<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
First American Capital Corporation
(Name of Small Business Issuer in its charter)
Kansas 48-1187574
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3360 S.W. Harrison Street, Suite 100, Topeka, KS 66611
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, (785)267-7077
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
NONE NONE
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.10 par value
(Title of class)
Preferred Stock, 6% non-cumulative, convertible, callable
(Title of class)
<PAGE>
<PAGE>1
PART I
Item 1. Description of Business
First American Capital Corporation (the "Company") was incorporated on
July 10, 1996 for the purpose of forming, owning and managing life
insurance companies. The Company sold 2,120,000 shares at $.10 per
share to its organizing shareholders in August of 1996 for total proceeds
of $212,000. Also, in September, 1996, the Company sold 600,000 shares
of its common stock for $1.00 per share in a separate private placement.
The initial capital was used to fund the Company's efforts to register a
$12,500,000 intra-state public offering with the Office of the Kansas
Securities Commissioner. Included in the registration was a 10% over-sale
provision. On March 11, 1997 the Office of the Kansas Securities
Commissioner declared the registration statement effective.
The offering was sold in Units consisting of one share of 6% non-cumulative
convertible, redeemable, $5.00 par value preferred stock and one share of no
par value common stock for a total Unit cost of $25.00. The net proceeds of
the offering were used to capitalize a life insurance subsidiary; form a
venture capital company and provide capital for the acquisition of additional
life insurance or insurance related companies. Three million dollars of the
proceeds of the stock sale were used to capitalize the life insurance
subsidiary, First Life America Corporation ("FLAC"). The venture capital
subsidiary, Capital Venture, Inc., was formed in October of 1998 and may be
capitalized with up to three million dollars on a schedule as determined by
the Company's Board of Directors. Capital Venture, Inc. has yet to be
capitalized and has no contemplated or pending acquisitions. The remainder
of the proceeds will provide resources for one of the following:
capital for the life insurance subsidiary; provide capital for the possible
acquisition of life insurance or insurance related company(s) or provide
working capital. On January 10, 1999, the Company completed the intra-state
public stock offering raising $13,750,000 of capital which included a 10%
over-sale of $1,250,000.
First American Capital Corporation
The primary segment of the Company's operations will be life insurance.
Accordingly, a significant portion of revenue will be generated by the
Company's wholly owned life insurance subsidiary, FLAC. The Company
has contracted with FLAC to provide services which are incident to the
operations of FLAC. Under the terms of the contract, FLAC will pay the
Company service fees based on percentages of first year and renewal
premium income delivered by FLAC. Additional income will be provided
in the form of investment income. When the venture capital subsidiary
becomes operational, additional income may be provided through a service
fee arrangement with the Company.
The Company has contracted with First Alliance Corporation ("FAC") of
Lexington, Kentucky to provide underwriting and accounting services for
FLAC. Under the terms of the management agreement, the Company pays
fees based on a percentage of delivered premiums of FLAC. The
percentages are 5.5% for first year premiums; 4% of second year
premiums; 3% of third year premiums; 2% of fourth year premiums; 1% of
fifth year premiums and 1% for years six through ten for ten year
policies and .5% in years six through twenty for twenty year policies.
Pursuant to the agreement, the Company incurred $816 of management fees
during 1998. FAC is also a shareholder of the Company (see Item 7 on
Page 13).
<PAGE>
<PAGE>2
First Life America Corporation
On October 15, 1997, FLAC received a certificate of authority from the
Kansas Department of Insurance to transact life and annuity business in the
state of Kansas. On November 19, 1998, life insurance operations
commenced. FLAC has $3,000,000 of capital and surplus and is wholly
owned by the Company. FLAC has contracted with the Company for
policy administration and data processing services.
Administration
Effective December 31, 1998, FLAC entered into a service agreement with
the Company. Under the terms of the agreement, the Company will
provide personnel, facilities, and services incident to the operations of
FLAC. FLAC will not have any employees. Service to be performed
pursuant to the agreement are underwriting, claim processing, accounting,
policy processing and service and other services necessary for FLAC to
operate. The agreement is effective until either party provides 90 days
written notice of termination. Under the agreement, FLAC pays fees based
on a percentage of first year and renewal premiums delivered by FLAC.
Delivered premium is defined as premium received on new written
business which has been underwritten by FLAC and the policy accepted
by the policy owner upon delivery by the agent. The percentages under the
contract are 25% of first year life premiums; 40% of second year life
premiums; 30% of third year life premiums; 20% of fourth year life
premiums and 10% of life premiums in years five and thereafter. If at any
time FLAC's annual premiums on new business were to exceed
$5,000,000, the provisions of the agreement will be tolled until the
agreement has been resubmitted to the Kansas Insurance Department for
approval. FLAC will bear the cost of all direct selling costs which include
agent recruiting, training and licensing; agent commissions; any benefits
or awards directly for or to agents or management including any life or
health insurance to be provided; and any taxes (federal, state or county)
directly related to the business of FLAC. Additionally, FLAC will be
responsible for any reinsurance premiums; legal expenses related to
settlement of claims; state examination fees; directors fees and directors
liability insurance; interest on indebtedness; costs related to mergers or
acquisitions and costs related to fulfilling obligations of the life insurance
and annuity contracts written by the agents of FLAC. Pursuant to the terms
of the agreement, FLAC incurred $4,081 of service fees during 1998.
Actuarial Services
On behalf of FLAC, the Company has retained the services of Bruce and
Bruce Company, consulting actuaries of Lake Bluff, Illinois. Bruce and
Bruce developed the product that FLAC is marketing. Mr. Robert Bruce
of Bruce and Bruce has been appointed by the Board of Directors of FLAC
to act as FLAC's valuation and illustration actuary.
Products of FLAC
The primary insurance product being marketed by FLAC is a modified
payment whole life insurance policy with a flexible premium deferred
annuity rider. A modified payment whole life insurance policy requires
premium payments to be made for a certain number of years after which the
policyholder is entitled to full policy benefits. Typical premium paying
periods for modified payment whole life insurance polices are ten, fifteen
and twenty years. FLAC's product, marketed as the "First America 2000",
combines both a ten and twenty payment period based on the issue age of
the insured. Issue ages from 0 to 20 and 51 through 80 are ten pay polices
and issue ages from age 21 to 50 are twenty pay policies. Premium
payments are split between the life and annuity based on percentages
established in the product design. First year premiums payments are
allocated 100% to life insurance and renewal payments are split 50% to life
and 50% to annuity. The product is being sold in premium units with the
ability to purchase either fractional or multiple units. At the end of the
required premium paying period, the policyholder may continue to make
full premium payments into the annuity rider to provide for greater annuity
accumulations.
The initial product was designed to provide predetermined life insurance
benefits based on the age of the insured. The base coverage decreases each
year until an ultimate benefit amount is attained. The annuity rider does not
contain any fees or load. Surrender charges in the annuity are based on a
regressive scale which starts at 10% in the first year and decreases by 1%
each year until after the tenth policy year there are no surrender charges.
<PAGE>
<PAGE>3
Other products are also being considered. Under consideration are such
products as a single premium deferred annuity and a ten year renewal term
product. Marketing of these products will be used to meet niche market
needs.
Product Marketing and Sales
FLAC is using the same face-to-face marketing techniques for its life
insurance products as the Company did for its public stock offering. The
marketing plan is designed in its entirety around the Company's
stockholder base, which provides an excellent referral system for FLAC
product sales.
Once FLAC develops a substantial policyholder base in Kansas, marketing
efforts will expand into additional states. This expansion will depend
largely on many factors, one of which is being admitted to do business in
these additional states. Due to the uncertainties involved, management
cannot reasonable estimate the time frame of such expansion.
FLAC's insurance operations commenced on November 19, 1998 on a
limited basis for test marketing of the initial insurance market. The
agency force involved in selling the public offering are being licensed
through FLAC to sell the life insurance products.
Product Sales Information
<TABLE>
The following table provides certain information about FLAC's life
insurance operations for the year ended December 31, 1998. FLAC
commenced selling life insurance on November 19, 1998 and accordingly,
the results provided are for approximately one full month of operations:
<CAPTION>
Policies Amount of
(number) Insurance(1)
<S> <C> <C>
Issued during the year 5 $ 387,000
In-force end of year 5 387,000
<FN>
<F1>
(1) excludes accidental death benefits of $120,000
</FN>
</TABLE>
Reinsurance
In order to reduce the risk of financial exposure to adverse underwriting
results, insurance companies reinsure a portion of their risks with other
insurance companies. FLAC has entered into an agreement with Business
Men's Assurance Company of Kansas City, Missouri, to reinsure portions
of the life insurance risks it underwrites. FLAC retains a maximum of
$50,000 on any one insured. At December 31, 1998, FLAC had ceded
$137,000 of ordinary business and $120,000 of accidental death benefit
risk to Business Men's Assurance Company ("BMA"). In the event BMA
is unable to fulfill their obligations under the reinsurance agreement,
FLAC remains primarily liable. According to the reinsurance agreement,
there are no premiums due on first year business.
Investments
The Company is currently seeking the services of an investment advisor
to assist FLAC in managing its investments. Any Agreement for advisory
services must be submitted to the Kansas Department of Insurnace for
approval.
The Kansas Insurance Code restricts the investments of insurance
companies by the type of investment, the amount that an insurance
company may invest in one type of investment, and the amount that an
insurance company may invest in the securities of any one issuer. The
restrictions of the Kansas Insurance Code are not expected to have a
material effect on the investment return of FLAC. The Company is not
subject to the limitations which restrict the investments made by FLAC.
Currently, investments are held in short-term, highly liquid securities.
<PAGE>
<PAGE>4
Competition
The life insurance industry is extremely competitive. There are a large
number of insurance companies which are substantially larger, have greater
financial resources, offer more diversified product lines and have larger
selling organizations than FLAC. Competition also is encountered from the
expanding number of banks and other financial intermediaries that offer
competing products. FLAC must also compete with other insurers to attract
and retain qualified agents to market FLAC's products.
Governmental Regulation
FLAC is subject to regulation and supervision by the Kansas Department
of Insurance ("KDI"). The insurance laws of Kansas give the KDI broad
regulatory authority, including powers to: (i) grant and revoke licenses to
transact business; (ii) regulate and supervise trade practices and market
conduct; (iii) establish guaranty associations; (iv) license agents; (v)
approve policy forms; (vi) approve premium rates for some lines of
business; (vii) establish reserve requirements; (viii) prescribe the form and
content of required financial statements and reports; (ix) determine the
reasonableness and adequacy of statutory capital and surplus; and (x)
regulate the type and amount of permitted investments.
Kansas has enacted legislation which regulates insurance holding company
systems, including acquisitions, extraordinary dividends, the terms of
affiliate transactions, and other related matters. Currently, the Company
and FLAC have registered as a holding company system pursuant to the
laws of the state of Kansas.
Year 2000 Concerns
A growing concern is the ability of computer systems to accurately process
date calculations in the year 2000 and beyond. The problem arises from
the initial design of date values which only recognize a two digit year
value. As a result, a computer may interpret a date entered for the year
2000 as the year 1900. Any computer system that performs date
comparisons and calculations is exposed to such a problem. These systems
are typically referred to as information technology systems ("ITS") or
computer based systems. Another concern is microchips which may also
be encoded with a two digit date value. These microchips are typically
found in such office equipment as facsimile machines and telephone
systems. These systems are referred to as non-information technology
systems ("NITS").
The Company's primary exposure to any business interruption would be the
result of an ITS failure. The life insurance industry relies heavily on date
sensitive calculations in daily operations. The inability to process
transactions could be detrimental to the Company's ability to continue
operations. The Company out-sources its primary computer processing
system through Navisys, Inc. of Saint Louis, Missouri. Navisys has
assured the Company that its hardware and software systems have been
modified to eliminate any potential year 2000 problems. Testing is
scheduled to be completed by mid year 1999. Evaluation of internal
hardware and software is being performed. However, management does
not believe that a failure of these internal systems would cause an
interruption of business. Additionally, a NITS failure would not
substantially disrupt operations.
The costs to address year 2000 issues have been and will continue to be
relatively insignificant for the Company. All of the major costs related to
the insurance processing system have been borne by Navisys. Internally,
year 2000 issues may require the replacement of such items as personal
computers and facsimile machines, however these are not expected to cause
any significant financial impact.
The ultimate risk of the year 2000 issue is the Company's inability continue
as a going concern in the event of major computer system failure. The
impact could alter, not only the Company's ability to transact business, but
also global financial systems. Even though the Company is confident that
these issues will not cause significant internal problems, a danger exists
regarding the lack of preparedness of consumers and other institutions,
including federal and state government.
<PAGE>
<PAGE>5
The Company is in the process of developing contingency plans to address
any system failure related to the year 2000. These plans are expected to be
completed during the summer of 1999.
Financial Information Relating to Industry Segments
<TABLE>
Financial information related to specific segments of the Company's
business are presented below. All sales of life insurance by FLAC are to
unaffiliated customers.
<CAPTION>
Period from July
Years ended inception) through
December 31, December 31,
1998 1997 1996
<S> <C> <C> <C>
Premiums earned, net of reinsurance:
Life and annuity insurance operations $ 16,325 $ - $ -
Revenues:
Life and annuity insurance operations $ 91,848 $ 31,618 $ -
Corporate operations 273,068 43,544 4,961
Total $ 364,916 $ 75,162 $ 4,961
Income (loss) before income taxes:
Life and annuity insurance operations $ 66,680 $ 6,618 $ -
Corporate operations (397,593) (633,198) (224,113)
Total $ (330,913) $ (626,580) $ (224,113)
Assets:
Life and annuity insurance operations $ 3,113,186 $ 1,231,618 $ -
Corporate operations 8,395,825 1,914,878 611,621
Total $11,509,011 $ 3,146,496 $ 611,621
</TABLE>
Employees
As of December 31, 1998, the Company had four full time and three part
time employees.
Item 2 Plan of Operation
The Company has established its initial business plan priorities
summarized as follows: (i) form and capitalize a wholly-owned Kansas
domiciled life insurance subsidiary with $3,000,000 of net offering
proceeds; (ii) form and capitalize a wholly-owned venture capital
subsidiary with $3,000,000 of net offering proceeds and (iii) use all
remaining net offering proceeds for either working capital, additional
capitalization of the life insurance or venture capital subsidiaries and/or
acquisition of insurance-related companies.
In January of 1999, the Company completed its Kansas intra-state public
stock offering raising total capital of $13,750,000. The Company's life
insurance subsidiary, FLAC was capitalized with $1,200,000 on July 15,
1997. An additional $1,800,000 of capital was placed in FLAC on
December 10, 1998 for total capitalization of $3,000,000. In November
<PAGE>
<PAGE>6
of 1998, FLAC began test marketing of its initial insurance product
referred to as the "First America 2000". Training seminars were held in
December of 1998 to prepare the Company's security sales agents for
selling life insurance.
The primary revenue for the Company will be from the Insurance
operations of FLAC. Other income will be provided through interest
earning on capital. The Company has also proposed a venture capital
subsidiary which may be capitalized with an amount not to exceed
$3,000,000. The venture capital company will not commence operations
until FLAC has established a solid base of insurance operations.
FLAC entered into a service agreement with the Company for policy
administration. Under the terms of the agreement, the Company will
provide personnel, facilities, and services incident to the operations of
FLAC. FLAC will not have any employees. Service to be performed
pursuant to the agreement are underwriting, claim processing, accounting,
policy processing and service and other services necessary for FLAC to
operate. Payment pursuant to the agreement will be based on a percentage
of life insurance sales of FLAC. Management does not anticipate a need
to hire a significant number of additional personnel in the next 12 months.
Life Insurance Subsidiary
FLAC is using the same face-to-face marketing techniques for its life
insurance products as the Company did for its public stock offering. The
marketing plan is designed in its entirety around the Company's
stockholder base, which provides an excellent referral system for FLAC
product sales. The Company's security sales agent's licenses will be
terminated and they will become life insurance agents for FLAC. FLAC
will also hire individuals who have a long-range goal to be a career life
insurance agent. The recruiting, training and hiring of captive agents
(agents who sell only FLAC's products) will be a continuous process for
FLAC.
The primary insurance product being marketed by FLAC is a modified
payment ordinary life insurance policy with a flexible premium deferred
annuity rider. A modified payment life insurance policy requires premium
payments to be made for a certain number of years after which the
policyholder is entitled to full policy benefits. Typical premium paying
periods for modified payment whole life insurance polices are ten, fifteen
and twenty years. FLAC's product, marketed as the "First America 2000",
combines both a ten and twenty payment period based on the issue age of
the insured. Issue ages from 0 to 20 and 51 through 81 are ten pay polices
and issue ages from age 21 to 50 are twenty pay policies. Premium
payments are split between the life and annuity based on percentages
established in the product design. First year premiums payments are
allocated 100% to life insurance and renewal payments are split 50% to life
and 50% to annuity. The product is being sold in premium units with the
ability to purchase either fractional or multiple units. At the end of the
required premium paying period, the policyholder may continue to make
full premium payments into the annuity rider to provide for greater annuity
accumulations.
The initial product was designed to provide predetermined life insurance
benefits based on the age of the insured. The base coverage decreases each
year until an ultimate benefit amount is attained. The annuity rider does not
contain any fees or load. Surrender charges in the annuity are based on a
regressive scale which starts at 10% in the first year and decreases by 1%
each year until after the tenth policy year there are no surrender charges.
Other products are also being considered. Under consideration are such
products as a single premium deferred annuity and a ten year renewal term
product. Marketing of these products will be used to meet niche market
needs.
Underwriting guidelines as established will have a direct impact on
FLAC's operating results. If the underwriting standards established are not
adequate, desired operating results will not be realized. Generally, when
underwriting standards are less restrictive, more mortality claims will
result and vice versa. Underwriting standards have a direct impact on the
pricing structure of a product. The less restrictive the underwriting
standards, the higher the product needs to be priced in order to allow for
a higher incident of mortality. This higher incident of mortality is also
reflected in greater policy reserves being established. FLAC has
established underwriting guidelines consistent with its product pricing
structure.
<PAGE>
<PAGE>7
FLAC will adopt an investment policy in compliance with the insurance
laws of the State of Kansas. The type and amount of investments which
can be made by a life insurance company domiciled in the State of Kansas
are specifically controlled by Article 2b of Kansas Statutes Annotated
Chapter 40.
In order to reduce the risk of financial exposure to adverse underwriting
results, insurance companies reinsure a portion of their risks with other
insurance companies. FLAC has entered into an agreement with Business
Men's Assurance Company ("BMA") of Kansas City, Missouri, to reinsure
portions of the life insurance risks they underwrite. BMA is rate A+ by
A.M. Best and Company insurance rating service. FLAC retains a
maximum of $50,000 on any one insured.
Capital provided from the public offering will provide a considerable
amount of operating funds for current and future operations. The
Company does not anticipate any situations which would cause significant
capital requirements and should be able to satisfy its cash requirements for
at least the next 12 months. The operations of FLAC should provide
ample cash flows from premium income and investment income to meet
operating requirements. Life insurance contract liabilities are generally
long term in natural and are generally paid from future cash flows.
Item 3. Description of Property
The Company is currently located in approximately 2,700 square feet of
leased office space at 3360 S.W. Harrison Street, Topeka, Kansas 66611.
This lease commenced on July 11, 1996 and is for a three year period that
expires on July 31, 1999. Annual rent is $31,671. The Company is
currently assessing whether additional space may be required when the
lease expires in July of 1999. Neither the Company nor any of its
subsidiaries owns any real estate.
Item 4. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of March 1, 1999, regarding
ownership of Common Stock of the Company by (i) the only persons
known by the Company to own beneficially more than 5% thereof; (ii) the
directors individually; and (iii) all officers and directors as a group. This
table assumes that all the Preferred Stock is converted into Common Stock
(see Item 8 on Page 13).
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address of Beneficial
Beneficial Owner Position Ownership Percent of Class
<S> <C> <C> <C>
Michael N. Fink Chairman of the 125,000 2%
1121 Chetford Drive Board
Lexington, KY 40509
Rick D. Meyer President and 526,000 10%
3500 SW 29th Street Director
Topeka, KS 66611
Chris J. Haas Secretary/Treasurer 75,000 1%
1183 Sheffield Place and Director
Lexington, KY 40509
Danny N. Biggs Director 40,000 (1) *
2601 Canterbury
Great Bend, KS 66045
Paul Burke Director 50,000 *
26391 Cedar Niles Circle
Olathe, KS 66061
<PAGE>
<PAGE>8
Ed C. Carter Director 65,000 (2) 1%
4100 Wimbledon Drive
Lawrence, KS 66047
Kenneth Frahm Director 40,000 *
6005 SW 39th Street
Topeka, KS 66610
John Hadl Director 40,000 *
1185 N 1700 Road
Lawrence, KS 66045
Steve Irsik, Jr. Director 60,000 1%
05405 Six Road
Ingalls, KS 67853
John G. Montgomery Director 45,000 *
510 Redbud Lane
Junction City, KS 66441
Harland E. Priddle Director 40,000 *
102 North Bunker Hill Dr
Junction City, KS 66441
Gary E. Yager Director 40,000 *
3521 SW Lincolnshire
Topeka, KS 66614
First Alliance Corporation 5% or more 525,000 (3) 9.9%
2285 Executive Drive shareholder
Suite 308
Lexington, KY 40505
All Directors and Officers 1,146,000 22%
as a Group
* Indicates less than 1% ownership.
<FN>
<F1>
(1) Excludes 5,000 shares held by his son as to which Mr. Biggs
disclaims beneficial ownership.
<F2>
(2) Excludes 20,000 shares held by Becky Carter, Mr. Carter's wife,
as to which Mr. Carter disclaims beneficial ownership.
<F3>
(3) FAC is a financial services holding company based in Lexington,
Kentucky, which wholly owns a life insurance and venture capital
subsidiaries. Messrs. Fink and Haas are officers and directors of
FAC.
</FN>
<PAGE>
<PAGE>9
Item 5. Directors and Executive Officers
</TABLE>
<TABLE>
The current Executive Officers and Directors of the Company are as
follows:
<CAPTION>
Name Age Position
<S> <C> <C>
Michael N. Fink 43 Chairman of the Board
Rick D. Meyer 47 President and Director
Chris J. Haas 53 Secretary/Treasurer and
Director
Danny N. Biggs 62 Director
Paul Burke 65 Director
Ed C. Carter 56 Director
Kenneth Frahm 52 Director
John Hadl 59 Director
Steve Irsik Jr. 52 Director
John G. Montgomery 59 Director
Harland E. Priddle 68 Director
Gary E. Yager 44 Director
</TABLE>
The Directors serve until their successors are elected and qualified.
Directors will be elected annually by the stockholders. The Executive
Officers serve at the discretion of the Board of Directors. The President,
Secretary and Treasurer are elected at the annual meeting of the Board,
while the other officers are elected by the Board from time to time as the
Board deems advisable. The Executive Officers and Directors also hold
the same positions for the Company's subsidiaries. The following is a
brief description of the previous business background of the Executive
Officers and Directors:
Michael N. Fink. Mr. Fink has eighteen years of experience in the
insurance industry, primarily in sales management. From 1981 to 1984,
Mr. Fink was an agent, District Director, and Regional Director with
Liberty American Assurance Company in Lincoln, Nebraska. In 1984, Mr.
Fink transferred to an affiliated company, Future Security Life, in Austin,
Texas, where he served as Regional Director and Agency Director until
1988. In March 1988, Mr. Fink became affiliated with United Income,
Inc. and United Security Assurance Company as Agency Director and
Assistant to the President. In June 1993, Mr. Fink left the United
Companies and became President of First Alliance Corporation and its life
insurance and venture capital companies.
Rick D. Meyer. Mr. Meyer has seventeen years of experience in the
insurance industry, primarily in sales management. From May 1982 to
October 1984, Mr. Meyer was a life insurance agent, District Director and
Executive Sales Director with Liberty American Assurance Company in
Lincoln, Nebraska. In October 1984, Mr. Meyer transferred to an affiliated
company to become Agency Director. In 1985, Mr. Meyer left Liberty
American to become an organizer and Zone Sales Director for United
Trust, Inc. in Springfield, Illinois. In January 1988, Mr. Meyer transferred
to Columbus, Ohio to assist in the organization of United Income, Inc. and
served as Zone Sales Manager. While with United Income, he was
promoted to Training Director in 1991 and to Agency Director in 1993.
Mr. Meyer left the United Companies in January 1996 to form the
Company.
<PAGE>
<PAGE>10
Chris J. Haas. Mr. Haas has twenty years of experience in the insurance
industry primarily in the areas of financial and operations administration.
He served as Chief Financial Officer of Life of Indiana Corp. from June
1979 to June 1987. He then served as Chairman of the Board and
President of ROI Corporation from June 1987 to June 1989. Mr. Haas
became associated with United Trust, Inc., an Illinois insurance holding
company, in March of 1990 as that company's Chief Financial Officer. He
also served as Executive Vice-President of the Ohio-based United Income,
Inc. and Chief Financial Officer of United Security Assurance Company
from March 1990 to March of 1993. Mr. Haas left the United Companies
in April 1993 to become the Chairman and Secretary/Treasurer of First
Alliance Corporation and its life insurance and venture capital subsidiaries.
Mr. Haas is a Certified Public Accountant (Inactive) and a Fellow of Life
Management Institute (FLMI). He served as an audit Manager at Arthur
Young & Company in Indianapolis, Indiana, from October 1976 to June
1979. Mr. Haas holds a B.S. in accounting from Ball State University.
Danny N. Biggs. Mr. Biggs is Vice-President, Partner, General
Superintendent and Director of Pickrell Drilling Company, Inc., Mobile
Drilling Company, Inc.; Central Dirt Service, Inc., and Pickrell
Acquisitions, Inc. and also a Partner in Kelly Petroleum. Mr. Biggs is a
past President of the Kansas Independent Oil & Gas Association
("KIOGA") and is currently a member and director of KIOGA, director
and president of Kansas Oil & Gas Hall of Fame & Museum Foundation
and director of Barton County Historical Foundation. He is a member of
the Great Bend Chamber of Commerce, American Petroleum Institute,
Interstate Oil & Gas Compact Commission Crude Oil Policy Committee,
Association of Energy Service Companies and the Independent Petroleum
Association of America. He served as Chairman of the Mid-America Oil
& Gas Technology Exposition, Vision 2000 Area Relations/Image
Committee, KIOGA Membership Committee and general Chairman of the
1992 KIOGA Convention. Mr. Biggs is actively involved in numerous
other business, civic and religious organizations including prior service as
an Elder in the Presbyterian Church.
Paul "Bud" Burke. Mr. Burke is the President of Issues Management
Group, Inc., a public relations and governmental affairs consulting
company. Mr. Burke served as a member of the Kansas State Senate from
1975 to January 1997 and served as the President of the Senate from 1989
until his retirement in 1997. During his tenure in the Kansas Senate, Mr.
Burke served as Chairman of the Organization, Calendar and Rules,
Legislative Coordinating Council and Interstate Cooperation Committees.
Mr. Burke was a majority leader of the Senate from 1985 to 1988. Mr.
Burke has served in numerous national, state and local leadership positions
including past positions as a member of the President's Advisory
Commission on Intergovernmental Relations. He is also the former owner
of WEBBCO, Inc., an industrial engineering and equipment company. Mr.
Burke received his Bachelor of Science degree in business from the
University of Kansas in 1956.
Ed C. Carter. Mr. Carter is an entrepreneur and real estate developer. Mr.
Carter is a retired senior executive (1963-1992) with the Kansas
Southwestern Bell Telephone Company. He served in numerous senior
executive positions including Division Manager Regulatory Relations,
Regional Vice President Southwestern Bell Telecom, a start up company
serving a four state area, and Kansas Director of Marketing and District
Manager Residence Service Centers. Mr. Carter served as City
Commissioner and Mayor of Lawrence, Kansas from 1977 to 1981. He
was a director and President of Lawrence, Kansas Rotary Club, past
Executive Board Member of the Kansas State Chamber of Commerce, past
Chairman of the Douglas County United Fund and Director and President
of Junior Achievement. He is a Co-Recipient of the Outstanding Kansan
Award for Civic Service. Mr. Carter was a member and All Conference
guard on the Pittsburgh State University National Championship Football
Team. He received his B.A. in Business Administration from Pittsburgh
State University in 1963.
Kenneth Frahm. Mr. Frahm is President of the Kansas Development and
Finance Authority. He has been a self-employed farmer since 1975. He
currently owns 1,200 acres of irrigated corn and dryland wheat production
land and manages an additional 4,500 acres, producing over 400,000
bushes of grain per year. Mr. Frahm's operating entities include Allied
Family Farm and Grain Management, Inc. He is past Chairman and
current member of the Board of Directors of 21st Century Alliance, a
closed co-op looking for value-added investments, a former member of the
Board of Directors of Bank IV Community Bank in Colby. In addition,
Mr. Frahm is a member of the Agricultural Use Value Committee of the
Kansas Department of Revenue, a member of the Board of Directors of the
Kansas Area United Methodist Foundation and Chairman of its Investment
Committee, Past President and Paul Harris Fellow of the Rotary, a member
of the Kansas Farm Bureau, Kansas Livestock Association, Kansas Corn
Growers Association, Kansas Association of Wheat Growers and Vice
President of the Kansas Water Resources Association. Mr. Frahm is
married to Sheila Frahm, a former Kansas United States Senator and has
three daughters. Mr. Frahm received his B.A. in Economics in 1968 from
Fort Hays Kansas State College and his M.B.A. in Finance in 1969 from
the University of Texas at Austin.
<PAGE>
<PAGE>11
John Hadl. Mr. Hadl is an Associate Athletics Director at the University
of Kansas in Lawrence, Kansas, and he also heads the Williams
Educational Fund, which provides scholarship assistance to more than 400
male and female Kansas University student-athletes. With a membership
of over 3,500 donors, the Williams Fund raised in excess of $3 million last
year to pay the scholarship expenses of student-athletes. Prior to becoming
the Associate Athletics Director, Mr. Hadl served as an Assistant Athletic
Director and member of the KU football coaching staff. Mr. Hadl was a
three year letterman at KU, earning All-American honors at two different
positions-as a halfback in 1960 and as a quarterback in 1961. He was All
- -Conference three times. After his college career, Mr. Hadl, went on to
play professional football for 18 seasons in the AFL, NFL with San Diego,
Los Angeles, Green Bay and Houston. He was NFL Man of the Year in
1971 and the NFL's Most Valuable Player in 1973. He played in four AFL
All-Star games, three title games and led the league in passing in 1968 and
in 1971. In December of 1994, Mr. Hadl was inducted into the College
Football Hall of Fame.
Steve Irsik, Jr. Mr. Irsik owns and operates a multi-county agri-business
centered in western Kansas. The business deals with both irrigated and dry
land wheat, grain sorghum and corn, a yearling steer operation utilizing
native grass and wheat pasture. Mr. Irsik also owns a ranch operation
which maintains a spring and fall cow herd, employing "Embryo Transfer"
for the development of registered Angus bulls. Mr. Irsik is one of the
owners of Irsik and Doll Company, a grain storage, merchandising and full
feeding cattle operation with facilities across the State of Kansas. Mr. Irsik
is actively involved in public service and has been elected to serve a third
term on the Gray County Commission. He currently serves as a Board
member of Dodge City Federal Land Bank, and 21st Century Alliance. He
is Chairman of the Kansas Ogallala Task Force, which focuses on
highlighting the importance of the Ogallala region and its water supply to
agriculture, the State of Kansas & the nation. Mr. Irsik has served as a past
Board member of the Southwest Kansas Irrigation Association, Upper Ark
Basin Advisory committee and the Ground Water Management District #3.
He received his undergraduate degree from Kansas State University in
1969.
John G. Montgomery. Mr. Montgomery is the President of Montgomery
Communications, Inc. of Junction City, Kansas. He is a newspaper
publisher and TV station owner. He is also Vice President of Travel
Centre in Junction City. His current business affiliations include
Directorship's with the Associated Press, New York City; First National
Bank, Junction City; Automobile Club of Kansas and Sprint/UTS Midwest.
He is also President of the Junction City Housing and Development
Corporation. From 1964 to 1973 he was the Assistant to the President at
the San Francisco Newspaper Printing Company. Mr. Montgomery is a
member of the InterAmerican Press Association, Inland Daily Press
Association & the Kansas Press Association. He was Civilian Aid to the
Secretary of the Army of Kansas from 1979-1981 and has again served in
that role since 1995. He has extensive state government service including
Past Chairman of the Kansas Board of Regents, Past member of the
Washburn University Board of Regents, Kansas, Inc. - Science and
Technology Council, and 1986 Democratic nominee for Lieutenant
Governor. His considerable civic involvement, in part, includes being past
President of the Junction City Chamber of Commerce, Director and past
President of the United Way, past Board member of the Boy Scouts of
America, Coronado Council, past Director of the YMCA, Trustee of the
William Allen White Foundation, Co-chair of Economic Lifelines, Board
member of Kansas Wildscape and the Kansas 4-H and a member of the
Rotary Club. Mr. Montgomery has received the 1975 Jaycees
Outstanding Young Man of Kansas Award, 1975 Junction City Jaycees
Distinguished Service Award and the Department of the Army, Patriotic
Civilian Service Award. He graduated from the Philips Academy,
Andover, Massachusetts, in 1958, Yale University in 1962, receiving a
Bachelor of Arts Degree, and from Stanford University in 1964, where he
received his MBA Degree.
Harland E. Priddle. Mr. Priddle is retired. He is the former Chairman and
Chief Executive Officer of Network Trade Associates and President and
Chief Executive Officer of Mid-American International Trade Services,
L.C. Mr. Priddle is the former Kansas Secretary of Agriculture and served
as the first Kansas Secretary of Commerce. As the first Secretary of
<PAGE>
<PAGE>12
Commerce, he was directly involved in the creation of such programs as
Kansas, Inc., Kansas Technology Enterprise Corporation, Kansas
Development Finance Authority and the Kansas Venture Capital Corp. He
was candidate for Lt. Governor of Kansas in 1990. He was the Deputy
Director of the White House Communications Agency for the President for
a period of four years where he provided support and accompanied the
President on approximately 200 Presidential trips. Mr. Priddle specializes
in international trade relations. Mr. Priddle was the Vice President for
Marketing and Customer Services for the Hutchinson National Bank from
1978 to 1981. He retired from the United States Air Force after 22 years
with the rank of Colonel. While in the Air Force, he received 17 military
decorations including the Bronze Star and two Legions of Merit. He
received a B.S. in Agriculture from Kansas State University in 1952.
Gary Yager. Mr. Yager recently became Executive Vice President and
Chief Executive Officer and Senior Lender of the Columbian Bank of
Topeka, Kansas. From October 1986 to December 1995, Mr. Yager served
as either the Vice President and Branch Manager or the Vice President of
Commercial Loans for the Commerce Bank and Trust of Topeka, Kansas.
From 1976 to 1986, he served in various management positions with Bank
IV of Topeka including Assistant Vice-President of Correspondent
Banking and Branch Manager. Mr. Yager is currently a member of the
Board of Directors of the Young Bank Officers of Kansas, Topeka-Shawnee
County Certified Development Corporation, Contemporary
Housing Alternatives of Topeka, and Quail Unlimited. He is a member of
the Topeka Chamber of Commerce, former member of the Board of
Directors of the Topeka Family Service and Guidance Center, and former
advisor of Junior Achievement. He is a past member of the Topeka Active
20-30 Club, where he served in numerous leadership roles including
President and Treasurer. Mr. Yager received his BA degree in Business
Administration from Washburn University of Topeka in 1976.
Item 6. Executive Compensation
<TABLE>
<CAPTION>
The following table sets forth amounts earned by executive officers as
compensation over the past three years:
Annual Compensation
Other Annual
Name and Principal Position Year Salary ($) Bonus($) Compensation($)(1)
<S> <C> <C> <C> <C>
Rick D. Meyer 1998 77,500 50,000 7,200
President and Director 1997 75,000 25,000 7,200
1996 30,481 - 3,000
Michael N. Fink 1998 63,000 36,000 4,800
Chairman and Director 1997 60,000 18,000 4,800
1996 24,385 - 2,000
Chris J. Haas 1998 31,000 18,000 2,400
Secretary/Treasurer 1997 30,000 9,000 2,400
and Director 1996 12,192 - 1,000
<FN>
<F1>
(1) Amounts paid for auto allowance.
</FN>
</TABLE>
<PAGE>
<PAGE>13
Executive Employment Agreements
On October 30, 1998, the Company entered into Executive Employment
Agreements with Messrs. Fink, Meyer and Haas. The employment
agreements are for a term of four years beginning November 1, 1998.
Annual compensation under the agreement is $90,000, $72,000 and
$36,000 for Messrs. Meyer, Fink and Haas, respectively. Incentive
compensation is earned based on percentages of first year life and renewal
premiums of FLAC's First America 2000 product. Also included in the
agreement is an annual auto allowance of $7,200, $4,800 and $2,400 for
Messrs. Meyer, Fink and Haas, respectively. Mr. Fink and Mr. Haas
devote 40% and 20% of their time to the operations of the Company while
Mr. Meyer devotes 100% of his time to the Company.
Item 7 Certain Relationships and Related Transactions
Messrs. Michael Fink, Rick Meyer and Chris Haas and First Alliance
Corporation should be considered promoters of the Company.
Collectively, they hold 1,251,000 shares of Common Stock in the
Company for which they paid aggregate consideration of $125,100 or $.10
per share.
The Company's short-term investments consisting of certificates of deposit
are purchased through Columbian Bank. Mr. Gary Yager, a Director of the
Company, is the Chief Executive Officer of this bank.
The Company has contracted with First Alliance Corporation ("FAC") of
Lexington, Kentucky to provide underwriting and accounting services for
FLAC and the Company. Under the terms of the management agreement, the
Company pays fees based on a percentage of delivered premiums of FLAC.
The percentages are 5.5% for first year premiums; 4% of second year
premiums; 3% of third year premiums; 2% of fourth year premiums; 1% of
fifth year premiums and 1% for years six through ten for ten year
policies and .5% in years six through twenty for twenty year policies.
Pursuant to the agreement, the Company incurred $816 of management fees
during 1998. FAC will own approximately 9.9% of the Company's
outstanding common stock assuming all shares of the Company's
outstanding Preferred Stock are converted to Common Stock.
Item 8 Description of Securities
The Company is presently authorized to issue 8,000,000 shares of
Common Stock, $.10 par value, and 550,000 shares of Preferred Stock
$5.00 par value, all of which has been designated 6% non-cumulative,
convertible and callable preferred stock. As of March 1, 1999, there were
a total of 3,250,000 shares of Common Stock (excluding 20,000 shares
held in treasury) and 550,000 shares of Preferred Stock outstanding,
respectively. The Company anticipates that all outstanding shares of
Preferred Stock will be converted to Common Stock resulting in 5,450,000
shares of Common Stock outstanding.
Common Stock
The holders of Common Stock are entitled to one vote for each share of
Common Stock held of record in each matter submitted to a vote of
stockholders. Cumulative voting in the election of directors is not allowed
and, therefore, the holders of a majority of the outstanding Common Stock
represented at any meeting at which a quorum is present will be able to
elect all the directors. A majority of the outstanding shares of Common
Stock entitled to vote constitutes a quorum at any stockholder meeting.
There are no preemptive or other subscription rights, conversion rights,
registration or redemption provisions with respect to any shares of
Common Stock.
Holders of Common Stock are entitled, subject to the prior rights of
holders of any Preferred Stock, then outstanding, to such dividends as the
Board of Directors, in its discretion, may declare out of legally available
funds. In the event of liquidation, holders of Common Stock are entitled,
subject to the prior rights of holders of any Preferred Stock then
outstanding, to participate pro rata in all assets, if any, of the Company
remaining after the payment of all liabilities.
<PAGE>
<PAGE>14
Description of Preferred Stock
The Board of Directors of the Company, without further action by the
stockholders, may issue shares of Preferred Stock and may fix or alter the
voting rights, redemption provisions (including sinking fund provisions),
dividend rights, dividend rates, liquidation preferences, conversion rights,
and the designation of a number of shares constituting any wholly unissued
series of Preferred Stock.
All of the 550,000 shares designated as Preferred Stock have identical
terms and characteristics. The following is a summary description of the
principal terms of the Preferred Stock under the Certificate of Designations
filed with the Secretary of State of the State of Kansas on ("Certificate of
Designations"). The summary description does not purport to be complete
and is subject to and qualified in its entirety by the Certificate of
Designations. The terms used and not otherwise defined herein have the
meanings ascribed to such terms in the Certificate of Designations.
Each share of Preferred Stock may be converted, at the holder's option,
into four shares of Common Stock until six months after the completion or
termination of this Offering. Each subscriber was given the opportunity
to exercise the conversion option at the time he or she signed a
Subscription Agreement. The Company anticipates that at the end of the
conversion period all shares of Preferred Stock will have been converted
to Common Stock.
If the holders of Preferred Stock do not exercise the options set forth in the
preceding paragraph, then the Company may call at any time or from time
to time all or any portion of the shares of Preferred Stock by paying the
holder $25.00 per preferred share, plus any declared but unpaid dividends.
In the event the preferred shares are called, the holder retains one share of
common stock per Unit purchased. Determination of shares to be called
will be made by the Board of Directors by lot or pro rata, as the Board
determines. The decision to call the Preferred Stock is solely within the
discretion of the Company. There can be no assurance that the Company
will elect to make this call or that funds will be available for such purpose.
Holders of preferred shares are entitled to receive cash dividends, when and
if declared by the Board of Directors out of funds legally available therefor,
at the rate of 6% of the $5.00 par value per annum ($.30 share) payable
annually. Such a dividend is in preference to and in priority over dividends
(other than stock dividends) on the shares of Common Stock. Dividends
on the Preferred Stock are non-cumulative. Holders of the Preferred Stock
have no voting rights except as may be required by Kansas law.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common
Equity and Other Shareholder Matters
(a.) Market Information
As of March 1, 1999, there was no established public market for the
Company's common stock. Pursuant to the terms and conditions of the
Company's public offering, no resales or transfers of the shares are
permitted for nine months after the completion of the offering. The public
offering was completed on January 10, 1999 and the shares will become
tradeable on October 10, 1999.
(b.) Holders
As of March 1, 1999, there are approximately 4,500 shareholders of the
Company's outstanding common stock and preferred stock.
(c.) Dividends
The Company has not paid any cash dividends since inception (July 10,
1996). Additionally, dividends are not anticipated in the foreseeable future.
<PAGE>
<PAGE>15
Item 2 Legal Proceedings
Neither the Company nor any of its principals are presently engaged in any
material pending litigation which might have an adverse impact on its net
assets.
Item 3 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Ernst & Young LLP of Louisville, Kentucky were independent auditors for
the Company for the period from July 10, 1996 (date of inception) through
December 31, 1997.
As of September 16, 1998, the Company changed auditors to Kerber, Eck and
Braeckel, LLP. The Audit Committee of the Board of Directors approved the
change of independent auditors to Kerber, Eck and Braeckel, LLP of
Springfield, Illinois.
Ernst & Young LLP did not issue a report on the financial
statements for either of the past two years which contained an adverse opinion
or disclaimer of opinion, or was modified as to uncertainty, audit scope, or
accounting principles. There were no disagreements with Ernst & Young LLP.
Item 4 Recent Sales of Unregistered Securities
During the last three fiscal years, the Company has sold securities in
reliance on exemptions from registration permitted by the Act and the rules
thereunder.
The Company sold 2,120,000 common stock at $.10 per share to its
organizing shareholders on August 19, 1996 for total proceeds of
$212,000. This private offering was conducted in reliance on the
exemptions from registration provided by Rule 506 of Regulation D of the
Securities and Exchange Commission. In September of 1996, the
Company sold 600,000 shares of its common stock for $1.00 per share in
a separate private placement to persons with whom the Company had pre-existing
personal and business relationships. The second private offering
was conducted in reliance on Rule 506 of Regulation D. The initial capital
from these separate private offerings was used to fund the Company's
efforts to register an intra-state public offering in the state of Kansas.
On March 11, 1997 the Office of the Kansas Securities Commissioner
declared the Company's registration statement effective. The Company's
intra-state offering was completed on January 10, 1999 raising total capital
of $13,750,000. The offering was sold in Units consisting of one share of
6% non-cumulative convertible, redeemable, $5.00 par value preferred
stock and one share of no par value common stock for a total Unit cost of
$25.00. The offering resulted in the Company selling 550,000 shares of
its Common Stock and 550,000 shares of its Preferred Stock. The
Company licensed its agents through the Office of the Kansas Securities
Commissioner to offer the stock on its behalf. Total commissions paid on
the sales did not exceed 10%.
The securities offered in the public offering were not registered under the
Securities Act in reliance on Rule 147 thereunder which exempts securities
offered and sold on a wholly intra-state basis. A condition of the
exemption is that during the period which the securities that are a part of an
issue are being offered and sold by the issuer, and for a period of nine
months from the date of the last sale by the issuer of such securities, all
resales of any part of the issue, by any person, shall be made only to
persons resident within the state of offer.
Item 5 Indemnification of Directors and Officers
The Company indemnifies and protects any Director or Officer to the
fullest extent permitted by Kansas law as set forth in the Company's articles
of incorporation.
PART F/S
The consolidated financial statements of First American Capital
Corporation presented in this report are listed in the index on Page F-1.
<PAGE>
<PAGE>16
PART III
Item 1 Index to Exhibits and Item 2 Description of Exhibits
Exhibit No. Description
2.1 Articles of Incorporation of the Company
2.2 By-Laws of the Company
3 Certificate of Designation 6% Non-Cumulative,
Convertible, Callable Preferred Stock
6.1 Lease
6.2 Form of Advisory Board Contract
6.3 Service Agreement between Company and FLAC
6.4 Management Agreement between Company and FAC
6.5 Employment Agreement of Rick D. Meyer
6.6 Employment Agreement of Michael N. Fink
6.7 Employment Agreement of Chris J. Haas
12 Letter of Former Accountants
27 Financial Data Schedule
SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of 1934,
the registrant has caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
FIRST AMERICAN CAPITAL CORPORATION
/s/ Rick D. Meyer
By: Rick D. Meyer, President
<PAGE>
<PAGE>F-1
FIRST AMERICAN CAPITAL CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Consolidated Financial Statements Numbers
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . F-2
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . F-3
Consolidated Balance Sheets as of December 31, 1998 and 1997. . . . . F-4
Consolidated Statements of Operations for the periods ended
December 31, 1998 and 1997 and the period from July 10, 1996
1996 (date of inception) through December 31, 1996 . . . . . . . . F-6
Consolidated Statements of Changes in Shareholders' Equity for
the periods ended December 31, 1998 and 1997 and the period from
July 10, 1996 (date of inception) through December 31, 1996. . . . F-7
Consolidated Statements of Cash Flows for the periods ended
December 31, 1998 and 1997 and the period from
July 10, 1996 (date of inception) through December 31, 1996. . . . F-8
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . F-9
<PAGE>
<PAGE>F-2
Independent Auditor's Report
Board of Directors and Shareholders
First American Capital Corporation
We have audited the accompanying consolidated balance sheet of First
American Capital Corporation (a Kansas corporation) and subsidiaries as of
December 31, 1998, and the related consolidated statements of operations,
changes in shareholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of First American
Capital Corporation and subsidiaries as of December 31, 1998, and the
consolidated results of their operations and their consolidated cash flows for
the year then ended in conformity with generally accepted accounting principles.
/s/KERBER, ECK & BRAECKEL LLP
Springfield, Illinois
February 18, 1999
<PAGE>
<PAGE>F-3
Report of Independent Auditors
To Shareholders and Board of Directors
First American Capital Corporation
We have audited the accompanying consolidated balance sheet of First American
Capital Corporation as of December 31, 1997, and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
the year ended December 31, 1997 and for the period from July 10, 1996 (date of
inception) through December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of First American
Capital Corporation and subsidiary at December 31, 1997, and the results of
their operations and their cash flows for the year ended December 31, 1997 and
for the period from July 10, 1996 (date of inception) through December 31, 1996,
in conformity with generally accepted accounting principles.
/s/ERNST & YOUNG LLP
Louisville, Kentucky
February 27, 1998
<PAGE>
<PAGE>F-4
<TABLE>
FIRST AMERICAN CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31,
1998 1997
<S> <C> <C>
Assets
Investments:
Short-term investments $ 10,718,261 $ 2,923,339
------------ ------------
Total investments 10,718,261 2,923,339
Cash and cash equivalents 624,919 120,658
Accrued investment income 53,444 26,227
Deferred policy acquisition costs
(net of $229 of amortization) 13,119 -
Prepaid expenses 7,921 7,355
Office furniture and equipment,
less accumulated depreciation of
$17,005 and $6,756 in 1998 and
1997, respectively) 30,843 13,498
Leasehold improvements (net of
accumulated amortization of
$2,738 and $1,605 at December 31,
1998 and 1997, respectively 662 1,795
Advances to agents 54,585 50,031
Other assets 5,257 3,593
------------ ------------
Total assets $ 11,509,011 $ 3,146,496
============ ============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>F-5
<TABLE>
FIRST AMERICAN CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS (continued)
<CAPTION>
December 31,
1998 1997
<S> <C> <C>
Liabilities and Shareholders' Equity
Policy and contract liabilities:
Life policy reserves $ 5,494 $ -
Deposits on pending policy
applications 9,554 -
------------ ------------
Total policy and contract liabilities 15,048 -
Federal income taxes payable:
Current 4,444 993
Deferred 4,277 -
Commissions, salaries, wages and
benefits payable 2,832 111,385
Accounts payable and accrued expenses 26,443 16,808
Accounts payable to affiliate 15,129 6,914
------------ ------------
Total liabilities 68,173 136,100
Shareholders' equity:
Preferred stock, 6% non-cumulative
convertible callable, $5.00 par and
liquidation value; 550,000 shares
authorized; 541,506 and 140,938
outstanding at December 31, 1998 and
1997, respectively 2,707,530 704,690
Common stock, no par value, 8,000,000
shares authorized; 2,720,000 shares
issued and 3,261,500 outstanding at
December 31, 1998 and 2,720,000 shares
issued and 2,840,938 outstanding at
December 31, 1997 326,150 286,094
Additional paid in capital 9,600,478 2,873,298
Retained earnings - deficit (1,191,320) (851,686)
Less: 20,000 treasury shares held at cost (2,000) (2,000)
------------ ------------
Total shareholders' equity 11,440,838 3,010,396
------------ ------------
Total liabilities and shareholders' equity $ 11,509,011 $ 3,146,496
============ ============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>F-5
<TABLE>
FIRST AMERICAN CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Period from July 10
1996(date of
inception) through
Years ended December 31, December 31,
1998 1997 1996
<S> <C> <C> <C>
Revenues
Premium income $ 16,325 $ - $ -
Net investment income 348,591 75,162 4,961
---------- ---------- ----------
Total revenue 364,916 75,162 4,961
Benefits and expenses
Increase in policy
reserves 5,494 - -
Commissions 9,267 - -
Policy acquisition
costs deferred (13,348) - -
Amortization of
deferred policy
acquisition costs 229 - -
Selling, administrative
and general insurance
expenses 17,470 - -
Salaries, wages and
employee benefits 401,939 448,134 85,165
Professional fees 43,293 34,289 -
Administrative fees
- related party 24,816 21,000 4,000
Advisory board and
directors fees 16,503 7,800 -
Rent expense 33,066 40,136 17,073
Depreciation and
amortization expense 11,547 6,448 1,913
Survey fees and expenses - 7,267 70,372
Organizational expenses - 17,500 20,034
Other operating costs
and expenses 145,553 119,168 30,517
---------- ---------- ----------
Total benefits and
expenses 695,829 701,742 229,074
---------- ---------- ----------
Loss before income
tax expense (330,913) (626,580) (224,113)
---------- ---------- ----------
Income tax expense 8,721 993 -
---------- ---------- ----------
Net loss $ (339,634) $ (627,573) $ (224,113)
========== ========== ==========
Net loss per common
share-basic and diluted $ (0.11) $ (0.23) $ (0.08)
========== ========== ==========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>F-7
<TABLE>
FIRST AMERICAN CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY
<CAPTION>
Period from July 10
1996(date of
inception) through
Years ended December 31, December 31,
1998 1997 1996
<S> <C> <C> <C>
Preferred stock:
Balance, beginning
of year $ 704,690 $ - $ -
Sale of shares in
public offering
(400,568 shares
in 1998 and
140,938 shares
in 1997) 2,002,840 704,690 -
---------- ---------- ----------
Balance, end of year 2,707,530 704,690 -
Common stock:
Balance, beginning
of year 286,094 272,000 -
Sale of 2,120,000
initial shares
at $.10 per share - - 212,000
Sale of 600,000
private placement
shares at $1.00
per share - - 60,000
Sale of shares in
public offering
(400,568 shares
in 1998 and 140,938
shares in 1997) 40,056 14,094 -
---------- ---------- ----------
Balance, end of year 326,150 286,094 272,000
Additional paid-in capital:
Balance, beginning
of year 2,873,298 519,423 -
Sale of 600,000 private
placement shares at
$1.00 per share - - 540,000
Cost of private
placements - - (20,577)
Sale of shares in
public offering
(400,568 shares
in 1998 and 140,938
shares in 1997) 7,971,303 2,804,666 -
Cost of public
offering (1,244,123) (450,791) -
---------- ---------- ----------
Balance, end of year 9,600,478 2,873,298 519,423
Retained earnings-deficit:
Balance, beginning
of year (851,686) (224,113) -
Net loss (339,634) (627,573) (224,113)
---------- ---------- ----------
Balance, end of year (1,191,320) (851,686) (224,113)
Treasury stock:
Balance, beginning
of year (2,000) - -
Purchase of 20,000
common shares at cost - (2,000) -
---------- ---------- ----------
Balance, end of year (2,000) (2,000) -
---------- ---------- ----------
Total shareholders'
equity $11,440,838 $3,010,396 $ 567,310
=========== ========== ==========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>F-8
<TABLE>
FIRST AMERICAN CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Period from July 10
1996(date of
inception) through
Years ended December 31, December 31,
1998 1997 1996
<S> <C> <C> <C>
Operating activities:
Net loss $ (339,634) $ (627,573) $ (224,113)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Provision for
depreciation and
amortization 11,547 6,448 1,913
Provision for deferred
federal income taxes 4,277 - -
Increase in accrued
investment income (27,217) (26,227) -
Increase in deferred
policy acquisition
costs, net (13,119) - -
Decrease/(increase)
in prepaid expenses (566) 4,513 -
Increase in agent
advances (4,554) (45,481) (4,550)
Increase in other
assets (1,664) (754) (14,707)
Increase in policy
reserves 5,494 - -
Increase in deposits
on pending policy
applications 9,554 - -
Increase in current
federal income taxes 3,451 993 -
Increase/(decrease)
in commissions,
salaries, wages and
benefits payable (108,553) 87,000 24,385
Increase/(decrease) in
accounts payable to
affiliate 8,215 (5,566) 12,480
Increase in accounts
payable, accrued
expenses and payable,
accrued expenses and
other liabilities 9,635 9,362 7,446
---------- ---------- ----------
Net cash used in
operating activities (443,134) (597,285) (197,146)
Investing activities:
Short-term investments
acquired (7,794,922) (2,923,339) -
Purchase of furniture
and equipment (27,759) (10,135) (13,519)
---------- ---------- ----------
Net cash used in
investing activities (7,822,681) (2,933,474) (13,519)
Financing activities:
Proceeds from public
stock offering 10,014,199 3,523,450 -
Proceeds from private
stock offering - - 812,000
Cost of stock offerings (1,244,123) (450,791) (20,577)
Purchase of treasury
stock - (2,000) -
---------- ---------- ----------
Net cash provided by
financing activities 8,770,076 3,070,659 791,423
---------- ---------- ----------
Increase/(decrease) in
cash and cash
equivalents 504,261 (460,100) 580,758
Cash and cash
equivalents, beginning
of period $ 120,658 $ 580,758 $ -
---------- ---------- ----------
Cash and cash equivalents,
end of period $ 624,919 $ 120,658 $ 580,758
========== ========== ==========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>F-9
1. Nature of Operations
First American Capital Corporation (the "Company") was incorporated on
July 10, 1996 for the primary purpose of forming, owning and managing life
insurance companies. On March 11, 1997, the Company's registration statement
filed with the Office of the Kansas Securities Commissioner for a $12,500,000
intra-state public stock offering, which included a 10% "over-sale" provision
(additional sales of $1,250,000), was declared effective. The Company
completed its public stock offering on January 10, 1999, raising total capital
of $13,750,000.
The Company has a wholly-owned insurance subsidiary, First Life America
Corporation ("FLAC"), which is domiciled in Kansas. FLAC was incorporated on
July 15, 1997 and capitalized with $1,200,000. On October 15, 1997, the
Kansas Department of Insurance ("KDI") granted FLAC a Certificate of Authority.
On December 10, 1998, the Company provided FLAC with an additional $1,800,000
of capital. Total capitalization of FLAC is $3,000,000. Insurance operations
commenced on November 19, 1998. Prior to the commencement of insurance
operations, the Company was in the development stage.
The primary insurance product being marketed by FLAC is a modified payment
whole life insurance policy with a flexible premium deferred annuity rider.
A modified payment whole life insurance policy requires premium payments to be
made for a certain number of years after which the policyholder is entitled to
full policy benefits. Typical premium paying periods for modified payment
whole life insurance polices are ten, fifteen and twenty years. FLAC's product,
marketed as the "First America 2000", combines both a ten and twenty payment
period based on the issue age of the insured. Issue ages from 0 to 20 and 51
through 81 are ten pay polices and issue ages from age 21 to 50 are twenty pay
policies. Premium payments are split between the life and annuity based on
percentages established in the product design. First year premiums payments
are allocated 100% to life insurance and renewal payments are split 50% to
life and 50% to annuity. The product is being sold in premium units with the
ability to purchase either fractional or multiple units. At the end of the
required premium paying period, the policyholder may continue to make full
premium payments into the annuity rider to provide for greater annuity
accumulations.
The initial product was designed to provide predetermined life insurance
benefits based on the age of the insured. The base coverage decreases each
year until an ultimate benefit amount is attained. The annuity rider does not
contain any fees or load. Surrender charges in the annuity are based on a
regressive scale which starts at 10% in the first year and decreases by 1%
each year until after the tenth policy year there are no surrender charges.
2. Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") which, for
FLAC, differ from statutory accounting practices prescribed or permitted
by the KDI.
Certain amounts from prior years have been reclassified to conform with the
current year's presentation. These reclassifications had no effect on
previously reported net income or shareholders' equity.
Principals of Consolidation
The accompanying consolidated financial statements include the accounts and
operations of the Company and its subsidiary, FLAC. All intercompany accounts
and transactions are eliminated in consolidation.
<PAGE>
<PAGE>F-10
Management's Estimates
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
accompanying notes. Such estimates and assumptions could change in the future
as more information becomes known, which could impact the amounts reported and
disclosed herein.
Investments
Short-term investments consist of investments with original maturities of less
than one year and greater than three months.
Cash equivalents consist of highly liquid investments with maturities of three
months or less at the date of purchase and are carried at cost which
approximates fair value.
Interest earned on investments is included in net investment income.
Office Furniture and Equipment
Office furniture and equipment is recorded at cost less accumulated
depreciation using the 200% declining balance method over the estimated
useful life of the respective assets.
Office Lease
The Company is currently located in approximately 2,700 square feet of leased
office space at 3360 S.W. Harrison Street, Topeka, Kansas 66611. This lease
commenced on July 11, 1996 and is for a three year period that expires on
July 31, 1999. Annual rent is $31,671.
Deferred Policy Acquisition Costs
Commissions and other costs of acquiring life insurance, which vary with, and
are primarily related to, the production of new business have been deferred
to the extent recoverable from future policy revenues and gross profits. The
acquisition costs are being amortized over the premium paying period of the
related policies using assumptions consistent with those used in computing
policy reserves.
Future Policy Benefits
The liabilities for future policy benefits on the Company's life insurance
products are computed using the net level premium method and assumptions as
to investment yields, mortality, withdrawals and other assumptions, modified
as necessary to reflect anticipated trends and to include provisions for
possible unfavorable deviations. The assumptions utilized were 7.25% for
investment yields, 1975-1980 select and ultimate tables for mortality, and
Linton BA tables for withdrawal rates.
<PAGE>
<PAGE>F-11
2. Significant Accounting Policies (continued)
Premiums
Life insurance premiums for limited payment contract are recorded according
to Statement of Financial Accounting Standard ("SFAS") No. 97. "Accounting and
Reporting by Insurance Enterprises for Certain Long-Duration Contracts and
for Realized Gains and Losses from the Sale of Investments". Any gross
premium in excess of net premium is deferred and recognized in income in a
constant relationship with insurance in force.
Federal Income Taxes
The Company uses the liability method of accounting for income taxes.
Deferred income taxes are provided for cumulative temporary differences
between balances of assets and liabilities determined under generally accepted
accounting principles and balances determined for tax reporting purposes.
Common Stock and Preferred Stock
The common stock is fully-paid and non-assessable with dividend rights subject
to the prior rights of the holders of preferred stock and has full voting
rights. The preferred stock has no voting rights, has a par and liquidation
value of $5.00 per share of which dividends, if and when declared, will be
paid at the rate of 6% of the par value, and is convertible into four shares
of common stock until July 10, 1999.
All shareholder rights conferred by the Company's Articles and By-Laws vested
in the subscribers immediately upon acceptance of the subscription by the
Company. These rights include, inter alia, voting rights, liquidation and
other preferences, etc. However, the actual issuance of ownership will not
occur before July 10, 1999. Accordingly, the stock sold in the public
offering is recorded as outstanding and not issued. Additionally, the share
certificates, when issued, are not tradeable until October 10, 1999.
Net Loss Per Common Share
In 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share". SFAS No. 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of convertible securities. Diluted earnings per share is very
similar to fully diluted earnings per share. The net loss per share amounts
for all periods have been presented to conform to the SFAS 128 requirements
for basic earnings per share. The diluted earnings per share amounts are not
presented as the effect of inclusion of the preferred stock outstanding as
common stock equivalents would be antidilutive.
Net loss per common share is based upon the weighted average number of common
shares outstanding each year. For the period ended December 31, 1996,
organizer and private placement shares are assumed to be outstanding since
inception. Shares issued during the public stock offering are assumed to be
outstanding for one half month of the month in which they are sold.
Accordingly, the weighted average outstanding common shares were 3,046,043,
2,772,770 and 2,720,000 for the periods ended December 31, 1998, 1997 and 1996,
respectively.
<PAGE>
<PAGE>F-12
3. Investments
The carrying value of short-term investments approximates their fair value.
At December 31, 1998 and 1997 the fair value of short-term investments was
$10,718,261 and $2,923,339, respectively.
Included in investments are securities which have a fair value of $411,535 at
December 31, 1998, which are on deposit with the KDI.
Interest income consist of interest earned on short-term investments. Short
- -term investments include certificates of deposit and U.S. Treasury Bills.
<TABLE>
The following table shows the components of investment income for the periods
ending December 31, 1998, 1997 and 1996:
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Investment income
Short-term investments $ 348,591 $ 75,162 $ 4,961
</TABLE>
4. Concentrations of Credit Risk
The Company minimizes credit risk by investing in U.S. Treasury obligations
and certificates of deposit. Certain certificates of deposit exceed the
maximum insurance protection of $100,000 provided by the Federal Deposit
Insurance Corporation ("FDIC"). The Company has not experienced any losses
in such accounts and believes it is not exposed to any significant credit
risk on cash and cash equivalents.
5. Income Taxes
The Company does not file a consolidated federal income tax return with FLAC.
FLAC is taxed as a life insurance company under the provisions of the Internal
Revenue Code and must file a separate tax return for its initial five years of
existence. There was no Federal tax expense in 1996. Federal income tax
expense for the years ended December 31, 1998 and 1997 consisted of the
following:
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997
<S> <C> <C>
Current $ 4,444 $ 993
Deferred 4,277 -
-------- -------
Federal income tax expense $ 8,721 $ 993
======== =======
</TABLE>
<PAGE>
<PAGE>F-13
5. Income Taxes (continued)
<TABLE>
Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate of 34% as follows:
<CAPTION>
Year ended December 31,
1998 1997
<S> <C> <C>
Federal income tax benefit at
statutory rate $ (112,510) $ (213,037)
Small life insurance company
deduction (11,037) -
Increase in valuation allowance 135,182 215,287
Surtax exemptions (2,914) (1,257)
---------- ----------
Federal income tax expense $ 8,721 $ 993
========== ==========
</TABLE>
Deferred federal income taxes reflect the impact of "temporary differences"
between the amount of assets and liabilities for financial reporting purposes
and such amounts as measured by tax laws and regulations. Significant
components of the Company's net deferred tax liability are as follows:
<TABLE>
<CAPTION>
December 31,
1998 1997
<S> <C> <C>
Deferred tax liability:
Policy reserves $ 201 $ -
Deferred policy acquisition
costs 4,076 -
----------- -----------
Total deferred tax liability 4,277 -
Deferred tax asset:
Net operating loss carry
forward 1,217,600 799,200
Alternative minimum tax
credit carry forward 1,198 -
----------- -----------
Total deferred tax asset 1,218,798 799,200
Valuation allowance (1,218,798) (799,200)
----------- -----------
Net deferred tax asset - -
----------- -----------
Net deferred tax liability $ 4,277 $ -
=========== ===========
</TABLE>
The Company has net operating loss carry forwards of approximately $1,217,600,
expiring in 2011 through 2013. These net operating loss carry forwards are
not available to offset FLAC income. FLAC has alternative minimum tax credit
carry forwards of $1,198, which have no expiration date. Federal income taxes
paid during 1998 was $993. There were no Federal Income taxes paid during
1996 or 1997.
6. Shareholders' Equity and Statutory Accounting Practices
FLAC prepares its statutory-basis financial statements in accordance with
statutory accounting practices ("SAP") prescribed or permitted by the KDI.
Currently, "prescribed" statutory accounting practices include state
insurance laws, regulations, and general administrative rules, as well as the
National Association of Insurance Commissioners ("NAIC") Accounting Practices
and Procedures Manual and a variety of other NAIC publications. "Permitted"
<PAGE>
<PAGE>F-14
statutory accounting practices encompass all accounting practices that are not
prescribed; such practices may differ from state to state, may differ from
company to company within a state, and may change in the future. The NAIC is
in the process of codifying SAP ("Codification"). Codification will likely
change, to some extent, prescribed SAP and may result in changes to the
accounting practices that FLAC uses to prepare its statutory-basis financial
statements. Codification, which is expected to be approved by the NAIC in
1999, will require adoption by the various states before it becomes the
prescribed statutory basis of accounting for insurance companies domesticated
within those states. Accordingly, before Codification becomes effective for
FLAC, the KDI must adopt Codification as the prescribed basis of accounting
on which domestic insurers must report their statutory-basis results to the
KDI. At this time it is unclear whether the KDI will adopt Codification.
However, based on current draft guidance, management believes that the impact
of Codification will not be material to FLAC's statutory-basis financial
statements.
Net income for 1998 and 1997 and capital and surplus at December 31, 1998 and
1997 for the Company's insurance operations as reported in these financial
statements prepared in accordance with GAAP as compared to amounts reported
in accordance with SAP prescribed or permitted by the KDI are as follows:
<TABLE>
<CAPTION>
GAAP SAP
--------------------- ------------------------
Net Capital and Net Capital and
Income Surplus Income Surplus
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
1998 $ 57,959 $ 3,063,584 $ 47,931 $ 3,050,432
1997 5,625 1,205,625 6,221 1,206,221
</TABLE>
Principal differences between GAAP and SAP include: a) costs of acquiring new
policies are deferred and amortized for GAAP; b) benefit reserves are
calculated using more current assumptions relating to investments, mortality
and withdrawals for GAAP; c) deferred income taxes are provided for GAAP;
d) statutory asset valuation reserves are not required for GAAP; and e)
available-for-sale fixed maturity investments are reported at fair value with
unrealized gains and losses reported as a separate component of shareholders'
equity for GAAP.
Statutory restrictions limit the amount of dividends which may be paid by FLAC
to the Company. Generally, dividends during any year may not be paid without
prior regulatory approval, in excess of the lesser of (a) 10% of statutory
shareholder's surplus as of the preceding December 31, or (b) statutory net
operating income for the preceding year. In addition, FLAC must maintain the
minimum statutory capital and surplus, $1,200,000, required for life insurance
companies domiciled in Kansas.
The KDI imposes on insurance enterprises minimum risk-based capital ("RBC")
requirements that were developed by the NAIC. The formulas for determining
the amount of RBC specify various weighing factors that are applied to
financial balances or various levels of activity based on the perceived degree
of risk. Regulatory compliance is determined by ratio (the "Ratio") of the
enterprises regulatory total adjusted capital, as defined by the NAIC, to its
<PAGE>
<PAGE>F-15
6. Shareholders' Equity and Statutory Accounting Practices (continued)
authorized control level RBC, as defined by the NAIC. Enterprises below
specific trigger points or ratios are classified within certain levels, each
of which requires specified corrective action. FLAC has a Ratio that is in
excess of the minimum RBC requirements; accordingly, FLAC meets the RBC
requirements.
7. Reinsurance
To minimize the risk of claim exposure to surplus, the Company retains a
maximum of $50,000 of risk on individual life insurance; all amounts greater
than $50,000, and all accidental death policies, are ceded to the Company's
reinsurer, Business Men's Assurance Company ("BMA"). At December 31, 1998,
FLAC had ceded $137,000 of ordinary business and $120,000 of accidental death
benefit risk to Business Men's Assurance Company ("BMA"). In the event BMA
is unable to fulfill their obligations under the reinsurance agreement, FLAC
remains primarily liable. Pursuant to the terms of the agreement, FLAC pays
no premiums on first year business.
8. Related Party Transactions
Effective December 31, 1998, the Company entered into a service agreement with
FLAC to provide personnel, facilities, and services to FLAC. The services to
be performed pursuant to the service agreement are underwriting, claim
processing, accounting, processing and servicing of policies, and other
services necessary to facilitate FLAC's business. The agreement is in effect
until either party provides ninety days written notice of termination. Under
the agreement, FLAC pays monthly fees based on life premiums delivered by FLAC.
The percentages are 25% of first year life premiums; 40% of second year life
premiums; 30% of third year premiums 20% of fourth year life premiums and 10%
of life premiums in years five and thereafter. FLAC will retain general
insurance expenses related to its sales agency, such as agent training and
licensing, agency meeting expenses, and agent's health insurance. Pursuant
to the terms of the agreement, FLAC had incurred expenses of $4,081 for the
year ended December 31, 1998.
The Company has contracted with First Alliance Corporation ("FAC") of
Lexington, Kentucky to provide underwriting and accounting services for FLAC
and the Company. Under the terms of the management agreement, the Company
pays fees based on a percentage of delivered premiums of FLAC. The percentages
are 5.5% for first year premiums; 4% of second year premiums; 3% of third year
premiums; 2% of fourth year premiums and 1% for years six through ten for ten
year policies and .5% in years six through twenty for twenty year policies.
Pursuant to the agreement, the Company incurred $816 of management fees
during 1998. FAC also owns approximately 9.9% of the Company's outstanding
common shares.
9. Fair Values of Financial Instruments
The fair values of financial instruments, and the methods and assumptions used
in estimating their fair values, are as follows:
Short-term Investments
The carrying value of short-term investments approximates their fair value.
At December 31, 1998 and 1997 the fair value of short-term investments was
$10,718,261 and $2,923,339, respectively.
<PAGE>
<PAGE>F-16
9. Fair Values of Financial Instruments (continued)
Cash and Cash Equivalents
The carrying values of cash and cash equivalents approximate their fair values.
At December 31, 1998 and 1997, the fair value of cash and cash equivalents was
$624,919 and $120,658, respectively.
10. Segment Information
Prior to 1998 segment data has been presented on an "industry approach" in
accordance with SFAS No. 14, SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", become effective for 1998 and superseded
SFAS No. 14, SFAS No. 131 requires a "management approach" (how management
internally evaluates the operating performance of its business units) in the
presentation of business segments. The segment data that follows has been
prepared in accordance with SFAS No. 131. The operations of the Company and
its subsidiaries have been classified into two operating segments as follows:
life and annuity insurance operations and corporate operations. Segment
information as of December 31, 1998, 1997 and 1996 and for the periods then
ended is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Revenues:
Life and annuity insurance
operations $ 91,848 $ 31,618 $ -
Corporate operations 273,068 43,544 4,961
------------ ----------- -----------
Total $ 364,916 $ 75,162 $ 4,961
============ =========== ===========
Income (loss) before income
taxes:
Life and annuity insurance
operations $ 66,680 $ 6,618 $ -
Corporate operations (397,593) (633,198) (224,113)
------------ ----------- -----------
Total $ (330,913) $ (626,580) $ (224,113)
============ =========== ===========
Assets:
Life and annuity insurance
operations $ 3,113,186 $ 1,231,618 $ -
Corporate operations 8,395,825 1,914,878 611,621
------------ ----------- -----------
Total $ 11,509,011 $ 3,146,496 $ 611,621
============ =========== ===========
Depreciation and amortization
expense:
Life and annuity insurance
operations $ 229 $ - $ -
Corporate operations 11,547 6,448 1,913
------------ ----------- -----------
Total $ 11,776 $ 6,448 $ 1,913
============ =========== ===========
</TABLE>
ARTICLES OF INCORPORATION OF
FIRST AMERICAN CAPITAL CORPORATION
The undersigned, a natural person, for the purpose of
incorporating a corporation under the Kansas General Corporation Code,
as amended and supplemented, hereby adopts the following Articles of
Incorporation:
I - NAME
The name of the corporation (the "Corporation") is First American
Capital Corporation.
II - REGISTERED OFFICE AND REGISTERED AGENT
The address, including street, number, city, and county, of the
registered office of the Corporation in the State of Kansas is 7500
College Boulevard, Suite 750, Overland Park, County of Johnson. The
name of the Corporation's resident agent at such address is PW&S Agent
Services of Kansas, Inc.
III - NATURE OF BUSINESS
The nature of the business or purposes to be conducted or
promoted by the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the Kansas General
Corporation Code, including, without limitation, to form, own and
manage life insurance companies and a venture capital company.
In addition to the powers and privileges conferred upon the
Corporation by law and those incidental thereto, the Corporation shall
possess and may exercise all the powers and privileges which are
necessary or convenient to the conduct, promotion or attainment of the
business or purposes of the Corporation.
IV - CAPITAL STOCK
(a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Eight Million Five Hundred Fifty
Thousand (8,550,000), of which (i) 8,000,000 shares shall be denominated as
voting "Common Stock" with a par value of $.10 per share; and (ii) 550,000
shares shall be denominated as "Preferred Stock" with a par value of $5.00 per
share.
(b) The Board of Directors is authorized to provide by
resolution or resolutions for the issuance of shares of stock of any class
or of any series of any class at any time and from time to time and, by
filing a certificate of designations in the manner prescribed under the
laws of the State of Kansas, to fix (and, if no shares of stock have been
issued of a class or series of stock, amend) the voting powers,
designations, preferences and relative, participating, optional or other
special rights, if any, and qualifications, limitations or restrictions thereof
which are not fixed by these Articles of Incorporation. Unless otherwise
provided in any such resolution or resolutions, the number of shares of
stock of any such series to which such resolution or resolutions apply
may be increased (but not above the total number of authorized shares of
the class or series) or decreased (but not below the number of shares
thereof then outstanding) by filing a certificate of designations in the
manner prescribed under the laws of the State of Kansas.
(c) No holder of any of the shares of stock of the
Corporation of any class shall be entitled, as a matter of right, to
subscribe for, purchase, or otherwise acquire any shares of stock of the
Corporation of any class which the Corporation proposes to issue or any
rights or options which the Corporation proposes to grant for the purchase
of shares of stock of the Corporation of any class or for the purchase of
any bonds, notes, debentures, securities, or obligations of the Corporation
which are convertible into or exchangeable for, or which carry any rights
to subscribe for, purchase, or otherwise acquire shares of stock of the
Corporation of any class; and any and all of such shares, bonds, notes,
debentures, securities or obligations of the Corporation, whether now or
hereafter authorized or created, may be issued, or may be reissued or
transferred if the same have been re-acquired and have treasury status,
and any and all of such rights and options may be granted by the Board
of Directors, to such persons and other entities, and for such lawful
consideration, and on such terms, as the Board of Directors, in its
discretion, may determine, without first offering the same, or any part
thereof, to any said holder of stock.
(d) No outstanding share of any class of stock which
is denied voting power under the provisions of the Articles of
Incorporation, or by resolution or resolutions adopted by the Board of
Directors pursuant to subsection (b) of this Article IV, shall entitle the
holder thereof to the right to vote at any meeting of stockholders except
as the provisions of K.S.A. 17-6602(c)(2) shall otherwise require;
provided, however, that no share of any such class which is otherwise
denied voting power shall entitle the holder thereof to vote upon the
increase or decrease in the number of authorized shares of said class.
V - INCORPORATOR
The name and the mailing address of the incorporator are as
follows:
Name Address
Paula L. Simmons 700 W. 47th Street,
Suite 1000
Kansas City, Missouri 64112
VI - EXISTENCE
The Corporation is to have perpetual existence.
VII - COMPROMISE WITH CREDITORS
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them or between this
Corporation and its stockholders or any class of them, any court of
competent jurisdiction within the State of Kansas, on the application in
a summary way of this Corporation or of any creditor or stockholder
thereof or on the application of any receiver or receivers appointed for
this Corporation under the provisions of K.S.A. 17-6901, and
amendments thereto, or on the application of trustees in dissolution or of
any receiver or receivers appointed for this Corporation under the
provisions of K.S.A. 17-6808, and amendments thereto, may order a
meeting of the creditors or class of creditors, or of the stockholders or
class of stockholders of this Corporation, as the case may be, to be
summoned in such manner as the court directs. If a majority in number
representing in value of the creditors or class of creditors, or of the
stockholders or class of stockholders of this Corporation, as the case may
be, agree to any compromise or arrangement and to any reorganization of
this Corporation as consequence of such compromise or arrangement, the
said compromise or arrangement and the said reorganization, if
sanctioned by the court to which the said application has been made, shall
be binding on all the creditors or class of creditors, or on all the
stockholders or class of stockholders, of this Corporation, as the case may
be, and also on this Corporation.
VIII - BOARD OF DIRECTORS
(a) The management of the business and the conduct
of the affairs of the Corporation shall be vested in its Board of Directors.
The number of directors which shall constitute the whole Board of
Directors shall be fixed by, or in the manner provided in, the Bylaws.
The phrase "whole Board" and the phrase "total number of directors"
shall each mean the total number of directors which the Corporation
would have if there were no vacancies.
(b) Voting for directors shall be by written ballot.
(c) At all elections of directors of the Corporation and
for the purposes of all other matters upon which stockholders are entitled
to vote, each stockholder shall be entitled to as many votes as shall equal
the number of shares of stock held by that stockholder. No cumulative
voting shall be permitted.
(d) The names and mailing addresses of the persons
who are to serve as the first Board of Directors until the first annual
meeting of stockholders or until their successors are elected and qualify
are:
Name Address
Rick D. Meyer 2285 Executive Drive,
Suite 308
Lexington, Kentucky 40505
Chris J. Haas 2285 Executive Drive,
Suite 308
Lexington, Kentucky 40505
Michael N. Fink 2285 Executive Drive,
Suite 308
Lexington, Kentucky 40505
IX - BYLAWS
(i) by the holders of a majority of the outstanding shares of
stock of the Corporation entitled to vote thereon (or, if applicable, such
larger percentage of the outstanding shares of stock entitled to vote
thereon as may be specified in the Bylaws), or (ii) by a majority of the
full Board of Directors. Any change so made by the stockholders may
thereafter be further changed by a majority of the full Board of Directors;
provided, however, that the power of the Board of Directors to amend or
repeal the Bylaws, or to adopt new Bylaws, (A) may be denied as to any
Bylaws or portion thereof by the stockholders if, at the time of enactment,
the stockholders shall so expressly provide, and (B) shall not divest the
stockholders of their power, nor limit their power, to amend or repeal the
Bylaws, or to adopt new Bylaws.
X - INDEMNIFICATION AND LIABILITY LIMITATION
(a) The Corporation shall indemnify and protect any
director, officer, employee or agent of the Corporation, or any person
who serves at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, to the fullest extent
permitted by the laws of the State of Kansas.
(b) The stockholders of the Corporation shall not be
personally liable for the payment or performance of the debts or other
obligations of the Corporation.
(c) Without limiting the generality of the foregoing
provisions of this Article X, to the fullest extent permitted or authorized
by the laws of the State of Kansas, including, without limitation, the
provisions of subsection (b)(8) of K.S.A. 17-6002 as now in effect and as
it may from time to time hereafter be amended, no director of the
Corporation shall be personally liable to the Corporation or to its
stockholders for monetary damages for breach of fiduciary duty as a
director. Any repeal or modification of the limitation of liability
provided by the immediately preceding sentence shall not adversely
affect any right or protection of a director of the Corporation existing
hereunder with respect to any act or omission occurring prior to or at the
time of such repeal or modification.
XI - STOCKHOLDERS OF RECORD
Except as may be otherwise provided by statute, the Corporation
shall be entitled to treat the registered holder of any shares of the
Corporation as the owner of such shares and of all rights derived from
such shares for all purposes, and the Corporation shall not be obligated
to recognize any equitable or other claim to or interest in such shares on
the part of any other person, including, but without limiting the generality
of the term "person," a purchaser, pledgee, assignee or transferee of such
shares, unless and until such person becomes the registered holder of such
shares. The foregoing shall apply whether or not the Corporation shall
have either actual or constructive notice of the claim by or the interest of
such person.
XII - BOOKS AND RECORDS
The books and records of the Corporation may be kept (subject to
any provision contained in the statutes of the State of Kansas) outside the
State of Kansas at such place or places as may be designated from time
to time by the Board of Directors or in the Bylaws of the Corporation.
XIII - AMENDMENTS
From time to time any of the provisions of these Articles of
Incorporation may be amended, altered, changed or repealed, and other
provisions authorized by the Kansas General Corporation Code at the
time in force may be added or inserted in the manner and at the time
prescribed by the Kansas General Corporation Code, and all rights at any
time conferred upon the stockholders of the Corporation by these Articles
of Incorporation are granted subject to the provisions of this Article.
Any person, upon becoming the owner or holder of any shares of
stock or other securities issued by the Corporation, does thereby consent
and agree that (i) all rights, powers, privileges, obligations or restrictions
pertaining to such person or such shares or securities in any way may be
altered, amended, restricted, enlarged or repealed by legislative
enactments of the State of Kansas or of the United States hereinafter
adopted which have reference to or affect corporations, such shares,
securities, or persons and (ii) the Corporation reserves the right to transact
any business of the Corporation, to alter, amend or repeal these Articles
of Incorporation, or to do any other acts or things as authorized, permitted
or allowed by such legislative enactments.
IN WINESS WHEREOF, these Articles of Incorporation have
been executed this 8th day of July, 1996.
Paula L. Simmons, Incorporator
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
This instrument was acknowledged, signed and sworn to before
me on ______________, 1996, by Paula L. Simmons.
Notary Public
My Commission Expires:
[SEAL]
BYLAWS
OF FIRST AMERICAN CAPITAL CORPORATION
ARTICLE I
OFFICES AND RECORDS
I.1 Registered Office and Resident Agent. The location of the registered
office and the name of the resident agent of First American Capital Corporation,
a Kansas corporation (the "Corporation") in the State of Kansas shall be as
stated in the Articles of Incorporation of the Corporation (the "Articles") or
as shall be determined from time to time by resolution of the Board of Directors
of the Corporation (the "Board") and on file in the appropriate public offices
of the State of Kansas as provided by law.
I.2 Other Corporate Offices. The Corporation may conduct its
business, carry on its operations, have other offices and exercise its powers
within or outside of the State of Kansas as the Board may designate or the
business of the Corporation may require.
I.3 Books, Accounts and Records, and Inspection Rights. The books,
accounts and records of the Corporation, except as may be otherwise required by
the laws of the State of Kansas, may be kept outside of the State of Kansas, at
such place or places as the Board may from time to time determine. Except as
otherwise provided by law, the Board shall determine whether, to what extent,
and the conditions upon which the books, accounts and records of the Corporation
shall be open to the inspection of the stockholders of the Corporation.
ARTICLE II
STOCKHOLDERS
II.1 Place of Meetings. All meetings of the stockholders shall be held
at the offices of the Corporation in the City of Topeka, State of Kansas, or at
such other place either within or without the State of Kansas as shall be
designated from time to time by the Board and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
II.2 Annual Meetings. An annual meeting of the stockholders shall be
held on the first Monday in June of each year, if not a legal holiday, and if a
legal holiday, then on the next secular day following, at 10:00 a.m., or at such
other date and time as shall be designated from time to time by the Board and
stated in the notice of the meeting or in a duly executed waiver of notice
thereof. At the annual meeting, the stockholders shall elect directors and may
also transact such other business as may be desired, whether or not the same was
specified in the notice of the meeting, unless the consideration of such other
business without its having been specified in the notice of the meeting as one
of the purposes thereof is prohibited by law.
II.3 Special Meetings. Special meetings of the stockholders may be
held for any purpose(s), unless otherwise prohibited by law or by the Articles.
A special meeting may be called by the Board, by the Chairman of the Board or by
the President, and shall be called by any officer directed to do so by the Board
or requested to do so in writing by a majority of the Board. Any such written
request shall state the purpose(s) of the proposed meeting. The business
transacted at the special meeting shall be confined to the purpose(s) stated in
the notice of such meeting, unless the transaction of other business is
consented to by the holders of all of the outstanding shares of stock of the
Corporation entitled to vote thereon. The "call" and the "notice" of any such
meeting shall be deemed to be synonymous.
II.4 Action Without a Meeting. Unless otherwise provided in the
Articles, any action required to be taken or any action which may be taken at
any annual or special meeting of the stockhold- ers, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by all the holders of
outstanding shares of stock entitled to vote thereon. Any such writing or
writings shall be filed with the minutes of proceedings of the stockholders.
II.5 Notice. Written notice of each meeting of the stockholders,
whether annual or special, which shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose(s) thereof, shall be
given to each stockholder entitled to vote at such meeting, either personally or
by mail, not less than ten (10) days nor more than sixty (60) days before the
date of the meeting. If mailed, such notice shall be deemed to be given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at the stockholder's address as it appears on the records of the
Corporation.
II.6 Waiver of Notice. Whenever any notice is required to be given to
any stockholder under any law, the Articles or these Bylaws, a written waiver
thereof, signed by the person entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice. Attendance by a stockholder at a meeting shall constitute a waiver of
notice of such meeting, except when the stockholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice unless so required by the Articles or these Bylaws.
II.7 Quorum. The holders of a majority of the shares of stock of the
Corporation entitled to vote thereat, present in person or represented by proxy,
shall constitute a quorum (a "Quorum") at all meetings of the stockholders for
the transaction of any business, except as otherwise provided by law, the
Articles or these Bylaws.
If a Quorum is not present at a meeting of the stockholders, the
holders of a majority of the stock present in person or represented by proxy at
such meeting shall have the power successively to adjourn the meeting from time
to time to a specified time and place, without notice to anyone other than an
announcement at the meeting at which such adjournment is taken, until a Quorum
shall be present. At such adjourned meeting at which a Quorum is present, any
business may be transacted which might have been transacted at the original
meeting. If the adjournment is for more than thirty (30) days, or if after
adjournment a new record date is fixed for the subsequent session of the
adjourned meeting, a notice of the subsequent session of the adjourned meeting
shall be given to each stockholder entitled to vote at the meeting.
II.8 Proxies. Each stockholder entitled to a vote at a meeting of
stockholders, or to express consent or dissent to corporate action in writing
without a meeting, may authorize another person or persons to act for such
stockholder by written proxy signed by such stockholder, but no such proxy shall
be voted or acted upon after three (3) years from its date, unless the proxy
provides for a longer period.
II.9 Voting.
(a) One Vote Per Share. Unless otherwise provided in the
Articles, each stockholder shall be entitled to one vote for each share of stock
held and registered in such stockholder's name on the books of the Corporation.
(b) Voting Otherwise Than by Written Ballot. At all meetings of
stockholders, the voting may be otherwise than by written ballot, except that
any stockholder entitled to vote may request a vote by written ballot on any
matter, in which event such vote shall be taken by written ballot.
(c) Shareholder Action. In all matters other than the election of
directors, the affirmative vote of the holders of a majority of the shares of
stock of the Corporation who are present in person or represented by proxy at a
meeting at which a Quorum is present and who are entitled to vote on the subject
matter shall be the valid corporate act of the stockholders, except in those
specific instances in which a larger vote is required by law, the Articles or
these Bylaws.
(d) Voting for Directors. Directors shall be elected by a
plurality of the votes of the stockholders present in person or by proxy at a
meeting at which a Quorum is present and entitled to vote on the election of
directors. Voting for directors shall be by written ballot. No cumulative
voting shall be permitted in the election of directors.
II.10 Stock Ledger; Voting Rights of Fiduciaries, Pledgors and
Joint Owners of Stock.
(a) Corporate Shares. No person shall be permitted to vote on
any shares belonging or hypothecated to the Corporation.
(b) Stock Ledger. The stock ledger shall be the only evidence as
to who are the stockholders entitled to examine the stock ledger, the list
required by Section 2.11 of these Bylaws or the books of the Corporation, or to
vote in person or by proxy at any meeting of the stockholders. Only
stockholders whose names are registered in the stock ledger shall be entitled to
be treated by the Corporation as the holders and owners in fact of the shares
standing in their respective names, and the Corporation shall not be bound to
recognize any equitable or other claim to or interest in such shares on the part
of any other person, whether or not the Corporation shall have express or other
notice thereof, except as expressly provided by the laws of the State of Kansas.
(c) Voting Rights of Fiduciaries and Pledgors. Persons holding
stock in a fiduciary capacity shall be entitled to vote the shares so held.
Persons whose stock is pledged shall be entitled to vote, unless in the transfer
by the pledgor on the books of the Corporation the pledgor has expressly
empowered the pledgee to vote thereon, in which case only the pledgee, or the
pledgee's proxy, may represent such stock and vote thereon.
(d) Voting Rights of Joint Owners of Stock. If shares or other
securities having voting power stand of record in the names of two (2) or more
persons, or if two (2) or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary is given written notice to the
contrary and is furnished with a copy of the instrument or order appointing them
or creating the relationship wherein it is so provided, or as otherwise provided
by the laws of the State of Kansas, their acts with respect to voting shall have
the following effect: (i) if only one votes, the act binds all; (ii) if more
than one vote, the act of the majority so voting binds all; (iii) if more than
one vote, but the vote is evenly split on any particular matter, each fraction
may vote the securities in question proportionally. If the instrument so filed
shows that any such tenancy is held in unequal interests, a majority or
even-split for the purpose of this subsection shall be a majority or even-split
in interest rather than in number.
II.11 Stockholders' Lists. The Secretary or an Assistant
Secretary, who shall have charge of the stock ledger of the Corporation, shall
prepare and make, at least ten (10) days before every meeting of the
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
II.12 Voting by Class. Where a separate vote by a class or classes
of stockholders is required, the holders of a majority of the outstanding shares
of such class or classes, present in person or represented by proxy, shall
constitute a quorum entitled to take action with respect to that vote on that
matter and the affirmative vote of the holders of a majority of shares of such
class or classes who are present in person or represented by proxy at the
meeting shall be the act of such class.
ARTICLE III
BOARD OF DIRECTORS
III.1 Number, Qualification; Term. The number of directors to
constitute the Board shall be no more than fifteen (15) and no less than three
(3). The exact number of directors shall be fixed from time to time, within the
limits specified, by resolution of the Board or the Stockholders. Directors
need not be stockholders. Each director shall hold office until a succes- sor
is elected and qualified or until such director's earlier resignation or
removal.
III.2 Powers of the Board. The business and affairs of the
Corporation shall be managed by and under the direction of the Board. In
addition to the powers and authorities by these Bylaws and the Articles
expressly conferred upon it, the Board may exercise all such powers of the
Corporation, and do all such lawful acts and things, as are not by statute or by
the Articles or by these Bylaws directed or required to be exercised or done by
the stockholders.
III.3 Acceptance of Director. Each director, upon election, shall
qualify by accepting the office of director, and such director's attendance at,
or written approval of the minutes of, any meeting of the Board subsequent to
the director's election shall constitute acceptance of such office by such
director; or the director may accept the office of director by executing a
separate written acceptance, which shall be placed in the minute book.
III.4 Meetings; Notice. Except as otherwise provided below, the
Board may hold its meetings within or outside the State of Kansas.
(a) Annual Meeting. The first meeting of each newly elected
Board shall be held (i) immediately following and at the same place as the
annual meeting of the stockholders at which such Board was elected, and no
notice of such meeting shall be necessary, provided a quorum is present, (ii) at
such time and place as consented to in writing by all of the newly elected
directors, or (iii) upon notice of such meeting as provided for in Section
3.4(c) hereof, except that such notice need not state the purpose(s) of the
meeting.
(b) Regular Meetings. Regular meetings of the Board may be held
without notice at such times and places as adopted by written consent of all
directors. Any business may be transacted at any regular meeting.
(c) Special Meetings. Special meetings of the Board may be
called by the Chairman of the Board, the President, or a majority of the
authorized directors. Special meetings shall be held at the place, day and hour
specified in the written notice of the meeting which notice shall also state the
purpose(s) thereof. Such notice shall be mailed to each director at the
director's residence or usual place of business at least three (3) days before
the day on which the meeting is to be held, or shall be sent to the director by
confirmed facsimile transmission, or delivered personally to the director, at
least two (2) days before the day on which the meeting is to be held. If
mailed, such notice shall be deemed to be delivered when it is deposited in the
United States mail with postage thereon addressed to the director at his
residence or usual place of business. If given by facsimile transmission, such
notice shall be deemed to be delivered when received. The notice may be given
by any person having authority to call the meeting. "Notice" and "call" with
respect to such meetings shall be deemed to be synonymous.
(d) Waiver of Notice. Whenever any notice is required to be
given to any director under any law, the Articles or these Bylaws, a written
waiver thereof, signed by the director entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
Attendance by a director at a meeting shall constitute a waiver of notice of
such meeting, except when the director attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors need be specified in any written waiver of notice unless so
required by the Articles or these Bylaws.
(e) Meetings by Conference Telephone or Similar Communica- tions
Equipment. Unless otherwise restricted by the Articles or these Bylaws, the
directors may participate in a meeting of the Board by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and partici- pation in a
meeting in such manner shall constitute presence in person at such meeting.
(f) Action Without a Meeting. Unless otherwise restricted by the
Articles or these Bylaws, any action required or permitted to be taken at any
meeting of the Board may be taken without a meeting if all directors consent
thereto in writing. Any such writing shall be filed with the minutes of
proceedings of the Board.
III.5 Quorum; Voting Requirements. Unless a greater number is
required by the Articles or these Bylaws, a majority of the total number of
directors shall constitute a quorum for the transaction of business and the vote
of the majority of the directors present at a meeting at which a quorum is
present shall be the valid corporate act of the Board.
III.6 Vacancies and Newly Created Directorships. Unless otherwise
provided in the Articles or these Bylaws, vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, although less than
a quorum, or by a sole remaining director, and the directors so chosen shall
hold office until the next annual election of directors by the stock- holders at
which such director's successor is duly elected and qualified, or until such
director's earlier resignation or removal. If, at any time, by reason of death,
resignation or other cause, the Corporation should have no directors in office,
then any officer or any stockholder or an executor, administrator, trustee or
guardian of a stockholder, or other fiduciary entrusted with like responsibility
for the person or estate of a stockholder, may call a special meeting of
stockholders in accordance with the provisions of the Articles or these Bylaws,
or as otherwise provided by law for such election.
III.7 Committees.
(a) Designation. The Board may designate, by resolution passed
by a majority of the whole Board, one or more committees of the Board. Each
committee shall consist of one or more designated directors.
(b) Absence; Disqualification. The Board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the members thereof present at any
meeting and not disqualified from voting, whether or not such members constitute
a quorum, may unanimously appoint another member of the Board to act at the
meeting in the place of any such absent or disqualified member.
(c) Powers; Limitation. Any such committee, to the extent
provided in the resolution of the Board or in these Bylaws, shall have and may
exercise all of the powers and authority of the Board in the management of the
business and affairs of the Corporation and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority of the Board with respect to (i)
amending the Articles, (ii) adopting an agreement of merger or consolidation,
(iii) recommending to the stock- holders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, (iv) recommending to
the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or (v) amending the Bylaws; and, unless the resolution, these
Bylaws or the Articles expressly so provide, no such committee shall have power
or authority to declare a dividend or to authorize the issuance of stock or to
adopt a certificate of ownership and merger.
(d) Recordkeeping. All committees so appointed shall, unless
otherwise provided by the Board, keep regular minutes of the transactions at
their meetings and shall cause them to be recorded in books kept for that
purpose in the office of the Corporation and shall report the same to the Board
at its next meeting. The Secretary or an Assistant Secretary of the Corporation
may act as Secretary of the committee if the committee or the Board so requests.
(e) Meetings By Conference Telephone or Similar Communica- tions
Equipment. Unless otherwise restricted by the Articles or these Bylaws, members
of any committee designated by the Board may participate in a meeting of such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting in such manner shall constitute presence in
person at such meeting.
(f) Committee Action Without a Meeting. Unless otherwise
restricted by the Articles or these Bylaws, any action required or permitted to
be taken at any meeting of a committee may be taken without a meeting if all
members of such committee consent thereto in writing. Any such writing shall be
filed with the minutes of proceedings of such committee.
III.8 Compensation. Unless otherwise restricted by the Articles or
these Bylaws, the Board shall have the authority to fix the compensation of
directors for serving as directors of the Corporation and may, by resolution,
fix a sum which shall be allowed and paid for attendance at each meeting of the
Board and may provide for reimbursement of expenses incurred by directors in
attending each meeting; provided that nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity and receiv- ing compensation therefor. Members of committees may be
allowed similar compensation for attending committee meetings.
III.9 Resignations. Any director may resign at any time upon
written notice to the Corporation. Such resignation shall take effect at the
time specified therein or shall take effect upon receipt thereof by the
Corporation if no time is specified therein, and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
III.10 Reliance on Records. A director, or a member of any
committee designated by the Board, shall be fully protected in the performance
of such director's or committee member's duties in relying in good faith upon
the records of the Corporation and upon such information, opinions, reports or
statements presented to the Corporation by any of the Corporation's officers or
employees, or committees of the Board, or by any other person as to matters such
director or committee member reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Corpora- tion.
III.11 Removal of Directors. The stockholders shall have the power,
by a vote of the holders of a majority of the shares then entitled to vote, to
remove any director or directors from office with or without cause.
ARTICLE IV
OFFICERS
IV.1 Designations.
(a) The Corporation shall have a President and a Secretary and
may also have the following officers: a Chairman of the Board, one or more Vice
Presidents, a Treasurer, one or more Assistant Secretaries and one or more
Assistant Treasurers, each with such duties as are stated in this Article IV or
by resolution of the Board which is not inconsistent with these Bylaws. The
Board shall elect a President and a Secretary at its annual meeting. The Board
then, or from time to time, may elect one or more of the other officers as it
may deem advisable, and may further identify or describe the duties of any one
or more of the officers of the Corporation.
(b) Officers of the Corporation need not be members of the Board.
Any number of offices may be held by the same person.
(c) An officer shall be deemed qualified when the officer enters
upon the duties of the office to which the officer has been elected or appointed
and furnishes any bond required by the Board; but the Board may also require a
written acceptance and promise faithfully to discharge the duties of such
office.
(d) A failure to elect the Corporation's officers in accordance
with these Bylaws shall not dissolve or otherwise affect the Corporation.
IV.2 Term of Office. Each officer shall hold office at the pleasure of
the Board or for such other period as the Board may specify at the time of such
officer's election or appointment, or until the death, resignation or removal of
such officer, whichever first occurs. In any event, each officer of the
Corporation who is not reelected or reappointed at the annual election of
officers by the Board next succeeding his or her election or appointment shall
be deemed to have been removed by the Board, unless the Board provides otherwise
at the time of such officer's election or appointment.
IV.3 Other Agents. The Board from time to time may also appoint such
other agents for the Corporation as the Board shall deem necessary or advisable.
Each such agent shall serve at the pleasure of the Board or for such period as
the Board may specify, and shall exercise such powers, have such titles and
perform such duties as shall be determined from time to time by the Board or by
an officer empowered by these Bylaws or the Board to make such determinations.
IV.4 Removal. Any officer or agent elected or appointed by the Board
may be removed or discharged by the Board whenever in the Board's judgment the
best interests of the Corporation would be served thereby, but such removal or
discharge shall be without prejudice to the contract rights, if any, of the
person so removed or discharged.
IV.5 Salaries and Compensation. Salaries and compensation of all
elected officers of the Corporation shall be fixed, increased or decreased by
the Board, but this power, except as to the salary or compensation of the
Chairman of the Board and the President, may, unless prohibited by law, be
delegated by the Board to the Chairman of the Board or the President, or may be
delegated to a committee. Salaries and compensation of all other officers,
agents and employees of the Corporation may be fixed, increased or decreased by
the Board, but until action is taken with respect thereto by the Board, the same
may be fixed, increased or decreased by the President or such other officer or
officers as may be empowered by the Board to do so.
IV.6 Delegation of Authority to Hire, Discharge and Designate Duties.
The Board from time to time may delegate to the Chairman of the Board, the
President or other officer or executive employee of the Corporation, authority
to hire and discharge and to fix and modify the duties and salary or other
compensation of employees of the Corporation under the juris- diction of such
person, and the Board may delegate to such officer or executive employee similar
authority with respect to obtaining and retaining for the Corporation the
services of attorneys, accountants and other professionals and experts.
IV.7 Chairman of the Board. If a Chairman of the Board is elected, the
Chairman of the Board shall preside at all meetings of the stockholders and
directors at which he or she may be present and shall have such other duties,
powers and authority as may be prescribed elsewhere in these Bylaws. The Board
may delegate such other authority and assign such additional duties to the
Chairman of the Board, other than those conferred by law exclusively upon the
President or another officer, as the Board may from time to time determine, and,
to the extent permissible by law, the Board may designate the Chairman of the
Board as the chief executive officer of the Corporation with all of the powers
otherwise conferred upon the President of the Corporation under Section 4.8 of
these Bylaws, or it may, from time to time, divide the responsibilities, duties
and authority for the general control and management of the Corporation's
business and affairs between the Chairman of the Board and the President.
IV.8 President.
(a) Unless the Board otherwise provides, the President shall be
the chief executive officer of the Corporation with such general executive
powers and duties of supervision and management as are usually vested in the
office of the chief executive officer of a corporation, and the President shall
carry into effect all directions and resolutions of the Board. The President,
in the absence of the Chairman of the Board or if there is no Chairman of the
Board, shall preside at all meetings of the stockholders and directors.
(b) The President may execute all bonds, notes, debentures,
mortgages and other instruments for and in the name of the Corporation, may
cause the corporate seal to be affixed thereto, and may execute all other
instruments and documents for and in the name of the Corporation.
(c) Unless the Board otherwise provides, the President, or any
person designated in writing by the President, shall have full power and
authority on behalf of the Corporation to (i) attend and to vote or take action
at any meeting of the holders of securities of corporations or other entities in
which the Corporation may hold securities, and at such meetings shall possess
and may exercise any and all rights and powers incident to being a holder of
such securities, and (ii) execute and deliver waivers of notice and proxies for
and in the name of the Corporation with respect to any securities held by the
Corporation.
(d) The President shall, unless the Board otherwise provides, be
ex officio a member of all standing committees.
(e) The President shall have such other or further duties and
authority as may be prescribed elsewhere in these Bylaws or from time to time by
the Board of Directors.
(f) If a Chairman of the Board is elected or appointed and
designated as the chief executive officer of the Corporation, as provided in
Section 4.7 of these Bylaws, the President shall perform such duties as may be
specifically delegated to the President by the Board or are conferred by law
exclusively upon the President, and in the absence or disability of the Chairman
of the Board or in the event of the Chairman's inability or refusal to act, the
President shall perform the duties and exercise the powers of the Chairman of
the Board.
IV.9 Vice Presidents. In the absence or disability of the President or
in the event of the President's inability or refusal to act, any Vice President
may perform the duties and exercise the powers of the President until the Board
otherwise provides. Vice Presidents shall perform such other duties and have
such other authority as the Board may from time to time prescribe.
IV.10 Secretary and Assistant Secretaries.
(a) The Secretary shall attend all meetings of the Board and the
stockholders and shall record the minutes of such meetings in a book to be kept
for that purpose. The Secretary shall perform similar duties for each standing
or temporary committee when requested by the Board or such committee.
(b) The Secretary shall keep in safe custody the seal of the
Corporation, and shall have authority to affix the seal to any instrument
requiring a corporate seal and, when so affixed, the Secretary may attest the
seal by signature. The Board of Directors may give or these Bylaws may provide
for general authority to any other officer to affix the seal of the Corporation
and to attest the seal by signature.
(c) The Secretary shall have the general duties, powers and
responsibilities of a secretary of a corporation and shall perform such other
duties and have such other responsibility and authority as may be prescribed
elsewhere in these Bylaws or from time to time by the Board or the chief
executive officer of the Corporation, under whose direct supervision the
Secretary shall be.
(d) In the absence or disability of the Secretary or in the event
of the inability or refusal of the Secretary to act, any Assistant Secretary or
other elected officer may perform the duties and exercise the powers of the
Secretary until the Board otherwise provides. Assistant Secretaries shall
perform such other duties and have such other authority as the Board may from
time to time prescribe.
IV.11 Treasurer and Assistant Treasurers.
(a) The Treasurer shall have responsibility for the safekeeping
of the funds and securities of the Corporation, shall keep or cause to be kept
full and accurate accounts of receipts and disbursements in books belonging to
the Corporation and shall keep or cause to be kept all other books of account
and accounting records of the Corporation. The Treasurer shall deposit or cause
to be deposited all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors or by any officer of the Corporation to whom such authority has
been granted by the Board.
(b) The Treasurer shall disburse, or permit to be disbursed, the
funds of the Corporation as may be ordered, or authorized generally, by the
Board, and shall render to the chief executive officer of the Corporation and
the directors, whenever they may require, an account of all such transactions as
Treasurer, and of those under the Treasurer's jurisdiction, and of the financial
condition of the Corporation.
(c) The Treasurer shall perform such other duties and shall have
such other responsibility and authority as may be prescribed elsewhere in these
Bylaws or from time to time by the Board.
(d) The Treasurer shall have the general duties, powers,
responsibilities and authorities of a treasurer of a corporation and shall,
unless otherwise provided by the Board, be the chief financial and accounting
officer of the Corporation.
(e) If required by the Board, the Treasurer shall give the
Corporation a bond in a sum and with one or more sureties satisfactory to the
Board for the faithful performance of the duties of the Treasurer and for the
restoration to the Corporation, in the case of such Treasurer's death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in the such Treasurer's possession or
under his control which belong to the Corporation.
(f) In the absence or disability of the Treasurer or in the event
of the Treasurer's inability or refusal to act, any Assistant Treasurer or other
elected officer may perform the duties and exercise the powers of the Treasurer
until the Board otherwise provides. Assistant Treasurers shall perform such
other duties and have such other authority as the Board may from time to time
prescribe.
IV.12 Duties of Officers May Be Delegated. If any officer of the
Corporation is absent or unable to act, or for any other reason that the Board
may deem sufficient, the Board may delegate, for the time being, some or all of
the functions, duties, powers and responsibilities of any officer to any other
officer, or to any other agent or employee of the Corporation or other
responsible person.
ARTICLE V
MANDATORY INDEMNIFICATION: OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
V.1 Limitation of Liability. No person shall be liable to the
Corporation or the stockholders for any loss, damage, liability or expense
suffered by the Corporation on account of any action taken or omitted to be
taken by such person as a director, employee, agent or officer of the
Corporation or of any Other Enterprise (as hereinafter defined) which such
person serves or has served as a director, employee, agent or officer at the
request of the Corporation, if such person (a) exercised the same degree of care
and skill as a prudent person would have exercised under the circumstances in
the conduct of his or her own affairs, or (b) took or omitted to take such
action in reliance upon advise of counsel for the Corporation, or for such Other
Enterprise, or upon statements made or information furnished by directors,
officers, employees or agents of the Corporation, or of such Other Enterprise,
which such person had no reasonable grounds to disbelieve.
V.2 Indemnification Generally. In addition to and without limiting
the rights to indemnification and advancement of expenses specifically provided
for in the other sections of this Article V, the Corporation shall indemnify and
advance expenses to each person who is or was a director, employee, agent or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director, employee, agent or officer of any Other Enterprise,
to the full extent permitted by the laws of the State of Kansas as in effect on
the date of the adoption of these Bylaws and as may hereafter be amended.
V.3 Indemnification in Actions by Third Parties. The Corporation
shall indemnify each person who has been or is a party, or is threatened to be
made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, investigative or appellate,
other than an action by or in the right of the Corporation, by reason of the
fact that such person is or was a director, employee, agent or officer of the
Corporation, or is or was serving at the request of the Corporation as a
director, employee, agent or officer of any Other Enterprise, against all
liabilities and expenses, including, without limitation, judgments, fines,
amounts paid in settlement (provided that such settlement and all amounts paid
in connection therewith are approved in advance by the Corporation using the
procedures set forth in Section 5.6 of these Bylaws, which approval shall not be
unreasonably withheld or delayed), attorneys' fees, ERISA excise taxes or
penalties, and other expenses actually and reasonably incurred by such person in
connection with such action, suit or proceeding (including, without limitation,
the investigation, defense, settlement or appeal of such action, suit or
proceeding) if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful; provided,
however, that the Corporation shall not be required to indemnify or advance
expenses to any such person or persons seeking indemnification or advancement of
expenses in connection with an action, suit or proceeding initiated by such
person or persons (including, without limitation, any crossclaim or counterclaim
initiated by such person or persons) unless the initiation of such action, suit
or proceeding was authorized by the Board. The termination of any such action,
suit or proceeding by judgment, order, settlement, conviction or under a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, that such
person had reasonable cause to believe that such person's conduct was unlawful.
V.4 Indemnification in Derivative Actions. The Corporation shall
indemnify each person who has been or is a party, or is threatened to be made a
party, to any threatened, pending or completed action, suit or proceeding by or
in the right of the Corporation to procure a judgment in its favor by reason of
the fact that such person is or was a director, employee, agent or officer of
the Corporation or is or was serving at the Corpora- tion's request as a
director, employee, agent or officer of any Other Enterprise against all
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action, suit or
proceeding (including, without limitation, the investigation, defense,
settlement or appeal of such action, suit or proceeding) if such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Corporation, except that no indemnification
under this Section 5.4 shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the court in which the action, suit or
proceeding was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.
V.5 Indemnification for Expenses. Notwithstanding the other
provisions of this Article V, to the extent a person who is or was serving as a
director, employee, agent or officer of the Corporation, or is or was serving at
the request of the Corporation as a director, employee, agent or officer of any
Other Enterprise, has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Sections 5.3 and 5.4 of these
Bylaws (including the dismissal of any such action, suit or proceeding without
prejudice), or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
V.6 Determination of Right to Indemnification. Prior to indemnifying
a person pursuant to the provisions of Sections 5.2, 5.3 and 5.4 of these
Bylaws, unless ordered by a court and except as otherwise provided by Section
5.5 of these Bylaws, the Corporation shall determine that such person has met
the specified standard of conduct entitling such person to indemnification as
set forth under Sections 5.2, 5.3 and 5.4 of these Bylaws. Any determination
that a person shall or shall not be indemnified under the provisions of Sections
5.2, 5.3 and 5.4 of these Bylaws shall be made (a) by the Board by a majority
vote of a quorum consisting of directors who were not parties to the action,
suit or proceeding, (b) if such quorum is not obtainable, or even if obtainable,
if a quorum of disinterested directors so directs, by independent legal counsel
in a written opinion, or (c) by the stockholders, and such determination shall
be final and binding upon the Corporation; provided, however, that in the event
such determination is adverse to the person or persons to be indemnified
hereunder, such person or persons shall have the right to maintain an action in
any court of competent jurisdiction against the Corporation to determine whether
or not such person has met the requisite standard of conduct and is entitled to
such indemnification hereunder. If such court action is successful and the
person or persons is determined to be entitled to such indemnification, such
person or persons shall be reimbursed by the Corporation for all fees and
expenses (including attorneys' fees) actually and reasonably incurred in
connection with any such action (including, without limitation, the
investigation, defense, settlement or appeal of such action).
V.7 Advancement of Expenses. Expenses (including attorneys' fees)
actually and reasonably incurred by a person who may be entitled to
indemnification hereunder in defending an action, suit or proceeding, whether
civil, criminal, administrative, investigative or appellate, may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that such person is not
entitled to indemnification by the Corporation. Notwithstanding the foregoing,
no advance shall be made by the Corporation if a determination is reasonably and
promptly made by (a) the Board by a majority vote of a quorum consisting of
directors who were not parties to the action, suit or proceeding for which the
advancement is requested, (b) if a quorum is not obtainable, or even if
obtainable, if a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (c) by the stockholders, that, based upon
the facts known to the Board, independent legal counsel or stockholders at the
time such determination is made, such person acted in bad faith and in a manner
that such person did not believe to be in or not opposed to the best interests
of the Corporation, or, with respect to any criminal proceeding, that such
person believed or had reasonable cause to believe such person's conduct was
unlawful. In no event shall any advancement of expenses be made in instances
where the Board, independent legal counsel or stockholders reasonably determines
that such person intentionally breached such person's duty to the Corporation or
the stockholders.
V.8 Non-Exclusivity. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article V shall not be exclusive of
any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any statute, the Articles of Incorporation, these
Bylaws, agreement, vote of stockholders or disinterested directors, policy of
insurance or otherwise, both as to action in their official capacity and as to
action in another capacity while holding their respective offices, and shall not
limit in any way any right which the Corporation may have to make additional
indemnifications with respect to the same or different persons or classes of
persons. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article V shall continue as to a person who has ceased
to be a director or officer and shall inure to the benefit of the heirs,
executors, administrators and estate of such a person.
V.9 Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director or officer of the Corporation, or
is or was serving at the request of the Corporation as a director or officer of
any Other Enterprise, against any liability asserted against such person and
incurred by such person in any such capacity, or arising out of such person's
status as such, whether or not the Corporation would have the power to indemnify
such person against such liability under this Article V.
V.10 Vesting of Rights. The rights granted by this Article V shall be
vested in each person entitled to indemnification hereunder as a bargained-for,
contractual condition of such person's acceptance of such person's election or
appointment as a director, employee, agent or officer of the Corporation or
serving at the request of the Corporation as a director, employee, agent or
officer of any Other Enterprise and while this Article V may be amended or
repealed, no such amendment or repeal shall release, terminate, or adversely
affect the rights of such person under this Article V with respect to any act
taken or the failure to take any act by such person prior to such amendment or
repeal or with respect to any action, suit or proceeding with respect to such
act or failure to act filed after such amendment or repeal.
V.11 Definitions. For purposes of this Article V, references to:
(a) "the Corporation" shall, if and only if the Board shall
determine, include, in addition to the resulting Corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors or officers or persons
serving at the request of such constituent corporation as a director or officer
of any Other Enterprise, so that any person who is or was a director or officer
of such constituent corpora- tion, or is or was serving at the request of such
constituent corporation as a director or officer of any Other Enterprise, shall
stand in the same position under the provisions of this Article V with respect
to the resulting or surviving corporation as such person would have with respect
to such constituent corporation if its separate existence had continued.
(b) "Other Enterprise" shall include, without limitation, any
other corporation, partnership, limited liability company, joint venture, trust
or employee benefit plan;
(c) "Director or officer of any Other Enterprise" shall include,
without limitation, any person performing similar functions with respect to such
Other Enterprise, whether incorporated or unincorporated.
(d) "fines" shall include any excise taxes assessed against a
person with respect to an employee benefit plan;
(e) "defense" shall include investigations of any threatened,
pending or completed action, suit or proceeding as well as appeals thereof and
shall also include any defensive assertion of a cross claim or counterclaim; and
(f) "serving at the request of the Corporation" shall include,
without limitation, any service as a director, employee, agent or officer of the
Corporation which imposes duties on, or involves services by, such director,
employee, agent or officer with respect to an employee benefit plan, its
participants, or benefi- ciaries; and a person who acted in good faith and in a
manner such person reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article V. In all other instances where any person shall serve as a
director, employee, agent or officer of an Other Enterprise, if it is not
otherwise established that such person is or was serving as such director,
employee, agent or officer at the request of the Corporation, the Board shall
determine whether such person is or was serving at the request of the
Corporation, and it shall not be necessary to show any prior request for such
service, which determination shall be final and binding on the Corporation and
the person seeking indemnification.
V.12 Severability. If any provision of this Article V or the
application of any such provision to any person or circumstance is held invalid,
illegal or unenforceable for any reason whatsoever, the remaining provisions of
this Article V and the application of such provisions to other persons or
circumstances shall not be affected thereby and, to the fullest extent possible,
the court finding such provision invalid, illegal or unenforceable shall modify
and construe the provision so as to render it valid and enforceable as against
all persons or entities and to give the maximum possible protection to persons
subject to indemnification hereby within the bounds of validity, legality and
enforceability. Without limiting the generality of the foregoing, if any
director, employee, agent or officer of the Corporation, or any person who is or
was serving at the request of the Corporation as a director, employee, agent or
officer of any Other Enterprise, is entitled under any provision of this Article
V to indemnification by the Corporation for some or a portion of the judgments,
amounts paid in settlement, attorneys' fees, ERISA excise taxes or penalties,
fines or other expenses actually and reasonably incurred by any such person in
connection with any threatened, pending or completed action, suit or proceeding
(including, without limitation, the investigation, defense, settlement or appeal
of such action, suit or proceeding), whether civil, criminal, administrative,
investigative or appellate, but not, however, for all of the total amount
thereof, the Corporation shall nevertheless indemnify such person for the
portion thereof to which such person is entitled.
ARTICLE VI
STOCK
VI.1 Certificates Representing Shares. Each stockholder shall be
entitled to receive a certificate, signed by the Chairman of the Board or the
President or a Vice President, and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Corporation, representing the
number of shares owned by such stockholder and registered in the stockholder's
name. Such certificates shall be issued in numerical order. To the extent
permitted by law, any or all of the signatures on the certificate may be a
facsimile. In the event that any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate has
ceased to be such officer, transfer agent or registrar before such certificate
is issued, such certificate may nevertheless be issued by the Corporation with
the same effect as if such officer, transfer agent or registrar who signed such
certificate, or whose facsimile signature shall have been placed thereon, were
such officer, transfer agent or registrar of the Corporation at the date of
issue.
VI.2 Transfers of Stock. Transfers of stock shall be made only upon
the stock transfer books of the Corporation, and before a new certificate is
issued the old certificate shall be surrendered for cancellation, subject to the
provisions of Section 6.5 of these Bylaws. Until and unless the Board appoints
some other person, firm or corporation as its transfer agent (and upon the
revocation of any such appointment, thereafter until a new appointment is
similarly made), the Secretary of the Corporation shall be the transfer agent of
the Corporation without the necessity of any formal action of the Board, and the
Secretary, or any person designated by the Secretary, shall perform all of the
duties of such transfer agent.
VI.3 Record Date.
(a) Stockholders' Meetings. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board, and which record date shall not be more
than sixty (60) nor less than ten (10) days before the date of such meeting. If
no record date is fixed by the Board, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of stockholders
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting except that the Board may fix a new record date for
the adjourned meeting.
(b) Stockholders' Action Without a Meeting. In order that the
Corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board may fix a record date which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board, which date shall not be more than ten (10)
days after the date upon which the resolution fixing the record date is adopted
by the Board, and which date shall be effective for no more than sixty (60) days
after such record date. If no record date has been fixed by the Board, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board is required by
any statute, the Articles or these Bylaws, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in the State
of Kansas, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded, and which date shall be effective for sixty (60) days
after such record date. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board and prior action by the Board is
required by any statute, the Articles or any Bylaw, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board adopts the resolution taking such prior action, and such date shall be
effective for sixty (60) days after such record date.
(c) Dividends and Other Distributions. In order that the
Corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purpose of any other lawful action, the Board may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall not be
more than sixty (60) days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the Board adopts the resolution relating
thereto.
VI.4 Regulations. The Board shall have power and authority to make all
such rules and regulations as it may deem expedient concerning the issue,
transfer, conversion and registration of certificates for shares of stock of the
Corporation, not inconsistent with the laws of the State of Kansas, the Articles
or these Bylaws.
VI.5 Lost Certificates. The Board may direct that a new certificate or
certificates of stock or uncertificated shares be issued in place of any
certificate or certificates theretofore issued by the Corporation, alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate or certificates to be lost, stolen
or destroyed. When authorizing the issue of such replacement certificate or
certificates of stock or uncertificated shares, the Board may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
allegedly lost, stolen or destroyed certificate or certificates, or such owner's
legal representative, to give the Corporation a bond as the Board may direct
sufficient to indemnify the Corporation against any claim that may be made
against the Corporation on account of the alleged loss, theft or destruction of
the certificate or certificates or the issuance of such new certificate or
certificates or uncertificated shares.
ARTICLE VII
CORPORATE FINANCE
VII.1 Dividends; Redemption. Subject to the Articles and the laws
of Kansas, the Board may declare and pay dividends upon the outstanding shares
of stock of the Corporation at any meeting, which dividends may be paid in cash,
in property or in shares of the Corporation's capital stock, and may cause the
Corporation to purchase or redeem any of its outstanding shares of stock. A
director or a member of any committee designated by the Board shall be fully
protected in relying in good faith upon the records of the Corporation and upon
such information, opinions, reports or statements presented to the Corporation
by any of its officers or employees, or committees of the Board, or by any other
person as to matters the director or committee member reasonably believes are
within such other person's professional or expert competence and who has been
selected with reasonable care by or on behalf of the Corporation, as to the
value and amount of the assets, liabilities or net profits of the Corporation,
or both, or any other facts pertinent to the existence and amount of net
profits, surplus or other funds from which dividends may properly be declared
and paid, or with which the Corporation's stock may properly be purchased or
redeemed.
VII.2 Creation of Reserves. The Board may set apart out of any of
the funds of the Corporation available for dividends or otherwise a reserve or
reserves for any proper purpose and may abolish any such reserve.
VII.3 Depositories; Checks. The moneys of the Corporation shall be
deposited in the name of the Corporation in such bank or banks or other
depositories as the Board shall designate, and all checks or instruments for the
payment of money shall be signed by persons designated by resolution adopted by
the Board. Notwithstanding the foregoing, the Board by resolution may authorize
an officer or officers of the Corporation to designate any bank or banks or
other depositories in which moneys of the Corporation may be deposited, and to
designate the persons who may sign checks or drafts on any particular account or
accounts of the Corporation, whether created by direct designation of the Board
or by an authorized officer or officers as aforesaid.
ARTICLE VIII
GENERAL PROVISIONS
VIII.1 Fiscal Year. The Board shall have power to fix and from time
to time change the fiscal year of the Corporation. In the absence of action by
the Board, the fiscal year of the Corporation shall end each year on the date
which the Corpora- tion treated as the close of its first fiscal year, until
such time, if any, as the fiscal year shall be changed by the Board.
VIII.2 Corporate Seal. The Corporation shall have a corporate seal
inscribed within the name of the Corporation and the words "Corporate Seal --
Kansas." The corporate seal may be used by causing it, or a facsimile thereof,
to be impressed or affixed or in any manner reproduced.
VIII.3 Contracts. The Board may authorize any officer or officers,
or agent or agents, to enter into any contract or execute and deliver any
instrument or document for, and in the name of, the Corporation, and such
authority may be general or confined to specific instances.
VIII.4 Amendments. These Bylaws may be altered, amended or
repealed, or new Bylaws may be adopted, in the manner provided in the Articles.
VIII.5 Amendments. These Bylaws may be altered, amended or repealed
or new Bylaws may be adopted in the manner provided in the Articles.
Notwithstanding the foregoing, Section 8.4 of the Bylaws may be repealed,
amended or altered only by the vote of stockholders holding at least 75% of the
issued and outstanding shares of stock of the Corporation.
CERTIFICATE
The undersigned Secretary of First American Capital Corporation, a
Kansas corporation, hereby certifies that the foregoing Bylaws are the original
Bylaws of the Corporation adopted by the initial directors named in the Articles
of Incorporation of the Corporation.
Dated: ___________________, 1996.
By: _____________________________________
Name: ___________________________________
Title: Secretary
CERTIFICATE OF DESIGNATIONS, PREFERENCES,
AND
RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL
RIGHTS OF PREFERRED STOCK AND
QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF
OF
6% NON-CUMULATIVE, CONVERTIBLE, CALLABLE
PREFERRED STOCK
OF
FIRST AMERICAN CAPITAL CORPORATION
____________________________________
Pursuant to Section 17-6002, and amendments thereto, of the
Kansas Statutes Annotated
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First American Capital Corporation, a Kansas corporation (the
"Corporation"), certifies that pursuant to the authority
contained in Article IV of its Articles of Incorporation, and in
accordance with the provisions of K.S.A. 17-6002, and
amendments thereto, its Board of Directors, at a special
meeting held on March 10, 1997, adopted the following
resolution creating a series of its Preferred Stock, par value
$5.00 per share, designated as 6% Non-Cumulative,
Convertible, Callable Preferred Stock:
WHEREAS, the Articles of Incorporation of the Corporation
authorizes a class of shares known as Preferred Stock, par
value $5.00 per share, to be issuable from time to time in one
or more series;
RESOLVED, that pursuant to the authority expressly granted
to and vested in the Board of Directors of the Corporation by
the provisions of the Articles of Incorporation, the Board
hereby creates a series of the class of authorized Preferred
Stock of the Corporation, and hereby fixes the designation and
amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of
such series, and the qualifications, limitations or restrictions
thereof as follows:
1. Designation. The designation of the series of Preferred Stock
authorized by this resolution shall be "6% Non-Cumulative,
Convertible, Callable Preferred Stock" (the "Preferred Stock").
The maximum number of shares of Preferred Stock issuable
hereunder shall be 550,000 and shall have a par value of $5.00
per share. The shares of Preferred Stock shall be issued by the
Corporation for their such value, in such amounts, at such
times and to such persons as shall be specified by the
Corporation's Board of Directors, from time to time.
2. Rank. The Preferred Stock shall, with respect to dividend
rights and rights on liquidation, winding up and dissolution,
rank junior to all classes and series of stock of the Corporation
now or hereafter authorized, issued or outstanding
(collectively, the "Senior Securities") other than the
Corporation's "Junior Securities." For the purposes hereof,
"Junior Securities" means all series and classes of common
stock, $.10 par value per share (the "Common Stock"), of the
Corporation, and such classes or series of stock of the
Corporation as shall be designated as junior to the Preferred
Stock. The Corporation shall not issue any series or class of
stock ranking senior to the Preferred Stock without the
affirmative vote of a majority of the outstanding shares of
Preferred Stock.
3. Dividends.
a) Amount. On the last business day of December in each
calendar year (the "Dividend Accrual Date"), the holder of
record of each share of the Preferred Stock as their names
appear in the stock register of the Corporation on such date
shall become entitled to receive (when, as and if declared by
the Board of Directors of the Corporation) a cash dividend (the
"Annual Dividend") equal to the sum of (i) six percent (6%) of
the $5.00 par value per annum ($.30 per share) of such share
(pro-rated for any portion of a full year that such share shall
have been issued and outstanding).
b) Time of Payment. Dividends shall be payable annually, when,
as and if declared by the Board of Directors of the Corporation.
Dividends on each share of the Preferred Stock shall be
non-cumulative with the right to receive dividends forfeited in any
year in whith a dividend is not declared.
c) Restrictions on Payment of Dividends. Notwithstanding
anything contained herein to the contrary, no dividends on
shares of Preferred Stock shall be declared by the Board of
Directors or paid or set apart for payment by the Corporation:
(i) unless, prior to or concurrently with such declaration,
payment or setting apart, all accrued and unpaid dividends, if
any, on shares of Senior Securities shall have been paid or
declared and set apart for payment through the dividend
payment period with respect to such Senior Securities which
next precedes or coincides with the Dividend Accrual Date; or
(ii) at such time as such declaration, payment or setting apart is
prohibited by the Kansas Corporation Code (the "KCC"); or
(iii) at such time as the terms and provisions of any contract or
other agreement of the Corporation or any of its subsidiaries
entered into or assumed providing financing (including
acquisition financing) or working capital to the Corporation or
any of its subsidiaries (whether or not entered into prior to, at
or after the issuance of the Preferred Stock), specifically
prohibits such declaration, payment or setting apart for
payment or provides that such declaration, payment or setting
apart for payment would constitute a breach thereof or a default
thereunder.
4. Restrictions on Junior Payments. So long as any shares of
Preferred Stock are outstanding, the Corporation shall not (a)
declare, pay or set apart for payment any dividend on, or make
any distribution in respect of, Junior Securities or any warrants,
rights, calls or options exercisable or convertible into any
Junior Securities, either directly or indirectly, whether in cash,
obligations or shares of the Corporation or other property
(other than distributions or dividends solely in the form of a
particular class or series of Junior Securities, or warrants, rights
or options exercisable for such Junior Securities, to holders of
such Junior Securities), (b) make any payment on account of,
or set apart for payment money for a sinking or other similar
fund for, the purchase, redemption, retirement or other
acquisition for value of any of, or redeem, purchase, retire or
otherwise acquire for value any of, the Junior Securities (other
than as a result of a reclassification of Junior Securities or the
exchange or conversion of one class or series of Junior
Securities for or into another class or series of Junior
Securities) or any warrants, rights, calls or options exercisable
for or convertible into any of the Junior Securities, or (c)
permit any corporation or other entity directly or indirectly
controlled by the Corporation to purchase, redeem, retire or
otherwise acquire for value any of the Junior Securities or any
warrants, rights, calls or options exercisable for or convertible
into any Junior Securities; provided, however, that the
restrictions of this Section 4 may be waived by the affirmative
vote of a majority of the outstanding shares of Preferred Stock.
5. Liquidation Preference.
a) The Liquidation Preference. In the event of any voluntary or
involuntary liquidation, dissolution or winding up the affairs of
the Corporation, the holders of shares of Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the
Corporation remaining after paying or providing for the
payment of all creditors, an amount equal to $5.00 for each
share outstanding plus an amount equal to all declared but
unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding up (the "Liquidation Preference"),
before any payment shall be made or any assets distributed to
the holders of Junior Securities. If the assets of the
Corporation are not sufficient to pay in full the liquidation
payments payable to the holders of outstanding shares of the
Preferred Stock and any series of preferred stock or any other
class of stock on a parity, as to rights on liquidation,
dissolution or winding up, with the Preferred Stock, then the
holders of all such shares shall share ratably in such
distribution of assets in accordance with the amount that would
be payable on such distribution if the amounts to which the
holders of outstanding shares of Preferred Stock and the
holders of outstanding shares of such other securities are
entitled were paid in full. Nothing herein contained shall be
deemed to prevent redemption of shares of the Preferred Stock
by the Corporation in the manner provided in Section 6. The
liquidation payment with respect to each outstanding fractional
share of Redeemable Preferred Stock shall be equal to a ratably
proportionate amount of the liquidation payment with respect
to each outstanding share of Preferred Stock. All payments for
which this Section 5 provides shall be in cash, property (valued
at its fair market value, as determined by an independent
nationally recognized investment banking firm) or a
combination thereof; provided, however, that no cash shall be
paid to holders of Junior Securities unless each holder of the
outstanding shares of Preferred Stock has been paid in cash the
full amount of the Liquidation Preference to which such holder
is entitled as provided herein. After payment of the full
amount of the Liquidation Preference to which each holder is
entitled, such holders of shares of Preferred Stock will not be
entitled to any further participation in any distribution of the
assets of the Corporation.
b) Events Not Constituting Liquidation. For the purposes of this
Section 5, neither the voluntary sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or
assets of the Corporation nor the consolidation or merger of the
Corporation with or into any other corporation shall be deemed
to be a voluntary or involuntary liquidation, dissolution or
winding up of the Corporation.
6. Redemption.
a) Optional Redemption. Subject to the restrictions set forth in
Section 6(c) hereof, the Corporation may, at the option of the
Board of Directors, at any time or from time to time, in whole
or in part, redeem the shares of Preferred Stock at the time
outstanding, upon notice given as hereinafter specified and on a
date as specified in such notice, at a redemption price equal to
$25 per share, together with declared but unpaid dividends
thereon to the date fixed for such redemption.
b) Manner of Redemption. Notice of redemption of outstanding
shares of Preferred Stock pursuant to this Section shall be sent
by or on behalf of the Corporation to the holders of record of
outstanding shares of Preferred Stock selected for redemption
in the manner provided in Section g(b) hereof. If, as a result of
a redemption, a holder would be left with a fraction of a share
of Preferred Stock, the Corporation shall redeem the number of
shares of such holder that it otherwise would redeem rounded
up or down, in the Corporation's sole discretion, to the nearest
whole number.
c) Restrictions on Redemptions. No shares of Preferred Stock
shall be redeemed in whole or part under this Section: (i) at any
time that such redemption is prohibited by the KCC; (ii) at any
time that the terms and provisions of any contract or other
agreement of the Corporation or any of its subsidiaries entered
into or assumed providing financing (including acquisition
financing) or working capital to the Corporation or any of its
subsidiaries (whether or not entered into prior to, at or after the
issuance of the Preferred Stock), specifically prohibits such
redemption or provides that such redemption would constitute
a breach thereof or a default thereunder; (iii) unless, prior to or
concurrently with such redemption, all unpaid and accrued
dividends on Preferred Stock and on Senior Securities for
dividend periods preceding or ending on the redemption date
have been paid in full or have been declared and set aside for
payment in full; or (iv) at any time that the Corporation shall be
in default in respect of any of its redemption obligations on or
under Senior Securities.
d) Priority as to Junior Securities. The Corporation shall take no
action that would otherwise require the Corporation to redeem
any outstanding shares of Preferred Stock pursuant to this
Section (each a "Redemption Obligation") if at such time the
Corporation is unable to discharge its Redemption Obligation;
provided, however, that if the Corporation fails to discharge
any Redemption Obligation (without regard as to the
circumstances pursuant to which such Redemption Obligation
arose), (x) the Redemption Obligation shall be discharged as
soon as the Corporation is able to discharge such Redemption
Obligation, and (y) so long as such Redemption Obligation
shall be outstanding but shall not be fully discharged, the
Corporation shall not (i) declare, pay or set apart for payment
any dividend on, or make any distribution in respect of, the
Junior Securities or any warrants, rights, calls or options
exercisable for or convertible into any of the Junior Securities,
either directly or indirectly, whether in cash, obligations or
shares of the Corporation or other property (other than
distributions or dividends of a particular class or series of
Junior Securities, or warrants, rights or options exercisable for
such Junior Securities, to holders of such Junior Securities), or
(ii) make any payment on account of, or set apart for payment
money for a sinking or other similar fund for, the purchase,
redemption, retirement or other acquisition for value of any of,
or redeem, purchase, retire or otherwise acquire for value any
of, the Junior Securities (other than as a result of a
reclassification of Junior Securities or the exchange or
conversion of one class or series of Junior Securities for or into
another class or series of Junior Securities, other than through
the use of the proceeds of a substantially contemporaneous sale
of other Junior Securities) or any warrants, rights, calls or
options exercisable for or convertible into any of the Junior
Securities, or (iii) permit any corporation or other entity
directly or indirectly controlled by the Corporation to purchase,
redeem, retire or otherwise acquire for value any of the Junior
Securities or any warrants, rights, calls or options exercisable
for or convertible into any of the Junior Securities.
Notwithstanding the immediately preceding, sentence, the
restrictions of this Section 6(d) shal not apply to the repurchase
or redemption of shares of the Corporation's capital stock in
accordance with Section 4 hereof.
7. Conversion. The Preferred Stock may be converted, at the
holder's option, into four shares of Common Stock of the
Corporation until six months after the completion or
termination of an initial Public Offering of units of the
Corporation's equity securities, including the Preferred Stock
(the "Public Offering"). As used herein, the term "Public
Offering" means the offer and sale units pursuant to an
effective registration statement with the United States
Securities and Exchange Commission or the offer and sale of
units on an intrastate-only basis pursuant to Rule 147 of the
United States Securities and Exchange Commission and to an
offering qualified with the Office of the Kansas Securities
Commission for public sale.
8. Procedure for Conversion. Each subscriber to the Public
Offering may elect to exercise the conversion option described
in Section 7 hereof at the time he or she signs a Subscription
Agreement.
9. Redemption Selection. In the event that fewer than all of the
outstanding Preferred Stock are to be redeemed pursuant to
Section 6, the determination of the shares to be returned will be
made by the Board of Directors by lot or pro rata as the Board
shall determine.
10. Voting Rights. Except as specifically set forth herein or in the
KCC, the holders of shares of Preferred Stock shall not be
entitled to any voting rights with respect to any matters voted
upon by stockholders of the Corporation.
11. Preemptive Rights. Holders of Preferred Stock are not entitled
to any preemptive rights.
12. Sinking Fund Provisions. Sinking fund provisions are not
applicable to holders of Preferred Stock.
13. Restrictions on Transfer of Preferred Stock. During the period
in which the Preferred Stock is being offered and sold by the
Corporation, and for a period of nine months from the date of
the last sale by the Corporation of such Preferred Stock, all
resales of any part of the issue, by any person, shall be made
only to persons resident within the State of Kansas.
14. Section Headings. Section headings are for convenience of
reference only and shall not constitute a part of this Certificate
or be referred to in connection with the interpretation or
construction hereof.
IN WITNESS WHEREOF, the Corporation has caused this
certificate to be executed, signed and acknowledged by Rick D.
Meyer, its President, and to be attested by Chris J. Haas, its
Secretary, this _______ day of March, 1997.
_____________________________________
________________
Attest:_______________________________
Secretary
STATE OF )
) ss.
COUNTY OF )
Subscribed and sworn to before me this 10th day of March, 1997.
___________________________
NOTARY PUBLIC
My Commission Expires:
_______________________
[SEAL]
COMMERCIAL AND INDUSTRIAL LEASE AGREEMENT
(For Use by members of the Topeka Board of REALTORS, Inc.)
THIS LEASE is made this 11th day of July 1996 between
Bowman Properties, Inc., LESSOR and First American Capital
Corporation, LESSEE.
LESSOR hereby leases to LESSEE, and LESSEE hereby leases
from LESSOR, the following described premises, hereinafter referred to
as "the premises", in the City of Topeka, County of Shawnee, State of
Kansas.
To Wit: the first floor office suite in the office building at 3360 SW
Harrison Street, Topeka, KS. Lease is based on 2700 gross s.f. applicable
to said space.
for a term of 3 years and 0 months, beginning on the 1st day of August,
1996, and ending the 31st day of July, 1999. LESSEE will take
occupancy the day following the Doug Wright For Congress Campaign
Offices moves out of the space after the August 6, 1996 primary. Rent
shall be prorated from the date of occupancy by LESSEE.
LESSEE agrees to pay LESSOR rent according to the following schedule:
Year 1,2&3 $11.73 per s.f. $2639.25 per month $31,671 per year
Each month rent payment shall be due and payable on the 1st day of each
and every month of the term hereof, in advance at LESSORS office at
4848 SW 21st Street, PO Box 4241, Topeka, KS 676604 or at such place
as LESSOR may designate from time to time, in writing.
LATE CHARGES: If the rent is not paid by the 10th day of the
month a late charge of $100 shall be assessed. All unpaid amounts of rent
and additional rent due LESSOR under this Lease shall bear interest at the
rate of ten percent (10%) per annum from the due date until paid. All
other amounts due to LESSOR under this Lease shall be considered as
additional rent, and if unpaid when due, shall bear interest at the rate of
ten percent (10%) per annum from the due date until paid.
GUARANTEE:
This lease shall be personally guaranteed for one year by Rick D.
Meyer who for the first year of this lease shall be responsible for
maintaining the rent schedule provided above should First American
Capital fail to do so.
OPTION FOR RENEWAL:
LESSEE shall have the option to renew this lease with all its
rights and responsibilities for a period of three years at the following rent
schedule:
Year 1,2,3 $12.44 per s.f. $2799 per month $33,588 per year
LESSEE shall give LESSOR at least 90 days notice of his desire to
exercise this option for renewal.
1. SECURITY DEPOSIT:
Concurrently with its execution of the Lease, LESSEE shall
deliver to LESSOR $2639 as security for the performance by LESSEE of
every covenant and condition of this Lease. Said deposit may be co-mingled
with other funds of LESSOR and shall bear no interest. If
LESSEE shall default with respect to any covenant or condition of this
Lease, including, but not limited to the payment of rent, LESSOR may
apply the who or any part of such security to the payment of any sum
which LESSOR may be required to spend by reason of LESSEE's default.
Should LESSEE comply with all of the covenants and conditions of this
Lease, the security deposit or any balance thereof shall be returned to
LESSEE at the expiration of the term hereof. Nothing in this Paragraph
shall be deemed to limit the amount of any claim, demand or cause of
action of Lessor against LESSEE under the provisions of this Lease.
2. POSSESSION AT BEGINNING OF TERM:
LESSOR shall use due diligence to give possession as nearly as
possible at the beginning of the term of this Lease, and rent shall abate pro
rata for the period of any delay in so doing. LESSEE shall make no other
claim against LESSOR for any such delay.
3. PRO RATA SHARE:
In the event pro rata share applies in this Lease, it shall be
calculated as follows: lessees rentable area is approximately 2700 square
feet in the building located at 3360 SW Harrison in such premises being
more particularly outlined on the plan attached as Exhibit A. For
purposes of this Lease, total rentable area in the above building is 5400
square feet and LESSEE's proportionate share is fifty percent (50%).
Payment of the LESSEE's pro rate share shall be as follows:
4. INSURANCE:
LESSEE shall comply with all insurance regulations so the
lowest fire, lighting, explosion, extended coverage and liability insurance
rates may be obtained; and nothing shall be done or kept in or on the
premises by LESSEE which will cause an increase in the premium for any
such insurance on the premises or on any building of which said premises
are a part or which will cause cancellation of any such insurance.
Premiums for a policy written by a company approved to do
business by the insurance commissioner of the State of Kansas for fire and
extended coverage insurance for the property shall be paid for by
LESSOR.
If, during the term of this Lease, the premium for the fire and
what is commonly known as extended coverage insurance should be
changes so as to cause an increase in premium, then LESSEE shall pay,
as additional rent, the LESSEE's pro rata share of such increase, which
amount shall be payable within fifteen days from the date of the
LESSOR's notice of an amount so due hereunder.
If the building or demised premises are made partially or
substantially untenantable by fire or other casualty, LESSOR may elect
either to (a) Terminate this Lease as of the date of such fire or other
casualty by delivery of written notice of termination to LESSEE within
sixty (60) days after said date, whereupon LESSEE shall immediately
surrender said premises and all interest to LESSOR; or (b) Proceed with
due diligence to repair, restore or rehabilitate the building and demised
premises. Restoration of leasehold improvements shall be at LESSEE's
sole expense except to the extent of LESSOR's receipt of insurance
proceeds for said loss.
If LESSOR elects not to repair and the building and demised
premises have been damaged by casualty due to the act or neglect of the
LESSEE, its employees, agents, servants, invitees, or guests, then the
LESSEE shall pay to the LESSOR upon demand the amount of the
LESSOR's loss.
If all or any part of the demised premises are rendered
substantially untenantable by fire or other casualty not due to the act or
neglect of LESSEE, its employees, agents, servants, invitees or guests
under this Lease is not terminated, then rent shall abate for said part of the
demised premises which are untenantable on a per diem basis from and
after the date of the fire or other casualty and until the demised premises
are repaired and restored.
LESSEE, at LESSEE's cost and expense, shall maintain
comprehensive general liability insurance protecting and indemnifying
LESSEE and LESSOR, as an additional insured, against any and all
claims of liability for injury or damage to persons or property or for the
loss of life or property occurring upon, in or about the demised premises,
and the public portions of the building caused by or resulting from any act
or omission (in whole or in part) of LESSEE, its employees, agents,
servants, invitees or guests; such insurance to afford minimum protection
during the term of this Lease, of not less than $500,000 for personal injury
to any one person, including death, and $500,000 for personal injury
including death or more than one person arising out of any one occurrence
and not less the $500,000 with respect to property damage. All such
insurance shall be effected under valid and enforceable policies; shall be
issued by insurers of recognized responsibility; and shall contain a
provision whereby the insurer agrees not to cancel the insurance without
ten (10) days prior written notice to LESSOR. On or before the
commencement date, LESSEE, shall furnish LESSOR with certificates
evidencing the aforesaid insurance coverage, and renewal policies or
certificates therefore shall be furnished to LESSOR at least ten (10) days
prior to the expiration date of each policy for which a certificate was
theretofore furnished.
LESSOR hereby waives all claims for recover from LESSEE for
any loss or damage to LESSOR or its property insured under valid and
collectible insurance policies to the extent of the proceeds collected under
such insurance policies; provided, however, that this waiver shall be
effective only if allowed by the applicable insurance policy of LESSOR.
REAL ESTATE TAXES AND ASSESSMENTS:
Real estate taxes and assessments shall be the responsibility of
the (x) LESSOR only; ( ) LESSEE only; ( ) LESSOR and LESSEE. If
"LESSEE' or LESSOR and LESSEE" is checked above, LESSEE's
obligation and schedule for payment of all or part of the real estate taxes
and assessments shall be as follows: LESSEE shall be responsible for
only his pro rata share of any increases in real property taxes assessed for
1995 on the property at 3360 SW 29th.
6. UTILITIES:
Utilities for the premises shall be paid by the indicated party
LESSOR LESSEE
GA X
ELECTRIC X
WATER/SEWER X
STORM WATER FEE X
TRASH X
The LESSOR does not warrant that nay of the services above
mentioned will be free from interruptions caused by repairs, renewals,
improvements, alterations, strikes, war, civil unrest, acts of God, lockout,
accidents, inability of LESSOR to obtain fuel or supplies, or other causes
beyond the reasonable control of the LESSOR. Any such interruption of
service shall never be deemed an eviction or disturbance of LESSEE's use
and possession of the premises or any part thereof, or render the LESSOR
liable to the LESSEE for damages, or relieve the LESSEE from
performance of LESSEE's obligations under this Lease.
7. MAINTENANCE AND REPAIR
Responsibility for maintenance and repair shall be as follows:
LESSOR LESSEE
EXTERIOR & ROOF X
DOORS & GLASS X
HVAC, ELECTRIC, & PLUMBING GENERAL
MAINTENANCE X
PLUMBING SYSTEM MAJOR COMPONENT
REPLACEMENT X
HVAC, ELECTRICAL SYSTEM MAJOR COMPONENT
REPLACEMENT X
INTERIOR MAINTENANCE, MINOR X
REDECORATING
PEST CONTROL X
8. COMMON AREA MAINTENANCE:
The LESSEE shall have the obligation for his pro rata share as
set fourth in Paragraph 3 for the following items described below:
Interior: LESSOR
Exterior: LESSOR
In the event LESSEE is responsible for any of the above listed
and the premises are a part of a multi-tenant property, LESSEE shall pay
its pro rata share based on the terms set forth in Paragraph 3 above.
9. JANITORIAL:
LESSEE shall be responsible for the janitorial within the subject
space.
10. OTHER SERVICES:
11. TENANT FINISH:
LESSEE is responsible for any remodel or redecoration of the
subject space. No work shall be done in the subject space without prior
approval by the LESSOR; such approval shall not be unreasonable
withheld. All costs related to said remodel and redecoration shall be the
responsibility of the LESSEE. All bills for material and labor for said
work, along with evidence of their payment, shall be submitted to
LESSOR or his designated agent.
All improvements related to said remodel shall be in full
compliance with all federal, stat and local laws and regulations.
LESSOR does agree to initially pay cost of agreed upon
alterations. LESSEE agrees that said costs will be amortized and included
in LESSEE's rent payments.
12. ACCEPTANCE:
LESSEE has inspected and knows the condition of the premises
and accepts the same in their present condition (subject to ordinary wear,
tear, and deterioration in the event the term commences after the date
hereof and to the rights of present or former occupant or occupants , if
any, to remove movable property).
13. PERSONAL PROPERTY
LESSOR shall not be liable for any loss or damage to any
merchandise or personal property in or about the premises, regardless of
the cause of such loss or damage.
14. ALTERATIONS:
LESSEE shall make no alterations or improvements to the leased
premises without first obtaining written consent from LESSOR. LESSEE
shall construct any such alterations and improvements in compliance will
all applicable federal, state, and local government laws and regulations.
15. SIGNS AND ADVERTISEMENTS:
LESSEE shall not put upon nor permit to be put upon any part
of the premises any signs, billboards, or advertisements whatsoever,
without the prior written consent of LESSOR. LESSOR provides
directory signs at curb side and in the entry lobby. LESSEE at his
expense may have installed compatible signs on said directors and on
entry door or adjacent glass.
16. ASSIGNMENT:
LESSEE shall not assign, transfer or encumber this Lease and
shall not sublease the premises or any part thereof or allow any other
person to be in possession thereof without the prior written consent of
LESSOR, in each and every instance, which consent or consents shall
note be unreasonably withheld.
17. SUCCESSORS:
The provisions, covenants and conditions of the Lease shall bind
and inure to the benefit of the legal representatives, heirs, successors and
assigns of each of the parties hereto, except that no assignment or
subletting by LESSEE without the written consent of LESSOR shall vest
any right in the assignee or sublease of the LESSEE.
18. LESSOR'S RIGHT OF ENTRY:
LESSOR, its officers, agents and representatives shall have the
right to enter into and upon any and all parts of the demised premises, at
reasonable times, to inspect same or clean or make repairs or alterations
or additions as LESSOR may deem necessary, and LESSOR may and
shall, at all times, have master keys or pass keys to the demised premises
and LESSEE agrees that LESSEE shall not change any locks in the doors
in the demised premises without LESSOR's prior written consent. IF
LESSEE shall not be present to open and permit any entry into the
demised premises at any time, LESSOR may enter the same by a master
key or pass key or may forcibly enter the same, without rendering
LESSOR liable therefore, provided that during such entry LESSOR shall
take reasonable care of LESSEE's property. LESSOR shall have the right
at any time to erect, use, maintain, repair, replace or relocate pipes, ducts,
wiring conduits and similar devices in and through the demised premises
and to enter upon said premises for the purpose of the performance of any
such work. Nothing contained above shall be deemed to impose upon
LESSOR any obligations, responsibility or liability whatsoever for the
care, supervision or repair of the building or the premises or any part
thereof and LESSEE shall be entitled to no abatement of rent or reduction
of rent by any reason thereof. LESSOR shall further have the right to
enter the premises at reasonable hours to exhibit same to prospective
purchasers or lessees and inspect the premises to see that LESSEE is
complying with all of its obligations hereunder or to make repairs or
modifications to any adjoining space or to the building.
19. FIXTURES:
All buildings, repairs, alterations, additions, improvements,
installations, and any other fixtures by whomsoever installed or erected
(except such business trade fixtures and equipment belonging to LESSEE
as can be removed without damage to or leaving incomplete the premises
or building) shall belong to LESSOR and remain on and be surrendered
with the premises as a part thereof at the expiration of this Lease or any
extensions thereof.
20. PUBLIC REQUIREMENTS:
LESSEE shall comply with all laws, orders, ordinances and other
public requirements now or hereafter affecting the premises or the use
thereof, and save LESSOR harmless from expense or damage resulting
from failure to do so.
21. EMINENT DOMAIN:
If the premises or any substantial part thereof shall be taken by
any competent authority under the power of eminent domain or be
acquired for any public or quasi-public use or purpose, the term of the
Lease shall cease and terminated as to the portion of the premises so taken
upon the date when the possession of said premises is required to be
surrendered. The LESSEE shall not be entitled to an apportionment of the
award, and LESSEE shall have no claim against LESSOR for the value
of any unexpired term of this Lease. If any condemnation proceeding
shall be instituted in which it is sought to take or damage any part of
LESSOR's building or the land under it or if the grade of any street or
alley adjacent to the building is changed by any competent authority and
such change of grade makes it necessary or desirable to remodel the
building to conform to the changed grade, LESSOR shall have the right
to cancel this Lease after giving written notice of cancellation to LESSEE
not less than ninety (90) days prior to the date of cancellation designated
in the notice. In either of said events, rent at the then current rate shall
be apportioned as of the date of the termination. No money or other
consideration shall be e payable by the LESSOR to the LESSEE for the
right of cancellation and the LESSEE shall have no right to share in the
condemnation award or in any judgement for damages caused by the
taking or the change of grade. Nothing in this paragraph shall preclude
an award being made to LESSEE for loss of business or depreciation to
and cost of removal of equipment or fixtures.
22. DEFAULT AND REMEDIES:
(a) DEFAULT. LESSOR may give LESSEE five days notice of
intention to terminate this Lease in any of the following circumstances:
(1) BREACH. If the LESSEE SHALL DEFAULT in observing, performing,
or keeping any term, provision, covenant or condition of the Lease
on Lessee's part to be kept, observed or performed (other than
covenants for payment of basic rent and additional rent) and shall
not cure such default within 15 days after LESSOR gives LESSEE
written notice thereof, or, if such default cannot be cured
completely within the 15 day period, if LESSEE does not promptly
commence within such period and thereafter proceed with due
diligence to cure the same.
(2) INSOLVENCY. If LESSEE is unable to meet its obligations as they
become due, is adjudicated a bankrupt, makes a general assignment
for the benefit of creditors, or takes the benefit of any insolvency
act, or a permanent receiver or trustee is appointed for LESSEE's
property and such appointment is not vacated within 90 days. For
these purposes, "LESSEE" shall mean the LESSEE then in possession
of the leased property.
(3) ABANDONMENT. If the leased property becomes vacant or deserted
for a period of 30 days.
(4) ASSIGNMENT. If this Lease is assigned or the leased property
sublet other than in accordance with the Lease terms and such default
is not cured with 15 days after notice.
(5) RENT. If LESSEE shall be in default of the prompt payment, when
due, of any installment of basic rent or additional rent.
(b) TERMINATION. If LESSOR gives the five days notice of termination
provided in subparagraph (a), at the expiration of such period this Lease
shall terminate as completely as if that were the date fixed for the
expirations hereof, and LESSEE shall then surrender the leased property to
LESSOR. If this Lease so terminates, LESSOR may, without any formal demand
or notice, re-enter the leased property by an unlawful detainer action or by
any other means, including force, and remove LESSEE therefrom without being
liable for any damages therefore. Upon termination of this lease, LESSOR may
terminate any sublease then in effect, without the consent of the sublessee.
(c) CONTINUED LIABILITY. LESSEE shall remain liable for
all its obligations under this Lease, despite LESSORS'S reentry, and
LESSOR may re-rent or use the leased property as LESSEE's agent, if
LESSOR so elects. LESSEE waives any legal requirement for notice of
intention to re-enter and any right of redemption.
(d) STATUTORY NOTICE. Nothing in this article shall be
deemed to require LESSOR to give LESSEE any notice except as
required by statue, before the commencement of any unlawful detainer
action for nonpayment of any basic or additional rent.
(e) DEFICIENCY. If the Lease terminates as provided in this
article, LESSOR may at any time recover from LESSEE the amount by
which the rent and charges equivalent to rent reserved herein for the
balance of the term exceed the reasonable rental value of the leased
property for the same period.
(f) TIME OF ESSENCE. Time is of the essence of this Lease
with respect to LESSEE's performance of its obligations hereunder.
23. WAIVER OF SUBROGATION:
LESSOR shall not be liable to LESSEE for any loss or damage
to any person or property, including the person and property of the
LESSEE, its employees, agents, servants, invitees or guests, occasioned
by theft, the acts of any co-lessee or the acts of any employee or agent of
any co-lessee, leaks, casualty, rain, water, condensation, fire, acts of God,
public enemy, injunction, riot, strike, insurrection, picketing, mob action,
bombing, explosion, war, court order, latent defects, requisition or order
of government authority, the construction or repair, maintenance or
alteration of any part improvement of the building as a whole, or any
other cause not due to LESSOR's gross or willful negligence. LESSEE
shall indemnify LESSOR and save it harmless from all suits, actions,
damages, liability and expense in connection with loss of life, bodily or
personal injury or property damage arising from or out of any occurrence
in, upon, at or from the demised premises or the occupance or use by
LESSEE of the demised premises or any part thereof, or occasioned
wholly or in part by any action or omission of LESSEE, its employees,
agents, servants, invitees or guest. If LESSOR shall be made a party to
any action commenced by or against LESSEE, the LESSEE shall protect
and hold LESSOR harmless and shall pay all costs, expenses and
attorneys' fees incurred by LESSOR.
24. ESTOPPEL CERTIFICATE:
LESSEE shall from time to time upon not less than ten (10) days
prior written request by LESSOR, deliver to LESSOR a statement in
writing certifying that this Lease is unmodified and in full force and
effect, or if there have been modifications, that the Lease as modified is
in full force and effect, the dates to which rent or other charges have been
paid, and that LESSOR is not in default , a detailed description thereof.
LESSEE hereby appoints LESSOR as LESSEE's Attorney-in-Fact with
full power and authority to execute and deliver in the name of the
LESSEE any such certificate in the event LESSEE fails to do so on
request.
25. SUBORDINATION:
This Lease shall be subject and subordinate at all times to the
Lien of existing mortgages and Deeds of Trust or both and of mortgages
or Deeds of Trust or both which hereafter may be made a Lien on the
demised premises. Although no instrument or act on the part of the
LESSEE shall be necessary to effectuate such subordination, the LESSEE
will nevertheless execute and deliver such further instruments of
subordinating this Lease to the Lien of any such mortgages or Deeds of
Trusts as may be desired by the Mortgagee or Beneficiary. LESSEE
hereby irrevocably appoints the LESSOR its Attorney-in-Fact to execute
and deliver any such instrument in the name of the LESSEE in the event
the LESSEE fails to do so. LESSEE acknowledges that its title is and
always shall be subordinate to the title of the owner of the building.
LESSEE further agrees to attorn to any new purchaser or purchaser at
foreclosure and that no foreclosure of any Deed of Trust or Mortgage
shall entitle LESSEE to terminate or cancel this Lease.
26. WAIVER:
The rights and remedies of the LESSOR under this Lease, as well
as those provided or accorded by law, shall be cumulative, and none shall
be exclusive of any other rights or remedies hereunder or allowed by law.
A waiver by LESSOR of any breach or breaches, default or defaults of
LESSEE hereunder shall not be deemed or construed to be a continuing
waiver of such breach or default nor as a waiver of or permission,
expressed or implied, for any subsequent breach or default, and it is
agrees that the acceptance by LESSOR of any installment of rent
subsequent to the date the same should have been paid hereunder, shall in
no manner alter or affect the covenant and obligation of LESSEE to pay
subsequent installments of rent promptly upon the due date thereof. No
receipt of money by LESSOR after the termination in any way of the
Lease shall reinstate, continue or extend the term above demised.
27. BANKRUPTCY:
Neither this Lease nor any interest therein nor any estate hereby
created shall pass to any trustee or receiver in bankruptcy or to any other
receiver or assignee for the benefit of creditors by operation of law or
otherwise during the term of this Lease or any renewal thereof.
28. HOLDING OVER:
In case of holding over by LESSEE after expiration or
termination of this Lease or of any renewal or extension thereof, LESSEE
will pay, at a minimum, double rent for the entire hold over period.
LESSEE shall further be liable to LESSOR for all direct and
consequential damages caused to LESSOR by LESSEE's wrongful hold
over and for all attorney's fees and expenses incurred by LESSOR in
enforcing its rights hereunder. After the expiration date of this Lease,
unless LESSEE is allowed to remain under an express and written hold
over agreement, LESSEE shall be deemed and shall be a trespasser; and
LESSEE hereby expressly agrees and understands that LESSEE has no
right to the demised premises after the expiration date of the Lease or of
any renewal or extension thereof.
29. QUIET POSSESSION:
LESSOR agrees that so long as LESSEE fully complies with all
of the terms, covenants and conditions herein contained on LESSEE's
part to be kept and performed, LESSEE shall and may peaceably and
quietly have, hold, and enjoy the said premises for the term aforesaid, it
being expressly understood and agreed that the aforesaid covenant of
quiet enjoyment shall be binding upon the LESSOR, its heirs, successors,
or assigns. LESSOR further covenants and represents that LESSOR has
full right, title, power, and authority to make, execute and deliver this
LEASE.
30. NOTICES:
Any and all notices required or permitted to be given hereunder
shall be served either personally or by United State pail, postage prepaid
(and if permitted by law, by Registered or Certified Mail), at the
following addresses:
TO LESSOR: Douglas S. Wright
Bowman Properties,Inc.
4848 SW 21st
Topeka, KS 66604
TO LESSEE: Rick D. Meyer
First American Capital Corporation
3360 SW Harrison
Topeka, KS 66611
31. ENVIRONMENTAL:
LESSOR represents and warrants that during the term in which
LESSOR owned the property neither LESSOR nor, to the best of
LESSOR's knowledge, any third party has used, generated, manufactured,
stored or disposed of on, under, or about the property or transported to or
from the property any "hazardous materials". The term "hazardous
materials" shall mean any flammable explosives, toxic wastes or
substances including without limitation, any substances defined as
"hazardous wastes, hazardous materials, hazardous substances, , or toxic
substances" under any applicable federal, state, or local laws or
regulations.
32. ADDENDUM:
There is one addendum and one exhibit to this Lease as of the
date of execution.
33. REALTOR AGENCY:
Griffith & Blair, Inc. is the agent of the LESSOR with the duty
to represent the LESSOR's interest and will not be the agent of the
LESSEE. Information given to the agent will be disclosed to the
LESSOR. LESSOR and LESSEE acknowledge that the disclosure of
agency status was made prior to the execution of this Lease.
34. ENTIRE AGREEMENT:
This Lease contains the entire agreement between the parties, and
no modification of this Lease shall be binding upon the parties unless
evidenced by an agreement in writing signed by the LESSOR and the
LESSEE after the date hereof. If there be more than one LESSEE named
herein, the provisions of this Lease shall be applicable to and binding
upon such LESSEES, jointly and severally.
35. TIME OF THE ESSENCE:
Time is expressly declared to be of the essence of this agreement.
36. SEVERABILITY:
In the event any provision of the Lease are officially found to be
contrary to law, or void as against public policy or otherwise, such
provisions shall be either modified to conform to the law or considered
severable with the remaining provisions hereof continuing in full force
and effect.
37. LEGAL USE:
LESSEE shall only use and occupy the demised premises for a
business office. LESSEE agrees to maintain the premises in a clean,
orderly, healthful condition and to comply with all laws, ordinances, rules
and regulations, of all governmental agencies having jurisdiction over the
demised premises. LESSEE will not use, occupy or permit the use or
occupancy of the demised premises for any unlawful, disruptive, or extra
- -hazardous purpose, or maintain or permit the maintenance of any public
or private nuisance; or do or permit any act or thing which may disturb
the quiet enjoyment of any other LESSEE of the building; or keep any
substances or carry on or permit any operation which might emit
offensive odors into other portions of the building; or use any apparatus
which might make undue noise or set off vibrations in the building; or
permit anything to be done which would increase the fire insurance rate
or other insurance rates on the building or contents. LESSEE shall not
obstruct or use the sidewalks, entries, passages, vestibules, halls, elevators
or stairways of the building for any other purpose than ingress or egress
to and from the demised premises, or throw or sweep or put anything out
of the windows or doors, or in the passages or corridors of the building.
38. RULES AND REGULATIONS:
LESSEE, its employees, agents, servants, invitees, and guests
will comply fully with all requirements of the Rules and Regulations of
the building as of and hereafter established by LESSOR. LESSOR shall
at all times have the right to change such Rules and Regulations or to
amend them in such reasonable manner as may be deemed advisable for
the safety, care, cleanliness, and exterior and interior appearance of the
premises and building and for the preservation of good order and control
therein and throughout. All of the Rules and Regulations, changes and
amendments thereto, will be forwarded to LESSEE and after LESSEE
shall carry out and observe all of such Rules, Regulations, changes and
amendments.
THIS IS A LEGALLY BINDING CONTRACT. IF NOT
UNDERSTOOD, SEEK THE ADVISE OF AN ATTORNEY.
IN WITNESS WHEREOF, said parties hereunto subscribed their
names. Executed in 2 Originals.
LESSOR LESSEE
Date Date:
Date Date:
AGREEMENT
THIS AGREEMENT, made and entered into this _____ day of ___________,
19____, by and between First American Capital Corporation, a Kansas corporation,
with offices in the city of Topeka, County of Shawnee, and State of Kansas,
(Hereinafter the "Company") and ________________________, State of Kansas
(Hereinafter, the "Appointee").
WITNESSETH
1. The Company hereby appoints and designates the Appointee as a member
of the Advisory Board of the Corporation;
2. The purpose and duties of the Advisory Board shall be as follows:
A. Advise the Company's officers, directors and representatives on
such matters as may be presented to the Appointee for consideration, opinion,
cooperation and execution;
B. Consider any and all matters of local and general nature
affecting the interest and welfare of the Company coming within the Appointee's
knowledge, and to pass on to the Company such matters as shall appear to be
meritorious, with any refinements thereof;
C. Communicate to the Company's officers, directors and
representatives recommendations with reference to corporate policy, practice and
activity either locally or generally, which in the opinion of the Board or any
of its individual members, may be conducive to the growth and profitability of
the Company;
D. In general, serve as a composite reflection of the business and
the opportunities in the geographical localities in which the Company operates,
thereby complimenting management in its administration of the Company's affairs.
3. Nothing contained in this Agreement shall be construed to create any
liability on the part of the Appointee, nor shall the Appointee be responsible
for any contracts or agreements made by the Company. The Company acknowledges
that Appointee serves solely in an advisory capacity and makes no determinations
or decisions on behalf of the First American Capital Corporation. All
determinations and decision regarding the Company are made exclusively through
its officers and its Board of Directors.
4. Effective ___________________, 19_____, and continuing during the term
of this Agreement, the Company shall compensate Appointee upon the commencement
of life insurance operations. Said compensation shall be in the form of shares
of the Company's common stock and shall be based upon the amount of certain
first year insurance revenue collected and in force by the Company's insurance
subsidiary each year within Appointee's geographical area as designated by the
Company's Board of Directors. It is the Company's intention to create a pool
consisting of four percent (4%) of said first year insurance revenue and to
utilize these funds to make acquisitions of the Company's common stock from time
to time as deemed appropriate by the Company's Board of Directors. Distributions
of shares so acquired by the Company shall be made annually to Advisory Board
members based on the proportion of the first year revenue generated in each such
member's geographic area.
5. The Appointee agrees that the Appointee will not engage in the
business of transacting insurance or perform any act or services for or on
behalf of the Company or the Company's insurance subsidiary which requires
licensure by the Kansas Department of Insurance.
6. The Appointee accepts such appointment and agrees to serve as a member
of the Advisory Board of the Company, performing the duties above-described on
behalf of the Company.
7. The Appointee consents to the publication of his/her name as a member
of the Advisory Board of the Company in any sales promotional material,
presentation or otherwise on behalf of the Company.
8. This Agreement shall take effect on the date of execution and shall
continue in effect until canceled by either party hereto. This Agreement can be
canceled giving ten (10) days' written notice of such cancellation to the other
party at the address contained below.
IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate
on the date aforesaid.
FIRST AMERICAN CAPITAL CORPORATION 3360 SW Harrison Street, Suite
100 Topeka, KS 66611 BY: _________________________________________
ADVISORY BOARD APPOINTEE BY:
_________________________________________
_________________________________________ Street Address
_________________________________________ City, State, Zip County
_________________________________________ Rick D. Meyer,
President
SERVICE AGREEMENT
This agreement is entered into this day of , 1998 between
First American Capital Corporation, incorporated under the laws of and domiciled
in the State of Kansas (hereinafter referred to as "the Company") and First Life
America Corporation, a life insurance company also incorporated and domiciled in
Kansas (hereinafter referred to as "FLAC").
The principal place of business of both the Company and FLAC is 3360 SW Harrison
Street, Topeka, Kansas 66611.
RECITALS
A. FLAC has need of numerous services, expertise and premises in the conduct
of its life insurance and annuity business including the following:
1) Executive, Marketing and Investment Management including related
compensation, taxes, and benefits;
2) Administrative Support management and staff including compensation, taxes
and benefits;
3) Data Processing;
4) Business Liability and Property Insurance;
5) Professional Services (including Accounting, Actuarial, Legal, Investment
Advisors, and miscellaneous Consulting);
6) Use of office space and equipment.
7) Regulatory Report Preparation a. Annual Statements b. Federal, State and
County tax returns (including premium tax returns, if any) c. Any reports
required by Insurance regulators
8) Underwriting, Policy Issue and Policyholder Service a. Ordering and
handling medical exams and attending physician statements b. Inspection reports
c. Medical Information Bureau (MIB) processing d. Issuance of contracts e.
Handling of all policyholder contract changes
9) Claims identification, investigation, processing & payment
10) General Office Expenses a. Postage, Telegraph and Telephone b. Printing
(other than sales material), including policy forms c. Administrative fees
charged by banks and service bureaus d. Bureau and Association dues,
publications, periodicals e. Office supplies and general expenses
11) Form Development
B. The Company desires to provide the above described services, expertise and
premises.
In consideration of the above recitals and the terms and covenants of this
agreement, the parties agree as follows:
SECTION ONE (EFFECTIVE DATE)
This agreement shall become effective on the date of its execution by the
parties hereto provided that same has been submitted to the Kansas Department of
Insurance and has not been disapproved.
SECTION TWO (COMPANY OBLIGATIONS)
The Company shall provide (and bear the expense of so providing) all of the
services, expertise and premises described in Recital A above EXCEPT that the
Company shall neither provide nor bear the expense of providing same in any
matter 1.) not related to the conduct of FLAC's life insurance and annuity
business; or 2.) arising out of the interpretation or enforcement of this
agreement. The Company shall not be responsible for any losses incurred by FLAC
resulting from the providing of the services and expertise enumerated in Recital
A absent a showing of gross negligence.
SECTION THREE (FLAC-RETAINED EXPENSES)
FLAC shall bear the expense of providing all direct selling costs including
agent recruiting, training and licensing; agent commissions; any benefits or
awards directly for or to agents or management, including any life or health
insurance to be provided; and any taxes (federal, state or county) directly
related to the business of FLAC. FLAC will also be responsible for any
expenditures related to reinsurance and to fulfilling obligations arising
directly from the contracts of life insurance, annuity, etc. entered into by its
agents, including legal costs related to claims. FLAC shall further be
responsible for any state examination fees arising from the conduct of its life
insurance and annuity business; independent auditors fees; any interest on FLAC
indebtedness; FLAC directors fees; Directors Liability Insurance; and any
expenses arising out of mergers or acquisitions involving FLAC.
SECTION FOUR (EXPENSES NOT ENUMERATED)
In the event that any expense is incurred by FLAC which is neither enumerated
nor described in this agreement, Company shall have no obligation to bear the
cost of same. However, the parties may enter into agreements separate and apart
from this agreement with respect to said expenses provided that those agreements
are not in violation of any applicable laws or regulations in any jurisdiction
in which FLAC conducts an insurance or annuity business.
SECTION FIVE (PAYMENTS FOR SERVICES)
In consideration for services enumerated in Recital A above, FLAC shall pay to
the Company a percentage of the life insurance and annuity premiums "delivered"
by FLAC agents. The percentages shall be twenty-five percent (25%) of first
year premiums; twenty percent (20%) of second year premiums; fifteen percent
(15%) of third year premiums; and ten percent (10%) of fourth year premiums and
five percent (5%) in years five and thereafter. Delivered premiums shall be
defined as premium received on new written business which has been underwritten
by FLAC and the policy accepted by the policy owner upon delivery by the agent.
SECTION SIX (TIME OF PAYMENTS)
The payments to the Company arising out of the calculations set forth in Section
Five above are to be remitted on a monthly basis and are due on or before the
fifth day of the month following the incurrence of the obligation to pay.
SECTION SEVEN (GOVERNING LAW)
It is agreed that this agreement shall be governed by, constructed and enforced
in accordance with the laws of the State of Kansas.
SECTION EIGHT (BINDING ARBITRATION)
It is agreed by the parties herein that any disputes arising under this
agreement shall be submitted to binding arbitration under the rules of
commercial arbitration of the American Arbitration Association.
SECTION NINE (ENTIRE AGREEMENT)
This agreement shall constitute the entire agreement between the parties. Any
prior understanding or representation of any kind preceding the date of this
agreement shall not be binding on either party except to the extent expressly
set out in this agreement.
SECTION TEN (MODIFICATION)
Any modification of this agreement or additional obligation assumed by either
party in connection with this agreement shall be binding only if evidenced in a
written document signed by both parties. Said written document shall first have
been submitted to the Departments of Insurance in all states in which FLAC is
authorized to conduct any insurance or annuity business without having been
disapproved.
SECTION ELEVEN (BINDING EFFECT)
This agreement shall inure to the benefit of and be binding upon the parties to
this agreement, their successors and assigns.
SECTION TWELVE (TERM OF AGREEMENT)
This agreement shall remain in effect until such time as either party provides
ninety (90) days written notice of termination.
SECTION THIRTEEN (PARTIAL INVALIDITY)
The invalidity of any part of this agreement will not and shall not be deemed to
affect the validity of any other part. In the event that any provision of this
agreement is held to be invalid, the parties agree that the remaining provisions
shall remain in full force and effect as if they had been executed by both
parties subsequent to the expungement of the invalid provision.
SECTION FOURTEEN (NOTIFICATION)
Any notices required under this agreement shall be made to the party to receive
notice at the party's principal place of business as described in the first
paragraph of this agreement unless said party has notified the other party in
writing of a change of address pursuant to this section.
SECTION FIFTEEN (PARAGRAPH HEADINGS)
The titles to the paragraphs of this agreement are solely for the convenience of
the parties and shall not be used to explain, modify or simplify the provisions
of this agreement.
SECTION SIXTEEN (FAILURE TO INSIST ON PERFORMANCE)
Failure at any time to insist on performance of any term or provision of this
agreement shall not be deemed a waiver of any right reserved or any other
provision of this agreement.
SIGNATURES
In witness whereof each party to this agreement has caused it to be executed in
Topeka, Shawnee County, Kansas on the date indicated below.
FIRST AMERICAN CAPITAL CORPORATION (the Company)
by: Date
Title
FIRST LIFE AMERICA CORPORATION (FLAC)
by: Date
Title
MANAGEMENT AGREEMENT
This agreement is entered into this day of , 1998 between
First American Capital Corporation, incorporated under the laws of and domiciled
in the State of Kansas (hereinafter referred to as "the Company") and First
Alliance Corporation, a life insurance holding company incorporated and
domiciled in Kentucky (hereinafter referred to as "FAC").
The principal place of business of the Company is 3360 SW Harrison Street,
Topeka, Kansas 66611 and the principal place of business of FAC is 2285
Executive Drive, Suite 308, Lexington, Kentucky 40505.
RECITALS
A. The Company has need of numerous services, expertise and premises in the
management of its life insurance and annuity business conducted by its
wholly-owned life insurance subsidiary, First Life America Corporation ("FLAC")
including the following:
1) Accounting & reporting of investments;
2) Administrative Support management and staff including compensation, taxes
and benefits;
3) Professional Services including Accounting, Data Processing and
miscellaneous Consulting;
4) Regulatory Report Preparation a. Annual and quarterly statutory financial
statements b. Federal, State and County tax returns (including premium tax
returns, if any) c. Any reports required by Insurance regulator;
5) Accounting, auditing and reporting services a. Performing all accounting
functions including but not limited to accounts payable, general ledger posting
& maintenance, all account reconciliations, reconciliation of data processing
reports, preparation of financial statements & review thereof with Company
management b. Processing and maintenance of the Company and FLAC investment
portfolio c. Interface with the Company's independent auditors, prepare audit
work papers, assist auditors in the conduct of the audit, prepare financial
statements pursuant to Generally Accepted Accounting Principles (GAAP) d.
Prepare all annual & quarterly reports & financial statements necessary for
filing with the Securities & Exchange Commission e. Miscellaneous other
accounting, auditing and reporting detail task;
6) Underwriting, Policy Issue and Policyholder Service a. Requesting and
handling medical exams and attending physician statements b. Requesting
Inspection reports c. Medical Information Bureau (MIB) processing d. Issuance of
contracts; e. Evaluating all underwriting information and issuing underwriting
decision, including consultation with the Medical Director, when
necessary.
7) Reinsurance a. Negotiating reinsurance Agreements b. Processing
reinsurance cessions to reinsurer c. Processing of reinsurance terminations to
reinsurer d. Reconciling monthly reinsurance billings and remitting payment
8) Transfer Agent a. Interfacing with the transfer agent to process transfer
of the Company's stock b. Assisting and scheduling of transfer agent
information required for annual shareholders meetings c. Assisting and training
Company personnel in processing transfer request
9) Policy Development & other actuarial interface services a. Assisting in
the development of additional products to be marketed by FLAC b. Working with
FLAC independent actuaries for year end statutory and GAAP actuarial
certifications c. Working with FLAC illustrations actuary to help determine
required marketing illustrations.
10) Claims processing a. Investigating, processing, denying or paying
insurance policy claims b. Reporting death claims to reinsurance company and
receiving reimbursement.
B. First Alliance Corporation desires to provide the above described services
and expertise.
In consideration of the above recitals and the terms and covenants of this
agreement, the parties agree as follows: SECTION ONE (EFFECTIVE DATE)
This agreement shall become effective on the date of its execution by the
parties hereto. However, in the event this agreement is required to be filed
with the Kansas Department of Insurance, the effective date shall be the date
the Department of Insurance approves this agreement.
SECTION TWO (COMPANY OBLIGATIONS)
First Alliance Corporation shall provide (and bear the expense of so providing)
all of the services, expertise and premises described in Recital A above EXCEPT
that the First Alliance Corporation shall neither provide nor bear the expense
of providing same in any matter 1.) not related to the conduct of the Company's
life insurance and annuity business; or 2.) arising out of the interpretation or
enforcement of this agreement. First Alliance Corporation shall be responsible
for any losses incurred by the Company and its wholly-owned subsidiary, FLAC,
resulting from the providing of the services and expertise enumerated in Recital
A as a result of negligence.
SECTION THREE (Company-RETAINED EXPENSES)
The Company shall be directly responsible for the payment of the following
expenses and, accordingly, are not included as a part of this contract. These
expenses generally relate to the operation of the Company's home office located
in Topeka, Kansas and to the conduct of its general business plan and are not
necessarily limited to the items enumerated below.
1. Fees to independent auditors, actuaries, legal counsel, investment
advisors, or any other professional advisor or consultant; 2. Filing fees
required of any Federal, State or Local government authorities for the filing of
any annual, quarterly or other period reports; 3. Federal, State or local
income, capital, franchise, premium or any other type of tax on
revenue, income, assets or capital; 4. Interest on any indebtedness; 5.
Medical Director fees and fees for Attending Physician Statements, inspection
reports, and para-med exams; 6. Fees for membership in the Medical Information
Bureau and monthly processing charges; 7. Fees or costs related to
publications including but not limited to the National Insurance Law Services,
Investment publications and etc.; 8. Cost related to the merger or acquisition
of an insurance or insurance related company such as due diligence cost of
independent expert, brokers fees, legal fees and etc. Further, personnel of FAC,
other than its Secretary/Treasurer, used for merger or acquisition purposes
shall be reimbursed at cost plus 10%, cost to included all payroll related cost
and benefits; 9. Office rent, general office expenses such as postage,
telegraph, telephone, printing bank service & administrative fees, service
bureau fees, bureau & association dues, publications, periodicals, office
supplies, equipment rental and any other general or miscellaneous business
expenses; 10. Compensation, payroll tax expense and benefits of Company
employees including travel, entertainment or other employee related expenses;
11. Computer hardware and software cost including any data transmission
requirements 12. Any and all cost or expenses related to the conduct of the
Company's venture capital business.
SECTION FOUR (EXPENSES NOT ENUMERATED)
In the event that any expense is incurred by the Company which is neither
enumerated nor described in this agreement, First Alliance Corporation shall
have no obligation to bear the cost of same. However, the parties may enter into
agreements separate and apart from this agreement with respect to said expenses
provided that those agreements are not in violation of any applicable laws or
regulations in any jurisdiction in which the Company conducts an insurance or
annuity business.
SECTION FIVE (PAYMENTS FOR SERVICES)
In consideration for the services enumerated in Recital A above, the Company
shall pay to First Alliance Corporation a percentage of the life insurance and
annuity premiums "delivered" by First Life America Corporation's life insurance
agents. The percentages shall be five and one-half percent (5.5%) of first year
premiums; four percent (4%) of second year premiums; three percent (3%) of third
year premiums; two percent (2%) of fourth year premiums; one percent (1%) of
fifth year premiums; one percent (1%) for years six (6) through ten (10) for ten
pay contracts and one-half percent (.5%) for years six (6) through twenty (20)
for twenty pay contracts. Delivered premiums (and Policies) shall be defined as
premium received on new written business which has been underwritten by FLAC and
the policy accepted by the policy owner upon delivery by the agent.
SECTION SIX (TIME OF PAYMENTS)
The payments to the Company arising out of the calculations set forth in Section
Five above are to be remitted on a monthly basis and are due on or before the
fifth day of the month following the incurrence of the obligation to pay.
SECTION SEVEN (GOVERNING LAW)
It is agreed that this agreement shall be governed by, constructed and enforced
in accordance with the laws of the State of Kansas.
SECTION EIGHT (BINDING ARBITRATION)
It is agreed by the parties herein that any disputes arising under this
agreement shall be submitted to binding arbitration under the rules of
commercial arbitration of the American Arbitration Association.
SECTION NINE (ENTIRE AGREEMENT)
This agreement shall constitute the entire agreement between the parties. Any
prior understanding or representation of any kind preceding the date of this
agreement shall not be binding on either party except to the extent expressly
set out in this agreement.
SECTION TEN (MODIFICATION)
Any modification of this agreement or additional obligation assumed by either
party in connection with this agreement shall be binding only if evidenced in a
written document signed by both parties. Said written document shall first have
been submitted to the Departments of Insurance in all states in which FLAC is
authorized to conduct any insurance or annuity business, if necessary, and has
not been disapproved by any such State's Department of Insurance.
SECTION ELEVEN (BINDING EFFECT)
This agreement shall inure to the benefit of and be binding upon the parties to
this agreement, their successors and assigns.
SECTION TWELVE (TERM OF AGREEMENT)
This agreement shall be for a period of five years or the period of time the
Company markets the " First America 2000" initial contract, whichever occurs
first. Upon the termination of this contract, the fees to be paid First
Alliance Corporation pursuant to Section Five (Payment for Services) shall
continue until all such earned fees have been received by First Alliance
Corporation.
SECTION THIRTEEN (PARTIAL INVALIDITY)
The invalidity of any part of this agreement will not and shall not be deemed to
affect the validity of any other part. In the event that any provision of this
agreement is held to be invalid, the parties agree that the remaining provisions
shall remain in full force and effect as if they had been executed by both
parties subsequent to the expungement of the invalid provision.
SECTION FOURTEEN (NOTIFICATION)
Any notices required under this agreement shall be made to the party to receive
notice at the party's principal place of business as described in the first
paragraph of this agreement unless said party has notified the other party in
writing of a change of address pursuant to this section.
SECTION FIFTEEN (PARAGRAPH HEADINGS)
The titles to the paragraphs of this agreement are solely for the convenience of
the parties and shall not be used to explain, modify or simplify the provisions
of this agreement.
SECTION SIXTEEN (FAILURE TO INSIST ON PERFORMANCE)
Failure at any time to insist on performance of any term or provision of this
agreement shall not be deemed a waiver of any right reserved or any other
provision of this agreement.
SECTION SEVENTEEN ( FORCE MAJEURE)
Neither party shall be liable for delays in the performance of any of its
obligations hereunder due to causes beyond its reasonable control including,
without limitation, acts of God, strikes, computer equipment malfunction or
inability to obtain timely services or materials from usual sources.
SIGNATURES
In witness whereof each party to this agreement has caused it to be executed in
Lexington, Fayette County, Kentucky on the date indicated below.
FIRST AMERICAN CAPITAL CORPORATION (the Company)
by: Date
Title
FIRST ALLIANCE CORPORATION ("FAC")
by: Date
Title
EMPLOYMENT AGREEMENT
This employment agreement is entered into this day of
, 1998 between First American Capital Corporation ("FACC"), a Kansas
Corporation, and Rickie D. Meyer ("Executive"), Topeka, Kansas. FACC hereby
agrees to employ Executive in the position of President and Executive hereby
agrees to be employed in such position, upon the terms and conditions contained
in this agreement and will have the power to contractually bind FACC as provided
in FACC'S Articles and Bylaws and as further contained in Corporate Resolutions
approved from time-to-time by FACC's Board of Directors.
I. Governing laws:
This document is governed by the laws of the State of Kansas and any litigation
arising from the execution of this document will abide by such laws for
resolution.
II. Services to be provided:
Executive shall perform all duties incident to the position of President.
Executive has the express and implied authority to bind FACC contractually in
all areas of corporate operations arising in the ordinary course of business. In
addition, the Executive will have the duties and responsibilities as specified
in the Articles of Incorporation and By-laws of FACC and any Corporate
resolutions approved from time-to-time by FACC's Board of Directors.
III. Compensation:
The annual base compensation of Executive shall be $90,000 payable monthly and
shall be adjusted annually at each employment agreement anniversary for the
annual increase in the Consumer Price Index Labor Component as of the month
ending prior to each anniversary of this agreement.
Additionally, Executive shall receive incentive compensation which will be the
equivalent of five percent (5%) of the monthly first year delivered life
insurance premium of the initial product of First Life America Corporation
("FLAC") known generically as the " First America 2000". Delivered premium is
defined as the first year life insurance premium of the " First America 2000"
recorded as revenue by FLAC. Such incentive compensation is to be paid at the
end of each month in which such first year premium has been recorded as revenue
during the month.
Further, Executive shall receive as monthly incentive renewal compensation one
and one quarter percent (.0125) of renewal premium on the life insurance portion
of the " First America 2000" (excluding annuity rider premium) recorded as
revenue by FLAC. Renewal premium is defined as life insurance premium recorded
as revenue by FLAC on policies renewing on first and subsequent policy
anniversaries. The renewal incentive compensation shall also be paid at the end
of each month in which such renewal premium has been paid by the policy insured,
owner or payor.
IV. Bonus compensation:
The Board of Directors may, at its discretion, grant performance bonuses to
Executive based on outstanding performance relating to events such as, but not
limited to, acquisitions, establishment of subsidiaries or affiliates, company
expansion and corporate profits.
V. Competition: Confidential Information
The parties recognize that, due to the nature of the Executive's prior
association with FACC and of his engagement hereunder, and as a consequence of
his relationship to FACC, both in the past and in the future, Executive has had
access to and has acquired, and has assisted in and may assist in developing,
confidential and proprietary information relating to the business and operations
of FACC. Executive recognizes that such information has been and will continue
to be of central importance to the business of FACC and that disclosure of such
information to others or its use by others could cause substantial irreparable
loss to FACC. Executive and FACC also recognize that an important part of
Executive's duties will be to develop good will for FACC through his personal
contact with others having business relationships with FACC and within the
insurance industry, and that there is a danger that this good will, a
proprietary asset of FACC, may follow him if and when his relationship with FACC
is terminated. Executive accordingly agrees as follows:
a. Non-Competition During Employment Period. During the employment
period Executive will not directly or indirectly, either individually or as
owner, partner, agent, employee, consultant or otherwise, except for the account
of and on behalf of Companies, engage in any activity competitive with the
business of FACC, nor will he be in competition with FACC, solicit or otherwise
attempt to establish any business relationships with any person, firm or
corporation which was, at any time during the employment period, a customer or
supplier of FACC. However, nothing in this section shall be construed to
prevent him from owning, as an investment, up to one percent (1%) of a class of
equity securities issued by any competitor of FACC.
b. Non-Competition After Period of Employment. Executive agrees
that during the term of this Agreement and for a period of two (2) years
following termination of this Agreement, he will not, without FACC's prior
written permission, attempt to entice away from FACC or affiliates or
subsidiaries on behalf of any party whatsoever, or employee or otherwise engage,
contract with or retain directly or indirectly: (i) any employee then employed
by FACC, affiliates or subsidiaries or employed by them at any time during the
previous two (2) years; or (ii) any individual or entity under engagement by
FACC during the previous two (2) years, by contract or otherwise, for the
purpose of marketing, distributing or selling insurance and annuity products or
developing clients or customers on behalf of FACC. Executive further agrees
that during such period, he will not do anything to impair FACC or their
affiliates or subsidiaries' prospects of sales or business retention, and shall
not solicit for any reason any of FACC or its employees, agency personnel,
insureds or applicants, nor knowingly accept commissions directly or indirectly
on any policy written in replacement of any policy produced or written by FACC
or any of their affiliates or subsidiaries nor shall Executive in any way
derogate FAC, its products or personnel.
c. Confidential Information. Executive will not disclose any
confidential information of FACC which is now known to him or which hereafter
may become known to him as a result of his employment or association with FACC
and shall not at any time directly or indirectly disclose any such information
to any person, firm or corporation, or sue the same in any way other than in
connection with the business of FACC and at all times after the expiration of
the employment period.
d. Companies' Remedies for Breach. It is recognized that damages in
the event of breach of this section by Executive would be difficult, if not
impossible, to ascertain and it is, therefore, agreed that FACC, in addition to
and without limiting any other remedy or right it may have, shall have the right
to an injunction or other equitable relief in any court of competent
jurisdiction, enjoining any such breach, and Executive hereby waives any and all
defenses he may have on the ground of lack of jurisdiction or competence of the
court to grant such an injunction or other equitable relief. The existence of
this right shall not preclude FACC from pursuing any other rights and remedies
at law or in equity which FACC may have.
VI. Term:
The term of this employment agreement is for a four year period from its
effective date described below. Renewal Incentive Compensation accruing to the
Executive on "First America 2000" policies in force at the end of this four year
employment agreement period shall be deemed vested and payable to Executive upon
the payment of the renewal premium of each "First America 2000" policy in force.
Notwithstanding the foregoing if at anytime two-thirds of the outside members of
the Board of Directors vote to agree that the payment of incentive compensation
as described in paragraph III above is resulting in material economic detriment
to FACC in that unprofitable business is being accepted, Executive agrees to
renegotiate the compensation package in good faith. For purposes of this
Section, an outside director to the Board of Directors is one who is neither an
officer nor employee of FACC who receives compensation directly or indirectly
from FACC, other than as a director. No other terms of this Agreement are
subject to renegotiation unless this Agreement is modified by written amendment
or this Agreement is terminated by either FACC or Executive pursuant to any of
paragraphs VIII through XIII.
VII. Effective date:
The effective date of this agreement will be the date on which FACC's
wholly-owned life insurance subsidiary, First Life America Corporation ("FLAC"),
commences business. Commencement of business will be the date of the first
application for life insurance submitted to FLAC but in no event later than
November 1, 1998.
VIII. Other benefits:
FAC shall provide the following additional benefits to Executive:
* Annual automobile allowance of $8,400.
* $500,000 ten year level term life insurance policy issued at standard
rates at no cost to Executive. If Such policy is rated special class,
Executive shall have the option to pay such rated premium over and above
standard premiums for such policy. Beneficiary of such policy to be designated
by Executive.
* Executive shall be provided Disability Income insurance at no cost to
Executive. Such insurance shall provide coverage equal to Executive's annual
base compensation.
* Group health insurance coverage under FACC's Group Health Insurance
Plan for Executive and family to be provided at no cost to Executive.
* Annual physical examination to be provided for Executive at no cost to
Executive.
* Participation in any Deferred Compensation, Pension, other retirement
income programs and stock option plans applicable to executive-level
employees of FACC, subsidiaries or affiliates as approved by the FACC
Board of Directors.
IX. Termination without cause:
This agreement can be terminated by FACC by a two-thirds vote of the FACC Board
of Directors, excluding the vote of those executive officers who serve on the
Board of Directors. In the event the FACC Board of Directors would vote to
terminate this agreement, annual base compensation due and payable shall not be
less than one hundred thousand dollars ($100,000) if termination occurs within
the first year of this agreement and shall increase by fifty-thousand dollars
($50,000) at each of this Agreement's annual anniversaries up to a maximum of
two hundred fifty- thousand dollars ($250,000). Further, incentive compensation,
described above in paragraph III, which is based on renewal premium shall vest
and be payable on a monthly basis for as long as renewal premiums continue to be
received on policies delivered prior to the date of termination without cause.
Further, in the event of a change in control of FACC which results in the
Executive being terminated without cause as described above, the base
compensation due and payable shall not be less than two hundred fifty- thousand
dollars ($250,000) regardless of the agreement year in which such event occurs
and renewal incentive compensation as described above shall vest and be payable
on a monthly basis for as long as renewal premiums continue to be received on
policies delivered prior to the termination date.
X. Termination for cause:
The Executive's employment may be terminated for cause upon written notice to
the Executive by the FACC Board of Directors specifying the event(s) relied upon
for such termination, and said event(s) must evidence serious and willful
misconduct with respect to the Executive's duties under this Agreement,
including but not limited to conviction of a felony, perpetration of a common
law fraud or a legal determination that Executive has breached a duty owned to
FACC which has resulted in or is likely to result in material economic damage to
FACC. Additionally, with six months written notice, the FACC Board of Directors
may terminate this agreement by unanimous vote (excluding the vote of Executive)
for flagrant dereliction of duty regarding the responsibilities of the
Executive. In the event of a termination for cause, neither base salary nor
first year and renewal incentive compensation shall be payable to Executive.
XI. Resignation or retirement:
If Executive resigns or retires during the term of this agreement, the incentive
compensation referred to above in paragraph V. shall vest and be payable on a
monthly basis for as long as renewal premiums continue to be received on
policies delivered prior to resignation or retirement.
XII. Death:
In the event Executive dies during the term of this agreement, the incentive
renewal compensation referred to above in paragraph V. will vest and will be
payable on a monthly basis to the spouse of Executive or his heirs. Such death
payments will continue for as long as premiums continue to be received on
policies delivered prior to the date of death.
XIII. Disability:
In the event Executive becomes totally and permanently disabled as determined by
a physician mutually agreed upon between the FACC Board of Directors and
Executive, the incentive renewal compensation of one and one quarter percent
(.0125) enumerated in Section V. above will vest and be payable on a monthly
basis for as long as renewal premiums continue to be received on policies prior
to the date of total and permanent disability.
XIV. Binding Arbitration:
It is agreed by the parties herein that any disputes arising under this
agreement shall be submitted to binding arbitration under the rules of the
American Arbitration Association.
XV: Modification:
Any modification of this agreement or additional obligation assumed by either
party in connection with this agreement shall be binding only if evidenced in a
written document signed by both parties.
XVI. Successors:
This agreement shall inure to the benefit of and be binding upon the parties to
the agreement, their successors and assigns.
XVII. Partial Invalidity:
The invalidity of any part of this agreement will not and shall not be deemed to
affect the validity of any other part. In the event that any provision is held
to be invalid, the parties agree that the remaining provisions shall remain in
full force and effect as if they had been executed by the parties subsequent to
the expungement of the invalid provision.
XVIII. Failure to insist on performance:
Failure at any time to insist on performance of any term or provision of this
agreement shall not be deemed a waiver of any right or any other provision of
this agreement. A waiver of any right or any other provision of this agreement
shall be accomplished only in writing and signed by the parties to this
agreement.
XIX. Entire agreement:
This agreement shall constitute the entire agreement between the parties. Any
understanding or representation of any kind preceding the date of this agreement
shall not be binding on either party except as expressly set out herein.
XX. Successor company:
FACC shall require any successor or successors (either direct or indirect, by
purchase, merger, consolidation, exchange or otherwise) to all or substantially
all of the business or assets of FACC as of the date hereof, by agreement in
form and substance satisfactory to Executive, to acknowledge expressly that this
agreement is binding upon and enforceable against FACC in accordance with the
terms hereof, and to become jointly and severally obligated with FACC to perform
this agreement in the same manner and to the same extent that FACC would be
required to perform if no such
succession or successions had taken place. Failure of FACC to obtain such
agreement prior to the effectiveness of any such succession shall be a breach of
the agreement and shall be deemed a constructive termination at Executive's
election.
XXI. Survival:
Notwithstanding the termination of this agreement, FACC's obligations under any
of paragraphs VIII through XIII shall survive and remain in full force and
effect for the periods therein provided.
XXII. No mitigation:
Executive shall not be required to mitigate the amount of any payment or benefit
provided for in any of Paragraphs VIII through XIII hereof by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for in this agreement be reduced by any compensation earned by other employment
or otherwise.
XXIII. Notification:
Notices of intent to terminate this agreement must be provided in writing to the
other party at least ninety (90) days prior to said termination. Notifications
required by this agreement shall be made as follows:
Executive- Rickie D. Meyer 3360 SW Harrison Street
Topeka, Kansas 66611
First American Capital Corporation- 3360 SW Harrison Street
Topeka, Kansas 66611
FIRST ALLIANCE CORPORATION EXECUTIVE
By:__________________________ By:_____________________
Chairman\Compensation Committee Rickie D. Meyer
Date:_________________ Date:___________________
EMPLOYMENT AGREEMENT
This employment agreement is entered into this day of
, 1998 between First American Capital Corporation ("FACC"), a Kansas
Corporation, and Michael N. Fink ("Executive"), Lexington, Kentucky. FACC
hereby agrees to employ Executive in the position of Chairman of the Board and
Executive hereby agrees to be employed in such position, upon the terms and
conditions contained in this agreement and will have the power to contractually
bind FACC as provided in FACC'S Articles and Bylaws and as further contained in
Corporate Resolutions approved from time-to-time by FACC's Board of Directors.
I. Governing laws:
This document is governed by the laws of the State of Kansas and any litigation
arising from the execution of this document will abide by such laws for
resolution.
II. Services to be provided:
Executive shall perform all duties incident to the position of Chairman of the
Board. Executive has the express and implied authority to bind FACC
contractually in all areas of corporate operations arising in the ordinary
course of business. In addition, the Executive will have the duties and
responsibilities as specified in the Articles of Incorporation and By-laws of
FACC and any Corporate resolutions approved from time-to-time by FACC's Board of
Directors.
III. Compensation:
The annual base compensation of Executive shall be $72,000 payable monthly and
shall be adjusted annually at each employment agreement anniversary for the
annual increase in the Consumer Price Index Labor Component as of the month
ending prior to each anniversary of this agreement.
Additionally, Executive shall receive incentive compensation which will be the
equivalent of four percent (4%) of the monthly first year delivered life
insurance premium of the initial product of First Life America Corporation
("FLAC") known generically as the " First America 2000". Delivered premium is
defined as the first year life insurance premium of the " FirstAmerica 2000"
recorded as revenue by FLAC. Such incentive compensation is to be paid at the
end of each month in which such first year premium has been recorded as revenue
during the month.
Further, Executive shall receive as monthly incentive renewal compensation one
percent (.01)of renewal premium on the life insurance portion of the " First
America 2000" (excluding annuity rider premium) recorded as revenue by FLAC.
Renewal premium is defined as life insurance premium recorded as revenue by FLAC
on policies renewing on first and subsequent policy anniversaries. The renewal
incentive compensation shall also be paid at the end of each month in which such
renewal premium has been paid by the policy insured, owner or payor.
IV. Bonus compensation:
The Board of Directors may, at its discretion, grant performance bonuses to
Executive based on outstanding performance relating to events such as, but not
limited to, acquisitions, establishment of subsidiaries or affiliates, company
expansion and corporate profits.
V. Term:
The term of this employment agreement is for a four year period from its
effective date described below. Renewal Incentive Compensation accruing to the
Executive on " First America 2000" policies in force at the end of this four
year employment agreement period shall be deemed vested and payable to Executive
upon the payment of the renewal premium of each "First America 2000" policy in
force.
Notwithstanding the foregoing if at anytime two-thirds of the outside members of
the Board of Directors vote that the payment of incentive compensation as
described in paragraph III above is resulting in material economic detriment to
FACC in that unprofitable business is being accepted, Executive agrees to
renegotiate the compensation package in good faith. For purposes of this
Section, an outside director of the Board of Directors is one who is neither an
officer nor employee of FACC who receives compensation directly or indirectly
form FACC, other than as a director. No other terms of this Agreement are
subject to renegotiation unless this Agreement is modified by written amendment
or this Agreement is terminated by either FACC or Executive pursuant to any of
paragraphs VIII through XIII.
VI. Effective date:
The effective date of this agreement will be the date on which FACC's
wholly-owned life insurance subsidiary, First Life America Corporation ("FLAC"),
commences business. Commencement of business will be the date of the first
application for life insurance submitted to FLAC but in no event later than
November 1, 1998.
VII. Other benefits:
FAC shall provide the following additional benefits to Executive:
* Annual automobile allowance of $4,800.
* $150,000 ten year level term life insurance policy issued at standard
rates at no cost to Executive. If Such policy is rated special class,
Executive shall have the option to pay such rated premium over and above
standard premiums for such policy. Beneficiary of such policy to be designated
by Executive.
* Participation in any Deferred Compensation, Pension, other retirement
income programs and stock option plans applicable to executive-level
employees of FACC, subsidiaries or affiliates as approved by the FACC
Board of Directors.
VIII. Termination without cause:
This agreement can be terminated by FACC by a two-thirds vote of the FACC Board
of Directors, excluding the vote of those executive officers who serve on the
Board of Directors. In the event the FACC Board of Directors would vote to
terminate this agreement, annual base compensation due and payable shall not be
less than eighty- thousand dollars ($80,000) if termination occurs within the
first year of this agreement and shall increase by forty-thousand dollars
($40,000) at each of this Agreement's annual anniversaries up to a maximum of
two hundred thousand dollars ($200,000). Further, incentive compensation,
described above in paragraph III, which is based on renewal premium shall vest
and be payable on a monthly basis for as long as renewal premiums continue to be
received on policies delivered prior to the date of termination without cause.
Further, in the event of a change in control of FACC which results in the
Executive being terminated without cause as described above, the base
compensation due and payable shall not be less than two hundred thousand dollars
($200,000) regardless of the agreement year in which such event occurs and
renewal incentive compensation as described above shall vest and be payable on a
monthly basis for as long as renewal premiums continue to be received on
policies delivered prior to the termination date.
IX. Termination for cause:
The Executive's employment may be terminated for cause upon written notice to
the Executive by the FACC Board of Directors specifying the event(s) relied upon
for such termination, and said event(s) must evidence serious and willful
misconduct with respect to the Executive's duties under this Agreement,
including but not limited to conviction of a felony, perpetration of a common
law fraud or a legal determination that Executive has breached a duty owned to
FACC which has resulted in or is likely to result in material economic damage to
FACC. Additionally, with six months written notice, the FACC Board of Directors
may terminate this agreement by unanimous vote (excluding the vote of Executive)
for flagrant dereliction of duty regarding the responsibilities of the
Executive. In the event of a termination for cause, neither base salary nor
first year and renewal incentive compensation shall be payable to Executive.
X. Resignation or retirement:
If Executive resigns or retires during the term of this agreement, the incentive
compensation referred to above in paragraph V. shall vest and be payable on a
monthly basis for as long as renewal premiums continue to be received on
policies delivered prior to resignation or retirement.
XI. Death:
In the event Executive dies during the term of this agreement, the incentive
renewal compensation referred to above in paragraph V. will vest and will be
payable on a monthly basis to the spouse of Executive or his heirs. Such death
payments will continue for as long as premiums continue to be received on
policies delivered prior to the date of death.
XII. Disability:
In the event Executive becomes totally and permanently disabled as determined by
a physician mutually agreed upon between the FACC Board of Directors and
Executive, the incentive renewal compensation of one percent (.01) enumerated
in Section V. above will vest and be payable on a monthly basis for as long as
renewal premiums continue to be received on policies prior to the date of total
and permanent disability.
XIII. Binding Arbitration:
It is agreed by the parties herein that any disputes arising under this
agreement shall be submitted to binding arbitration under the rules of the
American Arbitration Association.
XIV: Modification:
Any modification of this agreement or additional obligation assumed by either
party in connection with this agreement shall be binding only if evidenced in a
written document signed by both parties.
XV. Successors:
This agreement shall inure to the benefit of and be binding upon the parties to
the agreement, their successors and assigns.
XVI. Partial Invalidity:
The invalidity of any part of this agreement will not and shall not be deemed to
affect the validity of any other part. In the event that any provision is held
to be invalid, the parties agree that the remaining provisions shall remain in
full force and effect as if they had been executed by the parties subsequent to
the expungement of the invalid provision.
XVII. Failure to insist on performance:
Failure at any time to insist on performance of any term or provision of this
agreement shall not be deemed a waiver of any right or any other provision of
this agreement. A waiver of any right or any other provision of this agreement
shall be accomplished only in writing and signed by the parties to this
agreement.
XVIII. Entire agreement:
This agreement shall constitute the entire agreement between the parties. Any
understanding or representation of any kind preceding the date of this agreement
shall not be binding on either party except as expressly set out herein.
XIX. Successor company:
FACC shall require any successor or successors (either direct or indirect, by
purchase, merger, consolidation, exchange or otherwise) to all or substantially
all of the business or assets of FACC as of the date hereof, by agreement in
form and substance satisfactory to Executive, to acknowledge expressly that this
agreement is binding upon and enforceable against FACC in accordance with the
terms hereof, and to become jointly and severally obligated with FACC to perform
this agreement in the same manner and to the same extent that FACC would be
required to perform if no such succession or successions had taken place.
Failure of FACC to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of the agreement and shall be deemed a constructive
termination at Executive's election.
XX. Survival:
Notwithstanding the termination of this agreement, FACC's obligations under any
of paragraphs VIII through XIII shall survive and remain in full force and
effect for the periods therein provided.
XXI. No mitigation:
Executive shall not be required to mitigate the amount of any payment or benefit
provided for in any of Paragraphs VIII through XIII hereof by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for in this agreement be reduced by any compensation earned by other employment
or otherwise.
XXII. Notification:
Notices of intent to terminate this agreement must be provided in writing to the
other party at least ninety (90) days prior to said termination. Notifications
required by this agreement shall be made as follows:
Executive- Michael N. Fink 1121 Chetford Drive
Lexington, Ky. 40509
First American Capital Corporation- 3360 SW Harrison Street
Topeka, Kansas 66611
FIRST ALLIANCE CORPORATION EXECUTIVE
By:__________________________ By:_____________________
Chairman\Compensation Committee Michael N. Fink
Date:_________________ Date:___________________
EMPLOYMENT AGREEMENT
This employment agreement is entered into this day of
, 1998 between First American Capital Corporation ("FACC"), a Kansas
Corporation, and Chris J. Haas ("Executive"), Lexington, Kentucky. FACC hereby
agrees to employ Executive in the position of Secretary/Treasurer and Executive
hereby agrees to be employed in such position, upon the terms and conditions
contained in this agreement and will have the power to contractually bind FACC
as provided in FACC'S Articles and Bylaws and as further contained in Corporate
Resolutions approved from time-to-time by FACC's Board of Directors.
I. Governing laws:
This document is governed by the laws of the State of Kansas and any litigation
arising from the execution of this document will abide by such laws for
resolution.
II. Services to be provided:
Executive shall perform all duties incident to the position of
Secretary/Treasurer. Executive has the express and implied authority to bind
FACC contractually in all areas of corporate operations arising in the ordinary
course of business. In addition, the Executive will have the duties and
responsibilities as specified in the Articles of Incorporation and By-laws of
FACC and any Corporate resolutions approved from time-to-time by FACC's Board of
Directors.
III. Compensation:
The annual base compensation of Executive shall be $36,000 payable monthly and
shall be adjusted annually at each employment agreement anniversary for the
annual increase in the Consumer Price Index Labor Component as of the month
ending prior to each anniversary of this agreement.
Additionally, Executive shall receive incentive compensation which will be the
equivalent of two percent (2%) of the monthly first year delivered life
insurance premium of the initial product of First Life America Corporation
("FLAC") known generically as the " First America 2000". Delivered premium is
defined as the first year life insurance premium of the " First America 2000"
recorded as revenue by FLAC. Such incentive compensation is to be paid at the
end of each month in which such first year premium has been recorded as revenue
during the month.
Further, Executive shall receive as monthly incentive renewal compensation one
half of one percent (.005) of renewal premium on the life insurance portion of
the " First America 2000" (excluding annuity rider premium) recorded as revenue
by FLAC. Renewal premium is defined as life insurance premium recorded as
revenue by FLAC on policies renewing on first and subsequent policy
anniversaries. The renewal incentive compensation shall also be paid at the end
of each month in which such renewal premium has been paid by the policy insured,
owner or payor.
IV. Bonus compensation:
The Board of Directors may, at its discretion, grant performance bonuses to
Executive based on outstanding performance relating to events such as, but not
limited to, acquisitions, establishment of subsidiaries or affiliates, company
expansion and corporate profits.
V. Term:
The term of this employment agreement is for a four year period from its
effective date described below. Renewal Incentive Compensation accruing to the
Executive on "First America 2000" policies in force at the end of this four year
employment agreement period shall be deemed vested and payable to Executive upon
the payment of the renewal premium of each "First America 2000" policy in force.
Notwithstanding the foregoing if at anytime two-thirds of the outside members of
the Board of Directors vote to agree that the payment of incentive compensation
as described in paragraph III above is resulting in material economic detriment
to FACC in that unprofitable business is being accepted, Executive agrees to
renegotiate the compensation package in good faith. For purposes of this
Section, an outside director of the Board of directors is one who is neither an
officer nor employee of FACC who receives compensation directly or indirectly
from FACC, other than as a director. No other terms of this Agreement are
subject to renegotiation unless this Agreement is modified by written amendment
or this Agreement is terminated by either FACC or Executive pursuant to any of
paragraphs VIII through XIII.
VI. Effective date:
The effective date of this agreement will be the date on which FACC's
wholly-owned life insurance subsidiary, First Life America Corporation ("FLAC"),
commences business. Commencement of business will be the date of the first
application for life insurance submitted to FLAC but in no event later than
November 1, 1998.
VII. Other benefits:
FAC shall provide the following additional benefits to Executive:
* Annual automobile allowance of $2,400.
* $150,000 ten year level term life insurance policy issued at standard
rates at no cost to Executive. If Such policy is rated special class,
Executive shall have the option to pay such rated premium over and above
standard premiums for such policy. Beneficiary of such policy to be designated
by Executive.
* Participation in any Deferred Compensation, Pension, other retirement
income programs and stock option plans applicable to executive-level
employees of FACC, subsidiaries or affiliates as approved by the FACC
Board of Directors.
VIII. Termination without cause:
This agreement can be terminated by FACC by a two-thirds vote of the FACC Board
of Directors, excluding the vote of those executive officers who serve on the
Board of Directors. In the event the FACC Board of Directors would vote to
terminate this agreement, annual base compensation due and payable shall not be
less than forty- thousand dollars ($40,000) if termination occurs within the
first year of this agreement and shall increase by twenty-thousand dollars
($20,000) at each of this Agreement's annual anniversaries up to a maximum of
one hundred thousand dollars ($100,000). Further, incentive compensation,
described above in paragraph III, which is based on renewal premium shall vest
and be payable on a monthly basis for as long as renewal premiums continue to be
received on policies delivered prior to the date of termination without cause.
Further, in the event of a change in control of FACC which results in the
Executive being terminated without cause as described above, the base
compensation due and payable shall not be less than one hundred thousand dollars
($100,000) regardless of the agreement year in which such event occurs and
renewal incentive compensation as described above shall vest and be payable on a
monthly basis for as long as renewal premiums continue to be received on
policies delivered prior to the termination date.
X. Termination for cause:
The Executive's employment may be terminated for cause upon written notice to
the Executive by the FACC Board of Directors specifying the event(s) relied upon
for such termination, and said event(s) must evidence serious and willful
misconduct with respect to the Executive's duties under this Agreement,
including but not limited to conviction of a felony, perpetration of a common
law fraud or a legal determination that Executive has breached a duty owned to
FACC which has resulted in or is likely to result in material economic damage to
FACC. Additionally, with six months written notice, the FACC Board of Directors
may terminate this agreement by unanimous vote (excluding the vote of Executive)
for flagrant dereliction of duty regarding the responsibilities of the
Executive. In the event of a termination for cause, neither base salary nor
first year and renewal incentive compensation shall be payable to Executive.
XI. Resignation or retirement:
If Executive resigns or retires during the term of this agreement, the incentive
compensation referred to above in paragraph V. shall vest and be payable on a
monthly basis for as long as renewal premiums continue to be received on
policies delivered prior to resignation or retirement.
XII. Death:
In the event Executive dies during the term of this agreement, the incentive
renewal compensation referred to above in paragraph V. will vest and will be
payable on a monthly basis to the spouse of Executive or his heirs. Such death
payments will continue for as long as premiums continue to be received on
policies delivered prior to the date of death.
XIII. Disability:
In the event Executive becomes totally and permanently disabled as determined by
a physician mutually agreed upon between the FACC Board of Directors and
Executive, the incentive renewal compensation of one half of one percent (.005)
enumerated in Section V. above will vest and be payable on a monthly basis for
as long as renewal premiums continue to be received on policies prior to the
date of total and permanent disability.
XIV. Binding Arbitration:
It is agreed by the parties herein that any disputes arising under this
agreement shall be submitted to binding arbitration under the rules of the
American Arbitration Association.
XV: Modification:
Any modification of this agreement or additional obligation assumed by either
party in connection with this agreement shall be binding only if evidenced in a
written document signed by both parties.
XVI. Successors:
This agreement shall inure to the benefit of and be binding upon the parties to
the agreement, their successors and assigns.
XVII. Partial Invalidity:
The invalidity of any part of this agreement will not and shall not be deemed to
affect the validity of any other part. In the event that any provision is held
to be invalid, the parties agree that the remaining provisions shall remain in
full force and effect as if they had been executed by the parties subsequent to
the expungement of the invalid provision.
XVIII. Failure to insist on performance:
Failure at any time to insist on performance of any term or provision of this
agreement shall not be deemed a waiver of any right or any other provision of
this agreement. A waiver of any right or any other provision of this agreement
shall be accomplished only in writing and signed by the parties to this
agreement.
XIX. Entire agreement:
This agreement shall constitute the entire agreement between the parties. Any
understanding or representation of any kind preceding the date of this agreement
shall not be binding on either party except as expressly set out herein.
XX. Successor company:
FACC shall require any successor or successors (either direct or indirect, by
purchase, merger, consolidation, exchange or otherwise) to all or substantially
all of the business or assets of FACC as of the date hereof, by agreement in
form and substance satisfactory to Executive, to acknowledge expressly that this
agreement is binding upon and enforceable against FACC in accordance with the
terms hereof, and to become jointly and severally obligated with FACC to perform
this agreement in the same manner and to the same extent that FACC would be
required to perform if no such succession or successions had taken place.
Failure of FACC to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of the agreement and shall be deemed a constructive
termination at Executive's election.
XXI. Survival:
Notwithstanding the termination of this agreement, FACC's obligations under any
of paragraphs VIII through XIII shall survive and remain in full force and
effect for the periods therein provided.
XXII. No mitigation:
Executive shall not be required to mitigate the amount of any payment or benefit
provided for in any of Paragraphs VIII through XIII hereof by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for in this agreement be reduced by any compensation earned by other employment
or otherwise.
XXIII. Notification:
Notices of intent to terminate this agreement must be provided in writing to the
other party at least ninety (90) days prior to said termination. Notifications
required by this agreement shall be made as follows:
Executive- Chris J. Haas 1188 Sheffield Place
Lexington, Ky. 40509
First American Capital Corporation- 3360 SW Harrison Street
Topeka, Kansas 66611
FIRST ALLIANCE CORPORATION EXECUTIVE
By:__________________________ By:_____________________
Chairman\Compensation Committee Chris J. Haas
Date:_________________ Date:___________________
AUTOMATIC UMBRELLA TREATY
TABLE OF CONTENTS
ARTICLE PAGE
I BASIS OF REINSURANCE 1
II LIABILITY 2
III ADMINISTRATIVE REPORTING 3
IV PLANS OF REINSURANCE 5
V REINSURANCE PREMIUMS 5
VI PREMIUM ACCOUNTING 6
VII OVERSIGHTS 6
VIII REDUCTIONS, TERMINATIONS AND CHANGES 7
IX INCREASE IN RETENTION AND RECAPTURES 8
X REINSTATEMENTS 9
XI EXPENSE OF ORIGINAL POLICY 9
XII CLAIMS 9
XIII TAX CREDITS 10
XIV DAC TAX 10
XV INSPECTION OF RECORDS 11
XVI INSOLVENCY 11
XVII ARBITRATION 11
XVIII PARTIES TO AGREEMENT 12
XIX ENTIRE CONTRACT.. 12
XX TERMINATION OF AGREEMENT 13
ARTICLE I
BASIS OF REINSURANCE
Reinsurance under this agreement must be individual insurance. The
CEDING COMPANY shall automatically reinsure the life insurance for the
plan(s) as stated in Schedule A.
1. REQUIREMENTS FOR AUTOMATIC REINSURANCE
A. The individual risk must be a permanent resident of the
United States.
B. The individual risk must be underwritten by the CEDING
COMPANY according to the standard underwriting practices and
guidelines as shown in Exhibit IA. The CEDING COMPANY shall
immediately notify BMA of any changes in underwriting practices
or guidelines. Any risk falling into a category of special
underwriting programs shall be excluded from this Agreement.
C. Any risk offered on a facultative basis to BMA or any
other reinsurer shall not qualify for automatic reinsurance.
D. The maximum issue age on any risk shall be as stated in
Schedule A. Applications with issue ages over the limit stated
in Schedule A must be submitted facultatively.
E. The mortality rating on any one risk shall not exceed
the Table Rating stated in Schedule A, or its equivalent on a
flat extra premium basis. Cases exceeding the Table Rating
stated in Schedule A, or its equivalent must be submitted
facultatively.
F. The maximum amount of insurance issued and applied for
in all companies on any one risk shall not exceed the Jumbo
limits as stated in Schedule A.
G. On any risk, the CEDING COMPANY must retain the amounts
of insurance as stated in Exhibit I.
H. The maximum amounts of insurance to be reinsured on any
one life shall not exceed the automatic binding limits as stated
in Schedule A.
I. The minimum amount of insurance to be ceded shall be as
stated in Schedule A.
2. REQUIREMENTS FOR FACULTATIVE REINSURANCE
A. Plan of Insurance Listed in Schedule A:
(1) If the Requirements for Automatic Reinsurance are met
but the CEDING COMPANY prefers to apply for facultative
reinsurance, or
(2) If Requirements for Automatic Reinsurance are not met
then the CEDING COMPANY must submit to BMA all the underwriting
documentation relating to the insurability of the individual
risk for facultative reinsurance.
B. Plan of Insurance Not Listed in Schedule A:
On a Yearly Renewable Term treaty the CEDING COMPANY may submit
an application for facultative reinsurance on any plan(s).
On a Coinsurance treaty the Ceding Company cannot submit an application
for facultative reinsurance on plan(s) other than the plan(s) listed in
Schedule A.
C. An application for facultative reinsurance may include life
insurance with or without either disability waiver of premium or
accidental death or both. Supplemental benefits without life are not
accepted on an individual cession basis.
D. Copies of all underwriting papers relating to the insurability
of the individual risk must be sent to BMA for facultative reinsurance.
After BMA has examined the underwriting papers, BMA will promptly notify
the CEDING COMPANY of the underwriting offer subject to additional
requirements, the final underwriting offer or declination. Any final
underwriting offer on the individual risk will automatically terminate
upon the earliest of:
(1) The date BMA receives notice of a withdrawal/cancellation by the
CEDING COMPANY,
(2) 120 days after the date on which the offer was made, or
(3) The date specified in BMA's approval to extend the offer.
E. The minimum amount of insurance to be ceded shall be as stated
in Schedule A.
ARTICLE II
LIABILITY
1. BMA's liability for automatic reinsurance shall begin
simultaneously with the CEDING COMPANY's liability.
<PAGE>
2. Except for
additional coverage pertaining to conditional receipt as described in
Schedule C, BMA's liability for facultative reinsurance on individual
risks shall not begin unless and until the CEDING COMPANY has accepted
BMA's final and unconditional written offer on the application for
facultative reinsurance.
3. BMA's liability for reinsurance on individual risks shall
terminate when the CEDING COMPANY's liability terminates.
4. As long as the original policy remains in full force, all
paid-up additions and accumulated dividends shall be the liability of
the CEDING COMPANY.
5. In no event shall reinsurance under this Agreement be in force
unless the insurance issued directly by the CEDING COMPANY is in force
and is issued and delivered in a jurisdiction in which the CEDING
COMPANY is properly licensed.
6. The payment of reinsurance premiums in accordance with this
Agreement shall be a condition precedent to the liability of BMA under
reinsurance covered by this Agreement
ARTICLE III
ADMINISTRATIVE REPORTING
1. Self-Administered Business
Promptly after liability for insurance has begun on an individual risk,
the CEDING COMPANY shall have the responsibility of maintaining adequate
records for the administration of the reinsurance account and shall
furnish BMA with monthly reports, in substantial conformity with the
following:
A. MONTHLY NEW BUSINESS REPORT
(1) policy number (10) amount
reinsured (2) full name of insured (11)
automatic/facultative indicator (3) date of birth (12)
state of residence (4) sex (13) table rating (5) issue
age (14) flat extra (amount
+ number of years) (6) policy date (15) death benefit
option (UL products) (7) underwriting classification
(16) net amount at risk (8) plan of insurance (17)
transaction code (9) amount issued (18) currency if
other than U.S.
B. MONTHLY CONVERSION REPORT
The CEDING COMPANY shall furnish BMA with a separate listing of
reinsurance policies that are conversions or replacements to the
plan(s) as stated in Schedule A. The listing should provide the
following information:
(1) 1 through 18 in 1.A above (4) attained
age (2) original policy date (5) duration (3)
original policy number (6) effective date if
other than policy date
C. MONTHLY PREMIUM REPORT
At the end of each month the CEDING COMPANY shall send to BMA a
listing of all reinsurance policies issued or renewing during
the past month accompanied by the reinsurance premiums for such
policies. The listing should be segregated into first year
issues and renewals and should provide the following
information:
(1) 1 through 18 in 1.A above (2) current net
amount at risk (3) On Yearly Renewable Term
treaties the net reinsurance premium due for each
reinsured policy with the premium for life and each
supplemental benefit separated. (4) On Coinsurance
treaties the gross reinsurance premium, commissions, net
reinsurance premium and other amounts (e.g. dividends,
cash surrender values) with premium separated for life
and each supplemental benefit.
All monthly lists shall be submitted to BMA no later than the
20th day of the following month.
D. MONTHLY CHANGE REPORT
The CEDING COMPANY shall report the details of all policy
terminations and changes on the reinsured policies. In addition
to the data indicated in 1.A, above, the report should provide
information about the nature, the effective date, and the
financial result of the change with respect to reinsurance.
E. MONTHLY POLICY EXHIBIT REPORT
The CEDING COMPANY shall provide a summary of new issues, terminations,
recaptures, changes, death claims and reinstatements during the month
and the inforce reinsurance at the end of the month.
F. QUARTERLY REPORTING
1. Within ten (10) days following the end of the quarter, the
CEDING COMPANY shall provide BMA with Premiums Due and Unpaid and
Commissions Due and Unpaid. This report may be in summary form
reporting totals by line of business with separate totals for first year
and renewals.
2. Within ten (10) days following the end of the quarter, the
CEDING COMPANY shall provide BMA with totals for the reserve liability
including statutory reserves by valuation basis segregated by Yearly
Renewable Term and Coinsurance.
G. ANNUAL INFORCE LISTING
Within ten (10) days after the close of the year, the CEDING
COMPANY shall furnish BMA a listing of reinsurance in force by
policy, by year of issue, segregated by Yearly Renewable Term
and Coinsurance and include statutory reserves for the same.
H. CLAIMS
Claims shall be reported as incurred on an individual basis.
2. Individual Cession Business
Promptly after liability for reinsurance has begun on the individual
risk the CEDING COMPANY shall send BMA a "Reinsurance Cession". Based
on the information on the "Reinsurance Cession", BMA will prepare and
send the CEDING COMPANY a "Client Individual Cession Record Report".
When reinsurance is reduced or changed the CEDING COMPANY shall send BMA
an "Amended Reinsurance Cession".
ARTICLE IV
PLANS OF REINSURANCE
1. Life reinsurance shall be ceded on the basis stated in Schedule
A.
2. Copies of all life insurance policies, riders, rate manuals,
benefit forms, commuted value tables and cash value tables shall be
provided by the CEDING COMPANY to BMA, and BMA shall be promptly
notified of any changes therein.
ARTICLE V
REINSURANCE PREMIUMS
1. Life Reinsurance Premiums
A. Life Reinsurance Premiums Paid on a Coinsurance Basis
The CEDING COMPANY shall pay the current premium as shown in Exhibit II
based on the amount of life insurance reinsured, less the allowance
stated in Exhibit III. In addition, the CEDING COMPANY shall pay any
substandard table extra and flat extra premiums, but shall exclude the
policy fee. In the event the current premium is changed, BMA shall be
notified by the CEDING COMPANY immediately.
B. Life Reinsurance Premiums on a Yearly Renewable Term
Basis
The life reinsurance premium on the net amount at risk shall be based on
rates shown in Exhibit II.
For those premiums less than the valuation net premium based on the 1980
CSO Table at 3% interest, only the latter premiums shall be guaranteed.
Should BMA increase the reinsurance premiums to the valuation net
premium based on the 1980 CSO Table at 3% interest, then the CEDING
COMPANY shall have the right to immediately recapture any business
affected by that change.
<PAGE>
ARTICLE VI
PREMIUM ACCOUNTING
1. Payment of Reinsurance Premium.
A. The reinsurance premiums shall be paid to BMA using the
rates shown in Exhibit II.
B. On issues ceded by individual cessions BMA shall send the CEDING
COMPANY each month two copies of a statement listing first year and
renewal reinsurance premiums less refunds and allowances which are due
during the current month.
C. On self-administered business the CEDING COMPANY shall provide
the statement to BMA using the format described in Article III Self-
Administered Business.
D. If a net reinsurance premium balance is payable to BMA the
CEDING COMPANY shall pay this balance within forty-five (45) days after
the close of that month. If the full balance is not received within the
forty-five (45) day period, the reinsurance premiums for reinsurance
risks listed on the statement, for which payment was not received, shall
be delinquent and the liability of BMA shall cease as of the date
reinsurance premium were due.
E. If a net reinsurance premium balance is payable to the CEDING
COMPANY, BMA shall pay this net balance within forty-five (45) days
after the monthly statement was sent to the CEDING COMPANY. If the
monthly statement has not been returned within forty-five (45) days, BMA
shall assume the CEDING COMPANY has verified and is in agreement with
the net balance and shall make payment to the CEDING COMPANY.
2. Currency.
The reinsurance premiums and benefits payable under this Agreement shall
be payable in the lawful money of the United States.
ARTICLE VII
OVERSIGHTS
If there is an unintentional oversight or clerical error in the
administration of this Agreement by either the CEDING COMPANY or BMA, it
can be corrected provided the correction takes place promptly after the
time the oversight or clerical error is first discovered. In that
event, the CEDING COMPANY and BMA will be restored to the position they
would have occupied had such oversight or clerical error not occurred.
<PAGE>
ARTICLE VIII
REDUCTIONS, TERMINATIONS AND CHANGES
1. A. If in accordance with policy provisions the original
policy is converted to permanent life insurance, the life risk under the
converted policy which exceeds the amount of risk originally retained by
the CEDING COMPANY shall continue to be reinsured with BMA.
B. If there is a replacement where full underwriting evidence is
not required according to the CEDING COMPANY regular underwriting rules,
the life risk which exceeds the amount of risk originally retained by
the CEDING COMPANY shall continue to be reinsured with BMA.
C. If there is a replacement where full underwriting evidence is
required by the CEDING COMPANY, reinsurance may be ceded to BMA subject
to a written agreement between BMA and the CEDING COMPANY.
2. If the amount of insurance under a policy or rider reinsured
under this Agreement increases and
A. The increase is subject to new underwriting evidence, the
provisions of Article I shall apply to the increase in reinsurance.
B. The increase is not subject to new underwriting evidence, BMA
shall accept automatically the increase in reinsurance but not to exceed
the automatic binding limit as stated in Schedule A.
3. If the amount of insurance under a policy or rider reinsured
under this Agreement is increased or reduced, any increase or reduction
in reinsurance for the risk involved shall be effective on the
effective date of the increase or reduction in the amount of insurance.
4. If any portion of the prior insurance retained by the CEDING
COMPANY on an individual life reduces or terminates, any reinsurance
under this Agreement based on the same life shall also be reduced or
terminated. The CEDING COMPANY shall reduce its reinsurance by applying
the retention limits which were in effect at the time the policy was
issued. The "reinsurance adjustment due to lapse or reduction of
previous insurance" shall be effective on the same date as the lapse or
reduction of prior insurance. The reinsurance to be terminated or
reduced shall be determined in chronological order by the date the risk
was first reinsured. Two or more policies issued the same date shall be
considered one policy.
5. If the insurance for a risk is shared by more than one
reinsurer, BMA's percentage of the increased or reduced reinsurance
shall be the same as BMA's percentage of initial reinsurance of the
individual risk.
6. If a risk reinsured under this Agreement is terminated, the
reinsurance for that risk shall be terminated as of the effective date
of the termination.
7. For facultative reinsurance, if the CEDING COMPANY reduces the
mortality rating, the reduction shall be subject to the facultative
provisions of this Agreement as stated in Article I, Section 2.
8. BMA shall refund all unearned reinsurance premiums not including
policy fees, less applicable allowances, arising from reductions,
terminations and changes as described in this Article.
ARTICLE IX
INCREASE IN RETENTION AND RECAPTURES
1. If the CEDING COMPANY changes its retention limits, as listed in
Exhibit I, prompt written notice of the change shall be provided to BMA.
2. The CEDING COMPANY shall have the option of recapturing the
reinsurance under this Agreement in the event the CEDING COMPANY
increases its retention limit and the policies have been in force the
required length of time as stated in Schedule A. The CEDING COMPANY may
exercise its option to recapture by giving written notice to BMA within
ninety (90) days after the effective date of the increase in retention.
If the recapture option is not exercised within ninety days (90) days
after the effective date of the increase in retention the CEDING COMPANY
may choose to recapture at a later date. In that case, the date of the
written notification to BMA shall determine the effective date the
recapture program shall begin.
3. If the CEDING COMPANY exercises its option to recapture, then:
A. The CEDING COMPANY shall reduce the reinsurance on all
individual risks on which it retained its maximum retention for the age
and mortality rating that was in effect at the time the reinsurance was
ceded.
B. The CEDING COMPANY shall increase its total amount of retained
insurance on the individual risk up to its new retention limit by
reducing the amount of reinsurance. If an individual risk is shared by
more than one reinsurer, BMA's percentage of the reduced reinsurance
shall be the same as BMA's initial percentage of reinsurance on the
individual risk.
C. The reduction of reinsurance shall become effective on the
later of the following dates:
(1) The policy anniversary date immediately following the date the
recapture program is to begin as determined by paragraph 2 of this
Article;
(2) The number of years stated in Schedule A starting with the
"policy date."
D. In the event the CEDING COMPANY overlooks any reduction in the
amount of a reinsurance policy because of an increase in the CEDING
COMPANY's retention, the acceptance by BMA of reinsurance premiums under
these circumstances shall not constitute a liability on the part of BMA
for such reinsurance. BMA shall be liable only for a refund of
premiums.
4. No recapture shall be permitted for reinsurance on an individual
risk if (a) the CEDING COMPANY retained less than its maximum retention
for the age and mortality rating in effect at the time the reinsurance
was ceded to BMA, or if (b) the CEDING COMPANY did not retain any of
the individual risk.
<PAGE>
ARTICLE X
REINSTATEMENT
If a policy reinsured under this Agreement lapses for nonpayment of
premium or is continued on the Reduced Paid-up or Extended Term
Insurance basis, and is reinstated in accordance with the terms of the
policy and the CEDING COMPANY's rules, the reinsurance on such policy
shall automatically be reinstated by BMA upon written notice of such
reinstatement. The CEDING COMPANY shall pay BMA all back reinsurance
premiums.
ARTICLE XI
EXPENSE OF ORIGINAL POLICY
The CEDING COMPANY shall bear the expense of all medical examinations,
inspection fees, and other charges in connection with the issuance of
the insurance.
ARTICLE XII
CLAIMS
1. The CEDING COMPANY shall give BMA prompt notice of any claim.
Copies of the proofs obtained by the CEDING COMPANY together with a
statement showing the amount due or paid on such claim by the CEDING
COMPANY shall be furnished to BMA at the time payment is requested.
2. BMA shall accept the decision of the CEDING COMPANY in settling
the claim and shall pay its portion to the CEDING COMPANY upon receipt
of proof that the CEDING COMPANY has paid the claimant. It is agreed,
however, that if a lesser amount at risk is retained by the CEDING
COMPANY than the amount ceded to BMA, the CEDING COMPANY shall consult
with BMA concerning its investigation and/or payment of the claim,
although the final decision shall be that of the CEDING COMPANY.
3. The CEDING COMPANY shall notify BMA of its intention to contest,
compromise, or litigate a claim involving reinsurance, and BMA shall pay
its share of the payment and specific claim expenses therein involved,
unless it declines to be a party to the contest, compromise, or
litigation in which case it shall pay the full amount of the reinsurance
to the CEDING COMPANY. "Claim expenses" shall be deemed to mean only
the reasonable legal and investigative expenses connected with the
litigation or settlement of claims. "Claim expenses" shall not include
expenses incurred in connection with a dispute or contest arising out of
conflicting claims of entitlement to policy proceeds which the CEDING
COMPANY admits are payable or any routine claim administrative expenses,
Home Office or otherwise.
4. In the event the amount of insurance provided by a policy or
policies reinsured hereunder is increased or reduced because of a
misstatement of age or sex established after the death of the insured,
BMA shall share in the increase or reduction in the proportion that the
net liability of BMA bore to the sum of the retained net liability of
the CEDING COMPANY and the net liability of other reinsurers immediately
prior to such increase or reduction. The reinsurance with BMA shall be
written from commencement on the basis of the adjusted amounts using
premiums and reserves at the correct ages and sex. The adjustment for
the difference in premiums shall be made without interest. 5. It is
understood and agreed that the payment of a death claim by BMA shall be
made in one sum regardless of the mode of settlement under the policy of
the CEDING COMPANY.
6. In no event shall BMA have any liability for any Extra
Contractual Damages which are assessed against the CEDING COMPANY as a
result of acts, omissions or course of conduct committed by the CEDING
COMPANY or its agents, other than a good faith decision to deny claim
liability, in connection with insurance reinsured under this Agreement.
It is recognized that there may be special circumstances involved which
indicate that BMA should participate in certain assessed damages. These
circumstances are not amenable to advance specific definition, but could
include those situations in which BMA was an active party in the act,
omission or course of conduct which ultimately results in the assessment
of such damages. The extent of such participation will be determined on
a good faith assessment of culpability in each case, but all factors
being equal, the division of any such assessment will generally be in
the proportion of net liability borne by each party.
7. If a claim is approved for disability waiver of premium
insurance reinsured under this Agreement, the CEDING COMPANY shall
continue to pay reinsurance premiums to BMA. BMA shall reimburse the
CEDING COMPANY BMA's share of the annual liability.
ARTICLE XIII
TAX CREDITS
In jurisdictions which impose premium taxes on the CEDING COMPANY
without deduction for reinsurance, BMA shall reimburse the CEDING
COMPANY for taxes paid on the amount of the reinsurance premiums on the
basis shown in Schedule A, unless BMA itself is required to pay a direct
tax on such reinsurance premiums.
ARTICLE XIV
DEFERRED ACQUISITION COSTS TAX
The CEDING COMPANY and BMA elect under Regulation 1.848-2(g) (8) to
compute "specified policy acquisition expense", as defined in section
848(c) of the Internal Revenue Code, in the following manner:
The party with net positive consideration as determined under Reg.
1.848-2(f) and Reg. 1.848-3 shall compute specified policy acquisition
expenses without regard to the general deductions limitation of section
848(c)(1) for each taxable year.
The parties will exchange information pertaining to the aggregate amount
of net consideration as determined under Regs. 1.848-2(f) and 1.848-3,
for all reinsurance agreements in force between them, to insure
consistency for the purposes of computing specified policy acquisition
expenses. BMA shall provide the CEDING COMPANY with the amount of such
net consideration for each taxable year no later than May 1 following
the end of such year. The CEDING COMPANY shall advise BMA if it
disagrees with the amounts provided, and the parties agree to amicably
resolve any difference. The amounts provided by BMA shall be presumed
correct if it does not receive a response from the CEDING COMPANY by May
31.
BMA represents and warrants that it is subject to U.S. taxation under
Subchapter L of the Internal Revenue Code.
ARTICLE XV
INSPECTION OF RECORDS
BMA shall have the right, at any reasonable time, to inspect at the
office of the CEDING COMPANY, all books and documents which relate to
reinsurance under this Agreement.
ARTICLE XVI
INSOLVENCY
1. In the event of insolvency of the CEDING COMPANY, all
reinsurance shall be payable by BMA directly to the CEDING COMPANY or
its liquidator, receiver, or statutory successor, on the basis of the
liability of the CEDING COMPANY under the policy or policies reinsured,
without diminution because of the insolvency of the CEDING COMPANY.
2. It is agreed that the liquidator, receiver, or statutory
successor of the insolvent CEDING COMPANY shall give written notice to
BMA of the pending of a claim against the insolvent CEDING COMPANY on
any policy reinsured within a reasonable time after such claim is filed
in the insolvency proceedings. During the pendency of any such claim
BMA may investigate such claim and interpose, in the proceeding where
such claim is to be adjudicated, any defense or defenses which BMA may
deem available to the CEDING COMPANY or its liquidator, receiver, or
statutory successor. The expense thus incurred by BMA shall be
chargeable, subject to court approval, against the insolvent CEDING
COMPANY as part of the expense of liquidation to the extent of a
proportionate share of the benefit which may accrue to the CEDING
COMPANY solely as a result of the defense undertaken by BMA.
3. Where two or more reinsurers are participating in the same claim
and a majority in interest elect to interpose a defense to such claim,
the expense shall be apportioned in accordance with the terms of the
Agreement as though such expenses had been incurred by the CEDING
COMPANY.
4. Any debts or credits, matured or unmatured, liquidated or
unliquidated, in favor of or against either the CEDING COMPANY or BMA
with respect to this agreement or with respect to any other claim of one
party against the other are deemed mutual debts or credits, as the case
may be, and shall be set off, and only the balance shall be allowed or
paid.
ARTICLE XVII
ARBITRATION
1. It is the intention of the CEDING COMPANY and BMA that the
customs and practices of the insurance and reinsurance industry shall be
given full effect in the operation and interpretation of this Agreement.
The parties agree to act in all things with the highest good faith.
However, if BMA and the CEDING COMPANY cannot mutually resolve a dispute
or claim which arises out of or relates to this agreement, the dispute
or claim shall be settled through arbitration.
2. The arbitrators shall be impartial regarding the dispute, and
shall base their decision on the terms and conditions of this agreement
plus, as necessary, on the customs and practices of the insurance and
reinsurance industry.
3. There shall be three arbitrators who must be officers of life
insurance companies other than the parties to this agreement or their
subsidiaries. Each of the parties to this agreement shall appoint one
of the arbitrators and these two arbitrators shall select the third. If
a party to this agreement fails to appoint an arbitrator within thirty
(30) days after the other party to this agreement has given notice of
the arbitrator appointment, the American Arbitration Association shall
appoint an arbitrator for the party to this Agreement that has failed to
do so. Should the two arbitrators be unable to agree on the choice of
the third, then the appointment of this arbitrator is left to the
American Arbitration Association.
4. Except for the appointment of arbitrators in accordance with the
provisions of Section 3 of the Article, arbitration shall be conducted
in accordance with the Commercial Arbitration Rules of the American
Arbitration Association which are in effect on the date of delivery of
demenad for arbitration. Arbitration shall be conducted in Kansas City,
Missouri.
5. Each party to this agreement shall pay part of the arbitration
expenses which are apportioned to it by the arbitrators.
6. The award agreed by the arbitrators shall be final, and
judgement may be entered upon it in any court having jurisdiction.
ARTICLE XVIII
PARTIES TO AGREEMENT
This is an agreement for indemnity reinsurance solely between the CEDING
COMPANY and BMA. The acceptance of reinsurance under this Agreement
shall not create any right or legal relation whatever between BMA and
the insured, owner, or any other party to or under any policy reinsured
under this Agreement.
ARTICLE XIX
ENTIRE CONTRACT
1. This agreement shall constitute the entire agreement between the
parties with respect to business being reinsured hereunder and that
there are no understandings between the parties other other than those
expressed in the agreement.
2. Any change or modification to this agreement shall be null and
void unless made by addendum to this agreement signed by both parties.
ARTICLE XX
TERMINATION OF AGREEMENT
1. This Agreement may be terminated at any time by either party
giving at least ninety(90) days written notice of termination. The day
the notice is deposited in the mail addressed to the Home Office, or to
an Officer of either company shall be the first day of the ninety-day
(90) period.
2. The CEDING COMPANY shall continue to cede reinsurance and BMA
shall continue to accept reinsurance, as provided for the terms of this
Agreement, until the date of termination.
3. All automatic reinsurance which became effective prior to the
termination of this Agreement and all facultative reinsurance approved
by BMA based upon applications received prior to termination of this
Agreement shall remain in effect until its termination or expiration,
unless the CEDING COMPANY and BMA mutually decide otherwise.
IN WITNESS WHEREOF, this agreement shall be effective with policies
dated 12:01 A.M. September 1, 1998 and is hereby executed in duplicate
between
FIRST LIFE AMERICA CORPORATION
Topeka, Kansas
referred to as the CEDING COMPANY
and
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
Kansas City, Missouri
referred to as BMA,
and duly signed by both parites' respective officers as follows:
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES
CEDING COMPANY
__________________________
Rick D. Meyer, President
__________________________
Chris J. Haas, Secretary
9/2/98
___________________
BMA
__________________________
Senior Vice President/Reinsurance
__________________________
Vice President Reinsurance Actuary
10/6/98
___________________
BULK ADB REINSURANCE AGREEMENT TABLE OF CONTENTS
ARTICLE PAGE
I PURPOSE OF AGREEMENT 1
II ACCIDENTAL DEATH RISKS REINSURED 1
III RESTRICTIONS OF ACCEPTANCE OF LIABILITY. 1
IV ACCIDENTAL DEATH REINSURANCE REPORT PROCEDURES. 2
V ACCIDENTAL DEATH REINSURANCE PREMIUMS AND PROCEDURES 2
VI OVERSIGHTS 3
VII CLAIMS. 3
VIII TAX CREDITS. 4
IX DAC TAX 4
X INSPECTION OF RECORDS 4
XI INSOLVENCY 4
XII ARBITRATION 5
XIII PARTIES TO AGREEMENT 6
XIV ENTIRE CONTRACT 6
XV GENERAL TREATY
PROVISIONS 6
SCHEDULES
A TREATY SPECIFICATIONS
EXHIBITS
I ACCIDENTAL DEATH POLICY FORMS
I.1 SAMPLE REPORTING FORM
BULK ADB REINSURANCE AGREEMENT
ARTICLE I
PURPOSE OF AGREEMENT
This agreement between the CEDING COMPANY and BMA will provide the CEDING
COMPANY with reinsurance coverage on specified Accidental Death risks under
a bulk method of reporting.
ARTICLE II
ACCIDENTAL DEATH RISKS REINSURED
1. BMA will provide reinsurance coverage on Accidental Death risk
liability to the CEDING COMPANY when Accidental Death benefits are
written with direct life insurance on Accidental Death benefit policy
form(s) included in Exhibit I.
2. This agreement will provide reinsurance protection on only that
liability caused by Accidental Death benefits included in life policies
and/or an Accidental Death benefit rider attached to life policies as
specified in Schedule A.
3. BMA will participate in 100% of the liability as defined in
Article II, Section 1., when Accidental Death occurs on or subsequent to
the effective date of this Agreement. Liability will terminate when the
CEDING COMPANY's liability terminates or at the age shown in Article II,
Section 5.
4. The CEDING COMPANY shall provide BMA with a copy of their policy
form(s) providing Accidental Death benefits reinsured under this
agreement. The CEDING COMPANY will notify BMA of any changes in
benefits or underwriting practices for Accidental Death benefits covered
under this agreement, prior to binding BMA.
5. The maximum age of Accidental Death Benefit coverage is through
age 70.
ARTICLE III
RESTRICTIONS ON ACCEPTANCE OF LIABILITY
BMA will accept automatically Accidental Death risks, not exceeding
$300,000 on any one life, provided that, to the best of the CEDING
COMPANY's knowledge, the total amount of Accidental Death issued and
applied for on any one life does not exceed $400,000 in all companies.
ARTICLE IV
ACCIDENTAL DEATH REINSURANCE REPORT PROCEDURES
1. Under the bulk method of handling Accidental Death reinsurance
as provided for in this agreement, the CEDING COMPANY shall not be
required to prepare individual reinsurance cessions.
2. Prior to January 10 of each calendar year, the CEDING COMPANY
shall report to BMA the amount of Accidental Death reinsurance in force
under this agreement as of January 1 or December 31 of the year
immediately preceding.
ARTICLE V
ACCIDENTAL DEATH REINSURANCE PREMIUMS AND PROCEDURE
1. The basic annual reinsurance premium rate per $1,000 shall be
$0.50. BMA reserves the right to change this premium rate. However,
should it be necessary to increase the premium beyond a rate which the
CEDING COMPANY considers equitable, the CEDING COMPANY shall have the
option of transferring the Accidental Death reinsurance as provided
under this agreement to a yearly renewable term basis.
2. Upon receipt of the Accidental Death risk exposure report, to be
furnished BMA prior to January 10 of each year, BMA shall examine the
report and send to the CEDING COMPANY a statement showing the amount due
BMA as of the current January 1. In cases where the treaty begins on a
date other than January 1, the premium will be pro-rated in the first
year.
3. Reinsurance premiums due in the first year shall be calculated
based on the following;
a. The per $1,000 rate multiplied by the Accidental Death
reinsurance in force as of January 1 of the current year (December 31 of
preceding year). These are premiums in advance.
In renewal years the following calculation will be added to (a)
above.
b. 50% of the per $1,000 rate multiplied by the increase (+) or
decrease (-) in Accidental Death reinsurance in force from January 1 or
December 31 of the preceding year. These are premiums (or refunds) in
arrears.
4. Upon receipt of the statement from BMA showing reinsurance
premiums due, the CEDING COMPANY shall remit to BMA the amount shown as
due within 20 days of receipt of the statement. If the statement shows
a balance due the CEDING COMPANY, BMA shall remit the amount to the
CEDING COMPANY.
5. Reinsurance rates in effect under this agreement are net rates,
and do not provide for any participation by BMA in premium taxes
incurred by the CEDING COMPANY, nor are such premiums eligible for
experience refunds.
6. The payment of reinsurance premiums in accordance with this
Agreement shall be a condition precedent to the liability of BMA for
reinsurance covered by this Agreement.
ARTICLE VI
OVERSIGHTS
If there is an unintentional oversight or clerical error in the
administration of this Agreement by either the CEDING COMPANY or BMA, it
can be corrected provided the correction takes place promptly after the
time the oversight or clerical error is first discovered. In that
event, the CEDING COMPANY and BMA will be restored to the position they
would have occupied had such oversight or clerical error not occurred.
ARTICLE VII
CLAIMS
1. The CEDING COMPANY shall give BMA prompt notice of any claim.
Copies of the proofs obtained by the CEDING COMPANY together with a
statement showing the amount paid on such claim by the CEDING COMPANY
shall be furnished to BMA at the time payment is requested. Copies of
the policy form under which the Accidental Death Benefit has been paid
shall be provided by the CEDING COMPANY.
2. BMA shall accept the decision of the CEDING COMPANY in settling
the claim and shall pay its portion to the CEDING COMPANY upon receipt
of proof that the CEDING COMPANY has paid the claimant. It is agreed,
however, that if the accidental death claim is more than $50,000, the
CEDING COMPANY shall consult with BMA concerning its investigation
and/or payment of the claim, although the final decision shall be that
of the CEDING COMPANY.
3. The CEDING COMPANY shall notify BMA of its intention to contest,
compromise, or litigate a claim involving reinsurance, and BMA shall pay
its share of the payment and specific claim expenses therein involved,
unless it declines to be a party to the contest, compromise, or
litigation in which case it shall pay the full amount of the reinsurance
to the CEDING COMPANY. "Claim expenses" shall be deemed to mean only
the reasonable legal and investigative expenses connected with the
litigation or settlement of claims. "Claim expenses" shall not include
expenses incurred in connection with a dispute or contest arising out of
conflicting claims of entitlement to policy proceeds which the CEDING
COMPANY admits are payable or any routine claim administrative expenses,
Home Office or otherwise.
4. It is understood and agreed that the payment of a death claim by
BMA shall be made in one sum regardless of the mode of settlement under
the policy of the CEDING COMPANY.
5. In no event shall BMA have any liability for any
Extra-Contractual damages which are assessed against the CEDING COMPANY
as a result of acts, omissions or course of conduct committed by the
CEDING COMPANY or its agents, other than a good faith decision to deny
claim liability, in connection with insurance reinsured under this
Agreement. It is recognized that there may be special circumstances
involved which indicate that BMA should participate in certain assessed
damages. These circumstances are not amenable to advance specific
definition, but could include those situations in which BMA was an
active party in the act, omission or course of conduct which ultimately
results in the assessment of such damages. The extent of such
participation will be determined on a good faith assessment of
culpability in each case, but all factors being equal, the division of
any such assessment will generally be in the proportion of net liability
borne by each party.
ARTICLE VIII
TAX CREDITS
In jurisdictions which impose premium taxes without deduction for
reinsurance, the CEDING COMPANY shall be responsible for any taxes which
must be paid. BMA shall not reimburse premium taxes paid by the CEDING
COMPANY.
ARTICLE IX
DEFERRED ACQUISITION COSTS TAX
The CEDING COMPANY and BMA elect under Regulation 1.848-2(g) (8) to
compute "specified policy acquisition expense", as defined in section
848(c) of the Internal Revenue Code, in the following manner:
The party with net positive consideration as determined under Reg.
1.848-2(f) and Reg. 1.848-3 shall compute specified policy acquisition
expenses without regard to the general deductions limitation of section
848(c)(1) for each taxable year.
The parties will exchange information pertaining to the aggretage amount
of net consideration as determined under Regs. 1.848-2(f) and 1.848-3,
for all reinsurance agreements in force between them, to insure
consistency for the purposes of computing specified policy acquisition
expense. BMA shall provide the CEDING COMPANY with the amount of such
net consideration for each taxable year no later than May 1 following
the end of such year. The CEDING COMPANY shall advise BMA if it
disagreems with the amounts provided, and the parties agree to amicably
resolve any difference. The amounts provided by BMA shall be presumed
correct if it does not receive a response from the CEDING COMPANY by May
31.
BMA represents and warrants that it is subject to U.S. taxation under
Subchapter L of the Internal Revenue Code.
ARTICLE X
INSPECTION OF RECORDS
BMA shall have the right, at any reasonable time, to inspect at the
office of the CEDING COMPANY, all books and documents which relate to
reinsurance under this Agreement.
ARTICLE XI
INSOLVENCY
1. In the event of insolvency of the CEDING COMPANY, all
reinsurance shall be payable by BMA directly to the CEDING COMPANY or
its liquidator, receiver, or statutory successor, on the basis of the
liability of the CEDING COMPANY under the policy or policies reinsured,
without diminution because of the insolvency of the CEDING COMPANY.
2. It is agreed that the liquidator, receiver, or statutory
successor of the insolvent CEDING COMPANY shall give written notice to
BMA of the pending of a claim against the insolvent CEDING COMPANY on
any policy reinsured within a reasonable time after such claim is filed
in the insolvency proceedings. During the pendency of any such claim
BMA may investigate such claim and interpose, in the proceeding where
such claim is to be adjudicated, any defense or defenses which BMA may
deem available to the CEDING COMPANY or its liquidator, receiver, or
statutory successor. The expense thus incurred by BMA shall be
chargeable, subject to court approval, against the insolvent CEDING
COMPANY as part of the expense of liquidation to the extent of a
proportionate share of the benefit which may accrue to the CEDING
COMPANY solely as a result of the defense undertaken by BMA.
3. Where two or more reinsurers are participating in the same claim
and a majority in interest elect to interpose a defense to such claim,
the expense shall be apportioned in accordance with the terms of the
Agreement as though such expenses had been incurred by the CEDING
COMPANY.
4. Any debts or credits, matured or unmatured, liquidated or
unliquidated, in favor of or against either the CEDING COMPANY or BMA
with respect to this agreement or with respect to any other claim of one
party against the other are deemed mutual debts or credits, as the case
may be, and shall be set off, and only the balance shall be allowed or
paid.
ARTICLE XII
ARBITRATION
1. It is the intention of the CEDING COMPANY and BMA that the
customs and practices of the insurance and reinsurance industry shall be
given full effect in the operation and interpretation of this Agreement.
The parties agree to act in all things with the highest good faith.
However, if BMA and the CEDING COMPANY cannot mutually resolve a dispute
or claim which arises out of or relates to this agreement, the dispute
or claim shall be settled through arbitration.
2. The arbitrators shall be impartial regarding the dispute, and
shall base their decision on the terms and conditions of this agreement
plus, as necessary, on the customs and practices of the insurance and
reinsurance industry.
3. There shall be three arbitrators who must be officers of life
insurance companies other than the parties to this agreement or their
subsidiaries. Each of the parties to this agreement shall appoint one
of the arbitrators and these two arbitrators shall select the third. If
a party to this agreement fails to appoint an arbitrator within thirty
(30) days after the other party to this agreement has given notice of
the arbitrator appointment, the American Arbitration Association shall
appoint an arbitrator for the party to this Agreement that has failed to
do so. Should the two arbitrators be unable to agree on the choice of
the third, then the appointment of this arbitrator is left to the
American Arbitration Association.
4. Except for the appointment of arbitrators in accordance with the
provisions of Section 3 of the Article, arbitration shall be conducted
in accordance with the Commercial Arbitration Rules of the American
Arbitration Association which are in effect on the date of delivery of
demenad for arbitration. Arbitration shall be conducted in Kansas City,
Missouri.
5. Each party to this agreement shall pay part of the arbitration
expenses which are apportioned to it by the arbitrators.
6. The award agreed by the arbitrators shall be final, and
judgement may be entered upon it in any court having jurisdiction.
ARTICLE XIII
PARTIES TO AGREEMENT
This is an agreement for indemnity reinsurance solely between the CEDING
COMPANY and BMA. The acceptance of reinsurance under this Agreement
shall not create any right or legal relation whatever between BMA and
the insured, owner, or any other party to or under any policy reinsured
under this Agreement.
ARTICLE XIV
ENTIRE CONTRACT
1. This agreement shall constitute the entire agreement between the
parties with respect to business being reinsured hereunder and that
there are no understandings between the parties other other than those
expressed in the agreement.
2. Any change or modification to this agreement shall be null and
void unless made by addendum to this agreement signed by both parties.
ARTICLE XV
GENERAL TREATY PROVISIONS
1. This Agreement may be terminated at any time by either party
giving at least ninety(90) days written notice of termination. The day
the notice is deposited in the mail addressed to the Home Office, or to
an Officer of either company shall be the first day of the ninety-day
(90) period.
2. THE EFFECTIVE DATE of this treaty shall be September 1, 1998.
IN WITNESS WHEREOF, this agreement shall be effective with policies
dated 12:01 A.M. September 1, 1998 and is hereby executed in duplicate
between
FIRST LIFE AMERICA CORPORATION
Topeka, Kansas
referred to as the CEDING COMPANY
and
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
Kansas City, Missouri
referred to as BMA,
and duly signed by both parites' respective officers as follows:
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES
CEDING COMPANY
__________________________
Rick D. Meyer, President
__________________________
Chris J. Haas, Secretary
9/2/98
___________________
BMA
__________________________
Senior Vice President/Reinsurance
__________________________
Vice President Reinsurance Actuary
10/6/98
___________________
March 24, 1999
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, DC 20549
We have read Item 3 of Form 10-SB for the year ended December 31, 1998 of First
American Capital Corporation and are in agreement with the statements contained
in the first paragraph. We have no basis to agree or disagree with other
statements of the registrant therein.
/s/ Ernst & Young LLP
Louisville, Kentucky
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