITY
FUTURES TRADING COMMISSION IN CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE
CLIENTS, THIS INVESTMENT ADVISORY AGREEMENT IS NOT REQUIRED TO BE, AND HAS NOT
BEEN, FILED WITH THE COMMISSION. THE COMMODITY FUTURES TRADING COMMISSION DOES
NOT PASS UPON THE MERITS OF PARTICIPATING IN A TRADING PROGRAM OR UPON THE
ADEQUACY OF COMMODITY TRADING ADVISOR DISCLOSURE. CONSEQUENTLY, THE COMMODITY
FUTURES TRADING COMMISSION HAS NOT REVIEWED OR APPROVED THIS INVESTMENT ADVISORY
AGREEMENT.
24
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Advisory Agreement to be executed as of this 18th day of February, 2000.
AMERUS CAPITAL MANAGEMENT GROUP, INC.
By: /s/ THOMAS C. GODLASKY
-------------------------------------
Name: Thomas C. Godlasky
-----------------------------------
Title: President
----------------------------------
WESTERN SECURITY LIFE INSURANCE COMPANY
By: /s/ JOHN J. FAHRENBACH
-------------------------------------
Name: John J. Fahrenbach
-----------------------------------
Title: CEO
----------------------------------
25
<PAGE> 1
INVESTMENT ADVISORY
AGREEMENT
BY AND
BETWEEN
BANKERS LIFE INSURANCE COMPANY OF NEW YORK
AND
AMERUS CAPITAL MANAGEMENT GROUP, INC.
DATED
FEBRUARY 18, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S><C> <C>
1. INVESTMENT MANAGEMENT AND SERVICES......................................... 2
1.1 Authorization and Appointment.......................................... 2
1.2 Services and Advice.................................................... 2
1.3 Documentation.......................................................... 4
1.4 Compliance With Investment Laws and Company Policies and Guidelines.... 4
1.5 Custodian.............................................................. 5
1.6 Reports to Boards of Directors......................................... 6
1.7 Supervision by Board of Directors...................................... 6
1.8 Powers of Advisor...................................................... 7
2. PERSONNEL, FACILITIES AND COSTS............................................ 8
2.1 Personnel.............................................................. 8
2.2 Facilities............................................................. 8
2.3 Costs and Expenses..................................................... 8
2.4 Brokerage.............................................................. 9
2.5 Non-Exclusive Advisory Services........................................ 10
2.6 Agency Cross Transactions.............................................. 10
2.7 Aggregation............................................................ 11
2.8 Conflict of Interest................................................... 12
3. AMOUNT AND PAYMENT OF FEES................................................. 12
3.1 Fees for Services...................................................... 12
3.2 Adjustment to Fees..................................................... 12
3.3 Proration of Fees...................................................... 13
4. CONFIDENTIALITY, PERFORMANCE, AND RELATIONSHIP OF PARTIES.................. 13
4.1 Disclosure of Information.............................................. 13
4.2 Records and Reports.................................................... 14
4.3 Inspection of Books and Records........................................ 14
4.4 Performance............................................................ 15
4.5 Relationship of Parties................................................ 15
4.6 Standard of Care....................................................... 15
4.7 Indemnification........................................................ 16
4.8 Arbitration of Disputes................................................ 17
5. REPRESENTATIONS AND WARRANTIES............................................. 19
5.1 Representations and Warranties of the Company.......................... 19
5.2 Representations and Warranties of Advisor.............................. 20
6. ACKNOWLEDGMENTS AND CONSENTS............................................... 20
6.1 Regulatory Approvals................................................... 20
</TABLE>
i
<PAGE> 3
<TABLE>
<S><C> <C>
6.2 Rule 204-3 Notice..................................................... 21
6.3 No Representation..................................................... 21
6.4 Confidential Information.............................................. 21
7. MISCELLANEOUS.............................................................. 22
7.1 Termination and Cancellation.......................................... 22
7.2 Compliance with Commitment Agreement.................................. 22
7.3 Notices............................................................... 22
7.4 Entire Agreement...................................................... 23
7.5 Governing Law......................................................... 23
7.6 Amendments............................................................ 23
7.7 Binding Agreement..................................................... 24
7.8 Severable Provisions.................................................. 24
7.9 Assignment............................................................ 24
7.10 Counterparts.......................................................... 24
7.11 Required CFTC Legend.................................................. 24
</TABLE>
ii
<PAGE> 4
THIS INVESTMENT ADVISORY AGREEMENT (the "Investment Advisory
Agreement") is dated this 18th day of February, 2000, made and entered into by
and between BANKERS LIFE INSURANCE COMPANY OF NEW YORK, a New York domiciled
life insurance company (the "Company"), and AMERUS CAPITAL MANAGEMENT GROUP,
INC., an Iowa corporation (the "Advisor").
R E C I T A L S:
WHEREAS, the Company desires to have the Advisor provide certain
investment advisory services, including investment management, investment
accounting and asset/liability management services on the terms and conditions
set forth herein; and
WHEREAS, the Advisor agrees to provide such investment advisory
services on the terms and conditions set forth herein; and
WHEREAS, the Company and the Advisor acknowledge that all investment
advisory services provided under this Agreement are subject to the applicable
investment provisions of the New York Insurance Law as well as oversight by the
Company's Board of Directors;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
<PAGE> 5
1. INVESTMENT MANAGEMENT AND SERVICES
1.1 AUTHORIZATION AND APPOINTMENT. The Company hereby authorizes and
appoints the Advisor to act as its investment advisor and to exercise full
investment discretion subject to the terms of this Investment Advisory
Agreement, as the Company's agent and attorney-in-fact, with respect to all cash
and invested assets of the Company (consisting of all assets required to be
listed on Lines 1 through 10 of Page 2 of the NAIC Annual Statement blank for
Life and Accident and Health Companies, other than policy loans (Line 5) and
real estate properties occupied by the Company (Line 4.1)) (all of which cash
and invested assets are collectively referred to in this Investment Advisory
Agreement as the "Assets"), and to perform the investment-related services
described in this Investment Advisory Agreement.
1.2 SERVICES AND ADVICE. The Advisor agrees to manage and service the
Assets of the Company. The services to be rendered by the Advisor to the Company
pursuant to this Section 1.2 shall include:
(a) Providing a continuous investment program for the Company,
including recommending investment policies and establishing procedures and asset
allocation and investment strategies commensurate with the Company's risk,
return, income, tax and asset/liability goals and objectives;
(b) Supervising, managing and directing the investment and reinvestment
of cash, securities, loans and all other property that comprise the Assets of
the Company;
(c) Obtaining and evaluating pertinent economic, financial, and other
relevant data affecting the Assets and other investment opportunities which the
Advisor considers suitable for
2
<PAGE> 6
the Company, and purchasing and selling or otherwise disposing of Assets in the
name and on behalf of the Company;
(d) Taking or causing all supervisory and ministerial actions to be
taken which are necessary to implement, manage, and service the investment
program of the Company, including but not limited to effecting and documenting
all transactions in the Assets and obtaining legal evidence of the ownership of
all Assets purchased or otherwise acquired for the Company's account;
(e) Performing, as requested by the Company, asset/liability matching
services including, but not limited to, cash flow testing, modeling activities,
the development of asset baseline strategies commensurate with the risk
characteristics of associated liabilities and to give advice on the investment
aspects of product development for traditional as well as investment oriented
products; and
(f) Providing investment accounting services and reports as follows:
(i) providing financial reporting on all invested asset-related
accounts and all investment income-related accounts necessary
for inclusion in the Company's general ledger, with the level
of detail deemed appropriate by the parties, and
(ii) providing additional accounting services as are normally
provided in the course of investment management for a life
insurance company, such as providing information for
regulatory reports, industry statistics, rating agency
compilations and examination reports.
3
<PAGE> 7
1.3 DOCUMENTATION. The Advisor shall maintain, and cause any Custodian
(as herein defined) having custody of any of the Assets to furnish to the
Advisor, copies or originals of the documentation pertaining to the servicing
and management of the Assets, including trade confirmations.
1.4 COMPLIANCE WITH INVESTMENT LAWS AND COMPANY POLICIES AND
GUIDELINES. In carrying out its responsibilities under this Investment Advisory
Agreement, the Advisor agrees to comply with all applicable requirements of the
Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), the
federal securities laws and all other applicable laws and regulations, and
acknowledges that its management of the Assets is subject to the following
guidelines, limitations and restrictions:
(a) All investments shall be made in compliance with all applicable
laws and regulations, including, without limitation, the relevant investment
provisions of New York's Insurance Law, including the qualitative and
quantitative limitations set forth therein;
(b) All investments shall be, in addition, subject to the investment
policies and guidelines approved by the Company's Board of Directors which are
attached hereto as Schedule 1.4(b)(ii) (as such investment policies may be
amended from time to time by the Company's Board of Directors, the "Company's
Investment Policies"). The Company reserves the right, in its sole discretion,
to amend the Company's Investment Policies and agrees that any such amendments
shall take effect only upon notice to the Advisor.
(c) All hedging activity in which the Company may become involved
relating to the investments and income generation activity by means of
derivative transactions will be subject to a Derivative Use Plan to be adopted
by the Company's Board of Directors and approved by the
4
<PAGE> 8
New York Insurance Department (the "NYID"). The Advisor will assist the Company
in developing the Derivative Use Plan after the date hereof. The Company
reserves the right, in its sole discretion, to amend such Derivative Use Plan
and agrees that any such amendments shall take effect only upon notice to the
Advisor and approval by the NYID.
1.5 CUSTODIAN. (a) Assets consisting of cash and securities shall be
held by those institutions specified in writing by the Company on Schedule 1.5
hereto (the "Custodians"). The Company's list of Custodians on Schedule 1.5 may
be modified from time to time by the Company after consultation with the
Advisor. The Company hereby represents that the institutions set forth on
Schedule 1.5 have agreed to act as Custodians for its Assets.
(b) The Assets will be established and maintained with the relevant
Custodians as provided herein and will be subject to any applicable custodial
agreements. The Company agrees to cooperate with the Advisor and the Custodians
in taking all such action as may be necessary or advisable to establish the
Advisor's and the Custodians' authority with respect to the management of the
securities and other Assets held in the Company's account.
(c) The Company shall furnish such authorization as any Custodian may
require from time to time in order that the Advisor may direct such Custodian to
deliver Assets sold and to pay out of the cash portion of the Assets managed by
the Advisor for any additional Assets purchased in accordance with any relevant
custodial agreement and this Investment Advisory Agreement.
(d) The Advisor shall give the Custodians appropriate instructions in
writing or orally and confirmed in writing as soon as practicable thereafter.
The Company shall instruct the Custodians to provide the Advisor with such
periodic reports concerning the status of the Company's account as the Advisor
may reasonably request from time to time. All income, gains
5
<PAGE> 9
and accruals from or to the Assets shall be collected by the relevant Custodian
and credited to the Company's account.
(e) The Company agrees that the Advisor shall have no liability to the
Company or any other person for any loss or other harm to any property of the
Company held in the custody of a Custodian (or its nominee), including any harm
to any property of the Company resulting from the bankruptcy of the Custodian or
any acts of the agents or employees of a Custodian and whether or not the full
amount of such loss is covered by the Securities Investor Protection Corporation
("SIPC") or any other insurance which may be carried by a Custodian. The Company
understands that SIPC provides only limited protection for the loss of property
held by a broker dealer.
1.6 REPORTS TO BOARDS OF DIRECTORS. The Advisor shall furnish such
periodic reports as may be requested by the Board of Directors of the Company,
or its duly authorized committee with respect to: (i) the Advisor's investment
activities and the performance of the Assets and the Company's investment
program; (ii) the Advisor's recommended changes, if any, in the Company's
investment program; and (iii) any and all other actions taken by the Advisor
relating to the Company's investment program.
1.7 SUPERVISION BY BOARD OF DIRECTORS. The Advisor acknowledges that
the Board of Directors of the Company is vested with the power, authority and
responsibility for managing the business and affairs of the Company including,
without limitation, its investment program. The Advisor acknowledges that any
and all actions, whether supervisory or ministerial, taken pursuant to this
Section 1 by the Advisor shall be subject to the continuous supervision of said
Board of Directors.
6
<PAGE> 10
1.8 POWERS OF ADVISOR. (a) Subject to the terms of this Investment
Advisory Agreement, the Company's Investment Policies and such written
investment instructions as the Company may deliver to the Advisor from time to
time (such terms, policies and instructions are collectively referred to herein
as the "Terms and Instructions"), the Advisor shall have power to supervise,
direct and execute the investment and reinvestment of the cash, securities and
other property that comprise the Assets and engage in such transactions on the
Company's behalf as the Advisor may deem appropriate, in the Advisor's sole
discretion and without prior consultation with the Company, in any and all forms
of securities or other property as permitted by the Terms and Instructions, and
to hold temporary cash balances without liability of the Advisor to the Company
for interest thereon or to invest such temporary cash balances in money market
funds or comparable short-term investments pending reinvestment thereof. The
Company hereby ratifies and confirms any and all transactions hereafter engaged
in by the Advisor in respect of its Assets provided that such transactions
comply with the Terms and Instructions.
(b) The Advisor shall, subject to the terms of this Investment Advisory
Agreement and the Company's Investment Policies, have the exclusive right to
manage the Assets and may use and rely on such information and materials as it
may deem pertinent (including seeking advice from its affiliates). Subject to
the foregoing, the Advisor may delegate all or a portion of its responsibilities
with respect to all or a portion of the Assets to one or more sub-advisors with
the consent of the Company, each of whom shall be an agent of the Advisor;
provided, that no such delegation shall relieve the Advisor from its obligations
hereunder.
7
<PAGE> 11
(c) Subject to the Terms and Instructions, and with respect to any
Assets in the form of securities, the Advisor is authorized, but shall not be
required: (i) to vote, tender or convert any such securities; (ii) to execute
waivers, consents and other instruments with respect to such securities; and
(iii) to endorse, transfer or deliver such securities or to consent to any class
action, plan of reorganization, merger, combination, consolidation, liquidation,
or similar plan with reference to such securities.
2. PERSONNEL, FACILITIES AND COSTS
2.1 PERSONNEL. Except as otherwise provided herein, the Advisor shall
furnish all personnel necessary to provide all the services to the Company as
are required to be rendered under this Investment Advisory Agreement.
2.2 FACILITIES. The Advisor shall furnish all equipment, software and
other facilities necessary to provide all of the services to the Company as are
required to be rendered under this Investment Advisory Agreement.
2.3 COSTS AND EXPENSES. The Company shall pay directly or reimburse the
Advisor for all costs and expenses reasonably necessary or required for Advisor
to render the services provided for by this Investment Advisory Agreement,
including, without limitation, all subadvisory fees, Custodian fees, mortgage
servicing fees, brokers' fees, bank fees, legal expenses and fees for tax advice
(provided the fees for legal services and tax advice are incurred for such
services beyond those provided in the normal course of originating or acquiring
securities, mortgage loans and other Assets and, in respect to any single
request for such services that the Advisor reasonably expects will exceed
$5,000.00, with the consent of the Company) and any costs of safekeeping or
transport in connection with the acquisition and disposition of
8
<PAGE> 12
Assets, including execution costs, custody fees, margin costs and any other
transaction expenses incurred in connection with a transaction in any of the
Assets; provided, however, that no employee of the Advisor shall receive any
salary or other compensation directly from the Company in connection with the
services, advice, and assistance to be rendered by the Advisor under this
Investment Advisory Agreement.
2.4 BROKERAGE. The Advisor is authorized to use its discretion to
select the brokers or dealers that will execute transactions in securities which
are included in the Assets. The Advisor will use reasonable efforts to obtain
prompt execution of orders at the most favorable prices reasonably obtainable
and, in doing so, will consider a number of factors, including, without
limitation, the overall direct net economic result of the transaction (including
commission, which may not be the lowest available but which ordinarily will not
be higher than the generally prevailing competitive range), the financial
strength and stability of the broker, the efficiency with which the transaction
is effected, the ability to effect a transaction involving a large block, the
availability of the broker to stand ready to execute possible difficult
transactions in the future and other matters involved in the receipt of
"brokerage and research services" as defined in and in compliance with Section
28(e) of the Securities Exchange Act of 1934, as amended, and regulations
thereunder. It is further understood that any supplemental advisory or
statistical services which may be provided to the Advisor from time to time by a
broker-dealer or other person for whatever reason shall not reduce the amount of
the fees payable to the Advisor hereunder, notwithstanding that such
supplemental advisory or statistical services are being furnished in connection
with or incident to the execution of portfolio securities transactions of the
Assets.
9
<PAGE> 13
2.5 NON-EXCLUSIVE ADVISORY SERVICES. It is understood that the Advisor
performs investment advisory services for various clients including investment
companies. The Company agrees that the Advisor may give advice and take action
with respect to any of its other clients which may differ from the advice given,
or the timing or nature of action taken, with respect to the Assets, so long as
it is the Advisor's policy, to the extent practical, to allocate investment
opportunities to the Company over a period of time on a fair and equitable basis
relative to other clients. Nothing in this Investment Advisory Agreement shall
limit or restrict the Advisor or any of its directors, officers, affiliates or
employees from buying, selling or trading in any securities or other assets for
its or their own account or accounts, and the Company acknowledges that the
Advisor, its directors, officers, affiliates and employees, and other clients of
the Advisor, may at any time acquire, increase, decrease or dispose of positions
in investments which are at the same time being acquired, held or disposed of
for the Company. The Advisor will not have any obligation to initiate the
purchase or sale, or to recommend for purchase or sale, for the Company any
security or other asset which the Advisor, its directors, officers, affiliates
or employees may purchase, hold or sell for its or their own accounts or for the
accounts of any other clients of the Advisor.
2.6 AGENCY CROSS TRANSACTIONS. From time to time, the Advisor or
brokers or dealers affiliated with it may find themselves in a position to buy
for certain of their brokerage clients securities which the Advisor's investment
advisory clients wish to sell, and to sell for certain of their brokerage
clients securities which advisory clients wish to buy. Where one of the parties
is an advisory client, the Advisor or the affiliated broker or dealer cannot
participate in this type of transaction (known as a cross transaction) on behalf
of an advisory client and retain commissions
10
<PAGE> 14
from both parties to the transaction without the advisory client's consent. This
is because in a situation where the Advisor is making the investment decision
(as opposed to a brokerage client which makes its own investment decisions), and
the Advisor or an affiliate is receiving commissions from one or both sides of
the transaction, there is a potential conflicting division of loyalties and
responsibilities on the Advisor's part regarding the advisory client. The
Securities and Exchange Commission has adopted a rule under the Investment
Advisers Act which permits the Advisor or its affiliates to participate on
behalf of the Company in agency cross transactions if the Company has given
written consent in advance. By execution of this Investment Advisory Agreement,
the Company authorizes the Advisor or its affiliates to participate in agency
cross transactions involving the Assets, subject to the Company's prior written
consent with respect to each particular agency cross transaction.
2.7 AGGREGATION. The Advisor is authorized, in its discretion, to
aggregate purchases and sales and other transactions made for the Company with
purchases and sales and other transactions in the same or similar securities or
instruments of the same issuer or counterparty for other clients of the Advisor
or with affiliates of the Advisor. When transactions are so aggregated, the
actual prices applicable to the aggregated transactions will be averaged, and
the Company will be deemed to have purchased or sold its proportionate share of
the instruments involved at the average price so obtained. Stock exchange
regulations may in certain instances prevent the executing broker/dealer from
delivering a separate confirmation slip with respect to the Company's
participation in the aggregated transactions and, in such event, the Advisor
will advise the Company in writing of any purchase or disposition of instruments
for the Company with respect to any such aggregated transaction.
11
<PAGE> 15
2.8 CONFLICT OF INTEREST. The Advisor shall not render any advice or
services concerning securities of companies of which any of the Advisor's, or
affiliates of the Advisor's, officers, directors, or employees are directors or
officers, or companies in which the Advisor or any of the Advisor's affiliates
or the officers, directors and employees of any of them has any substantial
economic interest, unless the Advisor discloses such conflict to the Company
prior to rendering such advice or services.
3. AMOUNT AND PAYMENT OF FEES
3.1 FEES FOR SERVICES. As consideration for the Advisor providing the
services, advice and assistance in connection with the Company's Assets and
investment program set forth in this Investment Advisory Agreement, the Company
agrees to pay the Advisor the fees set forth on Schedule 3.1 to this Investment
Advisory Agreement. The fees payable to the Advisor hereunder shall be exclusive
of the costs and expenses described in Section 2.3 incurred by the Advisor in
connection with transactions in the Assets, which shall be paid directly by the
Company or, if paid by the Advisor, reimbursed to the Advisor in addition to the
fees set forth in Schedule 3.1.
3.2 ADJUSTMENT TO FEES. The fees payable under Section 3.1 shall remain
payable each quarter for the duration of the term of this Investment Advisory
Agreement; provided, however, that if the amount of the Adjusted Assets (as
defined in Schedule 3.1) increases or decreases by at least 25% of the amount of
such Adjusted Assets as of the date of this Investment Advisory Agreement, then
the amount payable shall be subject to adjustment by the parties as set forth in
Schedule 3.1. For purposes of determining such increase or decrease, the
Adjusted Assets shall be valued as follows at the end of any calendar quarter
(each, a "Valuation Date") during the continuation of this Investment Advisory
Agreement. Bonds, debentures, notes, certificates of
12
<PAGE> 16
deposit, and other fixed income securities of a similar nature, whether or not
traded on a national securities exchange, shall be valued in accordance with any
reasonable valuation method selected by the Advisor which is based on sales
prices of the same or comparable securities on or reasonably preceding the
Valuation Date. Other securities for which market quotations are readily
available will be valued at the known current bid price reasonably believed by
the Advisor to most nearly represent current market value. Other securities and
all other assets will be valued at fair market value as determined in good faith
by the Advisor.
3.3 PRORATION OF FEES. In the event of (a) inception of this Investment
Advisory Agreement on a day other than the first day of a calendar quarter or
(b) termination of this Investment Advisory Agreement on a day other than the
last day of a calendar quarter, the fee accrued during the quarter in which such
event occurs shall be prorated on the basis of the number of days that the
Investment Advisory Agreement is in effect during such quarter relative to the
number of days in such quarter.
4. CONFIDENTIALITY, PERFORMANCE, AND RELATIONSHIP OF PARTIES
4.1 DISCLOSURE OF INFORMATION. The Advisor agrees that all information
communicated to it by the Company while this Investment Advisory Agreement is in
force shall be used by the Advisor only for the purposes of this Investment
Advisory Agreement and for the benefit of the Advisor and its affiliates in
connection with the Combination and Investment Agreement, dated as of the date
hereof, between American Mutual Holding Company, AmerUs Life Holdings, Inc.,
Indianapolis Life Insurance Company and The Indianapolis Life Group of
Companies, Inc., and that, during the term of this Investment Advisory Agreement
and thereafter, the Advisor will not
13
<PAGE> 17
disclose such information to any person who is not a director, officer, employee
or agent of the Company or the Advisor or, in furtherance of the performance of
this Investment Advisory Agreement, an affiliate thereof who shall agree to be
bound by this Section, except to the extent that such disclosure is required,
directly or indirectly, by applicable law, rule or regulation, it being
acknowledged that, to the extent such disclosure is made to any sub-advisor or
other agent of the Advisor, such agent shall be required to undertake to be
bound by the provisions of this Section.
4.2 RECORDS AND REPORTS. All forms, records, statements, reports, files
and other data and information prepared, maintained or collected by the Advisor
in the performance of this Investment Advisory Agreement shall become the sole
property of the Company and, upon request, shall be furnished to the Company or
its designee.
4.3 INSPECTION OF BOOKS AND RECORDS. The Advisor shall keep books of
accounts and records relating to the services performed hereunder, in which full
and correct entries will be made in accordance with generally accepted
accounting procedures. In addition, the books, records and accounts kept by
Advisor with respect to this Investment Advisory Agreement shall be so
maintained as to clearly and accurately disclose the precise nature and details
of the services, advice and assistance provided by Advisor to the Company. In
addition to the rights to have information and records furnished to it pursuant
to Section 4.2 above, the Company or its designated agents shall have, upon not
less than five (5) days prior written notice to the Advisor, the right to
inspect the books and records of the Advisor at the offices of the Advisor in
which said books and records are maintained during normal business hours for any
purpose related to the Advisor's performance under this Investment Advisory
Agreement. The Company and
14
<PAGE> 18
affiliates of the Company who are also clients of the Advisor shall coordinate
their exercise of the rights described in this paragraph in order to minimize
the impact of such inspection on the Advisor.
4.4 PERFORMANCE. The failure of any party to insist upon strict
performance of any provision of this Investment Advisory Agreement shall not
constitute a waiver of the right to insist upon strict performance of the
obligation to strictly perform thereafter.
4.5 RELATIONSHIP OF PARTIES. The Advisor assumes no responsibility
under this Investment Advisory Agreement other than to render the services,
advice, and assistance provided for hereunder in accordance with this Investment
Advisory Agreement. It is expressly understood and agreed that with respect to
and for the purposes of this Investment Advisory Agreement, that the Advisor and
the Company are not partners or joint venturers. The relationship between the
Company and the Advisor with respect to and for the purposes of this Investment
Advisory Agreement shall be that of independent contractor.
4.6 STANDARD OF CARE. (a) The Company understands that the Advisor has
assumed no responsibility under this Investment Advisory Agreement other than to
render the services provided for herein in accordance with this Investment
Advisory Agreement. The Advisor shall use its best judgment and knowledge in
carrying out its duties hereunder in good faith, and shall be liable for actions
and omissions constituting violations of the Investment Advisors Act, other
federal securities laws or any other applicable laws, but shall not be liable
for any mistake of judgment or for any other loss suffered by the Company in the
management of the Assets unless such loss results from the Advisor's willful
misfeasance, gross negligence, reckless disregard of its duties or bad faith in
connection with its performance hereunder. Without limiting the
15
<PAGE> 19
generality of the foregoing, the Advisor shall have no liability to any person
for the acts or omissions of any third party (other than its own agents).
(b) The Advisor shall use its best efforts to tender securities and
interest coupons in response to offers, calls or redemptions, or with respect to
exercise of conversion provisions, subscription rights and other options
relating to the Assets, but the Advisor shall not be liable to the Company or
otherwise for any failure to do so or to perform any act in connection therewith
or to do so on a timely basis, unless the Advisor has received written notice
thereof that refers to particular securities managed by it for the account of
the Company, in which case the Advisor shall exercise its sole discretion in
respect thereto in accordance with this Investment Advisory Agreement.
(c) The Advisor is authorized to accept and rely upon all written or
oral instructions, reports or communications given by an authorized agent of the
Company listed on Schedule 5.1(c) (as such Schedule may be amended from time to
time). The Advisor shall not be responsible for any act, omission or bankruptcy
of any broker-dealer or Custodian or any other person with whom the Advisor may
deal in respect of this Investment Advisory Agreement, including, without
limitation, actions taken in reliance on directions given by any agent of the
Company.
4.7 INDEMNIFICATION. (a) The Company shall indemnify and hold the
Advisor and each of its directors, members, managers, shareholders, officers,
controlling persons, employees, sub-advisors and agents (including any
individual who serves at the Advisor's request as director, officer, trustee or
the like of another corporation) and/or the legal representatives and
controlling persons of any of them harmless to the fullest extent permitted by
law from and against all losses,
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<PAGE> 20
claims, liabilities and expenses of any kind (including reasonable attorneys'
fees and expenses) and amounts paid in satisfaction of judgments, in compromise
or as fines or penalties (a "Loss") resulting from any inaccuracy of any
representation made by the Company herein or arising out of or as a consequence
of, or resulting from, any matter arising under this Investment Advisory
Agreement, including without limitation, actions taken by the Advisor pursuant
to this Investment Advisory Agreement other than with respect to any Loss
resulting from any failure by the Advisor to perform its duties and
responsibilities hereunder in accordance with the terms of this Investment
Advisory Agreement (including the standard of care set forth herein). The
Company agrees that this indemnity shall survive termination of this Investment
Advisory Agreement.
(b) The Advisor shall indemnify and hold the Company harmless from and
against all Losses resulting from any inaccuracy of any representation made by
the Advisor herein or resulting from any failure by the Advisor to perform its
duties and responsibilities hereunder consistent with Section 4.6(a) of this
Investment Advisory Agreement. The Advisor agrees that this indemnity shall
survive termination of this Investment Advisory Agreement.
4.8 ARBITRATION OF DISPUTES. (a) In the event of any dispute arising
between the Company and the Advisor with reference to any provision of this
Investment Advisory Agreement, the matter shall be arbitrated in accordance with
the Rules of the American Arbitration Association and the Federal Arbitration
Act, as provided below.
(b) Neither party shall initiate arbitration unless, at least 30 days
prior thereto, the party requesting arbitration has given the other party
written notice of the intent to initiate arbitration and a detailed description
of the basis of the dispute. If the dispute remains
17
<PAGE> 21
unresolved at the end of such 30-day period, then either party may notify the
other that it is proceeding to arbitration.
(c) Within thirty (30) days following such second notification, the
Company shall appoint an arbitrator and the Advisor shall appoint an arbitrator.
In the event one of the parties fails to appoint an arbitrator within said
thirty (30) days, the other party shall appoint both arbitrators. Within fifteen
(15) days following their appointment, and before entering into arbitration, the
arbitrators shall select an umpire. In the event the arbitrators are not able to
decide upon an umpire within said fifteen (15) days, the umpire shall be
appointed by the American Arbitration Association. The arbitrators shall be
executive officers or retired officers of investment management firms. Within
sixty (60) days following the notification of the decision to arbitrate, the
arbitration panel shall begin arbitration in Chicago, Illinois unless some other
place is agreed upon by the Company and the Advisor, at which time the parties
hereto may submit their cases in writing to the arbitration panel.
(d) The arbitration panel shall interpret this Investment Advisory
Agreement in accordance with Iowa laws and shall conduct proceedings in
accordance with the Federal Rules of Civil Procedure. Within sixty (60) days
after beginning the arbitration, the arbitrators shall file their written
decision on the matter under arbitration with the Company and with the Advisor.
(e) The expenses of the arbitration shall be paid by the party or
parties in the proportion established by the arbitrators.
(f) Any award of the arbitrators shall be deemed final and judgment
upon such award may be entered and enforced in any Iowa District Court and
transferred to any other jurisdiction.
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<PAGE> 22
5. REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants that as of the date of this Investment Advisory
Agreement:
(a) This Investment Advisory Agreement has been duly authorized,
executed and delivered by the Company and constitutes its valid and binding
obligation, enforceable against the Company in accordance with its terms;
(b) No governmental authorizations, approvals, consents or filings,
except for any approval of the New York State Department of Insurance, are
required in connection with the execution, delivery or performance of this
Investment Advisory Agreement by the Company; the execution, delivery and
performance of this Investment Advisory Agreement by the Company will not
violate or result in any default under the Company's certificate of
incorporation or bylaws (or equivalent constituent documents), any contract or
other agreement to which the Company is a party or by which it or its assets
(including the Assets) may be bound or any statute or any rule, regulation or
order of any government agency or body;
(c) The list of signatures attached hereto as Schedule 5.1(c) with
respect to the Company constitutes the valid signatures of all directors,
officers, employees or agents of the Company authorized to take action with
respect to the Company's Assets and the Advisor shall be entitled to
conclusively rely on any document executed by any of them;
(d) The Company is not an investment company (as that term is defined
in the Investment Company Act of 1940, as amended) and none of its Assets are
assets of an employee benefit plan subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended; and
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<PAGE> 23
(e) The Company is a "qualified eligible client" as defined in Rule
4.7(b)(1)(ii) of the Commodity Exchange Act.
5.2 REPRESENTATIONS AND WARRANTIES OF ADVISOR. The Advisor hereby
represents and warrants that as of the date of this Investment Advisory
Agreement:
(a) The Advisor hereby acknowledges that it is registered as an
investment adviser under the Investment Advisers Act.
(b) This Investment Advisory Agreement has been duly authorized,
executed and delivered by the Advisor and constitutes its valid and binding
obligation, enforceable against the Advisor in accordance with its terms; and
(c) No governmental authorizations, approvals, consents or filings are
required in connection with the execution, delivery or performance of this
Investment Advisory Agreement by the Advisor; the execution, delivery and
performance of this Investment Advisory Agreement by the Advisor will not
violate or result in any default under the Advisor's certificate of
incorporation or bylaws (or equivalent constituent documents), any contract or
other agreement to which the Advisor is a party or by which it may be bound or
any statute or any rule, regulation or order of any government agency or body.
6. ACKNOWLEDGMENTS AND CONSENTS
6.1 REGULATORY APPROVALS. The parties acknowledge that it is a
condition precedent to this Investment Advisory Agreement becoming effective
that all necessary insurance regulatory filings shall have been made and all
necessary insurance regulatory approvals shall have been obtained.
20
<PAGE> 24
6.2 RULE 204-3 NOTICE. The Advisor has delivered to the Company a copy
of the Advisor's Disclosure Statement, as required by Rule 204-3 under the
Investment Advisors Act. If the Company has not received the Advisor's
Disclosure Statement more than 48 hours prior to the date of execution of this
Investment Advisory Agreement, the Company understands that it may terminate
this Investment Advisory Agreement without penalty within five business days
after such date of execution, provided that any investment action taken by the
Advisor with respect to the Company's Assets prior to any such termination will
be at such Company's risk.
6.3 NO REPRESENTATION. The Advisor makes no representation as to the
success of any investment strategy or security recommended by the Advisor to the
Company. The Company acknowledges that it understands that no particular rate of
return on the Assets has been promised or indicated by the Advisor.
6.4 CONFIDENTIAL INFORMATION. By reason of the Advisor's investment
advisory activities and the investment banking and other activities of its
affiliates, the Advisor may acquire confidential information or be restricted
from initiating transactions in certain securities. The Company acknowledges and
agrees that the Advisor will not be free to divulge to the Company, or to act
upon, any such confidential information with respect to the Advisor's
performance of this Investment Advisory Agreement and that, due to such a
restriction, the Advisor may not initiate a transaction the Advisor otherwise
might have initiated.
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<PAGE> 25
7. MISCELLANEOUS
7.1 TERMINATION AND CANCELLATION. (a) This Investment Advisory
Agreement shall terminate automatically if it is assigned (as such term is
defined in the Investment Advisers Act and the rules thereunder) by the Advisor
without the prior written consent of the Company.
(b) This Investment Advisory Agreement may be terminated at any time by
either party by prior written notice to the other party, such termination to be
effective 60 days after receipt of such notice.
(c) Upon termination, the Company shall immediately pay the Advisor all
sums due hereunder through the date of termination and the Advisor shall deliver
to the Company or its designee, as soon as reasonably practicable, all forms,
records, statements, files, reports and other data and information prepared or
collected by the Advisor in connection with the performance of this Investment
Advisory Agreement. Termination of this Investment Advisory Agreement shall not
affect any obligation or liability on the part of the Company for any
transaction entered into or obligation incurred on the Company's behalf prior to
the effective date of such termination.
7.2 COMPLIANCE WITH COMMITMENT AGREEMENT. Indianapolis Life Insurance
Company and the Company are parties to a certain Commitment Agreement dated June
15, 1995 with the Superintendent of Insurance of New York in connection with the
operations and management of the Company. The Company and the Advisor agree that
no services shall be provided hereunder in violation of such Commitment
Agreement.
7.3 NOTICES. Any notices required or permitted under this Investment
Advisory Agreement shall be in writing and shall be deemed to have been duly
given if delivered or
22
<PAGE> 26
mailed, first class postage prepaid, to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
If to the Company: Bankers Life Insurance Company of New York
2960 North Meridian Street
Indianapolis, Indiana 46208
Attention: Jan Funk
If to the Advisor: AmerUs Capital Management Group, Inc.
699 Walnut, Suite 2000
Des Moines, Iowa 50309-3948
Attention: Thomas C. Godlasky, President
7.4 ENTIRE AGREEMENT. This Investment Advisory Agreement contains the
entire understanding of the parties hereto and supersedes all prior agreements
of the parties with respect to the subject matter contained herein. Any
condition to a party's obligation hereunder may be waived in writing by such
party.
7.5 GOVERNING LAW. It is understood that this Investment Advisory
Agreement shall be governed by and construed in accordance with the laws of the
State of Iowa applicable to contracts to be performed entirely within this
state, without regard to Iowa choice of law rules.
7.6 AMENDMENTS. This Investment Advisory Agreement shall not be
amended, changed, modified, terminated or discharged in whole or in part, except
by an instrument in writing duly executed by the affected parties hereto, or
their respective successors or assigns, and shall be subject to any required
approval of the applicable state regulatory authority for the Company.
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<PAGE> 27
7.7 BINDING AGREEMENT. This Investment Advisory Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns.
7.8 SEVERABLE PROVISIONS. If any provisions of this Investment Advisory
Agreement shall be found to be invalid by any administrative agency or court of
competent jurisdiction, such finding shall not affect the remaining provisions
of this Investment Advisory Agreement and all such remaining provisions shall
remain in full force and effect.
7.9 ASSIGNMENT. Any assignment, as defined by Section 202 of the
Investment Advisers Act to the extent applicable, by the Advisor shall require
the prior written consent of the Company, and any assignment by the Company or
the Advisor shall be subject to any required approval of the applicable state
regulatory authority for the Company.
7.10 COUNTERPARTS. This Investment Advisory Agreement may be executed
in two or more separate counterparts, each of which shall be deemed to be an
original hereof, but all of which shall constitute one and the same instrument.
7.11 REQUIRED CFTC LEGEND. PURSUANT TO AN EXEMPTION FROM THE COMMODITY
FUTURES TRADING COMMISSION IN CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE
CLIENTS, THIS INVESTMENT ADVISORY AGREEMENT IS NOT REQUIRED TO BE, AND HAS NOT
BEEN, FILED WITH THE COMMISSION. THE COMMODITY FUTURES TRADING COMMISSION DOES
NOT PASS UPON THE MERITS OF PARTICIPATING IN A TRADING PROGRAM OR UPON THE
ADEQUACY OF COMMODITY TRADING ADVISOR DISCLOSURE. CONSEQUENTLY, THE COMMODITY
FUTURES TRADING COMMISSION HAS NOT REVIEWED OR APPROVED THIS INVESTMENT ADVISORY
AGREEMENT.
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<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Advisory Agreement to be executed as of this 18th day of February, 2000.
AMERUS CAPITAL MANAGEMENT GROUP, INC.
By: /s/ THOMAS C. GODLASKY
---------------------------------
Name: Thomas C. Godlasky
-------------------------------
Title: President
------------------------------
BANKERS LIFE INSURANCE COMPANY OF NEW YORK
By: /s/ STEPHEN J. SHORROCK
---------------------------------
Name: Stephen J. Shorrock
-------------------------------
Title: President & CEO
------------------------------
<PAGE> 1
INVESTMENT ADVISORY
AGREEMENT
BY AND
BETWEEN
IL ANNUITY AND INSURANCE COMPANY
AND
AMERUS CAPITAL MANAGEMENT GROUP, INC.
DATED
FEBRUARY 18, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. INVESTMENT MANAGEMENT AND SERVICES .......................................... 2
1.1 Authorization and Appointment ........................................... 2
1.2 Services and Advice ..................................................... 2
1.3 Documentation ........................................................... 3
1.4 Compliance With Investment Laws and Company Policies and Guidelines ..... 4
1.5 Custodian ............................................................... 5
1.6 Reports to Boards of Directors .......................................... 6
1.7 Supervision by Board of Directors ....................................... 6
1.8 Powers of Advisor ....................................................... 7
2. PERSONNEL, FACILITIES AND COSTS ............................................. 8
2.1 Personnel ............................................................... 8
2.2 Facilities .............................................................. 8
2.3 Costs and Expenses ...................................................... 8
2.4 Brokerage ............................................................... 9
2.5 Non-Exclusive Advisory Services ......................................... 10
2.6 Agency Cross Transactions ............................................... 10
2.7 Aggregation ............................................................. 11
2.8 Conflict of Interest .................................................... 12
3. AMOUNT AND PAYMENT OF FEES .................................................. 12
3.1 Fees for Services ....................................................... 12
3.2 Adjustment to Fees ...................................................... 12
3.3 Proration of Fees ....................................................... 13
4. CONFIDENTIALITY, PERFORMANCE, AND RELATIONSHIP OF PARTIES ................... 13
4.1 Disclosure of Information ............................................... 13
4.2 Records and Reports ..................................................... 14
4.3 Inspection of Books and Records ......................................... 14
4.4 Performance ............................................................. 15
4.5 Relationship of Parties ................................................. 15
4.6 Standard of Care ........................................................ 15
4.7 Indemnification ......................................................... 16
4.8 Arbitration of Disputes ................................................. 17
5. REPRESENTATIONS AND WARRANTIES .............................................. 19
5.1 Representations and Warranties of the Company ........................... 19
5.2 Representations and Warranties of Advisor ............................... 20
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
6. ACKNOWLEDGEMENTS AND CONSENTS ............................................... 20
6.1 Regulatory Approvals .................................................... 20
6.2 Rule 204-3 Notice ....................................................... 21
6.3 No Representation ....................................................... 21
6.4 Confidential Information ................................................ 21
7. MISCELLANEOUS ............................................................... 22
7.1 Termination and Cancellation ............................................ 22
7.2 Notices ................................................................. 22
7.3 Entire Agreement ........................................................ 23
7.4 Governing Law ........................................................... 23
7.5 Amendments .............................................................. 23
7.6 Binding Agreement ....................................................... 23
7.7 Severable Provisions .................................................... 23
7.8 Assignment .............................................................. 24
7.9 Counterparts ............................................................ 24
7.10 Required CFTC Legend ................................................... 24
</TABLE>
ii
<PAGE> 4
THIS INVESTMENT ADVISORY AGREEMENT (the "Investment Advisory Agreement") is
dated this 18th day of February, 2000, made and entered into by and between IL
ANNUITY AND INSURANCE COMPANY, a Massachusetts domiciled life insurance company
(the "Company"), and AMERUS CAPITAL MANAGEMENT GROUP, INC., an Iowa corporation
(the "Advisor").
R E C I T A L S:
WHEREAS, the Company desires to have the Advisor provide certain investment
advisory services, including investment management, investment accounting and
asset/liability management services on the terms and conditions set forth
herein; and
WHEREAS, the Advisor agrees to provide such investment advisory services on
the terms and conditions set forth herein; and
WHEREAS, the Company and the Advisor acknowledge that all investment
advisory services provided under this Agreement are subject to the applicable
investment provisions of the Massachusetts Insurance Law as well as oversight by
the Company's Board of Directors;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
<PAGE> 5
1. INVESTMENT MANAGEMENT AND SERVICES
1.1 AUTHORIZATION AND APPOINTMENT. The Company hereby authorizes and
appoints the Advisor to act as its investment advisor and to exercise full
investment discretion subject to the terms of this Investment Advisory
Agreement, as the Company's agent and attorney-in-fact, with respect to all cash
and invested assets of the Company (consisting of all assets required to be
listed on Lines 1 through 10 of Page 2 of the NAIC Annual Statement blank for
Life and Accident and Health Companies, other than policy loans (Line 5) and
real estate properties occupied by the Company (Line 4.1)) (all of which cash
and invested assets are collectively referred to in this Investment Advisory
Agreement as the "Assets"), and to perform the investment-related services
described in this Investment Advisory Agreement.
1.2 SERVICES AND ADVICE. The Advisor agrees to manage and service the
Assets of the Company. The services to be rendered by the Advisor to the Company
pursuant to this Section 1.2 shall include:
(a) Providing a continuous investment program for the Company, including
recommending investment policies and establishing procedures and asset
allocation and investment strategies commensurate with the Company's risk,
return, income, tax and asset/liability goals and objectives;
(b) Supervising, managing and directing the investment and reinvestment of
cash, securities, loans and all other property that comprise the Assets of the
Company;
(c) Obtaining and evaluating pertinent economic, financial, and other
relevant data affecting the Assets and other investment opportunities which the
Advisor considers suitable for
2
<PAGE> 6
the Company, and purchasing and selling or otherwise disposing of Assets in the
name and on behalf of the Company;
(d) Taking or causing all supervisory and ministerial actions to be taken
which are necessary to implement, manage, and service the investment program of
the Company, including but not limited to effecting and documenting all
transactions in the Assets and obtaining legal evidence of the ownership of all
Assets purchased or otherwise acquired for the Company's account;
(e) Performing asset/liability matching services including, but not limited
to, cash flow testing, modeling activities, the development of asset baseline
strategies commensurate with the risk characteristics of associated liabilities
and to give advice on the investment aspects of product development for
traditional as well as investment oriented products; and
(f) Providing investment accounting services and reports as follows:
(i) providing financial reporting on all invested asset-related
accounts and all investment income-related accounts necessary for
inclusion in the Company's general ledger, with the level of
detail deemed appropriate by the parties, and
(ii) providing additional accounting services as are normally provided
in the course of investment management for a life insurance
company, such as providing information for regulatory reports,
industry statistics, rating agency compilations and examination
reports.
1.3 DOCUMENTATION. The Advisor shall maintain, and cause any Custodian (as
herein defined) having custody of any of the Assets to furnish to the Advisor,
copies or originals of the
3
<PAGE> 7
documentation pertaining to the servicing and management of the Assets,
including trade confirmations.
1.4 COMPLIANCE WITH INVESTMENT LAWS AND COMPANY POLICIES AND GUIDELINES. In
carrying out its responsibilities under this Investment Advisory Agreement, the
Advisor agrees to comply with all applicable requirements of the Investment
Advisers Act of 1940, as amended (the "Investment Advisers Act"), the federal
securities laws and all other applicable laws and regulations, and acknowledges
that its management of the Assets is subject to the following guidelines,
limitations and restrictions:
(a) All investments shall be made in compliance with all applicable laws
and regulations, including, without limitation, the relevant investment
provisions of Massachusetts' Insurance Law, including the qualitative and
quantitative limitations set forth therein;
(b) All investments shall be, in addition, subject to the investment
policies and guidelines approved by the Company's Board of Directors which are
attached hereto as Schedule 1.4(b)(ii)(as such investment policies may be
amended from time to time by the Company's Board of Directors, the "Company's
Investment Policies"). The Company reserves the right, in its sole discretion,
to amend the Company's Investment Policies and agrees that any such amendments
shall take effect only upon notice to the Advisor.
(c) All hedging activity in which the Company may become involved relating
to the investments and income generation activity by means of derivative
transactions will be subject to a Derivative Use Plan to be adopted by the
Company's Board of Directors and approved by the Massachusetts Insurance
Department (the "MID"). The Advisor will assist the Company in developing the
Derivative Use Plan after the date hereof. The Company reserves the right, in
its
4
<PAGE> 8
sole discretion, to amend such Derivative Use Plan and agrees that any such
amendments shall take effect only upon notice to the Advisor and approval by the
MID.
1.5 CUSTODIAN. (a) Assets consisting of cash and securities shall be held
by those institutions specified in writing by the Company on Schedule 1.5 hereto
(the "Custodians"). The Company's list of Custodians on Schedule 1.5 may be
modified from time to time by the Company after consultation with the Advisor.
The Company hereby represents that the institutions set forth on Schedule 1.5
have agreed to act as Custodians for its Assets.
(b) The Assets will be established and maintained with the relevant
Custodians as provided herein and will be subject to any applicable custodial
agreements. The Company agrees to cooperate with the Advisor and the Custodians
in taking all such action as may be necessary or advisable to establish the
Advisor's and the Custodians' authority with respect to the management of the
securities and other Assets held in the Company's account.
(c) The Company shall furnish such authorization as any Custodian may
require from time to time in order that the Advisor may direct such Custodian to
deliver Assets sold and to pay out of the cash portion of the Assets managed by
the Advisor for any additional Assets purchased in accordance with any relevant
custodial agreement and this Investment Advisory Agreement.
(d) The Advisor shall give the Custodians appropriate instructions in
writing or orally and confirmed in writing as soon as practicable thereafter.
The Company shall instruct the Custodians to provide the Advisor with such
periodic reports concerning the status of the Company's account as the Advisor
may reasonably request from time to time. All income, gains and accruals from or
to the Assets shall be collected by the relevant Custodian and credited to the
Company's account.
5
<PAGE> 9
(e) The Company agrees that the Advisor shall have no liability to the
Company or any other person for any loss or other harm to any property of the
Company held in the custody of a Custodian (or its nominee), including any harm
to any property of the Company resulting from the bankruptcy of the Custodian or
any acts of the agents or employees of a Custodian and whether or not the full
amount of such loss is covered by the Securities Investor Protection Corporation
("SIPC") or any other insurance which may be carried by a Custodian. The Company
understands that SIPC provides only limited protection for the loss of property
held by a broker dealer.
1.6 REPORTS TO BOARDS OF DIRECTORS. The Advisor shall furnish such periodic
reports as may be requested by the Board of Directors of the Company, or its
duly authorized committee with respect to: (i) the Advisor's investment
activities and the performance of the Assets and the Company's investment
program; (ii) the Advisor's recommended changes, if any, in the Company's
investment program; and (iii) any and all other actions taken by the Advisor
relating to the Company's investment program.
1.7 SUPERVISION BY BOARD OF DIRECTORS. The Advisor acknowledges that the
Board of Directors of the Company is vested with the power, authority and
responsibility for managing the business and affairs of the Company including,
without limitation, its investment program. The Advisor acknowledges that any
and all actions, whether supervisory or ministerial, taken pursuant to this
Section 1 by the Advisor shall be subject to the continuous supervision of said
Board of Directors.
6
<PAGE> 10
1.8 POWERS OF ADVISOR. (a) Subject to the terms of this Investment Advisory
Agreement, the Company's Investment Policies and such written investment
instructions as the Company may deliver to the Advisor from time to time (such
terms, policies and instructions are collectively referred to herein as the
"Terms and Instructions"), the Advisor shall have power to supervise, direct and
execute the investment and reinvestment of the cash, securities and other
property that comprise the Assets and engage in such transactions on the
Company's behalf as the Advisor may deem appropriate, in the Advisor's sole
discretion and without prior consultation with the Company, in any and all forms
of securities or other property as permitted by the Terms and Instructions, and
to hold temporary cash balances without liability of the Advisor to the Company
for interest thereon or to invest such temporary cash balances in money market
funds or comparable short-term investments pending reinvestment thereof. The
Company hereby ratifies and confirms any and all transactions hereafter engaged
in by the Advisor in respect of its Assets provided that such transactions
comply with the Terms and Instructions.
(b) The Advisor shall, subject to the terms of this Investment Advisory
Agreement and the Company's Investment Policies, have the exclusive right to
manage the Assets and may use and rely on such information and materials as it
may deem pertinent (including seeking advice from its affiliates). Subject to
the foregoing, the Advisor may delegate all or a portion of its responsibilities
with respect to all or a portion of the Assets to one or more sub-advisors with
the consent of the Company, each of whom shall be an agent of the Advisor;
provided, that no such delegation shall relieve the Advisor from its obligations
hereunder.
7
<PAGE> 11
(c) Subject to the Terms and Instructions, and with respect to any Assets
in the form of securities, the Advisor is authorized, but shall not be required:
(i) to vote, tender or convert any such securities; (ii) to execute waivers,
consents and other instruments with respect to such securities; and (iii) to
endorse, transfer or deliver such securities or to consent to any class action,
plan of reorganization, merger, combination, consolidation, liquidation, or
similar plan with reference to such securities.
2. PERSONNEL, FACILITIES AND COSTS
2.1 PERSONNEL. Except as otherwise provided herein, the Advisor shall
furnish all personnel necessary to provide all the services to the Company as
are required to be rendered under this Investment Advisory Agreement.
2.2 FACILITIES. The Advisor shall furnish all equipment, software and other
facilities necessary to provide all of the services to the Company as are
required to be rendered under this Investment Advisory Agreement.
2.3 COSTS AND EXPENSES. The Company shall pay directly or reimburse the
Advisor for all costs and expenses reasonably necessary or required for Advisor
to render the services provided for by this Investment Advisory Agreement,
including, without limitation, all subadvisory fees, Custodian fees, mortgage
servicing fees, brokers' fees, bank fees, legal expenses and fees for tax advice
(provided the fees for legal services and tax advice are incurred for such
services beyond those provided in the normal course of originating or acquiring
securities, mortgage loans and other Assets and, in respect to any single
request for such services that the Advisor reasonably expects will exceed
$5,000.00, with the consent of the Company) and any costs of safekeeping or
transport in connection with the acquisition and disposition of
8
<PAGE> 12
Assets, including execution costs, custody fees, margin costs and any other
transaction expenses incurred in connection with a transaction in any of the
Assets; provided, however, that no employee of the Advisor shall receive any
salary or other compensation directly from the Company in connection with the
services, advice, and assistance to be rendered by the Advisor under this
Investment Advisory Agreement.
2.4 BROKERAGE. The Advisor is authorized to use its discretion to select
the brokers or dealers that will execute transactions in securities which are
included in the Assets. The Advisor will use reasonable efforts to obtain prompt
execution of orders at the most favorable prices reasonably obtainable and, in
doing so, will consider a number of factors, including, without limitation, the
overall direct net economic result of the transaction (including commission,
which may not be the lowest available but which ordinarily will not be higher
than the generally prevailing competitive range), the financial strength and
stability of the broker, the efficiency with which the transaction is effected,
the ability to effect a transaction involving a large block, the availability of
the broker to stand ready to execute possible difficult transactions in the
future and other matters involved in the receipt of "brokerage and research
services" as defined in and in compliance with Section 28(e) of the Securities
Exchange Act of 1934, as amended, and regulations thereunder. It is further
understood that any supplemental advisory or statistical services which may be
provided to the Advisor from time to time by a broker-dealer or other person for
whatever reason shall not reduce the amount of the fees payable to the Advisor
hereunder, notwithstanding that such supplemental advisory or statistical
services are being furnished in connection with or incident to the execution of
portfolio securities transactions of the Assets.
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2.5 NON-EXCLUSIVE ADVISORY SERVICES. It is understood that the Advisor
performs investment advisory services for various clients including investment
companies. The Company agrees that the Advisor may give advice and take action
with respect to any of its other clients which may differ from the advice given,
or the timing or nature of action taken, with respect to the Assets, so long as
it is the Advisor's policy, to the extent practical, to allocate investment
opportunities to the Company over a period of time on a fair and equitable basis
relative to other clients. Nothing in this Investment Advisory Agreement shall
limit or restrict the Advisor or any of its directors, officers, affiliates or
employees from buying, selling or trading in any securities or other assets for
its or their own account or accounts, and the Company acknowledges that the
Advisor, its directors, officers, affiliates and employees, and other clients of
the Advisor, may at any time acquire, increase, decrease or dispose of positions
in investments which are at the same time being acquired, held or disposed of
for the Company. The Advisor will not have any obligation to initiate the
purchase or sale, or to recommend for purchase or sale, for the Company any
security or other asset which the Advisor, its directors, officers, affiliates
or employees may purchase, hold or sell for its or their own accounts or for the
accounts of any other clients of the Advisor.
2.6 AGENCY CROSS TRANSACTIONS. From time to time, the Advisor or brokers or
dealers affiliated with it may find themselves in a position to buy for certain
of their brokerage clients securities which the Advisor's investment advisory
clients wish to sell, and to sell for certain of their brokerage clients
securities which advisory clients wish to buy. Where one of the parties is an
advisory client, the Advisor or the affiliated broker or dealer cannot
participate in this type of transaction (known as a cross transaction) on behalf
of an advisory client and retain commissions
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from both parties to the transaction without the advisory client's consent. This
is because in a situation where the Advisor is making the investment decision
(as opposed to a brokerage client which makes its own investment decisions), and
the Advisor or an affiliate is receiving commissions from one or both sides of
the transaction, there is a potential conflicting division of loyalties and
responsibilities on the Advisor's part regarding the advisory client. The
Securities and Exchange Commission has adopted a rule under the Investment
Advisers Act which permits the Advisor or its affiliates to participate on
behalf of the Company in agency cross transactions if the Company has given
written consent in advance. By execution of this Investment Advisory Agreement,
the Company authorizes the Advisor or its affiliates to participate in agency
cross transactions involving the Assets, subject to the Company's prior written
consent with respect to each particular agency cross transaction.
2.7 AGGREGATION. The Advisor is authorized, in its discretion, to aggregate
purchases and sales and other transactions made for the Company with purchases
and sales and other transactions in the same or similar securities or
instruments of the same issuer or counterparty for other clients of the Advisor
or with affiliates of the Advisor. When transactions are so aggregated, the
actual prices applicable to the aggregated transactions will be averaged, and
the Company will be deemed to have purchased or sold its proportionate share of
the instruments involved at the average price so obtained. Stock exchange
regulations may in certain instances prevent the executing broker/dealer from
delivering a separate confirmation slip with respect to the Company's
participation in the aggregated transactions and, in such event, the Advisor
will advise the Company in writing of any purchase or disposition of instruments
for the Company with respect to any such aggregated transaction.
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2.8 CONFLICT OF INTEREST. The Advisor shall not render any advice or
services concerning securities of companies of which any of the Advisor's, or
affiliates of the Advisor's, officers, directors, or employees are directors or
officers, or companies in which the Advisor or any of the Advisor's affiliates
or the officers, directors and employees of any of them has any substantial
economic interest, unless the Advisor discloses such conflict to the Company
prior to rendering such advice or services.
3. AMOUNT AND PAYMENT OF FEES
3.1 FEES FOR SERVICES. As consideration for the Advisor providing the
services, advice and assistance in connection with the Company's Assets and
investment program set forth in this Investment Advisory Agreement, the Company
agrees to pay the Advisor the fees set forth on Schedule 3.1 to this Investment
Advisory Agreement. The fees payable to the Advisor hereunder shall be exclusive
of the costs and expenses described in Section 2.3 incurred by the Advisor in
connection with transactions in the Assets, which shall be paid directly by the
Company or, if paid by the Advisor, reimbursed to the Advisor in addition to the
fees set forth in Schedule 3.1.
3.2 ADJUSTMENT TO FEES. The fees payable under Section 3.1 shall remain
payable each quarter for the duration of the term of this Investment Advisory
Agreement; provided, however, that if the amount of the Adjusted Assets (as
defined in Schedule 3.1) increases or decreases by at least 25% of the amount of
such Adjusted Assets as of the date of this Investment Advisory Agreement, then
the amount payable shall be subject to adjustment by the parties as set forth in
Schedule 3.1. For purposes of determining such increase or decrease, the
Adjusted Assets shall be valued as follows at the end of any calendar quarter
(each, a "Valuation Date") during the continuation of this Investment Advisory
Agreement. Bonds, debentures, notes, certificates of
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deposit, and other fixed income securities of a similar nature, whether or not
traded on a national securities exchange, shall be valued in accordance with any
reasonable valuation method selected by the Advisor which is based on sales
prices of the same or comparable securities on or reasonably preceding the
Valuation Date. Other securities for which market quotations are readily
available will be valued at the known current bid price reasonably believed by
the Advisor to most nearly represent current market value. Other securities and
all other assets will be valued at fair market value as determined in good faith
by the Advisor.
3.3 PRORATION OF FEES. In the event of (a) inception of this Investment
Advisory Agreement on a day other than the first day of a calendar quarter or
(b) termination of this Investment Advisory Agreement on a day other than the
last day of a calendar quarter, the fee accrued during the quarter in which such
event occurs shall be prorated on the basis of the number of days that the
Investment Advisory Agreement is in effect during such quarter relative to the
number of days in such quarter.
4. CONFIDENTIALITY, PERFORMANCE, AND RELATIONSHIP OF PARTIES
4.1 DISCLOSURE OF INFORMATION. The Advisor agrees that all information
communicated to it by the Company while this Investment Advisory Agreement is in
force shall be used by the Advisor only for the purposes of this Investment
Advisory Agreement and for the benefit of the Advisor and its affiliates in
connection with the Combination and Investment Agreement, dated as of the date
hereof, between American Mutual Holding Company, AmerUs Life Holdings, Inc.,
Indianapolis Life Insurance Company and The Indianapolis Life Group of
Companies, Inc., and that, during the term of this Investment Advisory Agreement
and thereafter, the Advisor will not
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disclose such information to any person who is not a director, officer, employee
or agent of the Company or the Advisor or, in furtherance of the performance of
this Investment Advisory Agreement, an affiliate thereof who shall agree to be
bound by this Section, except to the extent that such disclosure is required,
directly or indirectly, by applicable law, rule or regulation, it being
acknowledged that, to the extent such disclosure is made to any sub-advisor or
other agent of the Advisor, such agent shall be required to undertake to be
bound by the provisions of this Section.
4.2 RECORDS AND REPORTS. All forms, records, statements, reports, files and
other data and information prepared, maintained or collected by the Advisor in
the performance of this Investment Advisory Agreement shall become the sole
property of the Company and, upon request, shall be furnished to the Company or
its designee.
4.3 INSPECTION OF BOOKS AND RECORDS. The Advisor shall keep books of
account and records relating to the services performed hereunder, in which full
and correct entries will be made in accordance with generally accepted
accounting procedures. In addition, the books, records and accounts kept by
Advisor with respect to this Investment Advisory Agreement shall be so
maintained as to clearly and accurately disclose the precise nature and details
of the services, advice and assistance provided by Advisor to the Company. In
addition to the rights to have information and records furnished to it pursuant
to Section 4.2 above, the Company or its designated agents shall have, upon not
less than five (5) days prior written notice to the Advisor, the right to
inspect the books and records of the Advisor at the offices of the Advisor in
which said books and records are maintained during normal business hours for any
purpose related to the Advisor's performance under this Investment Advisory
Agreement. The Company and
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affiliates of the Company who are also clients of the Advisor shall coordinate
their exercise of the rights described in this paragraph in order to minimize
the impact of such inspection on the Advisor.
4.4 PERFORMANCE. The failure of any party to insist upon strict performance
of any provision of this Investment Advisory Agreement shall not constitute a
waiver of the right to insist upon strict performance of the obligation to
strictly perform thereafter.
4.5 RELATIONSHIP OF PARTIES. The Advisor assumes no responsibility under
this Investment Advisory Agreement other than to render the services, advice,
and assistance provided for hereunder in accordance with this Investment
Advisory Agreement. It is expressly understood and agreed that with respect to
and for the purposes of this Investment Advisory Agreement, that the Advisor and
the Company are not partners or joint venturers. The relationship between the
Company and the Advisor with respect to and for the purposes of this Investment
Advisory Agreement shall be that of independent contractor.
4.6 STANDARD OF CARE. (a) The Company understands that the Advisor has
assumed no responsibility under this Investment Advisory Agreement other than to
render the services provided for herein in accordance with this Investment
Advisory Agreement. The Advisor shall use its best judgment and knowledge in
carrying out its duties hereunder in good faith, and shall be liable for actions
and omissions constituting violations of the Investment Advisors Act, other
federal securities laws or any other applicable laws, but shall not be liable
for any mistake of judgment or for any other loss suffered by the Company in the
management of the Assets unless such loss results from the Advisor's willful
misfeasance, gross negligence, reckless disregard of its duties or bad faith in
connection with its performance hereunder. Without limiting the
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generality of the foregoing, the Advisor shall have no liability to any person
for the acts or omissions of any third party (other than its own agents).
(b) The Advisor shall use its best efforts to tender securities and
interest coupons in response to offers, calls or redemptions, or with respect to
exercise of conversion provisions, subscription rights and other options
relating to the Assets, but the Advisor shall not be liable to the Company or
otherwise for any failure to do so or to perform any act in connection therewith
or to do so on a timely basis, unless the Advisor has received written notice
thereof that refers to particular securities managed by it for the account of
the Company, in which case the Advisor shall exercise its sole discretion in
respect thereto in accordance with this Investment Advisory Agreement.
(c) The Advisor is authorized to accept and rely upon all written or oral
instructions, reports or communications given by an authorized agent of the
Company listed on Schedule 5.1(c) (as such Schedule may be amended from time to
time). The Advisor shall not be responsible for any act, omission or bankruptcy
of any broker-dealer or Custodian or any other person with whom the Advisor may
deal in respect of this Investment Advisory Agreement, including, without
limitation, actions taken in reliance on directions given by any agent of the
Company.
4.7 INDEMNIFICATION. (a) The Company shall indemnify and hold the Advisor
and each of its directors, members, managers, shareholders, officers,
controlling persons, employees, sub-advisors and agents (including any
individual who serves at the Advisor's request as director, officer, trustee or
the like of another corporation) and/or the legal representatives and
controlling persons of any of them harmless to the fullest extent permitted by
law from and against all losses,
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claims, liabilities and expenses of any kind (including reasonable attorneys'
fees and expenses) and amounts paid in satisfaction of judgments, in compromise
or as fines or penalties (a "Loss") resulting from any inaccuracy of any
representation made by the Company herein or arising out of or as a consequence
of, or resulting from, any matter arising under this Investment Advisory
Agreement, including without limitation, actions taken by the Advisor pursuant
to this Investment Advisory Agreement other than with respect to any Loss
resulting from any failure by the Advisor to perform its duties and
responsibilities hereunder in accordance with the terms of this Investment
Advisory Agreement (including the standard of care set forth herein). The
Company agrees that this indemnity shall survive termination of this Investment
Advisory Agreement.
(b) The Advisor shall indemnify and hold the Company harmless from and
against all Losses resulting from any inaccuracy of any representation made by
the Advisor herein or resulting from any failure by the Advisor to perform its
duties and responsibilities hereunder consistent with Section 4.6(a) of this
Investment Advisory Agreement. The Advisor agrees that this indemnity shall
survive termination of this Investment Advisory Agreement.
4.8 ARBITRATION OF DISPUTES. (a) In the event of any dispute arising
between the Company and the Advisor with reference to any provision of this
Investment Advisory Agreement, the matter shall be arbitrated in accordance with
the Rules of the American Arbitration Association and the Federal Arbitration
Act, as provided below.
(b) Neither party shall initiate arbitration unless, at least 30 days prior
thereto, the party requesting arbitration has given the other party written
notice of the intent to initiate arbitration and a detailed description of the
basis of the dispute. If the dispute remains
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unresolved at the end of such 30-day period, then either party may notify the
other that it is proceeding to arbitration.
(c) Within thirty (30) days following such second notification, the Company
shall appoint an arbitrator and the Advisor shall appoint an arbitrator. In the
event one of the parties fails to appoint an arbitrator within said thirty (30)
days, the other party shall appoint both arbitrators. Within fifteen (15) days
following their appointment, and before entering into arbitration, the
arbitrators shall select an umpire. In the event the arbitrators are not able to
decide upon an umpire within said fifteen (15) days, the umpire shall be
appointed by the American Arbitration Association. The arbitrators shall be
executive officers or retired officers of investment management firms. Within
sixty (60) days following the notification of the decision to arbitrate, the
arbitration panel shall begin arbitration in Chicago, Illinois unless some other
place is agreed upon by the Company and the Advisor, at which time the parties
hereto may submit their cases in writing to the arbitration panel.
(d) The arbitration panel shall interpret this Investment Advisory
Agreement in accordance with Iowa laws and shall conduct proceedings in
accordance with the Federal Rules of Civil Procedure. Within sixty (60) days
after beginning the arbitration, the arbitrators shall file their written
decision on the matter under arbitration with the Company and with the Advisor.
(e) The expenses of the arbitration shall be paid by the party or parties
in the proportion established by the arbitrators.
(f) Any award of the arbitrators shall be deemed final and judgment upon
such award may be entered and enforced in any Iowa District Court and
transferred to any other jurisdiction.
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5. REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants that as of the date of this Investment Advisory
Agreement:
(a) This Investment Advisory Agreement has been duly authorized, executed
and delivered by the Company and constitutes its valid and binding obligation,
enforceable against the Company in accordance with its terms;
(b) No governmental authorizations, approvals, consents or filings, except
for any filing with the Massachusetts Department of Insurance, are required in
connection with the execution, delivery or performance of this Investment
Advisory Agreement by the Company; the execution, delivery and performance of
this Investment Advisory Agreement by the Company will not violate or result in
any default under the Company's certificate of incorporation or bylaws (or
equivalent constituent documents), any contract or other agreement to which the
Company is a party or by which it or its assets (including the Assets) may be
bound or any statute or any rule, regulation or order of any government agency
or body;
(c) The list of signatures attached hereto as Schedule 5.1(c) with respect
to the Company constitutes the valid signatures of all directors, officers,
employees or agents of the Company authorized to take action with respect to the
Company's Assets and the Advisor shall be entitled to conclusively rely on any
document executed by any of them;
(d) The Company is not an investment company (as that term is defined in
the Investment Company Act of 1940, as amended) and none of its Assets are
assets of an employee benefit plan subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended; and
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(e) The Company is a "qualified eligible client" as defined in Rule
4.7(b)(1)(ii) of the Commodity Exchange Act.
5.2 REPRESENTATIONS AND WARRANTIES OF ADVISOR. The Advisor hereby
represents and warrants that as of the date of this Investment Advisory
Agreement:
(a) The Advisor hereby acknowledges that it is registered as an investment
adviser under the Investment Advisers Act.
(b) This Investment Advisory Agreement has been duly authorized, executed
and delivered by the Advisor and constitutes its valid and binding obligation,
enforceable against the Advisor in accordance with its terms; and
(c) No governmental authorizations, approvals, consents or filings are
required in connection with the execution, delivery or performance of this
Investment Advisory Agreement by the Advisor; the execution, delivery and
performance of this Investment Advisory Agreement by the Advisor will not
violate or result in any default under the Advisor's certificate of
incorporation or bylaws (or equivalent constituent documents), any contract or
other agreement to which the Advisor is a party or by which it may be bound or
any statute or any rule, regulation or order of any government agency or body.
6. ACKNOWLEDGMENTS AND CONSENTS
6.1 REGULATORY APPROVALS. The parties acknowledge that it is a condition
precedent to this Investment Advisory Agreement becoming effective that all
necessary insurance regulatory filings shall have been made and all necessary
insurance regulatory approvals shall have been obtained.
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6.2 RULE 204-3 NOTICE. The Advisor has delivered to the Company a copy of
the Advisor's Disclosure Statement, as required by Rule 204-3 under the
Investment Advisors Act. If the Company has not received the Advisor's
Disclosure Statement more than 48 hours prior to the date of execution of this
Investment Advisory Agreement, the Company understands that it may terminate
this Investment Advisory Agreement without penalty within five business days
after such date of execution, provided that any investment action taken by the
Advisor with respect to the Company's Assets prior to any such termination will
be at such Company's risk.
6.3 NO REPRESENTATION. The Advisor makes no representation as to the
success of any investment strategy or security recommended by the Advisor to the
Company. The Company acknowledges that it understands that no particular rate of
return on the Assets has been promised or indicated by the Advisor.
6.4 CONFIDENTIAL INFORMATION. By reason of the Advisor's investment
advisory activities and the investment banking and other activities of its
affiliates, the Advisor may acquire confidential information or be restricted
from initiating transactions in certain securities. The Company acknowledges and
agrees that the Advisor will not be free to divulge to the Company, or to act
upon, any such confidential information with respect to the Advisor's
performance of this Investment Advisory Agreement and that, due to such a
restriction, the Advisor may not initiate a transaction the Advisor otherwise
might have initiated.
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7. MISCELLANEOUS
7.1 TERMINATION AND CANCELLATION. (a) This Investment Advisory Agreement
shall terminate automatically if it is assigned (as such term is defined in the
Investment Advisers Act and the rules thereunder) by the Advisor without the
prior written consent of the Company.
(b) This Investment Advisory Agreement may be terminated at any time by
either party by prior written notice to the other party, such termination to be
effective 60 days after receipt of such notice.
(c) Upon termination, the Company shall immediately pay the Advisor all
sums due hereunder through the date of termination and the Advisor shall deliver
to the Company or its designee, as soon as reasonably practicable, all forms,
records, statements, files, reports and other data and information prepared or
collected by the Advisor in connection with the performance of this Investment
Advisory Agreement. Termination of this Investment Advisory Agreement shall not
affect any obligation or liability on the part of the Company for any
transaction entered into or obligation incurred on the Company's behalf prior to
the effective date of such termination.
7.2 NOTICES. Any notices required or permitted under this Investment
Advisory Agreement shall be in writing and shall be deemed to have been duly
given if delivered or mailed, first class postage prepaid, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
If to the Company: IL Annuity and Insurance Company
2960 North Meridian Street
Indianapolis, Indiana 46208
Attention: Jan Funk
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If to the Advisor: AmerUs Capital Management Group, Inc.
699 Walnut, Suite 2000
Des Moines, Iowa 50309-3948
Attention: Thomas C. Godlasky, President
7.3 ENTIRE AGREEMENT. This Investment Advisory Agreement contains the
entire understanding of the parties hereto and supersedes all prior agreements
of the parties with respect to the subject matter contained herein. Any
condition to a party's obligation hereunder may be waived in writing by such
party.
7.4 GOVERNING LAW. It is understood that this Investment Advisory Agreement
shall be governed by and construed in accordance with the laws of the State of
Iowa applicable to contracts to be performed entirely within this state, without
regard to Iowa choice of law rules.
7.5 AMENDMENTS. This Investment Advisory Agreement shall not be amended,
changed, modified, terminated or discharged in whole or in part, except by an
instrument in writing duly executed by the affected parties hereto, or their
respective successors or assigns, and shall be subject to any required approval
of the applicable state regulatory authority for the Company.
7.6 BINDING AGREEMENT. This Investment Advisory Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns.
7.7 SEVERABLE PROVISIONS. If any provisions of this Investment Advisory
Agreement shall be found to be invalid by any administrative agency or court of
competent jurisdiction, such finding shall not affect the remaining provisions
of this Investment Advisory Agreement and all such remaining provisions shall
remain in full force and effect.
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7.8 ASSIGNMENT. Any assignment, as defined by Section 202 of the Investment
Advisers Act to the extent applicable, by the Advisor shall require the prior
written consent of the Company, and any assignment by the Company or the Advisor
shall be subject to any required approval of the applicable state regulatory
authority for the Company.
7.9 COUNTERPARTS. This Investment Advisory Agreement may be executed in two
or more separate counterparts, each of which shall be deemed to be an original
hereof, but all of which shall constitute one and the same instrument.
7.10 REQUIRED CFTC LEGEND. PURSUANT TO AN EXEMPTION FROM THE COMMODITY
FUTURES TRADING COMMISSION IN CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE
CLIENTS, THIS INVESTMENT ADVISORY AGREEMENT IS NOT REQUIRED TO BE, AND HAS NOT
BEEN, FILED WITH THE COMMISSION. THE COMMODITY FUTURES TRADING COMMISSION DOES
NOT PASS UPON THE MERITS OF PARTICIPATING IN A TRADING PROGRAM OR UPON THE
ADEQUACY OF COMMODITY TRADING ADVISOR DISCLOSURE. CONSEQUENTLY, THE COMMODITY
FUTURES TRADING COMMISSION HAS NOT REVIEWED OR APPROVED THIS INVESTMENT ADVISORY
AGREEMENT.
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IN WITNESS WHEREOF, the parties hereto have caused this Investment Advisory
Agreement to be executed as of this 18th day of February, 2000.
AMERUS CAPITAL MANAGEMENT GROUP, INC.
By: /s/ THOMAS C. GODLASKY
-----------------------------------------
Name: Thomas C. Godlasky
---------------------------------------
Title: President
--------------------------------------
IL ANNUITY AND INSURANCE COMPANY
By: /s/ LARRY R. PRIBLE
-----------------------------------------
Name: Larry R. Prible
---------------------------------------
Title: Chairman
--------------------------------------
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