<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
SCHEDULE 13E-3
RULE 13-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
(NAME OF ISSUER)
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
FIRST COMMAND FINANCIAL CORPORATION
LAMAR C. SMITH
JAMES N. LANIER
HOWARD M. CRUMP
HAL N. CRAIG
DONALDSON D. FRIZZELL
JERRY D. GRAY
DAVID P. THORESON
CARROLL H. PAYNE II
NAOMI K. PAYNE
(NAME OF PERSON(S) FILING STATEMENT)
CLASS B NONVOTING COMMON STOCK, $0.02 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
NOT APPLICABLE
(CUSIP NUMBER OF CLASS OF SECURITIES)
LAMAR C. SMITH
CHAIRMAN OF THE BOARD
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
4100 SOUTH HULEN STREET
FORT WORTH, TEXAS 76109
(817) 731-8621
WITH A COPY TO:
ROBERT F. WATSON BRIAN D. BARNARD
CORPORATE COUNSEL HAYNES AND BOONE, LLP
INDEPENDENT RESEARCH AGENCY 201 Main Street
FOR LIFE INSURANCE, INC. Suite 2200
4100 South Hulen Street Fort Worth, Texas 76102
Fort Worth, Texas 76109 (817) 347-6600
(817) 731-8621
(NAME, ADDRESSES AND TELEPHONE NUMBERS OF PERSONS AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF PERSON(s) FILING STATEMENT)
This statement is filed in connection with (check the appropriate box):
a. /X/ The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the
Securities Exchange Act of 1934.
b. / / The filing of a registration statement under the Securities Act of
1933.
c. / / A tender offer.
d. / / None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: /X/
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TRANSACTION VALUATION AMOUNT OF FILING FEE
- -------------------------------------------------------------------------------
<S> <C>
$26,756,929.92 (1) $5,351.38 (1)
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
(1) The filing fee is calculated pursuant to Section 13(e)(3) of the Securities
Exchange Act of 1934.
/X/ Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: $5,351.38.
Form or Registration No.: Schedule 14A.
Filing Party: Independent Research Agency for Life Insurance, Inc.
Date Filed: July 6, 1998.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
INTRODUCTION
This Rule 13e-3 Transaction Statement on Schedule 13E-3 is being filed
by Independent Research Agency for Life Insurance, Inc., a Texas corporation
(the "Company"), First Command Financial Corporation, a Texas corporation
("First Command"), Lamar C. Smith, James N. Lanier, Howard M. Crump, Hal N.
Craig, Donaldson D. Frizzell, Jerry D. Gray, David P. Thoreson, Carroll H.
Payne II, Naomi K. Payne (such individuals collectively referred to as the
"Management Group") in connection with the proposed merger (the "Merger") of
the Company with and into First Command pursuant to an Agreement and Plan of
Merger, dated as of July 1, 1998, (the "Merger Agreement"), by and between
the Company and First Command.
The Merger Agreement provides for the merger of the Company with and into
First Command, with First Command being the surviving corporation (the
"Surviving Corporation"). Upon the terms and conditions set forth in the Merger
Agreement, upon the Effective Time(as defined in the Proxy Statement), each
share of Class A Voting Common Stock, par value $0.10 per share ("Class A
Stock"), of the Company issued and outstanding immediately prior to the
Effective Time (as defined below) (other than shares of Class A Stock held in
treasury by the Company), subject to and upon the terms and conditions of the
Merger Agreement, will be converted into five shares of Voting Common Stock, par
value $0.01 per share ("Surviving Corporation Voting Stock"), of the Surviving
Corporation (the "Class A Consideration"). Further, (i) each share of Class B
Non-Voting Common Stock, par value $0.02 per share ("Class B Stock"), held by a
holder of Class B Stock (a "Class B Shareholder") that is not a holder of Class
A Stock, issued and outstanding immediately prior to the Effective Time, subject
to and upon the terms and conditions of the Merger Agreement, will be converted
into the right to receive $28.24 in cash, without interest (the "Class B Cash
Consideration"), and (ii) each share of Class B Stock held by a Class B
Shareholder that is also a holder of Class A Stock (a "Class A/B Shareholder"),
issued and outstanding immediately prior to the Effective Time, subject to and
upon the terms and conditions of the Merger Agreement, will be converted into
one share of Nonvoting Common Stock, par value $0.01 per share ("Surviving
Corporation Nonvoting Stock"), of the Surviving Corporation (the "Class B
Nonvoting Stock Consideration," and, together with the Class B Cash
Consideration, the "Class B Consideration"); provided, however that each Class
A/B Shareholder can elect to receive in lieu of receiving the Class B Nonvoting
Stock Consideration the Class B Cash Consideration for all shares of Class B
Stock held thereby immediately prior to the Effective Time. Each holder of
Common Stock, $0.10 par value per share, of First Command ("First Command Common
Stock"), issued and outstanding immediately prior to the Effective Time, subject
to and upon the terms and conditions of the Merger Agreement, will receive one
share of Surviving Corporation Nonvoting Stock for each 25 shares of First
Command Common Stock held by such shareholder.
This Schedule 13E-3 is being filed with the Securities and Exchange
Commission concurrently with the Preliminary Proxy Statement relating to the
solicitation of proxies for the Special Meeting of Shareholders of IRA. A copy
of the Proxy Statement is attached hereto as Exhibit (d). The following
cross reference sheet is being supplied pursuant to General Instruction F to
Schedule 13E-3 and shows the location in the Proxy Statement of the information
required to be included in this Schedule 13E-3. The information contained in
the Proxy Statement, including all the annexes thereto, is expressly
incorporated herein by reference and the responses to each item are qualified in
their entirety by reference to the information contained in the Proxy Statement
and the annexes thereto. Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to such terms in the Proxy
Statement.
<TABLE>
<CAPTION>
ITEM NUMBER AND
CAPTION IN SCHEDULE 13e-3 LOCATION IN THE PROXY STATEMENT
<S> <C>
1. ISSUER AND CLASS OF
SECURITY SUBJECT TO THE
TRANSACTION
(a)........................ "SUMMARY OF PROXY STATEMENT" and "CERTAIN
INFORMATION CONCERNING IRA."
(b)........................ "SUMMARY OF PROXY STATEMENT" and "THE
SPECIAL MEETING--Record Date."
(c)........................ "SUMMARY OF PROXY STATEMENT" and "MARKET
PRICE DATA, DISTRIBUTIONS AND SECURITY
OWNERSHIP OF IRA COMMON STOCK."
2
<PAGE>
(d)........................ "MARKET PRICE DATA, DISTRIBUTIONS AND
SECURITY OWNERSHIP OF IRA COMMON
STOCK--Distribution History" and "SPECIAL
FACTORS--Certain Effects of the Merger;
Plans for the Company after the Merger."
(e)........................ Not Applicable.
(f)........................ "SPECIAL FACTORS--Certain Transactions in
IRA Common Stock."
2. IDENTITY AND BACKGROUND.... "SUMMARY OF PROXY STATEMENT," "CERTAIN
INFORMATION CONCERNING IRA," "CERTAIN
INFORMATION CONCERNING FIRST COMMAND" and
"CERTAIN INFORMATION CONCERNING THE
MANAGEMENT GROUP."
3. PAST CONTACTS, TRANSACTIONS
OR NEGOTIATIONS
(a) and (b)................ "CERTAIN INFORMATION CONCERNING IRA,"
"CERTAIN INFORMATION CONCERNING FIRST
COMMAND," "CERTAIN INFORMATION CONCERNING
THE MANAGEMENT GROUP" "SPECIAL FACTORS--
Background of the Merger," "SPECIAL FACTORS--
Interests of Certain Persons in the Merger" and
"THE PROPOSED MERGER."
4. TERMS OF THE TRANSACTION
(a)........................ "SUMMARY OF PROXY STATEMENT," "SPECIAL
FACTORS" and "THE PROPOSED MERGER."
(b)........................ "SUMMARY OF THE PROXY STATEMENT," "SPECIAL
FACTORS--Background of the Merger" and "THE
PROPOSED MERGER--Conversion of Shares."
5. PLANS OR PROPOSALS OF THE
ISSUER OR AFFILIATE
(a) - (g).................. "CERTAIN INFORMATION CONCERNING
IRA--Directors and Executive Officers of
IRA," "SPECIAL FACTORS--Background of the
Merger," "SPECIAL FACTORS--Purpose and
Structure of the Merger," "SPECIAL
FACTORS--Certain Effects of the Merger;
Plans for the Company after the Merger,"
"MARKET PRICE DATA, DISTRIBUTIONS AND
SECURITY OWNERSHIP OF IRA COMMON STOCK" and
"MARKET PRICE DATA, DISTRIBUTIONS AND
SECURITY OWNERSHIP OF FIRST COMMAND COMMON
STOCK."
6. SOURCE AND AMOUNTS OF FUNDS
OR OTHER CONSIDERATION
(a) - (c).................. "SPECIAL FACTORS--Source and Amount of
Funds" and "THE PROPOSED MERGER--The Merger
Agreement--Expenses."
(d)........................ Not Applicable.
3
<PAGE>
7. PURPOSE(S), ALTERNATIVES,
REASONS AND EFFECTS
(a) - (d).................. "SPECIAL FACTORS--Background of the Merger,"
"SPECIAL FACTORS--Purpose and Structure of
the Merger," "SPECIAL FACTORS--Interests of
Certain Persons in the Merger," "SPECIAL
FACTORS--Recommendation of the IRA
Board and the Special Committee; Fairness of
the Merger," "SPECIAL FACTORS--Position of
the Management Group and First Command as to
the Fairness of the Merger," "SPECIAL
FACTORS--Opinion of the Financial Advisor,"
"SPECIAL FACTORS--Certain Effects of the
Merger; Plans for the Company after the
Merger," "SPECIAL FACTORS--Certain Federal
Income Tax Considerations," "SPECIAL
FACTORS--Accounting Treatment" and "THE
PROPOSED MERGER--Conversion of Shares."
8. FAIRNESS OF THE TRANSACTION
(a) - (e).................. "THE SPECIAL MEETING--Votes Required; Voting
Rights," "SPECIAL FACTORS--Background of the
Merger," "SPECIAL FACTORS--Purpose and
Structure of the Merger," "SPECIAL
FACTORS--Certain Effects of the Merger;
Plans for the Company after the Merger,"
"SPECIAL FACTORS--Recommendation of the IRA
Board and the Special Committee; Fairness
of the Merger," "SPECIAL FACTORS--Position of
the Management Group and First Command as to
the Fairness of the Merger," "SPECIAL
FACTORS--Opinion of the Financial Advisor"
and Annex B to the Proxy Statement.
(f)........................ Not Applicable.
9. REPORTS, OPINIONS,
APPRAISALS AND CERTAIN
NEGOTIATIONS
(a) - (c).................. "SPECIAL FACTORS--Background of the Merger,"
"SPECIAL FACTORS--Recommendation of the IRA
Board and the Special Committee; Fairness
of the Merger," "SPECIAL FACTORS--Position of
the Management Group and First Command as to
the Fairness of the Merger," "SPECIAL
FACTORS--Opinion of the Financial Advisor,"
"SPECIAL FACTORS--Certain Federal Income Tax
Considerations," Annex B to the Proxy
Statement and Annex F to the Proxy
Statement.
10. INTEREST IN SECURITIES OF
THE ISSUER
(a) and (b)................ "MARKET PRICE DATA, DISTRIBUTIONS AND
SECURITY OWNERSHIP OF IRA COMMON STOCK" and
"SPECIAL FACTORS--Certain Transactions in
IRA Common Stock."
11. CONTRACTS, ARRANGEMENTS OR "SUMMARY OF PROXY STATEMENT," "SPECIAL
UNDERSTANDINGS WITH RESPECT FACTORS--Background of the Merger," "SPECIAL
TO THE ISSUER'S SECURITIES FACTORS--Contracts with Respect to Surviving
Corporation Common Stock," "THE PROPOSED
MERGER--Conversion of Shares," "THE PROPOSED
MERGER--The Merger Agreement--Conditions to
the Merger" and "THE SPECIAL MEETING--Votes
Required; Voting Rights."
4
<PAGE>
12. PRESENT INTENTION AND
RECOMMENDATION OF CERTAIN
PERSONS WITH REGARD TO THE
TRANSACTION
(a) and (b)................ "SUMMARY OF PROXY STATEMENT," "SPECIAL
FACTORS--Interests of Certain Persons in the
Merger" and "THE SPECIAL MEETING--Votes
Required; Voting Rights."
13. OTHER PROVISIONS OF THE
TRANSACTION
(a)........................ "SUMMARY OF PROXY STATEMENT," "THE SPECIAL
MEETING--Dissenters' Rights" and "THE
PROPOSED MERGER--Rights of Dissenting
Shareholders."
(b)........................ Not Applicable.
(c)........................ Not Applicable.
14. FINANCIAL INFORMATION
(a)........................ "SELECTED FINANCIAL DATA OF IRA" and Annex
D to the Proxy Statement.
(b)........................ "SUMMARY PRO FORMA DATA"and "PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF IRA."
15. PERSONS AND ASSETS
EMPLOYED, RETAINED OR
UTILIZED
(a) and (b)................ "SPECIAL FACTORS--Interests of Certain
Persons in the Merger," "THE PROPOSED
MERGER--The Merger Agreement--Employee
Benefits," "THE PROPOSED MERGER--The Merger
Agreement--Expenses," "SPECIAL
FACTORS--Opinion of the Financial Advisor"
and "THE SPECIAL MEETING--Solicitation of
Proxies."
16. ADDITIONAL INFORMATION..... Additional information concerning the Merger
is set forth in the Preliminary Proxy
Statement attached hereto as Exhibit (d),
which information is incorporated herein by
reference in its entirety.
17. MATERIAL TO BE FILED AS Separately included herewith.
EXHIBITS ..................
</TABLE>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION
(a) The information set forth in "SUMMARY OF PROXY STATEMENT" and
"CERTAIN INFORMATION CONCERNING IRA" in the Proxy Statement is hereby
incorporated herein by reference.
(b) The information set forth in "SUMMARY OF PROXY STATEMENT" and
"THE SPECIAL MEETING--Record Date" in the Proxy Statement is hereby incorporated
herein by reference.
5
<PAGE>
(c) The information set forth in "SUMMARY OF PROXY STATEMENT" and
"MARKET PRICE DATA, DISTRIBUTIONS AND SECURITY OWNERSHIP OF IRA COMMON STOCK" in
the Proxy Statement is hereby incorporated herein by reference.
(d) The information set forth in "MARKET PRICE DATA, DISTRIBUTIONS
AND SECURITY OWNERSHIP OF IRA COMMON STOCK--Distribution History" and "SPECIAL
FACTORS--Certain Effects of the Merger; Plans for the Company after the Merger"
in the Proxy Statement is hereby incorporated herein by reference.
(e) Not Applicable.
(f) The information set forth in "SPECIAL FACTORS--Certain
Transactions in IRA Common Stock" in the Proxy Statement is hereby incorporated
herein by reference.
ITEM 2. IDENTITY AND BACKGROUND
(a) - (d) and (g) This Statement is being filed by the Company and
First Command and the Management Group as affiliates of the Company. The
Company is the issuer of the Class B Stock which is the subject of the Rule
13e-3 transaction. The information set forth in "SUMMARY OF PROXY
STATEMENT," "CERTAIN INFORMATION CONCERNING IRA," "CERTAIN INFORMATION
CONCERNING FIRST COMMAND" and "CERTAIN INFORMATION CONCERNING THE MANAGEMENT
GROUP" in the Proxy Statement is hereby incorporated herein by reference.
(e) - (f) During the last five years, none of the Company, First
Command, the executive officers and directors of the Company and First Command
or the Management Group has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) nor has any of the Company, First
Command, the executive officers and directors of the Company and First
Command or the Management Group been party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order
enjoining further violations of, or prohibiting activities, subject to,
federal or state securities laws or finding any violations of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a) and (b) The information set forth in "CERTAIN INFORMATION
CONCERNING IRA," "CERTAIN INFORMATION CONCERNING FIRST COMMAND," "CERTAIN
INFORMATION CONCERNING THE MANAGEMENT GROUP," "SPECIAL FACTORS--Background of
the Merger," "SPECIAL FACTORS--Interests of Certain Persons in the Merger"
and "THE PROPOSED MERGER" in the Proxy Statement is hereby incorporated
herein by reference.
ITEM 4. TERMS OF THE TRANSACTION
(a) The information set forth in "SUMMARY OF PROXY STATEMENT,"
"SPECIAL FACTORS" and "THE PROPOSED MERGER" in the Proxy Statement is hereby
incorporated herein by reference.
(b) The information set forth in "SUMMARY OF PROXY STATEMENT,"
"SPECIAL FACTORS--Background of the Merger" and "THE PROPOSED MERGER--Conversion
of Shares" in the Proxy Statement is hereby incorporated herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE
(a) - (g) The information set forth in "CERTAIN INFORMATION CONCERNING
IRA--Directors and Executive Officers of IRA," "SPECIAL FACTORS--Background of
the Merger," "SPECIAL FACTORS--Purpose and Structure of the Merger," "SPECIAL
FACTORS--Certain Effects of the Merger; Plans for the Company after the Merger,"
"MARKET PRICE DATA, DISTRIBUTIONS AND SECURITY OWNERSHIP OF IRA COMMON STOCK"
and "MARKET PRICE DATA, DISTRIBUTIONS AND SECURITY OWNERSHIP OF FIRST COMMAND
COMMON STOCK" in the Proxy Statement is hereby incorporated herein by reference.
6
<PAGE>
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
(a) - (c) The information set forth in "SPECIAL FACTORS--Source and
Amount of Funds" and "THE PROPOSED MERGER--The Merger Agreement--Expenses" in
the Proxy Statement is hereby incorporated herein by reference.
(d) Not applicable.
ITEM 7. PURPOSE(s), ALTERNATIVES, REASONS AND EFFECTS.
(a) - (d) The information set forth in "SPECIAL FACTORS--Background of
the Merger," "SPECIAL FACTORS--Purpose and Structure of the Merger," "SPECIAL
FACTORS--Interests of Certain Persons in the Merger," "SPECIAL
FACTORS--Recommendation of the IRA Board and the Special Committee; Fairness
of the Merger," "SPECIAL FACTORS--Position of the Management Group and First
Command as to the Fairness of the Merger," "SPECIAL FACTORS--Opinion of the
Financial Advisor," "SPECIAL FACTORS--Certain Effects of the Merger; Plans
for the Company after the Merger," "SPECIAL FACTORS--Certain Federal Income
Tax Considerations," "SPECIAL FACTORS--Accounting Treatment" and "THE
PROPOSED MERGER--Conversion of Shares" in the Proxy Statement is hereby
incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a) - (e) The information set forth in "THE SPECIAL MEETING--Votes
Required; Voting Rights," "SPECIAL FACTORS--Background of the Merger,"
"SPECIAL FACTORS--Purpose and Structure of the Merger," "SPECIAL
FACTORS--Certain Effects of the Merger; Plans for the Company after the
Merger," "SPECIAL FACTORS--Recommendation of the IRA Board and the Special
Committee; Fairness of the Merger," "SPECIAL FACTORS--Position of the
Management Group and First Command as to the Fairness of the Merger,"
"SPECIAL FACTORS--Opinion of the Financial Advisor" in the Proxy Statement
and Annex B to the Proxy Statement is hereby incorporated by reference.
(f) Not Applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) - (c) The information set forth in "SPECIAL FACTORS--Background of
the Merger," "SPECIAL FACTORS--Recommendation of the IRA Board and the
Special Committee; Fairness of the Merger," "SPECIAL FACTORS--Position of the
Management Group and First Command as to the Fairness of the Merger,"
"SPECIAL FACTORS--Opinion of the Financial Advisor" and "SPECIAL
FACTORS--Certain Federal Income Tax Considerations" in the Proxy Statement
and in Annex B and Annex F to the Proxy Statement is hereby incorporated
herein by reference.
A copy of the Financial Advisor Opinion is attached as Annex B to the
Proxy Statement, and a copy of the Tax Opinion of Ernst & Young LLP is
attached as Annex F to the Proxy Statement.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) and (b) "MARKET PRICE DATA, DISTRIBUTIONS AND SECURITY OWNERSHIP OF
IRA COMMON STOCK" and "SPECIAL FACTORS--Certain Transactions in IRA Common
Stock" in the Proxy Statement is hereby incorporated herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE
ISSUER'S SECURITIES.
The information set forth in "SUMMARY OF PROXY STATEMENT," "SPECIAL
FACTORS--Background of the Merger," "SPECIAL FACTORS--Contracts with Respect to
Surviving Corporation Common Stock," "THE PROPOSED MERGER--Conversion of
Shares," "THE PROPOSED MERGER--The Merger Agreement--Conditions to the Merger"
and "THE SPECIAL MEETING--Votes Required; Voting Rights" in the Proxy Statement
is hereby incorporated herein by reference.
7
<PAGE>
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH
REGARD TO THE TRANSACTION.
(a) and (b) The information set forth "SUMMARY OF PROXY STATEMENT,"
"SPECIAL FACTORS--Interests of Certain Persons in the Merger" and "THE SPECIAL
MEETING--Votes Required; Voting Rights" in the Proxy Statement is hereby
incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in "SUMMARY OF PROXY STATEMENT," "THE
SPECIAL MEETING--Dissenters' Rights" and "THE PROPOSED MERGER--Rights of
Dissenting Shareholders" in the Proxy Statement is hereby incorporated by
reference.
(b) Not Applicable.
(c) Not Applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The information set forth in "SELECTED FINANCIAL DATA OF IRA"
in the Proxy Statement and in Annex D to the Proxy Statement is hereby
incorporated herein by reference.
(b) The information set forth in "SUMMARY PRO FORMA DATA" and "PRO
FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF IRA" in the Proxy Statement
is hereby incorporated herein by reference.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) and (b) The information set forth in "SPECIAL FACTORS--Interests of
Certain Persons in the Merger," "THE PROPOSED MERGER--The Merger
Agreement--Employee Benefits," "THE PROPOSED MERGER--The Merger
Agreement--Expenses," "SPECIAL FACTORS--Opinion of the Financial Advisor" and
"THE SPECIAL MEETING--Solicitation of Proxies" in the Proxy Statement is hereby
incorporated herein by reference.
ITEM 16. ADDITIONAL INFORMATION.
Additional information concerning the Merger is set forth in the
Preliminary Proxy Statement attached hereto as Exhibit (d), which information is
incorporated herein by reference in its entirety.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) Commitment Letter of Norwest Bank Texas N.A. filed as Exhibit
99(a) to the Schedule 13E-3 filed on July 6, 1998, and incorporated by
reference herein.
(b)(1) Opinion of PricewaterhouseCoopers LLP (the "IRA Financial
Advisor"), financial advisor to the Special Committee of the Board of Directors
of IRA included as Annex B in the Proxy Statement is hereby incorporated by
reference.
(b)(2) Discussion materials prepared by the IRA Financial Advisor for
the Board of Directors of IRA filed as Exhibit 99(b)(2) to the Schedule 13E-3
filed on July 6, 1998, and incorporated by reference herein.
(b)(3) Tax Opinion of Ernst & Young LLP included as Annex F to the
Proxy Statement is hereby incorporated by reference.
(b)(4) Report prepared by Ernst & Young LLP for the Company filed
as Exhibit 99(b)(4) to Amendment No. 1 to the Schedule 13E-3 filed on August
26, 1998, and incorporated by reference herein.
(b)(5) Special Committee Package prepared by the IRA Financial
Advisor for the Special Committee.
(b)(6) Mission Accomplishment Plan Summary; Form of Mission
Accomplishment Plan Agreement for a Select Group of Agents; Form of Mission
Accomplishment Plan Agreement for a Select Group of Management; Form of
Mission Accomplishment Plan for a Select Group of Highly Compensated
Employees; USPA&IRA Mission Accomplishment Plans Board Grant Declaration and
Administrative Policies; Mission Accomplishment Plan for a Select Group of
Management; USPA&IRA Mission Accomplishment Plans Board Grant Declaration and
Administrative Policies; Mission Accomplishment Plan for Agents; Mission
Accomplishment Plan for a Select Group of Key Employees; and Mission
Accomplishment Plan for a Select Group of Highly Compensated Employees,
provided by the Company to the Financial Advisor.
(b)(7) List of Class A Shareholders and Class B Shareholders, as of
March 31, 1998, provided by the Company to the Financial Advisor.
(b)(8) Charts of Proposed Plan of Merger, the Current Structure and
Structure after the Merger, provided by the Company to the Financial Advisor.
(b)(9) List of Regional Agents and District Agents, as of August 1,
1998, provided by the Company to the Financial Advisor.
(b)(10) Home Office Organization Charts, as of March 5, 1998, provided
by the Company to the Financial Advisor.
(b)(11) Treasury Transactions from September 30, 1998, through July
31, 1998, provided by the Company to the Financial Advisor.
(b)(12) Plaintiff's Amended Motion for Summary Judgment, INDEPENDENT
RESEARCH AGENCY FOR LIFE INSURANCE, INC. V. HUGENBERG, filed May 3, 1991,
provided by the Company to the Financial Advisor.
(b)(13) Brief in Support of Amended Motion for Summary Judgment,
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC. V. HUGENBERG, filed May
3, 1991, provided by the Company to the Financial Advisor.
(b)(14) Affidavit of Sam F. Rhodes, INDEPENDENT RESEARCH AGENCY FOR
LIFE INSURANCE, INC. V. HUGENBERG, dated February 18, 1991, provided by the
Company to the Financial Advisor.
(b)(15) Corrected Brief for Appellee, INDEPENDENT RESEARCH AGENCY FOR
LIFE INSURANCE, INC. V. HUGENBERG, filed October 9, 1991, provided by the
Company to the Financial Advisor.
(b)(16) Form of Registered Representative/Agent Agreement, provided by
the Company to the Financial Advisor.
(b)(17) General Agent Agreement, between All American Life and
Casualty Company and Independent Research Agency for Life Insurance, dated
January 1, 1979, provided by the Company to the Financial Advisor.
(b)(18) General Agency Contract, between Liberty National Life
Insurance Company and Independent Research Agency for Life Insurance, Inc.,
effective October 1, 1981, provided by the Company to the Financial Advisor.
(b)(19) General Agency Contract, between Global Life Insurance Company
and Independent Research Agency for Life Insurance, Inc., dated February 7,
1997, provided by the Company to the Financial Advisor.
(b)(20) Managing General Agent's Contract, between Monumental Life
Insurance Company and Independent Research Agency for Life Insurance, dated
April 11, 1979, provided by the Company to the Financial Advisor.
(b)(21) General Agent's Agreement, between North American Company for
Life and Health Insurance and Independent Research Agency, dated January 1,
1971, provided by the Company to the Financial Advisor.
(b)(22) General Agent's Agreement, between The Old Line Life Insurance
Company of America and Carroll H. Payne, dated July 31, 1972, provided by the
Company to the Financial Advisor.
(b)(23) Prospective Operating Information, Summary of Cash Flow
Analysis and Balance Sheet Data from 1998 through 2009, and Summary of
Shareholder Cash Flows, provided by the Company to the Financial Advisor.
(b)(24) Dealer Agreement concerning Fidelity Systematic Investment
Plans: Destiny Plans I and Destiny Plans II, provided by the Company to the
Financial Advisor.
(b)(25) Dealer's Agreement, between A I M Distributors, Inc. and
United Services Planning Association, Inc., dated October 15, 1982, provided
by the Company to the Financial Advisor.
(b)(26) Dealer's Sales Agreement, between The Pioneer Group, Inc. and
United Services Planning Association, Inc., dated August 1, 1979, provided by
the Company to the Financial Advisor.
(b)(27) List of Directors and Officers of Independent Research Agency
for Life Insurance, Inc., as of May 8, 1998, provided by the Company to the
Financial Advisor.
(b)(28) Biographical Information of Members of the Board of
Independent Research Agency for Life Insurance, Inc., provided by the Company
to the Financial Advisor.
(b)(29) USPA&IRA Mission Statement, provided by the Company to the
Financial Advisor.
(b)(30) History of USPA&IRA, provided by the Company to the Financial
Advisor.
(b)(31) Top Agent Producers in 1997 and 1996, provided by the Company
to the Financial Advisor.
(b)(32) List of Property of Independent Research Agency for Life
Insurance, Inc., provided by the Company to the Financial Advisor.
(b)(33) Independent Research Agency for Life Insurance, Inc. Schedule
of Discretionary or Nonrecurring Items Included in the State of Operations,
for the Five Years Ended September 30, 1997, provided by the Company to the
Financial Advisor.
(b)(34) Form of Class B Stock Agreement, provided by the Company to
the Financial Advisor.
(b)(35) Payne Family Stock Agreement, between Independent Research
Agency for Life Insurance, Inc., Carroll H. Payne, Freda J. Payne, Debra S.
Payne, Carroll H. Payne II and Naomi K. Payne, dated March 22, 1983, provided
by the Company to the Financial Advisor.
(b)(36) Class A Stock Agreement, between Independent Research Agency
for Life Insurance, Inc. and Margaret L. Galda, dated December 5, 1997,
provided by the Company to the Financial Advisor.
(b)(37) Articles of Incorporation of Independent Research Agency for
Life Insurance, Inc., as amended, provided by the Company to the Financial
Advisor.
(b)(38) Bylaws of Independent Research Agency for Life Insurance,
Inc., as amended December 5, 1996, provided by the Company to the Financial
Advisor.
(b)(39) Internal Financial Information of USPA&IRA, from 1992 through
1997, provided by the Company to the Financial Advisor.
(b)(40) Independent Research Agency for Life Insurance, Inc. Class B
Stock Appreciation Schedule, from Fiscal Year 1990 Through Fiscal Year 1997,
provided by the Company to the Financial Advisor.
(b)(41) Market and Industry Data, provided by the Company to the
Financial Advisor. INSERT 11A
(c)(1) Agreement and Plan of Merger, dated as of July 1, 1998, between
Independent Research Agency for Life Insurance, Inc. and First Command Financial
Corporation, included as Annex A in the Proxy Statement is hereby incorporated
by reference.
8
<PAGE>
(c)(2) Form of Shareholders' Agreement to be entered into among
Surviving Corporation Shareholders and Surviving Corporation filed as Exhibit
99(c)(2) to the Schedule 13E-3 filed on July 6, 1998, and incorporated by
reference herein.
(c)(3) Form of Articles of Incorporation of the Surviving Corporation,
as proposed to be amended, included as Annex E to the Proxy Statement is hereby
incorporated by reference.
(c)(4) Form of Bylaws of the Surviving Corporation, as proposed to be
amended, included as Annex E to the Proxy Statement is hereby incorporated by
reference.
(d) Preliminary copy of Letter to Shareholders, Notice of Special
Meeting of Shareholders, Proxy Statement, Form of Proxy and Form of Election,
dated ___________, 1998, for the Special Meeting of Shareholders to be held
on ____________, 1998.
(e) Articles 5.11 through 5.13 from the Texas Business Corporation
Act Relating to Rights of Dissenting Shareholders included as Annex C in the
Proxy Statement is hereby incorporated by reference.
(f) None.
99.1 Ground Lease, dated June 1, 1998, by and between Independent
Research Agency for Life Insurance, Inc. and First Command Financial
Corporation filed as Exhibit 99.1 to Amendment No. 1 to the Schedule 13E-3
filed on August 26, 1998, and incorporated by reference herein.
99.2 Memorandum of Ground Lease, dated June 1, 1998, by and
between Independent Research Agency for Life Insurance, Inc. and First
Command Financial Corporation filed as Exhibit 99.2 to Amendment No. 1 to the
Schedule 13E-3 filed on August 26, 1998, and incorporated by reference herein.
99.3 Lease Agreement, dated June 1, 1998, by and between
Independent Research Agency for Life Insurance, Inc. and First Command
Financial Corporation filed as Exhibit 99.3 to Amendment No. 1 to the Schedule
13E-3 filed on August 26, 1998, and incorporated by reference herein.
99.4 Management Agreement, dated June 1, 1998 by and between
Independent Research Agency for Life Insurance, Inc. and First Command
Financial Corporation filed as Exhibit 99.4 to Amendment No. 1 to the Schedule
13E-3 filed on August 26, 1998, and incorporated by reference herein.
99.5 Administration Agreement, dated June 1, 1998 by and between
Independent Research Agency for Life Insurance, Inc. and First Command
Financial Corporation filed as Exhibit 99.5 to Amendment No. 1 to the Schedule
13E-3 filed on August 26, 1998, and incorporated by reference herein.
99.6 Line of Credit Agreement, dated June 1, 1998, by and between
First Command Financial Corporation and Independent Research Agency for Life
Insurance, Inc. filed as Exhibit 99.6 to Amendment No. 1 to the Schedule 13E-3
filed on August 26, 1998, and incorporated by reference herein.
99.7 Promissory Note, dated June 1, 1998, by and between First
Command Financial Corporation and Independent Research Agency for Life
Insurance, Inc. filed as Exhibit 99.7 to Amendment No. 1 to the Schedule 13E-3
filed on August 26, 1998, and incorporated by reference herein.
99.8 Deed of Trust, Security Agreement and Assignment of Rents and
Leases, dated June 1, 1998, by and between First Command Financial
Corporation and Independent Research Agency for Life Insurance, Inc. filed as
Exhibit 99.8 to Amendment No. 1 to the Schedule 13E-3 filed on August 26,
1998, and incorporated by reference herein.
99.9 Uniform Commercial Code - Financing Statement, by and between
First Command Financial Corporation and Independent Research Agency for Life
Insurance, Inc. filed as Exhibit 99.9 to Amendment No. 1 to the Schedule 13E-3
filed on August 26, 1998, and incorporated by reference herein.
9
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Date: September 8, 1998 INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE,
INC.
By: /s/ Lamar C. Smith
--------------------------------------------
Name: Lamar C. Smith
--------------------------------------------
Title: Chairman of the Board/C.E.O.
--------------------------------------------
FIRST COMMAND FINANCIAL CORPORATION
By: /s/ James N. Lanier
--------------------------------------------
Name: James N. Lanier
--------------------------------------------
Title: President
--------------------------------------------
/s/ Lamar C. Smith
--------------------------------------------
Lamar C. Smith
/s/ James N. Lanier
--------------------------------------------
James N. Lanier
/s/ Howard M. Crump
--------------------------------------------
Howard M. Crump
/s/ Hal N. Craig
--------------------------------------------
Hal N. Craig
/s/ Donaldson D. Frizzell
--------------------------------------------
Donaldson D. Frizzell
/s/ Jerry D. Gray
--------------------------------------------
Jerry D. Gray
/s/ David P. Thoreson
--------------------------------------------
David P. Thoreson
/s/ Carroll H. Payne II
--------------------------------------------
Carroll H. Payne II
/s/ Naomi K. Payne
--------------------------------------------
Naomi K. Payne
10
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT NAME
- ------- ------------
99(a) Commitment Letter of Norwest Bank Texas N.A filed as Exhibit
99(a) to the Schedule 13E-3 filed on July 6, 1998 and
incorporated by reference herein.
99(b)(1) Opinion of the IRA Financial Advisor, included as Annex B in
the Proxy Statement is hereby incorporated by reference.
99(b)(2) Discussion materials prepared by the IRA Financial Advisor for
the Board of Directors of IRA filed as Exhibit 99(b)(2) to
the Schedule 13E-3 filed on July 6, 1998 and incorporated
by reference herein.
99(b)(3) Tax Opinion of Ernst & Young LLP included as Annex F to the
Proxy Statement is hereby incorporated by reference.
99(b)(4) Report prepared by Ernst & Young LLP for the Company filed as
Exhibit 99(b)(4) to Amendment No. 1 to the Schedule 13E-3 filed
on August 26, 1998, and incorporated by reference herein.
99(b)(5) Special Committee Package prepared by the IRA Financial
Advisor for the Special Committee.
99(b)(6) Mission Accomplishment Plan Summary; Form of Mission
Accomplishment Plan Agreement for a Select Group of Agents; Form
of Mission Accomplishment Plan Agreement for a Select Group of
Management; Form of Mission Accomplishment Plan for a Select
Group of Highly Compensated Employees; USPA&IRA Mission
Accomplishment Plans Board Grant Declaration and Administrative
Policies; Mission Accomplishment Plan for a Select Group of
Management; USPA&IRA Mission Accomplishment Plans Board Grant
Declaration and Administrative Policies; Mission Accomplishment
Plan for Agents; Mission Accomplishment Plan for a Select Group
of Key Employees; and Mission Accomplishment Plan for a Select
Group of Highly Compensated Employees, provided by the Company to
the Financial Advisor.
99(b)(7) List of Class A Shareholders and Class B Shareholders, as of
March 31, 1998, provided by the Company to the Financial Advisor.
99(b)(8) Charts of Proposed Plan of Merger, the Current Structure and
Structure after the Merger, provided by the Company to the
Financial Advisor.
99(b)(9) List of Regional Agents and District Agents, as of August 1,
1998, provided by the Company to the Financial Advisor.
99(b)(10) Home Office Organization Charts, as of March 5, 1998, provided by
the Company to the Financial Advisor.
99(b)(11) Treasury Transactions from September 30, 1998, through July 31,
1998, provided by the Company to the Financial Advisor.
99(b)(12) Plaintiff's Amended Motion for Summary Judgment, INDEPENDENT
RESEARCH AGENCY FOR LIFE INSURANCE, INC. V. HUGENBERG, filed May
3, 1991, provided by the Company to the Financial Advisor.
99(b)(13) Brief in Support of Amended Motion for Summary Judgment,
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC. V.
HUGENBERG, filed May 3, 1991, provided by the Company to the
Financial Advisor.
99(b)(14) Affidavit of Sam F. Rhodes, INDEPENDENT RESEARCH AGENCY FOR LIFE
INSURANCE, INC. V. HUGENBERG, dated February 18, 1991, provided
by the Company to the Financial Advisor.
99(b)(15) Corrected Brief for Appellee, INDEPENDENT RESEARCH AGENCY FOR
LIFE INSURANCE, INC. V. HUGENBERG, filed October 9, 1991,
provided by the Company to the Financial Advisor.
99(b)(16) Form of Registered Representative/Agent Agreement, provided by
the Company to the Financial Advisor.
99(b)(17) General Agent Agreement, between All American Life and Casualty
Company and Independent Research Agency for Life Insurance, dated
January 1, 1979, provided by the Company to the Financial
Advisor.
99(b)(18) General Agency Contract, between Liberty National Life Insurance
Company and Independent Research Agency for Life Insurance,
Inc., effective October 1, 1981, provided by the Company to the
Financial Advisor.
99(b)(19) General Agency Contract, between Global Life Insurance Company
and Independent Research Agency for Life Insurance, Inc., dated
February 7, 1997, provided by the Company to the Financial
Advisor.
99(b)(20) Managing General Agent's Contract, between Monumental Life
Insurance Company and Independent Research Agency for Life
Insurance, dated April 11, 1979, provided by the Company to the
Financial Advisor.
99(b)(21) General Agent's Agreement, between North American Company for
Life and Health Insurance and Independent Research Agency, dated
January 1, 1971, provided by the Company to the Financial
Advisor.
99(b)(22) General Agent's Agreement, between The Old Line Life Insurance
Company of America and Carroll H. Payne, dated July 31, 1972,
provided by the Company to the Financial Advisor.
99(b)(23) Prospective Operating Information, Summary of Cash Flow Analysis
and Balance Sheet Data from 1998 through 2009, and Summary of
Shareholder Cash Flows, provided by the Company to the Financial
Advisor.
99(b)(24) Dealer Agreement concerning Fidelity Systematic Investment Plans:
Destiny Plans I and Destiny Plans II, provided by the Company to
the Financial Advisor.
99(b)(25) Dealer's Agreement, between A I M Distributors, Inc. and United
Services Planning Association, Inc., dated October 15, 1982,
provided by the Company to the Financial Advisor.
99(b)(26) Dealer's Sales Agreement, between The Pioneer Group, Inc. and
United Services Planning Association, Inc., dated August 1, 1979,
provided by the Company to the Financial Advisor.
99(b)(27) List of Directors and Officers of Independent Research Agency for
Life Insurance, Inc., as of May 8, 1998, provided by the Company
to the Financial Advisor.
99(b)(28) Biographical Information of Members of the Board of Independent
Research Agency for Life Insurance, Inc., provided by the Company
to the Financial Advisor.
99(b)(29) USPA&IRA Mission Statement, provided by the Company to the
Financial Advisor.
99(b)(30) History of USPA&IRA, provided by the Company to the Financial
Advisor.
99(b)(31) Top Agent Producers in 1997 and 1996, provided by the Company to
the Financial Advisor.
99(b)(32) List of Property of Independent Research Agency for Life
Insurance, Inc., provided by the Company to the Financial
Advisor.
99(b)(33) Independent Research Agency for Life Insurance, Inc. Schedule of
Discretionary or Nonrecurring Items Included in the State of
Operations, for the Five Years Ended September 30, 1997, provided
by the Company to the Financial Advisor.
99(b)(34) Form of Class B Stock Agreement, provided by the Company to the
Financial Advisor.
99(b)(35) Payne Family Stock Agreement, between Independent Research Agency
for Life Insurance, Inc., Carroll H. Payne, Freda J. Payne, Debra
S. Payne, Carroll H. Payne II and Naomi K. Payne, dated March 22,
1983, provided by the Company to the Financial Advisor.
99(b)(36) Class A Stock Agreement, between Independent Research Agency for
Life Insurance, Inc. and Margaret L. Galda, dated December 5,
1997, provided by the Company to the Financial Advisor.
99(b)(37) Articles of Incorporation of Independent Research Agency for Life
Insurance, Inc., as amended, provided by the Company to the
Financial Advisor.
99(b)(38) Bylaws of Independent Research Agency for Life Insurance, Inc.,
as amended December 5, 1996, provided by the Company to the
Financial Advisor.
99(b)(39) Internal Financial Information of USPA&IRA, from 1992 through
1997, provided by the Company to the Financial Advisor.
99(b)(40) Independent Research Agency for Life Insurance, Inc. Class B
Stock Appreciation Schedule, from Fiscal Year 1990 Through Fiscal
Year 1997, provided by the Company to the Financial Advisor.
99(b)(41) Market and Industry Data, provided by the Company to the
Financial Advisor.
99(c)(1) Agreement and Plan of Merger, dated as of July 1, 1998, between
Independent Research Agency for Life Insurance, Inc. and First
Command Financial Corporation, included as Annex A in the Proxy
Statement is hereby incorporated by reference.
99(c)(2) Form of Shareholders' Agreement to be entered into among
Surviving Corporation Shareholders and Surviving Corporation
filed as Exhibit 99(c)(2) to the Schedule 13E-3 filed on July 6,
1998, and incorporated by reference herein.
99(c)(3) Form of Articles of Incorporation of the Surviving Corporation,
as proposed to be amended, included as Annex E to the Proxy
Statement is hereby incorporated by reference.
99(c)(4) Form of Bylaws of the Surviving Corporation, as proposed to be
amended, included as Annex E to the Proxy Statement is hereby
incorporated by reference.
99(d) Preliminary copy of Letter to Shareholders, Notice of Special
Meeting of Shareholders, Proxy Statement, Form of Proxy and
Form of Election, dated ___________, 1998, for the Special
Meeting of Shareholders to be held on ____________, 1998 is
hereby incorporated by reference.
99(e) Articles 5.11 through 5.13 from the Texas Business Corporation
Act Relating to Rights of Dissenting Shareholders included as
Annex C in the Proxy Statement is hereby incorporated by
reference.
99(f) None.
99.1 Ground Lease, dated June 1, 1998, by and between Independent
Research Agency for Life Insurance, Inc. and First Command
Financial Corporation filed as Exhibit 99.1 to Amendment No.
1 to the Schedule 13E-3 filed on August 26, 1998, and
incorporated by reference herein.
99.2 Memorandum of Ground Lease, dated June 1, 1998, by and
between Independent Research Agency for Life Insurance, Inc.
and First Command Financial Corporation filed as Exhibit 99.2
to Amendment No. 1 to the Schedule 13E-3 filed on August 26,
1998, and incorporated by reference herein.
99.3 Lease Agreement, dated June 1, 1998, by and between
Independent Research Agency for Life Insurance, Inc. and
First Command Financial Corporation filed as Exhibit 99.3 to
Amendment No. 1 to the Schedule 13E-3 filed on August 26, 1998,
and incorporated by reference herein.
99.4 Management Agreement, dated June 1, 1998, by and between
Independent Research Agency for Life Insurance, Inc. and
First Command Financial Corporation filed as Exhibit 99.4 to
Amendment No. 1 to the Schedule 13E-3 filed on August 26,
1998, and incorporated by reference herein.
99.5 Administration Agreement, dated June 1, 1998, by and between
Independent Research Agency for Life Insurance, Inc. and
First Command Financial Corporation filed as Exhibit 99.5 to
Amendment No. 1 to the Schedule 13E-3 filed on August 26,
1998, and incorporated by reference herein.
99.6 Line of Credit Agreement, dated June 1, 1998, by and between
First Command Financial Corporation and Independent Research
Agency for Life Insurance, Inc. filed as Exhibit 99.6 to
Amendment No. 1 to the Schedule 13E-3 filed on August 26,
1998, and incorporated by reference herein.
99.7 Promissory Note, dated June 1, 1998, by and between First
Command Financial Corporation and Independent Research Agency
for Life Insurance, Inc. filed as Exhibit 99.7 to Amendment No.
1 to the Schedule 13E-3 filed on August 26, 1998, and
incorporated by reference herein.
99.8 Deed of Trust, Security Agreement and Assignment of Rents and
Leases, dated June 1, 1998, by and between First Command
Financial Corporation and Independent Research Agency for
Life Insurance, Inc. filed as Exhibit 99.8 to Amendment No.
1 to the Schedule 13E-3 filed on August 26, 1998, and
incorporated by reference herein
99.9 Uniform Commercial Code - Financing Statement, by and between
First Command Financial Corporation and Independent Research
Agency for Life Insurance, Inc. filed as Exhibit 99.9 to
Amendment No. 1 to the Schedule 13E-3 filed on August 26, 1998,
and incorporated by reference herein.
<PAGE>
SPECIAL COMMITTEE PACKAGE
FOR JUNE 24, 1998 CONFERENCE CALL (4:00 EST)
TABLE OF CONTENTS
SECTION:
1. EXECUTIVE SUMMARY
2. TRANSACTION SUMMARY AND RISK ASSESSMENT
Exhibit I - Transaction Graphic
Exhibit II - Pre-Transaction Features
Exhibit III - Post-Transaction Features
Exhibit IV - Pre/Post Transaction Analysis
Exhibit V - Stockholder Listing
3. FORM OF FAIRNESS OPINION
4. AT&T DIAL-IN INFORMATION
<PAGE>
1. EXECUTIVE SUMMARY
The subject transaction is detailed in the proposed Agreement and Plan of
Merger, dated as of _____________, 1998 the ("Merger Agreement"). The Merger
Agreement between the Independent Agency for Life Insurance ("IRA" or the
"Company"), and First Command Financial Corporation ("First Command") sets forth
the principal terms of the transaction. The Merger Agreement provides for, among
other things: 1) a merger of the Company into First Command (the "Merger"); 2)
the simultaneous exchange of the voting stock of First Command for the Class A
Voting Common Stock, par value $0.10 per share ("Class A Stock"), of the
Company; 3) the simultaneous exchange of cash for the Class B Non-Voting Common
Stock, par value $0.02 per share ("Class B Stock"), of the Company held by Class
B stockholders, and not by Class A stockholders; 4) the simultaneous conversion
of the Class B Stock held by the Class A stockholders into cash or an equivalent
amount of Surviving Corporation Non-Voting Stock (as defined in the Company's
proxy statement); and 5) conversion of the Company's corporate status from C
Corporation to S Corporation. Prior to the Merger, the Company plans to create a
stock incentive plan for agents and employees. Subsequent to the Merger, the
Surviving Corporation plans to issue stock appreciation rights ("SARs") and
dividend equivalent rights ("DERs") through its Mission Accomplishment Plan
("MAP") to those Class B stockholders of the Company who are still agents or
employees at the time of such issuance (hereafter collectively referred to as
the "Transaction").
The C&L engagement team has performed, or is currently undertaking, the
following:
1) Interviews with management (President, CEO, CFO, General Counsel,
Director of Agent Relations), Agents, and the Special Committee formed
to review transaction.
2) Analysis of historical financial and operating performance of the
Company including a discussion of agency specific and consolidated
performance trends.
3) An analysis of the components of the aggregate consideration to be
received/exchanged in connection with the Transaction.
4) A qualitative analysis of what the Class A and Class B stockholders of
the Company give up and receive (including management's
representations regarding the award of SAR's and DER's) as a result of
the Transaction.
5) Industry analysis including market share, demographic analysis, and
projected market growth.
6) A review of insurance sales regulation and related regulatory issues.
7) An analysis of future estimated cash flow streams to Class B
stockholders under two scenarios as follows: 1) Status Quo, and 2)
Post Transaction. Analysis targeted Class B shares held by
Class B stockholders only, Class B shares held by
<PAGE>
Class A stockholders, and Class A shares incorporating 2 yr, 5 yr,
10 yr, and 20 yr, holding period assumptions.
8) Performed a discounted cash flow analysis utilizing modified financial
projections provided by Company management. DCF was sensitized for
discount rate (WACC) and growth rates. Value indications were not
impacted for marketability or share restriction considerations.
9) A comprehensive guideline company search which yielded a very limited
set of comparables from which to develop meaningful market multiples.
Nevertheless, we did review and analyze the financial and operating
characteristics of the limited guideline company portfolio with a view
towards identifying any meaningful parameters/operating statistics.
10) A comprehensive comparable transaction search which yielded a very
limited set of comparable transactions from which to develop
meaningful transaction multiples. Nevertheless, we did review and
analyze the limited transaction data with a view towards identifying
any meaningful parameters/operating statistics.
11) Analysis of prior litigation involving stockholders of the Company
HUGENBERG V. INDEPENDENT AGENCY FOR LIFE INSURANCE RESEARCH.
Based upon our review, it is the opinion of the engagement team that the
Transaction, as described, is fragile in both form and structure. The Company is
unique and has no peers that we could identify. Although the Company's structure
and dedication to its founder's mission has had a direct impact on our ability
to demonstrate the financial fairness of this transaction using traditional
market, cost, and income based methodologies, qualitative and quantitative
analysis of the pre- and post-transaction treatment of the existing stockholder
base and other factors considered by the engagement team do provide a basis for
a determination that the Transaction is fair, from a financial point of view.
<PAGE>
2. TRANSACTION SUMMARY AND RISK ASSESSMENT
IRA is a C-Corporation registered in Fort Worth, Texas. The Company is
dedicated to providing, directly and indirectly through subsidiaries and
independent agents, life insurance and related insurance products to United
States military personnel, whether on duty or retired.
In order to reduce tax exposure and avoid the costs of being a SEC registrant,
the Company is planning to transform from a C-Corporation to an S-Corporation.
In order to be eligible as an S-Corporation, the company must have only one
class of stock and less than [35] shareholders.
At present, IRA hardly meets these requirements as there exists two classes of
stock, the Class A voting stock and the Class B non voting stock, with 14 Class
A shareholders and 535 Class B shareholders. (See shareholder list in Exhibit VI
to this section)
In order to meet the requirements for S-Corporation status, the Board of
Directors of the Company prepared the following plan, to be submitted to the
shareholders for approval.
This "going private" plan includes the following steps:
- Merger between IRA and First Command.
- Redemption of Class B stock owned by Class B only shareholders for
cash.
- Conversion of the Class A shares of IRA into the voting
stock of the Surviving Corporation.
- Conversion of the Class B shares of IRA owned by Class
A and B shareholders into non-voting stock of the Surviving
Corporation.
This plan will allow the Surviving Corporation, which is to be renamed IRA upon
the completion of the merger, to have less than [35] shareholders and only one
class of stock.
The Surviving Corporation, First Command, is a newly formed S Corporation whose
initial purpose was to build, own and operate a parking garage adjacent to the
USPA & IRA building. After completion of the merger, this activity will be
transferred to a to be created subsidiary. First Command capital stock is formed
of 1,000 shares owned equally by 4 shareholders, all Directors of IRA. As a
result of the merger, these 1,000 shares will be converted into 40 non-voting
shares of the surviving corporation.
IRA has, at present, 521 Class B only shareholders owning 567,102 Class B shares
out of the existing 957,558. Under the planned transaction, these shares are to
be redeemed for cash at a price of $28.24 per share.
This price, as settled by the Board of Directors of IRA, is consistent with the
Company's past history of Class B Stock price determination.
<PAGE>
As there never existed, and will hardly exist in the future, an organized market
for IRA Class A or B shares, following either legal restrictions under the Texas
Business Corporation Act or contractual limitations to marketability under the
shareholders' agreements to be signed by both Class A and B shareholders upon
acquiring shares.
Contractually, at the discretion of management, the Company's stock price has
been historically sat at book value, the computing method being unmodified since
the creation of the Class B stock.
The Class B Stock has been created in order to reward key employees and allow
them the opportunity to share the Company's growth through dividends and stock
appreciation. In order to maintain such an incentive under the new organization,
the Board of Directors of IRA intends to implement a "phantom stock plan"
dedicated to the same objectives as the Class B stock.
Under this plan, called the Mission Accomplishment Plan (MAP), the Company will
be able to grant key employees MAP units, composed each of a Stock Appreciation
Right (SAR) and a Dividend Equivalent Right (DER).
These MAP units will then replicate Class B stock allowing employees to benefit
from stock price increases and dividend payments.
As stated in the Proxy statement issued by the Company, it is expected that each
Class B shareholder will receive, upon completion of the merger, a number of MAP
units, issued by the Surviving Corporation, equal to the number of Class B
shares owned before the planned transaction.
Therefore, Class B only shareholders are due to receive, upon completion of the
merger, a total consideration of $28.24 and 1 MAP unit, composed of 1 SAR and 1
DER, per Class B share of IRA as of the date of record for the Merger.
Upon completion of the merger, each Class A shareholder of IRA will receive 5
voting shares of the Surviving Corporation per Class A share of IRA. The
Surviving Corporation will therefore have 125 voting shares owned by the 14
Class A shareholders of IRA.
The new voting shares will be roughly identical to the Class A shares with the
exception of the elimination of some rights provided by the Payne Family
shareholder agreement in order to comply with the one class of stock obligation.
Moreover, voting stocks will now be entitled to receive dividends.
The 390,456 Class B shares owned by Class A shareholders of IRA will be
exchanged for the same number of non voting shares of the Surviving Corporation,
provided that no Class A shareholder elects the Class B cash consideration. The
Class A shareholders will also receive one MAP unit per share of Class B Stock
owned.
<PAGE>
In order to compensate Class A shareholders for not receiving any cash
consideration for their Class B stock, a special dividend will be paid to them
annually based on the performance of the Company. This special dividend is
intended to be competitive with any proceeds the Class B only shareholders would
normally receive by reinvesting their cash proceeds, and is currently 8.0% per
annum.
The redemption price of the voting and non voting stock of the Surviving
Corporation is to be fixed at $28.24 per share.
Thus, upon completion of the Merger, the Surviving Corporation, to be renamed
IRA, will have the following capital stock (assuming no Class A stockholders
elect cash for their Class B Stock)
- 125 voting shares owned by 14 shareholders.
- 390,496 non voting shares owned by 14 shareholders (390,456 former
Class B shares and 40 former First Command shares).
Moreover, 947,608 MAP units will have been issued to former Class B shareholders
and more than $16 million paid to redeem Class B shares owned by Class B only
shareholders.
In the future, the Company intends to issue, at the Board of Directors'
discretion, new MAP units in a manner consistent with the historical method used
in Class B stock issuance.
RISK ASSESSMENT
During the course of this engagement, we reviewed the situation risk analysis
guidelines contained in the Appendix of the December 22, 1994 fairness opinion
policy guide. Based upon our review, we have identified the following issues
which we believe should be brought to the attention of the fairness opinion
committee:
- The structure of the Transaction is almost exclusively driven by the
need to preserve and protect S-Corporation status.
- As a result of the Transaction, Class B stockholders will no longer
be able to vote on material corporate actions (e.g., sale or
liquidation).
- The current form of the MAP has no mechanism to permit former Class B
stockholders to share in any tender offer/acquisition premium that may
ultimately be paid above $28.24 per share for the Company.
- The Company's ability to attain and preserve S-Corporation status is,
as always, questionable.
<PAGE>
- Stock price appreciation (as determined under the provisions of
relevant sections of the stockholder agreement with Class B
stockholders) was formerly taxed at federal capital gains rate
(20.0%), but will, under MAP, be taxed as ordinary income (39.6%).
- Payne family Class A stockholders will no longer possess rights of
first refusal on family-held Class A Stock.
- Directors and management other than General Counsel are Class A and
Class B stockholders (except Marty Durbin who only owns Class B
shares).
- Management anticipates that at least one Class A stockholder will
exercise dissenters rights under Texas Business Corporation Act.
- Independent agents are notoriously skeptical regarding changes in
compensation arrangements. However, no single agency or limited group
of agencies accounts for more than 5.0% of commission revenue.
- Different treatment of shareholders within the same Class of stock
exists (e.g., Class A with Class B has the option to receive cash or
non-voting stock in the Surviving Corporation).
- Our opinion assumes that the Class A stockholders and management will
continue to act as stewards of the Company emphasizing fair and
equitable treatment of the Company's primary asset, its agency force
(e.g., distribution of MAP units (stock appreciation and dividend
equivalent rights) consistent with historical allocation of Class B
stock purchase opportunities and historical dividend payments).
<PAGE>
EXHIBIT I
<PAGE>
PLAN OF MERGER
Revised 6/5/9[ILLEGIBLE]
GOAL:
To qualify for S Corporation status, there can only be one class of stock
and 75 or fewer shareholders. Through a "going private" transaction, IRA
will meet the qualification criteria and make an S election effective
October 1, 1998.
MERGER:
IRA will merge with FCFC. Simultaneously IRA will redeem all Class "B"
stock of "B" -only shareholders for cash. All IRA Class "B" stock
owned by Class "A" shareholders will be converted into non-voting stock of
FCFC. All IRA Class "A" stock will be converted into FCFC voting stock.
Immediately following the redemption of the IRA "B" stock it will be
de-registered with the SEC. The surviving entity will retain the existing
Board of Directors, officers, employees, and independent contractors. The
surviving entity `will' be renamed IRA, Inc. The garage operations of FCFC
will be placed in a wholly owned subsidiary of IRA. Following the merger,
IRA intends to grant Mission Accomplishment Plan (MAP) units (Stock
Appreciation Rights and Dividend Equivalent Rights) in the quantities
equivalent to former B stock holdings to reward agents and employees.
-------------------- -----------------
| | | |
| | | Voting |
---| "A" Stock | < --------------------------- > | Stock |--
| | | | | |
| -------------------- ----------------- |
| ----------------------- ----------------------- |
| | | | | |
| | | < ------------ > | Cash & | |
| --| "B" Stock | | Non-Voting |-- |
| | | | | Stock | | |
| | | | | | | |
| | ----------------------- ----------------------- | |
| | | |
| | | |
| --------------------- --------------------- |
| | | | | |
| | | | | |
-| IRA, Inc. | | FCFC |-
| | | |
--------------------- ---------------------
|
|
-----------------------------------------------------------------------
| | |
| | |
| | |
----------------- -------------- ------------------------- |
| | | | | | |
| USPA | | FCB | | IRA, Alabama |----|
| | | | | | |
----------------- -------------- ------------------------- |
------------------------- |
| | |
| IRA, Hawaii |----|
| | |
------------------------- |
------------------------- |
| | |
| IRA, Montana |----|
| | |
------------------------- |
------------------------- |
| | |
| IRA, Nevada |----|
| | |
------------------------- |
------------------------- |
| | |
| IRA, New York |----|
| | |
------------------------- |
------------------------- |
| | |
| IRA, Wyoming |----|
| |
-------------------------
<PAGE>
CURRENT STRUCTURE
- --------------------------------------------------------------------------------
------- ----------------- -----------------
/ \ | | | |
/ IRA \ | | | |
| "A" |------| "A" Stock | ---- | IRA, Inc. |
\Shareholders / | | | |
\ / | | ---| |
------- ----------------- | -----------------
| |
| |
------- ----------------- | |
/ \ | | | |
/ IRA \ | | | |
| "B" |------| "B" Stock |--| |
\Shareholders / | | |
\ / | | |
------- ----------------- |
|
|
--------------------------------------------------------------------
| | ---------------------- |
| | | | |
------------------ --------------- | IRA, Alabama |--|
| | | | | | |
| USPA, Inc. | | FCB | ---------------------- |
| | | | ---------------------- |
| | | | | | |
------------------ --------------- | IRA, Hawaii |--|
| | |
---------------------- |
---------------------- |
| | |
| IRA, Montana |--|
| | |
---------------------- |
---------------------- |
| | |
| IRA, Nevada |--|
| | |
---------------------- |
---------------------- |
| | |
| IRA, New York |--|
| | |
---------------------- |
---------------------- |
| | |
| IRA, Wyoming |--|
| |
----------------------
<PAGE>
STRUCTURE AFTER MERGER
- --------------------------------------------------------------------------------
------- ----------------- -----------------
/ \ | | | |
/ (New) \ | (New) | | (New) |
| IRA |------| IRA | ---- | IRA, Inc. |
\Shareholders / | Stock | | |
\ / | | | |
------- ----------------- -----------------
|
|
--------------------------------------------------------------
| | | |
------------ ----------- ------------------------ | |
| | | | | | | ------------
| USPA, Inc. | | FCB | | IRA, Alabama |--| | |
| | | | | | | | FCFC |
| | | | ------------------------ | | Garage |
------------ ----------- ------------------------ | | Corp |
| | | | |
| IRA, Hawaii |--| | |
| | | ------------
------------------------ |
------------------------ |
| | |
| IRA, Montana |--|
| | |
------------------------ |
------------------------ |
| | |
| IRA, Nevada |--|
| | |
------------------------ |
------------------------ |
| | |
| IRA, New York |--|
| | |
------------------------ |
------------------------ |
| | |
| IRA, Wyoming |--|
| |
------------------------
----------------
| | -------
| SARs | / Agent \
--------------- ----------- --| |-- / & \
| | | | | | | | | Select |
| (New) |--| |-| ---------------- |-- > \ Employees /
| IRA, Inc. | | MAP | | ---------------- | \ /
| | | | | | | | --------
| | | | | | DERs | |
--------------- ----------- --| |--
| |
----------------
<PAGE>
EXHIBIT II
<PAGE>
- ---------------------------------------
INDEPENDENT RESEARCH AGENCY
SHAREHOLDER AGREEMENTS
SUMMARY OF TERMS
PREPARED JUNE 1998
- ---------------------------------------
<TABLE>
<CAPTION>
NON PAYNE FAMILY, CLASS A AND CLASS B-
NON-BOARD CLASS A STOCK PAYNE FAMILY
---------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE BY At Any Time - Option of Company Mandatory Repurchase if all Payne
COMPANY Mandatory Repurchase when: family members refuse to acquire
1. Not a Texas Agent offered shares (Class A)
2. Not Employed by Company Company has right of first refusal on
3. Shareholder wants to Sell Payne (Class B) after Carroll's Death
Mandatory Repurchase - 12/31/2000 No Texas License triggers death clauses
PRICE Five times the Class B Price Set at Discretion of Company
Set at Discretion of Company
TRANSFERABILITY Not allowed to transfer pledge, assign Other Payne family members have right
or otherwise encumber the stock of first refusal (Class A)
BINDING NATURE Binding to owners and their heirs, etc. At death, other Paynes can acquire B
Shares until they own 5% of Company
MISCELLANEOUS Must be a Texas Agent Supersedes all Prior Agreements
Must be a Texas Agent
ANTI-DILUTION None Payne Family as a group should own
a minority interest by one share
LIMITATION ON None on A Shares Individual can own a maximum of 5%
OWNERSHIP of the Class B Shares
Maximum Class A ownership for Payne
Family - 50% less one share
<CAPTION>
CLASS A AND CLASS B- NON PAYNE FAMILY,
MEMBER OF BOARD OF DIRECTORS NON-BOARD CLASS B STOCK
-------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE BY Mandatory Repurchase when: Mandatory Repurchase when:
COMPANY 1. Not a Texas Agent (A&B) 1. Not a Texas Agent
2. Not a Board Member (A) 2. Not Employed by Company
2. Not Employed by Company (A&B) 3. Shareholder wants to Sell
3. Shareholder wants to Sell (A&B) 4. Individual has >5% of B Shares
PRICE Five times the Class B Price Set at Discretion of Company - Sets
Set at Discretion of Company B price for both sale and repurchase
TRANSFERABILITY Not allowed to transfer pledge, assign Not allowed to transfer pledge, assign
or otherwise encumber the stock or otherwise encumber the stock
BINDING NATURE Binding to owners and their heirs, etc. Binding to owners and their heirs, etc.
MISCELLANEOUS Applies to Current & Future Stock Applies to Current & Future Stock
Must be a Texas Agent Must be a Texas Agent
ANTI-DILUTION None None
LIMITATION ON Individual can own a maximum of 5% Individual can own a maximum of 5%
OWNERSHIP of the Class B Shares of the Class B Shares
None on A Shares
</TABLE>
<PAGE>
EXHIBIT III
<PAGE>
1987 through 1997. No dividends have been declared on Class A Stock. See
"MARKET PRICE DATA, DIVIDENDS AND SECURITY OWNERSHIP OF IRA COMMON STOCK."
Holders of common stock do not have preemptive rights to subscribe to any
additional shares issued by the Company. In the event of liquidation, all
holders of common stock are entitled to share pro rata in any distribution of
the Company's assets after payment of liabilities.
DESCRIPTION OF THE SURVIVING CORPORATION CAPITAL STOCK
GENERAL
The following is a summary of certain of the rights and privileges that,
after the Effective Time, will pertain to the stock of the Surviving
Corporation. For a full description of such stock, reference is made to the
Articles of Incorporation, as proposed to be amended by the Merger Agreement,
and the Bylaws of the Surviving Corporation, a copy of which are attached
hereto as Annex E.
[COMMON STOCK
Following the Merger, the Surviving Corporation will be authorized by its
Articles of Incorporation, as amended, to issue an aggregate of 10,000 shares of
Surviving Corporation Voting Stock and an aggregate of 10,000,000 shares of
Surviving Corporation Nonvoting Stock.
The holders of Surviving Corporation Voting Stock will be entitled to one
vote per share on all matters submitted for action by the shareholders.
Accordingly, the holders of more than 50% of the shares of Surviving Corporation
Common Stock will be able to elect all of the directors. In such event, the
holders of the remaining shares will not be able to elect any directors. Holders
of Surviving Corporation Nonvoting Stock have no voting rights, except for
certain voting rights in the event of certain extraordinary transactions as
provided by the TBCA, or as otherwise provided by law. There is no provision for
cumulative voting with respect to the election of directors.
All shares of Surviving Corporation Common Stock will be entitled to share
in such dividends as the Board of Directors may from time to time declare from
sources legally available therefor.
Upon liquidation or dissolution of the Surviving Corporation, whether
voluntary or involuntary, all shares of Surviving Corporation Common Stock are
entitled to share equally in the assets available for distribution to
shareholders after payment of all prior obligations of the Surviving
Corporation, including all agent and employee compensation plan obligations.
RESTRICTIONS ON TRANSFER OF SHARES
Article Seven of the Articles of Incorporation of the Surviving
Corporation, as amended, provide for certain restrictions on the transfer of
Surviving Corporation Common Stock. Except as otherwise provided, the Articles
prohibit a shareholder from selling, assigning, donating, pledging, encumbering
or otherwise disposing of any shares of First Command Common Stock.
The Articles further provide that no shareholder may transfer, and no
person may acquire, the legal or beneficial ownership of any share of First
Command Stock now or hereafter owned by him or her if that transfer or
acquisition would cause the S corporation status of First Command to terminate.
Specifically, no transfer may be made to, and no acquisition may be made by, any
person who would cause First Command
60
<PAGE>
to have more than the maximum permitted number of shareholders under the Code as
then in effect or to any person that is not eligible to be a shareholder of an S
corporation under the provisions of the Code.
In addition, upon the occurrence of certain operative events with respect
to a shareholder, such shareholder (or spouse or estate, as applicable) must
tender all of his or her shares to First Command, and First Command shall have
the option, the term of which is 120 days, to purchase all of shares of First
Command Common Stock owned by such shareholder. To facilitate such purchases,
First Command is permitted to obtain life insurance policies concerning its
shareholders. The purchase price for such purchases by First Command is to be
determined at least annually by First Command and is to be proportionately
adjusted for subsequent changes in the number of issued and outstanding shares,
stock dividends or other increases or decreases in the number of shares
outstanding. First Command may pay the purchase price in full to such
shareholder or may pay 20% of such purchase price in cash and pay the remainder
in four equal annual installments at prime interest rates.
SUBCHAPTER S PROVISIONS
SUBCHAPTER S REPRESENTATION. Article Eight of the Articles of Incorporation
of First Command contains certain provisions with regard to First Command's
status as an S corporation. Each shareholder must provide to First Command,
immediately upon First Command's request, such properly signed consents or other
documents as, in the opinion of First Command, may be necessary or useful to
maintain First Command's status as an S corporation, and each shareholder is
obligated to refrain from any actions that would interfere with First Command's
maintenance of its status as an S corporation.
REVOCATION OF ELECTION. In the event that the shareholders, by the
affirmative vote of at least 80% of the votes that all of the shareholders are
entitled to cast, determine to terminate First Command's status as an S
corporation, each shareholder, if requested, must execute a consent to such
revocation and deliver this consent to the secretary of First Command within 60
days. In the event of a termination of First Command's S status, the
shareholders and First Command shall elect, if applicable, to have Section
1362(e)(2) of the Code not apply, as provided in Section
1362(e)(3) of the Code. Any person who was a shareholder at any time
during the S Short Year (as defined in the Code) or who is a shareholder on the
first day of the C Short Year (as defined in the Code) must consent to such
election.
INADVERTENT TERMINATION OF SUBCHAPTER S ELECTION. In the event of a
termination of First Command's status as an S corporation other than as
described in the immediately preceding paragraph, if First Command desires that
First Command's status as an S corporation be continued, First Command and the
shareholders must use their best efforts to obtain from the Internal Revenue
Service a waiver of the terminating event on the ground of inadvertency. First
Command and the shareholders must take such steps, and make such adjustments, as
may be required by the Internal Revenue Service pursuant to Section 1362(f)(3)
and (4) of the Code. If a shareholder caused the terminating event to occur, he
or she will bear the expense of obtaining the waiver and of making such
adjustments as may be required. If the inadvertent termination is not waived by
the Internal Revenue Service and First Command's S status is permanently
terminated, First Command and the shareholders will make the election under
Section 1362(e)(3) of the Code described in the immediately preceding
paragraph.
PROVISION IN SHAREHOLDER WILLS. Each shareholder shall include in his or
her will a direction and authorization to his or her executor in substantially
the following form:
My Executor is hereby directed and authorized to hold stock of an S
Corporation, as defined in the Code (hereinafter "S Stock"), to make an
election to have any corporation treated as an S Corporation, to enter into
agreements with other shareholders or with the corporation relating to
transfers of S Stock or the management of the S Corporation, and to
61
<PAGE>
allocate amounts received and the tax on undistributed income between
income and principal. During the administration of my estate, my Executor
may allocate the tax deductions and credits arising from ownership of S
Stock between income and principal. In making any such allocations, by
Executor shall consider that the beneficiary is to have enjoyment of the
property at least equal to that ordinarily associated with an income
interest and in all events shall provide the required beneficial enjoyment
to the beneficiary until such time as the S Stock is distributed to him or
her.
Any beneficiary of my estate who receives stock in an S Corporation as
part of his or her distribution shall, prior to such distribution, enter
into a written agreement with said S Corporation (i) to consent to any
election to qualify the S Corporation as such; (ii) to do nothing to
interfere with the S Corporation's maintenance of its status as such; (iii)
to not transfer the S Stock to any transferee who does not agree to execute
a similar consent; (iv) to not transfer the S Stock in such manner as will
cause the S Corporation to lose its status as an S Corporation under the
then applicable federal and state income tax statutes and regulations; and
(v) if S status is inadvertently terminated, to join in any endeavor to
obtain a waiver of the terminating event on the grounds of inadvertency
from the Internal Revenue Service if the S Corporation or any shareholder
desires that the S status should continue.
Any S Stock distributed to a beneficiary shall bear an appropriate
legend on the stock certificate stating that the transfer, pledge,
assignment, hypothecation or other disposition of the stock is subject to
and restricted to the extent set forth in subparagraph (b) above.
DIVIDENDS TO PAY TAX LIABILITIES. With respect to any taxable period of
First Command during which it is an S Corporation, before the expiration of
thirty (30) days after First Command files its federal income tax return, Form
1120S, for such taxable period, First Command shall promptly declare and pay a
dividend to all shareholders in an amount equal to the excess of (i) the sum of
(A) that portion of First Command's income attributed to such shareholders
during such taxable period multiplied by (B) the sum of the maximum federal and
state individual income tax rates of any shareholder in effect for such taxable
period (without regard to exemptions or phase-outs of lower tax rates but with
consideration of the deductibility of such [state] taxes for federal income tax
purposes) plus $_________________ per share to allow for the additional expense
of tax return preparation, over (ii) the amount of any dividends declared by
First Command during such taxable period (other than any dividends declared
during such taxable period that were required to be declared under the
provisions of this paragraph with respect to a prior taxable period). First
Command's obligation to declare and pay such a dividend to the shareholders in
such an amount is subject to the restrictions governing dividends under the
Texas Business Corporation Act and such other pertinent governmental or
contractual restrictions as are now, or may hereafter become effective. If First
Command does not have sufficient funds available to permit it lawfully to
declare and pay such dividend, the shareholders and First Command shall take
such action, adopt such resolutions, and cause such certificates and other
documents to be filed as may be necessary to create sufficient funds to permit
the payment of such dividend, whereupon First Command shall declare and pay such
dividend. First Command shall make the distributions described in this paragraph
in a timely manner to allow the tax (including, without limitation, estimated
tax payments) attributable to the income passed through First Command to any
shareholder to be paid when due).
The Articles of Incorporation provide that in no event may the total
dividend paid with respect to any outstanding shares of stock of First Command
to differ from the amounts paid with respect to any other outstanding shares of
stock of First Command, and in no event shall these provisions be construed to
limit the ability of First Command to declare and pay additional dividends to
shareholders out of the assets of First Command legally available for such
payment at such time or times as the Board of Directors may determine.
62
<PAGE>
NONRECOGNITION OF CERTAIN TRANSFERS. First Command will not recognize
certain transfers made in violation of the terms of the Articles
of Incorporation.
LEGENDS ON SHARE CERTIFICATES. The following legend will be imprinted
conspicuously on the face of each certificate representing shares of Stock:
NOTICE IS HEREBY GIVEN THAT THE SALE, ASSIGNMENT, TRANSFER, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION OF THE SHARES OF CAPITAL STOCK
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO AND RESTRICTED BY THE
PROVISIONS OF THE ARTICLES OF INCORPORATION OF THE CORPORATION, AND ALL OF
THE PROVISIONS OF SUCH ARTICLES ARE INCORPORATED BY REFERENCE IN THIS
CERTIFICATE, SPECIFICALLY INCLUDING, BUT NOT LIMITED TO, THOSE PROVISIONS
OF THE ARTICLES RELATING TO THE CORPORATION'S TAX STATUS AS AN S
CORPORATION.
ELECTION TO CLOSE BOOKS. Each shareholder shall consent to close the books
of First Command pursuant to Section 1377(a)(2) of the Code whenever a
shareholder sells all of his Stock on a day other than the last day of First
Command's fiscal year.
CLASSIFIED BOARD
The Certificate of Incorporation provides for a Board of Directors divided
into three classes of directors serving staggered three year terms. The
classification of directors has the effect of making it more difficult for
stockholders to change the composition of the Board of Directors in a short
period of time. At least two annual meetings of stockholders, instead of one,
will generally be required to effect a change in a majority of the Board of
Directors.]
INDEPENDENT AUDITORS
The consolidated financial statements and schedules of IRA as of September
30, 1997 and 1996 and for the years ended September 30, 1997, 1997 and 1995,
included in the IRA 10-K incorporated by reference in this Proxy Statement, have
been audited by Brantley, Frazier, Rogers & Company, P.C., independent auditors.
[TO COME.]
The consolidated financial statements and schedules of First Command as of
May 1, 1998, included herein, have been audited by Ernst & Young. [To come.]
[Representatives of Ernst & Young, principal independent accountants to
IRA, along with Brantley, Frazier, Rogers & Company, which prepared certain
consolidated financial statements and schedules of IRA, will be present at the
Special Meeting and will have the opportunity to make a statement should they
desire to do so and are expected to be available to respond to appropriate
questions.]
OTHER MATTERS
The Board of Directors of IRA does not presently know of any matters to
be presented for consideration at the Special Meeting other than matters
described in the Notice of Special Meeting mailed together with this Proxy
Statement, but if other matters are presented, it is the intention of the
persons named in the accompanying proxy to vote on such matters in accordance
with their best judgment. The proxy confers discretionary authority to vote
only with respect to matters that the Board of Directors of IRA did not know,
within a reasonable time before the mailing of these materials, were to be
presented at the Special Meeting.
63
<PAGE>
EXHIBIT IV
<PAGE>
- --------------------------------------
IRA FAIRNESS OPINION
SUMMARY OF FEATURES
VALUATION AS OF JULY 1, 1998
- --------------------------------------
<TABLE>
<CAPTION>
BEFORE AFTER
SHAREHOLDER DESCRIPTION TRANSACTION TRANSACTION
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS B SHAREHOLDER ONLY Class B Stock (Non-Voting) MAP Unit
- Purchased at Book Value - Mandatory Redemption upon leaving
- Current Dividend Yield 20% to 30% the Company
- Current Price = $28.24 - DER (dividend equivalent right)
- Mandatory Redemption upon leaving - Will provide comparable Dividends
the Company - SAR (stock appreciation right)
- Option to put Stock to Company - Will provide comparable distribution
of Value Appreciation
Current Cash - $28.24 per share
CLASS B OWNED BY A CLASS A SHAREHOLDER Class B Stock (Non-Voting) MAP Unit
- Purchased at Book Value - Mandatory Redemption upon leaving
- Current Dividend Yield 20% to 30% the Company
- Current Price = $28.24 - DER (dividend equivalent right)
- Mandatory Redemption upon leaving - Will provide comparable Dividends
the Company - SAR (stock appreciation right)
- Option to put Stock to Company - Will provide comparable distribution
of Value Appreciation
Non-Voting Stock (or option for $28.24 Cash)
- Price fixed indefinitely at $28.24
- Annual Dividend covering 100% of
the individual's S-Corp tax liability
- Additional Dividend on $28.24 of 8%
- Mandatory Redemption upon leaving
the Company
- Option to put Stock to Company
CLASS A SHAREHOLDER Class A Stock (Voting) 5 Shares of Voting stock
- Purchased at 5 times Class B Stock Price - Price per share fixed at $28.24
- No Dividends - Annual Dividend covering 100% of
- Current Price = $141.20 the individual's S-Corp tax liability
- Mandatory Redemption upon leaving - Additional Dividend on $28.24 of 8%
the Company / Board of Directors - Mandatory Redemption upon leaving
- All repurchases at 5 times Class B the Company / Board of Directors
Stock Price - Option to put Stock to Company
</TABLE>
<PAGE>
- --------------------------------------
IRA FAIRNESS OPINION
SHAREHOLDERS VALUE SUMMARY
VALUATION AS OF JULY 1, 1998
- --------------------------------------
<TABLE>
<CAPTION>
STATUS QUO (7) NEW STRUCTURE (8) PERCENT INCREASE
VALUE PER SHARE/ VALUE PER SHARE/ VALUE PER SHARE/
SHAREHOLDER DESCRIPTION UNIT EQUIVALENT UNIT EQUIVALENT UNIT EQUIVALENT
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS B SHAREHOLDER ONLY (1)
Basis in Stock = $22.24 (4)
Holding Period = 2 years $32.97 $36.52 10.77%
Holding Period = 5 years $37.28 $45.55 22.18%
Holding Period = 10 years $41.27 $53.42 29.44%
Holding Period = 20 years $44.13 $60.16 36.32%
Basis in Stock = $2.00 (5)
Holding Period = 2 years $29.69 $32.47 9.36%
Holding Period = 5 years $35.12 $41.50 18.17%
Holding Period = 10 years $40.20 $49.37 22.81%
Holding Period = 20 years $43.90 $56.11 27.81%
CLASS B SHAREHOLDER ALSO OWNING CLASS A STOCK (2)
Basis in Stock = $22.24 (4)
Holding Period = 2 years $32.97 $33.44 1.43%
Holding Period = 5 years $37.28 $37.74 1.23%
Holding Period = 10 years $41.27 $42.27 2.42%
Holding Period = 20 years $44.13 $48.63 10.20%
Basis in Stock = $2.00 (5)
Holding Period = 2 years $29.69 $30.24 1.85%
Holding Period = 5 years $35.12 $35.74 1.77%
Holding Period = 10 years $40.20 $41.36 2.89%
Holding Period = 20 years $43.90 $48.47 10.41%
CLASS A SHAREHOLDER (3)
Basis in Stock = $111.20 (6)
Holding Period = 2 years $119.53 $121.53 1.67%
Holding Period = 5 years $89.11 $96.61 8.42%
Holding Period = 10 years $53.91 $72.55 34.58%
Holding Period = 20 years $17.27 $53.88 211.99%
Basis in Stock = $10.00 (6)
Holding Period = 2 years $103.11 $105.11 1.94%
Holding Period = 5 years $78.32 $85.81 9.56%
Holding Period = 10 years $48.55 $67.18 38.37%
Holding Period = 20 years $16.12 $52.72 227.05%
</TABLE>
Notes:
(1) Reflects after-tax cash flow to B shareholders discounted at 15% prior to
transaction and 20% after the transaction (increase in cost of equity
reflects cost of additional debt and loss of rights in sale).
(2) Reflects after-tax cash flow to B shares owned by A Shareholders discounted
at 15% prior to transaction and 17% after the transaction (increase in
cost of equity reflects cost of additional debt).
(3) Reflects after-tax cash flow to A shareholders discounted at 15% prior to
and after the transaction (Since additional control offsets cost of
additional debt, no change in cost of equity required).
(4) Basis for Shareholders who acquired Their shares in 1993 or 1994.
(5) Basis for Shareholders who acquired Original shares in 1981.
(7) Assumes C-Corp status and A and B stock under the current structure.
(8) Assumes S-Corp status, issuance of SARs and DERs, A stock replaced by
Voting Stock and B Stock held by A stockholders replaced by Non-Voting
Stock.
<PAGE>
- -----------------------------------------------
IRA FAIRNESS OPINION
SHAREHOLDER CASH FLOW MODEL - STATUS QUO B SHAREHOLDER ONLY
VALUATION AS OF JULY 1, 1998 STATUS QUO
DOLLARS IN THOUSANDS (EXCEPT PER SHARE VALUES) $22.24 BASIS
- -----------------------------------------------
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004 2005
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $15,283 $15,742 $16,214 $16,700 $17,201 $17,717 $18,249 $18,796 $19,360
New Garage/Building Net Revenue 0 0 (264) (272) (441) 776 816 858 901
-------------------------------------------------------------------------------------------
Adjusted EBDIT 15,283 15,742 15,950 16,428 16,760 18,493 19,065 19,654 20,261
Interest Expense 0 0 507 487 465 1,554 1,485 1,412 1,333
Depreciation 1,208 1,495 1,606 1,316 1,015 1,042 986 1,114 1,139
-------------------------------------------------------------------------------------------
Earnings Before Taxes 14,075 14,247 14,344 15,112 15,745 17,451 18,079 18,540 19,122
Income Taxes @ 34% 4,786 4,844 4,877 5,138 5,353 5,933 6,147 6,304 6,502
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Debt-Free Net Income (DFNI) $9,289 $9,403 $9,467 $9,974 $10,392 $11,518 11,932 $12,236 $12,620
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Adjustments
Add: Depreciation 1,495 1,606 1,316 1,015 1,042 986 1,114 1,139
Add: Debt Proceeds (Repayment) 7,245 (288) (308) 15,557 (986) (1,055) (1,128) (1,207)
Less: Capital Expenditures (8,895) (773) (971) (16,532) (844) (869) (896) (922)
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0 0
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Cash Flow Available for Dividends 9,248 10,011 10,010 10,432 10,730 10,995 11,326 11,630
Dividends Paid (2) @ 85% 7,861 8,509 8,509 8,867 9,120 9,345 9,627 9,886
Book Value (for Repurchase)(2) 26,760 28,147 29,650 31,151 32,716 34,325 35,975 37,674 39,419
Dividends Per Share (3) $8.30 $8.98 $8.98 $9.36 $9.62 $9.86 $10.16 $10.43
Book Value per Share (3) $28.24 $29.70 $31.29 $32.87 $34.52 $36.22 $37.96 $39.76 $41.60
Sample Shareholder After-Tax Cash Flows (4):
Sample 1 - 2 years 5.01 34.90 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 5.01 5.42 5.42 5.65 39.23 0.00 0.00 0.00
Sample 3 - 10 years 5.01 5.42 5.42 5.65 5.81 5.96 6.14 6.30
Sample 4 - 20 years 5.01 5.42 5.42 5.65 5.81 5.96 6.14 6.30
Months Away 6 18 30 42 54 66 78 90
Present Value Factor (5) @ 15% 0.9325 0.8109 0.7051 0.6131 0.5332 0.4636 0.4031 0.3506
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $4.67 $28.30 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $4.67 $4.40 $3.82 $3.47 $20.92 $0.00 $0.00 $0.00
Sample 3 - 10 years $4.67 $4.40 $3.82 $3.47 $3.10 $2.76 $2.47 $2.21
Sample 4 - 20 years $4.67 $4.40 $3.82 $3.47 $3.10 $2.76 $2.47 $2.21
Value Realized By Sample Shareholders:
Sample 1 - 2 YEARS $32.97
----------
----------
Sample 2 - 5 YEARS $37.28
----------
----------
Sample 3 - 10 YEARS $41.27
----------
----------
Sample 4 - 20 YEARS $44.13
----------
----------
<CAPTION>
2006 2007 2008 2009 2010 2011 2012 2013 2014
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $19,941 $20,539 $21,155 $21,790 $22,444 $23,117 $23,811 $24,525 $25,261
New Garage/Building Net Revenue 257 282 308 335 345 328 312 296 281
-------------------------------------------------------------------------------------------
Adjusted EBDIT 20,198 20,821 21,463 22,125 22,789 23,445 24,123 24,821 25,542
Interest Expense 1,248 1,158 1,061 957 846 728 601 466 321
Depreciation 1,164 1,190 1,217 1,245 1,070 1,102 1,135 1,169 1,204
-------------------------------------------------------------------------------------------
Earnings Before Taxes 19,034 19,631 20,246 20,880 21,719 22,343 22,988 23,652 24,338
Income Taxes @ 34% 6,472 6,675 6,884 7,099 7,384 7,597 7,816 8,042 8,275
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Debt-Free Net Income (DFNI) $12,562 $12,956 $13,362 $13,781 $14,335 $14,746 $15,172 $15,610 $16,063
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Adjustments
Add: Depreciation 1,164 1,190 1,217 1,245 1,070 1,102 1,135 1,169 1,204
Add: Debt Proceeds (Repayment) (1,292) (1,382) (1,479) (1,583) (1,694) (1,812) (1,939) (2,070) (1,423)
Less: Capital Expenditures (950) (979) (1,008) (1,038) (1,070) (1,102) (1,135) (1,169) (1,204)
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0 0 0
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Cash Flow Available for Dividends 11,484 11,786 12,092 12,405 12,641 12,934 13,233 13,540 14,640
Dividends Paid (2) @ 85% 9,762 10,018 10,278 10,544 10,745 10,994 11,248 11,509 12,444
Book Value (for Repurchase)(2) 41,141 42,909 44,723 46,584 48,480 50,421 52,406 54,437 56,633
Dividends Per Share (3) $10.30 $10.57 $10.85 $11.13 $11.34 $11.60 $11.87 $12.15 $13.13
Book Value per Share (3) $43.42 $45.28 $47.20 $49.16 $51.16 $53.21 $55.30 $57.45 $59.76
Sample Shareholder After-Tax Cash Flows (4):
Sample 1 - 2 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 3 - 10 years 6.22 47.06 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 4 - 20 years 6.22 6.38 6.55 6.72 6.85 7.01 7.17 7.34 7.93
Months Away 102 114 126 138 150 162 174 186 198
Present Value Factor (5) @ 15% 0.3048 0.2651 0.2305 0.2004 0.1743 0.1516 0.1318 0.1146 0.0997
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $1.90 $12.47 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 4 - 20 years $1.90 $1.69 $1.51 $1.35 $1.19 $1.06 $0.94 $0.84 $0.79
Value Realized By Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
<CAPTION>
GROWTH
2015 2016 2017 2018 RATE
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $26,019 $26,800 $27,604 $28,432 3.0%
New Garage/Building Net Revenue 267 254 241 229
----------------------------------------
Adjusted EBDIT 26,286 27,054 27,845 28,661
Interest Expense 221 114 0 0
Depreciation 1,240 1,277 1,315 1,354
----------------------------------------
Earnings Before Taxes 25,046 25,777 26,530 27,307
Income Taxes @ 34% 8,516 8,764 9,020 9,284
----------------------------------------
----------------------------------------
Debt-Free Net Income (DFNI) $16,530 $17,013 $17,510 $18,023
----------------------------------------
----------------------------------------
Adjustments
Add: Depreciation 1,240 1,277 1,315 1,354
Add: Debt Proceeds (Repayment) (1,523) (1,633) 0 0
Less: Capital Expenditures (1,240) (1,277) (1,315) (1,354)
Working Capital Adjustment @ 0% 0 0 0 0
----------------------------------------
----------------------------------------
Cash Flow Available for Dividends 15,007 15,380 17,510 18,023
Dividends Paid (2) @ 85% 12,756 13,073 14,884 15,320
Book Value (for Repurchase)(2) 58,883 61,190 63,816 66,519
Dividends Per Share (3) $13.46 $13.80 $15.71 $16.17
Book Value per Share (3) $62.14 $64.57 $67.34 $70.20
Sample Shareholder After-Tax Cash Flows (4):
Sample 1 - 2 years 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00
Sample 3 - 10 years 0.00 0.00 0.00 0.00
Sample 4 - 20 years 8.13 8.34 9.49 70.37
Months Away 210 222 234 246
Present Value Factor (5) @ 15% 0.0867 0.0754 0.0655 0.0570
----------------------------------------
----------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $0.00 $0.00 $0.00 $0.00
Sample 4 - 20 years $0.70 $0.63 $0.62 $4.01
Value Realized By Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
</TABLE>
--------------------------------------
SENSITIVITY ANALYSIS - SHAREHOLDER 3
--------------------------------------
<TABLE>
<CAPTION>
Growth Rate (EBDIT)
1% 2% 3% 4% 5% 6%
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12% $44.03 $45.92 $47.92 $50.02 $52.23 $54.59
13% $41.86 $43.65 $45.55 $47.51 $49.62 $51.82
14% $39.84 $41.55 $43.33 $45.22 $47.16 $49.26
PRESENT 15% $37.99 $39.59 $41.27 $43.04 $44.92 $46.90
VALUE 16% $36.26 $37.77 $39.36 $41.05 $42.83 $44.69
FACTOR 17% $34.64 $36.10 $37.60 $39.19 $40.88 $42.65
18% $33.15 $34.52 $35.96 $37.46 $39.05 $40.73
19% $31.77 $33.07 $34.45 $35.88 $37.37 $38.95
20% $30.46 $31.69 $33.02 $34.37 $35.81 $37.31
---------------------------------------------------------------
</TABLE>
NOTES:
(1) Historical EBDIT grown at 3% a year.
(2) Assumes that 85% of available Cash Flow is Distributed to shareholders.
Remaining Cash Flow increases (decreases) Book Value of IRA.
(3) Based upon 947,608 Class B Shares Outstanding.
(4) After tax Cash Flow. Assumes dividends are taxed at 39.6% and Capital
Gains at 20%. Basis in Stock is $22.24 (Purchased in 1993 or 1994).
(5) Present Value Factor determined based upon Estimated Equity Rate of Return.
<PAGE>
- ----------------------------------------------
IRA FAIRNESS OPINION B SHAREHOLDER ONLY
SHAREHOLDER CASH FLOW MODEL - NEW STRUCTURE NEW STRUCTURE
VALUATION AS OF JULY 1, 1998 $22.24 BASIS
DOLLARS IN THOUSANDS (EXCEPT PER SHARE VALUES)
- ----------------------------------------------
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $15,283 $15,742 $16,214 $16,700 $17,201 $17,717 $18,249
New Garage/Building Net Revenue 0 0 (264) (272) (441) 776 816
-------------------------------------------------------------------------------
Adjusted EBDIT 15,283 15,742 15,950 16,428 16,760 18,493 19,065
Interest Expense 0 1,163 1,586 1,476 1,357 2,343 2,164
Depreciation 1,208 1,495 1,606 1,316 1,015 1,042 986
-------------------------------------------------------------------------------
Earnings Before MAP and Tax Distributions 14,075 13,084 12,758 13,636 14,388 15,108 15,915
SAR Cash Payments (2) 0 0 0 0 0 0 0
DER Payments (3) @ 60% 0 7,850 7,655 8,181 8,633 9,065 9,549
-------------------------------------------------------------------------------
Earnings Before Tax Distributions 14,075 5,234 5,103 5,455 5,755 6,043 6,366
Income Tax Distributions (4) @ 40.0% 5,630 2,094 2,041 2,182 2,302 2,417 2,547
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Net Income After Tax Distributions $8,445 $3,140 $3,062 $3,273 $3,453 $3,626 $3,819
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Adjustments: YE 1997
-------
Add: Depreciation 1,495 1,606 1,316 1,015 1,042 986
Less: Capital Expenditures (8,895) (773) (971) (16,532) (844) (869)
Add: Debt Proceeds (Repayment) 16,609 6,043 (1,574) (1,684) 14,084 (2,562) (2,741)
Less: New Stock Dividends (5) (812) (812) (812) (812) (812) (812)
Add: SAR Accrual Reversal (2) 0 0 0 0 0 0
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
After Tax Cash Flow Requirements 16,609 (2,169) (1,554) (2,152) (2,245) (3,176) (3,436)
SAR Valued Accrued (2) 971 1,508 1,121 1,208 450 383
Per Share SAR Value $1.02 $1.59 $1.18 $1.27 $0.47 $0.40
Cumulative SAR Value Accrued $1.02 $2.62 $3.80 $5.07 $5.55 $5.95
Non-A B Share Repurchase (6) 16,609
DER Per Share $0.00 $8.28 $8.08 $8.63 $9.11 $9.57 $10.08
SAR/B Stock Sale Value Realized $28.24 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample Shareholder After-Tax Cash Flows (7):
Sample 1 - 2 years 27.04 5.00 6.46 0.00 0.00 0.00 0.00
Sample 2 - 5 years 27.04 5.00 4.88 5.21 5.50 9.13 0.00
Sample 3 - 10 years 27.04 5.00 4.88 5.21 5.50 5.78 6.09
Sample 4 - 20 years 27.04 5.00 4.88 5.21 5.50 5.78 6.09
Months Away 0 6 18 30 42 54 66
Present Value Factor (8) @ 20% 1.0000 0.9129 0.7607 0.6119 0.5281 0.4402 0.3669
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $27.04 $4.57 $4.91 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $27.04 $4.57 $3.71 $3.30 $2.91 $4.02 $0.00
Sample 3 - 10 years $27.04 $4.57 $3.71 $3.30 $2.91 $2.54 $2.23
Sample 4 - 20 years $27.04 $4.57 $3.71 $3.30 $2.91 $2.54 $2.23
Value Realized by Sample Shareholders:
Sample 1 - 2 years $36.52
------
------
Sample 2 - 5 years $45.55
------
------
Sample 3 - 10 years $53.42
------
------
Sample 4 - 20 years $60.16
------
------
<CAPTION>
2004 2005 2006 2007 2008 2009 2010
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $18,796 $19,360 $19,941 $20,539 $21,155 $21,790 $22,444
New Garage/Building Net Revenue 858 901 257 282 308 335 345
-------------------------------------------------------------------------------
Adjusted EBDIT 19,654 20,261 20,198 20,821 21,463 22,125 22,789
Interest Expense 1,973 1,768 1,547 1,313 1,061 957 846
Depreciation 1,114 1,139 1,164 1,190 1,217 1,245 1,070
-------------------------------------------------------------------------------
Earnings Before MAP and Tax Distributions 16,567 17,354 17,487 18,318 19,185 19,923 20,873
SAR Cash Payments (2) 0 0 0 971 1,508 1,121 1,208
DER Payments (3) @ 60% 9,940 10,413 10,492 10,991 11,511 11,954 12,524
-------------------------------------------------------------------------------
Earnings Before Tax Distributions 6,627 6,941 6,995 6,357 6,166 6,848 7,141
Income Tax Distributions (4) @ 40.0% 2,651 2,776 2,798 2,543 2,466 2,739 2,857
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Net Income After Tax Distributions $3,976 $4,165 $4,197 $3,814 $3,700 $4,109 $4,284
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Adjustments:
Add: Depreciation 1,114 1,139 1,164 1,190 1,217 1,245 1,070
Less: Capital Expenditures (896) (922) (950) (979) (1,008) (1,038) (1,070)
Add: Debt Proceeds (Repayment) (2,932) (3,137) (3,358) (3,594) (1,479) (1,583) (1,694)
Less: New Stock Dividends (5) (812) (812) (812) (812) (812) (812) (812)
Add: SAR Accrual Reversal (2) 0 0 0 971 1,508 1,121 1,208
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
After Tax Cash Flow Requirements (3,526) (3,732) (3,956) (3,224) (574) (1,067) (1,298)
SAR Valued Accrued (2) 450 433 241 589 3,126 3,042 2,986
Per Share SAR Value $0.48 $0.46 $0.25 $0.62 $3.30 $3.21 $3.15
Cumulative SAR Value Accrued $6.43 $6.88 $7.14 $6.74 $8.45 $10.48 $12.36
Non-A B Share Repurchase (6)
DER Per Share $10.49 $10.99 $11.07 $11.60 $12.15 $12.61 $13.22
SAR/B Stock Sale Value Realized $0.00 $0.00 $0.00 $1.02 $1.59 $1.18 $1.27
Sample Shareholder After-Tax Cash Flows (7):
Sample 1 - 2 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 3 - 10 years 6.34 6.64 6.69 11.69 0.00 0.00 0.00
Sample 4 - 20 years 6.34 6.64 6.69 7.62 8.30 8.33 8.75
Months Away 78 90 102 114 126 138 150
Present Value Factor (8) @ 20% 0.3057 0.2548 0.2123 0.1769 0.1474 0.1229 0.1024
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $1.94 $1.69 $1.42 $2.07 $0.00 $0.00 $0.00
Sample 4 - 20 years $1.94 $1.69 $1.42 $1.35 $1.22 $1.02 $0.90
Value Realized By Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
<CAPTION>
2011 2012 2013 2014 2015 2016 2017
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $23,117 $23,811 $24,525 $25,261 $26,019 $26,800 $27,604
New Garage/Building Net Revenue 328 312 296 281 267 254 241
-------------------------------------------------------------------------------
Adjusted EBDIT 23,445 24,123 24,821 25,542 26,286 27,054 27,845
Interest Expense 728 601 466 321 221 114 0
Depreciation 1,102 1,135 1,169 1,204 1,240 1,277 1,315
-------------------------------------------------------------------------------
Earnings Before MAP and Tax Distributions 21,615 22,387 23,186 24,017 24,825 25,663 26,530
SAR Cash Payments (2) 450 383 450 433 241 589 3,126
DER Payments (3) @ 60% 12,969 13,432 13,912 14,410 14,895 15,398 15,918
-------------------------------------------------------------------------------
Earnings Before Tax Distributions 8,196 8,572 8,824 9,174 9,689 9,676 7,486
Income Tax Distributions (4) @ 40.0% 3,278 3,429 3,530 3,669 3,875 3,870 2,994
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Net Income After Tax Distributions $4,918 $5,143 $5,294 $5,505 $5,814 $5,806 $4,492
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Adjustments:
Add: Depreciation 4,102 1,135 1,169 1,204 1,240 1,277 1,315
Less: Capital Expenditures (1,102) (1,135) (1,169) (1,204) (1,240) (1,277) (1,315)
Add: Debt Proceeds (Repayment) (1,812) (1,939) (2,070) (1,423) (1,523) (1,633) 0
Less: New Stock Dividends (5) (812) (812) (812) (812) (812) (812) (812)
Add: SAR Accrual Reversal (2) 450 383 450 433 241 589 3,126
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
After Tax Cash Flow Requirements (2,174) (2,368) (2,432) (1,802) (2,094) (1,856) 2,314
SAR Valued Accrued (2) 2,744 2,775 2,862 3,702 3,719 3,949 6,806
Per Share SAR Value $2.90 $2.93 $3.02 $3.91 $3.92 $4.17 $7.18
Cumulative SAR Value Accrued $14.79 $17.31 $19.85 $23.30 $26.98 $30.52 $34.41
Non-A B Share Repurchase (6)
DER Per Share $13.69 $14.17 $14.68 $15.21 $15.72 $16.25 $16.80
SAR/B Stock Sale Value Realized $0.47 $0.40 $0.48 $0.46 $0.25 $0.62 $3.30
Sample Shareholder After-Tax Cash Flows (7):
Sample 1 - 2 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 3 - 10 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 4 - 20 years 8.55 8.80 9.16 9.46 9.65 10.19 12.14
Months Away 162 174 186 198 210 222 234
Present Value Factor (8) @ 20% 0.0853 0.0711 0.0593 0.0494 0.0411 0.0343 0.0286
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 4 - 20 years $0.73 $0.63 $0.54 $0.47 $0.40 $0.35 $0.35
Value realized By Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
<CAPTION>
GROWTH
2018 RATE
-------------------------
<S> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $28,432 3.0%
New Garage/Building Net Revenue 229
----------
Adjusted EBDIT 28,661
Interest Expense 0
Depreciation 1,354
----------
Earnings Before MAP and Tax Distributions 27,307
SAR Cash Payments (2) 3,042
DER Payments (3) @ 60% 16,384
----------
Earnings Before Tax Distributions 7,881
Income Tax Distributions (4) @ 40.0% 3,153
----------
----------
Net Income After Tax Distributions $4,728
----------
----------
Adjustments:
Add: Depreciation 1,354
Less: Capital Expenditures (1,354)
Add: Debt Proceeds (Repayment) 0
Less: New Stock Dividends (5) (812)
Add: SAR Accrual Reversal (2) 3,042
Working Capital Adjustment @ 0% 0
----------
----------
After Tax Cash Flow Requirements 2,229
SAR Valued Accrued (2) 6,958
Per Share SAR Value $7.34
Cumulative SAR Value Accrued $38.54
Non-A B Share Repurchase (6)
DER Per Share $17.29
SAR/B Stock Sale Value Realized $3.21
Sample Shareholder After-Tax Cash Flows (7):
Sample 1 - 2 years 0.00
Sample 2 - 5 years 0.00
Sample 3 - 10 years 0.00
Sample 4 - 20 years 35.65
Months Away 246
Present Value Factor (8) @ 20% 0.0238
----------
----------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00
Sample 2 - 5 years $0.00
Sample 3 - 10 years $0.00
Sample 4 - 20 years $0.85
</TABLE>
Notes:
1) Historical EBDIT grown at 3% a year.
2) Assumes all Debt-Free Cash Flow after Stock 8% Dividends accrue to the
SARs. After ten years, accrual is reversed and paid in cash (and
expensed).
3) DERs assumed to equal 60% of Earnings Before Taxes. Maximum DER payment
which allows for all cash flow items to be covered by current cash
flows.
4) Distributions to S-Corporation shareholders to cover their corporate tax
liability.
5) Make-whole dividend on S-Corporation stock calculated as 8% multiplied by
$28.24 stipulated price multiplied by 359,584 shares issued.
6) Based upon 588,149 Class B Shares not owned by A shareholders and a price
of $28.24.
7) After tax Cash Flow. Assumes dividends are taxed at 39.6% and Capital
Gains at 20%. Basis in Stock is $22.24 (Purchased in 1993 or 1994).
8) Present Value Factor determined based upon Estimated Equity Rate of Return
Incremental 5% added to reflect risk of additional debt employed.
- ---------------------------------------------
SENSITIVITY ANALYSIS - SHAREHOLDER 3
- ---------------------------------------------
<TABLE>
<CAPTION>
Growth Rate (EBDIT)
1% 2% 3% 4% 5% 6%
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
14% $55.83 $57.81 $59.89 $62.08 $64.40 $66.84
15% $54.80 $56.67 $58.63 $60.71 $62.90 $65.20
PRESENT 16% $53.84 $55.60 $57.44 $59.43 $61.49 $63.66
VALUE 17% $52.94 $54.59 $56.35 $58.21 $60.18 $62.21
FACTOR 18% $52.09 $53.65 $55.32 $57.07 $58.92 $60.87
19% $51.25 $52.77 $54.33 $56.00 $57.77 $59.61
20% $50.50 $51.92 $53.42 $54.99 $56.68 $58.41
21% $49.78 $51.14 $52.56 $54.05 $55.62 $57.30
22% $49.10 $50.40 $51.73 $53.16 $54.66 $56.23
--------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------
IRA FAIRNESS OPINION
SHAREHOLDER CASH FLOW MODEL - STATUS QUO B SHAREHOLDER ONLY
VALUATION AS OF JULY 1, 1998 STATUS QUO
DOLLARS IN THOUSAND (EXCEPT PER SHARE VALUES) $2.00 BASIS
- --------------------------------------------
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004 2005
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $15,283 $15,742 $16,214 $16,700 $17,201 $17,717 $18,249 $18,796 $19,360
New Garage/Building Net Revenue 0 0 (264) (274) (441) 776 816 858 901
-------------------------------------------------------------------------------------------
Adjusted EBDIT 15,283 15,742 15,950 16,428 16,760 18,493 19,065 19,654 20,261
Interest Expense 0 0 507 487 465 1,554 1,485 1,412 1,333
Depreciation 1,208 1,495 1,606 1,316 1,015 1,042 986 1,114 1,139
-------------------------------------------------------------------------------------------
Earnings Before Taxes 14,075 14,247 14,344 15,112 15,745 17,451 18,079 18,540 19,122
Income Taxes @ 34% 4,786 4,844 4,877 5,138 5,353 5,933 6,147 6,304 6,502
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Debt-Free Net Income (DFNI) $9,289 $9,403 $9,467 $9,974 $10,392 $11,518 $11,932 $12,236 $12,620
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Adjustments:
Add: Depreciation 1,495 1,606 1,316 1,015 1,042 986 1,114 1,139
Add: Debt Proceeds (Repayment) 7,245 (288) (308) 15,557 (986) (1,055) (1,128) (1,207)
Less: Capital Expenditures (8,895) (773) (971) (16,532) (844) (869) (896) (922)
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0 0
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Cah Flow Available for Dividends 9,248 10,011 10,010 10,432 10,730 10,995 11,326 11,630
Dividends Paid (2) @ 85% 7,861 8,509 8,509 8,867 9,120 9,345 9,627 9,886
Book Value (for Repurchase)(2) 26,760 28,147 29,650 31,151 32,716 34,325 35,975 37,674 39,419
Dividends Per Share (3) $8.30 $8.98 $8.98 $9.36 $9.62 $9.86 $10.16 $10.43
Book Value per Share (3) $28.24 $29.70 $31.29 $32.87 $34.52 $36.22 $37.96 $39.76 $41.60
Sample Shareholder After-Tax Cash Flows (4):
Sample 1 - 2 years 5.01 30.86 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 5.01 5.42 5.42 5.65 35.19 0.00 0.00 0.00
Sample 3 - 10 years 5.01 5.42 5.42 5.65 5.81 5.96 6.14 6.30
Sample 4 - 20 years 5.01 5.42 5.42 5.65 5.81 5.96 6.14 6.30
Months Away 6 18 30 42 54 66 78 90
Present Value Factor (5)@ 15% 0.9325 0.8109 0.7051 0.6131 0.5332 0.4636 0.4031 0.3506
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $4.67 $25.02 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $4.67 $4.40 $3.82 $3.47 $18.76 $0.00 $0.00 $0.00
Sample 3 - 10 years $4.67 $4.40 $3.82 $3.47 $3.10 $2.76 $2.47 $2.21
Sample 4 - 20 years $4.67 $4.40 $3.82 $3.47 $3.10 $2.76 $2.47 $2.21
Value Realized By Sample Shareholders:
Sample 1 - 2 years $29.69
----------
----------
Sample 2 - 5 years $35.12
----------
----------
Sample 3 - 10 years $40.20
----------
----------
Sample 4 - 20 years $43.90
----------
----------
<CAPTION>
2006 2007 2008 2009 2010 2011 2012 2013 2014
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $19,941 $20,539 $21,155 $21,790 $22,444 $23,117 $23,811 $24,525 $25,261
New Garage/Building Net Revenue 257 282 308 335 345 328 312 296 281
-------------------------------------------------------------------------------------------
Adjusted EBDIT 20,198 20,821 21,463 22,125 22,789 23,445 24,123 24,821 25,542
Interest Expense 1,248 1,158 1,061 957 846 728 601 466 321
Depreciation 1,164 1,190 1,217 1,245 1,070 1,102 1,135 1,169 1,204
Earnings Before Taxes 19,034 19,631 20,246 20,880 21,719 22,343 22,988 23,652 24,338
Income Taxes @ 34% 6,472 6,675 6,884 7,099 7,384 7,597 7,816 8,042 8,275
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Debt-Free Net Income (DFNI) $12,562 $12,956 $13,362 $13,781 $14,335 $14,746 $15,172 $15,610 $16,063
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Adjustments
Add Depreciation 1,164 1,190 1,217 1,245 1,070 1,102 1,135 1,169 1,204
Add: Debt Proceeds (Repayment) (1,292) (1,382) (1,479) (1,583) (1,694) (1,812) (1,939) (2,070) (1,423)
Less: Capital Expenditures (950) (979) (1,008) (1,038) (1,070) (1,102) (1,135) (1,169) (1,204)
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0 0 0
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Cash Flow Available for Dividends 11,484 11,786 12,092 12,405 12,641 12,934 13,233 13,540 14,640
Dividends Paid (2) @ 85% 9,762 10,018 10,278 10,544 10,745 10,994 11,248 11,509 12,444
Book Value (for Repurchase)(2) 41,141 42,909 44,723 46,584 48,480 50,421 52,406 54,437 56,633
Dividends Per Share (3) $10.30 $10.57 $10.85 $11.13 $11.34 $11.60 $11.87 $12.15 $13.13
Book Value per Share (3) $43.42 $45.28 $47.20 $49.16 $51.16 $53.21 $55.30 $57.45 $59.76
Sample Shareholder After-Tax Cash Flows (4):
Sample 1 - 2 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 3 - 10 years 6.22 43.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 4 - 20 years 6.22 6.38 6.55 6.72 6.85 7.01 7.17 7.34 7.93
Months Away 102 114 126 138 150 162 174 186 198
Present Value Factor (5)@ 15% 0.3048 0.2651 0.2305 0.2004 0.1743 0.1516 0.1318 0.1146 0.0997
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $1.90 $11.40 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 4 - 20 years $1.90 $1.69 $1.51 $1.35 $1.19 $1.06 $0.94 $0.84 $0.79
Value Realized By Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
<CAPTION>
GROWTH
2015 2016 2017 2018 RATE
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $26,019 $26,800 $27,604 $28,432 3.0%
New Garage/Building Net Revenue 267 254 241 229
----------------------------------------
Adjusted EBDIT 26,286 27,054 27,845 28,661
Interest Expense 221 114 0 0
Depreciation 1,240 1,277 1,315 1,354
----------------------------------------
Earnings Before Taxes 25,046 25,777 26,530 27,307
Income Taxes @ 34% 8,516 8,764 9,020 9,284
----------------------------------------
----------------------------------------
Debt-Free Net Income (DFNI) $16,530 $17,013 $17,510 $18,023
----------------------------------------
----------------------------------------
Adjustments
Add Depreciation 1,240 1,277 1,315 1,354
Add: Debt Proceeds (Repayment) (1,523) (1,633) 0 0
Less: Capital Expenditures (1,240) (1,277) (1,315) (1,354)
Working Capital Adjustment @ 0% 0 0 0 0
----------------------------------------
----------------------------------------
Cash Flow Available for Dividends 15,007 15,380 17,510 18,023
Dividends Paid (2) @ 85% 12,756 13,073 14,884 15,320
Book Value (for Repurchase)(2) 58,883 61,190 63,816 66,519
Dividends Per Share (3) $13.46 $13.80 $15.71 $16.17
Book Value per Share (3) $62.14 $64.57 $67.34 $70.20
Sample Shareholder After-Tax Cash Flows (4):
Sample 1 - 2 years 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00
Sample 3 - 10 years 0.00 0.00 0.00 0.00
Sample 4 - 20 years 8.13 8.34 9.49 66.33
Months Away 210 222 234 246
Present Value Factor (5)@ 15% 0.0867 0.0754 0.0655 0.0570
----------------------------------------
----------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $0.00 $0.00 $0.00 $0.00
Sample 4 - 20 years $0.70 $0.63 $0.62 $3.78
Value Realized By Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
</TABLE>
NOTES:
(1) Historical EBDIT grown at 3% a year.
(2) Assumes that 85% of available Cash Flow is Distributed to shareholders.
Remaining Cash Flow increases (decreases) Book Value of IRA.
(3) Based upon 947,608 Class B Shares Outstanding.
(4) After tax Cash Flow. Assumes dividends are taxes at 39.6% and Capital
Gains at 20%. Based in Stock is $2.00 (Purchased original B Shares in
1981).
(5) Present Value Factor determined based upon Estimated Equity Rate of Return.
--------------------------------------
SENSITIVITY ANALYSIS - SHAREHOLDER 3
--------------------------------------
<TABLE>
<CAPTION>
Growth Rate (EBDIT)
1% 2% 3% 4% 5% 6%
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12% $42.65 $44.54 $46.54 $48.64 $50.85 $53.21
13% $40.60 $42.38 $44.28 $46.25 $48.36 $50.55
14% $38.67 $40.38 $42.17 $44.05 $46.00 $48.10
PRESENT 15% $36.92 $38.51 $40.10 $41.97 $43.85 $45.83
VALUE 16% $35.27 $36.78 $38.37 $40.06 $41.84 $43.70
FACTOR 17% $33.73 $35.19 $36.69 $38.28 $39.97 $41.74
18% $32.31 $33.68 $35.12 $36.62 $38.21 $39.89
19% $31.00 $32.29 $33.67 $35.10 $36.59 $38.18
20% $29.75 $30.97 $32.31 $33.65 $35.09 $33.59
---------------------------------------------------------------
</TABLE>
<PAGE>
- ----------------------------------------------
IRA FAIRNESS OPINION
SHAREHOLDER CASH FLOW MODEL - NEW STRUCTURE B SHAREHOLDER ONLY
VALUATION AS OF JULY 1, 1998 NEW STRUCTURE
DOLLARS IN THOUSANDS (EXCEPT PER SHARE VALUES) $2.00 BASIS
- ----------------------------------------------
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $15,283 $15,742 $16,214 $16,700 $17,201 $17,717 $18,249 $18,796
New Garage/Building Net Revenue 0 0 (264) (272) (441) 776 816 858
------------------------------------------------------------------------------
Adjusted EBDIT 15,283 15,742 15,950 16,428 16,760 18,493 19,065 19,654
Interest Expense 0 1,163 1,586 1,476 1,357 2,343 2,164 1,973
Depreciation 1,208 1,495 1,606 1,316 1,015 1,042 986 1,114
------------------------------------------------------------------------------
Earnings Before MAP and Tax Distributions 14,075 13,084 12,758 13,636 14,388 15,108 15,915 16,567
SAR Cash Payment (2) 0 0 0 0 0 0 0 0
DER Payments (3) @ 60% 0 7,850 7,655 8,181 8,633 9,065 9,549 9,940
------------------------------------------------------------------------------
Earnings Before Tax Distributions 14,075 5,234 5,103 5,455 5,755 6,043 6,366 6,627
Income Tax Distributions (4) @ 40.0% 5,630 2,094 2,041 2,182 2,302 2,417 2,547 2,651
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Net Income After Tax Distributions $8,445 $3,140 $3,062 $3,273 $3,453 $3,626 $3,819 $3,976
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Adjustments: YE 1997
-------
Add: Depreciation 1,495 1,606 1,316 1,015 1,042 986 1,114
Less: Capital Expenditures (8,895) (773) (971) (16,532) (844) (869) (896)
Add: Debt Proceeds (Repayment) 16,609 6,043 (1,574) (1,684) 14,084 (2,562) (2,741) (2,932)
Less: New Stock Dividends (5) (812) (812) (812) (812) (812) (812) (812)
Add: SAR Accrual Reversal (2) 0 0 0 0 0 0 0
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0 0
------------------------------------------------------------------------------
------------------------------------------------------------------------------
After Tax Cash Flow Requirements 16,609 (2,169) (1,554) (2,152) (2,245) (3,176) (3,436) (3,526)
SAR Value Accrued (2) 971 1,508 1,121 1,208 450 383 450
Per Share SAR Value $1.02 $1.59 $1.18 $1.27 $0.47 $0.40 $0.48
Cumulative SAR Value Accrued $1.02 $2.62 $3.80 $5.07 $5.55 $5.95 $6.43
Non-A B Shares Repurchase (6) 16,609
DER Per Share $0.00 $8.28 $8.08 $8.63 $9.11 $9.57 $10.08 $10.49
SAR/B Stock Sale Value Realized $28.24 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample Shareholder After-Tax Cash Flows (7):
Sample 1 - 2 years 22.99 5.00 6.46 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 22.99 5.00 4.88 5.21 5.50 9.13 0.00 0.00
Sample 3 - 10 years 22.99 5.00 4.88 5.21 5.50 5.78 6.09 6.34
Sample 4 - 20 years 22.99 5.00 4.88 5.21 5.50 5.78 6.09 6.34
Months Away 0 6 18 30 42 54 66 78
Present Value Factor (8) @ 20% 1.0000 0.9129 0.7607 0.6339 0.5283 0.4402 0.3669 0.3057
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $22.99 $4.57 $4.91 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $22.99 $4.57 $3.71 $3.30 $2.91 $4.02 $0.00 $0.00
Sample 3 - 10 years $22.99 $4.57 $3.71 $3.30 $2.91 $2.54 $2.23 $1.94
Sample 4 - 20 years $22.99 $4.57 $3.71 $3.30 $2.91 $2.54 $2.23 $1.94
Value Realized by Sample Shareholders:
Sample 1 - 2 years $32.47
-------
-------
Sample 2 - 5 years $41.50
-------
-------
Sample 3 - 10 years $49.37
-------
-------
Sample 4 - 20 years $56.11
-------
-------
<CAPTION>
2005 2006 2007 2008 2009 2010 2011 2012
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $19,360 $19,941 $20,539 $21,155 $21,790 $22,444 $23,117 $23,811
New Garage/Building Net Revenue 901 257 282 308 335 345 328 312
------------------------------------------------------------------------------
Adjusted EBDIT 20,261 20,198 20,821 21,463 22,125 22,789 23,445 24,123
Interest Expense 1,768 1,547 1,313 1,061 957 846 728 601
Depreciation 1,139 1,164 1,190 1,217 1,245 1,070 1,102 1,135
------------------------------------------------------------------------------
Earnings Before MAP and Tax Distributions 17,354 17,487 18,318 19,185 19,923 20,873 21,615 22,387
SAR Cash Payment (2) 0 0 971 1,508 1,121 1,208 450 383
DER Payments (3) @ 60% 10,413 10,492 10,991 11,511 11,954 12,524 12,969 13,432
------------------------------------------------------------------------------
Earnings Before Tax Distributions 6,941 6,995 6,357 6,166 6,848 7,141 8,196 8,572
Income Tax Distributions (4) @ 40.0% 2,776 2,798 2,543 2,466 2,739 2,857 3,278 3,429
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Net Income After Tax Distributions $4,165 $4,197 $3,814 $3,700 $4,109 $4,284 $4,918 $5,143
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Adjustments:
Add: Depreciation 1,139 1,164 1,190 1,217 1,245 1,070 1,102 1,135
Less: Capital Expenditures (922) (950) (979) (1.008) (1,038) (1,070) (1,102) (1,135)
Add: Debt Proceeds (Repayment) (3,137) (3,358) (3,594) (1,479) (1,583) (1,694) (1,812) (1,939)
Less: New Stock Dividends (5) (812) (812) (812) (812) (812) (812) (812) (812)
Add: SAR Accrual Reversal (2) 0 0 971 1,508 1,121 1,208 450 383
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0 0
------------------------------------------------------------------------------
------------------------------------------------------------------------------
After Tax Cash Flow Requirements (3,372) (3,956) (3,224) (574) (1,067) (1,298) (2,174) (2,368)
SAR Value Accrued (2) 433 241 589 3,126 3,042 2,986 2,744 2,755
Per Share SAR Value $0.46 $0.25 $0.62 $3.30 $3.21 $3.15 $2.90 $2.93
Cumulative SAR Value Accrued $6.88 $7.14 $6.74 $8.45 $10.48 $12.36 $14.79 $17.31
Non-A B Shares Repurchase (6)
DER Per Share $10.99 $11.07 $11.60 $12.15 $12.61 $13.22 $13.69 $14.17
SAR/B Stock Sale Value Realized $0.00 $0.00 $1.02 $1.59 $1.18 $1.27 $0.47 $0.40
Sample Shareholder After-Tax Cash Flows (7):
Sample 1 - 2 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 3 - 10 years 6.64 6.69 11.69 0.00 0.00 0.00 0.00 0.00
Sample 4 - 20 years 6.64 6.69 7.62 8.30 8.33 8.75 8.55 8.80
Months Away 90 102 114 126 138 150 162 174
Present Value Factor (8) @ 20% 0.2548 0.2123 0.1769 0.1474 0.1229 0.1024 0.0853 0.0711
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $1.69 $1.42 $2.07 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 4 - 20 years $1.69 $1.42 $1.35 $1.22 $1.02 $0.90 $0.73 $0.63
Present Value by Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
<CAPTION>
GROWTH
2013 2014 2015 2016 2017 2018 RATE
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $24,525 $25,261 $26,019 $26,800 $27,604 $28,432 3.0%
New Garage/Building Net Revenue 296 281 267 254 241 229
----------------------------------------------------------
Adjusted EBDIT 24,821 25,542 26,286 27,054 27,845 28,661
Interest Expense 466 321 221 114 0 0
Depreciation 1,169 1,204 1,240 1,277 1,315 1,354
----------------------------------------------------------
Earnings Before MAP and Tax Distributions 23,186 24,017 24,825 25,663 26,530 27,307
SAR Cash Payment (2) 450 433 241 589 3,126 3,042
DER Payments (3) @ 60% 13,912 14,410 14,895 15,398 15,918 16,384
----------------------------------------------------------
Earnings Before Tax Distributions 8,824 9,174 9,689 9,676 7,486 7,881
Income Tax Distributions (4) @ 40.0% 3,530 3,669 3,875 3,870 2,994 3,153
----------------------------------------------------------
----------------------------------------------------------
Net Income After Tax Distributions $5,294 $5,505 $5,814 $5,806 $4,492 $4,728
----------------------------------------------------------
----------------------------------------------------------
Adjustments:
Add: Depreciation 1,169 1,204 1,240 1,277 1,315 1,354
Less: Capital Expenditures (1,169) (1,204) (1,240) (1,277) (1,315) (1,354)
Add: Debt Proceeds (Repayment) (2,070) (1,423) (1,523) (1,633) 0 0
Less: New Stock Dividends (5) (812) (812) (812) (812) (812) (812)
Add: SAR Accrual Reversal (2) 450 433 241 589 3,126 3,042
Working Capital Adjustment @ 0% 0 0 0 0 0 0
----------------------------------------------------------
----------------------------------------------------------
After Tax Cash Flow Requirements (2,432) (1,802) (2,094) (1,856) 2,314 2,229
SAR Value Accrued (2) 2,862 3,702 3,719 3,949 6,806 6,958
Per Share SAR Value $3.02 $3.91 $3.92 $4.17 $7.18 $7.34
Cumulative SAR Value Accrued $19.85 $23.30 $26.98 $30.52 $34.41 $38.54
Non-A B Shares Repurchase (6)
DER Per Share $14.68 $15.21 $15.72 $16.25 $16.80 $17.29
SAR/B Stock Sale Value Realized $0.48 $0.46 $0.25 $0.62 $3.30 $3.21
Sample Shareholder After-Tax Cash Flows (7):
Sample 1 - 2 years 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 0.00 0.00
Sample 3 - 10 years 0.00 0.00 0.00 0.00 0.00 0.00
Sample 4 - 20 years 9.16 9.46 9.65 10.19 12.14 35.65
Months Away 186 198 210 222 234 246
Present Value Factor (8) @ 20% 0.0593 0.0494 0.0411 0.0343 0.0286 0.0238
----------------------------------------------------------
--------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 4 - 20 years $0.54 $0.47 $0.40 $0.35 $0.35 $0.85
Present Value by Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
</TABLE>
NOTES:
(1) Historical EBDIT grown at 3% a year.
(2) Assumes all Debt-Free Cash Flow after Stock 8% Dividends accrue to the
SARs. After ten years, accrual is reversed and paid in cash (and
expensed).
(3) DERs assumed to equal 60% of Earnings Before Taxes. Maximum DER payment
which allows for all cash flow items to be covered by current cash
flows.
(4) Distributions to S-Corporation shareholders to cover their corporate tax
liability.
(5) Make-whole dividend on S-Corporation stock calculated as 8% multiplied by
$28.24 stipulated price multipled by 359,584 shares issued.
(6) Based upon 588,149 Class B Shares not owned by A shareholders and price of
$28.24.
(7) After tax Cash Flow. Assumes dividends are taxed at 39.6% and Capital
Gains at 20%. Basis in Stock is $2.00 (Purchased original B Shares in
1981).
(8) Present Value Factor determined based upon Estimated Equity Rate of Return
Incremental 5% added to reflect risk of additional debt employed.
- -----------------------------------------
SENSITIVITY ANALYSIS - SHAREHOLDER 3
- -----------------------------------------
Growth Rate (EBDIT)
<TABLE>
<CAPTION>
1% 2% 3% 4% 5% 6%
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
14% $51.78 $53.76 $55.84 $58.03 $60.35 $62.79
15% $50.75 $52.62 $54.58 $56.66 $58.85 $61.65
PRESENT 16% $49.79 $51.55 $53.39 $55.38 $57.44 $59.61
VALUE 17% $48.89 $50.54 $52.30 $54.16 $56.13 $58.16
FACTOR 18% $48.04 $49.60 $51.27 $53.02 $58.87 $56.82
19% $47.20 $48.72 $50.28 $51.95 $53.72 $55.56
20% $46.45 $47.87 $49.37 $50.94 $52.63 $54.36
21% $45.73 $47.09 $48.51 $50.00 $51.57 $53.25
22% $45.05 $46.35 $47.68 $49.11 $50.61 $52.18
-------------------------------------------------------------
</TABLE>
<PAGE>
- -----------------------------------------------
IRA FAIRNESS OPINION
SHAREHOLDER CASH FLOW MODEL -- STATUS QUO SHAREHOLDER OWNING A AND B
VALUATION AS OF JULY 1, 1998 STATUS QUO
DOLLAR IN THOUSANDS (EXCEPT PER SHARE VALUES) $22.24 BASIS
- -----------------------------------------------
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004 2005
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $15,283 $15,742 $16,214 $16,700 $17,201 $17,717 $18,249 $18,796 $19,360
New Garage/Building Net Revenue 0 0 (264) (272) (441) 776 816 858 901
----------------------------------------------------------------------------------
Adjusted EBDIT 15,283 15,742 15,950 16,428 16,760 18,493 19,065 19,654 20,261
Interest Expense 0 0 507 487 465 1,554 1,485 1,412 1,333
Depreciation 1,208 1,495 1,606 1,316 1,015 1,042 986 1,114 1,139
----------------------------------------------------------------------------------
Earnings Before Taxes 14,075 14,247 14,344 15,112 15,745 17,451 18,079 18,540 19,122
Income Taxes @ 34% 4,786 4,844 4,877 5,138 5,353 5,933 6,147 6,304 6,502
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Debt-Free Net Income (DFNI) $9,289 $9,403 $9,467 $9,974 $10,392 $11,518 $11,932 $12,236 $12,620
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Adjustments:
Add: Depreciation 1,495 1,606 1,316 1,015 1,042 986 1,114 1,139
Add: Debt Proceeds (Repayment) 7,245 (288) (308) 15,557 (986) (1,055) (1,128) (1,207)
Less: Capital Expenditures (8,895) (773) (971) (16,532) (844) (869) (896) (922)
Working Capital Adjustments @ 0% 0 0 0 0 0 0 0 0
------------------------------------------------------------------------
------------------------------------------------------------------------
Cash Flow Available for Dividends 9,248 10,011 10,010 10,432 10,730 10,995 11,326 11,630
Dividends Paid (2) @ 85% 7,861 8,509 8,509 8,867 9,120 9,345 9,627 9,886
Book Value (for Repurchase)(2) 26,760 28,147 29,650 31,151 32,716 34,325 35,975 37,674 39,419
Dividends Per Share (3) $8.30 $8.98 $8.98 $9.36 $9.62 $9.86 $10.16 $10.43
Book Value per Share (3) $28.24 $29.70 $31.29 $32.87 $34.52 $36.22 $37.96 $39.76 $41.60
Sample Shareholder After-Tax Cash Flows (4):
Sample 1 - 2 years 5.01 34.90 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 5.01 5.42 5.42 5.65 39.23 0.00 0.00 0.00
Sample 3 - 10 years 5.01 5.42 5.42 5.65 5.81 5.96 6.14 6.30
Sample 4 - 20 years 5.01 5.42 5.42 5.65 5.81 5.96 6.14 6.30
Months Away 6 18 30 42 54 66 78 90
Present Value Factor (5) @ 15% 0.9325 0.8109 0.7051 0.6131 0.5332 0.4636 0.4031 0.3506
------------------------------------------------------------------------
------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $4.67 $28.30 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $4.67 $4.40 $3.82 $3.47 $20.92 $0.00 $0.00 $0.00
Sample 3 - 10 years $4.67 $4.40 $3.82 $3.47 $3.10 $2.76 $2.47 $2.21
Sample 4 - 20 years $4.67 $4.40 $3.82 $3.47 $3.10 $2.76 $2.47 $2.21
Value Realized by Sample Shareholders:
Sample 1 - 2 years $32.97
------
------
Sample 2 - 5 years $37.28
------
------
Sample 3 - 10 years $41.27
------
------
Sample 4 - 20 years $44.13
------
------
<CAPTION>
2006 2007 2008 2009 2010 2011 2012 2013
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $19,941 $20,539 $21,155 $21,790 $22,444 $23,117 $23,811 $24,525
New Garage/Building Net Revenue 257 282 308 335 345 328 312 296
----------------------------------------------------------------------
Adjusted EBDIT 20,198 20,821 21,463 22,125 22,789 23,445 24,123 24,821
Interest Expense 1,248 1,158 1,061 957 846 728 601 466
Depreciation 1,164 1,190 1,217 1,245 1,070 1,102 1,135 1,169
----------------------------------------------------------------------
Earnings Before Taxes 19,034 19,631 20,246 20,880 21,719 22,343 22,988 23,652
Income Taxes @ 14% 6,472 6,675 6,884 7,099 7,384 7,597 7,816 8,042
----------------------------------------------------------------------
----------------------------------------------------------------------
Debt-Free Net Income (DFNI) $12,562 $12,956 $13,362 $13,781 $14,335 $14,746 $15,172 $15,610
----------------------------------------------------------------------
----------------------------------------------------------------------
Adjustments:
Add: Depreciation 1,164 1,190 1,217 1,245 1,070 1,102 1,135 1,169
Add: Debt Proceeds (Repayment) (1,292) (1,382) (1,479) (1,583) (1,694) (1,812) (1,939) (2,070)
Less: Capital Expenditures (950) (979) (1,008) (1,038) (1,070) (1,102) (1,135) (1,169)
Working Capital Adjustments @ 0% 0 0 0 0 0 0 0 0
----------------------------------------------------------------------
----------------------------------------------------------------------
Cash Flow Available for Dividends 11,484 11,786 12,092 12,405 12,641 12,934 13,233 13,540
Dividends Paid (2) @ 85% 9,762 10,018 10,278 10,544 10,745 10,994 11,248 11,509
Book Value (for Repurchase)(2) 41,141 42,909 44,723 46,584 48,480 50,421 52,406 54,437
Dividends Per Share (3) $10.30 $10.57 $10.85 $11.13 $11.34 $11.60 $11.87 $12.15
Book Value per Share (3) $43.42 $45.28 $47.20 $49.16 $51.16 $53.21 $55.30 $57.45
Sample Shareholder After-Tax Cash Flows (4):
Sample 1 - 2 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 3 - 10 years 6.22 47.06 0.00 0.00 0.00 0.00 0.00 0.00
Sample 4 - 20 years 6.22 6.38 6.55 6.72 6.85 7.01 7.17 7.34
Months Away 102 114 126 138 150 162 174 186
Present Value Factor (5) @ 15% 0.3048 .02651 0.2305 0.2004 0.1743 0.1516 0.1318 0.1146
----------------------------------------------------------------------
----------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $1.90 $12.47 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 4 - 20 years $1.90 $1.69 $1.51 $1.35 $1.19 $1.06 $0.94 $0.84
Value Realized by Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
<CAPTION>
GROWTH
2014 2015 2016 2017 2018 RATE
------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $25,261 $26,019 $26,800 $27,604 $28,432 3.0%
New Garage/Building Net Revenue 281 267 254 241 229
--------------------------------------------
Adjusted EBDIT 25,542 26,286 27,054 27,845 28,661
Interest Expense 321 221 114 0 0
Depreciation 1,204 1,240 1,277 1,315 1,354
--------------------------------------------
Earnings Before Taxes 24,338 25,046 25,777 26,530 27,307
Income Taxes @ 14% 8,275 8,516 8,764 9,020 9,284
--------------------------------------------
--------------------------------------------
Debt-Free Net Income (DFNI) $16,063 $16,530 $17,013 $17,510 $18,023
--------------------------------------------
--------------------------------------------
Adjustments:
Add: Depreciation 1,204 1,240 1,277 1,315 1,354
Add: Debt Proceeds (Repayment) (1,423) (1,523) (1,633) 0 0
Less: Capital Expenditures (1,204) (1,240) (1,277) (1,315) (1,354)
Working Capital Adjustments @ 0% 0 0 0 0 0
--------------------------------------------
--------------------------------------------
Cash Flow Available for Dividends 14,640 15,007 15,380 17,510 18,023
Dividends Paid (2) @ 85% 12,444 12,756 13,073 14,884 15,320
Book Value (for Repurchase)(2) 56,633 58,883 61,190 63,816 65,519
Dividends Per Share (3) $13.13 $13.46 $13.80 $15.71 $16.17
Book Value per Share (3) $59.76 $62.14 $64.57 $67.34 $70.20
Sample Shareholder After-Tax Cash Flows (4)
Sample 1 - 2 years 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 0.00
Sample 3 - 10 years 0.00 0.00 0.00 0.00 0.00
Sample 4 - 20 years 7.93 8.13 8.34 9.49 70.37
Months Away 198 210 222 234 246
Present Value Factor (5) @ 15% 0.0997 0.0867 0.0754 0.0655 0.0570
--------------------------------------------
--------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $0.00 $0.00 $0.00 $0.00 $0.00
Sample 4 - 20 years $0.79 $0.70 $0.63 $0.62 $4.01
Value Realized by Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
</TABLE>
NOTES:
(1) Historical EBDIT grown at 3% a year.
(2) Assumes that 85% of available Cash Flow is Distributed to shareholders.
Remaining Cash Flow increases (decreases) Book Value of IRA.
(3) Based upon 947,608 Class B Shares Outstanding.
(4) After tax Cash Flow. Assumes dividends are taxed at 39.6% and Capital Gains
at 20%. Basis in Stock is $22.24 (Purchased shares in 1993 or 1994).
(5) Present Value Factor determined based upon Estimated Equity Rate of Return.
- --------------------------------------
SENSITIVITY ANALYSIS -- SHAREHOLDER 3
- --------------------------------------
Growth Rate (EBDIT)
<TABLE>
<CAPTION>
1% 2% 3% 4% 5% 6%
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12% $44.03 $45.92 $47.92 $50.02 $52.23 $54.59
13% $41.86 $43.65 $45.55 $47.51 $49.62 $51.82
14% $39.84 $41.55 $43.33 $45.22 $47.16 $49.26
PRESENT 15% $37.99 $39.59 $41.27 $43.04 $44.92 $46.90
VALUE 16% $36.26 $37.77 $39.36 $41.05 $42.83 $44.69
FACTOR 17% $34.64 $36.10 $37.60 $39.19 $40.88 $42.65
18% $33.15 $34.52 $35.96 $37.46 $39.05 $40.73
19% $31.77 $33.07 $34.45 $35.88 $37.37 $38.95
20% $30.46 $31.69 $33.02 $34.37 $35.81 $37.31
----------------------------------------------------------
</TABLE>
<PAGE>
- ----------------------------------------------
IRA FAIRNESS OPINION
SHAREHOLDER CASH FLOW MODEL - NEW STRUCTURE SHAREHOLDER OWNING A AND B
VALUATION AS OF JULY 1, 1998 NEW STRUCTURE
DOLLARS IN THOUSANDS (EXCEPT PER SHARE VALUES) $22.24 BASIS
- ---------------------------------------------
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $15,283 $15,742 $16,214 $16,700 $17,201 $17,717 $18,249 $18,796
New Garage/Building Net Revenue 0 0 (264) (272) (441) 776 816 858
-----------------------------------------------------------------------------
Adjusted EBDIT 15,283 15,742 15,950 16,428 16,760 18,493 19,065 19,654
Interest Expense 0 1,163 1,586 1,476 1,357 2,343 2,164 1,973
Depreciation 1,208 1,495 1,606 1,316 1,015 1,042 986 1,114
-----------------------------------------------------------------------------
Earnings Before MAP and Tax Distributions 14,075 13,084 12,758 13,636 14,388 15,108 15,915 16,567
SAR Cash Payments(2) 0 0 0 0 0 0 0 0
DER Payments(3) @ 60% 0 7,850 7,655 8,181 8,633 9,065 9,549 9,940
-----------------------------------------------------------------------------
Earnings Before Tax Distributions 14,075 5,234 5,103 5,455 5,755 6,043 6,366 6,627
Income Tax Distributions(4) @ 40.00% 5,630 2,094 2,041 2,182 2,302 2,417 2,547 2,651
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Net Income After Tax Distributions $8,445 $3,140 $3,062 $3,273 $3,453 $3,626 $3,819 $3,976
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Adjustments: YE 1997
--------
Add: Depreciation 1,495 1,606 1,316 1,015 1,042 986 1,114
Less: Capital Expenditures (8,895) (773) (971) (16,532) (844) (869) (896)
Add: Debt Proceeds (Repayment) 16,609 6,043 (1,574) (1,684) 14,084 (2,562) (2,741) (2,932)
Less: New Stock Dividends(5) (812) (812) (812) (812) (812) (812) (812)
Add: SAR Accrual Reversal(2) 0 0 0 0 0 0 0
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0 0
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
After Tax Cash Flow Requirements 16,609 (2,169) (1,554) (2,152) (2,245) (3,176) (3,436) (3,526)
SAR Value Accrued(2) 971 1,508 1,121 1,208 450 383 450
Per Share SAR Value $1.02 $1.59 $1.18 $1.27 $0.47 $0.40 $0.48
Cumulative SAR Value Accrued $1.02 $2.62 $3.80 $5.07 $5.55 $5.95 $6.43
Non-A B Share Repurchase(6) 16,609
DER Per Share $0.00 $8.28 $8.08 $8.63 $9.11 $9.57 $10.08 $10.49
Make-Whole Dividend $0.00 $2.26 $2.26 $2.26 $2.26 $2.26 $2.26 $2.26
SAR/B Stock Sale Value Realized $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample Shareholder After-Tax Cash Flows(7):
Sample 1 - 2 years 0.00 6.37 34.86 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 6.37 6.24 6.58 6.87 37.54 0.00 0.00
Sample 3 - 10 years 0.00 6.37 6.24 6.58 6.87 7.14 7.45 7.70
Sample 4 - 20 years 0.00 6.37 6.24 6.58 6.87 7.14 7.45 7.70
Months Away 0 6 18 30 42 54 66 78
Present Value Factor(8) @ 17.0% 1.0000 0.9245 0.7902 0.6754 0.5772 0.4934 0.4217 0.3604
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Present Value For Sample Shareholders:
Sample 1 - 2 years $0.00 $5.89 $27.55 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $5.89 $4.93 $4.44 $3.96 $18.52 $0.00 $0.00
Sample 3 - 10 years $0.00 $5.89 $4.93 $4.44 $3.96 $3.53 $3.14 $2.78
Sample 4 - 20 years $0.00 $5.89 $4.93 $4.44 $3.96 $3.53 $3.14 $2.78
Value Realized by Sample Shareholders:
Sample 1 - 2 years $33.44
-------
-------
Sample 2 - 5 years $37.74
-------
-------
Sample 3 - 10 years $42.27
-------
-------
Sample 4 - 20 years $48.63
-------
-------
<CAPTION>
2005 2006 2007 2008 2009 2010 2011 2012
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $19,360 $19,941 $20,539 $21,155 $21,790 $22,444 $23,117 $23,811
New Garage/Building Net Revenue 901 257 282 308 335 345 328 312
-----------------------------------------------------------------------------
Adjusted EBDIT 20,261 20,198 20,821 21,463 22,125 22,789 23,445 24,123
Interest Expense 1,768 1,547 1,313 1,061 957 846 728 601
Depreciation 1,139 1,164 1,190 1,217 1,245 1,078 1,102 1,135
-----------------------------------------------------------------------------
Earnings Before MAP and Tax Distributions 17,354 17,487 18,318 19,185 19,923 20,873 21,615 22,387
SAR Cash Payments(2) 0 0 971 1,508 1,121 1,208 450 383
DER Payments(3) @ 60% 10,413 10,492 10,991 11,511 11,954 12,524 12,969 13,432
-----------------------------------------------------------------------------
Earnings Before Tax Distributions 6,941 6,995 6,357 6,166 6,848 7,141 8,196 8,572
Income Tax Distributions(4) @ 40.00% 2,776 2,798 2,543 2,466 2,739 2,857 3,278 3,429
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Net Income After Tax Distribution $4,165 $4,197 $3,814 $3,700 $4,109 $4,284 $4,918 $5,143
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Adjustments:
Add: Depreciation 1,139 1,164 1,190 1,217 1,245 1,070 1,102 1,135
Less: Capital Expenditures (922) (950) (979) (1,008) (1,038) (1,070) (1,102) (1,135)
Add: Debt Proceeds (Repayment) (3,137) (3,358) (3,594) (1,479) (1,583) (1,694) (1,812) (1,939)
Less: New Stock Dividends(5) (812) (812) (812) (812) (812) (812) (812) (812)
Add: SAR Accrual Reversal(2) 0 0 971 1,508 1,121 1,208 450 383
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0 0
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
After Tax Cash Flow Requirements (3,732) (3,956) (3,224) (574) (1,067) (1,298) (2,174) (2,368)
SAR Value Accrued(2) 433 241 589 3,126 3,042 2,986 2,744 2,775
Per Share SAR Value $0.46 $0.25 $0.62 $3.30 $3.21 $3.15 $2.90 $2.93
Cumulative SAR Value Accrued $6.88 $7.14 $6.74 $8.45 $10.48 $12.36 $14.79 $17.31
Non-A B Share Repurchase(6)
DER Per Share $10.99 $11.07 $11.60 $12.15 $12.61 $13.22 $13.69 $14.17
Make-Whole Dividend $2.26 $2.26 $2.26 $2.26 $2.26 $2.26 $2.26 $2.26
SAR/B Stock Sale Value Realized $0.00 $0.00 $1.02 $1.59 $1.18 $1.27 $0.47 $0.40
Sample Shareholder After-Tax Cash Flows(7):
Sample 1 - 2 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 3 - 10 years 8.00 8.05 40.10 0.00 0.00 0.00 0.00 0.00
Sample 4 - 20 years 8.00 8.05 8.99 9.66 9.69 10.12 9.92 10.16
Months Away 90 102 114 126 138 150 162 174
Present Value Factor(8) @ 17.0% 0.3080 0.2633 0.2250 0.1923 0.1644 0.1405 0.1201 0.1026
-----------------------------------------------------------------------------
Present Value For Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $2.46 $2.12 $9.02 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 4 - 20 years $2.46 $2.12 $2.02 $1.86 $1.59 $1.42 $1.19 $1.04
<CAPTION>
GROWTH
2013 2014 2015 2016 2017 2018 RATE
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $24,525 $25,261 $26,019 $26,800 $26,604 $28,432 3.0%
New Garage/Building Net Revenue 296 281 267 254 241 229
----------------------------------------------------------
Adjusted EBDIT 24,821 25,542 26,286 27,054 27,845 28,661
Interest Expense 466 321 221 114 0 0
Depreciation 1,169 1,204 1,240 1,277 1,315 1,354
----------------------------------------------------------
Earnings Before MAP and Tax Distributions 23,186 24,017 24,825 25,663 26,530 27,307
SAR Cash Payments(2) 450 433 241 589 3,126 3,042
DER Payments(3)@ 60% 13,912 14,410 14,895 15,398 15,918 16,384
----------------------------------------------------------
Earnings Before Tax Distributions 8,824 9,174 9,689 9,676 7,486 7,881
Income Tax Distributions(4) @ 40.00% 3,530 3,669 3,875 3,870 2,994 3,153
----------------------------------------------------------
----------------------------------------------------------
Net Income After Tax Distribution $5,294 $5,505 $5,814 $5,806 $4,492 $4,728
----------------------------------------------------------
----------------------------------------------------------
Adjustments:
Add: Depreciation 1,169 1,204 1,240 1,277 1,315 1,354
Less: Capital Expenditures (1,169) (1,204) (1,240) (1,277) (1,315) (1,354)
Add: Debt Proceeds (Repayment) (2,070) (1,423) (1,523) (1,633) 0 0
Less: New Stock Dividends(5) (812) (812) (812) (812) (812) (812)
Add: SAR Accrual Reversal(2) 450 433 241 589 3,126 3,042
Working Capital Adjustment @ 0% 0 0 0 0 0 0
----------------------------------------------------------
----------------------------------------------------------
After Tax Cash Flow Requirements (2,432) (1,802) (2,094) (1,856) 2,314 2,229
SAR Value Accrued(2) 2,862 3,702 3,719 3,949 6,806 6,958
Per Share SAR Value $3.02 $3.91 $3.92 $4.17 $7.18 $7.34
Cumulative SAR Value Accrued $19.85 $23.30 $26.98 $30.52 $34.41 $38.54
Non-A B Share Repurchase(6)
DER Per Share $14.68 $15.21 $15.72 $16.25 $16.80 $17.29
Make-Whole Dividend $2.26 $2.26 $2.26 $2.26 $2.26 $2.26
SAR/B Stock Sale Value Realized $0.48 $0.46 $0.25 $0.62 $3.30 $3.21
Sample Shareholder After-Tax Cash Flows(7):
Sample 1 - 2 years 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 0.00 0.00
Sample 3 - 10 years 0.00 0.00 0.00 0.00 0.00 0.00
Sample 4 - 20 years 10.52 10.83 11.01 11.55 13.50 64.05
Months Away 186 198 210 222 234 246
Present Value Factor(8) @ 17.0% 0.0877 0.0750 0.0641 0.0548 0.0468 0.0400
----------------------------------------------------------
----------------------------------------------------------
Present Value For Sample Shareholders:
Sample 1 - 2 years 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 0.00 0.00
Sample 3 - 10 years 0.00 0.00 0.00 0.00 0.00 0.00
Sample 4 - 20 years $0.92 $0.81 $0.71 $0.63 $0.63 $2.56
</TABLE>
NOTES:
(1) Historical EBDIT grown at 3% a year.
(2) Assumes all Debt-Free Cash Flow after Stock 8% Dividends accrue to the
SARs. After ten years, accrual is reversed and paid in cash (and
expensed).
(3) DERs assumed to equal 60% of Earnings Before Taxes. Maximum DER payment
which allows for all cash flow items to be covered by current cash
flows.
(4) Distributions to S-Corporation shareholders to cover their corporate tax
liability.
(5) Make-whole dividend on S-Corporation stock calculated as 8% multiplied by
$28.24 stipulated price multiplied by 359,584 shares issued.
(6) Based upon 588,149 Class B Shares not owned by A shareholders and a price
of $28.24.
(7) After tax Cash Flow. Assumes dividends are taxed at 39.6% and Capital Gains
at 20%. Basis in Stock is $22.24 (Purchased shares in 1993 or 1994).
(8) Present Value Factor determined based upon Estimated Equity Rate of Return
Incremental 2% added to reflect risk of additional debt employed.
---------------------------------------
SENSITIVITY ANALYSIS -- SHAREHOLDER 3
----------------------------------------
Growth Rate (EBDIT)
<TABLE>
<CAPTION>
1% 2% 3% 4% 5% 6%
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
14% $44.17 $46.15 $48.24 $50.45 $52.76 $55.19
15% $42.28 $44.15 $46.11 $48.18 $50.36 $52.67
16% $40.50 $42.26 $44.11 $46.09 $48.14 $50.32
PERCENT 17% $38.84 $40.50 $42.27 $44.13 $46.09 $48.13
VALUE 18% $37.29 $38.89 $40.55 $42.31 $44.16 $46.09
FACTOR 19% $35.86 $37.38 $38.96 $40.60 $42.36 $44.20
20% $34.53 $35.93 $37.43 $39.03 $40.68 $42.43
21% $33.24 $34.59 $36.02 $37.53 $39.10 $40.74
22% $32.07 $33.35 $34.69 $36.11 $37.62 $39.19
-------------------------------------------------------
</TABLE>
<PAGE>
- ----------------------------------------------
IRA FAIRNESS OPINION
SHAREHOLDER CASH FLOW MODEL -- STATUS QUO SHAREHOLDER OWNING A AND B
VALUATIONS AS OF JULY 1, 1998 STATUS QUO
DOLLARS IN THOUSANDS (EXCEPT PER SHARE VALUES) $2.00 BASIS
- ----------------------------------------------
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $15,283 $15,742 $16,214 $16,700 $17,201 $17,717 $18,249 $18,796 $19,360 $19,941 $20,539
New Garage/Building Net Revenue 0 0 (264) (272) (441) 776 816 858 901 257 282
------------------------------------------------------------------------------------------
Adjusted EBDIT 15,283 15,742 15,950 16,428 16,760 18,493 19,065 19,654 20,261 20,198 20,821
Interest Expense 0 0 507 487 465 1,554 1,485 1,412 1,333 1,248 1,158
Depreciation 1,208 1,495 1,606 1,316 1,015 1,042 986 1,114 1,139 1,164 1,190
------------------------------------------------------------------------------------------
Earnings Before Taxes 14,075 14,247 14,344 15,112 15,745 17,451 18,079 18,540 19,122 19,034 19,631
Income Taxes @ 34% 4,786 4,844 4,877 5,138 5,353 5,933 6,147 6,304 6,502 6,472 6,675
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Debt-Free Net Income (DFNI) $9,289 $9,403 $9,467 $9,974 $10,392 $11,518 $11,932 $12,236 $12,620 $12,562 $12,956
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Adjustments:
Add: Depreciation 1,495 1,606 1,316 1,015 1,042 986 1,114 1,139 1,164 1,190
Add: Debt Proceeds (Repayment) 7,245 (288) (308) 15,557 (986) (1,055) (1,128) (1,207) (1,292) (1,382)
Less: Capital Expenditure (8,895) (773) (971)(16,532) (844) (869) (896) (922) (950) (979)
Wordking Capital Adjustment @ 0% 0 0 0 0 0 0 0 0 0 0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cash Flow Available for Dividends 9,248 10,011 10,010 10,432 10,730 10,995 11,326 11,630 11,484 11,786
Dividends Paid (2) @ 85% 7,861 8,509 8,509 8,867 9,120 9,345 9,627 9,886 9,762 10,018
Book Value (for Repurchase) (2) 26,760 28,147 29,650 31,151 32,716 34,325 35,975 37,674 39,419 41,141 42,909
Dividends Per Share (3) $8.30 $8.98 $8.98 $9.36 $9.62 $9.86 $10.16 $10.43 $10.30 $10.57
Book Value per Share (3) $28.24 $29.70 $31.29 $32.87 $34.52 $36.22 $37.96 $39.76 $41.60 $43.42 $45.28
Sample Shareholder After-Tax Cash Flows (4):
Sample 1-2 years 5.01 30.86 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2-5 years 5.01 5.42 5.42 5.65 35.19 0.00 0.00 0.00 0.00 0.00
Sample 3-10 years 5.01 5.42 5.42 5.65 5.81 5.96 6.14 6.30 6.22 43.01
Sample 4-20 years 5.01 5.42 5.42 5.65 5.81 5.96 6.14 6.30 6.22 6.38
Months Away 6 18 30 42 54 66 78 90 102 114
Present Value Factor (5) @ 15% 0.9325 0.8109 0.7051 0.6131 0.5332 0.4636 0.4031 0.3506 0.3048 0.2651
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Value Realized for Sample Shareholders:
Sample 1-2 years $4.67 $25.02 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2-5 years $4.67 $4.40 $3.82 $3.47 $18.76 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 3-10 years $4.67 $4.40 $3.82 $3.47 $3.10 $2.76 $2.47 $2.21 $1.90 $11.40
Sample 4-20 years $4.67 $4.40 $3.82 $3.47 $3.10 $2.76 $2.47 $2.21 $1.90 $1.69
Value Realized by Sample Shareholders:
Sample 1-2 years $29.69
--------
--------
Sample 2-5 years $35.12
--------
--------
Sample 3-10 years $48.20
--------
--------
Sample 4-20 years $43.90
--------
--------
<CAPTION>
GROWTH
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 RATE
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $21,155 $21,790 $22,444 $23,117 $23,811 $24,525 $25,261 $26,019 $26,800 $27,604 $28,432 3.0%
New Garage/Building Net Revenue 308 335 345 328 312 296 281 267 254 241 229
----------------------------------------------------------------------------------------
Adjusted EBDIT 21,463 22,125 22,789 23,445 24,123 24,821 25,542 26,286 27,054 27,845 28,661
Interest Expense 1,061 957 846 728 601 466 321 221 114 0 0
Depreciation 1,217 1,245 1,070 1,102 1,135 1,169 1,204 1,240 1,277 1,315 1,354
----------------------------------------------------------------------------------------
Earnings Before Taxes 20,246 20,880 21,719 22,343 22,988 23,652 24,338 25,046 25,777 26,530 27,307
Income Taxes @ 34% 6,884 7,099 7,384 7,597 7,816 8,042 8,275 8,516 8,764 9,020 9,284
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Debt-Free Net Income (DFNI) $13,362 $13,781 $14,335 $14,746 $15,172 $15,610 $16,063 $16,530 $17,013 $17,510 $18,023
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Adjustments:
Add: Depreciation 1,217 1,245 1,070 1,102 1,135 1,169 1,204 1,240 1,277 1,315 1,354
Add: Debt Proceeds (Repayment) (1,479) (1,583) (1,694) (1,812) (1,939) (2,070) (1,423) (1,523) (1,633) 0 0
Less: Capital Expenditure (1,008) (1,038) (1,070) (1,102) (1,135) (1,169) (1,204) (1,240) (1,277) (1,315) (1,354)
Wordking Capital Adjustment @ 0% 0 0 0 0 0 0 0 0 0 0 0
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Cash Flow Available for Dividends 12,092 12,405 12,641 12,934 13,233 13,540 14,640 15,007 15,380 17,510 18,023
Dividends Paid (2) @ 85% 10,278 10,544 10,745 10,994 11,248 11,509 12,444 12,756 13,073 14,884 15,320
Book Value (for Repurchase) (2) 44,723 46,584 48,480 50,421 52,406 54,437 56,633 58,883 61,190 63,816 66,519
Dividends Per Share (3) $10.85 $11.13 $11.34 $11.60 $11.87 $12.15 $13.13 $13.46 $13.80 $15.71 $16.17
Book Value per Share (3) $47.20 $49.16 $51.16 $53.21 $55.30 $57.45 $59.76 $62.14 $64.57 $67.34 $70.20
Sample Shareholder After-Tax Cash
Flows (4):
Sample 1-2 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2-5 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 3-10 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 4-20 years 6.55 6.72 6.85 7.01 7.17 7.34 7.93 8.13 8.34 9.49 66.33
Months Away 126 138 150 162 174 186 198 210 222 234 246
Present Value Factor (5) @ 15% 0.2305 0.2004 0.1743 0.1516 0.1318 0.1146 0.0997 0.0867 0.0754 0.0655 0.0570
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Value Realized for Sample Shareholders
Sample 1-2 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2-5 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 3-10 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 4-20 years $1.51 $1.35 $1.19 $1.06 $0.94 $0.84 $0.79 $0.70 $0.63 $0.62 $3.78
Value Realized by Sample Shareholders:
Sample 1-2 years
Sample 2-5 years
Sample 3-10 years
Sample 4-20 years
</TABLE>
Notes:
(1) Historical EBDIT grown at 3% a year.
(2) Assumes that 85% of available Cash Flow is Distributed to shareholders.
Remaining Cash Flow increases (decreases) Book Value of IRA.
(3) Based upon 947,608 Class B Shares Outstanding.
(4) After tax Cash Flow. Assumes dividends are taxed at 39.6% and Capital Gains
at 20%. Basis in Stock is $2.00 (Purchase original B Shares in 1981).
(5) Percent Value Factor determined based upon Estimated Equity Rate of Return.
---------------------------------------
SENSITIVITY ANALYSIS -- SHAREHOLDER 3
---------------------------------------
Growth Rate (EBDIT)
<TABLE>
<CAPTION>
1% 2% 3% 4% 5% 6%
----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12% $42.65 $44.54 $46.54 $48.64 $50.85 $53.21
13% $40.60 $42.38 $44.28 $46.25 $48.36 $50.55
14% $38.67 $40.38 $42.17 $44.05 $46.00 $48.10
PERCENT 15% $36.92 $38.51 $40.20 $41.97 $43.85 $45.83
VALUE 16% $35.27 $36.78 $38.37 $40.06 $41.84 $43.70
FACTOR 17% $33.73 $35.19 $36.69 $38.28 $39.97 $41.74
18% $32.31 $33.68 $35.12 $36.62 $38.21 $39.89
19% $31.00 $32.29 $33.67 $35.10 $36.59 $38.18
20% $29.75 $30.97 $32.31 $33.65 $35.09 $36.59
----------------------------------------------
</TABLE>
<PAGE>
- ---------------------------------------------
IRA FAIRNESS OPINION
SHAREHOLDER CASH FLOW MODEL -- NEW STRUCTURE SHAREHOLDER OWNING A AND B
VALUATION AS OF JULY 1, 1998 NEW STRUCTURE
DOLLARS IN THOUSANDS (EXCEPT PER SHARE VALUES) $2.00 BASIS
- ---------------------------------------------
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $15,283 $15,742 $16,214 $16,700 $17,201 $17,717 $18,249 $18,796
New Garage/Building Net Revenue 0 0 (264) (272) (441) 776 816 858
-----------------------------------------------------------------------
Adjusted EBDIT 15,283 15,742 15,950 16,428 16,760 18,493 19,065 19,654
Interest Expense 0 1,163 1,586 1,476 1,357 2,343 2,164 1,973
Depreciation 1,208 1,495 1,606 1,316 1,015 1,042 986 1,114
-----------------------------------------------------------------------
Earnings Before MAP and Tax Distributions 14,075 13,084 12,758 13,636 14,388 15,108 15,915 16,567
SAR Cash Payments (2) 0 0 0 0 0 0 0 0
DER Payments (1) @ 60% 0 7,850 7,655 8,181 8,633 9,065 9,549 9,940
-----------------------------------------------------------------------
Earnings Before Tax Distributions 14,075 5,234 5,103 5,455 5,755 6,043 6,366 6,627
Income Tax Distributions (4) @ 40.0% 5,630 2,094 2,041 2,182 2,302 2,417 2,547 2,651
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Net Income After Tax Distributions $8,445 $3,140 $3,062 $3,273 $3,453 $3,626 $3,819 $3,976
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Adjustments: YE1997
------
Add: Depreciation 1,495 1,606 1,316 1,015 1,042 986 1,114
Less: Capital Expenditures (8,895) (773) (971) (16,532) (844) (869) (896)
Add: Debt Proceeds (Repayment) 16,609 6,043 (1,574) (1,684) 14,084 (2,562) (2,741) (2,932)
Less: New Stock Dividends (5) (812) (812) (812) (812) (812) (812) (812)
Add: SAR Accural Reversal (2) 0 0 0 0 0 0 0
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0 0
-----------------------------------------------------------------------
-----------------------------------------------------------------------
After Tax Cash Flow Requirements 16,609 (2,169) (1,554) (2,152) (2,245) (3,176) (3,436) (3,526)
SAR Value Accrued (2) 971 1,508 1,121 1,208 450 383 450
Per Share SAR Value $1.02 $1.59 $1.18 $1.27 $0.47 $0.40 $0.48
Cummulative SAR Value Accrued $1.02 $2.62 $3.80 $5.07 $5.55 $5.95 $6.43
Non-A B Share Repurchase (6) 16,609
DER Per Share $0.00 $8.28 $8.08 $8.63 $9.11 $9.57 $10.08 $10.49
Make-Whole Dividend $0.00 $2.26 $2.26 $2.26 $2.26 $2.26 $2.26 $2.26
SAR/B Stock Sale Value Realized $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample Shareholder After-Tax Cash Flows (7):
Sample 1 - 2 years 0.00 6.37 30.82 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 6.37 6.24 6.58 6.87 33.49 0.00 0.00
Sample 3 - 10 years 0.00 6.37 6.24 6.58 6.87 7.14 7.45 7.70
Sample 4 - 20 years 0.00 6.37 6.24 6.58 6.87 7.14 7.45 7.70
Months Away 0 6 18 30 42 54 66 73
Present Value Factor (8) @ 17.0% 1.0000 0.9245 0.7902 0.6754 0.5772 0.4934 0.4217 0.3604
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $5.89 $24.35 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $5.89 $4.93 $4.44 $3.96 $16.52 $0.00 $0.00
Sample 3 - 10 years $0.00 $5.89 $4.93 $4.44 $3.96 $3.53 $3.14 $2.78
Sample 4 - 20 years $0.00 $5.89 $4.93 $4.44 $3.96 $3.53 $3.14 $2.78
Value Realized by Sample Shareholders:
Sample 1 - 2 years $38.24
-------
-------
Sample 2 - 5 years $35.74
-------
-------
Sample 3 - 10 years $41.36
-------
-------
Sample 4 - 20 years $48.47
-------
-------
<CAPTION>
2005 2006 2007 2008 2009 2010 2011 2012
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $19,360 $19,941 $20,539 $21,155 $21,790 $22,444 $23,117 $23,811
New Garage/Building Net Revenue 901 257 282 308 335 345 328 312
------------------------------------------------------------------------
Adjusted EBDIT 20,261 20,198 20,821 21,463 22,125 22,789 23,445 24,123
Interest Expense 1,768 1,547 1,313 1,061 957 846 728 601
Depreciation 1,139 1,164 1,190 1,217 1,245 1,070 1,102 1,135
------------------------------------------------------------------------
Earnings Before MAP and Tax Distributions 17,354 17,487 18,318 19,185 19,923 20,873 21,615 22,387
SAR Cash Payments (2) 0 0 971 1,508 1,121 1,208 450 383
DER Payments (1) @ 60% 10,413 10,492 10,991 11,511 11,954 12,524 12,969 13,432
------------------------------------------------------------------------
Earnings Before Tax Distributions 6,941 6,995 6,357 6,166 6,848 7,141 8,196 8,572
Income Tax Distributions (4) @ 40.0% 2,776 2,798 2,543 2,466 2,739 2,857 3,278 3,429
------------------------------------------------------------------------
------------------------------------------------------------------------
Net Income After Tax Distrubutions $4,165 $4,197 $3,814 $3,700 $4,109 $4,284 $4,918 $5,143
------------------------------------------------------------------------
------------------------------------------------------------------------
Adjustments:
Add: Depreciation 1,139 1,164 1,190 1,217 1,245 1,070 1,102 1,135
Less: Capital Expenditures (922) (950) (979) (1,008) (1,038) (1,070) (1,102) (1,135)
Add: Debt Proceeds (Repayment) (3,137) (3,358) (3,594) (1,479) (1,583) (1,694) (1,812) (1,939)
Less: Nwe Stock Dividends (5) (812) (812) (812) (812) (812) (812) (812) (812)
Add: SAR Accural Reversal (2) 0 0 971 1,508 1,121 1,208 450 383
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0 0
------------------------------------------------------------------------
------------------------------------------------------------------------
After Tax Cash Flow Requirements (3,732) (3,956) (3,224) (574) (1,067) (1,298) (2,174) (2,368)
SAR Value Accrued (2) 433 241 589 3,126 3,042 2,986 2,744 2,755
Per Share SAR Value $0.46 $0.25 $0.62 $3.30 $3.21 $3.15 $2.90 $2.93
Cummulative SAR Value Accrued $6.88 $7.14 $6.74 $8.45 $10.48 $12.36 $14.79 $17.31
Non-A B Share Repurchase (6)
DER Per Share $10.99 $11.07 $11.60 $12.15 $12.61 $13.22 $13.69 $14.17
Make-Whole Dividend $2.26 $2.26 $2.26 $2.26 $2.26 $2.26 $2.26 $2.26
SAR/B Stock Sale Value Realized $0.00 $0.00 $1.02 $1.59 $1.18 $1.27 $0.47 $0.40
Sample Shareholder After-Tax Cash Flows (7):
Sample 1 - 2 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 3 - 10 years 8.00 8.05 36.05 0.00 0.00 0.00 0.00 0.00
Sample 4 - 20 years 8.00 8.05 8.99 9.66 9.69 10.12 9.92 10.16
Months Away 90 102 114 126 138 150 162 174
Present Value Factor (8) @ 17.0% 0.3080 0.2633 0.2250 0.1923 0.1644 0.1201 0.1405 0.1026
------------------------------------------------------------------------
------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $2.46 $2.12 $8.11 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 4 - 20 years $2.46 $2.12 $2.02 $1.86 $1.59 $1.42 $1.19 $1.04
Value Realized by Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
<CAPTION>
GROWTH
2013 2014 2015 2016 2017 2018 RATE
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $24,525 $25,261 $26,019 $26,800 $27,604 $28,432 3.0%
New Garage/Building Net Revenue 296 281 267 254 241 229
------------------------------------------------------
Adjusted EBDIT 24,821 25,542 26,286 27,054 27,845 28,661
Interest Expense 466 321 221 114 0 0
Depreciation 1,169 1,204 1,240 1,277 1,315 1,354
------------------------------------------------------
Earnings Before MAP and Tax Distributions 23,186 24,017 24,825 25,663 26,530 27,307
SAR Cash Payments (2) 450 433 241 589 3,126 3,042
DER Payments (1) @ 60% 13,912 14,410 14,895 15,398 15,918 16,384
------------------------------------------------------
Earnings Before Tax Distributions 8,824 9,174 9,689 9,676 7,486 7,881
Income Tax Distributions (4) @ 40.0% 3,530 3,669 3,875 3,870 2,994 3,153
------------------------------------------------------
------------------------------------------------------
Net Income After Tax Distrubutions $5,294 $5,505 $5,814 $5,806 $4,492 $4,728
------------------------------------------------------
------------------------------------------------------
Adjustments:
Add: Depreciation 1,169 1,204 1,240 1,277 1,315 1,354
Less: Capital Expenditures (1,169) (1,204) (1,240) (1,277) (1,315) (1,354)
Add: Debt Proceeds (Repayment) (2,070) (1,423) (1,523) (1,633) 0 0
Less: Nwe Stock Dividends (5) (812) (812) (812) (812) (812) (812)
Add: SAR Accural Reversal (2) 450 433 241 589 3,126 3,042
Working Capital Adjustment @ 0% 0 0 0 0 0 0
------------------------------------------------------
------------------------------------------------------
After Tax Cash Flow Requirements (2,432) (1,802) (2,094) (1,856) 2,314 2,229
SAR Value Accrued (2) 2,862 3,702 3,719 3,949 6,806 6,958
Per Share SAR Value $3.02 $3.91 $3.92 $4.17 $7.18 $7.34
Cummulative SAR Value Accrued $19.85 $23.30 $26.98 $30.52 $34.41 $38.54
Non-A B Share Repurchase (6)
DER Per Share $14.68 $15.21 $15.72 $16.25 $16.80 $17.29
Make-Whole Dividend $2.26 $2.26 $2.26 $2.26 $2.26 $2.26
SAR/B Stock Sale Value Realized $0.48 $0.46 $0.25 $0.62 $3.30 $3.21
Sample Shareholder After-Tax Cash Flows (7):
Sample 1 - 2 years 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 0.00 0.00
Sample 3 - 10 years 0.00 0.00 0.00 0.00 0.00 0.00
Sample 4 - 20 years 10.52 10.83 11.01 11.55 13.50 60.00
Months Away 186 198 210 222 234 246
Present Value Factor (8) @ 17.0% 0.0877 0.0750 0.0641 0.0548 0.0468 0.0400
------------------------------------------------------
------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 4 - 20 years $0.92 $0.81 $0.71 $0.63 $0.61 $2.40
Value Realized by Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
</TABLE>
NOTES:
(1) Historical EBDIT grown at 3% a year.
(2) Assumes all Debt-Free Cash Flow after Stock 8% Dividends accrue to the
SARs. After ten years, accrual is reversed and paid in cash (and
expensed).
(3) DERs assumed to equal 60% of Earnings Before Taxes. Maximum DER payment
which allows for all cash flow items to be covered by current cash flows.
(4) Distributions to S-Corporation shareholders to cover their corporate tax
liability.
(5) Make-whole dividend on S-Corporation stock calculated as 8% multiplied by
$28.24 stipulated price multiplied by 359,584 share issued.
(6) Based upon 588,149 Clas B Shares not owned by A shareholders and a price
of $28.24.
(7) After tax Cash Flow. Assumes dividends are taxed at 29.6% and Capital
Gains at 20%. Basis in Stock is $2.00 (Purchased original B Shares in
1981).
(8) Present Value Factor determined based upon Estimated Equity Rate of
Return Incremental 2% added to reflect risk of additional debt employed.
---------------------------------------
SENSITIVITY ANALYSIS -- SHAREHOLDER 3
---------------------------------------
Growth Rate (EBDIT)
<TABLE>
<CAPTION>
1% 2% 3% 4% 5% 6%
---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
14% $43.01 $44.98 $47.07 $49.28 $51.59 $54.03
15% $41.20 $43.08 $45.04 $47.11 $49.29 $51.60
16% $39.52 $41.28 $43.12 $45.10 $47.15 $49.33
PRESENT 17% $37.93 $39.59 $41.36 $43.22 $45.18 $47.22
VALUE 18% $36.45 $38.05 $39.71 $41.47 $43.32 $45.25
FACTOR 19% $35.08 $36.60 $38.19 $39.83 $41.59 $43.42
20% $33.81 $35.21 $36.72 $38.31 $39.96 $41.72
21% $32.58 $33.93 $35.35 $36.87 $38.43 $40.08
22% $31.46 $32.71 $34.08 $35.50 $37.01 $38.57
---------------------------------------------------
</TABLE>
<PAGE>
- -----------------------------------------------
IRA FAIRNESS OPINION
SHAREHOLDER CASH FLOW MODEL - STATUS QUO A SHARES
VALUATION AS OF JULY 1, 1998 STATUS QUO
DOLLARS IN THOUSANDS (EXCEPT PER SHARE VALUES) $111.20 BASIS
- -----------------------------------------------
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004 2005
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $15,283 $15,742 $16,214 $16,700 $17,201 $17,717 $18,249 $18,796 $19,360
New Garage/Building Net Revenue 0 0 (264) (272) (441) 776 816 858 901
-------------------------------------------------------------------------------------------
Adjusted EBDIT 15,283 15,742 15,950 16,428 16,760 18,493 19,065 19,654 20,261
Interest Expense 0 0 507 487 465 1,554 1,485 1,412 1,333
Depreciation 1,208 1,495 1,606 1,316 1,015 1,042 986 1,114 1,139
-------------------------------------------------------------------------------------------
Earnings Before Taxes 14,075 14,247 14,344 15,112 15,745 17,451 18,079 18,540 19,122
Income Taxes @ 34% 4,786 4,844 4,877 5,138 5,353 5,933 6,147 6,304 6,502
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Debt-Free Net Income (DFNI) $9,289 $9,403 $9,467 $9,974 $10,392 $11,518 11,932 $12,236 $12,620
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Adjustments
Add: Depreciation 1,495 1,606 1,316 1,015 1,042 986 1,114 1,139
Add: Debt Proceeds (Repayment) 7,245 (288) (308) 15,557 (986) (1,055) (1,128) (1,207)
Less: Capital Expenditures (8,895) (773) (971) (16,532) (844) (869) (896) (922)
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0 0
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Cash Flow Available for Dividends 9,248 10,011 10,010 10,432 10,730 10,995 11,326 11,630
Dividends Paid (2) @ 85% 7,861 8,509 8,509 8,867 9,120 9,345 9,627 9,886
Book Value (for Repurchase)(2) 26,760 28,147 29,650 31,151 32,716 34,325 35,975 37,674 39,419
Dividends Per Share (3) $8.30 $8.98 $8.98 $9.36 $9.62 $9.86 $10.16 $10.43
Book Value per B Share (3) $28.24 $29.70 $31.29 $32.87 $34.52 $36.22 $37.96 $39.76 $41.60
Sample Shareholder After-Tax Cash Flows (4):
Sample 1 - 2 years 0.00 147.40 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 167.12 0.00 0.00 0.00
Sample 3 - 10 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 4 - 20 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Months Away 6 18 30 42 54 66 78 90
Present Value Factor (5) @ 15% 0.9325 0.8109 0.7051 0.6131 0.5332 0.4636 0.4031 0.3506
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $119.53 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00 $89.11 $0.00 $0.00 $0.00
Sample 3 - 10 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 4 - 20 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Value Realized By Sample Shareholders:
Sample 1 - 2 years $119.53
---------
---------
Sample 2 - 5 years $89.11
---------
---------
Sample 3 - 10 Years $53.91
---------
---------
Sample 4 - 20 Years $17.27
---------
---------
<CAPTION>
2006 2007 2008 2009 2010 2011 2012 2013 2014
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $19,941 $20,539 $21,155 $21,790 $22,444 $23,117 $23,811 $24,525 $25,261
New Garage/Building Net Revenue 257 282 308 335 345 328 312 296 281
-------------------------------------------------------------------------------------------
Adjusted EBDIT 20,198 20,821 21,463 22,125 22,789 23,445 24,123 24,821 25,542
Interest Expense 1,248 1,158 1,061 957 846 728 601 466 321
Depreciation 1,164 1,190 1,217 1,245 1,070 1,102 1,135 1,169 1,204
-------------------------------------------------------------------------------------------
Earnings Before Taxes 19,034 19,631 20,246 20,880 21,719 22,343 22,988 23,652 24,338
Income Taxes @ 34% 6,472 6,675 6,884 7,099 7,384 7,597 7,816 8,042 8,275
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Debt-Free Net Income (DFNI) $12,562 $12,956 $13,362 $13,781 $14,335 $14,746 $15,172 $15,610 $16,063
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Adjustments
Add: Depreciation 1,164 1,190 1,217 1,245 1,070 1,102 1,135 1,169 1,204
Add: Debt Proceeds (Repayment) (1,292) (1,382) (1,479) (1,583) (1,694) (1,812) (1,939) (2,070) (1,423)
Less: Capital Expenditures (950) (979) (1,008) (1,038) (1,070) (1,102) (1,135) (1,169) (1,204)
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0 0 0
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Cash Flow Available for Dividends 11,484 11,786 12,092 12,405 12,641 12,934 13,233 13,540 14,640
Dividends Paid (2) @ 85% 9,762 10,018 10,278 10,544 10,745 10,994 11,248 11,509 12,444
Book Value (for Repurchase)(2) 41,141 42,909 44,723 46,584 48,480 50,421 52,406 54,437 56,633
Dividends Per Share (3) $10.30 $10.57 $10.85 $11.13 $11.34 $11.60 $11.87 $12.15 $13.13
Book Value per Share (3) $43.42 $45.28 $47.20 $49.16 $51.16 $53.21 $55.30 $57.45 $59.76
Sample Shareholder After-Tax Cash Flows (4):
Sample 1 - 2 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 3 - 10 years 0.00 203.36 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 4 - 20 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Months Away 102 114 126 138 150 162 174 186 198
Present Value Factor (5) @ 15% 0.3048 0.2651 0.2305 0.2004 0.1743 0.1516 0.1318 0.1146 0.0997
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $0.00 $53.91 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 4 - 20 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Value Realized by Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
<CAPTION>
GROWTH
2015 2016 2017 2018 RATE
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $26,019 $26,800 $27,604 $28,432 3.0%
New Garage/Building Net Revenue 267 254 241 229
----------------------------------------
Adjusted EBDIT 26,286 27,054 27,845 28,661
Interest Expense 221 114 0 0
Depreciation 1,240 1,277 1,315 1,354
----------------------------------------
Earnings Before Taxes 25,046 25,777 26,530 27,307
Income Taxes @ 34% 8,516 8,764 9,020 9,284
----------------------------------------
----------------------------------------
Debt-Free Net Income (DFNI) $16,530 $17,013 $17,510 $18,023
----------------------------------------
----------------------------------------
Adjustments
Add: Depreciation 1,240 1,277 1,315 1,354
Add: Debt Proceeds (Repayment) (1,523) (1,633) 0 0
Less: Capital Expenditures (1,240) (1,277) (1,315) (1,354)
Working Capital Adjustment @ 0% 0 0 0 0
----------------------------------------
----------------------------------------
Cash Flow Available for Dividends 15,007 15,380 17,510 18,023
Dividends Paid (2) @ 85% 12,756 13,073 14,884 15,320
Book Value (for Repurchase)(2) 58,883 61,190 63,816 66,519
Dividends Per Share (3) $13.46 $13.80 $15.71 $16.17
Book Value per Share (3) $62.14 $64.57 $67.34 $70.20
Sample Shareholder After-Tax Cash Flows (4):
Sample 1 - 2 years 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00
Sample 3 - 10 years 0.00 0.00 0.00 0.00
Sample 4 - 20 years 0.00 0.00 0.00 303.04
Months Away 210 222 234 246
Present Value Factor (5)@ 15% 0.0867 0.0754 0.0655 0.0570
----------------------------------------
----------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $0.00 $0.00 $0.00 $0.00
Sample 4 - 20 years $0.00 $0.00 $0.00 $17.27
Value Realized by Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
</TABLE>
NOTES:
(1) Historical EBDIT grown at 3% a year.
(2) Assumes that 85% of available Cash Flow is Distributed to shareholders.
Remaining Cash Flow increases (decreases) Book Value of IRA.
(3) Based upon 947,608 Class B Shares Outstanding.
(4) After tax Cash Flow. Assumes Capital Gains are taxed at 20%. Basis in
Stock is $111.20 (Purchased A Shares in 1993 or 1994). Value = 5 times
Book Value of B Shares.
(5) Present Value Factor determined based upon Estimated Equity Rate of Return.
--------------------------------------
SENSITIVITY ANALYSIS - SHAREHOLDER 3
--------------------------------------
Growth Rate (EBDIT)
<TABLE>
<CAPTION>
1% 2% 3% 4% 5% 6%
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12% $66.59 $67.89 $69.28 $70.76 $72.32 $73.99
13% $61.21 $62.41 $63.69 $65.05 $66.49 $68.01
14% $56.29 $57.39 $58.57 $59.81 $61.14 $62.54
PRESENT 15% $51.81 $52.83 $53.91 $55.06 $56.28 $57.57
VALUE 16% $47.71 $48.64 $49.64 $50.69 $51.82 $53.01
FACTOR 17% $43.97 $44.84 $45.76 $46.73 $47.76 $48.86
18% $40.55 $41.35 $42.20 $43.09 $44.05 $45.06
19% $37.45 $38.18 $38.96 $39.79 $40.67 $41.61
20% $34.57 $35.25 $35.97 $36.74 $37.55 $38.42
------------------------------------------------------------------
</TABLE>
<PAGE>
- ----------------------------------------------
IRA FAIRNESS OPINION A SHARES
SHAREHOLDER CASH FLOW MODEL - NEW STRUCTURE NEW STRUCTURE
VALUATION AS OF JULY 1, 1998 $111.20 BASIS
DOLLARS IN THOUSANDS (EXCEPT PER SHARE VALUES)
- ----------------------------------------------
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $15,283 $15,742 $16,214 $16,700 $17,201 $17,717 $18,249
New Garage/Building Net Revenue 0 0 (264) (272) (441) 776 816
-------------------------------------------------------------------------------
Adjusted EBDIT 15,283 15,742 15,950 16,428 16,760 18,493 19,065
Interest Expense 0 1,163 1,586 1,476 1,357 2,343 2,164
Depreciation 1,208 1,495 1,606 1,316 1,015 1,042 986
-------------------------------------------------------------------------------
Earnings Before MAP and Tax Distributions 14,075 13,084 12,758 13,636 14,388 15,108 15,915
SAR Cash Payments (2) 0 0 0 0 0 0 0
DER Payments (3) @ 60% 0 7,850 7,655 8,181 8,633 9,065 9,549
-------------------------------------------------------------------------------
Earnings Before Tax Distributions 14,075 5,234 5,103 5,455 5,755 6,043 6,366
Income Tax Distributions (4) @ 40.0% 5,630 2,094 2,041 2,182 2,302 2,417 2,547
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Net Income After Tax Distributions $8,445 $3,140 $3,062 $3,273 $3,453 $3,626 $3,819
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Adjustments: YE 1997
-------
Add: Depreciation 1,495 1,606 1,316 1,015 1,042 986
Less: Capital Expenditures (8,895) (773) (971) (16,532) (844) (869)
Add: Debt Proceeds (Repayment) 16,609 6,043 (1,574) (1,684) 14,084 (2,562) (2,741)
Less: New Stock Dividends (5) (812) (812) (812) (812) (812) (812)
Add: SAR Accrual Reversal (2) 0 0 0 0 0 0
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
After Tax Cash Flow Requirements 16,609 (2,169) (1,554) (2,152) (2,245) (3,176) (3,436)
SAR Valued Accrued (2) 971 1,508 1,121 1,208 450 383
Per Share SAR Value $1.02 $1.59 $1.18 $1.27 $0.47 $0.40
Cumulative SAR Value Accrued $1.02 $2.62 $3.80 $5.07 $5.55 $5.95
Non-A B Share Repurchase (6) 16,609
DER Per Share $0.00 $8.28 $8.08 $8.63 $9.11 $9.57 $10.08
Make-Whole Dividend $0.00 $11.30 $11.30 $11.30 $11.30 $11.30 $11.30
SAR/B Stock Sale Value Realized $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample Shareholder After-Tax Cash Flows (7):
Sample 1 - 2 years 0.00 6.82 142.02 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 6.82 6.82 6.82 6.82 142.02 0.00
Sample 3 - 10 years 0.00 6.82 6.82 6.82 6.82 6.82 6.82
Sample 4 - 20 years 0.00 6.82 6.82 6.82 6.82 6.82 6.82
Months Away 0 6 18 30 42 54 66
Present Value Factor (8) @ 15.0% 1.0000 0.9325 0.8109 0.7051 0.6131 0.5332 0.4636
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $6.36 $115.17 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $6.36 $5.53 $4.81 $4.18 $75.73 $0.00
Sample 3 - 10 years $0.00 $6.36 $5.53 $4.81 $4.18 $3.64 $3.16
Sample 4 - 20 years $0.00 $6.36 $5.53 $4.81 $4.18 $3.64 $3.16
Value Realized by Sample Shareholders:
Sample 1 - 2 years $121.53
----------
----------
Sample 2 - 5 years $96.61
----------
----------
Sample 3 - 10 years $72.55
----------
----------
Sample 4 - 20 years $53.88
----------
----------
<CAPTION>
2004 2005 2006 2007 2008 2009 2010
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $18,796 $19,360 $19,941 $20,539 $21,155 $21,790 $22,444
New Garage/Building Net Revenue 858 901 257 282 308 335 345
-------------------------------------------------------------------------------
Adjusted EBDIT 19,654 20,261 20,198 20,821 21,463 22,125 22,789
Interest Expense 1,973 1,768 1,547 1,313 1,061 957 846
Depreciation 1,114 1,139 1,164 1,190 1,217 1,245 1,070
-------------------------------------------------------------------------------
Earnings Before MAP and Tax Distributions 16,567 17,354 17,487 18,318 19,185 19,923 20,873
SAR Cash Payments (2) 0 0 0 971 1,508 1,121 1,208
DER Payments (3) @ 60% 9,940 10,413 10,492 10,991 11,511 11,958 12,524
-------------------------------------------------------------------------------
Earnings Before Tax Distributions 6,627 6,941 6,995 6,357 6,166 6,848 7,141
Income Tax Distributions (4) @ 40.0% 2,651 2,776 2,798 2,543 2,466 2,739 2,857
-------------------------------------------------------------------------------
Net Income After Tax Distributions $3,976 $4,165 $4,197 $3,814 $3,700 $4,109 $4,284
-------------------------------------------------------------------------------
Adjustments:
Add: Depreciation 1,114 1,139 1,164 1,190 1,217 1,245 1,070
Less: Capital Expenditures (896) (922) (950) (979) (1,008) (1,038) (1,070)
Add: Debt Proceeds (Repayment) (2,932) (3,137) (3,358) (3,594) (1,479) (1,583) (1,694)
Less: New Stock Dividends (5) (812) (812) (812) (812) (812) (812) (812)
Add: SAR Accrual Reversal (2) 0 0 0 971 1,508 1,121 1,208
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0
-------------------------------------------------------------------------------
After Tax Cash Flow Requirements (3,526) (3,732) (3,956) (3,224) (574) (1,067) (1,298)
SAR Valued Accrued (2) 450 433 241 589 3,126 3,042 2,986
Per Share SAR Value $0.48 $0.46 $0.25 $0.62 $3.30 $3.21 $3.15
Cumulative SAR Value Accrued $6.43 $6.88 $7.14 $6.74 $8.45 $10.48 $12.36
Non-A B Share Repurchase (6)
DER Per Share $10.49 $10.99 $11.07 $11.60 $12.15 $12.61 $13.22
Make-Whole Dividend $11.30 $11.30 $11.30 $11.30 $11.30 $11.30 $11.30
SAR/B Stock Sale Value Realized $0.00 $0.00 $0.00 $1.02 $1.59 $1.18 $1.27
Sample Shareholder After-Tax Cash Flows (7):
Sample 1 - 2 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 3 - 10 years 6.82 6.82 6.82 142.02 0.00 0.00 0.00
Sample 4 - 20 years 6.82 6.82 6.82 6.82 6.82 6.82 6.82
Months Away 78 90 102 114 126 138 150
Present Value Factor (8) @ 20% 0.4031 0.3506 0.3048 0.2651 0.2305 0.2004 0.1743
-------------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $2.75 $2.39 $2.08 $37.65 $0.00 $0.00 $0.00
Sample 4 - 20 years $2.75 $2.39 $2.08 $1.81 $1.57 $1.37 $1.19
Present Value by Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
<CAPTION>
2011 2012 2013 2014 2015 2016 2017
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $23,117 $23,811 $24,525 $25,621 $26,019 $26,800 $27,604
New Garage/Building Net Revenue 328 312 296 281 267 254 241
-------------------------------------------------------------------------------
Adjusted EBDIT 23,445 24,123 24,821 25,542 26,286 27,054 27,845
Interest Expense 728 601 466 321 221 114 0
Depreciation 1,102 1,135 1,169 1,204 1,240 1,277 1,315
-------------------------------------------------------------------------------
Earnings Before MAP and Tax Distributions 21,615 22,387 23,186 24,017 24,825 25,663 26,530
SAR Cash Payments (2) 450 383 450 433 241 589 3,126
DER Payments (3) @ 60% 12,969 13,432 13,912 14,410 14,895 15,398 15,918
-------------------------------------------------------------------------------
Earnings Before Tax Distributions 8,196 8,572 8,824 9,174 9,689 9,676 7,486
Income Tax Distributions (4) @ 40.0% 3,278 3,429 3,530 3,669 3,875 3,870 2,994
-------------------------------------------------------------------------------
Net Income After Tax Distributions $4,918 $5,143 $5,294 $5,505 $5,814 $5,806 $4,492
-------------------------------------------------------------------------------
Adjustments:
Add: Depreciation 1,102 1,135 1,169 1,204 1,240 1,277 1,315
Less: Capital Expenditures (1,102) (1,135) (1,169) (1,204) (1,240) (1,277) (1,315)
Add: Debt Proceeds (Repayment) (1,812) (1,939) (2,070) (1,423) (1,523) (1,633) 0
Less: New Stock Dividends (5) (812) (812) (812) (812) (812) (812) (812)
Add: SAR Accrual Reversal (2) 450 383 450 433 241 589 3,126
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0
-------------------------------------------------------------------------------
After Tax Cash Flow Requirements (2,174) (2,368) (2,432) (1,802) (2,094) (1,856) 2,314
SAR Valued Accrued (2) 2,744 2,775 2,862 3,702 3,719 3,949 6,806
Per Share SAR Value $2.90 $2.93 $3.02 $3.91 $3.92 $4.17 $7.18
Cumulative SAR Value Accrued $14.79 $17.31 $19.85 $23.30 $26.98 $30.52 $34.41
Non-A B Share Repurchase (6)
DER Per Share $13.69 $14.17 $14.68 $15.21 $15.72 $16.25 $16.80
Make-Whole Dividend $11.30 $11.30 $11.30 $11.30 $11.30 $11.30 $11.30
SAR/B Stock Sale Value Realized $0.47 $0.40 $0.48 $0.46 $0.25 $0.62 $3.30
Sample Shareholder After-Tax Cash Flows (7):
Sample 1 - 2 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 3 - 10 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 4 - 20 years 6.82 6.82 6.82 6.82 6.82 6.82 6.82
Months Away 162 174 186 198 210 222 234
Present Value Factor (8) @ 20% 0.1516 0.1318 0.1146 0.0997 0.0867 0.0754 0.0655
-------------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 4 - 20 years $1.03 $0.90 $0.78 $0.68 $0.59 $0.35 $0.35
Present Value by Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
<CAPTION>
GROWTH
2018 RATE
-------------------------
<S> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $28,432 3.0%
New Garage/Building Net Revenue 229
----------
Adjusted EBDIT 28,661
Interest Expense 0
Depreciation 1,354
----------
Earnings Before MAP and Tax Distributions 27,307
SAR Cash Payments (2) 3,042
DER Payments (3) @ 60% 16,384
----------
Earnings Before Tax Distributions 7,881
Income Tax Distributions (4) @ 40.0% 3,153
----------
Net Income After Tax Distributions $4,728
----------
Adjustments:
Add: Depreciation 1,354
Less: Capital Expenditures (1,354)
Add: Debt Proceeds (Repayment) 0
Less: New Stock Dividends (5) (812)
Add: SAR Accrual Reversal (2) 3,042
Working Capital Adjustment @ 0% 0
----------
After Tax Cash Flow Requirements 2,229
SAR Valued Accrued (2) 6,958
Per Share SAR Value $7.34
Cumulative SAR Value Accrued $38.54
Non-A B Share Repurchase (6)
DER Per Share $17.29
Make-Whole Dividend $11.30
SAR/B Stock Sale Value Realized $3.21
Sample Shareholder After-Tax Cash Flows (7):
Sample 1 - 2 years 0.00
Sample 2 - 5 years 0.00
Sample 3 - 10 years 0.00
Sample 4 - 20 years 142.02
Months Away 246
Present Value Factor (8) @ 20% 0.0570
----------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00
Sample 2 - 5 years $0.00
Sample 3 - 10 years $0.00
Sample 4 - 20 years $0.85
Present Value by Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
</TABLE>
NOTES:
(1) Historical EBDIT grown at 3% a year.
(2) Assumes all Debt-Free Cash Flow after Stock 8% Dividends accrue to the
SARs. After ten years, accrual is reversed and paid in cash (and
expensed).
(3) DERs assumed to equal 60% of Earnings Before Taxes. Maximum DER payment
which allows for all cash flow items to be covered by current cash
flows.
(4) Distributions to S-Corporation shareholders to cover their corporate tax
liability.
(5) Make-whole dividend on S-Corporation stock calculated as 8% multiplied by
$28.24 stipulated price multiplied by 359,584 shares issued.
Each A share gets 5 new shares.
(6) Based upon 588,149 Class B Shares not owned by A shareholders and a price
of $28.24.
(7) After tax Cash Flow. Assumes Capital Gains are taxed at 20% and Dividends
at 39.6%. Basis in Stock is $111.20 (Purchased A Shares in 1993
or 1994). Value = 5 times Book Value of B Shares.
(8) Present Value Factor determined based upon Estimated Equity Rate of Return
Incremental 5% added to reflect risk of additional debt employed.
- ---------------------------------------------
SENSITIVITY ANALYSIS - SHAREHOLDER 3
- ---------------------------------------------
Growth Rate (EBDIT)
<TABLE>
<CAPTION>
1% 2% 3% 4% 5% 6%
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12% $86.88 $86.88 $86.88 $86.88 $86.88 $86.88
13% $81.70 $81.70 $81.70 $81.70 $81.70 $81.70
14% $76.93 $76.93 $76.93 $76.93 $76.93 $76.93
PRESENT 15% $72.55 $72.55 $72.55 $72.55 $72.55 $72.55
VALUE 16% $68.52 $68.52 $68.52 $68.52 $68.52 $68.52
FACTOR 17% $64.82 $64.82 $64.82 $64.82 $64.82 $64.82
18% $61.36 $61.36 $61.36 $61.36 $61.36 $61.36
19% $58.20 $58.20 $58.20 $58.20 $58.20 $58.20
20% $55.24 $55.24 $55.24 $55.24 $55.24 $55.24
--------------------------------------------------------------
</TABLE>
<PAGE>
- -----------------------------------------------
IRA FAIRNESS OPINION
SHAREHOLDER CASH FLOW MODEL - STATUS QUO A SHARES
VALUATION AS OF JULY 1, 1998 STATUS QUO
DOLLARS IN THOUSANDS (EXCEPT PER SHARE VALUES) $10.00 BASIS
- -----------------------------------------------
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004 2005
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $15,283 $15,742 $16,214 $16,700 $17,201 $17,717 $18,249 $18,796 $19,360
New Garage/Building Net Revenue 0 0 (264) (272) (441) 776 816 858 901
-------------------------------------------------------------------------------------------
Adjusted EBDIT 15,283 15,742 15,950 16,428 16,760 18,493 19,065 19,654 20,261
Interest Expense 0 0 507 487 465 1,554 1,485 1,412 1,333
Depreciation 1,208 1,495 1,606 1,316 1,015 1,042 986 1,114 1,139
-------------------------------------------------------------------------------------------
Earnings Before Taxes 14,075 14,247 14,344 15,112 15,745 17,451 18,079 18,540 19,122
Income Taxes @ 34% 4,786 4,844 4,877 5,138 5,353 5,933 6,147 6,304 6,502
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Debt-Free Net Income (DFNI) $9,289 $9,403 $9,467 $9,974 $10,392 $11,518 11,932 $12,236 $12,620
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Adjustments
Add: Depreciation 1,495 1,606 1,316 1,015 1,042 986 1,114 1,139
Add: Debt Proceeds (Repayment) 7,245 (288) (308) 15,557 (986) (1,055) (1,128) (1,207)
Less: Capital Expenditures (8,895) (773) (971) (16,532) (844) (869) (896) (922)
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0 0
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Cash Flow Available for Dividends 9,248 10,011 10,010 10,432 10,730 10,995 11,326 11,630
Dividends Paid (2) @ 85% 7,861 8,509 8,509 8,867 9,120 9,345 9,627 9,886
Book Value (for Repurchase)(2) 26,760 28,147 29,650 31,151 32,716 34,325 35,975 37,674 39,419
Dividends Per Share (3) $8.30 $8.98 $8.98 $9.36 $9.62 $9.86 $10.16 $10.43
Book Value per B Share (3) $28.24 $29.70 $31.29 $32.87 $34.52 $36.22 $37.96 $39.76 $41.60
Sample Shareholder After-Tax Cash Flows (4):
Sample 1 - 2 years 0.00 127.16 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 146.88 0.00 0.00 0.00
Sample 3 - 10 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 4 - 20 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Months Away 6 18 30 42 54 66 78 90
Present Value Factor (5) @ 15% 0.9325 0.8109 0.7051 0.6131 0.5332 0.4636 0.4031 0.3506
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $103.11 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00 $78.32 $0.00 $0.00 $0.00
Sample 3 - 10 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 4 - 20 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Value Realized by Sample Shareholders:
Sample 1 - 2 years $103.11
----------
----------
Sample 2 - 5 years $78.32
----------
----------
Sample 3 - 10 years $48.55
----------
----------
Sample 4 - 20 years $16.12
----------
----------
<CAPTION>
2006 2007 2008 2009 2010 2011 2012 2013 2014
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $19,941 $20,539 $21,155 $21,790 $22,444 $23,117 $23,811 $24,525 $25,261
New Garage/Building Net Revenue 257 282 308 335 345 328 312 296 281
-------------------------------------------------------------------------------------------
Adjusted EBDIT 20,198 20,821 21,463 22,125 22,789 23,445 24,123 24,821 25,542
Interest Expense 1,248 1,158 1,061 957 846 728 601 466 321
Depreciation 1,164 1,190 1,217 1,245 1,070 1,102 1,135 1,169 1,204
-------------------------------------------------------------------------------------------
Earnings Before Taxes 19,034 19,631 20,246 20,880 21,719 22,343 22,988 23,652 24,338
Income Taxes @ 34% 6,472 6,675 6,884 7,099 7,384 7,597 7,816 8,042 8,275
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Debt-Free Net Income (DFNI) $12,562 $12,956 $13,362 $13,781 $14,335 $14,746 $15,172 $15,610 $16,063
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Adjustments
Add: Depreciation 1,164 1,190 1,217 1,245 1,070 1,102 1,135 1,169 1,204
Add: Debt Proceeds (Repayment) (1,292) (1,382) (1,479) (1,583) (1,694) (1,812) (1,939) (2,070) (1,423)
Less: Capital Expenditures (950) (979) (1,008) (1,038) (1,070) (1,102) (1,135) (1,169) (1,204)
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0 0 0
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Cash Flow Available for Dividends 11,484 11,786 12,092 12,405 12,641 12,934 13,233 13,540 14,640
Dividends Paid (2) @ 85% 9,762 10,018 10,278 10,544 10,745 10,994 11,248 11,509 12,444
Book Value (for Repurchase)(2) 41,141 42,909 44,723 46,584 48,480 50,421 52,406 54,437 56,633
Dividends Per Share (3) $10.30 $10.57 $10.85 $11.13 $11.34 $11.60 $11.87 $12.15 $13.13
Book Value per Share (3) $43.42 $45.28 $47.20 $49.16 $51.16 $53.21 $55.30 $57.45 $59.76
Sample Shareholder After-Tax Cash
Flows (4):
Sample 1 - 2 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 3 - 10 years 0.00 183.12 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 4 - 20 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Months Away 102 114 126 138 150 162 174 186 198
Present Value Factor (5) @ 15% 0.3048 0.2651 0.2305 0.2004 0.1743 0.1516 0.1318 0.1146 0.0997
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $0.00 $48.55 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 4 - 20 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Value Realized by Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
<CAPTION>
GROWTH
2015 2016 2017 2018 RATE
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $26,019 $26,800 $27,604 $28,432 3.0%
New Garage/Building Net Revenue 267 254 241 229
----------------------------------------
Adjusted EBDIT 26,286 27,054 27,845 28,661
Interest Expense 221 114 0 0
Depreciation 1,240 1,277 1,315 1,354
----------------------------------------
Earnings Before Taxes 25,046 25,777 26,530 27,307
Income Taxes @ 34% 8,516 8,764 9,020 9,284
----------------------------------------
----------------------------------------
Debt-Free Net Income (DFNI) $16,530 $17,013 $17,510 $18,023
----------------------------------------
----------------------------------------
Adjustments
Add: Depreciation 1,240 1,277 1,315 1,354
Add: Debt Proceeds (Repayment) (1,523) (1,633) 0 0
Less: Capital Expenditures (1,240) (1,277) (1,315) (1,354)
Working Capital Adjustment @ 0% 0 0 0 0
----------------------------------------
----------------------------------------
Cash Flow Available for Dividends 15,007 15,380 17,510 18,023
Dividends Paid (2) @ 85% 12,756 13,073 14,884 15,320
Book Value (for Repurchase)(2) 58,883 61,190 63,816 66,519
Dividends Per Share (3) $13.46 $13.80 $15.71 $16.17
Book Value per Share (3) $62.14 $64.57 $67.34 $70.20
Sample Shareholder After-Tax Cash Flows (4):
Sample 1 - 2 years 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00
Sample 3 - 10 years 0.00 0.00 0.00 0.00
Sample 4 - 20 years 0.00 0.00 0.00 282.80
Months Away 210 222 234 246
Present Value Factor (5) @ 15% 0.0867 0.0754 0.0655 0.0570
----------------------------------------
----------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $0.00 $0.00 $0.00 $0.00
Sample 4 - 20 years $0.00 $0.00 $0.00 $16.12
Value Realized By Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
</TABLE>
NOTES:
(1) Historical EBDIT grown at 3% a year.
(2) Assumes that 85% of available Cash Flow is Distributed to shareholders.
Remaining Cash Flow increases (decreases) Book Value of IRA.
(3) Based upon 947,608 Class B Shares Outstanding.
(4) After tax Cash Flow. Assumes Capital Gains are taxed at 20%. Basis in
Stock is $10.00 (Purchased original A Shares in 1981). Value = 5 times
Book Value of B Shares.
(5) Present Value Factor determined based upon Estimated Equity Rate of Return.
- --------------------------------------
SENSITIVITY ANALYSIS - SHAREHOLDER 3
- --------------------------------------
Growth Rate (EBDIT)
<TABLE>
<CAPTION>
1% 2% 3% 4% 5% 6%
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12% $59.69 $61.00 $62.39 $63.86 $65.43 $67.09
13% $54.87 $56.08 $57.35 $58.71 $60.15 $61.68
14% $50.46 $51.56 $52.74 $53.98 $55.31 $56.71
PRESENT 15% $46.45 $47.46 $48.55 $49.69 $50.91 $52.20
VALUE 16% $42.77 $43.70 $44.70 $45.75 $46.88 $48.07
FACTOR 17% $39.42 $40.28 $41.20 $42.17 $43.21 $44.31
18% $36.35 $37.15 $38.00 $38.89 $39.85 $40.86
19% $33.57 $34.30 $35.09 $35.91 $36.79 $37.73
20% $30.99 $31.67 $32.39 $33.16 $33.97 $34.84
---------------------------------------------------------------
</TABLE>
<PAGE>
- -----------------------------------------------
IRA FAIRNESS OPINION A SHARES
SHAREHOLDER CASH FLOW MODEL - NEW STRUCTURE NEW STRUCTURE
VALUATION AS OF JULY 1, 1998 $10.00 BASIS
DOLLARS IN THOUSANDS (EXCEPT PER SHARE VALUES)
- -----------------------------------------------
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $15,283 $15,742 $16,214 $16,700 $17,201 $17,717 $18,249
New Garage/Building Net Revenue 0 0 (264) (272) (441) 776 816
-------------------------------------------------------------------------------
Adjusted EBDIT 15,283 15,742 15,950 16,428 16,760 18,493 19,065
Interest Expense 0 1,163 1,586 1,476 1,357 2,343 2,164
Depreciation 1,208 1,495 1,606 1,316 1,015 1,042 986
-------------------------------------------------------------------------------
Earnings Before MAP and Tax Distributions 14,075 13,084 12,758 13,636 14,388 15,108 15,915
SAR Cash Payments (2) 0 0 0 0 0 0 0
DER Payments (3) @ 60% 0 7,850 7,655 8,181 8,633 9,065 9,549
-------------------------------------------------------------------------------
Earnings Before Tax Distributions 14,075 5,234 5,103 5,455 5,755 6,043 6,366
Income Tax Distributions (4) @ 40.0% 5,630 2,094 2,041 2,182 2,302 2,417 2,547
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Net Income After Tax Distributions $8,445 $3,140 $3,062 $3,273 $3,453 $3,626 $3,819
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Adjustments: YE 1997
-------
Add: Depreciation 1,495 1,606 1,316 1,015 1,042 986
Less: Capital Expenditures (8,895) (773) (971) (16,532) (844) (869)
Add: Debt Proceeds (Repayment) 16,609 6,043 (1,574) (1,684) 14,084 (2,562) (2,741)
Less: New Stock Dividends (5) (812) (812) (812) (812) (812) (812)
Add: SAR Accrual Reversal (2) 0 0 0 0 0 0
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
After Tax Cash Flow Requirements 16,609 (2,169) (1,554) (2,152) (2,245) (3,176) (3,436)
SAR Valued Accrued (2) 971 1,508 1,121 1,208 450 383
Per Share SAR Value $1.02 $1.59 $1.18 $1.27 $0.47 $0.40
Cumulative SAR Value Accrued $1.02 $2.62 $3.80 $5.07 $5.55 $5.95
Non-A B Share Repurchase (6) 16,609
DER Per Share $0.00 $8.28 $8.08 $8.63 $9.11 $9.57 $10.08
Make-Whole Dividend $0.00 $11.30 $11.30 $11.30 $11.30 $11.30 $11.30
SAR/B Stock Sale Value Realized $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample Shareholder After-Tax Cash Flows (7):
Sample 1 - 2 years 0.00 6.82 121.78 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 6.82 6.82 6.82 6.82 121.78 0.00
Sample 3 - 10 years 0.00 6.82 6.82 6.82 6.82 6.82 6.82
Sample 4 - 20 years 0.00 6.82 6.82 6.82 6.82 6.82 6.82
Months Away 0 6 18 30 42 54 66
Present Value Factor (8) @ 15.0% 1.0000 0.9325 0.8109 0.7051 0.6131 0.5332 0.4636
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $6.36 $98.75 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $6.36 $5.53 $4.81 $4.18 $64.93 $0.00
Sample 3 - 10 years $0.00 $6.36 $5.53 $4.81 $4.18 $3.64 $3.16
Sample 4 - 20 years $0.00 $6.36 $5.53 $4.81 $4.18 $3.64 $3.16
Value Realized by Sample Shareholders:
Sample 1 - 2 years $105.11
-------
-------
Sample 2 - 5 years $85.81
-------
-------
Sample 3 - 10 years $67.18
-------
-------
Sample 4 - 20 years $52.72
-------
-------
<CAPTION>
2004 2005 2006 2007 2008 2009 2010
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $18,796 $19,360 $19,941 $20,539 $21,155 $21,790 $22,444
New Garage/Building Net Revenue 858 901 257 282 308 335 345
-------------------------------------------------------------------------------
Adjusted EBDIT 19,654 20,261 20,198 20,821 21,463 22,125 22,789
Interest Expense 1,973 1,768 1,547 1,313 1,061 957 846
Depreciation 1,114 1,139 1,164 1,190 1,217 1,245 1,070
-------------------------------------------------------------------------------
Earnings Before MAP and Tax Distributions 16,567 17,354 17,487 18,318 19,185 19,923 20,873
SAR Cash Payments (2) 0 0 0 971 1,508 1,121 1,208
DER Payments (3) @ 60% 9,940 10,413 10,492 10,991 11,511 11,954 12,524
-------------------------------------------------------------------------------
Earnings Before Tax Distributions 6,627 6,941 6,995 6,357 6,166 6,848 7,141
Income Tax Distributions (4) @ 40.0% 2,651 2,776 2,798 2,543 2,466 2,739 2,857
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Net Income After Tax Distributions $3,976 $4,165 $4,197 $3,814 $3,700 $4,109 $4,284
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Adjustments:
Add: Depreciation 1,114 1,139 1,164 1,190 1,217 1,245 1,070
Less: Capital Expenditures (896) (922) (950) (979) (1,008) (1,038) (1,070)
Add: Debt Proceeds (Repayment) (2,932) (3,137) (3,358) (3,594) (1,479) (1,583) (1,694)
Less: New Stock Dividends (5) (812) (812) (812) (812) (812) (812) (812)
Add: SAR Accrual Reversal (2) 0 0 0 971 1,508 1,121 1,208
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
After Tax Cash Flow Requirements (3,526) (3,732) (3,956) (3,224) (574) (1,067) (1,298)
SAR Valued Accrued (2) 450 433 241 589 3,126 3,042 2,986
Per Share SAR Value $0.48 $0.46 $0.25 $0.62 $3.30 $3.21 $3.15
Cumulative SAR Value Accrued $6.43 $6.88 $7.14 $6.74 $8.45 $10.48 $12.36
Non-A B Share Repurchase (6)
DER Per Share $10.49 $10.99 $11.07 $11.60 $12.15 $12.61 $13.22
Make-Whole Dividend $11.30 $11.30 $11.30 $11.30 $11.30 $11.30 $11.30
SAR/B Stock Sale Value Realized $0.00 $0.00 $0.00 $1.02 $1.59 $1.18 $1.27
Sample Shareholder After-Tax Cash Flows (7):
Sample 1 - 2 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 3 - 10 years 6.82 6.82 6.82 121.78 0.00 0.00 0.00
Sample 4 - 20 years 6.82 6.82 6.82 6.82 6.82 6.82 6.82
Months Away 78 90 102 114 126 138 150
Present Value Factor (8) @ 15.0% 0.4031 0.3506 0.3048 0.2651 0.2305 0.2004 0.1743
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $2.75 $2.39 $2.08 $32.28 $0.00 $0.00 $0.00
Sample 4 - 20 years $2.75 $2.39 $2.08 $1.81 $1.57 $1.37 $1.19
Value Realized by Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
<CAPTION>
2011 2012 2013 2014 2015 2016 2017
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $23,117 $23,811 $24,525 $25,621 $26,019 $26,800 $27,604
New Garage/Building Net Revenue 328 312 296 281 267 254 241
-------------------------------------------------------------------------------
Adjusted EBDIT 23,445 24,123 24,821 25,542 26,286 27,054 27,845
Interest Expense 728 601 466 321 221 114 0
Depreciation 1,102 1,135 1,169 1,204 1,240 1,277 1,315
-------------------------------------------------------------------------------
Earnings Before MAP and Tax Distributions 21,615 22,387 23,186 24,017 24,825 25,663 26,530
SAR Cash Payments (2) 450 383 450 433 241 589 3,126
DER Payments (3) @ 60% 12,969 13,432 13,912 14,410 14,895 15,398 15,918
-------------------------------------------------------------------------------
Earnings Before Tax Distributions 8,196 8,572 8,824 9,174 9,689 9,676 7,486
Income Tax Distributions (4) @ 40.0% 3,278 3,429 3,530 3,669 3,875 3,870 2,994
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Net Income After Tax Distributions $4,918 $5,143 $5,294 $5,505 $5,814 $5,806 $4,492
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Adjustments:
Add: Depreciation 1,102 1,135 1,169 1,204 1,240 1,277 1,315
Less: Capital Expenditures (1,102) (1,135) (1,169) (1,204) (1,240) (1,277) (1,315)
Add: Debt Proceeds (Repayment) (1,812) (1,939) (2,070) (1,423) (1,523) (1,633) 0
Less: New Stock Dividends (5) (812) (812) (812) (812) (812) (812) (812)
Add: SAR Accrual Reversal (2) 450 383 450 433 241 589 3,126
Working Capital Adjustment @ 0% 0 0 0 0 0 0 0
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
After Tax Cash Flow Requirements (2,174) (2,368) (2,432) (1,802) (2,094) (1,856) 2,314
SAR Valued Accrued (2) 2,744 2,775 2,862 3,702 3,719 3,949 6,806
Per Share SAR Value $2.90 $2.93 $3.02 $3.91 $3.92 $4.17 $7.18
Cumulative SAR Value Accrued $14.79 $17.31 $19.85 $23.30 $26.98 $30.52 $34.41
Non-A B Share Repurchase (6)
DER Per Share $13.69 $14.17 $14.68 $15.21 $15.72 $16.25 $16.80
Make-Whole Dividend $11.30 $11.30 $11.30 $11.30 $11.30 $11.30 $11.30
SAR/B Stock Sale Value Realized $0.47 $0.40 $0.48 $0.46 $0.25 $0.62 $3.30
Sample Shareholder After-Tax Cash Flows (7):
Sample 1 - 2 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 2 - 5 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 3 - 10 years 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Sample 4 - 20 years 6.82 6.82 6.82 6.82 6.82 6.82 6.82
Months Away 162 174 186 198 210 222 234
Present Value Factor (8) @ 15.0% 0.1516 0.1318 0.1146 0.0997 0.0867 0.0754 0.0655
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 2 - 5 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 3 - 10 years $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Sample 4 - 20 years $1.03 $0.90 $0.78 $0.68 $0.19 $0.31 $0.45
Value Realized by Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
<CAPTION>
GROWTH
2018 RATE
-------------------------
<S> <C> <C>
Earnings Before Depreciation,
Interest and Taxes (EBDIT)(1) $28,432 3.0%
New Garage/Building Net Revenue 229
----------
Adjusted EBDIT 28,661
Interest Expense 0
Depreciation 1,354
----------
Earnings Before MAP and Tax Distributions 27,307
SAR Cash Payments (2) 3,042
DER Payments (3) @ 60% 16,384
----------
Earnings Before Tax Distributions 7,881
Income Tax Distributions (4) @ 40.0% 3,153
----------
Net Income After Tax Distributions $4,728
----------
Adjustments:
Add: Depreciation 1,354
Less: Capital Expenditures (1,354)
Add: Debt Proceeds (Repayment) 0
Less: New Stock Dividends (5) (812)
Add: SAR Accrual Reversal (2) 3,042
Working Capital Adjustment @ 0% 0
----------
After Tax Cash Flow Requirements 2,229
SAR Valued Accrued (2) 6,958
Per Share SAR Value $7.34
Cumulative SAR Value Accrued $38.54
Non-A B Share Repurchase (6)
DER Per Share $17.29
Make-Whole Dividend $11.30
SAR/B Stock Sale Value Realized $3.21
Sample Shareholder After-Tax Cash Flows (7):
Sample 1 - 2 years 0.00
Sample 2 - 5 years 0.00
Sample 3 - 10 years 0.00
Sample 4 - 20 years 121.78
Months Away 246
Present Value Factor (8) @ 20% 0.0570
----------
Present Value for Sample Shareholders:
Sample 1 - 2 years $0.00
Sample 2 - 5 years $0.00
Sample 3 - 10 years $0.00
Sample 4 - 20 years $6.94
Value Realized by Sample Shareholders:
Sample 1 - 2 years
Sample 2 - 5 years
Sample 3 - 10 years
Sample 4 - 20 years
</TABLE>
NOTES:
(1) Historical EBDIT grown at 3% a year.
(2) Assumes all Debt-Free Cash Flow after Stock 8% Dividends accrue to the
SARs. After ten years, accrual is reversed and paid in cash (and
expensed).
(3) DERs assumed to equal 60% of Earnings Before Taxes. Maximum DER payment
which allows for all cash flow items to be covered by current cash
flows.
(4) Distributions to S-Corporation shareholders to cover their corporate tax
liability.
(5) Make-whole dividend on S-Corporation stock calculated as 8% multiplied by
$28.24 stipulated price multiplied by 359,584 shares issued. Each A
Share gets 5 new shares.
(6) Based upon 588,149 Class B Shares not owned by A shareholders and a price
of $28.24.
(7) After tax Cash Flow. Assumes Capital Gains are taxed at 20% and
Dividends at 39.6%. Basis in Stock is $10.00 (Purchased original A
Shares in 1981). Pre-Tax Value of A Shares on sale = $141.20.
(8) Present Value Factor determined based upon Estimated Equity Rate of Return
- ---------------------------------------------
SENSITIVITY ANALYSIS - SHAREHOLDER 3
- ---------------------------------------------
Growth Rate (EBDIT)
<TABLE>
<CAPTION>
1% 2% 3% 4% 5% 6%
--------------------------------------------------------------
<S> <S> <C> <C> <C> <C> <C> <C>
12% $79.98 $79.98 $79.98 $79.98 $79.98 $79.98
13% $75.36 $75.36 $75.36 $75.36 $75.36 $75.36
14% $71.10 $71.10 $71.10 $71.10 $71.10 $71.10
PRESENT 15% $67.18 $67.18 $67.18 $67.18 $67.18 $67.18
VALUE 16% $63.58 $63.58 $63.58 $63.58 $63.58 $63.58
FACTOR 17% $60.26 $60.26 $60.26 $60.26 $60.26 $60.26
18% $57.16 $57.16 $57.16 $57.16 $57.16 $57.16
19% $54.32 $54.32 $54.32 $54.32 $54.32 $54.32
20% $51.66 $51.66 $51.66 $51.66 $51.66 $51.66
--------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT V
<PAGE>
CURRENT SHAREHOLDERS - As of June 1, 1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Agt. # LAST NAME FIRST NAME MIDDLE TOTAL SHARES TERM. DATE
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1400 Adams S. Boyd 1,250
2342 Addison Thomas J. 175
2202 Agostini James S. 675
2098 Allen Sandra T. 600
1093 Amelon Richard R. 750
1684 Anconetani Anthony A. 850
1425 Anderson John E. 900
715 Anderson Morris D. 5,100
1119 Anthony Brenda L. 100
777 Austin Henry W. 1,475
869 Bahm Jr. John F. 1,000
1270 Baker Jerre L. 100
1766 Barber David E. 950
1545 Barnes Howard 200
1890 Barrett Michael W. 875
1630 Bartholomew Valeri A. 275
2207 Barton Donald G. 375
2117 Barton John W. 475
1809 Batey Alan M. 600
1520 Batten Richard E. 650
1157 Beaty Joseph K. 1,750
807 Beck Donald E. 11,775
2023 Beck Douglas A. 500
58 Becker Raymond C. 24,975
2291 Beeck Kenneth R. 100
1211 Belcher Walter C. 600
1920 Bell Mark 1,125
1993 Bell Wanda T. 1,250
2032 Benish Jr. George P 650
2369 Bennett John R. 175
1225 Bennett Kelley E. 4,900
1994 Bennett Raymond K. 650
692 Bennett Jr. Clyde R. 100
2114 Bent Rex A. 25
2327 Benton Betty J. 50
1813 Berger Bradley A. 2,375
1202 Bertagnolli Joseph J. 1,875
2385 Biederman Eric J. 50
922 Biehle Arlen L. 1,000 1/1/99
2384 Bissell Mary T. 175
Page 1
<PAGE>
1715 Blanchette Raymond C 650
1865 Blanton Jr. Lindsay C. 1,600
1868 Blomeke Hugh D. 850
1213 Bloyd John R. 1,000
2235 Bodenheim Bodie R. 300
831 Boe John P. 1,475
1373 Bolling Terry L. 2,575
2128 Bonamie Jeffry R. 25
1885 Bondy Raymond J. 50
1691 Booth Clinton A. 1,425
2260 Boschma Ruth M. 100
1404 Bowman Lonnie D. 1,000
1748 Bradley Jr. Edward J. 800
2362 Brannon Daniel M. 175
516 Breit William M. 3,200
981 Bridger Barry B. 5,125
2208 Briggs Kerry M. 275
2292 Brooks David H. 50
1805 Brown Carl D. 950
1886 Brown Dennis C. 350
1536 Brown Durward D. 1,325
2289 Brown Gary W. 175
1234 Brown Jr. Ralph E. 1,250
2250 Brueckbauer II Roger I. 300
1946 Burns David B. 350
2355 Burton James M. 175
2155 Cala Louis 575
1876 Campbell Jr. Wesley 525
2329 Canaday Brent A. 150
743 Canedy Charles E. 300
1919 Cantwell III Thomas J. 825
2088 Cappello James M. 525
1708 Cardenas Stephen R. 850
1887 Carlson Scott A. 850
2084 Carmichael Paul D. 1,025
1645 Carroll Gary K. 400
570 Carroll James C. 100
2311 Casey Joseph M. 1,400
2253 Castle Jonathan N. 375
1616 Cavasar Janine S. 75
1578 Cermak John D. 1,375
1209 Cheritt Thomas D. 300
Page 2
<PAGE>
2116 Cincotta Mark J. 1,100
2097 Clark Patrick G. 450
2386 Clarke Russell H. 175
1655 Clippinger Dennis D. 125
1158 Coats Jr. Thomas R. 250 7/1/98
2373 Coeuille John L. 175
1888 Collins Gary T. 875
2319 Collins Joe R. 175
1278 Conner James R. 1,075
1305 Conner Rex A. 375
2156 Consaul III H. Parker 675
1143 Corbett D. Charles 3,675
2193 Corder William D. 100
2256 Cornelius Jr. Carl E. 50
2284 Cosgrove Michael T. 100
1067 Cotto Rafael A. 2,000
2000 Coulter Walter F. 900
969 Courington George D. 2,125
1530 Cox Melissa R. 275
1970 Cox Jr. Landon G. 150
1525 Coxe Jr. William K. 1,500
2209 Cozby Paul W. 250
2206 Craddock William E. 50
673 Craig Hal N. 5,600
1117 Craig Jr. J. Edward 5,000
2370 Cramer Edward J. 75
2269 Crawford Jeffrey S. 175
2115 Crow William A. 400
418 Crump Howard M. 26,000
2360 Cultice William W. 175
2186 Jr. Paul M. 375
2254 Cureton Jacques C. 175
1632 Cyr Steven A. 1,025
1984 Davey Kenneth A. 1,650
1788 Davidson Donald G. 1,475
1273 Davis Loretta C. 250
1774 Daybell Mark H. 575
472 Dean Jr. William R. 10,575
1505 DeVos Jr. Edward G. 800
1448 Dierlam III Mark J. 2,650
1142 Dollander Lowell T. 1,275
1676 Dorenbush Ronald R. 1,225
Page 3
<PAGE>
1735 Drake III John R. 1,275
1909 Draper John L. 350
2251 Dubia Laurianne F. 175
2052 Ducos III Frank J. 425
99 Duggan Laurence I. 275
2367 Dugger William S. 100
1292 Dunn Paul A. 2,075
917 Durbin Martin R. 1,725
2039 Dyson Eric C. 250
2321 Eberly Donald L. 100
1918 Edgin Gordon R. 700
1875 Edmiston Bruce B. 400
2287 Edwards Gerald T. 175
1723 Ellenson Robert W. 1,375
1499 Elliot III Howard R. 200
1380 Ellis Gary G. 1,500
127 Elmendorf Jr. Edward T. 17,550
2004 Evans III Henry C. 350
2331 Feeley Audrey J. 150
1430 Fellenz Michael P. 2,200
1422 Ferguson Gary C. 250
2213 Ferguson Monte C. 475
539 Ferguson Thomas Y. 1,800
2126 Ferry Michael J. 125
1999 Flanigan Jr. William E. 575
668 Flowers Robert E. 3,650
2122 Foote Dennis P. 200
693 Frizzell Donaldson D. 7,100
2363 Fromm Vanessa S. 150
1834 Gagliardi Jr. Frank A. 1,375
813 Galda Margaret L. 4,500
2295 Gallas Randolph W. 100
2308 Gamble Gary L. 175
2307 Garrette Charles B. 150
1588 Gedelman M. Carolyn 1,275
1669 Genualdi Frederick 775
1450 Geraci Jeffrey S. 1,800
1541 Gilbert Michael D. 1,275
352 Giles Richard E. 5,400
1761 Giordano Ralph K. 775
1010 Glynn Dennis W. 4,725
2073 Golden Richard R. 525
Page 4
<PAGE>
880 Gorman Robert F. 4,850
839 Graves Warren R. 800
1926 Graw Paul H. 1,225
429 Gray Jerry D. 20,000
1608 Gray Martha E. 750
1427 Greenwood Everett O. 1,175
914 Grigsby Jr. John R. 1,925
2172 Gunderson Eric B. 325
556 Hagins Jr. Charies B. 4,525
1192 Hagler Ronald E. 1,875
1771 Haines Jr. Robert M. 1,325
1992 Haines Sr. Stanley K. 675
1693 Hakes David H. 775
701 Hale Michael L. 5,750
1294 Hallock Sr. Scott A. 1,325
1384 Hansen David W. 550
1416 Harkey James P. 1,825
1078 Harman Robert J. 2,300
1942 Harrold Lyman L. 350
2338 Hart Frank C. 100
870 Harvell Kenneth E. 825
2257 Harvin Michael E. 300
1123 Hayden III Fred R. 1,950
648 Hayes Clinton C. 18,250
1348 Haygood James L. 2,525
1986 Heaney Patrick J. 825
1353 Heard Dolan 1,850
1980 Heely William E. 300
2349 Heevner Scott A. 175
2312 Henderson Charles E. 100
1216 Heneveld III George A. 1,825
1874 Henn James E. 200
1967 Hennessey Paul T. 225
1011 Herzog Jr. Raymond L. 950
1016 Hewitt Scott R. 575
2195 Hickey Susan M. 475
1610 Higgins (King) Leigh Ann 50
1966 Hill Ralph L. 500
2318 Hilliard Samantha A. 175
1230 Hoadley Jeffrey S. 300
2210 Hoefar Terry 200
1930 Hoffman Martin L. 575
Page 5
<PAGE>
972 Holder Kenneth A. 150
1785 Holdsworth John W. 1,225
1077 Hollis Glenn D. 2,425
1568 Hollis Karen J. 1,800
2087 Hollis Kevin D. 100
2294 Hooker Jr. Robert W. 175
893 Hookness Robert S. 3,350
1729 Hombake Michael L. 250
2190 Houle Robert C. 375
1486 Hubbard Scott A. 1,125
2101 Huff Ronald D. 675
1698 Huff Jr. Howard F. 1,150
443 Hull Scott L. 6,000
1672 Ingram-Stahl F. Michael 25
1215 Jarrell Norman D. 1,000
882 Jeffus Robert E. 3,950
1965 Jennings Bruce A. 600
1599 John Elise M. 2,450
1640 Johnson David F. 2,075
1737 Johnson Eugene E. 1,575
477 Johnson III Lester J. 625
2368 Jones Kendall W. 175
2137 Jones Lawrence M. 25
1739 Jones Robert G. 350
1948 Jones Jr. Ernest H. 600
1826 Jorgensen Robert E. 1,225
527 Joy G. Frederic 200
1860 Kane William W. 1,225
1127 Karr James B. 2,500
2246 Kayanan Leslie F. 300
1132 Kearl Gordon C. 1,050
1932 Kilb Roger E. 500
1931 Kilmer Jr. Robert 600
1559 Klein Richard L. 1,025
927 Knapstein Anthony F. 2,625
2093 Knox Robert M. 300
372 Koenig William T. 425
1048 Kone Raleigh C. 1,375
1543 Krahl Jr. Kenneth L. 1,325
718 Kruse Paul S. 39
1097 Kwist Garry R. 2,525
897 Laidlaw Stephen R. 450
Page 6
<PAGE>
952 Lake Robert M. 550
1933 Landzettel Jr. Robert L. 50
473 Langley Harold L. 425
892 Lanier James N. 18,000
1220 Laughlin John D. 825
2230 Lawrence David A. 300
411 Leahy Robert E. 225
2167 Leap Richard B. 325
2187 LeBlanc Joseph J. 200
1824 Lee Christopher D. 200
630 LeHardy Jr. Frank A. 9,550
1780 Leifeld Kevin J. 825
1877 Lenz Richard A. 275
1620 Leopold Philip E. 1,625
1757 Levy Lewis R. 925
2380 Ligman Peter D. 100
2352 Lindsay Paul 100
2322 Lippold Daniel R. 100
1565 Liston John W. 175
679 Loignon Philip G. 5,800
1595 Lookingland William G. 1,025
1367 Lovell Jeffrey G. 450
1592 Lucas Robert C. 600
1470 Lucas Jr. Albert F. 1,650
1186 Luther Jeffrey A. 1,325
2324 Malherek Patrick J. 100
1424 Malkinski Daniel T. 375
925 Marcinkowski Garrett C. 400
1784 Marcum Donald G. 1,500
1532 Markowski Larry R. 775
2133 Martin Christine M. 225
2132 Martin Jack E. 200
1102 Marx Kyle J. 1,300
1776 Mathers Frank S. 1,075
2147 Matter Laura T. 475
2317 McBrayer John T. 175
2164 McCafferty Douglas L. 150
1114 McCall Robert D. 2,775
2366 McClelland Harold E. 175
2276 McClellon Johnie A. 300
1419 McConnell Sr. Michael C. 2,075
580 McCoy John F. 1,000
Page 7
<PAGE>
2388 McGilvray Roy F. 175
1938 McKibbin William J. 600
2110 McLaughlin Joseph R. 425
1342 McLin Joseph A. 625
2233 McLyman Edward P. 275
1972 McManus Richard I. 175
2051 Meeboer Jr. William J. 825
2063 Metzinger Gary D. 700
1952 Miller Jeffrey R. 1,750
1827 Millush David J. 250
781 Missildine William E. 1,050
1298 Monoski Jr. Stephen W. 2,925
389 Monroe Paul L. 1,125
370 Montgomery George L. 7,800
2153 Moody Jack O. 375
1903 Mora Javier 200
2027 Morgan John D. 300
1223 Morrin Jr. Joseph R. 500
1531 Morris Jr. Wilfred R. 2,375
2341 Morrison Michael F. 500
1857 Morrison Rufus M. 450
2160 Motley Jr. William A. 100
2100 Mueller Peter J. 300
2068 Muniz Luis A. 350
2111 Myers Sherry T. 325
644 Nahorski Kenneth T. 25
2201 Natali Denise E. 300
1845 Neidrick Robert T. 925
1899 Nelson William H. 75
697 Nielsen Jr. Mark F. 5,700
2012 Novak Jr. Leonard J. 575
2060 Obel Angel M. 125
510 Obrey Stanley L. 4,225
1522 Ochs David C. 700
2337 Offutt Frederic W. 175
434 O'Hanlon Michael D. 6,775
2173 Olde Gordon F. 325
2192 Olliff Kirk B. 675
621 Ordonio Franklin C. 2,625 10/1/98
866 Orr Frederick D. 2,625
1369 Palmer William D. 825
1622 Papizan James C. 975
Page 8
<PAGE>
1773 Parker Michael K. 1,225
1299 Parrington Richard F. 975
1752 Patisaul Charles E. 575
1744 Patterson Paul L. 550
1435 Patterson Raland J. 3,050
2282 Pattillo Stephen P. 50
457 Payne Debra S. 46,528
827 Payne Freda J. 46,977
458 Payne Naomi K. 46,977
456 Payne II Carroll H. 46,977
1194 Peate Laurence R. 275
2090 Perona Andrew D. 200
578 Peroyea III Emile C. 600
2303 Perrine Robert A. 175
1508 Petersen Douglas N. 250
863 Petersen James A. 9,950
1044 Philbrick Carleton R. 200
1906 Pierce James E. 675
672 Plowman Jr. Floyd C. 1,475
1850 Ponton Robert G. 800
2381 Powell Jr. Terence F. 100
2123 Prater James D. 425
2247 Price Jr. Doyel 300
1959 Pride Samuel G. 675
1591 Provo James M. 1,725
1667 Pullen Harvey L. 1,175
2215 Pulsifer II Raymond L. 375
1913 Putnam William D. 275
1987 Raich Bruce W. 500
766 Ramsey Jr. Frank P. 6,800
1796 Rastetter Curtis J. 475
1955 Rausch Robert J. 500
1747 Ray Stephen M. 650
342 Reed John L. 675
1160 Reichbach Kathy A. 3,025
1429 Rein Rickard E. 2,725
2176 Richards Troy D. 375
2064 Richardson Carl B. 575
2390 Rigor Jose C. 125
2107 Ritchey Stephen A. 575
2085 Robeson William M. 300
1150 Robinson Lawrence E. 450
Page 9
<PAGE>
2313 Rooney Claire A. 175
1736 Ross William R. 1,625
252 Rowe Dennis W. 3,100
2354 Rubin Craig 175
1058 Rush T. Howard 425
2025 Russell Redonda L. 125
749 Russell Stanley W. 5,000
1822 Saari Gerald O. 600
2274 Saenz Ernesto G. 175
2105 Sands Jr. James E. 775
1221 Scheib Chris D. 2,560
2021 Schless James M. 1,000
1607 er Connie C. 450
898 Schuhmacher John E. 25
2217 Schuler Douglas A. 150
2277 Scialabba Jacquelyn B. 275
1252 Sciancalepore John L. 1,450
1636 Scott Gavin D. 200
1820 Scott John D. 825
1063 Scruggs Jr. James T. 400
2009 Scully Debra L. 800
2203 Sebenoler Matthew G. 675
1892 Seemann Daniel F. 1,225
1706 Shireley James L. 1,025
2265 Shores Gary L. 225
2143 Silenzi Silvio N. 675
561 Simmons Stephen E. 75
2231 Simon Robert C. 125
2071 Simons James W. 250
404 Smith Lamar C. 40,000
1935 Smith Michael J. 200
2154 Smith Robert W. 425
2026 Smith Samuel T. 300
1633 Smith William G. 825
1974 Smith Jr. Paul J. 1,650
1318 Smith Jr. Theodore A. 800
2070 Snelson William G. 375
2082 Soderlund Paul R. 825
1808 Soliah Barbara A. 275
2045 Sourwine Douglas E. 575
2197 Speakman Glendon C. 375
1050 Spinks Patrick F. 1,550
Page 10
<PAGE>
2072 Spitler Mark G. 200
1222 Stanley Gerald I. 1,700
511 Stenson Jr. Charles R. 2,400
1789 Steve Michael P. 675
2393 Stevens Craig T. 50
790 Stevenson Robert J. 4,000
1615 Stewart Carol J. 200
2036 Stiles John L. 1,400
1356 Strange Benjamin L. 575
2296 Stratmann Jr. George E. 175
902 Street Jr. George M. 4,000
2102 Strick David C. 300
853 Strnad William R. 2,800
706 Stropp William J. 1,100
2168 Stuart Sr. Ronald F. 325
1674 Surgent David M. 1,600
2245 Svatek Gary F. 300
879 Swete Robert E. 6,750
646 Swindell Clay H. 3,025
2298 Tate Russell E. 175
1802 Taylor IV John M. 375
1185 Terrell Doris M. 1,625
1666 Terrell Richard H. 2,100
1511 Testa Ronald P. 400
2149 Thomas Michael E. 375
2144 Thompson Jr. Arthur R. 50
611 Thoreson David P. 27,850
2118 Thorne Lloyd M. 775
1229 Thurgood Leon C. 1,275
2066 Timberlake Jr. Marion A. 75
2259 Timko Sharon K. 300
2129 Tomlinson Ian R. 125
2236 Toweson Eric J. 300
2104 Trant Thomas H. 400
947 Treat Terry J. 5,475
2378 Tritschler Jr. Philip H. 100
2286 Tuschen Bryan F. 175
292 Tutterow Jacob T. 100
2194 Tutterow Sonya C. 200
1549 Tyler Jr. Charles S. 675
279 Vance Jay W. 7,775
2334 Vance William D. 100
Page 11
<PAGE>
895 Vaupel David K. 875
1703 Vejar Ray J. 1,825
2152 Vogel Kevin H. 100
2374 Vogus Ronald S. 175
1658 Wade Jr. Charles R. 125
1496 Wagner Jerry T. 2,825
1572 Walker Edward D. 575
1654 Walker Stephen D. 500
891 Wall Daniel W. 1,150
1481 Wall Jeffrey S. 350
2189 Wall Richard W. 275
1557 Wallace John R. 600
2302 Waller Earl D. 175
770 Walrath Jr. Burton J. 100
1358 Washnock David N. 1,825
2263 Washnock John D. 300
1334 Waters Dudley F. 600
2275 Watts Sr. Raymond E. 300
1943 Wax Richard R. 775
1072 Weatherington Michael W. 625
1893 Weaver Alan J. 600
1535 Weaver James L. 825
2046 Welch Alan R. 450
1951 Werner Marc H. 575
2332 Werner Richard M. 175
2182 Wheaton Eric E. 475
481 Wheeler Michael J. 24,750
2076 White William D. 200
2204 Whiteside Douglas R. 375
2075 Wilberg Clark N. 50
710 Wilcox Richard S. 4,350
865 Williams Bennie E. 2,050
1490 Williams David M. 600
1635 Williams Richard C. 575
2159 Williams Sheila N. 50
1983 Williams Wayne Q. 375
1847 Williamson Esau 1,725
1115 Winkler Sr. John L. 3,400
2130 Winter Francis C. 400
1204 Winters Blake E. 50
1336 Wolfe Robert J. 750
1205 Woodhouse William B. 2,025
Page 12
<PAGE>
1990 Worrell Homer W. 1,275
587 Wynne James H. 1,375
2145 Yaeger Jr. William L. 250
1923 Yohe Richard W. 100
1673 York Marc A. 275
2158 Young Richard T. 375
1846 Zayicek James S. 350
727 Zipperer William R. 650
- ---------------------------------------------------------------
510 947,608
- ---------------------------------------------------------------
- ---------------------------------------------------------------
</TABLE>
As of June 1,1998
Page 13
<PAGE>
SECTION 3
<PAGE>
SECTION 4
<PAGE>
[LOGO]
RESERVATION CONFIRMATION
TeleConference Services PAGE 01 of 01
- --------------------------------------------------------------------------------
Please Deliver To: MARY ANN JONES (215)963-8025
Fax Number: (215)963-3665
- --------------------------------------------------------------------------------
The following information confirms your: AUTOMATED DIAL IN RESERVATION
***NEW***
Please review this information and contact AT&T TeleConference Services at
(800)846-7959 if there are any changes.
<TABLE>
<S> <C> <C> <C>
Conference ID:MPW7736 Conference Host: PHIL WISLER
Conference Date:06/24/98 WED Start Time:04:00 PM EDT Reach Number: (215)963-8771
End Date:06/24/98 End Time:05:00 PM Conference Arranger: MARY ANN JONES
Duration:001 hr 00min 005 PORTS Reach Number: (215)963-8025
Fax Number: (215)963-3665
</TABLE>
- --------------------------------------------------------------------------------
The host will use the following to reach the conference call:
Dial In Number: (800)464-6549
HOST CODE: 292128
(FOR PHIL WISLER USE ONLY!)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please give all participants the following information to reach the
conference call:
Dial In Number: (800)464-6549
PARTICIPANT CODE: 811670
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
MISSION ACCOMPLISHMENT PLAN SUMMARY
1. GENERAL
The primary purpose of the Mission Accomplishment Plan ("MAP") is to
provide agents and a select group of key employees of United Services
Planning Association, Inc. and its participating affiliates
(collectively referred to as the "Company") an opportunity to
participate in the success of the Company through a special, stock-based
reward plan. The Company believes that the opportunity to participate in
its success encourages its agents and key employees to produce at a
higher level, to be concerned with efficiency, and to take a
longer-term view of client representation and employment.
Under the MAP, the Company will award Stock Appreciation Rights ("SARs")
and special Dividend Equivalent Rights ("DERs"). A SAR is the right to
participate in the undistributed earnings of the Company. A DER is the
right to participate when the Board of Directors of the Company
("Board") declares a dividend equivalent based upon the earnings of the
Company. The number of SAR/DER units that are awarded will vary from
time-to-time as determined by the Company in its sole discretion.
This document is only intended to summarize the MAP. Please refer to the
Mission Accomplishment Plan and your award certificate for a complete
explanation of the Plan.
2. ADMINISTRATION OF THE PLAN
a. The Board will designate an officer of the Company to administer the
MAP.
b. Annual awards and distributions under the MAP will coincide with the
Company's fiscal year ending September 30th (the "Plan Year").
c. An annual report, including computation of the participant's MAP units
and current values, will be provided to the participant--typically on
or about December 15th.
d. Notwithstanding any other provisions of this document, MAP units are
subject to all other provisions of the applicable Registered
Representative (RR)/Agent Agreement that may limit award payments
under the MAP, including the right of the Company to hold and/or
offset payments under the MAP as described in the paragraphs titled
"Termination; Return of Property" and "Remedies." Offset policies will
be established from time-to-time by the Plan Administrator. MAP awards
held or otherwise offset under this policy will not later be
transferred or otherwise become payable to such participating
individual or any other MAP participant, but will continue to be
property of the Company.
e. There will be no separate account, fund, trust, insurance policy, or
other source of funding related to the grant of SARs or DERs under the
MAP. Payment of SAR awards will be made in cash from the general
assets of the Company. The Company may maintain and transfer such
property to satisfy obligations arising under a DER.
f. The Board, in its sole and absolute discretion, has the power to
interpret and administer the MAP, including, but not limited to,
setting MAP policy, determining award amounts, and determining
valuation methods.
3. ELIGIBILITY AND ENTRY INTO THE PLAN
Participation will be limited to agents, a select group of management
employees, and certain other key employees of the Company as determined
from time-to-time by the Board in its sole discretion. Eligible
individuals must be licensed Registered Representatives/Agents of the
Company. Eligible individuals will be notified by the Plan Administrator.
4. ANNUAL GRANT
The grant of a MAP award will be based on a policy adopted from time to
time by the Board. Although this policy may change at any time and for
any reason, initial awards will be based on the following:
a. There are two types of MAP awards: (1) a Stock Appreciation Right
(SAR) which increases in value as the per-unit SAR value of the
Company increases, and (2) a Dividend Equivalent Right (DER) that
participates in an annual cash dividend equivalent declared by the
Board. Participants will receive a DER with each SAR award.
b. The Company will determine annually the number of SARs to grant based
on its needs for capital, Future Incentive Commissions, Deferred
Career Commission Plan, Profit Sharing Plan, and other factors. Units
granted under the MAP for any plan year will be credited to the
individual participant.
c. SAR and DER awards will be evidenced by an award agreement delivered
with one or more MAP certificates.
d. SARs and DERs may not be transferred, pledged, assigned, or otherwise
encumbered in any manner (except as specified in the MAP).
e. SARs and DERs are subject to immediate forfeiture if (1) the
participant violates the Company's policy regarding
non-competition, (2) the Company is entitled to a hold-back or
offset under the terms of an RR/Agent Agreement or Company policy,
or (3) services with the Company are terminated for cause, as
defined in the MAP.
- --------------------------------------------------------------------------------
1
<PAGE>
5. VALUATION OF UNITS
The value of each SAR will be established at least annually. The initial
Board policy will be to value each SAR based on the Company's earnings
as reported by the Company using generally accepted accounting
principles. This per-unit value will be reduced by the dividend
equivalent declared by the Company for payment based on the current year's
earnings, if any. For this purpose, the per-SAR Unit Value will not
include the effect of reporting the Company's investments at market
value as stipulated in Financial Accounting Standard (FAS) 115.
6. EXERCISE OF DERs
From time-to-time the Board may declare a cash dividend equivalent to
be paid following the end of the plan year.
7. EXERCISE OF SARs
Following termination/separation or at the end of the exercise period,
SAR holders are entitled to exercise their right (or option) to receive
a cash payment equal to the difference between the per-SAR Unit Value
determined by the Company as of the last day of the calendar quarter
during which the participant provides the Plan Administrator a written
request on an approved form, less the per-SAR Unit Value as of the date
of grant.
A SAR must be exercised during the time period specified on the MAP
Certificate. The Plan Administrator will complete the transaction within
60 to 90 days following the end of the calendar quarter of receipt of
the written request.
8. SAR UNIT VALUE AT EXERCISE
The SAR Unit Value at exercise is established by the Company.
9. OTHER EXERCISES OF SARs AND DERs
a. Participants who terminate service with the Company, or who
otherwise cease to be a licensed RR/Agent of the Company, must
exercise their SARs and DERs within 30 days following such
separation or loss of license. Failure to exercise constitutes a
lapse in all rights under the MAP as determined by the Board in
its sole discretion.
b. If services are terminated for cause, as defined in the MAP, the
participant will forfeit all SARs and DERs awarded under the MAP. A
termination "for cause" generally results from being convicted of a
felony, violating certain professional regulatory requirements or
ethical standards, or certain gross violations of Company policy as
determined by the Board in its sole discretion.
c. The Company may unilaterally exercise SARs of any participant who
holds unexercised SARs exceeding 5% of the total unexercised SARs
outstanding.
d. In the case of the death or disability of a participating
individual, exercise will be based upon the valuation made at the
end of the month in which such event occurs. SARs will be paid to
the participating individual within 30 days of the month of
disability or to the personal representative of the participant's
estate in the event of death. Payments in such case will occur
within 30 days after the later of the expiration of the month in
which death occurred or the date on which the personal
representative of the deceased's estate is appointed and qualified.
10. MISCELLANEOUS
a. The MAP is not intended to confer any rights as a stockholder to any
holder of SARs and DERs, including, but not limited to, the right to
vote any share of common stock or the right to receive dividends on
shares of Company stock.
b. The Board reserves the right to amend or terminate the MAP, and to
change any policy or practice described in this document, at any
time and for any reason, in its sole discretion.
c. Since awards under the MAP are compensatory in nature, they will be
reported annually as taxable earnings. The Company will report
earnings using IRS Form 1099 for agents and IRS Form W-2 for
employees. Cash payments and related transfers under the MAP are
subject to applicable employment taxes. Employees are generally
subject to income and employment tax withholding as of the date of
exercise.
d. The MAP does not affect any other commission or compensation plan.
e. The MAP is not intended to confer any right of employment or affect
the rights of the parties under any other agreement.
- --------------------------------------------------------------------------------
2
<PAGE>
[LOGO]
MISSION ACCOMPLISHMENT PLAN AGREEMENT
FOR A SELECT GROUP OF AGENTS OF INDEPENDENT RESEARCH AGENCY
FOR LIFE INSURANCE, INC.
THIS AGREEMENT, effective as of July 22, 1998 (the "Grant Date"), is between
Independent Research Agency for Life Insurance, Inc., a Texas corporation
("IRA"), and the person named on page 2 (hereinafter referred to as the
"Participant").
WITNESSETH:
WHEREAS, IRA has adopted the Mission Accomplishment Plan (MAP) for a Select
Group of Agents of Independent Research Agency for Life Insurance, Inc. (the
"MAP Plan"), which was adopted by IRA's Board of Directors ("Board") on June
27, 1998, and which provides for the grant of Stock Appreciation Rights
("SARs") and Dividend Equivalent Rights ("DERs"), collectively referred to as
MAP Units;
WHEREAS, the Participant has been selected by the Board to participate in the
MAP Plan, in accordance with the provisions thereof;
WHEREAS, Participant will receive an Award of SARs and DERs as of the Grant
Date; and
WHEREAS, the parties hereto desire to evidence in writing the terms and
conditions of the Award as set forth in this Agreement and under the MAP Plan
which is incorporated by this reference.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and agreements herein contained and as an inducement to Participant to continue
in the performance of services to IRA, the parties hereto hereby agree as
follows:
1. All capitalized terms not defined in this document are defined under the
MAP Plan document.
2. IRA hereby grants to Participant, effective as of the Grant Date, Map
Units specified on the MAP Certificate upon the terms and conditions set
forth herein and subject to terms and conditions of the MAP Plan.
3. Each MAP Unit represents one SAR unit and one DER unit.
4. The per-SAR Unit Value, as of this Grant Date, is equal to $1.00.
5. As long as the Participant is the rightful holder of a DER unit, the
Participant will be eligible to receive a Dividend Equivalent on each
Dividend Payment Date subsequent to the Grant Date specified herein. The
Participant's DERs are cancelled when their SARs are exercised.
6. Subject to the terms of the MAP Plan, the SAR Units granted by this
Agreement are only exercisable upon the first of the following events to
occur:
a. the ten (10) year anniversary from the Grant Date;
b. the Participant's separation from service; or
c. the Participant's death or disability.
7. The MAP Units granted herein are fully vested as of the Grant Date.
8. Payment of SAR Value or a DER unit Dividend Equivalent will be a
lump-sum cash payment unless other options are made available by the
Board under the MAP Plan.
9. The Board may make such provisions and take such steps as it may deem
necessary or appropriate for the withholding of any taxes which IRA is
required by any law or regulation of any governmental authority, whether
federal, state, or local, domestic or foreign, to withhold in connection
with any Award including, but not limited to, the withholding of the
payment of the SAR Value of all or any portion of such Awards until the
Participant reimburses IRA for the amount IRA is required to withhold
with respect to such taxes, canceling any portion of such Awards in an
amount sufficient to reimburse itself for the amount it is required to
so withhold, or taking any other action reasonably required to satisfy
IRA's withholding obligation.
10. This Agreement does not give the Participant the right to continue in
the service of IRA, nor does it affect the right of IRA to terminate
such service relationship with or without cause. This Award does not
affect any other commission or compensation plan of IRA.
11. The interpretation, performance, and enforcement of this Agreement shall
be governed by the laws of the State of Texas.
- --------------------------------------------------------------------------------
1
<PAGE>
12. Should any provision of the Plan be determined to be invalid, illegal,
or unenforceable, such invalidity, illegality, or unenforceability shall
not affect the remaining provisions of the Plan, but shall be fully
severable and the Plan shall be construed and enforced as if such
provision had never been inserted herein.
13. SARs and DERs are subject to immediate forfeiture if (1) participant
violates the Company's policy regarding non-competition, (2) the Company
is entitled to a hold-back or offset under the terms of a Registered
Representative/Agent Agreement or Company policy, or (3) participant's
services with the Company are terminated for cause, as defined in
the MAP Plan.
14. MAP Units granted pursuant to this MAP Agreement may not be transferred,
pledged, assigned, or otherwise encumbered in any manner unless
specified by the MAP Plan pursuant to an estate planning transaction
approved by the MAP Plan Administrator.
15. The MAP is not intended to confer any rights of a stockholder to any
holder of a MAP Unit including, but not limited to, the right to vote
any share of common stock or the right to receive dividends on shares of
IRA stock.
16. These MAP Units are not liable for, or subject to, in whole or in part,
the debts, contracts, liabilities, or torts of the Participant, nor
shall they be subject to garnishment, attachment, execution, levy, or
other legal or equitable process.
17. Participant accepts these MAP Units subject to all provisions of the MAP
Plan, which are incorporated herein by reference, including the
provisions that authorize the Board to administer and interpret the MAP
Plan and that provide that the Board's decisions, determinations, and
interpretations with respect to the MAP Plan are final and conclusive on
all persons affected thereby.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the
day and year first above written.
INDEPENDENT RESEARCH AGENCY PARTICIPANT
FOR LIFE INSURANCE, INC
--------------------------------------
By: Signature
--------------------------------
Lamar C. Smith --------------------------------------
Chief Executive Officer Printed Name Agent Number
- --------------------------------------------------------------------------------
2
<PAGE>
[LOGO]
MISSION ACCOMPLISHMENT PLAN AGREEMENT
FOR A SELECT GROUP OF MANAGEMENT OF INDEPENDENT RESEARCH
AGENCY FOR LIFE INSURANCE, INC.
THIS AGREEMENT, effective as of July 22, 1998 (the "Grant Date"), is between
Independent Research Agency for Life Insurance, Inc., a Texas corporation
("IRA"), and the person named on page 2 (hereinafter referred to as the
"Participant").
WITNESSETH:
WHEREAS, IRA has adopted the Mission Accomplishment Plan (MAP) for a Select
Group of Management of Independent Research Agency for Life Insurance, Inc. (the
"MAP Plan"), which was adopted by IRA's Board of Directors ("Board") on June 27,
1998, and which provides for the grant of Stock Appreciation Rights ("SARs")
and Dividend Equivalent Rights ("DERs"), collectively referred to as MAP Units;
WHEREAS, the Participant has been selected by the Board to participate in the
MAP Plan, in accordance with the provisions thereof;
WHEREAS, Participant will receive an Award of SARs and DERs as of the Grant
Date; and
WHEREAS, the parties hereto desire to evidence in writing the terms and
conditions of the Award as set forth in this Agreement and under the MAP Plan
which is incorporated by this reference.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and agreements herein contained and as an inducement to Participant to continue
in the performance of services to IRA, the parties hereto hereby agree as
follows:
1. All capitalized terms not defined in this document are defined under the
MAP Plan document.
2. IRA hereby grants to Participant, effective as of the Grant Date, Map
Units specified on the MAP Certificate upon the terms and conditions set
forth herein and subject to terms and conditions of the MAP Plan.
3. Each MAP Unit represents one SAR unit and one DER unit.
4. The per-SAR Unit Value, as of this Grant Date, is equal to $1.00.
5. As long as the Participant is the rightful holder of a DER unit, the
Participant will be eligible to receive a Dividend Equivalent on each
Dividend Payment Date subsequent to the Grant Date specified herein. The
Participant's DERs are cancelled when their SARs are exercised.
6. Subject to the terms of the MAP Plan, the SAR Units granted by this
Agreement are only exercisable upon the first of the following events to
occur:
a. the ten (10) year anniversary from the Grant Date;
b. the Participant's separation from service; or
c. the Participant's death or disability.
7. The MAP Units granted herein are fully vested as of the Grant Date.
8. Payment of SAR Value or a DER unit Dividend Equivalent will be a
lump-sum cash payment unless other options are made available by the
Board under the MAP Plan.
9. The Board may make such provisions and take such steps as it may deem
necessary or appropriate for the withholding of any taxes which IRA is
required by any law or regulation of any governmental authority, whether
federal, state, or local, domestic or foreign, to withhold in connection
with any Award including, but not limited to, the withholding of the
payment of the SAR Value of all or any portion of such Awards until the
Participant reimburses IRA for the amount IRA is required to withhold
with respect to such taxes, canceling any portion of such Awards in an
amount sufficient to reimburse itself for the amount it is required to
so withhold, or taking any other action reasonably required to satisfy
IRA's withholding obligation.
10. This Agreement does not give the Participant the right to continue in
the service of IRA, nor does it affect the right of IRA to terminate
such service relationship with or without cause. This Award does not
affect any other commission or compensation plan of IRA.
11. The interpretation, performance, and enforcement of this Agreement shall
be governed by the laws of the State of Texas.
- --------------------------------------------------------------------------------
1
<PAGE>
[LOGO]
MISSION ACCOMPLISHMENT PLAN AGREEMENT
FOR A SELECT GROUP OF KEY EMPLOYEES OF INDEPENDENT RESEARCH AGENCY FOR
LIFE INSURANCE, INC.
THIS AGREEMENT, effective as of July 22, 1998 (the "Grant Date"), is between
Independent Research Agency for Life Insurance, Inc., a Texas corporation
("IRA"), and the person named on page 2 (hereinafter referred to as the
"Participant").
WITNESSETH:
WHEREAS, IRA has adopted the Mission Accomplishment Plan (MAP) for a Select
Group of Key Employees of Independent Research Agency for Life Insurance,
Inc. (the "MAP Plan"), which was adopted by IRA's Board of Directors
("Board") on June 27, 1998, and which provides for the grant of Stock
Appreciation Rights ("SARs") and Dividend Equivalent Rights ("DERs"),
collectively referred to as MAP Units;
WHEREAS, the Participant has been selected by the Board to participate in the
MAP Plan, in accordance with the provisions thereof;
WHEREAS, Participant will receive an Award of SARs and DERs as of the Grant
Date; and
WHEREAS, the parties hereto desire to evidence in writing the terms and
conditions of the Award as set forth in this Agreement and under the MAP Plan
which is incorporated by this reference.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and agreements herein contained and as an inducement to Participant to
continue in the performance of services to IRA, the parties hereto hereby
agree as follows:
1. All capitalized terms not defined in this document are defined under the
MAP Plan document.
2. IRA hereby grants to Participant, effective as of the Grant Date, Map
Units specified on the MAP Certificate upon the terms and conditions set
forth herein and subject to terms and conditions of the MAP Plan.
3. Each MAP Unit represents one SAR unit and one DER unit.
4. The per-SAR Unit Value, as of this Grant Date, is equal to $1.00.
5. As long as the Participant is the rightful holder of a DER unit, the
Participant will be eligible to receive a Dividend Equivalent on each
Dividend Payment Date subsequent to the Grant Date specified herein.
The Participant's DERs are cancelled when their SARs are exercised.
6. Subject to the terms of the MAP Plan, the SAR Units granted by this
Agreement are only exercisable upon the first of the following events to
occur:
a. the five (5) year anniversary from the Grant Date;
b. the Participant's separation from service; or
c. the Participant's death or disability.
7. The MAP Units granted herein are fully vested as of the Grant Date.
8. Payment of SAR Value or a DER unit Dividend Equivalent will be a
lump-sum cash payment unless other options are made available by the
Board under the MAP Plan.
9. The Board may make such provisions and take such steps as it may deem
necessary or appropriate for the withholding of any taxes which IRA is
required by any law or regulation of any governmental authority, whether
federal, state, or local, domestic or foreign, to withhold in connection
with any Award including, but not limited, the withholding of the payment
of the SAR Value of all or any portion of such Awards until the
participant reimburses IRS for the amount IRA is required to withhold with
respect to such taxes, canceling any portion of such Awards in an amount
sufficient to reimburse itself for the amount it is required to so
withhold, or taking any other action reasonably required to satisfy IRA's
withholding obligation.
10. This Agreement does not give the Participant the right to continue in
the service of IRA, nor does it affect the right of IRA to terminate such
service relationship with or without cause. This Award does not affect any
other commission or compensation plan of IRA.
11. The interpretation, performance, and enforcement of this Agreement shall
be governed by the laws of the State of Texas.
- -------------------------------------------------------------------------------
1
<PAGE>
12. Should any provision of the Plan be determined to be invalid, illegal,
or unenforceable, such invalidity, illegality, or unenforceability shall
not affect the remaining provisions of the Plan, but shall be fully
severable and the Plan shall be construed and enforced as if such
provision had never been inserted herein.
13. SARs and DERs are subject to immediate forfeiture if (1) participant
violates the Company's policy regarding non-competition, (2) the Company
is entitled to a hold-back or offset under the terms of a Registered
Representative/Agent Agreement or Company policy, or (3) participant's
services with the Company are terminated for cause, as defined in the
MAP Plan.
14. MAP Units granted pursuant to this MAP Agreement may not be transferred,
pledged, assigned, or otherwise encumbered in any manner unless specified
in the MAP Plan pursuant to an estate planning transaction approved by
the MAP Plan Administrator.
15. The MAP is not intended to confer any rights of a stockholder to any
holder of a MAP Unit including, but not limited to, the right to vote
any share of common stock or the right to receive dividends on shares of
IRA stock.
16. These MAP Units are not liable for, or subject to, in whole or in part,
the debts, contracts, liabilities, or torts of the Participant, nor
shall they be subject to garnishment, attachment, execution, levy, or
other legal or equitable process.
17. Participant accepts these MAP Units subject to provisions of the MAP
Plan, which are incorporated herein by reference, including the provisions
that authorize the Board to administer and interpret the MAP Plan and that
provide that the Board's decisions, determinations, and interpretations
with respect to the MAP Plan are final and conclusive on all persons
affected thereby.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the
day and year first above written.
INDEPENDENT RESEARCH AGENCY PARTICIPANT
FOR LIFE INSURANCE, INC
--------------------------------------
By: Signature
--------------------------------
Lamar C. Smith --------------------------------------
Chief Executive Officer Printed Name Agent Number
- --------------------------------------------------------------------------------
2
<PAGE>
[LOGO]
MISSION ACCOMPLISHMENT PLAN AGREEMENT
FOR A SELECT GROUP OF KEY EMPLOYEES OF
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
THIS AGREEMENT, effective as of July 22, 1998 (the "Grant Date"), is between
Independent Research Agency for Life Insurance, Inc., a Texas corporation
("IRA"), and the person named on page 2 (hereinafter referred to as the
"Participant").
WITNESSETH:
WHEREAS, IRA has adopted the Mission Accomplishment Plan (MAP) for a Select
Group of Highly Compensated Employees of Independent Research Agency for Life
Insurance, Inc. (the "MAP Plan"), which was adopted by IRA's Board of
Directors ("Board") on June 27, 1998, and which provides for the grant of
Stock Appreciation Rights ("SARs") and Dividend Equivalent Rights
("DERs"), collectively referred to as MAP Units;
WHEREAS, the Participant has been selected by the Board to participate in
the MAP Plan, in accordance with the provisions thereof;
WHEREAS, Participant will receive an Award of SARs and DERs as of the Grant
Date; and
WHEREAS, the parties hereto desire to evidence in writing the terms and
conditions of the Award as set forth in this Agreement and under the MAP Plan
which is incorporated by this reference.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and agreements herein contained and as an inducement to Participant to
continue in the performance of services to IRA, the parties hereto hereby
agree as follows:
1. All capitalized terms not defined in this document are defined under the
MAP Plan document.
2. IRA hereby grants to Participant, effective as of the Grant Date, Map
Units specified on the MAP Certificate upon the terms and conditions set
forth herein and subject to terms and conditions of the MAP Plan.
3. Each MAP Unit represents one SAR unit and one DER unit.
4. The per-SAR Unit Value, as of this Grant Date, is equal to $1.00.
5. As long as the Participant is the rightful holder of a DER unit, the
Participant will be eligible to receive a Dividend Equivalent on each
Dividend Payment Date subsequent to the Grant Date specified herein. The
Participant's DERs are cancelled when their SARs are exercised.
6. Subject to the terms of the MAP Plan, the SAR Units granted by this
Agreement are only exercisable upon the first of the following events to
occur:
a. the five (5) year anniversary from the Grant Date;
b. the Participant's separation from service; or
c. the Participant's death or disability.
7. The MAP Units granted herein are fully vested as of the Grant Date.
8. Payment of SAR Value or a DER unit Dividend Equivalent will be a lump-sum
cash payment unless other options are made available by the Board under
the MAP Plan.
9. The Board may make such provisions and take such steps as it may deem
necessary or appropriate for the withholding of any taxes which IRA is
required by any law or regulation of any governmental authority,
whether federal, state, or local, domestic or foreign, to withhold in
connection with any Award including, but not limited to, the withholding
of the payment of the SAR Value of all or any portion of such Awards
until the Participant reimburses IRA for the amount IRA is required to
withhold with respect to such taxes, canceling any portion of such
Awards in an amount sufficient to reimburse itself for the amount it is
required to so withhold, or taking any other action reasonably required
to satisfy IRA's withholding obligation.
10. This Agreement does not give the Participant the right to continue in
the service of IRA, nor does it affect the right of IRA to terminate
such service relationship with or without cause. This Award does not
affect any other commission or compensation plan of IRA.
11. The interpretation, performance, and enforcement of this Agreement shall
be governed by the laws of the State of Texas.
- --------------------------------------------------------------------------------
1
<PAGE>
12. Should any provision of the Plan be determined to be invalid, illegal,
or unenforceable, such invalidity, illegality, or unenforceability shall
not affect the remaining provisions of the Plan, but shall be fully
severable and the Plan shall be construed and enforced as if such
provision had never been inserted herein.
13. SARs and DERs are subject to immediate forfeiture if (1) participant
violates the Company's policy regarding non-competition, (2) the Company
is entitled to a holdback or offset under the terms of a Registered
Represenatative/Agent Agreement or Company policy, or (3) participant's
services with the Company are terminated for cause, as defined in the
MAP Plan.
14. MAP Units granted pursuant to this MAP Agreement may not be transferred,
pledged, assigned, or otherwise encumbered in any manner unless specified
in the MAP Plan pursuant to an estate planning transaction approved by
the MAP Plan Administrator.
15. The MAP is not intended to confer any rights of a stockholder to any
holder of a MAP Unit including, but not limited to, the right to vote
any share of common stock or the right to receive dividends on shares of
IRA stock.
16. These MAP Units are not liable for, or subject to, in whole or in part,
the debts, contracts, liabilities, or torts of the Participant, nor
shall they be subject to garnishment, attachment, execution, levy, or
other legal or equitable process.
17. Participant accepts these MAP Units subject to all provisions of the MAP
Plan, which are incorporated herein by reference, including the
provisions that authorize the Board to administer and interpret the MAP
Plan and that provide that the Board's decisions, determinations, and
interpretations with respect to the MAP Plan are final and conclusive on
all persons affected thereby.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the
day and year first above written.
INDEPENDENT RESEARCH AGENCY PARTICIPANT
FOR LIFE INSURANCE, INC
--------------------------------------
By: Signature
--------------------------------
Lamar C. Smith --------------------------------------
Chief Executive Officer Printed Name Agent Number
- --------------------------------------------------------------------------------
2
<PAGE>
[LOGO]
MISSION ACCOMPLISHMENT PLAN AGREEMENT
FOR A SELECT GROUP OF KEY EMPLOYEES OF INDEPENDENT RESEARCH
AGENCY FOR LIFE INSURANCE, INC.
THIS AGREEMENT, effective as of July 22, 1998 (the "GRANT DATE"), is between
Independent Research Agency for Life Insurance, Inc., a Texas corporation
("IRA"), and the person named on page 2 (hereinafter referred to as the
"Participant").
WITNESSETH:
WHEREAS, IRA has adopted, Mission Accomplishment Plan (MAP) for a Select
Group of Key Employees of Independent Research Agency for Life Insurance,
Inc. (the "MAP Plan"), which was adopted BY IRA's BOARD of Directors
("Board") on June 27, 1998, and which provides for the grant of Stock
Appreciation Rights ("SARs") and Dividend Equivalent Rights ("DERs"),
collectively referred to as MAP Units;
WHEREAS, the Participant has been selected by the Board to participate in
the MAP Plan, in accordance with the provisions thereof;
WHEREAS, Participant will receive an Award of SARs and DERs as of the Grant
Date; and
WHEREAS, the parties hereto desire to evidence in writing the terms and
conditions of the Award as set forth in this Agreement and under the MAP Plan
which is incorporated by this reference.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and agreements herein contained and as an inducement to Participant to continue
in the performance of services to IRA, the parties hereto hereby agree as
follows:
1. All capitalized terms not defined in this document are defined under the
MAP Plan document.
2. IRA hereby grants to Participant, effective as of the Grant Date, Map
Units specified on the MAP Certificate upon the terms and conditions set
forth herein and subject to terms and conditions of the MAP Plan.
3. Each MAP Unit represents one SAR unit and one DER unit.
4. The per-SAR Unit Value, as of this Grant Date, is equal to $1.00.
5. As long as the Participant is the rightful holder of a DER unit, the
Participant will be eligible to receive a Dividend Equivalent on each
Dividend Payment Date subsequent to the Grant Date specified herein. The
Participant's DERs are cancelled when their SARs are exercised.
6. Subject to the terms of the MAP Plan, the SAR Units granted by this
Agreement are only exercisable upon the first of the following events to
occur:
a. the five (5) year anniversary from the Grant Date;
b. the Participant's separation from service; or
c. the Participant's death or disability.
7. The MAP Units granted herein are fully vested as of the Grant Date.
8. Payment of SAR Value or a DER unit Dividend Equivalent, will be a
lump-sum cash payment unless other options are made available by the
Board under the MAP Plan.
9. The Board may make such provisions and take such steps as it may deem
necessary or appropriate for the withholding of any taxes which IRA is
required by any law or regulation of any governmental authority, whether
federal, state, or local, domestic or foreign, to withhold in connection
with any Award including, but not limited to, the withholding of the
payment of the SAR Value of all or any portion of such Awards until the
Participant reimburses IRA for the amount ERA is required to withhold
with respect to such taxes, canceling any portion of such Awards in an
amount sufficient to reimburse itself for the amount it is required to
so withhold, or taking any other action reasonably required to satisfy
IRA's withholding obligation.
10. This Agreement does not give the Participant the right to continue in
the service of IRA, nor does it affect the right of IRA to terminate
such service relationship with or without cause. This Award does not
affect any other commission or compensation plan of IRA.
11. The interpretation, performance, and enforcement of this Agreement shall
be governed by the laws of the State of Texas.
- --------------------------------------------------------------------------------
1
<PAGE>
12. Should any provision of the Plan be determined to be invalid, illegal,
or unenforceable, such invalidity, illegality, or unenforceability shall
not affect the remaining provisions of the Plan, but shall be fully
severable and the Plan shall be construed and enforced as if such
provision had never been inserted herein.
13. SARs and DERs are subject to immediate forfeiture if (1) participant
violates the Company's policy regarding non-competition, (2) the Company
is entitled to a hold-back or offset under the terms of a Registered
Representative/Agent Agreement or Company policy, or (3) participant's
services with the Company are terminated for cause, as defined in the MAP
Plan.
14. MAP Units granted pursuant to this MAP Agreement may not be transferred,
pledged, assigned, or otherwise encumbered in any manner unless specified
in the MAP Plan pursuant to an estate planning transaction approved by
the MAP Plan Administrator.
15. The MAP is not intended to confer any rights of a stockholder to any
holder of a MAP Unit including, but not limited to, the right to vote
any share of common stock or the right to receive dividends on shares of
IRA stock.
16. These MAP Units are not liable for, or subject to, in whole or in part,
the debts, contracts, liabilities, or torts of the Participant, nor
shall they be subject to garnishment, attachment, execution, levy, or
other legal or equitable process.
17. Participant accepts these MAP Units subject to all provisions of the MAP
Plan, which are incorporated herein by reference, including the
provisions that authorize the Board to administer and interpret the MAP
Plan and that provide that the Board's decisions, determinations, and
interpretations with respect to the MAP Plan are final and conclusive on
all persons affected thereby.
IN WITNESS WHEREOF, the Parties hereto have executed this agreement as of the
day and year first above written.
INDEPENDENT RESEARCH AGENCY PARTICIPANT
FOR LIFE INSURANCE, INC
--------------------------------------
By: Signature
--------------------------------
Lamar C. Smith --------------------------------------
Chief Executive Officer Printed Name Agent Number
- --------------------------------------------------------------------------------
2
<PAGE>
USPA & IRA MISSION ACCOMPLISHMENT PLANS
BOARD GRANT DECLARATION AND ADMINISTRATIVE POLICIES
WHEREAS, Independent Research Agency for Life Insurance, Inc. ("IRA") sponsors
certain incentive compensation programs known generally as MAP plans; and
WHEREAS, under the terms of the MAP plans, the Board of Directors of IRA may
establish certain policies regarding the declaration and administration of
awards under the MAP plans; and
WHEREAS, as used throughout this policy, capitalized terms have the same meaning
ascribed them under the MAP plans; and
NOW, THEREFORE, BE IT RESOLVED, the Board of Directors hereby adopts the
following policies:
ADMINISTRATION OF THE PLAN.
The Board of Directors of the Company ("Board") shall appoint an officer of the
Company who shall have the authority and discretion to administer the Plan in
accordance with this policy statement. The Board appoints Marty Durbin as the
Administrator of the MAP Plans.
PARTICIPANTS RECEIVING MAP UNIT AWARDS
Participation in the MAP Plans is limited to the designated individuals
performing services for the Company in one or more of the following four (4)
separate classes:
<TABLE>
<CAPTION>
Plan Name Eligible Class
- --------- --------------
<S> <C>
MAP Plan for Agents Agents who perform services for the
Company under an Agent Agreement
MAP Plan for Senior Management Executive officers and other select
members of the Company's senior
management team designated by the Board
MAP Plan for Select Highly Select group of highly compensated
Compensated employees of the Company with annual
compensation of more than $80,000
designated by the Board
MAP Plan for Key Employees Select Group of Key Employees
designated by the Board
</TABLE>
Map Board Policy (ver. 1998-1) Page 1
Prepared: 07/17/98
<PAGE>
After the initial grant of Awards, new employees will become eligible for Board
nomination after one (1) year of service, (1000 hours of service) with the
Company. Agents become eligible for Board nomination during the next full Plan
year following their first payment of NASC.
The Board hereby approves a listing of Participants eligible for Awards under
the Plan in the accompanying Exhibit A hereto. The Board also approves the
number of MAP Units available for Award as set forth in Exhibit B. Each MAP Unit
is comprised of one SAR unit and one DER unit.
Participants entitled to an Award of MAP Units who are eligible under the
Company's existing recruiting incentive award program will receive additional
MAP Units
In determining the number of MAP Units available for grant, the Board has
considered the Company's capital needs, Future Incentive Commission needs, DCCP
needs, Profit Sharing Plan needs, total MAP Units outstanding, and such other
factors as deemed necessary and appropriate.
The grant of MAP Units under a Plan will be evidenced by a MAP Agreement and an
accompanying Certificate. An Eligible individual becomes a Participant, and
enters the MAP, on the date that the MAP Agreement is signed and completed by
the Company and the Participant.
DETERMINATION OF SAR UNIT VALUE
The Unit Value of each SAR will be approved by the Board and reported by the
Company in its annual report using generally accepted accounting principles as
of the last day of the fiscal year, but reduced by any Dividend Equivalents
declared by the Board for such fiscal year. The per SAR Unit Value will not
include the effect of reporting the Company's investments at market value as
stipulated in Financial Accounting Standard (FAS) 115.
The SAR Unit Value related to the initial grant of MAP Units is $1.
DIVIDEND EQUIVALENTS
The Board may declare a cash Dividend Equivalent within ninety (90) days
following the close of the Company's fiscal year. The Dividend Equivalent will
be expressed in dollars per DER units outstanding and of record as of the
Dividend Declaration Date. A Participant who holds a DER on the Dividend
Declaration Date will receive a cash payment equal to the total number of DERs
held by the Participant multiplied by the per DER unit Dividend Equivalent, less
applicable tax withholdings. Such Dividend Equivalent is payable as soon as
administratively feasible following the Dividend Declaration Date.
MAP Board Policy (ver. 1998-1) Page 2
Prepared: 07/17/98
<PAGE>
EXERCISE OF SARs
SARs are eligible to be exercised upon termination from the Company or upon the
fifth or tenth anniversary of the Grant Date as specified on the Participant's
MAP Certificate. Participants must exercise their SAR in accordance with
procedures established by the Plan administrator. The Exercise Date in
connection with a request by a Participant to exercise one or more SAR Units
will be the last day of the calendar quarter in which the written request is
received.
Participants exercising a SAR will be entitled to a cash payment equal to the
per unit intrinsic value of a SAR measured as the difference between (a) the SAR
Unit Value as of the Exercise Date, and (b) the SAR Unit Value as of the Grant
Date, adjusted for SAR Unit splits, SAR Unit re-capitalizations and similar
changes declared from time to time by the Board in its sole discretion.
The cash payment on account of the exercise of a SAR will be paid by the Company
within 60 to 90 days following the Exercise Date.
MISCELLANEOUS
MAP units may not be transferred, pledged, assigned or otherwise encumbered in
any manner unless specified in the MAP Agreement, unless pursuant to an estate
planning transaction approved by the Plan administrator.
In the event of the Participant's death or Disability at any time before the
Exercise Date, the Exercise Period will end thirty (30) days after the last day
of the month during which the date of death or Disability occurs and the Company
will make any cash payments due under the Plan to the Participant within thirty
(30) days of the month of Disability, and the personal representative of the
Participant's estate in the event of death provided, however, that the Company
in its sole discretion may delay payment until such time as a personal
representative of the deceased's estate is appointed and qualified.
The MAP is not intended to confer any rights of a stockholder to any holder of
MAP unit, including, but not limited to, the right to vote any share of common
stock, or the right to receive dividends on shares of Company stock.
The Board reserves the right to unilaterally amend or terminate a MAP plan in
whole or in part, and to change any policy or practice described in this
document, at any time and for any reason in its sole discretion.
MAP Board Policy (ver. 1998-1) Page 3
Prepared: 07/17/98
<PAGE>
CERTIFICATE OF SECRETARY
_________________________, Secretary of the Board of Directors of Independent
Research Agency for Life Insurance, Inc., do hereby certify that the attached
hereto is a true and correct copy of administrative policy and other
resolutions duly adopted at a meeting of the Board duly called and held on
the ____ day of ____________________, 1998, at which meeting a quorum of the
Board was present and acting throughout, and that such resolutions remain in
full force and effect on the date hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of Independent
Research Agency for Life Insurance, Inc. this ______ day of ________________,
1998.
(CORPORATE SEAL)
- -----------------------------------
Secretary
MAP Board Policy (ver. 1998-1) Page 4
Prepared: 07/17/98
<PAGE>
MISSION ACCOMPLISHMENT PLAN (MAP)
FOR A SELECT GROUP OF MANAGEMENT OF
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.*
1. NAME AND PURPOSE. This plan is established by Independent Research
Agency for Life Insurance, Inc. ("IRA") and its participating affiliates
and will be known as the Mission Accomplishment Plan for a Select Group
of Management (hereinafter the "Plan"). The purpose of the Plan is to
provide significant stock-based, incentive compensation opportunities to
a select group of senior management employees who perform valuable
services that significantly contribute to the success of IRA. Awards
under the MAP plans will include stock options, dividend equivalent
rights, and stock appreciation rights that provide holders the
opportunity to participate in changes in a portion of the market value
of IRA's common stock represented by annual changes in IRA's book value
as described herein.
2. DEFINITIONS. As used herein, the following definitions shall apply:
a. "Award" refers either individually or collectively to the grant of
MAP Units, the grant of Options, and the declaration of a Dividend
Equivalent under the Plan.
b. "Board" means the Board of Directors of the Company
c. "Cause" means by reason of any of the following: (A) the
Participant's conviction of, or plea of nolo contendere to,
any felony or to any crime or offense causing harm to the
Company or any of its subsidiaries or affiliates (whether or
not for personal gain) or involving acts of moral turpitude,
(B) the Participant's repeated intoxication by alcohol or
drugs during the performance of his or her duties, (C) malfeasance
in the conduct of the Participant's duties involving misuse or
diversion of the Company's (or its affiliates') funds,
embezzlement or willful and material misrepresentations or
concealments or any written reports submitted to the Company (or its
affiliates), (D) repeated material failure by the Participant to
perform the duties of his or her employment including any insurance
or investment industry ethical standard, (E) material failure by the
Participant to follow or comply with the reasonable and lawful
written directives of the Board or the Participant's immediate
supervisor, or (F) a material breach by the
- ------------------
PREPARED: 06/18/98 1
<PAGE>
participant of any written agreement between the Participant and
the Company (or its affiliates), including without limitation any
breach of any written non-competition covenant or written covenant
by the Participant with respect to the non-disclosure of
confidential information.
d. "Certificate" means to the written document evidencing individual
Awards under the Plan prepared by the Company and delivered from
time to time to Participants.
e. "Code" means the Internal Revenue Code of 1986, as amended.
f. "Company" means Independent Research Agency for Life Insurance, Inc.
and its participating affiliates that are subject to a joinder
agreement with IRA as approved by the Board.
g. "Declaration Date" means generally the date on which the Board
declares a Dividend Equivalent.
h. "DER" means a dividend equivalent right established under the MAP
Agreement involving either or a combination of, the following rights
as determined in the Board's sole and absolute discretion:
i) the right to receive a cash payment from time to time in
connection with the declaration of Dividend Equivalents, and
ii) the right to receive Shares with an intrinsic value (fair value
less exercise price) at the Option Grant Date equal to the DER
Unit Value.
i. "DER Unit Value" means the per unit value of a Dividend Equivalent
measured as of a Declaration Date not otherwise immediately payable
by the Company on the Dividend Payment Date.
j. "Dividend Equivalent" means the per unit DER amount declared by the
Board from time to time in its complete and sole discretion.
k. "Dividend Payment Date" means the date on which part or all of the
Dividend Equivalent is payable to DER holders in the form of a cash
payment or Options.
l. "Disability" means the complete and permanent disability of a
Participant as determined by the Company in its sole discretion with
or without the opinion of a licensed physician.
PREPARED: 06/18/98 2
<PAGE>
m. "Employee" for purposes of this Plan means any common law employee of
the Company.
n. "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
o. "Exercise Date" means, in the case of a SAR, the date a Participant
exercises the right to receive payment of the SAR Value in accordance
with the procedures established by the Company. In the case of the
transfer of Shares under an Option, the Exercise Date is the date a
Participant exercises the right to receive a transfer of Shares in
accordance with the procedures established by the Company.
p. "Exercise Period" means the ten (10) year period beginning with the
Grant Date; provided, however, that the following special limitations
apply:
i) In the event of the Participant's separation from service with
the Company for a reason other than for Cause, the Exercise
Period will end thirty (30) days following such separation from
service with the Company. The period following a termination of
employment shall in no event extend beyond the original Exercise
Period.
ii) In the event of the Participant's separation from service for
cause from the Company, unpaid Awards under the Plan will lapse
and any request for payment under the Plan will be null and
void. For this purpose, a separation for Cause will be
determined by the Company in its sole discretion.
iii) In the event of the Participant's death or Disability at any
time before the Exercise Date, the Exercise Period will end
thirty (30) days after the last day of the month during
which the date of death or Disability occurs.
Notwithstanding the foregoing, the Board may from time to time
limit or extend the Exercise Period in Its sole discretion.
q. "Grant Date" means:
i) in the case of an SAR Award, the date set forth in the MAP
Agreement or Certificate; and
ii) in the case of an Option Award, the date set forth in the Option
Agreement or Certificate.
PREPARED: 06/18/98 3
<PAGE>
r. "IRA" means Independent Research Agency for Life Insurance, Inc., a
Texas corporation with its home office located in Fort Worth, Texas.
s. "MAP Agreement" means the agreement, evidenced by a Certificate,
entered into by and between the Company and a Participant describing
the terms and conditions of an Award of one or more MAP Units.
t. "MAP Unit" refers collectively to a single SAR unit and a single DER
unit that are granted together, in tandem, as specified by the Board.
u. "Option" means an option granted pursuant to section 9 of this Plan
to purchase one or more Shares.
v. "Option Agreement" means a written agreement evidencing the award of
an Option under the Plan that may accompany, or be incorporated into,
the MAP Agreement.
w. "Participant" means any individual who, in connection with the
performance of services to IRA, is designated by the Board as eligible
to receive an Award and evidenced by a MAP Agreement or an Option
Agreement entered into between such eligible individual and the
Company.
x. "Plan" means the Mission Accomplishment Plan for a Select Group of
Management and is also commonly referred to as MAP Plan for Senior
Management.
y. "SAR" refers to a "stock appreciation right," or the right to
participate with other SAR unit holders in any appreciation in
the SAR Value of the Company.
z. "SAR Unit Value" means the amount declared from time to time by the
Board pursuant to a formal written policy representing the Company's
cumulative earnings, measured on a per SAR Unit basis since the
inception of the Plan, and determined using the Company's audited
financial statements prepared in accordance with generally accepted
accounting principles. For this purpose, and unless declared
otherwise by the Board in its complete and sole discretion,
the term SAR Unit Value will not include the effect of reporting
the Company's investments at market value as required by Statement
of Financial Accounting Standards (SFAS) No. 115 "Accounting for
Certain Investments in Debt and Equity Securities".
aa. "SAR Value" means the intrinsic value of a SAR measured as the
difference between (a) the per SAR Unit Value as of the Exercise
Date,
PREPARED: 06/18/98 4
<PAGE>
and (b) the per SAR Unit Value of as of the Grant Date, adjusted for
SAR Unit splits, SAR Unit recapitalizations and similar changes
declared from time to time by the Board in its sole discretion.
bb. "Shares" means the shares of mutual funds or other such property
identified and referenced in the Option Agreement, but may in no way
be expanded to include units of any money market funds or other cash
equivalents.
3. TERM OF PLAN. The Plan shall become effective on the date it is approved
by the Board and adopted by the Company and shall continue in effect until
terminated, at the sole discretion of the Board, pursuant to paragraph 15.
4. ELIGIBILITY. The Board will designate Participants eligible to receive
and hold MAP Units and Options under the Plan from time to time in its
sole discretion.
5. MAP UNITS AVAILABLE FOR AWARD. The aggregate number of MAP Units,
including the relative number of underlying SAR units and DER units,
available for Award shall be established from time to time by the
Board in its sole discretion.
6. AWARD OF MAP UNITS. From time to time, the Board will declare an Award of
MAP Units to designated Participants as of a Grant Date. Initially, each
MAP Unit will represent one SAR and one DER. For each designated
Participant, the Award of MAP Units will be subject to the terms of the
MAP Agreement and evidenced by a Certificate. Awards will be subject to
such additional terms and conditions as may be established from time to
time by the Board. The MAP Agreement and accompanying Certificate will
identify the number of MAP Units Awarded (including, where necessary,
the number of underlying SAR units and DER units), the SAR Unit Value
at the Grant Date, the effective date of DER unit participation in
Dividend Equivalents, and the Exercise Period. Authorized officers of the
Company will execute MAP Agreements and issue Certificates on behalf of
the Company upon instructions from the Board.
7. SAR AWARDS. The Award of MAP Units will involve a grant of SAR units to
designated Participants by the Company and the holding and exercise of
such SAR units by such Participants are subject to the following terms
and conditions:
a. PERIODIC REPORTING OF SAR UNIT VALUE. The SAR Unit Value as of the
Grant Date shall be determined and declared pursuant to a written
Board policy and evidenced on the Certificate. Thereafter, SAR Unit
Value will be established by the Board and reported annually in the
Company's annual report to stockholders. The Company will
periodically report to each Participant with respect to each Award
the number of SAR units and the current SAR Unit Value.
PREPARED: 06/18/98 5
<PAGE>
b. EXERCISE. Participants holding a SAR may only exercise their right to
receive payment of the SAR Value within 30 days immediately following
termination or separation from the Company or upon lapse of the
Exercise Period using such forms and in accordance with such
procedures as may be established from time to time by the Company.
The exercise is subject to the terms and conditions set forth in the
MAP Agreement. Except as otherwise provided in the MAP Agreement,
a SAR Award will be fully vested as of the Grant Date. Limitations
regarding the number and timing of SAR exercises may be established
from time to time by the Board in its sole discretion. All rights
of a Participant under a SAR lapse as of the last day of the Exercise
Period. After the close of the Exercise Period the SAR is canceled
and any subsequent request to exercise the SAR is null and void.
c. PAYMENT. The form and timing of payment of the SAR Value following
the Exercise Date shall be determined by the Board in its sole
discretion. Such form of payment may include, but is not limited
to lump sum cash payments, or an Option under section 9 of the
Plan below.
d. COMPANY EXERCISE OF SAR. The Company may unilaterally exercise SARs
on behalf of certain SAR holders in accordance with the terms of a
written policy established from time to time by the Board in its sole
discretion.
8. DER AWARDS. The Award of MAP Units will involve the grant of a DER by the
Company and the holding and exercise of such DERs by designated
Participants are subject to the following terms and conditions:
a. DECLARATION OF DIVIDEND EQUIVALENTS. As of any Declaration Date, the
Board may declare a Dividend Equivalent based on the financial
performance and profitability of the Company. The Declaration Date
will generally occur within ninety (90) days following the close of
the Company's fiscal year, or at such other time as determined by the
Board in its sole discretion.
b. PAYMENT OF DIVIDEND EQUIVALENTS. On the Declaration Date, the Board
in its sole discretion will declare the portion of the Dividend
Equivalent, if any, to be paid in the form of a lump sum cash payment
to holders of DERs. Such payment will be made only to DER holders of
record as of such Declaration Date. Payments are made as determined by
the Company on the Dividend Payment Date.
c. OPTION GRANTS. The portion of the per DER unit Dividend Equivalent
not otherwise declared as payable in the form of a cash payment by
the
PREPARED: 06/18/98 6
<PAGE>
Company, if any, will be declared by the Board as DER Unit Value
subject to the Option under section 9 of the Plan below.
9. OPTION AWARDS
a. SHARES SUBJECT TO THE PLAN. The aggregate number and type of Shares
subject to Options will be fully described in each Option Agreement.
b. ELIGIBILITY. The Board will name Participants eligible to receive
Options under the Plan from time to time in its sole discretion.
c. GRANT OF OPTIONS. The Board shall determine the number of Shares to
be offered from time to time and grant Options under the Plan. The
grant of Options shall be evidenced by written Option Agreements
containing such terms and provisions as approved by the Board.
Officers of the Company shall execute Option Agreements on behalf
of the Company upon instructions from the Board.
d. AMOUNT OF THE OPTION AWARD. The number of Shares granted under the
Plan will be determined as follows:
i) In the case of Options in connection with exercise of a SAR, the
intrinsic value (the fair value less the exercise price) of the
Shares determined as of the Option Grant Date will equal the SAR
Value determined as of the SAR Exercise Date.
ii) In the case of an Option grant in connection with the
declaration of Dividend Equivalents, the intrinsic
value of the Shares at the Option Grant Date will equal
the DER Unit Value determined as of the Dividend Declaration
Date.
e. TIME OF GRANT OF OPTIONS. The Grant Date of an Option under the Plan
shall, for all purposes, be the date on which the Board awards the
Option, as evidenced by the execution of an Option Agreement.
f. EXERCISE PRICE. The Option exercise price for each Share shall be
expressed in each Option Agreement, provided, however, the exercise
price shall be no lower than 25 percent of the fair market value of a
Share on the date of grant of the Option. Fair market value on any
day of reference shall be the closing price of the Share on such
date, unless the Board, in its sole discretion shall determine
otherwise in a fair and uniform manner. For this purpose, the
closing price of the Share on any business day shall be (i) if the
Share is listed or admitted for trading on any United States
national securities exchange, the last reported sale price of Share
on such exchange,
PREPARED: 06/18/98 7
<PAGE>
as reported in any newspaper of general circulation, (ii) if the
Share is not listed or admitted for trading on any United States
national securities exchange, the average of the high and low sale
prices of the Share for such a day reported on The Nasdaq SmallCap
Market or a comparable consolidated transaction reporting system,
or if no sales are reported for such day, such average for the
most recent business day within five business days before such day
which sales are reported, or (iii) if neither clause (i) or (ii)
is applicable, the average between the lowest bid and highest
asked quotations for the Share on such day as reported by The
Nasdaq SmallCap Market or the National Quotation Bureau,
Incorporated, if at least two securities dealers have inserted
both bid and asked quotations for the Share on at least 5 of the
10 preceding business days.
g. EXERCISE. Participants holding an Option may exercise their right
to tender the Option price and receive the Shares at any time
during the Exercise Period using such forms and in accordance with
such procedures as may be established from time to time by the
Company. The exercise is subject to the terms and conditions set
forth in the Option Agreement. Except as otherwise provided in the
Option Agreement, an Option Award will be fully vested and
immediately exercisable as of the Grant Date. Limitations
regarding the number and timing of Option exercises may be
established from time to time by the Board in its sole discretion.
All rights of a Participant under an Option lapse as of the last
day of the Exercise Period. After the close of the Exercise Period
the Option is canceled and any subsequent request to exercise the
Option is null and void.
h. OPTION FINANCING. Upon the exercise of any Option granted under the
Plan, the Participant may instruct the Company to sell a number of
Shares otherwise deliverable to the Participant and attributable to
the exercise of the Option in order to pay the exercise price of
the Option. The Board may, in its sole discretion, make financing
available to the Participant to facilitate the exercise of the
Option, subject to such terms as the Board may specify.
i. SUBSTITUTION OF OPTION. If a Participant has been granted an Option
to purchase Shares under an Option Agreement, then except as
limited by the terms of the Option Agreement, the Participant may
direct that the Option be converted into an Option to purchase
other Shares as permitted by the Option Agreement. Such
substitution shall only be allowed to the extent that, immediately
following the substitution, the difference between the fair market
value of the Shares subject to the substituted Option and the
exercise price of the substituted Option is no greater than the
difference which existed immediately prior to the substitution
between the fair market
PREPARED: 06/18/98 8
<PAGE>
value of the Shares subject to the original Option and the exercise
price of the original Option.
j. COMPANY EXERCISE OF OPTION. The Company may unilaterally exercise
one or more Options on behalf of the holder in accordance with the
terms of a written policy established from time to time by the
Board in its sole discretion.
k. EMPLOYEE ELECTIONS. The Company in its sole discretion may request
that Participants sign a special election as a condition of the
Share grant.
10. WITHHOLDING OF TAXES. The Board may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding of
any taxes which the Company is required by any law or regulation of any
governmental authority, whether federal, state or local, domestic or
foreign, to withhold in connection with any Award including, but not
limited to, the withholding of the payment of the SAR Value of all or
any portion of such Awards until the Participant reimburses the Company
for the amount the Company is required to withhold with respect to such
taxes, canceling any portion of such Awards in an amount sufficient to
reimburse itself for the amount it is required to so withhold, or taking
any other action reasonably required to satisfy the Company's
withholding obligation.
11. MODIFICATION OF AWARD. From time to time the Board may modify, extend,
or renew any outstanding Award, provided that such modification,
extension, or renewal shall not impair the Award without the consent of
the affected Participant.
12. FORFEITURE AND RIGHT OF OFFSET. The Board will establish policies from
time to time regarding the forfeiture of Awards. Part or all of a
Participant's Awards under the Plan may be forfeited by the Company in
its sole discretion in the event:
a. the Participant violates the Company's policy regarding
non-competition;
b. the Participant separates from service with the Company for Cause as
determined by the Board in its sole discretion; and
c. the Company exercises its right to hold or offset payments of Awards
under the Plan in accordance with the applicable provisions of the
Participant's applicable employment or agent agreement with the
Company.
Forfeited, lapsed, or waived MAP Units or other Awards under the Plan
revert to the Company.
PREPARED: 06/18/98 9
<PAGE>
13. ADMINISTRATION OF THE PLAN. The Board, in its sole discretion, will
designate an officer of the Company to exercise discretionary power and
control in the administration of the Plan. This authority includes the
power:
a. to interpret the Plan and ascribe one or more meanings to Plan terms
where deemed necessary or appropriate in it sole discretion;
b. to prescribe, amend and rescind procedures, protocols, forms, rules
and other requirements relating to the day-to-day administration of
the Plan;
c. to engage service providers to assist in the administration of the
Plan; and
d. to make such other determinations in the exercise of such
discretionary power and authority as may be necessary or advisable in
the administration of the Plan.
14. RELATIONSHIP TO THE COMPANY. Nothing in the Plan or any accompanying
document, including the MAP Agreement, Option Agreement, or Certificate
shall give any Participant the right to continue in the service of the
Company or affect the right of the Company to terminate such service
relationship of any such person with or without Cause. Awards under the
Plan do not affect any other commission or compensation plan of the
Company.
15. AMENDMENT AND TERMINATION OF THE PLAN. The Board, in its sole
discretion, may alter, suspend or discontinue the Plan at any time. No
alteration, suspension, or discontinuance shall impair the rights of any
Participant except to the extent necessary to comply with any provision
of federal or applicable state laws.
16. PAYMENTS ON ACCOUNT OF DEATH OR DISABILITY. In the event of the
Participant's death or Disability at any time before the Exercise Date,
the Exercise Period will end thirty (30) days after the last day of the
month during which the date of death or Disability occurs, Company will
make any cash payments due under the Plan to the Participant within
thirty (30) days of the month of Disability, and the personal
representative of the Participant's estate in the event of death
provided, however, that the Company in its sole discretion may delay
payment until such time as a personal representative of the deceased's
estate is appointed and qualified.
17. GOVERNING LAW. The Plan shall be governed by and construed in accordance
with the laws of the State of Texas.
18. ASSIGNMENT AND TRANSFER. The right of the Participant or any other
person to the payment of an Award under the Plan shall not be assigned,
and shall not be subject in any manner to anticipation, alienation,
sale, transfer, pledge, encumbrance, attachment, or garnishment by
creditors of such Participant or other person
PREPARED: 06/18/98 10
<PAGE>
claiming rights through the Participant; provided, however, that the
Company may in its sole discretion permit the transfer of some or all of
the Participant's rights under this Plan in connection with certain
estate planning transactions of the Participant that are approved by the
Company. Transfer may be conditioned on the Participant's agreement to
enter into an indemnification agreement with the Company in a form and
manner prescribed by the Company for all claims arising in connection
with the transfer.
19. DISPUTES. The interpretations and construction of the Company shall be
binding and conclusive on all persons and for all purposes. Any
disagreements about such interpretations and construction shall be
submitted to an arbitrator subject to the rules and procedures
established by the American Arbitration Association, and the costs of
arbitration shall be paid equally by the Company and the Participant. No
officer of the Corporation or member of the Board shall be liable to any
person for any action taken hereunder, except those actions undertaken
with lack of good faith.
20. UNFUNDED OBLIGATION. The rights of the Participant, and any other person
claiming through the Participant, shall solely be those of an unsecured
general creditor of the Company. The Participant, and any person
claiming through the Participant, shall only have the right to receive
from the Company those payments as specified under the Plan. The
Participant, and any other person claiming through the Participant,
shall have no rights or interest whatsoever in any specific asset of the
Employer except as set forth under section 9 of the Plan.
21. SEVERABILITY OF PROVISIONS. Should any provision of the Plan be
determined to be invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect the remaining provisions
of the Plan, but shall be fully severable, and the Plan shall be
construed and enforced as if such provision had never been inserted
herein.
22. RIGHTS AS A SHAREHOLDER. The MAP is not intended to confer any rights of
a stockholder to any holder of MAP unit including, but not limited to,
the right to vote any share of common stock or the right to receive
dividends on shares of Company stock.
PREPARED: 06/18/98 11
<PAGE>
IN WITNESS WHEREOF, Independent Research Agency for Life Insurance, Inc.
has caused this Plan to be executed by its duly authorized officer effective as
of July 1, 1998.
INDEPENDENT RESEARCH AGENCY
FOR LIFE INSURANCE, INC.
By:
---------------------------------------
Lamar C. Smith, Chief Executive Officer
Date:
-------------------------------------
PREPARED: 06/18/98 12
<PAGE>
USPA & IRA MISSION ACCOMPLISHMENT PLANS
BOARD GRANT DECLARATION AND ADMINISTRATIVE POLICIES
WHEREAS, Independent Research Agency for Life Insurance, Inc. ("IRA") sponsors
certain incentive compensation programs known generally as MAP plans; and
WHEREAS, under the terms of the MAP plans, the Board of Directors of IRA may
establish certain policies regarding the declaration and administration of
awards under the MAP plans; and
WHEREAS, as used throughout this policy, capitalized terms have the same meaning
ascribed them under the MAP plans; and
NOW, THEREFORE, BE IT RESOLVED, the Board of Directors hereby adopts the
following policies:
ADMINISTRATION OF THE PLAN.
The Board of Directors of the Company ("Board") shall appoint an officer of
the Company who shall have the authority and discretion to administer the
Plan in accordance with this policy statement. The Board appoints Marty
Durbin as the Administrator of the MAP Plans.
PARTICIPANTS RECEIVING MAP UNIT AWARDS
Participation in the MAP Plans is limited to the designated individuals
performing services for the Company in one or more of the following four (4)
separate classes:
<TABLE>
<CAPTION>
Plan Name Eligible Class
- --------- ---------------
<S> <C>
MAP Plan for Agents Agents who perform services for the
Company under an Agent Agreement
MAP Plan for Senior Management Executive officers and other select
members of the Company's senior management
team designated by the Board
MAP Plan for Select Highly Select group of highly compensated
Compensated employees of the Company with annual
compensation of more than $80,000
designated by the Board
MAP Plan for Key Employees Select Group of Key Employees
designated by the Board
</TABLE>
MAP Board Policy (ver. 1998-1) Page 1
Prepared: 06/18/98
<PAGE>
After the initial grant of Awards, new employees will become eligible for
Board nomination after one (1) year of service, (1000 hours of service) with
the Company. Agents become eligible for Board nomination during the next full
Plan year following their first payment of NASC.
The Board hereby approves a listing of Participants eligible for Awards under
the Plan in the accompanying Exhibit A hereto. The Board also approves the
number of MAP Units available for Award as set forth in Exhibit B. Each MAP
Unit is comprised of one SAR unit and one DER unit.
Participants entitled to an Award of MAP Units who are eligible under the
Company's existing recruiting incentive award program will receive additional
MAP Units
In determining the number of MAP Units available for grant, the Board has
considered the Company's capital needs, Future Incentive Commission needs,
DCCP needs, Profit Sharing Plan needs, total MAP Units outstanding, and such
other factors as deemed necessary and appropriate.
The grant of MAP Units under a Plan will be evidenced by a MAP Agreement and
an accompanying Certificate. An Eligible individual becomes a Participant,
and enters the MAP, on the date that the MAP Agreement is signed and
completed by the Company and the Participant.
DETERMINATION OF SAR UNIT VALUE
The Unit Value of each SAR will be approved by the Board and reported by the
Company in its annual report using generally accepted accounting principles
as of the last day of the fiscal year, but reduced by any Dividend
Equivalents declared by the Board for such fiscal year. The per SAR Unit
Value will not include the effect of reporting the Company's investments at
market value as stipulated in Financial Accounting Standard (FAS) 115.
The SAR Unit Value related to the initial grant of MAP Units is $1.
DIVIDEND EQUIVALENTS
The Board may declare a cash Dividend Equivalent within ninety (90) days
following the close of the Company's fiscal year. The Dividend Equivalent
will be expressed in dollars per DER units outstanding and of record as of
the Dividend Declaration Date. A Participant who holds a DER on the Dividend
Declaration Date will receive a cash payment equal to the total number of
DERs held by the Participant multiplied by the per DER unit Dividend
Equivalent, less applicable tax withholdings. Such Dividend Equivalent is
payable as soon as administratively feasible following the Dividend
Declaration Date.
MAP Board Policy (ver. 1998-1) Page 2
Prepared: 06/18/98
<PAGE>
Equivalent is payable as soon as administratively feasible following the
Dividend Declaration Date.
EXERCISE OF SARs
SARs are eligible to be exercised upon termination from the Company or upon
the tenth anniversary of the Grant Date. Participants must exercise their SAR
in accordance with procedures established by the Plan administrator. The
Exercise Date in connection with a request by a Participant to exercise one
or more SAR Units will be the last day of the calendar quarter in which the
written request is received.
Participants exercising a SAR will be entitled to a cash payment equal to the
per unit intrinsic value of a SAR measured as the difference between (a) the
SAR Unit Value as of the Exercise Date, and (b) the SAR Unit Value as of the
Grant Date, adjusted for SAR Unit splits, SAR Unit re-capitalizations and
similar changes declared from time to time by the Board in its sole
discretion.
The cash payment on account of the exercise of a SAR will be paid by the
Company within 60 to 90 days following the Exercise Date.
MISCELLANEOUS
MAP units may not be transferred, pledged, assigned or otherwise encumbered
in any manner unless specified in the MAP Agreement, unless pursuant to an
estate planning transaction approved by the Plan administrator.
In the event of the Participant's death or Disability at any time before the
Exercise Date, the Exercise Period will end thirty MAP (30) days after the
last day of the month during which the date of death or Disability occurs and
the Company will make any cash payments due under the Plan to the Participant
within thirty (30) days of the month of Disability, and the personal
representative of the Participant's estate in the event of death provided,
however, that the Company in its sole discretion may delay payment until such
time as a personal representative of the deceased's estate is appointed and
qualified.
The MAP is not intended to confer any rights of a stockholder to any holder
of MAP unit, including, but not limited to, the right to vote any share of
common stock, or the right to receive dividends on shares of Company stock.
The Board reserves the right to unilaterally amend or terminate a MAP plan in
whole or in part, and to change any policy or practice described in this
document, at any time and for any reason in its sole discretion.
MAP Board Policy (ver. 1998-1) Page 3
Prepared: 06/18/98
<PAGE>
CERTIFICATE OF SECRETARY
___________________________, Secretary of the Board of Directors of
Independent Research Agency for Life Insurance, Inc., do hereby certify that
the attached hereto is a true and correct copy of administrative policy and
other resolutions duly adopted at a meeting of the Board duly called and held
on the _____ day of ________, 1998, at which meeting a quorum of the Board was
present and acting throughout, and that such resolutions remain in full force
and effect on the date hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of Independent
Research Agency for Life Insurance, Inc. this _____ day of _______, 1998.
(CORPORATE SEAL)
- ------------------------------
Secretary
MAP Board Policy (ver. 1998-1) Page 4
Prepared: 06/18/98
<PAGE>
MISSION ACCOMPLISHMENT PLAN (MAP)
FOR AGENTS OF
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.*
1. NAME AND PURPOSE. This plan is established by Independent Research
Agency for Life Insurance, Inc. ("IRA") and its participating affiliates
and will be known as the Mission Accomplishment Plan for a Select Group
of Agents (hereinafter the "Plan"). The purpose of the Plan is to
provide significant stock-based, incentive compensation opportunities
agents who perform valuable services that significantly contribute to the
success of IRA. Awards under the MAP plans will include stock options,
dividend equivalent rights, and stock appreciation rights that provide
holders the opportunity to participate in changes in a portion of the
market value of IRA's common stock represented by annual changes in
IRA's book value as described herein.
2. DEFINITIONS. As used herein, the following definitions shall apply:
a. "Award" refers either individually or collectively to the grant of
MAP Units, the grant of Options, and the declaration of a Dividend
Equivalent under the Plan.
b. "Board" means the Board of Directors of the Company.
c. "Cause" means by reason of any of the following: (A) the
Participant's conviction of, or plea of nolo contendere to, any
felony or to any crime or offense causing harm to the Company or
any of its subsidiaries or affiliates (whether or not for personal
gain) or involving acts of moral turpitude, (B) the Participant's
repeated intoxication by alcohol or drugs during the performance of
his or her duties, (C) malfeasance in the conduct of the
Participant's duties involving misuse or diversion of the
Company's (or its affiliates') funds, embezzlement or willful and
material misrepresentations or concealments or any written reports
submitted to the Company (or its affiliates), (D) repeated material
failure by the Participant to perform the duties of his or her
employment including any insurance or investment industry ethical
standard, (E) material failure by the Participant
- ----------------------
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
<PAGE>
to follow or comply with the reasonable and lawful written
directives of the Board or the Participant's immediate supervisor,
or (F) a material breach by the Participant of any written
agreement between the Participant and the Company (or its
affiliates), including without limitation any breach of any written
non-competition covenant or written covenant by the Participant
with respect to the non-disclosure of confidential information.
d. "Certificate" means the written document evidencing individual
Awards under the Plan prepared by the Company and delivered from
time to time to Participants.
e. "Code" means the Internal Revenue Code of 1986, as amended.
f. "Company" means Independent Research Agency for Life Insurance,
Inc. and its participating affiliates that are subject to a joinder
agreement with IRA as approved by the Board.
g. "Declaration Date" means generally the date on which the Board
declares a Dividend Equivalent.
h. "DER" means a dividend equivalent right established under the MAP
Agreement involving either, or a combination of, the following
rights as determined in the Board's sole and absolute discretion:
i) the right to receive a cash payment from time to time in
connection with the declaration of Dividend Equivalents; and
ii) the right to receive Shares with an intrinsic value (fair value
less exercise price) at the Option Grant Date equal to the DER
Unit Value.
As referenced in this document, the phrase "Dividend Equivalent
Right" bears no reflection or right to any dividend that may be
declared or otherwise paid to the shareholders.
i. "DER Unit Value" means the per unit value of a Dividend Equivalent
measured as of a Declaration Date not otherwise immediately payable
by the Company on the Dividend Payment Date.
j. "Dividend Equivalent" means the per unit DER amount declared by the
Board from time to time in its complete and sole discretion.
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
Prepared: 06/26/98 2
<PAGE>
k. "Dividend Payment Date" means the date on which part or all of the
Dividend Equivalent is payable to DER holders in the form of a cash
payment or Options.
l. "Disability" means the complete and permanent disability of a
Participant as determined by the Company in its sole discretion
with or without the opinion of a licensed physician.
m. "Employee" for purposes of this Plan means any common law employee
of the Company.
n. "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
o. "Exercise Date" means, in the case of a SAR, the date a Participant
exercises the right to receive payment of the SAR Value in
accordance with the procedures established by the Company. In the
case of the transfer of Shares under an Option, the Exercise Date
is the date a Participant exercises the right to receive a transfer
of Shares in accordance with the procedures established by the
Company.
p. "Exercise Period" means the ten (10) year period beginning with the
Grant Date provided, however, that the following special
limitations apply:
i) In the event of the Participant's separation from service with
the Company for a reason other than for Cause, the Exercise
Period will end thirty (30) days following such separation from
service with the Company. The period following a termination of
employment shall in no event extend beyond the original Exercise
Period.
ii) In the event of the Participant's separation from service for
Cause from the Company, unpaid Awards under the Plan will lapse
and any request for payment under the Plan will be null and
void. For this purpose, a separation for Cause will be
determined by the Company in its sole discretion.
iii) In the event of the Participant's death or Disability at any
time before the Exercise Date, the Exercise Period will end
thirty (30)
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
Prepared: 06/26/98 3
<PAGE>
days after the last day of the month during which the date of
death or Disability occurs.
Notwithstanding the foregoing, the Board may from time to time
limit or extend the Exercise Period in its sole discretion.
q. "Grant Date" means:
i) in the case of a SAR Award, the date set forth in the MAP
Agreement or Certificate; and
ii) in the case of an Option Award, the date set forth in the Option
Agreement or Certificate.
r. "IRA" means Independent Research Agency for Life Insurance, Inc., a
Texas corporation with its home office located in Fort Worth, Texas.
s. "MAP Agreement" means the agreement, evidenced by a Certificate,
entered into by and between the Company and a Participant describing
the terms and conditions of an Award of one or more MAP Units.
t. "MAP Unit" refers collectively to a single SAR unit and a single DER
unit that are granted together, in tandem, as specified by the Board.
u. "Option" means an option granted pursuant to section 9 of this Plan
to purchase one or more Shares.
v. "Option Agreement" means a written agreement entered into by and
between the Company and a Participant evidencing the award of an
Option under the Plan that may accompany, or be incorporated into,
the MAP Agreement.
w. "Participant" means any individual who, in connection with the
performance of services to IRA, is designated by the Board as
eligible to receive an Award and evidenced by a MAP Agreement
or an Option Agreement entered into between such eligible individual
and the Company.
x. "Plan" means this Mission Accomplishment Plan for a Select Group of
Agents and is also commonly referred to as MAP Plan for Senior
Management.
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 4
<PAGE>
y. "SAR" refers to a "stock appreciation right," or the right to
participate with other SAR unit holders in any appreciation in
the SAR Value of the Company.
z. "SAR Unit Value" means the amount declared from time to time by
the Board pursuant to a formal written policy representing the
Company's cumulative earnings net of corporate tax payments,
measured on a per SAR Unit basis since the inception of the Plan,
and determined using the Company's audited financial statements
prepared in accordance with generally accepted accounting principles.
For this purpose, and unless declared otherwise by the Board in its
complete and sole discretion, the term SAR Unit Value will not
include the effect of reporting the Company's investments at
market value as required by Financial Accounting Standard (FAS) 115.
aa. "SAR Value" means the intrinsic value of a SAR measured as the
difference between (a) the per SAR Unit Value as of the Exercise
Date, and (b) the per SAR Unit Value of as of the Grant Date,
adjusted for SAR Unit splits, SAR Unit recapitalizations and
similar changes declared from time to time by the Board in its sole
discretion.
bb. "Shares" means the shares of mutual funds or other such property
identified and referenced in the Option Agreement, but may in no way
be expanded to include units of any money market funds or other cash
equivalents.
3. TERM OF PLAN. The Plan shall become effective on the date it is approved
by the Board and adopted by the Company and shall continue in effect until
terminated, at the sole discretion of the Board, pursuant to paragraph 15.
4. ELIGIBILITY. The Board will designate Participants eligible to receive and
hold MAP Units and Options under the Plan from time to time in its sole
discretion.
5. MAP UNITS AVAILABLE FOR AWARD. The aggregate number of MAP Units,
including the relative number of underlying SAR units and DER units,
available for Award shall be established from time to time by the
Board in its sole discretion.
6. AWARD OF MAP UNITS. From time to time, the Board will declare an Award of
MAP Units to designated Participants as of a Grant Date. Initially, each
MAP
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 5
<PAGE>
Unit will represent one SAR and one DER. For each designated
Participant, the Award of MAP Units will be subject to the terms of the
MAP Agreement and evidenced by a Certificate. Awards will be subject to
such additional terms and conditions as may be established from time to
time by the Board. The MAP Agreement and accompanying Certificate will
identify the number of MAP Units awarded (including, where necessary,
the number of underlying SAR units and DER units), the SAR Unit Value at
the Grant Date, the effective date of DER unit participation in Dividend
Equivalents, and the Exercise Period. Authorized officers of the Company
will execute MAP Agreements and issue Certificates on behalf of the
Company upon instructions from the Board.
7. SAR AWARDS. The Award of MAP Units will involve a grant of SAR units to
designated Participants by the Company and the holding and exercise of
such SAR units by such Participants are subject to the following terms
and conditions:
a. PERIODIC REPORTING OF SAR UNIT VALUE AND SAR VALUE. The SAR Unit
Value as of the Grant Date shall be determined and declared
pursuant to a written Board policy and evidenced on the
Certificate. Thereafter, SAR Unit Value will be established by the
Board and reported annually in the Company's annual report to
stockholders. The Company will periodically report to each
Participant with respect to each Award the number of SAR units and
the current SAR Value.
b. EXERCISE. Participants holding a SAR may only exercise their right
to receive payment of the SAR Value within 30 days immediately
following termination or separation from the Company or upon lapse
of the Exercise Period using such forms and in accordance with such
procedures as may be established from time to time by the Company.
The exercise is subject to the terms and conditions set forth in
the MAP Agreement. Except as otherwise provided in the MAP
Agreement, a SAR Award will be fully vested as of the Grant Date.
Limitations regarding the number and timing of SAR exercises may be
established from time to time by the Board in its sole discretion.
All rights of a Participant under a SAR lapse as of the last day of
the Exercise Period. After the close of the Exercise Period the SAR
is canceled and any subsequent request to exercise the SAR is null
and void.
c. PAYMENT. The form and timing of payment of the SAR Value following
the Exercise Date shall be determined by the Board in its sole
discretion. Such form of payment may include, but is not limited to
a lump sum cash payment or an Option under section 9 of the Plan
below.
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 6
<PAGE>
d. COMPANY EXERCISE OF SAR. The Company may unilaterally exercise SARs
on behalf of certain SAR holders in accordance with the terms of a
written policy established from time to time by the Board in its
sole discretion.
e. CANCELLATION. Exercise of a Participant's SARs cancels the MAP
Units.
8. DER AWARDS. The Award of MAP Units will involve the grant of DER by the
Company and the holding and exercise of such DERs by designated
Participants are subject to the following terms and conditions:
a. DECLARATION OF DIVIDEND EQUIVALENTS. As of any Declaration Date,
the Board may declare a Dividend Equivalent based on the financial
performance and profitability of the Company. The Declaration Date
will generally occur within ninety (90) days following the close of
the Company's fiscal year, or at such other time as determined by
the Board in its sole discretion.
b. PAYMENT OF DIVIDEND EQUIVALENTS. On the Declaration Date, the Board
in its sole discretion will declare the portion of the Dividend
Equivalent, if any, to be paid in the form of a lump sum cash
payment to holders of DERs. Such payment will be made only to DER
holders of record as of such Declaration Date. Payments are made as
determined by the Company on the Dividend Payment Date.
c. OPTION GRANTS. The portion of the per DER unit Dividend Equivalent
not otherwise declared as payable in the form of a cash payment by
the Company, if any, will be declared by the Board as DER Unit
Value subject to the Option under section 9 of the Plan below.
d. CANCELLATION. Participant's DERs are canceled when their SARs are
exercised in accordance with section 7.
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 7
<PAGE>
9. OPTION AWARDS
a. SHARES SUBJECT TO THE PLAN. The aggregate number and type of Shares
subject to Options will be fully described in each Option Agreement.
b. ELIGIBILITY. The Board will name Participants eligible to receive
Options under the Plan from time to time in its sole discretion.
c. GRANT OF OPTIONS. The Board shall determine the number of Shares to
be offered from time to time and grant Options under the Plan. The
grant of Options shall be evidenced by written Option Agreements
containing such terms and provisions as approved by the Board.
Officers of the Company shall execute Option Agreements on behalf of
the Company upon instructions from the Board.
d. AMOUNT OF THE OPTION AWARD. The number of Shares granted under the
Plan will be determined as follows:
i) In the case of Options in connection with exercise of a SAR, the
intrinsic value (the fair value less the exercise price) of the
Shares determined as of the Option Grant Date will equal the SAR
Value determined as of the SAR Exercise Date.
ii) In the case of an Option grant in connection with the
declaration of Dividend Equivalents, the intrinsic value
of the Shares at the Option Grant Date will equal the DER Unit
Value determined as of the Dividend Declaration Date.
e. TIME OF GRANT OF OPTIONS. The Grant Date of an Option under the Plan
shall, for all purposes, be the date on which the Board awards the
Option, as evidenced by the execution of an Option Agreement.
f. EXERCISE PRICE. The Option exercise price for each Share shall be
expressed in each Option Agreement provided, however, the exercise
price shall be not less than 25 percent of the fair market value of a
Share on the date of grant of the Option. Fair market value on any
day of reference shall be the closing price of the Share on such
date, unless the Board, in its sole discretion shall determine
otherwise in a fair and uniform manner. For this purpose, the closing
price of the Share on any business day shall be (i) if the Share
is listed or admitted for trading on any United States national
securities exchange, the last reported sale price of Share on
such exchange,
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 8
<PAGE>
as reported in any newspaper of general circulation, (ii) if the
Share is not listed or admitted for trading on any United States
national securities exchange, the average of the high and low sale
prices of the Share for such a day reported on The Nasdaq SmallCap
Market or a comparable consolidated transaction reporting system,
or if no sales are reported for such day, such average for the most
recent business day within five business days before such day which
sales are reported, or (iii) if neither clause (i) or (ii) is
applicable, the average between the lowest bid and highest asked
quotations for the Share on such day as reported by The Nasdaq
SmallCap Market or the National Quotation Bureau, Incorporated, if
at least two securities dealers have inserted both bid and asked
quotations for the Share on at least 5 of the 10 preceding business
days.
g. EXERCISE. Participants holding an Option may exercise their right
to tender the Option price and receive the Shares at any time
during the Exercise Period using such forms and in accordance with
such procedures as may be established from time to time by the
Company. The exercise is subject to the terms and conditions set
forth in the Option Agreement. Except as otherwise provided in the
Option Agreement, an Option Award will be fully vested and
immediately exercisable as of the Grant Date. Limitations regarding
the number and timing of Option exercises may be established from
time to time by the Board in its sole discretion. All rights of a
Participant under an Option lapse as of the last day of the
Exercise Period. After the close of the Exercise Period the Option
is canceled and any subsequent request to exercise the Option is
null and void.
h. OPTION FINANCING. Upon the exercise of any Option granted under the
Plan, the Participant may instruct the Company to sell a number of
Shares otherwise deliverable to the Participant and attributable to
the exercise of the Option in order to pay the exercise price of
the Option. The Board may, in its sole discretion, make financing
available to the Participant to facilitate the exercise of the
Option, subject to such terms as the Board may specify.
i. SUBSTITUTION OF OPTION. If a Participant has been granted an Option
to purchase Shares under an Option Agreement, then except as
limited by the terms of the Option Agreement, the Participant may
direct that the Option be converted into an Option to purchase
other Shares as permitted by the Option Agreement. Such
substitution shall only be allowed to the extent that, immediately
following the substitution, the difference between the fair market
value of the Shares subject to the substituted Option and the
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 9
<PAGE>
exercise price of the substituted Option is no greater than the
difference which existed immediately prior to the substitution
between the fair market value of the Shares subject to the original
Option and the exercise price of the original Option.
j. COMPANY EXERCISE OF OPTION. The Company may unilaterally exercise
one or more Options on behalf of the holder in accordance with the
terms of a written policy established from time to time by the
Board in its sole discretion.
k. EMPLOYEE ELECTIONS. The Company in its sole discretion may request
that Participants sign a special election as a condition of the
Share grant.
10. WITHHOLDING OF TAXES. The Board may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding of any
taxes which the Company is required by any law or regulation of any
governmental authority, whether federal, state or local, domestic or
foreign, to withhold in connection with any Award including, but not
limited to, the withholding of the payment of the SAR Value of all or any
portion of such Awards until the Participant reimburses the Company for
the amount the Company is required to withhold with respect to such
taxes, canceling any portion of such Awards in an amount sufficient to
reimburse itself for the amount it is required to so withhold, or taking
any other action reasonably required to satisfy the Company's withholding
obligation.
11. MODIFICATION OF AWARD. Subject to section 15, the Board may, from time to
time, modify, extend, or renew any outstanding Award, provided that such
modification, extension. or renewal shall not impair the Award without the
consent of the affected Participant.
12. FORFEITURE AND RIGHT OF OFFSET. The Board will establish policies from
time to time regarding the forfeiture of Awards. Part or all of a
Participant's Awards under the Plan may be forfeited by the Company in
its sole discretion in the event:
a. the Participant violates the Company's policy regarding
non-competition;
b. the Participant separates from service with the Company for Cause as
determined by the Board in its sole discretion; and
c. the Company exercises its right to hold or offset payments of Awards
under the Plan in accordance with the applicable provisions of the
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 10
<PAGE>
Participant's applicable employment or agent agreement with the
Company.
Forfeited, lapsed, or waived MAP Units or other Awards under the Plan
revert to the Company.
13. ADMINISTRATION OF THE PLAN. The Board, in its sole discretion, will
designate an officer of the Company to exercise discretionary power and
control in the administration of the Plan. This authority includes the
power:
a. to interpret the Plan and ascribe one or more meanings to Plan terms
where deemed necessary or appropriate in it sole discretion;
b. to prescribe, amend and rescind procedures, protocols, forms, rules
and other requirements relating to the day-to-day administration of
the Plan;
c. to engage service providers to assist in the administration of the
Plan; and
d. to make such other determinations in the exercise of such
discretionary power and authority as may be necessary or advisable in
the administration of the Plan.
14. RELATIONSHIP TO THE COMPANY. Nothing in the Plan or any accompanying
document, including the MAP Agreement, Option Agreement, or Certificate
shall give any Participant the right to continue in the service of the
Company or affect the right of the Company to terminate such service
relationship of any such person with or without Cause. Awards under the
Plan do not affect any other commission or compensation plan of the
Company.
15. AMENDMENT AND TERMINATION OF THE PLAN. The Board, in its sole
discretion, may alter, suspend or discontinue the Plan at any time, in
whole or in part without regard to past practice or policy and without
notice to Participants. No alteration, suspension, or discontinuance
shall impair the rights of any Participant except to the extent
necessary to comply with any provision of federal or applicable state
laws.
16. PAYMENTS ON ACCOUNT OF DEATH OR DISABILITY. In the event of the
Participant's death or Disability at any time before the Exercise Date,
the Exercise Period will end thirty (30) days after the last day of the
month during which the date of death or Disability occurs, Company will
make any cash payments due under the Plan to the Participant within
thirty (30) days of the month of Disability, and the
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 11
<PAGE>
personal representative of the Participant's estate in the event of
death provided, however, that the Company in its sole discretion may
delay payment until such time as a personal representative of the
deceased's estate is appointed and qualified.
17. GOVERNING LAW. The Plan shall be governed by and construed in accordance
with the laws of the State of Texas.
18. ASSIGNMENT AND TRANSFER. MAP Units and the right of the Participant or
any other person to the payment of an Award under the Plan shall not be
assigned, and shall not be subject in any manner to anticipation,
alienation, sale, transfer, pledge, encumbrance, attachment, or
garnishment by creditors of such Participant or other person claiming
rights through the Participant; provided, however, that the Company may
in its sole discretion permit the transfer of some or all of the
Participant's rights under this Plan in connection with certain estate
planning transactions of the Participant that are approved by the
Company. Transfer may be conditioned on the Participant's agreement to
enter into an indemnification agreement with the Company in a form and
manner prescribed by the Company for all claims arising in connection
with the transfer.
19. DISPUTES. The interpretations and construction of the Company shall be
binding and conclusive on all persons and for all purposes. Any
disagreements about such interpretations and construction shall be
submitted to an arbitrator subject to the rules and procedures
established by the American Arbitration Association, and the costs of
arbitration shall be paid equally by the Company and the Participant. No
officer of the Corporation or member of the Board shall be liable to any
person for any action taken hereunder, except those actions undertaken
with lack of good faith.
20. UNFUNDED OBLIGATION. The rights of the Participant, and any other person
claiming through the Participant, shall solely be those of an unsecured
general creditor of the Company. The Participant, and any person
claiming through the Participant, shall only have the right to receive
from the Company those payments as specified under the Plan. The
Participant, and any other person claiming through the Participant,
shall have no rights or interest whatsoever in any specific asset of the
Employer except as set forth under section 9 of the Plan.
21. SEVERABILITY OF PROVISIONS. Should any provision of the Plan be
determined to be invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect the remaining provisions
of the Plan, but shall be fully severable, and the Plan shall be
construed and enforced as if such provision had never been inserted
herein.
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 12
<PAGE>
22. RIGHTS AS A SHAREHOLDER. The MAP is not intended to confer any rights of
a stockholder to any holder of MAP unit including, but not limited to,
the right to vote any share of common stock or the right to receive
dividends on shares of Company stock.
IN WITNESS WHEREOF, Independent Research Agency for Life Insurance, Inc.
has caused this Plan to be executed by its duly authorized officer effective as
of July 1, 1998.
INDEPENDENT RESEARCH AGENCY
FOR LIFE INSURANCE, INC.
By:
----------------------------------------
Lamar C. Smith, Chief Executive Officer
Date:
----------------------------------------
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 13
<PAGE>
MISSION ACCOMPLISHMENT PLAN (MAP)
FOR A SELECT GROUP OF KEY EMPLOYEES OF
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.*
1. NAME AND PURPOSE. This plan is established by Independent Research
Agency for Life Insurance, Inc. ("IRA") and its participating affiliates
and will be known as the Mission Accomplishment Plan for a Select Group
of Key Employees (hereinafter the "Plan"). The purpose of the Plan is to
provide significant stock-based, incentive compensation opportunities to
a select group of key employees who perform valuable services that
significantly contribute to the success of IRA. Awards under the MAP
plans will include stock options, dividend equivalent rights, and stock
appreciation rights that provide holders the opportunity to participate
in changes in a portion of the market value of IRA's common stock
represented by annual changes in IRA's book value as described herein.
2. DEFINITIONS. As used herein, the following definitions shall apply:
a. "Award" refers either individually or collectively to the grant of
MAP Units, the grant of Options, and the declaration of a Dividend
Equivalent under the Plan.
b. "Board" means the Board of Directors of the Company.
c. "Cause" means by reason of any of the following: (A) the
Participant's conviction of, or plea of nolo contendere to, any
felony or to any crime or offense causing harm to the Company or
any of its subsidiaries or affiliates (whether or not for personal
gain) or involving acts of moral turpitude, (B) the Participant's
repeated intoxication by alcohol or drugs during the performance of
his or her duties, (C) malfeasance in the conduct of the
Participant's duties involving misuse or diversion of the Company's
(or its affiliates') funds, embezzlement or willful and material
misrepresentations or concealments or any written reports submitted
to the Company (or its affiliates), (D) repeated material failure
by the Participant to perform the duties of his or her employment
including any insurance or investment industry ethical standard,
(E) material failure by the Participant
- --------------------------
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
<PAGE>
to follow or comply with the reasonable and lawful written
directives of the Board or the Participant's immediate supervisor,
or (F) a material breach by the Participant of any written
agreement between the Participant and the Company (or its
affiliates), including without limitation any breach of any written
non-competition covenant or written covenant by the Participant
with respect to the non-disclosure of confidential information.
d. "Certificate" means the written document evidencing individual
Awards under the Plan prepared by the Company and delivered from
time to time to Participants.
e. "Code" means the Internal Revenue Code of 1986, as amended.
f. "Company" means Independent Research Agency for Life Insurance,
Inc. and its participating affiliates that are subject to a joinder
agreement with IRA as approved by the Board.
g. "Declaration Date" means generally the date on which the Board
declares a Dividend Equivalent.
h. "DER" means a dividend equivalent right established under the MAP
Agreement involving either, or a combination of, the following
rights as determined in the Board's sole and absolute discretion:
i) the right to receive a cash payment from time to time in
connection with the declaration of Dividend Equivalents; and
ii) the right to receive Shares with an intrinsic value (fair value
less exercise price) at the Option Grant Date equal to the DER
Unit Value.
As referenced in this document, the phrase "Dividend Equivalent
Right" bears no reflection or right to any dividend that may be
declared or otherwise paid to the shareholders.
i. "DER Unit Value" means the per unit value of a Dividend Equivalent
measured as of a Declaration Date not otherwise immediately payable
by the Company on the Dividend Payment Date.
j. "Dividend Equivalent" means the per unit DER amount declared by the
Board from time to time in its complete and sole discretion.
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 2
<PAGE>
k. "Dividend Payment Date" means the date on which part or all of the
Dividend Equivalent is payable to DER holders in the form of a cash
payment or Options.
l. "Disability" means the complete and permanent disability of a
Participant as determined by the Company in its sole discretion
with or without the opinion of a licensed physician.
m. "Employee" for purposes of this Plan means any common law employee
of the Company.
n. "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
o. "Exercise Date" means, in the case of a SAR, the date a Participant
exercises the right to receive payment of the SAR Value in
accordance with the procedures established by the Company. In the
case of the transfer of Shares under an Option, the Exercise Date
is the date a Participant exercises the right to receive a transfer
of Shares in accordance with the procedures established by the
Company.
p. "Exercise Period" means the five (5) year period beginning with the
Grant Date provided, however, that the following special
limitations apply:
i) In the event of the Participant's separation from service with
the Company for a reason other than for Cause, the Exercise
Period will end thirty (30) days following such separation
from service with the Company. The period following a
termination of employment shall in no event extend beyond the
original Exercise Period.
ii) In the event of the Participant's separation from service for
Cause from the Company, unpaid Awards under the Plan will
lapse and any request for payment under the Plan will be null
and void. For this purpose, a separation for Cause will be
determined by the Company in its sole discretion.
iii) In the event of the Participant's death or Disability at any
time before the Exercise Date, the Exercise Period will end
thirty (30)
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 3
<PAGE>
days after the last day of the month during which the date of
death or Disability occurs.
Notwithstanding the foregoing, the Board may from time to time limit
or extend the Exercise Period in its sole discretion.
q. "Grant Date" means:
i) in the case of a SAR Award, the date set forth in the MAP
Agreement or Certificate; and
ii) in the case of an Option Award, the date set forth in the
Option Agreement or Certificate.
r. "IRA" means Independent Research Agency for Life Insurance, Inc., a
Texas corporation with its home office located in Fort Worth, Texas.
s. "MAP Agreement" means the agreement, evidenced by a Certificate,
entered into by and between the Company and a Participant
describing the terms and conditions of an Award of one or more MAP
Units.
t. "MAP Unit" refers collectively to a single SAR unit and a single
DER unit that are granted together, in tandem, as specified by the
Board.
u. "Option" means an option granted pursuant to section 9 of this Plan
to purchase one or more Shares.
v. "Option Agreement" means a written agreement entered into by and
between the Company and a Participant evidencing the award of an
Option under the Plan that may accompany, or be incorporated into,
the MAP Agreement.
w. "Participant" means any individual who, in connection with the
performance of services to IRA, is designated by the Board as
eligible to receive an Award and evidenced by a MAP Agreement or an
Option Agreement entered into between such eligible individual and
the Company.
x. "Plan" means this Mission Accomplishment Plan for a Select Group of
Key Employees and is also commonly referred to as MAP Plan for
Senior Management.
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 4
<PAGE>
y. "SAR" refers to a "stock appreciation right," or the right to
participate with other SAR unit holders in any appreciation in the
SAR Value of the Company.
z. "SAR Unit Value" means the amount declared from time to time by the
Board pursuant to a formal written policy representing the
Company's cumulative earnings net of corporate tax payments,
measured on a per SAR Unit basis since the inception of the Plan,
and determined using the Company's audited financial statements
prepared in accordance with generally accepted accounting
principles. For this purpose, and unless declared otherwise by the
Board in its complete and sole discretion, the term SAR Unit Value
will not include the effect of reporting the Company's investments
at market value as required by Financial Accounting Standard (FAS)
115.
aa. "SAR Value" means the intrinsic value of a SAR measured as the
difference between (a) the per SAR Unit Value as of the Exercise
Date, and (b) the per SAR Unit Value of as of the Grant Date,
adjusted for SAR Unit splits, SAR Unit recapitalizations and
similar changes declared from time to time by the Board in its sole
discretion.
bb. "Shares" means the shares of mutual funds or other such property
identified and referenced in the Option Agreement, but may in no
way be expanded to include units of any money market funds or other
cash equivalents.
3. TERM OF PLAN. The Plan shall become effective on the date it is approved
by the Board and adopted by the Company and shall continue in effect
until terminated, at the sole discretion of the Board, pursuant to
paragraph 15.
4. ELIGIBILITY. The Board will designate Participants eligible to receive
and hold MAP Units and Options under the Plan from time to time in its
sole discretion.
5. MAP UNITS AVAILABLE FOR AWARD. The aggregate number of MAP Units,
including the relative number of underlying SAR units and DER units,
available for Award shall be established from time to time by the Board
in its sole discretion.
6. AWARD OF MAP UNITS. From time to time, the Board will declare an Award
of MAP Units to designated Participants as of a Grant Date. Initially,
each MAP
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 5
<PAGE>
Unit will represent one SAR and one DER. For each designated
Participant, the Award of MAP Units will be subject to the terms of the
MAP Agreement and evidenced by a Certificate. Awards will be subject to
such additional terms and conditions as may be established from time to
time by the Board. The MAP Agreement and accompanying Certificate will
identify the number of MAP Units awarded (including, where necessary,
the number of underlying SAR units and DER units), the SAR Unit Value at
the Grant Date, the effective date of DER unit participation in Dividend
Equivalents, and the Exercise Period. Authorized officers of the Company
will execute MAP Agreements and issue Certificates on behalf of the
Company upon instructions from the Board.
7. SAR AWARDS. The Award of MAP Units will involve a grant of SAR units to
designated Participants by the Company and the holding and exercise of
such SAR units by such Participants are subject to the following terms
and conditions:
a. PERIODIC REPORTING OF SAR UNIT VALUE AND SAR VALUE. The SAR Unit
Value as of the Grant Date shall be determined and declared
pursuant to a written Board policy and evidenced on the
Certificate. Thereafter, SAR Unit Value will be established by the
Board and reported annually in the Company's annual report to
stockholders. The Company will periodically report to each
Participant with respect to each Award the number of SAR units and
the current SAR Value.
b. EXERCISE. Participants holding a SAR may only exercise their right
to receive payment of the SAR Value within 30 days immediately
following termination or separation from the Company or upon lapse
of the Exercise Period using such forms and in accordance with such
procedures as may be established from time to time by the Company.
The exercise is subject to the terms and conditions set forth in
the MAP Agreement. Except as otherwise provided in the MAP
Agreement, a SAR Award will be fully vested as of the Grant Date.
Limitations regarding the number and timing of SAR exercises may be
established from time to time by the Board in its sole discretion.
All rights of a Participant under a SAR lapse as of the last day of
the Exercise Period. After the close of the Exercise Period the SAR
is canceled and any subsequent request to exercise the SAR is null
and void.
c. PAYMENT. The form and timing of payment of the SAR Value following
the Exercise Date shall be determined by the Board in its sole
discretion. Such form of payment may include, but is not limited to
a lump sum cash payment or an Option under section 9 of the Plan
below.
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 6
<PAGE>
d. COMPANY EXERCISE OF SAR. The Company may unilaterally exercise SARs
on behalf of certain SAR holders in accordance with the terms of a
written policy established from time to time by the Board in its
sole discretion.
e. CANCELLATION. Exercise of a Participant's SARs cancels the MAP Units.
8. DER AWARDS. The Award of MAP Units will involve the grant of DER by the
Company and the holding and exercise of such DERs by designated
Participants are subject to the following terms and conditions:
a. DECLARATION OF DIVIDEND EQUIVALENTS. As of any Declaration Date,
the Board may declare a Dividend Equivalent based on the financial
performance and profitability of the Company. The Declaration Date
will generally occur within ninety (90) days following the close of
the Company's fiscal year, or at such other time as determined by
the Board in its sole discretion.
b. PAYMENT OF DIVIDEND EQUIVALENTS. On the Declaration Date, the Board
in its sole discretion will declare the portion of the Dividend
Equivalent, if any, to be paid in the form of a lump sum cash
payment to holders of DERs. Such payment will be made only to DER
holders of record as of such Declaration Date. Payments are made as
determined by the Company on the Dividend Payment Date.
c. OPTION GRANTS. The portion of the per DER unit Dividend Equivalent
not otherwise declared as payable in the form of a cash payment by
the Company, if any, will be declared by the Board as DER Unit
Value subject to the Option under section 9 of the Plan below.
d. CANCELLATION. Participant's DERs are canceled when their SARs are
exercised in accordance with section 7.
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 7
<PAGE>
9. OPTION AWARDS
a. SHARES SUBJECT TO THE PLAN. The aggregate number and type of Shares
subject to Options will be fully described in each Option Agreement.
b. ELIGIBILITY. The Board will name Participants eligible to receive
Options under the Plan from time to time in its sole discretion.
c. GRANT OF OPTIONS. The Board shall determine the number of Shares to
be offered from time to time and grant Options under the Plan. The
grant of Options shall be evidenced by written Option Agreements
containing such terms and provisions as approved by the Board.
Officers of the Company shall execute Option Agreements on behalf
of the Company upon instructions from the Board.
d. AMOUNT OF THE OPTION AWARD. The number of Shares granted under the
Plan will be determined as follows:
i) In the case of Options in connection with exercise of a SAR,
the intrinsic value (the fair value less the exercise price)
of the Shares determined as of the Option Grant Date will
equal the SAR Value determined as of the SAR Exercise Date.
ii) In the case of an Option grant in connection with the
declaration of Dividend Equivalents, the intrinsic value of
the Shares at the Option Grant Date will equal the DER Unit
Value determined as of the Dividend Declaration Date.
e. TIME OF GRANT OF OPTIONS. The Grant Date of an Option under the
Plan shall, for all purposes, be the date on which the Board awards
the Option, as evidenced by the execution of an Option Agreement.
f. EXERCISE PRICE. The Option exercise price for each Share shall be
expressed in each Option Agreement provided, however, the exercise
price shall be not less than 25 percent of the fair market value of
a Share on the date of grant of the Option. Fair market value on
any day of reference shall be the closing price of the Share on
such date, unless the Board, in its sole discretion shall determine
otherwise in a fair and uniform manner. For this purpose, the
closing price of the Share on any business day shall be (i) if the
Share is listed or admitted for trading on any United States
national securities exchange, the last reported sale price of Share
on such exchange,
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 8
<PAGE>
as reported in any newspaper of general circulation, (ii) if the
Share is not listed or admitted for trading on any United States
national securities exchange, the average of the high and low sale
prices of the Share for such a day reported on The Nasdaq SmallCap
Market or a comparable consolidated transaction reporting system,
or if no sales are reported for such day, such average for the most
recent business day within five business days before such day which
sales are reported, or (iii) if neither clause (i) or (ii) is
applicable, the average between the lowest bid and highest asked
quotations for the Share on such day as reported by The Nasdaq
SmallCap Market or the National Quotation Bureau, Incorporated, if
at least two securities dealers have inserted both bid and asked
quotations for the Share on at least 5 of the 10 preceding business
days.
g. EXERCISE. Participants holding an Option may exercise their right
to tender the Option price and receive the Shares at any time
during the Exercise Period using such forms and in accordance with
such procedures as may be established from time to time by the
Company. The exercise is subject to the terms and conditions set
forth in the Option Agreement. Except as otherwise provided in the
Option Agreement, an Option Award will be fully vested and
immediately exercisable as of the Grant Date. Limitations regarding
the number and timing of Option exercises may be established from
time to time by the Board in its sole discretion. All rights of a
Participant under an Option lapse as of the last day of the
Exercise Period. After the close of the Exercise Period the Option
is canceled and any subsequent request to exercise the Option is
null and void.
h. OPTION FINANCING. Upon the exercise of any Option granted under the
Plan, the Participant may instruct the Company to sell a number of
Shares otherwise deliverable to the Participant and attributable to
the exercise of the Option in order to pay the exercise price of
the Option. The Board may, in its sole discretion, make financing
available to the Participant to facilitate the exercise of the
Option, subject to such terms as the Board may specify.
i. SUBSTITUTION OF OPTION. If a Participant has been granted an Option
to purchase Shares under an Option Agreement, then except as
limited by the terms of the Option Agreement, the Participant may
direct that the Option be converted into an Option to purchase
other Shares as permitted by the Option Agreement. Such
substitution shall only be allowed to the extent that, immediately
following the substitution, the difference between the fair market
value of the Shares subject to the substituted Option and the
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 9
<PAGE>
exercise price of the substituted Option is no greater than the
difference which existed immediately prior to the substitution
between the fair market value of the Shares subject to the original
Option and the exercise price of the original Option.
j. COMPANY EXERCISE OF OPTION. The Company may unilaterally exercise
one or more Options on behalf of the holder in accordance with the
terms of a written policy established from time to time by the
Board in its sole discretion.
k. EMPLOYEE ELECTIONS. The Company in its sole discretion may request
that Participants sign a special election as a condition of the
Share grant.
10. WITHHOLDING OF TAXES. The Board may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding of any
taxes which the Company is required by any law or regulation of any
governmental authority, whether federal, state or local, domestic or
foreign, to withhold in connection with any Award including, but not
limited to, the withholding of the payment of the SAR Value of all or
any portion of such Awards until the Participant reimburses the Company
for the amount the Company is required to withhold with respect to such
taxes, canceling any portion of such Awards in an amount sufficient to
reimburse itself for the amount it is required to so withhold, or taking
any other action reasonably required to satisfy the Company's
withholding obligation.
11. MODIFICATION OF AWARD. Subject to section 15, the Board may, from time
to time, modify, extend, or renew any outstanding Award, provided that
such modification, extension, or renewal shall not impair the Award
without the consent of the affected Participant.
12. FORFEITURE AND RIGHT OF OFFSET. The Board will establish policies from
time to time regarding the forfeiture of Awards. Part or all of a
Participant's Awards under the Plan may be forfeited by the Company in
its sole discretion in the event:
a. the Participant violates the Company's policy regarding
non-competition;
b. the Participant separates from service with the Company for Cause as
determined by the Board in its sole discretion; and
c. the Company exercises its right to hold or offset payments of Awards
under the Plan in accordance with the applicable provisions of the
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 10
<PAGE>
Participant's applicable employment or agent agreement with the
Company.
Forfeited, lapsed, or waived MAP Units or other Awards under the Plan
revert to the Company.
13. ADMINISTRATION OF THE PLAN. The Board, in its sole discretion, will
designate an officer of the Company to exercise discretionary power and
control in the administration of the Plan. This authority includes the
power:
a. to interpret the Plan and ascribe one or more meanings to Plan terms
where deemed necessary or appropriate in it sole discretion;
b. to prescribe, amend and rescind procedures, protocols, forms, rules
and other requirements relating to the day-to-day administration of
the Plan;
c. to engage service providers to assist in the administration of the
Plan; and
d. to make such other determinations in the exercise of such
discretionary power and authority as may be necessary or advisable in
the administration of the Plan.
14. RELATIONSHIP TO THE COMPANY. Nothing in the Plan or any accompanying
document, including the MAP Agreement, Option Agreement, or Certificate
shall give any Participant the right to continue in the service of the
Company or affect the right of the Company to terminate such service
relationship of any such person with or without Cause. Awards under the
Plan do not affect any other commission or compensation plan of the
Company.
15. AMENDMENT AND TERMINATION OF THE PLAN. The Board, in its sole
discretion, may alter, suspend or discontinue the Plan at any time, in
whole or in part without regard to past practice or policy and without
notice to Participants. No alteration, suspension, or discontinuance
shall impair the rights of any Participant except to the extent
necessary to comply with any provision of federal or applicable state
laws.
16. PAYMENTS ON ACCOUNT OF DEATH OR DISABILITY. In the event of the
Participant's death or Disability at any time before the Exercise Date,
the Exercise Period will end thirty (30) days after the last day of
the month during which the date of death or Disability occurs, Company
will make any cash payments due under the Plan to the Participant within
thirty (30) days of the month of Disability, and the
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 11
<PAGE>
personal representative of the Participant's estate in the event of
death provided, however, that the Company in its sole discretion may
delay payment until such time as a personal representative of the
deceased's estate is appointed and qualified.
17. GOVERNING LAW. The Plan shall be governed by and construed in accordance
with the laws of the State of Texas.
18. ASSIGNMENT AND TRANSFER. MAP Units and the right of the Participant or
any other person to the payment of an Award under the Plan shall not be
assigned, and shall not be subject in any manner to anticipation,
alienation, sale, transfer, pledge, encumbrance, attachment, or
garnishment by creditors of such Participant or other person claiming
rights through the Participant; provided, however, that the Company may
in its sole discretion permit the transfer of some or all of the
Participant's rights under this Plan in connection with certain estate
planning transactions of the Participant that are approved by the
Company. Transfer may be conditioned on the Participant's agreement to
enter into an indemnification agreement with the Company in a form and
manner prescribed by the Company for all claims arising in connection
with the transfer.
19. DISPUTES. The interpretations and construction of the Company shall be
binding and conclusive on all persons and for all purposes. Any
disagreements about such interpretations and construction shall be
submitted to an arbitrator subject to the rules and procedures
established by the American Arbitration Association, and the costs of
arbitration shall be paid equally by the Company and the Participant. No
officer of the Corporation or member of the Board shall be liable to any
person for any action taken hereunder, except those actions undertaken
with lack of good faith.
20. UNFUNDED OBLIGATION. The rights of the Participant, and any other person
claiming through the Participant, shall solely be those of an unsecured
general creditor of the Company. The Participant, and any person
claiming through the Participant, shall only have the right to receive
from the Company those payments as specified under the Plan. The
Participant, and any other person claiming through the Participant,
shall have no rights or interest whatsoever in any specific asset of the
Employer except as set forth under section 9 of the Plan.
21. SEVERABILITY OF PROVISIONS. Should any provision of the Plan be
determined to be invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect the remaining provisions
of the Plan, but shall be fully severable, and the Plan shall be
construed and enforced as if such provision had never been inserted
herein.
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 12
<PAGE>
22. RIGHTS AS A SHAREHOLDER. The MAP is not intended to confer any rights of
a stockholder to any holder of MAP unit including, but not limited to,
the right to vote any share of common stock or the right to receive
dividends on shares of Company stock.
IN WITNESS WHEREOF, Independent Research Agency for Life Insurance, Inc.
has caused this Plan to be executed by its duly authorized officer effective as
of July 1, 1998.
INDEPENDENT RESEARCH AGENCY
FOR LIFE INSURANCE, INC.
By:
----------------------------------------
Lamar C. Smith, Chief Executive Officer
Date:
----------------------------------------
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 13
<PAGE>
MISSION ACCOMPLISHMENT PLAN (MAP)
FOR A SELECT GROUP OF HIGHLY COMPENSATED EMPLOYEES OF
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.*
1. NAME AND PURPOSE. This plan is established by Independent Research
Agency for Life Insurance, Inc. ("IRA") and its participating affiliates
and will be known as the Mission Accomplishment Plan for a Select Group
of Highly Compensated Employees (hereinafter the "Plan"). The purpose of
the Plan is to provide significant stock-based, incentive compensation
opportunities to a select group of highly compensated employees who
perform valuable services that significantly contribute to the success
of IRA. Awards under the MAP plans will include stock options, dividend
equivalent rights, and stock appreciation rights that provide holders
the opportunity to participate in changes in a portion of the market
value of IRA's common stock represented by annual changes in IRA's book
value as described herein.
2. DEFINITIONS. As used herein, the following definitions shall apply:
a. "Award" refers either individually or collectively to the grant of MAP
Units, the grant of Options, and the declaration of a Dividend
Equivalent under the Plan.
b. "Board" means the Board of Directors of the Company.
c. "Cause" means by reason of any of the following: (A) the Participant's
conviction of, or plea of nolo contendere to, any felony or to any
crime or offense causing harm to the Company or any of its
subsidiaries or affiliates (whether or not for personal gain) or
involving acts of moral turpitude, (B) the Participant's repeated
intoxication by alcohol or drugs during the performance of his or her
duties, (C) malfeasance in the conduct of the Participant's duties
involving misuse or diversion of the Company's (or its affiliates')
funds, embezzlement or willful and material misrepresentations or
concealments or any written reports submitted to the Company (or its
affiliates), (D) repeated material failure by the Participant to
perform the duties of his or her employment including any insurance or
- ----------------------
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
<PAGE>
investment industry ethical standard, (E) material failure by the
Participant to follow or comply with the reasonable and lawful written
directives of the Board or the Participant's immediate supervisor, or
(F) a material breach by the Participant of any written agreement
between the Participant and the Company (or its affiliates), including
without limitation any breach of any written non-competition covenant
or written covenant by the Participant with respect to the
non-disclosure of confidential information.
d. "Certificate" means the written document evidencing individual Awards
under the Plan prepared by the Company and delivered from time to time
to Participants.
e. "Code" means the Internal Revenue Code of 1986, as amended.
f. "Company" means Independent Research Agency for Life Insurance, Inc.
and its participating affiliates that are subject to a joinder
agreement with IRA as approved by the Board.
g. "Declaration Date" means generally the date on which the Board
declares a Dividend Equivalent.
h. "DER" means a dividend equivalent right established under the MAP
Agreement involving either, or a combination of, the following rights
as determined in the Board's sole and absolute discretion:
i) the right to receive a cash payment from time to time in
connection with the declaration of Dividend Equivalents; and
ii) the right to receive Shares with an intrinsic value (fair value
less exercise price) at the Option Grant Date equal to the DER
Unit Value.
As referenced in this document, the phrase "Dividend Equivalent Right"
bears no reflection or right to any dividend that may be declared or
otherwise paid to the shareholders.
i. "DER Unit Value" means the per unit value of a Dividend Equivalent
measured as of a Declaration Date not otherwise immediately payable by
the Company on the Dividend Payment Date.
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 2
<PAGE>
j. "Dividend Equivalent" means the per unit DER amount declared by the
Board from time to time in its complete and sole discretion.
k. "Dividend Payment Date" means the date on which part or all of the
Dividend Equivalent is payable to DER holders in the form of a cash
payment or Options.
l. "Disability" means the complete and permanent disability of a
Participant as determined by the Company in its sole discretion with
or without the opinion of a licensed physician.
m. "Employee" for purposes of this Plan means any common law employee of
the Company.
n. "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
o. "Exercise Date" means, in the case of a SAR, the date a Participant
exercises the right to receive payment of the SAR Value in accordance
with the procedures established by the Company. In the case of the
transfer of Shares under an Option, the Exercise Date is the date a
Participant exercises the right to receive a transfer of Shares in
accordance with the procedures established by the Company.
p. "Exercise Period" means the ten (10) year period beginning with the
Grant Date provided, however, that the following special limitations
apply:
i) In the event of the Participant's separation from service with
the Company for a reason other than for Cause, the Exercise
Period will end thirty (30) days following such separation
from service with the Company. The period following a termination
of employment shall in no event extend beyond the original
Exercise Period.
ii) In the event of the Participant's separation from service for
Cause from the Company, unpaid Awards under the Plan will lapse
and any request for payment under the Plan will be null and void.
For this purpose, a separation for Cause will be determined by
the Company in its sole discretion.
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 3
<PAGE>
iii) In the event of the Participant's death or Disability at any time
before the Exercise Date, the Exercise Period will end thirty
(30) days after the last day of the month during which the date
of death or Disability occurs.
Notwithstanding the foregoing, the Board may from time to time limit
or extend the Exercise Period in its sole discretion.
q. "Grant Date" means:
i) in the case of a SAR Award, the date set forth in the MAP
Agreement or Certificate; and
ii) in the case of an Option Award, the date set forth in the Option
Agreement or Certificate.
r. "IRA" means Independent Research Agency for Life Insurance, Inc., a
Texas corporation with its home office located in Fort Worth, Texas.
s. "MAP Agreement" means the agreement, evidenced by a Certificate,
entered into by and between the Company and a Participant describing
the terms and conditions of an Award of one or more MAP Units.
t. "MAP Unit" refers collectively to a single SAR unit and a single DER
unit that are granted together, in tandem, as specified by the Board.
u. "Option" means an option granted pursuant to section 9 of this Plan to
purchase one or more Shares.
v. "Option Agreement" means a written agreement entered into by and
between the Company and a Participant evidencing the award of an
Option under the Plan that may accompany, or be incorporated into, the
MAP Agreement.
w. "Participant" means any individual who, in connection with the
performance of services to IRA, is designated by the Board as eligible
to receive an Award and evidenced by a MAP Agreement or an Option
Agreement entered into between such eligible individual and the
Company.
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 4
<PAGE>
x. "Plan" means this Mission Accomplishment Plan for a Select Group of
Management and is also commonly referred to as MAP Plan for Senior
Management.
y. "SAR" refers to a "stock appreciation right," or the right to
participate with other SAR unit holders in any appreciation in the SAR
Value of the Company.
z. "SAR Unit Value" means the amount declared from time to time by the
Board pursuant to a formal written policy representing the Company's
cumulative earnings net of corporate tax payments, measured on a per
SAR Unit basis since the inception of the Plan, and determined using
the Company's audited financial statements prepared in accordance with
generally accepted accounting principles. For this purpose, and unless
declared otherwise by the Board in its complete and sole discretion,
the term SAR Unit Value will not include the effect of reporting the
Company's investments at market value as required by Financial
Accounting Standard (FAS) 115.
aa. "SAR Value" means the intrinsic value of a SAR measured as the
difference between (a) the per SAR Unit Value as of the Exercise Date,
and (b) the per SAR Unit Value of as of the Grant Date, adjusted for
SAR Unit splits, SAR Unit recapitalizations and similar changes
declared from time to time by the Board in its sole discretion.
bb. "Shares" means the shares of mutual funds or other such property
identified and referenced in the Option Agreement, but may in no way
be expanded to include units of any money market funds or other cash
equivalents.
3. TERM OF PLAN. The Plan shall become effective on the date it is approved
by the Board and adopted by the Company and shall continue in effect
until terminated, at the sole discretion of the Board, pursuant to
paragraph 15.
4. ELIGIBILITY. The Board will designate Participants eligible to receive
and hold MAP Units and Options under the Plan from time to time in its
sole discretion.
5. MAP UNITS AVAILABLE FOR AWARD. The aggregate number of MAP Units,
including the relative number of underlying SAR units and DER units,
available for Award shall be established from time to time by the Board
in its sole discretion.
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 5
<PAGE>
6. AWARD OF MAP UNITS. From time to time, the Board will declare an Award
of MAP Units to designated Participants as of a Grant Date. Initially,
each MAP Unit will represent one SAR and one DER. For each designated
Participant, the Award of MAP Units will be subject to the terms of the
MAP Agreement and evidenced by a Certificate. Awards will be subject to
such additional terms and conditions as may be established from time to
time by the Board. The MAP Agreement and accompanying Certificate will
identify the number of MAP Units awarded (including, where necessary,
the number of underlying SAR units and DER units), the SAR Unit Value at
the Grant Date, the effective date of DER unit participation in Dividend
Equivalents, and the Exercise Period. Authorized officers of the Company
will execute MAP Agreements and issue Certificates on behalf of the
Company upon instructions from the Board.
7. SAR AWARDS. The Award of MAP Units will involve a grant of SAR units to
designated Participants by the Company and the holding and exercise of
such SAR units by such Participants are subject to the following terms
and conditions:
a. PERIODIC REPORTING OF SAR UNIT VALUE AND SAR VALUE. The SAR Unit
Value as of the Grant Date shall be determined and declared
pursuant to a written Board policy and evidenced on the
Certificate. Thereafter, SAR Unit Value will be established by the
Board and reported annually in the Company's annual report to
stockholders. The Company will periodically report to each
Participant with respect to each Award the number of SAR units and
the current SAR Value.
b. EXERCISE. Participants holding a SAR may only exercise their right
to receive payment of the SAR Value within 30 days immediately
following termination or separation from the Company or upon lapse
of the Exercise Period using such forms and in accordance with such
procedures as may be established from time to time by the Company.
The exercise is subject to the terms and conditions set forth in
the MAP Agreement. Except as otherwise provided in the MAP
Agreement, a SAR Award will be fully vested as of the Grant Date.
Limitations regarding the number and timing of SAR exercises may be
established from time to time by the Board in its sole discretion.
All rights of a Participant under a SAR lapse as of the last day of
the Exercise Period. After the close of the Exercise Period the SAR
is canceled and any subsequent request to exercise the SAR is null
and void.
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 6
<PAGE>
c. PAYMENT. The form and timing of payment of the SAR Value following
the Exercise Date shall be determined by the Board in its sole
discretion. Such form of payment may include, but is not limited to
a lump sum cash payment or an Option under section 9 of the Plan
below.
d. COMPANY EXERCISE OF SAR. THE Company may unilaterally exercise
SARs on behalf of certain SAR holders in accordance with the terms
of a written policy established from time to time by the Board in
its sole discretion.
e. CANCELLATION. Exercise of a Participant's SARs cancels the MAP
Units.
8. DER AWARDS. The Award of MAP Units will involve the grant of DER by the
Company and the holding and exercise of such DERs by designated
Participants are subject to the following terms and conditions:
a. DECLARATION OF DIVIDEND EQUIVALENTS. As of any Declaration Date,
the Board may declare a Dividend Equivalent based on the financial
performance and profitability of the Company. The Declaration Date
will generally occur within ninety (90) days following the close of
the Company's fiscal year, or at such other time as determined by
the Board in its sole discretion.
b. PAYMENT OF DIVIDEND EQUIVALENTS. On the Declaration Date, the Board
in its sole discretion will declare the portion of the Dividend
Equivalent, if any, to be paid in the form of a lump sum cash
payment to holders of DERs. Such payment will be made only to DER
holders of record as of such Declaration Date. Payments are made as
determined by the Company on the Dividend Payment Date.
c. OPTION GRANTS. The portion of the per DER unit Dividend Equivalent
not otherwise declared as payable in the form of a cash payment by
the Company, if any, will be declared by the Board as DER Unit
Value subject to the Option under section 9 of the Plan below.
d. CANCELLATION. Participant's DERs are canceled when their SARs are
exercised in accordance with section 7.
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 7
<PAGE>
9. OPTION AWARDS
a. SHARES SUBJECT TO THE PLAN. The aggregate number and type of Shares
subject to Options will be fully described in each Option Agreement.
b. ELIGIBILITY. The Board will name Participants eligible to receive
Options under the Plan from time to time in its sole discretion.
c. GRANT OF OPTIONS. The Board shall determine the number of Shares to
be offered from time to time and grant Options under the Plan. The
grant of Options shall be evidenced by written Option Agreements
containing such terms and provisions as approved by the Board.
Officers of the Company shall execute Option Agreements on behalf
of the Company upon instructions from the Board.
d. AMOUNT OF THE OPTION AWARD. The number of Shares granted under the
Plan will be determined as follows:
i) In the case of Options in connection with exercise of a SAR, the
intrinsic value (the fair value less the exercise price) of the
Shares determined as of the Option Grant Date will equal the SAR
Value determined as of the SAR Exercise Date.
ii) In the case of an Option grant in connection with the declaration
of Dividend Equivalents, the intrinsic value of the Shares at
the Option Grant Date will equal the DER Unit Value determined as
of the Dividend Declaration Date.
e. TIME OF GRANT OF OPTIONS. The Grant Date of an Option under the
Plan shall, for all purposes. be the date on which the Board awards
the Option, as evidenced by the execution of an Option Agreement.
f. EXERCISE PRICE. The Option exercise price for each Share shall be
expressed in each Option Agreement provided, however, the exercise
price shall be not less than 25 percent of the fair market value of
a Share on the date of grant of the Option. Fair market value on
any day of reference shall be the closing price of the Share on
such date, unless the Board, in its sole discretion shall determine
otherwise in a fair and uniform manner. For this purpose, the
closing price of the Share on any business day shall be (i) if the
Share is listed or admitted for trading on any United States
national securities exchange, the last reported sale price of Share
on such exchange,
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 8
<PAGE>
as reported in any newspaper of general circulation, (ii) if the
Share is not listed or admitted for trading on any United States
national securities exchange, the average of the high and low sale
prices of the Share for such a day reported on The Nasdaq SmallCap
Market or a comparable consolidated transaction reporting system,
or if no sales are reported for such day, such average for the most
recent business day within five business days before such day which
sales are reported, or (iii) if neither clause (i) or (ii) is
applicable, the average between the lowest bid and highest asked
quotations for the Share on such day as reported by The Nasdaq
SmallCap Market or the National Quotation Bureau, Incorporated, if
at least two securities dealers have inserted both bid and asked
quotations for the Share on at least 5 of the 10 preceding business
days.
g. EXERCISE. Participants holding an Option may exercise their right
to tender the Option price and receive the Shares at any time
during the Exercise Period using such forms and in accordance with
such procedures as may be established from time to time by the
Company. The exercise is subject to the terms and conditions set
forth in the Option Agreement. Except as otherwise provided in the
Option Agreement, an Option Award will be fully vested and
immediately exercisable as of the Grant Date. Limitations regarding
the number and timing of Option exercises may be established from
time to time by the Board in its sole discretion. All rights of a
Participant under an Option lapse as of the last day of the
Exercise Period. After the close of the Exercise Period the Option
is canceled and any subsequent request to exercise the Option is
null and void.
h. OPTION FINANCING. Upon the exercise of any Option granted under the
Plan, the Participant may instruct the Company to sell a number of
Shares otherwise deliverable to the Participant and attributable
to the exercise of the Option in order to pay the exercise price of
the Option. The Board may, in its sole discretion, make financing
available to the Participant to facilitate the exercise of the
Option, subject to such terms as the Board may specify.
i. SUBSTITUTION OF OPTION. If a Participant has been granted an Option
to purchase Shares under an Option Agreement, then except as
limited by the terms of the Option Agreement, the Participant may
direct that the Option be converted into an Option to purchase
other Shares as permitted by the Option Agreement. Such
substitution shall only be allowed to the extent that, immediately
following the substitution, the difference between the fair market
value of the Shares subject to the substituted Option and the
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 9
<PAGE>
exercise price of the substituted Option is no greater than the
difference which existed immediately prior to the substitution
between the fair market value of the Shares subject to the original
Option and the exercise price of the original Option.
j. COMPANY EXERCISE OF OPTION. The Company may unilaterally exercise
one or more Options on behalf of the holder in accordance with the
terms of a written policy established from time to time by the
Board in its sole discretion.
k. EMPLOYEE ELECTIONS. The Company in its sole discretion may request
that Participants sign a special election as a condition of the
Share grant.
10. WITHHOLDING OF TAXES. The Board may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding of
any taxes which the Company is required by any law or regulation of any
governmental authority, whether federal, state or local, domestic or
foreign, to withhold in connection with any Award including, but not
limited to, the withholding of the payment of the SAR Value of all or
any portion of such Awards until the Participant reimburses the Company
for the amount the Company is required to withhold with respect to such
taxes, canceling any portion of such Awards in an amount sufficient to
reimburse itself for the amount it is required to so withhold, or taking
any other action reasonably required to satisfy the Company's withholding
obligation.
11. MODIFICATION OF AWARD. Subject to section 15, the Board may, from time
to time, modify, extend, or renew any outstanding Award, provided that
such modification, extension, or renewal shall not impair the Award
without the consent of the affected Participant.
12. FORFEITURE AND RIGHT OF OFFSET. The Board will establish policies from
time to time regarding the forfeiture of Awards. Part or all of a
Participant's Awards under the Plan may be forfeited by the Company in
its sole discretion in the event:
a. the Participant violates the Company's policy regarding
non-competition;
b. the Participant separates from service with the Company for Cause as
determined by the Board in its sole discretion; and
c. the Company exercises its right to hold or offset payments of Awards
under the Plan in accordance with the applicable provisions of the
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 10
<PAGE>
Participant's applicable employment or agent agreement with the
Company.
Forfeited, lapsed, or waived MAP Units or other Awards under the Plan
revert to the Company.
13. ADMINISTRATION OF THE PLAN. The Board, in its sole discretion, will
designate an officer of the Company to exercise discretionary power and
control in the administration of the Plan. This authority includes the
power:
a. to interpret the Plan and ascribe one or more meanings to Plan terms
where deemed necessary or appropriate in it sole discretion;
b. to prescribe, amend and rescind procedures, protocols, forms, rules
and other requirements relating to the day-to-day administration of
the Plan;
c. to engage service providers to assist in the administration of the
Plan; and
d. to make such other determinations in the exercise of such
discretionary power and authority as may be necessary or advisable in
the administration of the Plan.
14. RELATIONSHIP TO THE COMPANY. Nothing in the Plan or any accompanying
document, including the MAP Agreement, Option Agreement, or Certificate
shall give any Participant the right to continue in the service of the
Company or affect the right of the Company to terminate such service
relationship of any such person with or without Cause. Awards under the
Plan do not affect any other commission or compensation plan of the
Company.
15. AMENDMENT AND TERMINATION OF THE PLAN. The Board, in its sole
discretion, may alter, suspend or discontinue the Plan at any time, in
whole or in part without regard to past practice or policy and without
notice to Participants. No alteration, suspension, or discontinuance
shall impair the rights of any Participant except to the extent
necessary to comply with any provision of federal or applicable state
laws.
16. PAYMENTS ON ACCOUNT OF DEATH OR DISABILITY. In the event of the
Participant's death or Disability at any time before the Exercise Date,
the Exercise Period will end thirty (30) days after the last day of
the month during which the date of death or Disability occurs, Company
will make any cash payments due under the Plan to the Participant within
thirty (30) days of the month of Disability, and the
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 11
<PAGE>
personal representative of the Participant's estate in the event of
death provided, however, that the Company in its sole discretion may
delay payment until such time as a personal representative of the
deceased's estate is appointed and qualified.
17. GOVERNING LAW. The Plan shall be governed by and construed in accordance
with the laws of the State of Texas.
18. ASSIGNMENT AND TRANSFER. MAP Units and the right of the Participant or
any other person to the payment of an Award under the Plan shall not be
assigned, and shall not be subject in any manner to anticipation,
alienation, sale, transfer, pledge, encumbrance, attachment, or
garnishment by creditors of such Participant or other person claiming
rights through the Participant; provided, however, that the Company may
in its sole discretion permit the transfer of some or all of the
Participant's rights under this Plan in connection with certain estate
planning transactions of the Participant that are approved by the
Company. Transfer may be conditioned on the Participant's agreement to
enter into an indemnification agreement with the Company in a form and
manner prescribed by the Company for all claims arising in connection
with the transfer.
19. DISPUTES. The interpretations and construction of the Company shall be
binding and conclusive on all persons and for all purposes. Any
disagreements about such interpretations and construction shall be
submitted to an arbitrator subject to the rules and procedures
established by the American Arbitration Association, and the costs of
arbitration shall be paid equally by the Company and the Participant. No
officer of the Corporation or member of the Board shall be liable to any
person for any action taken hereunder, except those actions undertaken
with lack of good faith.
20. UNFUNDED OBLIGATION. The rights of the Participant, and any other person
claiming through the Participant, shall solely be those of an unsecured
general creditor of the Company. The Participant, and any person
claiming through the Participant, shall only have the right to receive
from the Company those payments as specified under the Plan. The
Participant, and any other person claiming through the Participant,
shall have no rights or interest whatsoever in any specific asset of the
Employer except as set forth under section 9 of the Plan.
21. SEVERABILITY OF PROVISIONS. Should any provision of the Plan be
determined to be invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect the remaining provisions
of the Plan, but shall be fully severable, and the Plan shall be
construed and enforced as if such provision had never been inserted
herein.
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 12
<PAGE>
22. RIGHTS AS A SHAREHOLDER. The MAP is not intended to confer any rights of
a stockholder to any holder of MAP unit including, but not limited to,
the right to vote any share of common stock or the right to receive
dividends on shares of Company stock.
IN WITNESS WHEREOF, Independent Research Agency for Life Insurance, Inc.
has caused this Plan to be executed by its duly authorized officer effective as
of July 1, 1998.
INDEPENDENT RESEARCH AGENCY
FOR LIFE INSURANCE, INC.
By:
----------------------------------------
Lamar C. Smith, Chief Executive Officer
Date:
----------------------------------------
* THIS PLAN HAS BEEN PREPARED SOLELY FOR THE USE AND CONVENIENCE OF CLIENT'S
LEGAL COUNSEL.
PREPARED: 06/26/98 13
<PAGE>
CLASS A & CLASS B SHAREHOLDERS
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
CURRENT SHAREHOLDERS - AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
Name Total B "B" Cumulative S/H Total A "A" Cumulative
- ----- ------------------------------------
Agt # Last First Middle Shares % % Count Shares % %
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
456 Payne II Carroll H. 46,977 4.91% 4.91% 1 3 12.00% 12.00%
458 Payne Naomi K. 46,977 4.91% 9.81% 2 3 12.00% 24.00%
827 Payne Freda J. 46,977 4.91% 14.72% 3 3 12.00% 36.00%
457 Payne Debra S. 46,528 4.86% 19.58% 4 3 12.00% 48.00%
404 Smith Lamar C. 40,000 4.18% 23.75% 5 2 8.00% 56.00%
611 Thoreson David P. 27,850 2.91% 26.66% 6 1 4.00% 60.00%
418 Crump Howard M. 26,000 2.72% 29.38% 7 2 8.00% 68.00%
58 Becker Raymond C. 24,975 2.61% 31.99% 8
481 Wheeler Michael J. 24,750 2.58% 34.57% 9
429 Gray Jerry D. 20,000 2.09% 36.66% 10 1 4.00% 72.00%
648 Hayes Clinton C. 18,250 1.91% 38.57% 11 0.00%
892 Lanier James N. 18,000 1.88% 40.44% 12 2 8.00% 80.00%
127 Elmendorf Jr. Edward T. 17,550 1.83% 42.28% 13 1 4.00% 84.00%
807 Beck Donald E. 11,775 1.23% 43.51% 14
472 Dean Jr. William R. 10,575 1.10% 44.61% 15
863 Petersen James A. 9,950 1.04% 45.65% 16
630 LeHardy Jr. Frank A. 9,550 1.00% 46.65% 17
370 Montgomery George L. 7,800 0.81% 47.46% 18
279 Vance Jay W. 7,775 0.81% 48.27% 19
693 Frizzell Donaldso D. 7,100 0.74% 49.02% 20 1 4.00% 88.00%
842 Troutman Gregory L. 7,100 0.74% 49.76% 21
766 Ramsey Jr. Frank P. 6,800 0.71% 50.47% 22
434 O'Hanlon Michael D. 6,775 0.71% 51.18% 23
879 Swete Robert E. 6,750 0.70% 51.88% 24
443 Hull Scott L. 6,000 0.63% 52.51% 25
679 Loignon Philip G. 5,800 0.61% 53.11% 26
701 Hale Michael L. 5,750 0.60% 53.71% 27
697 Nielsen Jr. Mark F. 5,700 0.60% 54.31% 28
673 Craig Hal N. 5,600 0.58% 54.89% 29 1 4.00% 92.00%
947 Treat Terry J. 5,475 0.57% 55.46% 30
352 Giles Richard E. 5,400 0.56% 56.03% 31 1 4.00% 96.00%
981 Bridger Barry B. 5,125 0.54% 56.56% 32
715 Anderson Morris D. 5,100 0.53% 57.10% 33
749 Russell Stanley W. 5,000 0.52% 57.62% 34
1117 Craig Jr. J. Edward 5,000 0.52% 58.14% 35
1225 Bennett Kelley E. 4,900 0.51% 58.65% 36
880 Gorman Robert F. 4,850 0.51% 59.16% 37
1010 Glynn Dennis W. 4,725 0.49% 59.65% 38
556 Hagins Jr. Charles B. 4,525 0.47% 60.13% 39
</TABLE>
Page 1
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
CURRENT SHAREHOLDERS - AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
Name Total B "B" Cumulative S/H Total A "A" Cumulative
- ----- ------------------------------------
Agt # Last First Middle Shares % % Count Shares % %
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
813 Galda Margaret L. 4,500 0.47% 60.60% 40 1 4.00% 100.00%
710 Wilcox Richard S. 4,350 0.45% 61.05% 41
510 Obrey Stanley L. 4,225 0.44% 61.49% 42
790 Stevenson Robert J. 4,000 0.42% 61.91% 43
902 Street Jr. George M. 4,000 0.42% 62.33% 44
882 Jeffus Robert E. 3,950 0.41% 62.74% 45
1143 Corbett D. Charles 3,675 0.38% 63.12% 46
668 Flowers Robert E. 3,650 0.38% 63.50% 47
1115 Winkler Sr. John L. 3,400 0.36% 63.86% 48
893 Hookness Robert S. 3,350 0.35% 64.21% 49
516 Breit William M. 3,200 0.33% 64.54% 50
252 Rowe Dennis W. 3,100 0.32% 64.87% 51
1435 Patterson Raland J. 3,050 0.32% 65.18% 52
646 Swindell Clay H. 3,025 0.32% 65.50% 53
1160 Reichbach Kathy A. 3,025 0.32% 65.82% 54
1298 Monoski Jr. Stephen W. 2,925 0.31% 66.12% 55
1496 Wagner Jerry T. 2,825 0.30% 66.42% 56
853 Strnad William R. 2,800 0.29% 66.71% 57
1114 McCall Robert D. 2,775 0.29% 67.00% 58
1429 Rein Rickard E. 2,725 0.28% 67.28% 59
1448 Dierlam III Mark J. 2,650 0.28% 67.56% 60
927 Knapstein Anthony F. 2,625 0.27% 67.83% 61
621 Ordonio Franklin C. 2,625 0.27% 68.11% 62
866 Orr Frederick D. 2,625 0.27% 68.38% 63
1373 Bolling Terry L. 2,575 0.27% 68.65% 64
1221 Scheib Chris D. 2,560 0.27% 68.92% 65
1348 Haygood James L. 2,525 0.26% 69.18% 66
1097 Kwist Garry R. 2,525 0.26% 69.45% 67
1127 Karr James B. 2,500 0.26% 69.71% 68
1599 John Elise M. 2,450 0.26% 69.96% 69
1077 Hollis Glenn D. 2,425 0.25% 70.22% 70
511 Stenson Jr. Charles R. 2,400 0.25% 70.47% 71
1531 Morris Jr. Wilfred R. 2,375 0.25% 70.72% 72
1813 Berger Bradley A. 2,375 0.25% 70.96% 73
1078 Harman Robert J. 2,300 0.24% 71.20% 74
1430 Fellenz Michael P. 2,200 0.23% 71.43% 75
969 Courington George D. 2,125 0.22% 71.66% 76
1666 Terrell Richard H. 2,100 0.22% 71.87% 77
1640 Johnson David F. 2,075 0.22% 72.09% 78
</TABLE>
Page 2
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
CURRENT SHAREHOLDERS - AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
Name Total B "B" Cumulative S/H Total A "A" Cumulative
- ----- ------------------------------------
Agt # Last First Middle Shares % % Count Shares % %
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1419 McConnell Sr. Michael C. 2,075 0.22% 72.31% 79
1292 Dunn Paul A. 2,075 0.22% 72.53% 80
865 Williams Bennie E. 2,050 0.21% 72.74% 81
1205 Woodhouse William B. 2,025 0.21% 72.95% 82
1067 Cotto Rafael A. 2,000 0.21% 73.16% 83
1123 Hayden III Fred R. 1,950 0.20% 73.36% 84
914 Grigsby Jr. John R. 1,925 0.20% 73.56% 85
1202 Bertagnolli Joseph J. 1,875 0.20% 73.76% 86
1192 Hagler Ronald E. 1,875 0.20% 73.96% 87
1353 Heard Dolan 1,850 0.19% 74.15% 88
1216 Heneveld III George A. 1,825 0.19% 74.34% 89
1703 Vejar Ray J. 1,825 0.19% 74.53% 90
1416 Harkey James P. 1,825 0.19% 74.72% 91
1358 Washnock David N. 1,825 0.19% 74.91% 92
1568 Hollis Karen J. 1,800 0.19% 75.10% 93
1450 Geraci Jeffrey S. 1,800 0.19% 75.29% 94
539 Ferguson Thomas Y. 1,800 0.19% 75.48% 95
1952 Miller Jeffrey R. 1,750 0.18% 75.66% 96
1157 Beaty Joseph K. 1,750 0.18% 75.84% 97
917 Durbin Martin R. 1,725 0.18% 76.02% 98
1847 Williamson Esau 1,725 0.18% 76.20% 99
1591 Provo James M. 1,725 0.18% 76.38% 100
1222 Stanley Gerald I. 1,700 0.18% 76.56% 101
1974 Smith Jr. Paul J. 1,650 0.17% 76.73% 102
1470 Lucas Jr. Albert F. 1,650 0.17% 76.90% 103
1984 Davey Kenneth A. 1,650 0.17% 77.08% 104
931 Forepaugh Vance B. 1,650 0.17% 77.25% 105
1185 Terrell Doris M. 1,625 0.17% 77.42% 106
1620 Leopold Philip E. 1,625 0.17% 77.59% 107
1736 Ross William R. 1,625 0.17% 77.76% 108
1865 Blanton Jr. Lindsay C. 1,600 0.17% 77.92% 109
1674 Surgent David M. 1,600 0.17% 78.09% 110
1737 Johnson Eugene E. 1,575 0.16% 78.26% 111
1050 Spinks Patrick F. 1,550 0.16% 78.42% 112
1525 Coxe Jr. William K. 1,500 0.16% 78.57% 113
1380 Ellis Gary G. 1,500 0.16% 78.73% 114
1784 Marcum Donald G. 1,500 0.16% 78.89% 115
777 Austin Henry W. 1,475 0.15% 79.04% 116
831 Boe John P. 1,475 0.15% 79.20% 117
</TABLE>
Page 3
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
CURRENT SHAREHOLDERS - AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
Name Total B "B" Cumulative S/H Total A "A" Cumulative
- ----- ------------------------------------
Agt # Last First Middle Shares % % Count Shares % %
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1788 Davidson Donald G. 1,475 0.15% 79.35% 118
672 Plowman Jr. Floyd C. 1,475 0.15% 79.50% 119
1252 Sciancalepore John L. 1,450 0.15% 79.66% 120
1691 Booth Clinton A. 1,425 0.15% 79.80% 121
2311 Casey Joseph M. 1,400 0.15% 79.95% 122
2036 Stiles John L. 1,400 0.15% 80.10% 123
1723 Ellenson Robert W. 1,375 0.14% 80.24% 124
587 Wynne James H. 1,375 0.14% 80.38% 125
1048 Kone Raleigh C. 1,375 0.14% 80.53% 126
1578 Cermak John D. 1,375 0.14% 80.67% 127
1834 Gagliardi Jr. Frank A. 1,375 0.14% 80.81% 128
1543 Krahl Jr. Kenneth L. 1,325 0.14% 80.95% 129
1536 Brown Durward D. 1,325 0.14% 81.09% 130
1294 Hallock Sr. Scoft A. 1,325 0.14% 81.23% 131
1771 Haines Jr. Robert M. 1,325 0.14% 81.37% 132
1186 Luther Jeffrey A. 1,325 0.14% 81.51% 133
1102 Marx Kyle J. 1,300 0.14% 81.64% 134
1229 Thurgood Leon C. 1,275 0.13% 81.78% 135
1588 Gedelman M. Carolyn 1,275 0.13% 81.91% 136
1990 Worrell Homer W. 1,275 0.13% 82.04% 137
1541 Gilbert Michael D. 1,275 0.13% 82.17% 138
1142 Dollander Lowell T. 1,275 0.13% 82.31% 139
1735 Drake III John R. 1,275 0.13% 82.44% 140
1400 Adams S. Boyd 1,250 0.13% 82.57% 141
1993 Bell Wanda T. 1,250 0.13% 82.70% 142
1234 Brown Jr. Ralph E. 1,250 0.13% 82.83% 143
1860 Kane William W. 1,225 0.13% 82.96% 144
1926 Graw Paul H. 1,225 0.13% 83.09% 145
1826 Jorgensen Robert E. 1,225 0.13% 83.22% 146
1678 Dorenbush Ronald R. 1,225 0.13% 83.34% 147
1735 Holdsworth John W. 1,225 0.13% 83.47% 148
1892 Seemann Daniel F. 1,225 0.13% 83.60% 149
1773 Parker Michael K. 1,225 0.13% 83.73% 150
1427 Greenwood Everett 0. 1,175 0.12% 83.85% 151
1667 Pullen Harvey L. 1,175 0.12% 83.97% 152
891 Wall Daniel W. 1,150 0.12% 84.09% 153
1698 Huff Jr. Howard F. 1,150 0.12% 84.21% 154
389 Monroe Paul L. 1,125 0.12% 84.33% 155
1488 Hubbard Scott A. 1,125 0.12% 84.45% 156
</TABLE>
Page 4
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
CURRENT SHAREHOLDERS - AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
Name Total B "B" Cumulative S/H Total A "A" Cumulative
- ----- ------------------------------------
Agt # Last First Middle Shares % % Count Shares % %
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1920 Bell Mark 1,125 0.12% 84.57% 157
2116 Cincotta Mark J. 1,100 0.11% 84.68% 158
705 Stropp William J. 1,100 0.11% 84.80% 159
1278 Conner James R. 1,075 0.11% 84.91% 160
1776 Mathers Frank S. 1,075 0.11% 85.02% 161
781 Missildine William E. 1,050 0.11% 85.13% 162
1132 Kearl Gordon C. 1,050 0.11% 85.24% 163
1706 Shireley James L. 1,025 0.11% 85.35% 164
1559 Klein Richard L. 1,025 0.11% 85.45% 165
1632 Cyr Steven A. 1,025 0.11% 85.56% 166
2084 Carmichael Paul D. 1,025 0.11% 85.67% 167
1595 Lookingland William G. 1,025 0.11% 85.77% 168
1404 Bowman Lonnie D. 1,000 0.10% 85.88% 169
922 Biehle Arlen L. 1,000 0.10% 85.98% 170
580 McCoy John F. 1,000 0.10% 86.09% 171
1213 Bloyd John R. 1,000 0.10% 86.19% 172
2021 Schless James M. 1,000 0.10% 86.30% 173
869 Bahm Jr. John F. 1,000 0.10% 86.40% 174
1215 Jarrell Norman D. 1,000 0.10% 86.51% 175
1299 Parrington Richard F. 975 0.10% 86.61% 176
1622 Papizan James C. 975 0.10% 86.71% 177
1805 Brown Carl D. 950 0.10% 86.81% 178
1766 Barber David E. 950 0.10% 86.91% 179
1011 Herzog Jr. Raymond L. 950 0.10% 87.01% 180
1757 Levy Lewis R. 925 0.10% 87.10% 181
1845 Neidrick Robert T. 925 0.10% 87.20% 182
2000 Coulter Walter F. 900 0.09% 87.29% 183
1425 Anderson John E. 900 0.09% 87.39% 184
1890 Barrett Michael W. 875 0.09% 87.48% 185
895 Vaupel David K. 875 0.09% 87.57% 186
1888 Collins Gary T. 875 0.09% 87.66% 187
1887 Carlson Scott A. 850 0.09% 87.75% 188
1868 Blomeke Hugh D. 850 0.09% 87.84% 189
1684 Anconetani Anthony A. 850 0.09% 87.93% 190
1708 Cardenas Stephen R. 850 0.09% 88.02% 191
1780 Leifeld Kevin J. 825 0.09% 88.10% 192
1220 Laughlin John D. 825 0.09% 88.19% 193
1535 Weaver James L. 825 0.09% 88.28% 194
2051 Meeboer Jr. William J. 825 0.09% 88.36% 195
</TABLE>
Page 5
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
CURRENT SHAREHOLDERS - AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
Name Total B "B" Cumulative S/H Total A "A" Cumulative
Agt # Last First Middle Shares % % Count Shares % %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1820 Scott John D. 825 0.09% 88.45% 196
870 Harvell Kenneth E. 825 0.09% 88.53% 197
1986 Heaney Patrick J. 825 0.09% 88.62% 198
1633 Smith William G. 825 0.09% 88.71% 199
1369 Palmer William D. 825 0.09% 88.79% 200
1919 Cantwell III Thomas J. 825 0.09% 88.88% 201
2082 Soderlund Paul R. 825 0.09% 88.97% 202
1748 Bradley Jr. Edward J. 800 0.08% 89.05% 203
1505 DeVos Jr. Edward G. 800 0.08% 89.13% 204
839 Graves Warren R. 800 0.08% 89.22% 205
1318 Smith Jr. Theodore A. 800 0.08% 89.30% 206
2009 Scully Debra L. 800 0.08% 89.38% 207
1850 Ponton Robert G. 800 0.08% 89.47% 208
1693 Hakes David H. 775 0.08% 89.55% 209
1943 Wax Richard R. 775 0.08% 89.63% 210
2105 Sands Jr. James E. 775 0.08% 89.71% 211
1761 Giordano Ralph K. 775 0.08% 89.79% 212
1669 Genualdi Frederick 775 0.08% 89.87% 213
2118 Thorne Lloyd M. 775 0.08% 89.95% 214
1532 Markowski Larry R. 775 0.08% 90.03% 215
1608 Gray Martha E. 750 0.08% 90.11% 216
1093 Amelon Richard R. 750 0.08% 90.19% 217
1336 Wolfe Robert J. 750 0.08% 90.27% 218
1918 Edgin Gordon R. 700 0.07% 90.34% 219
1522 Ochs David C. 700 0.07% 90.41% 220
2063 Metzinger Gary D. 700 0.07% 90.49% 221
2192 Olliff Kirk B. 675 0.07% 90.56% 222
2202 Agostini James S. 675 0.07% 90.63% 223
1906 Pierce James E. 675 0.07% 90.70% 224
2156 Consaul III H. Parker 675 0.07% 90.77% 225
1959 Pride Samuel G. 675 0.07% 90.84% 226
342 Reed John L. 675 0.07% 90.91% 227
2101 Huff Ronald D. 675 0.07% 90.98% 228
1549 Tyler Jr. Charles S. 675 0.07% 91.05% 229
2203 Sebenoler Matthew G. 675 0.07% 91.12% 230
1992 Haines Sr. Stanley K. 675 0.07% 91.19% 231
2143 Silenzi Silvio N. 675 0.07% 91.26% 232
1789 Steve Michael P. 675 0.07% 91.33% 233
1747 Ray Stephen M. 650 0.07% 91.40% 234
</TABLE>
Page 6
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
CURRENT SHAREHOLDERS - AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
Name Total B "B" Cumulative S/H Total A "A" Cumulative
Agt # Last First Middle Shares % % Count Shares % %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
727 Zipperer William R. 650 0.07% 91.47% 235
2032 Benish Jr. George P. 650 0.07% 91.54% 236
1715 Blanchette Raymond C. 650 0.07% 91.60% 237
1994 Bennett Raymond K. 650 0.07% 91.67% 238
1520 Batten Richard E. 650 0.07% 91.74% 239
1342 McLin Joseph A. 625 0.07% 91.81% 240
477 Johnson III Lester J. 625 0.07% 91.87% 241
1072 Weatherington Michael W. 625 0.07% 91.94% 242
578 Peroyea III Emile C. 600 0.06% 92.00% 243
1822 Saari Gerald 0. 600 0.06% 92.06% 244
1211 Belcher Walter C. 600 0.06% 92.12% 245
1938 McKibbin William J. 600 0.06% 92.19% 246
1592 Lucas Robert C. 600 0.06% 92.25% 247
1557 Wallace John R. 600 0.06% 92.31% 248
1948 Jones Jr. Ernest H. 600 0.06% 92.37% 249
1334 Waters Dudley F. 600 0.06% 92.44% 250
1893 Weaver Alan J. 600 0.06% 92.50% 251
2098 Allen Sandra T. 600 0.06% 92.56% 252
1490 Williams David M. 600 0.06% 92.63% 253
1809 Batey Alan M. 600 0.06% 92.69% 254
1931 Kilmer Jr. Robert 600 0.06% 92.75% 255
1965 Jennings Bruce A. 600 0.06% 92.81% 256
1356 Strange Benjamin L. 575 0.06% 92.87% 257
1752 Patisaul Charles E. 575 0.06% 92.93% 258
1635 Williams Richard C. 575 0.06% 92.99% 259
2012 Novak Jr. Leonard J. 575 0.06% 93.05% 260
1999 Flanigan Jr. William E. 575 0.06% 93.11% 261
1572 Walker Edward D. 575 0.06% 93.17% 262
2155 Cala Louis 575 0.06% 93.23% 263
1774 Daybell Mark H. 575 0.06% 93.29% 264
2107 Ritchey Stephen A. 575 0.06% 93.35% 265
1951 Werner Marc H. 575 0.06% 93.41% 266
2045 Sourwine Douglas E. 575 0.06% 93.47% 267
1016 Hewitt Scott R. 575 0.06% 93.53% 268
2064 Richardson Carl B. 575 0.06% 93.59% 269
1930 Hoffman Martin L. 575 0.06% 93.65% 270
1744 Patterson Paul L. 550 0.06% 93.71% 271
952 Lake Robert M. 550 0.06% 93.77% 272
1384 Hansen David W. 550 0.06% 93.83% 273
</TABLE>
Page 7
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
CURRENT SHAREHOLDERS - AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
Name Total B "B" Cumulative S/H Total A "A" Cumulative
Agt # Last First Middle Shares % % Count Shares % %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2088 Cappello James M. 525 0.05% 93.88% 274
1876 Campbell Jr. Wesley 525 0.05% 93.94% 275
2073 Golden Richard R. 525 0.05% 93.99% 276
1223 Morrin Jr. Joseph R. 500 0.05% 94.04% 277
1932 Kilb Roger E. 500 0.05% 94.10% 278
2023 Beck Douglas A. 500 0.05% 94.15% 279
1654 Walker Stephen D. 500 0.05% 94.20% 280
1781 Kinser John W. 500 0.05% 94.25% 281
1966 Hill Ralph L. 500 0.05% 94.30% 282
1987 Raich Bruce W. 500 0.05% 94.36% 283
1995 Rausch Robert J. 500 0.05% 94.41% 284
2341 Morrison Michael F. 500 0.05% 94.46% 285
2182 Wheaton Eric E. 475 0.05% 94.51% 286
2213 Ferguson Monte C. 475 0.05% 94.56% 287
2147 Matter Laura T. 475 0.05% 94.61% 288
2195 Hickey Susan M. 475 0.05% 94.66% 289
1796 Rastetter Curtis J. 475 0.05% 94.71% 290
2117 Barton John W. 475 0.05% 94.76% 291
897 Laidlaw Stephen R. 450 0.05% 94.81% 292
1857 Morrison Rufus M. 450 0.05% 94.85% 293
1607 Schmidtbleicher Connie C. 450 0.05% 94.90% 294
2046 Welch Alan R. 450 0.05% 94.95% 295
1367 Lovell Jeffrey G. 450 0.05% 94.99% 296
2097 Clark Patrick G. 450 0.05% 95.04% 297
1150 Robinson Lawrence E. 450 0.05% 95.09% 298
2154 Smith Robert W. 425 0.04% 95.13% 299
2110 McLaughlin Joseph R. 425 0.04% 95.18% 300
372 Koenig William T. 425 0.04% 95.22% 301
2052 Ducos III Frank J. 425 0.04% 95.27% 302
1058 Rush T. Howard 425 0.04% 95.31% 303
473 Langley Harold L. 425 0.04% 95.35% 304
2123 Prater James D. 425 0.04% 95.40% 305
2115 Crow William A. 400 0.04% 95.44% 306
1063 Scruggs Jr. James T. 400 0.04% 95.48% 307
1875 Edmiston Bruce B. 400 0.04% 95.52% 308
1645 Carroll Gary K. 400 0.04% 95.57% 309
1511 Testa Ronald P. 400 0.04% 95.61% 310
2130 Winter Francis C. 400 0.04% 95.65% 311
2104 Trant Thomas H. 400 0.04% 95.69% 312
</TABLE>
Page 8
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
CURRENT SHAREHOLDERS - AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
Name Total B "B" Cumulative S/H Total A "A" Cumulative
Agt # Last First Middle Shares % % Count Shares % %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
925 Marcinkowski Garrett C. 400 0.04% 95.73% 313
2070 Snelson William G. 375 0.04% 95.77% 314
1983 Williams Wayne Q. 375 0.04% 95.81% 315
2190 Houle Robert C. 375 0.04% 95.85% 316
2149 Thomas Michael E. 375 0.04% 95.89% 317
2253 Castle Jonathan N. 375 0.04% 95.93% 318
2204 Whiteside Douglas R. 375 0.04% 95.97% 319
1424 Malkinski Daniel T. 375 0.04% 96.01% 320
1305 Conner Rex A. 375 0.04% 96.05% 321
2207 Barton Donald G. 375 0.04% 96.08% 322
2176 Richards Troy D. 375 0.04% 96.12% 323
2158 Young Richard T. 375 0.04% 96.16% 324
2215 Pulsifer II Raymond L. 375 0.04% 96.20% 325
2197 Speakman Glendon C. 375 0.04% 96.24% 326
2186 Cunningham Jr. Paul M. 375 0.04% 96.28% 327
2153 Moody Jack 0. 375 0.04% 96.32% 328
1802 Taylor IV John M. 375 0.04% 96.36% 329
1946 Burns David B. 350 0.04% 96.40% 330
1846 Zayicek James S. 350 0.04% 96.43% 331
1886 Brown Dennis C. 350 0.04% 96.47% 332
1739 Jones Robert G. 350 0.04% 96.51% 333
1909 Draper John L. 350 0.04% 96.54% 334
2068 Muniz Luis A. 350 0.04% 96.58% 335
2004 Evans III Henry C. 350 0.04% 96.61% 336
1481 Wall Jeffrey S. 350 0.04% 96.65% 337
1942 Harrold Lyman L. 350 0.04% 96.69% 338
2173 Olde Gordon F. 325 0.03% 96.72% 339
2167 Leap Richard B. 325 0.03% 96.76% 340
2172 Gunderson Eric B. 325 0.03% 96.79% 341
2168 Stuart Sr. Ronald F. 325 0.03% 96.82% 342
2111 Myers Sherry T. 325 0.03% 96.86% 343
2259 Timko Sharon K. 300 0.03% 96.89% 344
2085 Robeson William M. 300 0.03% 96.92% 345
2235 Bodenheim Bodie R. 300 0.03% 96.95% 346
2246 Kayanan Leslie F. 300 0.03% 96.98% 347
2245 Svatek Gary F. 300 0.03% 97.01% 348
2102 Strick David C. 300 0.03% 97.05% 349
2236 Toweson Eric J. 300 0.03% 97.08% 350
2250 Brueckbauer II Roger I. 300 0.03% 97.11% 351
</TABLE>
Page 9
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
CURRENT SHAREHOLDERS - AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
Name Total B "B" Cumulative S/H Total A "A" Cumulative
Agt # Last First Middle Shares % % Count Shares % %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2263 Washnock John D. 300 0.03% 97.14% 352
2275 Watts Sr. Raymond E. 300 0.03% 97.17% 353
743 Canedy Charles E. 300 0.03% 97.20% 354
2026 Smith Samuel T. 300 0.03% 97.23% 355
2093 Knox Robert M. 300 0.03% 97.27% 356
1209 Cheritt Thomas D. 300 0.03% 97.30% 357
2001 Thomas Steven M. 300 0.03% 97.33% 358
2230 Lawrence David A. 300 0.03% 97.36% 359
2247 Price Jr. Doyel 300 0.03% 97.39% 360
2100 Mueller Peter J. 300 0.03% 97.42% 361
1230 Hoadley Jeffrey S. 300 0.03% 97.45% 362
2201 Natali Denise E. 300 0.03% 97.48% 363
1980 Heely William E. 300 0.03% 97.52% 364
2257 Harvin Michael E. 300 0.03% 97.55% 365
2027 Morgan John D. 300 0.03% 97.58% 366
2276 McClellon Johnie A. 300 0.03% 97.61% 367
1630 Bartholomew Valeri A. 275 0.03% 97.64% 368
2189 Wall Richard W. 275 0.03% 97.67% 369
1808 Soliah Barbara A. 275 0.03% 97.70% 370
1913 Putnam William D. 275 0.03% 97.72% 371
2277 Scialabba Jacquelyn B. 275 0.03% 97.75% 372
2233 McLyman Edward P. 275 0.03% 97.78% 373
1194 Peate Laurence R. 275 0.03% 97.81% 374
99 Duggan Laurence I. 275 0.03% 97.84% 375
1673 York Marc A. 275 0.03% 97.87% 376
2208 Briggs Kerry M. 275 0.03% 97.90% 377
1530 Cox Melissa R. 275 0.03% 97.93% 378
1877 Lenz Richard A. 275 0.03% 97.95% 379
1422 Ferguson Gary C. 250 0.03% 97.98% 380
2071 Simons James W. 250 0.03% 98.01% 381
1158 Coats Jr. Thomas R. 250 0.03% 98.03% 382
1729 Hornbake Michael L. 250 0.03% 98.06% 383
2039 Dyson Eric C. 250 0.03% 98.08% 384
1827 Millush David J. 250 0.03% 98.11% 385
1273 Davis Loretta C. 250 0.03% 98.14% 386
2209 Cozby Paul W. 250 0.03% 98.16% 387
1508 Petersen Douglas N. 250 0.03% 98.19% 388
2145 Yaeger Jr. William L. 250 0.03% 98.22% 389
1967 Hennessey Paul T. 225 0.02% 98.24% 390
</TABLE>
Page 10
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
CURRENT SHAREHOLDERS - AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
Name Total B "B" Cumulative S/H Total A "A" Cumulative
Agt # Last First Middle Shares % % Count Shares % %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2133 Martin Christine M. 225 0.02% 98.26% 391
411 Leahy Robert E. 225 0.02% 98.29% 392
2265 Shores Gary L. 225 0.02% 98.31% 393
1824 Lee Christophe D. 200 0.02% 98.33% 394
1615 Stewart Carol J. 200 0.02% 98.35% 395
1903 Mora Javier 200 0.02% 98.37% 396
1044 Philbrick Carleton R. 200 0.02% 98.39% 397
1935 Smith Michael J. 200 0.02% 98.41% 398
2194 Tutterow Sonya C. 200 0.02% 98.43% 399
1874 Henn James E. 200 0.02% 98.46% 400
2210 Hoefar Terry 200 0.02% 98.48% 401
1545 Barnes Howard R. 200 0.02% 98.50% 402
2076 White William D. 200 0.02% 98.52% 403
2072 Spitler Mark G. 200 0.02% 98.54% 404
1636 Scott Gavin D. 200 0.02% 98.56% 405
527 Joy G. Frederic 200 0.02% 98.58% 406
2122 Foote Dennis P. 200 0.02% 98.60% 407
1499 Elliott III Howard R. 200 0.02% 98.62% 408
2187 LeBlanc Joseph J. 200 0.02% 98.64% 409
2090 Perona Andrew D. 200 0.02% 98.66% 410
2132 Martin Jack E. 200 0.02% 98.69% 411
2289 Brown Gary W. 175 0.02% 98.70% 412
2298 Tate Russell E. 175 0.02% 98.72% 413
2308 Gamble Gary L. 175 0.02% 98.74% 414
2362 Brannon Daniel M. 175 0.02% 98.76% 415
2388 McGilvray Roy F. 175 0.02% 98.78% 416
2384 Bissell Mary T. 175 0.02% 98.79% 417
2317 McBrayer John T. 175 0.02% 98.81% 418
1565 Liston John W. 175 0.02% 98.83% 419
2318 Hilliard Samantha A. 175 0.02% 98.85% 420
2368 Jones Kendall W. 175 0.02% 98.87% 421
2332 Werner Richard M. 175 0.02% 98.89% 422
2366 McClelland Harold E. 175 0.02% 98.90% 423
2349 Heevner Scott A. 175 0.02% 98.92% 424
2286 Tuschen Bryan F. 175 0.02% 98.94% 425
2302 Waller Earl D. 175 0.02% 98.96% 426
2369 Bennett John R. 175 0.02% 98.98% 427
2374 Vogus Ronald S. 175 0.02% 99.00% 428
1972 McManus Richard I. 175 0.02% 99.01% 429
</TABLE>
Page 11
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
CURRENT SHAREHOLDERS - AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
Name Total B "B" Cumulative S/H Total A "A" Cumulative
Agt # Last First Middle Shares % % Count Shares % %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2296 Stratmann Jr. George E. 175 0.02% 99.03% 430
2254 Cureton Jacques C. 175 0.02% 99.05% 431
2386 Clarke Russell H. 175 0.02% 99.07% 432
2303 Perrine Robert A. 175 0.02% 99.09% 433
2269 Crawford Jeffrey S. 175 0.02% 99.11% 434
2337 Offutt Frederic W. 175 0.02% 99.12% 435
2354 Rubin Craig 175 0.02% 99.14% 436
2251 Dubia Laurianne F. 175 0.02% 99.16% 437
2287 Edwards Gerald T. 175 0.02% 99.18% 438
2342 Addison Thomas J. 175 0.02% 99.20% 439
2274 Saenz Ernesto G. 175 0.02% 99.22% 440
2313 Rooney Claire A. 175 0.02% 99.23% 441
2319 Collins Joe R. 175 0.02% 99.25% 442
2373 Coeuille John L. 175 0.02% 99.27% 443
589 Doscher Jr. John C. 175 0.02% 99.29% 444
2294 Hooker Jr. Robert W. 175 0.02% 99.31% 445
2360 Cultice William W. 175 0.02% 99.32% 446
2355 Burton James M. 175 0.02% 99.34% 447
2331 Feeley Audrey J. 150 0.02% 99.36% 448
2164 McCafferty Douglas L. 150 0.02% 99.37% 449
2217 Schuler Douglas A. 150 0.02% 99.39% 450
2307 Garrette Charles B. 150 0.02% 99.41% 451
1970 Cox Jr. Landon G. 150 0.02% 99.42% 452
2329 Canaday Brent A. 150 0.02% 99.44% 453
2363 Fromm Vanessa S. 150 0.02% 99.45% 454
972 Holder Kenneth A. 150 0.02% 99.47% 455
2390 Rigor Jose C. 125 0.01% 99.48% 456
2288 Quinn Peter J. 125 0.01% 99.49% 457
1658 Wade Jr. Charles R. 125 0.01% 99.51% 458
2231 Simon Robert C. 125 0.01% 99.52% 459
1655 Clippinger Dennis D. 125 0.01% 99.53% 460
2060 Obel Angel M. 125 0.01% 99.55% 461
2129 Tomlinson Ian R. 125 0.01% 99.56% 462
2025 Russell Redonda L. 125 0.01% 99.57% 463
2126 Ferry Michael J. 125 0.01% 99.59% 464
770 Walrath Jr. Burton J. 100 0.01% 99.60% 465
2324 Malherek Patrick J. 100 0.01% 99.61% 466
1270 Baker Jerre L. 100 0.01% 99.62% 467
2322 Lippold Daniel R. 100 0.01% 99.63% 468
</TABLE>
Page 12
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
CURRENT SHAREHOLDERS - AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
Name Total B "B" Cumulative S/H Total A "A" Cumulative
Agt # Last First Middle Shares % % Count Shares % %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1923 Yohe Richard W. 100 0.01% 99.64% 469
1119 Anthony Brenda L. 100 0.01% 99.65% 470
2291 Beeck Kenneth R. 100 0.01% 99.66% 471
2193 Corder William D. 100 0.01% 99.67% 472
2312 Henderson Charles E. 100 0.01% 99.68% 473
2380 Ligman Peter D. 100 0.01% 99.69% 474
2284 Cosgrove Michael T. 100 0.01% 99.70% 475
2352 Lindsay Paul 100 0.01% 99.71% 476
2367 Dugger William S. 100 0.01% 99.72% 477
2321 Eberly Donald L. 100 0.01% 99.73% 478
2334 Vance William D. 100 0.01% 99.74% 479
292 Tutterow Jacob T. 100 0.01% 99.75% 480
570 Carroll James C. 100 0.01% 99.76% 481
2260 Boschma Ruth M. 100 0.01% 99.77% 482
2160 Motley Jr. William A. 100 0.01% 99.78% 483
2381 Powell Jr. Terence F. 100 0.01% 99.79% 484
692 Bennett Jr. Clyde R. 100 0.01% 99.81% 485
2378 Tritschler Jr. Philip H. 100 0.01% 99.82% 486
2328 Hart Frank C. 100 0.01% 99.83% 487
2295 Gallas Randolph W. 100 0.01% 99.84% 488
2152 Vogel Kevin H. 100 0.01% 99.85% 489
2087 Hollis Kevin D. 100 0.01% 99.86% 490
1997 Trevino Vicente V. 100 0.01% 99.87% 491
2066 Timberlake Jr. Marion A. 75 0.01% 99.88% 492
1899 Nelson William H. 75 0.01% 99.88% 493
2370 Cramer Edward J. 75 0.01% 99.89% 494
1616 Cavasar Janine S. 75 0.01% 99.90% 495
561 Simmons Stephen E. 75 0.01% 99.91% 496
1885 Bondy Raymond J. 50 0.01% 99.91% 497
2292 Brooks David H. 50 0.01% 99.92% 498
2393 Stevens Craig T. 50 0.01% 99.92% 499
2144 Thompson Jr. Arthur R. 50 0.01% 99.93% 500
1204 Winters Blake E. 50 0.01% 99.93% 501
1610 Higgins (King) Leigh Ann 50 0.01% 99.94% 502
2075 Wilberg Clark N. 50 0.01% 99.94% 503
2385 Biederman Eric J. 50 0.01% 99.95% 504
2206 Craddock William E. 50 0.01% 99.95% 505
2256 Cornelius Jr. Carl E. 50 0.01% 99.96% 506
2327 Benton Betty J. 50 0.01% 99.96% 507
</TABLE>
Page 13
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
CURRENT SHAREHOLDERS - AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
Name Total B "B" Cumulative S/H Total A "A" Cumulative
Agt # Last First Middle Shares % % Count Shares % %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2282 Pattillo Stephen P. 50 0.01% 99.97% 508
1933 Landzettel Jr. Robert L. 50 0.01% 99.98% 509
2159 Williams Sheila N. 50 0.01% 99.98% 510
718 Kruse Paul S. 39 0.00% 99.98% 511
2137 Jones Lawrence M. 25 0.00% 99.99% 512
2114 Bent Rex A. 25 0.00% 99.99% 513
1672 Ingram-Stahl F. Michael 25 0.00% 99.99% 514
644 Nahorski Kenneth T. 25 0.00% 99.99% 515
898 Schuhmacher John E. 25 0.00% 100.00% 516
2128 Bonamie Jeffry R. 25 0.00% 100.00% 517
517 957,558 25
- -------------------------------------------------------- ------
517 14
As of March 31, 1998 ******** 3,530
</TABLE>
Page 14
<PAGE>
PLAN OF MERGER
Revised 6/17/98
GOAL:
To de-register the Class B common Stock, IRA will merge with and into
First Command Financial Corporation ("going private"). Once the Class B
stock is redeemed/cashed out, IRA will qualify to make an S election.
The merger eliminates the cost and administrative burden of having two
separate S corporation.
MERGER:
IRA will merge with FCFC. Simultaneously IRA will redeem all Class "B"
stock of "B"-only shareholders for cash. All IRA Class "B" stock owned
by Class "A" shareholders will be converted into non-voting stock of
surviving FCFC. All IRA Class "A" stock will be converted into surviving
FCFC voting stock. The existing FCFC stock will be converted into non
voting stock of surviving FCFC. Immediately following the redemption of
the IRA "B" stock it will be de-registered with the SEC. The surviving
entity will retain the existing Board of Directors, officers, employees,
and independent contractors. The surviving entity will be renamed IRA,
Inc. The garage operations of FCFC will be placed in a wholly owned
subsidiary of IRA. Following the merger, IRA intends to grant Mission
Accomplishment Plan (MAP) units (Stock Appreciation Rights and Dividend
Equivalent Rights) to agents and employees who were former "B"
shareholders. These subsequent grants will be in addition to the units
to be granted in July, 1998.
[Graph]
<PAGE>
[Graph]
<PAGE>
[Graph]
<PAGE>
REGIONAL AGENTS AND DISTRICT AGENTS August 1, 1998
(AGENTS & TRAINEES BY DISTRICT)
CONFIDENTIAL--SHRED OUTDATED ROSTERS
LIMITED DISTRIBUTION--DO NOT COPY OR REDISTRIBUTE
- --------------------------------------------------------------------------------
CONTINENTAL REGION (101)
AK, AZ, CO, ID, MT, NM, NV, EL PASO TX, UT, WA, WY
- --------------------------------------------------------------------------------
0766 RAMSEY, FRANK - REGIONAL AGENT - 1-602-998-9717, Fax 1-602-998-9663
HQ6 (8283 North Hayden Road, Suite 295, SCOTTSDALE AZ 85258) [3]
PHX
0718 Kruse, Paul - Assistant Regional Agent
0279 Vance, Jay - Assistant Regional Agent
1400 ADAMS, BOYD - 1-915-772-0100, Fax 1-915-772-6611 - Fort Bliss TX
EP6 (7400 Viscount Boulevard, Suite 103, EL PASO TX 79925) [7]
-
ELP
T** 2505 Lenday, John - same as above - 8/1/98
- - ------
** 2555 McCherney, Clark - same as above
1903 Mora, Javier - same as above
1822 Saari, Gerry - same as above
2168 Stuart, Ron - same as above
2129 Tomlinson, Ian - same as above
2158 Young, Tate - same as above
1813 BERGER, BRAD - 1-253-584-7569, Fax 1-253-584-7698 - Fort Lewis/
TS6 Madigan Army Medical Center/McChord AFB/Bangor NSB/Puget Sound
Naval Shipyard WA (7504 Bridgeport Way West, PO Box 99160,
TAW TACOMA WA 98499) [12]
F 1270 Baker, Jerre - same as above
1209 Cheritt, Tom - same as above
** 2605 Danner, Steve - same as above - (arrives 10/1/98)
1996 Earl, Jim - same as above
1522 Ochs, Dave - same as above
2105 Sands, Jim - same as above
** 2612 Smith, Dave - same as above
2189 Wall, Rich - same as above
Bangor NSB/Puget Sound NS WA - 1-360-692-0277,
Fax 1-360-692-1387 - (100491 Kitsap Mall Blvd NW, Suite 106,
SVD SILVERDALE WA 98383)
** 2613 Plyler, Conrad - same as above
B 2476 Studer, Dave - same as above
1511 Testa, Ron - same as above
2116 CINCOTTA, MARK - 1-520-459-3591, Fax (M) 1-520-459-7714 - Fort
SV6 Huachuca AZ (333 West Wilcox Drive, Suite 201,
SVZ SIERRA VISTA AZ 85635-4748) [8]
1545 Barnes, Barney - same as above
A 2409 Fesser, Dennis - same as above
** 2519 Mason, Ken - same as above
** 2630 Murphy, Andy - same as above - (arrives 9/1/98)
1935 Smith, Mike - same as above
C 2457 Weinberg, Charles - same as above
Yuma Proving Ground/MCAS Yuma AZ - 1-520-344-8000,
YUM Fax 1-520-344-1213 - (2573 Arizona Avenue, Suite K, YUMA AZ 85364)
** 2634 Strickland, Jeff - same as above - (arrives 10/1/98)
1067 COTTO, RAFAEL - 1-509-456-5655, Fax 1-509-456-5688 - Fairchild AFB
SK6 WA/Malmstrom AFB MT (1717 S Rustle, Suite 210,
SPK SPOKANE WA 99224) [4]
** 2553 Estrella, Ed - Fairchild AFB WA
2074 Satterthwaite, John - Fairchild AFB WA
Malmstrom AFB MT - 1-406-727-2994/5, Fax (M) 1-406-727-2996
GTF (4241 2nd Avenue North, GREAT FALLS MT 59405)
1254 Smith, Dwight - same as above
1292 DUNN, PAUL - 1-602-842-4940, Fax 1-602-842-0091 - Luke AFB/NAF El
GY6 Centro CA/Yuma Proving Ground/MCAS Yuma AZ/Davis Monthan AFB
GLD AZ (5800 West Glenn Drive, Suite 140, GLENDALE AZ 85301) [9]
0878 DeLossa, Al - Luke AFB AZ
** 2548 Grams, Larry - Luke AFB AZ
2090 Perona, Andy - Luke AFB AZ
D 2401 Sylvester, Steve - Luke AFB AZ
** 2549 Williamson, Von - Luke AFB AZ
Davis-Monthan AFB AZ - 1-520-886-4068, Fax 1-520-290-6504
TUS -(1331 North Wilmont, Suite 222, TUSCON AZ 85712)
1780 Leifeld, Kevin - same as above
0580 McCoy, Jack - same as above
A 2426 Robertson, Tom - same as above
1380 ELLIS, GARY - 1-208-587-4645, Fax 1-208-587-9005 - Boise Air Terminal/
MH6 Mountain Home AFB/NNPTU Idaho Falls ID/Dugway Proving Ground/
Fort Douglas/Hill AFB/Tooele Army Depot UT (425 North 2nd Street
MHH East, MOUNTAIN HOME ID 83647) [7]
C 2509 Cameron, Jeff - same as above
1739 Jones, Gail - same as above
NNPTU Idaho Falls ID/Dugway Proving Ground/Fort Douglas/Hill
AFB/Defense Depot Ogden/Tooele Army Depot UT - 1-801-774-5601,
Fax 1-801-774-5683 - (1598 North 400th West, Suite D,
OGD LAYTON UT 84041)
2117 Barton, John - same as above
1192 Hagler, Ron - same as above
2324 Malherek, Pat - same as above
#** 2659 Odekirk, Byran - same as above - (arrives 1/1/00)
1834 GAGLIARDI, FRANK - 1-702-644-6720, Fax 1-702-644-1686 - Nellis AFB/
LV6 NAS Fallon NV (4375 Las Vegas Blvd North, Suite 20-A,
LVG LAS VEGAS NV 89115) [4]
** 2633 Fielding, Mike - Nellis AFB NV - (arrives 10/1/99)
2087 Hollis, Kevin - Nellis AFB NV
NAS Fallon NV - 1-702-423-7233, Fax 1-702-423-6549 -
FLN (40 East Center Street, Suite 14, FALLON NV 89406)
2042 Brockman, Perry - same as above
1123 HAYDEN, ROSS - 1-907-479-3000, Fax 1-907-474-8828 - Eielson AFB/
FB6 Elmendorf/Fort Richardson/Fort Greely/Fort Wainwright/Kodiak CG
Support Center AK/Juneau CG/Sitka CG/Ketchikan CG/Clear AS -
FAI (1300 Washington Drive, Suite 200, FAIRBANKS AK 99709) [7]
* 2498 Adkins, Carolyn - Eielson AFB/Fort Greely/Fort Wainwright AK
2000 Coulter, Walt - Eielson AFB/Fort Greely/Fort Wainwright AK
Elmendorf AFB/Fort Richardson/Kodiak CG Support Center AK -
1-907-272-8772, Fax 1-907-272-5259 - (301 West Northern Lights
ANC Blvd, Suite 408, ANCHORAGE AK 99503)
1595 Lookingland, Bill - Kodiak CG
* 2503 Peterson, Pete - Elmendorf AFB/Fort Richardson
1633 Smith, Glenn - Elmendorf AFB/Fort Richardson
Eielson AFB/Juneau CG/Sitka CG/Ketchikan CG/Clear AS/Fort
Wainwright AK - 1-907-488-4800, Fax 1-907-488-1316 -
NPL (201-A Santa Claus Lane, NORTH POLE AK 99705)
2215 Pulsifer, Ray - same as above
<TABLE>
<S> <C> <C> <C>
I - Inactive Agent F - Field Client Representative A - 98-A Class * - Next Class
M - Designated to New RA/DA (M) - Manual Fax B - 98-B Class ** - Future Class
R - Retire(d) # - Addition since last roster C - 98-C Class
S - Senior Status Underscore - Change since last roster D - 98-D Class
T - Terminate(d) ---------- E - 98-E Class
DISTRIBUTION Alpha/numeric characters under RA/DA agent number are the Region/District code CR 1
D, HO Special Alpha characters to the left of each office address are the office code
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CONTINENTAL REGION (CONTINUED)
- --------------------------------------------------------------------------------
2101 HUFF, RON - 1-719-380-7422, Fax 1-719-380-7560 - Air Force Academy/
CS6 Cheyenne Mountain AFS/Falcon AFB/Fort Carson Peterson AFB CO
(2130 South Academy Boulevard, Suite 200,
CSS COLORADO SPRINGS CO 80916) [6]
-
** 2575 Carey, Jeff - same as above
** 2510 Clarke, Bob - same as above
#** 2670 Duncan, Jeff - same as above - (arrives 10/1/98)
2167 Leap, Rich - same as above
C 2516 Lohmeyer, Hal - same as above
1599 JOHN, ELISE - 1-303-695-1199, Fax 1-303-695-0646 - Buckley ANGB/
AC6 Fitzsimons Army Garrison/DFAS Denver, ARPC/Warren AFB
AUR WY (10730 East Bethany Drive, Suite 300, AURORA CO 80014) [6]
F 0510 Obrey, Stan - same as above
1820 Scott, Dennis - same as above
Warren AFB WY - 1-307-635-6292, Fax 1-307-634-9970 - (USPA&IRA
CHY of Wyoming, 2206 Del Range Blvd, Suite G, CHEYENNE WY 82009)
1202 Bertagnolli, Joe - same as above
** 2607 Rose-Schmidt, Gina - same as above (arrives 12/1/98)
1549 Tyler, Chuck - same as above
1786 ROBERTS, DICK - 1-253-472-5756, Fax 1-253-472-5614 -
TC6 Tacoma area (6240 Tacoma Mall Boulevard, Suite 101,
TAC TACOMA WA 98409) [4]
** 2640 Antonio, Paul - same as above - (arrives 1/1/99)
2582 Floyd, Hunter - same as above
2230 Lawrence, Andrew - same as above
2415 Lewis Jr, Al - same as above
0252 ROWE, DENNIS - 1-505-294-0242, Fax 1-505-294-0203 - Cannon AFB/
AQ6 Holloman AFB/Kirtland AFB/White Sands Missle Range NM
ABQ (USPA&IRA, 1020 Eubank Blvd NE, ALBUQUERQUE NM 87112) [9]
2284 Cosgrove, Mike - Kirtland AFB NM
2093 Knox, Bob - Kirtland AFB NM
F 1995 Rausch, Bob - Kirtland AFB NM
- -
** 2558 Runyan, Damon - Kirtland AFB NM
Holloman AFB/White Sands Missle Range NM - 1-505-437-8979/
0257, Fax (M) 1-505-437-2512 - (500 East Tenth Street, Suite 2,
ALM ALAMOGURDO NM 88310)
2157 Jackson, Steven - same as above
1857 Morrison, Mac - same as above
Cannon AFB NM - 1-505-762-2335, Fax (M) 1-505-762-2335 -
CLV (201 Commerce Way, Suite 201-B, CLOVIS NM 88101)
** 2611 Albert, Tom - same as above - (arrives 9/1/98)
1776 Mathers, Frank - same as above
0706 STROPP, BILL - 1-719-599-8861, Fax 1-719-599-3340 - Air Force Academy/
CG6 Cheyenne Mountain AFS/Falcon AFB/Fort Carson/Peterson AFB CO
COS (6025 Erin Park Drive, Suite A, COLORADO SPRINGS CO 80918) [8]
1809 Batey, Alan - same as above
1946 Burns, Dave - same as above
2115 Crow, Alan - same as above
B 2452 Gould, Jill - same as above
F 0870 Harvell, Ken - same as above
A 2389 Morrow, Steve - same as above
A 2430 Murray, John - same as above
0891 WALL, DAN - 1-360-679-1364, Fax 1-360-679-2511 - Everett NS/13th CG
WA6 District/CGAS Port Angeles/NAS Whidbey Island/CGG Seattle/Marine
Supply Office Seattle/Navel Engineering Support Unit Seattle (785 SE
OHW Bayshore Drive, Suite 201, PO Box 1197, OAK HARBOR WA 98277) [7]
2373 Coeuille, John - same as above
1774 Daybell, Mark - same as above
C 2499 Gama, Rena - same as above
2100 Mueller, Pete - same as above
13th CG District/CGAS Port Angeles/CGG Seattle/Marine Supply
Office Seattle/Naval Engineering Support Unit Seattle -
1-425-637-1050, Fax 1-425-637-1055 - (1603 116th Avenue NE,
STL Suite 110, BELLEVUE WA 98004)
1744 Patterson, Paul - same as above
Everett NS - 1-425-339-8869, Fax 1-425-339-8527 - (1316 Wall
MCK Street, Suite 2A, EVERETT WA 98201-5024)
C 0940 Howson, Dick - same as above
CR 2
<PAGE>
- --------------------------------------------------------------------------------
EUROPEAN REGION (43)
Germany, Italy and United Kingdom
- --------------------------------------------------------------------------------
0879 SWETE, BOB - REGIONAL AGENT - 01149-6172-488170,
HQ8 Fax 01149-6172-488171 (Auf der Shanze 37, 61352
HGG BAD HOMBURG, GERMANY) [2]
1384 Hansen, David -Seminar Speaker - Fax 01149-6374-4839
1620 LEOPOLD, PHILIP - 01149-6783-7051, Fax 01149-6783-1277 - Baumholder
BB8 area/Bitburg/Spangdahlem/Brussels/Casteau/Chievres AB/Belgium/NAS
England/Suffolk England/Alconbury RAF/Croughton RAF/Edzell/Fairford
RAF/Feltwell RAF/Lakenheath RAF/ London/Mildenhall RAF
Molesworth RAF/St Mawgan JMCC/Uxbridge RAF/West Ruislip RAF/
Menwith Hill RAF/Brussels City/Flyingdales RAF
BHR (Aulenbacher Str 4, 55774 BAUMHOLDER, GERMANY) [7]
-
A 2455 Lawrence, Deborah - same as above
1356 Strange, Benny - same as above
Bitburg/Spangdahlem AB area/Bitburg - 01149-656-53112,
BBG Fax 01149-656-53257 (Gondorfer Str 4, 54647 DUDELDORF, GERMANY)
** 2645 Cieslewicz, Joe - same as above - (arrives 11/1/98)
Suffolk/England/Alconbury RAF/Croughton RAF/Edzell Scotland/
Fairford RAF/Feltwell RAF/Flyingdales RAF/Lakenheath RAF/
London/Mildenhall RAF/Molesworth RAF/St Mawgan JMCC/
Uxbridge RAF/West Ruislip RAF/Menwith Hill RAF -
011441-638-717700, Fax 01144-1638-510242 - (20-B Market Place,
BSE Mildenhall, Bury St Edmunds, SUFFOLK, ENGLAND, IP28 7EF)
F 1117 Craig, Ed - same as above
2337 Offutt, Fred - same as above
T/D 2255 Sauer, Butch - same as above - 7/6/98
- - ------
2045 Sourwine, Doug - same as above
1784 MARCUM, DON - 01149-631-52031, Fax 01149-631-57601 - Daener
KS8 Kaserne/Kapaun AS /Kaiserslautern/Landstuhl/Lautzenhausen/
Miesau/Pirmasens/Ramstein/Sembach, Germany
KST (Liebig Str 1, 67661 KAISERSLAUTERN, GERMANY) [8]
C 2570 Foley, Karen - Kaiserslautern/Ramstein
2172 Gunderson, Eric - Kaiserslautern/Ramstein
1938 McKibbin, Bill - Kaiserslautern/Ramstein
A 2429 Newman, Gary - Kaiserslautern/Ramstein
2154 Smith, Bob - Kaiserslautern/Ramstein
B 2465 Timko, Dave - Kaiserslautern/Ramstein
2259 Timko, Keala - Kaiserslautern/Ramstein
1736 ROSS, BILL - 01149-6221-37020, Fax 01149-6221-370288 - Heidelberg/
HB8 Mannheim/Stuttgart/Augsberg/Bad Aibling/Berchtesgaden/Garmisch/
Oberammergau/Worms/Sandhofen/Schwetzingen/Seckenheim/
Germershein/Kaefertal/Mohringen/Vaihingen/Boblingen
HBG (Im Bosseldom 24, 69126 HEIDELBERG, GERMANY) [7]
** 2440 Bailey, Steve - Heidelberg
B 2443 Balzer, Sheri - Heidelberg
2329 Canaday, Brent - Heidelberg
2195 Hickey, Sue - Heidelberg
Stuttgart area/Mohringen/Vaihingen/Augsburg/Boblingen/Bad Aibling/
Berchtesgaden/Garmish/Oberammergau - 01149-711-745-9311, Fax
01149-711-745-9313 - (USPA&IRA, Osterbronn Str 4, Postfach 800341,
STG 70565 STUTTGART, GERMANY)
1920 Bell, Mark - same as above
1993 Bell, Wanda - same as above
2203 SEBENOLER, MATT - 01149-6181-925262, Fax 01149-6181-925272 -
EB8 Babenhausen/Bad Godesberg (Bonn)/Bad Hersfeld/Bad Kreuznach/
Bremerhaven/Brunsum/Buedingen/Butzbach/Darmstadt/Dexheim/
Frankfurt/Friedburg/Geilenkirchen/Giebelstadt/Giessen/Hague/Hanau/
Kirchgoens/Kitzingen/Klein Borgel (Maastricht)/Mainz/Netherlands/
Rhein Main AB/Rhinedahlen/Roedelheim/Rotterdam/Schweinfurtt/Volkel/
HAN Wiesbaden/Wurzburg (Numberger Str 17, 63450 HANAU, GERMANY) [8]
** 2562 Drezinski, Ray - Hanau
2381 Powell, Terry - Hanau
Schweinfurt - 01149-9721-45142, Fax (M) 01149-9721-45142 -
SFT (Benno- Merkle Str 2, 97424 SCHWEINFURT, GERMANY)
SEND ALL INQUIRIES FOR THE SCHWEINFURT AREA TO ED PATISAUL IN THE
WURZBURG OFFICE. THE OFFICE WILL BE MANNED A COUPLE OF DAYS EACH
WEEK FOR APPOINTMENTS.
Bad Kreuznach/Brunsum/Dexheim/Geilenkirchen/Hague/Kleine
Borgel (Maastricht)/Mainz/Netherlands/Rotterdam/Volkel/Wiesbaden -
01149-611-702831, Fax 01149-611-702654 - (Abraham Lincoln Str 2,
WBN 65189 WIESBADEN, GERMANY)
2253 Castle, Jon - same as above
** 2666 Elenz, Nancy - same as above
* 2643 Kirstein, John - same as above
---- -------------------------------
Giebelstadt/Kitzingen/Wurzburg - 01149-931-74012,
WBG Fax 01149-931-86625 - (Kant Str 18, 97074 WURZBURG, GERMANY)
1157 Beaty, Keith -same as above
1752 Patisaul, Ed - same as above
1252 SCIANCALEPORE, JOHN - 01149-951-93552-0, Fax 01149-951-93552-20 -
VS8 Ansbach/Bamberg/Berlin/Furth/Grafenwohr/Hohenfels/Illesham/
Katterbach/Numberg/Vilseck-Sorghof/Zimdorf
VLK (Kirschacker Str 25, 96052 BAMBERG, GERMANY) [5]
2206 Craddock, Bill - same as above
Ansbach/Katterbach/Illesham - 01149-09820-912535,
Fax 01149-09820-912537 - (Baumgartenweg 14,
ANS 91611 LEHRBERG, GERMANY)
** 2586 Locke, Michael - same as above
Vilseck-Sorghof/Zirndorf/Ansbach/Grafenwohr/flesheim -
01149-966-2335, Fax 01149-966-2316 - (Balmhof Str 20,
SOR 92249 VILSECK-SORGHOF, GERMANY)
C 2524 Edwards, Dave - same as above
#** 2667 Meeks, Chip - same as above
1990 WORRELL, HOMER - 01139-04345-65488, Fax 01139-04345-65274 - Aviano
AV8 AB/Gaeta/Ghedi AB/Livomo Camp Darby/Naples/Rome/San Vito/La
Maddalena/Sardinia/Sigonella Sicily/Verona/Vicenza
AVN (Via Bellini 10, 33070 VIGONOVO (PN), ITALY) [7]
2388 McGilvray, Roy - same as above
1951 Werner, Marc - same as above
Naples, Italy - 01139-081230-3060, Fax 01139-081570-6176 -
NPS (USPA&IRA, MBE 221, Via A D'Isernia, 30, 80122 NAPLES, ITALY)
C 2514 Clinkscales, Elizabeth - same as above
** 2655 Clinkscales, Ron - same as above - (arrives 9/1/98)
* 2495 Finley, Jeff - same as above
Ghedi AB/Verona/Vicenza - 011-390-444-514478,
Fax 011-390-444-514991 - (Corso Padova 145, 36100
VCZ VICENZA (VI), ITALY)
A 2445 Colombana, Roger - same as above
- --------------------------------------------------------------------------------
SEE [LOGO] USPA&IRA FIELD OFFICES FOR APO/FPO
NUMBERS SERVICED BY EACH OFFICE.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
I - Inactive Agent F - Field Client Representative A - 98-A Class * - Next Class
M - Designated to New RA/DA (M) - Manual Fax B - 98-B Class ** - Future Class
R - Retire(d) # - Addition since last roster C - 98-C Class
S - Senior Status Underscore - Change since last roster D - 98-D Class
----------
T - Terminate(d) E - 98-E Class
Alpha/numeric characters under RA/DA agent number are the Region/District code EU 1
Alpha characters to the left of each office address are the office code
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
MID-ATLANTIC REGION (131)
---
DC, EASTERN NC, NORTH MADISONVILLE TN, VA
- --------------------------------------------------------------------------------
0863 PETERSEN, JIM - REGIONAL AGENT - 1-757-499-6500 and
HQ2 1-757-497-6187/8225/9204, Fax 1-757-497-9340
VBC (4605 Pembroke Lake Circle, Suite 200, VIRGINIA BEACH VA 23455) [3]
0749 Russell, Stan - Assistant Regional Agent
0481 Wheeler, Mike - Assistant Regional Agent
1868 BLOMEKE, HUGH - 1-757-548-9972, Fax 1-757-549-4406 - AFSC/
CK2 CINCLANTFL/FCTC Dam Neck/Fort Story/NAB Little Creek/NAS
Norfolk/CG Support Ctr Elizabeth City NC (1214 Progressive Drive,
CPK Suite 200, CHESAPEAKE VA 23320) [8]
-
2254 Cureton, Jacques - same as above
** 2618 Davis, Scott - same as above - (arrives 10/1/98)
#** 2668 Drees, Ken - same as above - (arrives 10/1/98)
#** 2673 Keaton, Shane - same as above - (arrives 6/1/99)
A 2478 Martin, Frank - same as above
** 2622 Paul, John - same as above - (arrives 10/1/98)
T** 2502 Terneus, Tom - same as above - 7/1/98
- - ------
B 2469 Vause, Steven - same as above
1373 BOLLING, TERRY - 1-757-499-8772, Fax 1-757-499-2358 - AFSC/
VB2 CINCLANTFLT/FCTC Dam Neck/Fort Story/NAB Little Creek/NAS
Norfolk/NAS Oceana/NAV Reg Med Center/NOB/Norfolk Naval
Shipyard VA/ (Tidewater District, 161 Business Park Drive,
VBV VIRGINIA BEACH VA 23462) [12]
2032 Benish, Pat - Tidewater area
0625 Bobst, Larry - Tidewater area
1578 Cermak, John - Tidewater area
2386 Clarke, Russell - Tidewater area
A 2428 Cochran, Lee - Tidewater area
2307 Garrette, Charles - Tidewater area
1669 Genualdi, Fred - Tidewater area
F 1726 Himmelwright, Heber - Tidewater area
A 2431 Longworth Sr, Mike - Tidewater
2107 Ritchey, Steve - Tidewater area
2298 Tate, Russ - Tidewater area
2156 CONSAUL, PARKER - 1-757-873-0993, Fax 1-757-873-6765 - Fort Eustis/Fort
NS2 Monroe/Langley AFB/NWS Yorktown VA (11790 Jefferson Avenue,
NNV Suite 208, NEWPORT NEWS VA 23606) [11]
2342 Addison, Tom - same as above
** 2654 Brewster, Charlie - same as above - (arrives 10/1/98)
** 2585 Brillant, Mark - same as above
** 2581 Carmichael, Charlie - same as above - (arrives 9/1/98)
1676 Dorenbush, Ron - same as above
** 2535 Dunham, Jeff - same as above
1980 Heely, Bill - same as above
D 2400 Moncure, Mark - same as above
** 2600 Slaughter, Jerry - same as above - (arrives 11/1/98)
2046 Welch, Bob - same as above
1788 DAVIDSON, DON - 1-804-520-4045, Fax 1-804-526-6012 -
CH2 Fort Lee/JAG School/ROTC Detachment/University of VA/USMC
CHV Quantico VA - (207 Temple Avenue, COLONIAL HEIGHTS VA 23834) [8]
1875 Edmiston, Bruce - same as above
** 2628 Hackleman, Jay - Fort Lee - (arrives 9/1/98)
2063 Metzinger, Gary - Fort Lee/University of VA/ROTC Detachment VA
** 2567 Stuhlmiller, Al - Fort Lee
Northwest NC and non-active duty in Fayetteville NC area -
1-910-426-2955, Fax 1-910-426-0130 - (301-F Keisler Drive,
RGH CARY NC 27511)
(SEND ALL MAIL TO 501 EXECUTIVE PLACE, FAYETTEVILLE, NC 28305)
F 1568 Hollis, Karen - same as above
JAG School/ROTC Detachment VA/University of VA -
1-804-984-3600, Fax 1-804-984-3601 - (One Morton Drive,
CVL Suite 407, CHARLOTTESVILLE VA 22903)
1520 Batten, Rick - same as above
Knoxville TN area- 1-423-420-0090, Fax 1-423-420-0095 -
KXV (PO Box 160, 3013 Highway 411, NORTH MADISONVILLE TN 37354)
F 1063 Scruggs, J.T. - same as above
0472 DEAN, BILL - 1-703-658-2943, Fax 1-703-658-3930 - Henderson Hall/Fort
AX2 Meyer/Navy Annex, Marine Barracks 8th & I, HQS USCG
ALX (5285 Shawnee Road, Suite 305, ALEXANDRIA VA 22312-2328) [12]
** 2636 Baumanis, Aivars - same as above - (arrives 9/1/98)
1691 Booth, Clint - same as above
D 2399 Driscoll, Sharon - same as above
1430 Fellenz, Mike - same as above
1999 Flanigan, Bill - same as above
** 2615 MacKinnon, Glenn - same as above - (arrives 10/1/98)
2133 Martin, Tina - same as above
1498 Phaneuf, Joe - same as above
2021 Schless, Jim - same as above
F 2197 Speakman, Glen - same as above
1893 Weaver, Alan - same as above
0648 HAYES, CLINT - 1-757-468-7711, Fax 1-757-468-0939 - AFSC/
VV2 CINCLANTFL/FCTC Dam Neck/Fort Story/NAB Little Creek/NAS
Norfolk/NAS Oceana/NAV Reg Med Ctr/NOB/Norfolk Naval Shipyard
VA/CG Support Ctr Elizabeth City NC (Windwood Centre, 780 Lynnhaven
VBL Parkway, Suite 100, VIRGINIA BEACH VA 23452) [13]
** 2533 Alexander, Ron - same as above - (arrives 10/1/98)
1093 Amelon, Rick - same as above
E 2394 Boyer, Sean - same as above
2289 Brown, Gary - same as above
C 2492 Hamilton, Lawrence - same as above
1932 Kilb, Roger - same as above
A 2397 Miller, Ed - same as above
1850 Ponton, Bob - same as above
2393 Stevens, Craig - same as above
1802 Taylor, Pete - same as above
2334 Vance, Bill - same as above
1205 Woodhouse, Bill - same as above
1348 HAYGOOD, LARRY- 1-910-323-3226, Fax 1-910-323-4195 - Fort Bragg/Pope
FH2 AFB NC (501 Executive Place, FAYETTEVILLE NC 28305) [11]
--
FAY
C 2595 Antoine, Nicole - same as above
A 2480 Canestra, Claudia - same as above
A 2281 Edmondson, Robert - same as above
#** 2260 Ferrier, Don - same as above
** 2625 Harris, Joe - same as above - (arrives 9/1/98)
1077 Hollis, Glenn - same as above
2147 Matter, Laura - same as above
C 2560 McCarthy, Dennis - same as above
2007 Shalon, Bruce - same as above
2374 Vogus, Ron - same as above
1048 KONE, RALEIGH - 1-703-352-7970, Fax 1-703-352-0674 - Fort McNair VA/
FA2 Washington Navy Yard (3975 University Drive, Suite 110,
FFX FAIRFAX VA 22030) [12]
** 2559 Bierwirth, J.B. - same as above
2186 Cunningham, Paul - same as above
#** 2665 Fagan, Dave - same as above
F 0691 Henry, Jim - same as above
2547 Monnett, Mike - same as above
2068 Muniz, Luis - same as above
2085 Robeson, Bill - same as above
C 2536 Springer, Gerry - same as above
2149 Thomas, Mike - same as above
2236 Toweson, Eric - same as above
F 1943 Wax, Rich - same as above
<TABLE>
<S> <C> <C> <C>
I - Inactive Agent F - Field Client Representative A - 98-A Class * - Next Class
M - Designated to New RA/DA (M) - Manual Fax B - 98-B Class ** - Future Class
R - Retire(d) # - Addition since last roster C - 98-C Class
S - Senior Status Underscore - Change since last roster D - 98-D Class
T - Terminate(d) ---------- E - 98-E Class
Alpha/numeric characters under RA/DA agent number are the Region/District code MA 1
Alpha characters to the left of each office address are the office code
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
MID-ATLANTIC REGION (Continued)
- --------------------------------------------------------------------------------
1470 LUCAS, AL - 1-540-659-7060, Fax 1-540-659-0447 - Dahlgren Naval Surface
SF2 Warfare Center/Fort AP Hill/USMC Quantico VA (385 Garrisonville
STF Road, Suite 120, STAFFORD VA 22554) [7]
1890 Barrett, Bill - same as above
** 2651 Hames, Larry - same as above - (arrives 9/1/98)
2233 McLyman, Ted - same as above
1987 Raich, Bruce - same as above
Quantico Marine Corp Base - 1-703-630-1754, Fax 1-703-630-0678 -
QTC (311 Potomac Avenue, QUANTICO VA 22134)
2362 Brannon, Dan - same as above
A 2500 Reeves, Mel - same as above
1298 MONOSKI, STEVE - 1-703-921-0500, Fax (M) 1-703-921-9575 - Fort Belvoir
SP2 (6564 Loisdale Court, Suite 205, SPRINGFIELD VA 22150) [12]
--
SPF
1748 Bradley, Ed - same as above
2251 Dubia, Lauri - same as above
1757 Levy, Lew - same as above
1419 McConnell, Mike - same as above
B 2453 Pagan, John - same as above
Fort Belvoir - 1-703-897-8787, Fax - 1-703-897-0701
WDB (13649 Office Place, Suite 202, WOODBRIDGE, VA 22192)
2260 Boschma, Ruth - same as above
** 2574 Castello, Greg - same as above
A 2450 Cousins Jr, Skip - same as above
2360 Cultice, Bill - same as above
F 1541 Gilbert, Mike - same as above
#** 2664 Hill, Bob - same as above - (arrives 7/1/99)
1429 REIN, RICK - 1-757-873-3622, Fax 1-757-873-3815 - Fort Eustis/Fort
NM2 Monroe/Langley AFB/NWS Yorktown VA/Yorktown Coast Guard Reserve
Training Center, RTC (11832 Rock Landing Drive, Suite 102,
NNW NEWPORT NEWS VA 23606-4231) [10]
1919 Cantwell, Tom - same as above
** 2556 Hultman, John - same as above
2246 Kayanan, Leslie - same as above
1097 Kwist, Garry - same as above
2380 Ligman, Pete - same as above
2104 Trant, Woody - same as above
** 2638 Whitehead, Frank - same as above - (arrives 9/1/98)
1983 Williams, Wayne - same as above
Tidewater Region - 1-757-890-2069, Fax 1-757-890-3131
NNR (103 Clarden Court, YORKTOWN VA 23692)
(SEND ALL MAIL TO 11832 ROCK LANDING DRIVE, SUITE 102, NEWPORT NEWS
VA 23606-4231)
F/S 1050 Spinks, Pat - same as above
0947 TREAT, TERRY - 1-703-968-2622, Fax 1-703-968-3667 -
CT2 OSIA/NRO/Vint Hill Farms (5900 Centreville Road, Suite 310,
CTV CENTREVILLE VA 20121-2443) [5]
E 2403 Butler, Dempsey - same as above
2331 Feeley, Sunny - same as above
** 2619 Garcia, Rudi - same as above
1486 Hubbard, Scott - same as above
1847 WILLIAMSON, ESAU - 1-910-860-7900, Fax 1-910-860-2233 -
FW2 Fort Bragg/Pope AFB NC (235 Westlake Road, Suite 201,
FTV FAYETTEVILLE NC 28314) [7]
B 2344 Duncan, Jeff - same as above
** 2632 Kennedy, Gerald - same as above - (arrives 9/1/98)
D 2424 Velez, Candy - same as above
Fort Bragg/Pope AFB NC - 1-910-678-0707, Fax 1-910-323-0328 -
FYV (501-B Executive Place, FAYETTEVILLE NC 28305)
1543 Krahl, Ken - same as above
2276 McClellon, Johnie - same as above
C 2563 West, Angela - same as above
MA 2
<PAGE>
- --------------------------------------------------------------------------------
NORTH ATLANTIC REGION (74)
CT, DC, DE, IN, KY, MA, ME, MD, NH, NJ, NY, OH, PA, RI, VT, WV
- --------------------------------------------------------------------------------
0443 HULL, SCOTT - REGIONAL AGENT - 1-301-317-8380 - Fax 1-301-317-4098
HQ1 (9175 Guilford Road, Suite 200, COLUMBIA MD 21046) [2]
BTM
0701 Mike Hale - Assistant Regional Agent
1425 ANDERSON, JOHN - 1-609-893-7787, Fax 1-609-893-1924 - Cape May/Earle
BM1 Ammo Depot/Fort Dix/Fort Monmouth/McGuire AFB/NAS Lakehurst NJ/
Philadelphia area PA (First Union Bank Building, Lakehurst and
BML Clubhouse Road, PO Box 738, BROWNS MILLS NJ 08015) [7]
1422 Ferguson, Gary - Office Manager
0839 Graves, Warren - Cape May/Fort Dix/McGuire AFB/
NAS Lakehurst NJ
1367 Lovell, Jeff- Fort Dix/McGuire AFB/NAS Lakehurst NJ
C 2477 Popielis, Ken - same as above
Philadelphia area PA - 1-609-429-3773, Fax 1-609-795-0713 -
CHL (14 Barclay Pavilion East, CHERRY HILL NJ 08034)
F 1278 Conner, Jim - same as above
Earle Ammo Depot/Picatinny Arsenal/Fort Monmouth NJ -
1-732-544-1192, Fax 1-732-544-0069 - (1 Main Street, Suite 504,
ETN EATONTOWN NJ 07724)
1299 Parrington, Rich - same as above
1865 BLANTON, LINDSAY - 1-301-984-3313, Fax 1-301-770-5207 - Fort Detrick/
CLI Fort Ritchie MD/NNMC Bethesda/Naval Reservatorie/Walter Reed AMC
DC/Carlisle PA area (11900 Parklawn Drive, Suite 210,
RKM ROCKVILLE MD 20852) [9]
2088 Cappello, Jim - NNMC Bethesda/Walter Reed AMC DC
A 2461 Eaton, Anna - NNMC Bethesda/Walter Reed AMC DC
2317 McBrayer, John - NNMC Bethesda/Walter Reed AMC DC
** 2614 Narel, Micah - NNMC Bethesda/Walter Reed AMC DC
2064 Richardson, Carl - NNMC Bethesda/Walter Reed AMC DC
2066 Timberlake, Marion - NNMC Bethesda/Walter Reed AMC DC
Carlisle Barracks/Carlisle PA area - 1-717-249-6688, Fax
CAR 1-717-249-3006 - (21 State Avenue, Suite 101, CARLISLE PA 17013)
1204 Winters, Blake - same as above
Fort Detrick/Fort Ritchie MD - 1-301-694-8219,
Fax 1-301-694-8633 - (178 Thomas Johnson Drive,
FRD Suite 203-L, FREDERICK MD 21702)
A 2463 Blanton, Dalise - same as above
0831 BOE, JOHN - 1-937-429-4490, Fax 1-937-429-0781 - Wright-Patterson AFB
BC1 OH (The Ashford Center, Suite 350, 4141 Colonel Glenn Highway,
FAO BEAVERCREEK OH 45431) [11]
--
** 2543 Ash, Steve - same as above
#** 2672 Birdwell, Terry - same as above - (arrives 1/1/99)
1645 Carroll, Gary - same as above
** 2546 Childress, Terry - same as above
2295 Gallas, Randy - same as above
1926 Graw, Paul - same as above
** 2571 Lower, Dallas - same as above
** 2597 Ramirez, Vinnie - same as above
D 2402 Vahle, Bill - same as above
1635 Williams, Dick - same as above
1771 HAINES, ROBERT - 1-301-899-9171, Fax 1-301-423-8028 - Andrews AFB/
CS1 Bolling AFB DC/Indian Head Naval Ordnance Station/Dover AFB DE/8th & I
Marine Barracks/Washington Navy Yard/Anacostia Navy Annex/Naval District
Washington/Naval Research Labs/ US Coast Guard Headquarters/ National
Maritime Intelligence Center/Cheltnham Naval Communication Station/DC
Armory/Naval Air Test Center (5801 Allentown Road, Suite
CMP 410, CAMP SPRINGS MD 20746) [7]
C 2504 Baur, Kirk - same as above
* 2372 Burnett, Larry - same as above
2352 Lindsay, Paul - same as above
Dover AFB DE - 1-302-698-0472, Fax 1-302-698-0530
DOV (1991 South State, Suite D, DOVER DE 19901)
3302 Waller, Earl - same as above
Naval Air Test Center/NAS Patuxent River MD - 1-301-862-4900,
Fax 1-301-863-5781 - (21615 South Essex Drive, Suite 52,
LEX PO Box 940, LEXINGTON PARK MD 20653)
S 0807 Beck, Don - same as above
2023 Beck, Doug - same as above
1078 HARMAN, BOB - 1-502-351-6038, Fax 1-502-351-6078 - Fort Knox KY
RC1 (1615 West Lincoln Trail Blvd, RADCLIFF KY 40160) [7]
RCF
** 2616 Berry, Harry - same as above
2256 Cornelius, Carl - same as above
** 2650 Hildebrandt, Fred - same as above - (arrives 8/15/98)
1931 Kilmer, Bob - same as above
** 2642 Miller, Rich - same as above
1773 Parker, Michael - same as above
1114 MCCALL, BOB - 1-401-846-9842, Fax 1-401-846-9889 - NETC Newport RI/
BW1 NSB New London CT/Fort Devens/Hanscom, AFB MA/NAS Brunswick
ME/NSY Portsmouth NH (Admiral's Gate Tower, 221 Third Street, Suite
NPT 300, NEWPORT RI 02840) [10]
1899 Nelson, Bill - NETC Newport RI
E 2418 Robbins, Marty - NETC Newport RI
NAS Brunswick ME/NSY Portsmouth NH - 1-207-729-4410,
Fax 1-207-729-0424 - (14 Maine Street, Suite 310,
BRU BRUNSWICK ME 04011)
0710 Wilcox, Rick - NAS Brunswick ME/NSY Portsmouth NH
Fort Devens/Hanscom AFB MA - 1-978-371-0101,
Fax 1-978-371-7182 - (Concord Professional Center, 747 Main Street,
CRD Suite 123, CONCORD MA 01742)
** 2631 Jewart, Jim - same as above - (arrives 10/1/98)
F 0925 Marcinkowski, Moose - same as above
1913 Putnam, Bill - same as above
** 0776 Turse, Cindy - same as above
NSB New London CT - 1-860-464-0433, Fax 1-860-464-0180 - (1622
GLF Highway 12, (USPA&IRA), PO Box 38, GALES FERRY CT 06335)
** 2579 Clay, Dave - same as above
2039 Dyson, Eric - same as above
<TABLE>
<S> <C> <C> <C>
I - Inactive Agent F - Field Client Representative A - 98-A Class * - Next Class
M - Designated to New RA/DA (M) - Manual Fax B - 98-B Class ** - Future Class
R - Retire(d) # - Addition since last roster C - 98-C Class
S - Senior Status Underscore - Change since last roster D - 98-D Class
T - Terminate(d) ---------- E - 98-E Class
Alpha/numeric characters under RA/DA agent number are the Region/District code NA 1
Alpha characters to the left of each office address are the office code
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
NORTH ATLANTIC REGION (Continued)
- --------------------------------------------------------------------------------
F0621 ORDONIO, FRANK - 1-937-429-4549, Fax 1-937-427-5750 - Indianapolis
BK1 Indiana area/Ohio (except active duty in Wright-Patterson AFB area)/
western Pennsylvania (The Ashford Center, Suite 242, 4141 Colonel
BVR Glenn Highway, BEAVERCREEK OH 45431) [6]
-
F 1735 Drake, John - same as above
F 2132 Martin, Jack - same as above
Lower pennisula (south of MacKinaw Bridge) - 1-517-336-8772,
------------------------------------------------------------
Fax 1-517-336-3410 (4572 South Hagadorn Road, Suite 2-J.
--------------------------------------------------------
ELN EAST LANSING MI 48823)
----------------------
M/F 2321 Eberly, Don - same as above
- --- ---- ---------------------------
Northern Ohio and Pittsburgh area - 1-724-789-7080,
PGH Fax 1-724-789-7315 - (1107 Blackberry Lane, EVANS CITY PA 16033)
F 1357 Stough, Lou - same as above
Indiana (except Gary) - 1-317-570-9463, Fax 1-317-570-9465 -
INP (7202 North Shadeland Avenue, Suite 212, INDIANAPOLIS IN 46250)
F 1887 Carlson, Scott - same as above
1667 PULLEN, HARVEY - 1-914-446-7755, Fax 1-914-446-7736 - Fort Drum/Fort
BR1 Hamilton/Fort Totten/NAVSTA Staten Island/USCG Governors Island NY/
HLF West Point NY (291 Main Street, HIGHLAND FALLS NY 10928) [8]
2122 Foote, Dennis - West Point NY
Fort Drum NY - 1-315-773-2144, Fax 1-315-773-5823 -
DRM (30139 Route 3, PO Box 127, BLACK RIVER NY 13612-0127)
1565 Liston, Sonny - Office Manager
2201 Natali, Denise - Fort Drum NY
1922 Schanely, Steve - Fort Drum NY
2231 Simon, Bob - Fort Drum NY
Fort Hamilton/Fort Totten/NAVSTA Staten Island/USCG Governors
Island NY - 1-718-680-1404, Fax 1-718-680-0777 - (7101 Narrows
BRK Avenue, BROOKLYN NY 11209)
* 2530 Frazier, Tom - same as above
D 2421 Messenger, Mike - same as above
1674 SURGENT, DAVE - 1-301-498-7900, Fax 1-301-498-6563,
AL1 DC Metro 1-202-470-1919, Baltimore 1-410-792-9419 - Aberdeen Proving
Ground/Fort Meade MD/Naval Service Weapons Center/US Naval
Academy MD (14502 Greenview Drive, #206,
LAU LAUREL MD 20708-4217) [7]
-
2370 Cramer Jr, Ed - Fort Meade MD
2190 Houle, Bob - Fort Meade MD
2027 Morgan, John - Fort Meade MD
S 1029 Scheg, Bud - Fort Meade MD
Aberdeen Proving Ground MD - 1-410-272-0727,
Fax 1-410-272-1736 - (219 West Bel Air Avenue, Suite 7, PO Box 669,
ABD ABERDEEN MD 21001-0669)
1923 Yohe, Rick - same as above
US Naval Academy MD - 1-410-626-8890,
Fax 1-410-626-8891 - (1511 Ritchie Highway, Suite 101-B,
USN ARNOLD MD 21012-2741)
** 2566 Cowen, Craig - same as above
---- ----------------------------
NA 2
<PAGE>
- --------------------------------------------------------------------------------
NORTH CENTRAL REGION (91)
--
AR, IA, IL, KS, MI, MN, MO, COLUMBUS MS, NE, ND, OK, SD, IN, WI
- --------------------------------------------------------------------------------
0352 GILES, RICH - REGIONAL AGENT - 1-913-768-8772, Fax 1-913-768-6643 -
HQ4 (519 North Mur-Len, OLATHE KS 66062) [2]
KCM
0880 Bob Gorman - Assistant Regional Agent
1404 BOWMAN, LONNIE - 1-785-537-0497, Fax 1-785-537-3649 - Fort Riley/
MH4 McConnell AFB KS (315 Houston Street, Suite L, PO Box 1085,
MHK MANHATTAN KS 66502) [8]
** 2521 Leach, Jim - Fort Riley KS - (arrives 9/1/98)
1902 Malik, Gene - Fort Riley KS
1532 Markowski, Larry - Fort Riley KS
** 2588 Rayner, Rod - Fort Riley KS
1892 Seemann, Dan - Fort Riley KS
McConnell AFB KS - 1-316-686-4895, Fax 1-316-683-4690
WTA (9415 East Harry Street, Suite 208, WICHITA KS 67207)
1933 Landzettel, Bob - same as above
** 2648 Yenchesky, Roy - same as above
1294 HALLOCK, SCOTT - 1-573-336-4602, Fax (M) 1-573-336-3180
WW4 Fort Leonard Wood/Whiteman AFB MO - (372 Old Route 66,
WVL ST ROBERT MO 65583) [7]
1994 Bennett, Ray - Fort Leonard Wood MO
** 2473 Driver, Dennis - Fort Leonard Wood MO
** 2561 Hallock, Brenda - Fort Leonard Wood MO
2144 Thompson Jr, Art - Fort Leonard Wood MO
Whiteman AFB MO - 1-660-747-2199, Fax (M) 1-660-747-1901 -
--_
WNB (123 East Gay Street, Suite A-7, WARRENSBURG MO 64093)
2345 Anderson, Brad - Fort Leonard Wood MO
1693 Hakes, Dave - same as above
1416 HARKEY, JIM - 1-501-758-8064, Fax 1-501-758-2030 -
LR4 Little Rock AFB AR (4704 West Commercial Drive, Suite C,
NLR NORTH LITTLE ROCK AR 72116) [5]
** 2653 Arnold, Barry - same as above - (arrives 2/1/99)
C 2377 Cantrell, Billy - same as above
2308 Gamble, Gary - same as above
0556 Hagins, Ben - same as above
1353 HEARD, DOLAN - 1-618-744-1175, Fax 1-618-744-1195 - Scott AFB IL/
BV4 Army Avia Sys Comm/Army Res Pers Admin Center MO
BLV (703 Seibert Road, Suite 1, SCOTT AFB IL 62225) [8]
A 2468 Acker, Bill - Scott AFB IL
2367 Dugger, Steve - Scott AFB IL
1016 Hewitt, Scott - Scott AFB IL
** 2565 Miller, Marc - Scott AFB IL - (arrives 9/l/98)
A 2410 Saltamachia, Glenn - Scott AFB IL
2217 Schuler, Doug - Scott AFB IL
** 2569 Taylor, Worth - Scott AFB IL
Army Avia Sys Comm/Army Res Pers Admin Ctr MO -
1-314-291-8777, Fax 1-314-291-8768 - (500 Northwest Plaza,
STC Suite 912, SAINT ANN MO 63074)
SCOTT HEWITT WILL BE IN THE OFFICE 2 OR 3 DAYS EACH WEEK FOR
APPOINTMENTS. SEND ALL BUSINESS MAIL TO: 703 SEIBERT ROAD, SUITE 1,
SCOTT AFB IL 6222.
1127 KARR, JIM - 1-913-651-6820, Fax 1-913-651-6888 -
LW4 Fort Leavenworth KS (424 Delaware Street, Suite C-2, PO Box 578,
LVN LEAVENWORTH KS 66048) [6]
F 0058 Becker, Ray - same as above
0981 Bridger, Barry - same as above
1536 Brown, Dave - same as above
1826 Jorgensen, Bob - same as above
2204 Whiteside, Doug - same as above
0866 ORR, FRED - 1-931-647-6516, Fax 1-931-647-3743 - Fort Campbell KY/
CV4 Columbus AFB MS/NAS Memphis TN (The Griffin Center, 209 Dover
CKV Road, CLARKSVILLE TN 37042-4155) [13]
2213 Ferguson, Monte - Fort Campbell KY
1966 Hill, Ralph - Fort Campbell KY
1860 Kane, Bill - Fort Campbell KY
* 2523 Kreitz, Darren - Fort Campbell KY
2366 McClelland, Eddie - Fort Campbell KY
2192 Olliff, Kirk - Fort Campbell KY
2082 Soderlund, Paul - Fort Campbell KY
1658 Wade, Chuck - Fort Campbell KY
Columbus AFB MS - 1-601-434-8847, Fax 1-601-434-5800 -
CMS (1027 Land Road, COLUMBUS MS 39701)
1998 Smith, Bill - same as above
NAS Memphis TN - 1-901-372-9469, Fax 1-901-372-7132 -
MMS (3606 Austin Peay Highway, Suite 111, MEMPHIS TN 38128)
** 2532 Maxey, Don - NAS Memphis TN - (arrives 9/1/98)
2274 Saenz, Ernie - NAS Memphis TN
1636 Scott, Dick - NAS Memphis TN
0578 PEROYEA, EMILE - 1-580-737-8594, Fax 1-580-737-1912 -
MC4 Tinker AFB/Vance AFB OK (7005 SE 15th Street, Suite 200,
MWC MIDWEST CITY OK 73110) [8]
2207 Barton, Don - Tinker AFB OK
1965 Jennings, Bruce - Tinker AFB OK
F 0389 Monroe, Paul - Tinker AFB OK
** 2603 Rollins, Tom - Tinker AFB
* 2518 Ross, Dave - Tinker AFB OK
1654 Walker, Steve - Tinker AFB OK
Vance AFB OK - 1-580-242-0550, Fax 1-580-242-0401 -
--- ---
END (1202 West Willow Road, Suite K, ENID OK 73703)
E 2406 Cox, Terry - same as above
1591 PROVO, JIM - 1-847-295-5100, Fax (M) 1-847-295-5101 - NTC Great Lakes
LB4 IL/Fort McCoy WI (II North Skokie Highway, Suite 300,
LBF LAKE BLUFF IL 60044) [8]
-
#** 2663 Anderson, Jon - NTC Great Lakes IL - (arrives 9/1/98)
2250 Brueckbauer, Roger - NTC Great Lakes IL
1970 Cox, Landon - NTC Great Lakes IL
** 2531 Falcone, Jeff - NTC Great Lakes IL
F 1342 McLin, Joe - NTC Great Lakes IL
2123 Prater, Jim - NTC Great Lakes IL
Wisconsin area - 1-608-374-4770, Fax 1-608-374-4880 -
TMW (1021 North Superior Avenue, Suite 12, TOMAH WI 54660)
F 1706 Shireley, Jim
<TABLE>
<S> <C> <C> <C>
I - Inactive Agent F - Field Client Representative A - 98-A Class * - Next Class
M - Designated to New RA/DA (M) - Manual Fax B - 98-B Class ** - Future Class
R - Retire(d) # - Addition since last roster C - 98-C Class
S - Senior Status Underscore - Change since last roster D - 98-D Class
T - Terminate(d) ---------- E - 98-E Class
Alpha/numeric characters under RA/DA agent number are the Region/District code NC 1
Alpha characters to the left of each office address are the office code
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
NORTH CENTRAL REGION (CONTINUED)
- --------------------------------------------------------------------------------
1221 SCHEIB, CHRIS - 1-402-291-3040, Fax 1-402-291-0371 - Offutt AFB/ROTC
BL4 Lincoln NE/IA Recruiters & ROTC/Rock Island Arsenal IL/Minneapolis
Saint Paul/Rochester MN (204 West Mission Avenue,
OMA BELLEVUE NE 68005) [11]
F 0777 Austin, Hank - same as above
2369 Bennett, John - Offutt AFB NE
B 2436 Coots, Frank - Offut AFB NE
2019 Dentinger, Jim - Offut AFB NE
F* 1509 Groff, Roger - Offut AFB NE
** 2629 Grubb, Chuck - Offut AFB NE - (arrives 11/1/98)
0882 Jeffus, Bob - Offutt AFB NE
** 2540 Mokrycki, Mike - Offutt AFB NE
** 2578 Spaulding, Merle - Offutt AFB NE - (arrives 1/1/99)
2332 Werner, Rick - Offutt AFB NE
2071 SIMONS, JIM - 1-701-839-6669, Fax 1-701-852-0206 - Cavalier AFB/Grand
EM4 Forks AFB/Minot AFB ND/Ellsworth AFB Rapid City SD
MNT (4825 North Broadway, PO Box 1926, MINOT ND 58702) [5]
C 2482 Dailey, Mary - same as above
Ellsworth AFB Rapid City SD - 1-605-923-4090, Fax 1-605-923-4191 -
RPD (214 Frontage Road, BOX ELDER SD 57719)
2152 Vogel, Kevin - same as above
Grand Forks AFB - 1-701-594-2730, Fax 1-701-594-4938 -
GFK (Baseview Shopping Center, RR 1 Box 126, EMERADO ND 58228)
2291 Beeck, Ken - same as above
1318 SMITH, TED - 1-580-536-7416, Fax 1-580-536-0393 - Altus AFB/
LA4 Fort Sill OK (7205 West Gore Blvd, LAWTON OK 73505) [10]
LAW --
1655 Clippinger, Dennis - Office Manager
2004 Evans, Henry - Fort Sill OK
2349 Heevner, Scott - Fort Sill OK
0927 Knapstein, Tony - Fort Sill OK
0644 Nahorski, Ken - Fort Sill OK
** 2590 Pagano, Les - Fort Sill OK
C 2420 Perry, Bill - Fort Sill OK
#** 2661 Wood, Jerry - Fort Sill OK - (arrives 2/1/99)
Altus AFB OK - 1-580-482-8772, Fax 1-580-482-5309 - (1416 North
ALT Park Lane, Suite A, Box 2, ALTUS OK 73521)
E 2408 Mahoney, Dan - same as above
NC 2
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC REGION (76)
--
CA, GUAM, HI
- --------------------------------------------------------------------------------
0611 THORESON, DAVE - REGIONAL AGENT - 1-916-852-9625,
HQ7 Fax 1-916-852-9615 - (11211 Gold Country Boulevard, Suite 108,
SAC GOLD RIVER CA 95670) [2]
1435 Patterson, Pat - Assistant Regional Agent
1885 BONDY, RAY - 1-209-924-7733, Fax 1-209-924-7740 - Defense Language
LM7 Institute/Fort Ord/Fort Hunter Liggett/NAS Lemoore/Naval PG School/
Moffett Field NAS/Onizuka AFB CA/Sharpe Army Depot
LMR (237 "C" Street, LEMOORE CA 93245) [9]
B 2484 Atwood, Tom - NAS Lemoore CA
1213 Bloyd, John - NAS Lemoore CA
** 2483 Johnson, Mell - NAS Lemoore CA
1846 Zayicek, Jim - NAS Lemoore CA
CBC Port Hueneme/NAWS Point Mugu/Vandenberg AFB CA -
1-805-482-6551/6323, Fax 1-805-389-7446 - (1200 Paseo Camarillo,
CAM Suite 255, CAMARILLO CA 93010-6035)
0853 Strnad, Bill - same as above
** 2624 Valverde, John - same as above - (arrives 1/18/99)
Vandenberg AFB CA - 1-805-733-1731, Fax 1-805-733-2770 -
LOM (USPA&IRA, 3769 Constellation Road, Suite F, LOMPOC CA 93436)
** 2598 Morrow, David - same as above - (arrives 10/1/98)
1115 Winkler, John - same as above
1805 BROWN, CARL - 1-619-299-8772, Fax 1-619-299-8783 - Naval Station SD/
S17 Naval Amphib Base/ASW/Sub Base/Naval Supply Center (591 Camino
SNG De La Reina, Suite 1200, SAN DIEGO CA 92108) [9]
-
** 2589 Alqueza, Regee - same as above
** 2593 Benito, Rick - same as above - (arrives 9/1/98)
* 2407 Eisenberg, Mike - same as above - (arrives 1/1/99)
** 2646 Hallihan, Tim - same as above
** 2652 Holder, Mark - same as above
2187 LeBlanc, Joe - same as above
#** 2671 Thompson, Ed - same as above - (arrives 11/1/98)
B 2462 Yackel, David - same as above
2311 CASEY, JOE - 1-671-734-2923, Fax 1-671-734-2927 - Andersen AFB/Naval
AG7 Activities Guam/Naval Hospital/Naval Weapons Station/Naval
Communications WestPacbases (USPA&IRA, PO Box 25449,
AGN BARRIGAGDA GU 96921) [4]
SHIPPING ADDRESS: USPA&IRA, HONG'S BUILDING, SUITE 5, ROUTE 10 & 32,
MANGILAO GUAM 96923
B 2511 Beasley, Ryan - same as above
2241 Boykin, Jess - same as above
** 2568 Harvey, Royce - same as above
1306 DODSON, JOHN - 1-808-487-7222, Fax 1-808-486-7447 - Hawaii
HW7 (Pearlridge Office Center, 98-211 Pali Momi Street, Suite 500,
AIE AIEA HI 96701) [10]
2049 Bales, Doug - Marine Corps Base Hawaii Kaneohe Bay/Fort Shafter/
Camp Smith HI
2055 Brown, Doug - Hickam AFB/Hono - CG District/Tripler Army
Medical Center HI
** 2610 Chiavacci, David - Marine Corps Base Hawaii/Pearl Harbor/NAS
Barbers Point HI
1839 Hayashida, John - Camp Smith/Schofield Barracks/Pearl Harbor HI
1301 Jenks, Pete - Schofield Barracks/Wheeler AAF HI
1073 Kreinik, Jerry - NAS Barbers Point/NB Pearl Harbor/Camp Smith HI
1381 Mills, Tim - NAS Barbers Point/NB Pearl Harbor/Camp Smith HI
1631 Skillington, Kathy - Schofield Barracks/Wheeler AAF HI
1355 Tyler, Teresa - Fort Shafter/Hickam AFB/Tripler Army Medical
Center HI
1582 LUCAS, BOB - 1-760-256-5722, Fax (M) 1-760-256-5778 - Fort Irwin/
BT7 Edward AFB/NAWS China Lake CA/Marine Corps Base Twentynine
Palms CA/MCLB Barstow CA (400 South 2nd Avenue, Suite 208,
BRT BARSTOW CA 92311) [8]
2318 Hilliard, Samantha - same as above
A 2383 Johnson, Scott - same as above
Los Angeles AFB CA/March ARB CA - 1-310-532-7274 -
Fax 1-310-532-7379 - (1515 West 190th Street,
GTR Suite 408 GARDENA CA 90248)
0955 Matthews, Mat - same as above
Edwards AFB CA/NAWS China Lake CA - 1-805-256-2070,
Fax 1-805-256-1130 - (1431 Rosamond Blvd, Suite 16,
RMD PO Box 1390, ROSAMOND CA 93560)
2010 Franzen, Ron - Edwards AFB/NAWS China Lake CA
** 2592 Lewis, John - Edwards AFB/NAWS China Lake CA - (arrives 1/1/99)
1481 Wall, Jeff - Edwards AFB
Marine Corps Base Twentynine Palms CA - 1-760-367-1998,
Fax 1-760-361-8045 - (5758 Adobe Road, Suite A,
TNP TWENTYNINE PALMS CA 92277)
1074 Uyeda, Chuck - same as above
1102 MARX, KYLE - 1-619-299-8772, Fax 1-619-299-8783 - Balboa Hospital,
SD7 Coronado NAB/ NAS Miramar/Naval Station SD/Naval Amphip Base/San
Diego ASW/San Diego Sub Base/Naval Supply Center/North Island NAS/
San Diego Marine Corps Recruit Depot (591 Camino De La Reina,
SAN Suite 1200, SAN DIEGO CA 92108) [12]
--
2385 Biedermann, Eric - same as above
** 2583 Blunck, Jerry - same as above
A 2481 Clarke, Pete - same as above
1984 Davey, Ken - same as above
1055 Duchin, Phil - same as above
** 2626 Gervacio, Alex - same as above
** 2657 Hausvik, Rick - same as above
1729 Hornbake, Mike - same as above
#** 2674 Knowles, Kevin - same as above - (arrives 4/1/99)
2322 Lippold, Dan - same as above
2245 Svatek, Gary - same as above
1160 REICHBACH, KATHY- 1-707-447-8772, Fax 1-707-447-4787 - Beale/Mather/
VC7 Marine Corp Warfare Training Center Bridgeport CA/McClellan/Travis
AFB/Sacramento Army Depot CA (190 South Orchard Avenue, Suite
VCV B-115, VACAVILLE CA 95688-3636) [7]
1559 Klein, Dick - Travis AFB CA
1220 Laughlin, John - Travis AFB CA
E 2416 Rasmussen, Eric - Travis AFB CA
Mather AFB/McClellan AFB/Sacramento Army Depot CA -
1-916-967-8772, Fax 1-916-967-8964 - (7840 Madison Avenue,
RCD Suite #186, FAIR OAKS CA 95628)
2137 Jones, Larry - same as above
F 1490 Williams, Dave - same as above
Beale AFB CA/Sierra Army Depot/Marine Corp Warfare Training
Center, Bridgeport CA - 1-530-432-7507, Fax 1-530-432-7509
YCY (10138 Commercial Court, Suite 104, PENN VALLEY CA 95946)
2072 Spitler, Mark - same as above
<TABLE>
<S> <C> <C> <C>
I - Inactive Agent F - Field Client Representative A - 98-A Class * - Next Class
M - Designated to New RA/DA (M) - Manual Fax B - 98-B Class ** - Future Class
R - Retire(d) # - Addition since last roster C - 98-C Class
S - Senior Status Underscore - Change since last roster D - 98-D Class
T - Terminate(d) ---------- E - 98-E Class
Alpha/numeric characters under RA/DA agent number are the Region/District code PR 1
Alpha characters to the left of each office address are the office code
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC REGION (CONTINUED)
- --------------------------------------------------------------------------------
1496 WAGNER, JERRY - 1-760-631-8300, FAX 1-760-631-8360 - Camp Pendleton/
OC7 MCAS El Toro/Santa Ana/MCAS Tustin CA (4167 Avenida De La Plata,
OCN Suite 102, OCEANSIDE CA 92056) [10]
B 2512 Harrison, Kent - Camp Pendleton CA
2012 Novak, Len - Camp Pendleton CA
2247 Price Jr, Doyel - Camp Pendleton CA
2354 Rubin, Craig - Camp Pendleton CA
C 2528 Segall, Karl - Camp Pendleton CA
2296 Stratmann, Chip - Camp Pendleton CA
2118 Thorne, Lloyd - Camp Pendleton CA
2130 Winter, Frank - Camp Pendleton CA
MSCAS El Toro/Santa Ana/MCAS Tustin CA - 1-714-727-3050,
Fax 1-714-727-4388 - (18 Technology Drive, Suite 203,
IRV IRVINE CA 92618)
1796 Rastetter, Curt - same as above
2182 WHEATON, ERIC - Defense Language Institute/Fort Ord/Naval PG School CA
MT7 - 01-408-649-8772, Fax 1-408-649-6837 - (2511 Garden Road, Garden
MRY Place Bldg A, Suite 170, MONTEREY CA 93940) [5]
0668 Flowers, Bob - same as above
** 2606 Hurt, Shawn - same as above
NAS Alameda/Coast Guard Island/NS Treasure Island/NSC Oakland/
Oakland Army Base/Presidio of San Francisco/NSY Mare Island/
Moffett Field NAS/Onizuka AFB CA - 1-510-337-9075, Fax
ALD 1-510-337-9077 - (883 Island Drive, Suite 210, ALAMEDA CA 94502)
1234 Brown, Ralph - same as above
Moffett Field NAS/Onizuka AFB CA - 1-408-980-8772,
Fax 1-408-980-8774 - (3080 Olcott Street, Suite 120-D,
SNC SANTA CLARA CA 95051)
** 2544 Shenoy, Nandini - same as above
PR 2
<PAGE>
- --------------------------------------------------------------------------------
SOUTH ATLANTIC REGION (112)
---
AL, FL, GA, SOUTHEAST NC, SC
- --------------------------------------------------------------------------------
0429 GRAY, DOUG - REGIONAL AGENT - 1-770-491-9137, Fax 1-770-938-6166 -
HQ3 (3525 Habersham at Northlake, TUCKER GA 30084) [2]
TCK
0630 LeHardy, Frank - Assistant Regional Agent
2202 AGOSTINI, JIM - 1-803-741-0134, Fax 1-803-741-0273 - Fort Jackson/
CB3 McEntire ANGB/Shaw AFB SC/Charlotte NC -
CSC (7499 Parklane Road, Suite 124, COLUMBIA SC 29223) [10]
* 2529 Haddle, Brian - same as above
1992 Haines, Stan - same as above
** 2591 Speaker, Greg - same as above
** 2539 Towry, John - same as above
Charlotte NC/Fort Jackson SC - 1-803-254-1688, Fax 1-803-254-1854
CLB - (623 Queen Street, COLUMBIA SC 29205)
F 0561 Simmons, Steve - same as above
McEntire ANGB/Shaw AFB SC - 1-803-469-0027,
SSC Fax 1-803-469-0036 - (2610 Hardee Court, SUMTER SC 29150)
** 2639 Bitsky, Ken - McEntire ANGB/Shaw AFB SC - (arrives 9/15/98)
1715 Blanchette, Ray - McEntire ANGB/Shaw AFB SC
** 2609 Fitzgerald, Jim - same as above
2390 Rigor, Jose - McEntire ANGB/Fort Jackson
1684 ANCONETANI, TONY - 1-706-323-9980, Fax (M) 1-706-323-9180 -
C03 Fort Benning GA/ROTC Auburn University AL (5363 Veterans Parkway,
COL COLUMBUS GA 31904) [10]
1499 Elliott, Howard - Fort Benning GA/ROTC Auburn AL
C 2454 Hunsaker, Chuck - Fort Benning GA
1424 Malkinski, Dan - Fort Benning GA
2282 Pattillo, Steve - Fort Benning GA
** 2584 Roberts, Shirrell - Fort Benning GA
** 2637 Powers, Karen - Fort Benning GA
1959 Pride, Sam - Fort Benning GA
** 2641 Smith, Mike - Fort Benning GA - (arrives 9/15/98)
2339 Stahl, Ben - Fort Benning GA
1143 CORBETT, CHUCK - 1-910-577-1177, Fax 1-910-577-3581 - Camp Lejeune/
JX3 MCAS New River/Camp Johnson/Camp Geiger (308 Western Blvd,
JXN JACKSONVILLE NC 285461 [6]
2328 Hart, Frank - Camp Lejeune/MCAS New River NC
2110 McLaughlin, Joe - Camp Lejeune/MCAS New River NC
1827 Millush, David - Camp Lejeune/MCAS New River NC
0672 Plowman, Floyd - Camp Lejeune/MCAS New River NC
2277 Scialabba, Jackie - Camp Lejeune/MCAS New River NC
1505 DEVOS, ED - 1-843-824-6629, Fax 1-843-824-6631 - Charleston
BF3 AFB & NB SC (7301 Rivers Avenue, Suite 190,
CHS NORTH CHARLESTON SC 29406-4650) [9]
1948 Jones, Bucky - same as above
* 2423 Minnillo, Vince - same as above
** 2647 Nardelli, Rob - same as above - (arrives 11/1/98)
1334 Waters, Lee - same as above
A 2449 Williamson, Terry - same as above
2145 Yaeger, Bill - same as above
Hunter Army Airfield GA/Charleston AFB & NB/MCAS Beaufort/MCRD
Parris Island SC - 1-843-846-0785, Fax (M) 1-843-846-0945 - (122
BFT Stanley Road, PO Box 4456, BEAUFORT SC 29902-4456)
B 2456 Gilman, James - same as above
2265 Shores, Gary - same as above
1450 GERACI, JEFF - 1-904-269-8772, Fax 1-904-269-1466 - NAS Cecil Field/NAS
OP3 JAX/NAS Mayport FL/Moody AFB GA (330 Corporate Way, Suite 100,
JAX ORANGE PARK FL 32073) [12]
--
** 2506 Brown, Dwayne - same as above
E 2398 Brunori, Tim - same as above
T/B 2439 Demers, Phil - same as above - 8/1/98
- - ------
** 2620 Kozak, Maike - same as above
A 2435 Smith, Carl - same as above
F 0770 Walrath, Burt - same as above
A 2486 Washnock, James - same as above
1072 Weatherington, Mike - same as above
NS & NAS Mayport FL/NAS Cecil Field/NAS Jax - 1-904-246-8011,
Fax 1-904-249-8667 - (413 Pablo Avenue North, Suite 101,
---
NBC JACKSONVILLE BEACH FL 32250)
A 2466 Brown, Regina - same as above
1230 Hoadley, Jeff - same as above
1789 Steve, Mike - same as above
C 2497 Wiggins, Mark - same as above
1010 GLYNN, DENNY - 1-954-434-3370, Fax 1-954-434-2494 - Cape Canaveral
M13 AFS/Key West NAS - Miami area/Patrick AFB FL -
MIA (10400 Griffin Road, Suite 108, COOPER CITY FL 33328) [8]
C 2489 Acosta, Fernando - Miami Area
** 2635 Swynenberg, Jeff - Miami Area - (arrives 10/1/98)
Cape Canaveral/Patrick AFB FL - 1-407-773-7298, Fax 1-407-773-6309 -
STB (1813 South Patrick Drive, INDIAN HARBOUR BEACH FL 32937)
1698 Huff, Frank - same as above
** 2572 Perron, Rob - same as above - (arrives 11/1/98)
** 2604 South, Dan - same as above - (arrives 9/1/98)
1911 Wise, Sid - same as above
Key West NAS - 1-305-745-3310, Fax (M) 1-305-745-3310 -(365 South
KYW Point Drive, SUGAR LOAF SHORES FL 33042)
S 0895 Vaupel, Dave - same as above
2257 HARVIN, MIKE - 1-404-350-8443, Fax (M) 1-404-350-8405 -
AT3 Dobbins AFB/Fort Gillem/Fort McPherson GA/Fort McClellan/Redstone
Arsenal AL (100 Atlanta Tech Center, 1575 Northside Drive NW,
ATL Suite 150, ATLANTA GA 30318-4208) [8]
F 0715 Anderson, Darryl - same as above
1632 Cyr, Steve - same as above
1874 Henn, Jim - same as above
2368 Jones, Ken - same as above
M/F 0292 Tutterow, Jay - same as above
M 2194 Tutterow, Sonya - same as above
Fort McClellan AL - 1-205-236-6649, Fax 1-205-236-6686 -
(4422 McClellan Blvd, Anniston AL 36201 OR, PO Box 5249,
ANN FORT MCCLELLAN AL 36205)
SEND ALL INQUIRIES FOR THE FORT MCCLELLAN AL AREA TO MIKE HARVIN IN
THE ATLANTA OFFICE.
Redstone Arsenal AL - 1-205-536-6966/7, Fax (M) 1-205-536-1818 -
HTV (1100 Jordan Lane NW, Suite H, HUNTSVILLE AL 35816)
2384 Bissell, Mary - same as above
1011 HERZOG, RAY - 1-334-277-7731, Fax 1-334-277-7488 - Gunter AFB/
MG3 Maxwell AFB AL (2931 Zelda Road, MONTGOMERY AL 36106-2648) [5]
-
MGM
T/** 2656 Christmas, B.C. - same as above - 8/1/98
- - ------
T/D 2358 Decker, Joe - same as above - 7/1/98
- - ------
1448 Dierlam, Mark - same as above
2287 Edwards, Gary - same as above
2073 Golden, Randy - same as above
1974 Smith, Paul - same as above
<TABLE>
<S> <C> <C> <C>
I - Inactive Agent F - Field Client Representative A - 97-A Class * - Next Class
M - Designated to New RA/DA (M) - Manual Fax B - 97-B Class ** - Future Class
R - Retire(d) # - Addition since last roster C - 97-C Class
S - Senior Status Underscore - Change since last roster D - 97-D Class
T - Terminate(d) ---------- E - 97-E Class
Alpha/numeric characters under RA/DA agent number are the Region/District code SA 1
Alpha characters to the left of each office address are the office code
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SOUTH ATLANTIC REGION (CONTINUED)
- --------------------------------------------------------------------------------
2294 HOOKER, BOB - 1-813-254-0100, Fax 1-813-251-9159 - MacDill AFB/
TA3 Orlando Naval Training Center FL - (Hyde Park Professional Center,
TPA 240 Plant Avenue, Suite A-200, TAMPA FL 33606 [8]
** 2580 Clark, Dan - MacDill AFB FL
2269 Crawford, Jeff - MacDill AFB FL
E 2392 Poole, Tom - MacDill AFB FL
F 1150 Robinson, Larry - MacDill AFB FL
A 2464 Saunders, Bill - MacDill AFB FL
Orlando Naval Training Center FL - 1-407-897-3888
Fax 1-407-896-3111 - (3165 McCrory Place, Suite 151,
ORL ORLANDO FL 32803)
F 0972 Holder, Ken - same as above
2173 Olde, Gordon - same as above
0893 HOOKNESS, BOB - 1-706-860-2448, Fax 1-706-860-4545 - Fort Gordon GA
AG3 (119 Davis Road, Suite 9-A, AUGUSTA GA 30907) [6]
AGS
1886 Brown, Dennis - Fort Gordon GA
** 2596 Gott, Robin - Fort Gordon GA
1427 Greenwood, Ev - Fort Gordon GA
2164 McCafferty, Doug - Fort Gordon GA
2286 Tushen, Bryan - Fort Gordon GA
1737 JOHNSON, GENE - 1-919-447-8772, Fax 1-919-447-5117 - MCAS Cherry
HV3 Point NC/Seymour Johnson AFB NC (193 Wolfcreek Professional Center,
HLK PO Box 278, HAVELOCK NC 28532 [6]
B 2472 LeBlanc, Glenn - same as above
A 2460 Slate, Dan - same as above
Seymour Johnson AFB NC - 1-919-778-9595,
Fax (M) 1-919-778-5940 - (1206-H North Berkeley Blvd,
GDB GOLDSBORO NC 27534
2155 Cala, Lou - same as above
** 2594 DeWitt, Joe - same as above - (arrives 9/1/98)
1761 Giordano, Ralph - Seymour Johnson AFB NC
1747 RAY, STEVE - 1-334-347-4238, Fax (M) 1-334-347-0750 - Fort Rucker AL
EN3 (1200 Rucker Blvd, ENTERPRISE AL 36330) [6]
ENT
1216 Heneveld, George - same as above
1186 Luther, Jeff - same as above
2176 Richards, Troy - same as above
** 2658 Tetreault, Glenn - same as above
2275 Watts, Ray - same as above
1703 VEJAR, JIM - 1-912-369-7281, Fax 1-912-369-3886 - Fort Stewart GA/NSB
HN3 Kings Bay GA (740 General Stewart Way, Suite 101,
HVL HINESVILLE GA 31313) [10]
S 0692 Bennett, Bob - Fort Stewart GA
C 2545 Noel, Rich - Fort Stewart GA
** 2617 North, Bill - Fort Stewart GA
E 2441 Sheehan, David - Fort Stewart GA
B 2507 Velasco, Curtis - Fort Stewart GA
NSB Kings Bay GA - 1-912-673-6363, Fax 1-912-673-6312 -
STM (412 Osborne Street, Suite A, SAINT MARYS GA 31558)
E 2451 Barnhardt, Carl - same as above
1572 Walker, Ed - same as above
Hunter Army Airfield GA - 1-912-354-9360, Fax 1-912-355-0906 -
{Warner Plaza, Bldg 6, Suite 1, 7373 Hodgson Memorial Drive,
SVH SAVANNAH GA 31406)
2355 Burton, Jim - same as above
F 1142 Dollander, L.T. - same as above
1358 WASHNOCK, DAVE - 1-912-923-1559, Fax 1-912-328-9395 - Martine Corp
WR3 Logistic Base MCLB Albany/Robins AFB GA/Moody AFB GA (607
WRB Russell Parkway, Suite C, WARNER ROBINS GA 31088) [6]
C 2488 Carter, Chirs - same as above
** 2587 Drinkhahn, Marc - same as above
1906 Pierce, Jim - same as above
E 2143 Silenzi, Silvio - same as above
Moody AFB GA - 1-912-242-7229, Fax, 1-912-242-4185 -
VAL (3473 Bemiss Road, VALDOSTA GA 31605)
2263 Washnock, John - same as above
SA 2
<PAGE>
- --------------------------------------------------------------------------------
SOUTH CENTRAL REGION (100)
MOBILE AL, FL PANHANDLE, LA, SOUTHERN MS, TX
- --------------------------------------------------------------------------------
1225 BENNETT, SKIPPER - REGIONAL AGENT - 1-817-737-8633,
HQ5 Fax 1-817-732-3556 - (6410 Southwest Blvd, Suite 200,
FTW FORT WORTH TX 76109-3920) [2]
0127 Elmendorf, Tom - Assistant Regional Agent
0922 BIEHLE, ARLEN - 1-850-651-8963, Fax 1-850-651-3910 - Eglin AFB/
SRS Hurlburt Field/ROTC Tallahassee/Tyndall AFB FL (1248-B North Eglin
SHL Parkway, SHALIMAR FL 32579) [10]
1708 Cardenas, Steve - Eglin/AFB Hurlburt Field FL
A 2446 Cross Jr, Rick - Eglin AFB/Hurlburt Field FL
1723 Ellenson, Bob - Eglin AFB/Hurlburt Field FL
* 2538 Maus, Mike - Eglin AFB/Hurlburt Field FL
2051 Meeboer, Bill - Eglin AFB/Hurlburt Field FL
** 2479 Schweppe, Floyd - Eglin AFB/Hurlburt Field FL
2026 Smith, Sam - Eglin AFB/Hurlburt Field FL
2378 Tritschler, Phil - Elgin AFB/Hurlburt Field FL
F 0865 Williams, Ben - Eglin AFB/Hurlburt Field FL
0743 CANEDY, CHARLIE - 1-210-824-9894, Fax (M) 1-210-824-7099 -
SN5 Brooke Army Hospital/Fort Sam Houston TX (Geronimo District)
SA2 (1919 Oakwell Farms Parkway, Suite 200, SAN ANTONIO TX 78218) [8]
* 2438 Harrison, Mike - same as above
1930 Hoffman, Marty - same as above
** 2554 McDonald, Joe - same as above
2160 Motley, Bill - same as above
F 1185 Terrell, Doris - same as above
1535 Weaver, Jim - same as above
2340 Wong, Linda - same as above
2084 CARMICHAEL, PAUL - 1-850-769-6565, Fax 1-850-785-7605 - Naval Coastal
PCS Systems Lab/Tyndall AFB/USA-USN-USMC Reserve Center & ROTC
Tallahassee FL (429 South Tyndall Parkway, Suite L,
PNC PANAMA CITY FL 32404-6747) [4]
1622 Papizan, Jim - same as above
B 2515 Schaffer, Tim - same as above
C 2508 Schauz, Bill - same as above
0570 CARROLL, CHET - 1-850-456-9237, Fax 1-850-456-9109 - NTTC Corry
PE8 Station/NAS Pensacola/Saufley Field/NAS Whiting Field FL (4500 Twin
PNS Oaks Drive, PENSACOLA FL 32506) [9]
D 2414 Bann, Pete - same as above
D 2404 Diunizio, Marion - same as above
** 2564 Diunizio, Mark - same as above - (arrives 9/1/98)
C 2491 George, Mike - same as above
** 2621 Kuklish, Tom - same as above - (arrives 11/1/98)
C 2550 Ross, Steve - same as above
C 2427 Winkler, Tom - same as above
NTTC Corry Station/NAS Pensacola/NAS Whiting Field FL/Saufley
Field - 1-850-626-1702, Fax 1-850-626-9205 - (USPA&IRA, 6856
MLT Caroline Street, Suite 101, MILTON FL 32570)
1336 Wolfe, Bob - same as above
1525 COXE, BILL - 1-512-937-8772, Fax 1-512-937-8774 - Corpus Christi Army
CC5 Depot/Houston/Galveston area/Ingleside NAVSTA/NAS Chase Field/NAS
Corpus Christi/NAS Kingsville/USCG Corpus Christi TX (Mercantile
Bank Building, 10201 South Padre Island Drive, Suite 310,
CRP CORPUS CHRISTI TX 78418) [4]
1766 Barber, Dave - Corpus Christi area TX
B 2387 Rosales, Raul - Corpus Christi area TX
Houston/College Station TX area - 1-281-550-7731, Fax
HST 1-281-550-7712 - (PO Box 842104, HOUSTON TX 77284-2104)
F 0372 Koenig, Bill - same as above - SHIPPING ADDRESS: 8130 BRIGHTON PLACE
COURT, HOUSTON 77095
Houston/Clear Lake/Galveston/NASA JSC/Ellington AF/
USCGMSO - 1-281-480-1811, Fax 1-281-480-1838 -
GVT (17040 El Camino Real, Suite 600, HOUSTON TX 77058)
(Coxe, Bill - SHARED TIME FROM DISTRICT OFFICE - SEE ABOVE)
Ingleside NAVSTA - 1-512-643-7780, Fax 1-512-643-7779 -
NSI (1001 Wildcat Drive, PORTLAND TX 78374)
1909 DRAPER, JOHN - 1-915-698-9714, Fax 1-915-698-3142 - Dyess AFB/
AB5 Goodfellow AFB/Reese AFB TX (3300 South 14th Street, Suite 200,
ABL ABILENE TX 79605) [4]
S 0099 Duggan, Larry - Dyess AFB TX
2111 Myers, Sherry - Dyess AFB TX
Goodfellow AFB TX - 1-915-653-3550, Fax 1-915-658-7696 - (224
SGL West Beauregard Avenue, Suite 205A, SAN ANGELO TX 76903-6305)
* 2413 Rawls, Dwight - same as above
1918 EDGIN, GORDON - 1-254-526-4559, Fax 1-254-526-6573 -
KL5 Fort Hood TX (1711 East Central Texas Expressway, Suite 201-A,
KLT KILLEEN TX 76541) [13]
** 2577 Adams, Drew - same as above - (arrives 10/1/98)
** 2608 Buck, Lon - same as above - (arrives 9/1/98)
1876 Campbell, Wes - same as above
1888 Collins, Gary - same as above
E 2447 DiGennaro, Mike - same as above
1588 Gedelman, Carolyn - same as above
1602 Gordon, Wayne - same as above
** 2649 Leigh, Joe - same as above
** 2599 Paine, Bob - same as above
2070 Snelson, Gerry - same as above
** 2534 Thomas, Ted - same as above
2075 Wilberg, Clark - same as above
1640 JOHNSON, DAVE - 1-940-692-5901, Fax 1-940-692-5932 - NAS Dallas/NAS
FT5 Fort Worth JRB/Sheppard AFB/Waco TX (Century Plaza, 2629 Plaza
WFL Parkway, Suite 10-B, PO Box 4685, WICHITA FALLS TX 76308) [7]
2052 Ducos, Frank - Sheppard AFB TX
D 2396 Foster, Bev - Sheppard AFB TX
** 2602 Garza, Carlos - Sheppard AFB TX
NAS Dallas/Waco TX - 1-972-409-9688, Fax 1-972-409-9689 - (Las
IVG Colinas, 6309 N O'Connor Boulevard, Suite 108, IRVING TX 75039)
F 0370 Montgomery, Lee - same as above
NAS Fort Worth JRB TX - 1-817-738-2661, Fax 1-817-738-2686 -(6320
FWT Southwest Boulevard, Suite 222, FORT WORTH TX 76109)
0473 Langley, Hal - same as above
2313 Rooney, Claire - same as above
<TABLE>
<S> <C> <C> <C>
I - Inactive Agent F - Field Client Representative A - 98-A Class * - Next Class
M - Designated to New RA/DA (M) - Manual Fax B - 98-B Class ** - Future Class
R - Retire(d) # - Addition since last roster C - 98-C Class
S - Senior Status Underscore - Change since last roster D - 97-D Class
T - Terminate(d) ---------- E - 97-E Class
Alpha/numeric characters under RA/DA agent number are the Region/District code SC 1
Alpha characters to the left of each office address are the office code
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SOUTH CENTRAL REGION (CONTINUED)
- --------------------------------------------------------------------------------
0527 JOY, FRED - 1-210-735-0653, Fax 1-210-737-2376 - Austin Metro area/Kelly
SL5 AFB/Lackland AFB/Wilford Hall Medical Center TX (Lone Star District)
SA3 (6243 I-H 10 West, Suite 250, SAN ANTONIO TX 78201-2022) [8]
2316 Bonney, Dave - same as above
B 2432 Church, Miki - same as above
F 1215 Jarrell, David - same as above
1877 Lenz, Rick - same as above
1972 McManus, Rick - same as above
C 2526 McSorley III, Dave - same as above
0646 Swindell, Clay - same as above
Austin Metro area - 1-512-440-1105, Fax 1-512-737-2376 -(1825 Fort
AUS View Road, Suite 112C, AUSTIN TX 78704)
SEND ALL INQUIRIES FOR THE AUSTIN AREA TO THE DISTRICT OFFICE IN
SAN ANTONIO. CONTACT DAVID JARRELL FOR ANY COMMUNICATION REGARDING
CLIENTS.
1952 MILLER, JEFF - 1-254-526-4559, Fax 1-254-526-6573 - Fort Hood TX
KN5 (1711 East Central Texas Expressway, Suite 201-A, KILLEEN TX 76541) [5]
KLN -
1942 Harrold, Lee - same as above
2312 Henderson, Charles - same as above
T** 2522 Miller, Frank - same as above - 8/1/98
- - ------
#** 2644 Rich, Dan - same as above - (arrives 10/1/98)
A 2422 Smith, Spencer - same as above
1058 RUSH, HOWARD - 1-228-388-6163, Fax (M) 1-228-388-6164 -
BX5 NAS Meridian MS/Keesler AFB/NAVSTA Pascagoula/Stennis Space
Center/USN CB Center Gulfport MS/Camp Shelby MS/USCG Aviation
Training Center Mobile AL/NAS-NSA-USCG-USMC New Orleans LA
BLX (2434 Pass Road, Suite E, BILOXI MS 39531) [9]
2292 Brooks, Dave - Keesler AFB/Stennis Space Center/USN CB Center
Gulfport MS/Camp Shelby MS
2153 Moody, Jack - Keesler AFB/Southern MS/NAS Meridian MS
1845 Neidrick, Bob - Keesler AFB/Southern MS/USN CB Center/NAS
Meridian MS
B 2417 Sobol, Curt - Keesler AFB/Stennis Space Center
** 2601 Young, Brian - Keesler AFB/Stennis Space Center/USN CB Center
Gulfport MS
USCG GRP/USCG MSO/NAVSTA Pascagoula/USCG Aviation Training Center
Mobile AL - 1-334-344-1861, Fax 1-334-344-1863 (1110 Montlimar
MBL Drive, #860, MOBILE AL 36609)
1785 Holdsworth, Wayne - same as above
NAS-NSA-USCG-USMC-377 TACOM New Orleans -
1-504-394-8744, Fax 1-504-394-8746 - (4480 General DeGaulle
NOL Drive, Suite 105, NEW ORLEANS LA 70131)
2114 Bent, Rex - same as above
** 2542 Curtis, Bob - same as above
2036 STILES, JOHN - 1-318-868-8801, Fax 1-318-865-0517 - Barksdale AFB Army
SH5 Ammo Plant LA (Minden LA, Marshall & Texarkana TX)/Red River Army
SHV Depot TX (3007 Knight Street, Suite 205, SHREVEPORT LA 71105) [8]
B 2437 Carrell, Bob - Barksdale AFB LA
** 2627 Qualls, Greg - Barksdale AFB LA
2102 Strick, Dave - Barksdale AFB LA
Fort Polk LA - 1-318-463-7719/8961, Fax 1-318-463-8969 -
DRD (427 North Pine Street, Suite C, DERIDDER LA 70634)
1824 Lee, Chris - same as above
#** 2662 Corda, Mark - same as above - (arrives 10/1/98)
2376 Washington, James - same as above
** 2552 Oliver, Randy - same as above
1666 TERRELL, DICK - 1-210-658-3809, Fax 1-210-658-0267 - Brooks AFB/
CBS Randolph AFB TX (Alamo District) (Norwest Bank Building,
SA1 (USPA&IRA), 700 FM 78, PO Box 557, CIBOLO TX 78108-0557) [9]
-
2235 Bodenheim, Bodie - same as above
2097 Clark, Patrick - same as above
F 0969 Courington, George - same as above
#** 2675 Gates, Steve - same as above - (arrives 10/1/98)
0914 Grigsby, John - same as above
0898 Schuhmacher, John - same as above
C 2527 Taflan, John - same as above
Laughlin AFB TX - 1-830-775-0616, Fax 1-830-775-9549
DRT (106 Kings Way, DEL RIO TX 78840)
1986 Heaney, Pat - same as above
SC 2
<PAGE>
Section A Home Office Organization
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2. HOME OFFICE ORGANIZATION CHARTS
- -------------------------------------------------------------------------------
[Flowchart]
- --------------------------------------------------------------------------------
A-2 ADMINISTRATIVE WORKBOOK March 5, 1997
<PAGE>
Home Office Organization Charts
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[Flowchart]
- --------------------------------------------------------------------------------
March 5, 1997 ADMINISTRATIVE WORKBOOK A-3
<PAGE>
Section A Home Office Organization
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[Flowchart]
- --------------------------------------------------------------------------------
A-4 ADMINISTRATIVE WORKBOOK March 5, 1997
<PAGE>
Home Office Organization Charts
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[Flowchart]
- --------------------------------------------------------------------------------
March 5, 1997 ADMINISTRATIVE WORKBOOK A-5
<PAGE>
Section A Home Office Organization
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[Flowchart]
- --------------------------------------------------------------------------------
A-6 ADMINISTRATIVE WORKBOOK March 5, 1997
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
Weighted Avg. of O/S Shares FYE 9-30-98
<TABLE>
<CAPTION>
TREASURY TRANSACTIONS
Account Total ----------------------------------
Stockholder Name Date 1325 Issued Begin Sold Bought Owned
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Begin FYE 1998 09/30/97 34,661.56 1,733,078
Burch #1483 10/01/97 34,700.06 1,925 1,735,003
Gavin 10/09/97 34,704.06 200 1,735,203
Speer 10/20/97 34,708.06 200 1,735,403
Void - Hart #2328 10/20/97 34,706.06 (100) 1,735,303
Stewart 10/21/97 34,713.06 350 1,735,653
Witwicki 10/21/97 34.724.56 575 1,736,228
Colman #1838 10/31/97 34,732.56 400 1,736,628
Stinebaugh 10/31/97 34,762.06 1,475 1,738,103
Stumpf 10/31/97 34,859.56 4,875 1,742,978
October Month-end 10/31/97 34,859.56 1,742,978
White 11/07/97 34.863.06 175 1,743,153
November Month-end 11/30/97 34,863.06 1,743,153
Leisey 12/09/97 34,864.06 50 1,743,203
Primmer 12/16/97 34,867.56 175 1,743,378
Douglass 12/29/97 34,871.06 175 1,743,553
December Month-end 12/31/97 34,871.06 1,743,553
Ollie 01/02/98 34,873.06 100 1,743,653
Witt 01/02/98 34,883.06 500 1,744,153
Broksieck 01/02/98 34,999.56 5,825 1,749,978
Hermann 01/02/98 35,032.56 1,650 1,751,628
Read 01/02/98 35,093.06 3,025 1,754,653
VanDonselaar 01/02/98 36,014.10 46,052 1,800,705
Coder 01/02/98 36,467.04 22,647 1,823,352
Jordan 01/02/98 36,491.54 1,225 1,824,577
Schuler 01/05/98 36,493.54 100 1,824,677
Tosh 01/19/98 36,494.04 25 1,824,702
January Month-end 01/31/98 36,494.04 1,824,702
Cunningham 02/02/98 36,496.54 125 1,824,827
Humphrey 02/03/98 36,500.54 200 1,825,027
Kazin 02/05/98 36,501.54 50 1,825,077
Riebe 02/06/98 36,502.54 50 1,825,127
Foley 02/06/98 36,508.54 300 1,825,427
Foley 02/06/98 36,508.54 1,825,427
Irvin 02/11/98 36,515.04 325 1,825,752
Tansey 02/18/98 36,525.04 500 1,826,252
Taitano 02/19/98 36,529.04 200 1,826,452
February Month-end 02/28/98 36,529.04 1,826,452
Duff #0919 03/04/98 36,531.04 100 1,826,552
Trevino #1560 03/04/98 36,566.04 1,750 1,828,302
Reverse Foley Duplicate 03/11/98 36,566.04 1,828,302
Trevino #1997 03/16/98 36,568.54 125 1,828,427
Taitano #2086 03/27/98 36,577.54 450 1,828,877
March Month-end 03/31/98 36,577.54 1,828,877
Kinser #1781 04/03/98 36,587.54 500 1,829,377
Doscher #0589 04/06/98 36,591.04 175 1,829,552
Forepaugh #0931 04/15/98 36,624.04 1,650 1,831,202
Troutman #0842 04/20/98 36,766.04 7,100 1,838,302
April Month-end 04/30/98 36,766.04 1,838,302
Thomas #2001 05/01/98 36,772.04 300 1,838,602
Quinn #2288 05/01/98 36,774.54 125 1,838,727
May Month-end 05/31/98 36,774.54 1,838,727
Trevino #1997 06/01/98 36,776.54 100 1,835,627
Ferry #2126 06/11/98 36,779.04 125 1,838,952
June Month-end 06/30/98 36,779.04 1,838,952
Collins #2319 07/01/98 36,782.54 175 1,839,127
Coats #1158 07/01/98 36,787.54 250 1,839,377
Perrine #2303 07/23/98 36,791.04 175 1,839.552
July Month-end 07/31/98 36,791.04 1,839,552
</TABLE>
<TABLE>
<CAPTION>
NET Avg Shs Avg Shs Avg Shs
Net O/S Days(x) Outstanding O/S O/S
Stockholder Name Days Shares Shares Y-T-D Q-T-D M-T-D
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Begin FYE 1998 1,053,357
Burch #1483 38.50 9 1,051,432 9,462,888 1,051,432
Gavin 4.00 11 1,051,232 11,563,552 1,051,322
Speer 4.00 0 1,051,032 0 1,051,322
Void - Hart #2328 (2.00) 1 1,051,132 1,051,132 1,051,313
Stewart 7.00 0 1,050,782 0 1,051,313
Witwicki 11.50 10 1,050,207 10,502,070 1,050,956
Colman #1838 8.00 0 1,049,807 0 1,050,956
Stinebaugh 29.50 0 1,048,332 0 1,050,956
Stumpf 97.50 0 1,043,457 0 1,050,956 1,050,956 1,050,956 31.00
October Month-end 0.00 7 1,043,457 7,304,199 1,049,575
White 3.50 23 1,043,282 23,995,486 1,047,202 1,047,202 1,043,323 30.00
November Month-end 0.00 9 1,043,282 9,389,538 1,046,698
Leisey 1.00 7 1,043,232 7,302,624 1,046,383
Primmer 3.50 13 1,043,057 13,559,741 1,045,903
Douglass 3.50 2 1,042,882 2,085,764 1,045,837 1,045,837 1,043,151 31
December Month-end 0.00 2 1,042,882 2,085,764 1,045,774
Ollie 2.00 0 1,042,782 0 1,045,774
Witt 10.00 0 1,042,282 0 1,045,774
Broksieck 116.50 0 1,036,457 0 1,045,774
Hermann 33.00 0 1,034,807 0 1,045,774
Read 60.50 0 1,031,782 0 1,045,774
VanDonselaar 921.04 0 985,730 0 1,045,774
Coder 452.94 0 963,083 0 1,045,774
Jordan 24.50 3 961,858 2,885,574 1,043,179
Schuler 2.00 14 961,758 13,464,612 1,032,909
Tosh 0.50 12 961,733 11,540,796 1,025,965 966,992 966,992 31
January Month-end 0.00 2 961,733 1,923,466 1,024,938
Cunningham 2.50 1 961,608 961,608 1,024,435
Humphrey 4.00 2 961,408 1,922,816 1,023,450
Kazin 1.00 1 961,358 961,358 1,022,969
Riebe 1.00 0 961,308 0 1,022,969
Foley 6.00 0 961,008 0 1,022,969
Foley 0.00 5 961,008 4,805,040 1,020,657
Irvin 6.50 7 960,683 6,724,781 1,017,679
Tansey 10.00 1 960,183 960,183 1,017,275
Taitano 4.00 9 959,983 8,639,847 1,013,860 963,997 960,682 28
February Month-end 0.00 4 959,983 3,839,932 1,012,469
Duff #0919 2.00 0 959,883 0 1,012,469
Trevino #1560 35.00 7 958,133 6,706,931 1,010,122
Reverse Foley Duplicate 0.00 5 968,133 4,790,665 1,008,565
Trevino #1997 2.50 11 958,008 10,538,088 1,005,441
Taitano #2086 9.00 4 957,558 3,830,232 1,004,388 962,019 958,253 31
March Month-end 0.00 3 957,558 2,872,674 1,003,629
Kinser #1781 10.00 3 957,058 2,871,174 1,002,886
Doscher #0589 3.50 9 956,883 8,611,947 1,000,784
Forepaugh #0931 33.00 5 955,233 4,776,165 999,657
Troutman #0842 142.00 10 948,133 9,481,330 997,226 953,776 953,776 30
April Month-end 0.00 1 948,133 948,133 996,996
Thomas #2001 6.00 0 947,833 0 996,996
Quinn #2288 2.50 30 947,708 28,431,240 990,911 950,699 947,722 31
May Month-end 0.00 1 947,708 947,708 990,734
Trevino #1997 2.00 10 947,608 9,476,080 989,036
Ferry #2126 2.50 19 947,483 18,002,177 986,144 949,655 947,532 30
June Month-end 0.00 1 947,483 947,483 986,003
Collins #2319 3.50 0 947,308 0 986,003
Coats #1158 5.00 22 947,058 20,835,276 983,108
Perrine #2303 3.50 8 946,883 7,575,064 982,155 947,027 947,027 31
July Month-end 0.00 946,883 0 982,155
</TABLE>
<PAGE>
CAUSE NO. 352-129228-90
INDEPENDENT RESEARCH AGENCY ) IN THE DISTRICT COURT
FOR LIFE INSURANCE, INC., )
Plaintiff, )
VS. ) TARRANT COUNTY, TEXAS
WILLIAM C. HUGENBERG, JR., )
Defendant. ) 352ND JUDICIAL DISTRICT
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT
COMES NOW, INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC., and
files this its Amended Motion for Summary Judgment against Defendant WILLIAM
C. HUGENBERG, JR., and for grounds would show unto the Court as follows:
Defendant William C. Hugenberg, Jr., (hereinafter "Hugenberg") has
appeared and answered in this suit.
INTRODUCTION
II.
Hugenberg is a former employee and registered representative of
United Services Planning Association, Inc. (hereinafter "USPA") and a former
authorized agent of Independent Research Agency for Life Insurance, Inc.,
(hereinafter "IRA"). As such, Hugenberg was permitted to purchase stock in
USPA's parent corporation, IRA. Hugenberg availed himself of the opportunity
to purchase IRA stock. Prior to purchasing the stock, Hugenberg executed a
"Stock Agreement" which provided in part that to hold
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 1
<PAGE>
stock in IRA, Hugenberg had to be an authorized agent for IRA. The Stock
Agreement also provides that if Hugenberg ceases to be an agent for IRA, then
IRA has the option to repurchase its stock from him. Hugenberg agreed in the
Stock Agreement that the repurchase price was to be the value placed on the
stock by IRA. At or about the time Hugenberg's resignation as a USPA employee
became effective, he also ceased to be an IRA agent. At that time, IRA had
placed $535,587.50 in Hugenberg's payroll account in full payment for his
Class B stock in accordance with the terms of the Stock Agreement executed by
Hugenberg. This sum represented the number of shares held by Hugenberg times
the value placed on the stock by IRA of $17.50 per share. Hugenberg
attempted to deliver a cashier's check in the same amount ($535,587.50) to
IRA's counsel. This Court entered an Order requiring that the cashier's check
which Hugenberg attempted to tender be endorsed and paid into the registry of
the Court. Since IRA paid the contractually agreed upon amount for the stock
to Hugenberg, IRA cancelled Hugenberg's shares on its stock register.
III.
In this suit, Hugenberg has filed a counterclaim alleging IRA did not
tender "value" to him for his IRA stock. On the basis of these allegations,
Hugenberg predicates causes of action for fraud and breach of fiduciary duty.
He also alleges that a "Control Group" manipulated IRA Class B stock for the
benefit of
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 2
<PAGE>
the members of that "group," and, that the "group" conspired to "suppress and
frustrate the rights of Class B stock shareholders ..." The crux of these
allegations is also a claim that IRA did not tender "value" to Hugenberg for
his stock. What Hugenberg fails to disclose in his counterclaim is that he
made several purchases of IRA stock and accepted dividends with knowledge of
the manner in which IRA set the price for repurchasing its stock, the actual
prices set for the stock, and the fact that IRA had and was continuing to
exercise its repurchase option in the Stock Agreement. In addition, IRA has
no obligation to tender any "value" to Hugenberg for his stock other than the
price set pursuant to the Stock Agreement.
IV.
IRA requests a summary judgment on all issues upon which it has the
burden of proof. IRA also requests a summary judgment on all issues raised by
Hugenberg in his Counterclaim.
FACTS
V.
This Motion for Summary Judgment is supported by all discovery on
file in this case filed on behalf of IRA. In addition, this Motion for
Summary Judgment is supported by the following affidavits' including excerpts
from deposition testimony which are incorporated herein fully by reference:
1. Affidavit of Lamar C. Smith, and exhibits thereto filed on
9/19/90 in support of Plaintiff's Motion for Summary Judgment, a
true and correct copy of which is attached hereto as Exhibit
"A". (Smith aff'd. #1);
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 3
<PAGE>
2. Affidavit in Support of Motion for Summary Judgment of Lamar C.
Smith, filed 2/11/91, a true and correct copy of which is
attached hereto as Exhibit "B". The exhibits to the Smith #2
affidavit were also filed on 2/11/91 and due to their volume are
not attached to this Motion, but are included in the Court's
file and incorporated herein. (Smith aff'd. #2);
3. Affidavit of Sam F. Rhodes attached hereto as Exhibit C. (Rhodes
aff'd.);
4. Affidavit of G. Norman Coder attached hereto as Exhibit D (Coder
aff'd.)
5. Affidavit of William Arthur Dast attached hereto as Exhibit E
(Dast aff'd.)
6. Affidavit of Robert F. Watson and Exhibits thereto being
extracts from the deposition transcripts of Hugenberg and Dr.
Allen Self, Sam Rhodes, G. Norman Coder, Lamar Smith, Merwyn
Eiland and W.L. Rankin attached hereto as Exhibit F. (Hugenberg
Depo. Vol.I and Vol.II, Self Depo., Rhodes Depo., Coder Depo.,
Smith Depo., Eiland Depo. and Rankin Depo.)
7. Affidavit of Duane 0. Schumacher attached hereto as Exhibit G
(Schumacher aff'd.)
8. Affidavit of Dabney D. Bassel attached hereto as Exhibit H.
(Bassel aff'd.).
A true and correct copy of the Defendant's First Amended Answer and Counterclaim
filed by Hugenberg on October 18, 1990, is attached hereto as Exhibit "I".
(Counterclaim)
VI.
The following facts are established as a matter of law. (A parenthetical
reference is made to the source which establishes each fact as a matter of law.)
1. USPA is a wholly owned subsidiary of IRA. (Smith aff'd. #1 and
Watson aff'd., Exhibit E, Hugenberg Depo. Vol. I, page 44,
11.5-19)
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 4
<PAGE>
2. Hugenberg was employed by USPA from July 23, 1976, until July
1, 1990. (Smith aff'd. #1 and Watson aff'd., Exhibit E, Hugenberg
Depo. Vol. I, page 6, 1.25-p.7, 1.3 and page 18, 11.17-19 and
Hugenberg Depo. Vol. II, page 147, 11.5-8
3. Hugenberg was an agent of IRA from 1976 until July 5, 1990.
(Smith aff'd. #1 and Watson aff'd., Exhibit E, Hugenberg Depo.
Vol. I, pages 6, 1.25-p.8, 1.5, p.18, 11.17-19 and p.47,
1.24-p-48, 1.1; Vol. II, page 147, 11.5-8)
4. Hugenberg is no longer licensed as an insurance agent by the
state of Texas. (Schumacher aff'd.)
5. Hugenberg executed a Stock Agreement dated March 3, 1981. (Smith
aff'd. #1 and Watson aff'd., Exhibit E, Hugenberg Depo. Vol. I,
pages 46, 1.23-p.47, 1.10 and Plaintiff's Exhibit 9)
6. The "Stock Agreement" had to be executed by Hugenberg before the
company would let him purchase IRA stock. (Smith aff'd. #1 and
Watson aff'd., Exhibit E, Hugenberg Depo., Vol. II, p.70,
1.20-p.71, 1.7)
7. The only persons who can hold the class of stock in IRA issued
to Hugenberg are "authorized agents of IRA." (Smith aff'd. #1 and
Watson aff'd., Exhibit E, Hugenberg Depo., Vol. I, p.47, 11.16-23)
8. During his employment, Hugenberg purchased IRA Class B common
non-voting stock in the following amounts and at the following
prices:
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 5
<PAGE>
<TABLE>
<CAPTION>
Number of
Year of Purchase Shares Purchased Price Paid
- ---------------- ---------------- ----------
<S> <C> <C>
1981 621 $ 76.50*
1981 2000 20,000.00
1982 2000 22,700.00
1984 1300 18,720.00
1985 200 4,600.00
-------- ---------
TOTAL 6121 $66,096.50
</TABLE>
* Hugenberg exchanged 911 shares of USPA stock acquired for $70.40
plus $6.10 to acquire these IRA shares. (Smith aff'd. #1 and
Watson aff'd., Exhibit E, Hugenberg Depo. Vol. I, page 40, 1.21
through page 41, 1.16 and Plaintiff's Exhibit 1-3; Vol. I, page
41, 1.17 through page 45, 1.16 and Plaintiff's Exhibit 6; Vol.
I, page 78, 11.6-13; pp. 98, 11,19-23; Vol. I, pp. 123,
1.10-p.124, 1.18; Vol. I, pp. 138, 1.22-p.139, 1.14)
9. In 1988, IRA Class B common non-voting shares were split five
for one, giving Hugenberg a total of 30,605 shares. (Smith aff'd.
#1 and Watson aff'd., Exhibit E, Hugenberg Depo., Vol. I, pages
168, 1.1-p.169, 1.10)
10. IRA paid Hugenberg dividends in the following amounts on his IRA
stock
<TABLE>
<CAPTION>
Year Amount of Dividend
---- ------------------
<S> <C>
1987 $ 48,968.00
1988 64,270.50
1989 81,108.25
-----------
TOTAL $194,341.75
</TABLE>
(Smith aff'd. #1 and Watson aff'd., Exhibit E, Hugenberg Depo.,
Vol. I, pages 163, 1.8-p.164, 1.1 and Plaintiff's Exhibit 25;
page 173, 1.15 and 174, 1.2 and Plaintiff's Exhibit 28; Vol. I,
page 186, 11.12-16 and Plaintiff's Exhibit 30)
11. The "Stock Agreement" provides that IRA has an option to
repurchase stock when the stockholder ceases to be an agent of
IRA. (Smith aff'd. #1, Exhibit A and Watson aff'd., Exhibit E,
Hugenberg Depo., Vol.I, p.48, 11.2-22)
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT -- PAGE 6
<PAGE>
12. The "Stock Agreement" provides that IRA may exercise the option
specified in paragraph IV of this motion by paying the
stockholder a price per share as established, at least annually,
by IRA, and that IRA shall notify the stockholder of this price.
(Smith aff'd. #1, Exhibit A and Watson aff'd., Exhibit E,
Hugenberg Depo., Vol. I, p.48, 1.20-p.49, 1.7)
13. The price which IRA tendered to Hugenberg for his Class B stock
was the book value of IRA stock at the end of the prior fiscal
year plus that year's earnings which are added in monthly
increments to the price as the ensuing year progresses, less any
dividends. Watson aff'd. Ex. F; Self Depo., p.142, 11.6-20;
Eiland Depo., pp.118, 1.20-p.119, 1.8)
14. The "Stock Agreement" has never been modified or revoked. (Smith
aff'd. #1)
15. A copy of the Stock Agreement is on file as part of the books
and records of IRA and available for inspection by IRA
stockholders and their attorneys and agents. (Coder aff'd.)
16. In 1990, IRA advised Hugenberg, in writing, of the value of his
stock in IRA. (Smith aff'd. #1, Exhibit N and Watson aff'd.,
Exhibit E, Hugenberg Depo., Vol. I, page 174, 11.3-13 and
Plaintiff's Exhibit 29, p.01975)
17. Hugenberg attempted to purchase IRA stock in an offering made by
IRA in 1990. (Watson aff'd., Exhibit E, Hugenberg Depo., Vol. I,
page 174, 11.11-13 and Vol. II, page 35, 1.14 through p.36, 1.25
and Plaintiff's Exhibit 37)
18. The price of the stock owned by Hugenberg in July 1990 was
$17.50 per share. (Smith aff'd. #1)
19. When Hugenberg's employment with USPA ended, his agency
agreement with IRA was terminated. (Smith aff'd. #1)
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 7
<PAGE>
20. When Hugenberg's employment with IRA ended, IRA deposited
$535,587.50 by means of a payroll direct deposit into
Hugenberg's account. (Smith aff'd. #1 and Watson aff'd.,
Exhibit E, Hugenberg Depo. Vol. II, page 66, 11.9-21 and
Plaintiff's Exhibit 57)
21. The price paid for Hugenberg's stock was calculated by
multiplying the 30,605 shares of Class B stock he owned times
$17.50. (Smith aff'd. #1)
22. Hugenberg attempted to deliver a cashier's check in the amount
of $535,587.50 to counsel for IRA. (Smith aff'd. #1)
23. IRA filed the instant suit and this Court ordered IRA to endorse
the cashier's check which Hugenberg attempted to deliver to
IRA's counsel and deposit the funds represented by this
cashier's check into the registry of the Court. (Smith aff'd. #1)
24. The stock issued to Hugenberg was cancelled on the books of IRA.
(Smith aff'd. #1)
25. A reasonable attorneys' fee for the necessary legal work done in
this case is $300,000. (Bassel aff'd.)
26. IRA was organized "to provide every professional military family
the opportunity to achieve financial independence." (Watson aff'd.
Ex. A; Smith depo. p. 46, 11.19-47 and 54, 11.5-15; testimony of
Ex. E, Hugenberg depo., Vol. I, p. 126, 11.5-24; Ex. G, Rankin
depo. p. 180, 11.6-17)
27. The founder (Carrol H. Payne) of IRA's purpose in selling stock
to IRA agents was to preserve the integrity of IRA and insure
its continuation as an independent entity, servicing the
military in the manner described above. (Watson aff'd., Ex. A;
Smith depo., p. 46, 1.19 - p. 47, 1.16, p. 54, 11.5-15; Ex. C,
Coder depo.,
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 8
<PAGE>
p. 89, 11.11-17; Ex. B, Self depo., p. 164, 11.3-10; Ex. G,
Rankin depo., p. 49, 1.4 through p. 50, 1.3; p. 141, 11-15-24)
28. The purpose for issuance of IRA Class B stock was to provide an
incentive to its agents. (Watson aff'd. Ex. E; Hugenberg depo.,
Vol. I, p. 106, 11.3-12; p. 108, 11.20-24; p. 140, 11.3-24; p.
160, 1.4 through p. 161, 1.7; p. 162, 11.14-21; p.185, 11.11-23;
p. 271, 1.1 through p. 272, 1.11; Vol. II, p. 104, 11.4-14; p.
148, 1.3 through p. 149, 1.7; WCH Exhibits 13, pp. 6 and 7; 16,
p. 00187; 17, pp. 1, 4, 8-9; 19, pp. 1, 4, 8-9; 21, p.00288; 22,
p. 00369; 23, pp. 1, 4, 7-8; 24, p.00439; 27, p. 00540; 29, pp.
4, 7 and 19; Ex. B, Self, vol. I, p. 156, 1.23 through p. 157,
1.21.)
29. Any person who purchased IRA Class B stock was required to
execute a stock agreement containing the same repurchase
provisions as the Stock Agreement. (Smith aff'd. and Watson
aff'd., Exhibit E, Hugenberg Depo., Vol. I, p.264, 11.17-23)
30. Each IRA Class B shareholder who has sold his stock back to IRA
did so at the price set by the Board of Directors pursuant to
the repurchase provisions of the stock agreement. (Rhodes aff'd.
and Smith aff'd. #2 and Watson aff'd., Exhibit E, Hugenberg
Depo., Vol. I, p.115, 11.11-14)
31. IRA issued and issues Class B stock as an incentive to its
agents and not for the purpose of raising capital. (Smith
aff'd. #2 and Watson aff'd., Exhibit E, Hugenberg Depo., Vol. II,
p.104, 11.4-14, pp. 147, 1.24 through p. 148, 1.19)
32. Stock agreements such as the one involved in this case are
commonly used vehicles to permit the incentive of stock
ownership to corporate agents and employees. (Rhodes aff'd.)
33. There is nothing unusual or improper about a closely held
corporation issuing
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 9
<PAGE>
incentive stock to its employees and agents. (Watson aff'd Ex.
E, Hugenberg depo. Vol. I, p. 140, 11.3-24; p. 185, 11.11-23;
Ex. B, Self pp. 139, 11.8-17, p. 156, 1.23 through p. 157, 1.21;
Rhodes aff'd)
34. Hugenberg contends the stock Agreement was breached because IRA
did not tender to him what he considers to be fair market value.
(Watson aff'd, Exhibit E, Hugenberg Depo., Vol.II, p.117,
11.10-24)
35. There is nothing inherently evil or unfair in a corporation
setting the price at which it will sell stock to employees or
agents and the price at which it will repurchase the stock from
him/her. (Watson aff'd, Exhibit E, Hugenberg Depo., Vol. I,
p.89, 11.4-8, p.110, 11.1-11, p.115, 11.11-14; Vol. II, p.60,
11.20-24; Vol. II, p.122, 1.17-p.123, 1.9; Vol. II, p.148,
11.14-19; Vol. II, p.158, 11.18-25) and Exhibit F (Eiland Depo.,
Vol. I, pp. 115, 1.16-p. 116, 1.1) and Exhibit D (Rhodes Depo.,
Vol. I, p.52, 11.7-18, p.53, 11.7-12)
36. Hugenberg acknowledges that IRA would not have sold Class B
stock to him at the price at which he was allowed to purchase it
without his agreement to sell it back at a price set by the
company. (Watson aff'd, Exhibit E, Hugenberg Depo., Vol. II,
p.148, 11.9-19, p.71, 11.5-7; Vol. I, p.46, 1.23 through p.49,
1.13, p.109, 1.18 through p.111, 1.10; Plaintiff's Exhibits 9;
10, pp.7 and 74; 13, pp.4, 7, 36 and 37; 17, pp.4, 6, 9, F-15
and E-4; 19, pp.6, 8, 9, 20, F15, F16 and E-1; 23, pp.4, 5, 6,
7, 16, F-14 and E-1; 29, pp-4, 6, 17, 18, 20, F-14 and
Appendix A, P.1.)
37. No one forced him to buy IRA Class B stock. (Watson aff'd,
Exhibit E, Hugenberg Depo., Vol. II, pp. 71 and 72)
38. Hugenberg believed at the time of his purchases and at the time
of his deposition that when he purchased IRA "Class B" stock he
got a good deal. Watson aff'd
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 10
<PAGE>
Ex. E, Hugenberg depo. Vol. I, p. 138, 11.14-21; p. 267,
11.6-12; Vol. II, p. 28, 1.9 through p. 29, 1.4; p. 40, 11.5-24;
pp. 71, 1.8 through p. 72, 1.2; p. 93, 11.15-19; p.98, 11.6-16.)
39. Offers of IRA Class B stock have been limited to agents and
employees of IRA and no one is allowed to purchase Class B stock
unless that person signs a Stock Agreement agreeing to sell
his/her stock back to IRA at a price to be set by the company.
(Watson aff'd Ex. E, Hugenberg depo. Vol. I, p. 46, 1.19 through
p. 49, 1.13; p. 83, 1.23 through p. 84, 1.5; p. 106, 1.13
through p. 107, 1.6; pp. 109, 1.18 through p. 110, 1.11; p. 123,
11.10-13; Exhibits 9, 10, p. 7; 13, pp. 4, 7 and 17; 17, pp. 4,
6 and 9; 19, pp. 4, 6, 9 and 20; 23, pp. 4-7 and 18; 29, pp. 4,
6, 17 and 20.)
40. Hugenberg does not know of anyone who bought IRA Class B stock
without signing a Stock Agreement. (Watson aff'd Ex. 3,
Hugenberg depo. Vol. I, P. 50, 11.4-14; p. 88, 1.15 through p.
89, 1.14; Vol. II, p. 79, 1.13 through p. 80, 1.20.)
41. The standard for the determination of the fairness of such
agreements is whether they are uniformly and consistently
applied to all shareholders. (Rhodes aff'd.)
42. The Board of Directors of IRA has followed a uniform and
consistent procedure for setting the repurchase price under its
stock agreements. (Smith aff'd. #2 and Rhodes aff'd.)
43. Hugenberg knows of no occasion where one stockholder was
treated differently than another. (Watson aff'd, Exhibit E,
Hugenberg depo. Vol. I, p. 185, 11.11-23)
44. To adopt the valuation method advocated by Hugenberg would
destroy IRA financially. (Smith aff'd. #2 and Rhodes aff'd.)
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 11
<PAGE>
45. Hugenberg received a high level of compensation for his services
to IRA and USPA. (Dast aff'd.)
46. Hugenberg entered into the stock agreement in good faith and
does not want to rescind it. (Watson aff'd, Exhibit E, Hugenberg
depo. Vol. I, pp. 109-110, Vol. II, p. 118, 11.15-17, p. 123,
11.10-17)
47. No one forced Hugenberg or anyone else to buy IRA Class B stock.
(Watson aff'd, Exhibit E, Hugenberg depo. Vol. II, p. 71,
11.8-10)
48. The method of computation of the price used by IRA has
mathematical certainty. (Watson aff'd., Exhibit F, Eiland Depo.
p. 121, 11.5-11)
49. Hugenberg's primary complaint in this suit and the material fact
of which he claims he was not informed was how IRA Class B stock
would be valued on repurchase. (Counterclaim 7, 8 and 13(a) and
(c) and Watson aff'd., Exhibit E, Hugenberg Depo. Vol. II p. 107,
11.7-15)
50. Hugenberg did not discuss the Stock Agreement with anyone at the
time he signed it. (Watson aff'd., Exhibit E (Hugenberg Depo.,
Vol. I, p. 49, 11.8-10 and Counterclaim PARAGRAPH 9)
51. Hugenberg cannot recall any specific discussion, prior to
signing the Stock Agreement, about how the stock would be
valued. (Watson aff'd., Exhibit E, Hugenberg Depo., p.102,
11.1-15)
52. Hugenberg made purchases of IRA Class B stock and attempted to
purchase additional IRA Class B stock with knowledge of the
manner in which IRA set the price for repurchasing IRA stock.
(Watson aff'd., Exhibit E, Hugenberg Depo. Vol. I, pp. 77,
11.9-16, 98, 1.6-p.99, 1.2, 121, 1.20-p.122, 1.13, 128,
1.12-p.129, 1.17, 174, 11.3-13; Vol. II 81, 11.2-p.82, 1.12;
Smith aff'd. #2 Exs- B, C, D, E, F and G)
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 12
<PAGE>
53. Hugenberg made purchases of IRA Class B stock and attempted to
make an additional purchase with knowledge of the price set by
IRA for the repurchase of its stock over a period of almost 10
years. ID.
54. Although Hugenberg now claims that he was in some way misled by
IRA in connection with his purchases of IRA Class B stock, he
admits that he received and read every offering document and
every annual report that was issued by the company between 1981
and 1990. (Watson aff'd Ex. E; Hugenberg depo. Vol. I, pp. 32,
1.15 through 36, 1.12.)
55. Hugenberg received and examined every annual report from 1981 to
1990 and read and understood that portion of the annual report
which described the price which IRA would pay its agents and
employees for the Class B stock. (Watson aff'd, Exhibit B,
Hugenberg depo. Vol. I, p. 40, 11.7-18; pp. 48, 1.23 through 49,
1.7; pp. 90, 1.19 through 91, 1.10; p. 110. 11.2-15; p. 112,
11.4-8; pp. 114, 1.15 through p. 115, 1.4; p. 119, 11.3-15; pp.
124, 1.19 through p. 126, 1.2; pp. 144, 1.12 through 145, 1.8;
pp. 165, 1.20 through 166, 1.4)
56. Each and every annual report of IRA contained comparable
information concerning the price at which IRA would repurchase
Class B stock. (Watson aff'd Ex. E; Hugenberg depo. Vol. I, pp.
90, 1.8 through 91, 1.22; pp. 113, 1.20 through 115, 1.24; pp.
118, 1.12 through 119, 1.21; pp. 124, 1.19 through 126, 1.2; pp.
139, 1.15 through 143, 1.12; pp. 144, 1.12 through 145, 1.8; Ex.
B Self Vol. I, pp. 185, 1.23 through 186, 1.22; Ex. F. Eiland,
Vol. I, pp. 118, 1.20 through 119, 1.8; Exhibits 12, p. 00072;
15, p. 000145; 16, p. 000187; 18A, p. 00235; 21, p. 00288;
22, p. 000369; 24, p. 00440; and 27, p. 00540.)
57. Hugenberg made purchases of IRA Class B stock and attempted to
make an additional purchase of IRA Class B stock with knowledge
that IRA had and was continuing to
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PACE 13
<PAGE>
exercise the repurchase option in the Stock Agreement. (Watson
aff'd., Exhibit E, Hugenberg Depo., Vol. I, p. 89, 1.4 through
p.92, 1.1, 110, 11.1-10, 145; Vol. II, pp. 106, 1.9 through 109,
1.15, 159, 11.6-9)
58. Prior to the times, that Hugenberg purchased stock in IRA or
attempted to purchase stock in IRA, he was notified that the
offering price for such stock was determined "arbitrarily."
(Watson aff'd., Exhibit E, Hugenberg Depo. Vol. I, pp. 77,
11.9-16. 98, 1.6-p.99, 1.2, 121, 1.20-p.122, 1.3, 128,
1.12-p.129, 1.17, 174, 11.3-13; Vol. II, pp. 80-82); Smith
aff'd. #2 Exs. B, C, D, E, F and G)
59. Hugenberg was aware that the offering price for such stock
corresponded to the price at which IRA was offering
contemporaneously to repurchase stock. (Watson aff'd., Exhibit
E, Hugenberg Depo. Vol. I, pp. 90, 1.4-p.91, 1.10, 113,
1.20-p.115, 1.4, 118, 1.12-p.119, 1.18, 139, 11.15-20, 144,
1.12-p.145, 1.18, 160, 11.4-23, 170, 1.10-p.171, 1.8, 174);
Smith aff'd. #2, Exs. I, J, K, L, M, N, 0, P and Q)
60. Hugenberg received numerous benefits as a result of his stock
ownership in IRA. (Facts 7 and 9 above)
61. IRA would not have sold Hugenberg IRA Class B stock on any
occasion if he had not executed the Stock Agreement (Smith
aff'd. #2 and Watson aff'd., Exhibit E, Hugenberg Depo., Vol.
II, p.71, 11.3-7, p.148, 11.14-19)
62. Hugenberg contends that IRA improperly cancelled his Class B
stock on its books. (Counter-Claim PARAGRAPH 13(b))
63. IRA cancelled Hugenberg's stock only after tendering the amount
due him for his Class B stock under the terms of the Stock
Agreement. (Smith aff'd. #1)
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 14
<PAGE>
64. Hugenberg contends that IRA "failed to disclose that the
accounting method employed by IRA failed to fairly reflect the
value of the corporation and its Class B stock by failing to
account for the amount of renewals that would result in future
revenues to that corporation." (Counterclaim PARAGRAPH 14(b))
65. Hugenberg was aware that such future renewal or "trail" income
was not included in the valuation of IRA stock prior to the time
that he initially purchased IRA stock as well as prior to his
subsequent purchases. (Watson aff'd., Exhibit E, Hugenberg Depo.
Vol I, pp.52, 11.4-p-53, 1.9; Vol. I, p. 267, 11.6-12; Vol. II,
p. 40, 11.15-24, pp. 81, 1.13-p-83, 1.11, Exhibit 32, p. 05064,
Exhibit 40, p. 04924)
66. Hugenberg contends that he was not informed that the "control
group" had no intentions of allowing a reasonable market to
develop where fair market value could be obtained for his stock
in IRA. (Counterclaim PARAGRAPH 14(c))
67. By statute, IRA Class B stock may be owned only by licensed
Texas insurance agents. (Smith aff'd. #2 and Watson aff'd.,
Exhibit E, Hugenberg Depo. Vol. I, p.84, 11.6-10)
68. Hugenberg was informed on numerous occasions that there was no
public trading market for IRA Class B stock and that it was
unlikely that such market would come into existence. (Watson
aff'd., Exhibit E, Hugenberg Depo. Vol. I, pp. 77, 1.9-p.79,
1.14, 84, 11.11-17, 88, 1.17-p.89, 1.8, 122, 11.14-23, 124,
11.19-25, 129, 1.18-p.133, 1.7; Smith aff'd. #2, Exs. B, C, D,
and E)
69. Hugenberg understood that there was no public market for IRA
Class B stock and that it would be unlikely that there would
ever be one. (Watson aff'd Ex. E, Hugenberg depo. Vol. I, p. 80,
11.2-15; p. 99, 11.14-21; pp. 107, 1.22 through 108, 1.4; pp.
122, 1.14 through 123,
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 15
<PAGE>
1.13; pp. 135, 1.16. through 137, 1.3; p. 156, 11.11-21;
Exhibits 10, pp. 2 and 7; 13, pp. 1, 2 and 4; 17, pp. 2, 4, 6
and 7; 19, pp. 2, 4 and 6; 23, pp. 2, 4 and 6; 29, pp. 4, 6 and
7)
70. The Stock Agreement itself reveals that a market may not
develop for IRA Class B stock. (Smith aff'd. #1 Ex. A)
71. No single Class B stockholder may own more than 5% of IRA Class
B stock. (Watson aff'd., Exhibit B, Self Depo., Vol. I, p.123,
11.9-12, p.126, 11.13-15, p.163, 1.24-p.164, 1.10 and Watson
aff'd., Exhibit E, Hugenberg Depo., Vol. I, pp.116, 1.23-p.117,
1.4)
72. Hugenberg knows of no occasion when a shareholder of IRA offered
stock back to the company and it was not purchased. (Watson
aff'd., Exhibit E, Hugenberg Depo., Vol. I, pp.91, 1.23-p.92,
1.1)
73. There is not a sufficient pool of purchasers to create a market
for IRA Class B stock. (Watson aff'd., Exhibit F, Eiland Depo.
p. 105, 11.7-9 and p. 108, 11.1-14, and Exhibit B, Self Depo.,
p. 126, 11.10-19)
74. Hugenberg contends that the "Control Group" has manipulated the
affairs of IRA for the personal benefit of the members of the
"Control Group" and failed to disclose certain of its
operations and plans. (Counterclaim PARAGRAPH 14(a) and (d))
75. Hugenberg does not know who makes up the "Control Group."
(Watson aff'd., Exhibit E, Hugenberg depo. Vol. II, pp. 76, 1.6
through p. 79, 1.5)
76. The only fact which Hugenberg contends was not disclosed by the
control group is the method of valuing IRA stock. (Watson
aff'd., Exhibit E, Hugenberg Depo. Vol. II, pp. 93, 1.3-p.94,
1.1, p.95, 11.15-22 and 107, 11.7-15)
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 16
<PAGE>
77. Hugenberg is unaware of any undisclosed plans by the "Control
Group" or the "Control Group's" intentions. (Watson aff'd.,
Exhibit E, Hugenberg Depo. Vol. II, pp. 104, 1.15 through p.
105, 1.5, p. 107, 11.7-19)
78. Hugenberg knows of no misapplication or waste of IRA assets by
the "Control Group." (Watson aff'd., Exhibit E (Hugenberg Depo.
Vol. II, p. 111, 11.17-25)
79. All members of the "Control Group" who have sold their Class B
stock back to IRA have received the price set by the Board of
Directors pursuant to the Stock Agreement. (Smith aff'd. #2;
Watson aff'd., Exhibit E, Hugenberg Depo. Vol. I, pp. 115, 1.11
through 118, 1.11; pp. 120, 1.7 through 121, 1.2, Vol. II, pp.
105, 1.19 through 106, 1.14)
80. The "Control Group" is not purchasing Class B stock from other
Class B shareholders. (Watson aff'd., Exhibit E, WCH, Vol. II,
p. 84, 11.4-7)
81. The articles of incorporation and by-laws of IRA have provisions
designed to avoid the very misactions of the Class A
shareholders which Hugenberg contends might arise. (Watson
aff'd., Exhibit C, Coder depo., Vol. I, p. 74, 1.21 through
p.75, 1.18, Exhibit B & C Coder aff'd.)
82. Hugenberg knows of no misapplication or waste of IRA assets by
the "Control Group" but contends there is a "potential" for
such abuses. (Watson aff'd., Exhibit E, Hugenberg Depo., Vol.
II, p.111, 11.17-25)
83. Hugenberg knows of no offer to buy or plan to sell IRA by which
a revaluation of IRA stock which he contends is improper might
occur. (Watson aff'd., Exhibit E, Hugenberg Depo., Vol. I, p.64,
11.14-16; Vol. I, pp. 139, 1.25 through 140, 1.17; Vol. II, pp.
92, 11.4-23, pp.141, 1.23, p.142, 1.4)
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 17
<PAGE>
84. As far as Hugenberg knows, every person who has sold Class B
stock back to IRA has been treated the same. (Watson aff'd Ex.
E, Hugenberg Vol. II, p. 28, 11.9-15; p. 85, 1.22 through 86,
1.4; p. 92, 11.4-23; p. 106, 11.9-14.)
85. Hugenberg claims he is being deprived of value in IRA he created.
(Watson aff'd, Exhibit E., Hugenberg depo. Vol. II, pp. 96, 1.5
through 98, 1.5)
86. All members of the alleged "Control Group" who bought Class B
stock signed a stock agreement. (Watson aff'd, Exhibit E,
Hugenberg depo. Vol. II, p. 80, 11.2-5)
87. Hugenberg acknowledged that when Class B stock is sold back to
IRA the only reason that Class A shareholders receive a benefit
is that they, just like Class B shareholders, share equally with
Class B shareholders on liquidation and that they are part of
the company and the company receives the benefit. (Watson aff'd,
Exhibit E, Hugenberg depo. Vol. II, p. 90, 11.3-5)
88. If IRA were liquidated, the assets of IRA would be divided
according to the number of shares owned by each stockholder.
(Watson aff'd., Exhibit E, Hugenberg depo. Vol. II, p. 90,
11.11-18)
89. Members of the "Control Group" share on the same basis as other
Class B shareholders upon liquidation. (Watson aff'd., Exhibit
E, Hugenberg depo. Vol. II, p. 91, 11.16-25)
90. Hugenberg knows of no member of the "Control Group" who has sold
his stock and received anything more for his stock than the
price set by the company. (Watson aff'd., Exhibit E, Hugenberg
depo. Vol. II, p. 92, 11.3-8)
91. If members of the "Control Group" do not remain stockholders
until the revaluation of the stock which Hugenberg contends
might occur, they will not receive any
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 18
<PAGE>
more benefit than other Class B shareholders. (Watson aff'd.,
Exhibit E, Hugenberg depo. Vol. II, p. 92, 11.20-23)
92. Hugenberg knows of no occasion where a member of the "Control
Group" purchased Class B stock from another shareholder. (Watson
aff'd., Exhibit E, Hugenberg depo. Vol. II, p. 84, 11.4-7, p.
93, 11.1-4)
93. Members of the "Control Group" who sold their stock back, sold
it back to IRA. (Watson aff'd, Exhibit E, Vol. II, p. 79,
11.17-20, p. 80, 11.14-20, p. 89, 11.1-7)
94. Hugenberg contends that certain activities of the "Control
Group" were not disclosed, however, the only activity he alleges
was not disclosed was the method of valuation of IRA stock.
(Watson aff'd. , Exhibit E, Hugenberg depo. Vol. II, p. 93, 1.15
through p. 94, 1.1)
95. Hugenberg suggests it is a fraudulent activity to represent that
there is a relationship between the value and price of the stock
and to represent that the method of valuation of IRA stock is
subject to review by the Board of Directors. (Watson aff'd.,
Exhibit E, Hugenberg depo. Vol. II, p. 94, 11.2-10)
96. Hugenberg cannot say how he developed an understanding that the
Board of Directors of IRA approved valuation of the company. Id.
97. The only way that members of the "Control Group" could benefit
from the repurchase of Class B stock would be to revaluate the
stock and sell the stock back to IRA. (Watson aff'd., Exhibit E,
Hugenberg depo. Vol. II, p. 106, 11.3-8)
98. The only misrepresentation upon which Hugenberg bases his claims
and counter-claim paragraph 13(c) is he was not informed "on
what authoritative basis" the method of valuing Class B stock
was "derived." (Watson aff'd., Exhibit E, Hugenberg depo. Vol.
II, p. 107, 11.7-15)
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 19
<PAGE>
99. Hugenberg is not even sure what is meant by the allegation that
plans of the "Control Group" were concealed from him. (Watson
aff'd., Exhibit E, Hugenberg depo. Vol. II, p. 107, 11-16-19)
100. With respect to the allegation that IRA would value a Class B
shareholder's stock at a reasonable price on repurchase, all
Hugenberg relies on is the fact that the Stock Agreement says
the company will annually advise the stockholders of the "value"
of the stock for purposes of setting the repurchase price.
(Watson aff'd., Exhibit E, Hugenberg depo. Vol. II, p. 108, 1.3
through p. 109, 1.5)
101. With respect to the counterclaim allegation in paragraph 14(d),
Hugenberg complains not that any misapplication or waste has
occurred, but that the method of valuation creates a potential
for it. (Watson aff'd., Exhibit E, Hugenberg depo. Vol. II, p.
111, 11.3-14)
102. Hugenberg can recall no specific representation where he was
told that the company will value stock in good faith. (Watson
aff'd., Exhibit E, Hugenberg depo. Vol. II, p. 50, 11.18-24, p.
102, 11.1-15)
103. Hugenberg alleges the existence of a conspiracy (Counterclaim
paragraph 15).
104. Hugenberg has no knowledge of when the conspiracy came into
being. (Watson aff'd., Exhibit E, Hugenberg depo. Vol. II, p.
112, 11.1-22)
105. Hugenberg does not know the names of the active members of the
conspiracy. (Watson aff'd., Exhibit E, Hugenberg depo. Vol. II,
p. 112, 1.13 through p. 113, 1.9)
106. The only thing that Hugenberg can recall that was done in
furtherance of the alleged conspiracy was that a member of the
Board of Directors denied that a point Hugenberg made about
valuation of stock held any credence and Hugenberg
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 20
<PAGE>
says this constituted an attempt to mislead him from obtaining
accurate information on IRA stock valuation. (Watson aff'd.,
Exhibit E, Hugenberg depo. Vol. II, p. 114, 1.1 through p. 116,
1.16)
107. The repurchase price established by IRA represents the book
value of IRA Class B stock as shown on its books at the end of
the fiscal year plus that year's earnings which are added in
monthly increments to the price as the ensuing year progresses,
less any dividends. (Watson aff'd., Exhibit D, Rhodes Depo. p.
41, 1.19 through p. 42, 1.2, Exhibit F, Eiland Depo., p. 118,
1.20 through p. 119, 1.8, and Exhibit B, Self Depo., p. 142,
11.14-20)
108. Dr. Stanley Allen Self and G. Merwin Eiland are expert witnesses
designated by William C. Hugenberg. (Watson aff'd, Exhibit S)
VII.
Based on the facts established as a matter of law, IRA requests that
this Court make the following declarations:
(1) IRA has properly exercised its option under the Stock Agreement
to repurchase the stock of Hugenberg in IRA;
(2) IRA has tendered full payment to Hugenberg for the stock he
owned in IRA; and
(3) Hugenberg is no longer a stockholder of IRA.
IRA also seeks a judgment that based an the facts established as a matter of law
Hugenberg take nothing by his counter-claim.
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 21
<PAGE>
EXHIBIT 99B(13)
NO. 352-129228-90
INDEPENDENT RESEARCH AGENCY ) IN THE DISTRICT COURT OF
FOR LIFE INSURANCE, INC., )
)
Plaintiff, )
)
v. ) TARRANT COUNTY, TEXAS
)
WILLIAM C. HUGENBERG, JR., )
)
Defendant. ) 352ND JUDICIAL DISTRICT
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
Robert F. Watson
State Bar No. 20661200
Dabney D. Bassel
State Bar No. 01890300
LAW, SNAKARD & GAMBILL
3200 Team Bank Building
500 Throckmorton Street
Fort Worth, Texas 76102
(817)335-7373
FAX (817) 332-7473
[STAMP]
ATTORNEYS FOR PLAINTIFF
INDEPENDENT RESEARCH AGENCY FOR
LIFE INSURANCE, INC.
May 3, 1991
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C> <C>
LIST OF AUTHORITIES . . . . . . . . . . . . . . . . . i,ii
iii,iv
I. STATEMENT OF THE CASE AND STATEMENT OF FACTS . . . . . 1
II. ARGUMENT AND AUTHORITIES . . . . . . . . . . . . . . . 25
A. STANDARDS FOR GRANTING SUMMARY JUDGMENT . . . . . 25
B. HUGENBERG HAS EITHER RATIFIED THE STOCK
AGREEMENT, WAIVED ANY COMPLAINT WITH RESPECT
TO ITS ENFORCEMENT, OR IS ESTOPPED TO DENY ITS
ENFORCEABILITY . . . . . . . . . . . . . . . . . 26
C. THE STOCK AGREEMENT . . . . . . . . . . . . . . . 33
1. ENFORCEABILITY OF PROVISIONS RELATING TO
REPURCHASE OF CORPORATE STOCK . . . . . . . 33
2. PUBLIC POLICY SUPPORTS OPTION PROVISION
CONTAINED IN STOCK AGREEMENT . . . . . . . . 36
3. PRICING PROVISION OF STOCK AGREEMENT
IS ENFORCEABLE . . . . . . . . . . . . . . . 38
4. ALLEGED INADEQUACY OF PRICE DOES NOT
PREVENT ENFORCEMENT OF STOCK AGREEMENT . . . 42
5. HUGENBERG HAS NO DEFENSE FOR BREACH
OF FIDUCIARY DUTY OR LACK OF GOOD FAITH
BECAUSE OF THE PRICE SET BY IRA FOR
EXERCISE OF THE REPURCHASE OPTION . . . . . 49
6. IRA HAS SET A REASONABLE PRICE FOR
THE EXERCISE OF ITS REPURCHASE OPTION . . . 54
D. HUGENBERG'S COUNTERCLAIM . . . . . . . . . . . . 58
1. HUGENBERG HAS NO STANDING TO BRING
DERIVATIVE CLAIMS . . . . . . . . . . . . . 58
2. ADMISSIONS OF HUGENBERG RELATING
TO HIS COUNTERCLAIM . . . . . . . . . . . . 61
3. HUGENBERG HAS NO CAUSE OF ACTION FOR
ARBITRARY AND CAPRICIOUS VALUATION
OF HIS STOCK . . . . . . . . . . . . . . . . 65
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
4. HUGENBERG HAS NO-CAUSE OF ACTION FOR
CANCELLATION OF HIS STOCK ON THE
RECORDS OF IRA . . . . . . . . . . . . . . . 65
5. HUGENBERG HAS NO CAUSE OF ACTION FOR A
REPRESENTATION THAT IRA WOULD DEAL FAIRLY
WITH HUGENBERG OR SET A REASONABLE PRICE
FOR REPURCHASE OF HIS SHARES . . . . . . . . 66
6. HUGENBERG HAS NO CAUSE OF ACTION
RESULTING FROM IRA'S ACCOUNTING METHODS . . 67
7. HUGENBERG HAS NO CAUSE OF ACTION THAT
IRA OMITTED TO DISCLOSE THAT A MARKET
WOULD NOT DEVELOP FOR IRA CLASS B STOCK . . 68
8. HUGENBERG HAS NO CAUSE OF ACTION THAT THE
CONTROL GROUP MANIPULATED IRA FOR ITS
BENEFIT OR CONSPIRED TO SUPPRESS OTHER
CLASS B SHAREHOLDERS . . . . . . . . . . . . 70
9. HUGENBERG HAS NO CAUSE OF ACTION
FOR BREACH OF THE STOCK AGREEMENT . . . . . 73
III. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . 73
CERTIFICATE OF SERVICE . . . . . . . . . . . . . . . . 76
</TABLE>
<PAGE>
LIST OF AUTHORITIES
<TABLE>
<CAPTION>
<S> <C>
CASES PAGE
- ----- ----
ADOLF COORS CO. V. RODRIGUEZ, 780 S.W.2d 477
(Tex. App.--Corpus Christi 1989, writ denied) . . . . . . 71
ALLEN V. BILTMORE TISSUE CORP.,
2 N.Y.2d 534, 141 N.E.2d 812 (1957) . . . . . . . . . . . 43,45
B & R DEV., INC. V. ROGERS,
561 S.W.2d 639 (Tex. Civ. App.--Texarkana
1978, writ ref'd n.r.e.) . . . . . . . . . . . . . . . . 29
BARON V. MULLINOX, WELLS, MAUZY & BAAB, INC.,
623 S.W.2d 457 (Tex. App.--Texarkana 1981,no writ) . . . 32
BOCANEGRA V. AETNA LIFE INS. CO.,
605 S.W.2d 648 (Tex. 1980) . . . . . . . . . . . . . . . 29
BOHN V. TRAVELERS INDEM. CO.,
604 S.W.2d 327 (Tex. Civ. App.--Texarkana
1980, no writ) . . . . . . . . . . . . . . . . . . . . . 72
BYNUM V. SIGNAL LIFE INSURANCE, (Tex. Civ. App.--
Dallas, writ ref'd n.r.e.) . . . . . . . . . . . . . . . 68
CENTRAL POWER & LIGHT CO. V. DEL MAR
CONSERVATION DISTRICT, 594 S.W.2d 782
(Tex. Civ.,App.--San Antonio 1980,
writ ref'd n.r.e.) . . . . . . . . . . . . . . . . . . . 32
COLEMAN V. KETTERING, 289 S.W.2d 953
(Tex. Civ. App.--Galveston 1956, no writ) . . . . . . . . 35,36,37,44
CONCORD AUTO AUCTION, INC. V. RUSTIN,
627 F.Supp. 1526 (D.Mass. 1986) . . . . . . . . . . . . . 46,53
DANIEL V. GOESL, 341 S.W.2d 892 (Tex. 1960) . . . . . . . . . 30
EVANGELISTA V. HOLLAND, 537 N.E.2d 589
(Mass. App. Ct. 1989) . . . . . . . . . . . . . . . . . . 46,52
FIRST NATIONAL BANK OF MONTCLAIR V. CALDWELL,
140 N.Y.S.2d 142 (1955), AFFIRMED 286 App. Div.
1079, 145 N.Y.S.2d 674 (1956), AFFIRMED 1 N.Y.2d
726, 151 N.Y.S.2d 935, 134 N.E.2d 683 (1956) . . . . . . 41,42
FOLTZ V. U.S. NEWS & WORLD REPORT, INC.,
865 F.2d 364 (D.C. Cir. 1989) . . . . . . . . . . . . . . 48
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
CASES PAGE
- ----- ----
FROST NATL. BANK V. MATTHEWS,
713 S.W.2d 365 (Tex. App.--Texarkana 1986,
writ ref'd n.r.e.) . . . . . . . . . . . . . . . . . . . . 71
GEARHART INDUSTRIES, INC. V. SMITH
INTERNATIONAL, INC.,
741 F.2d 707 (5th Cir. 1984) . . . . . . . . . . . . . . . 60
GINTER V. PALMER & CO., 39 Colo. App. 221,
566 P.2d 1358 (1977) . . . . . . . . . . . . . . . . . . . 46
GOLDEN TRIANGLE ENERGY V. WICKES LUMBER,
725 S.W.2d 439 (Tex. App.--Beaumont 1987,
no writ) . . . . . . . . . . . . . . . . . . . . . . . . . 25
GUACALUVE-BLANCO RIVER AUTHORITY V. CITY OF
SAN ANTONIO, 200 S.W.2d 989 (Tex. 1947) . . . . . . . . . 31
HURT V. STANDARD OIL CO., 444 S.W.2D 342
(Tex. Civ. App.--El Paso 1969, no writ) . . . . . . . . . 32
HOUSTON, CITY OF V. CLEAR CREEK BASIS AUTHORITY,
589 S.W.2d 671 (Tex. 1979) . . . . . . . . . . . . . . . . 25
JENKINS V. HAWORTH, 572 F. Supp. 591
(W.D. Mich. 1983) . . . . . . . . . . . . . . . . . . . . 51
JONES V. HUNT OIL Co., 456 S.W.2d 506 (Tex. Civ.
App.--Dallas 1970, writ ref'd n.r.e.) . . . . . . . . . . 30
JOY V. NORTH TEXAS COMPRESS & WAREHOUSE CO.,
151 S.W.2d 342 (Tex. Civ. App.--Fort Worth 1941,
no writ) . . . . . . . . . . . . . . . . . . . . . . . . . 61
KANAWHA-ROONE LANDS, INC. V. BURFORD, 359 S.E. 2d
618 (W.Va. 1987) . . . . . . . . . . . . . . . . . . . . . 46,55
KEATING V. BBDO INTERNATIONAL, INC.,
438 F. Supp. 676 (S.D.N.Y. 1977) . . . . . . . . . . . . . 50,51
KREBS V. MCDONALD, 266 S.W.2d 87 (Ky. 1953) . . . . . . . . . 37,39,40
KRAUS V. KUECHLER, 300 Mass. App. 346,
15 N.E.2d 207 (1938) . . . . . . . . . . . . . . . . . . . 40,41
LING & CO. V. TRINITY SAVINGS & LOAN ASS'N.,
482 S.W.2d 841 (Tex. 1972) . . . . . . . . . . . . . . . . 33
LYONS V. MONTGOMERY, 685 S.W.2d 390 (Tex. App.--
San Antonio 1985, rev'd in part, affirmed
in part 701 S-W.2d 641) . . . . . . . . . . . . . . . . . 68,69
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
CASES PAGE
- ----- ----
MARTIN V. GRAYBAR ELECTRIC CO.,
285 F.2d 619 (7th Cir. 1961) . . . . . . . . . . . . . . . 47,55
MASSEY V. ARMCO STEEL CO., 652 S.W.2d 932
(Tex. 1983) . . . . . . . . . . . . . . . . . . . . . . . 71
MATHER, ESTATE OF, 410 Pa. 361,
189 A.2d 586 (1963) . . . . . . . . . . . . . . . . . . . 47
MELLER, ESTATE OF V. ADOLF MELLER CO.,
564 A.2d 648 (R.I. 1989) . . . . . . . . . . . . . . . . . . . 47
MOTEL ENTERPRISES V. NOBANI,
784 S.W.2d 545 (Tex. App.--Houston
[1st Dist] 1990, no writ) . . . . . . . . . . . . . . . . 29
NEW ENGLAND TRUST CO. V. ABBOTT,
262 Mass. 148, 38 N.E. 432 (1894) . . . . . . . . . . . . 40,41,44
PALMER V. CHAMBERLIN, 191 F.2d 532 (5th Cir. 1951) . . . . . . 32,45
PRATT-HEWIT OIL CORP. V. HEWIT,
52 S.W.2d 64 22 Tex. 38 (1932) . . . . . . . . . . . . . . 60
RENBERG V. ZARROW, 667 P.2d 465 (Okla. 1983) . . . . . . . . . 37,46,48,
51,52
RGS, CARDOX RECOVERY, INC. V. DORCHESTER
ENHANCED RECOVERY CO.,
700 S.W.2d 635 (Tex. App.--Corpus Christi 1985,
writ ref'd n.r.e.) . . . . . . . . . . . . . . . . . . . . 25
ROWNTREE V. RICE, 426 S.W.2d 890 (Tex. Civ. App.--
San Antonio 1968, writ ref'd n.r.e.) . . . . . . . . . . . 69
ROWLAND V. ROWLAND, 633 P.2d 699 (Idaho 1981) . . . . . . . . 46,47,55
SAN ANTONIO HARDWARE CO. V. SANGER,
161 S.W. 1104 (Tex. Civ. App.--San Antonio
1912, writ ref'd . . . . . . . . . . . . . . . . . . . . . 35
SCHLUMBERGER WELL SURVEYING CORP. V. NORTEX OIL
& GAS CORP., 435 S.W.2d 854 (Tex. 1968) . . . . . . . . . . . 71
SCHOELLKOPF V. PLEDGER, 739 S.W.2d 914 (Tex. App.--
Dallas 1989, rev'd on other grounds, 762 S.W.2d
145 (Tex. App.--Dallas 1989, writ denied) . . . . . . . . 60
STATE EX REL HOWETH V. DAVIDSON,
517 P.2d 722 (Mont. 1973) . . . . . . . . . . . . . . . . 55,57
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
CASES PAGE
- ----- ----
TAYLOR PUBLISHING CO. V. SYSTEMS MARKETING, INC.,
686 S.W.2d 213 (Tex. App.--Dallas 1984,
writ ref'd n.r.e.) . . . . . . . . . . . . . . . . . . . . 67
VAQUERO PETROLEUM CO. V. SIMMONS,
636 S.W.2d 762 (Tex. App.--Corpus Christi 1982,
(no writ) . . . . . . . . . . . . . . . . . . . . . . . . 72
WETZEL V. SULLIVAN, KING & SABOM,
745 S.W.2d 78 (Tex. App.--Houston
[1st Dist] 1988, no writ) . . . . . . . . . . . . . . . . 29
WINGATE V. HAJDIK, 795 S.W.2d 717 (Tex. 1990) . . . . . . . . 60
WHITAKER V. HUFFAKER, 790 S.W.2d 761
(Tex. App.--El Paso 1990, writ denied) . . . . . . . . . . 71
WISE V. PENA, 552 S.W.2d 196
(Tex. Civ. App.--Corpus Christi 1977, writ
dism'd) . . . . . . . . . . . . . . . . . . . . . . . . . 29
YENG SUE CHOW V. LEVI STRAUSS & CO.,
122 Cal. Rptr. 816, 49 Cal. App.3d 315 (1975) . . . . . . 38,46
ZAUBER V. MURRAY SAV. ASS'N.,
591 S.W.2d 932 (Tex. Civ. App.--
Dallas 1979), writ ref'd n.r.e. per curiam
601 S.W.2d 940 (Tex. 1980) . . . . . . . . . . . . . . . . 59
STATUTES, RULES AND SECONDARY AUTHORITIES
Tex. Bus. Corp. Act Ann., art. 2.22(B)
(Vernon Supp. 1990) . . . . . . . . . . . . . . . . . . . 34
Tex. Bus. Corp. Act Ann., art. 2.22(D)
(Vernon Supp. 1990) . . . . . . . . . . . . . . . . . . . 34
Tex. Bus. Corp. Act Ann., Section 5.14
(Vernon Supp. 1990) . . . . . . .. . . . . . . . . . . . . 60
Tex. Ins. Code, art. 21.07, Section 2(d)(3)(C). . . . . . . . . 55,70
Tex. Ins. Code, art. 21.07-1, Section 4(e)(1)(C). . . . . . . . 35
FLETCHER CYC. CORV. Section 5617 (Perm. Ed.). . . . . . . . . . 36
</TABLE>
-iv-
<PAGE>
NO. 352-129228-90
INDEPENDENT RESEARCH AGENCY ) IN THE DISTRICT COURT OF
FOR LIFE INSURANCE, INC., )
)
Plaintiff, )
)
v. ) TARRANT COUNTY, TEXAS
)
WILLIAM C. HUGENBERG, JR., )
)
Defendant. ) 352ND JUDICIAL DISTRICT
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT
TO THE HONORABLE JUDGE OF SAID COURT:
COMES NOW, Plaintiff, Independent Research Agency for Life Insurance,
Inc. (hereinafter referred to as "IRA"), and files this its Brief in Support
of Amended Motion for Summary Judgment, and for grounds would show unto the
Court as follows:
I.
STATEMENT OF THE CASE AND
STATEMENT OF FACTS
William C. Hugenberg, Jr., Defendant, (hereinafter "Hugenberg"), is a
former employee and registered representative of United Services Planning
Association, Inc. and a former authorized agent of Independent Research
Agency for Life Insurance, Inc. (hereinafter "IRA"). As such, Hugenberg was
permitted to purchase stock in United Services Planning Association, Inc.
whose parent corporation is IRA. He later exchanged this USPA stock for IRA
stock. He made several additional purchases of IRA stock. For his IRA stock,
Hugenberg paid a total consideration of $66,096.50. In 1990, shortly before
he ceased
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 1
<PAGE>
being an IRA agent, he attempted to purchase additional IRA
shares.
Prior to purchasing any stock, Hugenberg executed a stock agreement
which described his rights and IRA's rights in the stock (hereinafter "Stock
Agreement"). While an agent of IRA, Hugenberg received dividends from his
stock ownership totalling $194,341.75. In July 1990, Hugenberg's agency
relationship with IRA was terminated after he resigned. Under the terms of
the Stock Agreement, IRA had the option to purchase Hugenberg's stock when he
ceased to be an IRA agent. Pursuant to the terms of the Stock Agreement, IRA
had notified all Class B shareholders of the price it would pay for Class B
stock purchased between May 1990 and October 1990. In accordance with the
repurchase price for July 1990, IRA tendered to Hugenberg $535,587.50, by
deposit into his payroll account.
Hugenberg attempted to retender the deposit by placing a cashier's
check on the desk of IRA's counsel. After Hugenberg attempted to retender the
check, IRA was compelled to seek a declaratory judgment. At the time that IRA
filed suit for a declaratory judgment, this Court entered an Order requiring
that the cashier's check which Hugenberg attempted to tender to counsel be
endorsed and paid into the Registry of the Court. Since IRA paid the
contractually agreed upon amount to Hugenberg, IRA cancelled Hugenberg's
stock on its stock registry.
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 2
<PAGE>
In its suit, IRA requested a declaratory judgment that:
(1) IRA had validly exercised its option to repurchase Defendant
Hugenberg's IRA stock;
(2) IRA had properly tendered the agreed upon amount to Defendant
Hugenberg to repurchase such shares, thereby making full and
final payment to him; and
(3) IRA had properly cancelled Defendant Hugenberg's IRA stock.
On September 12, 1990, IRA filed its Motion for Summary Judgment. At a
hearing on November 16, 1990, the Court heard and granted Defendant
Hugenberg's Motion for Continuance and gave the parties until January 31,
1991 to complete summary judgment discovery. Based on an agreement of the
parties, discovery has continued up to and including March 31, 1991.
Defendant Hugenberg has deposed Lamar Smith, IRA's Chief Executive Officer,
William Dast, Chief Financial Officer, Norm Coder, Corporate Secretary and
General Counsel, Warner F. Rankin, Jr., retired officer and director, Don
Erickson, of the accounting firm of Ernst & Young and Sam Rhodes, of the
accounting firm of Deloitte, Touche.
In addition, IRA has furnished Hugenberg literally thousands of pages of
documents requested by Hugenberg. IRA has deposed Hugenberg, as well as
Hugenberg's factual and expert witnesses, Dr. Stanley Allen Self and Merwyn
Eiland.
The above exercise has served to significantly reinforce the factual
basis for IRA's motion for summary judgment. If
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 3
<PAGE>
there has ever been a case that cried out for summary
disposition, this is it. We urge the Court, in the strongest
possible terms, to carefully review the deposition testimony
attached to the Affidavit of Robert F. Watson. Such review will
make it abundantly clear that Hugenberg's challenge to IRA's
declaratory relief is frivolous and entirely without merit.
Hugenberg's testimony, and that of his experts, establishes
beyond question that Hugenberg's challenge is based on nothing
but greed and spite. Hugenberg's sole purpose in this case is
to get before a jury, throw as much mud as he can up on the
wall and hope some of it sticks. IRA believes that to allow
that result in this case would constitute not just a waste of
the Court's time and IRA's money, but an abuse of the judicial
process solely in furtherance of Hugenberg's cupidity and his
frustration at not being elevated to the IRA board.
As is evident from Hugenberg's testimony and the exhibits thereto attached to
Watson's affidavit, IRA and its predecessors were organized, primarily by
Carroll H. Payne, "to provide every professional military family the
opportunity to achieve financial independence" (Testimony of Lamar Smith,
February 13, 1991, p. 46, 11.19-47 and 54, 11.5-15 (hereafter "Smith,
February 13, 1991, p. ___, ll._______"); testimony of William C. Hugenberg,
Jr., January 7 and 8, 1991, Vol. I, p. 126, 11.5 through 24 (hereafter, "WCH,
Vol. __, p. ___, 11. _____ through _____, WCH, Exhibit(s) _______");
Testimony of W.L.
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 4
<PAGE>
Rankin, Jr., January 14, 1991, p.180, ll.6-17 (hereafter "Rankin,
p. ___, ll. ___").
As a result of Carroll H. Payne's efforts, IRA developed into a
"unique", company, unlike any other. (WCH, Vol. II, p.131, l.23 through p.
132, l.3.) IRA is now and always has been a company operated by former
military personnel for the benefit of current and former military personnel.
In 1983 Carroll H. Payne expressed his intent to have 80% of the IRA
Class B stock in the hands of agents and employees. (WCH, Vol. I, p.120, ll.
7-20., WCH Exhibit 16, p. 00187.) Hugenberg understood this in 1983 and
believes it to be true today. (Ibid.)
Carroll H. Payne's purpose in diversifying ownership in this fashion
was to preserve the integrity of IRA and insure its continuation as an
independent entity, servicing the military community in the manner described
above. (Smith, p.46 l. 19 - p. 47 l.16, p.54, ll. 5-15; Testimony of G.
Norman Coder, January 16, 1991, p.89 ll. 11-17 (hereafter "Coder, p. ___, ll.
___"); Testimony of Stanley Allen Self, January 22, 1991, Vol. I, p.164 ll.
3-10 (hereafter "Self, Vol. I, p. __,ll.__") ; Rankin, 1/14/91, p.49 l.4
through p.50, l.3; p.141, ll. 15-24.) He believed that ownership of Class B
stock would provide an incentive to agents and employees. (WCH, Vol.I, p.106,
ll.3-12; p.108, ll.20-24; p.140, ll.3-24; p.160, l.4 through p.161, l.7;
p.162, ll.14-21; p.185, ll.11-23; p.271,l.1 through p.272,l.11);
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 5
<PAGE>
Vol.II, p.104, ll.4-14; p.148, l.3 through p.149, l.7; WCH Exhibits 13, pp.6
and 7; 16, p.00187; 17, pp.1, 4, 8-9; 19, pp.1, 4, 8-9; 21, p.00288; 22,
p.00369; 23, pp.1, 4, 7-8; 24, p.00439; 27, p.00540; 29, pp.4, 7 and 19;
Self, Vol.I, p.156, l.23 through p.157, l.21.)
There is absolutely nothing improper or unusual about a closely held
corporation issuing incentive stock to its employees or agents. (WCH, Vol.I,
p.140, ll.3-24; p.185, ll.11-23; Affidavit of Sam F. Rhodes, p.3 (hereinafter
"Rhodes aff'd."); Self 1/22/91, pp.139, ll.8-17, p.156, l.23 through p.157,
l.21) Furthermore, it is commonplace for such corporations to have agreements
with their agents and employees providing for an option on the part of the
company to repurchase the stock in the event of the employee's/agent's
termination, death or desire to sell his/her stock. (Rhodes aff'd., p.4)
There is also nothing inherently evil or even unfair in the corporation's
setting the price at which it will sell the stock to the employee/agent and
the price at which it will repurchase the stock from him/her. (WCH, Vol.I,
p.89, ll.4-8; Vol.I, p.110, ll.1-11; Vol.I, p.115, ll.11-14; Vol.II, p.60,
ll.20-24; Vol.II, p.122, l.17 through p.123, l.9; Vol.II, p.148, ll.14-19;
Vol.II, p.158, ll.18-25; Testimony of G. Merwyn Eiland, March 19, 1991,
Vol.I, p.115, l.16 through p.116, l.1 (hereafter "Eiland, Vol.I, p. __,ll.
__"); Testimony of Sam F. Rhodes, March 14, 1991, Vol.I, p.52, ll.7-18; p.53,
ll.7-12 (hereafter "Rhodes, Vol.I, p.__,ll.__").) This
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 6
<PAGE>
is particularly true because the "sell" and "buy" price of the stock is
always the same at any given time and the price is always set in advance and
progresses month by month exactly as set each year. Even Hugenberg recognized
that IRA never would have sold him Class B stock at the price at which he was
allowed to purchase it without his agreement to sell it back at a price to be
set by the company. (WCH, Vol.II, p.148, ll.9-19; p.71, ll.5-7; Vol.I, p.46,
l.23 through p.49, l.13; p.109, l.18 through p.111, l.10; Plaintiff's
Exhibits 9; 10, pp.7 and 74; 13, pp.4, 7, 36 and 37; 17, pp.4, 6, 9, F-15 and
E-4; 19, pp.6, 8, 9, 20, F15, F16 and E-1; 23, pp.4, 5, 6, 7, 18, F-14 and
E-1; 29, pp.4, 6, 17, 18, 20, F-14 and Appendix A, p.l., Rhodes,
p.41-l.19-p.42, l.2, Eiland, p.118, l.20 through p.119, l.81, Self, p.142,
ll.14-20.)
Hugenberg believed at the time of his purchases and at the time of his
deposition that when he purchased IRA Class B stock he got a "good deal."
(WCH Vol.I, p.138, ll.14-21; p.267, ll.6-12; Vol.II, p.28, l.9 through p.29,
l.4; p.40, ll.5-24; pp.71, l.8 through p.72, l.2; p.93, ll.15-19; p.98,
ll.6-16.)
Offers of IRA Class B stock have been limited to agents and employees
of IRA and no one is allowed to purchase Class B stock unless that person
signs a Stock Agreement agreeing to sell his/her stock back to IRA at a price
to be set by the company. (WCH, Vol.I, p.46, l.19 through p.49, l.13; p.83,
l.23 through p.84, l.5; p.106, l.13 through p.107, l.6; pp. 109, l.18 through
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 7
<PAGE>
p.110, l.11; p.123, ll.10-13; Exhibits 9, 10, p.7; 13, pp.4, 7 and 17; 17,
pp.4, 6 and 9; 19, pp.4, 6, 9 and 20; 23, pp.4-7 and 18; 29, pp.4, 6, 17 and
20.)
Hugenberg does not know of anyone who bought IRA Class B stock without
signing a Stock Agreement. (WCH, Vol.I, p.50, ll.4-14; p.88, l.15 through
p.89, l.14; Vol.II, p.79, l.13 through p.80, l.20.)
As far as Hugenberg knows, every person who has sold Class B stock
back to IRA has been treated the same. (WCH, Vol.II, p.28, ll.9-15; p.85,
l.22 through 86, l.4; p.92, ll.4-23; p.106,ll.9-14.)
What we have, then, is Hugenberg signing a contract in 1981 without
which, by his own admission, he never could have bought any Class B stock and
taking advantage of the privilege afforded him as a result of signing the
Stock Agreement by purchasing stock on four occasions at a price which he
believed then and believes now to have been "a good deal" "undervalued" and
"too low." He tried again to take advantage a fifth time, in 1990, by buying
an additional 5,000 shares for over $80,000, at a price he believed to be
"too low" and "so low the company should have been buying instead of selling"
without conveying that belief to anyone. Then finally, complaining, shortly
thereafter, because he says the company performed its obligations under
the Stock Agreement by paying him a price for the stock which was set in the
same manner as the price for all other repurchases had
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 8
<PAGE>
been set for the last ten years, for the founder, his family, his estate and
every officer and director who has retired, resigned or died during that
ten-year period. (Rhodes, pp.3, and 4.)
Although Hugenberg now claims that he was in some way misled by IRA in
connection with his purchases of IRA Class B stock, he admits that he
received and read every offering document and every annual report that was
issued by the company between 1981 and 1990. (WCH, Vol. I, pp.32, l.15
through 36, l.12.) Although Mr. Hugenberg claims to be a Phi Beta Kappa
graduate of the University of Michigan and to have been accepted by the
Harvard Law School, he claims that there was "something" in the documents
that he may not have completely understood, but "I couldn't put my finger on
what it was that I didn't completely understand." (WCH, Vol. I, p.36,
ll.11-12)
Mr. Hugenberg certainly understood all of the relevant information
contained in the offering documents and in the annual reports as evidenced by
this acknowledgment in his testimony as well as in numerous written memoranda
that he prepared in late 1989 and early 1990 in connection with his continual
criticism of management prior to his resignation. For example, he understood
that there was no public market for IRA Class B stock and that it would be
unlikely that there would ever be one. (WCH, Vol. I, P-80, ll.2-15; p.99,
ll.14-21; pp.107, l.22 through 108,l.4; pp-122, l.14 through 123, l.13;
pp.135, l.16 through 137, l.3; p.156, ll.11-21; Exhibits 10, pp.2 and 7; 13,
pp.1, 2, and 4;
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 9
<PAGE>
17, pp.2, 4, 6 and 7; 19, pp.2, 4 and 6; 23, pp.2, 4 and 6; 29, pp. 4, 6 and
7)
It is also obvious from Hugenberg's testimony and the exhibits thereto
that he was fully informed at least annually concerning the price at which
IRA would repurchase Class B stock from its agents and employees who were
shareholders. For example, the annual report for IRA for fiscal 1981, which
was received and read by Hugenberg, stated
"[d]uring the 12-month period from
October 1st, '81, the price which the
Company will pay for any shares that it
elects to repurchase, pursuant to its
Stock Agreement with the shareholders,
will increase a total of 18 percent
over the October 1st, '81 price. To
illustrate, the October 1st, '81 price
was $10 per share; the price for
November 1st, '81 was $10.15 per share;
the price for December 1st, 1981 is
$10.30; and the price for each month,
thereafter, will increase fifteen cents
per share over the preceding month
until October 1st, 1982, at which time
the price which the Company will pay
for any such shares that it elects to
purchase will be $11.80 per share."
Each and every annual report thereafter contained comparable information
concerning the price at which IRA would repurchase Class B stock. (WCH,
Vol.I, pp.90, l.8 through 91, l.22; pp.113, l.20 through 115, l.24; pp.118,
l.12 through 119, l.21; pp.124, l.19 through 126, l.2; pp. 139, l.15 through
143, l.12; pp.144, l.12 through 145, l.8; Self Vol.I, pp.185, l.23 through
186, l.22; Eiland, Vol.I, pp.118, l.20 through 119, l.8; Exhibits 12,
p.00072; 15, p.000145; 16, p.000187; 18A, p.00235; 21, p. 00288; 22,
p.000369; 24, p.00440; and 27, p.00540.)
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 10
<PAGE>
Hugenberg knows of no occasion when anyone who was a shareholder of IRA
offered stock back to the company and it was not purchased. (WCH, Vol.I,
pp.91, l.23 through 92, l.1) As far as Mr. Hugenberg knows, everybody who
sold any stock back to the company was treated the same, including Carroll
Payne's estate, members of the Payne family, Ralph Smith, the former chief
executive officer, when he left the company, Tex Rankin, former director and
member of the executive committee when he left the company or anyone else.
(WCH, Vol.I, pp.115, l.11 through 118, l.11; pp.120, l.7 through 121, l.2.)
In December of 1989, Hugenberg wrote, "I have known since I bought my first
share that the Company stock was intrinsically underpriced because it
excluded the present value of the future trail income contractually due the
company on persistent sales." (WCH, Vol.I, p.267, ll.6-12; Exhibit 32,
p.05064.) Mr. Hugenberg indicates that he believes today that instead of
selling stock in February of 1990, the company should have been buying it
back:
Q So you think the company should be buying stock
back from the agents at the undervalued price?
A Yes.
Q Because it's a good deal for the company to do so?
A Right.
(WCH, Vol.II, pp.28, l.24 through 29, l.4.)
On April 4, 1990, Mr. Hugenberg wrote a memo to Lamar Smith in which he
stated, "I have been aware since the Company's
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 11
<PAGE>
first stock offering that the method used to value IRA stock resulted in the
understatement of the Company's true value." (WCH, Vol.II, p.40, ll.15-24;
Exhibit 40, p.04924.) Mr. Hugenberg also testified:
Q And you bought stock not just once but several times
during the past ten years?
A Right.
Q And during that time you were aware of the price that
was being set for the IRA stock, were you not?
A Yes.
Q Did you consider the price that was being set as
revealed in the annual reports and other documents to
be arbitrarily determined?
A No. I believed it to be related to the fundamental
value of the business.
He goes on to say:
Q So you knew that the trails were not being included?
A Yes.
Q Did you consider the decision to not include the
trails to be arbitrary?
A No. I believe I have written and testified that at the
time the decision was originally made, it may have
been well-founded.
(WCH, Vol.II, p. 81, ll.2-7, l.24 through p.82, l.6.)
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 12
<PAGE>
Based on the preceding, it is obvious that Hugenberg could not have
been misled concerning the fact that the price which he was paying for the
stock was a favorable price which was being made available solely to agents
and employees of IRA. He also could not have failed to understand the pricing
of the stock for repurchase since he received and examined every annual
report from 1981 to 1990 and read and understood that portion of the annual
report which described the price which IRA would pay its agents and employees
for their Class B stock. (WCH, Vol.I, p.40, ll.7-18; pp.48, l.23 through 49,
l.7; pp.90, l.19 through 91, l.10; p.110, ll.1-15; p.112, ll.4-8; pp.114,
l.15 through p.115, l.4; p.119, ll.3-15; pp.124, l.19 through p.126, l.2;
pp.144, l.12 through 145, l.8; pp.165, l.20 through 166, l.4.)
Most of the allegations in Hugenberg's counterclaim are utterly
ridiculous. Even Hugenberg could think of no justification for them at the
time he testified. For example, the counterclaim alleges on page two that
"Hugenberg was required by IRA to execute a so-called 'Stock Agreement'
wherein the "Control Group" requires that all persons other than themselves
who buy the Class B Stock agree to sell the stock back to IRA at a price to
be arbitrarily determined by IRA's "Control Group," as and when they see fit,
while ensuring there is no market for the Class B Stock other than the
Control Group." This entire statement is replete with inaccurate and false
assertions. No one compelled Hugenberg or any other agent or employee to buy
IRA
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 13
<PAGE>
stock. (WCH, Vol.II, p.71, ll.8-10) When asked who required him to execute a
stock agreement, Hugenberg's response was "Well, I guess first of all I
didn't write this, but my understanding of what it means is that in order to
buy stock I had to execute a stock agreement." (WCH, Vol.II, p.71, ll.5-7.)
Anyone who bought Class B stock, including members of the "Control Group,"
was required to execute a stock agreement. (WCH, Vol. II, p.80, ll.2-20) The
corporation, acting through its Board and not the "Control Group" set the
option price. (Smith aff'd. #1, Exhibit "A") Members of the "Control Group"
who have sold Class B stock sold it back to IRA. (WCH, Vol. II, p.79,
ll.17-20; p.80, ll.14-20) The option price has been set each year in a
uniform and consistent fashion. (Rhodes aff'd.)
Hugenberg goes on to say on page 71 that no one required him to buy
stock, that he was not required to buy stock as a condition of employment, or
to be an agent, that no one suggested that he would be fired if he didn't buy
stock. Then he testifies:
Q Isn't it a fact that you wanted to buy stock in IRA?
A Yes.
Q And that you bought stock on several occasions?
A Yes.
Q And even tried to buy it in February of 1990 when
they didn't allow you to buy it; isn't that right?
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 14
<PAGE>
A That's correct.
(WCH, Vol.II, pp.71, l.19 through 72, l.2.)
He also alleges that he was arbitrarily refused the opportunity to buy
IRA Class B stock in February of 1990 at a price of $16.75 a share, just four
months prior to his demanding that the company pay him $72.00 a share for the
same stock.
Q You were arbitrarily refused the right to
purchase shares at a price which you considered
to be too low; is that right?
A That's correct.
(WCH, Vol.II, p.98, ll.13-16.)
On page two of the counterclaim, the statement is made that the
"Control Group" was ensuring that there was no market for the Class B stock
other than the "Control Group." In connection with that allegation, Mr.
Hugenberg was asked,
Q Is it your understanding that the control group
was purchasing stock from Class B shareholders?
A No. I believe the company itself was purchasing
the stock."
(WCH, Vol.II, p.84, ll.4-7.)
That, of course, is the case. At no time has anyone other than the
company purchased stock from the Class B shareholders.
With regard to allegations of breaches of fiduciary obligations the
following exchange is quite revealing:
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 15
<PAGE>
Q With regard to the next allegations that there
has been a breach of fiduciary duties of the
control group, what fiduciary duties of the
control group have been breached?
A I think fiduciary duties are a legal--have a
legal meaning that I'm not immediately familiar
with, but I don't believe my interests as a
stockholder, as a minority stockholder are being
protected by the distortion in the value of the
shares.
Q How were your interests damaged by the, quote,
distortion?
A Because I am being deprived of value that I
created.
Q And how did you create the value?
A By participating as an executive in this company
for twelve years.
Q So is it your testimony that because you
participated as an executive in this company for
twelve years, you're entitled to be paid a price
for the stock which is different from and greater
than that to which anyone else is entitled?
A NO. IT IS MY TESTIMONY THAT EVERYBODY SHOULD BE
ENTITLED TO THE FAIR VALUE OF THE STOCK, and
that as a long-time contributor to that value, I
EXPECT THE SAME TREATMENT FOR EVERYBODY THAT I
WANT.
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 16
<PAGE>
Q SO WE'll HAVE TO GO BACK AND RECALCULATE HOW
MUCH IS OWED TO EVERYONE WHO'S EVER SOLD; IS THAT
RIGHT?
A IF THAT'S WHAT IT TAKES TO CORRECT THE INEQUITY.
Q And that includes all the MEMBERS OF THE CONTROL
GROUP WHO HAVE LEFT AND SOLD AT THIS ALLEGEDLY
UNFAIR VALUE; is that right?
A I'm not sure that they would be included.
Q Why not?
A If they're responsible for deliberately creating
a distortion to their own benefit, then they
shouldn't be involved.
Q How did they benefit if they wound up selling
their stock at the unfair price?
A They haven't sold yet.
Q I'm talking about all the folks who were members
of the control group at the time the prices were
set at which they sold. Are they entitled to a
new price?
A They may be if that's what it takes to correct
the distortion.
Q DO YOU HAVE ANY IDEA HOW MUCH ALL THAT WOULD COST?
A NO. I DON'T.
Q Do you have any suggestions as to where the
company might get the money to do that?
A Well, I don't know how much it costs first.
(WCH, Vol.II, pp.96, l.5 through 98, l.5.) (Emphasis supplied)
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 17
<PAGE>
As further evidence of the totally frivolous nature of Hugenberg's
counterclaim, we refer the Court to the following exchange:
Q The next sentence says, "Repurchasing the Class B
Stock at artificially low prices inures directly
to the benefit of the Control Group, greatly
increasing the value of the Control Group's
holdings of both Class A and B Stock while
cheating the other shareholders." Now, you've
already told me that the Class A and Class B
stockholders all share equally on liquidation pro
rata; is that right?
A Yes.
Q So the only way that the control group could
benefit from this artificially low price is to at
some future time revalue the stock at a higher
price and then sell it back to the company; is
that right?
A I don't pretend to be an expert in this subject,
but that sounds about right.
Q AND I BELIEVE THAT YOU'VE TOLD ME THAT AS FAR AS
YOU KNOW, EVERY PERSON WHO HAS EVER BEEN A MEMBER
OF THE CONTROL GROUP AND LEFT HAS SOLD HIS STOCK
BACK TO THE COMPANY AT THE SAME PRICE THAT THEY
WERE PAYING TO THE OTHER SHAREHOLDERS; IS THAT
RIGHT?
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 18
<PAGE>
A YES.
(WCH, Vol.II, pp.105, l.19 through 106, l.14.)(Emphasis supplied)
In other words, all of the members of the theoretical "Control Group,"
beginning with Carroll H. Payne and continuing through George Talley have
either sold or agreed to sell their stock back to the company at the same
price that the company was paying all other Class B shareholders. If it was
this "Control Group's" intent to defraud Hugenberg and other agent/employee
shareholders, they have certainly done a remarkably inept job of it. As a
matter of fact, Hugenberg never thought of this as even a possibility until
Dr. Self put the bug in his ear in June of 1990. According to Dr. Self, all
of these alleged "Control Group" members who have already sold their stock
back to the company at the supposedly unfair low price just "got screwed".
(Self, Vol.I, p.184, ll.13-18.)
It is also a part of Dr. Self's fantasy that the company could be
acquired by a White Knight, and that is why the "Control Group" is attempting
to repurchase Class B stock at less than its fair market value. There are so
many reasons why this contention is absurd that it is difficult to know where
to begin to list them. In the first place, the whole purpose of Mr. Payne's
requiring every purchaser to sign the Stock Agreement giving the company the
option to repurchase their stock was to prevent outsiders from acquiring any
ownership in IRA. Secondly, in spite of the existence of the Stock Agreement,
the board of directors
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 19
<PAGE>
added suspenders to the belt by passing a bylaw requiring a staggered board
and the shareholders amended the articles to include what is called a fair
price provision which results in any person acquiring stock of IRA having to
pay the highest price paid to anyone in order to acquire all of the stock.
The obvious purpose of those amendments to the bylaws and the articles was to
protect IRA from any potential takeover. (Coder, Vol. I, p. 74, l.21 through
p. 75, l.18, Coder aff'd Exhibit B and C)
If anyone in the so called "Control Group" was interested in having the
company sold, then the person would have objected vehemently to the amendment
of the articles and bylaws in 1989 to create these impediments to the sale of
the company. Furthermore, Hugenberg knows of no occasion on which anyone has
ever offered to buy any stock of the company or any officer or director of
the company has indicated any interest in selling stock other than back to
the company:
Q During the time you were with the company, did you
ever receive any information from anyone that the
company was soliciting anyone else to acquire the
company?
A No, I did not.
Q Did you ever receive any information from anyone that
the company wanted to be acquired?
A No, I did not.
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 20
<PAGE>
Q In the past five years have you received any
information from anyone that there had been an
offer made for the company?
A No, I have not received that information.
Q Have you ever discussed with anyone at IRA the
concept of locating a, quote "White Knight" for
any purpose?
A No.
Q Has anyone at IRA ever mentioned that concept to
you as something they might want to do?
A Not to my recollection.
(WCH, Vol.I, pp.139, l.25 through 140, l.17.)
It is also suggested in Hugenberg's allegations that it was a misstatement of
fact to claim that the Class B stock was not being sold to raise capital for
IRA.
Q Do you believe that statement to be true or false?
A I'm not sure that it applied uniformly to every
stock offering.
Q Which one did it not apply to?
A I said I'm not sure. I KNOW THE STATED PURPOSE WE
TALKED BEFORE WAS TO PROVIDE AN INCENTIVE RATHER
THAN TO RAISE CAPITAL PER SE. There was no
apparent need for capital other than at the time
of Carroll's departure, selling his original
interest.
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 21
<PAGE>
Q Was it your belief that the company would have
sold the stock to you at the prices that it did
if you had not agreed to sell it back to the
company at a price to be set by the company?
A Would you repeat that question?
Q IS IT YOUR BELIEF THAT THE COMPANY WOULD HAVE
SOLD THE CLASS B STOCK TO YOU AT THE PRICES THAT
IT DID SELL THE CLASS B STOCK TO YOU IF YOU HAD
NOT AGREED TO SELL IT BACK TO THE COMPANY AT A
PRICE TO BE SET BY THE COMPANY?
A No.
(WCH, Vol.II, pp.147, l.24 through 148, l.19.) [Emphasis Added]
In the same vein, Mr. Hugenberg testified:
Q Wasn't the stated purpose to enable agents and
employees to participate in stock ownership?
A Yes.
Q Do you think that it's wrong for the company to
allow agents and employees to participate in
stock ownership at something less than book
value?
A NO, I THINK ALL SHAREHOLDERS OUGHT TO BE TREATED
THE SAME.
Q I COULDN'T AGREE WITH YOU MORE, SIR. DO YOU KNOW
OF ANY INSTANCE IN THE HISTORY OF THIS COMPANY
WHEN ANY SHAREHOLDER WAS TREATED DIFFERENTLY FROM
ANY OTHER SHAREHOLDER?
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 22
<PAGE>
A NO I DO NOT.
(WCH, Vol.I, p.185, ll.11-23.) (Emphasis supplied)
Finally, Hugenberg says that he entered into the contract in good faith
and that he has no intention of repudiating it at this time:
Q BY THE WAY, DID YOU ENTER INTO THIS CONTRACT IN
GOOD FAITH?
A Did I?
Q Yes.
A I BELIEVE SO, YES.
Q AT THE TIME YOU ENTERED INTO IT, DID YOU INTEND
TO ABIDE BY ITS PROVISIONS?
A YES, I DID.
Q At the time you purchased stock from IRA on
several different occasions, didn't you intend to
abide by its provisions?
A I certainly did.
Q At the time you tried to purchase stock in 1990,
did you intend to abide by its provisions?
A I certainly did.
* * *
Q DO YOU INTEND TODAY TO ABIDE BY ITS PROVISIONS?
A YES.
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 23
<PAGE>
(WCH, Vol. I, pp. 109, l.19 through 110, l.8; p.110, ll.15-17.)
(Emphasis supplied) To the same effect is the following testimony:
Q ARE YOU SEEKING TO RESCIND THE STOCK AGREEMENT?
A NO, I'M NOT.
(WCH, Vol.II, p.118, ll.15-17.) (Emphasis supplied)
If it is Mr. Hugenberg's intent to abide by the terms of the Stock
Agreement, then the Court obviously has no other choice but to grant
Plaintiff's Motion for Summary Judgment, since the Stock Agreement says,
unequivocally, that the company has the right to repurchase Mr. Hugenberg's
stock at a price to be set by the company, which it has done. That is not
just our conclusion, it is also Mr. Hugenberg's:
Q Well, okay, assuming that in February of '90,
that your leaving was contingent on you not being
elected to the board in April, had you thought
about whether or not if you weren't elected you
would be willing to sell that stock back to the
company in July at the July stated price?
A AT THAT POINT I WAS CONVINCED THAT THE STOCK
AGREEMENT PROHIBITED ANY OTHER ACTION.
(WCH, Vol.II, p.123, ll.10-17.) (Emphasis supplied)
By his own testimony, Mr. Hugenberg has established as a matter of law
that Plaintiff is entitled to summary judgment granting the relief requested.
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 24
<PAGE>
III
ARGUMENT AND AUTHORITIES
A.
STANDARDS FOR GRANTING SUMMARY JUDGMENT
IRA seeks a summary judgment on both its cause of action for
declaratory judgment as well as the causes of action raised by Hugenberg in
his Counterclaim. With respect to its cause of action, IRA accepts the burden
of proving each element of its cause of action as a matter of law. CITY OF
HOUSTON V. CLEAR CREEK BASIN AUTHORITY, 589 S.W.2d 671, 678 (Tex. 1979) This
case is ripe for a summary judgment because it involves a declaration that
IRA has performed under the unambiguous terms of the Stock Agreement. RGS,
CARDOX RECOVERY, INC. V. DORCHESTER ENHANCED RECOVERY CO., 700 S.W.2d 635,
638-39 (Tex. App. Corpus Christi, 1985, writ ref'd n.r.e.) IRA also accepts
the burden of negating at least one element of the causes of action raised in
Hugenberg's Counterclaim. GOLDEN TRIANGLE ENERGY V. WICKES LUMBER, 725 S.W.2d
439 (Tex. App.--Beaumont 1987). By disabling the Counterclaim of Hugenberg,
IRA also disables the affirmative defenses raised by Hugenberg since they
rely on the same legal and factual issues as the Counterclaim.
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 25
<PAGE>
B.
HUGENBERG HAS EITHER RATIFIED THE STOCK AGREEMENT,
WAIVED ANY COMPLAINT WITH RESPECT TO ITS ENFORCEMENT OR
IS ESTOPPED TO DENY ITS ENFORCEABILITY
Hugenberg claims that it is improper to enforce the option provision of
the Stock Agreement with respect to him. He claims that certain matters were
not disclosed to him at the time he signed the Stock Agreement. As will be
pointed out below, many of his allegations are sheer fantasy. However, even
if he did have some complaint with respect to the provisions of the Stock
Agreement, especially the option price provisions, he abandoned those claims
long ago. Specifically, after acquiring knowledge of the method by which IRA
exercised the option provision, he continued to purchase IRA stock and accept
the benefits incident to that ownership. To this day, he demands the benefits
of that ownership. For these reasons, he ratified the Stock Agreement and
waived any complaint regarding its enforcement. This conduct also creates an
estoppel in that Hugenberg cannot accept certain provisions of the Stock and
Subscription Agreements signed by him and at the same time, repudiate other
provisions of his agreements with IRA.
Hugenberg acknowledges that he could not have purchased IRA Class B
stock without agreeing to the terms of the Stock Agreement. He also
acknowledges that the only way he was able to buy stock from IRA at a
discount price was with the understanding that IRA could repurchase the stock
at a price set by it.
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 26
<PAGE>
Finally, he professes that he is not attempting to rescind the Stock
Agreement.
When it came time to sell his stock back to IRA, Hugenberg
counterclaimed because of certain alleged misconduct including: (1) valuing
Hugenberg's Class B stock in an arbitrary and capricious fashion
[Counterclaim PARA 13(a)]; (2) making false statements that IRA would deal
fairly with Hugenberg, value his shares at a reasonable price on repurchase
and inform him of the actions of the "Control Group" [Counterclaim PARA 13(c)];
(3) omitting to state that IRA's accounting method did not reveal the true
value of the corporation [Counterclaim PARA 14(b)]; and (4) failing to disclose
that IRA had no intent to allow a reasonable market for Class B stock to
develop [Counterclaim PARA 14(c)]. For these alleged representations, Hugenberg
seeks damages.
Hugenberg has long been aware of information which forms the basis for
these allegations. With respect to the allegation that the accounting methods
of IRA failed to reveal the true value of IRA and "it's Class B stock by
failing to account for the amount of renewals that would result in future
revenues to the corporation," Hugenberg is damned by his own words. As noted
in the Statement of the Case, Hugenberg stated in a memo that he drafted
while still at IRA:
I HAVE KNOWN SINCE I BOUGHT MY FIRST SHARE that the Company
stock was intrinsically underpriced because it excluded the
present value of the future trail income contractually due the
Company on persistent sales.
(Plaintiff Exhibit 32, p. 5064)
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 27
<PAGE>
With respect to the manner in which IRA set the price it would pay for Class
B stock, Hugenberg was equally well informed. From 1981 until he ceased being
an IRA agent, Hugenberg received IRA's annual report which he read and which
he believes he understood. Within each report, IRA informed its shareholders
of the price it would pay for Class B stock. Each offering circular through
which IRA offered Class B stock set out the sales price of the stock and both
the offering document and the Stock Agreement disclosed that the price to be
paid by IRA on repurchase would be set by the Company. Hugenberg was also
cognizant that IRA was exercising its option to repurchase IRA's Class B
stock from other Class B shareholders.
With respect to the allegation that the "Control Group" concealed that
it had no intent to allow a market to develop for Class B stock, IRA
proclaimed repeatedly and unambiguously that there was no market for IRA
Class B stock. Each offering circular noted that there was no market for IRA
Class B stock and that it was unlikely that such market would develop.
In the face of the knowledge Hugenberg had about the alleged
misrepresentations made to him and the alleged misconduct of IRA -- what did
Hugenberg do? He purchased IRA Class B stock in 1981, 1982, 1984, and 1985.
He made the additional purchases of IRA stock knowing that IRA sold him the
stock with the understanding that he would abide by the terms of the Stock
Agreement which allegedly he was defrauded into signing and which allegedly
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 28
<PAGE>
was being manipulated unfairly. After he knew of the alleged misdeeds of IRA,
he accepted the benefits from stock ownership by receiving dividends
totalling $194,000 on his stock in 1987, 1988, and 1989.
Even if the alleged fraud had occurred, by his actions, Hugenberg has
ratified the Stock Agreement.
Ratification is the adoption or confirmation by a person
with knowledge of all material facts of a prior act
which did not then legally bind him and which he had
the right to repudiate. Ratification arises when one,
induced by fraud to enter into a contract, continues to
accept certain benefits under the contract after he
becomes aware of the fraud or if he conducts himself in
such a manner as to recognize the contract as binding.
WISE V. PENA, 552 S.W.2d 196, 199 (Tex. Civ. App.--Corpus Christi 1977, writ
dism'd) SEE ALSO, MOTEL ENTERPRISES V. NOBANI, 784 S.W.2d 545, 547 (Tex.
App.--Houston [1st Dist] 1990, no writ). Ratification also arises if the
parties enter into a new agreement by which their rights are "adjusted" or
renewed. ID.; B & R DEVELOPMENT, INC. V. ROGERS, 561 S.W.2d 639, 642 (Tex.
Civ. App.--Texarkana 1978, writ ref'd n.r.e.) Ratification may be established
as a matter of law. WETZEL V. SULLIVAN, KING & SABOM, 745 S.W.2d 78, 81 (Tex.
App.--Houston [1st Dist] 1988, no writ). Ratification applies to a recision
action and an action for damages. B & R DEVELOPMENT, INC., 561 S.W.2d at 642.
Ratification does not require a change of position or prejudice to the party
asserting the ratification. BOCANEGRA V. AETNA LIFE INS. CO., 605 S.W.2d 840
(Tex. 1980). Ratification is a
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 29
<PAGE>
defense to a cause of action for conspiracy. JONES V. HUNT OIL CO., 456
S.W.2d 506, 513 (Tex. Civ. App.--Dallas 1970, writ ref'd n.r.e.).
Even if Hugenberg were defrauded into signing the Stock Agreement,
which he was not, he has long since ratified that agreement. He had full
knowledge of the "nefarious" actions of IRA. He knew how IRA consistently
valued its stock. He knew how IRA exercised its repurchase option. He knew
that "trail income" was not included in valuation of the Company. He knew
that there was no market for IRA stock. Yet he persisted in buying IRA stock
and continued to accept dividends accruing to that stock ownership.
Hugenberg is also estopped to deny the enforceability of the Stock
Agreement. He operated under the Stock Agreement and the Subscription
Agreements of which it was a part for years. He acknowledged that the only
way he obtained the benefits incident to stock ownership was by agreeing to
be bound by the Stock Agreement. Now he wants to repudiate that agreement
after having squeezed the benefits from it for ten years.
An example of an estoppel by accepting the benefits of an agreement is
DANIEL V. GOESL, 341 S.W.2d 892 (Tex. 1960). In DANIEL, a doctor retired from
his medical partnership. After the doctor received all the retirement
benefits provided for in the partnership agreement, he sought to avoid
certain provisions of the agreement that he did not like. As a defense to
enforcement
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 30
<PAGE>
of the agreement, the good doctor alleged that he had been defrauded into
entering into the partnership agreement. The Supreme Court held that the
entire agreement should be enforced noting:
Dr. Goesl having elected to retire and having
demanded and accepted the benefits accruing to
him as provided in the agreement cannot accept
that part of the contract beneficial to him and
deny the application of other provisions of the
contract which may be detrimental. (citation
omitted). To paraphrase what we said in GUADALUPE-
BLANCO RIVER AUTHORITY V. CITY OF SAN ANTONIO,
200 S.W.2d 989, 997 (Tex. 1947), Dr. Goesl seeks
to retain the beneficial part of the transaction
and to repudiate the disadvantageous part because
of the alleged fraud of the other party. This he
may not do.
If a person is induced by fraud to enter into a
contract, but receives and accepts benefits under
the contract after becoming aware of the fraud he
affirms and is bound by the terms of the contract
. . . by the same token and for the same reasons
he will not be heard to say after accepting all
the retirement benefits that some of the other
partners breached the contract first by neglect
of and inattention to the medical practice.
ID. at 895.
DANIEL relied on GUADALUPE-BLANCO RIVER AUTHORITY V. CITY OF SAN
ANTONIO, 200 S.W.2d 989 (Tex. 1947), another Supreme Court case outlining
that if a person accepts the benefits of an agreement that person is estopped
to deny its negative aspects. In GUADALUPE, the City of San Antonio claimed
the River Authority defrauded it into purchasing certain property. The City
wanted to keep the fruits of the transaction but repudiate its negative
aspects. The Supreme Court disposed of this contention by stating:
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 31
<PAGE>
Furthermore, the record shows that the system
acquired by the City actually earned a net profit
to the City, during the year 1943, of more than
$2,000,000 after deducting all expenses and a
liberal allowance for depreciation. Presumably, it
will pay like dividends during the years to come.
Certainly, the entire transaction was not an
"unconscionable transaction against a city" as now
contended for by the City. The City is seeking to
cancel the lease only. IT DOES NOT OFFER TO
SURRENDER THE ENTIRE CONSIDERATION RECEIVED BY IT
AND RESTORE THE STATUS QUO. IT SEEKS TO RETAIN THE
BENEFICIAL PART OF THE TRANSACTION AND TO REPUDIATE
THE DISADVANTAGEOUS PART BECAUSE OF THE ALLEGED
FRAUD OF THE OTHER PARTY. THIS IT MAY NOT DO.
(citations omitted). ID. at 997.
SEE ALSO, BARON V. MULLINOX, WELLS, MAUZY & BAAB, INC., 623 S.W.2d 457, 462
(Tex. App.--Texarkana 1981, no writ); CENTRAL POWER & LIGHT CO. V. DEL MAR
CONSERVATION DIST., 594 S.W.2d 782 (Tex. Civ. App.--San Antonio 1980, writ
ref'd n.r.e.); HURT V. STANDARD OIL CO., 444 S.W.2d 342 (Tex. Civ. App.--El
Paso 1969, no writ).
In this case, Hugenberg falls within the same estoppel. He has garnered
all of the considerable benefits of stock ownership, yet now wants to
repudiate the provisions which do not suit him. The reasons why he cannot
pursue such a course are aptly summarized in the case of PALMER V.
CHAMBERLIN, 191 F.2d 532, 541 (5th Cir. 1951):
The formula upon which the appellant is asked to
sell is the same formula upon which her decedent
was on fourteen separate occasions permitted to
buy. In a somewhat similar situation in
PRINDIVILLE V. JOHNSON & HIGGINS, 92 N.J.Eq. 515,
520, 113 A. 915, 918, the Court said: 'The
charter restriction of which he complains forms
the very keystone of the corporate scheme and structure he
helped build, and under which he holds, and he cannot
be heard to obliterate it. HE HAS SUPPED SUMPTUOUSLY
AT THE TABLE OF PLENTY FOR EIGHT YEARS, AND
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 32
<PAGE>
HE CANNOT BRING THE FEAST TO AN END SIMPLY BECAUSE
HE IS INDISPOSED.' [Emphasis added]
Hugenberg also ate heartily at IRA's table of plenty.
C.
THE STOCK AGREEMENT
Next, IRA will address the reasons why the provisions of the Stock
Agreement are enforceable and why IRA properly exercised its provisions.
1
ENFORCEABILITY OF PROVISIONS RELATING TO
REPURCHASE OF CORPORATE STOCK
The provision of the Stock Agreement providing for the purchase of
Class B stock by IRA reads as follows:
In the event Stockholder desires to sell or
otherwise dispose of the stock issued under the
terms hereof, Stockholder shall in writing notify
the Company of such desire. The Company shall have
an option for 120 days after receipt of such
notice to repurchase such shares from
Stockholder for the price described in
paragraph "4", below. In the event of
Stockholder's death, or ceasing to be a duly
authorized agent of the Company pursuant to a
current written agency agreement, the Company
shall also have such option to repurchase such
stock, under the same terms and conditions
described immediately above. Stockholder agrees
not to transfer, pledge, assign, or otherwise in
any manner encumber any of such shares of stock.
The quoted provision creates an option for IRA to repurchase
Hugenberg's stock. LING & COMPANY V. TRINITY SAVINGS & LOAN ASS'N., 482
S.W.2d 841, (Tex. 1972). The Texas Business Corporation Act authorizes the
Stock Agreement's option
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 33
<PAGE>
provision. Texas Business Corporation Act art. 2.22(B) (Vernon Supp. 1990)
provides:
A RESTRICTION ON THE TRANSFER OR REGISTRATION OF
TRANSFER OF A SECURITY MAY BE IMPOSED BY the articles
of incorporation, or by-laws, or a written agreement
among any number of the holders of such securities, or
A WRITTEN AGREEMENT AMONG ANY NUMBER OF THE HOLDERS AND
THE CORPORATION provided a counterpart of such agreement
shall be placed on file by the corporation at its
principal place of business or its registered office and
shall be subject to the same right of examination by a
shareholder of the corporation, in person or by agent,
attorney or accountant, as are the books and records of
the corporation. [Emphasis Added]
Article 2.22(D) of the Texas Business Corporation Act provides the type
of restriction which may be imposed. The pertinent portion of Article 2.22(D)
states:
In particular and without limiting the general powers
contained in sections (B) and (C) of this article to
impose reasonable restrictions, a restriction on the
transfer or registration of transfer of securities of a
corporation shall be valid if it reasonably:
(1) Obligates the holders of the restricted securities to
offer to the corporation or to any other holders of
securities of the corporation or to any other person, or
to any combination of the foregoing, a prior opportunity,
to be exercised within a reasonable time, to acquire the
restricted securities; or ....
The Stock Agreement provision, quoted above, represents an exercise of the
power granted by the Texas Business Corporation Act for a corporation to
repurchase its stock.
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 34
<PAGE>
In addition, the provisions of the Texas Insurance Code permit a
company to enter into an agreement restricting the transfer of its stock.
Article 21.07-1 of the Texas Insurance Code deals with Legal Reserve Life
Insurance Agents. Section 4(e)(1) authorizes the Insurance Commissioner to
issue a life insurance license to a corporation, if it finds that the
corporation's shareholders are licensed life insurance agents. In this case,
the Stock Agreement provides that to hold stock in IRA, Hugenberg must remain
a licensed life insurance agent in Texas. (SEE Stock Agreement PARA 2) Section
4(e)(1)(C) of Art. 21.07-1 provides, in part:
ANY SUCH CORPORATION SHALL HAVE THE POWER TO
REDEEM THE SHARES OF ANY SHAREHOLDER, or the
shares of any deceased shareholder, upon
such terms as may be agreed upon by the
board of directors and such shareholder or
his personal representative, or at such
price and UPON SUCH TERMS AS MAY BE PROVIDED
IN the articles of incorporation, the by-
laws, or AN EXISTING CONTRACT ENTERED INTO
BETWEEN THE SHAREHOLDERS OF THE CORPORATION.
[Emphasis Added]
Both the Texas Insurance Code and the Texas Business Corporation Act
authorize IRA to enter into an agreement with the stockholders by which IRA
may control who shall own its stock.
The cited provisions of the Texas Business Corporation Act and the
Texas Insurance Code carry forward a policy long established by case law in
Texas. A 1912 case settled the question that a corporation may buy back its
stock. SEE, SAN ANTONIO HARDWARE CO. V. SANGER, 151 S.W. 1104 (Tex. Civ. App.
- --San Antonio 1912, writ ref'd). In COLEMAN V. KETTERING,
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 35
<PAGE>
289 S.W.2d 953 (Tex. Civ. App.--Galveston 1956, no writ), the Court of Civil
Appeals examined an option provision very similar to the provisions of the
Stock Agreement. The appellant in COLEMAN claimed such a contract was against
public policy because the repurchase price of the stock was limited to "book
value". ID. at 957. Appellant argued that this made the contract "harsh,
unreasonable and confiscatory in its application." ID. The court in COLEMAN
noted several out of state cases upholding such provisions and that a
corporation had a right to determine its destiny by controlling the identity
of its shareholders. The COLEMAN court could find "no merit" to the
contention that the contract violated public policy. Treatises also recognize
the validity of such provisions. FLETCHER CYC. CORP. Section 5617 (Perm Ed).
2
PUBLIC POLICY SUPPORTS OPTION
PROVISION CONTAINED IN STOCK AGREEMENT
Even though recognized by Texas statutes and case law, Hugenberg would
have this Court believe that it is part of a nefarious scheme for a
corporation to have an option to repurchase its stock. As with most of
Hugenberg's allegations, nothing could be further from the truth. IRA uses
its Class B stock as incentive compensation. In other words, it wants to give
its agents a stake in their own destiny by giving them a stake in IRA's
future. One way to accomplish this is to make them corporate owners by
selling them stock. Since IRA has no
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 36
<PAGE>
other reason to issue stock, it does not want its stock sold to persons who
do not have the same interest as its agents in seeing the corporation
flourish or to persons who might actually be competition to IRA.
Numerous cases dealing with stock agreements enumerate the policy
reasons for their enforceability. COLEMAN V. KETTERING, SUPRA at 957,
discussed above, involved a stockholder who argued that a stock agreement
requiring him to offer his stock back to the corporation for book value, if
he decided to dispose of his stock, was "harsh, unreasonable, and
confiscatory . . ." The court in COLEMAN noted that:
[I]n the management of corporations few things
are more apparent than the desire to keep the
control of the same in the hands of people who
are congenial to the enterprise and those who
manage its affairs.
The opinion went on to discuss the fact that stock agreements requiring that
stock be offered to the corporation before being sold to a third party were
frequently encountered. Instead of being contrary to public policy, such
agreements advanced common sense and practical business. ID.
COLEMAN echoes the reasoning of numerous cases that stockholders in a
closely held corporation often bear a relationship to one another closer than
that encountered with publicly traded companies. RENBERG V. ZARROW, 667 P.2d
465, 469 (Okla. 1983); KREBS V. MCDONALD, 266 S.W.2d 87, 89 (Ky. 1953). For
this reason, stockholders in such a corporation have a right to choose who
their fellow stockholders will be. ID.
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 37
<PAGE>
Other cases note that restrictions on the sale of stock serve an
important function in preserving the viability of corporations such as IRA.
Bylaws restricting transfer in closed corporations are
frequently essential to a successful enterprise; they
perform an important function in precluding unwanted
intrusions by outsiders; they preserve the integrity of
the functioning entity. SUCH BYLAWS ARE NECESSARY FOR
THE PROTECTION OF THE CORPORATION AND ITS STOCKHOLDERS
AGAINST RIVALS IN BUSINESS OR OTHERS WHO MIGHT PURCHASE
ITS SHARES FOR THE PURPOSE OF ACQUIRING INFORMATION
WHICH MIGHT THEREAFTER BE USED AGAINST THE INTERESTS OF
THE COMPANY . . . . [Emphasis added]
YENG SUE CHOW V. LEVI STRAUSS & CO., 122 Cal. Rptr. 816, 49 Cal. App.3d 315
(1975).
Thus, the stock restrictions at issue are not in furtherance of a
"plantation" mentality as Hugenberg alleges. Instead, an option to repurchase
stock is a common arrangement in closely held corporations. These options are
a well recognized and commonly approved method of permitting a corporation
such as IRA to control its own destiny.
3.
PRICING PROVISION OF STOCK AGREEMENT IS ENFORCEABLE
Paragraph 4 of the Stock Agreement provides that the price to be paid
to Hugenberg for his IRA stock shall be determined as follows:
The Company shall, at least annually, advise
Stockholder in writing of the value of the stock in
the Company for the purpose of establishing the
repurchase price of such stock, and it is specifically
agreed that this value, as of the most recent date
provided by the Company, shall be the repurchase price
paid by the Company for Stockholder's shares upon
their repurchase from Stockholder or Stockholder's
estate.
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 38
<PAGE>
In accordance with these provisions, IRA notified its stockholders in 1990 of
the price it would pay for IRA Class B stock to be repurchased. IRA tendered
Hugenberg a price for his stock set in accordance with the written
notification.
Hugenberg apparently wants to attack the validity of the pricing
provision because it does not specify that he shall be paid a price set by
"any known or customary method of valuation of securities." Counterclaim PARA 8.
The fact that the corporation annually sets the repurchase price does not
impair the effectiveness of the Stock Agreement. After all, Hugenberg was a
mature, intelligent adult when he accorded IRA the right to set the price by
signing the Stock Agreement.
In KREBS v. MCDONALD, SUPRA, at 89, a stock agreement provided that
the option price was to be set by the stockholders at a special annual
meeting. The price placed on the stock in question was less than half the
value placed on the stock for inheritance tax purposes. When the widow of the
stockholder refused to sell stock back to the corporation for the set price,
the other stockholder brought an action to compel her to comply with the
stock agreement.
KREBS explained that repurchase options were frequently encountered in
the context of closely held corporations, and noted, with respect to the
option provision it was examining, that:
. . . the criteria for evaluating the stock are so
broad in their implications that we conclude they
amounted to a carte blanche grant of power to the
shareholders to set the valuation at whatever they
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 39
<PAGE>
considered reasonable so long as they acted in
good faith. ID. at 90.
Also, in the Court's view, the price set by the purchasing stockholders did
not "sensitively" reflect the stock's actual value. Nevertheless, the Court
concluded that it was not inequitable to enforce the option's pricing
provision since the widow's husband was one of the architects of the pricing
provision and had known of the price which was set even though he did not
attend the meeting at which it was set.
KREBS relied on the often-quoted case of NEW ENGLAND TRUST CO. v.
ABBOTT, 162 Mass. 148, 38 N.E. 432 (1894). NEW ENGLAND TRUST examined a
by-law provision which provided that, on a stockholder's death, the
corporation had an option to purchase the deceased stockholder's stock at a
price set by an appraisal of the directors. A stockholder's executor
challenged the by-law. The Court found nothing to invalidate the by-law and
specifically upheld the power the stockholders granted the directors to
appraise the stock. After stating that the repurchase option did not
contravene public policy, the Court held, with respect to the directors'
power to appraise the stock, that:
[I]t is settled that one may agree to sell his
property at a price to be determined by another, and
that he will be bound by the price so fixed, even
though the party establishing it was interested;
provided the interest was known, and no objection
was made by the parties, and no fraud or bad faith
is shown. ID. at 434.
KRAUS V. KUECHLER, 300 Mass App. 346, 15 N.E.2d 207 (1938) cited and
reaffirmed the rule of NEW ENGLAND TRUST that
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 40
<PAGE>
the repurchase option price may be set by an interested party. In KRAUS, the
corporation's bylaws provided that a deceased stockholder's stock
automatically became the property of the corporation "by paying to the estate
of the deceased a sum agreed upon by the remaining stockholders." ID. at 208.
The opinion held that stockholders may bind themselves to "such a regulation
by mutual agreement and estop themselves and their representatives to deny
its validity." ID. at 209. KRAUS concluded this holding by quoting the
language of NEW ENGLAND TRUST cited in the preceding paragraph that a party
may bind himself to take a price for his stock set by a third party even
though that party is interested in the transaction. ID.
The principle of allowing an interested person to set the option price
was also confirmed in FIRST NATIONAL BANK OF MONTCLAIR v. COLDWELL, 140
N.Y.S.2d 142 (1955), AFFIRMED 286 App. Div. 1079, 145 N.Y.S.2d 674 (1956),
AFFIRMED 1 N.Y.2d 726, 151 N.Y.S.2d 935, 134 N.E.2d 683 (1956). In COLDWELL,
a deceased stockholder agreed for his estate to sell his stock to the
corporation at book value as that value was fixed by the corporation. The
agreement "further provided that the determination of book value by the board
of directors [was] final." ID. at 143. The plaintiff, the deceased
shareholder's executor, alleged that the board failed to properly determine
book value. The Court denied the plaintiff's right to challenge the board's
determination, by holding:
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 41
<PAGE>
First, the board of directors was given the sole
right and authority to fix and determine the book
value of the stock; SECOND, THE BOARD OF
DIRECTORS DID FIX THE VALUE IN ACCORDANCE WITH
PAST ESTABLISHED PRACTICES AND UPON THE SAME
BASIS WHICH IT HAD CONSISTENTLY USED IN ALL
PREVIOUS INSTANCES OF VALUATING AND FIXING THE
BOOK VALUE OF ITS STOCK. It was established that
the determination made was the highest value ever
placed by the board of directors as the book
value of its corporate stock. Third, the specific
and unequivocal language of the agreement
provides that the determination of book value by
said board of directors shall be final and
binding upon all. (Emphasis added)
ID. at 145. The COLDWELL Court enforced the agreement as written.
In the instant case, Hugenberg signed a contract which gave IRA the
right to set the price to be paid under the repurchase option. Under the
holdings of the cited cases, the enforceability of such a pricing provision
has long been recognized. The arguments of Hugenberg are simply yet another
attempt by him, to squirm out of a contract which he signed and from which he
benefited for almost ten years.
4.
ALLEGED INADEQUACY OF PRICE DOES NOT
PREVENT ENFORCEMENT OF STOCK AGREEMENT
Hugenberg apparently believes that IRA is mistreating him if it does not
tender to him his determination of "fair market value" for his stock. As the
summary judgment evidence demonstrates, IRA is offering Hugenberg the book
value of the stock as shown on the books at the end of the fiscal year plus
that year's earnings which are added to the price offered as the
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 42
<PAGE>
year progresses, less any dividends. (Rhodes pp. 41, l. 19 42, l. 2, Eiland,
pp. 118, l. 20 - 119, l. 8 and Self, p. 142, ll. 14-20) Furthermore,
Hugenberg's concept of fair market value of the stock is also rather elusive
since his experts have at least two opinions as to exactly what constitutes
the value per share of the stock. Mr. Eiland thinks the fair market value is
$52 per share (Eiland p. 115, l. 12), while Dr. Self thinks it should be $72
per share. (Self, p. 189, l. 5) The fact that Hugenberg's experts cannot
agree on the price reveals why his approach is untenable. Hugenberg's
approach requires the application of a panoply of subjective factors
including: what companies are comparable to IRA; what discounts should be
applied to the stock value; and what percentage the discounts should be. The
use of these subjective factors would do nothing but foment controversy. On
the other hand, IRA's approach provides an objective basis for valuation
which has been and can be consistently applied. ALLEN v. BILTMORE TISSUE
CORP., 2 N.Y.S.2d 534, 141 N.E.2d 812 (1957). Even Eiland admits that the
current method of computation has "mathematical certainty." (Eiland, p. 121,
ll. 5-11)
In any case, by signing the agreement, Hugenberg has foreclosed the
argument that he is entitled to anything other than the price set by the
board. The cases are legion that stock agreements are enforceable between the
parties and the fact that the terms of the agreement do not provide for the
seller to
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 43
<PAGE>
receive some subjective version of "fair market value" is irrelevant. These
cases recognize that there are many considerations to the enforcement of such
agreements other than allowing the shareholder to gouge the corporation and
its other shareholders.
COLEMAN v. KETTERING, SUPRA, at 957 dealt with the argument that a
stock agreement violated public policy because the option price was limited
to book value. Noting that the Court could not find a Texas case on point,
the Court examined numerous out of state cases and rejected any argument that
the agreement violated public policy.
Many cases from other jurisdictions are in accord with the holding of
COLEMAN that a shareholder need not receive someone's concept of "fair market
value" for his stock to make a repurchase option valid. one of the earliest
cases addressing this question is NEW ENGLAND TRUST CO. v. ABBOTT, SUPRA, at
434. This case addressed whether specific performance of a stock agreement
could be avoided because the price called for was inadequate. NEW ENGLAND
TRUST held that a party is bound by his agreement and the inadequacy or
excessiveness of the price does not enter into the question unless the
difference in price is ". . . so great as to lead to a reasonable conclusion of
fraud, mistake, or concealment in the nature of fraud, and to render it
plainly inequitable and against conscience that the contract should be
enforced." ID. at 434. The Court enforced the con-
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 44
<PAGE>
tract as written. SEE ALSO, PALMER v. CHAMBERLIN, SUPRA, at 541. Clearly
WHERE, AS here, the stockholder is receiving a tremendous windfall ($66,000
vs. $725,000), equity compels enforcement.
Perhaps the most often cited case for the proposition that "inadequacy"
of price does not void a stock restriction is ALLEN v. BILTMORE TISSUE CORP.,
SUPRA. , at 813. The by-laws in ALLEN provided that the corporation had the
option to purchase a deceased shareholder's stock for the amount received by
the corporation for the stock. ID. at 813. The executor of a deceased
shareholder challenged the by-laws as an unreasonable restraint on
alienation. Allen examined an opinion from a lower court invalidating the
by-laws because of the "unfairness" of the option price. In ALLEN'S view, the
lower court's approach was unsupportable. Adopting the lower court's approach
would, prompt litigation if the price contained in the by-laws were other
than "a recognized and easily assertainable fair market value." ID. at 816.
This would destroy the social utility of such options and render all
repurchase options inoperative since they must operate in the future and have
some provision to determine the option price at that future date. ID. Closely
held corporations simply do not lend themselves to a ready determination of
market value and must depend on some mechanism to set the price for stock
repurchase. ALLEN concluded:
In sum, then, THE VALIDITY OF THE RESTRICTION ON
TRANSFER DOES NOT REST ON ANY ABSTRACT NOTION OF
INTRINSIC FAIRNESS OF PRICE. TO BE INVALID, MORE
THAN MERE DISPARITY BETWEEN
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 45
<PAGE>
OPTION PRICE AND CURRENT VALUE OF THE STOCK MUST
BE SHOWN. Since the parties have in effect agreed
on a price formula which united them, and
provision is made freeing the stock for outside
sale should the corporation not make, or provide
for, the purchase, the restriction is reasonable
and valid. ID. at 817. [Emphasis Added]
The rule from ALLEN has been cited frequently in jurisdictions
throughout the nation. EVANGELISTA V. HOLLAND, 537 N.E.2d 589, 593 (Mass.
App. Ct. 1989) [upholding stock option price of $75,000 when stock allegedly
was worth $191,000]; KANAWHA-ROONE LANDS, INC. V. BURFORD, 359 S.E.2d 618, 621
(W.Va. 1987) [upheld set stock option price even though allegedly stock was much
more valuable because of appreciation of assets]; CONCORD AUTO AUCTION, INC. V.
RUSTIN, 627 F.Supp. 1526, 1531 (D. Mass. 1986) [upheld stock option price
allegedly lower than market value of stock]; RENBERG V. ZARROW, 667 P.2d
465, 470 (Okla. 1983) [upheld stock option price allegedly much lower than
present book value of stock]; ROWLAND V. ROWLAND, 633 P.2d 599, 607 (Idaho
1981) [upheld option price of book value in face of allegation that book value,
as set by directors, was much lower than fair market value]; GINTER V. PALMER
& CO., 39 Colo. App. 221, 566 P.2d 1358, 1360-61 (1977), rev'd on other grounds
196 Colo. 203; 585 P.2d 583 (1978) [upheld book value set for stock option
price of $1.91 in face of allegations that stock had a value of $120 per
share]; YENG SUE CHOW V. LEVI STRAUSS & CO., 122 Cal. Rptr. 816, 49 Cal.
App.3d 315 (1975) [upheld option price set at book value even though stock
greatly increased in
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 46
<PAGE>
value when it began to publicly trade]; MARTIN V. GRAYBAR ELECTRIC CO., 285
F.2d 619, 625 (7th Cir. 1961) [upheld option price set at price stock issued
by corporation in face of allegation that market value was much higher].
The reasons given for upholding option prices which allegedly do not
reflect fair market value are that courts should not intervene and rewrite
contracts for persons who are trying to avoid obligations that they no longer
like. ESTATE OF MATHER, 410 Pa. 361, 189 A.2d 586 (1963) [Upholding $1 option
price for stock allegedly worth $1,000 per share.] Such restrictions also
serve the purpose of permitting the corporation to set a price which it can
pay and thus, enable it to carry out the very purpose of such stock
agreement. ROWLAND, 633 P.2d at 607. A company's right to set a price which
will not bankrupt it was explained in ESTATE OF MELLER V. ADOLF MELLER CO.,
554 A.2d 648 (R.I. 1989):
As our holding in Greenwald suggests, we do
not second-guess the parties concerning the
adequacy or inadequacy of the consideration
they have named in an unequivocal or
unambiguous stock-redemption agreement.
THERE ARE MANY MOTIVATIONS FOR ENTERING
INTO A STOCK REDEMPTION AGREEMENT. AMONG
THESE MOTIVATIONS MAY BE THE DESIRE THAT A
BUSINESS SHOULD CONTINUE WITHOUT BEING
FORCED TO PAY OUT INSUPPORTABLE SUMS OF
MONEY UPON THE DEATH OF A KEY SHAREHOLDER,
WHETHER MAJORITY OR MINORITY. THE DESIRE TO
GIVE ADEQUATE CONSIDERATION TO A DECEASED
SHAREHOLDER OR PARTNER MAY BE ONLY ONE OF
THE MOTIVATIONS THAT THE PARTIES HAD IN MIND
AT THE TIME OF THE EXECUTION OF THEIR
AGREEMENT. IT IS NOT THE FUNCTION OF THE
COURT TO REWRITE A CONTRACT ACCORDING TO ITS
NOTIONS OF FAIRNESS. WE BELIEVE THAT THE
TRIAL JUSTICE WAS CORRECT IN GRANTING THE
MOTION FOR ENTRY OF JUDGMENT OF SPECIFIC
PERFORMANCE.
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 47
<PAGE>
ID. at 653 [Emphasis Added].
Other valid considerations for setting a value which the corporation can
pay include (1) the ability of the surviving shareholders to pay the purchase
price; (2) maintenance of the option price at a level which would be
attractive enough to the survivors to exercise their option; and (3)
provision of a market for the shares. RENBERG, SUPRA, at 470.
A case which emphasizes, in the strongest terms, the right of a
corporation to set a price which will not bankrupt it and which will carry
out the goal of preserving employee ownership, is FOLTZ V. U.S. NEWS & WORLD
REPORT, INC., 865 F.2d 364 (D.C. Cir. 1989) FOLTZ dealt with a cause of
action brought under ERISA. Several ex-employees claimed that the appraisal
procedure utilized to value their stock upon repurchase greatly undervalued
it. The Court repeatedly emphasized that the main purpose for the arrangement
set out in the stock option plan was "to perpetuate employees' ownership and
control." ID. at 369. In light of this policy, the Court upheld the valuation
even though the departing employees sold their stock for $65 to $470 a share
and the same shares sold shortly thereafter for $2,842. When the ex-employee
contended that valuation techniques should be used which would estimate a
value of stock which would normally be realized if the company were sold, the
Court noted: ". . . while obviously evaluation on the basis of a hypothetical
sale could co-exist with employee ownership, IT WOULD CREATE
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 48
<PAGE>
LIQUIDITY PROBLEMS THAT WOULD JEOPARDIZE THAT PURPOSE." ID. at
373.
IRA has a right to set a repurchase price which carries out the purpose
for which it began selling stock to its agents and employees. IRA has set a
price which it can live with and which will perpetuate agent and employee
ownership of the corporation. Simply because this price does not meet
Hugenberg's expectations of fair market value is irrelevant. His valuation
works contrary to the very policy for which IRA offered him stock. Not only
would Hugenberg's valuation quickly bankrupt the company, it ignores the
expressed concern of the company and its founder that IRA be able to place a
value on its stock that would permit it to exercise the option and maintain
ownership among its agents. Instead of recognizing that he is bound by the
simple and straightforward document he signed, Hugenberg wants to look only
to his own selfish purposes and extort the highest price possible for his
stock.
5.
HUGENBERG HAS NO DEFENSE OF BREACH
OF FIDUCIARY DUTY OR LACK OF GOOD FAITH
BECAUSE OF THE PRICE SET BY IRA FOR EXERCISE
OF THE REPURCHASE OPTION
Hugenberg would have this Court believe that IRA treated him so
shabbily by the price it set for his stock that the actions of IRA constitute
a lack of good faith or breach of fiduciary duty. Instead, of discussing this
allegation in the section of the brief dealing with his counterclaim, IRA
will dis-
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 49
<PAGE>
cuss it at this point since it illustrates that the Stock Agreement is
enforceable as written. As will be shown below, even if the price set by IRA
was viewed through the prism of good faith, the evidence demonstrates
Hugenberg has no cause of action because IRA offered him an appropriate price
for his stock. However, irrespective of the amount offered to him, any
allegations regarding a lack of good faith or breach of fiduciary duty by IRA
are illusory.
First, it is difficult to imagine exactly where the perceived duty
toward Hugenberg had its origin. He signed an agreement granting IRA the
right to purchase his Class B shares at a price set by IRA.(1) How Hugenberg
can argue that the corporation did not have the right to exercise the very
right he awarded to it in the Stock Agreement is not made known in his
pleadings. This argument is similar to one raised by an ex-employee in
KEATING V. BBDO INTERNATIONAL, INC., 438 F.Supp. 676 (S.D.N.Y. 1977). In
KEATING, an ex-employee whose employment was terminable at will complained
that his company fired him and demanded return of his stock while plans were
afoot to take the corporation public. Because this action caused him
"economic harm", the ex-employee argued that the company owed him a duty not
to demand his stock back even though he was properly terminated. ID. at
___________________
(1) Hugenberg alleges that certain facts were misrepresented to him regarding
the agreement. However, a later portion of this brief will demonstrate that
Hugenberg's claims in this regard are baseless.
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 50
<PAGE>
682. KEATING disposed of this contention with the following remarks:
In other words, the corporation owed plaintiff
some sort of fiduciary duty not to exercise the
option as explicitly set forth in the
stockholder's agreement because it would be
injurious to him. The fallacy of this proposition
is immediately apparent . . . . ID.
SEE ALSO, JENKINS V. HAWORTH, 572 F. Supp. 591, 601 (W.D. Mich. 1983),
[Cannot use fiduciary duty as pretext to avoid clear contractual duty.]
RENBERG V. ZARROW, SUPRA, at 471 [Court will not rewrite agreement so parties
may avoid an improvident agreement.]
KEATING, JENKINS and RENBERG mandate that the parties are bound by the price
they agreed to irrespective of whether it is fair market value or not and
demonstrate the simple concept that parties are bound by the language of
their agreements. Thus, Hugenberg should not be permitted to argue that there
was some duty on the part of IRA, the existence of which is negated by the
words of the very document he signed.
There is no unfairness for several additional reasons. To briefly
summarize the evidence, all Class B shareholders signed a Stock Agreement
containing the same terms and provisions as the Stock Agreement in this case.
There are only 25 shares of Class A IRA stock issued and outstanding and all
of the Class A shareholders also own Class B stock. The Class A shareholders'
Class B stock is subject to the strictures of the Stock Agreement. Annually,
IRA sets the price which it will pay during the coming year for Class B
stock. IRA set this price to reflect
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 51
<PAGE>
book value plus the prior year's earnings less dividends. The prior year
earnings are included by dividing the earnings by twelve and adding 1/12 of
the earnings to the stock price each month. Each Class B shareholder,
including those Class A shareholders who also own Class B stock, who sold his
stock back to the corporation, received the price set in this fashion. This
includes the founder of IRA who presumably was the origin of the nefarious
"Control Group" which haunts Hugenberg's thoughts. It also includes each
member of the board who has had responsibility to set the price to be paid
for IRA stock. Even Hugenberg admitted that he did not know of a single
instance where a Class B shareholder received disparate treatment. Also, as
noted previously, Hugenberg received some $725,000 for stock for which he
paid only $66,000. These facts conclusively demonstrate Hugenberg has not
been ill treated.
These facts also demonstrate the fairness of the manner by which the
option price is set. First of all, the price is not set for each individual
sale. Instead a price is set yearly which applies to all sales of Class B
stock made during that year. One aspect of fairness in analyzing the pricing
provision of a stock repurchase option is whether there is "mutuality of
risk." EVANGELISTA V. HOLLAND, SUPRA at 592-593; RENBERG V. ZARROW, SUPRA at
470. This concept is usually addressed in the context of cases where the
stock agreement provides a set price or a formula such as book value
determines the price. ID.
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 52
<PAGE>
However, the concept is that such agreements are fair because parties do not
know when or if the agreement will be exercised and a party cannot predict if
they will profit or lose from the price they set. There is no incentive to
set an excessively low price because the parties setting the price may be
cutting their own throats. In this case, the parties setting the price for
repurchase, the members of IRA's Board of Directors, are also subject to risk
from the price they set. Thus, there is no incentive, as Hugenberg suggests,
for them to set a low price. The Board members may retire, die or be
terminated as agents during any year and have to accept the price set for
Class B stock, and this in fact has occurred on numerous occasions, with the
departing Board members or their estates receiving the price set just like
the price for Hugenberg's stock was set. Thus, any motive which Hugenberg
suggests for allegedly low-balling the repurchase option price is
non-existent.
The absence of a breach of fiduciary duty or bad faith is shown even
more strongly because there is no evidence that IRA manipulated the option
price. Absent fraudulent inducement in entering the agreement, the most
pervasive test for the fairness of an option is its uniform application. As
noted in CONCORD AUTO AUCTION, INC. V. RUSTIN, 627 F. Supp. 1526, 1531 (D.
Mass. 1986):
. . . 'fairness' and 'good faith' in a closely held
corporation generally means that each stockholder
must have an equal opportunity to sell his or her
shares to the corporation for an equal price.
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 53
<PAGE>
That is how IRA operates its option. Each stockholder of the company may sell
his or her stock to the corporation for an identical price. There has never
been a deviation from this policy, no matter who the seller was.
Thus, the evidence in this case reveals as a matter of law that there
is no breach of fiduciary duty or lack of good faith. The terms of this
agreement are clear. IRA has applied the terms of the agreement uniformly and
those making the price determination have no incentive to create an
artifically low value for the stock. In fact, the only breach of fiduciary
duty which could arise in this case would be if IRA granted the special
dispensation Hugenberg demands and gave him an unfairly high price for his
stock, thus, arguably breaching its duty to the other shareholders.
6.
IRA HAS SET A REASONABLE PRICE
FOR THE EXERCISE OF ITS REPURCHASE OPTION
If this Court has to reach the issue of the fairness of the price set
by IRA to exercise its repurchase option, the evidence shows as a matter of
law that the set price is fair and reasonable. To briefly reiterate, the
practice followed in setting the price is to take the price at the end of
IRA's fiscal year and add that fiscal year's earnings per share (less each
dividend, if any) to it incrementally, approximately one-twelfth per month
for the next twelve months. For example, if the price set for the stock on
September 30, 1985, was $10 and the earnings
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 54
<PAGE>
per share for that fiscal year were $2.40, then the stock price would
increase at the rate of $.20 per month for the next twelve months. (Smith
Affidavit #2, pg. 4) For the past several years, this price has closely
approximated the book value of the stock with a one-year lag. The reason the
one year lag is placed on the stock is to ensure that the company is
protected from any financial reversals which might arise during the year.
The method of valuation utilized by the company is not unfair,
"arbitrary and capricious," or a breach of duty either real or imagined. As
noted previously, the books are full of cases which permit repurchase options
with the price to be set at book value; some percentage of book value; what
the person paid for the stock irrespective of book value; or a set price
irrespective of the stock's present book value. KANAWHA-ROONE LANDS, INC. V.
BURFORD, SUPRA at 620-621; ROWLAND V. ROWLAND, SUPRA at 606-607; MARTIN V.
GRAYBAR ELECTRIC CO., SUPRA at 624-625; STATE EX REL HOWETH V. DAVIDSON,
SUPRA at 730.
Perhaps the strongest evidence of what Texas considers to be a fair
price comes from Art. 21.07 of the Texas Insurance Code. This Article deals
with who may own stock in an insurance agency. One criteria for stock
ownership is that a stockholder must maintain an insurance license. Art.
21.07 Section 2(d)(3)(C) in part provides:
Should such an unlicensed person acquire shares in
a corporation and not dispose of them within a
period of 90 days to a licensed agent, then they
must be purchased by the corporation for THEIR
BOOK VALUE, that is, the value of said shares of
stock as reflected by the regular books and
records
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 55
<PAGE>
of said corporation, AS OF THE DATE OF THE
ACQUISITION OF SAID SHARES BY SAID UNLICENSED
PERSON. Should the corporation fail or refuse to
so purchase such shares, its license shall be
cancelled. [Emphasis added]
Thus, the very statute governing who may own stock in a corporation such as
IRA provides for use of "book value" in pricing the stock for repurchase. As
established by the certificate from the Texas Insurance Board, which is
Exhibit A to Schumacher's Affidavit, Hugenberg's Texas insurance license was
cancelled on February 20, 1991. Thus, if he were to be considered an IRA
shareholder, today, IRA would have until May 21, 1991 to repurchase his stock
for its book value AT THE TIME HE PURCHASED IT or face the loss of its Texas
agency license, which would put it out of business. Book value at the time of
Hugenberg's purchase of IRA Class B stock was considerably less than the
$535,000 he has been paid. If he wants to repudiate his obligation under the
Stock Agreement, then we will be happy to pay him the price provided for in
the Texas Insurance Code.
Finally, even if a person ignored the overwhelming weight of authority
which validates IRA's actions, Hugenberg cannot even sustain a "taint fair"
argument. He bought Class B stock at a fraction of what IRA paid him for it.
He received dividends of three times what he paid for the stock. Salary,
bonuses, and fringe benefits generously compensated him for his service to
USPA and IRA. During his last full year with IRA, Hugenberg received $222,993
in compensation. (Dast aff'd.) Yet
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 56
<PAGE>
now he claims mistreatment because he is not being compensated for his
efforts which caused the stock to increase in price. (WCH, Vol. II, pp. 96,
l. 5 through 98, l. 5) Hugenberg's argument is a repeat of an argument
rejected by the court in STATE EX REL HOWETH V. DAVIDSON, SUPRA at 730. In
HOWETH, the plaintiff cried that forcing him to sell his stock at 50% of book
value was a "harsh forfeiture." The Court responded:
Howeth was allowed to buy stock in 1965 AS A
FRINGE BENEFIT TO ENCOURAGE PARTICIPATION IN THE
CORPORATE AFFAIRS. He paid less than one-half of
book value for that stock, a total of $15,000. At
that time, Howeth signed the repurchase agreement
whereby the corporation could buy back the stock
at 50% of book value (or up to 100% if the
corporation so approved) in the event of
termination of his employment. Five years later
the corporation exercised its option upon
Howeth's termination as an employee at one-half
of book value, which is $43,473.30. That is an
increase of $28,473.30 over what he paid for it.
HOWETH'S FORFEITURE ARGUMENT IS PREMISED UPON HIS
ASSERTION THAT HIS EFFORTS GREATLY CONTRIBUTED TO
THE INCREASE IN THE BOOK VALUE OF THE DAVIDSON
COMPANY STOCK. THE RECORD INDICATES THAT OVER THE
YEARS HOWETH WAS WELL COMPENSATED FOR HIS
EFFORTS. OFTEN TIMES THIS WAS IN THE FORM OF
COMMISSIONS DIRECTLY RESULTING FROM A PERCENTAGE OF
HIS SALES IN ADDITION TO HIS REGULAR SALARY. ADDITIONALLY
THE SUBSTANTIAL GAIN IN THE BOOK VALUE OF HIS
STOCK UNDER THE REPURCHASE AGREEMENT REWARDED HIS
EFFORTS. UNDER SUCH CIRCUMSTANCES NO HARSH
FORFEITURE IS INVOLVED. [Emphasis Added]
This Court may simply substitute Hugenberg's name in this quotation.
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 57
<PAGE>
D.
HUGENBERG'S COUNTERCLAIM
This section of the brief will address the reasons why a summary
judgment should be rendered on Hugenberg's Counterclaim.
1.
HUGENBERG HAS NO STANDING
TO BRING DERIVATIVE CLAIMS
The Counterclaim makes numerous references to a "Control Group."
According to Hugenberg, some of the holders of IRA's Class A voting stock in
theory make up this "Control Group" and, according to the Counterclaim,
dominate IRA for their personal benefit. The allegations against the "Control
Group" are sheer fantasy. However, even if they were true, Hugenberg,
individually, does not have standing to assert claims for wrongs to IRA
allegedly done by the "Control Group."
Hugenberg attempts to dress up his Counterclaim and give the impression
that he was defrauded into signing the stock agreement or buying IRA stock
because certain facts regarding the plans and actions of the "Control Group"
were not revealed to him. In fact, these allegations rely on a complaint that
Hugenberg does not like the manner in which IRA is operated, largely as a
result of his not being elected to the board of directors. Paragraph 14 of
his Counterclaim states:
IRA also engaged in conduct resulting in the following
material omissions:
(a) IRA completely failed and refused to inform
Hugenberg and other Class B stock shareholders
similarly situated that the Class B stock along
with the corporation ITSELF WAS BEING
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 58
<PAGE>
OPERATED SO UNFAIRLY FOR THE BENEFIT OF THE CONTROL
GROUP TO THE DETRIMENT OF THE CLASS B STOCK SHAREHOLDERS;
(b) failed to disclose that THE ACCOUNTING METHODS EMPLOYED
BY IRA FAILED TO FAIRLY REFLECT THE VALUE OF THE
CORPORATION AND ITS CLASS B STOCK BY FAILING TO ACCOUNT
FOR THE AMOUNT OF RENEWALS THAT WOULD RESULT IN FUTURE
REVENUES TO THE CORPORATION;
(c) failed to disclose that the Control Group had no
intention of allowing any reasonable market to develop
for the Class B stock wherein fair value could be obtained
therefor upon any attempt at sale; and
(d) failed to disclose that THE CONTROL GROUP WOULD OPERATE
IRA AND MANIPULATE THE CLASS B STOCK FOR ITS PERSONAL
BENEFIT INCLUDING POTENTIAL MISAPPLICATION AND WASTE OF
ASSETS.
[Emphasis Added]
The simplest reason why Hugenberg has no cause of action is that he is
no longer an IRA stockholder due to IRA's exercise of its rights under the
Stock Agreement. A person who is no longer a stockholder has no standing to
bring a derivative suit. ZAUBER V. MURRAY SAV. ASSN., 591 S.W.2d 932,
937-938 (Tex. Civ. App. -- Dallas 1979, writ ref'd n.r.e.) PER CURIAM 601
S.W.2d 940 (Tex. 1980).
If Hugenberg were sincere in his allegations of corporate
mismanagement, misappropriation of assets and breach of fiduciary duty, he
would be in the position of the wrong party suing the wrong party. A
corporation and not its individual shareholders owns the cause of action for
injury to corporate property by the fraudulent, ultra vires, or negligent
acts of its
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 59
<PAGE>
directors or majority stockholders. PRATT-HEWIT OIL CORP. V. HEWIT, 52 S.W.2d
64, 122 Tex. 38 (1932); GEARHART INDUSTRIES, INC. V. SMITH INTERNATIONAL,
INC., 741 F.2d 707, 721 (5th Cir. 1984). This is the case even if the
stockholder alleges that the misaction caused a reduction in the value of his
stock. SCHOELLKOPF V. PLEDGER, 739 S.W.2d 914, 918 (Tex. App.--Dallas 1989,
rev'd on other grounds, 762 S.W.2d 145 (Tex. 1988) PER CURIAM, opinion on
remand 778 S.W.2d 897 (Tex. App.--Dallas 1989, writ denied) This rule is
based on the fact that if the corporation recovers for an injury suffered,
the stockholder will also be made whole in proportion to the amount of stock
he owns. WINGATE V. HAJDIK, 795 S.W.2d 717, 719 (Tex. 1990) This rule also
avoids the multiplicity of suits which would arise from giving each
stockholder an individual cause of action. ID. If a stockholder wishes to
bring a suit on behalf of the corporation, he may bring a derivative suit.
However, to do so, a stockholder must follow the provisions of the Texas
Business Corporation Act which provides the prerequisites for a derivative
suit, which include pleading, with particularity, the stockholder's effort to
have the board of directors bring suit or the reason for not making such an
effort. Tex. Bus. Corp. Act Ann. Section 5.14; GEARHART INDUSTRIES, INC.,
SUPRA, at 722. Hugenberg simply cannot bring an action for mismanagement of
the corporation in his individual capacity and he has no pleading showing his
compliance with the statutory prerequisites to bring a derivative suit.
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 60
<PAGE>
The proper defendant in a suit for mismanagement of a corporation is
the mismanager. JOY V. NORTH TEXAS COMPRESS & WAREHOUSE CO., (Tex. Civ.
App.--Fort Worth 1941, no writ). As phrased in his Counterclaim, Hugenberg is
suing the corporation for the damage caused to it by the alleged misconduct
of its employees. Such an approach would make the corporation pay for an
injury which has been done to it.
This Court should hold that Hugenberg individually has no standing to
bring claims which are predicated on mismanagement of the corporation or
breach of fiduciary duty by its controlling shareholders. Instead, he is
attempting to assert causes of action which are not the proper subject of
this suit.
2.
ADMISSIONS OF HUGENBERG
RELATING TO HIS COUNTERCLAIM
To properly understand why each cause of action alleged by Hugenberg
is flawed, IRA will briefly summarize the admissions made by Hugenberg
relating to the Counterclaim. Hugenberg could not testify as to who the
members of the "Control Group" were on the various occasions when he bought
his stock. (WCH Vol. II, pp. 76, l. 6 through p. 79, l. 5, 76-79) He
acknowledged that all members of the alleged "Control Group" who ever bought
Class B stock signed a Stock Agreement. (WCH Vol. II, p. 80, ll. 2-5) He
acknowledged that when Class B stock is sold back to IRA the only reason that
Class A shareholders, the "Control Group," receive a benefit is that they,
just like the Class B share-
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 61
<PAGE>
holders, share equally with the Class B shareholders on liquidation and that
they are a part of the company and the company receives a benefit. (WCH Vol.
II, p. 90, ll. 3-5) If IRA were liquidated, the assets of IRA would be
divided according to the number of shares owned by each stockholder. (WCH
Vol. II, p. go, ll. 11-18) Members of the "Control Group" share on the same
basis as other Class B shareholders upon liquidation. (WCH Vol. II, p. 91,
ll. 16-25) Hugenberg knows of no member of the "Control Group" who has sold
his stock and has received anything more for his stock than the price set by
the company. (WCH Vol. II, p. 92, ll. 3-8) If members of the "Control Group"
do not stick around until the revaluation of the stock which he contends
MIGHT occur, they will not receive any more benefit than other Class B
shareholders. (WCH Vol. II, p. 92, ll. 20-23) He knows of no occasion where a
member of the "Control Group" purchased Class B stock from another
shareholder. (WCH Vol. II, p. 93, ll. 1-4) He knows of no plans or prospects
to sell IRA and trigger the revaluation he fears. (WCH, Vol. II, p. 92, ll.
4-23)
His counterclaim alleges that activities of the "Control Group" were
not disclosed. However, the only activity that he alleges was not disclosed
was the method of valuation of IRA stock. Although he acknowledges that the
price set for the Class B stock for repurchase was disclosed every year from
1981 forward and that the method of valuation being utilized was discernible
from the annual reports, he claims that there was a fraudulent
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 62
<PAGE>
non-disclosure of this method. (WCI-I Vol. II, PP. 93, l. 15 through p. 94,
l. 1) He suggests that it is a fraudulent activity to represent that there is
a relationship between value and price and to represent that the method of
valuation of IRA stock is subject to review by the board of directors. (WCH
Vol. II, p.94, l. 2-10) This is the extent of the fraudulent
misrepresentations of which he is aware. (WCH Vol. II, p. 95, ll. 15-22)
Hugenberg knew that both the Stock Agreement and the offering documents
provided that the price of IRA Class B stock for repurchase would be set by
the company. (WCH Vol. I, pp. 32, l.15 through 36, l.12) That the company,
acting through its board, did set the price annually is evident from the
annual reports which Hugenberg admits receiving and reading. Therefore, the
allegation is patently without merit.
Hugenberg's understanding of the reason Class B stock was sold was that
it was not to raise money for the company, but to encourage ownership by
those contributing to the company's success. (WCH Vol. II, p. 104, ll. 4-14)
with respect to the allegation that "[t]he purpose of such low valuation (of
Class B stock] is to enable the "Control Group" to receive the benefit of
dividends on the Class B stock, while at the same time, knowing that they can
repurchase such shares from all outstanding Class B shareholders at a low
price while maintaining total control", Hugenberg admitted he had no
knowledge of the "Control Group's" intentions. (WCH Vol. II, pp. 104, l. 15
through p. 105, l. 5)
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 63
<PAGE>
He does not even know who comprises the "Control Group." The only way the
"Control Group" could benefit from the repurchase of Class B stock would be
to revalue the stock and then sell it back to itself. (WCH Vol. II, p. 106,
ll. 3-8) However, every member of the "Control Group" who has sold his stock
back, did so at the price also being paid other Class B stockholders. (WCH
Vol. II, p. 106, ll. 9-14) As noted above, Hugenberg knows of no plans to
sell or offers to buy IRA by which the revaluation he fears might occur.
The only misrepresentation upon which he bases his claims in
Counterclaim Paragraph 13(c) is that he was not informed "on what authoritative
basis" the method of valuing Class B stock was "derived." (WCH Vol. II, p.
107, ll. 7-15) He is not even sure what is meant by the allegation that plans
of the "Control Group" were concealed from him. (WCH Vol. II, p. 107, ll.
16-19)
With respect to the allegation that IRA would value a Class B
shareholder's stock at a reasonable price on repurchase, all that Hugenberg
relies on is the fact that the Stock Agreement says that the company will
annually advise the stockholders of the "value" of the stock for purposes of
setting a repurchase price. (WCH Vol. II, p. 108, l. 3 through p. 109, l. 5)
From this phrase, Hugenberg claims that he believed that the price would be
the function of his concept of "value."
With respect to the counterclaim's allegations in Paragraph 14(d), his
complaint is not that any misapplication or waste
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 64
<PAGE>
has occurred, but that the method of valuation creates a potential for it.
(WCH Vol. II, p. 111.,ll. 3-14) He knows of no evidence of any waste or
misapplication. (WCH Vol. II, p. lll, ll. 17-25)
3.
HUGENBERG HAS NO CAUSE OF ACTION FOR ARBITRARY
AND CAPRICIOUS VALUATION OF HIS STOCK
Hugenberg alleges that IRA "engaged in false, fraudulent, malicious and
grossly negligent conduct" by an "[a]rbitrary and capricious valuation of his
shares of Class B stock at a ridiculously low price for the sole purpose of
benefiting the control group." [Counterclaim Paragraph 13(a)] As pointed out
above, IRA simply set a price for stock which it repurchased pursuant to the
terms of the Stock Agreement. [This brief Sections C-3, 4 and 6] By complying
with the contract, IRA fulfilled its duties to Hugenberg. As Hugenberg
admitted, his claim that the "Control Group" has manipulated the stock price
for its personal benefit is a delusion since the "Control Group" operates
under the same strictures as other Class B shareholders.
4.
HUGENBERG HAS NO CAUSE OF ACTION FOR
CANCELLATION OF HIS STOCK ON THE RECORDS OF IRA
Hugenberg attempts to state a cause of action within the Counterclaim
for cancellation of his stock on the records of IRA. [Counterclaim Paragraph
13(b)) IRA did cancel Hugenberg's stock. It had every right to do so. It
tendered to him an appropriate amount
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 65
<PAGE>
under the Stock Agreement. When Hugenberg attempted to re-tender the payment,
IRA placed it into the Registry of the Court. There exists no cause of action
for IRA properly complying with the provisions of the Stock Agreement.
[This Brief section C-5] Hugenberg is no longer a Texas licensed agent.
Therefore, it would be illegal under the Texas Insurance Code for IRA to have
him as a shareholder. (Schumacher Affidavit)
5.
HUGENBERG HAS NO CAUSE OF ACTION FOR A REPRESENTATION
THAT IRA WOULD DEAL FAIRLY WITH HUGENBERG OR SET A
REASONABLE PRICE FOR REPURCHASE OF HIS SHARES
Hugenberg claims that IRA made a false statement or omission to state
with respect to the purchase and sale of Class B stock in that IRA
represented it would deal fairly with him and value his shares at a
reasonable price upon repurchase. [Counterclaim 13(c)] As noted above, IRA
has both dealt fairly with Hugenberg and tendered a reasonable price for his
stock. Even if it failed to do so, Hugenberg once again admits himself out of
a cause of action.
When asked what he was told about how the stock would be priced before
he obtained his IRA stock, he admitted he had no conversation with anyone on
this subject. (WCH Vol. I, p 50, ll 18-24) His counterclaim also acknowledges
this fact. [Counterclaim Paragraph 9] When interrogated about how he reached
the conclusion that the stock would be valued by means of good faith and fair
dealing, the following exchange occurred:
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 66
<PAGE>
Q. Did someone in the company tell you anything in 1982,
about how the stock was going to be valued?
A. Yes, I think they did.
Q. Who?
A. I think Mr. Rankin among others.
Q. And what did he say?
A. I think the impression of good faith and fair dealing
was created from the beginning.
Q. And upon what was that impression based, sir?
A. Various conversations. I mean, it was just -- it was
part of THE AURA of the company at that time.
Q. Well, can you be more specific?
A. NO, I REALLY CAN'T. I MEAN, IT WAS JUST MY -- MY SENSE
OF WHAT WAS GOING ON AT THAT TIME.
[Emphasis added] (WCH Vol. I, p. 102, ll. 1-15)
In order to have a cause of action for fraud, the party asserting the
cause of action must at least allege a representation. TAYLOR PUBLISHING CO.
V. SYSTEMS MARKETING, INC., 686 S.W.2d 213, 219 (Tex. App.--Dallas 1984, writ
ref'd n.r.e.) Hugenberg, by his own admission, cannot recall a representation
upon which he bases his cause of action.
6.
HUGENBERG HAS NO CAUSE OF ACTION RESULTING
FROM IRA'S ACCOUNTING METHODS
Hugenberg alleged that IRA didn't disclose that its accounting methods
"failed to fairly reflect" the value of IRA
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 67
<PAGE>
and its Class B stock because it did not account " ... for the amount of
future renewals." Counterclaim PARA 14(b). As noted above, Hugenberg stated in
writing that he knew from his first purchase of IRA stock that IRA stock was
allegedly undervalued because it did not account for future renewals.
(Plaintiff Exhibt 32, p. 5064).
An element of fraud is reliance. BYNUM v. SIGNAL LIFE INSURANCE
COMPANY, 522 S.W.2d 696, 700 (Tex. Civ. App. -- Dallas 1975, writ ref'd
n.r.e.). "If a person to whom a false representations is made is aware of the
truth, it is obvious that he is neither deceived or defrauded and, therefore,
any loss he may sustain is not traceable to the representation but is
self-inflicted." ID. By the same token, if a party is aware of the fact
allegedly concealed from them, there is no cause of action for the fraudulent
concealment of that fact. LYONS V. MONTGOMERY, 685 S.W.2d 390, 392 (Tex. App.
- -- San Antonio 1985, rev'd in part, affirmed in part 701 S.W.2d 641).
Hugenberg knew from the very first instance that IRA did not include future
revenue from renewals in its stock valuation and thus, there is no reliance
to support his cause of action.
7.
HUGENBERG HAS NO CAUSE OF ACTION THAT IRA
OMITTED TO DISCLOSE THAT A MARKET WOULD
NOT DEVELOP FOR IRA CLASS B STOCK
Hugenberg makes the rather fantastic allegation that the "Control
Group" failed to disclose that it had "no intention of
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 68
<PAGE>
allowing any reasonable market to develop for the Class B stock wherein fair
value could be obtained therefor upon any attempt at sale." [Counterclaim
PARA 14(c)] In Section I, of this brief, IRA pointed out that each offering
circular stated that no public market existed for this stock and it was unlikely
that such a market would come into existence and that Hugenberg read and
understood these portions of the offering documents. However, even more basic is
how was it concealed from Hugenberg that no market was contemplated for this
stock when he had to sign the Stock Agreement prior to purchasing the stock and
the Stock Agreement clearly provides that a Class B shareholder cannot sell his
stock to a third party without giving IRA an opportunity to exercise its option
and repurchase the stock. Apparently, Hugenberg wants to predicate a cause of
action on the failure of IRA to reveal that it would exercise the rights given
it under the Stock Agreement.
Even if there was a duty to speak, in order to have a cause of action
for fraud, something must be concealed. ROWNTREE V. RICE, 426 S.W.2d 890,
892-93 (Tex. Civ. App.--San Antonio 1968, writ ref'd n.r.e.). SEE ALSO, LYONS
V. MONTGOMERY, SUPRA at 392. In view of the existence of the option provision
and the repeated disclosures in the offering documents which Hugenberg admits
receiving and reading, no such concealment existed.
In addition, how IRA would allow a market to develop for its Class B
stock is a mystery. Stock of an insurance agency
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 69
<PAGE>
such as IRA cannot be owned by anyone other than an insurance agent licensed
in the state of Texas. Tex. Ins. Code art. 21.07. Even Hugenberg's expert
witnesses acknowledge that such a pool of purchasers is insufficient to
create a market for a stock. (Eiland p. 105, ll. 7-9, p. 108, ll. 1-14; Self,
p. 126, ll. 10-19).
8.
HUGENBERG HAS NO CAUSE OF ACTION THAT THE
CONTROL GROUP MANIPULATED IRA FOR ITS BENEFIT
OR CONSPIRED TO SUPPRESS OTHER CLASS B SHAREHOLDERS
Hugenberg wants this Court to believe that there is a grand conspiracy
of Class A shareholders, what he terms the "Control Group," to manipulate IRA
for their own selfish benefit. [Counterclaim PARA 15] He also alleges that the
corporation failed to disclose that it was being manipulated for the benefit
of Class A shareholders and that the Class A shareholders would operate IRA
for their own personal benefit. [Counterclaim PARA 14 a and d] The only problem
with these theories is that he does not seem to know who has committed these
allegedly evil acts or exactly what they have done. The most fatal flaw is
that the scheme allegedly instituted by the Class A shareholders does not
exist.
With respect to the alleged conspiracy, he has no knowledge of when it
came into being. (WCH Vol. II, p. 112, ll. 1-22) He does not know the names
of the active members of any such conspiracy. (WCH Vol. II, p. 112, l. 23
through p. 113, l. 9)
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 70
<PAGE>
All that he can recall that was done in furtherance of the alleged conspiracy
was that a member of the board of directors denied that points Hugenberg made
about valuation of stock held any credence and constituted an attempt to
mislead him from obtaining accurate information on IRA stock valuation. (WCH
Vol. II, p. 114, l. 1 through p. 116, l. 16)
The elements of a civil conspiracy were outlined in MASSEY V. ARMCO
STEEL COMPANY, 652 S.W.2d 932, 934 (Tex. 1983) as follows:
[A]n actionable civil conspiracy is a combination by
two or more persons to accomplish an unlawful purpose
or to accomplish a lawful purpose by unlawful means . . .
The essential elements are: (1) two or more persons;
(2) an object to be accomplished; (3) a meeting of the
minds on the object or course of action; (4) one or
more unlawful, overt acts; and (5) damages as the
proximate result.
"[T]he gist of a civil conspiracy is the damage resulting from commission of
a wrong which injures another, and not the conspiracy itself." SCHLUMBERGER
WELL SURVEYING CORP. V. DARTEX OIL & GAS CORP., 435 S.W.2d 654, 856 (Tex.
1968); ADOLOPH COORS CO. V. RODRIGUEZ, 780 S.W.2d 477, 487 (Tex. App.--Corpus
Christi 1989, writ denied) A summary judgment may be granted finding the
evidence lacking as a matter of law to support the existence of a conspiracy.
WHITAKER V. HUFFAKER, 790 S.W.2d 761, 764-66 (Tex. App.--El Paso 1990, writ
denied); FROST NATL. BANK V. MATTHEWS, 713 S.W.2d 365, 369-70 (Tex.
App.--Texarkana 1986, writ ref'd n.r.e.).
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 71
<PAGE>
A conspiracy may be proven by circumstantial evidence. BOHN V.
TRAVELERS INDEM. Co., 604 S.W.2d 327, 329 (Tex. Civ. App.--Texarkana 1980,
no writ). However, the fact that a conspiracy may be proven by circumstantial
evidence is not a call to create conspiracies out of whole cloth.
"[D]isconnected circumstances, any one of which or all of which are as
consistent with a lawful purpose as they are with an unlawful undertaking, are
insufficient to establish a conspiracy." ID. Also, the essence of a conspiracy
is that there must be some wrongful goal or act. VAQUERO PETROLEUM CO. V.
SIMMONS, 636 S.W.2d 762, 769 (Tex. App.--Corpus Christi 1982, no writ).
The evidence in this case reveals no improper purpose or unlawful means
to support a conspiracy or any selfish misdeeds by the "Control Group." The
board of directors is acting under the clear terms of the Stock Agreement.
They are acting to carry out a legitimate purpose to preserve the composition
of shareholders of IRA. In the face of these facts comes the allegations of
Hugenberg regarding a conspiracy. Of course, he does not know who participated
in it or when it started. The only overt acts which he alleges occurred are
that personnel of IRA disagreed with him about his conclusions on stock
valuation, a topic upon which he acknowledges a lack of expertise. Hugenberg
pursues the existence of a conspiracy even though the very persons who
allegedly created the conspiracy acted in a way directly contrary to the
interests which they would be implementing by this
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 72
<PAGE>
conspiracy. The alleged members of the conspiracy have sold their Class B
stock back at the same price set for all other Class B stockholders. In the
face of this fact, Hugenberg and his experts say that there is a POTENTIAL
for mistreatment. They know of no evidence that anyone at IRA has thought of
this potential or attempted to implement it and the bylaws and articles of
incorporation of IRA are designed to prevent the very circumstance Hugenberg
fears. (Coder Aff'd, Exhibit B, pp. 000014 and 000014A, and Exhibit C., p.
000022).
9.
HUGENBERG HAS NO CAUSE OF ACTION
FOR BREACH OF THE STOCK AGREEMENT
Hugenberg alleges a cause of action for breach of the Stock Agreement.
[Counterclaim Paragraph 16] To support this cause of action he relies on the
way IRA set the repurchase price for Class B stock. (WCH Vol. II, p. 117, ll.
10-24) As noted above, the manner in which IRA set the repurchase price of
the stock was within the powers given it under the unambiguous provisions of
the Stock Agreement as well as Texas corporate law and case law in this and
other states. Hugenberg has no cause of action.
IV.
CONCLUSION
IRA has faced massive expense in the process of attempting to enforce a
simple written agreement signed by Hugenberg and under which he operated and
greatly benefited for almost ten
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 73
<PAGE>
years. When it came time for Hugenberg to hold up his end of the bargain he
had struck which permitted him him to buy and profit greatly from his Class B
stock, he refused to comply, forcing IRA to file a simple suit to enforce
its rights. In answer to this simple suit, Hugenberg sought to further
increase the burden on IRA by filing a counterclaim replete with allegations
which Hugenberg admits have no basis in fact and by obtaining additional time
within which to conduct extensive, needless and expensive discovery. This
Court should put an end to the bleeding and grant IRA the summary judgment
which it requests.
To briefly summarize why a summary judgment is appropriate, the Stock
Agreement has an option providing that it may repurchase Class B
shareholder's stock when that person ceases to be an agent of IRA. Such
repurchase options are long recognized by statute and case law in Texas.
These options carry out purposes which are recognized as a proper exercise by
a corporation of its right to determine its own destiny. The pricing
provision which permitted IRA to set the repurchase price for the stock is
enforceable and simply because it does not meet Hugenberg's subjective
concept of fair market value this does not in any way impair the option's
enforceability. Finally, even if the Court were to examine the fairness of
the price set by IRA, the evidence shows that the price is appropriate and
more than fair.
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 74
<PAGE>
In an attempt to avoid the enforcement of the option, Hugenberg attempts
to create the impression of fraud, conspiracy, and breach of fiduciary duty.
However, when examined closely, the evidence reveals that these causes of
action are merely wishful thinking on the part of Hugenberg and his counsel.
He does not even have standing to bring many of the claims upon which he
bases his counterclaim. For those which he may arguably have standing,
Hugenberg either ratified the Stock Agreement so that no cause of action
exists any longer, or he is estopped to deny the enforceability of the Stock
Agreement. When the merits of his counterclaims are examined, they reveal
that the mispresentations upon which he relies are illusory and that there is
no evidence that management has operated IRA contrary to the best interests
of anyone.
Respectfully submitted,
LAW, SNAKARD & GAMBILL
By: /s/ Robert F. Watson
--------------------
Robert F. Watson
State Bar No. 20961200
By: /s/ Dabney D. Bassel
--------------------
Dabney D. Bassel
State Bar No. 01890300
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 75
<PAGE>
3200 Team Bank Building
500 Throckmorton Street
Fort Worth, Texas 76102
(817)335-7373
FAX (817) 332-7473
ATTORNEYS FOR PLAINTIFF
INDEPENDENT RESEARCH AGENCY FOR
LIFE INSURANCE, INC.
CERTIFICATE OF SERVICE
This is to certify that a true, and correct copy of the foregoing
document has been mailed by hand delivery certified mail, return receipt
requested to Khent H. Rowton, WRIGHT & ROWTON, P.O. Box 190930, Dallas, Texas
75219, on this the 3rd day of April, 1991.
/s/ Dabney D. Bassel
--------------------
DDB/rn#W(10)
BRIEF/BRIEF36
BRIEF IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 76
<PAGE>
CAUSE NO. 352-129228-90
INDEPENDENT RESEARCH AGENCY ( IN THE DISTRICT COURT
FOR LIFE INSURANCE, INC., (
(
Plaintiff, (
VS. ( TARRANT COUNTY, TEXAS
(
WILLIAM C. HUGENBERG, JR., (
(
Defendant. ( 352ND JUDICIAL DISTRICT
AFFIDAVIT OF SAM F. RHODES
--------------------------
STATE OF TEXAS (
(
COUNTY OF TARRANT (
BEFORE ME, the undersigned authority, personally appeared Sam F. Rhodes,
known to me to be the person whose signature appears below and who, after
being duly sworn by me did upon his oath state as follows:
"My name is Sam F. Rhodes. I am a Certified Public Accountant, a
Certified Management Consultant, and a partner in the international public
accounting firm of Deloitte & Touche, Certified Public Accountants.
"In January, 1991, I was asked to review the shareholder records of
Independent Research Agency for Life Insurance, Inc. ("IRA") at its
headquarters located at 4100 S. Hulen Street, Fort Worth, Texas.
"That review disclosed that IRA has an established and a well-maintained
shareholder record system wherein transactions in IRA Class A and IRA Class B
stock are recorded. Each
AFFIDAVIT OF SAM F. RHODES - Page 1
<PAGE>
shareholder has an individual ledger sheet to which stock transfers appear to
have been posted contemporaneously with their occurrence. In addition, a
separate stock transfer record in chronological format has been kept. These
records are supported by individual shareholder files in which correspondence
and other information concerning stock transfers appears. To the extent that
I deemed it necessary, I also reviewed actions taken by the IRA Board of
Directors, including minutes of Executive Committee and Board of Directors
meetings.
"From the foregoing records of IRA, the attached alphabetical listing of
former Class B shareholders of IRA was prepared. This listing, which is
entitled "Independent Research Agency, Selling Shareholders", a copy of which
has been marked as Exhibit "A" and attached to my affidavit, shows the name
of each selling shareholder of IRA, the dates of stock transfers involving
each selling IRA Class B shareholder, the price at which such transactions
were effected, the number of shares involved in such transactions and the
cumulative number of Class B shares owned by each IRA shareholder following
each such stock transfer.
"I have reviewed selected stock transfer transactions, the information
contained in Exhibit "A" attached, and other information contained in IRA
records to the extent that I deemed necessary.
AFFIDAVIT OF SAM F. RHODES - Page 2
<PAGE>
"Based upon such review, it is my opinion that each IRA Class B
shareholder shown on Exhibit "A" attached purchased his or her stock from IRA
at prices set by the IRA Board of Directors from time to time during the
years from 1981 through July, 1990. It is also my opinion that IRA
repurchased such stock from such shareholders at prices set by the Board of
Directors of IRA as shown on attached Exhibit "B", in accord with the terms
and conditions of their Stock Agreements and in the manner described above. I
found no instance in which any IRA Class B shareholder received a price per
share from the resale of his or her IRA Class B shares to IRA that had not
been previously set by the IRA Board of Directors and was not also received
by any other IRA Class B shareholder who contemporaneously resold his or her
Class B shares to IRA. I am also of the opinion that IRA acted reasonably and
consistently in carrying out the provisions pertaining to such stock
transactions as described in its annual reports, offering circulars,
prospectuses and Stock Agreements.
"Often closely held corporations such as IRA wish to restrict stock
ownership to a limited class of people. When stock is intended, as in this
case, to be an incentive for high performance by corporate agents and
employees, such agreements commonly restrict stock ownership to corporate
agents. By this means, the ownership of the corporation is placed in the
hands of the persons who are responsible for its success.
AFFIDAVIT OF SAM F. RHODES - Page 3
<PAGE>
"I have reviewed numerous agreements between corporations and their
shareholders giving such corporations the right to repurchase shares sold to
such shareholders. The stock agreements which I have reviewed contain various
ways of determining the price to be paid upon repurchase of stock by the
corporation. There is no readily ascertainable gauge to determine what the
"market value" of closely held stock actually is because, by definition,
there is no market for such stock. None of the various methods of setting the
price of closely held stock is inherently superior to any other method. The
appropriate method must be determined by the facts of each particular
situation. It is not uncommon to let the Board of Directors or another third
party set the repurchase price for such stock.
The primary criterion I have applied concerning whether shareholders are
treated fairly in regard to such transactions is whether or not all
shareholders are treated consistently. In my opinion, if the terms and
conditions of the Stock Agreement are reasonable and if all shareholders are
treated consistently, then all shareholders have been treated fairly.
Consistent treatment is a proper standard to determine fairness because it
equalizes the risks and rewards to all shareholders and insures that one
shareholder will not receive preferential treatment. In my opinion, the terms
and conditions of the Stock Agreement are reasonable and the method used to
set the stock price was applied consistently in connection with both the sale
and repurchase of Class B common stock by IRA.
AFFIDAVIT OF SAM F. RHODES - Page 4
<PAGE>
"Based upon my experience and my analysis of the relevant documents
related above, it is my opinion that the prices set by the IRA Board of
Directors in offering and selling IRA Class B common stock to IRA agents and
in repurchasing such stock from such agents were fair and reasonable in the
light of IRA's financial resources. It is also my opinion that any
substantial increase in the price to be paid by IRA for Class B stock will
work an economic hardship on IRA and its agents/shareholders, since any such
increase will greatly reduce IRA's liquidity and/or increase its liabilities
and substantially impair the ability of IRA to grow and prosper for the
benefit of its shareholders. It is also my opinion that the periodic increase
in such stock prices indicated by Exhibit "B" attached, has resulted in an
excellent return on the investment of any IRA agent who purchased and held
IRA Class B common stock for any significant period of time.
"Further Affiant saith not."
/s/ SAM F. RHODES
-----------------------------------
AFFIDAVIT OF SAM F. RHODES - Page 5
<PAGE>
SUBSCRIBED AND SWORN TO BEFORE ME on this 18th day of February, 1991.
/s/ DONNA R. BARRERA
----------------------------------------
Notary Public in and for The
State of
My Commission expires: Printed Name of Notary
6-17-92 DONNA R. BARRERA
- ----------------------------------- ----------------------------------------
AF RHODES
AFFIDAVIT OF SAM F. RHODES - Page 6
<PAGE>
EX. A (ALPHA)
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mary Tom Abelson 17-Sep-85 631 B 200 $23.00 $4,600.00 200
Mary Tom Abelson 04-Feb-86 631 B 200 $31.50 $6,300.00 0
Charles E. Adams 30-Sep-82 175 B 100 $11.35 (B) 100
Charles E. Adams 28-Feb-84 349 B 100 $14.40 $1,440.00 200
Charles E. Adams 02-Mar-87 175 B 100 $48.00 $4,800.00 100
Charles E. Adams 02-Mar-87 349 B 100 $48.00 $4,800.00 0
Charles B. Addison 05-Nov-81 59 B 200 $10.00 $2,000.00 200
Charles B. Addison 30-Sep-82 176 B 1,100 $11.35 (B) 1,300
Charles B. Addison 02-Jul-84 59 B 200 $15.60 $3,120.00 1,100
Charles B. Addison 02-Jul-84 176 B 1,100 $15.60 $17,160.00 0
Charles B. Addison 21-Sep-87 849 B 600 $53.00 $31,800.00 600
Charles B. Addison 01-Nov-88 B 600 (C) (C)
Charles B. Addison 01-Nov-88 1092 B 3,000 (C) (C) 3,000
Charles B. Addison 01-May-90 1354 B 2,000 $16.75 $33,500.00 5,000
Marc L. Alessandria 17-Sep-85 666 B 100 $23.00 $2,300.00 100
Marc L. Alessandria 21-Sep-87 850 B 100 $53.00 $5,300.00 200
Marc L. Alessandria 01-Nov-88 B 200 (C) (C)
Marc L. Alessandria 01-Nov-88 1060 B 1,000 (C) (C) 1,000
Marc L. Alessandria 03-Jan-89 1060 B 1,000 $13.52 $13,520.00 0
Bernard J. Ameis 21-Sep-87 851 B 100 $53.00 $5,300.00 100
Bernard J. Ameis 17-Jun-88 851 B 100 $61.20 $6,120.00 0
Leslie R. Anderson 13-Mar-81 13 B 637 $10.00 $6,370.00(A) 637
Leslie R. Anderson 04-Nov-81 129 B 2,000 $10.00 $20,000.00 2,637
Leslie R. Anderson 30-Sep-82 177 B 6,900 $11.35 (B) 11,537
Leslie R. Anderson 13-Nov-84 129 B 2,000 $16.40 $32,800.00 9,537
Leslie R. Anderson 13-Nov-84 13 B 637 $16.40 $10,446.80 8,900
</TABLE>
Page - 1 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Leslie R. Anderson 01-Nov-88 177 B 8,900 (C) (C)
Leslie R. Anderson 01-Nov-88 1093 B 44,500 (C) (C) 44,500
Leslie R. Anderson 01-Oct-89 1093 B 44,500 $15.25 $678,625.00 0
Raymond F. Aquilina 30-Sep-82 253 500 $11.35 (B) 500
Raymond F. Aquilina 17-Sep-85 741 250 $23.00 $5,750.00 750
Raymond F. Aquiline 19-Jan-88 253 B 500 $57.20 $28,600.00 250
Raymond F. Aquilina 19-Jan-88 741 B 250 $57.20 $14,300.00 0
Willie W. Ashley, Jr. 21-Sep-87 853 B 50 $53.00 $2,650.00 50
Willie W. Ashley. Jr. 01-Nov-88 853 B 50 (C) (C)
Willie W. Ashley, Jr. 01-Nov-88 1055 B 250 (C) (C) 250
Willie W. Ashley, Jr. 04-May-89 1055 B 250 $14.32 $3,500.00 0
Thomas K. Badger 28-Feb-84 387 B 100 $14.40 $1,440.00 100
Thomas K. Badger 17-Sep-85 696 B 100 $23.00 $2,300.00 200
Thomas K. Badger 17-Dec-86 696 B 100 $45.00 $4,500.00 100
Thomas K. Badger 17-Dec-86 387 B 100 $45.00 $4,500.00 0
[ILLEGIBLE] A. Baxter 31-Mar-84 506 B 100 $14.40 $1,440.00 100
[ILLEGIBLE] A. Baxter 17-Sep-85 606 B 100 $23.00 $2,300.00 200
[ILLEGIBLE] A. Baxter 01-Nov-88 B 200 (C) (C)
[ILLEGIBLE] A. Baxter 01-Nov-88 1065 B 1,000 (C) (C) 1,000
[ILLEGIBLE] A. Baxter 07-Jun-89 1065 B 1,000 $14.52 $14,520.00 0
Kenneth N. Beckman 04-Nov-81 96 B 100 $10.00 $1,000.00 100
Kenneth N. Beckman 05-Sep-84 96 B 100 $16.00 $1,600.00 0
Jack A. Beckett 06-Nov-81 146 B 200 $10.00 $2,000.00 200
Jack A. Beckett 28-Mar-84 146 B 200 $14.80 $2,960.00 0
</TABLE>
Page - 2 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
David S. Bennett 21-Sep-87 858 B 50 $53.00 $2,650.00 50
David S. Bennett 01-Nov-88 858 B 50 (C) (C)
David S. Bennett 01-Nov-88 1084 B 250 (C) (C) 250
David S. Bennett 31-May-89 1084 B 250 $14.32 $3,580.00 0
Allan 0. Berg 04-Nov-81 136 B 100 $10.00 $1,000.00 100
Allan 0. Berg 30-Sep-82 262 B 100 $11.35 (B) 200
Allan 0. Berg 28-Feb-84 353 B 200 $14.40 $2,600.00 400
Allan 0. Berg 13-Jun-04 353 B 100 $15.40 $1,540.00 300
Allan 0. Berg 17-Sep-85 702 B 100 $23.00 $2,300.00 400
Allan 0. Berg 21-Sep-87 834 B 100 $53.00 $5,300.00 500
Allan O. Berg 04-Apr-88 834 B 100 $59.60 $5,960.00 400
Allan 0. Berg 01-Nov-88 B 400 (C) (C)
Allan 0. Berg 01-Nov-88 1102 B 2,000 (C) (C) 2,000
Leonard A. Berglund, Jr. 17-Sep-85 614 B 50 $23.00 $1,150.00 50
Leonard A. Berglund. Jr. 17-Aug-88 614 B 50 $62.80 $3,140.00 0
Robert E. Berretta 05-Nov-81 51 B 250 $10.00 $2,500.00 250
Robert E. Berretta 06-Jul-84 51 B 250 $15.60 $3,900.00 0
Joseph J. Bertagnolli 21-Sep-87 859 B 100 $53.00 $5,300.00 100
Joseph J. Bertagnolli 01-Nov-88 859 B 100 (C) (C)
Joseph J. Bertagnolli 01-Nov-88 1097 B 500 (C) (C) 500
Joseph J. Bertagnolli 06-Jul-89 1097 B 450 $14.72 $6,624.00 50
Joseph J. Bertagnolli 06-Jul-89 1313 B 50
Joseph J. Bertagnolli 01-May-90 1362 B 450 $16.75 $7,537.50 500
James B. Blunk. Jr. 17-Sep-85 583 B 50 $23.00 $1,150.00 50
James B. Blunk. Jr. 11-Jun-87 583 B 50 $51.00 $2,550.00 0
</TABLE>
Page - 3 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas John Bobowski 17-Sep-85 588 B 100 $23.00 $2,300.00 100
Thomas John Bobowskl 03-Aug-87 588 B 100 $53.00 $5,300.00 0
Larry S. Bobst 04-Nov-81 137 B 100 $10.00 $1,000.00 100
Larry S. Bobst 28-Feb-84 395 B 100 $14.40 $1,440.00 200
Larry S. Bobst 21-Sep-87 864 B 50 $53.00 $2,650.00 250
Larry S. Bobst 06-Jun-88 864 B 50 $61.20 $3,060.00 200
Larry S. Bobst 06-Jun-88 395 B 100 $61.20 $6,120.00 100
Larry S. Bobst 01-Nov-88 137 B 100 (C) (C)
Larry S. Bobst 01-Nov-88 1072 B 500 (C) (C) 500
Larry S. Bobst 06-Feb-90 1072 B 200 $16.75 $3,350.00 300
Larry S. Bobst 06-Feb-90 1337 B 300
Larry S. Bobst 02-Jul-90 1337 B 300 $17.50 $5,250.00 0
Ronald P. Bodeen 23-Mar-81 27 B 415 $10.00 $4,150.00(A) 415
Ronald P. Bodeen 05-Nov-81 57 B 300 $10.00 $3,000.00 715
Ronald P. Bodeen 30-Sep-82 277 B 300 $11.35 (B) 1,015
Ronald P. Bodeen 05-Oct-83 27 B 415 $13.87 $5,756.05 600
Ronald P. Bodeen 05-Oct-83 277 B 300 $13.87 $4,161.00 300
Ronald P. Bodeen 05-Oct-83 57 B 300 $13.87 $4,161.00 0
Michael A. Boos 28-Feb-84 415 B 100 $14.40 $1,440.00 100
Michael A. Boos 06-Jan-86 415 B 100 $30.00 $3,000.00 0
Gary D. Bowman 04-Nov-81 126 B 350 $10.00 $3,500.00 350
Gary C. Bowman 19-Jul-84 126 B 350 $15.60 $5,460.00 0
Jack L. Bowman 13-Mar-81 30 B 2,648 $10.00 $26,480.00(A) 2,648
Jack L. Bowman 06-Nov-81 159 B 2,768 $10.00 $27,680.00 5,416
Jack L. Bowman 06-Nov-81 130 B 525 $10.00 $5,250.00 5,941
Jack L. Bowman 11-Dec-81 13 A 1 5,942
</TABLE>
Page - 4 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jack L. Bowman 30-Sep-82 287 B 1,500 $11.35 (B) 7,442
Jack L. Bowman 02-Sep-83 13 A 1 7,441
Jack L. Bowman 15-Feb-84 159 B 2,768 $14.60 $40,412.00 4,673
Jack L. Bowman 15-Feb-84 287 B 1,500 $14.60 $21,900.00 3,173
Jack L. Bowman 15-Feb-84 30 B 2,648 $14.60 $38,660.80 525
Jack L. Bowman 15-Feb-84 130 B 525 $14.60 $7,665.00 0
Raymond C. Bradbury 17-Sep-85 688 B 150 $23.00 $3,450.00 150
Raymond C. Bradbury 06-Jul-87 688 B 75 $52.00 $3,900.00 75
Raymond C. Bradbury 06-Jul-87 811 B 75
Raymond C. Bradbury 21-Jan-88 811 B 75 $57.20 $4,290.00 0
John T. Braton 21-Sep-87 865 B 100 $53.00 $5,300.00 100
John T. Braton 31-0ct-88 865 B 100 $64.60 $6,460.00 0
Gregory D. Breland 21-Sep-87 866 B 100 $53.00 $5,300.00 100
Gregory D. Breland 01-Nov-88 866 B 100 (C) (C)
Gregory D. Breland 01-Nov-88 1073 B 500 (C) (C) 500
Gregory D. Breland 07-Apr-89 1073 B 500 $14.12 $7,060.00 0
Barry M. Brown 05-Nov-81 41 B 600 $10.00 $6,000.00 600
Barry M. Brown 30-Sep-82 183 B 1,000 $11.35 (B) 1,600
Barry M. Brown 27-Mar-84 464 B 400 $14.40 $5,760.00 2,000
Barry M. Brown 17-Sep-85 726 B 1,000 $23.00 $23,000.00 3,000
Barry M. Brown 21-Sep-87 867 B 600 $53.00 $31,800.00 3,600
Barry M. Brown 21-Oct-87 30 A 1 3,601
Barry M. Brown 01-Nov-88 B 3,600 (C) (C)
Barry M. Brown 01-Nov-88 1061 B 18,000 (C) (C) 18,001
Barry M. Brown 06-Jul-90 30 A 1 18,000
Barry M. Brown 25-Jul-90 1061 B 18,000 $17.50 $315,000.00 0
</TABLE>
Page - 5 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Christopher R. Browne 30-Sep-82 284 B 100 $11.35 (B) 100
Christopher R. Browne 06-Sep-83 284 B 100 $13.69 $1,369.00 0
Peter G. Bruder 04-Nov-81 37 B 490 $10.00 $4,900.00 490
Peter G. Bruder 30-Sep-82 185 B 400 $11.35 (B) 890
Peter G. Bruder 12-Sep-85 37 B 490 $23.80 $11,662.00 400
Peter G. Bruder 12-Sep-85 185 B 400 $23.80 $9,520.00 0
James L Burgess 28-Feb-84 381 B 200 $14.40 $2,880.00 200
James L. Burgess 12-Feb-87 381 B 200 $47.00 $9,400.00 0
Boyd B. Burkholder 28-Feb-84 383 B 1,000 $14.40 $14,400.00 1,000
Boyd B. Burkholder 17-Sep-85 630 B 200 $23.00 $4,600.00 1,200
Boyd B. Burkholder 01-Aug-86 383 B 1,000 $40.50 $40,500.00 200
Boyd B. Burkholder 01-Aug-86 630 B 200 $40.50 $8,100.00 0
Gary D. Burrows 21-Sep-87 870 B 100 $53.00 $5,300.00 100
Gary D. Burrows 01-Nov-88 870 B 100 (C) (C)
Gary D. Burrows 01-Nov-88 1286 B 500 (C) (C) 500
Gary D. Burrows 04-May-89 1286 B 500 $14.32 $7,160.00 0
Richard J. Busch 05-Nov-81 69 B 300 $10.00 $3,000.00 300
Richard J. Busch 14-Mar-84 69 B 300 $14.80 $4,440.00 0
Joseph W. Cabrina 01-May-90 1521 B 100 $16.75 $1,675.00 100
Joseph W. Cabrina 19-Jul-90 1521 B 100 $17.50 $1,750.00 0
David H. Campbell 21-Sep-87 871 B 100 $53.00 $5,300.00 100
David H. Campbell 07-Sep-88 671 B 100 $63.60 $6,360.00 0
Charles E. Canedy 28-Feb-84 380 B 100 $14.40 $1,440.00 100
</TABLE>
Page - 6 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Charles E. Canedy 17-Oct-88 300 B 100 $12.92 $1,292.00 0
Charles E. Canedy 01-May-90 1522 B 300 $16.75 $5,025.00 300
George Caridakis 04-Nov-81 148 B 200 $10.00 $2,000.00 200
Georoe CaridakIs 08-Nov-84 148 B 200 $16.40 $3,280.00 0
William Carrier, Jr. 04-Nov-81 119 B 250 $10.00 $2,500.00 250
William Carrier, Jr. 05-Oct-83 119 B 250 $13.87 $3,467.50 0
James C. Carroll 21-Sep-87 873 B 150 $53.00 $7,950.00 150
James C. Carroll 21-Oct-88 873 B 150 $64.60 $9,690.00 0
James W. Carroll 01-May-90 1523 B 100 $16.75 $1,675.00 100
James W. Carroll 31-Jul-90 1523 B 100 $17.50 $1,750.00 0
Mark B. Cheben 21-Sep-87 874 B 100 $53.00 $5,300.00 100
Mark B. Cheben 13-Sep-88 874 B 100 $63.60 $6,360.00 0
John M. Compton 31-Mar-84 494 B 100 $14.40 $1,440.00 100
John M. Compton 01-Aug-85 494 B 100 $23.00 $2,300.00 0
Billy J. Cone 28-Feb-84 351 B 100 $14.40 $1,440.00 100
Billy J. Cone 01-Nov-88 351 B 100 (C) (C)
Billy J. Cone 01-Nov-88 1106 B 500 (C) (C) 500
Billy J. Cone 01-Oct-89 1106 B 500 $15.25 $7,625.00 0
Oliver J. Cook, Jr. 05-Nov-81 39 B 300 $10.00 $3,000.00 300
Oliver J. Cook, Jr. 30-Sep-82 188 B 300 $11.35 (B) 600
Oliver J. Cook, Jr. 05-Mar-84 368 B 100 $14.40 $1,440.00 700
Oliver J. Cook. Jr. 03-Fob-86 39 B 300 $31.50 $9,450.00 400
Oliver J. Cook. Jr. 03-Feb-86 188 B 300 $31.50 $9,450.00 100
</TABLE>
Page - 7 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Oliver J. Cook, Jr. 03-Feb-86 368 B 100 $31.50 $3,150.00 0
Gerald E. Copher 30-Sep-82 307 B 1,000 $11.35 (B) 1,000
Gerald E. Copher 06-Sep-83 307 B 1,000 $13.69 $13.690.00 0
John G. Corbett 21-Sep-87 879 B 100 $53.00 $5,300.00 100
John G. Corbett 01-Nov-88 879 B 100 (C) (C)
John G. Corbett 01-Nov-88 1078 B 500 (C) (C) 500
John G. Corbett 01-May-90 1380 B 400 $16.75 $6,700.00 900
John G. Corbett 09-Jan-91 1078 B 500 $18.68 $9,340.00 400
John G. Corbett 09-Jan-91 1380 B 400 $18.68 $7,472.00 0
David C. Cottington 30-Mar-84 476 B 100 $14.40 $1,440.00 100
David C. Cottington 03-Sep-85 476 B 100 $23.80 $2,380.00 0
David G. Craft 16-Mar-81 24 B 419 $10.00 $4,190.00(A) 419
David G. Craft 04-Nov-81 127 B 600 $10.00 $6,000.00 1,019
David G. Craft 30-Sep-82 278 B 500 $11.35 (B) 1,519
David G. Craft 21-Nov-83 24 B 419 $14.05 $5,886.95 1,100
David G. Craft 21-Nov-83 278 B 500 $14.05 $7,025.00 600
David G. Craft 21-Nov-83 127 B 600 $14.05 $8,430.00 0
Donald C. Cunningham 06-Nov-81 135 B 100 $10.00 $1,000.00 100
Donald C. Cunningham 28-Feb-84 338 B 100 $14.40 $1,440.00 200
Donald C. Cunningham 17-Sep-85 698 B 50 $23.00 $1,150.00 250
Donald C. Cunningham 21-Sep-87 887 B 50 $53.00 $2,650.00 300
Donald C. Cunningham 01-Nov-88 B 300 (C) (C)
Donald C. Cunningham 01-Nov-88 1083 B 1,500 (C) (C) 1,500
Donald C. Cunningham 01-May-90 1389 B 100 $16.75 $1,675.00 1,600
Donald C. Cunningham 01-Aug-90 1389 B 100 $17.75 $1,775.00 1,500
Donald C. Cunningham 01-Aug-90 1083 B 1,500 $17.75 $26,625.00 0
Page - 8 -
<PAGE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Theodore W. Cuny, Jr. 06-Nov-81 140 B 500 $10.00 $5,000.00 500
Theodore W. Cuny, Jr. 29-Feb-84 397 B 700 $14.40 $10,080.00 1,200
Theodore W. Cuny, Jr. 01-Nov-88 B 1,200 (C) (C)
Theodore W. Cuny, Jr. 01-Nov-80 1086 B 6,000 (C) (C) 6,000
Theodore W. Cuny, Jr. 01-Jan-90 1086 B 6,000 $16.00 $96,000.00 0
Joseph G. Dalgle 06-Nov-81 133 B 100 $10.00 $1,000.00 100
Joseph G. Dalgle 30-Sep-82 190 B 200 $11.35 (B) 300
Joseph G. Dalgle 17-Sep-85 581 B 200 $23.00 $4,600.00 500
Joseph G. Dalgle 01-Nov-88 B 500 (C) (C)
Joseph G. Dalgle 01-Nov-88 1107 B 2,500 (C) (C) 2,500
Joseph G. Dalgle 24-Aug-89 1107 B 2,500 $14.92 $37,300.00 0
Eugene B. Dalbey 04-Nov-81 77 B 640 $10.00 $6,400.00 640
Eugene B. Dalbey 18-Apr-84 77 B 640 $15.00 $9,600.00 0
Elmer J. Dalflume 30-Sep-82 276 B 100 $11.35 (B) 100
Elmer J. Dalflume 20-Jun-84 276 B 100 $15.40 $1,540.00 0
William A. Dast 13-Mar-81 20 B 127 $10.00 $1,270.00(A) 127
William A. Dast 04-Nov-81 160 B 250 $10.00 $2,500.00 377
William A. Dast 11-Dec-81 8 A 1 378
William A. Dast 30-Sep-82 191 B 300 $11.35 (B) 678
William A. Dast 29-Feb-84 450 B 2,O0O $14.40 $28,800.00 2,678
William A. Dast 17-Sep-85 627 B 1,500 $23.00 $34,500.00 4,178
William A. Dast 01-Oct-86 627 B 1,500 $43.00 $64,500.00 2,678
William A. Dast 01-Nov-88 191 B 300 (C) (C)
William A. Dast 01-Nov-88 450 B 2,000 (C) (C)
William A. Dast 01-Nov-88 20 B 127 (C) (C)
William A. Dast 01-Nov-88 160 B 250 (C) (C)
Page - 9 -
<PAGE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
---------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
William A. Dast 01-Nov-88 1033 B 13,385 (C) (C) 13,386
Harold E. Diekman, Jr. 28-Feb-84 419 B 100 $14.40 $1,440.00 100
Harold E. Diekman. Jr. 03-Aug-87 419 B 100 $53.00 $5,300.00 0
John P. Dodson 05-Nov-81 66 B 200 $10.00 $2,000.00 200
John P. Dodson 18-Dec-86 66 B 200 $45.00 $9,000.00 0
Richard E. Dodson 28-Feb-84 410 B 200 $14.40 $2,880.00 200
Richard E. Dodson 29-May-85 410 B 200 $20.60 $4,120.00 0
Herman T. Dubuc, Jr. 13-Mar-81 14 B 495 $10.00 $4,950.00(A) 495
Herman T. Dubuc, Jr. 23-Oct-81 115 B 750 $10.00 $7,500.00 1,245
Herman T. Dubuc, Jr. 30-Sep-82 279 B 2,000 $11.35 (B) 3,245
Herman T. Dubuc, Jr. 28-Mar-88 14 B 495 $58.80 $29,106.00 2,750
Herman T. Dubuc, Jr. 12-Apr-88 115 B 386 $59.60 $23,005.60 2,364
Herman T. Dubuc, Jr. 12-Apr-88 998 B 2,364
Herman T. Dubuc, Jr. 01-Nov-88 B 2,364 (C) (C)
Herman T. Dubuc, Jr. 01-Nov-88 1178 B 11,820 (C) (C) 11,820
Herman T. Dubuc, Jr. 01-Apr-89 1178 B 11,820 $14.12 $166,898.40 0
Lawrence I. Duggan 30-Sep-82 300 B 200 $11.35 (B) 200
Lawrence I. Duggan 28-Feb-84 358 B 100 $14.40 $1,440.00 300
Lawrence I. Duggan 07-Apr-87 358 B 100 $49.00 $4,900.00 200
Lawrence I. Duggan 07-Apr-87 300 B 200 $49.00 $9,800.00 0
Lawrence I. Duggan 01-May-90 1532 B 50 $16.75 $837.50 50
Martin R. Durbin 28-Feb-84 412 B 100 $14.40 $1,440.00 100
Martin R. Durbin 21-Sep-87 892 B 100 $53.00 $5,300.00 200
Martin R. Durbin 15-Jun-88 892 B 100 $61.20 $6,120.00 100
Martin R. Durbin 08-Sep-88 412 B 90 $63.60 $5,724.00 10
Page - 10 -
<PAGE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Martin R. Durbin 08-Sep-88 1021 B 10
Martin R. Durbin 01-Nov-88 1021 B 10 (C) (C)
Martin R. Durbin 01-Nov-88 1179 B 50 (C) (C) 50
Peter A. Dysko 17-Sep-85 658 B 100 $23.00 $2,300.00 100
Peter A. Dysko 01-Jul-88 658 B 100 $62.00 $6,200.00 0
Arthur R. Elpper, Jr. 17-Sep-85 604 B 400 $23.00 $9,200.00 400
Arthur R. Elpper, Jr. 16-May-88 604 B 400 $60.40 $24,160.00 0
Paul H. Engel 15-Mar-84 452 B 400 $14.40 $5,760.00 400
Paul H. Engel 17-Sep-85 654 B 400 $23.00 $9,200.00 800
Paul H. Engel 21-Sep-87 895 B 100 $53.00 $5,300.00 900
Paul H. Engel 01-Nov-88 B 900 (C) (C)
Paul H. Engel 01-Nov-88 1101 B 4,500 (C) (C) 4,500
Paul H. Engel 01-Apr-89 1101 B 4,500 $14.12 $63,540.00 0
Lloyd J. Engelhardt 05-Nov-81 149 B 500 $10.00 $5,000.00 500
Lloyd J. Engelhardt 30-Sep-82 197 B 200 $11.35 (B) 700
Lloyd J. Engelhardt 15-Mar-84 432 B 200 $14.40 $2,880.00 900
Lloyd J. Engelhardt 02-Jan-85 432 B 200 $17.40 $3,480.00 700
Lloyd J. Engelhardt 02-Jan-85 197 B 200 $17.40 $3,480.00 500
Lloyd J. Engelhardt 02-Jan-85 149 B 500 $17.40 $8,700.00 0
Webster C. English, Jr. 16-Mar-81 25 B 876 $10.00 $8,760.00(A) 876
Wobster C. English, Jr. 15-Nov-81 71 B 124 $10.00 $1,240.00 1,000
Webster C. English, Jr. 30-Sep-82 198 B 500 $11.35 (B) 1,500
Webster C. English, Jr. 10-Jan-83 71 B 124 $12.25 $1,519.00 1,376
Webster C. English, Jr. 10-Jan-83 198 B 500 $12.25 $6,125.00 876
Webster C. English, Jr. 10-Jan-83 25 B 876 $12.25 $10,731.00 0
Page - 11 -
<PAGE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Betty J. Epperson 04-Nov-81 141 B 100 $10.00 $1,000.00 100
Betty J. Epperson 04-Aug-86 141 B 100 $40.50 $4,050.00 0
John W. Fair 16-Mar-81 22 B 688 $10.00 $6,880.00(A) 688
John W. Fair 17-Jan-84 22 B 688 $14.40 $9,907.20 0
Kenneth Fisher 17-Sep-85 615 B 100 $23.00 $2,300.00 100
Kenneth Fisher 06-Jun-86 615 B 100 $37.50 $3,750.00 0
David E. Fitzgerald 17-Sep-85 609 B 100 $23.00 $2,300.00 100
David E. Fitzgerald 01-Jul-87 609 B 100 $52.00 $5,200.00 0
David R. Foshee 05-Nov-81 46 B 400 $10.00 $4,000.00 400
David R. Foshee 01-Nov-88 46 B 400 (C) (C)
David R. Foshee 01-Nov-88 1110 B 2,000 (C) (C) 2,000
David R. Foshee 01-May-90 1399 B 400 $16.75 $6,700.00 2,400
David R. Foshee 01-Aug-90 1110 B 2,000 $17.75 $35,500.00 400
David R. Foshee 01-Aug-90 1399 B 400 $17.75 $7,100.00 0
Charles L. Fye, Jr. 17-Sep-85 554 B 100 $23.00 $2,300.00 100
Charles L. Fye, Jr. 27-Jul-87 554 B 100 $52.00 $5,200.00 0
Dwight W. Galda 17-Sep-85 672 B 100 $23.00 $2,300.00 100
Dwight W. Galda 06-Oct-86 672 B 95 $43.00 $4,085.00 5
Dwight W. Galda 06-Oct-86 773 B 5
Dwight W. Galda 01-Nov-88 773 B 5 (C) (C)
Dwight W. Galda 01-Nov-88 1113 B 25 (C) (C) 25
Dwight W. Galda 01-May-90 1403 B 50 $16.75 $837.50 75
Dick F. Gibson 04-Nov-81 84 B 250 $10.00 $2,500.00 250
Dick F. Gibson 07-Feb-84 84 B 250 $14.60 $3,650.00 0
Page - 12 -
<PAGE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Richard E. Giles 30-Sep-82 301 B 300 $11.35 (B) 300
Richard E. Giles 28-Feb-84 359 B 400 $14.40 $5,760.00 700
Richard E. Giles 14-Nov-86 B 500 $44.00 $22,000.00 200
Richard E. Giles 14-Nov-86 781 B 200
Richard E. Giles 01-Nov-88 781 B 200 (C) (C)
Richard E. Giles 01-Nov-88 B 1,000 (C) (C) 1,000
Joseph M. Gilmore 05-Nov-81 49 B 450 $10.00 $4,500.00 450
Joseph M. Gilmore 09-Mar-84 422 B 700 $14.40 $10,080.00 1,150
Joseph M. Gilmore 17-Sep-85 625 B 400 $23.00 $9,200.00 1,550
Joseph M. Gilmore 01-Nov-88 B 1,550 (C) (C)
Joseph M. Gilmore 01-Nov-88 1114 B 7,750 (C) (C) 7,750
Joseph M. Gilmore 03-Jan-89 1114 B 7,750 $13.52 $104,780.00 0
Gary W. Goldenbogen 28-Feb-84 376 B 100 $14.40 $1,440.00 100
Gary W. Goldenbogen 17-Sep-85 704 B 50 $23.00 $1,150.00 150
Gary W. Goldenbogen 01-Nov-88 150 (C) (C)
Gary W. Goldenbogen 01-Nov-88 1116 B 750 (C) (C) 750
Gary W. Goldenbogen 11-Jun-90 1116 B 750 $17.25 $12,937.50 0
Charles S. Graham, III 21-Mar-84 459 B 3,500 $14.40 $50,400.00 3,500
Charles S. Graham, III 17-Sep-85 632 B 800 $23.00 $118,400.00 4,300
Charles S. Graham, III 21-Sep-87 902 B 200 $53.00 $10,600.00 4,500
Charles S. Graham, III 01-Nov-88 B 4,500 (C) (C)
Charles S. Graham, III 01-Nov-88 1119 B 22,500 (C) (C) 22,500
Charles S. Graham, III 15-Jul-89 1119 B 22,500 $14.72 $331,200.00 0
David L. Gray 31-Mar-84 488 B 400 $14.40 $5,760.00 400
David L. Gray 17-Sep-85 602 B 300 $23.00 $6,900.00 700
David L. Gray 07-Apr-86 488 B 400 $34.50 $13,800.00 300
Page - 13 -
<PAGE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
David L. Gray 07-Apr-86 602 B 300 $34.50 $10,350.00 0
Jency W. Griffin 05-Mar-84 374 B 100 $14.40 $1,440.00 100
Jency W. Griffin 05-Feb-85 374 B 100 $18.20 $1,820.00 0
Heidi S. Griffiths 21-Sep-87 904 B 100 $53.00 $5,300.00 100
Heidi S. Griffiths 01-Nov-88 904 B 100 (C) (C)
Heidi S. Griffiths 01-Nov-88 1121 B 500 (C) (C) 500
Heidi S. Griffiths 14-Aug-89 1121 B 500 $14.92 $7,460.00 0
Richard A Gwyn 30-Sep-82 313 B 100 $11.35 (B) 100
Richard A Gwyn 01-Nov-88 313 B 100 (C) (C)
Richard A Gwyn 01-Nov-88 B 500 (C) (C) 500
Richard A Gwyn 01-May-90 1408 B 350 $16.75 $5,862.50 850
Richard A Gwyn 31-Jul-90 B 500 $17.50 $8,750.00 350
Richard A Gwyn 31-Jul-90 1408 B 350 $17.50 $6,125.00 0
Antone W. Hagen 17-Sep-85 687 B 100 $23.00 $2,300.00 100
Antone W. Hagen 01-Nov-88 687 B 100 (C) (C)
Antone W. Hagen 01-Nov-88 1270 B 500 (C) (C) 500
Antone W. Hagen 01-Mar-89 1270 B 500 $13.92 $6,960.00 0
Harry E. Hall 05-Nov-81 50 B 300 $10.00 $3,000.00 300
Harry E. Hall 30-Sep-82 203 B 300 $11.35 (B) 600
Harry E. Hall 05-Nov-86 50 B 300 $44.00 $13,200.00 300
Harry E. Hall 05-Nov-86 203 B 300 $44.00 $13,200.00 0
Ronald L. Halsted 17-Sep-85 659 B 100 $23.00 $2,300.00 100
Ronald L. Halsted 30-Jul-86 659 B 100 $39.00 $3,900.00 0
George A. Hamlin 04-Nov-81 86 B 100 $10.00 $1,000.00 100
</TABLE>
Page - 14 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
George A. Hamlin 09-Apr-82 86 B 100 $10.90 $1,090.00 0
John F. Hampton 04-Nov-81 98 B 100 $10.00 $1,000.00 100
John F. Hampton 31-Mar-84 482 B 100 $14.40 $1,440.00 200
John F. Hampton 17-Sep-85 652 B 100 $23.00 $2,300.00 300
John F. Hampton 21-Sep-87 907 B 250 $53.00 $13,250.00 550
John F. Hampton 01-Nov-88 B 550 (C) (C)
John F. Hampton 01-Nov-88 1126 B 2,750 (C) (C) 2,750
John F. Hampton 01-May-90 1412 B 300 $16.75 $5,025.00 3,050
John F. Hampton 01-Oct-90 1126 B 2,750 $18.17 $49,967.50 300
John F. Hampton 01-Oct-90 1412 B 300 $18.17 $5,451.00 0
Billy R. Harrison 04-Nov-81 131 B 500 $10.00 $5,000.00 500
Billy R. Harrison 30-Sep-82 204 B 500 $11.35 (B) 1,000
Billy R. Harrison 05-Mar-84 366 B 600 $14.40 $8,640.00 1,600
Billy R. Harrison 17-Sep-85 649 B 200 $23.00 $4,600.00 1,800
Billy R. Harrison 02-Sep-86 366 B 600 $42.00 $25,200.00 1,200
Billy R. Harrison 02-Sep-86 649 B 200 $42.00 $8,400.00 1,000
Billy R. Harrison 02-Sep-86 204 B 500 $42.00 $21,000.00 500
Billy R. Harrison 02-Sep-86 131 B 500 $42.00 $21,000.00 0
Donald H. Hart 17-Sep-85 613 B 100 $23.00 $2,300.00 100
Donald H. Hart 01-Nov-88 613 B 100 (C) (C)
Donald H. Hart 01-Nov-88 1127 B 500 (C) (C) 500
Donald H. Hart 01-Oct-89 1127 B 500 $15.25 $7,625.00 0
Alexander H.C. Harwick 01-May-90 1552 B 250 $16.75 $4,187.50 250
Alexander H.C. Harwick 11-Sep-90 1552 B 250 $18.00 $4,500.00 0
Howard F. Haupt, II 17-Sep-85 670 B 100 $23.00 $2,300.00 100
Howard F. Haupt, II 21-Sep-87 910 B 50 $53.00 $2,650.00 150
Page - 15 -
<PAGE>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Howard F. Haupt, II 01-Nov-88 B 150 (C) (C)
Howard F. Haupt, II 01-Nov-88 1128 B 750 (C) (C) 750
Howard F. Haupt, II 01-Jul-89 1128 B 750 $14.72 $11,040.00 0
James H. Henderson 04-Nov-81 103 B 100 $10.00 $1,000.00 100
James H. Henderson 30-Sep-82 266 B 900 $11.35 (B) 1,000
James H. Henderson 16-Mar-84 456 B 500 $14.40 $7,200.00 1,500
James H. Henderson 06-Jun-86 456 B 500 $37.50 $18,750.00 1,000
James H. Henderson 06-Jun-86 266 B 900 $37.50 $33,750.00 100
James H. Henderson 06-Jun-86 103 B 100 $37.50 $3,750.00 0
James W. Hill, III 05-Nov-81 44 B 420 $10.00 $4,200.00 420
James W. Hill, III 30-Sep-82 206 B 400 $11.35 (B) 820
James W. Hill, III 06-Sep-83 206 B 400 $13.69 $5,476.00 420
James W. Hill, III 17-Sep-85 585 B 100 $23.00 $2,300.00 520
James W. Hill, III 10-Oct-86 585 B 100 $43.00 $4,300.00 420
James W. Hill, III 10-Nov-86 44 B 200 $44.00 $8,800.00 220
James W. Hill, III 10-Nov-86 779 B 220
James W. Hill, III 02-Mar-87 779 B 70 $48.00 $3,360.00 150
James W. Hill, III 02-Mar-87 796 B 150
James W. Hill, III 04-May-87 796 B 50 $50.00 $2,500.00 100
James W. Hill, III 04-May-87 801 B 100
James W. Hill, III 27-May-87 801 B 20 $50.00 $1,000.00 80
James W. Hill, III 27-May-87 803 B 80
James W. Hill, III 05-Jun-87 803 B 80 $51.00 $4,080.00 0
David A. Himes 05-Nov-81 32 B 2,000 $10.00 $20,000.00 2,000
David A. Himes 30-Sep-82 267 B 3,000 $11.35 (B) 5,000
David A. Himes 17-Jun-88 32 B 2,000 $61.20 $122,400.00 3,000
David A. Himes 17-Jun-88 267 B 3,000 $61.20 $183,600.00 0
Page - 16 -
<PAGE>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
F. Reed Holsington, III 30-Sep-82 255 B 100 $11.35 (B) 100
F. Reed Holsington, III 27-Mar-84 465 B 100 $14.40 $1,440.00 200
F. Reed Holsington, III 26-Sep-84 255 B 100 $16.00 $1,600.00 100
F. Reed Holsington, III 26-Sep-84 465 B 100 $16.00 $1,600.00 0
William M. Hood 17-Sep-85 686 B 100 $23.00 $2,300.00 100
William M. Hood 21-Sep-87 913 B 50 $53.00 $2,650.00 150
William M. Hood 01-Nov-88 B 150 (C) (C)
William M. Hood 01-Nov-88 1130 B 750 (C) (C) 750
William M. Hood 31-Mar-90 1130 B 750 $16.75 $12,562.50 0
Douglas E. Hovde 21-Sep-87 914 B 50 $53.00 $2,650.00 50
Douglas E. Hovde 19-Apr-88 914 B 50 $59.60 $2,980.00 0
Dean R. Huffer 04-Nov-81 94 B 100 $10.00 1,000.00 100
Dean R. Huffer 09-Feb-88 94 B 100 $58.00 $5,800.00 0
William C. Hugenberg, Jr. 13-Mar-81 15 B 621 $10.00 $6,210.00(A) 621
William C. Hugenberg, Jr. 04-Nov-81 152 B 2,000 $10.00 $20,000.00 2,621
William C. Hugenberg, Jr. 30-Sep-62 207 B 2,000 $11.35 (B) 4,621
William C. Hugenberg, Jr. 29-Feb-84 429 B 1,300 $14.40 $18,720.00 5,921
William C. Hugenberg, Jr. 17-Sep-85 565 B 200 $23.00 $4,600.00 6,121
William C. Hugenberg, Jr. 01-Nov-88 429 B 1,300 (C) (C)
William C. Hugenberg, Jr. 01-Nov-88 207 B 2,000 (C) (C)
William C. Hugenberg, Jr. 01-Nov-88 15 B 621 (C) (C)
William C. Hugenberg, Jr. 01-Nov-88 565 B 200 (C) (C)
William C. Hugenberg, Jr. 01-Nov-88 152 B 2,000 (C) (C)
William C. Hugenberg, Jr. 01-Nov-68 1035 B 30,605 (C) (C) 30,605
William C. Hugenberg, Jr. 02-Jul-90 1035 B 30,605 $17.50 $535,587.50 0
Alvin C. Hutchins, Jr. 28-Feb-84 393 B 300 $14.40 $4,320.00 300
Page - 17 -
<PAGE>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alvin C. Hutchins, Jr. 07-Jun-85 393 B 300 $21.40 $6,420.00 0
Edward W. Jackson, Jr. 17-Sep-85 566 B 50 $23.00 $1,150.00 50
Edward W. Jackson, Jr. 22-Sep-87 566 B 50 $54.00 $2,700.00 0
Peter M. Jenks 01-May-90 1566 B 100 $16.75 $1,675.00 100
Peter M. Jenks 29-Oct-90 1566 B 100 $18.17 $1,817.00 0
Charlie C. Jones 13-Mar-81 10 B 3,685 $10.00 $36,850.00 (A) 3,685
Charlie C. Jones 04-Nov-81 155 B 315 $10.00 $3,150.00 4,000
Charlie C. Jones 14-May-82 10 B 500 $11.05 $5,525.00 3,500
Charlie C. Jones 14-May-82 167 B 3,500
Charlie C. Jones 30-Mar-84 493 B 200 $14.40 $2,880.00 3,700
Charlie C. Jones 17-Sep-85 732 100 $23.00 $2,300.00 3,800
Charlie C. Jones 01-Nov-88 B 3,800 (C) (C)
Charlie C. Jones 01-Nov-88 1258 B 5,000 (C) (C)
Charlie C. Jones 01-Nov-88 1256 B 5,000 (C) (C)
Charlie C. Jones 01-Nov-88 1257 B 5,000 (C) (C)
Charlie C. Jones 01-Nov-88 1259 B 4,000 (C) (C) 19,000
Charlie C. Jones 01-Aug-89 1259 B 4,000 $14.92 $59,680.00 15,000
Charlie C. Jones 01-Aug-89 1258 B 5,000 $14.92 $74,600.00 10,000
Charlie C. Jones 04-Jan-91 1256 B 5,000 $18.68 $93,400.00 5,000
Charlie C. Jones 04-Jan-91 1257 B 5,000 $18.68 $93,400.00 0
James R. Johnson 06-Nov-81 122 B 590 $10.00 $5,900.00 590
James R. Johnson 30-Sep-82 261 B 100 $11.35 (B) 690
James R. Johnson O1-Aug-88 122 B 590 $62.80 $37,052.00 100
James R. Johnson 01-Aug-88 261 B 100 $62.80 $6,280.00 0
Lester J. Johnson, III 04-Nov-81 85 B 100 $10.00 $1,000.00 100
Lester J. Johnson, III 09-Aug-82 85 B 100 $11.50 $1,150.00 0
Page - 18 -
<PAGE>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lester J. Johnson, III 30-Sep-82 296 B 100 $11.35 (B) 100
Lester J. Johnson, III 06-Sep-83 296 B 100 $13.69 $1,369.00 0
Larry E. Juday 09-Nov-81 151 B 200 $10.00 $2,000.00 200
Larry E. Juday 30-Sep-82 268 B 300 $11.35 (B) 500
Larry E. Juday 17-Oct-83 151 B 200 $13.87 $2,774.00 300
Larry E. Juday 17-Oct-83 268 B 300 $13.87 $4,161.00 0
Robert C. Jurek 04-Nov-81 73 B 500 $10.00 $5,000.00 500
Robert C. Jurek 09-Feb-83 73 B 500 $12.43 $6,215.00 0
William R. Jurgens 01-May-90 1570 B 50 $16.75 $837.50 50
William R. Jurgens 01-Aug-90 1570 B 50 $17.75 $887.50 0
Walter E. Kidwell 04-Nov-81 78 B 100 $10.00 $1,000.00 100
Walter E. Kidwell 30-Sep-82 208 B 500 $11.35 (B) 600
Walter E. Kidwell 28-Feb-84 364 B 100 $14.40 $1,440.00 700
Walter E. Kidwell 17-Sep-85 559 B 300 $23.00 $6,900.00 1,000
Walter E. Kidwell 18-May-87 28 A 1 1,001
Walter E. Kidwell 21-Sep-87 919 B 300 $53.00 $15,900.00 1,301
Walter E. Kidwell 01-Nov-88 B 1,300 (C) (C)
Walter E. Kidwell 01-Nov-88 1062 B 6,500 (C) (C) 6,501
Walter E. Kidwell 01-Mar-89 28 A 1 6,500
Walter E. Kidwell 02-Jul-90 1062 B 6,500 $17.50 $113,750.00 0
Mark K. Klages 21-Sep-87 920 B 100 $53.00 $5,300.00 100
Mark K. Klages 01-Nov-88 920 B 100 (C) (C)
Mark K. Klages 01-Nov-88 1139 B 500 (C) (C) 500
Mark K. Klages 06-Sep-90 1139 B 500 $18.00 $9,000.00 0
Joseph E. Kleponis O5-Nov-81 68 B 100 $10.00 $1,000.00 100
Page - 19 -
<PAGE>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Joseph E. Kleponis 29-Jan-85 68 B 100 $17.40 $1,740.00 0
Eleanor A. Kolton 21-Sep-87 922 B 15O $53.00 $7,950.00 150
Eleanor A. Kolton 01-Nov-88 922 B 150 (C) (C)
Eleanor A. Kolton 01-Nov-88 1144 B 750 (C) (C) 750
Eleanor A. Kolton 01-Mar-89 1144 B 750 $13.92 $10,440.00 0
Carlos I. Koski 17-Sep-85 640 B 200 $23.00 $4,600.00 200
Carlos I. Koski 01-Nov-88 640 B 200 (C) (C)
Carlos I. Koski 01-Nov-08 1184 B 1,000 (C) (C) 1,000
Carlos I. Koski 11-May-89 1184 B 500 $14.32 $7,160.00 500
Carlos I. Koski 11-May-89 1299 B 500
Carlos I. Koski 04-Jan-90 1299 B 500 $16.00 $8,000.00 0
Paul H. Krause 13-Mar-81 9 B 761 $10.00 $7,610.00(A) 761
Paul H. Krause 05-Nov-81 156 B 239 $10.00 $2,390.00 1,000
Paul H. Krause 11-Dec-81 6 A 1 1,001
Paul H. Krause 30-Sep-82 209 B 500 $11.35 (B) 1,501
Paul H. Krause 28-Feb-84 436 B 500 $14.40 $7,200.00 2,001
Paul H. Krause 17-Sep-85 575 B 1,500 $23.00 $34,500.00 3,501
Paul H. Krause 01-Nov-88 6 A 1 3,500
Paul H. Krause 01-Nov-88 209 B 500 $65.60 $32,800.00 3,000
Paul H. Krause 01-Nov-88 436 B 500 $65.60 $32,800.00 2,500
Paul H. Krause 01-Nov-88 575 B 1,500 $65.60 $98,400.00 1,000
Paul H. Krause 01-Nov-88 156 B 239 $65.60 $15,678.40 761
Paul H. Krause 01-Nov-88 9 B 761 $65.60 $49,921.60 0
Eugene G. Krelnik 01-May-90 1576 B 600 $16.75 $10,050.00 600
Eugene G. Krelnik 29-Oct-90 1576 B 600 $18.17 $10,902.00 0
Jonathan E. Kruse 04-Nov-81 123 B 400 $10.00 $4,000.00 400
Page - 20 -
<PAGE>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jonathan E. Kruse 30-Sep-82 270 B 100 $11.35 (B) 500
Jonathan E. Kruse 28-Feb-84 401 B 100 $14.40 $1,440.00 600
Jonathan E. Kruse 21-Sep-87 837 B 100 $53.00 $5,300.00 700
Jonathan E. Kruse 01-Nov-88 B 700 (C) (C)
Jonathan E. Kruse 01-Nov-88 1145 B 3,500 (C) (C) 3,500
Jonathan E. Kruse 23-Jan-89 1145 B 3,500 $13.52 $47,320.00 0
Claire I. Kulas 17-Sep-85 587 B 200 $23.00 $4,600.00 200
Claire I. Kulas 21-Sep-87 838 B 200 $53.00 $10,600.00 400
Claire I. Kulas 01-Nov-88 B 400 (C) (C)
Claire I. Kulas 01-Nov-88 1183 B 2,000 (C) (C) 2,000
Claire I. Kulas 01-Dec-89 1183 B 2,000 $15.75 $31,500.00 0
John A. Kulas 30-Sep-82 210 B 100 $11.35 (B) 100
John A. Kulas 23-Jun-86 210 B 100 $37.50 $3,750.00 0
Harold L. Langley 31-Mar-84 501 B 100 $14.40 $1,440.00 100
Harold L. Langley 03-Oct-86 501 B 100 $43.00 $4,300.00 0
Charles E. Laskey 21-Sep-87 925 B 100 $53.00 $5,300.00 100
Charles E. Laskey 13-Sep-88 925 B 100 $63.60 $6,360.00 0
Kevin Leeth 09-Mar-84 430 B 100 $14.40 $1,440.00 100
Kevin Leeth 28-Nov-84 430 B 100 $16.40 $1,640.00 0
David I. Liebman 13-Mar-81 16 B 374 $10.00 $3,740.00(A) 374
David I. Liebman 05-Nov-61 40 B 1,000 $10.00 $10,000.00 1,374
David I. Liebman 01-Nov-88 B 1,374 (C) (C)
David I. Liebman 01-Nov-88 1148 B 6,870 (C) (C) 6,870
David I. Liebman 24-Jan-89 1148 B 6,870 $13.52 $92,882.40 0
</TABLE>
Page - 21 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Robert H. Lindeman 30-Mar-84 477 B 100 $14.40 $1,440.00 100
Robert H. Lindeman 01-Jul-87 477 B 100 $52.00 $5,200.00 0
Roy E. Lindquist, Jr. 17-Sep-85 555 B 150 $23.00 $3,450.00 150
Roy E. Lindquist, Jr. 03-Aug-87 555 B 150 $53.00 $7,950.00 0
Richard A. Lochner 04-Nov-81 102 B 560 $10.00 $5,600.00 560
Richard A. Lochner 30-Sep-82 211 B 100 $11.35 (B) 660
Richard A. Lochner 27-Mar-84 466 B 100 $14.40 $1,440.00 760
Richard A. Lochner 17-Sep-85 705 B 50 $23.00 $1,150.00 810
Richard A. Lochner 21-Sep-87 926 B 100 $53.00 $5,300.00 910
Richard A. Lochner 11-Apr-88 211 B 100 $59.60 $5,960.00 810
Richard A. Lochner 11-Apr-88 926 B 100 $59.60 $5,960.00 710
Richard A. Lochner 11-Apr-88 705 B 50 $59.60 $2,980.00 660
Richard A. Lochner 11-Apr-88 466 B 100 $59.60 $5,960.00 560
Richard A. Lochner 11-Apr-88 102 B 560 $59.60 $33,376.00 0
Robert W. Loomis 06-Nov-81 124 B 200 $10.00 $2,000.00 200
Robert W. Loomis 19-Oct-82 124 B 200 $11.80 $2,360.00 0
Peter M. Mack 31-Mar-84 505 B 100 $14.40 $1,440.00 100
Peter M. Mack 09-Sep-85 505 B 100 $23.80 $2,380.00 0
Carol A. Madle 01-May-90 1589 B 150 $16.75 $2,512.50 150
Carol A. Madle 01-Nov-90 1589 B 150 $18.34 $2,751.00 0
Patricia T. Mayer 17-Sep-85 673 B 100 $23.00 $2,300.00 100
Patricia T. Mayer 21-Sep-87 841 B 200 $53.00 $10,600.00 300
Patricia T. Mayer 01-Nov-88 B 300 (C) (C)
Patricia T. Mayer 01-Nov-88 1261 B 1,500 (C) (C) 1,500
Patricia T. Mayer 31-Dec-89 1261 B 1,500 $15.75 $23,625.00 0
</TABLE>
Page -22-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
George R. McCalla 04-Nov-81 144 B 1,000 $10.00 $10,000.00 1,000
George R. McCalla 17-Jan-84 144 B 1,000 $14.40 $14,400.00 0
Donald E. McKelvey, Jr. 30-Mar-84 475 B 100 $14.40 $1,440.00 100
Donald E. McKelvey, Jr. 02-Jan-86 475 B 100 $30.00 $3,000.00 0
John J. McNamara 01-May-90 1598 B 150 $16.75 $2,512.50 150
John J. McNamara 01-Nov-90 1598 B 150 $18.34 $2,751.00 0
Richard D. McSweeney 28-Feb-84 390 B 100 $14.40 $1,440.00 100
Richard D. McSweeney 07-Nov-86 390 B 100 $44.00 $4,400.00 0
Charles J. McVey 17-Sep-85 567 B 50 $23.00 $1,150.00 50
Charles J. McVey 07-Apr-88 567 B 50 $59.60 $2,980.00 0
Norman O. Mesplay 04-Nov-81 74 B 720 $10.00 $7,200.00 720
Norman O. Mesplay 30-Sep-82 214 B 600 $11.35 (B) 1,320
Norman O. Mesplay 28-Feb-84 431 B 100 $14.40 $1,440.00 1,420
Norman O. Mesplay 17-Sep-85 634 B 600 $23.00 $13,800.00 2,020
Norman O. Mesplay 21-Sep-87 826 B 150 $53.00 $7,950.00 2,170
Norman O. Mesplay 01-Nov-88 B 2,170 (C) (C)
Norman O. Mesplay 01-Nov-88 1157 B 10,850 (C) (C) 10,850
Norman O. Mesplay 01-Feb-89 1157 B 10,850 $13.72 $148,682.00 0
Charles P. Metzler 01-May-90 1599 B 100 $16.75 $1,675.00 100
Charles P. Metzler 31-Aug-90 1599 B 100 $17.75 $1,775.00 0
Larry E. Milam 30-Sep-82 311 B 1,000 $11.35 (B) 1,000
Larry E. Milam 31-Mar-84 489 B 200 $14.40 $2,880.00 1,200
Larry E. Milam 17-Sep-85 723 B 200 $23.00 $4,600.00 1,400
</TABLE>
Page - 23 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Larry E. Milam 01-Nov-88 B 1,400 (C) (C)
Larry E. Milam 01-Nov-88 1159 B 7,000 (C) (C) 7,000
Larry E. Milam 10-Jan-89 1159 B 1,500 $13.52 $20,280.00 5,500
Larry E. Milam 10-Jan-89 1272 B 5,500
Larry E. Milam 01-Mar-89 1272 B 1,250 $13.92 $17,400.00 4,250
Larry E. Milam 01-Mar-89 1283 B 4,250
Larry E. Milam 05-Jun-89 1283 B 750 $14.52 $10,890.00 3,500
Larry E. Milam 05-Jun-89 1304 B 3,500
Larry E. Milam 30-Jun-89 1304 B 3,500 $14.52 $50,820.00 0
Charles D. Miller 05-Mar-84 414 B 100 $14.40 $1,440.00 100
Charles D. Miller 09-Sep-85 414 B 100 $23.80 $2,380.00 0
John H. Miller 05-Nov-81 65 B 700 $10.00 $7,000.00 700
John H. Miller 30-Sep-82 174 B 300 $11.35 (B) 1,000
John H. Miller 28-Feb-84 334 B 300 $14.40 $4,320.00 1,300
John H. Miller 17-Sep-85 716 B 450 $23.00 $10,350.00 1,750
John H. Miller 21-Sep-87 843 B 200 $53.00 $10,600.00 1,950
John H. Miller 01-Nov-88 B 1,950 (C) (C)
John H. Miller 01-Nov-88 1160 B 9,750 (C) (C) 9,750
John H. Miller 01-May-89 1160 B 9,750 $14.32 $139,620.00 0
Dorothy L. Mills 01-May-90 1601 B 250 $16.75 $4,187.50 250
Dorothy L. Mills 29-Oct-90 1601 B 250 $18.17 $4,542.50 0
James W. Moss 04-Nov-81 91 B 200 $10.00 $2,000.00 200
James W. Moss 30-Sep-82 170 B 300 $11.35 (B) 500
James W. Moss 28-Feb-84 348 B 300 $14.40 $4,320.00 800
James W. Moss 17-Sep-85 734 B 300 $23.00 $6,900.00 1,100
James W. Moss 01-Apr-87 734 B 300 $49.00 $14,700.00 800
James W. Moss 21-Sep-88 B 400 $63.60 $25,440.00 400
</TABLE>
Page -24-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
James W. Moss 21-Sep-88 1026 B 400
James W. Moss 01-Nov-88 B 400 (C) (C)
James W. Moss 01-Nov-88 1163 B 2,000 (C) (C) 2,000
James W. Moss 01-Oct-89 1163 B 2,000 $15.25 $30,500.00 0
R. Richard Mulder 17-Sep-85 669 B 100 $23.00 $2,300.00 100
R. Richard Mulder 14-Jan-86 669 B 100 $30.00 $3,000.00 0
Donald R. Myser 04-Nov-81 79 B 300 $10.00 $3,000.00 300
Donald R. Myser 01-Apr-86 79 B 300 $34.50 $10,350.00 0
Kenneth T. Nahorski 05-Nov-81 45 B 200 $10.00 $2,000.00 200
Kenneth T. Nahorski 07-Apr-88 45 B 200 $59.60 $11,920.00 0
M. Christyne Nasbe 17-Sep-85 597 B 100 $23.00 $2,300.00 100
M. Christyne Nasbe 21-Sep-87 933 B 100 $53.00 $5,300.00 200
M. Christyne Nasbe 01-Jun-88 597 B 100 $61.20 $6,120.00 100
M. Christyne Nasbe 01-Jun-88 933 B 100 $61.20 $6,120.00 0
Glenn H. Nelson 04-Nov-81 89 B 700 $10.00 $7,000.00 700
Glenn H. Nelson 30-Sep-86 89 B 700 $42.00 $29,400.00 0
Allen D. Nettleingham 21-Sep-87 934 B 50 $53.00 $2,650.00 50
Allen D. Nettleingham 01-Nov-88 934 B 50 (C) (C)
Allen D. Nettleingham 01-Nov-88 1165 B 250 (C) (C) 250
Allen D. Nettleingham 05-Sep-89 1165 B 250 $15.12 $3,780.00 0
Mark F. Nielsen, Jr. 30-Sep-82 290 B 100 $11.35 (B) 100
Mark F. Nielsen, Jr. 28-Feb-84 341 B 100 $14.40 $1,440.00 200
Mark F. Nielsen, Jr. 02-Jan-85 290 B 100 $17.40 $1,740.00 100
Mark F. Nielsen, Jr. 02-Jan-85 341 B 100 $17.40 $1,740.00 0
</TABLE>
Page - 25 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Frank J. Novotny 30-Sep-82 219 B 2,000 $11.35 (B) 2,000
Frank J. Novotny 19-Jan-84 219 B 2,000 $14.40 $28,800.00 0
David L. Norris 06-Nov-81 138 B 100 $10.00 $1,000.00 100
David L. Norris 30-Sep-82 218 B 200 $11.35 (B) 300
David L. Norris 31-Mar-84 492 B 100 $14.40 $1,440.00 400
David L. Norris 07-Feb-86 218 B 200 $31.50 $6,300.00 200
David L. Norris 17-Mar-86 492 B 100 $33.00 $3,300.00 100
David L. Norris 09-May-86 138 B 100 $36.00 $3,600.00 0
Holliss Ann Norris 17-Sep-85 665 B 50 $23.00 $1,150.00 50
Holliss Ann Norris 15-Jun-87 665 B 50 $51.00 $2,550.00 0
Stanley L. Obrey 04-Nov-81 114 B 250 $10.00 $2,500.00 250
Stanley L. Obrey 30-Sep-82 220 B 300 $11.35 (B) 550
Stanley L. Obrey 06-Sep-83 220 B 300 $13.69 $4,107.00 250
Stanley L. Obrey 21-Sep-87 936 B 250 $53.00 $13,250.00 500
Stanley L. Obrey 01-Nov-88 B 500 (C) (C)
Stanley L. Obrey 01-Nov-88 1168 B 2,500 (C) (C) 2,500
Stanley L. Obrey 01-May-90 1448 B 600 $16.75 $10,050.00 3,100
Franklin C. Ordonio 04-Nov-81 82 B 100 $10.00 $1,000.00 100
Franklin C. Ordonio 30-Sep-82 222 B 200 $11.35 (B) 300
Franklin C. Ordonio 28-Feb-84 336 B 100 $14.40 $1,440.00 400
Franklin C. Ordonio 03-May-88 336 B 100 $60.40 $6,040.00 300
Franklin C. Ordonio 13-Sep-88 82 B 100 $63.60 $6,360.00 200
Franklin C. Ordonio 01-Nov-88 222 B 200 (C) (C)
Franklin C. Ordonio 01-Nov-88 1170 B 1,000 (C) (C) 1,000
Franklin C. Ordonio 14-Jun-89 1170 B 500 $14.52 $7,260.00 500
Franklin C. Ordonio 14-Jun-89 1308 B 500
</TABLE>
Page - 26 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -------------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Franklin C. Ordonio 01-May-90 1451 B 400 $16.75 $6,700.00 900
Robert M. Page 17-Sep-85 678 B 100 $23.00 $2,300.00 100
Robert M. Page 18-Aug-86 678 B 100 $40.50 $4,050.00 0
James K. Parker 31-Mar-84 485 B 300 $14.40 $4,320.00 300
James K. Parker 25-Aug-87 485 B 200 $53.00 $10,600.00 100
James K. Parker 25-Aug-87 818 B 100
James K. Parker 01-Nov-88 818 B 100 (C) (C)
James K. Parker 01-Nov-88 1172 B 500 (C) (C) 500
James K. Parker 01-May-90 1453 B 300 $16.75 $5,025.00 800
Carroll H. Payne 13-Mar-81 3 B 1,247 $10.00 $12,470.00(A) 1,247
(Comm Prop)
Carroll H. Payne 17-Aug-84 3 B 1,247 $15.80 $19,702.60 0
(Comm Prop)
Carroll H. Payne 01-Feb-81 2 B 90 $10.00 $900.00(A) 90
(Separ Prop)
Carroll H. Payne 01-Feb-81 1 A 10 100
(Separ Prop)
Carroll H. Payne 27-Feb-81 2 A 90 190
(Separ Prop)
Carroll H. Payne 03-Mar-81 4 B 110,250 $10.00 $1,102,500.00(A) 110,440
(Separ Prop)
Carroll H. Payne 13-Mar-81 1 B 54,480 $10.00 $544,800.00(A) 164,920
(Separ Prop)
Carroll H. Payne 04-Dec-81 1 B 10,000 $10.00 $100,000.00 154,920
(Separ Prop)
Carroll H. Payne 04-Dec-81 164 B 154,920
(Separ Prop)
Carroll H. Payne 10-Dec-81 2 A 11 154,909
(Separ Prop)
Carroll H. Payne 10-Dec-81 3 A 154,909
(Separ Prop)
Carroll H. Payne 30-Sep-82 164 B 21,150 $11.35 (B) 133,759
(Separ Prop)
Carroll H. Payne 30-Sep-82 291 B (B) 133,759
(Separ Prop)
Carroll H. Payne 01-Dec-82 3 A 1 133,758
(Separ Prop)
Carroll H. Payne 02-Dec-82 15 A 133,758
(Separ Prop)
Carroll H. Payne 09-Dec-82 15 A 1 133,757
(Separ Prop)
Carroll H. Payne 09-Dec-82 17 A 133,757
(Separ Prop)
Carroll H. Payne 22-Mar-83 1 A 10 133,747
(Separ Prop)
</TABLE>
Page -27-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Carroll H. Payne 22-Mar-83 17 A 77 133,670
(Separ Prop)
Carroll H. Payne 01-Aug-83 B 71,304 $12.61 $899,143.44 62,366
(Separ Prop)
Carroll H. Payne 01-Aug-83 317 B 62,366
(Separ Prop)
Carroll H. Payne 17-Aug-84 317 B 62,366 $15.80 $985,382.80 0
(Separ Prop)
Carroll H. Payne, II 03-Mar-81 6 B 110,250 $10.00 $1,102,500.00 (A) 110,250
Carroll H. Payne, II 04-Dec-81 6 B 10,000 $10.00 $100,000.00 100,250
Carroll H. Payne, II 04-Dec-81 163 B 100,250
Carroll H. Payne, II 30-Sep-82 163 B 21,150 $11.35 (B) 79,100
Carroll H. Payne, II 30-Sep-82 293 B 79,100
Carroll H. Payne, II 22-Mar-83 20 A 3 79,103
Carroll H. Payne, II 01-Aug-83 293 B 79,100 $12.61 $997,451.00 3
Carroll H. Payne, II 06-Sep-83 319 B 39,930 $13.51 $539,454.30 39,933
Carroll H. Payne, II 03-Aug-84 319 B 25,657 $15.80 $405,380.60 14,276
Carroll H. Payne, II 03-Aug-84 525 B 14,276
Carroll H. Payne, II 17-Sep-85 620 B 1,500 $23.00 $34,500.00 15,776
Carroll H. Payne, II 21-Sep-87 940 B 400 $53.00 $21,200.00 16,176
Carroll H. Payne, II 01-Nov-88 B 16,173 (C) (C)
Carroll H. Payne, II 01-Nov-88 1057 B 80,865 (C) (C) 80,868
Carroll H. Payne, II 11-Apr-90 1057 B 9,937 $16.75 $166,444.75 70,931
Carroll H. Payne, II 11-Apr-90 1342 B 70,931
Debra Sue Payne 03-Mar-81 5 B 110,250 $10.00 $1,102,500.00 (A) 110,250
Debra Sue Payne 04-Dec-81 5 B 10,000 $10.00 $100,000.00 100,250
Debra Sue Payne 04-Dec-81 162 B 100,250
Debra Sue Payne 30-Sep-82 162 B 21,150 $11.35 (B) 79,100
Debra Sue Payne 30-Sep-82 292 B (B) 79,100
Debra Sue Payne 22-Mar-83 19 A 3 79,103
Debra Sue Payne 01-Aug-83 292 B 79,100 $12.61 $997,451.00 3
Debra Sue Payne 06-Sep-83 318 B 39,930 $13.51 $539,454.30 39,933
Debra Sue Payne 03-Aug-84 318 B 25,657 $15.80 $405,380.60 14,276
</TABLE>
Page -28-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
---------------------------- ------------------------------ CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Debra Sue Payne 03-Aug-84 521 B 14,276
Debra Sue Payne 17-Sep-85 621 B 1,500 $23.00 $34,500.00 15,776
Debra Sue Payne 21-Sep-81 941 B 400 $53.00 $21,200.00 16,176
Debra Sue Payne 01-Nov-88 B 16,173 (C) (C)
Debra Sue Payne 01-Nov-88 1059 B 80,865 (C) (C) 80,868
Debra Sue Payne 11-Apr-90 1059 B 9,937 $16.75 $166,444.75 70,931
Debra Sue Payne 11-Apr-90 1346 B 70,931
Eddie T. Payne 13-Mar-81 17 B 621 $10.00 $6,210.00(A) 621
Eddie T. Payne 16-Nov-81 154 B 379 $10.00 $3,790.00 1,000
Eddie T. Payne 30-Sep-82 223 B 1,000 $11.35 (B) 2,000
Eddie T. Payne 28-Feb-84 352 B 500 $14.40 $7,200.00 2,500
Eddie T. Payne 17-Dec-86 154 B 379 $45.00 $17,055.00 2,121
Eddie T. Payne 17-Dec-86 17 B 621 $45.00 $27,945.00 1,500
Eddie T. Payne 29-Dec-86 223 B 1,000 $45.00 $45,000.00 500
Eddie T. Payne 29-Dec-86 352 B 500 $45.00 $22,500.00 0
Freda J. Payne 22-Mar-83 18 A 3 3
Freda J. Payne 17-Aug-84 528 B 14,273 $15.80 $225,513.40 14,276
Freda J. Payne 17-Sep-85 619 B 1,500 $23.00 $34,500.00 15,776
Freda J. Payne 21-Sep-87 942 B 400 $53.00 $21,200.00 16,176
Freda J. Payne 01-Nov-88 B 16,173 (C) (C)
Freda J. Payne 01-Nov-88 1049 B 80,865 (C) (C) 80,868
Freda J. Payne 11-Apr-90 1049 B 9,937 $16.75 $166,444.75 70,931
Freda J. Payne 11-Apr-90 1340 B 70,931
Naomi K. Payne 03-Mar-81 21 B 110,250 $10.00 $1,102,500.00(A) 110,250
Naomi K. Payne 04-Dec-81 21 B 10,000 $10.00 $100,000.00 100,250
Naomi K. Payne 04-Dec-81 165 B 100,250
Naomi K. Payne 30-Sep-02 165 B 21,150 $11.35 (B) 79,100
Naomi K. Payne 30-Sep-82 294 B (B) 79,100
</TABLE>
Page -29-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
---------------------------- ------------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Naomi K. Payne 22-Mar-83 21 A 3 79,103
Naomi K. Payne 01-Aug-83 294 B 79,100 $12.61 $997,451.00 3
Naomi K. Payne 06-Sep-83 320 B 39,930 $13.51 $539,454.30 39,933
Naomi K. Payne 03-Aug-84 320 B 25,657 $15.80 $405,380.60 14,276
Naomi K. Payne 03-Aug-84 523 B 14,276
Naomi K. Payne 17-Sep-85 622 B 1,500 $23.00 $34,500.00 15,776
Naomi K. Payne 21-Sep-87 943 B 400 $53.00 $21,200.00 16,176
Naomi K. Payne 01-Nov-88 B 16,173 (C) (C)
Naomi K. Payne 01-Nov-88 1058 B 80,865 (C) (C) 80,868
Naomi K. Payne 11-Apr-90 1058 B 9,937 $16.75 $166,444.75 70,931
Naomi K. Payne 11-Apr-90 1344 B 70,931
Michael Peters 21-Sep-87 944 B 50 $53.00 $2,650.00 50
Micheal Peters 01-Sep-88 944 B 50 $63.60 $3,180.00 0
Steven R. Pritchard 30-Sep-82 224 B 200 $11.35 (B) 200
Steven R. Pritchard 07-Jun-85 224 B 200 $21.40 $4,280.00 0
Paul D. Raino 01-May-90 1353 B 350 $16.75 $5,862.50 350
Paul D. Raino 02-Jul-90 1353 B 350 $17.50 $6,125.00 0
William J. Ralphs 17-Sep-85 596 B 200 $23.00 $4,600.00 200
William J. Ralphs 08-Sep-87 596 B 200 $54.00 $10,800.00 0
M. Scott Rankin 04-Nov-81 87 B 500 $10.00 $5,000.00 500
M. Scott Rankin 30-Sep-82 285 B 500 $11.35 (B) 1,000
M. Scott Rankin 07-Mar-84 448 B 500 $14.40 $7,200.00 1,500
M. Scott Rankin 22-Jul-85 87 B 500 $22.20 $11,100.00 1,000
M. Scott Rankin 22-Jul-85 285 B 500 $22.20 $11,100.00 500
M. Scott Rankin 22-Jul-85 448 B 500 $22.20 $11,100.00 0
</TABLE>
Page -30-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
---------------------------- ------------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Warner F. Rankin, Jr. 13-Mar-81 8 B 5,869 $10.00 $58,690.00(A) 5,869
Warner F. Rankin, Jr. 30-Oct-81 153 B 2,000 $10.00 $20,000.00 7,869
Warner F. Rankln, Jr. 11-Dec-81 5 A 1 7,870
Warner F. Rankin, Jr. 30-Sep-82 225 B 3,000 $11.35 (B) 10,870
Warner F. Rankin, Jr. 07-Mar-84 440 B 1,000 $14.40 $14,400.00 11,870
Warner F. Rankin, Jr. 17-Sep-85 576 B 1,500 $23.00 $34,500.00 13,370
Warner F. Rankin, Jr. 01-Nov-88 B 13,369 (C) (C)
Warner F. Rankin, Jr. 01-Nov-88 1048 B 66,845 (C) (C) 66,846
Warnor F. Rankin, Jr. 03-Jan-89 5 A 1 66,845
Warner F. Rankin, Jr. 01-May-89 1048 B 66,845 $14.32 $957,220.40 0
Daniel G. Rasmussen 01-May-90 1613 B 50 $16.75 $837.50 50
Daniel G. Rasmussen 07-Dec-90 1613 B 50 $18.51 $925.50 0
Robert L. Reed 30-Sep-82 304 B 200 $11.35 (B) 200
Robert L. Reed 09-Jan-86 304 B 200 $30.00 $6,000.00 0
Gerd P. Reichelt 01-May-90 1614 B 100 $16.75 $1,675.00 100
Gerd P. Reichelt 13-Sep-90 1614 B 100 $18.00 $1,800.00 0
Donald R. Reynolds 04-Nov-81 113 B 100 $10.00 $1,000.00 100
Donald R. Reynolds 30-Sep-82 226 B 200 $11.35 (B) 300
Donald R. Reynolds 28-Feb-84 370 B 200 $14.40 $2,880.00 500
Donald R. Reynolds 17-Sep-85 562 B 150 $23.00 $3,450.00 650
Donald R. Reynolds 21-Sep-87 947 B 50 $53.00 $2,650.00 700
Donald R. Reynolds 01-Nov-88 B 700 (C) (C)
Donald R. Reynolds 01-Nov-88 1194 B 3,500 (C) (C) 3,500
Donald R. Reynolds 03-Jan-89 1194 B 1,924 $13.52 $26,012.48 1,576
Donald R. Reynolds 03-Jan-89 1264 B 1,576
Donald R. Reynolds 01-May-90 1463 B 100 $16.75 $1,675.00 1,676
</TABLE>
Page -31-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
---------------------------- ------------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
James E. Richardson 17-Sep-85 675 B 100 $23.00 $2,300.00 100
James E. Richardson 19-Sep-86 677 B 100 $42.00 $4,200.00 0
Larry L. Richter 04-Nov-81 99 B 1,250 $10.00 $12,500.00 1,250
Larry L. Richter 30-Sep-82 227 B 300 $11.35 (B) 1,550
Larry L. Richter 31-Mar-84 502 B 300 $14.40 $4,320.00 1,850
Larry L. Richter 17-Sep-85 730 B 400 $23.00 $9,200.00 2,250
Larry L. Richter 21-Sep-87 948 B 250 $53.00 $13,250.00 2,500
Larry L. Richter 01-Nov-88 B 2,500 (C) (C)
Larry L. Richter 01-Nov-88 1195 B 12,500 (C) (C) 12,500
Larry L. Richter 07-Apr-89 1195 B 12,500 $14.12 $176,500.00 0
Ralph O. Riojas 28-Feb-84 384 B 100 $14.40 $1,440.00 100
Ralph O. Riojas 20-Jul-87 384 B 100 $52.00 $5,200.00 0
Glenn L. Robertson 04-Nov-81 112 B 200 $10.00 $2,000.00 200
Glenn L. Robertson 30-Sep-82 171 B 300 $11.35 (B) 500
Glenn L. Robertson 30-Mar-84 479 B 200 $14.40 $2,880.00 700
Glenn L. Robertson 01-Nov-88 B 700 (C) (C)
Glenn L. Robertson 01-Nov-88 1197 B 3.500 (C) (C) 3,500
Glenn L. Robertson 02-Jul-90 1197 B 3,500 $17.50 $61,250.00 0
Victor H. Russell 04-Nov-81 90 B 100 $10.00 $1,000.00 100
Victor H. Russell 30-Sep-82 229 B 100 $11.35 (B) 200
Victor H. Russell 28-Feb-84 360 B 100 $14.40 $1,440.00 300
Victor H. Russell 07-Jul-87 90 B 100 $52.00 $5,200.00 200
Victor H. Russell 07-Jul-87 360 B 100 $52.00 $5,200.00 100
Victor H. Russell 07-Jul-87 229 B 100 $52.00 $5,200.00 0
Dean E. Salmeier 04-Nov-81 92 B 900 $10.00 $9,000.00 900
Dean E. Salmeier 30-Sep-82 230 B 600 $11.35 (B) 1,500
</TABLE>
Page -32-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
---------------------------- ------------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dean E. Salmeier 28-Feb-84 343 B 200 $14.40 $2,880.00 1,700
Dean E. Salmeier 01-Jul-85 92 B 900 $22.20 $19,980.00 800
Dean E. Salmeier 01-Jul-85 230 B 600 $22.20 $13,320.00 200
Dean E. Salmeier 01-Jul-85 343 B 200 $22.20 $4,440.00 0
Marcus R. Sanders 30-Sep-82 305 B 100 $11.35 (B) 100
Marcus R. Sanders 28-Jul-83 305 B 100 $13.33 $1,333.00 0
Patricia L. Saries 17-Sep-85 676 B 50 $23.00 $1,150.00 50
Patricia L. Saries 01-Jul-87 676 B 50 $52.00 $2,600.00 0
Charles M. Schencke 04-Nov-81 81 B 200 $10.00 $2,000.00 200
Charles M. Schencke 13-Sep-83 81 B 200 $13.69 $2,738.00 0
Sheila M. Schencke 04-Nov-81 80 B 200 $10.00 $2,000.00 200
Sheila M. Schencke 12-Jun-84 80 B 200 $15.40 $3,080.00 0
Louise O. Schomerus 13-Mar-81 12 B 4,026 $10.00 $40,260.00(A) 4,026
Louise O. Schomorus 05-Nov-81 43 B 100 $10.00 $1,000.00 4,126
Louise O. Schomerus 28-Feb-84 398 B 100 $14.40 $1,440.00 4,226
Louise O. Schomerus 17-Sep-85 558 B 100 $23.00 $2,300.00 4,326
Louise O. Schomerus 27-Jun-86 12 B 4,026 $37.50 $150,975.00 300
Louise O. Schomerus 27-Jun-86 43 B 100 $37.50 $3,750.00 200
Louise O. Schomerus 27-Jun-86 398 B 100 $37.50 $3,750.00 100
Louise O. Schomerus 27-Jun-86 558 B 100 $37.50 $3,750.00 0
David I. Scott 28-Feb-84 418 B 200 $14.40 $2,880.00 200
David I. Scott 19-Jul-84 418 B 200 $15.60 $3,120.00 0
William K. Sebert, Jr. 01-May-90 1623 B 300 $16.75 $5,025.00 300
William K. Sebert, Jr. 29-Oct-90 1623 B 300 $18.17 $5,451.00 0
</TABLE>
Page -33-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
---------------------------- ------------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Robert Dennis Seigler 17-Sep-85 668 B 50 $23.00 $1,150.00 50
Robert Dennis Seigler 21-Sep-87 952 B 50 $53.00 $2,650.00 100
Robert Donnis Seigler 15-Dec-87 668 B 50 $56.40 $2,820.00 50
Robert Dannis Seigler 01-Nov-88 952 B 50 (C) (C)
Robert Donnis Seigler 01-Nov-88 1262 B 250 (C) (C) 250
Robert Dennis Seigler 03-Nov-89 1262 B 250 $15.50 $3,875.00 0
Marie Eloise Setser 17-Sep-85 642 B 750 $23.00 $17,250.00 750
Marle Eloise Setser 21-Sep-87 953 B 100 $53.00 $5,300.00 850
Marie Eloise Setser 01-Nov-88 B 850 (C) (C)
Marie Eloise Setser 01-Nov-88 1202 B 4,250 (C) (C) 4,250
Marie Eloise Setser 01-May-90 1352 B 750 $16.75 $12,562.50 5,000
Marie Eloise Setser 02-Jul-90 1202 B 4,250 $17.50 $74,375.00 750
Marie Eloise Setser 02-Jul-90 1352 B 750 $17.50 $13,125.00 0
James L. Shanahan 30-Sep-82 231 B 100 $11.35 (B) 100
James L. Shanahan 23-Mar-87 231 B 100 $48.00 $4,800.00 0
Jeffrey A. Shaner 17-Sep-85 674 B 100 $23.00 $2,300.00 100
Jeffrey A. Shaner 15-Dec-86 674 B 100 $45.00 $4,500.00 0
Leonard J. Siegert 04-Nov-81 109 B 600 $10.00 $6,000.00 600
Leonard J. Siegert 30-Sep-82 233 B 1,800 $11.35 (B) 2,400
Leonard J. Siegert 29-Feb-84 445 B 1,500 $14.40 $21,600.00 3,900
Leonard J. Siegert 17-Sep-85 623 B 1,100 $23.00 $25,300.00 5,000
Leonard J. Siegert 01-Nov-88 B 5,000 (C) (C)
Leonard J. Siegert 01-Nov-88 1203 B 25,000 (C) (C) 25,000
Leonard J. Siegert 01-May-89 35 A 1 25,001
Leonard J. Siegert 19-Apr-90 35 A 1 25,000
Leonard J. Siegert 19-Apr-90 1203 B 25,000 $16.75 $418,750.00 0
</TABLE>
Page -34-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
---------------------------- ------------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Henry E. Simpson, Jr. 05-Nov-81 52 B 100 $10.00 $1,000.00 100
Henry E. Simpson, Jr. 30-Sep-82 234 B 100 $11.35 (B) 200
Henry E. Simpson, Jr. 28-Feb-84 335 B 100 $14.40 $1,440.00 300
Henry E. Simpson, Jr. 06-Jul-84 335 B 100 $15.60 $1,560.00 200
Henry E. Simpson, Jr. 06-Jul-84 234 B 100 $15.60 $1,560.00 100
Henry E. Simpson, Jr. 06-Jul-84 52 B 100 $15.60 S1,560.00 0
Kathryn L. Skillington 01-May-90 1625 B 150 $16.75 $2,512.50 150
Kathryn L. Skillington 29-Oct-90 1625 B 150 $18.17 $2,725.50 0
Douglas R. Sliger 04-Nov-81 108 B 450 $10.00 $4,500.00 450
Douglas R. Sliger 11-May-83 108 B 450 $12.97 $5,836.50 0
Cromer W. Smith, Jr. 04-Nov-81 97 B 400 $10.00 $4,000.00 400
Cromer W. Smith, Jr. 30-Sep-82 235 B 200 $11.35 (B) 600
Cromer W. Smith, Jr. 31-Mar-84 483 B 200 $14.40 $2,880.00 800
Cromer W. Smith, Jr. 17-Sep-85 718 B 200 $23.00 $4,600.00 1,000
Cromer W. Smith, Jr. 21-Sep-87 956 B 100 $53.00 $5,300.00 1,100
Cromer W. Smith, Jr. 01-Nov-88 B 1,100 (C) (C)
Cromer W. Smith, Jr. 01-Nov-88 1205 B 5,500 (C) (C) 5,500
Cromer W. Smith, Jr. 01-May-90 1471 B 300 $16.75 $5,025.00 5,800
Cromer W. Smith, Jr. 01-Oct-90 1205 B 5,500 $18.17 $99,935.00 300
Cromer W. Smith, Jr. 01-Oct-90 1471 B 300 $18.17 $5,451.00 0
Ralph F. Smith 13-Mar-81 7 B 4,037 $10.00 $40,370.00(A) 4,037
Ralph F. Smith 13-Mar-81 158 B 2,000 $10.00 $20,000.00(A) 6,037
Ralph F. Smith 11-Dec-81 4 A 2 6,039
Ralph F. Smith 30-Sep-82 280 B 1,000 $11.35 (B) 7,039
Ralph F. Smith 05-Mar-84 369 B 1,000 $14.40 $14,400.00 8,039
Ralph F. Smith 17-Sep-85 645 B 500 $23.00 $11,500.00 8,539
</TABLE>
Page -35-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ralph F. Smith 12-Dec-85 4 A 2 8,537
Ralph F. Smith 07-Nov-86 158 B 2,000 $44.00 $88,000.00 6,537
Ralph F. Smith 07-Nov-86 369 B 1,000 $44.00 $44,000.00 5,537
Ralph F. Smith 02-Doc-86 7 B 4,037 $45.00 $181,665.00 1,500
Ralph F. Smith 02-Dec-86 645 B 500 $45.00 $22,500.00 1,000
Ralph F. Smith 02-Dec-06 280 B 1,000 $45.00 $45,000.00 0
Roy M. Springer, Jr. 05-Nov-81 60 B 100 $10.00 $1,000.00 100
Roy M. Springer, Jr. 30-Sep-82 281 B 100 $11.35 (B) 200
Roy M. Springer, Jr. 31-Jan-84 60 B 100 $14.40 $1,440.00 100
Roy M. Springer, Jr. 31-Jan-84 281 B 100 $14.40 $1,440.00 0
Carroll J. Squyres 28-Feb-84 388 B 100 $14.40 $1,440.00 100
Carroll J. Squyres 01-Nov-88 388 B 100 (C) (C)
Carroll J. Squyres 01-Nov-88 1208 B 500 (C) (C) 500
Carroll J. Squyres 02-Jul-90 1208 B 500 $17.50 $8,750.00 0
Edward C. Stadjuhar 15-Mar-81 28 B 341 $10.00 $3,410.00(A) 341
Edward C. Stadjuhar 01-Sep-81 28 B 341 $10.00 $3,410.00 0
Robert A. Stallsmith 17-Sop-85 594 B 50 $23.00 $1,150.00 50
Robert A. Slallsmith 02-Oct-86 594 B 50 $43.00 $2,150.00 0
Brian D. Stankle 29-Feb-84 449 B 500 $14.40 $7,200.00 500
Brian D. Stankle 23-Aug-85 449 B 300 $23.00 $6,900.00 200
Brian D. Stankle 23-Aug-85 548 B 200
Brian D. Stankle 19-Nov-85 548 B 200 $27.00 $5,400.00 0
Allan M. Stearns 20-Feb-84 392 B 100 $14.40 $1,440.00 100
Allan M. Stearns 19-Jul-84 392 B 100 $15.60 $1,560.00 0
</TABLE>
Page -36-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
William B. Stone 17-Sep-85 595 B 300 $23.00 $6,900.00 300
William B. Stone 01-Nov-88 595 B 300 (C) (C)
William B. Stone O1-Nov-88 1211 B 1,500 (C) (C) 1,500
William B. Stone 01-DOC-89 1211 B 1,500 $15.75 $23,625.00 0
Richard R. Streets 01-May-90 1632 B 100 $16.75 $1,675.00 100
Richard R. Streets 04-Oct-90 1632 B 100 $18.17 $1,817.00 0
Karen L. Suhr 21-Sep-87 964 B 50 $53.00 $2,650.00 50
Karen L. Suhr 27-May-88 964 B 50 $60.40 $3,020.00 0
Gladyne H. Swartz 01-May-90 1634 B 100 $16.75 $1,675.00 100
Gladyne H. Swartz 31-Aug-90 1634 B 100 $17.75 $1,775.00 0
Donald R. Thomas 16-Mar-81 29 B 1,489 $10.00 $14,090.00(A) 1,489
Donald R. Thomas 30-Sep-82 241 B 1,500 $11.35 (B) 2,989
Donald R. Thomas 24-Jun-85 29 B 1,489 $21.40 $31,864.60 1,500
Donald R. Thomas 24-Jun-85 241 B 1,500 $21.40 $32,100.00 0
Erle W. Thomas 17-Sep-85 584 B 100 $23.00 $2,300.00 100
Erle W. Thomas 22-Jan-88 584 B 100 $57.20 $5,720.00 0
Fernand A. Thomassy, III 01-May-90 1349 B 150 $16.75 $2,512.50 150
Fernand A. Thomassy, III 01-May-90 1349 B 150 $16.75 $2,527.50 0
Marc L. Troiani 21-Sep-87 971 B 50 $53.00 $2,650.00 50
Marc L. Troiani 01-Nov-88 971 B 50 (C) (C)
Marc L. Troiani 01-Nov-88 1222 B 250 (C) (C) 250
Marc L. Troiani 20-Apr-89 1222 B 250 $14.12 $3,530.00 0
Bradley D. Troutman 17-Sep-85 582 B 50 $23.00 $1,150.00 50
</TABLE>
Page -37-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bradley D. Troutman 24-Nov-86 582 B 50 $44.00 $2,200.00 0
Donald E. Troutman 30-Sep-82 243 B 100 $11.35 (B) 100
Donald E. Troutman 07-Feb-84 243 B 100 $14.60 $1,460.00 0
Thomas A. Tullar 30-Sep-82 244 B 100 $11.35 (B) 100
Thomas A. Tullar 09-Oct-84 244 B 100 $16.20 $1,620.00 0
Cynthia G. Turse 17-Sep-85 681 B 100 $23.00 $2,300.00 100
Cynthia G. Turse 02-Dec-86 681 B 100 $45.00 $4,500.00 0
Jacob T. Tutterow 13-Mar-81 18 B 269 $10.00 $2,690.00(A) 269
Jacob T. Tutterow 13-Mar-81 70 B 500 $10.00 $5,000.00(A) 769
Jacob T. Tutterow 11-Dec-81 10 A 1 770
Jacob T. Tutterow 30-Sep-82 245 B 1,000 $11.35 (B) 1,770
Jacob T. Tutterow 29-Feb-84 427 B 1,200 $14.40 $17,280.00 2,970
Jacob T. Tutterow 17-Sep-85 600 B 650 $23.00 $14,950.00 3,620
Jacob T. Tutterow 01-Oct-87 10 A 1 3,619
Jacob T. Tutterow 02-Aug-88 600 B 650 $62.80 S40,820.00 2,969
Jacob T. Tutterow 02-Aug-88 427 B 1,200 $62.80 $75,360.00 1,769
Jacob T. Tutterow 02-Aug-88 18 B 269 $62.80 $16,893.20 1,500
Jacob T. Tutterow 02-Aug-88 245 B 1,000 $62.80 $62,800.00 500
Jacob T. Tutterow 02-Aug-88 70 B 500 $62.80 $31,400.00 0
H. David Tyler 04-Nov-81 105 B 500 $10.00 $5,000.00 500
H. David Tyler 30-Sep-82 246 B 300 $11.35 (B) 800
H. David Tyier 28-Feb-84 438 B 200 $14.40 $2,880.00 1,000
H. David Tyler 17-Sep-85 656 B 250 $23.00 $5,750.00 1,250
H. David Tyler 21-Sep-87 974 B 250 $53.00 $3,250.00 1,500
H. David Tyler 01-Nov-88 B 1,500 (C) (C)
H. David Tyler 01-Nov-88 1225 B 7,500 (C) (C) 7,500
</TABLE>
Page -38-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
H. David Tyler 10-Mar-89 1225 B 3,500 $13.92 $48,720.00 4,000
H. David Tyler 10-Mar-89 1285 B 4,000
H. David Tyler 06-Feb-90 1285 B 3,900 $16.75 $65,325.00 100
H. David Tyler 06-Feb-90 1335 B 100
H. David Tyler 29-Oct-90 1335 B 100 $18.17 $1,817.00 0
Teresa M. Tyler
(Teresa Love) 01-May-90 1565 B 100 $16.75 $1,675.00 100
Teresa M. Tyler
(Teresa Love) 29-Oct-90 1585 B 100 $18.17 $1,817.00 0
David K. Vaupel 17-Sep-85 663 B 200 $23.00 $4,600.00 200
David K. Vaupel 22-Dec-86 663 B 200 $45.00 $9,000.00 0
David K. Vaupel 01-May-90 1638 B 100 $16.75 $1,675.00 100
Arthur J. Ver Steegh, Jr. 30-Sep-82 309 B 100 $11.35 (B) 100
Arthur J. Ver Steegh, Jr. 28-Feb-84 357 B 100 $14.40 $1,440.00 200
Arthur J. Ver Steegh, Jr. 01-Nov-88 B 200 (C) (C)
Arthur J. Ver Steegh, Jr. 01-Nov-88 1228 B 1,000 (C) (C) 1,000
Arthur J. Ver Steegh, Jr. 07-Apr-89 1228 B 800 $14.12 $11,296.00 200
Arthur J. Ver Steegh, Jr. 07-Apr-89 1290 B 200
Arthur J. Ver Steegh, Jr. 08-Jun-89 1290 B 200 $14.52 $2,904.00 0
John R. Vice 30-Sep-82 257 B 200 $11.35 (B) 200
John R. Vice 23-Mar-84 257 B 200 $14.80 $2,960.00 0
John R. Voss 21-Sep-87 977 B 50 $53.00 $2.650.00 50
John R. Voss 01-Nov-88 977 B 50 (C) (C)
John R. Voss 01-Nov-88 1229 B 250 (C) (C) 250
John R. Voss 28-Feb-89 1229 B 250 $13.72 $3,430.00 0
Burton J. Walrath, Jr. 05-Mar-84 407 B 300 $14.40 $4,320.00 300
Burton J. Walrath, Jr. 17-Sep-85 599 B 200 $23.00 $4,600.00 500
</TABLE>
Page -39-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Burton J. Walrath, Jr. 20-Jun-88 599 B 200 $61.20 $12,240.00 300
Burton J. Walrath, Jr. 01-Aug-88 407 B 100 $62.80 $6,280.00 200
Burton J. Walrath, Jr. 01-Aug-88 1015 B 200
Burton J. Walrath, Jr. 04-0ct-88 1015 B 200 $64.60 $12,920.00 0
Burtland Bane Weber 31-Mar-84 503 B 200 $14.40 $2,880.00 200
Burtland Bane Weber 17-Sep-85 703 B 100 $23.00 $2,300.00 300
Burtland Bane Weber 01-Nov-88 B 300 (C) (C)
Burtland Bane Weber 01-Nov-88 1233 B 1,500 (C) (C) 1,500
Burtland Bane Weber 09-Jan-89 1233 B 1,500 $13.52 $20,280.00 0
Allen E. Weseleskey 21-Sep-87 979 B 150 $53.00 $7,950.00 150
Allen E. Weseleskey 01-Nov-88 979 B 150 (C) (C)
Allen E. Weseleskey 01-Nov-88 1234 B 750 (C) (C) 750
Allen E. Weseleskey 31-May-89 1234 B 750 $14.32 $10,740.00 0
James H. Westberry 30-Mar-84 470 B 100 $14.40 $1,440.00 100
James H. Westberry 01-Nov-88 478 B 100 (C) (C)
James H. Westberry 01-Nov-88 1235 B 500 (C) (C) 500
James H. Westberry 06-Jan-89 1235 B 500 $13.52 $6,760.00 0
Lloyd D. Whitney 04-Nov-81 142 B 450 $10.00 $4,500.00 450
Lloyd D. Whitney 30-Sep-82 172 B 200 $11.35 (B) 650
Lloyd D. Whitney 28-Feb-84 363 B 300 $14.40 $4,320.00 950
Lloyd D. Whitney 17-Sep-85 737 B 550 $23.00 $12,650.00 1,500
Lloyd D. Whitney 21-Sep-87 980 B 100 $53.00 $5,300.00 1,600
Lloyd D. Whitney 01-Nov-88 B 1,600 (C) (C)
Lloyd D. Whitney 01-Nov-88 1237 B 8,000 (C) (C) 8,000
Lloyd D. Whitney 01-May-90 1351 B 800 $16.75 $13,400.00 8,800
Lloyd D. Whitney 02-Jul-90 1351 B 800 $17.50 $14,000.00 8,000
Lloyd D. Whitney 02-Jul-90 1237 B 8,000 $17.50 $140,000.00 0
</TABLE>
Page -40-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas M. Wiktorek 30-Sep-82 251 B 100 $11.35 (B) 100
Thomas M. Wiktorek 28-Feb-84 340 B 300 $14.40 $4,320.00 400
Thomas M. Wiktorek 13-Mar-86 251 B 100 $33.00 $3,300.00 300
Thomas M. Wiktorek 07-Apr-86 340 B 200 S34.50 $6,900.00 100
Thomas M. Wiktorek 07-Apr-86 755 B 100
Thomas M. Wiktorek 16-Jun-86 755 B 100 $37.50 $3,750.00 0
Leonard E. Williams 04-Nov-81 104 B 500 $10.00 $5,000.00 500
Leonard E. Williams 30-Sep-82 173 B 500 $11.35 (B) 1,000
Leonard E. Williams 16-Mar-84 454 B 300 $14.40 $4,320.00 1,300
Leonard E. Williams 17-Sep-85 553 B 300 $23.00 $6,900.00 1,600
Leonard E. Williams 03-Dec-86 553 B 300 $45.00 $13,500.00 1,300
Leonard E. Williams 03-Dec-86 454 B 300 $45.00 $13,500.00 1,000
Leonard E. Williams 03-Dec-86 173 B 500 $45.00 $22,500.00 500
Leonard E. Williams 03-Dec-86 104 B 500 $45.00 $22,500.00 0
Tommy C. Wimberly 27-Mar-84 461 B 100 $14.40 $1,440.00 100
Tommy C. Wimberly 04-Feb-87 461 B 100 $47.00 $4,700.00 0
Thomas G. Woods 30-Sep-82 259 B 100 $11.35 (B) 100
Thomas G. Woods 23-Apr-84 259 B 100 $15.00 $1,500.00 0
R. J. Wooten 21-Sep-87 984 B 100 $53.00 $5,300.00 100
R. J. Wooten 01-Jul-88 984 B 100 $62.00 $6,200.00 0
James H. Wynne 04-Nov-81 83 B 100 $10.00 $1,000.00 100
James H. Wynne 30-Sep-82 252 B 300 $11.35 (B) 400
James H. Wynne 08-Jun-88 83 B 100 $57.20 $5,720.00 300
James H. Wynne 08-Jun-88 252 B 100 $61.20 $6,120.00 200
James H. Wynne 08-Jun-88 1006 B 200
</TABLE>
Page -41-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- ----------------------------- CUMULATIVE
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL # OF
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION SHARES COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
James Wynne 01-Nov-88 1000 B 200 (C) (C) (C)
James Wynne 01-Nov-88 1243 B 1000 (C) (C) 1,000
William L Zint, Jr. 31-Mar-84 484 B 100 $14.40 $1,440.00 100
William L Zint, Jr. 20-Jun-84 484 B 100 $15.40 $1,540.00 0
</TABLE>
FOOTNOTES:
(A) In March 1981, USPA, Inc.'s common shares were exchanged for the Class "B"
non-voting common stock of IRA. Inc. Fractional shares of IRA's stock were
paid for in cash by the USPA Shareholders, at the rate of $10.00 per share.
(B) IRA did not receive any proceeds from this stock issuance. The shares of
stock sold were for the benefit of Affiliates (Carroll H. Payne, Carroll H.
Payne II, Debra Sue Payne, and Naomi K. Payne).
(C) A five-for-one stock split was effectuated on November 1, 1988.
Page -42-
<PAGE>
EX. B (CHRONO)
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
---------------------------- ------------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Norman T. Dubuc, Jr. 23-Oct-81 115 B 750 $10.00 $7,500.00
Warner F. Rankin, Jr. 30-Oct-81 153 B 2,000 $10.00 $20,000.00
Leslie R. Anderson 04-Nov-81 129 B 2,000 $10.00 $20,000.00
Kenneth N. Beckman 04-Nov-81 96 B 100 $10.00 $1,000.00
Allan G. Berg 04-Nov-81 136 B 100 $10.00 $1,000.00
Larry S. Bobst 04-Nov-81 137 B 100 $10.00 $1,000.00
Gary D. Bowman 04-Nov-81 126 B 350 $10.00 $3,500.00
Peter G. Bruder 04-Nov-81 37 B 490 $10.00 $4,900.00
George Caridakis 04-Nov-81 148 B 200 $10.00 $2,000.00
William Carrier, Jr. 04-Nov-81 119 B 250 $10.00 $2,500.00
David G. Craft 04-Nov-81 127 B 600 $10.00 $6,000.00
Eugene B. Dalbey 04-Nov-81 77 B 640 $10.00 $6,400.00
William A. Dast 04-Nov-81 160 B 250 $10.00 $2,500.00
Betty J. Epperson 04-Nov-81 141 B 100 $10.00 $1,000.00
Dick F. Gibson 04-Nov-81 84 B 250 $10.00 $2,500.00
George A. Hamlin 04-Nov-81 86 B 100 $10.00 $1,000.00
John F. Hampton 04-Nov-81 98 B 100 $10.00 $1,000.00
Billy R. Harrison 04-Nov-81 131 B 500 $10.00 $5,000.00
James H. Henderson 04-Nov-81 103 B 100 $10.00 $1,000.00
Dean R. Huffer 04-Nov-81 94 B 100 $10.00 $1,000.00
William C. Hugenberg, Jr. 04-Nov-81 152 B 2,000 $10.00 $20,000.00
Charlie C. Jones 04-Nov-81 155 B 315 $10.00 $3,150.00
Lester J. Johnson, III 04-Nov-81 85 B 100 $10.00 $1,000.00
Robert C. Jurek 04-Nov-81 73 B 500 $10.00 $5,000.00
Walter E. Kidwell 04-Nov-81 78 B 100 $10.00 $1,000.00
Jonathan E. Kruse 04-Nov-81 123 B 400 $10.00 $4,000.00
Richard A. Lochner 04-Nov-81 102 B 560 $10.00 $5,600.00
George R. McCalla 04-Nov-81 144 B 1,000 $10.00 $10,000.00
Norman G. Mesplay 04-Nov-81 74 B 720 $10.00 $7,200.00
James W. Moss 04-Nov-81 91 B 200 $10.00 $2,000.00
Donald R. Myser 04-Nov-81 79 B 300 $10.00 $3,000.00
</TABLE>
Page - 2 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
---------------------------- ------------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Glenn H. Nelson 04-Nov-81 89 B 700 $10.00 $7,000.00
Stanley L. Obrey 04-Nov-81 114 B 250 $10.00 $2,500.00
Franklin C. Ordonio 04-Nov-81 82 B 100 $10.00 $1,000.00
M. Scott Rankin 04-Nov-81 87 B 500 $10.00 $5,000.00
Donald R. Reynolds 04-Nov-81 113 B 100 $10.00 $1,000.00
Larry L. Richter 04-Nov-81 99 B 1,250 $10.00 $12,500.00
Glenn L. Robertson 04-Nov-81 112 B 200 $10.00 $2,000.00
Victor H. Russell 04-Nov-81 90 B 100 $10.00 $1,000.00
Dean E. Salmeler 04-Nov-81 92 B 900 $10.00 $9,000.00
Charles M. Schencke 04-Nov-81 81 B 200 $10.00 $2,000.00
Sheila M. Schencke 04-Nov-81 80 B 200 $10.00 $2,000.00
Leonard J. Siegert 04-Nov-81 109 B 600 $10.00 $6,000.00
Douglas R. Sliger 04-Nov-81 108 B 450 $10.00 $4,500.00
Cromer W. Smith, Jr. 04-Nov-81 97 B 400 $10.00 $4,000.00
H. David Tyler 04-Nov-81 105 B 500 $10.00 $5,000.00
Lloyd D. Whitney 04-Nov-81 142 B 450 $10.00 $4,500.00
Leonard E. Williams 04-Nov-81 104 B 500 $10.00 $5,000.00
James H. Wynne 04-Nov-81 83 B 100 $10.00 $1,000.00
Charles B. Addison 05-Nov-81 59 B 200 $10.00 $2,000.00
Robert E. Berretta 05-Nov-81 51 B 250 $10.00 $2,500.00
Ronald P. Bodeen 05-Nov-81 57 B 300 $10.00 $3,000.00
Barry M. Brown 05-Nov-81 41 B 600 $10.00 $6,000.00
Richard J. Busch 05-Nov-81 69 B 300 $10.00 $3,000.00
Oliver J. Cook, Jr. 05-Nov-81 39 B 300 $10.00 $3,000.00
John P. Dodson 05-Nov-81 66 B 200 $10.00 $2,000.00
Lloyd J. Engelhardt 05-Nov-81 149 B 500 $10.00 $5,000.00
David R. Foshee 05-Nov-81 46 B 400 $10.00 $4,000.00
Joseph M. Gilmore 05-Nov-81 49 B 450 $10.00 $4,500.00
Harry E. Hall 05-Nov-81 50 B 300 $10.00 $3,000.00
James W. Hill, III 05-Nov-81 44 B 420 $10.00 $4,200.00
David A. Himes 05-Nov-81 32 B 2,000 $10.00 $20,000.00
</TABLE>
Page - 3 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
---------------------------- ------------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Joseph E. Kloponis 05-Nov-81 68 B 100 $10.00 $1,000.00
Paul H. Krause 05-Nov-81 156 B 239 $10.00 $2,390.00
David I. Liebman 05-Nov-81 40 B 1,000 $10.00 $1O,000.00
John H. Miller 05-Nov-81 65 B 700 $10.00 $7,000.00
Kenneth T. Nahorski 05-Nov-81 45 B 200 $10.00 $2,000.00
Louise O. Schomerus 05-Nov-81 43 B 100 $10.00 $1,000.00
Henry E. Simpson, Jr. 05-Nov-81 52 B 100 $10.00 $1,000.00
Roy M. Springer, Jr. 05-Nov-81 60 B 100 $10.00 $1,000.00
Jack A. Beckett 06-Nov-81 146 B 200 $10.00 $2,000.00
Jack L. Bowman 06-Nov-81 130 B 525 $10.00 $5,250.00
Jack L. Bowman 06-Nov-81 159 B 2,768 $10.00 $27,680.00
Donald C. Cunningham 06-Nov-81 135 B 100 $10.00 $1,000.00
Theodore W. Cuny, Jr. 06-Nov-81 140 B 500 $10.00 $5,000.00
Joseph G. Dalgle 06-Nov-81 133 B 100 $10.00 $1,000.00
James R. Johnson 06-Nov-81 122 B 590 $10.00 $5,900.00
Robert W. Loomis 06-Nov-81 124 B 200 $10.00 $2,000.00
David L. Norris 06-Nov-81 138 B 100 $10.00 $1,000.00
Larry E. Juday 09-Nov-81 151 B 200 $10.00 $2,000.00
Webster C. English, Jr. 15-Nov-81 71 B 124 $10.00 $1,240.00
Eddie T. Payne 16-Nov-81 154 B 379 $10.00 $3,790.00
Carroll H. Payne (Separ Prop) 04-Dec-81 1 B 10,000 $10.00 $100,000.00
Carroll H. Payne (Separ Prop) 04-Dec-81 164 B
Carroll H. Payne, II 04-Dec-81 6 B 10,000 $10.00 $100,000.00
Carroll H. Payne, II 04-Dec-81 163 B
Debra Sue Payne 04-Dec-81 162 B
Debra Sue Payne 04-Dec-81 5 B 10,000 $10.00 $100,000.00
Naomi K. Payne 04-Dec-81 21 B 10,000 $10.00 $100,000.00
Naomi K. Payne 04-Dec-81 165 B
Carroll H. Payne (Separ Prop) 10-Dec-81 2 A 11
Carroll H. Payne (Separ Prop) 10-Dec-81 3 A
Jack L. Bowman 11-Dec-81 13 A 1
</TABLE>
Page - 4 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
---------------------------- ------------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
William A. Dast 11-Dec-81 8 A 1
Paul H. Krause 11-Dec-81 6 A 1
Warner F. Rankin, Jr. 11-Dec-81 5 A 1
Ralph F. Smith 11-Dec-81 4 A 2
Jacob T. Tutterow 11-Dec-81 10 A 1
George A. Hamlin 09-Apr-82 86 B 100 $10.90 $1,090.00
Charlie C. Jones 14-May-82 10 B 500 $11.05 $5,525.00
Charlie C. Jones 14-May-82 167 B
Lester J. Johnson, III 09-Aug-82 85 B 100 $11.50 $1,150.00
Charles E. Adams 30-Sep-82 175 B 100 $11.35 (B)
Charles D. Addison 30-Sep-82 176 B 1,100 $11.35 (B)
Leslie R. Anderson 30-Sep-82 177 B 8,900 $11.35 (B)
Raymond F. Aquillna 30-Sep-82 253 B 500 $11.35 (B)
Allan G. Berg 30-Sep-82 262 B 100 $11.35 (B)
Ronald P. Bodeen 30-Sep-82 277 B 300 $11.35 (B)
Jack L. Bowman 30-Sep-82 287 B 1,500 $11.35 (B)
Barry M. Brown 30-Sep-82 183 B 1,000 $11.35 (B)
Christopher R. Browne 30-Sep-82 284 B 100 $11.35 (B)
Peter G. Bruder 30-Sep-82 185 B 400 $11.35 (B)
Oliver J. Cook, Jr. 30-Sep-82 188 B 300 $11.35 (B)
Gerald E. Copher 30-Sep-82 307 B 1,000 $11.35 (B)
David G. Craft 30-Sep-82 278 B 500 $11.35 (B)
Joseph G. Dalgle 30-Sep-82 190 B 200 $11.35 (B)
Elmer J. Dalflume 30-Sep-82 276 B 100 $11.35 (B)
William A. Dast 30-Sep-82 191 B 300 $11.35 (B)
Norman T. Dubuc, Jr. 30-Sep-82 279 B 2,000 $11.35 (B)
Laurence I. Duggan 30-Sep-82 300 B 200 $11.35 (B)
Lloyd J. Engelhardt 30-Sep-82 197 B 200 $11.35 (B)
Webster C. English, Jr. 30-Sep-82 198 B 500 $11.35 (B)
Richard E. Giles 30-Sep-82 301 B 300 $11.35 (B)
Richard A. Gwyn 30-Sep-82 313 B 100 $11.35 (B)
</TABLE>
Page - 5 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
---------------------------- ------------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Harry E. Hall 30-Sep-82 203 B 300 $11.35 (B)
Billy R. Harrison 30-Sep-82 204 B 500 $11.35 (B)
James H. Henderson 30-Sep-82 266 B 900 $11.35 (B)
James W. Hill, III 30-Sep-82 2O6 B 400 $11.35 (B)
David A. Himes 30-Sep-82 267 B 3,000 $11.35 (B)
F. Reed Holsington, III 30-Sep-82 255 B 100 $11.35 (B)
William C. Hugenberg, Jr. 30-Sep-82 207 B 2,000 $11.35 (B)
James R. Johnson 30-Sep-82 261 B 100 $11.35 (B)
Lester J. Johnson, III 30-Sep-82 296 B 100 $11.35 (B)
Larry E. Juday 30-Sep-82 268 B 300 $11.35 (B)
Walter E. Kidwell 30-Sep-82 208 B 500 $11.35 (B)
Paul H. Krause 30-Sep-82 209 B 500 $11.35 (B)
Jonathan E. Kruse 30-Sep-82 270 B 100 $11.35 (B)
John A. Kulas 30-Sep-82 210 B 100 $11.35 (B)
Richard A. Lochner 30-Sep-82 211 B 100 $11.35 (B)
Norman G. Mesplay 30-Sep-82 214 B 600 $11.35 (B)
Larry E. Milam 30-Sep-82 311 B 1,000 $11.35 (B)
John H. Miller 30-Sep-82 174 B 300 $11.35 (B)
James W. Moss 30-Sep-82 170 B 300 $11.35 (B)
Mark F. Nielson, Jr. 30-Sep-82 290 B 100 $11.35 (B)
Frank J. Novotny 30-Sep-82 219 B 2,000 $11.35 (B)
David L. Norris 30-Sep-82 218 B 200 $11.35 (B)
Stanley L. Obrey 30-Sep-82 220 B 300 $11.35 (B)
Franklin C. Ordonlo 30-Sep-82 222 B 200 $11.35 (B)
Carroll H. Payne (Separ Prop) 30-Sep-82 291 B (B)
Carroll H. Payne (Separ Prop) 30-Sep-82 164 B 21,150 $11.35 (B)
Carroll H. Payne, II 30-Sep-82 163 B 21,150 $11.35 (B)
Carroll H. Payne, II 30-Sep-82 293 B (B)
Debra Sue Payne 30-Sep-82 292 B (B)
Debra Sue Payne 30-Sep-82 162 B 21,150 $11.35 (B)
Eddie T. Payne 30-Sep-82 223 B 1,000 $11.35 (B)
</TABLE>
Page - 6 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
---------------------------- ------------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Naomi K. Payne 30-Sep-82 165 B 21,150 $11.35 (B)
Naomi K. Payne 30-Sep-82 294 B (B)
Steven R. Pritchard 30-Sep-82 224 B 200 $11.35 (B)
M. Scott Rankin 30-Sep-82 285 B 500 $11.35 (B)
Warner F. Rankin, Jr. 30-Sep-82 225 B 3,000 $11.35 (B)
Robert L. Reed 30-Sep-82 304 B 200 $11.35 (B)
Donald R. Reynolds 30-Sep-82 226 B 200 $11.35 (B)
Larry L. Richter 30-Sep-82 227 B 300 $11.35 (B)
Glenn L. Robertson 30-Sep-82 171 B 300 $11.35 (B)
Victor H. Russell 30-Sep-82 229 B 100 $11.35 (B)
Dean E. Salmeier 30-Sep-82 230 B 600 $11.35 (B)
Marcus R. Sanders 30-Sep-82 305 B 100 $11.35 (B)
James L. Shanahan 30-Sep-82 231 B 100 $11.35 (B)
Leonard J. Slegert 30-Sep-82 233 B 1,800 $11.35 (B)
Henry E. Simpson, Jr. 30-Sep-82 234 B 100 $11.35 (B)
Cromer W. Smith, Jr. 30-Sep-82 235 B 200 $11.35 (B)
Ralph F. Smith 30-Sep-82 280 B 1,000 $11.35 (B)
Roy M. Springer, Jr. 30-Sep-82 281 B 100 $11.35 (B)
Donald R. Thomas 30-Sep-82 241 B 1,500 $11.35 (B)
Donald E. Troutman 30-Sep-82 243 B 100 $11.35 (B)
Thomas A. Tullar 30-Sep-82 244 B 100 $11.35 (B)
Jacob T. Tutterow 30-Sep-82 245 B 1,000 $11.35 (B)
H. David Tyler 30-Sep-82 246 B 300 $11.35 (B)
Arthur J. Ver Steegh, Jr. 30-Sep-82 309 B 100 $11.35 (B)
John R. Vice 30-Sep-82 257 B 200 $11.35 (B)
Lloyd D. Whitney 30-Sep-82 172 B 200 $11.35 (B)
Thomas M. Wiktorek 30-Sep-82 251 B 100 $11.35 (B)
Leonard E. Williams 30-Sep-82 173 B 500 $11.35 (B)
Thomas G. Woods 30-Sep-82 259 B 100 $11.35 (B)
James H. Wynne 30-Sep-62 252 B 300 $11.35 (B)
Robert W. Loomis 19-Oct-82 124 B 200 $11.80 $2,360.00
</TABLE>
Page - 7 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Carroll H. Payne (Separ Prop) 01-Dec-82 3 A 1
Carroll H. Payne (Separ Prop) 02-Dec-82 15 A
Carroll H. Payne (Separ Prop) 09-Dec-82 17 A
Carroll H. Payne (Separ Prop) 09-Dec-82 15 A 1
Webster C. English, Jr. 10-Jan-83 71 B 124 $12.25 $1,519.00
Webster C. English, Jr. 10-Jan-83 25 B 876 $12.25 $10,731.00
Webster C. English, Jr. 10-Jan-83 198 B 500 $12.25 $6,125.00
Robert C. Jurek 09-Feb-83 73 B 500 $12.43 $6,215.00
Carroll H. Payne (Separ Prop) 22-Mar-83 1 A 10
Carroll H. Payne (Separ Prop) 22-Mar-83 17 A 77
Carroll H. Payne, II 22-Mar-83 20 A 3
Debra Sue Payne 22-Mar-83 19 A 3
Freda J. Payne 22-Mar-83 18 A 3
Naomi K. Payne 22-Mar-83 21 A 3
Douglas R. Silger 11-May-83 108 B 450 $12.97 $5,836.50
Marcus R. Sanders 28-Jul-83 305 B 100 $13.33 $1,333.00
Carroll H. Payne (Separ Prop) 01-Aug-83 317 B
Carroll H. Payne (Separ Prop) 01-Aug-83 B 71,304 $12.61 $899,143.44
Carroll H. Payne, II 01-Aug-83 293 B 79,100 $12.61 $997,451.00
Debra Sue Payne 01-Aug-83 292 B 79,100 $12.61 $997,451.00
Naomi K Payne 01-Aug-83 294 B 79,100 $12.61 $997,451.00
Jack L. Bowman 02-Sep-83 13 A 1
Christopher R. Browne 06-Sep-83 284 B 100 $13.69 $1,369.00
Gerald E. Copher 06-Sep-83 307 B 1,000 $13.69 $13,690.00
James W. Hill, III 06-Sep-83 206 B 400 $13.69 $5,476.00
Lester J. Johnson, III 06-Sep-83 296 B 100 $13.69 $1,369.00
Stanley L. Obrey 06-Sep-83 220 B 300 $13.69 $4,107.00
Carroll H. Payne, II 06-Sep-83 319 B 39,930 $13.51 $539,454.30
Debra Sue Payne 06-Sep-83 318 B 39,930 $13.51 $539,454.30
Naomi K. Payne 06-Sep-83 320 B 39,930 $13.51 $539,454.30
Charles M. Schencke 13-Sep-83 81 B 200 $13.69 $2,738.00
</TABLE>
Page - 8 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald P. Bodeen 05-Oct-83 277 B 300 $13.87 $4,161.00
Ronald P. Bodeen 05-Oct-83 57 B 300 $13.87 $4,161.00
Ronald P. Bodeen 05-Oct-83 27 B 415 $13.87 $5,756.05
William Carrier. Jr. 05-Oct-83 119 B 250 $13.87 $3,467.50
Larry E. Juday 17-Oct-83 268 B 300 $13.87 $4,161.00
Larry E. Juday 17-Oct-83 151 B 200 $13.87 $2,774.00
David G. Craft 21-Nov-83 24 B 419 $14.05 $5,886.95
David G. Craft 21-Nov-83 127 B 600 $14.05 $8,430.00
David G. Craft 21-Nov-83 278 B 500 $14.05 $7,025.00
John W. Fair 17-Jan-84 22 B 688 $14.40 $9,907.20
George R. McCalla 17-Jan-84 144 B 1,000 $14.40 $14,400.00
Frank J. Novotny 19-Jan-84 219 B 2,000 $14.40 $28,800.00
Roy M. Springer, Jr. 31-Jan-84 60 B 100 $14.40 $1,440.00
Roy M. Springer, Jr. 31-Jan-84 281 B 100 $14.40 $1,440.00
Dick F. Gibson 07-Feb-84 84 B 250 $14.60 $3,650.00
Donald E. Troutman 07-Feb-84 243 B 100 $14.60 $1,460.00
Jack L. Bowman 15-Feb-84 159 B 2,768 $14.60 $40,412.80
Jack L. Bowman 15-Feb-84 207 B 1,500 $14.60 $21,900.00
Jack L. Bowman 15-Feb-84 130 B 525 $14.60 $7,665.00
Jack L. Bowman 15-Feb-84 30 B 2,648 $14.60 $38,660.80
Charles E. Adams 28-Feb-84 349 B 100 $14.40 $1,440.00
Thomas K. Badger 28-Feb-84 387 B 100 $14.40 $1,440.00
Allan G. Berg 28-Feb-84 353 B 200 $14.40 $2,880.00
Larry S. Bobst 28-Feb-84 395 B 100 $14.40 $1,440.00
Michael A. Boos 28-Feb-84 415 B 100 $14.40 $1,440.00
James L. Burgess 28-Feb-84 381 B 200 $14.40 $2,880.00
Boyd B. Burkholder 28-Feb-84 383 B 1,000 $14.40 $14,400.00
Charles E. Canedy 28-Feb-84 380 B 100 $14.40 $1,440.00
Billy J. Cone 28-Feb-84 351 B 100 $14.40 $1,440.00
Donald C. Cunningham 28-Feb-84 338 B 100 $14.40 $1,440.00
Harold E. Dickman, Jr. 28-Feb-84 419 B 100 $14.40 $1,440.00
</TABLE>
Page - 9 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Richard E. Dodson 28-Feb-84 410 B 200 $14.40 $2,880.00
Laurence I. Duggan 28-Feb-84 358 B 100 $14.40 $1,440.00
Martin R. Durbin 28-Feb-84 412 B 100 $14.40 $1,440.00
Richard E. Giles 28-Feb-84 359 B 400 $14.40 $5,760.00
Gary W. Goldenbogen 28-Feb-84 376 B 100 $14.40 $1,440.00
Alvin C. Hutchins, Jr. 28-Feb-84 393 B 300 $14.40 $4,320.00
Waltor E. Kidwell 28-Feb-84 364 B 100 $14.40 $1,440.00
Paul H. Krause 28-Feb-84 436 B 500 $14.40 $7,200.00
Jonathan E. Kruse 28-Feb-84 401 B 100 $14.40 $1,440.00
Richard D. McSweeney 28-Feb-84 390 B 100 $14.40 $1,440.00
Norman G. Mosplay 28-Feb-84 431 B 100 $14.40 $1,440.00
John H. Miller 28-Feb-84 334 B 300 $14.40 $4,320.00
James W. Moss 28-Feb-84 348 B 300 $14.40 $4,320.00
Mark F. Nielsen, Jr. 28-Feb-84 341 B 100 $14.40 $1,440.00
Franklin C. Ordonlo 28-Feb-84 336 B 100 $14.40 $1,440.00
Eddie T. Payne 28-Feb-84 352 B 500 $14.40 $7,200.00
Donald R. Reynolds 28-Feb-84 370 B 200 $14.40 $2,880.00
Ralph 0. Riojas 28-Feb-84 384 B 100 $14.40 $1,440.00
Victor H. Russell 28-Feb-84 360 B 100 $14.40 $1,440.00
Dean E. Salmeier 28-Feb-84 343 B 200 $14.40 $2,880.00
Louise 0. Schomerus 28-Feb-84 398 B 100 $14.40 $1,440.00
David I. Scott 28-Feb-84 418 B 200 $14.40 $2,880.00
Henry E. Simpson, Jr. 28-Feb-84 335 B 100 $14.40 $1,440.00
Carroll J. Squyres 28-Feb-84 388 B 100 $14.40 $1,440.00
Allan M. Stearns 28-Feb-84 392 B 100 $14.40 $1,440.00
H. David Tyler 28-Feb-84 438 B 200 $14.40 $2,880.00
Arthur J. Ver Steegh, Jr. 28-Feb-84 357 B 100 $14.40 $1,440.00
Lloyd D. Whitney 28-Feb-84 363 B 300 $14.40 $4,320.00
Thomas M. Wiktortek 28-Feb-84 340 B 300 $14.40 $4,320.00
Theodore W. Cuny, Jr. 29-Feb-84 397 B 700 $14.40 $10,080.00
William A. Dast 29-Feb-84 450 B 2,000 $14.40 $28,800.00
</TABLE>
Page - 10 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
William C. Hugenberg, Jr. 29-Feb-84 429 B 1,300 $14.40 $18,720.00
Leonard J. Siegert 29-Feb-84 445 B 1,500 $14.40 $21,600.00
Brian D. Stankle 29-Feb-84 449 B 500 $14.40 $7,200.00
Jacob T. Tutterow 29-Feb-84 427 B 1,200 $14.40 $17,280.00
Oliver J. Cook, Jr. 05-Mar-84 368 B 100 $14.40 $1,440.00
Jency W. Griffin 05-Mar-84 374 B 100 $14.40 $1,440.00
Billy R. Harrison 05-Mar-84 366 B 600 $14.40 $8,640.00
Charles D. Miller 05-Mar-84 414 B 100 $14.40 $1,440.00
Ralph F. Smith 05-Mar-84 369 B 1,000 $14.40 $14,400.00
Burton J. Walrath, Jr. 05-Mar-84 407 B 300 $14.40 $4,320.00
M. Scott Rankin 07-Mar-84 448 B 500 $14.40 $7,200.00
Warner F. Rankin, Jr. 07-Mar-84 440 B 1,000 $14.40 $14,400.00
Joseph M. Gilmore 09-Mar-84 422 B 700 $14.40 $10,080.00
Kevin Leeth 09-Mar-84 430 B 100 $14.40 $1,440.00
Richard J. Busch 14-Mar-84 69 B 300 $14.80 $4,440.00
Paul H. Engel 15-Mar-84 452 B 400 $14.40 $5,760.00
Lloyd J. Engelhardt 15-Mar-84 432 B 200 $14.40 $2,880.00
James H. Henderson 16-Mar-84 456 B 500 $14.40 $7,200.00
Leonard E. Williams 16-Mar-84 454 B 300 $14.40 $4,320.00
Charles S. Graham, III 21-Mar-84 459 B 3,500 $14.40 $50,400.00
John R. Vice 23-Mar-84 257 B 200 $14.80 $2,960.00
Barry M. Brown 27-Mar-84 464 B 400 $14.40 $5,760.00
F. Reed Holsington, III 27-Mar-84 465 B 100 $14.40 $1,440.00
Richard A. Lochner 27-Mar-84 466 B 100 $14.40 $1,440.00
Tommy C. Wimberly 27-Mar-84 461 B 100 $14.40 $1,440.00
Jack A. Beckett 28-Mar-84 146 B 200 $14.80 $2,960.00
David C. Cottington 30-Mar-84 476 B 100 $14.40 $1,440.00
Charlie C. Jones 30-Mar-84 493 B 200 $14.40 $2,880.00
Robert H. Lindeman 30-Mar-84 477 B 100 $14.40 $1,440,00
Donald E. McKelvey, Jr. 30-Mar-84 475 B 100 $14.40 $1,440.00
Glenn L. Robertson 30-Mar-84 479 B 200 $14.40 $2,880.00
</TABLE>
Page - 11 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
James H. Westberry 30-Mar-84 478 B 100 $14.40 $1,440.00
Meta A. Baxter 31-Mar-84 506 B 100 $14.40 $1,440.00
John M. Compton 31-Mar-84 494 B 100 $14.40 $1,440.00
David L. Gray 31-Mar-84 488 B 400 $14.40 $5,760.00
John F. Hampton 31-Mar-84 482 B 100 $14.40 $1,440.00
Harold L. Langley 31-Mar-84 501 B 100 $14.40 $1,440.00
Peter M. Mack 31-Mar-84 505 B 100 $14.40 $1,440.00
Larry E. Milam 31-Mar-84 489 B 200 $14.40 $2,880.00
David L. Norris 31-Mar-84 492 B 100 $14.40 $1,440.00
James K. Parker 31-Mar-84 485 B 300 $14.40 $4,320.00
Larry L. Richter 31-Mar-84 502 B 300 $14.40 $4,320.00
Cromer W. Smith, Jr. 31-Mar-84 483 B 200 $14.40 $2,880.00
Burtland Bane Weber 31-Mar-84 503 B 200 $14.40 $2,880.00
William L. Zint, Jr. 31-Mar-84 484 B 100 $14.40 $1,440.00
Eugene B. Dalbey 18-Apr-84 77 B 640 $15.00 $9.600.00
Thomas G. Woods 23-Apr-84 259 B 100 $15.00 $1,500.00
Sheila M. Schencke 12-Jun-84 80 B 200 $15.40 $3,080.00
Allan G. Berg 13-Jun-84 353 B 100 $15.40 $1,540.00
Elmer J. Dafflume 20-Jun-84 276 B 100 $15.40 $1,540.00
William L Zint, Jr. 20-Jun-84 484 B 100 $15.40 $1,540.00
Charles B. Addison 02-Jul-84 59 B 200 $15.60 $3,120.00
Charles B. Addison 02-Jul-84 176 B 1,100 $15.60 $17,160.00
Robert E. Berretta 06-Jul-84 51 B 250 $15.60 $3,900.00
Henry E. Simpson, Jr. 06-Jul-84 52 B 100 $15.60 $1,560.00
Henry E. Simpson, Jr. 06-Jul-84 335 B 100 $15.60 $1,560.00
Henry E. Simpson, Jr. 06-Jul-84 234 B 100 $15.60 $1,560.00
Gary D. Bowman 19-Jul-84 126 B 350 $15.60 $5,460.00
David I. Scott 19-Jul-84 418 B 200 $15.60 $3,120.00
Allan M. Stearns 19-Jul-84 392 B 100 $15.60 $1,560.00
Carroll H. Payne, II 03-Aug-84 525 B
Carroll H. Payne, II 03-Aug-84 319 B 25,657 $15.80 $405,380.60
</TABLE>
Page - 12 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Debra Sue Payne 03-Aug-84 521 B
Debra Sue Payne 03-Aug-84 318 B 25,657 $15.80 $405,380.60
Naomi K. Payne 03-Aug-84 320 B 25,657 $15.80 $405,380.60
Naomi K. Payne 03-Aug-84 523 B
Carroll H. Payne (Comm Prop) 17-Aug-84 3 B 1,247 $15.80 $19,702.60
Carroll H. Payne (Separ Prop) 17-Aug-84 317 B 62,366 $15.80 $985,382.80
Freda J. Payne 17-Aug-84 528 B 14,273 $15.80 $225,513.40
Kenneth N. Beckman 05-Sep-84 96 B 100 $16.00 $1,600.00
F. Reed Holsington, III 26-Sep-84 255 B 100 $16.00 $1,600.00
F. Reed Holsington, III 26-Sep-84 465 B 100 $16.00 $1,600.00
Thomas A. Tullar 09-Oct-84 244 B 100 $16.20 $1,620.00
George Carldakis 08-Nov-84 148 B 200 $16.40 $3,280.00
Leslie R. Anderson 13-Nov-84 13 B 637 $16.40 $10,446.80
Leslie R. Anderson 13-Nov-84 129 B 2,000 $16.40 $32,800.00
Kevin Leeth 28-Nov-84 430 B 100 $16.40 $1,640.00
Lloyd J. Engelhardt 02-Jan-85 149 B 500 $17.40 $8,700.00
Lloyd J. Engelhardt 02-Jan-85 197 B 200 $17.40 $3,480.00
Lloyd J. Engelhardt 02-Jan-85 432 B 200 $17.40 $3,480.00
Mark F. Nielsen, Jr. 02-Jan-85 341 B 100 $17.40 $1,740.00
Mark F. Nielsen, Jr. 02-Jan-85 290 B 100 $17.40 $1,740.00
Joseph E. Kleponis 29-Jan-85 68 B 100 $17.40 $1,740.00
Jency W. Griffin 05-Feb-85 374 B 100 $18.20 $1,820.00
Richard E. Dodson 29-May-85 410 B 200 $20.60 $4,120.00
Alvin C. Hutchins, Jr. 07-Jun-85 393 B 300 $21.40 $6,420.00
Steven R. Pritchard 07-Jun-85 224 B 200 $21.40 $4,280.00
Donald R. Thomas 24-Jun-85 241 B 1,500 $21.40 $32,100.00
Donald R. Thomas 24-Jun-85 29 B 1,489 $21.40 $31,864.60
Dean E. Salmeier 01-Jul-85 230 B 600 $22.20 $13,320.00
Dean E. Salmeier 01-Jul-85 92 B 900 $22.20 $19,980.00
Dean E. Salmeier 01-Jul-85 343 B 200 $22.20 $4,440.00
M. Scott Rankin 22-Jul-85 285 B 500 $22.20 $11,100.00
</TABLE>
Page - 13 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
M. Scott Rankin 22-Jul-85 448 B 500 $22.20 $11,100.00
M. Scott Rankin 22-Jul-85 87 B 500 $22.20 $11,100.00
John M. Compton 01-Aug-85 494 B 100 $23.00 $2,300.00
Brian D. Stankle 23-Aug-85 548 B
Brian D. Stankle 23-Aug-85 449 B 300 $23.00 $6,900.00
David C. Cottington 03-Sep-85 476 B 100 $23.80 $2,380.00
Peter M. Mack 09-Sep-85 505 B 100 $23.80 $2,380.00
Charles D. Miller 09-Sep-85 414 B 100 $23.80 $2,380.00
Peter G. Bruder 12-Sep-85 185 B 400 $23.80 $9,520.00
Peter G. Bruder 12-Sep-85 37 B 490 $23.80 $11,662.00
Mary Tom Abelson 17-Sep-85 631 B 200 $23.00 $4,600.00
Marc L. Alessandria 17-Sep-85 666 B 100 $23.00 $2,300.00
Raymond F. Aquilina 17-Sep-85 741 B 250 $23.00 $5,750.00
Thomas K. Badger 17-Sep-85 696 B 100 $23.00 $2,300.00
Meta A. Baxter 17-Sep-85 606 B 100 $23.00 $2,300.00
Allan G. Berg 17-Sep-85 702 B 100 $23.00 $2,300.00
Leonard A. Berglund, Jr. 17-Sep-85 614 B 50 $23.00 $1,150.00
James B. Blunk, Jr. 17-Sep-85 583 B 50 $23.00 $1,150.00
Thomas John Bobowski 17-Sep-85 588 B 100 $23.00 $2,300.00
Raymond C. Bradbury 17-Sep-85 688 B 150 $23.00 $3,450.00
Barry M. Brown 17-Sep-85 726 B 1,000 $23.00 $23,000.00
Boyd B. Burkholder 17-Sep-85 630 B 200 $23.00 $4,600.00
Donald C. Cunningham 17-Sep-85 698 B 50 $23.00 $1,150.00
Joseph G. Dalgle 17-Sep-85 581 B 200 $23.00 $4,600.00
William A. Dast 17-Sep-85 627 B 1,500 $23.00 $34,500.00
Peter A. Dysko 17-Sep-85 658 B 100 $23.00 $2,300.00
Arthur R. Elpper, Jr. 17-Sep-85 604 B 400 $23.00 $9,200.00
Paul H. Engel 17-Sep-85 654 B 400 $23.00 $9,200.00
Kenneth Fisher 17-Sop-85 615 B 100 $23.00 $2,300.00
David E. Fitzgerald 17-Sep-85 609 B 100 $23.00 $2,300.00
Charles L. Fye, Jr. 17-Sep-85 554 B 100 $23.00 $2,300.00
</TABLE>
Page - 14 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dwight W. Galda 17-Sep-85 672 B 100 $23.00 $2,300.00
Joseph M. Gilmore 17-Sep-85 625 B 400 $23.00 $9,200.00
Gary W. Goldenbogen 17-Sep-85 704 B 50 $23.00 $1,150.00
Charles S. Graham, III 17-Sep-85 632 B 800 $23.00 $18,400.00
David L. Gray 17-Sep-85 602 B 300 $23.00 $6,900.00
Antone W. Hagen 17-Sep-85 687 B 100 $23.00 $2,300.00
Ronald L. Halsted 17-Sep-85 659 B 100 $23.00 $2,300.00
John F. Hampton 17-Sep-85 652 B 100 $23.00 $2,300.00
Billy R. Harrison 17-Sep-85 649 B 200 $23.00 $4,600.OO
Donald H. Hart 17-Sep-85 613 B 100 $23.00 $2,300.00
Howard F. Haupt, II 17-Sep-85 670 B 100 $23.00 $2,300.00
James W. Hill, III 17-Sep-85 585 B 100 $23.00 $2,300.00
William M. Hood 17-Sep-85 686 B 100 $23.00 $2,300.00
William C. Hugenberg, Jr. 17-Sep-85 565 B 200 $23.00 $4,600.00
Edward W. Jackson, Jr. 17-Sep-85 566 B 50 $23.00 $1,150.00
Charlie C. Jones 17-Sep-85 732 B 100 $23.00 $2,300.00
Walter E. Kidwell 17-Sep-85 559 B 300 $23.00 $6,900.00
Carlos I. Koski 17-Sep-85 640 B 200 $23.00 $4,600.00
Paul H. Krause 17-Sep-85 575 B 1,500 $23.00 $34,500.00
Claire I. Kulas 17-Sep-85 587 B 200 $23.00 $4,600.00
Roy E. Lindquist, Jr. 17-Sep-85 555 B 150 $23.00 $3,450.00
Richard A. Lochner 17-Sep-85 705 B 50 $23.00 $1,150.00
Patricia T. Mayor 17-Sep-85 673 B 100 $23.00 $2,300.00
Charles J. McVey 17-Sep-85 567 B 50 $23.00 $1,150.00
Norman G. Mesplay 17-Sep-85 634 B 600 $23.00 $13,800.00
Larry E. Milam 17-Sep-85 723 B 200 $23.00 $4,600.00
John H. Miller 17-Sep-85 716 B 450 $23.00 $10,350.00
James W. Moss 17-Sep-85 734 B 300 $23.00 $6,900.00
R. Richard Mulder 17-Sep-85 669 B 100 $23.00 $2,300.00
M. Christyne Nasbe 17-Sep-85 597 B 100 $23.00 $2,300.00
Holliss Ann Norris 17-Sep-85 665 B 50 $23.00 $1,150.00
</TABLE>
Page - 15 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Robert M. Page 17-Sep-85 678 B 100 $23.00 $2,300.00
Carroll H. Payne, II 17-Sep-85 620 B 1,500 $23.00 $34,500.00
Debra Sue Payne 17-Sep-85 621 B 1,500 $23.00 $34,500.00
Freda J. Payne 17-Sep-85 619 B 1,500 $23.00 $34,500.00
Naomi K. Payne 17-Sep-85 622 B 1,500 $23.00 $34,500.00
William J. Ralphs 17-Sep-85 596 B 200 $23.00 $4,600.00
Warner F. Rankin, Jr. 17-Sep-85 576 B 1,500 $23.00 $34,500.00
Donald R. Reynolds 17-Sep-85 562 B 150 $23.00 $3,450.00
James E. Richardson 17-Sep-85 675 B 100 $23.00 $2,300.00
Larry L. Richter 17-Sep-85 730 B 400 $23.00 $9,200.00
Patricia L. Saries 17-Sep-85 676 B 50 $23.00 $1,150.00
Louise 0. Schomerus 17-Sep-85 558 B 100 $23.00 $2,300.00
Robert Dennis Seigler 17-Sep-69 668 B 50 $23.00 $1,150.00
Marie Eloise Setser 17-Sep-85 642 B 750 $23.00 $17,250.00
Jeffrey A. Shaner 17-Sep-85 674 B 100 $23.00 $2,300.00
Leonard J. Siegert 17-Sep-65 623 B 1,100 $23.00 $25,300.00
Cromer W. Smith, Jr. 17-Sep-85 718 B 200 $23.00 $4,600.00
Ralph F. Smith 17-Sep-85 645 B 500 $23.00 $11,500.00
Robert A. Stallsmith 17-Sep-85 594 B 50 $23.00 $1,150.00
William B. Stone 17-Sep-85 595 B 300 $23.00 $6,900.00
Erie W. Thomas 17-Sep-85 584 B 100 $23.00 $2,300.00
Bradley D. Troutman 17-Sep-85 582 B 50 $23.00 $1,150.00
Cynthia G. Turse 17-Sep-85 681 B 100 $23.00 $2,300.00
Jacob T. Tutterow 17-Sep-65 600 B 650 $23.00 $14,950.00
H. David Tyler 17-Sep-85 656 B 250 $23.00 $5,750.00
David K. Vaupel 17-Sep-85 663 B 206 $23.00 $4,600.00
Burton J. Walrath, Jr. 17-Sep-85 599 B 200 $23.00 $4,600.00
Burtland Bane Weber 17-Sep-85 703 B 100 $23.00 $2,300.00
Lloyd D. Whitney 17-Sep-85 737 B 550 $23.00 $12,650.00
Leonard E. Williams 17-Sep-85 553 B 300 $23.00 $6,900.00
Brian D. Stankle 19-Nov-85 548 B 200 $27.00 $5,400.00
</TABLE>
Page - 16 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARED & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ralph F. Smith 12-Dec-85 4 A 2
Donald E. McKelvey, Jr. 02-Jan-86 475 B 100 $30.00 $3,000.00
Michael A. Boos 06-Jan-86 415 B 100 $30.00 $3,000.00
Robert L. Reed 09-Jan-86 304 B 200 $30.00 $6,000.00
R. Richard Mulder 14-Jan-86 669 B 100 $30.00 $3,000.00
Oliver J. Cook, Jr. 03-Feb-86 368 B 100 $31.50 $3,150.00
Oliver J. Cook, Jr. 03-Feb-86 188 B 300 $31.50 $9,450.00
Oliver J. Cook, Jr. 03-Feb-86 39 B 300 $31.50 $9,450.00
Mary Tom Abelson 04-Feb-86 631 B 200 $31.50 $6,300.00
David L. Norris 07-Feb-86 218 B 200 $31.50 $6,300.00
Thomas M. Wiktorek 13-Mar-86 251 B 100 $33.00 $3,300.00
David L. Norris 17-Mar-86 492 B 100 $33.00 $3,300.00
Donald R. Myser 01-Apr-86 79 B 300 $34.50 $10,350.00
David L. Gray 07-Apr-86 488 B 400 $34.50 $13,800.00
David L. Gray 07-Apr-86 602 B 300 $34.50 $10,350.00
Thomas M. Wiktorek 07-Apr-86 755 B
Thomas M. Wiktorek 07-Apr-86 340 B 200 $34.50 $6,900.00
David L. Norris 09-May-86 138 B 100 $36.00 $3,600.00
Kenneth Fisher 06-Jun-86 615 B 100 $37.50 $3,750.00
James H. Henderson 06-Jun-86 103 B 100 $37.50 $3,750.00
James H. Henderson 06-Jun-86 456 B 500 $37.50 $18,750.00
James H. Henderson 06-Jun-86 266 B 900 $37.50 $33,750.00
Thomas M. Wiktorek 16-Jun-86 755 B 100 $37.50 $3,750.00
John A. Kulas 23-Jun-86 210 B 100 $37.50 $3,750.00
Louise 0. Schomerus 27-Jun-86 43 B 100 $37.50 $3,750.00
Louise 0. Schomerus 27-Jun-86 558 B 100 $37.50 $3,750.00
Louise 0. Schomerus 27-Jun-86 12 B 4,026 $37.50 $150,975.00
Louise 0. Schomerus 27-Jun-86 398 B 100 $37.50 $3,750.00
Ronald L. Halsted 30-Jul-86 659 B 100 $39.00 $3,900.00
Boyd B. Burkholder 01-Aug-86 630 B 200 $40.50 $8,100.00
Boyd B. Burkholder 01-Aug-86 383 B 1,000 $40.50 $40,500.00
</TABLE>
Page - 17 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Betty J. Epperson 04-Aug-86 141 B 100 $40.50 $4,050.00
Robert M. Page 18-Aug-86 678 B 100 $40.50 $4,050.00
Billy R. Harrison 02-Sep-86 204 B 500 $42.00 $21,000.00
Billy R. Harrison 02-Sep-86 131 B 500 $42.00 $21,000.00
Billy R. Harrison 02-Sep-86 366 B 600 $42.00 $25,200.00
Billy R. Harrison 02-Sep-86 649 B 200 $42.00 $8,400.00
James E. Richardson 19-Sep-86 675 B 100 $42.00 $4,200.00
Glenn H. Nelson 30-Sep-86 89 B 700 $42.00 $29,400.00
William A. Dast 01-Oct-86 627 B 1,500 $43.00 $64,500.00
Robert A. Stallsmith 02-Oct-86 594 B 50 $43.00 $2,150.00
Harold L. Langley 03-Oct-86 501 B 100 $43.00 $4,300.00
Dwight W. Galda 06-Oct-86 672 B 95 $43.00 $4,085.00
Dwight W. Galda 06-Oct-86 773 B
James W. Hill, III 10-Oct-86 585 B 100 $43.00 $4,300.00
Harry E. Hall 05-Nov-86 203 B 300 $44.00 $13,200.00
Harry E. Hall 05-Nov-86 50 B 300 $44.00 $13,200.00
Richard D. McSweeney 07-Nov-86 390 B 100 $44.00 $4,400.00
Ralph F. Smith 07-Nov-86 158 B 2,000 $44.00 $88,000.00
Ralph F. Smith 07-Nov-86 369 B 1,000 $44.00 $44,000.00
James W. Hill, III 10-Nov-86 779 B
James W. Hill, III 10-Nov-86 44 B 200 $44.00 $8,000.00
Richard E. Giles 14-Nov-86 781 B
Richard E. Giles 14-Nov-86 B 500 $44.00 $22,000.00
Bradley D. Troutman 24-Nov-86 582 B 50 $44.00 $2,200.00
Ralph F. Smith 02-Dec-86 645 B 500 $45.00 $22,500.00
Ralph F. Smith 02-Dec-86 280 B 1,000 $45.00 $45,000.00
Ralph F. Smith 02-Dec-86 7 B 4,037 $45.00 $181,665.00
Cynthia G. Turse 02-Dec-86 681 B 100 $45.00 $4,500.00
Leonard E. Williams 03-Dec-86 553 B 300 $45.00 $13,500.00
Leonard E. Williams 03-Dec-86 454 B 300 $45.00 $13,500.00
Leonard E. Williams 03-Dec-86 173 B 500 $45.00 $22,500.00
</TABLE>
Page - 18 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Leonard E. Williams 03-Dec-86 104 B 500 $45.00 $22,500.00
Jeffrey A. Shaner 15-Dec-86 674 B 100 $45.00 $4,500.00
Thomas K. Badger 17-Dec-86 696 B 100 $45.00 $4,500.00
Thomas K. Badger 17-Dec-86 387 B 100 $45.00 $4,500.00
Eddie T. Payne 17-Dec-86 17 B 621 $45.00 $27,945.00
Eddie T. Payne 17-Dec-86 154 B 379 $45.00 $17,055.00
John P. Dodson 18-Dec-86 66 B 200 $45.00 $9,000.00
David K. Vaupel 22-Dec-86 663 B 200 $45.00 $9,000.00
Eddie T. Payne 29-Dec-86 223 B 1,000 $45.00 $45,000.00
Eddie T. Payne 29-Dec-86 352 B 500 $45.00 $22,500.00
Tommy C. Wimberly 04-Feb-87 461 B 100 $47.00 $4,700.00
James L. Burgess 12-Feb-87 381 B 200 $47.00 $9,400.00
Charles E. Adams 02-Mar-87 349 B 100 $48.00 $4,800.00
Charles E. Adams 02-Mar-87 175 B 100 $48.00 $4,800.00
James W. Hill, III 02-Mar-87 779 B 70 $48.00 $3,360.00
James W. Hill, III 02-Mar-87 796 B
James L. Shanahan 23-Mar-87 231 B 100 $48.00 $4,800.00
James W. Moss 01-Apr-87 734 B 300 $49.00 $14,700.00
Laurence I. Duggan 07-Apr-87 300 B 200 $49.00 $9,800.00
Laurence I. Duggan 07-Apr-87 358 B 100 $49.00 $4,900.00
James W. Hill, III 04-May-87 801 B
James W. Hill, III 04-May-87 796 B 50 $50.00 $2,500.00
Walter E. Kidwell 18-May-87 28 A 1
James W. Hill, III 27-May-87 801 B 20 $50.00 $1,000.00
James W. Hill, III 27-May-87 803 B
James W. Hill, III 05-Jun-87 803 B 80 $51.00 $4,080.00
James B. Blunk, Jr. 11-Jun-87 583 B 50 $51.00 $2,550.00
Holliss Ann Norris 15-Jun-87 665 B 50 $51.00 $2,550.00
David E. Fitzgerald 01-Jul-87 609 B 100 $52.00 $5,200.00
Robert H. Lindeman 01-Jul-87 477 B 100 $52.00 $5,200.00
Patricia L. Sarles 01-Jul-87 676 B 50 $52.00 $2,600.00
</TABLE>
Page - 19 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Raymond C. Bradbury 06-Jul-87 688 B 75 $52.00 $3,900.00
Raymond C. Bradbury 06-Jul-87 811 B
Victor H. Russell 07-Jul-87 229 B 100 $52.00 $5,200.00
Victor H. Russell 07-Jul-87 360 B 100 $52.00 $5,200.00
Victor H. Russell 07-Jul-87 90 B 100 $52.00 $5,200.00
Ralph 0. Riojas 20-Jul-87 384 B 100 $52.00 $5,200.00
Charles L. Fye, Jr. 27-Jul-87 554 B 100 $52.00 $5,200.00
Thomas John Bobowski 03-Aug-87 588 B 100 $53.00 $5,300.00
Harold E. Diekman, Jr. 03-Aug-87 419 B 100 $53.00 $5,300.00
Roy E. Lindquist, Jr. 03-Aug-87 555 B 150 $53.00 $7,950.00
James K. Parker 25-Aug-87 485 B 200 $53.00 $10,600.00
James K. Parker 25-Aug-87 818 B
William J. Ralphs 08-Sep-87 596 B 200 $54.00 $10,800.00
Charles B. Addison 21-Sep-87 849 B 600 $53.00 $31,800.00
Marc L. Alessandria 21-Sep-87 850 B 100 $53.00 $5,300.00
Bernard J. Amels 21-Sep-87 851 B 100 $53.00 $5,300.00
Willie W. Ashley, Jr. 21-Sep-87 853 B 50 $53.00 $2,650.00
David S. Bennett 21-Sep-87 858 B 50 $53.00 $2,650.00
Allan G. Berg 21-Sep-87 834 B 100 $53.00 $5,300.00
Joseph J. Bertagnolli 21-Sep-87 859 B 100 $53.00 $5,300.00
Larry S. Bobst 21-Sep-87 864 B 50 $53.00 $2,650.00
John T. Braton 21-Sep-87 865 B 100 $53.00 $5,300.00
Gregory D. Breland 21-Sep-87 866 B 100 $53.00 $5,300.00
Barry M. Brown 21-Sep-87 867 B 600 $53.00 $31,800.00
Gary D. Burrows 21-Sep-87 870 B 100 $53.00 $5,300.00
David H. Campbell 21-Sep-87 871 B 100 $53.00 $5,300.00
James C. Carroll 21-Sep-87 873 B 150 $53.00 $7,950.00
Mark B. Cheben 21-Sep-87 874 B 100 $53.00 $5,300.00
John G. Corbett 21-Sep-87 879 B 100 $53.00 $5,300.00
Donald C. Cunningham 21-Sep-87 887 B 50 $53.00 $2,650.00
Martin R. Durbin 21-Sep-87 892 B 100 $53.00 $5,300.00
</TABLE>
Page - 20 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Paul H. Engel 21-Sep-87 895 B 100 $53.00 $5,300.00
Charles S. Graham, III 21-Sep-87 902 B 200 $53.00 $10,600.00
Heidi S. Griffiths 21-Sep-87 904 B 100 $53.00 $5,300.00
John F. Hampton 21-Sep-87 907 B 250 $53.00 $13,250.00
Howard F. Haupt, II 21-Sep-87 910 B 50 $53.00 $2,650.00
William M. Hood 21-Sep-87 913 B 50 $53.00 $2,650.00
Douglas E. Hovde 21-Sep-87 914 B 50 $53.00 $2,650.00
Walter E. Kidwell 21-Sep-87 919 B 300 $53.00 $15,900.00
Mark K. Klages 21-Sep-87 920 B 100 $53.00 $5,300.00
Eleanor A. Kolton 21-Sep-87 922 B 150 $53.00 $7,950.00
Jonathan E. Kruse 21-Sep-87 837 B 100 $53.00 $5,300.00
Claire I. Kulas 21-Sep-87 838 B 200 $53.00 $10,600.00
Charles E. Laskey 21-Sep-87 925 B 100 $53.00 $5,300.00
Richard A. Lechner 21-Sep-87 926 B 100 $53.00 $5,300.00
Patricia T. Mayer 21-Sep-87 841 B 200 $53.00 $10,600.00
Norman G. Mosplay 21-Sep-87 826 B 150 $53.00 $7,950.00
John H. Miller 21-Sep-87 843 B 200 $53.00 $10,600.00
M. Christyne Nasbe 21-Sep-87 933 B 100 $53.00 $5,300.00
Allen D. Nettleingham 21-Sep-87 934 B 50 $53.00 $2,650.00
Stanley L. 0brey 21-Sep-87 936 B 250 $53.00 $13,250.00
Carroll H. Payne, II 21-Sep-87 940 B 400 $53.00 $21,200.00
Debra Sue Payne 21-Sep-87 941 B 400 $53.00 $21,200.00
Freda J. Payne 21-Sep-87 942 B 400 $53.00 $21,200.00
Naomi K. Payne 21-Sep-87 943 B 400 $53.00 $21,200.00
Michael Peters 21-Sep-87 944 B 50 $53.00 $2,650.00
Donald R. Reynolds 21-Sep-87 947 B 50 $53.00 $2,650.00
Larry L. Richter 21-Sep-87 948 B 250 $53.00 $13,250.00
Robert Dennis Seigler 21-Sep-87 952 B 50 $53.00 $2,650.00
Marie Eloise Setser 21-Sep-87 953 B 100 $53.00 $5,300.00
Cromer W. Smith, Jr. 21-Sep-87 956 B 100 $53.00 $5,300.00
Karen L. Suhr 21-Sep-87 964 B 50 $53.00 $2,650.00
</TABLE>
Page - 21 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Marc L. Troiani 21-Sep-87 971 B 50 $53.00 $2,650.00
H. David Tyler 21-Sep-87 974 B 250 $53.00 $13,250.00
John R. Vose 21-Sep-87 977 B 50 $53.00 $2,650.00
Allen E Werseleskey 21-Sep-87 979 B 150 $53.00 $7,950.00
Lloyd D. Whitney 21-Sep-87 980 B 100 $53.00 $5,300.00
R. J. Wooten 21-Sep-87 984 B 100 $53.00 $5,300.00
Edward W. Jackson, Jr. 22-Sep-87 566 B 50 $54.00 $2,700.00
Jacob T. Tutterow 01-Oct-87 10 A 1
Barry M. Brown 21-Oct-87 30 A 1
Robert Dennis Seigler 15-Dec-87 668 B 50 $56.40 $2,820.00
James H. Wynne 08-Jan-88 83 B 100 $57.20 $5,720.00
Raymond F. Aquilina 19-Jan-88 741 B 250 $57.20 $14,300.00
Raymond F. Aquilina 19-Jan-88 253 B 500 $57.20 $28,600.00
Raymond C. Bradbury 21-Jan-88 811 B 75 $57.20 $4,290.00
Erle W. Thomas 22-Jan-88 584 B 100 $57.20 $5,720.00
Dean R. Huffer 09-Feb-88 94 B 100 $58.00 $5,800.00
Norman T. Dubuc, Jr. 26-Mar-88 14 B 495 $58.80 $29,106.00
Allan G. Berg 04-Apr-88 834 B 100 $59.60 $5,960.00
Charles J. McVey 07-Apr-88 567 B 50 $59.60 $2,980.00
Kenneth T. Nahorski 07-Apr-88 45 B 200 $59.60 $11,920.00
Richard A. Lochner 11-Apr-88 211 B 100 $59.60 $5,960.00
Richard A. Lochner 11-Apr-88 705 B 50 $59.60 $2,980.00
Richard A. Lochner 11-Apr-88 466 B 100 $59.60 $5,960.00
Richard A. Lochner 11-Apr-88 926 B 100 $59.60 $5,960.00
Richard A. Lochner 11-Apr-88 102 B 560 $59.60 $33,376.00
Norman T. Dubuc, Jr. 12-Apr-88 998 B
Norman T. Dubuc, Jr. 12-Apr-88 115 B 386 $59.60 $23,005.60
Douglas E. Hovde 19-Apr-88 914 B 50 $59.60 $2,980.00
Franklin C. Ordonio 03-May-88 336 B 100 $60.40 $6,040.00
Arthur R. Elpper, Jr. 16-May-88 604 B 400 $60.40 $24,160.00
Karen L. Suhr 27-May-88 964 B 50 $60.40 $3,020.00
</TABLE>
Page - 22 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
M. Christyne Nasbe 01-Jun-88 597 B 100 $61.20 $6,120.00
M. Chrislyne Nasbe 01-Jun-88 933 B 100 $61.20 $6,120.00
Larry S. Bobst 06-Jun-88 395 B 100 $61.20 $6,120.00
Larry S. Bobst 06-Jun-88 864 B 50 $61.20 $3,060.00
James H. Wynne 08-Jun-88 1006 B
James H. Wynne 08-Jun-88 252 B 100 $61.20 $6,120.00
Martin R. Durbin 15-Jun-88 892 B 100 $61.20 $6,120.00
Bernard J. Amols 17-Jun-88 851 B 100 $61.20 $6,120.00
David A. Himes 17-Jun-88 267 B 3,000 $61.20 $183,600.00
David A. Himes 17-Jun-88 32 B 2,000 $61.20 $122,400.00
Burton J. Walrath, Jr. 20-Jun-88 599 B 200 $61.20 $12,240.00
Peter A. Dysko 01-Jul-88 658 B 100 $62.00 $6,200.00
R. J. Wooten O1-Jul-88 984 B 100 $62.00 $6,200.00
James R. Johnson 01-Aug-88 122 B 590 $62.80 $37,052.00
James R. Johnson 01-Aug-88 261 B 100 $62.80 $6,280.00
Burton J. Walrath, Jr. 01-Aug-88 407 B 100 $62.80 $6,280.00
Burton J. Walrath, Jr. 01-Aug-88 1015 B
Jacob T. Tutterow 02-Aug-88 427 B 1,200 $62.80 $75,360.00
Jacob T. Tutterow 02-Aug-88 18 B 269 $62.80 $16,893.20
Jacob T. Tutterow 02-Aug-88 600 B 650 $62.80 $40,820.00
Jacob T. Tutterow 02-Aug-88 245 B 1,000 $62.80 $62,800.00
Jacob T. Tutterow 02-Aug-88 70 B 500 $62.80 $31,400.00
Leonard A. Berglund, Jr. 17-Aug-88 614 B 50 $62.80 $3,140.00
Michael Peters 01-Sep-88 944 B 50 $63.60 $3,180.00
David H. Campbell 07-Sep-88 871 B 100 $63.60 $6,360.00
Martin R. Durbin 08-Sep-88 1021 B
Martin R. Durbin 08-Sep-88 412 B 90 $63.60 $5,724.00
Mark B. Cheben 13-Sep-88 874 B 100 $63.60 $6,360.00
Charles E. Laskey 13-Sep-88 925 B 100 $63.60 $6,360.00
Franklin C. Ordonio 13-Sep-88 82 B 100 $63.60 $6,360.00
James W. Moss 21-Sep-88 1026 B
</TABLE>
Page - 23 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
James W. Moss 21-Sep-88 B 400 $63.60 $25,440.00
Burton J. Walrath, Jr. 04-Oct-88 1015 B 200 $64.60 $12,920.00
Charles E. Canody 17-Oct-88 380 B 100 $12.92 $1,292.00
James C. Carroll 21-Oct-88 873 B 150 $64.60 $9,690.00
John T. Braton 31-Oct-88 865 B 100 $64.60 $6,460.00
Charles B. Addison 01-Nov-88 1092 B 3,000 (C) (C)
Charles B. Addison 01-Nov-88 B 600 (C) (C)
Marc L. Alessandria 01-Nov-88 B 200 (C) (C)
Marc L. Alessandria 01-Nov-88 1060 B 1,000 (C) (C)
Leslie R. Anderson 01-Nov-88 1093 B 44,500 (C) (C)
Leslie R. Anderson 01-Nov-88 177 B 8,900 (C) (C)
Willie W. Ashley, Jr. 01-Nov-88 853 B 50 (C) (C)
Willie W. Ashley, Jr. 01-Nov-88 1055 B 250 (C) (C)
Meta A. Baxter 01-Nov-88 1065 B 1,000 (C) (C)
Meta A. Baxter 01-Nov-88 B 200 (C) (C)
David S. Bennett 01-Nov-88 858 B 50 (C) (C)
David S. Bennett 01-Nov-88 1084 B 250 (C) (C)
Allan G. Berg 01-Nov-88 1102 B 2,000 (C) (C)
Allan G. Berg 01-Nov-88 B 400 (C) (C)
Joseph J. Bertagnolli 01-Nov-88 859 B 100 (C) (C)
Joseph J. Bertagnolli 01-Nov-88 1097 B 500 (C) (C)
Larry S. Bobst 01-Nov-88 137 B 100 (C) (C)
Larry S. Bobst 01-Nov-88 1072 B 500 (C) (C)
Gregory D. Breland 01-Nov-88 866 B 100 (C) (C)
Gregory D. Breland 01-Nov-88 1073 B 500 (C) (C)
Barry M. Brown 01-Nov-88 B 3,600 (C) (C)
Barry M. Brown 01-Nov-88 1061 B 18,000 (C) (C)
Gary D. Burrows 01-Nov-88 1286 B 500 (C) (C)
Gary D. Burrows 01-Nov-88 870 B 100 (C) (C)
Billy J. Cone 01-Nov-88 351 B 100 (C) (C)
Billy J. Cone 01-Nov-88 1106 B 500 (C) (C)
</TABLE>
Page - 24 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
John G. Corbett 01-Nov-88 1078 B 500 (C) (C)
John G. Corbett 01-Nov-88 879 B 100 (C) (C)
Donald C. Cunningham 01-Nov-88 1083 B 1,500 (C) (C)
Donald C. Cunningham 01-Nov-88 B 300 (C) (C)
Theodore W. Cuny, Jr. 01-Nov-88 B 1,200 (C) (C)
Theodore W. Cuny, Jr. 01-Nov-88 1086 B 6,000 (C) (C)
Joseph G. Daigle 01-Nov-88 B 500 (C) (C)
Joseph G. Daigle 01-Nov-88 1107 B 2,500 (C) (C)
William A. Dast 01-Nov-88 20 B 127 (C) (C)
William A. Dast 01-Nov-88 160 B 250 (C) (C)
William A. Dast 01-Nov-88 1033 B 13,385 (C) (C)
William A. Dast 01-Nov-88 191 B 300 (C) (C)
William A. Dast 01-Nov-88 450 B 2,000 (C) (C)
Norman T. Dubuc, Jr. 01-Nov-88 B 2,364 (C) (C)
Norman T. Dubuc, Jr. 01-Nov-88 1178 B 11,820 (C) (C)
Martin R. Durbin 01-Nov-88 1179 B 50 (C) (C)
Martin R. Durbin 01-Nov-88 1021 B 10 (C) (C)
Paul H. Engel 01-Nov-88 1101 B 4,500 (C) (C)
Paul H. Engel 01-Nov-88 B 900 (C) (C)
David R. Foshee 01-Nov-88 46 B 400 (C) (C)
David R. Foshee 01-Nov-88 1110 B 2,000 (C) (C)
Dwight W. Gaida 01-Nov-88 773 B 5 (C) (C)
Dwight W. Gaida 01-Nov-88 1113 B 25 (C) (C)
Richard E. Giles 01-Nov-88 B 1,000 (C) (C)
Richard E. Giles 01-Nov-88 781 B 200 (C) (C)
Joseph M. Gilmore 01-Nov-88 1114 B 7,750 (C) (C)
Joseph M. Gilmore 01-Nov-88 B 1,550 (C) (C)
Gary W. Goldenbogen 01-Nov-88 B 150 (C) (C)
Gary W. Goldenbogen 01-Nov-88 1116 B 750 (C) (C)
Charles S. Graham, III 01-Nov-88 B 4,500 (C) (C)
Charles S. Graham, III 01-Nov-88 1119 B 22,500 (C) (C)
</TABLE>
Page - 25 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Heidi S. Griffiths 01-Nov-88 904 B 100 (C) (C)
Heidi S. Griffiths 01-Nov-88 1121 B 500 (C) (C)
Richard A. Gwyn 01-Nov-88 313 B 100 (C) (C)
Richard A. Gwyn 01-Nov-88 B 500 (C) (C)
Antone W. Hagen 01-Nov-88 1270 B 500 (C) (C)
Antone W. Hagen 01-Nov-88 687 B 100 (C) (C)
John F. Hampton 01-Nov-88 B 550 (C) (C)
John F. Hampton 01-Nov-88 1126 B 2,750 (C) (C)
Donald H. Hart 01-Nov-88 613 B 100 (C) (C)
Donald H. Hart 01-Nov-88 1127 B 500 (C) (C)
Howard F. Haupt, II 01-Nov-88 B 150 (C) (C)
Howard F. Haupt, II 01-Nov-88 1128 B 750 (C) (C)
William M. Hood 01-Nov-88 B 150 (C) (C)
William M. Hood 01-Nov-88 1130 B 750 (C) (C)
William C. Hugenberg, Jr. 01-Nov-88 565 B 200 (C) (C)
William C. Hugenberg, Jr. 01-Nov-88 207 B 2,000 (C) (C)
William C. Hugenberg, Jr. 01-Nov-88 429 B 1,300 (C) (C)
William C. Hugenberg, Jr. 01-Nov-88 1035 B 30,605 (C) (C)
William C. Hugenberg, Jr. 01-Nov-88 15 B 621 (C) (C)
William C. Hugenberg, Jr. 01-Nov-88 152 B 2,000 (C) (C)
Charlie C. Jones 01-Nov-88 1258 B 5,000 (C) (C)
Charlie C. Jones 01-Nov-88 1257 B 5,000 (C) (C)
Charlie C. Jones 01-Nov-88 B 3,800 (C) (C)
Charlie C. Jones 01-Nov-88 1256 B 5,000 (C) (C)
Charlie C. Jones 01-Nov-88 1259 B 4,000 (C) (C)
Walter E. Kidwell 01-Nov-88 1062 B 6,500 (C) (C)
Walter E. Kidwell 01-Nov-88 B 1,300 (C) (C)
Mark K. Klages 01-Nov-88 920 B 100 (C) (C)
Mark K. Klages 01-Nov-88 1139 B 500 (C) (C)
Eleanor A. Kolton 01-Nov-88 922 B 150 (C) (C)
Eleanor A. Kolton 01-Nov-88 1144 B 750 (C) (C)
</TABLE>
Page - 26 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Carlos I. Koski 01-Nov-88 640 B 200 (C) (C)
Carlos I. Koski 01-Nov-88 1184 B 1,000 (C) (C)
Paul H. Krause 01-Nov-88 9 B 761 $65.60 $49,921.60
Paul H. Krause 01-Nov-88 436 B 500 $65.60 $32,800.00
Paul H. Krause 01-Nov-88 156 B 239 $65.60 $15,678.40
Paul H. Krause 01-Nov-88 575 B 1,500 $65.60 $98,400.00
Paul H. Krause 01-Nov-88 6 A 1
Paul H. Krause 01-Nov-88 209 B 500 $65.60 $32,800.00
Jonathan E. Kruse 01-Nov-88 1145 B 3,500 (C) (C)
Jonathan E. Kruse 01-Nov-88 B 700 (C) (C)
Claire I. Kulas 01-Nov-88 1183 B 2,000 (C) (C)
Claire I. Kulas 01-Nov-88 B 400 (C) (C)
David I. Liebman 01-Nov-88 1148 B 6,870 (C) (C)
David I. Liebman 01-Nov-88 B 1,374 (C) (C)
Patricia T. Mayer 01-Nov-88 B 300 (C) (C)
Patricia T. Mayer 01-Nov-88 1261 B 1,500 (C) (C)
Norman G. Mesplay 01-Nov-88 B 2,170 (C) (C)
Norman G. Mesplay 01-Nov-88 1157 B 10,850 (C) (C)
Larry E. Milam 01-Nov-88 1159 B 7,000 (C) (C)
Larry E. Milam 01-Nov-88 B 1,400 (C) (C)
John H. Miller 01-Nov-88 B 1,950 (C) (C)
John H. Miller 01-Nov-88 1160 B 9,750 (C) (C)
James W. Moss 01-Nov-88 B 400 (C) (C)
James W. Moss 01-Nov-88 1163 B 2,000 (C) (C)
Allen D. Nettleingham 01-Nov-88 1165 B 250 (C) (C)
Allen D. Nettleingham 01-Nov-88 934 B 50 (C) (C)
Stanley L. Obrey 01-Nov-88 B 500 (C) (C)
Stanley L. Obrey 01-Nov-88 1168 B 2,500 (C) (C)
Franklin C. Ordonio 01-Nov-88 1170 B 1,000 (C) (C)
Franklin C. Ordonio 01-Nov-88 222 B 200 (C) (C)
James K. Parker 01-Nov-88 818 B 100 (C) (C)
</TABLE>
Page - 27 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
James K. Parker 01-Now-88 1172 B 500 (C) (C)
Carroll H. Payne, II 01-Nov-88 1057 B 80,865 (C) (C)
Carroll H. Payne, II 01-Nov-88 B 16,173 (C) (C)
Debra Sue Payne 01-Nov-88 1059 B 80,865 (C) (C)
Debra Sue Payne 01-Nov-88 B 16,173 (C) (C)
Freda J. Payne 01-Nov-88 B 16,173 (C) (C)
Freda J. Payne 01-Nov-88 1049 B 80,865 (C) (C)
Naomi K. Payne 01-Nov-88 1058 B 80,865 (C) (C)
Naomi K. Payne 01-Nov-88 B 16,173 (C) (C)
Warner F. Rankin, Jr. 01-Nov-88 1048 B 66,845 (C) (C)
Warner F. Rankin, Jr. 01-Nov-88 B 13,369 (C) (C)
Donald R. Reynolds 01-Nov-88 B 700 (C) (C)
Donald R. Reynolds 01-Nov-88 1194 B 3,500 (C) (C)
Larry L. Richter 01-Nov-88 B 2,500 (C) (C)
Larry L. Richter 01-Nov-88 1195 B 12,500 (C) (C)
Glenn L. Robertson 01-Nov-88 B 700 (C) (C)
Glenn L. Robertson 01-Nov-88 1197 B 3,500 (C) (C)
Robert Dennis Seigler 01-Nov-88 952 B 50 (C) (C)
Robert Dennis Seigler 01-Nov-88 1262 B 250 (C) (C)
Marie Eloise Selser 01-Nov-88 1202 B 4,250 (C) (C)
Marie Eloise Selser 01-Nov-88 B 850 (C) (C)
Leonard J. Siegert 01-Nov-88 B 5,000 (C) (C)
Leonard J. Siegert 01-Nov-88 1203 B 25,000 (C) (C)
Cromer W. Smith, Jr. 01-Nov-88 1205 B 5,500 (C) (C)
Cromer W. Smith, Jr. 01-Nov-88 B 1,100 (C) (C)
Carroll J. Squyres 01-Nov-88 1200 B 500 (C) (C)
Carroll J. Squyres 01-Nov-88 388 B 100 (C) (C)
William B. Stone 01-Nov-88 595 B 300 (C) (C)
William B. Stone 01-Nov-88 1211 B 1,500 (C) (C)
Marc L. Troiani 01-Nov-88 971 B 50 (C) (C)
Marc L. Troiani 01-Nov-88 1222 B 250 (C) (C)
</TABLE>
Page - 28 -
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
H. David Tyler 01-Nov-88 B 1,500 (C) (C)
H, David Tyler 01-Nov-88 1225 B 7,500 (C) (C)
Arthur J. Ver Steegh, Jr. 01-Nov-88 1228 B 1,000 (C) (C)
Arthur J. Ver Steegh, Jr. 01-Nov-88 B 200 (C) (C)
John R. Vose 01-Nov-88 977 B 50 (C) (C)
John R. Vose 01-Nov-88 1229 B 250 (C) (C)
Durtland Bane Weber 01-Nov-88 1233 B 1,500 (C) (C)
Durtland Bane Weber 01-Nov-88 B 300 (C) (C)
Allen E. Weseleskey 01-Nov-88 1234 B 750 (C) (C)
Allen E. Weseleskey 01-Nov-88 979 B 150 (C) (C)
James H. Westberry 01-Nov-88 478 B 100 (C) (C)
James H. Westberry 01-Nov-88 1235 B 500 (C) (C)
Lloyd D. Whitney 01-Nov-88 1237 B 8,000 (C) (C)
Lloyd D. Whitney 01-Nov-88 B 1,600 (C) (C)
James H. Wynne 01-Nov-88 1243 B 1000 (C) (C)
James H. Wynne 01-Nov-88 1006 B 200 (C) (C)
Marc L. Alessandria 03-Jan-89 1060 B 1,000 $13.52 $13,520.00
Joseph M. Gilmore 03-Jan-89 1114 B 7,750 $13.52 $104,780.00
Warner F. Rankin, Jr. 03-Jan-89 5 A 1
Donald R. Reynolds 03-Jan-89 1194 B 1,924 $13.52 $26,012.48
Donald R. Reynolds 03-Jan-89 1264 B
James H. Westberry 06-Jan-89 1235 B 500 $13.52 $6,760.00
Burtland Bane Weber 09-Jan-89 1233 B 1,500 $13.52 $20,280.00
Larry E. Milam 10-Jan-89 1272 B
Larry E. Milam 10-Jan-89 1159 B 1,500 $13.52 $20,280.00
Jonathan E. Kruse 23-Jan-89 1145 B 3,500 $13.52 $47,320.00
David I. Liebman 24-Jan-89 1148 B 6,870 $13.52 $92,882.40
Norman G. Mesplay 01-Feb-89 1157 B 10,850 $13.72 $148,862.00
John R. Vose 28-Feb-89 1229 B 250 $13.72 $3,430.00
Antone W. Hagen 01-Mar-89 1270 B 500 $13.92 $6,960.00
Walter E. Kidwell 01-Mar-89 28 A 1
</TABLE>
Page -29-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Eleanor A. Kolten 01-Mar-89 1144 B 750 $13.92 $10,440.00
Larry E. Milam 01-Mar-89 1283 B
Larry E. Mllam 01-Mar-89 1272 B 1,250 $13.92 $17,400.00
H. David Tyler 10-Mar-89 1225 B 3,500 $13.92 $48,720.00
H. David Tyler 10-Mar-89 1285 B
Norman T. Dubuc, Jr. 01-Apr-89 1178 B 11,820 $14.12 $166,898.40
Paul H. Engel 01-Apr-89 1101 B 4,500 $14.12 $63,540.00
Gregory D. Breland 07-Apr-89 1073 B 500 $14.12 $7,060.00
Larry L. Richter 07-Apr-89 1195 B 12,500 $14.12 $176,500.00
Arthur J. Ver Steegh, Jr. 07-Apr-89 1290 B
Arthur J. Ver Steegh, Jr. 07-Apr-89 1228 B 800 $14.12 $11,296.00
Marc L. Trolani 20-Apr-89 1222 B 250 $14.12 $3,530.00
John H. Miller 01-May-89 1160 B 9,750 $14.32 $139,620.00
Warner F. Rankin, Jr. 01-May-89 1048 B 66,845 $14.32 $957,220.40
Leonard J. Siegert 01-May-89 35 A 1
Willie W. Ashley, Jr. 04-May-89 1055 B 250 $14.32 $3,580.00
Gary D. Burrows 04-May-89 1286 B 500 $14.32 $7,160.00
Carlos I. Koski 11-May-89 1184 B 500 $14.32 $7,160.00
Carlos I. Koski 11-May-89 1299 B
David S. Bennett 31-May-89 1084 B 250 $14.32 $3,580.00
Allen E. Weseleskey 31-May-89 1234 B 750 $14.32 $10,740.00
Larry E. Milam 05-Jun-89 1304 B
Larry E. Milam 05-Jun-89 1283 B 750 $14.52 $10,890.00
Meta A. Baxter 07-Jun-89 1065 B 1,000 $14.52 $14,520.00
Arthur J. Ver Steegh, Jr. 08-Jun-89 1290 B 200 $14.52 $2,904.00
Franklin C. Ordonio 14-Jun-89 1170 B 500 $14.52 $7,260.00
Franklin C. Ordonio 14-Jun-89 1308 B
Larry E. Milam 30-Jun-89 1304 B 3,500 $14.52 $50,820.00
Howard F. Haupt, II 01-Jul-89 1128 B 750 $14.72 $11,040.00
Joseph J. Bertagnolli 06-Jul-89 1097 B 450 $14.72 $6,624.00
Joseph J. Bertagnolli 06-Jul-89 1313 B
</TABLE>
Page -30-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Charles S. Graham, III 15-Jul-89 1119 B 22,500 $14.72 $331,200.00
Charlie C. Jones 01-Aug-89 1258 B 5,000 $14.92 $74,600.00
Charlie C. Jones 01-Aug-89 1259 B 4,000 $14.92 $59,680.00
Heidi S. Griffiths 14-Aug-89 1121 B 500 $14.92 $7,460.00
Joseph G. Daigle 24-Aug-89 1107 B 2,500 $14.92 $37,300.00
Allen D. Nettleingham 05-Sep-89 1165 B 250 $15.12 $3,780.00
Leslie R. Anderson 01-Oct-89 1093 B 44,500 $15.25 $678,625.00
Billy J. Cone 01-Oct-89 1106 B 500 $15.25 $7,625.00
Donald H. Hart 01-Oct-89 1127 B 500 $15.25 $7,625.00
James W. Moss 01-Oct-89 1163 B 2,000 $15.25 $30,500.00
Robert Dennis Seigler 03-Nov-89 1262 B 250 $15.50 $3,875.00
Claire I. Kulas 01-Dec-89 1183 B 2,000 $15.75 $31,500.00
William B. Stone 01-Dec-89 1211 B 1,500 $15.75 $23,625.00
Patricia T. Mayer 31-Dec-89 1261 B 1,500 $15.75 $23,625.00
Theodore W. Cuny, Jr. 01-Jan-90 1086 B 6,000 $16.00 $96,000.00
Carlos I. Koski 04-Jan-90 1299 B 500 $16.00 $8,000.00
Larry S. Bobst 06-Feb-90 1337 B
Larry S. Bobst 06-Feb-90 1072 B 200 $16.75 $3,350.00
H. David Tyler 06-Feb-90 1335 B
H. David Tyler 06-Feb-90 1285 B 3,900 $16.75 $65,325.00
William M. Hood 31-Mar-90 1130 B 750 $16.75 $12,562.50
Carroll H. Payne, II 11-Apr-90 1342 B
Carroll H. Payne, II 11-Apr-90 1057 B 9,937 $16.75 $166,444.75
Debra Sue Payne 11-Apr-90 1059 B 9,937 $16.75 $166,444.75
Debra Sue Payne 11-Apr-90 1346 B
Freda J. Payne 11-Apr-90 1049 B 9,937 $16.75 $166,444.75
Freda J. Payne 11-Apr-90 1340 B
Naomi K. Payne 11-Apr-90 1344 B
Naomi K. Payne 11-Apr-90 1058 B 9,937 $16.75 $166,444.75
Leonard J. Siegert 19-Apr-90 35 A 1
Leonard J. Siegert 19-Apr-90 1203 B 25,000 $16.75 $418,750.00
</TABLE>
Page -31-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Charles B. Addison 01-May-90 1354 B 2,000 $16.75 $33,500.00
Joseph J. Berlagnolli 01-May-90 1362 B 450 $16.75 $7,537.50
Joseph W. Cabrina 01-May-90 1521 B 100 $16.75 $1,675.00
Charles E. Canedy 01-May-90 1522 B 300 $16.75 $5,025.00
James W. Carroll 01-May-90 1523 B 100 $16.75 $1,675.00
John G. Corbett 01-May-90 1300 B 400 $16.75 $6,700.00
Donald C. Cunningham 01-May-90 1389 B 100 $16.75 $1,675.00
Laurence I. Duggan 01-May-90 1532 B 50 $16.75 $837.50
David R. Foshee 01-May-90 1399 B 400 $16.75 $6,700.00
Dwight W. Galda 01-May-90 1403 B 50 $16.75 $837.50
Richard A. Gwyn 01-May-90 1408 B 350 $16.75 $5,862.50
John F. Hampton 01-May-90 1412 B 300 $16.75 $5,025.00
Alexander H.C. Harwick 01-May-90 1552 B 250 $16.75 $4,187.50
Peter M. Jenks 01-May-90 1566 B 100 $16.75 $1,675.00
William R. Jurgens 01-May-90 1570 B 50 $16.75 $837.50
Eugene G. Kreinik 01-May-90 1576 B 600 $16.75 $10,050.00
Carol A. Madle 01-May-90 1589 B 150 $16.75 $2,512.50
John J. McNamara 01-May-90 1598 B 150 $16.75 $2,512.50
Charles P. Metzler 01-May-90 1599 B 100 $16.75 $1,675.00
Timothy L. Mills 01-May-90 1601 B 250 $16.75 $4,187.50
Stanley L. Obrey 01-May-90 1448 B 600 $16.75 $10,050.00
Franklin C. Ordonio 01-May-90 1451 B 400 $16.75 $6,700.00
James K. Parker 01-May-90 1453 B 300 $16.75 $5,025.00
Paul D. Raino 01-May-90 1353 B 350 $16.75 $5,862.50
Daniol G. Rasmussen 01-May-90 1613 B 50 $16.75 $837.50
Gerd P. Reichelt 01-May-90 1614 B 100 $16.75 $1,675.00
Donald R. Reynolds 01-May-90 1463 B 100 $16.75 $1,675.00
William K. Sebert, Jr. 01-May-90 1623 B 300 $16.75 $5,025.00
Marie Eloise Setser 01-May-90 1352 B 750 $16.75 $12,562.50
Kathryn L. Skillington 01-May-90 1625 B 150 $16.75 $2,512.50
Cromer W. Smith. Jr. 01-May-90 1471 B 300 $16.75 $5,025.00
</TABLE>
Page -32-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Richard R. Streets 01-May-90 1632 B 100 $16.75 $1,675.00
Gladyne H. Swartz 01-May-90 1634 B 100 $16.75 $1,675.00
Fernand A. Thomassy, III 01-May-90 1349 B 150 $16.75 $2,512.50
Fernand A. Thomassy, III 01-May-90 1349 B 150 $16.75 $2,512.50
Teresa M. Tyler
(Teresa Love) 01-May-90 1585 B 100 $16.75 $1,675.00
David K. Vaupell 01-May-90 1638 B 100 $16.75 $1,675.00
Lloyd D. Whitney 01-May-90 1351 B 800 $16.75 $113,400.00
Gary W. Goldenbogen 11-Jun-90 1116 B 750 $17.25 $12,937.50
Larry S. Bobst 02-Jul-90 1337 B 300 $17.50 $5,250.00
William C. Hugenberg, Jr. 02-Jul-90 1035 B 30,605 $17.50 $535,587.50
Walter E. Kidwell 02-Jul-90 1062 B 6,500 $17.50 $113,750.00
Paul D. Raino 02-Jul-90 1353 B 350 $17.50 $6,125.00
Glenn L. Robertson 02-Jul-90 1197 B 3,500 $17.50 $61,250.00
Marie Eloise Setser 02-Jul-90 1352 B 750 $17.50 $13,125.00
Marie Eloise Setser 02-Jul-90 1202 B 4,250 $17.50 $74,375.00
Carroll J. Squyres 02-Jul-90 1208 B 500 $17.50 $8,750.00
Lloyd D. Whitney 02-Jul-90 1351 B 800 $17.50 $14,000.00
Lloyd D. Whitney 02-Jul-90 1237 B 8,000 $17.50 $140,000.00
Barry M. Brown 06-Jul-90 30 A 1
Joseph W. Cabrina 19-Jul-90 1521 B 100 $17.50 $1,750.00
Barry M. Brown 25-Jul-90 1061 B 18,000 $17.50 $315,000.00
James W. Carroll 31-Jul-90 1523 B 100 $17.50 $1,750.00
Richard A Gwyn 31-Jul-90 1408 B 350 $17.50 $6,125.00
Richard A Gwyn 31-Jul-90 B 500 $17.50 $8,750.00
Donald C. Cunningham 01-Aug-90 1083 B 1,500 $17.75 $26,625.00
Donald C. Cunningham 01-Aug-90 1389 B 100 $17.75 $1,775.00
David R. Foshee 01-Aug-90 1110 B 2,000 $17.75 $35,500.00
David R. Foshee 01-Aug-90 1399 B 400 $17.75 $7,100.00
William R. Jurgens 01-Aug-90 1570 B 50 $17.75 $887.50
Charles P. Metzler 31-Aug-90 1599 B 100 $17.75 $1,775.00
Gladyne H. Swartz 31-Aug-90 1634 B 100 $17.75 $1,775.00
</TABLE>
Page -33-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mark K. Klages 06-Sep-90 1139 B 500 $18.00 $9,000.00
Alexander H.C. Harwick 11-Sep-90 1552 B 250 $18.00 $4,500.00
Gerd P. Reichelt 13-Sep-90 1614 B 100 $18.00 $1,800.00
John F. Hampton 01-Oct-90 1412 B 300 $18.17 $5,451.00
John F. Hampton 01-Oct-90 1126 B 2,750 $18.17 $49,967.50
Cromer W. Smith, Jr. 01-Oct-90 1471 B 300 $18.17 $5,451.00
Cromer W. Smith, Jr. 01-Oct-90 1205 B 5,500 $18.17 $99,935.00
Richard R. Streets 04-Oct-90 1632 B 100 $18.17 $1,817.00
Peter M. Jenks 29-Oct-90 1566 B 100 $18.17 $1,817.00
Eugene G. Kreinik 29-Oct-90 1576 B 600 $18.17 $10,902.00
Timothy L. Mills 29-Oct-90 1601 B 250 $18.17 $4,542.50
William K. Sebert, Jr. 29-Oct-90 1623 B 300 $18.17 $5,451.00
Kathryn L. Skillington 29-Oct-90 1625 B 150 $18.17 $2,725.50
H. David Tyler 29-Oct-90 1335 B 100 $18.17 $1,817.00
Teresa M. Tyler
(Teresa Love) 29-Oct-90 1585 B 100 $18.17 $1,817.00
Carol A. Madle 01-Nov-90 1589 B 150 $18.34 $2,751.00
John J. McNamara 01-Nov-90 1598 B 150 $18.34 $2,751.00
Daniel G. Rasmussen 07-Dec-90 1613 B 50 $18.51 $925.50
Charlie C. Jones 04-Jan-91 1257 B 5,000 $18.68 $93,400.00
Charlie C. Jones 04-Jan-91 1256 B 5,000 $18.68 $93,400.00
John G. Corbett 09-Jan-91 1380 B 400 $18.68 $7,472.00
John G. Corbett 09-Jan-91 1078 B 500 $18.68 $9,340.00
</TABLE>
FOOTNOTES:
(A) In March 1981, USPA, Inc.'s common shares were exchanged for the Class "B"
non-voting common stock of IRA. Inc. Fractional shares of IRA's stock
were paid for in cash by the USPA Shareholders, at the rate of $10.00
per share.
Page -34-
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 21-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL SELLING SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASE REDEMPTION
--------------------------- -----------------------------
CERTIF STOCK # OF PRICE TOTAL # OF PRICE TOTAL
SHAREHOLDER DATE NUMBER CLASS SHARES PER SHARE PURCHASE SHARES PER SHARE REDEMPTION COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
(B) IRA did not receive any proceeds from this stock issuance. The shares of
stock sold were for the benefit of Affiliates (Carroll H. Payne,
Carroll H. Payne II, Debra Sue Payne, and Naomi K. Payne).
(C) A five-for-one stock split was effectuated on November 1, 1988.
Page -35-
<PAGE>
Ex. B
<PAGE>
<TABLE>
<CAPTION>
LAW SNAKARD & GAMBILL INDEPENDENT RESEARCH AGENCY 20-Feb-91
ATTORNEY WORK PRODUCT - CONFIDENTIAL CLASS "B" STOCK REDEMPTION PRICES
- ----------------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1982 $10.00 $10.15 $10.30 $10.45 $10.60 $10.75 $10.90 $11.05 $11.20 $11.35 $11.50 $11.65
1983 $11.80 $11.95 $12.10 $12.25 $12.43 $12.61 $12.79 $12.97 $13.15 $13.33 $13.51 $13.69
1984 $13.87 $14.05 $14.23 $14.40 $14.60 $14.80 $15.00 $15.20 $15.40 $15.60 $15.80 $16.00
1985 $16.20 $16.40 $16.60 $17.40 $18.20 $19.00 $19.80 $20.60 $21.40 $22.20 $23.00 $23.80
1986 $25.50 $27.00 $28.50 $30.00 $31.50 $33.00 $34.50 $36.00 $37.50 $39.00 $40.50 $42.00
1987 $43.00 $44.00 $45.00 $46.00 $47.00 $48.00 $49.00 $50.00 $51.00 $52.00 $53.00 $54.00
1988 $54.80 $55.60 $56.40 $57.20 $58.00 $58.80 $59.60 $60.40 $61.20 $62.00 $62.80 $63.60
1989 (A) $12.92 $13.12 $13.32 $13.52 $13.72 $13.92 $14.12 $14.32 $14.52 $14.72 $14.92 $15.12
1990 $15.25 $15.50 $15.75 $16.00 $16.75 $16.75 $16.75 $17.00 $17.25 $17.50 $17.75 $18.00
1991 $18.17 $18.34 $18.51 $18.68 $18.85 $19.02 $19.19 $19.36 $19.53 $19.70 $19.87 $20.00
</TABLE>
(A) A 5-for-1 stock split was effectuated on November 1, 1988
SOURCE DOCUMENTS:
IRA Board of Directors' meeting dated December 1, 1981
IRA Board of Directors' meeting dated November 5, 1982
IRA Board of Directors' meeting dated October 24, 1983
IRA Board of Directors' meeting dated November 21, 1984
IRA Board of Directors' meeting dated November 22, 1985
IRA Board of Directors' meeting dated December 2, 1986
IRA Board of Directors' meeting dated November 23, 1987
IRA Board of Directors' meeting dated November 21, 1988
IRA Board of Directors' meeting dated November 27, 1989
IRA Board of Directors' meeting dated November 28, 1990
<PAGE>
NO. 02-91-152-CV
IN THE COURT OF APPEALS
FOR THE SECOND APPELLATE DISTRICT OF TEXAS
AT FORT WORTH
--------------------
WILLIAM C. HUGENBERG, JR.,
APPELLANT,
V.
INDEPENDENT RESEARCH AGENCY
FOR LIFE INSURANCE, INC.,
APPELLEE.
--------------------
CORRECTED BRIEF FOR APPELLEE
--------------------
LAW, SNAKARD & GAMBILL
3200 Team Bank Building
Fort Worth, Texas 76102
(817) 335-7373
(817) 335-7473 FAX
ROBERT F. WATSON
State Bar No. 20961200
DABNEY D. BASSEL
State Bar No. 01890300
ORAL ARGUMENT REQUESTED ATTORNEYS FOR APPELLEE
<PAGE>
NAMES OF ALL PARTIES
TO TRIAL COURT'S FINAL JUDGMENT
Pursuant to Rule 74(a) Tex. R. App. P., and in order that the Court may
determine disqualification and refusal, Appellee certifies that the following
is a complete list of the parties and counsel having an interest in this case.
1. Independent Research Agency for Life Insurance, Inc.
USPA & IRA Building
4100 South Hulen
P.O. Box 2387
Fort Worth, Texas 76113
APPELLEE
2. Robert F. Watson
Dabney D. Bassel
Law, Snakard & Gambill, P.C.
3200 Team Bank Building
Fort Worth, Texas 76102
ATTORNEYS FOR APPELLEE
3. William C. Hugenberg, Jr.
805 29th Street, #556
Boulder, Colorado 80303
APPELLANT
4. Khent H. Rowton
Khent H. Rowton & Associates
300 Carlisle, Suite 200
Dallas, Texas 75204
ATTORNEYS FOR APPELLANT
/s/ Dabney D. Bassel
----------------------
Dabney D. Bassel
i
<PAGE>
TABLE OF CONTENTS
NAMES OF ALL PARTIES
TO TRIAL COURT'S FINAL JUDGMENT. . . . . . . . . . . . . . . . . . . . . . i
TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
LIST OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
PRELIMINARY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 1
STATEMENT OF FACTS RELEVANT TO ALL REPLY POINTS OF ERROR . . . . . . . . . 2
ARGUMENT AND AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . 6
RESPONSE TO ASSAULT ON THE CHARACTER OF JUDGE AULD . . . . . . . . . . . . 6
REPLY POINT OF ERROR NO. 1 RESTATED: The trial Court did not err in
granting IRA's Amended Motion for Summary Judgment.
[Responsive to Point of Error No. 1.] . . . . . . . . . . . . . . . . 7
ARGUMENT & AUTHORITIES UNDER REPLY POINT OF ERROR NO. 1. . . . . . . . . . 7
THE STOCK AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 7
1. Enforceability of Provisions Relating to Repurchase of
Corporate Stock. . . . . . . . . . . . . . . . . . . . . . . . . 7
2. Public Policy Supports Option Provision Contained in Stock
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3. Alleged Inadequacy of Price Does Not Prevent Enforcement of
Stock Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 10
4. Hugenberg Has No Claim of Breach of Fiduciary Duty or
Lack of Good Faith Because of the Price Set by IRA to
Exercise its Repurchase Option . . . . . . . . . . . . . . . . . 13
5. IRA Has Set a Reasonable Price for the Exercise of Its
Repurchase Option. . . . . . . . . . . . . . . . . . . . . . . . 16
ii
<PAGE>
REPLY POINT OF ERROR NO. 2 RESTATED: The trial Court did not err in
granting Plaintiffs Motion for Summary Judgment upholding the
application by IRA of the stockholder's agreement to allow the
company to set the "price" of IRA stock for repurchase.
[Responsive to Point of Error No. 2.] . . . . . . . . . . . . . . . . 18
ARGUMENT & AUTHORITIES UNDER REPLY POINT OF ERROR NO. 2. . . . . . . . . . 18
REPLY POINT OF ERROR NO. 3 RESTATED: The trial Court did not err in refusing
to join IRA's Class B shareholders to this litigation.
[Responsive to Point of Error No. 3.] . . . . . . . . . . . . . . . . 23
ARGUMENT & AUTHORITIES UNDER REPLY POINT OF ERROR NO. 3. . . . . . . . . . 23
REPLY POINT OF ERROR NO. 4 RESTATED: The trial Court did not err in
dismissing Hugenberg's counterclaims for breach of contract,
fraud, fraudulent concealment, and negligence.
[Responsive to Point of Error No. 4.] . . . . . . . . . . . . . . . . 30
ARGUMENT & AUTHORITIES UNDER REPLY POINT OF ERROR NO. 4. . . . . . . . . . 30
ADMISSIONS OF HUGENBERG RELATING TO HIS COUNTERCLAIM. . . . . . . . . 30
HUGENBERG HAS NO CAUSE OF ACTION FOR ARBITRARY
AND CAPRICIOUS VALUATION OF HIS STOCK . . . . . . . . . . . . . . . . 33
HUGENBERG HAS NO CAUSE OF ACTION FOR CANCELLATION
OF HIS STOCK ON THE RECORDS OF IRA. . . . . . . . . . . . . . . . . . 33
IRA DEALT FAIRLY WITH HUGENBERG AND SET A
REASONABLE PRICE FOR REPURCHASE OF HIS SHARES,
THUS, HUGENBERG HAS NO CAUSE OF ACTION IN THIS REGARD . . . . . . . . 34
HUGENBERG HAS NO CAUSE OF ACTION RESULTING
FROM IRA'S ACCOUNTING METHODS . . . . . . . . . . . . . . . . . . . . 35
HUGENBERG HAS NO CAUSE OF ACTION THAT IRA
OMITTED TO DISCLOSE THAT A MARKET WOULD
NOT DEVELOP FOR IRA CLASS B STOCK . . . . . . . . . . . . . . . . . . 36
HUGENBERG HAS NO CAUSE OF ACTION THAT THE
"CONTROL GROUP" MANIPULATED IRA FOR ITS BENEFIT
OR CONSPIRED TO SUPPRESS OTHER CLASS B SHAREHOLDERS . . . . . . . . . 37
iii
<PAGE>
HUGENBERG HAS NO CAUSE OF ACTION
FOR BREACH OF THE STOCK AGREEMENT . . . . . . . . . . . . . . . . . . 40
HUGENBERG HAS EITHER RATIFIED THE STOCK AGREEMENT
OR IS ESTOPPED TO DENY ITS ENFORCEABILITY . . . . . . . . . . . . . . 40
RATIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ESTOPPEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
REPLY POINT OF ERROR NO. 5 RESTATED: The trial Court did not abuse its
discretion in not granting Hugenberg's Motion for Leave to
Supplement Record, Motion for Clarification of Rulings and
Production of Transcript of Hearings, Objection to Proposed
Final Summary Judgment Order Submitted by Plaintiffs, and
Objection to Plaintiffs' Correction of Summary Judgment Evidence
and Judgment. [Responsive to Point of Error No. 5] . . . . . . . . . 45
ARGUMENT & AUTHORITIES UNDER REPLY POINT OF ERROR NO. 5 . . . . . . . . . 46
REPLY POINT OF ERROR NO. 6 RESTATED: The trial Court did not err in
awarding IRA Three Hundred Thousand Dollars ($300,000) in
attorney's fees based upon the affidavit testimony of
Dabney D. Bassel. [Responsive to Point of Error No. 6.] . . . . . . . 49
ARGUMENT & AUTHORITIES UNDER REPLY POINT OF ERROR NO. 6 . . . . . . . . . 49
CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
PRAYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
CERTIFICATE OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . 52
iv
<PAGE>
APPENDICES
APPENDIX A: IRA's Amended Motion for Summary Judgment (without exhibits)
APPENDIX B: Stock Agreement
APPENDIX C: Corrected Final Judgment
APPENDIX D: Texas Business Corporation Act art. 2.22
APPENDIX E: Texas Civil Practice & Remedies Code Section 37.006
APPENDIX F: Texas Rule of Civil Procedure 39
APPENDIX G: Hugenberg's First Amended Answer and Counterclaim
v
<PAGE>
LIST OF AUTHORITIES
<TABLE>
<CAPTION>
CASES PAGE
----- ----
<S> <C>
Adolph Coors Co. v. Rodriguez,
780 S.W.2d 477 (Tex. App.--Corpus Christi 1989,
writ denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
Allen v. Biltmore Tissue Corp.,
2 N.Y.2d 534, 141 N.E.2d 812,
161 N.Y.S.2d 418 (1957) . . . . . . . . . . . . . . . . . . . . . .10, 11
B & R Development, Inc. v. Rogers,
561 S.W.2d 639 (Tex. Civ. App--Texarkana 1978,
writ ref'd n.r.e.) . . . . . . . . . . . . . . . . . . . . . . . . 42, 43
B&H Warehouse v. Atlas Van Lines, Inc.,
490 F.2d 818 (5th Cir. 1974) . . . . . . . . . . . . . . . . . . . . .16
Baron v. Mullinox, Wells, Mauzy & Baab, Inc.,
623 S.W.2d 457 (Tex. App.--Texarkana 1981, no writ) . . . . . . . . . .45
Bendalin v. Delgado, 397 S.W.2d 889
(Tex. Civ. App.--El Paso 1965),
REV'D ON OTHER GROUNDS, 406 S.W.2d 897 (Tex. 1966) . . . . . . . . . .19
Bocanegra v. Aetna Life Ins. Co.,
605 S.W.2d 848 (Tex. 1980) . . . . . . . . . . . . . . . . . . . . . .43
Bohn v. Travelers Indem. Co., 604 S.W.2d 327
(Tex. Civ. App.--Texarkana 1980, no writ) . . . . . . . . . . . . . . .38
Brewer v. Myers, 545 S.W.2d 235
(Tex. Civ. App.--Tyler 1976, no writ) . . . . . . . . . . . . . . . . .22
Brown v. Hawes, 764 S.W.2d 855 (Tex. App.--Austin 1989, no writ) . . . .23
Bynum v. Signal Life Insurance Co.,
522 S.W.2d 696 (Tex. Civ. App.--Dallas 1975,
writ ref'd n.r.e.). . . . . . . . . . . . . . . . . . . . . . . . . . .35
vi
<PAGE>
Central Power & Light Co. v. Del Mar
Conservation Dist., 594 S.W.2d 782
(Tex. Civ. App.--San Antonio 1980, writ ref'd n.r.e.). . . . . . . . . 45
Clancy v. Zales Corp., 705 S.W.2d 820
(Tex. App.--Dallas 1986, writ ref'd n.r.e.) . . . . . . . . . . . . . 46
Clear Lake City Water Auth. v.
Clear Lake Utility, 549 S.W.2d 385 (Tex. 1977) . . . . . . . . . 24, 25
Coleman v. Kettering, 289 S.W.2d 953
(Tex. Civ. App.--Galveston 1956, no writ) . . . . . . . . . . . . . 8-10
Concord Auto Auction, Inc. v. Rustin,
627 F.Supp. 1526 (D. Mass. 1986). . . . . . . . . . . . . . . . . 11, 15
Daniel v. Goesl, 161 Tex. 490, 341 S.W.2d 892 (1960) . . . . . . . . . 44
Estate of Mather, 410 Pa. 361, 189 A.2d 586 (1963) . . . . . . . . . . 12
Evangelista v. Holland, 537 N.E.2d 589 (Mass. App. Ct. 1989). . . . 11, 15
First National Bank-of Montclair v. Coldwell,
140 N.Y.S.2d 142 (1955), AFFIRMED 286 A.D. 1079,
145 N.Y.S.2d 674 (1956), AFFIRMED 1 N.Y.2d 726,
151 N.Y.S.2d 935, 134 N.E.2d 683 (1956) . . . . . . . . . . . . . . . .21
Fischer v. NWA, Inc., 883 F.2d 594 (8th Cir. 1988)
CERT. DENIED, 110 S. Ct. 2205, 109 L.Ed.2d 531 (1990) . . . . . . . . .26
Foltz v. U.S. News and World Report, Inc.,
865 F.2d 364 (D.C. Cir. 1989),
CERT. DENIED, 490 U.S. 1108, 109 S.Ct. 3162,
104 L.Ed.2d 1024 (1989) . . . . . . . . . . . . . . . . . . . . 9, 12, 13
Frost Natl. Bank v. Matthews,
713 S.W.2d 365 (Tex. App.--Texarkana 1986,
writ ref'd n.r.e.) . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Go Leasing, Inc. v. Groos National Bank,
628 S.W.2d 143 (Tex. App.--San Antonio 1982, no writ). . . . . . . . . 48
vii
<PAGE>
Guadalupe-Blanco River Authority v.
City of San Antonio, 145 Tex. 611,
200 S.W.2d 989 (1947) . . . . . . . . . . . . . . . . . . . . . . . . .44
Hertzberg's Diamond Shops, Inc. v.
Valley West Des Moines Shopping Center, Inc.,
564 F.2d 816 (8th Cir. 1977) . . . . . . . . . . . . . . . . . . . . .27
Houston, City of v. Clear Creek Basin Authority,
589 S.W.2d 671 (Tex. 1979) . . . . . . . . . . . . . . . . . . . . . .47
Hurt v. Standard Oil Co., 444 S.W.2d 342
(Tex. Civ. App.--El Paso 1969, no writ) . . . . . . . . . . . . . . . .45
Jenkins v. Haworth, 572 F.Supp. 591
(W.D. Mich. 1983) . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Jones v. Hunt Oil Co., 456 S.W.2d 506
(Tex. Civ. App.--Dallas 1970, writ ref'd n.r.e.) . . . . . . . . . . .43
Jones v. LaFargue, 758 S.W.2d 320
(Tex. App.--Houston [14th Dist] 1988, writ denied) . . . . . . . . . .24
Kanawha-Roane Lands, Inc. v. Burford,
359 S.E.2d 618 (W.Va. 1987) . . . . . . . . . . . . . . . . . . . .11, 16
Keating v. BBDO International, Inc.,
438 F.Supp. 676 (S.D. N.Y. 1977) . . . . . . . . . . . . . . . . . . .13
Krauss v. Kuechler, 300 Mass. 346,
15 N.E.2d 207 (1938) . . . . . . . . . . . . . . . . . . . . . . .20, 21
Krebs v. McDonald, 266 S.W.2d 87 (Ky. 1953) . . . . . . . . . . 9, 19, 20
Lede v. Adcock, 630 S.W.2d 669
(Tex. App.--Houston [14th Dist] 1982, writ ref'd n.r.e.). . . . . . . .26
Lewis v. Deaf Smith Elec. Co-op, Inc.,
768 S.W.2d 511 (Tex. App.--Amarillo 1989, no writ) . . . . . . . . . .46
Ling & Co. v. Trinity Savings & Loan Assoc.,
482 S.W.2d 841 (Tex. 1972) . . . . . . . . . . . . . . . . . . . . . . 7
viii
<PAGE>
Lyons v. Montgomery, 685 S.W.2d 390
(Tex. App.--San Antonio 1985),
REV'D IN PART, AFFIRMED IN PART,
701 S.W.2d 641 (Tex. 1985) . . . . . . . . . . . . . . . . . . . .35, 36
Malloy v. Newman, 649 S.W.2d 155
(Tex. App.--Austin 1983, no writ) . . . . . . . . . . . . . . . . . .26
Malooly Brothers, Inc. v. Napier,
461 S.W.2d 119 (Tex. 1970) . . . . . . . . . . . . . . . . . . . . . . 7
Martin v. Graybar Electric Co.,
285 F.2d 619 (7th Cir. 1961) . . . . . . . . . . . . . . . . . . .11, 16
Massey v. Armco Steel Co., 652 S.W.2d 932 (Tex. 1983) . . . . . . . . .38
McNeil v. McLain, 272 S.W.2d 573
(Tex. Civ. App.--Fort Worth 1954, no writ) . . . . . . . . . . . . . .26
MCZ, Inc. v. Smith, 707 S.W.2d 672
(Tex. App.--Houston [1st Dist] 1986,
writ ref'd n.r.e.) . . . . . . . . . . . . . . . . . . . . . . . . .25
Meller, Estate of v. Adolph Meller Co., 554 A.2d 648
(R.I. 1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Miller v. Miller, 700 S.W.2d 941
(Tex. App.--Dallas 1985, writ ref'd n.r.e.) . . . . . . . . . . . . . 25
Motel Enterprises v. Nobani,
784 S.W.2d 545 (Tex. App.--Houston [1st Dist] 1990, no writ) . . . . . 42
New England Trust Co. v. Abbott,
162 Mass. 148, 38 N.E. 432 (1894) . . . . . . . . . . . . . . . . .20, 21
Northrop Corp. v. McDonnell Douglas Corp.,
705 F.2d 1030, 1044 (9th Cir. 1983)
CERT. DENIED, 464 U.S. 849, 104 S. Ct. 156,
78 L.Ed.2d 144 (1983) . . . . . . . . . . . . . . . . . . . . . . . . .27
Palmer v. Chamberlin, 191 F.2d 532 (5th Cir. 1951) . . . . . . . . . . .45
ix
<PAGE>
Pan American Petroleum Corp. v. Vines,
459 S.W.2d 911 (Tex. Civ. App.--Tyler 1970,
writ ref'd n.r.e.) . . . . . . . . . . . . . . . . . . . . . . . . 28, 29
Patton v. Nicholas, 154 Tex. 385,
279 S.W.2d 848 (1955) . . . . . . . . . . . . . . . . . . . . . . . . .22
Phoenix Mutual Life Ins. Co. v.
Seafarers Officers & Employees Pension Plan,
128 F.R.D. 25 (E.D.N.Y. 1989) . . . . . . . . . . . . . . . . . . . . .27
Prindiville v. Johnson & Higgins,
92 N.J.Eq. 515, 520, 113 A. 915 (1921),
116 A. 785 (1922) . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Querner Truck Lines, Inc. v.
Alta Verde Industries, Inc., 747 S.W.2d 464
(Tex. App.--San Antonio 1988, no writ) . . . . . . . . . . . . . . . .49
Renberg v. Zarrow, 667 P.2d 465 (Okla. 1983) . . . . . . . . . 9, 11, 15
Ross v. Burleson, 274 S.W.2d 105
(Tex. Civ. App.--San Antonio 1954, no writ) . . . . . . . . . . . . . .22
Rowland v. Rowland, 102 Idaho 534,
633 P.2d 599, 607 (Idaho 1981) . . . . . . . . . . . . . . . .11, 12, 16
Rowntree v. Rice, 426 S.W.2d 890
(Tex. Civ. App.--San Antonio 1968, writ ref'd n.r.e.) . . . . . . . . 36
Schlumberger Well Surveying Corp. v.
Nortex Oil & Gas Corp., 435 S.W.2d 854 (Tex. 1968) . . . . . . . . . .38
Special Jet Services v. Fed. Ins. Co.,
83 F.R.D. 596 (W.D. Penn. 1979) . . . . . . . . . . . . . . . . . . . .27
State ex rel. Howeth v. Davidson,
163 Mont. 355, 517 P.2d 722 (1973) . . . . . . . . . . . . . . . . 16-18
State v. Easley, 404 S.W.2d 296 (Tex. 1966). . . . . . . . . . . . . . .48
Taylor Publishing Co. v. Systems Marketing, Inc.,
686 S.W.2d 213 (Tex. App.--Dallas 1984,
writ ref'd n.r.e.). . . . . . . . . . . . . . . . . . . . . . . . . . .34
x
<PAGE>
Taylor v. Taylor, 747 S.W.2d 940
(Tex. App.--Amarillo 1986, writ denied) . . . . . . . . . . . . . . . .47
Tesoro Petroleum Corp. v. Coastal Refining
& Marketing, Inc., 754 S.W.2d 764
(Tex. App.--Houston [1st Dist] 1988, writ denied) . . . . . . . . . . .50
Updegrave v. Reliance National Investors Corp.,
337 F.2d 604 (9th Cir. 1964) . . . . . . . . . . . . . . . . . . . . .29
Vaquero Petroleum Co. v. Simmons,
636 S.W.2d 762 (Tex. App.--Corpus Christi 1982,
no writ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Veal v. Thomason, 183 Tex. 341, 159 S.W.2d 472 (1942) . . . . . . . 28, 29
Video Towne, Inc. v. RB-3 Assoc.,
125 F.R.D. 457 (S.D. Ohio 1988) . . . . . . . . . . . . . . . . . . . .26
Wetzel v. Sullivan, King & Sabom,
745 S.W.2d 78, 81 (Tex. App.--Houston
[1st Dist] 1988, no writ) . . . . . . . . . . . . . . . . . . . . . . .42
Whitaker v. Huffaker, 790 S.W.2d 761
(Tex. App.--El Paso 1990, writ denied) . . . . . . . . . . . . . . . .38
Wise v. Pena, 552 S.W.2d 196
(Tex. Civ. App.--Corpus Christi 1977,
writ dism'd w.o.j.) . . . . . . . . . . . . . . . . . . . . . . . . . .42
Yeng Sue Chow v. Levi Strauss & Co.,
49 Cal.App.3rd 315, 122 Cal.Rptr. 816 (1975). . . . . . . . . . . . 9, 11
xi
<PAGE>
STATUTES AND RULES OF COURT
Fed. R. Civ. P. 19 . . . . . . . . . . . . . . . . . . . . . . . . 25-27
Tex. Bus. Corp. Act art. 2.22(B) and (D)
(Vernon Supp. 1991) . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Tex. Civ. Prac. & Rem. Code Section 37.006(a) . . . . . . . . . . . . 24
Tex. Ins. Code Ann. art. 21.07-1
(Vernon Supp. 1991) . . . . . . . . . . . . . . . . . . . . . . 8, 16, 37
Tex. R. App. P. 52(a) . . . . . . . . . . . . . . . . . . . . . . . . . 46
Tex. R. App. P. 74(f) . . . . . . . . . . . . . . . . . . . . . . . . . 46
Tex. R. Civ. P. 39(a) . . . . . . . . . . . . . . . . . . . . . . . 25, 26
Tex. R. Civ. P. 93(4) . . . . . . . . . . . . . . . . . . . . . . . . . 24
Tex. R. Civ. P. 166(a)(c) . . . . . . . . . . . . . . . . . . . . . . . 47
Tex. R. Civ. P. 316 . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECONDARY AUTHORITY
C. Wright, A. Miller & M. Kane, Federal
Practice & Procedure: Civil 2nd Section 1613 . . . . . . . . . . . . . 27
H. William & C. Meyers, Oil & Gas Law,
Section 928 (1990) . . . . . . . . . . . . . . . . . . . . . . . . . . 28
O'Neal's Close Corporation (3d ed. 1987) . . . . . . . . . . . . . . . 18
R. McDonald, Texas Civil Practice in District
and County Courts Section 7.13-(IV) at 175 (rev. 1982) . . . . . . . . 24
</TABLE>
xii
<PAGE>
NO. 02-91-152-CV
IN THE COURT OF APPEALS
FOR THE SECOND APPELLATE DISTRICT OF TEXAS
AT FORT WORTH
--------------------------------
WILLIAM C. HUGENBERG, JR.,
APPELLANT,
V.
INDEPENDENT RESEARCH AGENCY
FOR LIFE INSURANCE, INC.,
APPELLEE.
--------------------------------
BRIEF FOR APPELLEE
--------------------------------
TO THE HONORABLE JUSTICES OF THE COURT OF APPEALS:
COMES NOW, Independent Research Agency for or Life Insurance, Inc.,
("IRA") and files this its Appellee's Brief urging affirmance of the Summary
Judgment entered by the Honorable Bruce Auld, presiding judge of the 352nd
District Court of Tarrant County, Texas in a case styled Independent Research
Agency for Life Insurance, Inc. v. William C. Hugenberg, Jr., ("Hugenberg")
Cause No. 352-129228-90.
PRELIMINARY STATEMENT
IRA cannot agree to Hugenberg's argumentative statement and must tender
its own. IRA sought a declaratory judgment holding that it had properly
performed under a Stock Agreement with its
1
<PAGE>
former agent, Hugenberg. [Tr. 2-14]. In essence, the Stock Agreement provided
that IRA had the right to repurchase Hugenberg's stock when he ceased to be
an IRA agent. ID. IRA filed its action after Hugenberg attempted to retender
$535,587.50 paid to him for his stock. ID. Hugenberg responded to IRA's
declaratory judgment action with a counterclaim alleging various causes of
action which had as their core Hugenberg's dissatisfaction with the amount of
money tendered to him. [Tr. 92-114]. After the completion of discovery, IRA
filed an Amended Motion for Summary Judgment. [Tr. 1316-1920]. Hugenberg did
not respond to this amended motion. The trial Court granted Summary Judgment
to IRA for the declaratory relief it sought and attorney's fees.
[Tr. 2155-2159]. The trial Court entered a take nothing judgment with respect
to the causes of action Hugenberg raised in his counterclaim. ID.
STATEMENT OF FACTS RELEVANT TO ALL REPLY POINTS OF ERROR
Hugenberg was an agent of IRA and executive employee of IRA's
subsidiary, United Services Planning Services, Inc. [Tr. 1320, #1, 2, 3].(1)
In 1981, IRA offered Class B stock to its agents. [Tr. 1321, #8]. The
purpose of the offer was as an incentive to the agents and to give them a
stake in the welfare and continued health of IRA. [Tr. 1323, #26, 27, 28, 31].
Obviously, IRA did not want its stock placed in the hands of persons who did
not have a stake in the welfare of the company and who might indeed have
interests inimical to IRA's continued health. Repurchase options are
frequently encountered to permit the incentive of stock
- -------------------
(1) In the references to the Transcript, IRA will
often cite specific facts referenced within its Amended Motion for Summary
Judgment. A record reference such as [Tr. _,#_] will reference to the
location in the Motion where the fact in question is referenced. At that
point, the referenced fact in the Motion contains a parenthetical reference
to the portion of the Motion which establishes that fact. The facts are
referenced on pages 4-21 of the Motion. A copy of the Motion, without
exhibits, is attached hereto as Appendix A.
2
<PAGE>
ownership for corporate agents and employees. [Tr. 1324, #32]. For this
reason, Hugenberg and every other agent of IRA from the newest agent to the
president of the company was required to sign a stock agreement.(2)
[Tr. 1324, #29]. This short Stock Agreement simply provided that if any agent
ceased to be either an agent of IRA or a duly licensed Texas life insurance
agent, IRA would have 120 days to exercise an option to repurchase the
[Tr. 1320, #4-7]. The agreement also contained the following paragraph
stating what an agent would be paid for his stock.
4. The Company shall, at least annually, advise Stockholder in writing
of the value of stock, and it is specifically agreed that this value, as
of the most recent date provided by the Company, shall be the purchase
price paid by the Company for Stockholder's shares upon their repurchase
from Stockholder or Stockholder's estate.
IRA repurchased the stock of every agent who left IRA in accord with this
paragraph of the Stock Agreement. [Tr. 1324,#30]. No one was permitted to
purchase IRA Class B stock unless that person first signed a Stock Agreement
identical in all material respects to the one Hugenberg signed. [Tr.
1324,#29]. However, Hugenberg purchased the stock voluntarily. [Tr.1325,#37].
Hugenberg purchased a total of 30,065 shares of Class B stock while an
agent of IRA. [Tr.1340-1346]. For these shares, he paid a total of
$66,096.50. Id. Hugenberg received the opportunity to buy this stock in
addition to his other compensation which went as high as $222,993 in 1989.
[Tr.1517-18,1327,#45]. In 1990, Hugenberg became disenchanted with IRA
because of his inability to obtain a place on IRA's Board of Directors and
decided to resign and go to law school.[Tr. 1628]. Even though he was leaving
IRA,
- -------------------
(2) The stock agreement signed by Hugenberg is attached as Appendix B.
3
<PAGE>
he still attempted to buy Class B stock at the time of an offering made a few
months before his resignation. [Tr.1322,#17].
Prior to his departure from the company, IRA notified Hugenberg of the
price IRA would pay all agents selling their stock in 1990. [Tr. 1322,#16,18].-
This price was the book value of IRA stock at the end of the prior fiscal
year plus that year's earnings. The earnings are added in monthly increments
to the price as the ensuing year progresses less any dividends.
[Tr.1322,#13,1336,#107]. Over the years of his stock ownership, IRA paid
dividends to Hugenberg of $194,341.75. [Tr.1321,#10]. Based on the price set
in accord with the Stock Agreement, IRA placed $535,587.50 in Hugenberg's
payroll account as payment for the Class B stock which he had purchased for a
total of $66,096.50. [Tr.1320-21,#8,9,1323,#20,21,22]. In so doing, IRA paid
Hugenberg a price for his stock calculated in exactly the same manner as it
had calculated the price for every share it had ever purchased from
directors, chief executive officers, and the Company's founder's estate.
[Tr.1324,#30,1326,#43].
Hugenberg's attempt to retender the $535,587.50 payment compelled IRA to
seek a judicial declaration that its actions complied with the simple
language of the Stock Agreement. [Tr.1323,#2-14]. Shortly after filing its
declaratory judgment action, IRA filed a short Motion for Summary Judgment
requesting that the Court find that IRA had complied with the terms of the
Stock Agreement and that Hugenberg was no longer a shareholder. [Tr.32~91].
Hugenberg responded with a counterclaim.[Tr. 92-114]. The essence of the
counterclaim was that he had not been given "value" for his IRA stock.
[Tr.1325,#34]. He hired an "expert in the valuation of securities" who opined
that the stock was worth
4
<PAGE>
$72 per share.[Tr. 1567]. Hugenberg later hired a second expert who opined a
value of $52 per share. [Tr.1749].
When IRA pressed for a hearing on its original Motion for Summary
Judgment, Hugenberg responded that he did not like the price paid to him for
his stock because it was too low and did not reflect "value," and that value
was not paid so that cash could be conserved in the corporation and be paid
the "Control Group" of Class A shareholders on their separation or
retirement. [Tr. 131-133, 141-144]. He also asked for a continuance so that he
could conduct discovery.[Tr. 172-174]. He believed that he needed discovery
to uncover evidence of wrongdoing to support the allegations of his
counterclaim. ID. Judge Auld granted the requested continuance. [Tr. 347].
As the massive Transcript of this case reflects, Hugenberg fully availed
himself of the opportunity to pursue discovery. Pursuant to document requests
and deposition notices served by Hugenberg, IRA produced several thousand
pages of documents and presented several of its officers and experts for
deposition. [Tr.115-123,149-152,663,1285,1287,1313,2001]. Hugenberg and his
"experts" were deposed. [Tr.657,1998,2003]. The discovery revealed that
Hugenberg could point to no proof to support the allegations contained in his
counterclaim.[Tr.1316-1920]. The discovery also produced evidence that
Hugenberg had long been aware of information the alleged concealment of which
he contended supported his counterclaim. ID. While in possession of this
knowledge, he continued to buy IRA stock and receive benefits from its
ownership. [Tr. 1320-21,#8,10]. After the completion of discovery, IRA
amended its Motion for Summary Judgment and brought forward the numerous
facts which demonstrated, in IRA's view, its right to enforce the Stock
Agreement and the lack of support for Hugenberg's
5
<PAGE>
counterclaim.[Tr. 1316-1920]. The Amended Motion also raised the fact that
Hugenberg is no longer a licensed Texas life insurance agent. [Tr.1320,#4].
HUGENBERG DID NOT FILE A RESPONSE TO THIS AMENDED MOTION FOR SUMMARY JUDGMENT
("Motion"). Instead, within 7 days of the summary judgment hearing, Hugenberg
filed a "Motion for Leave to Supplement the Record."[Tr. 2006-2029]. In
essence, the motion sought permission to file 5 depositions in bulk.ID. After
a hearing, and upon this state of the record, Judge Auld granted IRA's Motion
for Summary Judgment.[Tr. 2155-2159]. The Judgment granted IRA its requested
declaratory relief and awarded IRA attorneys' fees of $300,000 which was the
amount IRA had provided affidavit proof to support and which Hugenberg did
not rebut.(3) ID. Upon this record Hugenberg brings his appeal to this Court.
ARGUMENT AND AUTHORITIES
RESPONSE TO ASSAULT ON THE CHARACTER OF JUDGE AULD
In a section of the brief not related to any particular Point of Error,
Hugenberg accuses Judge Auld of "judicial malfeasance." [Ant. br. 10-14].
Apparently, Judge Auld's sin is the granting of IRA's Amended Motion for
Summary Judgment because the record is large. Hugenberg's accusation against
Judge Auld is quite simply a cowardly attempt to impugn the integrity of
Judge Auld to cover the procedural, legal and factual failings of his case.
If Hugenberg wants to know the basis of the Judgment, IRA commends his review
of the 108 factual matters established as a matter of law in
- -------------------
(3) The judgment is attached hereto as Appendix C.
6
<PAGE>
IRA's Motion and the 76-page brief IRA filed.[Tr. 1319-1336, 1922-1997]. (4)(5)
REPLY POINT OF ERROR NO. 1 RESTATED: The trial Court did not err in
granting IRA's Amended Motion for Summary Judgment.
[Responsive to Point of Error No. 1.]
ARGUMENT & AUTHORITIES UNDER REPLY POINT OF ERROR NO. 1
THE STOCK AGREEMENT
Hugenberg attempts to create the impression that the Stock Agreement was
some type of extraordinary vehicle utilized by the Board of Directors or
"Control Group"(6) of IRA to suppress other shareholders. This contention
necessitates a discussion of such stock agreements; their validity under
Texas law; and why Hugenberg is incorrect in his contentions.
1. ENFORCEABILITY OF PROVISIONS RELATING TO REPURCHASE OF CORPORATE STOCK
The provisions of the Stock Agreement create an option for IRA to
purchase Hugenberg's stock. LING & CO. V. TRINITY SAVINGS &
- -------------------
(4) Another aspect of Hugenberg's brief makes his tactics abundantly
clear. On four occasions, Hugenberg references a memo by Debra Payne, a
member of IRA's Board, and the responses of other Board members to it.
[Ant. br.6,8,20,27]. Because Ms. Payne felt IRA's stock might be undervalued
and because other Board members of IRA did not want a public discussion of
the matter, Hugenberg contends that there was a "conspiracy of silence."
[Ant. br. 28]. The Court may simply ignore the references to the discussion
of Ms. Payne's statements. As Hugenberg knows this document and the other
documents he discusses on page 28 of his brief are not a part of the Summary
Judgment record. Instead they were filed as part of a Motion to Compel and a
Motion to Pay Dividends.[Tr.481-529, 530-554]. As will become clear, the fact
that someone thought the price of IRA stock might be higher than the price
set by the Board of Directors is irrelevant.
(5) Another example of Hugenberg's tactics is his treatment of
MALOOLY BROTHERS, INC. V. NAPIER, 461 SW.2d 119,121 (Tex. 1970) for the
proposition that all he need do is include a general point of error and he
has preserved all grounds to overturn the Summary Judgment whether he has
argued them or not. [Ant. br. 20-21]. Of course, this is not what MALOOLY
holds. A general point is sufficient, under the rules of procedure, and "to
allow argument as to all the possible grounds upon which summary judgment
should have been denied." MALOOLY is not an excuse to see what the Appellee's
brief says and then raise new grounds to avoid the summary judgment in a
reply brief.
(6) The term "Control Group" is coined by Hugenberg to describe the
entity he believes is "suppressing" his rights. It is apparently made up, at
least in part, of IRA's Class A shareholders.
7
<PAGE>
LOAN ASSOC., 482 S.W.2d 841 (Tex. 1972). An option for the repurchase of the
stock by a shareholder who wishes to dispose of his stock is provided for in
the Texas Business Corporation Act. See Art. 2.22(B) and (D) (Vernon Supp.
1991).(7)
Not only are such option provisions provided for by the Business
Corporation Act, the Texas Insurance Code also provides for such options with
respect to companies such as IRA. Article 21.07-1 of the Tex. Ins. Code deals
with Legal Reserve Life Insurance agents. Section 4(e)(1) of this article
authorizes the Insurance Commissioner to issue a license to a corporation if
it finds that the corporation's shareholders are licensed insurance agents.
This article goes on to provide in Section 4(e)(3)(C) "any such corporation
shall have the power to redeem the shares of any shareholder . . . at such
price and upon such terms as may be provided in the articles of
incorporation, the bylaws, or an existing contract entered into between the
shareholders of the corporation." Thus, an option, such as that provided in
the Stock Agreement, is permitted by Texas statute. The statutes referenced
above carry forward a policy long established by case law in Texas. COLEMAN
V. KETTERING, 289 S.W.2d 953 (Tex. Civ. App.--Galveston 1956, no writ)
examined an option provision very similar to the provisions of the Stock
Agreement. COLEMAN dealt with the appellant's argument that the agreement was
"harsh, unreasonable and confiscatory" in its application because it limited
the payment he was to receive to book value. After reviewing several
out-of-state cases upholding such a provision and noting that a corporation
had a right to determine the identify of its
- -------------------
(7) The full text of art. 2.22 is attached hereto as Appendix D.
8
<PAGE>
3. ALLEGED INADEQUACY OF PRICE DOES NOT PREVENT ENFORCEMENT OF STOCK
AGREEMENT
The fact that a stock option agreement provides for a price which is
less than the stockholder's concept of "fair market value" does not prevent
enforcement of the agreement. In fact, such agreements are frequently very
beneficial to the shareholder because they provide a price for stock for
which there may be no established market. This situation involves a case
study in the need for such agreements. As noted in his brief, even
Hugenberg's own experts cannot agree on a fair market value for IRA stock.(9)
The cases in both Texas and other jurisdictions are legion to the effect
that it is irrelevant if a stock agreement does not provide for a price which
meets a stockholder's subjective concept of market value. See COLEMAN V.
KETTERING, SUPRA. at 957 [Book value is adequate repurchase price.] The most
often cited case that "inadequacy" of price does not void a stock restriction
is ALLEN V. BILTMORE TISSUE CORP., 2 N.Y.2d 534, 141 N.E.2d 812, 161 N.Y.S.2d
418 (1957). ALLEN refused to accept a lower court's determination that an
option with the price set at the amount paid by Allen to the corporation for
the stock was an unreasonable restraint on alienation. In the ALLEN Court's
view, adopting the lower court's approach would prompt litigation over the
price of every stock which did not have a recognized and easily ascertainable
market value. Since stock such as IRA's does not have such an easily
ascertainable market value, the social utility of such option agreement would
be destroyed. ALLEN concluded: "In
- ------------------
(9) Even Hugenberg's own expert, Mr. Eiland, admitted that if the
Stock Agreement is valid, then the fair market value is the price set by IRA
pursuant to the Agreement.[Tr. 1746-1747]. Mr. Eiland also admitted that
IRA's method of setting the repurchase price has mathmatical certainty.
[Tr. 1750].
10
<PAGE>
sum, then, the validity of the restriction on transfer does not rest on any
abstract notion of intrinsic fairness of price. To be invalid, more than a
mere disparity between option price and current value of the stock must be
shown. Since the parties have in effect agreed on a price formula which
suited them, and provision is made freeing the stock for outside sale should
the corporation not make, or provide for, the purchase, the restriction is
reasonable and valid." 141 N.E.2d AT 817.
The Rule from ALLEN has been cited frequently in jurisdictions
throughout the nation. EVANGELISTA V. HOLLAND, 27 Mass. App. Ct. 244, 537
N.E.2d 589, 593 (1989) [Upholding stock option price of $75,000 when stock
allegedly was worth $191,000]; KANAWHA-ROANE LANDS, INC. V. BURFORD, 359
S.E.2d 618, 621 (W.Va. 1987) [Upheld set stock option price even though
allegedly stock was much more valuable because of appreciation of assets];
CONCORD AUTO AUCTION, INC. V. RUSTIN, 627 F.Supp. 1526, 1531 (D. Mass.
1986) [upheld stock option price allegedly lower than market value of stock];
RENBERG V. ZARROW, 667 P.2d 465, 470 (Okla. 1983) [upheld stock option
price allegedly much lower than present book value of stock]; ROWLAND V.
ROWLAND, 102 Idaho 534, 633 P.2d 599, 607 (Idaho 1981) [Upheld option price
of book value in face of allegation that book value, as set by directors, was
much lower than fair market value]; YENG SUE CHOW V. LEVI STRAUSS & CO. ,
122 Cal. Rptr. 816, 49 Cal. App.3d 315 (1975) [upheld option price set at
book value even though stock greatly increased in value when it began to
publicly trade]; MARTIN V. GRAYBAR ELECTRIC CO., 285 F.2d 619, 625
(7th Cir. 1961) [upheld option price set at price stock issued by
corporation in face of allegation that market value was much higher].
The reasons why stock agreements are enforceable even though they may
not provide for some subjective concept of fair market
11
<PAGE>
value are numerous and further illustrate the public policy upholding such
agreements. As noted above, the concept of the "fair market value" of a
non-publicly traded stock is so fraught with uncertainty that courts
willingly enforce stock agreements such as the one between IRA and its
shareholders. Also, courts are reluctant to intervene and rewrite contracts
for persons who are trying to avoid obligations they no longer like. See
ESTATE OF MATHER, 410 Pa. 361, 189 A.2d 586 (1963) [upholding one dollar option
price for stock allegedly worth $1,000 a share]. Such restrictions also serve
the purpose of permitting the corporation to set a price which it can pay and
thus, enable it to carry out the very purpose of such stock agreements.
ROWLAND, 633 P.2d at 607. A company quite simply has the right to set a
repurchase price which will not bankrupt it should the corporation exercise
its option to repurchase any and all of departing shareholders' stock. SEE:
ESTATE OF MELLER V. ADOLPH MELLER CO., 554 A.2d 648, 653 (R.I. 1989).
Preserving employee ownership of the corporation is one of the purposes
for having such options. In FOLTZ V. U.S. NEWS AND WORLD REPORT, INC., 865
F.2d 364 (D.C. Cir. 1989), CERT. DENIED, 490 U.S. 1108, 109 S.Ct. 3162, 104
L.Ed.2d 1024 (1989), several ex-employees claimed the appraisal procedure
utilized to value their stock upon repurchase greatly undervalued the stock.
The Court in FOLTZ repeatedly emphasized that the main purpose for the
arrangement contained in the stock option plan was to perpetuate employees'
ownership and control. Id. AT 373. The same is true of IRA. In light of this
policy, the Court upheld the valuation even though the departing employees
sold their stock for between $65.00 and $470.00 a share and the same shares
sold shortly thereafter for $2,642. The ex-employees contended that a
valuation technique
12
<PAGE>
should be used which would estimate the value of the stock that would
normally be realized if the company were sold. The Court noted: "... While
obviously evaluation on the basis of a HYPOTHETICAL sale could co-exist with
employee ownership, IT COULD CREATE LIQUIDITY PROBLEMS THAT WOULD JEOPARDIZE
THAT PURPOSE." ID. AT 373. [Emphasis added]
4. HUGENBERG HAS NO CLAIM OF BREACH OF FIDUCIARY DUTY OR LACK OF GOOD
FAITH BECAUSE OF THE PRICE SET BY IRA TO EXERCISE ITS REPURCHASE
OPTION
Simply because a company exercises an option given to it by a stock
agreement does not create a cause of action for breach of fiduciary duty
or bad faith. Numerous cases and concepts illustrate this point. KEATING V.
BBDO INTERNATIONAL, INC., 438 F.Supp. 676 (S.D. N.Y. 1977) dealt with an
argument very similar to Hugenberg's that he is being treated unfairly
because IRA exercised its option in accordance with its very terms. In
KEATING, an ex-employee whose employment was terminable at will complained his
company fired him and demanded return of the stock while plans were afoot to
take the corporation public. Because this action caused him "economic harm,"
the ex-employee argued that the company owed him a duty not to demand the
stock back even though he was properly terminated. ID. AT 682. KEATING
disposed of this contention with the following remarks: "In other words, the
corporation owed plaintiff some sort of fiduciary duty not to exercise the
option as explicitly set forth in the stockholder's agreement because it
would be injurious to him. The fallacy of this proposition is immediately
apparent. . . ." ID.
13
<PAGE>
Other cases also note that it is not a breach of fiduciary duty to
exercise the right contained in a stock agreement. SEE: JENKINS V. HAWORTH,
572 F.SUPP. 591, 601 (W.D. MICH. 1983)
[Cannot use fiduciary duty as pretext to avoid clear contractual duty.]
RENBERG AT 471. (Court will not rewrite agreement so parties may avoid an
improvident contract].
There is no unfairness for several additional reasons. To briefly
summarize the evidence, all Class B shareholders signed a stock agreement
containing the same terms and provisions as the Stock Agreement in this
case.[Tr. 1324,#29]. There are only 25 shares of Class A IRA stock issued and
outstanding and all of the Class A shareholders also own Class B
stock.[Tr.1572,1753]. The Class A shareholders' Class B stock is subject to
the strictures of the Stock Agreement.[Tr.1333,#86]. Annually, IRA sets the
price which it will pay during the coming year for Class B stock.[Tr. 1393].
IRA set this price to reflect book value plus the prior year's earnings less
dividends. The prior year's earnings are included by dividing the earnings by
twelve and adding 1/12 of the earnings to the stock price each
month.(Tr.1322,#13]. Each Class B shareholder, including those Class A
shareholders who also own Class B stock, who sold his stock back to the
Company received the price set in this fashion. [Tr.1332,#79]. This includes
the founder of IRA who presumably was the origin of the nefarious "Control
Group" which haunts Hugenberg's thoughts.[Tr. 1394]. Even Hugenberg admitted
that he did not know of a single instance where a Class B shareholder
received disparate treatment. [Tr.1324,#30, 1326,#43]. Also, as noted
previously, Hugenberg received some $725,000 for stock for which he paid only
$66,000. [Tr.1320,#8, 1321,#10, 1323,#21,22]. These facts conclusively
demonstrate Hugenberg has not been ill treated.
14
<PAGE>
These facts also demonstrate the fairness of the manner by which the
option price is set. First of all, the price is not set for each individual
sale. Instead, a price is set yearly which applies to all sales of Class B
stock made during that year. One aspect of fairness in analyzing the pricing
provision of a stock repurchase option is whether there is "mutuality of
risk." EVANGELISTA V. HOLLAND, 537 N.E.2D AT 592-593; RENBERG AT 470. This
concept is usually addressed in the context of cases where the stock
agreement provides a set price or a formula such as book value determines the
price. ID. Such agreements are fair because parties do not know when or if
the agreement will be exercised and a party cannot predict if they will
profit or lose from the price they set. There is no incentive to set an
excessively low price because the parties setting the price may be cutting
their own throats. In this case, the parties setting the price for
repurchase, the members of IRA's Board of Directors, are also subject to
risk from the price they set. Thus, there is no incentive, as Hugenberg
suggests, for them to set a low price. The board members may retire, die or
be terminated as agents during any year and have to accept the price set for
Class B stock. This, in fact, has occurred on numerous occasions, with the
departing board members or their estates receiving the price set just like
the price for Hugenberg's stock was set. Thus, any motive which Hugenberg
suggests for allegedly low-balling the repurchase option price is
non-existent.
The absence of a breach of fiduciary duty or bad faith is shown even
more strongly because there is no evidence that IRA manipulated the option
price. The most pervasive test for the fairness of an option is its uniform
application. As noted in CONCORD AUTO AUCTION, INC. V. RUSTIN, 627 F. SUPP.
1526, 1531 (D.
15
<PAGE>
Mass. 1986): ". . . 'fairness' and 'good faith' in a closely held corporation
generally means that each stockholder must have an equal opportunity to sell
his or her shares to the corporation for an identical price." That is how IRA
operates its option. [Tr. 1326,#40-43]. Each stockholder of the Company may
sell his or her stock to the Company for an identical price. There has never
been a deviation from this policy, no matter who the seller was.
5. IRA HAS SET A REASONABLE PRICE FOR THE EXERCISE OF ITS REPURCHASE
OPTION
Even if this Court were to consider the issue of fairness of the
price set by IRA to exercise its repurchase option, the evidence shows
as a matter of law that the price set is fair and reasonable. The
price set basically approximates the book value of the stock with a
one year lag. The reason the one year lag is placed on the stock is to
ensure that the company is protected from any financial reversals that
might occur during the year.
As noted previously, numerous cases permit repurchase options
with the price to be set at book value; some percentage of book value;
what the person paid for the stock irrespective of book value or a
price set irrespective of the stock's present value. SEE: KANAWHA-
ROANE LANDS, INC. V. BURFORD AT 620-621; ROWLAND 633 P.2D AT 606-607;
MARTIN V. GRAYBAR ELECTRIC CO. AT 624-625; and STATE EX REL. HOWETH V.
DAVIDSON, 163 Mont. 355, 517 P.2d 722, 730 (1973). (10)
Texas statutory law is also clear on this point. Article 21.07
of the Texas Insurance Code deals with who may own stock in
- --------------------------
(10) Hugenberg cites one case that even mentions book value. He cites
B&H WAREHOUSE V. ATLAS VAN LINES, INC., 490 F. 2d 818 (5th Cir. 1974) for the
proposition that book value is an inappropriate measure in a repurchase
option. But B&H WAREHOUSE is distinguishable on its facts. In B&H
WAREHOUSE, the corporation exercising the option adopted a charter amendment
permitting a repurchase price caluculated on the basis of book value AFTER
the plaintiff purchased its stock. The Court in B&H made absolutely clear
that the restriction would have been valid, AS WRITTEN, if it had been in
effect at the time the shareholder purchased his stock as it was in the
instant case. ID. AT 826.
16
<PAGE>
an insurance agency. One criteria for stock ownership is that the stockholder
must maintain an insurance license. Article 21.07 Section 2(d) (3) (C) in
part provides:
Should such an unlicensed person acquire shares
in a corporation and not dispose of them within
a period of 90 days to a licensed agent, then
they must be purchased by the corporation for
their book value, that is, the value of said
shares of stock as reflected by the regular
books and records of said corporation, as of the
date of the acquisition of said shares by said
unlicensed person. Should the corporation fail
or refuse to so purchase such shares, its
license shall be canceled.
Hugenberg is basically relegated to a "t'aint fair" argument.
However, he cannot even sustain that argument. The repurchase price
set by IRA is more than eight times what Hugenberg paid for the stock.
He has already received dividends of three times what he paid for the
stock. Salary, bonuses, and fringe benefits generously compensated him
for his services to USPA and IRA. As noted previously, Hugenberg
received $222,000 in compensation in his last complete year with IRA.
Hugenberg's claim of unfairness is a repeat of an argument rejected by
the Court in STATE EX REL HOWETH V. DAVIDSON, 517 P.2D AT 730. In
HOWETH, the plaintiff complained that forcing him to sell his stock at
50% OF BOOK VALUE was a "harsh forfeiture." The Court responded:
Howeth was allowed to buy stock in 1965 AS A
FRINGE BENEFIT TO ENCOURAGE PARTICIPATION IN THE
CORPORATE AFFAIRS. He paid less than one-half of
book value for that stock, a total of $15,000.
At that time, Howeth signed the repurchase
agreement whereby the corporation could buy back
the stock at 50% of book value (or up to 100% if
the corporation so approved) in the event of
termination of his employment. Five years later
the corporation exercised its option upon
Howeth's termination as an employee at one-half
of book value, which is
17
<PAGE>
$43,473.30. That is an increase of $28,473.30
over what he paid for it.
HOWETH'S FORFEITURE ARGUMENT IS PREMISED UPON
HIS ASSERTION THAT HIS EFFORTS GREATLY
CONTRIBUTE TO THE INCREASE IN THE BOOK VALUE OF
THE DAVIDSON COMPANY STOCK. THE RECORD INDICATES
THAT OVER THE YEARS HOWETH WAS WELL COMPENSATED
FOR HIS EFFORTS. OFTEN TIMES THIS WAS IN THE
FORM OF COMMISSIONS DIRECTLY RESULTING FROM A
PERCENTAGE OF HIS SALES IN ADDITION TO HIS
REGULAR SALARY. ADDITIONALLY THE SUBSTANTIAL
GAIN IN THE BOOK VALUE OF HIS STOCK UNDER THE
REPURCHASE AGREEMENT REWARDED HIS EFFORTS. UNDER
SUCH CIRCUMSTANCES NO HARSH FORFEITURE IS
INVOLVED. [Emphasis Added] ID.
This Court may simply substitute Hugenberg's name for HOWETH'S IN
this holding.
REPLY POINT OF ERROR NO. 2 RESTATED: The trial Court did not
err in granting Plaintiff's Motion for Summary Judgment upholding the
application by IRA of the stockholder's agreement to allow the
company to set the "price" of IRA stock for repurchase. [Responsive
to Point of Error No. 2.]
ARGUMENT & AUTHORITIES UNDER REPLY POINT OF ERROR NO. 2
In essence, Hugenberg is having belated second thoughts about
the Stock Agreement he signed and operated under for 10 years.
Hugenberg claims that the Stock Agreement is flawed because it does
not provide a mechanism to set the price for repurchase of the stock.
Of course, the agreement does provide a mechanism. The Company sets
the repurchase price. As noted by the evidence and the law, such a
mechanism is neither unfair nor illegal. (Tr.1325,#35].
Even though Hugenberg believes that there is something untoward
about such a mechanism, the treatise he quotes references such a
pricing mechanism. The extended quote from O'NEAL'S CLOSE CORPORATION
(3D ED. 1987) on pages 16-17 of Appellant's brief
18
<PAGE>
basically recommends that the pricing provisions of a repurchase option have
a definite mechanism for the determination of the price. The definite
mechanism avoids a possible dispute when the corporation exercises the
option. One of the mechanisms suggested by the treatise is ". . . (7)
Authorizing the Board of Directors or other shareholders to set a
value . . . ." This is precisely the method specified in the Stock
Agreement.(11)
The statement from the treatise cited by Hugenberg merely crystallizes
the holdings of cases from several jurisdictions extending back to 1894. In
KREBS v. MCDONALD, 266 S.W.2d 87 (Ky. 1953), a stock agreement provided that
the option price was to be set by the stockholders at a special annual
meeting. The price placed on the stock in question was less than half the
value placed on the stock for inheritance tax purposes. When the widow of the
stockholder refused to sell stock back to the corporation for the set price,
the other stockholder brought an action to compel her to comply with the
stock agreement.
KREBS explained that repurchase options were frequently encountered in
the context of closely held corporations, and noted, with respect to the
option provision it was examining, that: ". . . the criteria for evaluating
the stock are so broad in their implications that we conclude they amounted
to a carte blanche grant of power to the shareholders to set the valuation at
whatever they considered reasonable so long as they acted in good faith." ID.
AT 89, 90. Also, in the Court's view, the price set by the
- -------------------------
(11) Hugenberg cites BENDALIN V. DELGADO, 397 S.W.2d 889 (Tex. Civ.
App.--El Paso 1965), REV'D ON OTHER GROUNDS, 406 S.W.2d 897 (Tex. 1966) for
the proposition that the price offered to Hugenberg for his stock had to be
reasonable and three was a jury question whether the repurchase price IRA set
was reasonable. BENDALIN has no application to this suit. BENDALIN dealt
with an oral agreement to repurchase stock which had no term regarding price.
In the absence of a price term, BENDALIN held a reasonable price should be
paid.
Id. at 891-892. There is no missing term in the stock agreement. It has a
specific price term. IRA sets the repurchase price.
19
<PAGE>
purchasing stockholders did not "sensitively" reflect the stock's actual
value. Nevertheless, the Court enforced the option's pricing provision since
the widow's husband was one of the architects of the pricing provision and
had known of the price which was set even though he did not attend the
meeting at which it was set.
KREBS relied on the oft-cited case of NEW ENGLAND TRUST CO. V. ABBOTT,
162 Mass. 148, 38 N.E. 432 (1894). NEW ENGLAND TRUST examined a bylaw
provision which provided that, on a stockholder's death, the corporation had
an option to purchase the deceased stockholder's stock at a price set by an
appraisal of the directors. After the challenge to the bylaw, the Court
upheld the power the stockholders granted the directors to appraise the
stock. After stating that the repurchase option did not contravene public
policy, the Court held, with respect to the directors' power to appraise the
stock, that: "It is settled that one may agree to sell his property at a
price to be determined by another, and that he will be bound by the price so
fixed, even though the party establishing it was interested; provided
the interest was known, and no objection made by the parties, and no fraud or
BAD FAITH is shown." (Emphasis added](12) ID. at 434.
KRAUSS V. KUECHLER, 300 Mass. 346, 15 N.E.2d 207 (1938) cited and
reaffirmed the rule of NEW ENGLAND TRUST that the repurchase option price may
be set by an interested party. In KRAUSS, the corporation's bylaws provided
that a deceased stockholder's stock automatically became the property of the
corporation "by paying to the estate of the deceased a sum agreed upon by the
remaining stockholders." ID. AT 208. The opinion held that stockholders may
- -------------------------
(12) See discussion of fiduciary duty and good faith, INFRA, p.13.
20
<PAGE>
bind themselves to "such a regulation by mutual agreement and estop
themselves and their representatives thereafter to deny its validity." ID. AT
209. KRAUSS concluded this holding by quoting the language of NEW ENGLAND
TRUST cited in the preceding paragraph that a party may bind himself to take
a price for his stock set by a third party even though that party is
interested in the transaction. ID.
The principle of allowing an interested person to set the option
price was also confirmed in FIRST NATIONAL BANK OF MONTCLAIR V. COLDWELL,
140 N.Y.S.2d 142 (1955), AFFIRMED 286 A.D. 1079, 145 N.Y.S.2d 674 (1956),
AFFIRMED 1 N.Y.2d 726, 151 N.Y.S.2d 935, 134 N.E.2d 683 (1956). In
COLDWELL, a deceased stockholder agreed for his estate to sell his
stock to the corporation at book value as that value was fixed by the
corporation. The agreement "further provided that the determination of
book value by the board of directors [was] final." 140 N.Y.S.2D AT 143. The
plaintiff, the deceased shareholder's executor, alleged that the board
failed to properly determine book value. The Court denied the
plaintiff's right to challenge the board's determination, by holding:
First, the board of directors was given the sole right and authority
to fix and determine the book value of the stock; SECOND, THE BOARD OF
DIRECTORS DID FIX THE VALUE IN ACCORDANCE WITH PAST ESTABLISHED
PRACTICES AND UPON THE SAME BASIS WHICH IT HAD CONSISTENTLY USED IN
ALL PREVIOUS INSTANCES OF VALUATING AND FIXING THE BOOK VALUE OF ITS
STOCK. It was established that the determination made was the highest
value ever placed by the board of directors as the book value of its
corporate stock. Third, the specific and unequivocal language of the
agreement provides that the determination of book value by said board
of directors shall be final and binding upon all. [Emphasis added]
ID. AT 145. The COLDWELL Court enforced the agreement as written.
21
<PAGE>
Hugenberg, apparently sensing the weakness of his argument that the
pricing provision of the Stock Agreement is unenforceable, tries to will an
ambiguity in the Stock Agreement into existence. Of course, Hugenberg
characteristically failed to plead any ambiguity in the Stock Agreement and
thus, cannot rely on this argument on appeal. BREWER V. MYERS, 545 S.W.2d
235, 237 (Tex. Civ. App.--Tyler 1976, no writ); ROSS V. BURLESON, 274
S.W.2d 105, 107 (Tex. Civ. App.--San Antonio 1954, no writ). Even if
Hugenberg had attempted to raise the issue in the trial Court, it is without
merit. The Stock Agreement clearly provides that the amount of money the
shareholder is to receive from IRA for the repurchase of his stock is set by
IRA. The concept is clear whether the Stock Agreement terms this amount of
money "value," "repurchase price" or places some other name on it.
Hugenberg also claims that there is evidence of fraud in the Stock
Agreement because a prospectus dated ten years after Hugenberg signed the Stock
Agreement stated the repurchase price was "determined ARBITRARILY by the
company." (Ant. br. p. 22]. (13) The basis of the claim that this statement is
fraudulent is that IRA uses some undisclosed method. Again this argument ignores
the Stock Agreement. It provides that the company may set the repurchase price
and does not require IRA to use any method at all.(14) This is hardly fraud.
Furthermore, Hugenberg was informed of the specific method used to set the stock
price in the annual reports
- -------------------------
(13) It is common knowledge that the Securities and Exchange Commission and
the Blue Sky regulators require that the offering circular for any stock which
is not publically traded state that the price is being determined arbitrarily.
(14) Hugenberg also cites PATRON V. NICHOLAS, 154 Tex. 385, 279 S.W.2d 848,
854 (1955), which has nothing to do with the facts of this case. In PATTON, a
majority shareholder maliciously refused to pay dividends. The Supreme Court
held this was improper and fashioned the remedy that henceforth the corporation
would pay a reasonable dividend. PATTON is a far cry from the instant case where
a corporation exercised a power granted to it by a contract and paid a
stockholder more than eight times what he paid for stock after already paying
him three times what he had paid for the stock in dividends.
22
<PAGE>
for 1981 and every year thereafter, which annual reports he admitted he read
and understood. [Tr. 1328-1329,#55-59]. As for his ability to understand the
report's contents, he was a senior member of management for many years, and
he also claims to be an honor graduate of the University of Michigan and to
have been accepted for admission to the Harvard Law School.
REPLY POINT OF ERROR NO. 3 RESTATED: The trial Court did not
err in refusing to join IRA's Class B shareholders to this litigation.
[Responsive to Point of Error No. 3.]
ARGUMENT & AUTHORITIES UNDER REPLY POINT OF ERROR NO. 3
In Point of Error No. 3, Hugenberg asserts that the trial Court erred in
failing to join all of the other shareholders of IRA as parties to this action.
Hugenberg's argument fails for two reasons. First, he failed to preserve error
on this point. Second, any other shareholders did not have a sufficient
interest to require joinder.
Hugenberg predicates his contention that the other shareholders of IRA
should have been joined in the suit on the claim that they signed a Stock
Agreement containing identical terms to the agreement signed by Hugenberg.
Hugenberg raised this matter in the trial Court by means of a special exception.
However, the pleading to which Hugenberg lodged his special exception does not
make any mention of the names of the other shareholders of IRA. [Tr. 380-395].
Hugenberg waived error for three reasons. First, a special exception
addresses only matters shown on the face of a pleading. BROWN V. HAWES, 764
S.W.2d 855, 856 (Tex. App.--Austin 1989, no writ). An exception which looks to
matters outside the face of the pleading is a "speaking demurrer" for which
Texas procedure does not provide. ID. Second, to bring the issue of non-joinder
before
23
<PAGE>
the trial court, Hugenberg should have filed a verified plea in abatement
raising this issue under Tex. R. Civ. P. 93(4). JONES V. LAFARGUE, 758 S.W.2d
320, 324 (Tex. App.--Houston [14th Dist] 1988, writ denied). The need for a
verified pleading raising the non-joinder of parties is applicable to the
failure to join parties under the Declaratory Judgments Act. CLEAR LAKE CITY
WATER AUTH. V. CLEAR LAKE UTILITY, 549 S.W.2d 385, 389 (Tex. 1977). The
failure to file a proper pleading raising this issue on the part of Hugenberg
waived error on this issue. JONES V. LAFARGUE, 785 S.W.2d at 324. The failure
to join "indispensable parties," without the filing of a proper pleading is
not a jurisdictional defect nor is it a fundamental error. ID. Finally, the
special exception failed to include those matters which must be included in a
pleading raising the issue of non-joinder of parties. SEE: R. MCDONALD, TEXAS
CIVIL PRACTICE IN DISTRICT AND COUNTY COURTS Section 7.13-(IV) at 175 (rev.
1982). (15)
Even if Hugenberg properly raised the issue and assuming his
presentation of the evidence is correct, the trial Court did not err.
Hugenberg relies on Section 37.006(a) of the Texas Civil Practice & Remedies
Code (hereinafter referred to as "Section 37.006") as the basis for his
exception. The language of Section 37.006 is similar to Rule 39(a) of the
Texas Rules of Civil Procedure.(16) Case law notes that the provisions of
Rule 39 of the Texas Rules of Civil Procedure and Section 37.006 may be read
together in determining a joinder of parties question. Clear Lake City Water
Auth. V. Clear
___________________________
(15) By the same token, Hugenberg raising the issue in his "Motion to
Supplement the Record" failed to preserve error. Again, it was unverified and
failed to include the allegations necessary for a proper plea in abatement.
(16) Section 37.006 and Tex. R. Civ. P. 39 are attached to this brief as
Appendices E and F.
24
<PAGE>
LAKE UTILITY, 549 S.W.2d 385, 390 (Tex. 1977). The Court's decision regarding
the joinder of parties is tested by an abuse of discretion standard. MCZ,
INC. V. SMITH, 707 S.W.2d 672, 675 (Tex. App.--Houston [1st Dist] 1986, writ
ref'd n.r.e.). The issue with respect to Hugenberg's exception is simple --
Do the other Class B shareholders have or claim any interest that would be
affected by the declaration sought by IRA? The obvious answer to this
question is "No". It is apparently Hugenberg's theory that any time a
contract dispute arises, the Court must join all parties who have a contract
containing similar provisions to the contract held by Plaintiff.
Texas case law and federal case law interpreting the federal
counterpart of Rule 39 of the Texas Rules of Civil Procedure, Rule 19 of the
Federal Rules of Civil Procedure, do not support Hugenberg's exception.
MILLER V. MILLER, 700 S.W.2d 941 (Tex. App.--Dallas 1985, writ ref'd n.r.e.)
dealt with a stock agreement between a husband and wife. The stock agreement
performed the same function as the stock agreement in the instant suit in
that both the husband and the other stockholders had the right to purchase
the wife's stock at a price fixed by a formula contained within the
agreement. The wife, after a divorce from the husband, sought to rescind the
agreement based on fraud and breach of fiduciary duty. The trial Court
refused this relief because it concluded such relief would unfairly prejudice
other parties to the stock agreement. The Court of Appeals disagreed and held
that the trial Court could have limited its judgment to the relief requested
by the wife and held that: "This relief would not impair the rights of
[the other shareholders] to purchase [the wife's] shares if they so choose and
it would not leave them subject to inconsistent obligations." ID. at 950.
Other Texas cases holding similarly are
25
<PAGE>
MALLOY V. NEWMAN, 649 S.W.2d 155 (Tex. App.--Austin 1983, no writ).
[in a declaratory judgment action to determine validity of restrictive
covenants, other land owners with similar covenants in subdivisions
were not necessary parties.] LEDE V. ADCOCK, 630 S.W.2d 669 (Tex.
App.--Houston [14th Dist] 1982, writ ref'd n.r.e.). [In a declaratory
judgment action seeking to determine if offers to purchase partnership
interests was bona fide pursuant to the terms of a partnership
agreement, the partner to whom the offer was made was not a necessary
party.]
The cases cited above illustrate a principle that parties need not be
joined if their rights are not directly in issue. This is especially true
when a contract dispute arises and an attempt is made to join a non-party to
a contract as a necessary party. "In a suit upon contract, the only necessary
parties to the suit are the parties to the contract, although others have an
interest in its performance and may have equitable title to the cause sued
upon." MCNEIL V. MCLAIN, 272 S.W.2d 573 (Tex. Civ. App.--Fort Worth 1954, no
writ).
The principle that a non-party to a contract is not a necessary party to
a suit determining rights under that contract is aptly illustrated by federal
case law under Fed. R. Civ. P. 19, the counterpart of Tex. R. Civ. P. 39. As
noted in VIDEO TOWNE, INC. V. RB-3 ASSOC., 125 F.R.D. 457, 459 (S.D. Ohio
1988): ". . . [A] person does not become an indispensable party to an action
to determine rights under a contract simply because determination of the
action will affect that person's rights under a separate or subsequent
contract. . ." SEE ALSO: FISCHER V. NWA, INC., 883 F.2d 594 (8th Cir. 1988)
CERT. DENIED, 110 S. Ct. 2205, 109 L.Ed.2d 531 (1990); NORTHROP CORP. V.
MCDONNELL DOUGLAS CORP., 705 F.2d 1030, 1044 (9th Cir. 1983) CERT. DENIED,
464 U.S. 849, 104 S.Ct.
26
<PAGE>
156, 78 L.Ed.2d 144 (1983); HERTZBERG'S DIAMOND SHOPS, INC. V.
VALLEY WEST DES MOINES SHOPPING CENTER, INC., 564 F.2d 816 (8th Cir.
1977); and PHOENIX MUTUAL LIFE INS. CO. V. SEAFARERS OFFICERS &
EMPLOYEES PENSION PLAN, 128 F.R.D. 25 (E.D.N.Y. 1989). Cases dealing
with this principle note that: "The 'interest' relating to the subject
matter of the action that makes an absent party a party needed for
just adjudication must be a legally protected interest, not merely a
financial interest or interest for convenience." SPECIAL JET SERVICES
V. FED. INS. CO., 83 F.R.D. 596, 599 (W.D. Pa. 1979). SPECIAL JET
noted that cases which provide for joinder usually deal with a
situation where there is a single fund or reserve and the absent party
may have a claim to that fund. ID. The fact that a part may or may not
be affected by a suit does not require its joinder. As noted in
NORTHROP CORP. V. MCDONNELL DOUGLAS CORP., 705 F.2d 1030, 1046 (9th
Cir.): "Speculation about the occurrence of a future event ordinarily
does not render all parties potentially affected by that future event
necessary or indispensable parties under Rule 19." The situation
where parties usually must be joined in a contract action is if the
action seeks reformation, cancellation, revision or otherwise
challenges the validity of the contract. C. WRIGHT, A. MILLER & M.
KANE, FEDERAL PRACTICE & PROCEDURE: CIVIL 2ND Section 1613.
Do the other Class B shareholders have a direct and immediate
interest in this action under their separate stock agreements? The
answer is "no." IRA is not trying to do anything in this suit which
affects the other shareholder's ownership of Class B stock in IRA.
Each of the other stockholders is operating under a separate contract
executed at different times and with different parties than those in
the instant suit. As noted above, there is no question about what the
Stock Agreement says or means and IRA is
27
<PAGE>
not trying to reform the language of the agreement, or alter any other
parties' rights. The issues on IRA's side of the case are simple, the
agreement says that IRA has an option to purchase Hugenberg's stock at a
price to be set by IRA. In accordance with the simple language of the
contract, this is what IRA has done.
Hugenberg, by slight of hand, tries to turn the contracts executed by
other Class B shareholders into one contract with his Stock Agreement. He
does this by stating that, if the contract is enforced as written, it will
affect the other Class B shareholders. He does not answer how they will be
affected since IRA asked that the Court find that the Stock Agreement has
been complied with in accord with its unambiguous terms and no change or
revision of its terms is sought by IRA. In attempting to perform this slight
of hand, Hugenberg relies on two cases dealing with pooled or unitized oil
and gas interests. VEAL V. THOMASON, 183 Tex. 341, 159 S.W.2d 472 (1942), and
PAN AMERICAN PETROLEUM CORP. V. VINES, 459 S.W.2d 911 (Tex. Civ. App.--Tyler
1970, writ ref'd n.r.e.). The obvious distinction between these cases and the
instant case is that VEAL and PAN AMERICAN deal with joint owners of a fund,
that is the proceeds of a unitized or pooled tract of oil and gas property.
This joint interest in the fund creates a joint interest in property. H.
WILLIAM & C. MEYERS, OIL & GAS LAW, Section 928 (1990), p. 727. It is in this
context that Veal states "that written contracts executed in different
instruments whereby a single transaction or purpose is consummated are to be
taken and construed together as one contract." 159 S.W.2d at 475. As VEAL
further notes: "Measured by the above rule, all the lease contracts affecting
lands in this unitized block constitute but one contract just as though all
the lessors of lands in such block had signed the same instrument. IT FOLLOWS
THAT BY EXECUTING THE SEVERAL
28
<PAGE>
LEASES TO LANDS IN THIS UNITIZED BLOCK THE SEVERAL LESSORS POOLED THEIR
RESPECTIVE LANDS UNDER ONE LEASE CONTRACT." [Emphasis added.] ID. VEAL says
nothing about the need for joinder of shareholders in the instant suit. It
does not even deal with joinder of parties. It also does not mean that the
various stock agreements are one instrument and in some way this mandates the
joinder of the other Class B shareholders. In fact, case law is directly to
the contrary. Each share of stock in a corporation represents a separate and
distinct ownership interest and this is not the same as joint ownership in a
unitized or pooled tract of oil and gas property. As noted in UPDEGRAVE V.
RELIANCE NATIONAL INVESTORS CORP., 337 F.2d 604, 605 (9th Cir. 1964): "The
certificates of stock constitute the subject matter of the contract here in
dispute. One such share is quite separate from any other share." Logic
dictates that simply because two parties have a separate contract with a
third party, both of these parties do not have to be joined in a suit against
the third party simply because their contracts have similar terms.
PAN AMERICAN PETROLEUM CORP. V. VINES, 459 S.W.2d 911 is also
inapplicable. PAN AMERICAN dealt with a division order which related
to a pooled or unitized gas field. The division order dealt with how a
fund, in the form of payments from that unit, would be divided. The
Court was asked to decide what certain terms describing what was to be
paid meant. Obviously, since the Court was going to decide the meaning
of terms in the division order which impacted how the common fund was
to be divided, the other interest holders were directly impacted by
this determination. In the instant case, we are not dealing in a joint
interest in property, a common fund or construction of terms. Instead
we are dealing with a request for declaratory relief based on what IRA
has
29
<PAGE>
done VIS A VIS Hugenberg, not the other shareholders. We are also not dealing
with a joint interest in property, but separate contracts dealing with
separate ownership of stock in IRA.
REPLY POINT OF ERROR NO. 4 RESTATED: The trial Court did not
err in dismissing Hugenberg's counterclaims for breach of contract,
fraud, fraudulent concealment, and negligence. [Responsive to Point
of Error No. 4.]
ARGUMENT & AUTHORITIES UNDER REPLY POINT OF ERROR NO. 4
ADMISSIONS OF HUGENBERG RELATING TO HIS COUNTERCLAIM
To properly understand why each cause of action alleged by Hugenberg is
flawed, IRA will briefly summarize the admissions made by Hugenberg relating
to the Counterclaim.(17) Hugenberg could not testify as to whom the members
of the "Control Group" were on the various occasions when he brought his
stock. [Tr. 1331,#75]. He acknowledged that all members of the alleged
"Control Group" who ever bought Class B stock signed a Stock Agreement.
[Tr. 1333,#86]. He acknowledged that when Class B stock is sold back to IRA
the only reason that Class A shareholders, the "Control Group," receive a
benefit is that they, just like the Class B shareholders, share equally with
the Class B shareholders on liquidation and that they are a part of the
company and the company receives a benefit. [Tr.1333,#87]. If IRA were
liquidated, the assets of IRA would be divided according to the number of
shares owned by each stockholder. [Tr.1333,#88]. Members of the "Control
Group" share on the same basis as other Class B shareholders upon
liquidation. [Tr.1333,#89]. Hugenberg knows of no member of the "Control
Group" who has sold his stock and has received anything more for his stock
than the price set by the company. [Tr.1333,#90]. Hugenberg fears
___________________________
(17) Hugenberg's counterclaim is attached hereto as Appendix G.
30
<PAGE>
a "revaluation" of IRA might occur and this would profit the "Control
Group." (Tr.1332,#82,83,97]. If members of the "Control Group" do not stick
around until the revaluation of the stock which he contends MIGHT occur, they
will not receive any more benefit than other Class B shareholders.
[Tr.1333,#91]. He knows of no occasion where a member of the "Control Group"
purchased Class B stock from another shareholder. [Tr.1332,#80,1333,#92]. He
knows of no plans or prospects to sell IRA and trigger the revaluation he
fears. [Tr.1332,#83].
His counterclaim alleges that activities of the "Control Group" were
not disclosed. However, the only activity that he alleges was not disclosed
was the method of setting a price for IRA stock. [Tr.1334,#98]. Although he
acknowledges that the price set for the Class B stock for repurchase was
disclosed every year from 1981 forward and that the method of pricing being
utilized was discernible from the annual reports, he claims that there was a
fraudulent non-disclosure of this method. [Tr.1328,#54-56]. He suggests that
it is a fraudulent activity to represent that there is a relationship between
value and price and to represent that the method of valuation of IRA stock is
subject to review by the Board of Directors. [Tr.1334,#95]. However, he cannot
say how he developed the impression the board approved the valuation.
[Tr.1334,#96]. This is the extent of the fraudulent misrepresentations of which
he is aware. [Tr.1334,#98]. Hugenberg knew that both the Stock Agreement and
the offering documents provided that the price of IRA Class B stock for
repurchase would be set by the Company. [Tr.1327-1329,#52-59]. That the
company, acting through its board, did set the price annually is evident
from the annual reports which Hugenberg admits receiving and reading.
31
<PAGE>
Hugenberg's understanding of the reason Class B stock was sold was that
it was not to raise money for the company, but to encourage ownership by those
contributing to the company's success. [Tr.1324,#28). With respect to the
allegation that "[t]he purpose of such low valuation [of Class B stock] is to
enable the "Control Group" to receive the benefit of dividends on the Class B
stock, while at the same time, knowing that they can repurchase such shares
from all outstanding Class B shareholders at a low price while maintaining
total control", Hugenberg admitted that he had no knowledge of the "Control
Group's" intentions. [Tr.1332,#77]. He does not even know who comprises the
"Control Group." The only way the "Control Group" could benefit from the
repurchase of Class B stock would be to revalue the stock and then sell it
back to itself. [Tr.1334,#97]. However, every member of the "Control Group"
who has sold his stock back, did so at the price also being paid to other
Class B stockholders, including Hugenberg. [Tr.1332,#79]. As noted above,
Hugenberg knows of no plans to sell or offers to buy IRA by which the
revaluation he fears might occur.
The only misrepresentation upon which he bases his claims in
Counterclaim PARA 13(c) is that he was not informed "on what authoritative
basis" the method of pricing Class B stock was "derived." [Tr.1334,#98]. He
is not even sure what is meant by the allegation that plans of the "Control
Group" were concealed from him. [Tr.1335,#99].
With respect to the allegation that IRA would price a Class B
shareholder's stock at a reasonable price for repurchase, all that Hugenberg
relies on is the fact that the Stock Agreement says that the company will
annually advise the stockholders of the "value" of the stock for purposes of
setting a repurchase price. [Tr. 1335,
32
<PAGE>
#100]. From this phrase, Hugenberg claims that he believed that the price
would be the function of HIS concept of "value." (18)
With respect to the counterclaim's allegations in PARA 14(d), his
complaint is not that any misapplication or waste has occurred, but that the
method of valuation creates a potential for it. [Tr.1335, #101]. He knows of
no evidence of any waste or misapplication. ID.
HUGENBERG HAS NO CAUSE OF ACTION FOR ARBITRARY
AND CAPRICIOUS VALUATION OF HIS STOCK
Hugenberg alleges that IRA "engaged in false, fraudulent, malicious and
grossly negligent conduct" by an "[a]arbitrary and capricious valuation of his
shares of Class B stock at a ridiculously low price for the sole purpose of
benefitting the control group." [Counterclaim PARA 13(a)]. As pointed out
above, IRA simply set a price for stock which it repurchased pursuant to the
terms of the Stock Agreement. By complying with the contract, IRA fulfilled
its duties to Hugenberg. As Hugenberg admitted, his claim that the "Control
Group" has manipulated the stock price for its personal benefit is a delusion
since the "Control Group" operates under the same strictures as other Class B
shareholders. (19)
HUGENBERG HAS NO CAUSE OF ACTION FOR CANCELLATION
OF HIS STOCK ON THE RECORDS OF IRA
Hugenberg attempts to state a cause of action in his Counterclaim for
cancellation of his stock on the records of IRA. [Counterclaim PARA 13(b)].
IRA did cancel Hugenberg's stock. It had every right to do so. It tendered to
him an appropriate amount
___________________________
(18) See discussion, INFRA P.22.
(19) His argument that the method of pricing the Class B stock was
"arbitrary" and that this is confirmed by the language in the offering
documents is disingenuous in the extreme. As noted previously
[Note 13, SUPRA, p.22] the use of that term in the offering documents is
mandated by securities regulators. However, since the term "arbitrary" is
used in the very documents which he read prior to purchasing his stock, how
could he possibly have been misled?
33
<PAGE>
under the Stock Agreement. [Tr. 1329,#63]. When Hugenberg attempted
to retender the payment, IRA placed in into the Registry of the Court. There
exists no cause of action because IRA properly complied with the provisions
of the Stock Agreement. Hugenberg is no longer a Texas licensed agent.
Therefore, it would be illegal under the Texas Insurance Code for IRA to have
him as a shareholder.
IRA DEALT FAIRLY WITH HUGENBERG AND SET A
REASONABLE PRICE FOR REPURCHASE OF HIS SHARES,
THUS, HUGENBERG HAS NO CAUSE OF ACTION IN THIS REGARD
Hugenberg claims that IRA made a false statement or omission with
respect to the purchase and sale of Class B stock in that IRA represented it
would deal fairly with him and value his shares at a reasonable price upon
repurchase. [Counterclaim PARA 13(c)]. As noted above, IRA has dealt fairly
with Hugenberg and tendered a reasonable price for his stock. Even if it
failed to do so, Hugenberg once again admits himself out of a cause of action.
When asked what he was told about how the stock would be priced before
he obtained his IRA stock, he admitted that he had no specific conversation
with anyone on this subject. [Tr. 1327, #50,51]. His counterclaim also
acknowledges this fact. [Counterclaim PARA 9]. When interrogated about how he
reached the conclusion that the stock would be valued by means of good faith
and fair dealing, he concluded that was part of IRA's "aura" and stated "it
was just his sense of what was going on." [Tr. 1335,#102].
In order to have a cause of action for fraud, the party asserting the
cause of action must at least allege a representation. TAYLOR PUBLISHING CO.
V. SYSTEMS MARKETING, INC., 686 S.W.2d 213, 219 (Tex. App.--Dallas 1984, writ
ref'd n.r.e.).
34
<PAGE>
Hugenberg, by his own admission, cannot recall a representation upon which
he bases his cause of action. Furthermore, as noted previously, the Stock
Agreement, the offering documents and the annual reports all combined to make
abundantly clear the fact that there would be no public market for the stock
and the method by which it was being priced for repurchase.
HUGENBERG HAS NO CAUSE OF ACTION RESULTING
FROM IRA'S ACCOUNTING METHODS
Hugenberg alleged that IRA did not disclose that its accounting methods
"failed to fairly reflect" the value of IRA and its Class B stock because it
did not account. . . for the amount of future renewals." [Counterclaim PARA
14(b)]. As noted above, Hugenberg stated in writing that he knew from his first
purchase of IRA stock that IRA stock was allegedly undervalued because it did
not account for future renewals.
An element of fraud is reliance. BYNUM V. SIGNAL LIFE INSURANCE CO.,
522 S.W.2d 696, 700 (Tex. Civ. App.--Dallas 1975, writ ref'd n.r.e.).
"If the person to whom a false representation is made is aware of the
truth, it is obvious that he is neither deceived nor defrauded, and,
therefore, any loss he may sustain is not traceable to the representation but
is self-inflicted." ID. By the same token, if parties are aware of the fact
allegedly concealed from them, there is no cause of action for the fraudulent
concealment of that fact. LYONS V. MONTGOMERY, 685 S.W.2d 390, 392 (Tex.
App.--San Antonio 1985), REV'D IN PART, AFFIRMED IN PART, 701 S.W.2d 641
(Tex. 1985). Hugenberg knew from the very first instance that IRA did not
include possible future revenue from
35
<PAGE>
renewals in its stock valuation and thus, there is no reliance to support his
cause of action. (20)
HUGENBERG HAS NO CAUSE OF ACTION THAT IRA
OMITTED TO DISCLOSE THAT A MARKET WOULD
NOT DEVELOP FOR IRA CLASS B STOCK
Hugenberg makes the fantastic allegation that the "Control Group"
failed to disclose that it had "no intention of allowing any reasonable
market to develop for the Class B stock wherein fair value could be obtained
therefor upon any attempt at sale." [Counterclaim PARA 14(c)]. IRA pointed
out in each offering circular that no public market existed for this stock
and it was unlikely that such a market would come into existence. Hugenberg
read and understood these portions of the offering documents. However, even
more basic is how it could be concealed from Hugenberg that no market was
contemplated for this stock when he had to sign the Stock Agreement prior to
purchasing the stock and the Stock Agreement clearly provides that a Class B
shareholder cannot sell his stock to a third party without giving IRA an
opportunity to exercise its option and repurchase the stock. Apparently,
Hugenberg wants to predicate a cause of action on the failure of IRA to
reveal that it would exercise the rights given it under the Stock Agreement.
Even if there was a duty to speak, in order to have a cause of action
for fraud, something must be concealed. ROWNTREE V. RICE, 426 S.W.2d 890,
892-893 (Tex. Civ. App.--San Antonio 1968, writ ref'd n.r.e.). SEE ALSO:
LYONS V. MONTGOMERY, 685 S.W.2d at 392. In view of the existence of the
option provision and the repeated
___________________________
(20) See discussion of GAAP accounting at p. 43.
36
<PAGE>
disclosures in the offering documents which Hugenberg admits receiving and
reading, no such concealment existed.
In addition, how IRA would allow a market to develop for its Class B
stock is a mystery. As Hugenberg knew, stock of an insurance agency such as
IRA cannot be owned by anyone other than an insurance agent licensed in the
state of Texas. Tex. Ins. Code art. 21.07. [Tr.1330,#67]. Even Hugenberg's
expert witnesses acknowledge that such a pool of purchasers is insufficient
to create a market for a stock. [Tr. 1331,#73].
HUGENBERG HAS NO CAUSE OF ACTION THAT THE
"CONTROL GROUP" MANIPULATED IRA FOR ITS BENEFIT
OR CONSPIRED TO SUPPRESS OTHER CLASS B SHAREHOLDERS
Hugenberg wants this Court to believe that there is a grand conspiracy
of Class A shareholders, what he terms the "Control Group," to manipulate IRA
for their own selfish benefit. [Counterclaim PARA 15]. He also alleges that
the Company failed to disclose that it was being manipulated for the benefit
of the Class A shareholders and that the Class A shareholders would operate
IRA for their own personal benefit. [Counterclaim PARA 14(a) and (d)]. The
only problem with these theories is that he does not seem to know who has
committed these allegedly evil acts or exactly what they have done. The most
fatal flaw is that the scheme allegedly instituted by the Class A
shareholders does not exist.
With respect to the alleged conspiracy, he has no knowledge of when it
came into being. [Tr. 1335,#104]. He does not know the names of the active
members of any such conspiracy. [Tr. 1335, #105]. All that he can recall that
was done in furtherance of the alleged conspiracy was that a member of the
Board of Directors denied that points Hugenberg made about valuation of stock
held any credence and constituted an attempt to mislead him from obtaining
37
<PAGE>
is that there must be some wrongful goal or act. VAQUERO PETROLEUM CO. V.
SIMMONS, 636 S.W.2d 762, 769 (Tex. App.--Corpus Christi 1982, no writ).
The evidence in this case reveals no improper purpose or unlawful means
to support a conspiracy or any selfish misdeeds by the "Control Group." The
Board of Directors is acting under the clear terms of the Stock Agreement.
They are acting to carry out a legitimate purpose to preserve the composition
of shareholders of IRA. In the face of these facts come the allegations of
Hugenberg regarding a conspiracy. Of course, he does not know who
participated in it or when it started. The only overt acts which he alleges
occurred are that personnel of IRA disagreed with him about his conclusions
on stock valuation, a topic upon which he claims a lack of expertise.
Hugenberg pursues the existence of a conspiracy even though the very persons
who allegedly created the conspiracy acted in a way directly contrary to the
interests which they would be implementing by this conspiracy. The alleged
members of the conspiracy have sold their Class B stock back at the same
price set for all other Class B shareholders, including Hugenberg. In the
face of this fact, Hugenberg and his experts say that there is a POTENTIAL
for mistreatment. (22) They know of no evidence that anyone at IRA has
thought of this potential or attempted to implement it and the Bylaws and
Articles of Incorporation of IRA are designed to prevent the very
circumstance Hugenberg fears. [Tr. 1332,#79-83].
- --------------------------
(22) For those members of the "Control Group" who sold their stock in accord
with the Stock Agreement, Hugenberg's expert opined they were apparently
blind and just got "screwed." [Tr. 1564]
39
<PAGE>
HUGENBERG HAS NO CAUSE OF ACTION
FOR BREACH OF THE STOCK AGREEMENT
Hugenberg alleges a cause of action for breach of the Stock Agreement.
(Counterclaim PARA 16]. To support this cause of action, he relies on the way
IRA set the repurchase price for Class B stock. As noted above, the manner in
which IRA set the repurchase price of the stock was within the powers given
it under the unambiguous provisions of the Stock Agreement as well as Texas
corporate law and case law in this and other states. Hugenberg has no cause
of action.
HUGENBERG HAS EITHER RATIFIED THE STOCK AGREEMENT
OR IS ESTOPPED TO DENY ITS ENFORCEABILITY
RATIFICATION
Hugenberg acknowledges that IRA raised ratification and waiver in the
Motion and devotes a grand total of four sentences to his discussion of
these matters. The only defense he can muster is one sentence where he
states "he had no knowledge of how any price was determined by IRA." This
statement is untrue and would not prevent a ratification even if it were.
After acquiring knowledge of the method by which IRA exercised the option
provision, Hugenberg continued to purchase IRA stock and accept the benefits
incident to that ownership. To this day, he demands the benefits of that
ownership. For these reasons, he ratified the Stock Agreement and waived any
complaint regarding its enforcement.
Hugenberg has long been aware of information which forms the basis of
his Counterclaim. With respect to the allegation that the accounting methods
of IRA failed to reveal the true value of IRA and "it's Class B stock by
failing to account for the amount of renewals that would result in future
revenues to the corporation,"
40
<PAGE>
Hugenberg is damned by his own words. Hugenberg stated that he' knew, since
he first bought stock, it was "intrinsically underpriced" because trail
income was not included. [Tr. 1330,#65].
With respect to the manner in which IRA set the price it would pay for
Class B stock, Hugenberg, from 1981 until he ceased being an IRA agent,
received, read and understood IRA's annual reports. [Tr.1328,#54,55]. Within
each report, IRA informed its shareholders of the price it would pay for
Class B stock and the manner in which the price was ascertained. ID. Each
offering circular through which IRA offered Class B stock set out the sales
price of the stock and both the offering document and the Stock Agreement
disclosed that the price to be paid by IRA on repurchase would be set by the
Company. [Tr.1328,#56]. As noted by Hugenberg, the offering circulars stated
the repurchase price was set ARBITRARILY. (23) [Tr. 1329,#58].
With respect to the allegation that the "Control Group" concealed that
it had no intent to allow a market to develop for Class B stock, IRA
proclaimed repeatedly and unambiguously that there was no market for IRA
Class B stock. [Tr. 1330,#66-70]. Each offering circular noted that there was
no market for IRA Class B stock and that it was unlikely that such a market
would develop. [Tr.1330,#68].
In the face of this knowledge, Hugenberg purchased IRA Class B stock in
1981, 1982, 1984, and 1985. [Tr.1320,#8]. He even tried
___________________________
(23) As stated previously, the Securities and Exchange Commission and the Blue
Sky regulators require that the offering circular for any stock which is not
publicly traded state that the price is being determined "arbitrarily."
Hugenberg knew that there was not, and likely never would be a public market
for IRA'S stock. [This brief, pg. 36-37].
41
<PAGE>
to purchase IRA's stock again in 1990 shortly before leaving IRA.
[Tr. 1322,#17]. He made the additional purchases of IRA stock knowing that
IRA sold him the stock with the understanding that he would abide by the
terms of the Stock Agreement. [Tr. 1325,#36]. After he knew of the alleged
misdeeds of IRA, he accepted the benefits from stock ownership by receiving
dividends totalling $194,000 on his stock in 1987, 1988, and 1989.
[Tr. 1321,#10].
Even if the alleged fraud had occurred, by his actions, Hugenberg
ratified the Stock Agreement. "Ratification is the adoption or confirmation
by a person with knowledge of all material facts of a prior act which did not
then legally bind him and which he had the right to repudiate. Ratification
occurs when one, induced by fraud to enter into a contract, continues to
accept benefits under the contract after he becomes aware of the fraud or if
he conducts himself in such a manner as to recognize the contract as
binding." WISE V. PENA, 552 S.W.2d 196, 199 (Tex. Civ. App.--Corpus Christi
1977, writ dism'd w.o.j.). SEE ALSO: MOTEL ENTERPRISES V. NOBANI, 784 S.W.2d
545, 547 (Tex. App.--Houston [1st Dist] 1990, no writ). Ratification also
arises if the parties enter into a new agreement by which their rights are
"adjusted" or renewed. ID.; B & R DEVELOPMENT, INC. V. ROGERS, 561 S.W.2d
639, 642 (Tex. Civ. App--Texarkana 1978, writ ref'd n.r.e.). Ratification may
be established as a matter of law. WETZEL V. SULLIVAN, KING & SABOM, 745
S.W.2d 78, 81 (Tex. App.--Houston [1st Dist]1988, no writ). Ratification
applies to a recision action and an action for damages. B & R DEVELOPMENT,
INC., 561 S.W.2D at
42
<PAGE>
642. Ratification does not require a change of position or prejudice to the
party asserting the ratification. BOCANEGRA V. AETNA LIFE INS. CO., 605
S.W.2d 848 (Tex. 1980). Ratification is a defense to a cause of action for
conspiracy. JONES V. HUNT OIL CO., 456 S.W.2d 506, 513 (Tex. Civ.
App.--Dallas 1970, writ ref'd n.r.e.).
Even if Hugenberg were defrauded into signing the Stock Agreement,
which he was not, he has long since ratified that agreement. He had full
knowledge of the "nefarious" actions of IRA. He knew how IRA consistently
priced its stock. He knew how IRA exercised its repurchase option. He knew
that pursuant to Generally Accepted Accounting Principles, "trail income" was
not included as an asset of the Company. He knew that there was no market for
IRA stock. Yet he persisted in buying IRA stock and continued to accept
dividends accruing to that stock ownership.
ESTOPPEL
With respect to estoppel, Hugenberg acknowledges that he could not have
purchased IRA Class B stock without agreeing to the terms of the Stock
Agreement. He also acknowledges that the only way he was able to buy stock
from IRA at a discount price was with the understanding that IRA could
repurchase the stock at a price set by it. [Tr.1325,#36]. Finally, he
professes that he is not attempting to rescind or repudiate the Stock
Agreement. [Tr.1327,#46]. However, he now wants to repudiate that portion of
the Agreement he does not like while continuing to receive the benefits he
has squeezed out of it for ten years.
43
<PAGE>
An example of an estoppel by accepting the benefits of an agreement is
DANIEL V. GOESL, 161 Tex. 490, 341 S.W.2d 892 (1960). In DANIEL, a doctor
retired from his medical partnership. After the doctor received all the
retirement benefits provided for in the partnership agreement, he sought to
avoid certain provisions of the agreement he did not like. As a defense to
enforcement of the agreement, the good doctor alleged that he had been
defrauded into entering into the partnership agreement. The Supreme Court
held that the entire agreement should be enforced noting that the doctor
retired and accepted all of the benefits due him under the agreement. He was
estopped to accept the beneficial portion of the agreement and reject the
detrimental portion. 341 S.W.2d at 895.
DANIEL relied on GUADALUPE-BLANCO RIVER AUTHORITY V. CITY OF SAN
ANTONIO, 145 Tex. 611, 200 S.W.2d 989 (1947), another Supreme Court
case outlining that if a person accepts the benefits of an agreement
that person is estopped to deny its negative aspects. In GUADALUPE,
the City of San Antonio claimed the River Authority defrauded it into
purchasing certain property. The City wanted to keep the fruits of the
transaction, but repudiate its negative aspects. The Supreme Court
disposed of this contention by noting the City had received large
benefits under the agreement. The Supreme Court concluded: "[THE CITY]
DOES NOT OFFER TO SURRENDER THE ENTIRE CONSIDERATION RECEIVED BY IT
AND RESTORE THE STATUS QUO. IT SEEKS TO RETAIN THE BENEFICIAL PART OF
THE TRANSACTION AND TO REPUDIATE THE DISADVANTAGEOUS PART BECAUSE OF
THE ALLEGED FRAUD OF THE OTHER PARTY. THIS IT MAY NOT DO." ID. AT 997.
(citations
44
<PAGE>
omitted). See also: BARON V. MULLINOX, WELLS, MAUZY & BAAB, INC., 623 S.W.2d
457, 462 (Tex. App.--Texarkana 1981, no writ); CENTRAL POWER & LIGHT CO. V.
DEL MAR CONSERVATION DIST., 594 S.W.2d 782 (Tex. Civ. App.--San Antonio 1980,
writ ref'd n.r.e.); HURT V. STANDARD OIL CO., 444 S.W.2d 342 (Tex. Civ.
App.--El Paso 1969, no writ).
In this case, Hugenberg falls within the same estoppel. He has garnered
all of the considerable benefits of stock ownership, yet now wants to
repudiate the provisions of the Stock Agreement which do not suit him. The
reasons why he cannot pursue such a course are aptly summarized in the case
of PALMER V. CHAMBERLIN, 191 F.2d 532, 541 (5th Cir. 1951):
The formula upon which the appellant is asked to
sell is the same formula upon which her decedent
was on fourteen separate occasions permitted to
buy. In a somewhat similar situation in PRINDIVILLE V.
JOHNSON & HIGGINS, 92 N.J.Eq. 515, 520, 113 A. 915,
918, the Court said: "The charter restriction of
which he complains forms the very keystone of
the corporate scheme and structure he helped
build, and under which he holds, and he cannot
be heard to obliterate it. HE HAS SUPPED
SUMPTUOUSLY AT THE TABLE OF PLENTY FOR EIGHT
YEARS, AND HE CANNOT BRING THE FEAST TO AN END
SIMPLY BECAUSE HE IS INDISPOSED.' [Emphasis
added]
Hugenberg also ate heartily at IRA's table of plenty.
REPLY POINT OF ERROR NO. 5 RESTATED: The trial Court did not
abuse its discretion in not granting Hugenberg's Motion for Leave to
Supplement Record, Motion for Clarification of Rulings and Production of
Transcript of Hearings, Objection to Proposed Final Summary Judgment
Order Submitted by Plaintiffs, and Objection to Plaintiffs' Correction of
Summary Judgment Evidence and Judgment. [Responsive to Point of
Error No. 5].
45
<PAGE>
1. MOTION FOR CLARIFICATION OF RULING AND PRODUCTION OF
TRANSCRIPTION OF HEARINGS [Tr. 2045-2049].
Hugenberg apparently wanted the trial Court to order the Court reporter
to produce transcripts of two summary judgment hearings. It is not necessary
to have a Court reporter present at a hearing on Motion for Summary Judgment.
CITY OF HOUSTON V. CLEAR CREEK BASIN AUTHORITY, 589 S.W.2d 671, 677 (Tex.
1979).
2. MOTION FOR LEAVE TO SUPPLEMENT THE RECORD [Tr. 2006-2029]
Less than 7 days prior to the hearing on the Amended Motion for Summary
Judgment Hugenberg filed this motion asking the Court to read five
depositions without one specific reference to testimony within those
depositions and to consider an unauthenticated letter which had nothing to do
with the instant case. IRA responded pointing out that the motion was
untimely filed under Tex. R. Civ. P. 166(a)(c) and it lacked sufficient
specificity to be "a response to the Motion for Summary Judgment under CITY
OF HOUSTON V. CLEAR CREEK BASIN AUTHORITY, 589 S.W.2d 671 (Tex. 1979). Merely
referencing even filed depositions does not meet the non-movant's burden of
specifically presenting issues necessary to raise a fact question. TAYLOR V.
TAYLOR, 747 S.W.2d 940 (Tex. App.--Amarillo 1986, writ denied). This motion
was simply an inept attempt to cover Hugenberg's failure to file a response
to IRA's Amended Motion for Summary Judgment.
3. OBJECTION TO PROPOSED SUMMARY JUDGMENT ORDER SUBMITTED
BY PLAINTIFF [Tr. 2050-2114]
In addition to the award of attorneys' fees which is discussed under
Point of Error No. 6, this objection raised two objections to the form of the
Judgment. First, Hugenberg claimed that the declarations made in the Judgment
were improper findings of fact.
46
<PAGE>
They were not findings of fact, but the declarations which IRA
sought. Then Hugenberg flip-flopped and claimed the Judgment should
contain findings as to why the Court granted the motion. He reiterates
this argument in his brief. Hugenberg was right the first time that
findings of fact and conclusions of law are inappropriate in a summary
judgment. STATE V. EASLEY, 404 S.W.2d 296, 297 (Tex. 1966). Contrary
to Hugenberg's assertion, IRA's Amended Motion for Summary Judgment
and supporting brief clearly outline the grounds for the motion.
4. OBJECTION TO CORRECTION OF SUMMARY JUDGMENT EVIDENCE
[Tr.2162-2178]
This motion objected to the trial Court entering the Corrected Summary
Judgment and the fact that IRA brought the Court's attention to the fact that
one page of deposition testimony was incorrect. The Corrected Judgment was
entered because an exhibit was inadvertently left off the original judgment.
Hugenberg apparently wanted a Judgment Nunc Pro Tunc to remedy this problem.
Tex. R. Civ. P. 316. Of course, this was not necessary since the trial Court
has the inherent power to modify its judgment until that judgment becomes
final. GO LEASING, INC. V. GROOS NATIONAL BANK, 628 S.W.2d 143, 144 (Tex.
App.--San Antonio 1982, no writ). With respect to the one page of testimony,
IRA simply wanted to correct a possible misimpression it might have created
through its mistake.
Each and every one of the motions about which Hugenberg complains was
fatally flawed. Point of Error No. 5 should be overruled.
47
<PAGE>
REPLY POINT OF ERROR NO. 6 RESTATED: The Trial Court did not
err in awarding IRA Three Hundred Thousand Dollars ($300,000)
in attorney's fees based upon the affidavit testimony of
Dabney D. Bassel. [Responsive to Point of Error No. 6.]
ARGUMENT & AUTHORITIES UNDER REPLY POINT OF ERROR NO. 6
The affidavit of Dabney D. Bassel set out his qualifications and his
opinion regarding the amount of reasonable and necessary attorney's fees.
[Tr.1888-89]. Hugenberg filed no affidavit controverting such proof.
Hugenberg filed an objection to the judgment's award of attorney's fees, but
even then did not present any evidence to rebut IRA's affidavit.
It appears that Hugenberg hinges his argument on a claim that the
attorney's fees are a fact question and the affidavit did not set out the
factors established by case law which may be considered in establishing a
reasonable fee. IRA agrees the question of the reasonableness of attorney's
fees is a fact question. However, like any number of fact questions,
reasonableness can be established as a matter of law in a Motion for Summary
Judgment.
With respect to his second contention, Hugenberg cites no authority for
the proposition that an affidavit in support of an award of attorney's fees
in a Motion for Summary Judgment must outline the various factors which may
be considered in determining a reasonable fee. This failure results from the
fact that case law is contrary to his assertion. QUERNER TRUCK LINES, INC. V.
ALTA VERDE INDUSTRIES, INC., 747 S.W.2d 464 (Tex. App.--San Antonio 1988, no
writ) examined the issue of attorney's fees in a summary judgment context.
Initially, QUERNER noted: "An attorney's affidavit can sufficiently establish
reasonable attorney's fees." ID. AT 468. In QUERNER, the movant filed an
affidavit which merely stated that $3,000 was a reasonable and necessary
attorney's fee.
48
<PAGE>
ID. AT 469. The court concluded that "The affidavit was sufficent summary
judgment proof of the reasonableness of the attorney's fees." ID. Since the
non-movant filed no competent summary judgment evidence rebutting the
movant's evidence of attorneys' fees, the Court concluded there was no
material and genuine issue of fact concerning attorney's fees. ID. SEE ALSO:
TESORO PETROLEUM CORP. V. COASTAL REFINING & MARKETING, INC., 754 S.W.2d 764,
767 (Tex. App.--Houston [1st Dist] 1988, writ denied). [". . . the affidavit
of [the movant's] attorney established a PRIMA FACIE case for a recovery of
the stated amount of attorneys' fees, and in the absence of controverting
evidence, the affidavit would support the Court's summary judgment."]
Not only did Hugenberg fail to rebut IRA's summary judgment proof, the
amount of attorney's fees in this case are the wages of Hugenberg's sins. As
previously noted, IRA sought summary judgment in September of 1990. If the
Court had heard and granted the motion, then, the fees would have been a
small fraction of what they eventually became. Between the initial hearing
and the hearing on IRA's Amended Motion, IRA had to respond to Hugenberg's
voluminous document request. [Tr. 149]. In addition, numerous depositions
were taken and defended. On top of this, IRA had to respond to a number of
Hugenberg's motions and file motions itself to keep discovery from getting
out of hand. [Tr. 179, 341, 380, 458, 451, 530, 643, 1259]. Finally, IRA had
to brief and amend its Motion for Summary Judgment to rebut the multiple
spurious counterclaims with which Hugenberg tried to intertwine with IRA's
claim for relief. It was Hugenberg's insistence on unnecessarily extending
discovery and on raising numerous issues through the assertion of spurious
counterclaims, which issues had to be addressed during that discovery, that
caused the fees to grow
49
<PAGE>
dramatically. Having set the case on that course, he should not now be heard
to complain of the consequences of his own conduct.
Hugenberg failed to rebut the proof of IRA on the issue of attorneys'
fees, foreclosing the arguments which he now makes. Further, the amount of
IRA's attorney's fees is directly traceable to Hugenberg's conduct. As with
all other aspects of this case, this Court should overrule Hugenberg's Point
of Error No. 6.
CONCLUSION
Judge Auld properly granted IRA a summary judgment. The stock Agreement
Hugenberg signed is a commonly used and widely accepted device which permits
companies such as IRA to control who will be their shareholders. Hugenberg's
primary complaint, that there is something untoward in permitting the Company
to set the repurchase price, is contrary to a hundred years of case law. His
complaint that the price offered to him for the stock, which gave him a
return on this investment of several hundred percent, is equally unappealing.
Finally, the counterclaims raised by Hugenberg that he was deceived or
mistreated contain no substance and even if they did, Hugenberg continued to
buy stock and accept the benefits of his arrangement with IRA long after he
was apprised of all the details of how the Stock Agreement implementation
might affect him should he leave IRA.
PRAYER
The Judgment of the trial Court should be affirmed, all costs of this
appeal should be taxed against Hugenberg, and IRA should receive such other
and further relief to which it shows itself justly entitled.
50
<PAGE>
Respectfully submitted,
/s/ Dabney D. Bassel
------------------------
ROBERT F. WATSON
State Bar No. 20961200
DABNEY D. BASSEL
State Bar No. 01890300
LAW, SNAKARD & GAMBILL
3200 Team Bank Building
Fort Worth, Texas 76102
(817) 335-7373 Office
(817) 332-7473 FAX
ATTORNEYS FOR APPELLEE
CERTIFICATE OF SERVICE
This is to certify that a copy of the foregoing Corrected Appellee's
Brief has been deposited in the United States Postal System, Certified Mail,
Return Receipt Requested, properly addressed to Mr. Khent Rowton, 3000
Carlisle, Suite 200, Dallas, Texas 75204, on this the 9th day of October,
1991.
/s/ Dabney D. Bassel
----------------------------
DABNEY D. BASSEL
51
<PAGE>
CAUSE NO. 352-129228-90
INDEPENDENT RESEARCH AGENCY Section IN THE DISTRICT COURT
FOR LIFE INSURANCE, INC., Section
Plaintiff, Section
Section
vs. Section TARRANT COUNTY, TEXAS
Section
WILLIAM C. HUGENBERG, JR., Section
Defendant. Section 352ND JUDICIAL DISTRICT
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT
COMES NOW, INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC., and
files this its Amended Motion for Summary Judgment against Defendant WILLIAM
C. HUGENBERG, JR., and for grounds would show unto the Court as follows:
I.
Defendant William C. Hugenberg, Jr., (hereinafter "Hugenberg") has
appeared and answered in this suit.
INTRODUCTION
II.
Hugenberg is a former employee and registered representative of United
Services Planning Association, Inc. (hereinafter "USPA") and a former
authorized agent of Independent Research Agency for Life Insurance, Inc.,
(hereinafter "IRA"). As such, Hugenberg was permitted to purchase stock in
USPA's parent corporation, IRA. Hugenberg availed himself of the opportunity
to purchase IRA stock. Prior to purchasing the stock, Hugenberg executed a
"Stock Agreement" which provided in part that to hold
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 1
<PAGE>
stock in IRA, Hugenberg had to be an authorized agent for IRA. The Stock
Agreement also provides that if Hugenberg ceases to be an agent for IRA, then
IRA has the option to repurchase its stock from him. Hugenberg agreed in the
Stock Agreement that the repurchase price was to be the value placed on the
stock by IRA. At or about the time Hugenberg's resignation as a USPA employee
became effective, he also ceased to be an IRA agent. At that time, IRA had
placed $535,587.50 in Hugenberg's payroll account in full payment for his
Class B stock in accordance with the terms of the Stock Agreement executed by
Hugenberg. This sum represented the number of shares held by Hugenberg times
the value placed on the stock by IRA of $17.50 per share. Hugenberg attempted
to deliver a cashier's check in the same amount ($535,587.50) to IRA's
counsel. This Court entered an Order requiring that the cashier's check which
Hugenberg attempted to tender be endorsed and paid into the registry of the
Court. Since IRA paid the contractually agreed upon amount for the stock to
Hugenberg, IRA cancelled Hugenberg's shares on its stock register.
III.
In this suit, Hugenberg has filed a counterclaim alleging IRA did not
tender "value" to him for his IRA stock. On the basis of these allegations,
Hugenberg predicates causes of action for fraud and breach of fiduciary duty.
He also alleges that a "Control Group" manipulated IRA Class B stock for the
benefit of
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 2
<PAGE>
the members of that "group," and that the "group" conspired to "suppress and
frustrate the rights of Class B stock shareholders..." The crux of these
allegations is also a claim that IRA did not tender "value" to Hugenberg for
his stock. What Hugenberg fails to disclose in his counterclaim is that he
made several purchases of IRA stock and accepted dividends with knowledge of
the manner in which IRA set the price for repurchasing its stock, the actual
prices set for the stock, and the fact that IRA had and was continuing to
exercise its repurchase option in the Stock Agreement. In addition, IRA has
no obligation to tender any "value" to Hugenberg for his stock other than the
price set pursuant to the Stock Agreement.
IV.
IRA requests a summary judgment on all issues upon which it has the
burden of proof. IRA also requests a summary judgment on all issues raised by
Hugenberg in his Counterclaim.
FACTS
V.
This Motion for Summary Judgment is supported by all discovery on file
in this case filed on behalf of IRA. In addition, this motion for Summary
Judgment is supported by the following affidavits' including excerpts from
deposition testimony which are incorporated herein fully by reference:
1. Affidavit of Lamar C. Smith, and exhibits thereto
filed on 9/19/90 in support of Plaintiff's Motion for
Summary Judgment, a true and correct copy of which is
attached hereto as Exhibit "A". (Smith aff'd. #1);
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 3
<PAGE>
2. Affidavit in Support of Motion for Summary
Judgment of Lamar C. Smith, filed 2/11/91,
a true and correct copy of which is
attached hereto as Exhibit "B". The
exhibits to the Smith #2 affidavit were
also filed on 2/11/91 and due to their
volume are not attached to this Motion, but
are included in the Court's file and
incorporated herein. (Smith aff'd. #2);
3. Affidavit of Sam F. Rhodes attached hereto
as Exhibit C. (Rhodes aff'd.);
4. Affidavit of G. Norman Coder attached
hereto as Exhibit D (Coder aff'd.)
5. Affidavit of William Arthur Dast attached
hereto as Exhibit E (Dast aff'd.)
6. Affidavit of Robert F. Watson and Exhibits
thereto being extracts from the deposition
transcripts of Hugenberg and Dr. Allen
Self, Sam Rhodes, G. Norman Coder, Lamar
Smith, Merwyn Eiland and W.L. Rankin
attached hereto as Exhibit F. (Hugenberg
Depo. Vol. I and Vol. II, Self Depo.,
Rhodes Depo., Coder Depo., Smith Depo.,
Eiland Depo. and Rankin Depo.)
7. Affidavit of Duane 0. Schumacher attached
hereto as Exhibit G (Schumacher aff'd.)
8. Affidavit of Dabney D. Bassel attached
hereto as Exhibit H. (Bassel aff'd.).
A true and correct copy of the Defendant's First Amended Answer and
Counterclaim filed by Hugenberg on October 18, 1990, is attached hereto as
Exhibit "I". (Counterclaim)
VI.
The following facts are established as a matter of law. (A parenthetical
reference is made to the source which establishes each fact as a matter of
law.)
1. USPA is a wholly owned subsidiary of IRA.
(Smith aff'd. #1 and Watson aff'd., Exhibit
E, Hugenberg Depo. Vol. I, page 44, ll.5-19)
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 4
<PAGE>
2. Hugenberg was employed by USPA from July
23, 1976, until July 1, 1990. (Smith aff'd.
#1 and Watson aff'd., Exhibit E,
Hugenberg Depo. Vol. I, page 6, l.25-p.7, l.3
and page 18, ll.17-19 and Hugenberg Depo.
Vol. II, page 147, ll.5-8)
3. Hugenberg was an agent of IRA from 1976
until July 5, 1990. (Smith aff'd. #1 and
Watson aff'd., Exhibit E, Hugenberg Depo.
Vol. I, pages 6, l.25-p.8, l.5, p.18, ll.17-
19 and p.47, l.24-p.48, l.1; Vol. II, page
147, ll.5-8)
4. Hugenberg is no longer licensed as an
insurance agent by the state of Texas.
(Schumacher aff'd.)
5. Hugenberg executed a Stock Agreement dated
March 3, 1981. (Smith aff'd. #1 and Watson
aff'd., Exhibit E, Hugenberg Depo. Vol. I,
pages 46, l.23-p.47, l.10 and Plaintiff's
Exhibit 9)
6. The "Stock Agreement" had to be executed by
Hugenberg before the company would let him
purchase IRA stock. (Smith aff'd. #1 and
Watson aff'd., Exhibit E, Hugenberg Depo.,
Vol. II, p.70, l.20-p.71, l.7)
7. The only persons who can hold the class of
stock in IRA issued to Hugenberg are
"authorized agents of IRA." (Smith aff'd.
#1 and Watson aff'd., Exhibit E, Hugenberg
Depo., Vol. I, p.47, ll.16-23)
8. During his employment, Hugenberg purchased
IRA Class B common non-voting stock in the
following amounts and at the following
prices:
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 5
<PAGE>
<TABLE>
<CAPTION>
Number of
Year of Purchase Shares Purchased Price Paid
---------------- ---------------- ----------
<S> <C> <C>
1981 621 $ 76.50*
1981 2000 20,000.00
1982 2000 22,700.00
1984 1300 18,720.00
1985 200 4,600.00
---- ----------
TOTAL 6121 $66,096.50
</TABLE>
* Hugenberg exchanged 911 shares of USPA
stock acquired for $70.40 plus $6.10 to
acquire these IRA shares. (Smith aff'd. #1
and Watson aff'd., Exhibit E, Hugenberg
Depo. Vol. I, page 40, l.21 through page
41, l.16 and Plaintiff's Exhibit l-3; Vol. I,
page 41, l.17 through page 45, l.16 and
Plaintiff's Exhibit 6; Vol. I, page 78, ll.6-
13; pp. 98, ll.19-23; Vol. I, pp. 123, l.10-
p.124, l.18; Vol. I, pp. 138, l.22-p.139,
l.14)
9. In 1988, IRA Class B common non-voting
shares were split five for one, giving
Hugenberg a total of 30,605 shares. (Smith
aff'd. #1 and Watson aff'd., Exhibit E,
Hugenberg Depo., Vol. I, pages 168, l.1-p.169,
l.10)
10. IRA paid Hugenberg dividends in the
following amounts on his IRA stock:
<TABLE>
<CAPTION>
Year Amount of Dividend
---- ------------------
<S> <C>
1987 $ 48,968.00
1988 64,270.50
1989 81,108.25
----- -----------
TOTAL $194,341.75
</TABLE>
(Smith aff'd. #1 and Watson aff'd., Exhibit
E, Hugenberg Depo., Vol. I, pages 163, l.8-
p.164, l.1 and Plaintiff's Exhibit 25; page
173, l.15 and 174, l.2 and Plaintiff's
Exhibit 28; Vol. I, page 186, ll.12-16 and
Plaintiff's Exhibit 30)
11. The "Stock Agreement" provides that IRA has
an option to repurchase stock when the
stockholder ceases to be an agent of IRA.
(Smith aff'd. #1, Exhibit A and Watson
aff'd., Exhibit E, Hugenberg
Depo., Vol.I, p.48, ll.2-22)
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 6
<PAGE>
12. The "Stock Agreement" provides that IRA
may exercise the option specified in
paragraph IV of this motion by paying
the stockholder a price per share as
established, at least annually, by IRA,
and that IRA shall notify the
stockholder of this price. (Smith
aff'd. #1, Exhibit A and Watson aff'd.,
Exhibit E, Hugenberg Depo., Vol. I, p.48,
l.10-p.49, l.7)
13. The price which IRA tendered to
Hugenberg for his Class B stock was
the book value of IRA stock at the end
of the prior fiscal year plus that
year's earnings which are added in
monthly increments to the price as the
ensuing year progresses, less any
dividends. Watson aff'd. Ex. F; Self
Depo., p.142, ll.6-20; Eiland Depo., pp.118,
l.20-p.119, l.8)
14. The "Stock Agreement" has never been
modified or revoked. (Smith aff'd. #1)
15. A copy of the Stock Agreement is on
file as part of the books and records
of IRA and available for inspection
by IRA stockholders and their attorneys
and agents. (Coder aff'd.)
16. In 1990, IRA advised Hugenberg, in
writing, of the value of his stock in
IRA. (Smith aff'd. #1, Exhibit N and
Watson aff'd., Exhibit E, Hugenberg
Depo., Vol. I, page 174, ll.3-13 and Plaintiff's
Exhibit 29, p.01976)
17. Hugenberg attempted to purchase IRA
stock in an offering made by IRA in 1990.
(Watson aff'd., Exhibit E, Hugenberg
Depo., Vol. I, page 174, ll.11-13 and Vol. II,
page 35, l.14 through p.36, l.25 and
Plaintiff's Exhibit 37)
18. The price of the stock owned by
Hugenberg in July 1990 was $17.50 per share.
(Smith aff'd. #1)
19. When Hugenberg's employment with USPA
ended, his agency agreement with IRA
was terminated. (Smith aff'd. #1)
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 7
<PAGE>
20. when Hugenberg's employment with IRA
ended, IRA deposited $535,587.50 by
means of a payroll direct deposit into
Hugenberg's account. (Smith aff'd. #1
and Watson aff'd., Exhibit E,
Hugenberg Depo. Vol. II, page 66, ll.9-21
and Plaintiff's Exhibit 57)
21. The price paid for Hugenberg's stock
was calculated by multiplying the
30,605 shares of Class B stock he owned
times $17.50. (Smith aff'd. #1)
22. Hugenberg attempted to deliver a
cashier's check in the amount of
$535,587.50 to counsel for IRA. (Smith
aff'd. #1)
23. IRA filed the instant suit and this
Court ordered IRA to endorse the
cashier's check which Hugenberg
attempted to deliver to IRA's counsel
and deposit the funds represented by
this cashier's check into the registry
of the Court. (Smith aff'd. #1)
24. The stock issued to Hugenberg was
cancelled on the books of IRA. (Smith
aff'd. #1)
25. A reasonable attorneys' fee for the
necessary legal work done in this case
is $300,000. (Bassel aff'd.)
26. IRA was organized "to provide every professional
military family the opportunity to achieve
financial independence." (Watson aff'd. Ex. A;
Smith depo. p. 46, ll.19-47 and 54,
ll.5-15; testimony of Ex. E, Hugenberg
depo. Vol. I, p. 126, ll.5-24; Ex. G,
Rankin depo. p. 180, ll.6-17)
27. The founder (Carrol H. Payne) of IRA's
purpose in selling stock to IRA agents
was to preserve the integrity of IRA
and insure its continuation as an
independent entity, servicing the
military in the manner described
above. (Watson aff'd, Ex. A; Smith
depo., p. 46, l.19 - p. 47, l.16, p.
54, ll.5-15; Ex. C, Coder depo.,
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 8
<PAGE>
p. 89, ll.11-17; Ex. B, Self depo., p.
164, ll.3-10; Ex. G, Rankin depo., p. 49,
l.4 through p. 50, l.3; p. 141, ll.15-24)
28. The purpose for issuance of IRA Class B
stock was to provide an incentive to its
agents. (Watson aff'd. Ex. E; Hugenberg
depo. , Vol. I, p. 106, ll.3-12; p. 108,
ll.20-24; p. 140, ll.3-24; p. 160, l.4
through p. 161, l.7; p. 162, ll.14-21;
p. 185, ll.11-23; p. 271, l.1 through p.
272, l.11; Vol. II, p. 104, ll.4-14; p.
148, l.3 through p. 149, l.7; WCH Exhibits
13, pp. 6 and 7; 16, p. 00187; 17, pp. 1,
4, 8-9; 19, pp. 1, 4, 8-9; 21, p. 00288; 22,
p. 00369; 23, pp. 1, 4, 7-8; 24, p. 00439;
27, p. 00540; 29, pp. 4, 7 and 19; Ex. B,
Self, vol. I, p. 156, l.23 through p. 157,
l.21.)
29. Any person who purchased IRA Class B stock
was required to execute a stock agreement
containing the same repurchase provisions
as the Stock Agreement. (Smith aff'd. and
Watson aff'd., Exhibit E, Hugenberg Depo.,
Vol. I, p.264, ll.17-23)
30. Each IRA Class B shareholder who has sold
his stock back to IRA did so at the price
set by the Board of Directors pursuant to
the repurchase provisions of the stock
agreement. (Rhodes aff'd. and Smith aff'd.
#2 and Watson aff'd., Exhibit E,
Hugenberg Depo., Vol. I, p.115, ll.11-14)
31. IRA issued and issues Class B stock as an
incentive to its agents and not for the
purpose of raising capital. (Smith aff'd.
#2 and Watson aff'd., Exhibit E, Hugenberg
Depo., Vol. II, p.104, ll.4-14, pp. 147,
l.24 through p. 148, l.19)
32. Stock agreements such as the one involved
in this case are commonly used vehicles to
permit the incentive of stock ownership to
corporate agents and employees. (Rhodes
aff'd.)
33. There is nothing unusual or improper about
a closely held corporation issuing
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 9
<PAGE>
incentive stock to its employees and agents. (Watson
aff'd Ex. E, Hugenberg depo. Vol. I, p. 140, ll.3-24;
p. 185, ll.11-23; Ex. B. Self pp. 139, ll.8-17,
p. 156, l.23 through p. 157, l.21; Rhodes aff'd)
34. Hugenberg contends the Stock Agreement was breached
because IRA did not tender to him what he considers to
be fair market value. (Watson aff'd., Exhibit E,
Hugenberg Depo., Vol. II, p.117, ll.10-24)
35. There is nothing inherently evil or unfair in a
corporation setting the price at which it will sell
stock to employees or agents and the price at which
it will repurchase the stock from him/her. (Watson
aff'd., Exhibit E, Hugenberg Depo., Vol. I, p.89,
ll.4-8, p.110, ll.1-11, p.115, ll.11-14; Vol. II,
p.60, ll.20-24; Vol. II, p.122, l.17-p.123, l.9;
Vol. II, p.148, ll.14-19; Vol. II, p.158, ll.18-25)
and Exhibit F (Eiland Depo., Vol. I, pp-115,
l.16-p.116, l.1) and Exhibit D (Rhodes Depo.,
Vol. I, .p52, ll.7-18, p.53, ll.7-12)
36. Hugenberg acknowledges that IRA would not have sold
Class B stock to him at the price at which he was
allowed to purchase it without his agreement to sell
it back at a price set by the company. (Watson
aff'd., Exhibit E, Hugenberg Depo., Vol. II,
p.148, ll.9-19, p.71, ll.5-7; Vol. I, p.46, l.23
through p.49, l.13, p.109, l.18 through p.111, l.10;
Plaintiff's Exhibits 9; 10, pp.7 and 74; 13, pp.4,
7, 36 and 37; 17, pp.4, 6, 9, F-15 and E-4; 19,
pp.6, 8, 9, 20, F15, F16 and E-1; 23, pp.4, 5, 6, 7,
18, F-14 and E-1; 29, pp.4, 6, 17, 18, 20, F-14 and
Appendix A, p.1.)
37. No one forced him to buy IRA Class B stock. (Watson
aff'd, Exhibit E, Hugenberg Depo., Vol. II, pp. 71
and 72)
38. Hugenberg believed at the time of his purchases and
at the time of his deposition that when he purchased
IRA "Class B" stock he got a good deal. Watson aff'd
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 10
<PAGE>
Ex. E, Hugenberg depo. Vol. I, p. 138, ll.14-21; p.
267, ll.6-12; Vol. II, p. 28, l.9 through p. 29, l.4;
p. 40, ll.5-24; pp. 71, l.8 through p. 72, l.2; p. 93,
ll.15-19; p. 98, ll.6-16.)
39. Offers of IRA Class B stock have been limited to
agents and employees of IRA and no one is allowed to
purchase Class B stock unless that person signs a
Stock Agreement agreeing to sell his/her stock back
to IRA at a price to be set by the company. (Watson
aff'd Ex. E, Hugenberg depo. Vol. I, p. 46, l.19
through p. 49, l.13; p. 83, l.23 through p. 84, l.5;
p. 106, l.13 through p. 107, l.6; pp. 109, l.18
through p. 110, l.11; p. 123, ll.10-13; Exhibits 9,
10, p. 7; 13, pp. 4, 7 and 17; 17, pp. 4, 6 and 9;
19, pp. 4, 6, 9 and 20; 23, pp. 4-7 and 18; 29, pp.
4, 6, 17 and 20.)
40. Hugenberg does not know of anyone who bought IRA
Class B stock without signing a Stock Agreement.
(Watson aff'd Ex. 3, Hugenberg depo. Vol. I, p. 50,
ll.4-14; p. 88, l.15 through p. 89, l.14; Vol. II, p.
79, l.13 through p. 80, l.20.)
41. The standard for the determination of the fairness of
such agreements is whether they are uniformly and
consistently applied to all shareholders. (Rhodes
aff'd.)
42. The Board of Directors of IRA has followed a uniform
and consistent procedure for setting the repurchase
price under its stock agreements. (Smith aff'd. #2 and
Rhodes aff'd.)
43. Hugenberg knows of no occasion where one stockholder
was treated differently than another. (Watson aff'd,
Exhibit E, Hugenberg depo. Vol. I, p. 185, ll.11-23)
44. To adopt the valuation method advocated by Hugenberg
would destroy IRA financially. (Smith aff'd. #2 and
Rhodes aff'd.)
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 11
<PAGE>
45. Hugenberg received a high level of compensation for
his services to IRA and USPA. (Dast aff'd.)
46. Hugenberg entered into the stock agreement in good
faith and does not want to rescind it. (Watson aff'd,
Exhibit E, Hugenberg depo. Vol. I, pp. 109-110, Vol.
II, p. 118, ll.15-17, p. 123, ll.10-17)
47. No one forced Hugenberg or anyone else to buy IRA
Class B stock. (Watson aff'd, Exhibit E, Hugenberg
depo. Vol. II, p. 71, ll.8-10)
48. The method of computation of the price used by IRA has
mathematical certainty. (Watson aff'd., Exhibit F,
Eiland Depo. p. 121, ll.5-11)
49. Hugenberg's primary complaint in this suit and the
material fact of which he claims he was not informed
was how IRA Class B stock would be valued on
repurchase. (Counterclaim 7, 8 and 13(a) and (c) and
Watson aff'd., Exhibit E, Hugenberg Depo. Vol. II
p. 107, ll.7-15)
50. Hugenberg did not discuss the Stock Agreement with
anyone at the time he signed it. (Watson aff'd.,
Exhibit E (Hugenberg Depo., Vol. I, p. 49, ll.8-10 and
Counterclaim PARA 9)
51. Hugenberg cannot recall any specific discussion, prior
to signing the Stock Agreement, about how the stock
would be valued. (Watson aff'd., Exhibit E, Hugenberg
Depo., p.102, ll.1-15)
52. Hugenberg made purchases of IRA Class B stock and
attempted to purchase additional IRA Class B stock
with knowledge of the manner in which IRA set the
price for repurchasing IRA stock. (Watson aff'd.,
Exhibit E, Hugenberg Depo. Vol. I, pp. 77, ll.9-16,
98, l.6-p.99, l.2, 121, l.20-p-122, l.13, 128,
l.12-p.129, l.17, 174, ll.3-13; Vol. II 81,
ll.2-p.82, l.12; Smith aff'd. #2 Exs. B, C, D, E, F
and G)
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 12
<PAGE>
53. Hugenberg made purchases of IRA Class B stock and
attempted to make an additional purchase with
knowledge of the price set by IRA for the repurchase
of its stock over a period of almost 10 years. ID.
54. Although Hugenberg now claims that he was in some way
misled by IRA in connection with his purchases of IRA
Class B stock, he admits that he received and read
every offering document and every annual report that
was issued by the company between 1981 and 1990.
(Watson aff'd Ex. E; Hugenberg depo. Vol. I, pp. 32,
l.15 through 36, l.12.)
55. Hugenberg received and examined every annual report
from 1981 to 1990 and read and understood that portion
of the annual report which described the price which
IRA would pay its agents and employees for the Class B
stock. (Watson aff'd, Exhibit B, Hugenberg depo. Vol.
I, p. 40, ll.7-18; pp. 48, l.23 through 49, l.7; pp.
90, l.19 through 91, l.10; p. 110. ll.1-15; p. 112,
ll.4-8; pp. 114, l.15 through p. 115, l.4; p. 119,
ll.3-15; pp. 124, l.19 through p. 126, l.2; pp. 144,
l.12 through 145, l.8; pp. 165, l.20 through 166, l.4)
56. Each and every annual report of IRA contained
comparable information concerning the price at which
IRA would repurchase Class B stock. (Watson aff'd
Ex. E; Hugenberg depo. Vol. I, pp. 90, l.8 through
91, l.22; pp. 113, l.20 through 115, l.24; pp. 118,
l.12 through 119, l.21; pp. 124, l.19 through 126,
l.2; pp. 139, l.15 through 143, l.12; pp. 144, l.12
through 145, l.8; Ex. B Self Vol. I, pp. 185, l.23
through 186, l.22; Ex. F. Eiland, Vol. I, pp. 118,
l.20 through 119, l.8; Exhibits 12, p. 00072; 15, p.
000145; 16, p. 000187; 18A, p. 00235; 21, p. 00288;
22, p. 000369; 24, p. 00440; and 27, p. 00540.)
57. Hugenberg made purchases of IRA Class B stock and
attempted to make an additional purchase of IRA
Class B stock with knowledge that IRA had and was
continuing to
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 13
<PAGE>
exercise the repurchase option in the Stock
Agreement. (Watson aff'd., Exhibit E, Hugenberg
Depo., Vol. I, p. 89, l.4 through p.92, l.1, 110,
ll.1-10, 145; Vol. II, pp. 106, l.9 through 109,
l.15, 159, ll.6-9)
58. Prior to the times that Hugenberg purchased stock in
IRA or attempted to purchase stock in IRA, he was
notified that the offering price for such stock was
determined "arbitrarily." (Watson aff'd., Exhibit E,
Hugenberg Depo. Vol. I, pp. 77, ll.9-16, 98,
l.6-p.99, l.2, 121, l.20-p.122, l.3, 128,
l.12-p.129, l.17, 174, ll.3-13; Vol. II, pp. 80-82);
Smith aff'd. #2 Exs. B, C, D, E, F and G)
59. Hugenberg was aware that the offering price for such
stock corresponded to the price at which IRA was
offering contemporaneously to repurchase stock.
(Watson aff'd., Exhibit E, Hugenberg Depo. Vol. I,
pp. 90, l.4-p.91, l.10, 113, l.20-p.115, l.4, 118,
l.12-p.119, l.18, 139, ll.15-20, 144, l.12-p.145,
l.18, 160, ll.4-23, 170, l.10-p.171, l.8, 174);
Smith aff'd. #2, Exs. I, J, K, L, M, N, 0, P and Q)
60. Hugenberg received numerous benefits as a result of
his stock ownership in IRA. (Facts 7 and 9 above)
61. IRA would not have sold Hugenberg IRA Class B stock
on any occasion if he had not executed the Stock
Agreement (Smith aff'd. #2 and Watson aff'd.,
Exhibit E, Hugenberg Depo., Vol. II, p.71, ll.3-7,
p.148, ll.14-19)
62. Hugenberg contends that IRA improperly cancelled his
Class B stock on its books. (Counter-Claim PARA 13(b))
63. IRA cancelled Hugenberg's stock only after tendering
the amount due him for his Class B stock under the
terms of the Stock Agreement. (Smith aff'd. #1)
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 14
<PAGE>
64. Hugenberg contends that IRA "failed to disclose that
the accounting method employed by IRA failed to fairly
reflect the value of the corporation and its Class B
stock by failing to account for the amount of renewals
that would result in future revenues to that
corporation." (Counterclaim PARA 14(b))
65. Hugenberg was aware that such future renewal or
"trail" income was not included in the valuation of
IRA stock prior to the time that he initially
purchased IRA stock as well as prior to his
subsequent purchases. (Watson aff'd., Exhibit E,
Hugenberg Depo. Vol I, pp.52, ll.4-p.53, l.9; Vol.
I, p. 267, ll.6-12; Vol. II, p. 40, ll.15-24, pp.
81, l.13-p.83, l.11, Exhibit 32, p. 05064, Exhibit
40, p. 04924)
66. Hugenberg contends that he was not informed that the
"control group" had no intentions of allowing a
reasonable market to develop where fair market value
could be obtained for his stock in IRA.
(Counterclaim PARA 14(c))
67. By statute, IRA Class B stock may be owned only by
licensed Texas insurance agents. (Smith aff'd. #2
and Watson aff'd., Exhibit E, Hugenberg Depo. Vol.
I, p.84, ll.6-10)
68. Hugenberg was informed on numerous occasions that
there was no public trading market for IRA Class B
stock and that it was unlikely that such market
would come into existence. (Watson aff'd., Exhibit
E, Hugenberg Depo. Vol. I, pp. 77, l.9-p.79, l.14,
84, ll.11-17, 88, l.17-p.89, l.8, 122, ll.14-23,
124, ll.19-25, 129, l.18-p.133, l.7; Smith aff'd.
#2, Exs. B, C, D, and E)
69. Hugenberg understood that there was no public market
for IRA Class B stock and that it would be unlikely
that there would ever be one. (Watson aff'd Ex. E,
Hugenberg depo. Vol. I, p. 80, ll.2-15; p. 99,
ll.14-21; pp. 107, l.22 through 108, l.4; pp. 122,
l.14 through 123,
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 15
<PAGE>
l.13; pp. 135, l.16 through 137, 1.3; p. 156, ll.11-21;
Exhibits 10, pp. 2 and 7; 13, pp. 1, 2 and 4; 17, pp.
2, 4, 6 and 7; 19, pp. 2, 4 and 6; 23, pp. 2, 4 and 6;
29, pp. 4, 6 and 7)
70. The Stock Agreement itself reveals that a market may
not develop for IRA Class B stock. (Smith aff'd. #1
Ex. A)
71. No single Class B stockholder may own more than 5% of
IRA Class B stock. (Watson aff'd., Exhibit B, Self
Depo., Vol. I, p.123, ll.9-12, p.126, ll.13-15, p.163,
l.24-p.164, l.10 and Watson aff'd., Exhibit E,
Hugenberg Depo., Vol. I, pp.116, l.23-p.117, l.4)
72. Hugenberg knows of no occasion when a shareholder of
IRA offered stock back to the company and it was not
purchased. (Watson aff'd., Exhibit E, Hugenberg
Depo., Vol. I, pp.91, l.23-p.92, l.1)
73. There is not a sufficient pool of purchasers to
create a market for IRA Class B stock. (Watson
aff'd., Exhibit F, Eiland Depo. p. 105, ll.7-9 and
p. 108, ll.1-14, and Exhibit B, Self Depo., p. 126,
ll.10-19)
74. Hugenberg contends that the "Control Group" has
manipulated the affairs of IRA for the personal
benefit of the members of the "Control Group" and
failed to disclose certain of its operations and
plans. (Counterclaim PARA 14(a) and (d))
75. Hugenberg does not know who makes up the "Control
Group." (Watson aff'd., Exhibit E, Hugenberg depo.
Vol. II, pp. 76, l.6 through p. 79, l.5)
76. The only fact which Hugenberg contends was not
disclosed by the control group is the method of
valuing IRA stock. (Watson aff'd., Exhibit E,
Hugenberg Depo. Vol. II, pp. 93, l.3-p.94, l.1,
p.95, ll.15-22 and 107, ll.7-15)
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 16
<PAGE>
77. Hugenberg is unaware of any undisclosed plans by the
"Control Group" or the "Control Group's" intentions.
(Watson aff'd., Exhibit E, Hugenberg Depo. Vol. II,
pp. 104, l.15 through p. 105, l.5, p. 107, ll.7-19)
78. Hugenberg knows of no misapplication or waste of IRA
assets by the "Control Group." (Watson aff'd.,
Exhibit E (Hugenberg Depo. Vol. II, p. 111, ll.17-25)
79. All members of the "Control Group" who have sold their
Class B stock back to IRA have received the price set
by the Board of Directors pursuant to the Stock
Agreement. (Smith aff'd. #2; Watson aff'd., Exhibit E,
Hugenberg Depo. Vol. I, pp. 115, l.11 through 118,
l.11; pp. 120, l.7 through 121, l.2, Vol. II pp. 105,
l.19 through 106, l.14)
80. The "Control Group" is not purchasing Class B stock
from other Class B shareholders. (Watson aff'd.,
Exhibit E, WCH, Vol. II, p. 84, ll.4-7)
81. The articles of incorporation and by-laws of IRA
have provisions designed to avoid the very
misactions of the Class A shareholders which
Hugenberg contends might arise. (Watson aff'd.,
Exhibit C, Coder depo., Vol. I, p. 74, l.21 through
p.75, l.18, Exhibit B & C Coder aff'd.)
82. Hugenberg knows of no misapplication or waste of IRA
assets by the "Control Group" but contends there is
a "potential" for such abuses. (Watson aff'd.,
Exhibit E, Hugenberg Depo., Vol. II, p.111, ll.17-25)
83. Hugenberg knows of no offer to buy or plan to sell
IRA by which a revaluation of IRA stock which he
contends is improper might occur. (Watson aff'd.,
Exhibit E, Hugenberg Depo., Vol. I, p.64, ll.14-16;
Vol. I, pp. 139, l.25 through 140, l.17; Vol. II,
pp. 92, ll.4-23, pp.141, l.23, p.142, l.4)
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 17
<PAGE>
84. As far as Hugenberg knows, every person who has sold
Class B stock back to IRA has been treated the same.
(Watson aff'd Ex. E, Hugenberg Vol. II, p. 28,
ll.9-15; p. 85, l.22 through 86, l.4; p. 92,
ll.4-23; p. 106, ll.9-14.)
85. Hugenberg claims he is being deprived of value in
IRA he created. (Watson aff'd, Exhibit E., Hugenberg
depo. Vol. II, pp. 96, l.5 through 98, l.5)
86. All members of the alleged "Control Group" who bought
Class B stock signed a stock agreement. (Watson aff'd,
Exhibit E, Hugenberg depo. Vol. II, p. 80, ll.2-5)
87. Hugenberg acknowledged that when Class B stock is sold
back to IRA the only reason that Class A shareholders
receive a benefit is that they, just like Class B
shareholders, share equally with Class B shareholders
on liquidation and that they are part of the company
and the company receives the benefit. (Watson aff'd,
Exhibit E, Hugenberg depo. Vol. II, p. 90, ll.3-5)
88. If IRA were liquidated, the assets of IRA would be
divided according to the number of shares owned by
each stockholder. (Watson aff'd., Exhibit E,
Hugenberg depo. Vol. II, p. 90, ll.11-18)
89. Members of the "Control Group" share on the same
basis as other Class B shareholders upon
liquidation. (Watson aff'd., Exhibit E, Hugenberg
depo. Vol. II, p. 91, ll.16-25)
90. Hugenberg knows of no member of the "Control Group"
who has sold his stock and received anything more
for his stock than the price set by the company.
(Watson aff'd., Exhibit E, Hugenberg depo. Vol. II,
p. 92, ll.3-8)
91. If members of the "Control Group" do not remain
stockholders until the revaluation of the stock which
Hugenberg contends might occur, they will not receive
any
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 18
<PAGE>
more benefit than other Class B shareholders.
(Watson aff'd., Exhibit E, Hugenberg depo. Vol. II,
p. 92, ll.20-23)
92. Hugenberg knows of no occasion where a member of the
"Control Group" purchased Class B stock from another
shareholder. (Watson aff'd., Exhibit E, Hugenberg
depo. Vol. II, p. 84, ll.4-7, p. 93, ll.1-4)
93 Members of the "Control Group" who sold their stock
back, sold it back to IRA. (Watson aff'd, Exhibit
E, Vol. II, p. 79, ll.17-20, p. 80, ll.14-20, p. 89,
ll.1-7)
94. Hugenberg contends that certain activities of the
"Control Group" were not disclosed, however, the
only activity he alleges was not disclosed was the
method of valuation of IRA stock. (Watson aff'd.,
Exhibit E, Hugenberg depo. Vol. II, p. 93, l.15
through p. 94, l.1)
95. Hugenberg suggests it is a fraudulent activity to
represent that there is a relationship between the
value and price of the stock and to represent that
the method of valuation of IRA stock is subject to
review by the Board of Directors. (Watson aff'd.,
Exhibit E, Hugenberg depo. Vol. II, p. 94, ll.2-10)
96. Hugenberg cannot say how he developed an
understanding that the Board of Directors of IRA
approved valuation of the company. ID.
97. The only way that members of the "Control Group"
could benefit from the repurchase of Class B stock
would be to revaluate the stock and sell the stock
back to IRA. (Watson aff'd., Exhibit E, Hugenberg
depo. Vol. II, p. 106, ll.3-8)
98. The only misrepresentation upon which Hugenberg
bases his claims and counterclaim paragraph 13(c)
is he was not informed "on what authoritative
basis" the method of valuing Class B stock was
"derived." (Watson aff'd., Exhibit E, Hugenberg
depo. Vol. II, p. 107, ll.7-15)
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 19
<PAGE>
99. Hugenberg is not even sure what is meant by the
allegation that plans of the "Control Group" were
concealed from him. (Watson aff'd., Exhibit E,
Hugenberg depo. Vol. II, p. 107, ll.16-19)
100. With respect to the allegation that IRA would value
a Class B shareholder's stock at a reasonable price
on repurchase, all Hugenberg relies on is the fact
that the Stock Agreement says the company will
annually advise the stockholders of the "value" of
the stock for purposes of setting the repurchase
price. (Watson aff'd., Exhibit E, Hugenberg depo.
Vol. II, p. 108, l.3 through p. 109, l-5)
101. With respect to the counterclaim allegation in
paragraph 14(d), Hugenberg complains not that any
misapplication or waste has occurred, but that the
method of valuation creates a potential for it.
(Watson aff'd., Exhibit E, Hugenberg depo. Vol. II,
p. 111, ll.3-14)
102. Hugenberg can recall no specific representation where
he was told that the company will value stock in good
faith. (Watson aff'd., Exhibit E, Hugenberg depo. Vol.
II, p. 50, ll.18-24, p. 102, ll.1-15)
103. Hugenberg alleges the existence of a conspiracy
(Counterclaim paragraph 15).
104. Hugenberg has no knowledge of when the conspiracy
came into being. (Watson aff'd., Exhibit E,
Hugenberg depo. Vol. II, p. 112, ll.1-22)
105. Hugenberg does not know the names of the active
members of the conspiracy. (Watson aff'd., Exhibit
E, Hugenberg depo. Vol. II, p. 112, l.13 through p.
113, 1.9)
106. The only thing that Hugenberg can recall that was done
in furtherance of the alleged conspiracy was that a
member of the Board of Directors denied that a point
Hugenberg made about valuation of stock held any
credence and Hugenberg
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 20
<PAGE>
says this constituted an attempt to mislead him from
obtaining accurate information on IRA stock valuation.
(Watson aff'd., Exhibit E, Hugenberg depo. Vol. II, p.
114, l.1 through p. 116, l.16)
107. The repurchase price established by IRA represents
the book value of IRA Class B stock as shown on its
books at the end of the fiscal year plus that year's
earnings which are added in monthly increments to
the price as the ensuing year progresses, less any
dividends. (Watson aff'd., Exhibit D, Rhodes Depo.
p. 41, l.19 through p. 42, l.2, Exhibit F, Eiland
Depo., p. 118, l.20 through p. 119, l.8, and Exhibit
B, Self Depo., p. 142, ll.14-20)
108. Dr. Stanley Allen Self and G. Merwin Eiland are expert
witnesses designated by William C. Hugenberg. (Watson
aff'd, Exhibit S)
VII.
Based on the facts established as a matter of law, IRA requests
that this Court make the following declarations:
(1) IRA has properly exercised its option under the Stock Agreement
to repurchase the stock of Hugenberg in IRA;
(2) IRA has tendered full payment to Hugenberg for the stock he
owned in IRA; and
(3) Hugenberg is no longer a stockholder of IRA.
IRA also seeks a judgment that based on the facts established as a matter of
law Hugenberg take nothing by his counter-claim.
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 21
<PAGE>
VIII.
This Amended Motion for Summary Judgment is supported by IRA's Brief in
Support of Amended Motion for Summary Judgment which is incorporated herein
by reference.
IX.
If this Court is unable to award a full summary judgment at the time of
the hearing of this motion, IRA requests that, in accord with Tex. R. Civ. P.
166-A(d), this Court shall ascertain and enter an Order setting forth the
material facts existing without substantial controversy and what material
facts are actually and in good faith controverted and should be tried.
WHEREFORE, PREMISES CONSIDERED, IRA respectfully prays that this Court
issue declarations and grant the relief requested in paragraph VII of this
motion; that IRA be awarded its reasonable attorneys' fees; that all costs of
court in this matter be taxed against Hugenberg; and that IRA be awarded such
other and further relief both at law and equity to which it shows itself
justly entitled.
Respectfully submitted,
LAW, SNAKARD & GAMBILL
By: /s/ Robert F. Watson
-----------------------------
Robert F. Watson
State Bar No. 20961200
By: /s/ Dabney D. Bassel
-----------------------------
Dabney D. Bassel
State Bar No. 01890300
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 22
<PAGE>
3200 Team Bank Building
Fort Worth, Texas 76102
(817)335-7373
ATTORNEYS FOR PLAINTIFF
CERTIFICATE OF SERVICE
This is to certify that a true and correct copy of the foregoing
document has been sent by hand delivery and certified mail, return receipt
requested to Khent H. Rowton, Wright & Rowton, P.O. Box 190930, Dallas, Texas
75219 on this 3rd day of May, 1991.
/s/ Dabney D. Bassel
----------------------------
Dabney D. Bassel
DDB/rn#W(10)
AMEND
PLAINTIFF'S AMENDED MOTION FOR SUMMARY JUDGMENT - PAGE 23
<PAGE>
STOCK AGREEMENT
This Agreement, made on this 3rd day of March, 1981, between INDEPENDENT
RESEARCH AGENCY FOR LIFE INSURANCE, INC., a Texas Corporation having its
principal place of business in Fort Worth, Texas, herinafter referred to as
"Company" and William C. Hugenberg, Jr. , hereinafter referred to as
"Stockholder";
WITNESSETH:
WHEREAS, Company desires to convey to Stockholder shares of the common
stock of the Company and may hereafter convey additional shares of same to
Stockholder; and, whereas, in partial consideration thereof, Stockholder
hereby desires to agree to limitations on the transferability of such stock
and to grant, transfer and assign to Company the right to purchase said
shares under certain circumstances.
NOW, THEREFORE, for good and valuable considerations, the receipt of
which is hereby acknowledged, the parties hereto do mutually agree as follows:
1. This Agreement shall apply to all stock of the Company issued to
Stockholder currently and in the future.
2. Stockholder understands and agrees that, in accordance with Texas
law pertaining to incorporated insurance agencies, Stockholder must be duly
licensed as a Texas life insurance agent (resident or non-resident as
applicable) in order to own stock of the Company. In the event Stockholder
ceases to be so licensed, Stockholder and the Company agree that
Stockholder's stock shall be subject to repurchase under the same terms and
conditions as hereinafter described for repurchase in the event of
Stockholder's desire to sell same or death or ceasing to be an agent of the
Company.
3. In the event Stockholder desires to sell or otherwise dispose of the
stock issued under the terms hereof, Stockholder shall in writing notify the
Company of such desire. The Company shall have an option for 120 days after
receipt of such notice to repurchase such shares from Stockholder for the
price described in paragraph "4", below. In the event of Stockholder's death,
or ceasing to be a duly authorized agent of the Company pursuant to a current
written agency agreement, the Company shall also have such option to
repurchase such stock, under the same terms and conditions described
immediately above. Stockholder agrees not to transfer, pledge, assign, or
otherwise in any manner encumber any of such shares of stock.
4. The Company shall, at least annually, advise Stockholder in writing
of the value of stock in the Company for the purpose of establishing the
repurchase price of such stock, and it is specifically agreed that this
value, as of the most recent date provided by the Company, shall be the
purchase price paid by the Company for Stockholder's shares upon their
repurchase from Stockholder or Stockholder's estate.
5. All stock issued to Stockholder shall be legended in accordance with
Texas law as to incorporated insurance agencies and with the following
statement:
"The shares represented by this certificate are subject to the
provisions of that certain Stock Agreement executed on March 3, 1981,
by and between Independent Research Agency for Life Insurance Inc.
("Company"), and William C. Hugenberg, Jr., a copy of which Agreement
is on file in the Company's office."
6. This Agreement shall be binding upon the parties hereto, and all
provisions hereof shall inure to the benefit of and shall be binding upon the
heirs, executors, legal representatives, successors and assigns of the
parties hereto.
7. No amendment, modification, nor waiver of any provision of this
Agreement shall be valid unless made in writing and signed by both parties
hereto.
EXECUTED on this 3rd day of March, 1981.
/s/ W. C. Hugenberg, Jr.
------------------------------
Stockholder
INDEPENDENT RESEARCH AGENCY
FOR LIFE INSURANCE, INC.
ATTEST: By: /s/ Carroll H. Payne
--------------------------
President
/s/ [ILLEGIBLE] Coder
--------------------------
Secretary
EXHIBIT "A"
<PAGE>
RATIFICATION
For good and valuable considerations. the receipt of which is hereby
acknowledged the undersigned. spouse of WILLIAM C. HUGENBERG, JR. does
hereby join the execution of this Agreement and does hereby ratify and
acknowledge that this Agreement is entirely fair, just, and equitable and to
her/his best interests and that she/he desires to bind her/his community
interest, if any, in the performance of this Agreement.
EXECUTED on this 3rd day of March, 1981.
/s/ Carolyn C Hugenberg
Spouse
ACKNOWLEDGMENT OF COMPANY PRESIDENT
STATE OF TEXAS )
COUNTY OF TARRANT )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared CARROLL H. PAYNE known to me
to be the person or officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC., a corporation, and
that he executed the same as the act of such corporation for the purposes and
consideration therein expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 3rd day of March, 1981.
[STAMP]
/s/ [ILLEGIBLE]
--------------------------
Notary Public
ACKNOWLEDGMENT OF STOCKHOLDER
STATE OF TEXAS )
COUNTY OF TARRANT )
BEFORE ME. the undersigned, a Notary Public in and for said County and
State, on this day personally appeared WILLIAM C. HUGENBERG, JR. known to
me to be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he/she executed the same for the purposes and
consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 3rd day of March, 1981.
[STAMP]
/s/ [ILLEGIBLE]
--------------------------
Notary Public
ACKNOWLFDGMENT OF STOCKHOLDER'S SPOUSE
STATE OF TEXAS )
COUNTY OF TARRANT )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared CAROLYN C. HUGENBERG known to me to be
the person whose name is subscribed to the foregoing instrument, and
acknowledged to me he/she executed the same for the purposes and consideration
therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 3rd day of March, 1981.
[STAMP]
/s/ [ILLEGIBLE]
--------------------------
Notary Public
<PAGE>
CAUSE NO. 352-129228-90
INDEPENDENT RESEARCH AGENCY Section IN THE DISTRICT COURT
FOR LIFE INSURANCE, INC. Section
Section
VS. Section TARRANT COUNTY, TEXAS
Section
WILLIAM C. HUGENBERG, JR. Section 352ND JUDICIAL DISTRICT
CORRECTED FINAL SUMMARY JUDGMENT
*************************************************************************
On May 28, 1991, came on to be heard the Amended Motion for Summary
Judgment of Independent Research Agency for Life Insurance, Inc. The Court
considered the Amended Motion for Summary Judgment, the record submitted by
the parties, and heard the argument of counsel. It appears to the Court that
such motion has been made in proper form and time, that proper service of the
Plaintiff's motion has been made upon the Defendant, and that the Defendant
has been properly notified of the hearing on this motion. Having considered
the matters recited above, the Court finds that there is no genuine issue of
any material fact and enters judgment as follows:
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that: (1) Independent
Research Agency for Life Insurance, Inc. has exercised its option under the
stock agreement executed by William C. Hugenberg, Jr. and Independent
Research Agency for Life Insurance, Inc. which is attached as Exhibit A to
this Judgment; (2) Independent Research Agency for Life Insurance, Inc. has
tendered to William C. Hugenberg, Jr. full and final payment for William C.
Hugenberg's 30,605 shares of Class B common stock in
FINAL SUMMARY JUDGMENT 1
<PAGE>
Independent Research Agency for Life Insurance, Inc.; and (3) Independent
Research Agency for Life Insurance, Inc. has properly canceled Defendant
William C. Hugenberg, Jr. as a shareholder of Independent Research Agency for
Life Insurance, Inc.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that William C. Hugenberg,
Jr. take nothing on his counterclaim filed against Independent Research
Agency for Life Insurance, Inc.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that attorneys' fees shall
be awarded to Independent Research Agency for Life Insurance, Inc. in the
following amounts: (1) $300,000 through the trial of this case; (2) $25,000
should William C. Hugenberg, Jr. take appeal to the Court of Appeals; (3)
$15,000 if Application for Writ of Error is filed in the Supreme Court of
Texas; and (4) $15,000 if Application for Writ of Error to the Supreme Court
of Texas is granted.
THE COURT FINDS that on July 18, 1990, this Court ordered the sum of
$535,587.50 to be paid into the Registry of the Court.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the District Clerk of
Tarrant County, Texas, shall pay the following sums from the sum referenced
in the preceding paragraph to the parties named herein: $300,000, plus
interest accrued on that amount while on deposit in the Court's Registry,
shall be paid to Independent Research Agency for Life Insurance, Inc. and the
remaining sum shall be paid to William C. Hugenberg, Jr.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the disbursements
referenced in the preceding paragraph shall not be made until this Judgment
FINAL SUMMARY JUDGMENT 2
<PAGE>
becomes final and William C. Hugenberg, Jr. has not perfected an appeal to
it. If William C. Hugenberg, Jr. does perfect an appeal, disbursements shall
be made when this Judgment becomes final by issuance of Mandate by the Court
of Appeals or the Supreme Court of Texas. Disbursements may also be made
pursuant to further order of this Court.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that all costs of court are
taxed against William C. Hugenberg, Jr.
All relief not expressly granted herein is DENIED.
SIGNED this the 12 day of June, 1991.
/s/ [ILLEGIBLE]
---------------------------------
JUDGE PRESIDING
APPROVED AS TO FORM:
- ------------------------------
KHENT H. ROWTON
State Bar No. ______
Wright & Rowton
P.O. Box 190930
Dallas, Texas 75219
ATTORNEYS FOR DEFENDANT
FINAL SUMMARY JUDGMENT 3
<PAGE>
STOCK AGREEMENT
This Agreement, made on this 3rd day of March 1981, between INDEPENDENT
RESEARCH AGENCY FOR LIFE INSURANCE, INC., a Texas Corporation having its
principal place of business in Fort Worth, Texas, hereinafter referred to as
"Company" and William C. Hugenberg, Jr., hereinafter referred to as
"Stockholder";
WITNESSETH:
WHEREAS, Company desires to convey to Stockholder shares of the common
stock of the Company and may hereafter convey additional shares of same to
Stockholder; and, whereas, in partial consideration thereof, Stockholder
hereby desires to agree to limitations on the transferability of such stock
and to grant, transfer and assign to Company the right to purchase sold
shares under certain circumstances.
NOW, THEREFORE, for good and valuable considerations, the receipt of
which is hereby acknowledged, the parties hereto do mutually agree as follows:
1. This Agreement shall apply to all stock of the Company issued to
Stockholder currently and in the future.
2. Stockholder understands and agrees that, in accordance with Texas
law pertaining to incorporated insurance agencies, Stockholder must be duly
licensed as a Texas life insurance agent (resident or non-resident as
applicable) in order to own stock of the Company. In the event Stockholder
ceases to be so licensed, Stockholder and the Company agree that
Stockholder's stock shall be subject to repurchase under the same terms and
conditions as hereinafter described for repurchase in the event of
Stockholder's desire to sell same or death or ceasing to be an agent of the
Company.
3. In the event Stockholder desires to sell or otherwise dispose of
the stock issued under the terms hereof, Stockholder shall in witing notify
the Company of such desire. The Company shall have an option for 120 days
after receipt of such notice to repurchase such shares from Stockholder for
the price described in paragraph "4", below. In the event of Stockholder's
death, or ceasing to be a duly authorized agent of the Company pursuant to a
current written agency agreement, the Company shall also have such option to
repurchase such stock, under the same terms and conditions described
immediately above. Stockholder agrees not to transfer, pledge, assign, or
otherwise in any manner encumber any of such shares of stock.
4. The Company shall, at least annually, advise Stockholder in writing of
the value of stock in the Company for the purpose of establishing the repurchase
price of such stock, and it is specifically agreed that this value, as of the
most recent date provided by the Company, shall be the purchase price paid by
the Company for Stockholder's shares upon their repurchase from Stockholder or
Stockholder's estate.
5. All stock issued to Stockholder shall be legended in accordance
with Texas law as to incorporated insurance agencies and with the following
statement:
"The shares represented by this certificate are subject to the
provisions of that certain Stock Agreement executed on March 3,
1981, by and between Independent Research Agency for Life Insurance
Inc. ("Company"), and William C. Hugenberg, Jr., a copy of which
Agreement is on file in the Company's office."
6. This Agreement shall be binding upon the parties hereto, and all
provisions hereof shall inure to the benefit of and shall be binding upon the
heirs, executors, legal representatives, successors and assigns of the
parties hereto.
7. No amendment, modification, nor waiver of any provision of this
Agreement shall be valid unless made in writing and signed by both parties
hereto.
EXECUTED on this 3rd day of March, 1981.
/s/ W. C. Hugenberg, Jr.
-------------------------------
Stockholder
INDEPENDENT RESEARCH AGENCY
FOR LIFE INSURANCE, INC.
ATTEST: By /s/ Carroll H. Payne
----------------------------
President
/s/ [ILLEGIBLE] Coder
- --------------------------
Secretary
EXHIBIT "A"
<PAGE>
RATIFICATION
For good and valuable considerations. the receipt of which is hereby
acknowledged the undersigned, spouse of William C. Hugenberg, Jr. does
hereby join the execution of this Agreement and does hereby ratify and
acknowledge that this Agreement is entirely fair, just, and equitable and to
her/his best interests and that she/he desires to bind her/his community
interest, if any, in the performance of this Agreement.
EXECUTED on this 3rd day of March, 1981.
/s/ Carolyn C. Hugenberg
-----------------------------
Spouse
ACKNOWLEDGMENT OF COMPANY PRESIDENT
STATE OF TEXAS )
COUNTY OF TARRANT )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared Carroll H. Payne known to me to be
the person or officer whose name is subscribed to the foregoing instrument
and acknowledged to me that the same was the act of the said INDEPENDENT
RESEARCH AGENCY FOR LIFE INSURANCE, INC., a corporation, and that he executed
the same as the act of such corporation for the purposes and consideration
therein expressed, and In the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 3rd day of March, 1981.
[STAMP]
/s/ [ILLEGIBLE]
------------------------------
Notary Public
ACKNOWLEDGMENT OF STOCKHOLDER
STATE OF TEXAS )
COUNTY OF TARRANT )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared William C. Hugenberg, Jr. known to me
to be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he/she executed the same for the purposes and
consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 3rd day of March, 1981.
[STAMP]
/s/ [ILLEGIBLE]
--------------------------------
Notary Public
ACKNOWLEDGMENT OF STOCKHOLDER'S SPOUSE
STATE OF TEXAS )
COUNTY OF TARRANT )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared Carolyn C. Hugenberg known to me to be
the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that she/he executed the same for the purposes and
consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 3rd day of March, 1981.
[STAMP]
/s/ [ILLEGIBLE]
----------------------------------
Notary Public
<PAGE>
ART. 2.22. TRANSFER OF SHARES AND OTHER SECURITIES AND RESTRICTIONS ON TRANSFER
A. The shares and other securities of a corporation shall be personal
property for all purposes and shall be transferable in accordance with the
provisions of Chapter 8--Investment Securities--of the Business & Commerce
Code, as amended,(1) except as otherwise provided in this Act.
B. A restriction on the transfer or registration of transfer of a
security may be imposed by the articles of incorporation, or by-laws, or a
written agreement among any number of the holders of such securities, or a
written agreement among any number of the holders and the corporation
provided a counterpart of such agreement shall placed on file by the
corporation at its principal place of business or its registered office and
shall be subject to the same right of examination by a shareholder of the
corporation, in person or by agent, attorney or accountant, as are the books
and records of the corporation. No restriction so imposed shall be valid with
respect to any security issued prior to the adoption of the restriction
unless the holder of the security voted in favor of the restriction or is a
party to the agreement imposing it.
C. Any restriction on the transfer or registration of transfer of a
security of a corporation, if reasonable and noted conspicuously on the
certificate or other instrument representing the security or, in the case of
an uncertificated security, if reasonable and if notation of the restriction
is contained in the notice sent pursuant to Section D of Article 2.19 of this
Act with respect to the security, shall be specifically enforceable against
the holder of the restricted security or any successor or transferee of the
holder. Unless noted conspicuously on the certificate or other instrument
representing the security or, in the case of an uncertificated security,
unless notation of the restriction is contained in the notice sent pursuant
to Section D of Article 2.19 of this Act with respect to the security, a
restriction, even though otherwise enforceable, is ineffective against a
transferee for value without actual knowledge of the restriction at the time
of the transfer or against any subsequent transferee (whether or not for
value), but such a restriction shall be specifically enforceable against any
other person who is not a transferee for value from and after the time that
the person acquires actual knowledge of the existence of the restriction.
D. In particular and without limiting the general power granted in
Sections B and C of this Article to impose reasonable restrictions, a
restriction on the transfer or registration of transfer of securities of a
corporation shall be valid if it reasonably:
(1) Obligates the holders of the restricted securities to offer to the
corporation or to any other holders of securities of the corporation or to
any other person or to any combination of the foregoing, a prior opportunity,
to be exercised within a reasonable time, to acquire the restricted
securities; or
(2) Obligates the corporation to the extent permitted by this Act or
any holder of securities of the corporation or any other person, or any
combination of the foregoing, to purchase the securities which are the
subject of an agreement respecting the purchase and sale of the restricted
securities; or
(3) Requires the corporation or the holders of any class of securities
of the corporation to consent to any proposed transfer of the restricted
securities or to approve the proposed transferee of the restricted securities
for the purpose of preventing violations of federal or state laws; or
(4) Prohibits the transfer of the restricted securities to designated
persons or classes of persons, and such designation is not manifestly
unreasonable; or
(5) Maintains the status of the corporation as an electing small
business corporation under Subchapter S of the United States Internal Revenue
Code,(1) maintains any other tax advantage to the corporation, or maintains the
status of the corporation as a close corporation under Part Twelve of this
Act.
<PAGE>
E. A corporation that has adopted a bylaw, or is a party to an
agreement, restricting the transfer of its shares or other securities may
file such bylaw or agreement as a matter of public record with the Secretary
of State, as follows:
(1) The corporation shall file a copy of the bylaw or agreement in the
office of the Secretary of State together with an attached statement setting
forth:
(a) the name of the corporation;
(b) that the copy of the bylaw or agreement is a true and correct copy
of the same; and
(c) that such filing has been duly authorized by the board of directors
or, in the case of a close corporation that, in conformance with Part Twelve
of this Act, is managed in some other manner pursuant to a shareholders'
agreement, by the shareholders or by the persons empowered by the agreement
to manage its business and affairs.
(2) Such statement shall be executed on behalf of the corporation by an
officer. The original and a copy of the statement shall be delivered to the
Secretary of State with copies of such bylaw or agreement restricting the
transfer of shares or other securities attached thereto. If the Secretary of
State finds that such statement conforms to law and the appropriate filing
fee has been paid as prescribed by law, he shall:
(a) endorse on the original and the copy the word "Filed", and the
month, day, and year of the filing thereof;
(b) file the original in his office; and
(c) return the copy to the corporation or its representative.
(3) After the filing of such statement by the Secretary of State, the
bylaw or agreement restricting the transfer of shares or other securities
shall become a matter of public record and the fact of such filing shall be
stated on any certificate representing the shares or other securities so
restricted if required by Section G, Article 2.19, of this Act.
F. A corporation that is a party to an agreement restricting the
transfer of its shares or other securities may make such agreement part of
its articles of incorporation without restating the provisions of such
agreement therein by complying with the provisions of Part Four of this Act
for amendment of the articles of incorporation. If such agreement shall alter
any provision of the original or amended articles of incorporation, the
articles of amendment shall identify by reference or description the altered
provision. If such agreement is to be an addition to the original or amended
articles of incorporation, the articles of amendment shall state that fact.
The articles of amendment shall have attached thereto a copy of the agreement
restricting the transfer of shares or other securities, and shall state that
the attached copy of such agreement is a true and correct copy of the same
and that its inclusion as part of the articles of incorporation has been duly
authorized in the manner required by this Act to amend the articles of
incorporation.
G. When shares are registered on the books of a corporation in the
names of two or more persons as joint owners with the right of survivorship,
after the death of a joint owner and before the time that the corporation
receives actual written notice that parties other than the surviving joint
owner or owners claim an interest in the shares or any distributions thereon,
the corporation may record on its books and otherwise effect the transfer of
those shares to any person, firm, or corporation (including that surviving
joint owner individually) and pay any distributions made in respect of those
shares, in each case as if the surviving joint owner or owners were the
absolute owners of the shares. A corporation permitting such a transfer by
and making any distribution to such a surviving joint owner or owners before
the receipt of written notice from other parties claiming an interest in
those shares or distributions is discharged from all liability for the
transfer or payment so made; provided, however, that the discharge of the
corporation from liability and the transfer of full legal and equitable title
of the shares in no way affects, reduces, or limits any cause of action
existing in favor of any owner of an interest in those shares or
distributions against the surviving owner or owners.
Sec. E amended by Acts 1981, 67th Leg., p. 838, ch. 297, 1 14, eff. Aug. 31,
1981; Secs. D and E amended by Acts 1981, 67th Leg., p. 3113, ch. 818,
Section 3, eff. Aug. 31, 1981; Sec. E amended by Acts 1985, 69th Leg., ch.
128, Section 7, eff. May 20, 1985; Sec. G added by Acts 1987, 70th Leg., ch.
93, Section 8, eff. Aug. 31, 1987; Secs. B to D amended by Acts 1989, 71st
Leg., ch. 801, Section 8, eff. Aug. 28, 1989. 126 U.S.C.A. Section 1371 et seq.
<PAGE>
CIVIL PRACTICE & REMEDIES CODE
TITLE 2
SECTION 37.006. PARTIES
(a) When declaratory relief is sought, all persons who have or claim any
interest that would be affected by the declaration must be made parties. A
declaration does not prejudice the rights of a person not a party to the
proceeding.
(b) In any proceeding that involves the validity of a municipal
ordinance or franchise, the municipality must be made a party and is entitled
to be heard, and if the statute, ordinance, or franchise is alleged to be
unconstitutional, the attorney general of the state must also be served with
a copy of the proceeding and is entitled to be heard.
Acts 1985, 69th Leg., ch. 959, Section 1. eff. Sept. 1. 1985.
<PAGE>
DISTRICT AND COUNTY COURTS Rule 39
- -----------------------------------------------------------------------------
RULE 39. JOINDER OF PERSONS
NEEDED FOR JUST
ADJUDICATION
(a) PERSONS TO BE JOINED IF FEASIBLE. A person who is
subject to service of process shall be joined as a party in
the action if (1) in his absence complete relief cannot be
accorded among those already parties, or (2) he claims an
interest relating to the subject of the action and is so
situated that the disposition of the action in his absence
may (i) as a practical matter impair or impede his ability to
protect that interest or (ii) leave any of the persons
already parties subject to a substantial risk of incurring
double, multiple, or otherwise inconsistent obligations by
reason of his claimed interest. If he has not been so joined,
the court shall order that he be made a party. If he should
join as a plaintiff but refuses to do so, he may be made a
defendant, or, in a proper case, an involuntary plaintiff.
(b) DETERMINATION BY COURT WHENEVER JOINDER NOT
FEASIBLE. If a person as described in subdivision (a)(1)--(2)
hereof cannot be made a party, the court shall determine
whether in equity and good conscience the action should
proceed among the parties before it, or should be
dismissed, the absent person being thus regarded as
indispensable. The factors to be considered by the court
include: first, to what extent a judgment rendered in the
person's absence might be prejudicial to him or those
already parties; second, the extent to which, by protective
provisions in the judgment, by the shaping of relief, or
other measures, the prejudice can be lessened or avoided;
third, whether a judgment rendered in the person's absence
will be adequate; fourth, whether the plaintiff will have an
adequate remedy if the action is dismissed for non-joinder.
(c) PLEADING REASONS FOR NONJOINDER. A pleading
asserting a claim for relief shall state the names, if known
to the pleader, of any persons as described in subdivision
(a)(1)--(2) hereof who are not joined, and the reasons why
they are not joined.
(d) EXCEPTION OF CLASS ACTIONS. This rule is subject to
the provisions of Rule 42.
(Amended July 21, 1970, eff. Jan. 1, 1971.)
<PAGE>
NO. 352-129228-90
INDEPENDENT RESEARCH AGENCY SECTION IN THE DISTRICT COURT
FOR LIFE INSURANCE, INC., SECTION
SECTION
Plaintiff, SECTION
SECTION
V. SECTION TARRANT COUNTY, TEXAS
SECTION
WILLIAM C. HUGENBERG, JR., SECTION
SECTION
Defendant. SECTION 352nd JUDICIAL DISTRICT
DEFENDANT'S FIRST AMENDED ANSWER AND COUNTERCLAIM
NOW COMES, WILLIAM C. HUGENBERG, JR., Defendant ("Hugenberg"), and files
this his First Amended Answer and Counterclaim with respect to the Original
Petition filed by Independent Research Agency for Life Insurance, Inc.
("IRA"), and in support thereof would show the Court and jury the following:
1. Hugenberg denies all of the material allegations contained in IRA's
Original Petition and demands strict proof thereof by a preponderance of the
creditable evidence before the jury.
2. Hugenberg is currently the owner and holder of Thirty Thousand Six
Hundred Five (30,605) shares of IRA's issued and outstanding Class B
Non-Voting common stock ("Class B Stock"). Currently, IRA has issued and has
outstanding approximately One Million Five Hundred Thousand (1,500,000)
shares of the Class B Stock. At the same time, all of the voting rights in
IRA is vested in a minority number of Class B Stock shareholders who own all
of
- --------------------------------------------------------------
DEFENDANT'S FIRST AMENDED ANSWER AND COUNTERCLAIM - PAGE 1
<PAGE>
the Class A Voting shares (the "Control Group"). A list of such persons is
attached hereto as Exhibit "A" and incorporated herein by reference. There
are only twenty-five (25) issued and outstanding shares of Class A Voting
common stock ("Class A Stock") as opposed to One Million Five Hundred
THOUSAND (1,500,000) shares of Class B stock. Thus the total voting control
is in the hands of a small number of Class A shareholders who have absolute
power over the operations of IRA. Hugenberg was required by IRA to execute a
so-called "Stock Agreement" wherein the Control Group requires that all
persons other than themselves who buy the Class B Stock agree to sell the
stock back to IRA at a price to be arbitrarily determined by IRA's Control
Group, as and when they see fit, while ensuring there is no market for the
Class B Stock other than the Control Group.
3. Through the Stock Agreement, IRA desires to force Hugenberg to sell
his stock to IRA for the sum of Five Hundred Thirty-five Thousand Five
Hundred Eighty-seven and 50/100ths Dollars ($535,587.50), or Seventeen and
50/100ths Dollars ($17.50) per share. At the same time, IRA desires to cancel
Hugenberg's shares of Class B Stock on IRA's books, and force him to accept
this offer (which he has specifically rejected).
4. Hugenberg alleges that the price offered by IRA is grossly
inadequate and constitutes breaches of fiduciary duties owed to him by IRA's
controlling shareholders. Further, he alleges that the values of such shares
are four (4) times or more greater
- --------------------------------------------------------------
DEFENDANT'S FIRST AMENDED ANSWER AND COUNTERCLAIM - PAGE 2
<PAGE>
than the value of Seventeen and 50/100ths Dollars ($17.50) per share offered
by IRA and the Control Group.
5. Hugenberg would show that IRA's value of Seventeen and 50/100ths
Dollars ($17.50) per share is arbitrary and capricious and designed only to
benefit the Control Group. The Control Group owns a majority of the Class B
Stock as well as all Class A Stock, and is the primary beneficiary of
dividends declared on the Class B Stock. The Control Group receives the
benefit of sales of Class B Stock to employee investors, and then buys the
shares back at a low price, which only benefits the Control Group.
6. As affirmative defenses, Hugenberg would show that such activities
are fraudulent in that the activities of the Control Group are not disclosed,
and false and fraudulent representations are made in connection with the
purchase of Class B Stock, to the effect that fair value will be received for
such shares upon the sale of IRA's Class B Stock back to IRA. Furthermore,
Hugenberg alleges that the conduct of the Control Group is illegal and
constitutes a breach of the fiduciary duties of the Control Group to the
holders of Class B Stock who do not have voting rights in the corporation.
Exhibit "A" sets forth the Control Group, who owns the Class A Voting shares,
their position in the corporation, and the number of shares each holds.
COUNTERCLAIM
7. Hugenberg is a former employee of IRA. As an employee, Hugenberg
invested in the Class B Stock by periodically acquiring
- --------------------------------------------------------------
DEFENDANT'S FIRST AMENDED ANSWER AND COUNTERCLAIM - PAGE 3
<PAGE>
such shares as the opportunity arose, although he has been arbitrarily
refused the right to purchase shares on one occasion. Hugenberg's history of
acquiring the Class B Stock is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
12/79 352 USPA Class B Non-Voting Common Shares
03/80 559 USPA Class B Non-Voting Common Shares
03/81 Exchanged 911 USPA Class B Non-Voting Common Shares
for 621 IRA Class B Non-Voting Common Shares
07/81 621 IRA Class B Non-Voting Common Shares
07/81 2000 IRA Class B Non-Voting Common Shares
07/82 2000 IRA Class B Non-Voting Common Shares
07/84 1300 IRA Class B Non-Voting Common Shares
08/85 200 IRA Class B Non-Voting Common Shares
</TABLE>
IRA declared a stock split in 1988, increasing the shares held by Hugenberg
by five for one. After the stock split, Hugenberg owned Thirty Thousand Six
Hundred Five (30,605) shares of Stock.
8. As stated above, Hugenberg was required by IRA to execute a Stock
Agreement which gave IRA the absolute right to repurchase his shares at a
value to be determined by the Control Group, such Stock Agreement being a
contract of adhesion in favor of IRA. Hugenberg and other shareholders
similarly situated, upon leaving the employ of IRA, were and are forced to
sell their shares of Class B Stock back to IRA at whatever price the Control
Group deems to be the repurchase price, without regard to any known or
customary method of valuation of securities. The obvious purpose of the Stock
Agreement is to allow the Control Group to oppress
- --------------------------------------------------------------
DEFENDANT'S FIRST AMENDED ANSWER AND COUNTERCLAIM - PAGE 4
<PAGE>
the Class B Stock shareholders and to obtain the use of the investors' funds
by selling shares of Class B Stock to their employees, while refusing to
redeem such shares at a price related to the actual value thereof. Rather,
the purpose of such low valuation is to enable the Control Group to receive
the benefit of dividends on the Class B Stock, while at the same time,
knowing that they can repurchase such shares from all outstanding Class B
Stock shareholders at a low price while maintaining total control.
Repurchasing the Class B Stock at artificially low prices inures directly to
the benefit of the Control Group, greatly increasing the value of the Control
Group's holdings of both Class A and B Stock while cheating the other
shareholders.
9. When Hugenberg entered into the Stock Agreement and purchased his
shares of Class B Stock, he was told nothing about the method of valuation by
which the shares would be valued upon a repurchase thereof. Rather, Hugenberg
relied upon the good faith of IRA, and believed that the Control Group would
deal fairly with him in connection with any repurchase of his shares. He was
not told of the true motivations and reasons for the arrangement with the
non-voting Class B Stock and its effect upon investors therein.
10. In July, 1990, Hugenberg terminated his employment with IRA, and IRA
notified Hugenberg that the price Hugenberg would have to accept for his
shares was Seventeen and 50/100ths Dollars ($17.50) per share, irrespective
of his desire to sell or not to sell. The shareholders of the Class B Stock
under the Stock
- --------------------------------------------------------------
DEFENDANT'S FIRST AMENDED ANSWER AND COUNTERCLAIM - PAGE 5
<PAGE>
Agreement are forced to sell their shares at any price arbitrarily set by the
Control Group. In this instance, Hugenberg, being offered Five Hundred
Thirty-five Thousand Five Hundred Eighty-Seven and 50/100ths ($535,587.50) or
Seventeen and 50/100ths Dollars ($17.50) per share, desired to have his
shares valued by a third party. Hugenberg rejected in writing IRA's offer to
buy such shares for Seventeen and 50/100ths ($17.50) per share, and hired Dr.
Allen Self, an expert in the field of valuing securities, to examine the
books and records of IRA available to Hugenberg. Dr. Self reached a
preliminary appraisal of such shares at Seventy Dollars ($70.00) per share,
and believes that the value of such shares might even be higher, depending on
what discovery shows with respect to future earnings. Attached hereto and
incorporated herein by reference as Exhibit "B" is a copy of Dr. Self's
Affidavit which clearly shows that IRA is attempting to force Hugenberg to
accept a grossly inadequate and unfair consideration for his shares of Class
B Stock in violation of IRA's fiduciary duty to Class B Stock shareholders.
11. While Dr. Self was doing his evaluation, IRA advised Hugenberg that
it was going to tender to him Seventeen and 50/100ths Dollars ($17.50) per
share which he would be forced to take, because such funds would be wired
directly into Hugenberg's bank account whether he wanted the funds or not.
Hugenberg through his counsel instructed IRA not to tender such funds into
his account, but despite such instructions, IRA attempted to force
- --------------------------------------------------------------
DEFENDANT'S FIRST AMENDED ANSWER AND COUNTERCLAIM - PAGE 6
<PAGE>
Hugenberg to accept the rejected offer and did in fact wire such funds into
the account. Hugenberg did not accept these funds and delivered a cashier's
check to counsel for IRA, repaying that amount. Attached hereto as Exhibits
"C-1, C-2 and C-3" and incorporated herein by reference, are three letters
from Hugenberg's law firm relative to these events.
12. Hugenberg has control and custody of his shares of Class B Stock,
and has no desire to sell such shares at the arbitrarily low price proposed
by IRA, desiring instead to hold such shares and receive the dividends
thereon, or in the alternative tender such shares back to IRA in exchange for
a fair value to be determined by the Court, together with damages as allowed
by law.
13. upon information and belief, IRA claims to have cancelled
Hugenberg's shares. This is an additional breach of the fiduciary duties owed
by IRA to Hugenberg. By removing his name from the role of shareholders, IRA
attempts to wrongfully deny Hugenberg rights associated with his ownership of
the Class B Stock, including dividends declared or to be declared in the
future. Based upon the facts now available to Hugenberg, Hugenberg would show
the Court that IRA has engaged in false, fraudulent, malicious and grossly
negligent conduct which upon information and belief includes but is not
limited to the following:
(a) Arbitrary and capricious valuation of his shares of Class B Stock
at a ridiculously low price for the sole purpose of benefitting the
Control Group;
- --------------------------------------------------------------
DEFENDANT'S FIRST AMENDED ANSWER AND COUNTERCLAIM - PAGE 7
<PAGE>
(b) attempting to cancel Hugenberg's shares on the books and records of
IRA to his detriment;
(c) engaging in a course of conduct which includes making false
statements of material fact and omissions of material fact in
connection with the purchase and sell of Class B Stock including
representations that IRA would deal fairly with Hugenberg, value
his shares at a reasonable price upon repurchase, and fully inform
Hugenberg of material facts relative to IRA and the plans of the
Control Group.
14. IRA also engaged in conduct resulting in the following material
omissions:
(a) IRA completely failed and refused to inform Hugenberg and other
Class B Stock shareholders similarly situated that the Class B
Stock along with the corporation itself was being operated so
unfairly for the benefit of the Control Group to the detriment of
the Class B Stock shareholders;
(b) failed to disclose that the accounting methods employed by IRA
failed to fairly reflect the value of the corporation and its Class
B Stock by failing to account for the amount of renewals that would
result in future revenues to the corporation;
(c) failed to disclose that the Control Group had no intention of
allowing any reasonable market to develop for the Class B Stock
wherein fair value could be obtained therefor upon any attempt at
sale; and
(d) failed to disclose that the Control Group would upon operate IRA
and manipulate the Class B Stock for its personal benefit including
potential misapplication and waste of assets.
15. Hugenberg further alleges that there has been and continues to be a
conspiracy among the Control Group intended to suppress and frustrate the
rights of Class B Stock shareholders,
- --------------------------------------------------------------
DEFENDANT'S FIRST AMENDED ANSWER AND COUNTERCLAIM - PAGE 8
<PAGE>
and in effect, to deny them their legitimate rights as shareholders.
Hugenberg further alleges that IRA has engaged and continues to engage in a
course of conduct which constitutes a clear breach of the fiduciary duties
owed by IRA and the Control Group to the Class B Stock shareholders.
16. Hugenberg would further show that IRA and its Control Group have
engaged in intentional fraudulent concealment of the true nature of their
actions with respect to the Class B Stock. Without discovery, Hugenberg is
unable at this time to fully develop the facts with respect to what is
attempted to be accomplished by attempting to buy back his shares at a price
which is obviously unfair and arbitrary, or to determine the scope of unfair
personal self dealing and breaches of fiduciary duties that have occurred.
17. Hugenberg alleges that the actions by IRA as set forth above
constitute breaches of the Stock Agreement, breaches of fiduciary duty, and
common law fraud. As a result he has been damaged by an amount at least equal
to the actual value of his shares less the amount tendered, all accrued and
accruing dividends, together with pre-judgment and post-judgment interest and
punitive damages. Because of IRA's breach of the Stock Agreement, Hugenberg
is entitled to recover reasonable attorneys' fees pursuant to the
Tex.Civ.Prac.& Rem. Code Ann.Section 28.001(8).
18. Hugenberg further alleges that such conduct with respect to
attempting to force him to sell his shares for an inadequate
- --------------------------------------------------------------
DEFENDANT'S FIRST AMENDED ANSWER AND COUNTERCLAIM - PAGE 9
<PAGE>
consideration is a violation of Texas Business and Commerce Code, Section
27.01(a) dealing with fraud in a transaction involving stock of a
corporation. As set forth above, IRA has made false representations of
material fact in connection with the sale to Hugenberg of such securities, as
well as representing it would fairly value his Class B Stock with no
intention of fulfilling its duties and representations. This is in addition
to the other fraudulent activities alleged above. Under Section 27.01
Hugenberg is entitled to recover pre-judgment and post-judgment interest,
costs and reasonable attorneys' fees. Hugenberg is also entitled to recover
punitive damages because of the malicious and intentional nature of the fraud
set forth herein.
WHEREFORE, PREMISES CONSIDERED, Hugenberg prays that IRA take nothing by
virtue of its Original Petition, that he recover actual damages, together
with pre-judgment and post-judgment interest, punitive damages, attorneys'
fees, the amount of any dividends to which he is entitled, and that he have
such other and further relief both general and special at law or in equity to
which he may show himself justly entitled.
- --------------------------------------------------------------
DEFENDANT'S FIRST AMENDED ANSWER AND COUNTERCLAIM - PAGE 10
<PAGE>
Respectfully submitted,
SIMON, ANISMAN, DOBY, WILSON & SKILLERN
400 Professional Building
303 West Tenth Street
P. 0. Box 17047
Fort Worth, TX 76102-7071
(817) 335-6133 (FAX) 429-5390
By /s/ Khent H. Rowton
------------------------------
KHENT H. ROWTON
State Bar No. 1735000
ATTORNEY FOR DEFENDANT
WILLIAM C. HUGENBERG, JR.
CERTIFICATE OF SERVICE
THE UNDERSIGNED CERTIFIES that a copy of the above and foregoing
DEFENDANT'S FIRST AMENDED ANSWER AND COUNTERCLAIM was served upon counsel for
Plaintiff as follows:
Robert F. Watson, Esq.
Dabney D. Bassel, Esq.
Stephen G. Wilcox, Esq.
Law, Snakard & Gambill
3200 Team Bank Building
500 Throckmorton Street
Fort Worth, Texas 76102
in accordance with Rule 72, Texas Rules of Civil Procedure, on this 18th day
of October 1990, via hand delivery.
/s/ Khent H. Rowton
------------------------------
KHENT H. ROWTON
C:\Hugenberg\Amend2.Ans
12251.000
- -------------------------------------------------------------
DEFENDANT'S FIRST AMENDED ANSWER AND COUNTERCLAIM - PAGE 11
<PAGE>
CLASS A VOTING COMMON STOCK SHAREHOLDERS
<TABLE>
<CAPTION>
NUMBER OF
NAME & TITLE SHARES
- ------------ ---------
<S> <C>
Freda J. Payne 3
Director
Carroll H. Payne II 3
Director
Debra S. Payne 3
Director
Naomi K. Payne 3
Director
George C. Talley, Jr. 2
Director, Chairman of the Board,
Chief Executive Officer
Lamar C. Smith 2
Director, President, Chief Operating officer
William J. Mansfield 1
Director, Senior Vice President,
Director of Planning and Development
James N. Lanier 1
Director, Senior Vice President,
Director of Marketing
C. L. Van Donselaar 1
Director, Vice President,
Director of Field Marketing
John D. Beer 1
Director, Vice President and Director of
Public Relations and Protocol
Barry M. Brown 1
Director, Regional Vice President
Leonard J. Siegert 1
Director, Regional Vice President
William M. Stevenson 1
Director, Regional Vice President
Frederic W. Watke 1
Director, Regional Vice President
</TABLE>
AS OF IRA PROSPECTUS DATED FEBRUARY 12, 1990
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
NAME & TITLE SHARES
- ------------ ---------
<S> <C>
William A. Dast 1
Director, Treasurer
</TABLE>
c:\hugenberg\Class A Shareholders
AS OF IRA PROSPECTUS DATED FEBRUARY 12, 1990
2
<PAGE>
CAUSE NO. 352-129228-90
INDEPENDENT RESEARCH AGENCY SECTION IN THE DISTRICT COURT OF
FOR LIFE INSURANCE, INC., SECTION
SECTION
Plaintiff, SECTION
SECTION
V. SECTION TARRANT COUNTY, TEXAS
SECTION
WILLIAM C. HUGENBERG, JR., SECTION
SECTION
Defendant. SECTION 352ND JUDICIAL DISTRICT
AFFIDAVIT OF ALLEN SELF, PH.D.
IN OPPOSITION OF MOTION FOR SUMMARY JUDGMENT
STATE OF TEXAS SECTION
COUNTY OF TARRANT SECTION
Before me, the undersigned authority, personally appeared Dr. Allen Self
who upon his oath did depose and state:
1. My name is Dr. Allen Self. I am over the age of twenty-one (21) and I
am fully competent to make this Affidavit based upon my personal knowledge
of the facts set forth herein.
2. I have a Ph.D. in economics from the University of Oklahoma. I am a
past Emeritus Professor of Management at the M. J. Neeley School of Business
at Texas Christian University. I am currently an Economic, Management and
Financial Consultant. My curriculum vitae is attached hereto and incorporated
herewith for all purposes as Exhibit "A".
3. I have analyzed the financial circumstances surrounding the valuation
of the Class B Non-Voting Stock of Independent Research Agency for Life
Insurance, Inc. ("IRA"). It is my expert opinion that the shares are worth at
least seventy dollars ($70.00)
AFFIDAVIT OF ALLEN SELF, PH.D.
IN OPPOSITION OF MOTION FOR SUMMARY JUDGMENT - Page 1
<PAGE>
per share. The shares may be valued at a higher price, depending
upon the impact of renewal commissions upon IRA's earnings in years
to come.
4. My opinion is based upon my examination of annual reports and
prospectuses issued by IRA, an outline of IRA's financial history I
prepared, a financial spread sheet software package, and certain
correspondence that is associated with this case. From these, I have
analyzed the status and the changes in this company's financial
history. Also, I have consulted standard financial sources to
determine the relationship between earnings and share prices for
comparable firms in the financial services and insurance industry.
5. The value of the Class B Non-Voting shares of IRA was set by
its Board of Directors at about three (3) times earnings, at book
value, whereas its actual market value is about twelve (12) times
earnings, or four (4) times as much as the Board's admittedly
arbitrary value, as set forth in IRA's documents.
6. The Board apparently set the value of these shares at Seventeen and
50/100 Dollars ($17.50) per share as of July, 1990. The economic advantage to
those shareholders in the control group for setting the stock's value at a
low level is that cash is thereby conserved in the corporation and can be
paid later to themselves and others upon retirement or separation. This
economic advantage can be clearly seen and demonstrated.
7. It is my opinion that these shares are worth at least
AFFIDAVIT OF ALLEN SELF, PH.D.
IN OPPOSITION OF MOTION FOR SUMMARY JUDGMENT - Page 2
<PAGE>
seventy dollars ($70.00) per share, and perhaps considerably more, depending
upon what discovery reveals.
FURTHER AFFIANT SAITH NOT.
/s/ Allen Self, Ph.D
-------------------------------
ALLEN SELF, Ph.D.
SUBSCRIBED AND SWORN TO BEFORE ME on this 16 day of October, 1990.
/s/ Jack B. Harris Sr.
-------------------------------
SEAL Notary Public, State of Texas
/s/ Jack B. Harris Sr.
-------------------------------
Printed Name of Notary
My Commission Expires:
August 8, 1992
- ----------------------------------
C:\DAILY\SELF.AFF
AFFIDAVIT OF ALLEN SELF, PH.D.
IN OPPOSITION OF MOTION FOR SUMMARY JUDGMENT - Page 3
<PAGE>
Stanley Allen Self
Present Position: Economic, Management, Financial Consultant
Immediate Past Position: Emeritus Professor of Management
M. J. Neeley School of Business
Texas Christian University
Consulting Business Address:
Dr. Allen Self
River Plaza Building, Suite 1105
1701 River Run
Fort Worth, Texas 76107
Home: 2004 Hillcrest
Fort Worth, Texas 76107
Telephone: 817-332-4410 (Consulting)
817-738-7879 (Home)
FAX: 817-332-4410 (24-hour Receiving)
Education: Alamo Heights High School, San Antonio, 1944
B. A. (History, Economics), Texas A & M
University, 1947.
M. A. (Economics, Government), North Texas State
University, 1949.
Ph. D. (Economics), University of Oklahoma, 1957
Postdoctoral Study:
Harvard Graduate School of Business, 1961.
Carnegie-Mellon University Graduate School of Industrial
Administration, 1963.
Honors:
Beta Gamma Sigma (Business Honor Society)
Omicron Delta Epsilon (Economics Honor Society)
Life Member, Southwest Division, Academy of Management
Woodrow Wilson Fund Fellow, 1956-57
Ford Foundation Research Fellow, 1964
Publications and Research:
Co-author (with John A. Patton and C. L. Littlefield,)
JOB EVALUATION: TEXT AND CASES, Third Edition, Richard D. Irwin, Inc., 1964.
Editor (posthumous), C. D. Williamson, EXECUTIVE OPERATIONS TECHNIQUE,
Prentice-Hall, Inc., 1963.
MUNICIPAL ELECTRIC UTILITY SYSTEMS IN OKLAHOMA, University Microfilms,
1958.
THE DAIRY INDUSTRY AND THE TEXAS ANTITRUST LAWS, unpublished master's
thesis, North Texas State University, 1949.
Co-author (with 8. G. Havill and John E. Pearson) "Programming Circular
Autocorrelation for Cycle Research," JOURNAL OF CYCLE RESEARCH, Vol. 9, No. 3,
July 1960.
"A Method for Peer Rating on a Student Team Project," COLLEGIATE NEWS AND
VIEWS, December 1968.
<PAGE>
Brief Biographical Sketch, Dr. Allen Self Page 2
WHITE SETTLEMENT, TEXAS: AN ECONOMIC BASE STUDY, Bureau of Business
Research, Texas Christian University, 1966.
LOAN RESOURCES FOR POVERTY GROUPS IN TARRANT COUNTY, Bureau of Buisness
Research, Texas Christian University, 1966.
Editor and Project Director, ECONOMIC IMPACT of THE MOBILE HOME
INDUSTRY IN TEXAS; Bureau of Business Research, Texas Christian University,
1967.
Co-author (with C. Richard Waits), MOUNTAIN VALLEY RECREATION
AREA, Bureau of Business Research, Texas Christian University, 1968.
Co-author (with Joe Lee Steele and Ike H. Harrison), UNIVERSITY BANK
OFFICE COMPLEX, Bureau of Business Research, Texas Christian University, 1969.
Co-author (with Joe Lee Steele), WEST SIDE STATE BANK: MARKET,
FACILITIES, AND FUTURE, Bureau of Business Research, Texas Christian
University, 1970.
Co-author (with Joe Lee Steele), SOUTH FORT WORTH STATE BANK: BUILDING
COMPLEX FEASIBILITY STUDY, Bureau of Business Research, Texas Christian
University 1970.
SOUTHWEST BANK OF FORT WORTH: ITS MARKET, ITS BUILDING, ITS FUTURE,
Bureau of Business Research, Texas Christian University, 1973.
Consulting Activity:
Since 1957, a large number of consulting projects with large and small
corporations, including banks, savings and loan associations, manufacturing
companies, insurance companies, and many others.
Since 1967, expert economic consultant and witness in antitrust,
banking, securities, personal injury, wrongful death, divorce (business
valuation, retirement fund evaluation), breach of contract, complex financial
disputes, condemnation, employement, age and sex discrimination, personnel
management, and similar matters, in state and federal courts and
administrative agencies.
Employment:
1947: Investigator, Antitrust Division, Texas Attorney General, Austin,
Texas.
1947-48: Assistant, Office of the President, North Texas State
University.
Fall, 1948: Teaching Fellow, Economics Department, Texas A & M
University.
Spring 1949: Teaching Fellow, Economics Department, North Texas State
University.
1949-54: Instructor, Victoria College, Victoria, Texas.
1954-56: Instructor, Economics Department, University of Oklahoma.
1956-57: Fellow, Woodrow Wilson Fund, University of Oklahoma.
<PAGE>
Brief Biographical Sketch, Dr. Allen Self Page 3
1957-64: Assistant Professor (1957-59), Associate Professor (1959-63),
Professor (1963-64) and Acting Chairman, Management Department, North Texas
State University.
1964 to present: Professor of the History of Business Enterprise and
Director of the Bureau of Business Research (1964-67), Professor of
Management (1967-1990), Chairman of the Management and Marketing Department
(1971-1975), Emeritus Professor of Management, 1990-Present. Retired from TCU
and Texas Teacher Retirement System as of May 31, 1990.
Civic Activities:
Member, Zoning Board of Adjustment, City of Denton, Texas,
1957-59.
Member and Vice Chairman, Planning and Zoning Board, City of Denton,
Texas, 1959-63.
City Councilman, City of Denton, Texas, 1963-64.
Member, DFW Airport Zoning Board, Tarrant County Representative.
Professional Associations:
Life Member, Southwest Division, Academy of Management.
Southwestern Social Science Association.
<PAGE>
SIMON, ANISMAN, DOBY, WILSON & SKILLERN
[LETTERHEAD]
June 28, 1990
G. Norman Coder, Esq.
General Counsel
Independent Research Agency for
Life Insurance, Inc.
4100 South Hulen
Fort Worth, Texas 76109
Re: William C. Hugenberg, Jr.; your letter of June 4, 1990, concerning
the "repurchase" of 30,605 Class B shares of the common stock of
IRA at $17.50 per share.
Dear Mr. Coder:
We have been asked to review the rights of Mr. Hugenberg in connection
with your proposed purchase of his shares of IRA stock for $535,587.50. In
your letter you indicate that you desire to deposit such amount into Mr.
Hugenberg's account as "full payment for the share" on July 2, 1990. Our
initial review of the situation indicates that the value of such shares is
substantially in excess of $17.50 per share. Accordingly, Mr. Hugenberg will
be unable to accept the offer outlined in your letter.
Currently we are having Dr. Alan Self review this matter, and he will
furnish pursuant to my direction a report outlining what he believes to be
the actual value that should be received by Mr. Hugenberg for such shares. I
anticipate receiving this report next week, meaning the week of July 2, 1990.
When I have had a chance to review Dr. Self's report and consult with Mr.
Hugenberg, we will make a counter-proposal with respect to the shares in
question.
Very truly yours,
/s/ Khent H. Rowton
Khent H. Rowton
KHR:vsd
cc: William C. Hugenberg, Jr.
<PAGE>
SIMON, ANISMAN, DOBY, WILSON & SKILLERN
[LETTERHEAD]
July 2, 1990
VIA TELEFAX (817) 738-1023
G. Norman Coder, Esq.
General Counsel
Independent Research Agency for
Life Insurance, Inc.
4100 South Hulen
Fort worth, Texas 76109
Re: William C. Hugenberg, Jr.; your letter of June 4, 1990, concerning
the "repurchase" of 30,605 Class B shares of the common stock of
IRA at $17.50 per share.
Dear Mr. Coder:
Enclosed is a copy of our letter of June 28, 1990. Our client informs us
that you stated on Friday that you had not received any correspondence from
Mr. Rowton, This document was hand-delivered and left with your receptionist
on Thursday, at approximately 5:15-5:25 p.m.
Very truly yours,
/s/ Vi Davis
Vi Davis, Secretary
Khent H. Rowton
KHR:vsd
Enclosure
cc: Client
<PAGE>
SIMON, ANISMAN, DOBY, WILSON & SKILLERN
[LETTERHEAD]
July 2, 1990
VIA TELEFAX (817) 738-1023
Lamar C. Smith
Independent Research Agency for
Life Insurance, Inc.
4100 South Hulen
Fort Worth, Texas 76109
Re: William C. Hugenberg, Jr.;
your letter of July 2, 1990,
and my letter of Thursday, June 28, 1990;
Mr. Hugenberg's 30,605 shares of Class B I.R.A. stock.
Dear Mr. Smith:
I faxed you a copy of my letter of June 28 because Mr. Hugenberg
informed me that you were attempting to claim you did not receive my letter
rejecting your offer to purchase his shares as set forth in that letter. Your
people received the letter, not that it makes any difference, from one of our
employees on Thursday afternoon at approximately 5:00 p.m. The employee was
David White, the son of one of my partners. If you check with Mr. Coder and
his secretary, you will find he has the letter, because the employee was told
that the letter would be delivered to Mr. Coder who was there at that time. I
suggest that in fact you also have had the letter all along.
Since you claim to have attempted to transfer the funds to an account of
Mr. Hugenberg's when you knew he would not accept the terms of your offer, I
reiterate that he rejects your offer of $17.50 per share for his stock. If
you wish for Mr. Hugenberg to retain the funds while preserving his right to
demand a larger payment, we will do so. In the alternative, we will return
the funds to you if you in fact managed to "wire transfer" the funds on July
2, 1990.
<PAGE>
Lamar C. Smith
Independent Research Agency for
Life Insurance, Inc.
July 2, 1990
Page 2
I consider all of this to be high-handed, irresponsible and quite odd.
It appears to me that you are trying to force a transaction to close which
Mr. Hugenberg rejects. This is beginning to look like gamesmanship on your
part. I am checking the bank to see if you put the money there contrary to my
instructions and the request of Mr. Hugenberg. If you did so, then we will
exercise whatever option referenced above which you desire. We will not
deliver to you the stock certificates nor will we be railroaded into
accepting a totally inadequate offer. Finally, I suggest you have your legal
counsel contact me because I'm sure this matter can be better resolved if
your counsel is involved.
Very truly yours,
/s/ Khent H. Rowton
Khent H. Rowton
KHR:vsd
C:\Hugenber\Smith.ltr
l2511.000
cc: Client
<PAGE>
REGISTERED REPRESENTATIVE/AGENT AGREEMENT
CONTENTS
<TABLE>
<S> <C>
1. PLACE OF AGREEMENT - LAW GOVERNING . . . . . . . . . . . . . . . . . . .1
2. TERRITORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
3. INDEPENDENT CONTRACTOR STATUS - RIGHTS
AND RESPONSIBILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . .1
4. RULES AND AGREEMENTS AS TO OBLIGATIONS,
AUTHORITY, AND PROHIBITIONS . . . . . . . . . . . . . . . . . . . . . . .2
5. LIABILITY FOR COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . .2
6. CONFLICTS OF INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . .3
7. TRADE SECRETS AND PROPRIETARY INFORMATION . . . . . . . . . . . . . . . .3
8. COMMISSIONS AND ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . .3
9. PRODUCTION CREDIT (PC) . . . . . . . . . . . . . . . . . . . . . . . . .4
10. TERMINATION; RETURN OF PROPERTY . . . . . . . . . . . . . . . . . . . . .4
11. COMMISSIONS AFTER TERMINATION . . . . . . . . . . . . . . . . . . . . . .4
12. AGREEMENT AS TO POST-TERMINATION ACTIVITY . . . . . . . . . . . . . . . .5
13. REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
14. ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
15. SOLE AGREEMENT; CONDITIONS NOT WAIVED;
CONTINUING APPLICABILITY; SEVERABILITY. . . . . . . . . . . . . . . . . .6
ANNEX A - IRA AGENT COMMISSION . . . . . . . . . . . . . . . . . . . . . . .A-1
ANNEX B - USPA RR COMMISSION . . . . . . . . . . . . . . . . . . . . . . . .B-1
ANNEX C - QUARTERLY PROFESSIONAL COMMISSION . . . . . . . . . . . . . . . .C-1
ANNEX E - DEFERRED CAREER COMMISSION PLAN . . . . . . . . . . . . . . . . .E-1
ANNEX N - SPECIAL COMMISSION AVAILABLE TO "NEW
RR/AGENTS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N-1
</TABLE>
This Agreement is made between _______ ("RR/Agent"), United Services Planning
Association, Inc. ("USPA"), and Independent Research Agency for Life Insurance,
Inc. ("IRA"). As detailed on the following pages, this is an agreement under
which RR/Agent will represent USPA&IRA in offering products to the public which
USPA&IRA are authorized to sell, for which RR/Agent will be paid sales
commissions. RR/Agent will represent USPA&IRA as an independent contractor and
not as an employee, and will be financially responsible for RR/Agent's own
taxes, social security, benefit plans, business expenses, and liability
insurance. RR/Agent acknowledges that RR/Agent must observe the policies and
procedures of any business organization that RR/Agent represents and agrees to
do so in representing USPA&IRA, and the insurance companies and securities
distributors whose products are sold. RR/Agent additionally recognizes that the
insurance and securities industries are highly regulated, and RR/Agent agrees to
be responsible for knowledge of, and compliance with, the laws and regulations
governing these businesses as they affect RR/Agent.
Accordingly, USPA hereby appoints RR/Agent to represent it as its Registered
Representative in soliciting and selling securities for which USPA may act as
dealer, underwriter, or broker, and IRA hereby appoints RR/Agent to represent it
as its Agent in soliciting and selling insurance, and RR/Agent hereby accepts
these appointments subject to the terms and conditions stated above and
following:
1. PLACE OF AGREEMENT - LAW GOVERNING.
This Agreement is made in Fort Worth, Tarrant County, Texas (or if not
actually made in Fort Worth, Tarrant County, Texas, is not binding until
accepted and approved at the Home Office of USPA&IRA in Fort Worth, Tarrant
County, Texas). Any and all sums of money due or becoming due to RR/Agents
under this Agreement shall be payable at USPA&IRA's Home Office, in Fort
Worth, Tarrant County, Texas. Any claim for such money shall be made to
USPA&IRA's Home Office, and, subject to paragraph "14." below, any lawsuit
filed to collect such money shall be filed in Fort Worth, Texas, and
determined under Texas law.
2. TERRITORY.
The geographical area within 100 miles of any border of the following
United States military installation(s) and auxiliary installation(s), shall
be the territory in which RR/Agent agrees to represent USPA&IRA:
3. INDEPENDENT CONTRACTOR STATUS - RIGHTS AND RESPONSIBILITIES.
a. Within the territory in which RR/Agent agrees to represent USPA&IRA,
the RR/Agent shall use RR/Agent's own judgment as to the time, place,
and means of exercising authority under the terms of this Agreement.
RR/Agent is not required to personally provide the services described
herein but may delegate the performance of such services to RR/Agent's
employees or others, provided RR/Agent is not personally required to
perform such services by insurers, securities distributors, or
applicable laws and rules, and further provided that RR/Agent remains
fully responsible for all obligations agreed to herein.
b. It is specifically understood and agreed that RR/Agent's
appointment under this Agreement constitutes RR/Agent as an
independent contractor, and that the status of RR/Agent hereunder
shall not be that of an employee or full-time life insurance
salesperson under the terms of any federal, state, or local law.
Neither USPA nor IRA will withhold any deductions for social
security, income taxes, unemployment, or other taxes imposed upon
an employer/employee relationship. Thus, the RR/Agent shall be
responsible for all self-employment taxes and all other related
governmental obligations, including all
- --------------------------------------------------------------------------------
1
<PAGE>
local fees and taxes incidental to doing business as a Registered
Representative and insurance Agent.
c. The RR/Agent agrees to pay all business expenses incurred in
representing USPA&IRA. Such expenses include those incurred in the
operation of RR/Agent's office, and for all USPA&IRA sales materials
used by RR/Agent. The RR/Agent further agrees to pay $50 for each
Family Financial Program prepared on his/her behalf, for the purpose
of defraying the costs associated with Program production. However, in
any calendar quarter in which 15 to 19.5 Programs are produced (as
defined in Annex C of this Agreement), $25 per Program produced will
be refunded to the Agent as a Quarterly Program Refund (QPR); in any
quarter in which 20 to 24.5 Programs are produced, $30 per Program
will be so refunded; and in any quarter in which 25 or more Programs
are produced, $35 per Program will be so refunded.
4. RULES AND AGREEMENTS AS TO OBLIGATIONS, AUTHORITY, AND PROHIBITIONS.
a. The RR/Agent agrees to:
(1) Treat all monies received from clients on behalf of USPA&IRA
as trust funds, and to pay over such monies to USPA, or to
appropriate insurance companies on behalf of IRA, promptly upon
receipt.
(2) Place through USPA&IRA all business in which the prospect's
interest was generated by advertising, Seminars, Programs,
proposals, and/or sales presentations prepared by USPA&IRA or
other RR/Agents, or by referrals from other USPA&IRA clients,
prospects, or RR/Agents, giving USPA&IRA and companies
represented by them first opportunity for acceptance or refusal
of all investment or insurance business generated from members of
military families and/or families of existing clients.
(3) Make timely and proper delivery to the policyowner of all
insurance policies, and notify the Director of Insurance of IRA
if such delivery cannot be accomplished within 30 days after
receipt by the RR/Agent of the policy to be delivered.
b. The RR/Agent acknowledges that:
(1) RR/Agent shall have no authority to make, alter, or discharge an
investment contract, to waive forfeitures, or to incur any
liability on behalf of USPA or any securities distributor
represented by USPA.
(2) RR/Agent shall have no authority on behalf of IRA or any
insurance company represented by IRA to make, alter, or discharge
any policy or annuity contract, to extend the time for applying a
premium or consideration, to waive forfeitures, nor allow the
delivery of any policy unless the proposed insured is in good
health and the first premium is paid in full or an appropriate
military allotment has been duly filed.
(3) RR/Agent shall not have any right to bind USPA&IRA in any way
or make any contract, promise, or representation on behalf of
USPA&IRA except as set forth in this Agreement. RR/Agent is
particularly not authorized to enter into any lease for any
type of property, establish any bank account, or contract in
any way, in the name of "USPA&IRA," "USPA," "IRA," "United
Services Planning Association, Inc.," or "Independent Research
Agency for Life Insurance, Inc."
(4) Client information is confidential and should only be used by a
client's servicing RR/Agent for sales and client service.
Accessing and/or using client information by any, other party for
any other purpose shall be considered a breach of this Agreement
by an RR/Agent allowing such access or doing such accessing.
c. RR/Agent further acknowledges that RR/Agent is subject to and agrees
to abide by the policies and procedures of USPA&IRA, as well as the
rules and regulations of the Federal Securities and Exchange
Commission (SEC), the National Association of Securities Dealers
(NASD), applicable state securities laws, the rules and regulations of
the insurance companies represented, applicable state insurance laws
and regulations, applicable Department of Defense (DoD) and
subordinate Army, Navy, Air Force, and Marine Corps directives, Coast
Guard directives, and any other regulatory agencies as to securities
or insurance sold by RR/Agent.
5. LIABILITY FOR COMPLIANCE.
RR/Agent further agrees:
a. To hold USPA&IRA harmless and indemnify them fully from any and all
losses, expenses, damages, costs, and attorney fees that USPA&IRA may
incur by reason of any unauthorized act, omission, misrepresentation,
or misinformation by RR/Agent, be it intentional or resulting from
RR/Agent's negligence, by failure to reveal fully on an investment
application any information which is known the RR/Agent and required
by the securities distributor, or by failure to reveal fully on an
insurance application any pertinent information bearing on the health,
hazardous duty, profession, or practices of the applicant which is
known to the RR/Agent and required by the insurance company.
b. That USPA&IRA shall have the right to deduct any such losses from any
and all commissions or other monies otherwise payable to RR/Agent
under the terms of this Agreement, and RR/Agent further agrees to
reimburse USPA&IRA for any such losses in excess of commissions due.
Additionally, in the event either USPA or IRA shall determine, in
their sole discretion, that RR/Agent has committed any of the acts
described in subparagraph "5.a.," above, USPA or IRA, as applicable,
shall have the right to charge back any amounts previously earned on,
or as a result of, the sale in question, REGARDLESS of whether any
loss has been experienced by USPA, IRA, or the providers of the
product sold.
c. To fully and accurately complete and sign any "Compliance Checklist,"
which is a listing in plain language of some emphasis items designed
to communicate and confirm USPA&IRA policy and procedures as well as
general regulatory compliance, which USPA&IRA may from time to time
provide, and that RR/Agent's failure to do so shall be considered a
breach of this Agreement.
d. In the event RR/Agent observes or otherwise has knowledge of the
violation by any other RR/Agent of USPA&IRA of any law, rule, or
regulation pertaining to the conduct of the
- --------------------------------------------------------------------------------
2
<PAGE>
investment or insurance businesses, or of the terms of this Agreement,
to report such violation to the Presidents of USPA&IRA, through
RR/Agent's District Agent and Regional Office, and acknowledges that
failure to do so may be considered as a breach of this Agreement.
e. That, for the purpose of assuring that any RR/Agent's actions are in
compliance with securities and insurance laws, rules, and regulations,
District Agents, Regional Agents, and Home Office personnel are
authorized and expected to periodically visit and observe operations,
offices, records, and activities of RR/Agents, and to monitor RR/Agent
appointments with prospects and clients so as to observe sales
presentations and techniques.
f. To pay for, assume responsibility for, and indemnify and hold USPA&IRA
harmless from, any and all damage to property and/or injury or
injuries to other persons occurring on the business premises of
RR/Agent in representing USPA&IRA or from the use of RR/Agent's
automobile or the use by RR/Agent of the automobile of another person,
or any other damages, expenses, and attorney fees, incurred by USPA,
IRA, or the investment or insurance companies represented by the
RR/Agent, as a result of any unauthorized, unlawful, or negligent acts
of the RR/Agent.
g. To carry, in full force at all times, bodily injury and property
damage insurance on RR/Agent's automobile to indemnify against loss of
this nature, in limits of not less than $50,000 for damage to property
of other persons in any one accident, and not less than $200,000 for
the death of or injury to one person in any one accident, and not less
than $500,000 for more than one person in any one accident.
6. CONFLICTS OF INTEREST.
a. RR/Agent acknowledges that all information concerning the identity and
productivity of RR/Agents or employees of USPA&IRA is confidential and
proprietary to USPA&IRA and to those RR/Agents or employees. RR/Agent
acknowledges that RR/Agent will not, directly or indirectly, use,
disclose, or make available in any manner, to persons other than duly
authorized USPA&IRA RR/Agents or employees, such confidential and
proprietary information.
b. RR/Agent further agrees that RR/Agent will not, in the territory in
which RR/Agent has represented USPA&IRA (specifically described in
numerical paragraph "2" of this Agreement), during the term of this
Agreement and for two (2) years after its termination:
(1) Solicit or induce any RR/Agent or employee of USPA&IRA to
terminate with USPA&IRA.
(2) Enter into or invest in any business directly or indirectly
competing with USPA&IRA with any RR/Agent or employee of USPA, or
with any former RR/Agent or employee of USPA&IRA who has
performed any services for USPA&IRA within any of the twelve (12)
preceding months.
7. TRADE SECRETS AND PROPRIETARY INFORMATION.
a. SALES MATERIAL. USPA&IRA may make available to RR/Agent sales
materials, including computer software, created and/or compiled by
them. It is further agreed and understood that all such items created
and/or compiled by USPA&IRA, whether or not copyrighted, are
confidential and proprietary to USPA&IRA. RR/Agent shall safeguard all
such materials, including, but not limited to, forms, books, tapes,
manuals, rosters, and software, in a confidential manner, and shall
not disclose or make available to persons other than duly authorized
USPA&IRA RR/Agents or employees, such confidential or proprietary
information of USPA&IRA and their clients.
b. INSURANCE AND CLIENT INFORMATION. RR/Agent acknowledges that as an
RR/Agent, he/she will become acquainted with confidential and
proprietary information of USPA&IRA relating to persons, firms, and
organizations which are clients of USPA&IRA. This confidential
information may include, but is not necessarily limited to, the names
and addresses of clients and prospective clients of USPA&IRA, computer
software, compilations of census data, information concerning the
policies and procedures of the United States Military Services, policy
expiration dates, policy terms, conditions and rates, and client risk
characteristics. RR/Agent agrees to safeguard all such materials in a
confidential manner and will not, without the prior written approval
of the Presidents of USPA&IRA, directly or indirectly use, disclose,
or make available in any manner to persons other than duly authorized
USPA&IRA RR/Agents or employees, such confidential or proprietary
information of USPA&IRA and their clients.
C. PRODUCT AND MARKETING INFORMATION. It is agreed that USPA&IRA have a
proprietary interest in all information concerning their products,
processes, and services, including information relating to research,
development, programming, computer software, accounting, marketing and
pricing techniques, briefings, charts, films, slides, presentations,
merchandising, and clients, which information is not generally known
in the industries in which USPA&IRA are engaged, and which may become
known by, or disclosed to, RR/Agent solely as a consequence of
RR/Agent's dealings with USPA&IRA. RR/Agent agrees not to use,
disclose, or make available in any manner to persons other than duly
authorized USPA&IRA RR/Agents or employees, such confidential or
proprietary information of USPA&IRA and their clients.
8. COMMISSIONS AND ASSIGNMENTS.
a. RR/AGENT COMMISSIONS. The RR/Agent's sole sources of remuneration
under this Agreement are the commissions and, as to certain
investments, service fees, scheduled in the attached Annexes, which
are incorporated in this Agreement for all purposes. USPA&IRA RESERVE
THE RIGHT TO CHANGE THE PORTION OF THIS AGREEMENT PERTAINING TO
RR/AGENT COMMISSIONS AND SERVICE FEES, AS WELL AS ANY OF THESE
ANNEXES, PROVIDED THAT WRITTEN NOTICE OF ALL CHANGES IS POSTED TO THE
RR/AGENT PRIOR TO THE EFFECTIVE DATE OF THE CHANGES. No other
compensation - such as payment for franchise rights, ownership
interest, goodwill, or other remuneration or consideration - shall be
due to an RR/Agent, District Agent, Assistant Regional Agent, or
Regional Agent, from USPA and/or IRA, notwithstanding the fact that
RR/Agent has established an office, has maintained administrative
- --------------------------------------------------------------------------------
3
<PAGE>
facilities, has relocated, or for any other reasons during the term of
this Agreement or thereafter.
b. COMMISSION ASSIGNMENTS. RR/Agent agrees that:
(1) All monies payable to him/her from the securities distributors or
insurance companies represented by USPA or IRA are hereby
assigned to USPA or IRA, respectively, for payment in accordance
with the Annexes attached hereto and the other terms and
provisions contained herein.
(2) No assignment to third parties of commissions earned, accrued, or
to accrue under this Agreement shall be binding upon USPA or IRA
unless said assignment is approved in advance in writing and
signed by a duly authorized officer of USPA or IRA.
9. PRODUCTION CREDIT (PC).
PC is defined as the total commissions which are expected to be paid by
USPA or IRA to an RR/Agent on a particular sale. PC is used to determine
current individual production, to measure qualification for sales meeting
attendance, to determine annualized production, and to qualify for the
Quarterly Professional Commission and other incentives. PC will be granted
by USPA or IRA upon the receipt of acceptably documented details of a sale.
CREDIT WILL BE GRANTED IN THE MONTH THAT THE ENVELOPE TRANSMITTING THE
DOCUMENTATION TO USPA OR IRA IS POSTMARKED (IF THAT ENVELOPE IS RECEIVED AT
THE USPA&IRA HOME OFFICE ON OR PRIOR TO THE FIFTH DAY OF THE FOLLOWING
MONTH). UNDER NO CIRCUMSTANCES CAN PC BE AWARDED RETROACTIVELY. Additional
information concerning the award of PC for insurance and investment sales
is provided in Annexes A and B, respectively. However:
a. Whenever an investment amount or insurance premium is to be paid by
military allotment, PC will be granted only after an authentic copy of
the properly registered military allotment (or a suitable substitute)
is received by USPA or IRA at their Home Office.
b. The submission of any insurance or investment application, or the
causing of any existing insurance policy or investment plan to be
continued in force, under any circumstances when it is known by the
RR/Agent that the client does not genuinely intend to retain the
account or policy for any reason, and specifically when such action by
the RR/Agent results in, or is for the purpose of, attaining or
maintaining production or persistency minimums, for earning certain
incentive commissions, or for any other purpose of monetary gain,
constitutes a breach of this Agreement.
c. "CONTROLLED BUSINESS." Insurance policies or investment products sold
by an RR/Agent for RR/Agent's own account, or to RR/Agent's spouse,
parents, children, employee(s), or to another USPA&IRA RR/Agent, or to
the spouse, parents, children, or employee(s) of said RR/Agent, shall
be identified as "controlled business" on the Cover Memo provided to
USPA&IRA by the RR/Agent and shall be subject to the following special
rules:
(1) If any such "controlled business" becomes nonpersistent (as
described in Annexes A and B), the PC penalty normally applicable
to such "nonpersistent business" shall be double that described
in the respective Annexes.
(2) In addition, USPA&IRA may retroactively apply the PC penalty to
the date of the original sale and adjust accordingly any
commissions which may have been awarded as a result of the
originally credited PC.
(3) If any insurance sale defined as "controlled business" directly
or indirectly replaces existing insurance sold through ERA, no
commissions shall be paid or PC credited as a result of the
issuance of the "controlled business." For purposes of this
provision, an indirect replacement will be deemed to have
occurred if insurance sold through IRA was terminated by the
purchaser within six (6) months prior to the issuance of the
"controlled business."
10. TERMINATION; RETURN OF PROPERTY.
a. This Agreement can be terminated by either RR/Agent or USPA&IRA at any
time without cause upon the giving of 30 days written notice to the
other parties. This Agreement may be terminated immediately for cause
by either USPA&IRA or RR/Agent upon the giving of written notice. Such
notice may, in either case, be delivered personally or mailed to the
last known address of the recipient of such notice, via United States
mail or its equivalent. This Agreement shall automatically terminate
in the event of death of RR/Agent.
b. RR/Agent agrees that, within three (3) days of the termination of this
Agreement, RR/Agent shall return all USPA&IRA property to USPA&IRA,
including all copies of information within RR/Agent's possession or
subject to RR/ Agent's control pertaining to the business and clients
of USPA&IRA, whether prepared by RR/Agent or others. RR/ Agent
specifically agrees that computer software in his/her possession at
termination shall either be turned over in its entirety to USPA&IRA's
designated representative (usually RR/Agent's District Agent) or
permanently destroyed. Until it has been established to the
satisfaction of USPA&IRA that all of the foregoing has occurred, any
commissions otherwise payable to the terminating RR/Agent may be
withheld by USPA&IRA.
c. RR/Agent specifically agrees that the provisions of paragraphs "6,"
"7," "ll," "12," "13," "14," and "15" shall survive termination of
this Agreement.
11. COMMISSIONS AFTER TERMINATION.
a. TERMINATION AT ANY TIME. Upon termination of this Agreement,
commissions due and to become due shall be retained by USPA&IRA as
follows:
(1) USPA&IRA shall determine and retain amounts necessary to cover
possible refunds of commissions previously paid on insurance
policies and on systematic (contractual) investment plans sold
which may subsequently lapse or be liquidated. These amounts may
be retained for a period of 25 months following the issue date of
the last insurance policy sold, or 30 days following the
expiration of the 18-month (28-month in states which have adopted
the NASAA Guidelines for contractual plans) liquidation period
allowed by the last
- --------------------------------------------------------------------------------
4
<PAGE>
systematic (contractual) investment plan sold, whichever shall
occur last.
(2) Amounts necessary for the repayment of any loans (including
interest accruing on such loans until paid in full) made by USPA
and/or IRA to the RR/Agent.
b. RETENTION OF COMMISSION BY USPA&IRA. Commissions retained by USPA may
be used to cover refunds and/or repayments due to both USPA&IRA.
Commission retained by IRA may be used to cover refunds and/or
repayments due to both USPA&EPA.
c. PAYMENT OF REMAINING COMMISSIONS. After all repayments have been made
and at the end of the above-defined periods, all remaining accrued
commissions will be paid to the RR/Agent, together with interest at a
rate equal to the passbook savings rate at Central Bank & Trust, Fort
Worth, Texas, on the amount remaining, computed from the date said
remaining amounts were received by USPA and/or IRA until payment. In
the event termination has resulted from the death of the RR/Agent,
such commissions shall be paid to RR/Agent's estate. A terminated
RR/Agent or the estate of a deceased RR/Agent is qualified to receive
commissions payable on systematic (contractual) plans and insurance
policies after satisfaction of the above-described claims. However, NO
COMMISSIONS ARE PAYABLE ON PAYMENTS MADE INTO VOLUNTARY ACCOUNTS AFTER
TERMINATION OF THIS AGREEMENT.
12. AGREEMENT AS TO POST-TERMINATION ACTIVITY.
In addition to paragraphs "6," "7," "11," "13," and "14," of this
Agreement as they affect RR/Agent's post-termination activity, RR/Agent
specifically agrees that for a period of two (2) years following
termination of this Agreement, RR/Agent will not, in the territory in which
RR/Agent has represented USPA&IRA:
a. Solicit, directly or indirectly, or assist or train others in the
solicitation of active duty members of the United States Military
Services or their immediate families, in connection with the purchase
or sale of life insurance of a type which is sold by or competes with
IRA, or investments of a type which is brokered or sold by or competes
with USPA, unless RR/Agent has obtained the prior written consent of
the Presidents of USPA and/or IRA.
b. Induce, solicit, or assist others in the inducement or solicitation
of, any client of USPA&IRA to liquidate, partially liquidate, or
transfer to any other broker/dealer, USPA investment accounts, or to
cancel or replace insurance policies sold by or through IRA, unless
RR/Agent has obtained the prior written consent of the Presidents of
USPA&IRA.
13. REMEDIES.
If, as a result of any activity constituting a violation of any provision
of this Agreement, any commission or fee becomes payable to RR/Agent or to
any other person, firm, or organization with whom RR/Agent is then
associated, contracted, or employed, RR/Agent agrees that USPA&IRA will
have been damaged in the amount of this commission or fee and agrees to pay
promptly to USPA&IRA an amount equal to such damages plus interest at the
legal rate. Such restitution shall not, however, limit the amount of any
monetary damage or the availability of any equitable remedies, including
injunctive relief, to which USPA&IRA may become entitled, and USPA&IRA may
withhold payment of commission otherwise due to RR/Agent during the period
required to determine whether USPA&IRA are entitled to the restitution
described above. In the event this determination is in favor of RR/Agent,
these withholdings shall be paid to RR/Agent, with interest at a rate equal
to the passbook savings rate at Central Bank & Trust, Fort Worth, Texas.
14. ARBITRATION.
All controversies, disputes or claims between RR/Agent and USPA&IRA arising
out of and/or relating to this Agreement shall be submitted for binding
arbitration to the National Association of Securities Dealers, Inc.
("NASD"), and such arbitration proceedings shall be heard in accordance
with the then current NASD Uniform Code of Arbitration; provided, however,
that if such controversy, dispute or claim is not eligible for submission
to arbitration before the NASD, such matters shall be submitted for binding
arbitration to the American Arbitration Association ("AAA") and such
proceedings shall be heard in accordance with the then current commercial
arbitration rules of the AAA.
Except as limited by this Agreement, the arbitrator will have the right to
award or include in the arbitrator's award any relief which the arbitrator
deems proper in the circumstances, including, without limitation, money
damages (with interest on unpaid amounts from the date due), specific
performance, injunctive relief, and attorneys' fees and costs, provided
that the arbitrator will not have the right to award exemplary or punitive
damages. The award and decision of the arbitrator will be conclusive and
binding upon all parties hereto and any arbitration award may be entered as
a judgment in any court of competent jurisdiction.
The parties hereto agree to be bound by the provisions of any limitation on
the period of time in which claims must be brought under applicable law or
this Agreement, whichever expires earlier. The parties further agree that,
in connection with any such arbitration proceeding, each must submit or
file any claim which would constitute a compulsory counterclaim (as defined
by Rule 13 of the Federal Rules of Civil Procedure) within the same
proceeding as the claim to which it relates. Any such claim which is not
submitted or filed as described above will be forever barred.
The parties hereto agree that arbitration will be conducted on an
individual, not a class-wide, basis and that an arbitration proceeding
between RR/Agent and USPA&IRA may not be consolidated with any other
arbitration proceeding between USPA&IRA and any other person. The costs of
arbitration shall be borne equally by the parties pending a final award by
the arbitrator.
Notwithstanding anything to the contrary contained in this paragraph 14,
RR/Agent and USPA&IRA each have the right in a proper case to obtain
temporary restraining orders and temporary or preliminary injunctive relief
from a court of competent jurisdiction, provided, however, that the parties
agree to contemporaneously (or as soon thereafter as is reasonably
possible) submit the dispute for arbitration on the merits as provided
herein.
- --------------------------------------------------------------------------------
5
<PAGE>
The laws of the state of Texas shall govern with respect to any
controversies, disputes or claims arbitrated or litigated hereunder.
15. SOLE AGREEMENT; CONDITIONS NOT WAIVED; CONTINUING APPLICABILITY;
SEVERABILITY.
a. SOLE AGREEMENT. This Agreement supersedes all prior Agreements between
RR/Agent and USPA or IRA and, along with its Annexes, contains all of
the terms and understanding between the parties hereto as of this
date. The parties agree that said terms and provisions shall not be
altered or modified in any manner except by mutual written agreement
between RR/Agent and the Presidents of USPA&IRA, provided, however,
that USPA&IRA reserve the unilateral right to change the portions of
this Agreement pertaining to commissions and the Annexes attached upon
prior written notice, as described in paragraph "8.a." above.
b. CONDITIONS NOT WAIVED. The failure by USPA&IRA to exact strict
compliance with the terms of this Agreement or to declare any default
when such shall become known to USPA&IRA, shall neither operate as a
waiver of such terms nor release RR/Agent from RR/Agent's obligation
to perform this Agreement in accordance with its terms.
c. CONTINUING APPLICABILITY. This Agreement shall be binding upon the
parties, their legal representatives, successors, and assignees. It is
expressly agreed that the provisions contained herein which affect the
RR/Agent's activities, both before and after termination, shall
continue in full force and effect after this Agreement is otherwise
terminated.
d. SEVERABILITY. If for any reason any provision or portion of any
provision of this Agreement is held by proper judicial authority to be
invalid and/or unenforceable, said holding shall not invalidate any
other portion of this Agreement which is otherwise valid and
enforceable.
IN WITNESS WHEREOF, the parties to this Agreement have executed it as of the
date first written above.
By
---------------------------------------------------
Signature of Registered Representative/Agent
Form of business entity of RR/Agent:
/ / Corporation / / Partnership / / Sole Proprietorship
United Services Planning Association, Inc.
and
Independent Research Agency for Life Insurance, Inc.
By
---------------------------------------------------
Signature of President
- --------------------------------------------------------------------------------
6
<PAGE>
ANNEX A
USPA&IRA RR/AGENT AGREEMENT
IRA AGENT COMMISSION
1. INSURANCE COMMISSIONS.
Insurance commissions will be paid and Production Credit (PC) will be
granted to an appropriately licensed Agent who makes persistent sales of
the products shown in this Annex, under the following conditions:
a. Commissions are paid on the first-year premium only, are paid to an
Agent only after IRA receives commissions from the insurance
companies.
b. As noted in paragraph "8.a." of this Agreement, this Annex may be
changed upon prior written notice by IRA.
2. INSURANCE COMMISSION AMOUNTS.
Agents will be paid commissions and be granted PC amounting to 80% of the
first-year premium on each sale made of the "standard" insurance products
described in this Annex.
3. PRODUCTION CREDIT.
As defined in paragraph "9" of this Agreement, IRA grants PC to the Agent
upon its receipt of acceptably documented details of a sale. For insurance
sales, this documentation is transmitted using the IRA "Cover Memo"
designed for that purpose. For purposes of awarding PC, a "sale" is deemed
to have occurred only after the appropriately supported "Cover Memo" is
received and processed at the Home Offices of USPA&IRA. Further, the award
of PC is subject to the following additional conditions:
a. The sale must be made to either an existing client* or an immediate
family member of said existing client, or to an individual who is an
active duty member of the U.S. military with the rank of E-6 or above,
or the immediate family member of an active duty E-6 or above; and the
sale must occur within 24 months after the scheduled presentation of a
Family Financial Program which recommended the products sold.
b. Subject to "a.," above, IRA will grant full PC, equal to the amount of
first-year commissions to be paid to the selling Agent, ONLY if:
(1) A military allotment has been completed and properly registered,
or an automatic bank draft plan has been established with the
required initial premium, or if full payment of the first annual
premium has been received by the insurance company; and
(2) A completed Cover Memo and, if applicable, a copy of the properly
filed military allotment (or a suitable substitute) have been
received by IRA at its Home Office.
c. Otherwise, but also subject to "a.," above, IRA will grant partial PC
to the selling Agent to the extent of the commissions due on the
premium amounts received by the insurance company, either in
conjunction with the initial application or subsequently during the
first policy year.
d. IRA will grant PC on a "trial" or "C.O.D." application only after the
policy is issued by the insurance company and the first payment or
copy of a duly filed military allotment (or suitable substitute) or
bank draft authorization (with initial premium) is received by the
insurance company. The granting of PC in such cases shall also be
subject to the requirements stated in "a.," above.
4. TERM CONVERSIONS.
When a full or partial term conversion is made and the in-force term
coverage is converted to whole life insurance, PC is granted and
commissions are paid on the full amount of the new (converted) policy's
premium. However, if ANY of the in-force term coverage is canceled, NO PC
or commissions will be paid on the converted policy. Also, a conversion
made during the first policy year is treated as follows:
a. CONVERTING AGENT IS SAME AS SELLING AGENT. Full PC and commissions are
paid on the converted policy. A 100% chargeback of PC and commissions
is made on the amount of term that was converted;
b. CONVERTING AGENT IS DIFFERENT FROM SELLING AGENT. Converting Agent is
paid PC and commissions on the increase in premium (new policy plus
remaining policy minus original policy). No chargeback of PC or
commissions is made to the selling Agent.
5. NONPERSISTENT BUSINESS.
Chargebacks of paid commissions and granted PC will be made for
nonpersistent business--policies and riders which are not issued, issued
but not taken, canceled, lapsed, or otherwise terminated for whatever
reason (excluding the death of the insured). In the event of a policy
cancellation involving a refund of all premiums paid, the selling Agent
will incur a 100% PC and commission chargeback. In the event of a
cancellation not involving a refund of all premiums paid, no PC or
commission chargeback will be made if the cancellation occurs after 25
monthly premiums have been paid. However, cancellations not involving a
refund of all premiums paid but occurring before 25 premium payments
have been made will result in a chargeback, computed as follows:
a. COMMISSION CHARGEBACK. Commissions are considered to be earned as they
are paid, but are subject to recoupment should the policy become
nonpersistent prior to receipt of the 25th monthly premium. Upon
termination or lapse, commissions already paid on a nonpersistent
insurance policy will be charged back as follows:
(1) 100% of commissions paid will be charged back if termination
occurs at or prior to the fifth monthly premium;
(2) Thereafter, commissions paid will be charged back at a rate of 5%
per month for each month less than 25 months that the policy was
in force.
- ------------------------
* A client who was in the USPA&IRA Home Office computer database as of June
30, 1996.
- --------------------------------------------------------------------------------
A-1
<PAGE>
b. PRODUCTION CREDIT CHARGEBACKS. Similarly, PC is considered to be
earned as each commission payment is received. WHENEVER COMMISSIONS
ARE CHARGED BACK, PC WILL ALSO BE CHARGED BACK SUCH THAT THE AMOUNT OF
PC RETAINED FOLLOWING THE PC CHARGEBACK WILL EQUAL THE AMOUNT OF
COMMISSIONS RETAINED FOLLOWING THE COMMISSION CHARGEBACK.
c. TIMING OF CHARGEBACKS. As a general rule, both commission and PC
chargebacks will take effect in the month FOLLOWING that in which the
chargeback is processed, unless the Agent otherwise requests that it
be applied immediately.
6. INSURANCE COMPANIES AND PRODUCTS.
The following are the standard insurance products upon which the
commissions described in paragraph "2" of this Annex are paid:
ALL AMERICAN LIFE INSURANCE COMPANY
Preferred Whole Life
Preferred Uniform Decreasing Term (PUDT-65)
*Specified riders attached at time of policy issue
LIBERTY NATIONAL LIFE INSURANCE COMPANY
Whole Life (BANDED SERIES ONLY)
Decreasing Term to Ages 65, 70, 75, 80, and 85
(last 5 years level) (DT-65, 70, 75, 80, and 85)
All riders attached at time of policy issue and DT-65, 70,
75, 80, or 85 riders added to existing policies.
MONUMENTAL LIFE INSURANCE COMPANY
Whole Life
Uniform Decreasing Term to Ages 65 and 85
(UDT-65 and 85)
Decreasing Term to Age 80 (DT-80)
All riders attached at time of policy issue and UDT-65,
DT-80, or UDT-85 riders added to existing policies.
THE OLD LINE LIFE INSURANCE COMPANY OF AMERICA
Preferred Whole Life
Preferred Uniform Decreasing Term (PUDT-65)
*Specified riders attached at time of policy issue
SECURITY BENEFIT LIFE INSURANCE COMPANY**
Whole Life
Decreasing Term to Age 65 (DT-65)
All riders attached at time of policy issue
- ---------------------------
* Only PUDT-65 may be written as a rider on Preferred Whole Life (PWL). Other
decreasing term riders are not authorized. Child rider, OPAI, GIO (AL
only), and WP may be written on both PUDT-65 and PWL.
** No commission is paid on the portion of first year premium which is a
policy fee.
Commissions to be paid and PC granted on products other than those listed
above shall be 40% of the first-year premiums.
Subject to satisfying the requirements in paragraph "3.a.," above, PC and
commissions shall be credited/paid to the original Agent on riders added to
an existing policy during the first policy year, and will be credited/paid
pro rata during the BALANCE of the first policy year after such addition.
NO PC OR COMMISSION SHALL BE CREDITED/PAID ON RIDERS ADDED TO A POLICY
AFTER THE FIRST POLICY YEAR, except for the addition of decreasing term
riders to existing Monumental Life and Liberty National policies, for which
full first-year commission will be paid to the Agent who adds the
decreasing term rider. PC will be granted in accordance with paragraph
"3" above.
- --------------------------------------------------------------------------------
A-2
<PAGE>
ANNEX B
USPA&IRA RR/AGENT AGREEMENT
USPA RR COMMISSION
1. INVESTMENT COMMISSIONS.
Investment commissions and 12b-1 service fees will be paid and Production
Credit (PC) will be granted to an appropriately licensed RR who makes
persistent sales of the products shown in this Annex, under the following
conditions:
a. For systematic (contractual) investment plans, commissions are based
solely on the first-year sales charges paid by the investor.
Systematic plan 12b-1 fees are not paid to the RR.
b. For voluntary investment accounts, commissions and service fees are a
percentage of investment amounts and subsequent service fees paid to
USPA.
c. For both systematic (contractual) investment plans and voluntary
investment accounts, commissions are paid to an RR only after USPA
receives payment for sales from the respective securities
distributors.
d. As noted in paragraph "8.a." of this Agreement, this Annex may be
changed upon prior written notice by USPA to the RR.
2. INVESTMENT COMMISSION AMOUNTS AND SERVICE FEES.
a. The commission and PC amounts associated with the investment products
most frequently sold by USPA RRs are shown in paragraphs "7" and "8"
of this Annex.
b. Additional payments, termed "service fees" for purposes hereof, may be
payable on certain mutual funds. These service fees will be a portion
of the fees paid to USPA under a 12b-1 distribution plan by the
particular mutual fund. The amount of such 12b-1 fees are described in
paragraph "8" of this Annex. They will normally be paid quarterly
subsequent to receipt by USPA. Of the 12b-1 amounts received by USPA,
the original selling RR may be paid a portion of them depending on the
fund and when purchased. The Current Servicing Agent (CSA), as USPA
defines such for all other purposes, shall, in any event, receive a
portion of such amounts. If the original selling RR and the CSA are
the same person, this individual may be paid both portions of the
12b-1 amounts received by USPA and paid to RRs, depending on the fund
and when purchased. PC shall be credited to an RR in an amount equal
to any service fees paid to the RR, and any such amounts shall be
considered with other commissions in determining Quarterly
Professional Commission qualification. District Agents and Regions
will be paid overrides at the rate payable for all other RR sales
commissions for service fees paid to their RRs.
3. PRODUCTION CREDIT.
As described in paragraph "8" of this Agreement, USPA grants PC to the
RR upon its receipt of acceptably documented details of a sale. For
investment sales, this documentation is transmitted using the USPA
"Cover Memo" designed for that purpose. For purposes of awarding PC, a
"sale" is deemed to have occurred only after the appropriately supported
"Cover Memo" is received and processed at the Home Offices of USPA&IRA.
Further, the award of PC is subject to the following additional
conditions:
a. The sale must satisfy the requirements of USPA&IRA Statement of Policy
(SOP) 13-7, titled "Award of Production Credit," including the
requirement for Form 1340, titled "Market Confirmation for Production
Credit," and must be in accordance with SOP 5-1, titled "Authorized
Sales Procedures."
b. SYSTEMATIC (CONTRACTUAL) INVESTMENT PLANS.
(1) Subject to "a.," above, "Full PC" - equal to the total amount of
first-year commissions payable to the RR, as shown in paragraph
"7" of this Annex - will be granted if the Cover Memo is received
by USPA at its Home Office and
(a) is accompanied by evidence that an acceptable "monthly mode
of payment" has been or is being established on a timely
basis, such evidence to include a copy of a properly
registered military allotment (or a suitable substitute),
automatic bank draft authorization, or approved electronic
funds transfer (EFT) authorization. Payments made pursuant
to such an acceptable mode of payment are hereinafter
referred to as "modal payments." For the purpose of awarding
PC, a mode of payment will be considered timely and
acceptable IF AND ONLY IF the first monthly modal payment is
scheduled to arrive at the fund company within three full
production months following and including the production
month for which the PC is awarded. Modal payments on other
than a monthly frequency (bimonthly, quarterly, etc.) will
be awarded PC on a residual basis.
(b) Plans cannot be opened with partial modal payments.
(2) Residual PC equal to the amount of commissions due to the RR on
any initial cash investment accompanying the application - will
be granted when no mode of payment is established and the Cover
Memo, supporting documentation, and initial investment are
otherwise sufficient to permit opening the account. Residual PC
(and commissions) are awarded for each full monthly unit of the
plan. When partial payments are received by the fund, commissions
are paid to USPA after each full investment unit accrues.
(3) Otherwise, if no valid mode of payment is established and no
acceptable initial investment is received, no PC will be awarded
and the Cover Memo with its supporting documentation will be
returned to the RR.
(4) Once the investor has made the commissionable investments
described in paragraph "7" of this Annex, no further commissions
or PC will be paid or credited to the selling RR.
- --------------------------------------------------------------------------------
B-1
<PAGE>
c. VOLUNTARY (OPEN) ACCOUNTS:
(1) Commissions on initial lump sum/cash sales which establish
voluntary (open) accounts are paid to the RR after USPA receives
payment for such sales from the investment companies. Subject to
the requirements of paragraph "3a," above, initial PC on these
sales is credited when the Home Office RECEIVES the Cover Memo,
an appropriately executed application, and an acceptable initial
investment. The amount of PC shall be equal to the commission
payable to the RR for the amount of investment actually
transmitted with the Cover Memo. This is normally 50% of the
dealer allowance paid to USPA in accordance with the current
prospectus and dealer agreements. Some examples are shown in
paragraph "8" of this Annex.
(2) If no acceptable initial investment is received and no valid
payments are established, no PC will be awarded and the Cover
Memo and accompanying documents may be returned to the RR.
d. COMMISSIONS/PC FOR SUBSEQUENT INVESTMENTS TO PREVIOUSLY ESTABLISHED
VOLUNTARY ACCOUNTS. The following provisions will be implemented to
the extent that they do not conflict with SEC, NASD, or state
regulations, rules, or laws prevailing at the time:
(1) Commissions will be paid and "residual" PC will be awarded on
subsequent monthly or lump sum investments to previously
established voluntary accounts AFTER the commission on each such
subsequent investment is paid to USPA, and in an amount equal to
the commission payable to the RR on each such investment.
(2) The selling RR will continue to receive commissions and
"residual" PC (in accordance with paragraph "3.c.(1)" above:
(a) on subsequent MODAL investments into previously established
voluntary accounts, so long as this Agreement has not been
terminated AND the modal payments continue without
interruption.
(b) on subsequent CASUAL (non-modal payments not equal to the
anticipated modal amount, if any) investments into
previously established voluntary accounts, so long as this
Agreement has not been terminated and entitlement to such
commissions and PC has not been earned by another RR, as
explained in paragraph "5" below.
e. ADDITIONAL INVESTMENTS TO ACCOUNTS ESTABLISHED BY OTHER RRs. A
servicing RR who causes additional commissionable monthly or lump sum
dollars to be invested in a previously established account MAY be
granted PC and commissions on such additional investments upon receipt
by USPA of properly documented evidence of the sale.
4. NONPERSISTENT BUSINESS.
Chargebacks of paid commissions and granted PC will be made for
nonpersistent business - investment plans and accounts which are not
actually established, which are established but not funded, or which are
canceled, lapsed, discontinued, liquidated, or to which the investor fails
to continue payments for any cause whatsoever (except the death of the
investor) - and will be computed as follows:
a. SYSTEMATIC (CONTRACTUAL) INVESTMENT PLAITS.
(1) 100% of any commissions paid and of the original PC granted will
be charged back if the investment plan is not established or if
it is liquidated within 18 months of the date the plan is
established.
(2) In the event that MONTHLY MODAL payments are discontinued prior
to the end of the commissionable period, the amount of PC
attributable to the remaining commissionable payments will be
charged back.
(3) If a Pioneer Independence Plans modal payment is reduced to a
partial payment, it will be treated as a discontinued mode and
the amount of PC attributable to remaining commissionable
payments will be charged back. PC will then be paid residually on
partial payments, based on the amount of the payment.
b. VOLUNTARY ACCOUNTS. All PC awarded and commissions and service fees
paid in conjunction with an investment into a voluntary account will
be charged back to the extent that the invested monies, for whatever
reason, are subsequently refunded to the investor in whole or in part,
and for which commissions and service fees are recouped from USPA.
c. TIMING OF CHARGEBACKS. As a general rule, both commission and PC
chargebacks will take effect in the month following that in which the
chargeback is processed, unless the RR otherwise requests that it be
applied immediately.
d. RESUMPTION OF MODAL PAYMENTS ON A CONTRACTUAL INVESTMENT PLAN. In the
event modal payments are restarted (or begun) on a contractual plan
which has been dormant for six months and has had a chargeback
applied, commissions and PC will be awarded for any of the remaining
commissionable payments. These commissions and PC will be awarded to
the licensed RR determined to be most responsible for causing the
resumption of modal payments.
5. SERVICING VOLUNTARY ACCOUNTS SOLD BY OTHER RRs.
a. SOLD BY AN RR WHO IS STILL ACTIVE. Upon appropriate notification to
the Home Office, a servicing RR may receive commissions and PC by:
(1) initiating or resuming a mode of payment on an account that has
been dormant for at least six months; or
(2) increasing a monthly mode of payment; or
(3) the servicing RR most responsible for a casual (non-modal)
payment to an active or dormant account will be entitled to
commissions and PC for that transaction only.
- --------------------------------------------------------------------------------
B-2
<PAGE>
b. SOLD BY AN RR WHO IS NO LONGER ACTIVE. In addition to the provisions
of paragraph "5.a." above, servicing RR may earn entitlement to
receive commissions and PC on subsequent modal and/or casual
investments to voluntary accounts sold by an RR who no longer
represents USPA (and to which entitlement has not already been
transferred to another ACTIVE RR) by:
(1) generating a new sale to the investor of any product offered by
USPA or IRA;
(2) completing a formal Update Program for the investor/planholder;
OR
(3) accomplishing a formal Annual Financial Review of the investor's
Family Financial Program.
6. LETTERS OF INTENT, RIGHTS OF ACCUMULATION, AND AUTHORIZED FUND TRANSFERS.
Commissions will be paid and PC granted only upon the amount of cash
actually invested in an established account, without regard to the full
amount of any planned investments made in conjunction with a Letter of
Intent (LOI) or authorized transfer, and without regard to any amounts
already invested but which are used to establish sales charges under Rights
of Accumulation. As subsequent investments are made pursuant to an LOI or
as fund transfers are actually consummated, the RR will be paid appropriate
commissions and be granted PC on the amounts involved.
7. SYSTEMATIC (CONTRACTUAL) INVESTMENT PLAN COMMISSIONS.
<TABLE>
<CAPTION>
COMMISSION STRUCTURE
AIM Summit (ASF)
Fidelity Destiny I & II (DST)
Pioneer Independence Plans (PIN)
Templeton Capital Accumulation (TCA)
Monthly Investment Applicable Fund Commissions Number of Commission
Amount* Company and PC Monthly Monthly Commissions and PC Total
------------------ --------------- -------------- ------------------- ------------
<S> <C> <C> <C> <C>
$50.00 ALL $12.50 12 $150
$75.00 ALL $18.75 12 $225
$100.00 ALL $25.00 12 $300
$125.00 ALL $31.25 12 $375
$150.00 ALL $37.50 12 $450
$166.66 ALL $41.67 12 $500
$200.00 ALL $50.00 12 $600
$250.00 ALL $62.50 12 $750
$300.00 ALL $75.00 12 $900
$350.00 ALL $87.50 12 $1,050
$400.00 ALL $100.00 12 $1,200
$450.00 PIN $109.58 12 $1,315
$500.00 ASF, DST, TCA $112.50 12 $1,350
$500.00 PIN $118.33 12 $1,420
$600.00 ASF $130.00 12 $1,560
$600.00 PIN $137.50 12 $1,650
$700.00 PIN $156.25 12 $1,875
$750.00 ASF, DST, TCA $150.00 12 $1,800
$800.00 PIN $172.92 12 $2,075
$900.00 PIN $182.50 12 $2,190
$1,000.00 PIN $192.50 12 $2,310
$1,000.00 DST $150.00 12 $1,800
$1,000.00 ASF, TCA $175.00 12 $2,100
$1,250.00 PIN $204.17 12 $2,450
$1,500.00 PIN $206.25 12 $2,475
$1,500.00 DST $157.50 12 $1,890
$1,500.00 ASF, TCA $187.50 12 $2,250
$1,750.00 PIN $223.33 12 $2,680
$2,000.00 PIN $240.83 12 $2,890
$2,000.00 DST $162.50 12 $1,950
$2,000.00 TCA $220.00 12 $2,640
$2,500.00 DST $175.00 12 $2,100
$2,500.00 PIN $257.92 12 $3,095
$3,000.00 ASF, TCA $225.00 12 $2,700
$5,000.00 DST $200.00 12 $2,400
$5,000.00 TCA $250.00 12 $3,000
$5,000.00 PIN $275.00 12 $3,300
$6,000.00 ASF $300.00 12 $3,600
$10,000.00 DST $250.00 12 $3,000
$10,000.00 TCA $375.00 12 $4,500
$10,000.00 PIN $412.50 12 $4,950
</TABLE>
* When two or more plans are combined to determine reduced sales charges,
commissions and PC are reduced accordingly.
- --------------------------------------------------------------------------------
B-3
<PAGE>
8. VOLUNTARY INVESTMENT ACCOUNT COMMISSIONS AND SERVICE FEES.
This table lists the commission and service fee rates payable by USPA for
sales of the mutual funds identified. These commission schedules are
representative of the funds and share classes available, it does not list
all the fund groups or individual funds USPA might broker. These rates are
used to calculate commissions and Production Credit (PC) on specific
investment amounts, as explained in this Annex. For products not covered
below, commission information is available from the fund prospectus or upon
request from USPA. "NAV" means the net asset value of shares in the account
at the time service (12b-1) fees are determined. Service (12b-1) fees
received on voluntary accounts by USPA are shared with the Representatives
as follows: 20% of the amount received to the selling Representative and
20% to the Current Servicing Agent (CSA). Payment schedules on 12b-1 are
subject to change in accordance with dealer agreements with and decisions
by the mutual fund distributors.
FRANKLIN TEMPLETON EQUITY FUNDS
(GROWTH, WORLD, GLOBAL SMALLER COMPANIES, FOREIGN, ETC.)
(CLASS I SHARES)
<TABLE>
<CAPTION>
Amount Dealer RR's 12b-1
Invested Reallowance Commission Fees
-------- ----------- ---------- -----
<S> <C> <C> <C>
$ to $ 49,999 5.00% 2.50% .03% of the NAV of shares in an account which were sold
$ 50K to $ 99,999 3.75% 1.875% prior to January 1, 1993, which amount is payable to CSA
$ 100k to $ 249,999 2.80% 1.40% ONLY. On shares sold subsequent to January 1, 1993, .05%
$ 250K to $ 499,999 2.00% 1.00% of NAV to original selling RR and .05% of NAV to CSA.
$ 500K to $ 999,999 1.60% .80%
$ 1,000K to $ 1,999,999 1.00% .50%
$ 2,000K and Above *
</TABLE>
* Available upon request from USPA.
FRANKLIN TEMPLETON EQUITY FUNDS
(GROWTH, WORLD, GLOBAL SMALLER COMPANIES, FOREIGN, ETC.)
(CLASS II SHARES)
<TABLE>
<CAPTION>
Amount Dealer RR's 12b- 1
Invested Reallowance Commission Fees
-------- ----------- ---------- ----
<S> <C> <C> <C>
0 to $ 999,999 2.00% 1.00% .05 % of the NAV of shares during the first year and .20%
after the first year to the original selling RR and the CSA.
</TABLE>
PIONEER EQUITY FUNDS
(PIONEER FUND, PIONEER II, MID-CAP, ETC.)
(CLASS A SHARES)
<TABLE>
<CAPTION>
Amount Dealer RR's 12b-1
Invested Reallowance Commission Fees
-------- ----------- ---------- ----
<S> <C> <C> <C>
$ to $ 49,999 5.00% 2.50% .03% of the NAV of shares in an account which were sold
$ 50K to $ 99,999 4.00% 2.00% prior to August 19, 1991, which amount is payable to CSA
$ 100k to $ 249,999 3.00% 1.50% ONLY. On shares sold subsequent to August 19, 1991, .05%
$ 250K to $ 499,999 2.00% 1.00% of NAV to original selling RR and .05% of NAV to CSA.
$ 500K to $ 999,999 1.75% .875%
$ 1,000,000 to $ 5,000,000 1.00% .50%
$ 5,000,001 and Above *
</TABLE>
* Available UPON request from USPA.
PIONEER EQUITY FUNDS
(PIONEER FUND, PIONEER II, MID-CAP, ETC.)
(CLASS B SHARES)
<TABLE>
<CAPTION>
Amount Dealer RR's 12b-1
Invested Reallowance Commission Fees
-------- ----------- ---------- ----
<S> <C> <C> <C>
0 to $ 250,000 4.00% 2.00% .05% of the NAV to the original
selling RR and .05% of NAV to CSA.
</TABLE>
PIONEER EQUITY FUNDS
(PIONEER FUND, PIONEER II, MID-CAP, ETC.
(CLASS C SHARES)
<TABLE>
<CAPTION>
Amount Dealer RR's 12b-1
Invested Reallowance Commission Fees
-------- ----------- ---------- ----
<S> <C> <C> <C>
No Limit 1.00% 1.00% Beginning in the second year,
.20% of NAV to original selling
RR and .20% of NAV to CSA.
</TABLE>
- --------------------------------------------------------------------------------
B-4
<PAGE>
ANNEX C
USPA&IRA RR/AGENT AGREEMENT
QUARTERLY PROFESSIONAL COMMISSION
A Quarterly Professional Commission (QPC) shall be paid to qualifying RR/Agents
approximately 20 days following the end of each calendar quarter, provided the
RR/Agent has continuously represented USPA&IRA during all of such quarter, in
accordance with the following provisions:
1. COMPLIANCE CRITERIA.
To initially qualify for the QPC, an RR/Agent needs only to satisfy (as
evidenced by District Agent and Regional Agent endorsement of USPA&IRA Form
286) the following professional standards:
a. Maintain a professional office other than in the RR/Agent's home.
b. Prominently display a "USPA&IRA" logo sign at or near the office
and/or on a main access road to the military installation(s) serviced.
c. List "USPA&IRA" in the white pages (only) of the local phone
directory.
d. Not later than the end of the quarter during which the RR/Agent
attends Phase V School, employ and utilize a professional
Administrative Assistant at least 40 hours per week. (Note: A Client
Contact Specialist may be utilized up to 20 hours per week toward
satisfaction of this requirement.)
e. Obtain prior approval from the Regional (or Home) Office of any
written sales proposal and of all sales made, and provide the original
of every fully or partially completed Confidential Check List and
Program Worksheet to the office providing that approval.
f. Maintain adequate client files and otherwise fully cooperate with, and
participate in, the USPA&IRA client service system.
g. Make proper and timely delivery of all insurance policies.
2. AMOUNT OF QPC.
The QPC payable to a qualifying RR/Agent is the product of:
a. The total amount of commissions described in Annexes A and B of the
Agreement paid to the Agent during the calendar quarter for which the
QPC is being computed; and
b. The QPC Rate (described below)
3. QPC RATE.
The QPC Rate is the product of the total net PC generated during the
quarter and the applicable QPC Factor.
a. NET PC. Gross PC less applicable PC chargebacks resulting from
nonpersistent business.
b. QPC FACTOR.
(1) BASIC QPC FACTOR. The basic QPC Factor used to compute any
qualifying RR/Agent's QPC is .375% PER $1000 of total net PC
credited to that RR/Agent in the calendar quarter for which that
QPC is being computed.
(2) INCENTIVE QPC FACTORS. The basic QPC Factor described above is
effectively DOUBLED to .75% PER $1000 of total net PC if EITHER
of the qualifications listed below are met:
(a) QUANTITATIVE STANDARD. If the RR/Agent is credited with at
least $15,000 of total net PC during the calendar quarter.
(b) QUALITATIVE STANDARD. If the RR/Agent satisfies at least
four (4) of the following five (5) requirements.
1) 60 Family Financial Programs must have been produced
during the previous four calendar quarters (excluding
the current quarter), or 15 such Programs must be
produced during the current calendar quarter.
2) 70% of Family Financial Programs to have been presented
during the previous four calendar quarters must have
resulted in the sale of a commissionable product
offered through USPA&IRA.
3) The required percent of the combined insurance and
investment PC programmed in Family Financial Programs
during the previous four calendar quarters must have
been sold. Currently, this required percent is -0-, and
all RR/Agents satisfy this requirement.
4) 91% of the PC awarded on periodic investment plans
completing their 18th month during the previous four
calendar quarters must be persistent.
5) 94% of the insurance premiums sold on policies
completing their 24th month during the previous four
calendar quarters must be persistent.
(3) MAXIMUM QPC FACTOR. By producing at least $15,000 of net PC
AND by satisfying four out of five qualitative requirements,
the RR/Agent can effectively QUADRUPLE the Basic QPC Factor
to 1.5% PER $1000 of total net PC.
c. MAXIMUM QPC RATE. Regardless of the QPC Factor otherwise
computed, the Maximum QPC Rate BASED SOLELY ON QUANTITY OF
PRODUCTION is 12.5%. The Maximum QPC Rate BASED UPON BOTH
QUANTITY AND BY SATISFYING FOUR OUT OF FIVE QUALITATIVE
REQUIREMENTS WILL NOT EXCEED 25%.
d. MINIMUM QPC AMOUNT Notwithstanding the QPC amount calculated
based on actual paid commissions, any RR/Agent who otherwise
qualifies for the QPC at the 1.5% per $1000 QPC Factor will be
paid a minimum QPC of $2000 ($1000 if still eligible to earn the
NASC described in Annex N to this Agreement).
- --------------------------------------------------------------------------------
C-1
<PAGE>
4. SUMMARY OF QPC COMPUTATIONS.
"QPC FACTOR" PER $1000 OF NET PC*
<TABLE>
<CAPTION>
QUANTITY
$15,000 of Net PC in
Calendar Quarter?
---------------- Maximum
No Yes Rate
QUALITY ---------------------------------
<S> <C> <C> <C> <C>
Qualified in at Least No .375% .75% 12.5%
4 of 5 Requirements? Yes .75% 1.5% 25.0%
---------------------------------
</TABLE>
*MINIMUM QPC RULES ALSO APPLY.
5. CONTINUOUS QUALIFICATION FOR THE QPC.
Upon qualification for the QPC as described in paragraphs "1" through "3"
above, the RR/Agent may continue to earn the QPC for the following calendar
quarter and each subsequent calendar quarter thereafter by continuing to
satisfy the qualification requirements contained herein for each such
subsequent quarter.
6. NOTICE OF MODIFICATION.
As noted in paragraph "8.a." of this Agreement, USPA&IRA reserves the right
to modify this (or any other) Annex by providing prior written notice to
the RR/Agent.
- --------------------------------------------------------------------------------
C-2
<PAGE>
ANNEX D
USPA&IRA RR/AGENT AGREEMENT
DISTRICT AGENT COMMISSION
In addition to the RR/Agent commissions elsewhere described in this Agreement, a
USPA&IRA RR/Agent who is designated as a District Agent ("DA") may also earn the
following supplemental commissions based on sales made by RR/Agents assigned to
that DA while said designation is in force:
1. OVERRIDES.
An RR/Agent appointed in writing by USPA&IRA as a DA will receive
commission overrides based upon sales made by, and commissions paid to,
RR/Agents designated to that DA, provided that the DA is properly licensed
in the states in which those designated RR/Agents make such sales.
a. AMOUNT OF COMMISSION OVERRIDES.
(1) In addition to commissions for the DA's own personal sales, each
month a DA will receive override commissions amounting to 30% of
the total commissions (excluding QPC and NASC) paid to each
designated RR/Agent on sales made while that RR/Agent is
designated to the DA.
(2) If an RR/Agent designated to the DA has been appointed a Field
Client Representative (FCR), the override commissions payable to
the DA as to that FCR shall be reduced by the amount commissions
and 12b-1 service fees paid to such FCR exceed commissions and
12b-1 service fees which would be paid for comparable sales or
service to an RR/Agent who was not an FCR. Also, the computation
of overrides on such FCR shall not include any Future Performance
Commission (FPC) paid to such FCR, nor shall such FPC be included
in any override reduction.
b. OVERRIDES WHEN RR/AGENT IS NO LONGER DESIGNATED TO THE DA. The
entitlement of a DA to override commissions on the new sales of a
designated RR/Agent will cease upon the relocation of either the
RR/Agent or the DA, upon the redesignation of the RR/Agent to another
DA or to the Regional Office, or whenever the DA ceases to act as the
DA for such RR/Agent. In these situations, override commissions
granted or to be granted to the DA, based on previous sales made while
the RR/Agent was designated to the DA, will be treated as follows:
(1) DA shall remain entitled to override commissions on insurance and
systematic investment sales (as defined in Annexes A and B
respectively) made while the selling RR/Agent was designated to
the DA for so long as those commissions are earned on such sales
by that RR/Agent.
(2) For voluntary investment sales the DA shall remain entitled to
override commissions on persistent monthly modal payments (paid
via a valid "mode of payment"), initiated while the selling
RR/Agent was designated to the DA, for so long as the valid mode
of payment continues. However, in the event that the DA
terminates as an RR/Agent of USPA&IRA, no override commissions
on monthly voluntary investments shall be payable on such sales
after the date of termination and any overrides payable
thereafter will revert to USPA&IRA.
c. NONPERSISTENT BUSINESS. Override commissions paid to a DA on business
that subsequently becomes nonpersistent shall be charged back to the
DA to whom the selling RR/Agent was designated at the time the sale
to which the chargeback applies was made and shall be 30% of the
amounts charged back to the selling RR/Agent.
2. QUARTERLY PROFESSIONAL COMMISSION (QPC).
Notwithstanding the provisions of Annex C of the Agreement, an RR/Agent who
at any time during a calendar quarter is also designated as a DA may
qualify for the QPC in accordance with the following provisions:
a. A DA with less than four (4) designated RR/Agents no longer considered
"New RR/Agents" earns the QPC if
(1) at least 50% of those designated RR/Agents fully qualify for the
QPC; OR
(2) the DA personally satisfies the requirements of Annex C to this
Agreement, with the exception that said DA is required to satisfy
only three (3) of the five (5) qualitative requirements described
in paragraph "3" of Annex C, AND at least 50% OF ALL RR/AGENTS in
the District, INCLUDING THE PERSONALLY PRODUCING DA, FULLY
QUALIFY for the QPC during the quarter.
b. A DA with four (4) or more designated RR/Agents who are no longer
considered "New RR/Agents" earns the QPC IF AND ONLY IF at least 50%
of those designated RR/Agents, EXCLUDING THE DA, fully qualify for
the QPC.
c. For the purpose of applying subparagraphs "2.a." and "b" above, the
failure of a "New RR/Agent" (defined as one who has not completed
twelve (12) months since the month in which cumulative PC of $5000 was
first credited to that Agent) to fully qualify for the QPC shall not
adversely affect the DA's eligibility for the QPC. However, any such
New RR/Agent who does fully qualify for the QPC shall be included
under the provisions of subparagraphs "2.a." or "b." above, IF such
inclusion enables the DA to qualify for the QPC.
d. The amount of QPC payable to a DA shall be determined in accordance
with paragraph "4" of Annex C to this Agreement, subject to the
following conditions:
(1) The DA's QPC shall be based solely upon that DA's personal sales,
without regard to any override commissions paid to the DA for
sales made by the DA's designated RR/Agents.
- --------------------------------------------------------------------------------
D-1
<PAGE>
(2) DAs who qualify for the QPC solely by virtue of the full
qualification of designated Agents are considered to be
themselves fully qualified for the QPC, such that their QPC
amount will be computed using the 1.5% "QPC Factor" described in
paragraph "4" of Annex C to this Agreement.
(3) The minimum QPC described in paragraph "3.d." of Annex C is not
payable to DAs.
3. PROFESSIONAL LEADERSHIP COMMISSION (PLC).
In addition to the commissions a DA may derive from personal sales, from
overrides, and from the QPC, a DA who also qualifies for the QPC in
accordance with paragraph "2" above may also earn a quarterly PLC equal to
30% of the quarterly QPC paid to each of the DA's qualifying designated
RR/Agents.
4. PROFESSIONAL TRAINING COMMISSION (PTC).
In addition to other commissions described above, a DA training an RR/Agent
who has completed twelve (12) or fewer months since his/her first NASC
payment will be paid a non-recoupable PTC equal to 30% of the New Agent
Special Commission (NASC) paid to that New RR/Agent.
5. QUARTERLY SUPPLEMENTAL COMMISSION (QSC).
In addition to the monthly override commissions, PTC, and quarterly
commissions described above, qualifying DAs will also be paid a QSC, based
on district size and the number of remote offices, as follows:
a. DETERMINING DISTRICT SIZE. For the purpose of determining the number
of RR/Agents designated to a DA:
(1) RR/Agents who have not yet received their first NASC will be
counted as zero (0).
(2) Agents who have announced their intention to terminate their
Agreement with USPA&IRA will be counted as zero (0) in and after
the production month in which their termination is effective.
(3) RR/Agents who have completed fewer than twelve (12) production
months since the month of his/her first NASC payment are
considered to be "New Agents" (as defined in Annex N of this
Agreement) and will be counted as one-half (.5) in and after the
production month for which the first NASC is paid [and for eleven
(11) production months thereafter].
(4) Senior RR/Agents who have been officially so designated by the
Executive Committee will be counted as six-tenths (.6) during the
term of their designation as Senior RR/Agents.
(5) All other RR/Agents; not covered by subparagraphs "5.a.(1)"
through "5.a.(4)" above are considered to be "fully qualified"
RR/Agents and will be counted as one (1).
b. QSC PERCENTAGE. The QSC will be calculated on a quarterly basis as a
percentage of the paid commissions used to determine the QPC payable
to each RR/Agent designated to the DA, IAW Annex C of this Agreement.
(1) DISTRICT SIZE, The primary determinant of the QSC percentage will
be the number of RR/Agents designated to the DA.
(2) REMOTE OFFICES, DAs otherwise qualifying for the QSC and
responsible for districts containing multiple offices will
receive an additional 1% QSC on the paid commissions of
designated RR/Agents officed remotely from the principal office
of the DA.
(3) The QSC is determined using the following table:
<TABLE>
<CAPTION>
NUMBER OF RR/AGENTS OFFICED OFFICED
DESIGNATED TO DA WITH DA REMOTELY
<S> <C> <C>
Less than two (2) 8% 9%
At least two (2) but 6% 7%
less than three (3)
At least three (3) but 4% 5%
less than four (4)
At least four (4) but 2% 3%
less than five (5)
At least five (5) but 0% 1%
less than six (6)
Six (6) or more 0% 0%
</TABLE>
6. SOLE SOURCES OF COMPENSATION.
The commissions described herein are the sole amounts payable to DAs by
USPA&IRA under this Agreement. No other amounts, such as payment for
franchise rights, ownership interests, goodwill, or other remuneration or
considerations, shall be due to a DA from USPA and/or IRA or others as the
result of representing USPA and/or IRA, notwithstanding that DA has
established an office, maintained an administrative facility, relocated, or
for any other reason, before, during, or after termination of or
performance under this Agreement.
7. DISTRICT AGENT OBJECTIVE.
The primary objective of the DA is to establish and maintain -through
LEADERSHIP- the highest possible degree of effectiveness and
professionalism of the RR/Agents designated to that DA. All other
activities, including personal sales, are secondary. In addition, in the
event that the DA observes or has knowledge of the violation of a law,
rule, or regulation pertaining to the conduct of USPA&IRA's investment or
insurance business, or the terms of this RR/Agent Agreement, by any other
RR/Agent, DA, Assistant Regional Agent, or Regional Agent of USPA&IRA, said
DA has the responsibility to report such violation to the Presidents of
USPA&IRA, and any failure to do so may be construed as a breach of said
DA's RR/Agent Agreement with USPA&IRA.
- --------------------------------------------------------------------------------
D-2
<PAGE>
ANNEX E
USPA&IRA RR/AGENT AGREEMENT
DEFERRED CAREER COMMISSION PLAN
1. GENERAL.
The financial operating results achieved by USPA&IRA can be expected to
vary somewhat from year to year. Described herein is a Deferred Career
Commission Plan (DCCP) which will allow Independent Research Agency for
Life Insurance, Inc. ("the Company") flexibility in sharing a portion of
the results from a good year of financial operations with its (independent
non-employee) sales representatives. The DCCP is in addition to all other
commissions paid and it is critically important that all members of the
field force understand the Company WILL apply the needed flexibility in its
fiscal strategy to this program FIRST. This means that in some years the
DCCP will be credited in substantial amounts and in other years in reduced
amounts, or not at all. There should be no expectation or implied claim on
any share (proportionate or otherwise) of operating profits or other gains
by participants in the DCCP as opposed to other constituencies of the
Company. This is the program where flexibility will primarily be applied.
The aforementioned Plan is for the benefit of (independent non-employee)
RR/Agents who have more than $15,000 of paid monthly commissions excluding
New Agent Special Commissions (NASC), Quarterly Professional Commissions
(QPC), and Future Incentive Commissions (FIC), during a Plan year, who are
hereafter referred to as "qualified RR/Agents," District Agents (DAs),
Assistant Regional Agents (ARAs), and Regional Agents (RAs). This Plan
recognizes the value of high persistency over time on the profits of the
Company. Longtime RR/Agents with above average sales persistency will be
rewarded at a higher rate than newly established RR/Agents or those with
low persistency. The details of the Plan follow.
2. ADMINISTRATION OF THE PLAN.
a. The Company will annually determine if profits are available to be
credited to participants' account balances under the Plan. This
determination will be based on the Company's and USPA's capital needs,
Future Incentive Commission needs, Profit Sharing Plan needs, a
favorable return to stockholders of Company stock and other factors.
If the Company, in its sole and absolute discretion, decides to credit
deferred commissions under the Plan, prior to the close of each fiscal
year, the amount to be accrued will be identified and carried on the
books of the Company as a liability payable to participants. Deferred
commissions credited under the Plan for any fiscal year will be
allocated to participant accounts as described in paragraph "4."
Notwithstanding any provision of this Plan to the contrary, all assets
and property of the Company will remain available for use by the
Company in its general operations, if needed, and remain at risk to
the participants during any downturn in the operating results of the
Company. All of such assets and property of the Company shall remain
fully subject to the claims of creditors. Nevertheless, it is the
Company's intention to fully invest the reserves set aside to meet
obligations accruing under the Plan in mutual fund products marketed
by USPA. If such reserves set aside to meet obligations accruing under
the Plan are required by the Company for use in its general
operations, the Plan will be credited with a hypothetical interest
growth factor determined by the Company to reflect market conditions,
and Plan participants will be advised accordingly. The growth of
deferred commissions payable under the Plan will be credited to
participant accounts and the Company will absorb the corporate tax
impact of this growth until such time as a participant's Plan account
balance is distributed to him or her.
b. The Plan year runs from October 1 through September 30.
c. The Independent Research Agency for Life Insurance, Inc. (IRA) will
discharge the obligations accruing under the Plan only out of its
general assets. There will be no separate trust fund, insurance
policy, or other source of funding.
d. Annually, a report, including computation of the participant's Plan
credit for the current year as well as a summary of all credits to
date, will be provided to the participant (prior to December 15
following Plan year closeout).
e. Notwithstanding any other provisions of this Annex, any commission
becoming payable under the Plan will be subject to all other
provisions of the RR/Agent Agreement affecting payment of commissions
or offset therefrom, specifically including but not limited to the
rights of USPA&IRA to hold and/or offset commissions as described in
paragraphs "10. Termination; Return of Property.", 11.
Commissions After Termination", and "13. Remedies", of the RR/Agent
Agreement. Any commissions not payable to a participant because of
such an offset will be the property of USPA&IRA and not revert to the
Plan.
3. ENTRY INTO THE PLAN.
Qualified RR/Agents other than new RR/Agents entered the Plan on October 1,
1992. New RR/Agents will enter the Plan in the next full Plan year which
starts after the initial payment of their NASC. Annually, thereafter, in
any year in which the Company credits deferred commissions under the Plan,
a credit will be made to the RR/Agent's account. These amounts will remain
in the Plan until the RR/Agent terminates through retirement or otherwise.
4. ANNUAL CREDIT.
A pooled point system will be used to determine qualified RR/Agent annual
credit. An individual participant's total points will determined as
follows:
a. Qualified RR/Agent paid monthly commissions during the Plan year will
be divided by 1,000. The resulting figure forms the basis for all
further computations.
b. The result of item "a." above will be multiplied by a factor
representing time the RR/Agent has been with the Company, measured
from his first sale (or in the case of Agents who received NASC from
the month of first NASC payment).
- --------------------------------------------------------------------------------
E-1
<PAGE>
The time will be measured by month and will maximize at 15 years,
although an RR/Agent may be associated as such as long as willing,
able, and effective. Each month of association with USPA&IRA as an
RR/Agent will add .005556 to a factor of one, so that at 15 years the
maximum factor equals two.
c. The result of the point value determined in "b." above will be then
multiplied by a sales persistency factor as indicated in the table
listed below:
<TABLE>
<S> <C>
100% = 2
95% = 1.857
90% = 1.714
85% = 1.571
80% = 1.428
75% = 1.285
70% = 1.142
65% and below = 1
</TABLE>
Appropriate interpolations will be made for percentages not listed
above. Sales persistency is determined by dividing the total number of
accounts and policies on the books at the end of the Plan year by the
total number of accounts and policies sold by the RR/Agent over the
past fifteen years.
d. Points of all participants to be funded, including DAs, ARAs, and RAs,
will then be added together and divided into total dollars available
to determine point value.
e. The points computed for a specific participant will be multiplied by
point value to determine annual credit to the participant.
5. PARTICIPANT CREDITS - SUBSEQUENT YEARS.
The Plan will be operated and reported thereon, in general terms, similar
to a composite mutual fund. Each subsequent year the earnings/losses will
affect the value of the unit and each year that there are contributions it
will affect the number of units in the Plan and in each account.
6. DISABILITY OR DEATH.
The account balance of a participant who incurs a long-term disability (as
determined by the Company) or dies will be based upon a valuation made at
the end of the month in which such event occurs. The amount in the
participant's Plan account will be paid to the participant within 30 days
of the month of disability, and to the personal representative of the
participant's estate in the event of death. Payment in such a case will
occur within 30 days after the later of the expiration of the month in
which death occurred or the date on which the personal representative of
the deceased's estate is appointed and qualified. For example, a
participant who is determined by the Company to be disabled on March 15
will be paid based upon a valuation as of March 31, and funds will be
distributed by April 30.
7. RETIREMENT OR OTHER TERMINATION.
A participant who retires or otherwise terminates as an RR/Agent other
than as a result of death or disability will be credited for commissions
paid up to the date of termination for purposes of computing allocations to
his/her Plan account balance. However, payment from the participant's Plan
account balance will not be made until up to 75 days after the end of the
Plan year which immediately follows the Plan year in which the termination
occurred. The account value shall be based upon a Plan valuation made at
the end of such following Plan year.
8. EARLY PAYMENTS AND LOANS.
A participant's deferred commission benefits accruing under the Plan are
not available for early payment, and may not be assigned, transferred, or
otherwise conveyed, pledged, mortgaged, or hypothecated, or borrowed by the
participant. Such activity would create a situation of "constructive
receipt" at the time of crediting of participant accounts and make all such
amounts immediately taxable to all RR/Agents, even though not disbursed. A
participant shall have no right to any benefits accruing under the Plan
until such benefits are paid to him or her in cash upon retirement, death,
disability, or other termination as an RR/Agent.
9. TRANSFERS TO THE HOME OFFICE.
A participant who transfers to the Home Office staff during a Plan year
will receive DCCP funding based upon his or her paid commissions prior to
such employment. The participant will remain in the Plan as long as he or
she maintains an active employee or RR/Agent relationship with the Company,
but will not participate in new funding to the Plan while a member of the
Home Office staff.
10. USPA&IRA RIGHT TO AMEND OR TERMINATE.
USPA&IRA reserve the right unilaterally to amend or terminate this Annex
and the Plan created hereby in whole or in part at any time upon the giving
of written notice to RR/Agent, provided, however, and subject to
subparagraph "2.e." of this Annex, any benefit accrued under the Plan prior
to such amendment or termination shall not be reduced or eliminated and
such accrued benefits shall be payable as otherwise provided under the
Plan.
- --------------------------------------------------------------------------------
E-2
<PAGE>
ANNEX N
USPA&IRA RR/AGENT AGREEMENT
SPECIAL COMMISSION AVAILABLE TO "NEW RR/AGENTS"
1. INDEPENDENT CONTRACTOR STATUS - RESPONSIBILITIES.
a. As noted in paragraph "3.c." on page 2 of this Agreement,
"The RR/Agent agrees to pay a business expenses incurred in
representing USPA&IRA. Such expenses include those incurred in the
operation of RR/Agent's office, and for all USPA&IRA sales materials
used by RR/Agent."
b. Thus, the RR/Agent is personally responsible for all expenses incurred
in the course of doing business as an independent contractor
representing USPA&IRA, and should expect no direct financial
assistance from USPA&IRA, from any other RR/Agent thereof, or from any
insurance or investment company represented thereby, other than the
commissions described in this Agreement.
c. In addition, the RR/Agent will be eligible to occupy and become
financially responsible for office space and will be eligible to begin
incurring a pro rata portion of office and other shared administrative
expenses on the date upon which the RR/Agent and his/her DA concur (or
the Regional Agent (RA) concurs) that the following conditions have
been met:
(1) RR/Agent is no longer on active duty or terminal leave; and
(2) RR/Agent is "licensed to solicit"; as determined by the Home
Office Licensing Department; and
(3) RR/Agent is available for full-time endeavor as an RR/Agent; and
(4) RR/Agent is qualified to initiate active solicitation of
potential clients on behalf of USPA&IRA.
2. "NEW RR/AGENT" DEFINED.
Wherever used in this Agreement, the term New RR/Agent refers to any
RR/Agent subject to the terms of this Annex whose tenure is less that
twelve (12) full production months since "Month 1" as defined in paragraph
"3." below.
3. NEW AGENT SPECIAL COMMISSION (NASC).
In addition to the commissions described in Annexes A and B of this
Agreement, New RR/Agents will be entitled to the following additional
commission commencing with the month in which the RR/Agent's PC
cumulatively totals $5000. That month shall be "Month 1 " for the purposes
hereof
a. MONTHS #1 THROUGH #12. An NASC equal to 10% of net PC will be paid to
the New RR/Agent on ALL net PC credited in production months #1
through #12, regardless of the total amount generated in any single
month.
b. DOUBLE NASC. The basic NASC rate of 10% will be doubled to 20%, under
the following conditions:
(1) In Month #1 on ALL net PC generated cumulatively up to and during
that month.
(2) In Months #2 through #12, IF net PC credited in that month is at
least $5000.
4. RECOUPMENT OF NASC.
In addition to the provisions described in paragraph "11." on page 4 of
this Agreement pertaining to "Termination at Any Time," the following
special recoupment provisions apply to the NASC:
a. 100% of all NASC paid to any RR/Agent will be recouped from future
commissions due if termination occurs during the 12-month period
described in paragraph "3.a." of this Annex.
b. Thereafter, this 100% recoupment rate will decrease by 8.333% per
month, reaching zero at the end of the 24th month following (and
including) "Month 1," defined above.
c. All recoupable funds are immediately due and payable from the RR/Agent
directly from his/her future earned commissions.
d. Further, any NASC paid based on PC awarded in conjunction with a mode
of payment that is not properly established and, as a result, becomes
nonpersistent, is subject to recoupment.
5. QUARTERLY PROFESSIONAL COMMISSION FOR NEW RR/AGENTS.
In addition to the NASC, a New RR/Agent may also earn the Quarterly
Professional Commission described in Annex C to this Agreement, subject to
the conditions described therein, except as follows:
a. The New RR/Agent is considered qualified in all five (5) "Qualitative
Requirements" of paragraph "3.c." of Annex C, and
b. The New RR/Agent is eligible to earn a Minimum QPC as described in
paragraph "3.d." of Annex C. However, THE AMOUNT OF THE MINIMUM QPC
PAYABLE TO NEW RR/AGENTS (ELIGIBLE FOR THE NASC) IS $1000 (vice $2000
for RR/Agents NOT eligible for the NASC).
c. Any amounts of NASC paid to the New RR/Agent will NOT be included in
"paid commissions" for the purpose of computing the QPC.
- --------------------------------------------------------------------------------
N-1
<PAGE>
ALL AMERICAN LIFE & Casualty Company
GENERAL AGENT
AGREEMENT
[GRAPHIC]
______________________________________________________________________________
LOGO
<PAGE>
EFFECTIVE this 1st day of January, 1979, between ALL AMERICAN LIFE & Casualty
Company ("The Company") and Independent Research Agency for Life Insurance
("The General Agent") whose address is Fort Worth. Tarrant County, Texas
1. APPOINTMENT; AUTHORITY
The Company appoints the General Agent to procure and submit to the Company
applications for all types of insurance and annuities issued by the Company.
The General Agent is authorized to appoint Producers provided they are
properly licensed by the appropriate insurance regulatory authority. As used
herein, Producer shall mean any person who procures, supervises or otherwise
participates in the procurement of applications for insurance and annuities
for the Company.
2. PRODUCERS
(a) The General Agent shall submit to the Company a copy of every agreement
into which he enters with each Producer he appoints. Such agreements shall be
on forms approved by the Company.
The General Agent shall promptly notify the Company, in writing, upon
termination of any agreement with a Producer. The Company reserves the right
to require the General Agent to cancel the appointment of any Producer.
(b) The General Agent shall be responsible to the Company for the acts of his
Producers and his employees, and shall promptly report to the Company, in
writing, any known or alleged misappropriation of funds by such Producers or
employees regardless of whether such known or alleged misappropriation is
with respect to funds of this Company or funds of any other person or Company.
(c) The Company agrees to be and is hereby authorized and directed by the
General Agent to make payment on his behalf following termination of this
Agreement to Producers for compensation earned by them pursuant to the terms
of the applicable agreement with the General Agent on file with the Company.
3. COMPENSATION
The compensation of the General Agent shall be in the form of commissions,
bonuses and other allowances, if any, on business written by him and his
Producers in accordance with the Schedule of Compensation in effect at the
time of application for such business, which Schedule is made part of this
Agreement.
4. GENERAL PROVISIONS
(a) The General Agent agrees to comply with all applicable insurance laws and
regulations and with all the published rules, regulations and instructions of
the Company now in force and such as may be hereafter adopted.
(b) If the Company shall, either during the continuance of this Agreement or
after its termination, return the premium on any policy, the General Agent
agrees to repay the Company on demand any compensation received on premium so
returned.
(c) All monies or other property belonging to the Company, while in the
custody of the General Agent, shall be held by him in a fiduciary capacity
and shall be reported and transmitted to the Company in accordance with its
instructions.
(d) The General Agent shall maintain accurate records of his transactions on
behalf of the Company in a form satisfactory to the Company. Such books and
records shall be open for examination by authorized representatives of the
Company and shall remain the property of the Company. The General Agent shall
return all undelivered policies to the Company for cancellation in accordance
with its instructions.
(e) The General Agent, his Producers and his employees shall have no
authority to make, alter or modify any policy or receipt, nor to waive a
forfeiture or any provision or condition of any policy issued by the Company,
nor to incur any liability on behalf of or against the Company, except as
expressly provided herein or otherwise authorized in writing by the Company.
The General Agent is not authorized and agrees not to publish, issue or
circulate any advertising material, circular or pamphlet relating to the
Company or its products unless the same shall have been approved in writing
by an officer of the Company.
(f) If any lawsuit shall be brought against the Company in consequence of any
unauthorized action or statement of the General Agent, his employees or his
Producers, all costs and damages arising therefrom shall be paid by the
General Agent.
(g) The General Agent agrees to reimburse the Company for any payments made
or costs incurred as a result of any claim made by a Producer or an employee
of the General Agent against the Company.
(h) The Company shall have a prior lien on any and all sums of money due or
to become due to the General Agent under this or any prior Agreement with the
Company for any indebtedness, obligation or liability of the General Agent to
the Company; and the Company may at any time offset against such sums of
money the amount of any such indebtedness, obligation or liability.
It is understood that any "advance" or "commission advance" made by the
Company to the General Agent shall be a loan which shall create an
indebtedness of the General Agent to the Company repayable upon demand. The
Company can require an immediate repayment of such an indebtedness regardless
of whether or not future compensation payable to the General Agent appears to
be adequate to offset such indebtedness.
In the event the Company is required to pursue collection procedures in order
to collect any indebtedness, the General Agent agrees to be liable for any
and all Company expense so incurred.
(i) The General Agent shall pay all expenses incurred by him in the
performance of this Agreement.
(j) The General Agent may not assign any of his rights or interests hereunder
without the written consent of an authorized officer of the Company.
<PAGE>
(k) The failure of the Company to exact strict compliance with the terms of
this Agreement, or the failure to declare any default when same shall become
known to it, shall not operate as a waiver of such terms nor release the
General Agent from his obligation to perform this Agreement strictly in
accordance with its terms.
(1) The Company reserves the right to discontinue writing all or any part of
its business in any jurisdiction upon written notice thereof to the General
Agent.
5. RELATIONSHIP
It is understood and agreed that the General Agent shall be considered an
independent contractor. As such, the General Agent shall be free to exercise
his own independent judgment as to the persons he solicits, the time and
place of solicitation and the Producers he appoints. No other provision of
this Agreement nor any rule or regulation of the Company shall be construed
to abridge this freedom or create the relationship of employer and employee
between the Company and the General Agent or between the Company and a
Producer or employee of the General Agent.
6. TERMINATION
(a) The General Agent's withholding or converting to his own use funds or
property of the Company, an applicant or insured, shall constitute an
automatic breach of this Agreement, which shall forthwith terminate, and all
rights of the General Agent to compensation hereunder or otherwise payable on
termination of this Agreement shall be forfeited.
(b) This Agreement shall automatically terminate upon (i) the death or
disability of the General Agent, if the General Agent be an individual, (ii)
the dissolution of the partnership, if the General Agent be a partnership,
(iii) the dissolution of a corporation, if the General Agent be a corporation
or (iv) violation by the General Agent of any of the provisions of this
Agreement. Disability of the General Agent shall mean the total and permanent
disability of the General Agent as evidenced by the receipt of, or
qualification for, Social Security disability benefits.
(c) This Agreement, unless otherwise terminated as provided above, may be
terminated either by the Company or the General Agent by giving the other
party thirty days notice in writing at the last known address of such other
party.
Termination of this Agreement shall automatically terminate any previous
Agreement between the Company and the General Agent.
7. COMPENSATION AFTER TERMINATION
If this Agreement be terminated other than as provided in Paragraph 6(a)
hereof, the General Agent shall receive compensation with respect to premiums
paid to and accepted by the Company on and after the effective date of such
termination as follows:
(a) On business written by the General Agent and his Producers under this
Agreement the compensation will be as provided in the Schedule of
Compensation of this Agreement.
(b) On business written by the General Agent and his Producers prior to the
Date of this Agreement the compensation will be as provided under the terms
of any previous Agreements, except as otherwise provided in the Schedule of
Compensation.
Any payment becoming due the General Agent under the terms of this Paragraph
shall continue to be subject to Paragraph 4(h) hereof.
8. PRIOR AGREEMENTS
This Agreement is substituted in place of all prior verbal or written
agreements between the Company and the General Agent and the provisions
hereof shall be applicable to all business written by the General Agent and
his Producers prior to the Date of this Agreement except as may be otherwise
specifically provided herein.
Executed in duplicate by the Company and the General Agent to be effective as
of the day and year written above, which is the Date of this Agreement.
<TABLE>
<CAPTION>
<S> <C>
Independent Research Agency for Life Insurance ALL AMERICAN LIFE & Casualty Company
- ----------------------------------------------
Name of General Agent
By: /s/ Carroll H. Payne By /s/ [ILLEGIBLE]
- ---------------------------------------------- --------------------------------------
General Agent Authorized Officer
</TABLE>
<PAGE>
(TO BE EXECUTED IF GENERAL AGENT IS A CORPORATION)
GUARANTEE
The undersigned do hereby severally, individually and jointly guarantee to
ALL AMERICAN LIFE & Casualty Company the full and faithful performance and
discharge of all the duties, responsibilities, conditions, obligations,
liabilities and indebtedness of
______________________________________________________________________________
under its General Agent Agreement with ALL AMERICAN LIFE & Casualty Company,
and waive notice of any breach in the performance thereof on the part of said
______________________________________________________________________________
Dated: __________________________
Witness: ________________________________ ________________________________
Witness: ________________________________ ________________________________
Witness: ________________________________ ________________________________
Witness: ________________________________ ________________________________
8501 West Higgins Road
Chicago Illinois 60631
ALL AMERICAN LIFE
& Casualty Company
LOGO
<PAGE>
GENERAL AGENCY CONTRACT
LIBERTY NATIONAL LIFE INSURANCE COMPANY (the "Company") hereby appoints
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC. of Fort Worth, Texas
("IRA") as its General Agency, to procure applications for contracts of life
insurance with the Company in those jurisdictions in which it and the Company
are properly licensed.
IRA shall exercise its own judgment as to the persons to be solicited
for insurance, the time and places of such solicitations, and nothing in this
contract shall be construed to create the legal relationship either of
employer and employee or of partnership between IRA and the Company.
This APPOINTMENT is made on the following terms and conditions:
1. AUTHORITY. IRA is hereby authorized itself and through agents to
solicit applications for life insurance with the Company according to the
premium rates, classification of risks, and practices of the Company now
existing or as altered or amended by the Company from time to time, and to
appoint agents to carry out the purposes of this contract and to fix their
compensation. IRA agrees to remit promptly to the Company any money due it
and to indemnify the Company for any loss resulting from the misuse or loss
of any funds or conditional receipts by IRA, its officers, employees or
representatives.
IRA is not authorized to accept risks of any kind, make, alter or
discharge contracts for insurance, waive forfeitures, extend time for paying
a premium, or in any way obligate the Company except as set forth in the
preceding Paragraph. IRA shall deliver no policy, the applicant for which to
the knowledge of IRA's agent is not in good health, unless a first premium
equal to or greater than one month's premium or a copy of an authentic and
duly filed military allotment in accordance with the Company's published
rates has been received by the Company with the application, the conditional
receipt detached if appropriate and the policy issued as applied for.
IRA shall promptly notify the Company of every agent's appointment made
by it and shall notify the Company immediately of the termination of any such
appointments. IRA shall be responsible for the compensation of such agents
and for their fidelity and honesty, and shall be liable to the Company for
all monies received by said agents on behalf of the Company and for any
indebtedness due the Company by them.
IRA hereby warrants, represents, and agrees that solicitation for
insurance policies to be issued by the Company shall be undertaken only by
persons holding all necessary licenses from the insurance supervisory
authority having jurisdiction over the location where such solicitation
occurs, and that all such solicitation shall be conducted in accordance with
all laws, rules, regulations, or directives governing such solicitation.
Without limiting the generality of the foregoing, this provision is intended
to require IRA to be responsible for insuring that all agents are properly
licensed in any state where solicitation is being conducted on behalf of the
Company and that such agents comply with all applicable rules, regulations,
and directives promulgated by the Department of Defense, by any branch of the
military service, or by the commanding officer of any military facility where
such solicitation is carried out.
<PAGE>
-2-
2. INDEMNIFICATION. IRA shall indemnify and hold harmless the Company
and each of its directors, officers, agents, servants, employees, successors,
assigns, and other affiliated corporations, jointly and severally, from any
and all claims, demands, actions, causes of action, suits, costs, damages,
expenses, compensation, and liability of every kind, character, and
description, either direct or consequential, at law or in equity, related to,
arising from, or growing out of any act of IRA, its officers, agents,
servants, or employees; provided however, that the Company shall have acted
in good faith and with reasonable diligence in relation to any matter giving
rise to a claim for indemnity by IRA under this provision; and provided
further, that in no event shall the Company be entitled to indemnity under
this provision for any claim, demand, action, cause of action, suit, cost,
damage, expense, compensation, or liability resulting from the malfeasance of
misfeasance of the Company.
3. PROPERTY. All undelivered policies, rate books, applications and
other forms, and all other books and paper connected with the business of the
Company are and shall remain the property of the Company.
4. PRINTED MATTER. The Company will furnish to IRA all blanks,
circulars and other printed matter requisite to the business of IRA for the
Company. No advertising, sales presentations or other marketing materials of
any nature relating to the business of the Company and not supplied by the
Company shall be used by IRA unless the Company has given written approval.
The Company shall approve or disapprove such materials and presentations
prepared by IRA within thirty days of receipt by the Company. Failure of the
Company to approve or disapprove such materials and presentations within the
thirty day period shall be deemed approval thereof until such time as the
Company shall notify IRA to the contrary. All such materials shall be mailed
to the Company by registered or certified mail and shall be directed to the
attention of the Company officer specified in writing to IRA from time to
time by the Company.
5. COMMISSIONS ON IRA POLICY SERIES. IRA shall be paid the following
commissions on the IRA Policy Series on premiums paid to the Company for
policies issued under this contract:
IRA shall be paid a first year commission of 150% on
the "IRA Policy Series" on first year premiums paid to
the Company for policies issued under this contract.
IRA shall be paid a renewal commission of 17.5% on
the "IRA Policy Series" for the second through the tenth
policy years' renewal premiums paid to the Company for
policies issued under this contract.
IRA shall be paid a service fee of 10% on the "IRA
Policy Series" for the eleventh and subsequent policy
years' renewal premiums paid to the Company on policies
issued under this contract.
IRA shall be paid a sales development allowance based upon annualized
premium paid for during each IRA Fiscal Year, which begins on October 1st and
ends on September 30th each year, in accordance with the following schedule:
<PAGE>
-3-
<TABLE>
<CAPTION>
% of Annualized Minimum Amount of
Premium to be paid Annualized Premiums Paid For
- ------------------ ----------------------------
<S> <C>
2% $ 500,000
3% 1,000,000
4% 1,500,000
</TABLE>
All commissions, renewal commissions, service fees, and other
remuneration payable to IRA under this contract shall be fully vested and
upon termination of this contract, the first year and renewal commissions and
service fees otherwise payable to IRA shall be continued until no IRA
business with the Company is left in force.
The rate of commission for all benefit riders, issued as a part of a
life insurance policy shall be determined by the rate of commission
applicable to the basic policy, except that no commissions shall be payable
on premium deposits or preliminary term premiums. COMMISSIONS SHALL BE
PAYABLE ON ANY OTHER TYPE OF EXTRA PREMIUM WHATSOEVER UNLESS OTHERWISE
MUTUALLY AGREED UPON BY THE PARTIES HERETO.
The Company agrees to pay all Commissions and/or compensation in any
form earned by IRA and its agents, both before and after the termination of
this contract, to IRA, and to no other parties unless otherwise directed in
writing to do so by the Chief Executive Officer of IRA or as required by
formal order or request from a governmental authority.
Rates of commission for plans and durations not included in the "IRA
Policy Series", term conversions or other policy changes shall be determined
in each case by the Company.
6. PRIVACY. The Company agrees that it will not, during or after the
term of this contract, furnish any information to any third party concerning
sales promotional material, sales presentations, merchandising methods, trade
secrets, copyrighted materials, programming, remuneration, client lists or
client information of IRA, except as may be authorized by IRA; provided,
however, that the Company may furnish any such information to any duly
authorized party as may be required by any applicable law or regulation upon
evidence of any order or request being received by the Company.
The Company agrees that it will make no disclosures concerning its
relationship with IRA or its agents, the volume, persistency, quality, or
type of policies written by IRA for the Company, or any other information
concerning the methods of operation of IRA except as may be determined by the
Company to be required by any applicable law or regulation or desirable or
necessary consistent with its obligations to stockholders and regulatory
authorities.
The Company agrees that it will not mail advertising data regarding
contests, sales meetings, new products promotion, salesmen standings, or
copies of sales bulletins to any agent of IRA without prior approval of IRA.
IRA agrees that it will not, during or after the term of this contract,
furnish any information to any third party concerning commission schedules or
other information concerning the operation of the Company other than that
authorized by the Company in writing.
<PAGE>
-4-
7. ADJUSTMENTS. The Company agrees that it shall not, prior to
six-month written notice, except by mutual agreement of the parties, which
agreement shall not be unreasonably withheld, and except as a result of war
or threatened war, with respect to military risks: (a) Lower an existing
commission rate or alter an existing premium rate or (b) Impose more
restrictive underwriting rules on military personnel than those in effect at
the date of the agreement. The Company reserves the right to discontinue
writing any plan or benefit rider which is currently for sale or which
hereafter is offered for sale, after first giving six months' written notice
to IRA, or earlier if by mutual agreement of the parties, which agreement
shall not be unreasonably withheld.
If a new policy is written and there is on the same life other
insurance coverage with the Company which (a) terminated within one year
prior to a new application or (b) terminates within one year after a new
policy is issued, the commissions on the new policy shall be adjusted
according to the rules of the Company then in force.
Should the Company cancel or terminate a policy for any cause deemed
sufficient by the Company and tender return of the premium or premiums
thereon, IRA shall refund and pay to the Company on demand any commissions
received on the premiums so tendered.
8. ACCOUNTS. IRA agrees to examine any statement of its account
received from the Company and to notify the Company at once of any difference
between such statement and its own records.
The Company may at any time charge any debt or obligation due or to
become due the Company by IRA or any agent appointed by it under this
Agreement or otherwise, against any commissions, remuneration, or
reimbursement due to IRA, and the Company shall have a first lien thereon
until the debt or obligation is fully paid.
9. HIRING PRACTICES. The Company expressly agrees that for a period of
two years following the termination of either (1) any party's contract as an
agent of IRA or its successors or (2) employment of any party by IRA or any
of its agents, neither the Company nor its subsidiaries or affiliates will
knowingly enter into any type of agent's or employee's arrangement or
agreement with any such terminated party without the written consent of IRA
or its successors.
IRA expressly agrees that for a period of two years following the
termination of either (1) any party's contract as an agent of the Company,
its subsidiaries, affiliates, or successors or (2) employment of any party by
the Company, its subsidiaries, affiliates or any of their agents, IRA will
not knowingly enter into any type of agent's or employee's arrangement or
agreement with any such terminated party without the written consent of the
Company or its successors.
10. ASSIGNMENT OR MODIFICATION. No assignment of commissions earned or
to accrue under this contract or of interest herein shall be valid unless
acknowledged in writing by the Company. The rights of an assignee under an
assignment shall be subject to all the terms and provisions of this contract.
This contract supersedes any previous contract of the same or similar tenor,
and no waiver or alteration of the printed terms herein shall be valid unless
in writing and signed by an executive officer of the Company.
<PAGE>
-5-
11. APPLICABLE LAW. This agreement is entered into under the laws of
the State of Texas and is to be construed in accordance with such laws. It is
understood that this appointment of IRA is subject to the applicable laws,
rules, and regulations of any state, province or country that may have
jurisdiction, and that any modification of this agreement made necessary by
any such law, rule or regulation shall not be construed as a breach of
contract.
12. TERMINATION. Unless otherwise mutually agreed upon by both
parties, this contract may be terminated by either the Company or IRA
effective six months after the mailing of written notice of such termination.
Termination shall be effective immediately upon the mailing of written notice
if terminated by the Company because IRA has wrongfully withheld any funds,
policies, receipts, or other documents or property belonging to the Company.
IN WITNESS WHEREOF, the parties hereto have duly executed this
agreement in duplicate this 16th day of September, 1981, to be effective as
of the First day of October, 1981, which is the beginning of the first
contract year.
<TABLE>
<CAPTION>
<S> <C>
INDEPENDENT RESEARCH AGENCY
FOR LIFE INSURANCE, INC.
By /s/ [ILLEGIBLE]
--------------------------------
ATTEST:
/s/ [ILLEGIBLE]
- ------------------------------------
LIBERTY NATIONAL LIFE
INSURANCE COMPANY
By /s/ [ILLEGIBLE]
--------------------------------
ATTEST:
/s/ [ILLEGIBLE]
- ------------------------------------
</TABLE>
<PAGE>
COMMISSION LOAN AGREEMENT
This COMMISSION LOAN AGREEMENT is made and entered into as of this 16th
day of September, 1981 between Liberty National Life Insurance Company (the
"Company") and Independent Research Agency for Life Insurance, Inc. ("IRA").
1. The Company hereby agrees to loan to IRA amounts equal to a portion
of the First Year Commissions payable on policies solicited by agents of IRA
which are issued by the Company, said loans to be on the following basis:
Upon receipt by the Company of the first policy
premium for the premium payment mode selected, be such
mode monthly, quarterly, or semi-annually, the Company
shall remit to IRA the total first year commission
payable on such policy. Said remittance shall consist of
the commission earned by IRA on the premium received,
plus a loan of the balance of first year commission
payable on such policy.
2. In the event the Company does not receive the total first policy
year premium for a policy upon which commissions have been so loaned, other
than as a result of the death of the insured, the portion of said loan unpaid
to the Company by receipt of such premium shall be repayable to the Company
by IRA. The Company shall make written demand for repayment of any such
unpaid loan.
3. IRA hereby acknowledges that any monies due to the Company under
this Agreement shall constitute a bona fide loan which shall be a debt which
will survive the life of this Agreement and the General Agency Contract
existing between the Company and IRA, providing such debt is not repaid at
the time such Contract terminates.
<TABLE>
<CAPTION>
<S> <C>
INDEPENDENT RESEARCH AGENCY
FOR LIFE INSURANCE, INC.
By /s/ [ILLEGIBLE]
--------------------------------
ATTEST:
/s/ [ILLEGIBLE]
- ------------------------------------
LIBERTY NATIONAL LIFE
INSURANCE COMPANY
By /s/ [ILLEGIBLE]
--------------------------------
ATTEST:
/s/ [ILLEGIBLE]
- ------------------------------------
</TABLE>
<PAGE>
GENERAL AGENCY CONTRACT
GLOBE LIFE AND ACCIDENT INSURANCE COMPANY
("Company")
HEREBY APPOINTS
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
("IRA")
OF
FORT WORTH, TEXAS
as its General Agent, to procure applications for life insurance policies
issued by the Company in those jurisdictions in which it and the Company are
properly licensed.
IRA shall exercise its own judgment as to the persons to be solicited for
insurance, the time and places of such solicitations, and nothing in this
contract shall be construed to create the legal relationship either of
employer and employee or of partnership between IRA and the Company.
THE APPOINTMENT is made on the following terms and conditions:
1. AUTHORITY. IRA is hereby authorized itself and through agents to
solicit applications for life insurance on behalf of the Company according to
the premium rates classification of risks, and practices of the Company, now
existing or as altered or amended by the Company from time to time, and to
appoint agents to carry out the purposes of this contract and to fix their
compensation. IRA agrees to remit promptly to the Company any money due it
and to indemnify the Company for any loss resulting from the misuse or loss
of any funds or conditional receipts by IRA, its officers, employees or
representatives.
IRA is not authorized to accept risks of any kind, make, alter or
discharge contracts for insurance, waive forfeitures, extend time for paying
a premium, or in way obligate the Company except as set forth in the
preceding paragraph. IRA shall deliver no policy, the applicant for which to
the knowledge of IRA's agent is not in good health, unless a first premium
equal to or greater than one month's premium or a copy of an authentic and
duly filed military allotment in accordance with the Company's published
rates as been received by the Company with the application, the conditional
receipt detached if appropriate and the policy issued as applied for.
IRA shall promptly notify the Company of every agent's appointment made
by it and shall notify the Company immediately of the termination of any such
appointments. IRA shall be responsible for the compensation of such agents
and for their fidelity and honesty, and shall be liable to the Company for
all monies received by said agents on behalf of the Company and for any
indebtedness due to the Company by them.
IRA hereby warrants, represents, and agrees that solicitation for
insurance policies to be issued by the Company shall be undertaken only by
persons holding necessary licenses from the insurance supervisory authority
having jurisdiction over the, location where such solicitation occurs, and
that all such solicitation shall be conducted in accordance with all laws,
<PAGE>
rules, regulations, or directives governing such solicitation. Without
limiting the generality of the foregoing, this provision is intended to
require IRA to be responsible for insuring that all agents are properly
licensed in any state where solicitation is being conducted on behalf of the
Company, and that such agents comply with all applicable rules, regulations,
and directives promulgated by the Department of Defense, by any branch of the
military service, or by the commanding officer of any military facility where
solicitation is carried out.
2. INDEMNIFICATION. IRA shall indemnify and hold harmless the Company
and each of its directors, officers, agents, servants, employees, successors,
assigns, and other affiliated corporations, jointly and severally, from any
and all claims, demands, actions, causes of action, suits, costs, damages,
expenses, compensation, and liability of every kind, character, and
description, either direct or consequential, at law or in equity, related to,
arising from, or growing out of any act of IRA, its officers, agents,
servants, or employees, provided however, that the Company shall have acted
in good faith and with reasonable diligence in relation to any matter giving
rise to a claim for indemnity by IRA under this provision, and provided
further, that in no event shall the Company be entitled to indemnity under
this provision for any claim, demand, action, cause of action, suit, cost,
damage, expense, compensation, or liability resulting from the malfeasance or
misfeasance of the Company.
3. PROPERTY. All undelivered policies, rate books, applications and
other forms, and all other books and papers connected with the business of
the Company are and shall remain the property of the Company.
4. PRINTED MATTER. The Company will furnish to IRA all blanks, circulars
and other printed matter requisite to the business of IRA for the Company. No
advertising, sales presentations or other marketing materials of any nature
relating to the business of the Company and not supplied by the Company shall
be used by IRA unless the Company has given written approval. The Company
shall approve or disapprove such materials and presentations prepared by IRA
within thirty days of receipt by the Company. Failure of the Company to
approve or disapprove such materials and presentations within the thirty day
period shall be deemed approval thereof until such time as the Company shall
notify IRA to the contrary. All such materials shall be mailed to the Company
by registered or certified mail and shall be directed to the attention of the
Company officer specified in writing to IRA from time to time by the Company.
5. COMMISSIONS ON "IRA POLICY SERIES." IRA shall be paid the following
commissions on the "IRA Policy Series" (identified in Attachment I) on
premiums paid to the Company for policies issued under this contract.
IRA shall be paid a first year commission of 150% on the "IRA Policy
Series" on first year premiums paid to the Company for policies issued
under this contract.
IRA shall be paid a renewal commission of 17.5% on the "IRA Policy
Series" for the second through the tenth policy years' renewal premiums
paid to the Company for policies issued under this contract.
IRA shall be paid a service fee of 10% on the "IRA Policy Series" for
the eleventh and subsequent policy years' renewal premiums paid to the
Company on policies issued under this contract.
2
<PAGE>
IRA shall be paid a Sales Development Allowance each IRA Fiscal Year,
which begins on October 16st and ends on September 30th each year, in
accordance with the Attachment II.
All commissions, renewal commissions, service fees, and other
remuneration payable to IRA under this contract shall be fully vested and
upon termination of this contract the first year and renewal commissions and
service fees otherwise payable to IRA shall be continued until no IRA
business with the Company is left in force.
The rate of commission for all benefit riders, issued as a part of a
life insurance policy shall be determined by the rate of commission
applicable to the basic policy, except that no commissions shall be payable
on premium deposits or preliminary term premiums. Commissions shall be
payable on any other type of extra premium whatsoever unless otherwise
mutually agreed upon by the parties hereto.
The Company agrees to pay all commissions and/or compensation in any
form earned by IRA and its agents, both before and after the termination of
this contract, to IRA, and to no other parties, unless otherwise directed in
writing to do so by the Chief Executive Officer of IRA or as required by
formal order or request from a governmental authority.
Rates of commission for plans not included in the "IRA Policy Series",
term conversions prior to the third anniversary of the term coverage being
converted, or other policy changes shall be determined in each case by the
Company
6. PRIVACY. The Company agrees that it will not, during or after the
term of this contract, furnish any information to any third party concerning
sales promotional materials, sales presentations, merchandising methods,
trade secrets, copyrighted materials, programming, remuneration, client lists
of client information of IRA, except as may be authorized by IRA; provided,
however, that the Company may furnish any such information to any duly
authorized party as may be required by any applicable law or regulation, upon
evidence of a formal order or formal request for same having been duly
received by the Company.
The Company agrees that it will make no disclosures concerning its
relationship with IRA or its agents, the volume, persistency, quality, or
type of policies written by IRA for the Company, or any other information
concerning the methods of operation of IRA except as may be determined by the
Company to be required by any applicable law or regulation consistent with
its obligations to stockholders and regulatory authorities.
The Company agrees that it will not mail advertising data regarding
contests, sales meetings, new products promotion, salesmen standings, or
copies of its sales bulletin to any agent of IRA without prior approval of
IRA.
IRA agrees that it will not, during or after the term of this contract,
furnish any information to any third party concerning commission schedules or
other information concerning the operation of the Company other than that
authorized by the Company in writing.
7. ADJUSTMENTS. The Company agrees that it shall not, prior to six
months' written notice, except by mutual agreement of the parties, which
agreement shall not be unreasonably withheld, and except as a result of war
or threatened war, with respect to military risks: (a) Lower an existing
commission rate or alter an existing premium rate or (b) Impose more
3
<PAGE>
restrictive underwriting rules on military personnel than those in effect at
the date of the agreement. The Company reserves the right to discontinue
writing any plan or benefit rider which is currently for sale or which
hereafter is offered for sale, after first giving six months' written notice
to IRA, or earlier if by mutual agreement of the parties, which agreement
shall not be unreasonably withheld.
If a new policy is written and there is on the same life other insurance
coverage with the Company or any of the Company's affiliates which (a)
terminated within one year prior to a new application or (b) terminates
within one year after a new policy is issued, the commissions on the new
policy shall be adjusted according to the rules of the Company then in force.
Should the Company cancel or terminate a policy for any cause deemed
sufficient by the Company and tender return of the premium or premiums
thereon, IRA shall refund and pay to the Company on demand any commissions
received on the premiums so tendered.
8. ACCOUNTS. IRA agrees to examine any statement of its account received
from the Company and to notify the Company at once of any difference between
such statement and its own records.
The Company may at any time charge any debt or obligation due or to
become due the Company by IRA or any agent appointed by it under this
Agreement or otherwise, against any commissions, remuneration, or
reimbursement due to IRA, and the Company shall have a first lien thereon
until the debt or obligation is fully paid.
9. ASSIGNMENT OR MODIFICATION. No assignment of commissions earned or to
accrue under this contract or of interest herein shall be valid unless
acknowledged in writing by the Company. The rights of an assignee under an
assignment shall be subject to all the terms and provisions of this contract.
The contract supersedes any previous contract of the same or similar tenor,
and no waiver or alteration of the printed terms herein shall be valid unless
in writing and signed by an executive officer of the Company.
10. APPLICABLE LAWS. This agreement is entered into under the laws of
the state of Texas and is to be construed in accordance with such laws. It is
understood that this appointment is subject to the laws or rulings of the
Insurance Department of any State, Province or Country that may have
jurisdiction, and that any modification of this agreement made necessary by
such law or ruling shall not be construed as a breach of contract.
11. TERMINATION. Unless otherwise mutually agreed upon by both parties,
this contract may be terminated by either the Company or IRA effective six
months after the mailing of written notice of such termination . Termination
shall be effective immediately upon the mailing of written notice if
terminated by the Company because IRA has wrongfully withheld any funds,
policies, receipts, or other documents or property belonging to the Company.
12. REVISION. IRA understands that Company may structure one or more
arrangements with affiliated or non-affiliated third parties to fund all or
part of the commissions or loans due IRA hereunder, in order to reduce the
surplus drain resulting from business written pursuant hereto. IRA agrees to
provide reasonable cooperation to the Company to accomplish such purpose and,
if necessary, to revise this contract to provide for such third party to pay
commissions, provided, however, in no event will IRA be called upon to alter
the commission or allowance rates provided for in this Contract.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this agreement
in duplicate this 7th day of February, 1997, to be effective as of the 1st
day of February, 1997, which is the beginning of the first contract year.
INDEPENDENT RESEARCH AGENCY GLOBE LIFE AND ACCIDENT
FOR LIFE INSURANCE, INSURANCE COMPANY
By /s/ James [ILLEGIBLE] By /s/ J. B. Hudson
------------------------------ ------------------------------
Title President Title Chairman and CEO
--------------------------- ---------------------------
ATTEST
By /s/ [ILLEGIBLE] By /s/ Gary L. [ILLEGIBLE]
------------------------------ ------------------------------
Title Secretary Title Senior Vice President
---------------------------- ----------------------------
5
<PAGE>
ATTACHMENT I
The "IRA POLICY SERIES" consists of plans of insurance issued on the policy
forms listed below:
<TABLE>
<CAPTION>
Plan (1) Policy Form
- -------- -----------
<S> <C>
Whole Life MIL
Decreasing Term Without Cash Values MLDT
Decreasing Term With Cash Values MLDTCV
</TABLE>
(1) The "IRA POLICY SERIES" includes all state variations of the policy forms,
and all Riders and Supplemental Benefits issued in conjunction with the
plans shown.
6
<PAGE>
ATTACHMENT II
IRA shall be paid a Sales Development Allowance (Bonus) based on first
year premium issued and paid for during each IRA Fiscal Year, which begins on
October 1st and ends on September 30th of each year (Bonus Period) in
accordance with the following formula:
c = Current Bonus Period
p = Prior Bonus Period
R = Bonus percentage taken from the following table:
<TABLE>
<CAPTION>
Minimum Amount of
Annualized Premiums Issued And Paid For
R Globe Life and Affiliates
- -------------------------
<S> <C>
2% $500,000
3% 1,000,000
4% 1,500,000
</TABLE>
Ac = Net (excluding policies whereby paid-to-date equals issue date)
Annualized Premium Issued
Bc = Adjustment for first year terminations for policies included in Ac,
unless termination resulted from death
Calculate the unpaid first year premium (modal) for policies with a
paid-to-date in months prior to the last month of c
Ap = Net (excluding policies whereby paid-to-date equals issue date)
Annualized Premium Issued
Bp = Adjustment for first year terminations for policies included in Ap,
unless termination resulted from death
If paid-to-date is less than first policy anniversary date, calculate
unpaid first year premium (modal)
Bonus for Current Bonus Period
(Ac-Bc) x R
+
(Ap-Bp) x R(1)
-
(Ac-Bc) x R(2)
(1) Calculation of allowance for Prior Bonus Period at end of Current Bonus
Period
(2) Calculation of allowance for Prior Bonus Period at end of Prior Bonus
Period
The Bonus will be paid within 45 days after the end of the Bonus Period.
7
<PAGE>
COMMISSION LOAN AGREEMENT
This COMMISSION LOAN AGREEMENT is made and entered into as of the 1st
day of February, 1997 between Globe Life And Accident Insurance Company (the
"Company") and Independent Research Agency for Life Insurance, Inc. ("IRA").
1. The Company hereby agrees to loan IRA amounts equal to a portion of
the First Year Commissions payable on policies solicited by agents of IRA
which are issued by the Company, said loans to be on the following basis:
Upon receipt by the Company of the first policy premium for the premium
payment mode selected, be such mode monthly, quarterly, or semi-annually, the
Company shall remit to IRA the total first year commission payable on such
policy. Said remittance shall consist of the commission earned by IRA on the
premium received, plus a loan on the balance of first year commission payable
on such policy.
2. In the event the Company does not receive the total first year
premium for a policy upon which commissions have been so loaned, other than
as a result of the death of the insured, the portion of said loan unpaid to
the Company by receipt of such premium shall be repayable to the Company by
IRA. The Company shall make written demand for repayment of any such unpaid
loan.
3. IRA hereby agrees that any monies due to the Company under this
Commission Loan Agreement shall constitute a bona fide loan which shall be a
debt which will survive the life of this agreement and the General Agency
Contract between Company and IRA, provided such debt is not repaid at the
time such contract terminates. Company shall have the right to offset any
amounts due it hereunder against any sums next coming due IRA under the
General Agency Contract.
GLOBE LIFE AND ACCIDENT INSURANCE
COMPANY
By /s/ J.B. Hudson
-------------------------------------
Title Chairman and CEO
----------------------------------
INDEPENDENT RESEARCH AGENCY FOR LIFE
INSURANCE, INC.
By /s/ James [ILLEGIBLE]
-------------------------------------
Title President
----------------------------------
8
<PAGE>
MONUMENTAL LIFE INSURANCE COMPANY
Charles & Chase Streets, Baltimore, Maryland 21202
UNITED STATES OF AMERICA
MANAGING GENERAL AGENT'S CONTRACT
THIS AGREEMENT, made in duplicate this 11th day of April, 1979, by and between
MONUMENTAL LIFE INSURANCE COMPANY, a corporation of the State of Maryland,
hereinafter called the Company, and
(NAME) Carroll H. Payne, Hugh A. Payne, Carroll H. Payne II, Debra Sue Payne
and Naomi K. Payne DBA Independent Research Agency for Life Insurance
----------------------------------------------------------------------
(ADDRESS) Independent Research Agency for Life Insurance, Executive Suite -
Rowan Building, P. 0. Box 2387, Fort Worth, Texas 76113
----------------------------------------------------------------------
hereinafter referred to as the General Agent,
WITNESSETH, that in consideration of the mutual covenants hereinafter
contained, the parties hereto agree as follows:
1. TERRITORY - The General Agent is authorized to solicit business in the
following territory but said territory is not assigned
exclusively to him.
ALL STATES IN THE UNITED STATES IN WHICH MONUMENTAL LIFE, THE GENERAL AGENT
AND THE SOLICITING AGENT ARE LICENSED AND AUTHORIZED TO DO BUSINESS AND ALL
MILITARY BASES IN THE UNITED STATES WHERE A REPRESENTATIVE OF THE GENERAL
AGENT IS AUTHORIZED TO DO BUSINESS.
The Company reserves the right to make changes in the Territory or to
withdraw at any time upon 30 days notice to the General Agent.
2. DUTIES
a. The General Agent will solicit applications for life insurance
policies issued by the Company and shall at all times be deemed an
independent contractor and he shall refrain from holding himself
out as an employee, partner, joint venturer, or associate of the
Monumental Life Insurance Company, and nothing contained herein
shall be construed to create the relationship of employer and
employee between the Company and the General Agent.
<PAGE>
b. The General Agent will conform to and abide by the Company's
instructions, rules and requirements and will be governed by the
ethics of the life insurance business, the insurance laws and
regulations of the state, province, or country in which he is
authorized to do business, as well as the laws and regulations of
the state insurance departments, the state and the United States.
3. RESPONSIBILITIES AND AUTHORITY
a. The General Agent or any of his representatives shall have no
authority to change, omit, add to, or waive any question, any
provision of the policy of insurance issued by the Company; to
waive forfeitures, extend time of premium payments, quote rates
other than those published by the Company, or to obligate or bind
the Company in any way not specifically authorized by this Contract
or in writing by the President or a Vice-President of the Company.
b. The General Agent shall have the power to appoint and contract with
agents to carry out the purpose of this Contract after the
necessary agent's license shall have been duly secured by or for
such persons. In contracting with agents, the General Agent shall
use without alteration the printed form of agent's contract
approved by the Company. The General Agent shall be responsible to
the Company for all business done by or entrusted to agents or
others appointed by the General Agent and no such agent or
appointee shall have any claim against the Company for commissions
or otherwise. The Company shall at any time have the right to
refuse to accept business from any agent of the General Agent.
c. The General Agent shall be responsible to the Company for all
monies received for or on behalf of the Company by the General
Agent, his Agents or employees and will immediately turn over to
the Company all such monies received, including those paid at the
time any application for insurance is written. Promissory notes are
not acceptable for monies payable to the Company. Should the
General Agent fail to make prompt transfer of monies, then he shall
also be responsible for and indemnify the Company for any loss
suffered in any change in currency rates.
d. The General Agent shall indemnify and save the Company harmless
from any and all expenses, costs, causes of action and damages
resulting from or growing out of unauthorized acts or transactions
of the General Agent or of the General Agent's agents or employees.
e. The General Agent shall not deliver any policy except where
coverage has been provided under a conditional receipt and the
policy was issued as applied for, unless all insureds thereunder
(and premium payer if a Payer Benefit Rider is included) are in
good health at the time of delivery of said policy and unless the
first premium for the same has been fully paid or premiums are
payable under a military mode and an allotment request has been
duly filed and registered. If a conditional receipt was given for a
non-placed policy, it is to be returned with the policy.
-2-
<PAGE>
f. The General Agent shall not publish, distribute or circulate
advertising of any character on behalf of the Company without prior
written consent of the Company and the Company warrants that it
will advise the General Agent of its decision on such
advertisement material within thirty (30) days from date of
mailing by General Agent; otherwise, such material shall be deemed
approved.
INITIALS
--------
g. The General Agent, without first securing written consent of the
Company, will not fix liability on the Company for licenses or
taxes which might be required as a Company license fee or tax.
4. GENERAL PROVISIONS
a. The Company will have the full authority to act or not to act on
any application submitted by the General Agent. No right of action
against the Company will arise because of refusal, delay or
postponement by the Company, for any reason to issue a policy on
any application submitted by the General Agent.
b. The Company may prescribe the form, plan, and character of policies
for which application will be accepted for consideration of
issuance and may from time to time change or discontinue any form,
plan, or character of policy now or hereafter in use upon sixty
(60) days written notice to General Agent; provided, however, that
in the event the Company is required to discontinue any such form
by order or directive of a regulatory authority, then such
discontinuance shall take effect upon written notice to the General
Agent.
c. The General Agent shall bear all the expenses incurred in the
performance of this Contract and shall receive as full compensation
the remuneration recited in the Compensation Schedule attached
hereto.
d. [Further, no commissions will be allowed or paid on any premiums
waived by the Company under a disability provision or under a payer
clause or under any other policy provision or for any other purpose.]
e. The General Agent shall be responsible for the acts of his agents
and obligations when the same are due and unpaid from the agent to
the Company, and the said General Agent shall, on demand, pay the
Company the amount of such debt and shall likewise pay any amount
due from himself to the Company upon demand. Such debt due the
Company may at any time be offset against any commissions, service
fees, bonuses or other remuneration, if any, accrued or to accrue
to the General Agent or to one of his agents.
-3-
<PAGE>
f. Whenever the term "advance" is used, the same shall nevertheless
be construed to mean a loan. The General Agent agrees to indemnify
the Company for any fees and expenses that the Company may incur in
the collection of any indebtedness owing by one of his agents or
for any legal action brought by or against the General Agent or
any agent under him, to which the Company may be a party, and it
is agreed that the Company may, if it so desires, employ its own
counsel in defense of any legal proceeding to which it may be made
a party, and all expense of such litigation, including costs and
attorney fees, shall, in any event, be paid by the General Agent.
g. In the event that a dispute shall arise between General Agent and
his agent concerning any commission fees, or any other
remuneration due him from the General Agent, it is agreed that in
said event Company, after giving reasonable notice in advance to
General Agent, may pay such agent the commission fees or any other
remuneration due him and offset such payments against any monies
due or to become due the General Agent, but the Company shall not
be obligated to make such payments due him by the General Agent.
INITIALS
--------
h. The Company reserves the right upon sixty (60) days written notice
to General Agent to revise the terms of this Contract, including
commissions on any one or all of the policies, at any time it deems
such revision advisable but such revision(s) with respect to
commissions will apply only to insurance thereafter issued;
provided, however, that in the event the Company is required to
revise the terms of one of its contracts by an order or directive
of a regulatory authority, then such revision shall take effect
upon written notice to the General Agent.
i. This Contract will be the sole and only contract between the
Company and the General Agent, and any changes or interlineations
made therein will be invalid unless signed and dated by the General
Agent and the President or a Vice President of the Company. Any
modifications of this Contract must be by written addendum executed
by the President, or a Vice President of the Company and the
General Agent.
j. Failure of either party hereto to enforce or insist upon any of the
provisions of this Contract in any instance(s) will not be
construed as a waiver of its rights to enforce or insist upon such
provision(s) either currently or in the future.
k. This Contract is not transferable. No rights or interests arising
therefrom will be subject to assignment except with the written
consent of the Company.
l.
-4-
<PAGE>
m. Commissions, if any, will be determined by the Company in any and
all of the following cases:
1. On account of change in plan, benefits, or amount of policy,
or on any issued within one (1) year before or after a former
policy on the same life has lapsed, been suspended, or
converted into paid-up or extended insurance on when a policy
cannot be issued as a normal classified risk or when special
reinsurance arrangements are required.
2. On a Family Rider, the placement of which results in or causes
any policy or policies issued by the Company on the life of
the husband (Insured under said Family Policy) or any members
of his immediate family to lapse, be suspended, or converted
into paid up or extended insurance within a period of six (6)
months prior or subsequent to the date of issue of the Family
Policy or Family Rider.
3. On account of the conversion of a Term policy or Rider to a Life
or Endowment policy on either an original age basis or an
attained age basis.
n. Neither first year commissions, renewal commissions, bonuses, nor
service fees will be payable on any premium which has been paid in
advance until such premium actually falls due.
o. In the event of default for a period of sixty (60) days from the end
of the grace period in the payment of a premium on a policy written
under this Contract, if the policy is subsequently reinstated, except
through the instrumentality of the General Agent, the Company will not
be liable to the General Agent for further remuneration thereon. In
case of the termination of this Contract, except by death of the
General Agent or by being superseded by another Contract with this
Company, the said sixty (60) day period will be reduced to thirty
(30) days.
p. The Company will from time to time, at its option, offer new plans
of insurance not listed in the Commission Schedule of this
Contract, which will be included under this Contract and may be
sold by the General Agent. The Commission Schedule applicable to such
policies will be announced by the Company by letter addressed to the
General Agent at the time such policies are introduced and the General
Agent agrees to be bound by the commissions set forth by the Company
in such letter.
-5-
<PAGE>
5. TERMINATION
This Agreement shall be terminated by the giving by either party hereto
sixty (60) days' advance written notice prior to any such termination,
said notice mailed or delivered to the last known address of either
party, and in no other manner, except in instances in which the General
Agent is adjudicated a bankrupt or has failed to comply with the
insurance laws and regulations of the state, province, or country in
which it is authorized to do business, the laws and regulations of the
state insurance department, the state, and United States, the General
Agent may be terminated automatically by the Company.
6. SERVICE FEES DEDUCTION
A service fee deduction of 2% of annual premiums then being received and
retained by the Company will be made from any renumeration due to the
General Agent, if after termination of this Contract, the General Agent
does not exercise due diligence in servicing and conserving business
written under this Contract.
7. VESTING
Subject to the provisions in paragraphs 4(e) and 6, above, all
commissions, renewals, Service Fees and other remunerations are fully
vested in the General Agent, except that if this Contract is terminated
for any reason, all renewal commissions will cease if the General Agent
was due less than Five Hundred Dollars ($500.00) in total remuneration
under the terms hereof during the previous calendar year.
8. DAMAGES FOR REPLACEMENT
At any time while this contract is in efect or after it is terminated,
the General Agent warrants to the Company that he shall not nor permit his
Agency to conduct a systematic inducement of policyholders of the Company
or relinquish a policy with the Company. Should a systematic replacement
of policies, defined as that annual amount greater than or equal to one
percent (1%) of the annualized premiums in force on policies less than or
equal to the preceding fifteen (15) years' duration from the date of issue
of the policies underwritten by the General Agent, with the Company occur,
then the present value of future profits pertaining to those replaced
policies shall be deducted from any and all remuneration payable thereafter
to the General Agent as appropriate damages thereto.
9. The Company shall agree that notice of demand for repayment of any amounts
due shall not be given until in the COmpany's judgment, the deferred first
year commissions due will be insufficient to repay any outstanding balance
due.
-6-
<PAGE>
10. The Company agrees that it will not, either during or after the term of
this Contract, furnish information to its agents, directly or through
others, or to any other third party, other than a regulatory authority
upon receiving due request concerning sales materials and
presentations, merchandising methods of the General Agent or any other
trade secrets and copyrighted materials, programming procedures, or
client or agent lists or information identified by the General Agent as
confidential.
11. The Company agrees that it will not impose more restrictive underwriting
rules on military personnel than those in effect at the date of this
Contract unless there is a concern of war or threat of war or military
action (declared or undeclared), persistency of business, amount of
claims or other condition which can be reasonably expected to affect the
profitability of the business.
12. The Company agrees that it will not during or after the term of this
Contract, assign, sell, or transfer any portion of the General Agent's
business unless it is part of an overall transaction deemed to be in the
best interest of the Company.
13. The Company and General Agent agree that during the term of this
Contract and for two years thereafter, neither will knowingly license,
contract or offer employment to any General Agent or agents of a General
Agent, Sub-agent or employee of the other party hereto without written
approval of the other party.
14. It is understood and agreed that this Contract cancels and supersedes all
previous Contracts and Agreements, and it is further agreed that this
Contract shall be binding upon the parties hereto, their successors and
assigns.
15. The "Managing General Agent" of the General Agency (Partnership) is
authorized to act on behalf of, and execute documents for all partners.
/s/ [ILLEGIBLE] /s/ Carroll H. Payne
- ------------------------------ ----------------------------------------
WITNESS CARROLL H. PAYNE, MANAGING GENERAL AGENT
INDEPENDENT RESEARCH AGENCY
FOR LIFE INSURANCE
/s/ [ILLEGIBLE] /s/ Roger R. Kolker
- ------------------------------ ----------------------------------------
WITNESS ROGER KOLKER, PRESIDENT
MONUMENTAL LIFE INSURANCE
COMPANY
-7-
<PAGE>
ADDENDUM TO GENERAL AGENT'S CONTRACT
WITNESSETH, that in consideration of the mutual covenants hereinafter
contained, notwithstanding the General Agent's Contract to which this Addendum
is attached hereto, the following undersigned parties further agree as follows:
PARTNERSHIP
(a) That the partnership heretofore formed by the undersigned parties
shall be deemed General Agent as provided in the General Agent's
Contract to which this Addendum is attached. It is further
understood that such partnerhsip shall be recognized by Monumental
Life upon the duly authorized signature of a representative of
Monumental Life.
(b) The parties named in the Managing General Agent's Contract to which
this Addendum is attached are the sole partners to such
partnership, there being no silent partners to such partnership nor
additional individuals who may become partners of such partnership
at a later date.
(c) That any change in such partnership shall be promptly notified in
writing to the Company, and any change must be acknowledged by the
Company which may require signatures of the respective parties to
the partnership.
(d) That upon the dissolution of the partnership for whatever reason,
the remaining partner (or partners) and any appointees, and sub-agents
recruited by such partnership shall continue in their respective
capacities.
(e) The partners further agree that any debts on monies becoming due and
owing Monumental Life for wahtever reason, shall be considered the
debts of the partnership as well as the partners individually and that
Monumental Life may elect to hold either the partners or the
individual partners liable.
/s/ [ILLEGIBLE] /s/ Carroll H. Payne
- ------------------------------ ----------------------------------------
WITNESS CARROLL H. PAYNE, MANAGING GENERAL AGENT
INDEPENDENT RESEARCH AGENCY
FOR LIFE INSURANCE
/s/ [ILLEGIBLE] /s/ Roger R. Kolker
- ------------------------------ ----------------------------------------
WITNESS ROGER KOLKER, PRESIDENT
MONUMENTAL LIFE INSURANCE
COMPANY
-8-
<PAGE>
[LETTERHEAD]
GENERAL AGENT'S AGREEMENT
NORTH AMERICAN COMPANY FOR LIFE AND HEALTH INSURANCE, (herein called Company)
and
- -------------------------------------------------------------------------------
Independent Research Agency
- --------------------------------------------------------------------------------
of Fort Worth, Texas
- --------------------------------------------------------------------------------
(herein called General Agent), hereby agree as follows:
1. AUTHORITY:
a. The Company hereby authorizes the General Agent to procure personally,
and through agents appointed by him, applications for policies of insurance
covered by this Agreement, and of a kind and character satisfactory to the
Company; to make proper delivery of policies issued by the Company on such
applications, and to collect the first premiums on such policies and remit
same to the Company.
b. The General Agent shall use without alteration the printed forms of
agent's contracts furnished by the Company when appointing agents. No such
agent's contract shall be in force until approved in writing by an officer
of the Company.
c. The Company shall pay all licence fees which may be required by the
state in which the General Agent resides, and the General Agent shall pay
all other taxes and fees which may be required by local authorities in the
Territory.
2. TERRITORY:
a. This appointment is limited to the following territory and is not
exclusive in such territory:
FORT WORTH, TEXAS & VICINITY
b. The Company reserves the right to retire from the Territory, and to
discontinue or withdraw any forms of policies from the General Agent in his
Territory without prejudice to the right of the Company to continue said
forms in any other territory.
3. LIFE AND ACCIDENT AND HEALTH:
This Agreement applies specifically to all forms of life insurance policies
and annuity contracts and to all forms of accident and health policies
(other than those in either line classified by the Company as wholesale,
franchise or group) and in no way affects any contract or agreement which
the General Agent may have with the Company pertaining to any other forms
of insurance.
4. LIMITATION OF AUTHORITY:
The General Agent has no authority to make, alter, or discharge any policy
or to extend any provision thereof; to extend the time for payment of
premiums; to waive or extend any policy, or contract obligation or
condition; to waive any forfeiture; to deliver or cause to be delivered any
policy unless the proposed insured named therein is at the time of delivery
in good health and in an insurable condition; or to incur any debt or
liability against the Company.
5. RELATIONSHIP:
a. Nothing herein contained shall be construed to create the relationship
of employer and employee between the Company and the General Agent.
b. The General Agent shall conduct his activities in accordance with the
laws in force in the Territory, and with all present and future rulings and
instructions of the Company.
O-538
<PAGE>
6. LIEN FOR INDEBTEDNESS AND ASSIGNMENT:
a. Any debt or other liability of the General Agent to the Company may be
off-set by the Company at any time against any sums due or becoming due the
General Agent or his widow or any legal representative, and a lien is
hereby reserved to the Company for the satisfaction of any such debt or
liability.
b. After termination of this Agreement, any amount paid at any time by the
Company to the General Agent which is in excess of the sum of
(i) the amount of commissions payable in accordance with Section 9 of
this Agreement as determined from earned premiums paid in cash to the
Company; and
(ii) any amount otherwise payable to the General Agent in accordance
with the terms of this Agreement,
shall constitute a debt of the General Agent to the Company, payable to the
Company as and when determinable.
c. No assignment of this Agreement or of compensation earned or to accrue
thereunder shall be valid unless authorized in advance in writing by the
Company.
7. COMPANY MONEY AND BOND:
a. The General Agent shall not use monies received by him for or on
account of the Company for any personal or other purpose whatsoever, but
shall hold the same in trust for the Company to be reported upon and
transmitted to the Company in accordance with its rules and instructions.
b. The General Agent may be bonded in such manner and amount as the
Company shall require.
8. ADVERTISING:
The General Agent shall not print, publish, or distribute, any
advertisement, circular, statement, or any other document relating to the
business or the standing of the Company or of any other insurance company
unless the same shall have been previously approved in writing by an
officer of the Company.
9. COMPENSATION:
(1) COMMISSIONS:
a. GENERAL AGENT'S OVERRIDING COMMISSIONS. The compensation of the
General Agent shall consist of overriding commissions on premiums paid
in cash on policies issued by the Company on applications obtained by
him or his agents, at rates according to the following table:
- --------------------------------------------------------------------------------
GENERAL AGENT COMMISSIONS
---------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Policy Year
-------------------------------------------------------
Form of Policy 1st 2nd 3rd 4th-10th 11th+
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TOTAL 7-1-73 80 33 1/2 10 10 5
Life Policies, excluding Equity Protector % 2 1/3%
TOTAL 1-1-71 80 17 1/2 10% 7 1/2 2 1/2
Endowment Policies on which premiums
are payable for less than 20 years 5 2 1/2 1 1/2 1 1/2
Equity Protector 10 7 1/2 5 2 1/2
Retirement Annuity--Retirement Income
Age at Issue:
45 Years and Under 10 5 2 1/2 2 1/2
Over 45 Years 5 2 1/2 1 1/2 1 1/2
Single Premium (Life Insurance and
Annuities) 1 -- -- --
Accident and Health Policies 10 10 10 10
- -------------------------------------------------------------------------------------------------
</TABLE>
O-538
<PAGE>
b. AGENT'S COMMISSIONS. In addition to the overriding commissions
provided for in a., above, the Company will pay to the General Agent,
for the use and account of the agent, the Agent's Commissions as set
forth in the Schedule of Agent's Commissions attached hereto, which he
shall pay to the agent entitled thereto; provided, however, the
Company may at the General Agent's request or at its own discretion,
pay the Agent's Commissions or any other fees or allowances direct to
the agent.
c. CONDITIONS. Payment of commissions shall be subject to the
following conditions:
(i) On policies on which one or more renewal premiums are paid in
advance, commissions shall accrue only as such premiums
otherwise would have become due.
(ii) Renewal commissions shall not be allowed on policies being
continued in force under any Nonforfeiture or Waiver of Premium
provision of any policy.
(2) SERVICE ALLOWANCE: A service allowance will be allowed on premiums paid for
the eleventh and subsequent policy years on business written and placed by
the General Agent or his agents, provided no commissions are payable on
such premiums and provided that the General Agent is such General Agent for
the Company at the time such allowances are payable, except as may be
provided for under Section 10, b., (iii).
The service allowance shall be the following percentages of such premiums:
SERVICE
FORM OF INSURANCE ALLOWANCE
Life Insurance and Annuities 2 1/2%
----------------------------------------------------------
Non-Cancellable or Guaranteed
Renewable Accident and Health *2 1/2
Commercial Accident and Health 5
* Includes agent's 1 1/2%
-------------------------------
(3) AGENCY DEVELOPMENT ALLOWANCE: The Agency Development Allowance payable
each month on policies written under this Agreement on permanent plans of
insurance exclusive of term insurance plans and the Equity Protector plan
(herein referred to as "permanent plans") shall be the product of the
applicable ADA rate and the net increase in Production Credit during the
month, according to the Company's records.
The Agency Development Allowance payable each month on policies written
under this Agreement on term insurance plans and on the Equity Protector
plan (herein referred to as "term plans") shall be the sum of (a) 50% of
the product of the applicable ADA rate under the Production Credit on such
policies renewing on their first anniversaries during the month and (b) 50%
of the product of the applicable ADA rate and the Production Credit on such
policies renewing on their second anniversaries during the month.
Payment of the Agency Development Allowance shall be subject to the
following conditions:
a. Lapses of policies on permanent plans on which at least two full
years' premiums have been paid in cash and policies terminating by
death, will not be deducted.
b. The amount deducted for lapses of policies on permanent plans on which
more than one but less then two full years' premiums have been paid
shall be the amount by which the original Production Credit exceeds
the pro-rata part of such credit based on the ratio of the period for
which premiums were paid to two years.
c. For any month in which the aggregate amount deducted for policies on
permanent plans lapsing during the month exceeds the amount of
Production Credit on new business paid during the month on such
plans, no Agency Development Allowance shall be paid for such plans
but the amount of such excess shall be deducted from the Agency
Development Allowance payable for the month for policies on term
plans. If the amount of such excess is greater than the amount of the
Agency Development Allowance for term plans, the balance (herein
called the "Agency Development Allowance Deficiency") shall be carried
forward as an offset against the Agency Development Allowance payable
for the succeeding month or months.
d. "Production Credit", as used herein, for any and all purposes, shall
mean the face amount of insurance, modified by the following:
<TABLE>
<CAPTION>
FORM OF INSURANCE PRODUCTION CREDIT
<S> <C>
(i) Level term policies and 60% of face amount
riders, Graded Premium Life** of insurance
and Modified Life**
</TABLE>
O-538
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(ii) All other term policies and riders 40% of initial amount
(excluding the Retirement Income of insurance
decreasing term insurance rider--
see item (v) below)
(iii) Family Protection Benefit
-- Wife and Children's Term
Insurance......................... $2,000 per benefit unit
--Children's Term Insurance....... $500 per benefit unit
(iv) Preliminary Term and Option to None until converted to a permanent
Purchase Additional Insurance plan of insurance, or until the option
to purchase additional insurance is
exercised.
(v) Annual Premium Retirement
Annuities (including such policies $1,000 for each $10.00 monthly income
issued with the Retirement Income (based on annuity commencement on
Decreasing Term Insurance Rider) policy anniversary at age 65)
(vi) Single Premium Contracts, Waiver
of Premium, Accidental Death
Benefit, Child's Protection None
Benefit, and Increasing Term
Riders
(vii) Accident and Health Policies $1,000 for each $25 of annualized
premium
</TABLE>
**Additional Production Credit of 40% of face amount of insurance on
renewal at beginning of sixth policy year, if automatic conversion is
effected (fifth policy year for Graded Premium Life).
e. If the amount of life insurance on an individual life exceeds
$200,000, the production credit for such excess insurance shall be the
product of the Production Credit as normally determined and the
appropriate factors from the following table:
<TABLE>
<CAPTION>
Amount of Insurance Factor
------------------- ------
<S> <C>
First $200,000 1.00
Third 100,000 .80
Fourth 100,000 .60
Fifth 100,000 .40
Over 500,000 .20
</TABLE>
In the case of decreasing term insurance, this rule will be applied on
the basis of the initial amount of insurance.
If new insurance, combined with insurance in force on the same life
exceeds $200,000 the adjustment factor applicable to such new insurance
shall be determined on the basis that the new insurance and such
insurance in force constitute a single policy.
f. The Agency Development Allowance Rate per $1,000 Production Credit
applicable until the end of the first fiscal period shall be the amount
specified on the last page of this Agreement opposite the caption
"Initial ADA Rate." The Agency Development Allowance Rate per $1,000
Production Credit applicable to each fiscal period thereafter shall be
determined from the following table on the basis of the volume of new
business (amounts determined on the "Production Credit" basis) placed
in the preceding fiscal period, according to the Company's records.
<TABLE>
<CAPTION>
New Business Volume ADA Rate
<S> <C>
Over $500,000 $5.00
375,000 to $500,000 4.00
250,000 to 375,000 3.00
Under 250,000 2.00
</TABLE>
The first "fiscal period", for the purpose of this Agreement, shall
mean the earliest six month period beginning on January 1, April 1,
July 1 or October 1 next following the effective date of this
Agreement. Thereafter, "fiscal period" shall mean each consecutive
six month period following such first fiscal period.
(4) Compensation for forms of policies not scheduled herein, and for any form
of policy when used in a salary savings, pension or similar plan, and
policy changes, shall be determined in each case by the Company. The
Company reserves the right from time to time to change the commission
schedule, by notice to the General Agent.
10. VESTING:
a. First-year overriding commissions are vested.
<PAGE>
b. Should this Agreement be terminated by the death or disability of the
General Agent at a time when renewal commissions or other emoluments are
payable hereunder, the Company will continue the payment of such
commissions and other emoluments otherwise due to the General Agent under
this Agreement and any prior agreement (in case of such disability) or in
the case of his death, to the lawful widow of the General Agent, if any,
during her life, and thereafter to such person or persons as she may by
will appoint, including her own estate or in default of appointment to her
legal representative. If this Agreement is terminated by mental disability
of the General Agent or if the General Agent dies leaving no widow, such
commissions and other emoluments shall be payable to the legal
representative of the General Agent.
c. When payment provided for hereunder fails to exceed a total of $600.00
in any calendar year, the Company shall, after the end of such year, have
the option, exercisable in its sole discretion, of purchasing any further
commissions and other emoluments from the General Agent, or from any other
person who owns the right thereto acquired under or through the General
Agent, for their present value. "Present value" as here used means the
value of such commissions and other emoluments determined by the Company on
the basis of accepted actuarial practices.
d. The amount payable for vested renewal commissions and other emoluments,
if any, will be reduced by any debt or other liability of the General
Agent to the Company, including any Agency Development Allowance Deficiency
existing at termination of this Agreement or accruing after such
termination pursuant to Section 9 (3) c.
e. To the extent commissions otherwise payable to an agent are not vested
pursuant to agreement between the General Agent, the Company and the agent,
such commissions shall vest in the General Agent.
f. If this Agreement is terminated because of the failure of the General
Agent to pay over funds received for the Company, all further commissions
and other emoluments under this Agreement shall be forfeited to the
Company.
11. TERMINATION:
a. Either the General Agent or the Company may terminate this Agreement by
giving notice in writing to the other at least thirty days prior to such
termination date. Notice by mail to the last known business address of the
party to be notified shall be sufficient.
b. If the General Agent is an individual, his total and permanent physical
or mental disability, or death, shall terminate this Agreement. If the
General Agent is a partnership, the death of either partner shall not
terminate this Agreement but it shall continue in force and effect in
favor of the surviving partner. If the General Agent is a corporation,
upon the dissolution, bankruptcy or insolvency of the General Agent, this
Agreement shall immediately terminate and no sum or sums of money shall
thereafter accrue under this Agreement.
c. Upon termination hereof the General Agent shall immediately pay in
cash all sums due hereunder and shall immediately deliver to the Company
all rate books, letters, records and supplies connected with the business
and belonging to the Company.
<PAGE>
12. NON-WAIVER:
Forbearance or neglect of the Company to insist upon the performance of
any of the terms of this Agreement, or to declare a forfeiture or
termination against the General Agent shall not constitute a waiver of such
rights and privileges.
13. PRIOR AGREEMENTS:
This Agreement supersedes any prior agreement between the Company and the
General Agent as to new business issued through the General Agent after
this Agreement becomes effective. If such an agreement be in existence, it
is hereby cancelled, except that on any business already issued, any
commissions payable under said prior agreement shall, subject to all liens
and assignments, continue to be paid in accordance with the terms thereof.
14. EFFECTIVE DATE AND MODIFICATION:
This Agreement shall be effective January 1, 1971. No modification of
this Agreement shall be valid unless made in writing by an
officer of the Company.
Initial ADA Rate $5.00
NORTH AMERICAN COMPANY FOR
LIFE AND HEALTH INSURANCE
Independent Research Agency for Life Ins. By: /s/ [ILLEGIBLE]
- ----------------------------------------- ---------------------
/s/ Carroll H. Payne Second Vice President Title
- ----------------------------------------- ---------------------------
General Agent
O-538
<PAGE>
[LOGO]
SCHEDULE OF GENERAL AGENT'S COMMISSIONS
This Schedule is attached to and made a part of the General Agent's Agreement
effective _______________, 19___, between ___________________________________,
the General Agent, of ___________________________, and North American Company
for Life and Health Insurance.
This Commission Schedule shall be effective _____________, 19___, and shall
supersede any Commission Schedule previously in effect with respect to policies
written after such effective date.
First year and renewal commissions are vested and will be paid as they become
due. The following commission rates will be paid on premiums on the Agent's
business:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
PREMIUMS
FORM OF POLICY PAYABLE FOR 1ST YEAR 2ND YEAR 3RD TO 10TH
YEARS YEARS, INCL.
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ORDINARY LIFE INSURANCE AND
ANNUITIES -- Personal
Insurance
LIFE
Whole Life 80% 10% 5%
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Preferred Life 65 10 5
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Equity Protector 25 10 10
Whole Life With Return of
Cash Value 45 10 7 1/2
Estate Foundation Plan 65 10 5
Joint Ordinary Life 65 10 5
Modified Life 65 10 5+
Graded Premium Life 65 22 1/2 5*
LIMITED PAYMENT LIFE 35 + 65 10 5
30 to 34 65 10 5
25 to 29 60 10 5
20 to 24 55 10 5
15 to 19 45 9 5
10 to 14 35 7 5
ENDOWMENTS 35 + 65 10 5
30 to 34 60 10 5
25 to 29 55 10 5
20 to 24 50 9 5
15 to 19 40 8 3
10 to 14 30 6 3
- ------------------------------------------------------------------------------------
</TABLE>
* Additional commission of 17 1/2% in 3rd to 5th years inclusive.
+ Additional commission of 60% of increase, if any, in premium for 6th year.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Form of Policy Age at 1st Year 2nd Year 3rd to 10th
Issue Years, Incl.
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RETIREMENT ANNUITY --
RETIREMENT INCOME 30 & Under 65 % 7 1/2% 5%
31 - 35 60 7 1/2 5
36 - 40 55 7 1/2 5
41 - 45 45 7 1/2 5
46 - 50 30 5 3
51 - 55 20 5 3
56 & Over 15 3 3
<CAPTION>
----------
Term
Period
----------
<S> <C> <C> <C> <C>
TERM * 20 + 60 10 5
- ------------------------------------------------------------------------------
15 - 19 50 9 5
5 - 14 40 8 5
Ten Year Deposit Term** 40 8 5
Single Premium
Life and Endowment 3 1/2
Annuities 2
- ------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------
3rd to 20th Years,
1st Year 2nd Year Inclusive
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
FIVE TEAR RENEWABLE TERM 50% 10% 5%+
- ------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------
1st 2nd 3rd to 10th 11th 12th 13th to 20th
Year Year Years, Incl. Year Year Years, Incl.
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TEN YEAR DEPOSIT
TERM/WHOLE LIFE** 40% 8% 5% 15% 10% 5%
- ------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------
3rd to 10th Years,
1st Year 2nd Year Inclusive
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
ACCIDENT AND HEALTH 40% 10% 10%
- ------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------------------
RIDERS
Level Term \ Rate of Commission same as policy to which
Home Protector Benefit | attached if added at time of issue. No
Increasing Term | first-year commission will be paid on
Family Protection Benefit | premiums collected for riders added after
Option to Purchase | policy has been in force for one year. If
Additional Insurance > added during the first year, commissions
Waiver of Premium | will be allowed only on the premium for the
Accidental Death Benefit | remainder of that year. If added after the
Child's Protection Benefit| first year, the rate of renewal commission
Uniform Decreasing Term / will apply.
\ No commissions paid on preliminary term
Preliminary Term | premiums. Production credit allowed and base
| policy commissions payable when first
/ regular premium is paid.
- ------------------------------------------------------------------------------
Commissions may be allowed on extra premiums in accordance with the Company's
practice.
* One Year Renewable Term regarded as Term to 70 for commission purposes.
** No commissions are payable on the "Initial Deposit" on either the Ten Year
Renewable Deposit Term or Ten Year Deposit Term/Whole Life; full
commissions payable on premiums (exclusive of the Initial Deposit) received
during the first renewal only of the Ten Year Renewable Deposit Term.
+ Additional commission of 35% payable in 6th, 11th and 16th policy years.
<PAGE>
[LETTERHEAD]
GENERAL
AGENT'S
BULLETIN
- --------------------------------------------------------------------------------
AD-11-71 NOVEMBER 15, 1971
INCREASED COMMISSIONS ON
PREFERRED MINIMUM 50!
IN ORDER TO FURTHER ENHANCE YOUR REASONS FOR SELLING OUR GREAT NEW PLAN, WE'RE
INCREASING YOUR COMMISSIONS!
10% THE FIRST YEAR 5% THE SECOND YEAR
5% THE THIRD YEAR
WE ARE HAPPY TO ANNOUNCE THIS NEW INCREASED SCALE OF COMMISSIONS FOR THE
PREFERRED LIFE PLAN WHEN WRITTEN FOR AMOUNTS OF $50,000 OR MORE. YOU'VE
INDICATED BY SELLING THIS PLAN OVER THE LAST THREE MONTHS THAT YOU LIKE IT, AND
WE WANT YOU TO WRITE MORE.
THESE NEW COMMISSIONS WILL BE EFFECTIVE FOR BUSINESS ISSUED ON APPLICATIONS
PROCURED NOVEMBER 15, 1971 AND LATER.
NEW TOTAL COMMISSIONS AS FOLLOWS
<TABLE>
<CAPTION>
POLICY TOTAL AGENT'S GENERAL AGENT'S
YEAR COMMISSION COMMISSION OVERRIDING
------ ---------- ---------- ----------------
<S> <C> <C> <C>
1 90.0% 60.0% 30.0%
2 17.5% 10.0% 7.5%
3 12.5% 7.5% 5.0%
4-10 5.0% 2.5% 2.5%
</TABLE>
<PAGE>
[LETTERHEAD]
GENERAL
AGENT'S
BULLETIN
- --------------------------------------------------------------------------------
AD-9-71
TO: North American General Agents
FROM: Tony Raynor
RE: New P.W.L. Min. 50 Commission Structure
Upon request of our Field Force, we have modified the commission structure for
our New Preferred Whole Life Min. 50 as follows:
<TABLE>
<CAPTION>
General Agents'
Agent's Override Total
Policy Commission Commission Commission
------ ---------- --------------- -----------
<S> <C> <C> <C>
First Year 50% 30% 80%
Second Year 5% 7-1/2% 12-1/2%
Third Year 2-1/2% 5% 7-1/2%
Fourth-Tenth Year 2-1/2% 2-1/2% 5%
</TABLE>
As you can see from the above, we have realigned the first year commissions from
60-20 to 50-30, while the total percentage of commission remains the same at
80%.
We believe that this change will benefit you, the General Agent, by making this
already competitive product much more profitable.
This arrangement gives you more leeway in your own operation.
<PAGE>
[LETTERHEAD]
GENERAL AGENT'S AGREEMENT
SECTION ONE -- APPOINTMENT AND PURPOSE
A. This Agreement is hereby made, entered into and effective the First day of
June, 1972, by and between THE OLD LINE LIFE INSURANCE COMPANY OF AMERICA,
a Wisconsin Insurance Corporation, (called "the COMPANY") and Carroll H.
Payne of Ft. Worth, Texas, (called "the GENERAL AGENT") as a GENERAL AGENT
to recommend applicants to the COMPANY for appointment as Agents, Special
Agents, District Agents and Brokers, subject to appointment by the COMPANY
by written contract, and hereinafter designated as the "REPRESENTATIVE" and
the REPRESENTATIVE so recommended by the GENERAL AGENT and so contracted by
the COMPANY shall be under his jurisdiction. In addition, the GENERAL AGENT
when properly licensed may personally solicit applications for individual
Life Insurance and Annuities, Health Insurance and Group Life and Group
Health Insurance policies.
SECTION TWO -- GENERAL AGENT'S RESPONSIBILITIES
A. The GENERAL AGENT agrees to comply with the COMPANY'S rules and regulations
in force and such as may be adopted by the COMPANY from time to time.
B. [DELETED]
C. The GENERAL AGENT agrees not to induce or endeavor to induce any
REPRESENTATIVE of the COMPANY to sever his contractual relationship with
it, or any policyowner to cancel a policy in this COMPANY.
D. The GENERAL AGENT agrees to conform to all the regulations of the Insurance
Department and the insurance laws of the state or states in which he may be
performing his functions under this Agreement.
E. The GENERAL AGENT is without authority to perform and expressly agrees not
to perform any of the following acts:
(1) Make, modify, alter or discharge any policy contract;
(2) Extend the time for payment of any premium;
(3) Waive any forfeiture;
(4) Guarantee dividends;
(5) Incur any debt or liability in the name of the COMPANY;
(6) Advertise or issue advertising material without the specific
written approval of the COMPANY first obtained;
(7) Withhold or convert to his own use or for the benefit of others
any monies, securities, policies or receipts belonging to the
COMPANY or fail to submit promptly to the COMPANY any
applications for policies.
<PAGE>
F. The GENERAL AGENT has no right or authority to receive or collect monies
for or on behalf of the COMPANY, except the initial premium on insurance
solicited by him, unless otherwise directed in writing by the COMPANY. All
monies, settlements or documents received by the GENERAL AGENT for or on
behalf of the COMPANY shall be received by the GENERAL AGENT in a fiduciary
capacity and immediately paid over or delivered to the COMPANY, except as
otherwise directed in writing by the COMPANY.
SECTION THREE -- COMPENSATION
A. Subject to the provisions hereof and the rules of the COMPANY, the full
compensation of the GENERAL AGENT shall be commissions and persistency fees
payable at the applicable rate set forth in the Schedule of Commissions,
Persistency Fees and Vesting Requirements in effect at the date of
application for the policy, which Schedule and all amendments, supplements
and replacements thereof and hereto are hereby made a part of this
Agreement.
B. Commissions and persistency fees are subject to change at any time by
written notice by the COMPANY to the GENERAL AGENT, but no such change
shall affect commissions or persistency fees on any policy issued prior to
the effective date of such change.
C. If commission rates are not shown in the Schedule or if special premium
rate quotations are made, commission rates shall be such as may be fixed
by the COMPANY. Commissions to be allowed on converted insurance are to be
determined by the COMPANY as of the time when the conversion is effective
in accordance with rates and practices of the COMPANY then in effect.
D. In the event any policy on which the GENERAL AGENT is entitled to
commissions or persistency fees shall lapse because of non-payment of
premium and shall be replaced or reinstated, any commissions or persistency
fees on the new or reinstated policy shall be payable only in the sole
discretion of the COMPANY.
E. To be entitled to commissions and fees, if any, the GENERAL AGENT'S name or
the name of a REPRESENTATIVE under his jurisdiction must appear as
soliciting agent on the application for insurance and the insurance must
have been fairly effected through the efforts of said GENERAL AGENT or
REPRESENTATIVE. [DELETION]
F. Whenever, in the judgment of the COMPANY, it shall become advisable to
recall any policy issued before delivery thereof is made, the GENERAL AGENT
shall promptly refund to the COMPANY any commissions received by him on
account of such policy. Whenever after delivery the COMPANY shall effect or
procure the surrender, rescission or cancellation of any policy and refund
or waive the premium or premiums, the GENERAL AGENT shall in all cases lose
all rights to commissions and persistency fees and shall repay such
commissions and persistency fees to the COMPANY.
SECTION FOUR -- TERMINATION PROVISIONS - AMENDED 3-11-78
AMENDMENT ATTACHED
A. This Agreement shall automatically terminate upon the death of the GENERAL
AGENT.
B. This Agreement shall automatically terminate upon the revocation or
non-renewal of the GENERAL AGENT's license(s).
C. This Agreement may also be terminated with or without cause by the GENERAL
AGENT or by the COMPANY by notice sent by ordinary or certified mail to the
last address furnished to the party sending such notice.
D. Upon termination of this Agreement, the GENERAL AGENT shall immediately pay
in cash to the COMPANY all sums due hereunder or otherwise and shall
immediately deliver to the COMPANY or its representatives all rate books,
letters, records and supplies connected with the business of the COMPANY
and belonging to the COMPANY.
<PAGE>
SECTION FIVE -- VESTING PROVISIONS
A. [DELETED]
B. [DELETED]
C. If this Agreement is terminated prior to the tenth anniversary of the
Agreement for any reason other than the death of the GENERAL AGENT, or for
the violation of any of the provisions in SECTION TWO, Sub-Section "B"
through "F" inclusive, prior to termination, the first year and renewal
commissions shall be paid as they accrue to the GENERAL AGENT on each
respective class of vested business shown in Part 8, Vesting Requirements,
of the Schedule of Commissions, Persistency Fees and Vesting Requirements,
subject to the limitations appearing in SECTION FIVE, Sub-Section "E"
thereof, of this Agreement.
D. If this Agreement is terminated on or after the tenth anniversary of the
Agreement for any reason other than the death of the GENERAL AGENT, or for
the violation of any of the provisions in SECTION TWO, Sub-Section "B"
through "F" inclusive, prior to termination, the first year, renewal and
special renewal commissions shall be paid as they accrue to the GENERAL
AGENT on each respective class of vested business shown in Part 8, Vesting
Requirements, of the Schedule of Commissions, Persistency Fees and Vesting
Requirements, subject to the limitations appearing in SECTION FIVE,
Sub-Section "E", thereof, of this Agreement.
E. Any commission payments provided for in Sub-Section "C" and "D" of SECTION
FIVE of this Agreement will be paid only in the event that the Paid Volume
of Life Insurance in force, or the paid Annual Premium on Annuity Contracts
in force, or the Paid Annual Premium on Health Insurance in force by reason
of this or any previous agreement or agreements which this Agreement
supersedes, equals or exceeds one or more of the minimum amounts appearing
in lines 1 or 3, or both, of Part 8 of the Schedule of Commissions,
Persistency Fees and Vesting Requirements, it being understood that such
commission payments will be paid only with respect to those Classes of
Vested Business with respect to which the paid minimum amounts have so been
equalled or exceeded.
Said Commissions, after termination of this Agreement, will no longer be
paid with respect to any class of vested business set forth in Part 8,
Vesting Requirements, of the Schedule of Commissions, Persistency Fees and
Vesting Requirements, in the event that the minimum of volume or premium in
force, as the case may be, should at any time fall below the minimum amount
provided for in lines 2 or 4, or both, of said Part 8 of said Schedule of
Commissions, Persistency Fees and Vesting Requirements.
F. If this Agreement is terminated by the GENERAL AGENT, any commissions,
other than first year commissions, to which he may thereafter become
entitled, would be reduced by a collection fee of 20% thereof.
SECTION SIX -- GENERAL PROVISIONS
A. The COMPANY shall have a prior right and offset to all commissions and
persistency fees payable hereunder for any debt due from the GENERAL AGENT
or any REPRESENTATIVE under his jurisdiction to the COMPANY together with
interest at the legal rate. This prior right and offset shall not be
extinguished by the termination of this Agreement.
<PAGE>
B. Neither this Agreement nor the commissions or persistency fees accuring
hereunder, nor any interest herein, nor any right or claim created hereby
or arising by reason of the GENERAL AGENT acting hereunder, shall be
assignable, except upon the prior written consent of the COMPANY which
right to consent and subsequent acceptance of the assignments is herein
specifically reserved.
C. Forebearance or failure of the COMPANY to insist upon performance of this
Agreement or to enforce its rights hereunder, shall not constitute a waiver
of its rights or privileges hereunder or of its subsequent right to insist
upon such performance.
D. The GENERAL AGENT shall be an independent contractor reserving the right to
exercise independent judgment as to the time, place and manner of
soliciting applications and generally achieving the authorized purposes set
forth in SECTION ONE of this Agreement. No provision of this Agreement
shall be construed to abridge this right or to create a relationship of
employer and employee.
E. The COMPANY reserves the right to decline any application for insurance and
to withdraw from any territory without liability to the GENERAL AGENT.
F. This Agreement supersedes any previous GENERAL AGENT'S or other Agent's
Agreements between the GENERAL AGENT and the COMPANY except as to
commissions and fees, if any, accruing under such previous Agent's
Agreement or Agreements, and, except further, any rights of the COMPANY
under the provisions of such previous agreement or agreements and it is
further understood that all financial obligations to the COMPANY heretofore
incurred or assumed by the GENERAL AGENT by virtue of the provisions of
such agreement or agreements, and prior rights of the COMPANY and offsets
to which it is entitled created in connection therewith, remain in full
force and effect.
G. The COMPANY shall have the right to terminate the Agreement of any
REPRESENTATIVE recommended by or under the jurisdiction of the GENERAL
AGENT and such termination shall be without liability to the COMPANY,
either to the GENERAL AGENT or otherwise.
H. This Agreement shall not be effective until executed by the parties hereto.
No modification of this Agreement or of any amendment hereto shall be valid
unless made in writing and executed by the COMPANY.
I. It is expressly understood and agreed that this Agreement contains all
promises, inducements and representations made collateral thereto.
Executed in duplicate at Milwaukee, Wisconsin, this 31 day of July, 1972.
/s/ Carroll H. Payne
---------------------------------------------
THE GENERAL AGENT
THE OLD LINE LIFE INSURANCE COMPANY OF AMERICA
BY [ILLEGIBLE]
-------------------------------------------
ITS Vice-President
------------------------------------------
<PAGE>
[Logo] SUPPLEMENTAL AGREEMENT
The General Agent's Agreement entered into as of the 1st day of June, 1972,
by and between The Old Line Life Insurance Company of America of
Milwaukee, Wisconsin, and Carroll H. Payne hereinafter referred to or
designated as the General Agent is effective June 1, 1972 supplemented as
follows:
1. In order to assist the General Agent in the (development of the General
Agency,) the Company agrees to pay the General Agent the following
Development Allowances on insurance written and paid for by the Agency
operated by said General Agent's Agreement:
a. Two and 50/100 Dollars ($2.50) for each $1,000.00 of face value of
Permanent Life Insurance.
b. Two and 00/100 Dollars ($2.00) for each $1,000.00 of initial face
value of Executive Term Life Insurance written on Policy Forms
N. 2110 and No. 2121 without deposit at standard rates.
c. One and 00/100 Dollars ($1.00) for each $1,000.00 of face value or
initial commuted value of Term Life Insurance, except that any
insurance written on Policy Forms No. 2010 (10 Year Decreasing
Term, No. 2110 (with deposit) and No. 2121 (with deposit) shall
not qualify for the payment of said allowance either in whole
or in part.
d. Four and 00/100 Dollars ($4.00) for each $1,000.00 of face value of
Level Term with Maturity Value.
e. Said Development Allowances will be paid monthly on or before the
15th of each calendar month for business paid for at the Home Office
during the month period ending on the 25th day of the calendar month
preceding the month in which payment is so made.
f. The General Agency shall not have earned the right to receive
payment of said Development Allowance until payment is due in the
month following the time the General Agency attains an aggregate
Development Allowance credit of $1,000.00, at which time the
Development Allowance will be paid retroactively to cover all
production applying hereunder. In the event that this Supplemental
Agreement shall terminate under Paragraph 3 hereof prior to the time
such aggregate Development Allowance equals $1,000.00, nothing shall
be payable hereunder to the General Agency.
2. In the event of a lapse, cancellation or termination of any policy
during the first Twenty-five (25) months, following the date of its
issuance, any "sum paid" by the Company pursuant to this agreement on
account of the issuance of such policy, shall be deducted from any
future payment which may become due hereunder, or against any other
payment or credit then due the General Agent under any other contract or
agreement with the Company, and if there be no such payment or credits
then due the General Agent, the General Agent shall thereupon be
immediately liable to the Company to the extent of said "sum paid",
except said "sum paid" will not include any development Allowance, as
relating to this Agreement which the General Agent has received on Level
Term with Maturity Value under this Agreement.
3. This Supplemental Agreement shall terminate and the payments provided
for therein shall cease:
a. Upon written notice to the General Agent by the Company mailed to
his last address furnished the Company; or
b. Contemporaneous with the effective date of the termination of the
said General Agent's Contract with the Company.
<PAGE>
4. This Agreement cancels any previous Supplemental Agreement between the
General Agent and the Company providing for Development Allowances,
except for such allowances as may be accrued thereunder prior to the
effective date of this agreement and except further, any rights of the
Company under the provisions of such previous agreement.
/s/ Carroll H. Payne
-----------------------------------
SIGNATURE OF GENERAL AGENT
THE OLD LINE LIFE INSURANCE COMPANY
OF AMERICA
BY /s/ [ILLEGIBLE]
-----------------------------------
DULY AUTHORIZED OFFICER
<PAGE>
[LOGO] SUPPLEMENT TO GENERAL AGENT'S AGREEMENT
SPECIAL SERVICE FEE AGREEMENT
This AGREEMENT is entered into by The Old Line Life Insurance Company of
America, hereinafter called the Company, and Carroll H. Payne,
hereinafter referred to as the General Agent.
It is hereby agreed between the parties as follows:
1. This AGREEMENT shall be a supplement to the General Agent's Agreement
entered into on the 1ST day of June, 1972, between the General Agent and
the Company.
2. A Service Fee will be paid to the General Agent upon meeting certain
levels of annual issued and paid business as follows:
<TABLE>
<CAPTION>
FEE CATEGORY FEE PER ONE THOUSAND
"ALL PRODUCTION" TERM INSURANCE PERMANENT INSURANCE
<S> <C> <C>
Under $3,000,000 0 0
$3,000,000- $9,000,000 $0.50 $1.00
$9,000,000-$24,000,000 .75 1.50
$24,000,000-$48,000,000 1.00 2.00
Over $48,000,000 1.25 2.50
</TABLE>
3. The issued and paid business for each calendar year will determine the
fee category. As issued and paid production is accumulated through the
year, the fee category will be re-determined with corresponding
retroactive fee payments.
The fee for general agencies that commence writing business during the
calendar year will be determined on a pro rata basis. All business paid
for in the current calendar year will be used in determining the fee
category.
4. After the General Agent has sufficient production in the calendar year
to qualify for the Service Fee Payment, said Service Fee will be paid on
the calendar year production to date, and will thereafter be paid
monthly on or before the 15th of each calendar month for business on
which the initial premium is credited on business issued and paid for at
the Home Office of the Company during the monthly period ending on the
25th day of the calendar month preceding the month in which payment is
made.
Wherever the lapse or cancellation of any policy for which a Service Fee
has been paid to the General Agent occurs before the policy has been in
force during the first twenty-five (25) months from the issue date, a
charge-back of the fee paid shall be made against the General Agent's
Commission Account.
For policies issued on any single life or a group of policies written
under deferred compensation, key men, etc., that exceed $500,000.00, the
Company reserves the right to negotiate the fee on the excess over
$500,000.00. Pledged Collateral Executive Decreasing Term, Ten Year
Decreasing Term, Executive Whole Life and Level Term with Maturity Value
plans shall be excluded from fee payments; however, business issued on
these plans will be included in determining the fee category.
<PAGE>
5. All of the terms, conditions and agreements of the General Agent's
Agreement not inconsistent herewith shall continue in full force and
effect, including but not limited to the power to change and modify
commissions, allowances or fees and to terminate this AGREEMENT upon
thirty days' notice.
Dated this 25TH day of July, 1972.
/s/ Carroll H. Payne THE OLD LINE LIFE INSURANCE COMPANY
- ------------------------------ OF AMERICA
GENERAL AGENT
BY /s/ [ILLEGIBLE]
--------------------------------
<PAGE>
[Tollica LOGO] THE OLD LINE LIFE INSURANCE COMPANY OF AMERICA
HOME OFFICE: WISCONSIN AVENUE AT ELEVENTH - MILWAUKEE, WIS. 53233 - 271-2820
SCHEDULE OF COMMISSIONS, PERSISTENCY FEES
AND VESTING REQUIREMENTS
1. This Schedule is subject to the terms and conditions of the General Agent's
Agreement to which it is attached.
2. Percentages shown are calculated on paid premium only.
3. The Commissions and Persistency Fees allowable to the GENERAL AGENT on
business written by the GENERAL AGENT shall be the applicable percentage
set forth in Paragraphs 6 and 7 of this Schedule.
4. The Commissions and Persistency Fees allowable to the GENERAL AGENT on
business written by REPRESENTATIVES under his jurisdiction, shall be the
percentage of paid premium appearing in Paragraphs 6 and 7 of this
Schedule less any Commissions and Persistency Fees if any, allowable to
the REPRESENTATIVE under the jurisdiction of the GENERAL AGENT.
5. In the event of the termination of the Agency Agreement of any
REPRESENTATIVE under the jurisdiction of the GENERAL AGENT, and at the
effective date of such termination, said REPRESENTATIVE shall not,
thereafter, be entitled to commissions by virtue of the vesting provisions
of the Agency Agreement, the GENERAL AGENT shall, nevertheless, not forfeit
his right to his applicable percentage of commissions to which he may
become entitled under the Schedule of Commissions, Persistency Fees and
Vesting Requirements.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
COMMISSIONS
------------------------------------------------------------
SPECIAL
FIRST YEAR RENEWAL RENEWAL PERSISTENCY FEES
---------------------------------------------------------------------------------
2ND-10TH YRS. 11-15TH YRS. 11TH + YEARS
6. LIFE INSURANCE & ANNUITIES GAR. PREM. PAR GAR. PREM. & PAR GAR. PREM. & PAR GAR. PREM. & PAR
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TERM INSURANCE:
Decreasing Term to 65.................. 85 -- 17 1/2 3 4 Rev. 9-19-74
30, 25, 20, 15 Yr. Decreasing Term..... 85 -- 7 1/2 3 4
10 Year Decreasing Term................ 75 -- 7 1/2 - -
Ex. DT to 100, 70, 65-Standard......... 85 -- 7 1/2 3 4
Ex. DT 20 Year - Standard.............. 85 -- 7 1/2 3 4
Ex. DT to 100, 70, 65-Pledged Collat... 150 -- -- - -
Ex. DT 20 Year - Pledged Collateral.... 150 -- -- - -
Level Term to 65 ...................... 85 -- 7 1/2 3 4
Annual Renewable Term.................. 50 -- 7 1/2 3 4
10, 15 and 20 Yr. Conv. Term........... 65 -- 7 1/2 3 4
5 and 10 Year Conv. & Renew............ 50 -- 7 1/2 - -
*10 and 15 Yr. Two Plus (LTMV).......... *85 -- -- - -
5 Yr. Automatic Conv. ................. 60 -- 7 1/2 - -
Increasing Term ....................... 70 -- 7 1/2 3 4
Family Income Term .................... 85 -- 7 1/2 3 4
Joint Life - 30, 25, 20 Yr. DT ........ 85 -- 7 1/2 3 4
CENTURY SERIES DT:
10, 15, 20, 25, 30, 35 Yr. DT ......... 85 -- 7 1/2 3 4
DT to 70, 65 .......................... 85 -- 7 1/2 3 4
SELECT SPLIT LIFE & DISABILITY:
Select Deferred Life Annuity........... 70 -- 3 1 -
Select R&C Level Term ................. 25 -- 2nd Yr. 3rd-10th 1 -
12 1/2 3
WHOLE LIFE:
Whole Life............................. 85 75 17 1/2 3 4
Life Paid Up at 95..................... 85 75 7 1/2 3 4
Executive Whole Life................... -- 45 12 1/2* 3 4
Progressive Estate Builder............. -- 70 7 1/2 3 4
Joint Life - W.L. ..................... 85 -- 7 1/2 3 4
LIMITED PAY LIFE:
20 or more premiums.................... 85 80 7 1/2 3 4
15 or more premiums.................... 75 70 7 1/2 3 4
10 or more premiums.................... 60 55 5 1/2 - -
ENDOWMENT:
35 or more premiums.................... 85 80 7 1/2 3 4
20 or more premiums.................... 80 75 7 1/2 3 4
15 or more premiums.................... 60 55 7 1/2 3 4
9 or more premuims.................... 50 45 5 1/2 - -
TEN PAY RETIREMENT INCOME................ 50 50 5 1/2 - -
RETIREMENT INCOME AT 65 & 70:
Ages at issue 10-25.................... 80 80 7 1/2 3 4
Ages at issue 26-35.................... 75 75 7 1/2 3 4
Ages at issue 36-45.................... 65 65 7 1/2 3 4
Ages at issue 46-50.................... 60 60 5 1/2 3 4
Ages at issue 51 and over.............. 50 50 5 1/2 3 4
SINGLE PREMIUM ANNUITY................... 2 3/4 -- -- - -
DEFERRED LIFE ANNUITY.................... -- 35 7 1/2 - -
SINGLE PREMIUM LIFE...................... 5 -- -- - -
SINGLE PREMIUM ENDOWMENT................. 5 -- -- - -
SINGLE PREMIUM MORTGAGE PROTECTION ...... 22 1/2 -- -- - -
GRADED DEATH BENEFIT:
Life Paid UP @ 85 ..................... 35 -- 7 1/2 3 4
Retirement Income ..................... 35 -- 7 1/2 3 4
POLICY PROVISIONS (Riders) Same as base policy to which attached
---------------------------------------------------------------------------------
*85% plus $2.00 per $1,000 vol.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
COMMISSIONS
---------------------------------------------------------------------------------
7. HEALTH INSURANCE RENEWAL
----------------------------------------------------------------
7TH &
PLANS OF FIRST 2ND 3RD 4TH-6TH SUBSEQUENT
INSURANCE YEAR YEAR YEAR YEARS YEARS
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-Cancellable
Disability Income Policy
Form No. SB (3-67) 1877C................... 55 25 20 20 7 1/2
Guaranteed Renewable
Disability Income Policy
Form No. GR 1915C (3-67)................... 55 25 20 20 12 1/2
Hospital Confinement Policy
Form No. HC (3-67) 1878C................... 45 25 20 20 12 1/2
Hospital Policy
Form No. SH (2-67) 1942C................... 45 25 20 20 12 1/2
Select Ann. Ren. Dis. ..................... 55 10 10 10 10
All other Policy Forms..................... 45 30 25 20 12 1/2
---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
8. VESTING REQUIREMENTS CLASSES OF VESTED BUSINESS
------------------------------------------------------------------------------------
LIFE INSURANCE ANNUITY CONTRACTS HEALTH INSURANCE
EXCLUDING Group Life, Deferred Life An- All Health Iinsur-
Single Premium Policies, nuities ONLY, ance Policies
Paid-Up Policies, Excluding All EXCLUDING Single
Annuities, and Life In- other Annuity Premium Health
surance in force under Contracts and Group Health
non-forfeiture options
or waiver of premium
provisions.
------------------------------------------------------------------------------------
PAID VOLUME PAID ANNUAL PAID ANNUAL
IN FORCE PREMIUM IN FORCE PREMIUM IN FORCE
------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. Personal Production Vesting Terminates $ 50,000 $ 1,000 $ 1,000
- ---------------------------------------------------------------------------------------------------------------------------------
3. General Agency Production (2) Requirement $1,000,000 $20,000 $20,000
4. General Agency Vesting Terminates 100,000 2,000 2,000
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Paid business to be considered as "Personal Production" is that business
effected SOLELY through the efforts of the General Agent.
(2) Paid business to be considered as "General Agency Production" is that
business effected by ALL REPRESENTATIVES of the Agency, including the
General Agent's "Personal Production".
FORM NO. I-2325 REV. 9-72
<PAGE>
June 1, 1972
AMENDMENT TO
GENERAL AGENT'S AGREEMENT
IT IS UNDERSTOOD AND AGREED, that the General Agent's Agreement effective
June 1, 1972, by and between Carroll H. Payne (the GENERAL AGENT) and The Old
Line Life Insurance Company of America, (the COMPANY) is amended as of said
date as follows:
1. SECTION TWO, subsection B is deleted in its entirety.
2. SECTION THREE
A. Change the 9th word from the end "thereto" to "hereto".
E. Delete the last sentence.
3. SECTION FOUR, subsection E is created to read:
"E. Upon termination of this Agreement, the COMPANY agrees to enter
into a new General Agent's Agreement with the designated
"successor General Agent" as listed below in subparagraph
(1) when licensed with the COMPANY and otherwise qualified:
(1) Hugh A. Payne, First Successor General Agent Warner F.
Rankin, Jr., Second Successor General Agent David I. Liebman,
Third Successor General Agent
(2) The General Agent hereby assigns and transfers, all
commissions, renewals, Special Renewals, Persistency Fees,
Development Allowances and Special Service Fees....due and
to become due following the cancellation of his contract with
the COMPANY, due to death or other reasons, to the above
designated successor GENERAL AGENT(S) upon their appointment.
(3) The COMPANY agrees to pay all monies, as outlined in (2)
above, to the successor GENERAL AGENT(S). Further the
COMPANY agrees that the new GENERAL AGENT'S Agreement will
function as the successor to this GENERAl AGENT'S Agreement
and shall include and continue in force all Vesting
Provisions (SECTION FIVE) of this General Agent's Agreement."
<PAGE>
Amendment to General Agent's Agreement -2- June 1, 1972
4. SCHEDULE OF COMMISSIONS, Paragraph 8, VESTING REQUIREMENTS, is
amended to delete the following:
1. Personal Production (1) Requirement
2. Personal Production Vesting Terminates
5. SECTION FIVE - VESTING PROVISIONS, is amended as follows:
A. Deleted.
B. Deleted.
Add:
G. Section Five, paragraphs C. D., and E notwithstanding, when the
GENERAL AGENT has sold through his total agent force "Paid
Business" of a minimum of $500,000 in Annualized Premiums,
in force, then all Commissions, Renewals, Special Renewals,
Persistency Fees, Development Allowances, Special Service Fees
and all other forms of remuneration shall become fully vested
for the duration of the policy's premium paying period
irrespective of whether or not this contract is in force. However,
when the annualized premiums of policies in force drops below
$50,000, this paragraph G shall not apply.
6. SECTION SIX is amended as follows:
B. Add to the end of sentence: "except as otherwise provided
herein and by amendments hereto".
Paragraph I. is deleted and the following is substituted therefor:
I. It is expressly understood and agreed that this agreement and the
following listed parts which are attached hereto and made a part
hereof, contains all promises, inducements and representations
made collateral thereto. The attached parts are:
(1) SCHEDULE OF COMMISSIONS, PERSISTENCY FEES AND VESTING
REQUIREMENTS, Form No. I-2325, September 1, 1968.
<PAGE>
Amendment to General Agent's Agreement -3- June 1, 1972
(2) SUPPLEMENT TO GENERAL AGENT'S AGREEMENT, Special Service
Fee Agreement, Form I-3724, executed this date.
(3) SUPPLEMENTAL AGREEMENT, Form I-3723, executed this date.
(4) Assignment of Commissions, assigning GENERAL AGENT
COMMISSIONS to the Independent Research Agency for
Life Insurance, executed this date.
(5) AMENDMENT TO GENERAL AGENT'S AGREEMENT, executed this date.
ADD:
J. The COMPANY agrees not to offer to or execute with an agent
contracted to the GENERAL AGENT....an Agent, General Agent, or Broker
Contract, except through the General Agent, for a period of two years
following the agent's termination of his contract with the General
Agent and the Independent Research Agency for Life Insurance, Ltd.,
without the written consent of the General Agent.
K. "Paid Business" or "Paid for Business", in addition to applications
accompanied with a payment in a dollar instrument, shall also include
applications which are accompanied by a copy of duly filed Government
Allotment by Military Personnel, when otherwise qualifying under the
current COMPANY underwriting rules. The record date, for production
credit purposes, shall be the date of filing recorded on the Government
Allotment. However, the COMPANY shall make no payment of commissions or
other dollars on government allotment business until actual receipt of
the first payment in its home office.
Executed in duplicate at MILWAUKEE, WISCONSIN, this 1ST day of JUNE, 1972.
/s/ Carroll H. Payne
---------------------------------------------
THE GENERAL AGENT
The Old Line Life Insurance Company of America
BY: /s/ Chas S. Lewis
--------------------------------------------
Its VICE PRESIDENT & DIRECTOR OF AGENCIES
--------------------------------------------
<PAGE>
PROJECTED CASH FLOWS AND BALANCE SHEETS
ASSUMPTIONS AND CAUTIONARY STATEMENT
The attached estimates of projected Cash Flows and Balance Sheets constitute
forward-looking information. In reviewing such information it should be kept
in mind that total actual cash flows may differ materially from those set
forth in attached document. This forward-looking information is based on
various factors and was derived utilizing numerous assumptions and other
important factors that could cause cash flows to differ materially from the
estimates set forth. The more significant assumptions used in the preparation
of above mentioned estimates are:
(i) The 9/30/97 audited balance sheet has been adjusted for dividend
payments, payments of certain accruals and buy back of B-stock subsequent
to 9/30/97.
(ii) The company has assumed no growth in net income as the purpose of model
is to evaluate the company's ability to service the debt under current
operating conditions. Revenue generating assets and liabilities have
also been assumed to remain constant while certain other assets and
liabilities have been projected on historical trends.
(iii) The interest rate on the contemplated mortgage and the B stock redemption
loan is assumed to be 7% and the periods of the notes to be 15 years and
10 years respectively. It was further assumed that any cash surpluses
can be reinvested yielding an annual interest rate of 5% per year and
that any short-term cash needs could be borrowed at 7% per year.
(iv) Corporate taxes were assumed to remain constant at 35%, whereas the
S-corporation's shareholder A-stockholder taxes were assumed to be
35.29%, a composite of individual and capital gains taxes.
(v) The company assumed that 100% of all net income before taxes, on a GAAP
basis, will be distributed to B-stockholders in the event that the
company continues to operate as a C-corporation. In the event that the
company decides to change its tax status to an S-corporation it was
assumed that 85% of taxable income will be paid out as Dividend
Equivalent Rights (DER) with the remainder increasing the appreciated
value of the Share Appreciation Rights(SAR). Collectively the DER and
the SAR will be referred to as the Mission Accomplishment Plan. (MAP)
(vi) The net increase in the investment portfolio is assumed to be 6% per year
and is considered to be all unrealized gains and losses. All
distributions from Mutual Funds are recorded in income and distributed
based on assumption (v) above.
(vii) The results for First Command Bank were based on the bank's forecasted
assets and liabilities assuming current growth expectations.
(viii) Operating results for a contemplated new building are based on estimated
occupancy levels and expected market lease rates.
(ix) The Company further assumes that the accrual for the Deferred Career
Commission Plan (DCCP) will be $4 million on a year to year basis, with
15% of the opening DCCP balance being paid out on a yearly basis.
(x) The deferred tax assets and liabilities on all timing differences, except
for the deferred tax liability relating to the unrealized gain, is
assumed to be charged against the share appreciation right over a 10 year
period. The deferred tax liability relating to the unrealized gain is
assumed to be credited against the unrealized gain after the expiration
of the 10 year built-in-gains tax window.
<PAGE>
(xi) Class "A"-stockholders are assumed not to receive any cash for their B
shares but are to receive an after-tax distribution of 8% per year on
the redemption value of their former B shares at the date of the
transaction.
The company expects that SARs granted will be redeemed evenly over their ten
year life based on normal agent employee turnover and that these
redemptions will be funded through a reduction in the DER payments. The
net cash effect on the company is expected to be minimal and has not been
separately reflected in the projected cash flows and balance sheets.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
The forward-looking statements in this document, including without
limitation, statements relating to the Company's plans, strategies,
objectives, expectations, intentions and adequacy of resources, are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. All forward-looking information contained in this
document is based on management's current knowledge of factors affecting USPA
& IRA's business. Any such forward looking statements would be subject to the
risks and uncertainties that could cause actual results of operations,
financial condition, acquisitions, financing transactions, operations,
expansion and other events to differ materially from those expressed or
implied in such forward looking statements. Any such forward looking
statements are subject to a number of assumptions, including those listed
above, regarding among other things, future economic, competitive and market
conditions generally. Such assumptions would be based on facts and conditions
as they exist at the time such statements are made as well as predictions as
to future facts and conditions, the accurate prediction of which may be
difficult and involve the assessment of events beyond the Company's control.
Further, the Company's business is subject to a number of risks that would
affect any such forward looking statements and such risks include, among
others, the following:
(i) the Company's plans, strategies, objectives, expectations and intentions
are subject to change at any time at the discretion of the Company;
(ii) the Company's plans and results of operations will be affected by the
Company's ability to manage and maintains its current earnings.
(iii) the risk that the Company is not able to expand its services, territory
and agent base.
(iv) interest rates changes
(v) changes in the competitive market
(vi) future operating results and success of business ventures in the United
States and abroad may be subject to the effects of and changes in United
States and foreign trade and monetary policies, laws and regulations,
political and governmental changes, inflation and exchange rates, taxes,
and operating conditions.
(vii) net operating cost of new building being different than projected by
management due to increased competition, surplus in office space, reduced
revenue per square foot or higher than anticipated construction costs
(viii) risk of nonpayment of accounts receivable
(ix) effect of uninsured loss
If USPA & IRA 's actual performance differs from its projections and
estimates regarding the economy, the industry and key performance indicators,
USPA & IRA 's actual results could vary materially from the performance
projected in the forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements.
<PAGE>
<TABLE>
<CAPTION>
USPA&IRA (S-Corp) (THESE PROJECTIONS ARE BASED ON CURRENT EXPECTATIONS. ACTUAL RESULTS MAY DIFFER MATERIALLY)
Cash Flow Statement ('000)
- -------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------
1998 1999 2000 2001 2002
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME Before interest 13,788 13,130 13,411 13,543 14,073
Interest paid on contemplated mortgage 0 0 0 0 (1,733)
Interest paid to B stock redemption loan 0 (1,119) (1,038) (951) (859)
Interest other - net (90) (99) 58 44 631
------------------------------------------------------------------
13,698 11,912 12,431 12,636 12,112
TAXES Corporate (4,794) 0 0 0 0
A Stockholders reimbursement 0 (670) (681) (678) (637)
------------------------------------------------------------------
(4,794) (670) (681) (678) (637)
------------------------------------------------------------------
NET INCOME AFTER TAX 8,904 11,242 11,750 11,958 11,475
OTHER CASH FLOW ITEMS 552 1,188 524 (121) (1,442)
A STOCKHOLDER DISTRIBUTION 0 (841) (841) (841) (841)
------------------------------------------------------------------
NET CASH AVAILABLE FOR DISTRIBUTION 9,456 11,589 11,432 10,997 9,192
DISTRIBUTIONS C Corp dividends 0 0 0 0 0
Dividend Equivalent Right payments 0 (10,755) (10,937) (10,880) (10,229)
------------------------------------------------------------------
0 (10,755) (10,937) (10,880) (10,229)
------------------------------------------------------------------
NET CASH FLOW 9,456 834 496 116 (1,037)
------------------------------------------------------------------
------------------------------------------------------------------
<CAPTION>
------------------------------------------------------------
2003 2004 2005 2006
------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME Before interest 14,149 14,042 14,039 13,347
Interest paid on contemplated mortgage (1,664) (1,591) (1,512) (1,427)
Interest paid to B stock redemption loan (759) (653) (540) (418)
Interest other - net 579 515 445 366
------------------------------------------------------------
12,304 12,313 12,433 11,868
TAXES Corporate 0 0 0 0
A Stockholders reimbursement (636) (625) (622) (583)
------------------------------------------------------------
(636) (625) (622) (583)
------------------------------------------------------------
NET INCOME AFTER TAX 11,669 11,687 11,811 11,285
OTHER CASH FLOW ITEMS (1,911) (2,189) (2,569) (2,950)
A STOCKHOLDER DISTRIBUTION (841) (841) (841) (841)
------------------------------------------------------------
NET CASH AVAILABLE FOR DISTRIBUTION 8,917 8,657 8,401 7,494
DISTRIBUTIONS C Corp dividends 0 0 0 0
Dividend Equivalent Right payments (10,206) (10,042) (9,987) (9,360)
------------------------------------------------------------
(10,206) (10,042) (9,987) (9,360)
------------------------------------------------------------
NET CASH FLOW (1,289) (1,385) (1,587) (1,866)
------------------------------------------------------------
------------------------------------------------------------
<CAPTION>
------------------------------------------------
2007 2008 2009 TOTAL
------------------------------------------------
<S> <C> <C> <C> <C>
INCOME Before interest 13,323 13,298 13,273 163,414
Interest paid on contemplated mortgage (1,337) (1,240) (1,136) (11,640)
Interest paid to B stock redemption loan (288) (149) (0) (6,773)
Interest other - net 273 168 51 2,942
------------------------------------------------
11,971 12,077 12,187 147,942
TAXES Corporate 0 0 0 (4,794)
A Stockholders reimbursement (580) (577) (575) (6,863)
------------------------------------------------
(580) (577) (575) (11,657)
------------------------------------------------
NET INCOME AFTER TAX 11,391 11,500 11,612 136,285
OTHER CASH FLOW ITEMS (3,337) (3,731) (1,862) (17,849)
0
A STOCKHOLDER DISTRIBUTION (841) (841) (841) (9,252)
------------------------------------------------
NET CASH AVAILABLE FOR DISTRIBUTION 7,213 6,928 8,909 109,184
DISTRIBUTIONS C Corp dividends 0 0 0 0
Dividend Equivalent Right payments (9,309) (9,266) (9,231) (110,201)
------------------------------------------------
(9,309) (9,266) (9,231) (110,201)
------------------------------------------------
NET CASH FLOW (2,095) (2,338) (322) (1,017)
------------------------------------------------
------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET ('000)
- ------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------
1997 1998 1999 2000 2001
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets 3,553 13,009 16,843 17,339 17,455
Property and Equipment - net 12,146 19,546 18,449 22,841 33,094
First Command Bank 22,063 65,000 100,000 150,000 150,000
Marketable Securities, other 67,827 71,896 76,210 80,783 85,630
---------------------------------------------------------------
TOTAL ASSETS 105,589 169,451 211,502 270,962 286,179
---------------------------------------------------------------
---------------------------------------------------------------
LIABILITES AND STOCKHOLDERS EQUITY
Current Liabilities 25,262 25,262 25,262 25,262 25,262
Deferred Career Commission Plan 19,420 21,728 23,763 25,570 27,189
Contemplated Mortgage - Building/Garage 0 7,245 7,752 13,470 24,763
First Command Bank 13,438 56,375 94,375 144,375 144,375
B Stock Redemption Loan 0 15,984 14,827 13,589 12,265
Stock Appreciaion Right Accrual 0 9,259 8,905 8,272 7,904
Other 4,570 4,190 10,242 10,242 10,242
---------------------------------------------------------------
TOTAL LIABILITIES 62,689 140,041 185,125 240,779 251,998
Common Stock and Paid In Capital 4,729 1,797 1,797 1,797 1,797
Retained Earnings 22,124 8,717 2,665 3,270 3,875
---------------------------------------------------------------
EQUITY BEFORE UNREALIZED GAINS 26,853 10,514 4,462 5,067 5,672
Unrealized Gains 16,047 18,895 21,915 25,116 28,509
---------------------------------------------------------------
TOTAL EQUITY 42,900 29,409 26,377 30,183 34,181
---------------------------------------------------------------
TOTAL LIABILITES AND STOCKHOLDERS EQUITY 105,589 169,451 211,502 270,962 286,179
---------------------------------------------------------------
---------------------------------------------------------------
<CAPTION>
-------------------------------------------------
2002 2003 2004 2005
-------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets 16,418 15,130 13,744 12,158
Property and Equipment - net 32,055 31,097 30,038 28,980
First Command Bank 150,000 150,000 150,000 150,000
Marketable Securities, other 90,767 96,213 101,986 108,105
-------------------------------------------------
TOTAL ASSETS 289,241 292,441 295,768 299,244
-------------------------------------------------
-------------------------------------------------
LIABILITES AND STOCKHOLDERS EQUITY
Current Liabilities 25,262 25,262 25,262 25,262
Deferred Career Commission Plan 28,652 29,988 31,221 32,374
Contemplated Mortgage - Building/Garage 23,777 22,723 21,595 20,387
First Command Bank 144,375 144,375 144,375 144,375
B Stock Redemption Loan 10,847 9,331 7,708 5,972
Stock Appreciaion Right Accrual 7,704 7,721 7,919 8,297
Other 10,242 10,242 10,242 10,242
-------------------------------------------------
TOTAL LIABILITIES 250,858 249,641 248,322 246,909
Common Stock and Paid In Capital 1,797 1,797 1,797 1,797
Retained Earnings 4,480 5,086 5,691 6,296
-------------------------------------------------
EQUITY BEFORE UNREALIZED GAINS 6,278 6,883 7,488 8,093
Unrealized Gains 32,105 35,917 39,958 44,242
-------------------------------------------------
TOTAL EQUITY 38,383 42,800 47,446 52,335
-------------------------------------------------
TOTAL LIABILITES AND STOCKHOLDERS EQUITY 289,241 292,441 295,768 299,244
-------------------------------------------------
-------------------------------------------------
<CAPTION>
-------------------------------------------------
2006 2007 2008 2009
-------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets 10,291 8,196 5,858 5,536
Property and Equipment - net 27,925 26,872 25,822 24,774
First Command Bank 150,000 150,000 150,000 150,000
Marketable Securities, other 114,592 121,467 128,755 136,481
-------------------------------------------------
TOTAL ASSETS 302,808 306,536 310,435 316,791
-------------------------------------------------
-------------------------------------------------
LIABILITES AND STOCKHOLDERS EQUITY
Current Liabilities 25,262 25,262 25,262 25,262
Deferred Career Commission Plan 33,464 34,507 35,517 36,507
Contemplated Mortgage - Building/Garage 19,096 17,714 16,235 14,652
First Command Bank 144,375 144,375 144,375 144,375
B Stock Redemption Loan 4,115 2,127 0 0
Stock Appreciaion Right Accrual 8,775 9,412 10,199 11,135
Other 10,242 10,242 395 395
-------------------------------------------------
TOTAL LIABILITIES 245,328 243,637 231,983 232,326
Common Stock and Paid In Capital 1,797 1,797 1,797 1,797
Retained Earnings 6,901 7,507 8,112 8,717
-------------------------------------------------
EQUITY BEFORE UNREALIZED GAINS 8,698 9,304 9,909 10,514
Unrealized Gains 48,782 53,595 68,544 73,951
-------------------------------------------------
TOTAL EQUITY 57,481 62,899 78,452 84,465
-------------------------------------------------
TOTAL LIABILITES AND STOCKHOLDERS EQUITY 302,808 306,536 310,435 316,791
-------------------------------------------------
-------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
<TABLE>
<CAPTION>
USPA&IRA (S-Corp) (THESE PROJECTIONS ARE BASED ON CURRENT EXPECTATIONS. ACTUAL RESULTS MAY DIFFER MATERIALLY)
RATIOS
- ---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002 2003 2004
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debt/Equity 0.00 0.79 0.86 0.90 1.08 0.90 0.75 0.62
Current Assets/Current Liabilites * 2.83 3.36 3.68 3.88 4.08 4.24 4.41 4.58
Net Income After Tax/Total Assets N/A 5.25% 5.32% 4.34% 4.18% 3.97% 3.99% 3.95%
Interest Coverage N/A 0.00 11.73 12.92 14.24 5.43 5.84 6.26
<CAPTION>
-----------------------------------------------------------
2005 2006 2007 2008 2009 TOTAL
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Debt/Equity 0.50 0.40 0.32 0.21 0.17
Current Assets/Current Liabilites * 4.76 4.94 5.13 5.33 5.62
Net Income After Tax/Total Assets 3.95% 3.73% 3.72% 3.70% 3.67%
Interest Coverage 6.84 7.23 8.20 9.57 11.68
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* Mutual fund investments are included in current assets
Page 2
<PAGE>
<TABLE>
<CAPTION>
USPA&IRA (C-Corp) (THESE PROJECTIONS ARE BASED ON CURRENT EXPECTATIONS. ACTUAL RESULTS MAY DIFFER MATERIALLY)
CASH FLOW STATEMENT ('000)
- ---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------
1998 1999 2000 2001 2002 2003
---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCOME Before interest 13,788 13,130 13,411 13,543 14,073 14,149
Interest paid on contemplated mortgage 0 0 0 0 (1,733) (1,664)
Interest paid to B stock redemption loan 0 0 0 0 0 0
Interest other - net (90) (558) (325) (282) 355 356
---------------------------------------------------------
13,698 12,571 13,086 13,260 12,695 12,840
TAXES Corporate (4,794) (4,400) (4,580) (4,641) (4,443) (4,494)
A Stockholders reimbursement 0 0 0 0 0 0
---------------------------------------------------------
(4,794) (4,400) (4,580) (4,641) (4,443) (4,494)
---------------------------------------------------------
NET INCOME AFTER TAX 8,904 8,171 8,506 8,619 8,252 8,346
OTHER CASH FLOW ITEMS 552 2,085 1,609 1,146 3 (290)
---------------------------------------------------------
NET CASH AVAILABLE FOR DISTRIBUTION 9,456 10,257 10,115 9,765 8,254 8,056
DISTRIBUTIONS C Corp dividends (8,904) (8,171) (8,506) (8,619) (8,252) (8,346)
Dividend Equivalent Right payments 0 0 0 0 0 0
---------------------------------------------------------
(8,904) (8,171) (8,506) (8,619) (8,252) (8,346)
---------------------------------------------------------
NET CASH FLOW 552 2,085 1,609 1,146 3 (290)
---------------------------------------------------------
---------------------------------------------------------
<CAPTION>
------------------------------------------------------------------
2004 2005 2006 2007 2008 2009 TOTAL
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME Before interest 14,042 14,039 13,347 13,323 13,298 13,273 163,414
Interest paid on contemplated mortgage (1,591) (1,512) (1,427) (1,337) (1,240) (1,136) (11,640)
Interest paid to B stock redemption loan 0 0 0 0 0 0 0
Interest other - net 341 321 292 252 203 143 1,007
------------------------------------------------------------------
12,792 12,848 12,212 12,238 12,261 12,279 152,781
TAXES Corporate
A Stockholders reimbursement (4,477) (4,497) (4,274) (4,283) (4,291) (4,298) (53,473)
0 0 0 0 0 0 0
------------------------------------------------------------------
NET INCOME AFTER TAX (4,477) (4,497) (4,274) (4,283) (4,291) (4,298) (53,473)
OTHER CASH FLOW ITEMS ------------------------------------------------------------------
8,315 8,351 7,938 7,955 7,969 7,981 99,308
NET CASH AVAILABLE FOR DISTRIBUTION
(392) (594) (793) (992) (1,193) (1,398) (257)
DISTRIBUTIONS C Corp dividends
Dividend Equivalent Right payments ------------------------------------------------------------------
7,923 7,758 7,145 6,963 6,776 6,584 99,051
NET CASH FLOW (8,315) (8,351) (7,938) (7,955) (7,969) (7,981) (99,308)
0 0 0 0 0 0 0
------------------------------------------------------------------
(8,315) (8,351) (7,938) (7,955) (7,969) (7,981) (99,308)
------------------------------------------------------------------
(392) (594) (793) (992) (1,193) (1,398) (257)
------------------------------------------------------------------
------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET ('000)
- --------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002 2003 2004
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets 3,553 4,105 9,190 10,799 11,946 11,948 11,658 11,266
Property and Equipment - net 12,146 19,546 18,449 22,841 33,094 32,055 31,097 30,038
First Command Bank 22,063 65,000 100,000 150,000 150,000 150,000 150,000 150,000
Marketable Securities, other 67,827 71,896 76,210 80,783 85,630 90,767 96,213 101,986
-----------------------------------------------------------------------------
TOTAL ASSETS 105,589 160,547 203,850 264,423 280,670 284,771 288,969 293,290
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
LIABILITES AND STOCKHOLDERS EQUITY
Current Liabilities 25,262 25,262 25,262 25,262 25,262 25,262 25,262 25,262
Deferred Career Commission Plan 19,420 21,728 23,763 25,570 27,189 28,652 29,988 31,221
B Stock Redemption Loan 0 0 0 0 0 0 0 0
Contemplated Mortgage - Building/Garage 0 7,245 7,752 13,470 24,763 23,777 22,723 21,595
First Command Bank 13,438 56,375 94,375 144,375 144,375 144,375 144,375 144,375
Other 4,926 4,545 4,286 4,133 4,076 4,103 4,207 4,382
-----------------------------------------------------------------------------
TOTAL LIABILITIES 63,044 115,154 155,437 212,809 225,663 226,168 226,554 226,834
Common Stock and Paid in Capital 4,729 4,729 4,729 4,729 4,729 4,729 4,729 4,729
Retained Earnings 21,768 21,768 21,768 21,768 21,768 21,768 21,768 21,768
-----------------------------------------------------------------------------
EQUITY BEFORE UNREALIZED GAINS 26,498 26,498 26,498 26,498 26,498 26,498 26,498 26,498
Unrealized Gains 16,047 18,895 21,915 25,116 28,509 32,105 35,917 39,958
-----------------------------------------------------------------------------
TOTAL EQUITY 42,544 45,393 48,413 51,614 55,006 58,603 62,415 66,456
-----------------------------------------------------------------------------
TOTAL LIABILITES AND STOCKHOLDERS EQUITY 105,589 160,547 203,850 264,423 280,670 284,771 288,969 293,290
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
<CAPTION>
-----------------------------------------------
2005 2006 2007 2008 2009
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets 10,672 9,879 8,887 7,694 6,297
Property and Equipment - net 28,980 27,925 26,872 25,822 24,774
First Command Bank 150,000 150,000 150,000 150,000 150,000
Marketable Securities, other 108,105 114,592 121,467 128,755 136,481
-----------------------------------------------
TOTAL ASSETS 297,758 302,396 307,227 312,272 317,552
-----------------------------------------------
-----------------------------------------------
LIABILITES AND STOCKHOLDERS EQUITY
Current Liabilities 25,262 25,262 25,262 25,262 25,262
Deferred Career Commission Plan 32,374 33,464 34,507 35,517 36,507
B Stock Redemption Loan 0 0 0 0 0
Contemplated Mortgage - Building/Garage 20,387 19,096 17,714 16,235 14,652
First Command Bank 144,375 144,375 144,375 144,375 144,375
Other 4,621 4,920 5,277 5,689 6,154
-----------------------------------------------
TOTAL LIABILITIES 227,018 227,116 227,134 227,077 226,950
Common Stock and Paid in Capital 4,729 4,729 4,729 4,729 4,729
Retained Earnings 21,768 21,768 21,768 21,768 21,768
-----------------------------------------------
EQUITY BEFORE UNREALIZED GAINS 26,498 26,498 26,498 26,498 26,498
Unrealized Gains 44,242 48,782 53,595 58,697 64,104
-----------------------------------------------
TOTAL EQUITY 70,740 75,280 80,093 85,194 90,602
-----------------------------------------------
TOTAL LIABILITES AND STOCKHOLDERS EQUITY 297,758 302,396 307,227 312,272 317,552
-----------------------------------------------
-----------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE>
<TABLE>
<CAPTION>
USPA&IRA (C-Corp) (THESE PROJECTIONS ARE BASED ON CURRENT EXPECTATIONS. ACTUAL RESULTS MAY DIFFER MATERIALLY)
RATIOS
- --------------------------------------------------------------------------------------------------
-----------------------------------------------------------
1997 1998 1999 2000 2001 2002 2003
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Debt/Equity 0.00 0.16 0.16 0.26 0.45 0.41 0.36
Current Assets/Current Liabilites* 2.83 3.01 3.38 3.63 3.86 4.07 4.27
Net Income After Tax/Total Assets N/A 5.55% 4.01% 3.22% 3.07% 2.90% 2.89%
Interest Coverage N/A N/A N/A N/A N/A 8.12 8.50
<CAPTION>
----------------------------------------------------------
2004 2005 2006 2007 2008 2009 TOTAL
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Debt/Equity 0.32 0.29 0.25 0.22 0.19 0.16
Current Assets/Current Liabilites* 4.48 4.70 4.93 5.16 5.40 5.65
Net Income After Tax/Total Assets 2.84% 2.80% 2.62% 2.59% 2.55% 2.51%
Interest Coverage 8.83 9.29 9.35 9.97 10.72 11.68
- --------------------------------------------------------------------------------------------------
</TABLE>
* Mutual fund investments are included in current assets
Page 4
<PAGE>
USPA&IRA
ASSUMPTIONS USED IN CASH FLOW PROJECTION (S-CORP)
<TABLE>
<S> <C>
Taxable income $14,075,000
Percentage of income capital in nature 22.00%
Projected growth in income 0.00%
Federal corporate tax rate 35.00%
Federal individual tax rate 39.60%
Federal capital gains tax rate 20.00%
Investment rate 6.00%
Lease rate per square foot 19.00
Property tax rate 3.21%
Depreciation period 27.50
Interest received rate 5.00%
Interest paid rate 7.00%
</TABLE>
<TABLE>
<CAPTION>
B STOCK MORTGAGE
<S> <C> <C>
Note balance 29,747,038 24,762,687
Portion relieved - 1997 (2,893,930)
Transferred to SAR Accrual (355,308) 0
A-Shareholders interest (10,514,090)
--------------------------
Net balance 15,983,710 24,762,687
--------------------------
--------------------------
Note term (years) 10 15
Interest rate 7.00% 7.00%
Payment per year 2,275,721 2,718,810
--------------------------
--------------------------
</TABLE>
Page 1
<PAGE>
USPA&IRA
CASH FLOW PROJECTIONS (S-CORP)
<TABLE>
<CAPTION>
NOTES 1997 1998 1999 2000 2001
<S> <C> <C> <C> <C> <C> <C>
BOOK INCOME 14,075,000
Depreciation 1,208,130
-----------
BOOK INCOME BEFORE DEPREC 0.00% 15,283,130 15,283,130 15,283,130 15,283,130 15,283,130
-----------
-----------
Effect of new building SEE ATTACHED 0 0 (547,917) (556,450) (725,570)
Interest revenue 5.00% 0 408,621 600,318 625,113
EXPENSES
Interest - Mortgage 0 0 0 0 0
Interest not able to capitalize 0 0 (507,150) (542,651) (580,636)
Interest - B Stock 0 (1,118,860) (1,037,879) (951,231)
Interest expense overdraft 7.00% (89,821) 0 0 0
Depreciation (1,208,130) (1,208,130) (804,334) (386,680)
Depreciation - Capital Expenditure (287,143) (397,500) (511,168) (628,246)
--------------------------------------------------------------------
NET INCOME 0 13,698,036 11,912,194 12,430,966 12,635,880
- -----------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME CALCULATION
DCCP accrual net 1,087,040 740,852 435,604 164,496
--------------------------------------------------------------------
Taxable Income before MAP 0 14,785,076 12,653,046 12,866,570 12,800,377
DER Paid 85.00% 0 (10,755,089) (10,936,585) (10,880,320)
--------------------------------------------------------------------
TAXABLE INCOME 0 14,785,076 1,897,957 1,929,986 1,920,057
- -----------------------------------------------------------------------------------------------------------------------------------
TAXES
Corporate 35.00% (5,174,776) 0 0 0
Deferred taxes 35.00% 0 380,464 0 0 0
--------------------------------------------------------------------
NET INCOME AFTER TAX 0 8,903,723 1,157,105 1,494,382 1,755,560
OTHER CASH FLOW ITEMS
Capital payments on B Stock note 0 (1,156,861) (1,237,841) (1,324,490)
Capital payments on Mortgage 0 0 0 0
Capital expenditure 0 (1,650,000) (772,500) (795,675) (819,545)
Interest expensed non cash flow 0 0 507,150 542,651 580,636
Depreciation 1,208,130 1,208,130 804,334 386,680
Depreciation - New building 0 0 263,455 263,455 263,455
Depreciation - Capital expenditure 287,143 397,500 511,168 628,246
(Increase) in other assets 0 0 0 0
Increase in accounts payable 0 0 0 0
Increase in accrued commissions (7,140,000) 0 0 0 0
Increase in other current liabilities (993,511) 0 0 0 0
Increase in DCCP (1,137,530) 1,087,040 740,852 435,604 164,496
Increase in deferred taxes (380,464) 0 0 0
Increase in other liabilities 0 0 0 0
B Shares Redeemed (2,893,930) 0 0 0 0
Distribution to A-Shareholders for Dividend 8.00% (841,127) (841,127) (841,127)
--------------------------------------------------------------------
TOTAL OF NON-CASH FLOW ITEMS (12,164,971) 551,849 346,598 (317,433) (961,650)
A STOCKHOLDER TAXES
Normal 39.60% 0 (586,241) (596,134) (593,067)
Capital 20.00% 0 (83,510) (84,919) (84,482)
--------------------------------------------------------------------
Combined 35.29% 0 0 (669,751) (681,053) (677,550)
--------------------------------------------------------------------
NET CASH FLOW BEFORE DIVIDENDS (12,164,971) 9,455,572 833,952 495,896 116,361
Dividends (8,142,450) 0
--------------------------------------------------------------------
Net cash flow (20,307,421) 9,455,572 833,952 495,896 116,361
--------------------------------------------------------------------
--------------------------------------------------------------------
Cummulative note payment - B-Stock 0 1,156,861 2,394,702 3,719,193
Cummulative note payment - Mortgage 0 0 0 0
<CAPTION>
2002 2003 2004 2005 2006
<S> <C> <C> <C> <C> <C>
BOOK INCOME
Depreciation
BOOK INCOME BEFORE DEPREC 15,283,130 15,283,130 15,283,130 15,283,130 15,283,130
Effect of new building (168,291) (148,104) (127,312) (105,897) (772,157)
Interest revenue 630,931 579,094 514,661 445,391 366,065
EXPENSES
Interest - Mortgage (1,733,388) (1,664,409) (1,590,600) (1,511,626) (1,427,123)
Interest not able to capitalize 0 0 0 0 0
Interest - B Stock (858,516) (759,312) (653,163) (539,584) (418,055)
Interest expense overdraft 0 0 0 0 0
Depreciation (293,058) (293,058) (293,058) (293,058) (293,058)
Depreciation - Capital Expenditure (748,836) (693,044) (820,978) (845,607) (870,976)
--------------------------------------------------------------------
NET INCOME 12,111,972 12,304,298 12,312,679 12,432,748 11,867,826
- ----------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME CALCULATION
DCCP accrual net (78,291) (297,748) (498,157) (683,210) (856,091)
--------------------------------------------------------------------
Taxable Income before MAP 12,033,681 12,006,550 11,814,521 11,749,538 11,011,735
DER Paid (10,228,628) (10,205,568) (10,042,343) (9,987,108) (9,359,975)
--------------------------------------------------------------------
TAXABLE INCOME 1,805,052 1,800,983 1,772,178 1,762,431 1,651,760
- ----------------------------------------------------------------------------------------------------------------------
TAXES
Corporate 0 0 0 0 0
Deferred taxes 0 0 0 0 0
--------------------------------------------------------------------
NET INCOME AFTER TAX 1,883,343 2,098,730 2,270,336 2,445,641 2,507,852
OTHER CASH FLOW ITEMS
Capital payments on B Stock note (1,417,205) (1,516,409) (1,622,557) (1,736,136) (1,857,666)
Capital payments on Mortgage (985,422) (1,054,401) (1,128,209) (1,207,184) (1,291,687)
Capital expenditure (844,132) (869,456) (895,539) (922,405) (950,078)
Interest expensed non cash flow 0 0 0 0 0
Depreciation 293,058 293,058 293,058 293,058 293,058
Depreciation - New building 841,173 841,173 841,173 841,173 841,173
Depreciation - Capital expenditure 748,836 693,044 820,978 845,607 870,976
(Increase) in other assets 0 0 0 0 0
Increase in accounts payable 0 0 0 0 0
Increase in accrued commissions 0 0 0 0 0
Increase in other current liabilities 0 0 0 0 0
Increase in DCCP (78,291) (297,748) (498,157) (683,210) (856,091)
Increase in deferred taxes 0 0 0 0 0
Increase in other liabilities 0 0 0 0 0
B Shares Redeemed 0 0 0 0 0
Distribution to A-Shareholders for Dividend (841,127) (841,127) (841,127) (841,127) (841,127)
--------------------------------------------------------------------
TOTAL OF NON-CASH FLOW ITEMS (2,283,110) (2,751,866) (3,030,382) (3,410,225) (3,791,443)
A STOCKHOLDER TAXES
Normal (557,544) (556,287) (547,390) (544,380) (510,196)
Capital (79,422) (79,243) (77,976) (77,547) (72,677)
--------------------------------------------------------------------
Combined (636,967) (635,531) (625,366) (621,927) (582,873)
--------------------------------------------------------------------
NET CASH FLOW BEFORE DIVIDENDS (1,036,733) (1,288,666) (1,385,412) (1,586,511) (1,866,464)
Dividends
--------------------------------------------------------------------
Net cash flow (1,036,733) (1,288,666) (1,385,412) (1,586,511) (1,866,464)
--------------------------------------------------------------------
--------------------------------------------------------------------
Cummulative note payment - B-Stock 5,136,397 6,652,806 8,275,363 10,011,500 11,869,166
Cummulative note payment - Mortgage 985,422 2,039,823 3,168,033 4,375,217 5,666,904
<CAPTION>
2007 2008 2009 TOTAL
<S> <C> <C> <C> <C>
BOOK INCOME
Depreciation
BOOK INCOME BEFORE DEPREC 15,283,130 15,283,130 15,283,130 183,397,560
Effect of new building (770,087) (767,954) (765,758) (5,455,498)
Interest revenue 272,742 167,984 51,067 4,661,987
EXPENSES
Interest - Mortgage (1,336,705) (1,239,957) (1,136,438) (11,640,246)
Interest not able to capitalize 0 0 0 (1,630,437)
Interest - B Stock (288,018) (148,879) (0) (6,773,497)
Interest expense overdraft 0 0 0 (89,821)
Depreciation (293,058) (293,058) (293,058) (5,951,738)
Depreciation - Capital Expenditure (897,105) (924,018) (951,739) (8,576,359)
----------------------------------------------------
NET INCOME 11,970,899 12,077,247 12,187,204 147,941,951
- ------------------------------------------------------------------------------------------------------
TAXABLE INCOME CALCULATION
DCCP accrual net (1,019,562) (1,176,026) (1,327,583) (3,508,678)
----------------------------------------------------
Taxable Income before MAP 10,951,337 10,901,222 10,859,621 144,433,273
DER Paid (9,308,636) (9,266,038) (9,230,678) (110,200,968)
----------------------------------------------------
TAXABLE INCOME 1,642,701 1,635,183 1,628,943 34,232,305
- ------------------------------------------------------------------------------------------------------
TAXES
Corporate 0 0 0 (5,174,776)
Deferred taxes 0 0 0 380,464
----------------------------------------------------
NET INCOME AFTER TAX 2,662,263 2,811,209 2,956,527 32,946,671
OTHER CASH FLOW ITEMS
Capital payments on B Stock note (1,987,703) (2,126,842) 0 (15,983,710)
Capital payments on Mortgage (1,382,105) (1,478,852) (1,582,372) (10,110,233)
Capital expenditure (978,580) (1,007,937) (1,038,175) (11,544,022)
Interest expensed non cash flow 0 0 0 1,630,437
Depreciation 293,058 293,058 293,058 5,951,738
Depreciation - New building 841,173 841,173 841,173 7,519,745
Depreciation - Capital expenditure 897,105 924,018 951,739 8,576,359
(Increase) in other assets 0 0 0 0
Increase in accounts payable 0 0 0 0
Increase in accrued commissions 0 0 0 (7,140,000)
Increase in other current liabilities 0 0 0 (993,511)
Increase in DCCP (1,019,562) (1,176,026) (1,327,583) (4,646,208)
Increase in deferred taxes 0 0 0 (380,464)
Increase in other liabilities 0 0 0 0
B Shares Redeemed 0 0 0 (2,893,930)
Distribution to A-Shareholders for Dividend (841,127) (841,127) (841,127) (9,252,399)
----------------------------------------------------
TOTAL OF NON-CASH FLOW ITEMS (4,177,741) (4,572,536) (2,703,289) (39,266,198)
A STOCKHOLDER TAXES
Normal (507,397) (505,075) (503,148) (6,006,860)
Capital (72,279) (71,948) (71,673) (855,678)
----------------------------------------------------
Combined (579,676) (577,023) (574,821) (6,862,538)
----------------------------------------------------
NET CASH FLOW BEFORE DIVIDENDS (2,095,155) (2,338,350) (321,584) (13,182,066)
Dividends (8,142,450)
----------------------------------------------------
Net cash flow (2,095,155) (2,338,350) (321,584) (21,324,516)
----------------------------------------------------
----------------------------------------------------
Cummulative note payment - B-Stock 13,856,868 15,983,710 15,983,710
Cummulative note payment - Mortgage 7,049,009 8,527,861 10,110,233
</TABLE>
Page 2
<PAGE>
USPA&IRA
BALANCE SHEET PROJECTION (S-CORP) - ASSETS
<TABLE>
<CAPTION>
NOTES 1997 1998 1999 2000 2001 2002
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash 289,074 (1,283,158) 8,172,414 12,006,366 12,502,262 12,618,623
MM funds 0.00% 18,735,189 0 0 0 0 0
Replace IRS CD with FCB Borkered Money 3,000,000
Current year cash flow Act (20,307,421) 9,455,572 833,952 495,896 116,361 (1,036,733)
----------------------------------------------------------------------------------
Net cash Act (1,283,158) 8,172,414 12,006,366 12,502,262 12,618,623 11,581,889
Other 0.00% 4,836,429 4,836,429 4,836,429 4,836,429 4,836,429 4,836,429
----------------------------------------------------------------------------------
Total current assets 3,553,271 13,008,843 16,842,795 17,338,691 17,455,052 16,418,318
PP&E Act 20,575,628 20,575,628 29,470,628 30,243,128 36,213,803 47,745,598
Additions - New Building 0 7,000,000 0 5,000,000 10,000,000 0
Capital Expenditure 1,650,000 772,500 795,675 819,545 844,132
Capitalized interest 0 245,000 0 175,000 712,250 0
----------------------------------------------------------------------------------
20,575,628 29,470,628 30,243,128 36,213,803 47,745,598 48,589,730
Accumulated Depreciation Act (8,429,667) (8,429,667) (9,924,940) (11,794,024) (13,372,981) (14,651,361)
Current PPE 0 (1,208,130) (1,208,130) (804,334) (386,680) (293,058)
Capital expenditure 0 (287,143) (397,500) (511,168) (628,246) (748,836)
New Building 0 0 (263,455) (263,455) (263,455) (841,173)
----------------------------------------------------------------------------------
(8,429,667) (9,924,940) (11,794,024) (13,372,981) (14,651,361) (16,534,428)
Net PPE 12,145,961 19,545,688 18,449,104 22,840,822 33,094,237 32,055,302
First Command Bank 20.00% 22,062,980 65,000,000 100,000,000 150,000,000 150,000,000 150,000,000
Other assets - Marketable Sec 6.00% 67,826,675 71,896,276 76,210,052 80,782,655 85,629,614 90,767,391
----------------------------------------------------------------------------------
Total assets 105,588,887 169,450,807 211,501,951 270,962,168 286,178,903 289,241,012
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
<CAPTION>
2003 2004 2005 2006 2007 2008 2009
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash 11,581,889 10,293,223 8,907,811 7,321,300 5,454,835 3,359,681 1,021,331
MM funds 0 0 0 0 0 0 0
Replace IRS CD with FCB Borkered Money
Current year cash flow (1,288,666) (1,385,412) (1,586,511) (1,866,464) (2,095,155) (2,338,350) (321,584)
------------------------------------------------------------------------------------------
Net cash 10,293,223 8,907,811 7,321,300 5,454,835 3,359,681 1,021,331 699,747
Other 4,836,429 4,836,429 4,836,429 4,836,429 4,836,429 4,836,429 4,836,429
------------------------------------------------------------------------------------------
Total current assets 15,129,652 13,744,240 12,157,729 10,291,264 8,196,110 5,857,760 5,536,176
PP&E 48,589,730 49,459,185 50,354,725 51,277,130 52,227,208 53,205,787 54,213,725
Additions - New Building 0 0 0 0 0 0 0
Capital Expenditure 869,456 895,539 922,405 950,078 978,580 1,007,937 1,038,175
Capitalized interest 0 0 0 0 0 0 0
------------------------------------------------------------------------------------------
49,459,185 50,354,725 51,277,130 52,227,208 53,205,787 54,213,725 55,251,900
Accumulated Depreciation (16,534,428) (18,361,702) (20,316,911) (22,296,749) (24,301,956) (26,333,291) (28,391,540)
Current PPE (293,058) (293,058) (293,058) (293,058) (293,058) (293,058) (293,058)
Capital expenditure (693,044) (820,978) (845,607) (870,976) (897,105) (924,018) (951,739)
New Building (841,173) (841,173) (841,173) (841,173) (841,173) (841,173) (841,173)
------------------------------------------------------------------------------------------
(18,361,702) (20,316,911) (22,296,749) (24,301,956) (26,333,291) (28,391,540) (30,477,510)
Net PPE 31,097,483 30,037,813 28,980,381 27,925,252 26,872,496 25,822,184 24,774,391
First Command Bank 150,000,000 150,000,000 150,000,000 150,000,000 150,000,000 150,000,000 150,000,000
Other assets - Marketable Sec 96,213,435 101,986,241 108,105,415 114,591,740 121,467,245 128,755,279 136,480,596
------------------------------------------------------------------------------------------
Total assets 292,440,570 295,768,294 299,243,525 302,808,256 306,535,850 310,435,223 316,791,163
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE>
USPA&IRA
BALANCE SHEET PROJECTION (S-CORP) - LIABILITIES AND EQUITY
<TABLE>
<CAPTION>
NOTES 1997 1998 1999 2000 2001 2002
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable 0.00% 597,578 597,578 597,578 597,578 597,578 597,578
Accrued Commision & Bonusses 13,202,084
Payment subsequent to Y/E Bonus & FIC (7,140,000)
-----------
Net balance 0.00% 6,062,084 6,062,084 6,062,084 6,062,084 6,062,084 6,062,084
Loans from insurance cos. 0.00% 15,842,192 15,842,192 15,842,192 15,842,192 15,842,192 15,842,192
Other 3,753,339
Payment subsequent to Y/E PSP (993,511)
-----------
Net balance 0.00% 2,759,828 2,759,828 2,759,828 2,759,828 2,759,828 2,759,828
----------------------------------------------------------------------------------
Total current liabilities 25,261,682 25,261,682 25,261,682 25,261,682 25,261,682 25,261,682
LONG TERM LIABILITIES
DCCP 20,557,266 19,419,736 21,727,656 23,762,640 25,570,025 27,188,609
Accrual made 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000
Unrealized gain 1,220,880 1,294,133 1,371,781 1,454,088 1,541,333
Pay outs 15.00% (1,137,530) (2,912,960) (3,259,148) (3,564,396) (3,835,504) (4,078,291)
----------------------------------------------------------------------------------
Net balance 19,419,736 21,727,656 23,762,640 25,570,025 27,188,609 28,651,651
Capital notes Act 15,983,710 14,826,849 13,589,008 12,264,518 10,847,313
Building mortgage Act 0 0 7,245,000 7,752,150 13,469,801 24,762,687
Additions Act 0 7,000,000 0 5,000,000 10,000,000 0
Interest capitalized in mortgage Act 0 245,000 507,150 717,651 1,292,886 0
Capital payments Act 0 0 0 0 0 (985,422)
----------------------------------------------------------------------------------
0 7,245,000 7,752,150 13,469,801 24,762,687 23,777,265
Deferred taxes Act 4,175,136 3,794,672 9,846,917 9,846,917 9,846,917 9,846,917
Other 0.00% 395,110 395,110 395,110 395,110 395,110 395,110
----------------------------------------------------------------------------------
Total long term liabilities 23,989,982 49,146,148 56,583,667 62,870,861 74,457,841 73,518,256
First Command Bank Net asset 13,437,520 56,374,540 91,374,540 144,374,540 144,374,540 144,374,540
position
Replace IRS CD with FCB
Borkered Money 3,000,000 0 0 0 0
----------------------------------------------------------------------------------
13,437,520 56,374,540 94,374,540 144,374,540 144,374,540 144,374,540
MAP Accrual 0 0 9,259,033 8,905,261 8,272,237 7,903,896
Current year accual 0 9,259,033 10,401,316 10,303,561 10,511,979 10,028,653
Current year payment 0 0 (10,755,089) (10,936,585) (10,880,320) (10,228,628)
----------------------------------------------------------------------------------
0 9,259,033 8,905,261 8,272,237 7,903,896 7,703,921
STOCKHOLDERS' EQUITY
Common Stock and PIC Act 4,729,309 4,729,309 1,797,139 1,797,139 1,797,139 1,797,139
Buy-back of B shares 0 (2,932,170)
---------------------------------------------------------------------------------
4,729,309 1,797,139 1,797,139 1,797,139 1,797,139 1,797,139
Retained earnings Act 33,160,181 22,123,801 8,716,951 2,664,706 3,269,931 3,875,155
Buy-back of B shares 1997 (2,893,930) 0
Note issued 1998 (13,051,540)
Net Income After Tax 0 8,903,723 1,157,105 1,494,382 1,755,560 1,883,343
MAP Accrual (9,259,033) 353,773 27,799 (236,884) (405,250)
A Stockholder Distribution 0 (841,127) (841,127) (841,127) (841,127)
---------------------------------------------------------------------------------
30,266,251 8,716,951 9,386,702 3,345,759 3,947,480 4,512,122
Taxes Reimbursed A Stockholders 0 0 (669,751) (681,053) (677,550) (636,967)
Dividends Paid (8,142,450) 0 0 0 0 0
Deferred tax reversal (6,052,245) 605,225 605,225 605,225
---------------------------------------------------------------------------------
Net 22,123,801 8,716,951 2,664,706 3,269,931 3,875,155 4,480,380
Unrealized gains Act 16,046,593 16,046,593 18,895,313 21,914,957 25,115,779 28,508,651
Deferred taxes
Current year portion 2,848,720 3,019,644 3,200,822 3,392,872 3,596,444
---------------------------------------------------------------------------------
16,046,593 18,895,313 21,914,957 25,115,779 28,508,651 32,105,094
Total equity 42,899,703 29,409,403 26,376,802 30,182,848 34,180,944 38,382,613
---------------------------------------------------------------------------------
TOTAL LIABILITIES & EQUITY 105,588,887 169,450,807 211,501,951 270,962,168 286,178,903 289,241,012
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
<CAPTION>
2003 2004 2005 2006 2007 2008 2009
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable 597,578 597,578 597,578 597,578 597,578 597,578 597,578
Accrued Commision & Bonusses
Payment subsequent to Y/E
Net balance 6,062,084 6,062,084 6,062,084 6,062,084 6,062,084 6,062,084 6,062,084
Loans from insurance cos. 15,842,192 15,842,192 15,842,192 15,842,192 15,842,192 15,842,192 15,842,192
Other
Payment subsequent to Y/E
Net balance 2,759,828 2,759,828 2,759,828 2,759,828 2,759,828 2,759,828 2,759,828
-----------------------------------------------------------------------------------------------
Total current liabilities 25,261,682 25,261,682 25,261,682 25,261,682 25,261,682 25,261,682 25,261,682
LONG TERM LIABILITIES
DCCP 28,651,651 29,987,716 31,221,401 32,373,943 33,463,749 34,506,838 35,517,223
Accrual made 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000
Unrealized gain 1,633,813 1,731,842 1,835,752 1,945,897 2,062,651 2,186,410 2,317,595
Pay outs (4,297,748) (4,498,157) (4,683,210) (4,856,091) (5,019,562) (5,176,026) (5,327,583)
-----------------------------------------------------------------------------------------------
Net balance 29,987,716 31,221,401 32,373,943 33,463,749 34,506,838 35,517,223 36,507,234
Capital notes 9,330,904 7,708,347 5,972,210 4,114,544 2,126,842 0 0
Building mortgage 23,777,265 22,722,863 21,594,654 20,387,470 19,095,783 17,713,678 16,234,825
Additions 0 0 0 0 0 0 0
Interest capitalized in mortgage 0 0 0 0 0 0 0
Capital payments (1,054,401) (1,128,209) (1,207,184) (1,291,687) (1,382,105) (1,478,852) (1,582,372)
-----------------------------------------------------------------------------------------------
22,722,863 21,594,654 20,387,470 19,095,783 17,713,678 16,234,825 14,652,453
Deferred taxes 9,846,917 9,846,917 9,846,917 9,846,917 9,846,917 0 0
Other 395,110 395,110 395,110 395,110 395,110 395,110 395,110
-----------------------------------------------------------------------------------------------
Total long term liabilities 72,283,511 70,766,429 68,975,650 66,916,103 64,589,385 52,147,158 51,554,798
First Command Bank 144,374,540 144,374,540 144,374,540 144,374,540 144,374,540 144,374,540 144,374,540
Replace IRS CD with FCB
Borkered Money 0 0 0 0 0 0 0
-----------------------------------------------------------------------------------------------
144,374,540 144,374,540 144,374,540 144,374,540 144,374,540 144,374,540 144,374,540
MAP Accrual 7,703,921 7,720,769 7,919,387 8,296,749 8,775,376 9,411,611 10,199,445
Current year accual 10,222,415 10,240,961 10,364,470 9,838,602 9,944,871 10,053,872 10,166,031
Current year payment (10,205,568) (10,042,343) (9,987,108) (9,359,975) (9,308,636) (9,266,038) (9,230,678)
-----------------------------------------------------------------------------------------------
7,720,769 7,919,387 8,296,749 8,775,376 9,411,611 10,199,445 11,134,798
STOCKHOLDERS' EQUITY
Common Stock and PIC 1,797,139 1,797,139 1,797,139 1,797,139 1,797,139 1,797,139 1,797,139
Buy-back of B shares
-----------------------------------------------------------------------------------------------
1,797,139 1,797,139 1,797,139 1,797,139 1,797,139 1,797,139 1,797,139
Retained earnings 4,480,380 5,085,604 5,690,829 6,296,053 6,901,278 7,506,502 8,111,727
Buy-back of B shares
Note issued
Net Income After Tax 2,098,730 2,270,336 2,445,641 2,507,852 2,662,263 2,811,209 2,956,527
MAP Accrual (622,072) (803,842) (982,587) (1,083,851) (1,241,460) (1,393,058) (1,540,578)
A Stockholder Distribution (841,127) (841,127) (841,127) (841,127) (841,127) (841,127) (841,127)
-----------------------------------------------------------------------------------------------
5,115,910 5,710,970 6,312,755 6,878,926 7,480,954 8,083,526 8,686,548
Taxes Reimbursed A Stockholders (635,531) (625,366) (621,927) (582,873) (579,676) (577,023) (574,821)
Dividends Paid 0 0 0 0 0 0 0
Deferred tax reversal 605,225 605,225 605,225 605,225 605,225 605,225 605,225
-----------------------------------------------------------------------------------------------
Net 5,085,604 5,690,829 6,296,053 6,901,278 7,506,502 8,111,727 8,716,951
Unrealized gains 32,105,094 35,917,325 39,958,289 44,241,711 48,782,139 53,594,992 68,543,533
Deferred taxes 0 9,846,917
Current year portion 3,812,230 4,040,964 4,283,422 4,540,427 4,812,853 5,101,624 5,407,722
-----------------------------------------------------------------------------------------------
35,917,325 39,958,289 44,241,711 48,782,139 53,594,992 68,543,533 73,951,255
Total equity 42,800,068 47,446,256 52,334,903 57,480,555 62,898,632 78,452,398 84,465,344
-----------------------------------------------------------------------------------------------
TOTAL LIABILITIES & EQUITY 292,440,570 295,768,294 299,243,525 302,808,257 306,535,850 310,435,223 316,791,163
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
</TABLE>
Page 4
<PAGE>
USPA&IRA
ASSUMPTIONS USED IN CASH FLOW PROJECTION (C-CORP)
<TABLE>
<S> <C>
Taxable income $14,075,000
PercenTage of income capital in nature 22.00%
Projected growth in income 0.00%
Federal corporate tax rate 35.00%
Federal individual tax rate 39.60%
Federal capital gains tax rate 20.00%
Investment rate 6.00%
Dividend as % of 1998 earnings 100.00%
Lease rate per square foot 19.00
Property tax rate 3.21%
Depreciation period 27.50
Interest received rate 5.00%
Interest paid rate 7.00%
</TABLE>
<TABLE>
<CAPTION>
B STOCK MORTGAGE
<S> <C> <C>
Note balance 0 24,762,687
Portion relieved 0 0
---------------------
Net balance 0 24,762,687
---------------------
---------------------
Note term (years) 10 15
Interest rate 7.00% 7.00%
Payment per year 0 2,718,810
---------------------
---------------------
</TABLE>
Page 1
<PAGE>
USPA&IRA
CASH FLOW PROJECTIONS (C-CORP)
<TABLE>
<CAPTION>
NOTES 1997 1998 1999 2000 2001 2002
<S> <C> <C> <C> <C> <C> <C> <C>
Book income 14,075,000
Depreciation 1,208,130
-----------
Book income before deprec 0.00% 15,283,130 15,283,130 15,283,130 15,283,130 15,283,130 15,283,130
-----------
-----------
Effect of new building SEE ATTACHED 0 0 (547,917) (556,450) (725,570) (168,291)
Interest revenue 5.00% 0 0 217,699 298,153 355,472
Expenses
Interest - Mortgage 0 0 0 0 0 (1,733,388)
Interest not able to capitalize 0 0 (507,150) (542,651) (580,636) 0
Interest - B Stock 0 0 0 0 0
Interest expense overdraft 7.00% (89,821) (51,192) 0 0 0
Depreciation (1,208,130) (1,208,130) (804,334) (386,680) (293,058)
Depreciation - Capital Expenditure (287,143) (397,500) (511,168) (628,246) (748,836)
SAR Accrual 0 0 0 0
-------------------------------------------------------------------------------
Net income 0 13,698,036 12,571,242 13,086,226 13,260,151 12,695,029
- -----------------------------------------------------------------------------------------------------------------------------------
Taxable income calculation
DCCP accrual net 1,087,040 740,852 435,604 164,496 (78,291)
SAR accrual 0 0 0 0 0
SAR paid 0 0 0 0 0
-------------------------------------------------------------------------------
Taxable income 0 14,785,076 13,312,093 13,521,830 13,424,647 12,616,738
- -----------------------------------------------------------------------------------------------------------------------------------
Taxes
Corporate 35.00% (5,174,776) (4,659,233) (4,732,641) (4,698,626) (4,415,858)
Deferred taxes 35.00% 0 380,464 259,298 152,461 57,574 (27,402)
-------------------------------------------------------------------------------
Net Income After Tax 0 8,903,723 8,171,307 8,506,047 8,619,098 8,251,769
Other cash flow items
Capital payments on B Stock note 0 0 0 0 0
Capital payments on Mortgage 0 0 0 0 (985,422)
Capital expenditure 0 (1,650,000) (772,500) (795,675) (819,545) (844,132)
Interest expensed non cash flow 0 0 507,150 542,651 580,636 0
Depreciation 1,208,130 1,208,130 804,334 386,680 293,058
Depreciation - New building 0 0 263,455 263,455 263,455 841,173
Depreciation - Capital expenditure 287,143 397,500 511,168 628,246 748,836
(Increase) in other assets 0 0 0 0 0
Increase in accounts payable 0 0 0 0 0
Increase in accrued commissions (7,140,000) 0 0 0 0 0
Increase in other current liabilities (993,511) 0 0 0 0 0
Increase in DCCP (1,137,530) 1,087,040 740,852 435,604 164,496 (78,291)
Increase in deferred taxes (380,464) (259,298) (152,461) (57,574) 27,402
Increase in other liabilities 0 0 0 0 0
B Shares Redeemed (2,893,930) 0 0 0 0 0
-------------------------------------------------------------------------------
Total of Non-Cash Flow Items (12,164,971) 551,849 2,085,288 1,609,074 1,146,394 2,624
Distribution to SAR 0.00% 0 0 0 0
A Stockholder Taxes
Normal 39.60% 0 0 0 0 0
Capital 20.00% 0 0 0 0 0
-------------------------------------------------------------------------------
Combined 35.29% 0 0 0 0 0 0
-------------------------------------------------------------------------------
Net cash flow from operations (12,164,971) 9,455,572 10,256,595 10,115,121 9,765,492 8,254,393
Dividends (8,142,450) (8,903,723) (8,171,307) (8,506,047) (8,619,098) (8,251,769)
-------------------------------------------------------------------------------
Total cash flow (20,307,421) 551,849 2,085,288 1,609,074 1,146,394 2,624
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Cummulative note payment - B-Stock 0 0 0 0 0
Cummulative note payment - Mortgage 0 0 0 0 985,422
<CAPTION>
2003 2004 2005 2006
<S> <C> <C> <C> <C>
Book income
Depreciation
Book income before deprec 15,283,130 15,283,130 15,283,130 15,283,130
Effect of new building (148,104) (127,312) (105,897) (772,157)
Interest revenue 355,604 341,098 321,481 291,789
Expenses
Interest - Mortgage (1,664,409) (1,590,600) (1,511,626) (1,427,123)
Interest not able to capitalize 0 0 0 0
Interest - B Stock 0 0 0 0
Interest expense overdraft 0 0 0 0
Depreciation (293,058) (293,058) (293,058) (293,058)
Depreciation - Capital Expenditure (693,044) (820,978) (845,607) (870,976)
SAR Accrual 0 0 0 0
--------------------------------------------------------
Net income 12,840,119 12,792,279 12,848,423 12,211,605
- ------------------------------------------------------------------------------------------------
Taxable income calculation
DCCP accrual net (297,748) (498,157) (683,210) (856,091)
SAR accrual 0 0 0 0
SAR paid 0 0 0 0
--------------------------------------------------------
Taxable income 12,542,371 12,294,121 12,165,213 11,355,513
- ------------------------------------------------------------------------------------------------
Taxes
Corporate (4,389,830) (4,302,942) (4,257,824) (3,974,430)
Deferred taxes (104,212) (174,355) (239,124) (299,632)
--------------------------------------------------------
Net Income After Tax 8,346,077 8,314,981 8,351,475 7,937,543
Other cash flow items
Capital payments on B Stock note 0 0 0 0
Capital payments on Mortgage (1,054,401) (1,128,209) (1,207,184) (1,291,687)
Capital expenditure (869,456) (895,539) (922,405) (950,078)
Interest expensed non cash flow 0 0 0 0
Depreciation 293,058 293,058 293,058 293,058
Depreciation - New building 841,173 841,173 841,173 841,173
Depreciation - Capital expenditure 693,044 820,978 845,607 870,976
(Increase) in other assets 0 0 0 0
Increase in accounts payable 0 0 0 0
Increase in accrued commissions 0 0 0 0
Increase in other current liabilities 0 0 0 0
Increase in DCCP (297,748) (498,157) (683,210) (856,091)
Increase in deferred taxes 104,212 174,355 239,124 299,632
Increase in other liabilities 0 0 0 0
B Shares Redeemed 0 0 0 0
--------------------------------------------------------
Total of Non-Cash Flow Items (290,118) (392,342) (593,838) (793,018)
Distribution to SAR 0 0 0 0
A Stockholder Taxes
Normal 0 0 0 0
Capital 0 0 0 0
--------------------------------------------------------
Combined 0 0 0 0
--------------------------------------------------------
Net cash flow from operations 8,055,959 7,922,639 7,757,637 7,144,526
Dividends (8,346,077) (8,314,981) (8,351,475) (7,937,543)
--------------------------------------------------------
Total cash flow (290,118) (392,342) (593,838) (793,018)
--------------------------------------------------------
--------------------------------------------------------
Cummulative note payment - B-Stock 0 0 0 0
Cummulative note payment - Mortgage 2,039,823 3,168,033 4,375,217 5,666,904
<CAPTION>
2007 2008 2009 TOTAL
<S> <C> <C> <C> <C>
Book income
Depreciation
Book income before deprec 15,283,130 15,283,130 15,283,130 183,397,560
Effect of new building (770,087) (767,954) (765,758) (5,455,498)
Interest revenue 252,138 202,534 142,887 2,778,853
Expenses
Interest - Mortgage (1,336,705) (1,239,957) (1,136,438) (11,640,246)
Interest not able to capitalize 0 0 0 (1,630,437)
Interest - B Stock 0 0 0 0
Interest expense overdraft 0 0 0 (141,013)
Depreciation (293,058) (293,058) (293,058) (5,951,738)
Depreciation - Capital Expenditure (897,105) (924,018) (951,739) (8,576,359)
SAR Accrual 0 0 0 0
----------------------------------------------------
Net income 12,238,313 12,260,677 12,279,025 152,781,123
- --------------------------------------------------------------------------------------------
Taxable income calculation
DCCP accrual net (1,019,562) (1,176,026) (1,327,583) (3,508,678)
SAR accrual 0 0 0 0
SAR paid 0 0 0 0
----------------------------------------------------
Taxable income 11,218,751 11,084,651 10,951,441 149,272,445
- --------------------------------------------------------------------------------------------
Taxes
Corporate (3,926,563) (3,879,628) (3,833,004) (52,245,356)
Deferred taxes (356,847) (411,609) (464,654) (1,228,037)
----------------------------------------------------
Net Income After Tax 7,954,904 7,969,440 7,981,366 99,307,730
Other cash flow items
Capital payments on B Stock note 0 0 0 0
Capital payments on Mortgage (1,382,105) (1,478,852) (1,582,372) (10,110,233)
Capital expenditure (978,580) (1,007,937) (1,038,175) (11,544,022)
Interest expensed non cash flow 0 0 0 1,630,437
Depreciation 293,058 293,058 293,058 5,951,738
Depreciation - New building 841,173 841,173 841,173 7,519,745
Depreciation - Capital expenditure 897,105 924,018 951,739 8,576,359
(Increase) in other assets 0 0 0 0
Increase in accounts payable 0 0 0 0
Increase in accrued commissions 0 0 0 (7,140,000)
Increase in other current liabilities 0 0 0 (993,511)
Increase in DCCP (1,019,562) (1,176,026) (1,327,583) (4,646,208)
Increase in deferred taxes 356,847 411,609 464,654 1,228,037
Increase in other liabilities 0 0 0 0
B Shares Redeemed 0 0 0 (2,893,930)
----------------------------------------------------
Total of Non-Cash Flow Items (992,065) (1,192,958) (1,397,507) (12,421,588)
Distribution to SAR 0 0 0 0
A Stockholder Taxes
Normal 0 0 0 0
Capital 0 0 0 0
----------------------------------------------------
Combined 0 0 0 0
----------------------------------------------------
Net cash flow from operations 6,962,839 6,776,482 6,583,859 86,886,142
Dividends (7,954,904) (7,969,440) (7,981,366) (107,450,180)
----------------------------------------------------
Total cash flow (992,065) (1,192,958) (1,397,507) (20,564,038)
----------------------------------------------------
----------------------------------------------------
Cummulative note payment - B-Stock 0 0 0 0
Cummulative note payment - Mortgage 7,049,009 8,527,861 10,110,233
</TABLE>
Page 2
<PAGE>
USPA&IRA
BALANCE SHEET PROJECTION (C-CORP) - ASSETS
<TABLE>
<CAPTION>
NOTES 1997 1998 1999 2000 2001 2002
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash 289,074 (1,283,158) (731,309) 4,353,979 5,963,053 7,109,447
MM funds 0.00% 18,735,189 0 0 0 0 0
Replace IRS CD with FCB Borkered Money 3,000,000
Current year cash flow Act (20,307,421) 551,849 2,085,288 1,609,074 1,146,394 2,624
--------------------------------------------------------------------------------
Net cash Act (1,283,158) (731,309) 4,353,979 5,963,053 7,109,447 7,112,071
Other 0.00% 4,836,429 4,836,429 4,836,429 4,836,429 4,836,429 4,836,429
--------------------------------------------------------------------------------
Total current assets 3,553,271 4,105,120 9,190,408 10,799,482 11,945,876 11,948,500
PP&E Act 20,575,628 20,575,628 29,470,628 30,243,128 36,213,803 47,745,598
Additions - New Building 0 7,000,000 0 5,000,000 10,000,000 0
Capital Expenditure 1,650,000 772,500 795,675 819,545 844,132
Capitalized interest 0 245,000 0 175,000 712,250 0
--------------------------------------------------------------------------------
20,575,628 29,470,628 30,243,128 36,213,803 47,745,598 48,589,730
Accumulated Depreciation Act (8,429,667) (8,429,667) (9,924,940) (11,794,024) (13,372,981) (14,651,361)
Current PPE 0 (1,208,130) (1,208,130) (804,334) (386,680) (293,058)
Capital expenditure 0 (287,143) (397,500) (511,168) (628,246) (748,836)
New Building 0 0 (263,455) (263,455) (263,455) (841,173)
--------------------------------------------------------------------------------
(8,429,667) (9,924,940) (11,794,024) (13,372,981) (14,651,361) (16,534,428)
Net PPE 12,145,961 19,545,688 18,449,104 22,840,822 33,094,237 32,055,302
First Command Bank 0.00% 22,062,980 65,000,000 100,000,000 150,000,000 150,000,000 150,000,000
Other assets - Marketable Sec 6.00% 67,826,675 71,896,276 76,210,052 80,782,655 85,629,614 90,767,391
--------------------------------------------------------------------------------
TOTAL ASSETS 105,588,887 160,547,083 203,849,563 264,422,960 280,669,727 284,771,193
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<CAPTION>
2003 2004 2005 2006 2007 2008 2009
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash 7,112,071 6,821,952 6,429,610 5,835,772 5,042,755 4,050,690 2,857,732
MM funds 0 0 0 0 0 0 0
Replace IRS CD with FCB
Borkered Money
Current year cash flow (290,118) (392,342) (593,838) (793,018) (992,065) (1,192,958) (1,397,507)
-----------------------------------------------------------------------------------------------
Net cash 6,821,952 6,429,610 5,835,772 5,042,755 4,050,690 2,857,732 1,460,225
Other 4,836,429 4,836,429 4,836,429 4,836,429 4,836,429 4,836,429 4,836,429
-----------------------------------------------------------------------------------------------
Total current assets 11,658,381 11,266,039 10,672,201 9,879,184 8,887,119 7,694,161 6,296,654
PP&E 48,589,730 49,459,185 50,354,725 51,277,130 52,227,208 53,205,787 54,213,725
Additions - New Building 0 0 0 0 0 0 0
Capital Expenditure 869,456 895,539 922,405 950,078 978,580 1,007,937 1,038,175
Capitalized interest 0 0 0 0 0 0 0
-----------------------------------------------------------------------------------------------
49,459,185 50,354,725 51,277,130 52,227,208 53,205,787 54,213,725 55,251,900
Accumulated Depreciation (16,534,428) (18,361,702) (20,316,911) (22,296,749) (24,301,956) (26,333,291) (28,391,540)
Current PPE (293,058) (293,058) (293,058) (293,058) (293,058) (293,058) (293,058)
Capital expenditure (693,044) (820,978) (845,607) (870,976) (897,105) (924,018) (951,739)
New Building (841,173) (841,173) (841,173) (841,173) (841,173) (841,173) (841,173)
-----------------------------------------------------------------------------------------------
(18,361,702) (20,316,911) (22,296,749) (24,301,956) (26,333,291) (28,391,540) (30,477,510)
Net PPE 31,097,483 30,037,813 28,980,381 27,925,252 26,872,496 25,822,184 24,774,391
First Command Bank 150,000,000 150,000,000 150,000,000 150,000,000 150,000,000 150,000,000 150,000,000
Other assets - Marketable Sec 96,213,435 101,986,241 108,105,415 114,591,740 121,467,245 128,755,279 136,480,596
-----------------------------------------------------------------------------------------------
TOTAL ASSETS 288,969,299 293,290,094 297,757,997 302,396,176 307,226,860 312,271,625 317,551,641
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE>
USPA&IRA
BALANCE SHEET PROJECTION (C-CORP) - LIABILITIES AND EQUITY
<TABLE>
<CAPTION>
NOTES 1997 1998 1999 2000 2001
<S> <C> <C> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable 0.00% 597,578 597,578 597,578 597,578 597,578
Accrued Commision & Bonusses 13,202,084
Payment subsequent to Y/E Bonus & FIC (7,140,000)
-----------
Net balance 0.00% 6,062,084 6,062,084 6,062,084 6,062,084 6,062,084
Loans from insurance cos. 0.00% 15,842,192 15,842,192 15,842,192 15,842,192 15,842,192
Other 3,753,339
Payment subsequent to Y/E PSP (993,511)
-----------
Net balance 0.00% 2,759,828 2,759,828 2,759,828 2,759,828 2,759,828
------------------------------------------------------------------
Total current liabilities 25,261,682 25,261,682 25,261,682 25,261,682 25,261,682
LONG TERM LIABILITIES
DCCP 20,557,266 19,419,736 21,727,656 23,762,640 25,570,025
Accrual made 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000
Unrealized gain 1,220,880 1,294,133 1,371,781 1,454,088
Accrual reversed 15.00% (1,137,530) (2,912,960) (3,259,148) (3,564,396) (3,835,504)
------------------------------------------------------------------
Net balance 19,419,736 21,727,656 23,762,640 25,570,025 27,188,609
Capital notes Act 0 0 0 0
Building mortgage Act 0 0 7,245,000 7,752,150 13,469,801
Additions Act 0 7,000,000 0 5,000,000 10,000,000
Interest capitalized in mortgage Act 0 245,000 507,150 717,651 1,292,886
Capital payments Act 0 0 0 0 0
------------------------------------------------------------------
0 7,245,000 7,752,150 13,469,801 24,762,687
Deferred taxes Act 4,175,136 3,794,672 3,535,374 3,382,913 3,325,339
Other 0.00% 750,418 750,418 750,418 750,418 750,418
------------------------------------------------------------------
Total long term liabilities 24,345,290 33,517,746 35,800,582 43,173,156 56,027,053
First Command Bank Net asset 13,437,520 56,374,540 91,374,540 144,374,540 144,374,540
position
Replace IRS CD with FCB
Borkered Money 0 3,000,000 0 0
------------------------------------------------------------------
13,437,520 56,374,540 94,374,540 144,374,540 144,374,540
SAR Accrual 0 0 0 0 0
Current year accual 0 0 0 0 0
Current year payment 0 0 0 0 0
------------------------------------------------------------------
0 0 0 0 0
STOCKHOLDERS' EQUITY
Common Stock and PIC Act 4,729,309 4,729,309 4,729,309 4,729,309 4,729,309
Buy-back of B shares 0 0
------------------------------------------------------------------
4,729,309 4,729,309 4,729,309 4,729,309 4,729,309
Retained earnings Act 33,160,181 21,768,493 21,768,493 21,768,493 21,768,493
Buy-back of B shares Act (2,893,930) 0
Net Income After Tax 0 8,903,723 8,171,307 8,506,047 8,619,098
Adjustment (355,308)
------------------------------------------------------------------
29,910,943 30,672,216 29,939,800 30,274,540 30,387,591
Taxes Reimbursed A Stockholders 0 0 0 0 0
Dividends Paid (8,142,450) (8,903,723) (8,171,307) (8,506,047) (8,619,098)
------------------------------------------------------------------
Net 21,768,493 21,768,493 21,768,493 21,768,493 21,768,493
Unrealized gains Act 16,046,593 16,046,593 18,895,313 21,914,957 25,115,779
Current year portion 2,848,720 3,019,644 3,200,822 3,392,872
------------------------------------------------------------------
16,046,593 18,895,313 21,914,957 25,115,779 28,508,651
Total equity 42,544,395 45,393,115 48,412,759 51,613,581 55,006,453
------------------------------------------------------------------
Total liabilities & equity 105,588,887 160,547,083 203,849,563 264,422,960 280,669,727
------------------------------------------------------------------
------------------------------------------------------------------
<CAPTION>
2002 2003 2004 2005
<S> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable 597,578 597,578 597,578 597,578
Accrued Commision & Bonusses
Payment subsequent to Y/E
Net balance 6,062,084 6,062,084 6,062,084 6,062,084
Loans from insurance cos. 15,842,192 15,842,192 15,842,192 15,842,192
Other
Payment subsequent to Y/E
Net balance 2,759,828 2,759,828 2,759,828 2,759,828
-----------------------------------------------------
Total current liabilities 25,261,682 25,261,682 25,261,682 25,261,682
LONG TERM LIABILITIES
DCCP 27,188,609 28,651,651 29,987,716 31,221,401
Accrual made 4,000,000 4,000,000 4,000,000 4,000,000
Unrealized gain 1,541,333 1,633,813 1,731,842 1,835,752
Accrual reversed (4,078,291) (4,297,748) (4,498,157) (4,683,210)
-----------------------------------------------------
Net balance 28,651,651 29,987,716 31,221,401 32,373,943
Capital notes 0 0 0 0
Building mortgage 24,762,687 23,777,265 22,722,863 21,594,654
Additions 0 0 0 0
Interest capitalized in mortgage 0 0 0 0
Capital payments (985,422) (1,054,401) (1,128,209) (1,207,184)
-----------------------------------------------------
23,777,265 22,722,863 21,594,654 20,387,470
Deferred taxes 3,352,741 3,456,953 3,631,308 3,870,431
Other 750,418 750,418 750,418 750,418
-----------------------------------------------------
Total long term liabilities 56,532,075 56,917,950 57,197,780 57,382,262
First Command Bank 144,374,540 144,374,540 144,374,540 144,374,540
Replace IRS CD with FCB
Borkered Money 0 0 0 0
-----------------------------------------------------
144,374,540 144,374,540 144,374,540 144,374,540
SAR Accrual 0 0 0 0
Current year accual 0 0 0 0
Current year payment 0 0 0 0
-----------------------------------------------------
0 0 0 0
STOCKHOLDERS' EQUITY
Common Stock and PIC 4,729,309 4,729,309 4,729,309 4,729,309
Buy-back of B shares
-----------------------------------------------------
4,729,309 4,729,309 4,729,309 4,729,309
Retained earnings 21,768,493 21,768,493 21,768,493 21,768,493
Buy-back of B shares
Net Income After Tax 8,251,769 8,346,077 8,314,981 8,351,475
Adjustment
-----------------------------------------------------
30,020,262 30,114,570 30,083,474 30,119,968
Taxes Reimbursed A Stockholders 0 0 0 0
Dividends Paid (8,251,769) (8,346,077) (8,314,981) (8,351,475)
-----------------------------------------------------
Net 21,768,493 21,768,493 21,768,493 21,768,493
Unrealized gains 28,508,651 32,105,094 35,917,325 39,958,289
Current year portion 3,596,444 3,812,230 4,040,964 4,283,422
-----------------------------------------------------
32,105,094 35,917,325 39,958,289 44,241,711
Total equity 58,602,896 62,415,127 66,456,091 70,739,513
-----------------------------------------------------
Total liabilities & equity 284,771,193 288,969,299 293,290,094 297,757,997
-----------------------------------------------------
-----------------------------------------------------
<CAPTION>
2006 2007 2008 2009
<S> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable 597,578 597,578 597,578 597,578
Accrued Commision & Bonusses
Payment subsequent to Y/E
Net balance 6,062,084 6,062,084 6,062,084 6,062,084
Loans from insurance cos. 15,842,192 15,842,192 15,842,192 15,842,192
Other
Payment subsequent to Y/E
Net balance 2,759,828 2,759,828 2,759,828 2,759,828
-----------------------------------------------------
Total current liabilities 25,261,682 25,261,682 25,261,682 25,261,682
LONG TERM LIABILITIES
DCCP 32,373,943 33,463,749 34,506,838 35,517,223
Accrual made 4,000,000 4,000,000 4,000,000 4,000,000
Unrealized gain 1,945,897 2,062,651 2,186,410 2,317,595
Accrual reversed (4,856,091) (5,019,562) (5,176,026) (5,327,583)
-----------------------------------------------------
Net balance 33,463,749 34,506,838 35,517,223 36,507,234
Capital notes 0 0 0 0
Building mortgage 20,387,470 19,095,783 17,713,678 16,234,825
Additions 0 0 0 0
Interest capitalized in mortgage 0 0 0 0
Capital payments (1,291,687) (1,382,105) (1,478,852) (1,582,372)
-----------------------------------------------------
19,095,783 17,713,678 16,234,825 14,652,453
Deferred taxes 4,170,063 4,526,910 4,938,519 5,403,173
Other 750,418 750,418 750,418 750,418
-----------------------------------------------------
Total long term liabilities 57,480,013 57,497,844 57,440,985 57,313,279
First Command Bank 144,374,540 144,374,540 144,374,540 144,374,540
Replace IRS CD with FCB
Borkered Money 0 0 0 0
-----------------------------------------------------
144,374,540 144,374,540 144,374,540 144,374,540
SAR Accrual 0 0 0 0
Current year accual 0 0 0 0
Current year payment 0 0 0 0
-----------------------------------------------------
0 0 0 0
STOCKHOLDERS' EQUITY
Common Stock and PIC 4,729,309 4,729,309 4,729,309 4,729,309
Buy-back of B shares
-----------------------------------------------------
4,729,309 4,729,309 4,729,309 4,729,309
Retained earnings 21,768,493 21,768,493 21,768,493 21,768,493
Buy-back of B shares
Net Income After Tax 7,937,543 7,954,904 7,969,440 7,981,366
Adjustment
-----------------------------------------------------
29,706,036 29,723,397 29,737,933 29,749,859
Taxes Reimbursed A Stockholders 0 0 0 0
Dividends Paid (7,937,543) (7,954,904) (7,969,440) (7,981,366)
-----------------------------------------------------
Net 21,768,493 21,768,493 21,768,493 21,768,493
Unrealized gains 44,241,711 48,782,139 53,594,992 58,696,616
Current year portion 4,540,427 4,812,853 5,101,624 5,407,722
-----------------------------------------------------
48,782,139 53,594,992 58,696,616 64,104,338
Total equity 75,279,941 80,092,794 85,194,418 90,602,140
-----------------------------------------------------
Total liabilities & equity 302,396,176 307,226,860 312,271,625 317,551,641
-----------------------------------------------------
-----------------------------------------------------
</TABLE>
Page 4
<PAGE>
IRA
Summary of Cash Flow Analysis and Balance Sheet Data
See Assumptions and Cautionary Statement
<TABLE>
<CAPTION>
FY FY FY FY FY FY FY
CASH FLOW STATEMENT (000s) 1998 1999 2000 2001 2002 2003 2004
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
IRA (WITHOUT MERGER)
--------------------
1 Net Income Before Corp. Tax and Interest 13,788 13,130 13,411 13,543 14,073 14,149 14,042
Interest - net (90) (558) (325) (282) (1,378) (1,309) (1,250)
-----------------------------------------------------------------------
Net Income Before Corp. Tax 13,698 12,571 13,086 13,260 12,695 12,840 12,792
2 Corporate-Level Taxes (4,794) (4,400) (4,580) (4,641) (4,443) (4,494) (4,477)
-----------------------------------------------------------------------
Net Income After-Tax 8,904 8,171 8,506 8,619 8,252 8,346 8,315
Other Cash Flow Items (Net) 552 2,085 1,609 1,146 3 (290) (392)
3 Dividends to Shareholders (8,904) (8,171) (8,506) (8,619) (8,252) (8,346) (8,315)
-----------------------------------------------------------------------
Net Cash Flow After Taxes and Dividends 552 2,085 1,609 1,146 3 (290) (392)
-----------------------------------------------------------------------
-----------------------------------------------------------------------
FCFC (WITH MERGER)
--------------------
1 Net Income Before Corp. Tax and Interest 13,130 13,411 13,543 14,073 14,149 14,042
Interest - net (1,217) (980) (907) (1,961) (1,845) (1,729)
3 Payments to MAP Participants (10,755) (10,937) (10,880) (10,229) (10,206) (10,042)
--------------------------------------------------------------
Net Income Before Corp. Tax and MAP Payments 1,157 1,494 1,756 1,883 2,099 2,270
Other Cash Flow Items (Net) 1,188 524 (121) (1,442) (1,911) (2,189)
Distributions to S-Corp Shareholders
(Return on Investment) (841) (841) (841) (841) (841) (841)
2 Distributions to S-Corp Shareholders (Federal
Income Tax) (670) (681) (678) (637) (636) (625)
--------------------------------------------------------------
Net Cash Flow After Taxes and Distributions 834 496 116 (1,037) (1,289) (1,385)
--------------------------------------------------------------
<CAPTION>
FY FY FY FY FY 1999-2009
CASH Flow Statement (000s) 2005 2006 2007 2008 2009 TOTALS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
IRA (WITHOUT MERGER)
--------------------
1 Net Income Before Corp. Tax and Interest 14,039 13,347 13,323 13,298 13,273 149,626
Interest - net (1,190) (1,135) (1,085) (1,037) (994) (10,543)
--------------------------------------------------------------
Net Income Before Corp. Tax 12,848 12,212 12,238 12,261 12,279 139,083
2 Corporate-Level Taxes (4,497) (4,274) (4,283) (4,291) (4,298) (48,679)
--------------------------------------------------------------
Net Income After-Tax 8,351 7,938 7,955 7,969 7,981 90,404
Other Cash Flow Items (Net) (594) (793) (992) (1,193) (1,398) (808)
3 Dividends to Shareholders (8,351) (7,938) (7,955) (7,969) (7,981) (90,404)
--------------------------------------------------------------
Net Cash Flow After Taxes and Dividends (594) (793) (992) (1,193) (1,398) (808)
--------------------------------------------------------------
--------------------------------------------------------------
FCFC (WITH MERGER)
--------------------
1 Net Income Before Corp. Tax and Interest 14,039 13,347 13,323 13,298 13,273 149,626
Interest - net (1,606) (1,479) (1,352) (1,221) (1,085) (15,382)
3 Payments to MAP Participants (9,987) (9,360) (9,309) (9,266) (9,231) (110,201)
--------------------------------------------------------------
Net Income Before Corp. Tax and MAP Payments 2,446 2,508 2,662 2,811 2,957 24,043
Other Cash Flow Items (Net) (2,569) (2,950) (3,337) (3,731) (1,862) (18,401)
Distributions to S-Corp Shareholders
(Return on Investment) (841) (841) (841) (841) (841) (9,252)
2 Distributions to S-Corp Shareholders (Federal
Income Tax) (622) (583) (580) (577) (575) (6,863)
--------------------------------------------------------------
Net Cash Flow After Taxes and Distributions (1,587) (1,866) (2,095) (2,338) (322) (10,473)
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FY FY FY FY FY FY
BALANCE SHEET (000s) 1998 1999 2000 2001 2002 2003
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
IRA (WITHOUT MERGER)
--------------------
Assets:
Current Assets 3,553 4,105 9,190 10,799 11,946 11,948
First Command Bank 65,000 100,000 150,000 150,000 150,000 150,000
Property and Equipment 19,546 18,449 22,841 33,094 32,055 31,097
Securities and Other Assets 72,448 81,295 82,392 86,776 90,770 95,923
----------------------------------------------------------------------------
Total Assets 160,547 203,850 264,423 280,670 284,771 288,969
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities:
Deferred Career Commission Plan 21,728 23,763 25,570 27,189 28,652 29,988
Contemplated Mortgage Garage/Building 7,245 7,752 13,470 24,763 23,777 22,723
First Command Bank 56,375 94,375 144,375 144,375 144,375 144,375
Other Liabilities 29,807 29,547 29,395 29,337 29,365 29,469
----------------------------------------------------------------------------
Total Liabilities 115,154 155,437 212,809 225,663 226,168 226,554
Total Equity 45,393 48,413 51,614 55,006 58,603 62,415
----------------------------------------------------------------------------
Total Liabilities and Equity 160,547 203,850 264,423 280,670 284,771 288,969
----------------------------------------------------------------------------
----------------------------------------------------------------------------
FCFC (WITH MERGER)
------------------
Assets:
Current Assets 16,843 17,339 17,455 16,418 15,130
First Command Bank 100,000 150,000 150,000 150,000 150,000
Property and Equipment 18,449 22,841 33,094 32,055 31,097
Securities and Other Assets 76,210 80,783 85,630 90,767 96,213
---------------------------------------------------------------
Total Assets 211,502 270,962 286,179 289,241 292,441
---------------------------------------------------------------
---------------------------------------------------------------
Liabilities:
Deferred Career Commission Plan 23,763 25,570 27,189 28,652 29,988
Contemplated Mortgage Garage/Building 7,752 13,470 24,763 23,777 22,723
Stock Redemption Loan 14,827 13,589 12,265 10,847 9,331
4 Stock Appreciation Right (SAR) Plan Payable 8,905 8,272 7,904 7,704 7,721
First Command Bank 94,375 144,375 144,375 144,375 144,375
Other Liabilities 35,504 35,504 35,504 35,504 35,504
---------------------------------------------------------------
Total Liabilities 185,125 240,779 251,998 250,858 249,641
Total Equity 26,377 30,183 34,181 38,383 42,800
---------------------------------------------------------------
Total Liabilities and Equity 211,502 270,962 286,179 289,241 292,441
---------------------------------------------------------------
---------------------------------------------------------------
<CAPTION>
FY FY FY FY FY FY
BALANCE SHEET (000s) 2004 2005 2006 2007 2008 2009
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
IRA (WITHOUT MERGER)
--------------------
Assets:
Current Assets 11,658 11,266 10,672 9,879 8,887 7,694
First Command Bank 150,000 150,000 150,000 150,000 150,000 150,000
Property and Equipment 30,038 28,980 27,925 26,872 25,822 24,774
Securities and Other Assets 101,594 107,512 113,799 120,475 127,562 135,083
-----------------------------------------------------------------------------
Total Assets 293,290 297,758 302,396 307,227 312,272 317,552
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Liabilities:
Deferred Career Commission Plan 31,221 32,374 33,464 34,507 35,517 36,507
Contemplated Mortgage Garage/Building 21,595 20,387 19,096 17,714 16,235 14,652
First Command Bank 144,375 144,375 144,375 144,375 144,375 144,375
Other Liabilities 29,643 29,883 30,182 30,539 30,951 31,415
-----------------------------------------------------------------------------
Total Liabilities 226,834 227,018 227,116 227,134 227,077 226,950
Total Equity 66,456 70,740 75,280 80,093 85,194 90,602
-----------------------------------------------------------------------------
Total Liabilities and Equity 293,290 297,758 302,396 307,227 312,272 317,552
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
FCFC (WITH MERGER)
------------------
Assets:
Current Assets 13,744 12,158 10,291 8,196 5,858 5,536
First Command Bank 150,000 150,000 150,000 150,000 150,000 150,000
Property and Equipment 30,038 28,980 27,925 26,872 25,822 24,774
Securities and Other Assets 101,986 108,105 114,592 121,467 128,755 136,481
-----------------------------------------------------------------------------
Total Assets 295,768 299,244 302,808 306,536 310,435 316,791
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Liabilities:
Deferred Career Commission Plan 31,221 32,374 33,464 34,507 35,517 36,507
Contemplated Mortgage Garage/Building 21,595 20,387 19,096 17,714 16,235 14,652
Stock Redemption Loan 7,708 5,972 4,115 2,127 0 0
4 Stock Appreciation Right (SAR) Plan Payable 7,919 8,297 8,775 9,412 10,199 11,135
First Command Bank 144,375 144,375 144,375 144,375 144,375 144,375
Other Liabilities 35,504 35,504 35,504 35,504 25,657 25,657
-----------------------------------------------------------------------------
Total Liabilities 248,322 246,909 245,328 243,637 231,983 232,326
Total Equity 47,446 52,335 57,481 62,899 78,452 84,465
-----------------------------------------------------------------------------
Total Liabilities and Equity 295,768 299,244 302,808 306,536 310,435 316,791
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
IRA
<TABLE>
<CAPTION>
Summary of Shareholder Cash Flows from 1998 to 2009 DOLLARS (000S)
SEE ASSUMPTIONS AND CAUTIONARY STATEMENT IRA (C CORP) FCFC (S CORP)
---------------------------------- ------------------------------------
WITH A/B WITH ONLY B TOTAL WITH A/B WITH ONLY B TOTAL
SHARES SHARES SHARES SHARES
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ownership ratio 39.68% 60.32% 39.68% 60.32%
-----------------------------------------------------------------------------
Proceeds on sale of B-Shares 10,514 15,984 26,498 10,514 15,984 26,498
Capital gains taxes (20%) (2,103) (3,197) (5,300) (2,103) (3,197) (5,300)
Dividends 39,404 59,903 99,308 0 0 0
Distributions to DER-holders 0 0 0 43,727 66,474 110,201
Distribution of SAR accrual 0 0 0 4,418 6,717 11,135
Individual taxes on distributions (39.6%) (15,604) (23,722) (39,326) (19,065) (28,984) (48,049)
Make Whole Distributions to Shareholders with
A & B shares (8% after tax) 0 0 0 9,252 0 9,252
Investment return on proceeds net of capital
gains tax (Return of 10% after tax) 0 0 0 0 14,066 14,066
-----------------------------------------------------------------------------
After-Tax Return 32,212 48,969 81,180 46,743 71,060 117,803
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Increase S Corp over C Corp 45.11% 45.11% 45.11%
-----------------------------------------------------------------------------
<CAPTION>
Summary of Shareholder Cash Flows from 1998 to 2009 PER SHARE
SEE ASSUMPTIONS AND CAUTIONARY STATEMENT IRA (C CORP) FCFC (S CORP)
---------------------- -----------------------
WITH A/B WITH ONLY B WITH A/B WITH ONLY B
SHARES SHARES SHARES SHARES
---------------------------------------------------
<S> <C> <C> <C> <C>
Ownership ratio
---------------------------------------------------
/1/ /1/ /1/ /1/
Proceeds on sale of B-Shares 28.24 28.24 28.24 28.24
Capital gains taxes (20%) (5.65) (5.65) (5.65) (5.65)
Dividends 105.84 105.84 0.00 0.00
Distributions to DER-holders 0.00 0.00 117.45 117.45
Distribution of SAR accrual 0.00 0.00 11.87 11.87
Individual taxes on distributions (39.6%) (41.91) (41.91) (51.21) (51.21)
Make Whole Distributions to Shareholders with
A & B shares (8% after tax) 0.00 0.00 24.85 0.00
Investment return on proceeds net of capital
gains tax (Return of 10% after tax) 0.00 0.00 0.00 24.85
---------------------------------------------------
After-Tax Return 86.52 86.52 125.55 125.55
---------------------------------------------------
---------------------------------------------------
/2/ /2/ /3/ /3/
Increase S Corp over C Corp 45.11% 45.11%
----------------------
/4/ /4/
</TABLE>
Discounted Cash Flows from 1998 to 2009 (4%)
<TABLE>
<CAPTION>
IRA (C Corp) FCFC (S Corp)
---------------------------------- ------------------------------------
WITH A/B WITH ONLY B TOTAL WITH A/B WITH ONLY B TOTAL
SHARES SHARES SHARES SHARES
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ownership ratio 39.68% 60.32% 39.68% 60.32%
-----------------------------------------------------------------------------
Proceeds on sale of B-Shares 6,711 10,201 16,912 6,711 11,230 17,941
Capital gains taxes (20%) (1,342) (2,040) (3,382) (1,342) (3,069) (4,411)
Dividends 31,917 48,521 80,439 0 0 0
Distributions to DER-holders 0 0 0 34,781 52,874 87,655
Distribution of SAR accrual 0 0 0 2,820 4,287 7,107
Individual taxes on distributions (39.6%) (12,639) (19,214) (31,854) (14,890) (22,636) (37,526)
Make Whole Distributions to Shareholders
with A & B shares 0 0 0 7,303 0 7,303
Investment return on proceeds net of capital
gains tax (Return of 10% after tax) 0 0 0 0 11,102 11,102
-----------------------------------------------------------------------------
Discounted After-Tax Return 24,646 37,468 62,114 35,382 53,789 89,171
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Increase S Corp over C Corp 43.56% 43.56% 43.56%
-----------------------------------------------------------------------------
<CAPTION>
IRA (C CORP) FCFC (S CORP)
---------------------- ---------------------
WITH A/B WITH ONLY B WITH A/B WITH ONLY B
SHARES SHARES SHARES SHARES
-------------------------------------------------
<S> <C> <C> <C> <C>
Ownership ratio
------------------------------------------------
Proceeds on sale of B-Shares 18.02 18.02 18.02 19.84
Capital gains taxes (20%) (3.60) (3.60) (3.60) (5.42)
Dividends 85.73 85.73 0.00 0.00
Distributions to DER-holders 0.00 0.00 93.42 93.42
Distribution of SAR accrual 0.00 0.00 7.57 7.57
Individual taxes on distributions (39.6%) (33.95) (33.95) (39.99) (39.99)
Make Whole Distributions to Shareholders
with A & B shares 0.00 0.00 19.62 0.00
Investment return on proceeds net of capital
gains tax (Return of 10% after tax) 0.00 0.00 0.00 19.62
------------------------------------------------
Discounted After-Tax Return 66.20 66.20 95.03 95.03
------------------------------------------------
------------------------------------------------
Increase S Corp over C Corp 43.56% 43.56%
---------------------
/5/ /5/
</TABLE>
Page 1
<PAGE>
FIDELITY
SYSTEMATIC INVESTMENT PLANS:
DESTINY PLANS I
DESTINY PLANS II
---------------------------------------------------------------
DEALER AGREEMENT
<PAGE>
DEALER AGREEMENT
- -------------------------------------------------------------------------------
Gentlemen: As sponsor and principal underwriter, we invite you to join a
Selling Group to distribute
Fidelity Systematic Investment Plans, a plan consisting of
two series, Destiny Plans I and Destiny Plans II
(collectively referred to as the "Plan" or "Plans"), for the
Accumulation of Shares of Fidelity Destiny Portfolios, a
series fund consisting of Destiny I and Destiny II
(collectively referred to as the "Fund") upon the following
terms and conditions.
1. The Dealer Agreement previously in effect is hereby
terminated, effective at the opening of business this date,
and our relations thereafter will be governed by the terms
of this Agreement.
2. All applications for the Plans shall be made on application
forms supplied by us, and all initial payments collected
shall be remitted in full without deduction of any discounts
representing your profit on the sale of Plans, as principal
(hereinafter called "commissions"), together with such
application forms, signed by each applicant (as
"Planholder") to our principal office. Checks or money
orders for initial payments shall be drawn to the order of
State Street Bank & Trust Company, Custodian. A separate
check or money order shall accompany the application form
submitted for each Plan. After the initial payment has been
made and the Plan has been issued, the Planholder may send
all future payments made, payable to State Street Bank &
Trust Company, Custodian, to Boston Financial Data Services,
Inc., P.O. Box 1271, Boston, Massachusetts 02104.
3. Planholders of Destiny Plans I purchase shares of Destiny I
and Planholders of Destiny Plans II purchase shares of
Destiny II.
4. We reserve the right in our sole discretion to reject any
Plan application and to return any payment made in
connection therewith. We also reserve the right in our sole
discretion to give any accepted applicant the privilege of
canceling his Plan in accordance with any rights described
in the prospectus effective at the time of purchase of the
Plan. We further reserve the right to refund all or part of
any payment or payments made by any Planholder in the event
that we, in our sole discretion, believe that the
solicitation and/or sale associated therewith was effected
in violation of any applicable State or Federal law or rule
or regulation of the National Association of Securities
Dealers, Inc. In the event of any such refund or refunds you
shall not be entitled to any commissions thereon, and, if
such commissions have been paid, you shall promptly refund
same to us or we may at our option charge the same against
future commissions. To this end you hereby grant us a lien
on any such commissions.
5. On all approved sales of Plans made by you, as evidenced by
the issuance of a Plan Certificate and its acceptance by the
applicant, we shall pay you commissions in accordance with
the terms of this Agreement and the "Dealer Commission and
Service Fee Schedule" which is attached hereto and made a
part of this Agreement. As nearly as practicable, Destiny
Plans I and Destiny Plans II commissions on first-year
payments (1 through 13 on Plans of $150 per month or less
and 1 through 12 on Plans over $150
<PAGE>
per month) will be paid monthly as the Creation and
Sales Charges applicable thereto are received by us
from the Custodian. As nearly as practicable,
servicing fees for Destiny Plans II will be paid
monthly as they are received by us from the
Custodian. On Destiny Plans I servicing fees payable
from the 14th through the final monthly payment
(13th through final payments on plans of more than
$150 per month) of a Plan will be accrued as
payments are received and paid to you annually, i.e.
when the 24th, 36th or 48th, etc. payment is made.
Such servicing fees on Destiny Plans I and Destiny
Plans II are not to be construed as earned
commissions, but are designed solely as continuing
compensation for servicing the Planholder's account
during the life of this Agreement. After the
expiration of 18 months from the date on which a
Plan has been issued, if any payment on a Plan is
due, and no payment has been made by the Planholder
for 6 months, the Plan account shall revert back to
us for collection, and in such event no further
commissions or servicing fees with respect to such
account shall be due or payable to you. Your rights
to commissions on Plans sold during the term of this
Agreement shall survive termination of this
Agreement only as outlined in Paragraph 13 hereof.
6. For all plans written after the effective date of this
agreement dealer commission and service fees which are
outlined in Schedule A will be paid according to the tier to
which the dealer firm qualifies. Such qualification is
determined by the face amount written by that dealer in the
previous calendar year. Qualification for the various tiers
can be expected to be amended from time to time.
7. In the event a Planholder exercises his right under Section
27 of the Investment Company Act of 1940, as amended, to
surrender his certificate within the first eighteen months
following its issuance, and to receive the value of his
account plus an amount equal to that part of the excess paid
with respect to that Plan for Creation and Sales charges
which exceeds fifteen per cent of the gross payments made,
you shall promptly refund to us a portion of the commission
previously paid to you with respect to such Plan which bears
the same relationship to the total amount of such commission
as the amount refunded to the Planholder bears to the total
Creation and Sales Charge paid by him with respect to such
Plan, or we may, at our option, charge such amount against
future commissions receivable by you. To this end you hereby
grant us a lien on any such commissions. In order to insure
us that you will have sufficient assets to make such
repayment, we shall initially establish on our books an
account in your name to which shall be credited ten percent
of the commissions due and payable to you and shall retain
such portion of those commissions as a reserve from which
any claims for refund with respect to Plans sold by you can
be paid in the event you shall fail to honor any request of
ours for such repayment. We shall have the right in our
sole discretion to reduce or waive such reserve requirements
on the basis of your refund experience, level of business or
any other circumstances which we may deem relevant.
<PAGE>
8. You will accept Plan applications only from persons who to
the best of your knowledge and belief, can and will complete
all payments specified in the applications. If any
Planholder becomes delinquent in his payments, it shall be
your responsibility to contact the Planholder for the
purpose of reinstating the payment schedule.
9. Plans shall be offered and sold in such denominations and
units calling for such periodic payments as we shall from
time to time determine and set forth in the Plans
Prospectus. We reserve the right in our sole discretion,
with 30-day written notice, to suspend, restrict, alter, or
modify in any way the sale of any of the Plans or to
withdraw the offering of the Plans entirely.
10. No person is authorized or permitted to give any information
or make any representations concerning the Plans other than
those which are contained in the current Plans Prospectus
and in such other printed information as may be subsequently
issued by us as information supplemental to such Plans
Prospectus or approved by us in writing for use in
connection therewith. You will not use the words "Fidelity
Destiny Portfolios," "Destiny I or Destiny II" or "Fidelity
Distributors Corporation" whether in writing, by radio or
television or any other advertising media without our prior
written approval.
11. Additional copies of the current Plans Prospectus, any
printed information issued as supplemental to such Plans
Prospectus, and the Plans application forms will be supplied
by us in reasonable quantities upon request.
12. You represent that you are and will remain a member in good
standing of the National Association of Securities Dealers,
Inc. and agree to abide by all of its rules and regulations,
including its Rules of Fair Practice. You further agree to
comply with all applicable State and Federal laws and rules
and regulations of regulatory agencies having jurisdiction.
Reference is hereby specifically made to Section 26, Article
III, of the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. which is
incorporated herein as if set forth in full. Any breach of
said Section 26 will immediately and automatically terminate
this Agreement.
13. Your commissions shall vest, subject to the limitation in
the event of non-payment by a Planholder set forth in the
next-to-last sentence of Paragraph 5 and Paragraph 8 hereof,
as follows:
a. Commissions on first-year payments (1 through 13 of
Plans of $150.00 per month or less and 1 through 12 on
Plans over $150.00 per month) and servicing fees on
Plan payments in subsequent years will be paid to you
so long as this Agreement remains in force and effect
and you continue membership in the National Association
of Securities Dealers, Inc. If you should voluntarily
terminate your membership in the National Association
of Securities Dealers, Inc. we reserve the right to
assign Plan accounts as to which you are the Dealer of
record and the right to receive servicing fees with
respect to
<PAGE>
such Plan accounts to one of our active dealers.
Nevertheless, we, in our sole discretion, may pay
servicing fees on Plan payments made with respect to
such Plan accounts subsequent to such voluntary
termination to you, your widow, direct beneficiaries
or assignees.
b. Notwithstanding sub-paragraph (a.) above, in the event
your membership in the National Association of
Securities Dealers, Inc. is discontinued or suspended
because of disciplinary proceedings by the National
Association of Securities Dealers, Inc., the Securities
and Exchange Commission, or other regulatory bodies, no
commissions or servicing fees will be paid on any
Investor's payments received during the period of a
suspension or after the effective date of an expulsion
or revocation of a membership; provided, however, that
in the event your National Association of Securities
Dealers, Inc. membership is thereafter reinstated in
good standing, or if such disciplinary action by
another regulatory body is thereafter terminated by
same, payment of such commissions to you shall then
resume, if such payment is allowable under law, rules
or regulations.
14. In all sales of the Plans to the public you shall act as a
dealer for your own account and in no transaction shall you
have any authority to act or hold yourself out as agent for
us, the Fund, or any other member of the Selling Group, and
nothing in this Agreement, including the use of the word
"commissions," shall constitute you a partner, employee, or
agent of ours or give you any authority to act for us.
Neither we nor the Fund shall be liable for any of your acts
or obligations as a Dealer under this Agreement.
15. Each party hereto has the right to cancel or amend this
Agreement at any time upon written or telegraphic notice to
the other.
16. You will comply with all applicable State and Federal laws
and with the rules and regulations of authorized regulatory
agencies thereunder. You will not offer Plans for sale
unless such Plans are duly registered under the applicable
State and Federal statutes and the rules and regulations
thereunder.
17. All communications to us shall be sent to the address below
or to such other address as we may authorize in writing. All
communications and/or notices to you shall be duly given,
mailed or telegraphed to you, at the address specified by
you below, or at such other address as you may authorize in
writing.
18. Failure of either party to terminate this Agreement upon the
occurrence of any event set forth in this Agreement as a
cause for termination shall not constitute a waiver of the
right to terminate this Agreement at a later time on account
of such occurrence.
19. This Agreement shall be construed in accordance with the
laws of the Commonwealth of Massachusetts and no
modification hereof shall be valid unless in writing.
<PAGE>
20. We reserve the right to amend this Agreement upon 30-days
notice.
21. This Agreement or any monies due or to become due hereunder
shall not be assignable by you without prior written
approval by us. Any request for an assignment shall be on a
form approved by us, which may be obtained from Boston
Financial Data Services, Inc., P.O. Box 1271, Boston,
Massachusetts 02104.
22. This Agreement supersedes and cancels all previous
agreements between us whether oral or written.
VERY TRULY YOURS,
Fidelity Distributors Corporation
(General Distribution Agent for
Fidelity Systematic Investment Plans)
82 Devonshire Street
Boston, Massachusetts 02109
By___________________________________________
The undersigned hereby accepts your invitation to become a member
of the Selling Group referred to herein and agrees to abide by
all the foregoing terms and conditions.
Dated As Of ________ ,19
Firm _____________________________________________
By _______________________________________________
(Authorized Signature)
Address __________________________________________
__________________________________________________
3/86
<PAGE>
SCHEDULE A
DEALER COMMISSION AND SERVICE FEE SCHEDULE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE OF SALES & CREATION
CHARGES PAID TO DEALER
------------------------------
PRODUCTION FIRST TWELVE TRAIL YEAR
LEVEL 1985 FACE AMOUNT PAYMENTS* COMMISSIONS
-------------------------------------------------------------------
<S> <C> <C> <C>
I 0 - $ 2,000,000 80% 41.7%
II $ 2,000,001 - $ 30,000,000 85% 50%
III $ 30,000,001 - $182,000,000 89.4% 60%
IV $182,000,001+ 92.4% 92.4%
</TABLE>
* May be paid 13 times because a double initial payment
is required on all Plans of $150 per month or less.
<PAGE>
FIDELITY
SYSTEMATIC INVESTMENT PLANS:
DESTINY PLANS I
DESTINY PLANS II
------------------------------------------------------
DEALER AGREEMENT APPLICATION
FIRM IDENTIFICATION: Name of Firm:
Address: Street __________________________________
City_______________________State_________Zip______
Telephone_____________
BACKGROUND: Date Organized or Founded ________________________
Total No. of Employees ___________________________
Names of Principal Officers:
President ______________________________________
Vice President(s) ______________________________
______________________________
Mutual Fund Manager_____________________________
ORGANIZATION: Number of Branch Offices ____________________________
States in which firm registered _____________________
Existing Sales Representatives ______________________
Potential Representatives to be
NASD Registered _____________________________________
Has your firm previously sold:
Mutual Funds Yes ______ No _______
Contractual Plans Yes _____ No _______
MARKETING: 1. What is the estimated population of your Trade
Area?
Under 50,0000___50-100,000____100-250,000___
250-500,000___Over 500,000____
2. What was your firm's average Mutual Fund sales
ticket in the past year?
Under $5,000_____$5-10,000_____$10-25,000 _______
Over $25,000______
3. Sales include: Voluntary ___________
Systematic (Contractual)_______ Both _________
4. Does your firm sponsor or hold meetings for the
public concerning Mutual Funds?
Yes _____ No_____
5. What do you consider the most important source of
your current Mutual Fund sales?
Advertisements _________ Direct Mail _________
Seminars _________ Other _________
Telephone Calls __________ Word of Mouth ________
Existing Clients __________
------------------------------------------------------
_________________________ SIGNED__________________
DATE TITLE __________________
<PAGE>
[Letterhead of United Services Planning Association, Inc.]
February 21, 1986
Mr. William T. Ryan
Director of Broker/Dealer Sales
Fidelity Distributors
82 Devonshire Street
Boston MA 02109
Dear Bill:
Enclosed is a Dealer Agreement which has been corrected in accordance with our
telephone conversation today. Based on those corrections and the specifics of
how certain passages of the agreement will be interpreted as specified below,
you will find that this agreement has been signed by our Chief Executive
Officer. We are in hopes that the agreement will be countersigned immediately
and a copy returned to us by overnight express mail so that we will be in a
position to inform our representatives that they may sell Fidelity Destiny II.
With regard to paragraph 2 of the enclosed Dealer Agreement, it is our
understanding that even though the agreement says a separate check or money
order shall accompany each application, you are prepared to continue to accept
applications which are associated with accounts which will be initiated by U.S.
military allotment. This represents no change from our current practice.
The second provision of paragraph 7 sets up a reserving requirement against
which Fidelity can collect claims for refund due to cancellation of individual
plans. It is our understanding that you do not intend to apply this reserve
provision to business with our firm.
All other indications to the contrary, it is our understanding that you will
continue to pay first-year commissions and trail-year commissions at the rate of
92.4 percent on all business which we have placed on the books under existing
Dealer Agreements prior to the execution of this new agreement. The first
sentence of paragraph 6 in the new agreement
<PAGE>
Mr. William T. Ryan -2- February 21, 1986
specifies that this agreement applies to all plans written after the
effective date. We clearly understand that it is your intention to continue
the higher level of commissions for all plans sold under the previous
existing Dealer's Agreement.
If you will acknowledge that these interpretations are correct by signing below,
then return a copy of this letter along with an executed copy of the Dealer
Agreement, we will be prepared to initiate sales in Destiny I and II under this
agreement. We understand that you will be having a Dealer's Agreement typeset
which will reflect this exact same wording. We expect to execute one of the
typeset agreements when they are ready, but would prefer not to wait to begin
selling the plans.
Sincerely,
/s/ LAMAR C. SMITH
LAMAR C. SMITH
LCS/eml
Enclosure: Dealer Agreement
This letter accurately states our
arrangements.
/s/ William T. Ryan
-------------------------------------
William T. Ryan,
Fidelity
/s/ Christopher W. Tomecek
-------------------------------------
Christopher W. Tomecek
Vice President
AMENDMENT TO PARAGRAPH #3 OF THIS LETTER
Paragraph 5 of the agreement indicates that a plan which is 18 months past issue
and which has received no payment for six months will revert back to Fidelity
Distributors Corporation. We understand that your present intention is not to
enforce the provision for USPA accounts under this new Dealer Agreement,
although you may in the future.
<PAGE>
20. We reserve the right to amend this Agreement upon 30-days notice.
21. This Agreement or any monies due or to become due hereunder shall not be
assignable by you without prior written approval by us. Any request for an
assignment shall be on a form approved by us, which may be obtained from
Boston Financial Data Services, Inc., P.O. Box 1271, Boston, Massachusetts
02104.
22. This Agreement supersedes and cancels all previous agreements between us
whether oral or written.
VERY TRULY YOURS,
Fidelity Distributors Corporation
(General Distribution Agent for
Fidelity Systematic Investment Plans)
82 Devonshire Street
Boston, Massachusetts 02109
By
-------------------------------------------------------------------
The undersigned hereby accepts your invitation to become a member of the Selling
Group referred to herein and agrees to abide by all the foregoing terms and
conditions, as modified by the letter agreement dated February 21, 1986, copy
attached. Dated As Of May 12, 1986
Firm UNITED SERVICES PLANNING ASSOCIATION, INC.
----------------------------------------------------------------
By /s/ George C. Talley, Jr.
-------------------------------------------------------------------
George C. Talley, Jr. (Authorized Signature) Chairman/CEO
Address 4100 South Hulen
--------------------------------------------------------------
Fort Worth TX 76109
- ----------------------------------------------------------------------
3/86
<PAGE>
DEALER'S AGREEMENT
This Agreement is made by and between A I M Distributors, Inc. (hereinafter
called "A I M"), as sponsor and principal underwriter of Summit Investors
Plans for the accumulation of shares of Summit Investors Fund, Inc., a mutual
fund (hereinafter referred to as the "Plans"), and the United Services
Planning Association, Inc. (hereinafter called "USPA"), Fort Worth, Texas.
1. All applications for the Plans shall be made on application forms
provided by A I M, and all initial payments collected shall be remitted in
full, without deduction of any commission by USPA, together with such
application forms, signed by each applicant (an "Investor"), to THE BANK OF
NEW YORK (the "Custodian"), at P. O. Box 11555, Church Street Station, New
York, New York, 10249. Checks or money orders for initial payments shall be
drawn to the order of "The Bank of New York, Custodian." A separate check or
money order shall accompany the application form submitted for each Plan.
After the initial payment has been made and the Plan has been issued, the
Investor shall send all future payments to the address stated above, or such
other addressee as A I M shall identify to USPA in writing.
2. A I M reserves the right in its sole discretion to reject any Plan
application and to return any payment made in connection therewith. A I M
also reserves the right in its sole discretion to give any accepted applicant
the privilege of canceling that applicant's Plan in accordance with any
rights described in the Plans prospectus effective at the time of purchase of
the Plan. A I M further reserves the right to refund all or part of any
payment or payments made by any Investor in the event that it, in its sole
discretion, believes that the solicitation and/or sale associated therewith
was effected in violation of any applicable State or Federal law or rule or
regulation of the National Association of Securities Dealers, Inc. In the
event of any such refund or refunds, USPA shall not be entitled to any
commissions thereon, and, if such commissions have been paid, USPA shall
promptly refund same to A I M or A I M may, at its option, charge the same
against future commissions. To this end, USPA hereby grants A I M a lien on
any such commissions.
3. On all approved sales of Plans made by USPA, as evidenced by the
issuance of a Plan Certificate and its acceptance by the Investor, A I M
shall pay USPA commissions in accordance with the terms of this Agreement and
the "Summit Investors Plan Commission Schedule" which is attached hereto and
made a part of this Agreement. All commissions on first-year and subsequent
payments will be paid monthly as the Creation and Sales Charges applicable
thereto are received by A I M frown the Custodian. USPA's rights to all
commissions on Plans sold during the term of this Agreement shall survive
termination of this Agreement if USPA is in compliance with Paragraph 10
hereof.
4. Anything herein to the contrary notwithstanding, the attached
"Summit Investors Plan Commission Schedule" is subject to change by A I M at
any time and from time to time, but no such changes shall affect amounts
payable to USPA as commissions on Plans accepted by A I M prior to any such
changes. Any such change shall be communicated by A I M to USPA in writing
ninety (90) days prior to becoming effective.
<PAGE>
-2-
5. In the event a Planholder exercises his right under Section 27 of
the Investment Company Act of 1940, as amended, to surrender his certificate
within the first 18 months following its issuance, and to receive the value
of his account plus an amount equal to that part of the excess paid with
respect to that Plan for Creation and Sales Charges which exceeds 15% of the
gross payments made, USPA shall promptly refund to A I M a portion of the
commission previously paid to USPA with respect to such Plan which bears the
same relationship to the total amount of such commission as the amount
refunded to the Planholder bears to the total Creation and Sales Charge paid
by him with respect to such Plan, or A I M may, at its option, charge such
amount against future commissions receivable by USPA. To this end, USPA
hereby grants A I M a lien on any such corn missions.
6. USPA will accept Plan applications only from persons who have
received a copy of the current Plans Prospectus issued under the Securities
Act of 1933 and who, to the best of USPA's knowledge and belief, can and will
complete all payments specified in the applications. If an Investor becomes
delinquent in his payments, it shall be USPA's responsibility to contact the
Investor for the purpose of reinstating the payment schedule.
7. Plans shall be offered and sold in such denominations and units
calling for such periodic payments as A I M shall from time to time determine
and set forth in the Plan Prospectus. A I M reserves the right in its sole
discretion, to suspend, restrict, alter, or modify in any way the sale of any
of the Plans or to withdraw the offering of the Plans entirely; provided,
however, that in the event any such suspension, restriction, alteration, or
modification results from other than a State or Federal regulatory or
statutory requirement, no such change shall be effected prior to USPA having
been notified of same by A I M ninety (90) days prior thereto.
8. No person is authorized or permitted to give any information or
make any representations concerning the Plan other than those which are
contained in the current Plan Prospectus and in such other printed
information as may be subsequently issued by A I M as information
supplemental to such Plan Prospectus or approved by A I M in writing for use
in connection therewith. USPA will not use the words "Summit Investors Fund,"
(hereinafter referred to as the "Fund") or "A I M Distributors," whether in
writing, by radio and television, or any other advertising media, without
A I M's prior written approval.
9. Additional copies of the current Plan Prospectus, any printed
information issued as supplemental to such Plan Prospectus, and the Plan
application forms will be supplied by A I M in reasonable quantities upon
request. All other expenses incurred by USPA in connection with activities
under this Agreement shall be borne by USPA.
10. USPA represents that it is and will remain a member in good
standing of the National Association of Securities Dealers, Inc.,
(hereinafter called "NASD"), and agrees to abide by all of its rules and
regulations, including its Rules of Fair Practice. USPA further agrees to
comply with all applicable State and Federal laws and rules and
<PAGE>
-3-
regulations of regulatory agencies having jurisdiction. Reference is hereby
specifically made to Section 26, Article III, of the Rules of Fair Practice
of the NASD which is incorporated herein as if set forth in full.
11. USPA's commissions shall vest as follows: Commissions on first and
subsequent year payments will be paid to USPA so long as this Agreement
remains in full force and effect or so long thereafter as USPA continues
membership in the NASD. If USPA should voluntarily terminate its membership
in the NASD, A I M reserves the right to assign Plan accounts as to which
USPA is the Dealer of Record and the right to receive commissions with
respect to such Plan accounts to one of its active dealers. Nevertheless,
A I M in its sole discretion, may pay commissions to USPA on Plan payments made
with respect to such Plan accounts subsequent to such voluntary termination
by USPA. Notwithstanding the above, in the event USPA's membership in the
NASD is discontinued or suspended because of disciplinary proceedings by the
NASD, the Securities and Exchange Commission, or other regulatory bodies, no
commissions will be paid on any Investor's payments received during the
period of a suspension or after the effective date of an expulsion or
revocation of a membership; provided, however, that in the event USPA's NASD
membership is thereafter reinstated in good standing, or if such disciplinary
action by another regulatory body is thereafter terminated by same, payment
of such commissions to USPA shall then resume, if such payment resumption is
allowable under applicable law, rules, or regulations.
12. In all sales of the Plans to the public, USPA shall act as a Dealer
for its own account and in no transaction shall it have any authority to act
or hold itself out as agent for A I M, the Fund, or any other member of the
selling group of the Fund, and nothing in this Agreement, including the use
of the word "commissions," shall constitute USPA as a partner, employee, or
agent of A I M or give USPA any authority to act for A I M. Neither A I M nor
the Fund shall be liable for any of the acts or obligations of USPA as a
Dealer under this Agreement.
13. Each party hereto has the right to cancel this Agreement at any
time upon ninety (90) days written or telegraphic notice to the other.
14. USPA will comply with all applicable State and Federal laws and
with the rules and regulations of authorized regulatory agencies thereunder.
USPA will not offer Plans for sale unless such Plans are duly registered
under the applicable State and Federal statutes and the rules and regulations
thereunder.
15. All communications to A I M shall be sent to the address below or
to such other address as A I M may authorize in writing. All communications
and/or notices to USPA shall be duly given, mailed, or telegraphed to USPA,
at the address specified by USPA below, or at such other address as USPA may
authorize in writing.
16. Failure of either party to terminate this Agreement upon the
occurrence of any event set forth in this Agreement as a cause for
termination shall not constitute a waiver of the right to terminate this
Agreement at a later time on account of such occurrence.
<PAGE>
-4-
17. A I M agrees to use its best efforts to cause the Custodian under
the Plans to make available to USPA such information, and in such form,
regarding Investors' accounts as USPA may reasonably request.
18. This Agreement shall be construed in accordance with the laws of
the state of Texas and no modification hereof shall be valid unless in
writing.
19. This Agreement or any moneys due or to become due hereunder shall
not be assignable by USPA without prior written approval by A I M. Any
request for an assignment shall be on a form approved by A I M, which may be
obtained from A I M at the address shown below.
20. This Agreement supersedes and cancels all previous Agreements
pertaining to the Fund between A I M and USPA, whether oral or written.
AGREED this 15th day of October, 1982.
A I M DISTRIBUTORS UNITED SERVICES PLANNING ASSOC., INC.
Eleven Greenway Plaza 6000 Camp Bowie Boulevard
Suite 1919 P. O. Box 2387
Houston TX 77046 Fort Worth, TX 76113
By /s/ [Illegible] By /s/ Ralph F. Smith
------------------------------- -------------------------------
Title President Title President
------------------------------- -------------------------------
<PAGE>
SUMMIT INVESTORS PLAN COMMISSION SCHEDULE
<TABLE>
<CAPTION>
15-Year Plan
-----------------------------------
First Year Trial Years
------------------- -------------------
Monthly 14 Year Total
Payment Unit Monthly Total Monthly Total 15 Years
- ------------ ------- ----- ------- --------- ----------
<S> <C> <C> <C> <C> <C>
$ 75.00 $ 34.65 $ 415.80 $ 3.84 $ 645.12 $1,060.92
93.00 42.97 515.64 4.30 722.40 1,238.04
100.00 46.20 554.40 4.62 776.16 1,330.56
125.00 57.75 693.00 5.78 971.04 1,664.04
150.00 69.30 831.60 5.44 913.92 1,745.52
166.00 76.69 920.28 6.02 1,011.36 1,931.64
200.00 92.40 1,108.80 7.26 1,219.68 2,328.48
250.00 115.50 1,386.00 9.07 1,523.76 2,909.76
300.00 138.60 1,663.20 4.95 831.60 2,494.80
400.00 184.80 2,217.60 4.62 776.16 2,993.76
500.00 207.90 2,494.80 4.95 831.60 3,326.40
600.00 231.00 2,772.00 5.78 971.04 3,743.04
1,000.00 323.40 3,880.80 11.55 1,940.40 5,821.20
1,500.00 346.50 4,158.00 12.37 2,078.16 6,236.16
3,000.00 415.80 4,989.60 14.85 2,494.80 7,484.40
6,000.00 554.40 6,652.60 19.80 3,326.40 9,979.00
</TABLE>
<PAGE>
A I M Management; Inc.
Robert H, Graham
Vice President & Secretory
October 18, 1982
Mr. Ralph F. Smith, President
United Services Planning Association, Inc.
P. O. Box 2387
Fort Worth, Texas 76113
Dear Ralph:
Enclosed please find an executed copy of the Dealer's Agreement between
A I M Distributors and USPA.
We are hoping to commence sales of Summit Investors Plans shortly.
Sincerely,
/s/ Robert Graham
Robert Graham
RHG/fsa
Enc:
<PAGE>
THE PIONEER GROUP, INC.
PRINCIPAL UNDERWRITER FOR 60 STATE STREET
PIONEER FUND, INC. BOSTON, MASSACHUSETTS 02109
PIONEER II, INC. TELEPHONE 617-742-7825
PIONEER BOND FUND, INC.
DEALER'S SALES AGREEMENT
United Services Planning Association Inc.
Box 2387
Fort Worth, TX 76113 Dated August 1, 1979
Gentlemen:
We have entered into an underwriting contract with PIONEER FUND. INC.,
PIONEER II, INC. and PIONEER BOND FUND, INC, whereby we will act as Principal
Underwriter, as defined in the Investment Company Act of 1940, with the right
to purchase shares of Capital Stock of PIONEER FUND, INC., PIONEER II, INC,
and PIONEER BOND FUND, INC, for sale of such shares to investors either
directly or indirectly through other broker-dealers. As Principal we offer to
sell to you shares of the above funds (the "Funds") subject to the following
conditions:
1. In all sales of shares to the public you shall act as dealer for
your own account.
2. On purchases of shares, you shall receive a discount amounting to a
percentage of the applicable public offering price which varies with the size
and nature of each such purchase as follows:
<TABLE>
<CAPTION>
TOTAL AMOUNT OF DEALER DISCOUNT
SIMULTANEOUS PURCHASE OR SALES ON SINGLE
HOLDINGS AFTER PURCHASE CHARGE TRANSACTIONS
------------------------ ------ ----------------
<S> <C> <C>
Less than $10,000 8.5% 7.0%
$ 10,000 or more but less than $ 25,000 7.75 6.25
$ 25,000 or more but less than $ 50,000 6.0 5.0
$ 50,000 or more but less than $100,000 4.5 4.0
$100,000 or more but less than $250,000 3.5 3.0
$250,000 or more but less than $400,000 2.5 2.25
$400,000 or more but less than $600,000 2.0 1.75
$600,000 or more 1.0 0.75
</TABLE>
For Pioneer Fund, Inc., the sales charge is reduced to .25 of 1% on
purchases of $5,000,000 or more by accounts subject to the Employee
Retirement Income Security Act of 1974 ("ERISA Accounts"). Commissions are
reallowed to dealers on sales of $5,000,000 or more to ERISA accounts at a
rate of .20 of 1%).
In the case of a Pioneer Investing Account, a charge of $1 will be made
for each monthly commission check. No commission check will be issued for
less than $1.
For purposes of the above, the term "single transaction" shall also be
applied to all purchases of shares of the Funds either alone or jointly
(either directly or through Pioneer Investment Plans for the Accumulation of
shares of Pioneer Fund, Inc.) made by you or the investor to cover orders
from any one investor within any one period of thirteen months if his
purchases plus any credit under the "right of accumulation" within that
period aggregate $10,000 or more, provided that the investor has on file with
you and the Principal Underwriter a "Letter of Intention" stating that he
intends within thirteen months to make purchases which when added to any
credit under the "right of accumulation" total at least $10,000, and further
provided that the shares so purchased are still owned by the investor at the
end of the thirteen month period.
The foregoing scale of quantity discounts shall also apply to current
purchases of shares of the Funds, either alone or jointly, where the
aggregate quantity of such shares previously purchased or acquired (either
directly or through Pioneer Investment Plans for the Accumulation of shares
of Pioneer Fund, Inc.) and then owned by any one investor, determined a
current offering price, plus shares being purchased amounts to more than
$10,000 provided you or the investor give written notice to us each time such
a purchase is made which would so qualify.
As used in Section 2 hereof, the term "any one investor" includes (i) an
individual, (ii) an individual, his spouse and their children under the age
of twenty-one, purchasing securities for his or their own account, (iii) a
trustee or other fiduciary purchasing securities for a single trust estate,
or single fiduciary account including pension, profit sharing and other
employee benefit trusts qualified under Section 401 of the Internal Revenue
Code, although more than one beneficiary is involved, and (iv) for purposes
of investing in individual retirement accounts, the employees of a single
employer or the members of a single union.
<PAGE>
3. You represent that you are, and at the time of purchasing any
shares of the Funds will be, a member in good standing of the National
Association of Securities Dealers, Inc.
4. Orders received from you will be accepted by us only at the public
offering price applicable to each order as established by the then current
prospectus of the applicable Fund. The procedure relating to handling orders
shall be subject to instructions which we shall forward you from time to
time. All orders are subject to acceptance or rejection by us in our sole
discretion.
5. You agree to purchase shares only from us or from your customers.
If you purchase shares from us, you agree that all such purchases shall be
made only to cover orders already received by you from your customers, or for
your own bona fide investment. If you purchase shares from your customers,
you agree to pay such customers not less than the redemption price in effect
on the date of purchase, as defined in the Prospectus of the applicable Fund,
We in turn agree that we will not purchase any shares from the issuer except
for the purpose of covering purchase orders which we have already received.
6. You shall sell shares only (a) to customers at the public offering
price then in effect (b) to the issuer, or to any dealer who is a member of
the National Association of Securities Dealers, Inc. at the redemption price
in effect on the date of sale.
7. We will only accept from you unconditional orders for shares at a
definite specified price.
8. If any shares sold to you under the terms of this agreement are
repurchased by the issuer or are tendered for redemption within seven
business days after the date of our confirmation, it is agreed that you shall
forfeit your right to any discount received by you on such shares.
9. Remittance of the net amount due for shares purchased from us shall
be made payable to The First National Bank of Boston, Agent for the
Underwriter, in New York or Boston funds within seven days of our
confirmation of sale to you. Such payment should be sent, together with stock
transfer stamps required on account of the sale by you, to The First National
Bank of Boston, Mutual Funds Division, Box 1473, Boston, Massachusetts 02104,
with your transfer instructions on the appropriate copy of our confirmation
of sale to you. If such payment is not received by the Bank, we reserve the
right, without notice, forthwith to cancel the sale.
10. Promptly upon receipt of payment, shares sold to you shall be
deposited by us or by our agent, The First National Bank of Boston, in a
Pioneer Investing Account. No certificates will be issued unless specifically
requested.
11. No person is authorized to make any representations concerning
shares of the Funds except those contained in the current Prospectus for each
of the Funds and in supplements thereto. In purchasing shares from us you
shall rely solely on the representations contained in the Prospectus for each
of the Funds and supplements thereto.
12. Additional copies of the current Prospectus and supplements thereto
and other literature will be supplied by us in reasonable quantities upon
request.
13. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of shares entirely or to modify or cancel this
agreement.
14. We both hereby agree to abide by the Rules of Fair Practice of the
National Association of Securities Dealers, Inc.
15. All communications to us should be sent to the above address. Any
notice to you shall be duly given, if mailed or telegraphed to you at your
address specified above. This agreement shall be construed in accordance with
the laws of Massachusetts.
THE PIONEER GROUP, INC.
By /s/ [Illegible]
--------------------------------------
The undersigned hereby accepts the offer set forth in the above letter.
Firm United Services Planning Association Inc.
----------------------------------------------
By /s/ [Illegible]
--------------------------------------
Authorized Representative
(RETAIN ONE COPY AND RETURN THE OTHER)
<PAGE>
FUND RESEARCH AND MANAGEMENT, INC.
Principal Underwriter for 60 State Street
Pioneer Fund, Inc, Boston, Massachusetts 02109
Pioneer II, Inc. Telephone 617-742-7825
Pioneer Bond Fund, Inc.
Pioneer Investment Plans for the
Accumulation of Shares of Pioneer Fund. Inc.
DEALER'S SALES AGREEMENT
Gentlemen:
We have entered into an underwriting contract with PIONEER BOND FUND,
INC. (the "Fund") whereby we will act as Principal Underwriter, as defined in
the Investment Company Act of 1940, with the right to purchase shares of
Common Stock of the Fund for sale of such shares to investors either directly
or indirectly through other broker-dealers. As Principal, we offer to sell to
you shares of the Fund subject to the following conditions:
1. In all sales of shares to the public, you shall act as dealer for
your own account.
2. During the Initial Offering Period (defined below), you shall
receive a discount amounting to a percentage of the applicable public
offering price which varies with the size and nature of each such purchase as
follows:
<TABLE>
<CAPTION>
TOTAL AMOUNT OF DEALER DISCOUNT CONTRIBUTION
SIMULTANEOUS PURCHASE OR SALES ON SINGLE TO THE
HOLDING, AFTER PURCHASE CHARGE TRANSACTIONS INCENTIVE FUND
------------------------ ------ --------------- --------------
<S> <C> <C> <C>
Less than $10,000 . . . . . . . . . 7.0% 6.2% .8%
$ 10,000 or more but Less than
$25,000. . . . . . . . . . . . . . 6.25 5.5 .75
$ 25,000 or more but Less than
$50,000. . . . . . . . . . . . . . 5.0 4.4 .6
$ 50,000 or more but Less than
$100,000 . . . . . . . . . . . . . 4.0 3.5 .5
$100,000 or more but Less than
$250,000 . . . . . . . . . . . . . 3.0 2.6 .4
$250,000 or more but Less than
$400,000 . . . . . . . . . . . . . 2.25 1.9 .35
$400,000 or more but Less than
$600,000 . . . . . . . . . . . . . 1.75 1.5 .25
$600,000 or more. . . . . . . . . . 0.75 0.6 .15
</TABLE>
If, during the Initial Offering Period, you sell to the public shares
with an aggregate current offering price in excess of $200,000, then you and
other dealers selling in excess of $200,000 shall share, on a pro rata basis
reflecting relative sales, in a fund comprised of the aggregate sales charges
on all sales of shares of the Fund during the Initial Offering Period less
the aggregate dealer discounts on such sales (the "Incentive Fund").
The Initial Offering Period shall refer to the period commencing on the
date on which the prospectus of the Fund becomes effective and ending sixty
(60) days thereafter, unless such period is extended by written notice to you
from the Principal Underwriter.
3. On purchases of shares after the Initial Offering Period, you shall
receive a discount amounting to a percentage of the applicable public
offering price which varies with the size and nature of each such purchase as
follows:
<PAGE>
<TABLE>
<CAPTION>
TOTAL AMOUNT OF DEALER DISCOUNT
SIMULTANEOUS PURCHASE OR SALES ON SINGLE
HOLDING AFTER PURCHASE CHARGE TRANSACTIONS
------------------------ ------ ---------------
<S> <C> <C>
Less than $10,000 . . . . . . . . . . . . . . 8.5 % 7.0 %
$10,000 or more but Less than $25,000 . . . . 7.75 6.25
$25,000 or more but Less than $50,000 . . . . 6.0 5.0
$50,000 or more but Less than $100,000. . . . 4.5 4.0
$100,000 or more but Less than $250,000 . . . 3,5 3.0
$250,000 or more but Less than $400,000 . . . 2.5 2.25
$400,000 or more but Less than $600,000 . . . 2.0 1.75
$600,000 or more. . . . . . . . . . . . . . . 1.0 0.75
</TABLE>
4. In the case of a Pioneer Investing Account, a charge of $1 will be
made for each monthly commission check. No commission check will be issued
for less than $1.
For purposes of the above, the term "single transaction" shall also be
applied to all purchases of shares of the Fund, Pioneer II, Inc. and Pioneer
Fund, Inc. (collectively, the "Funds") either alone or jointly (either
directly or through Pioneer Investment Plans for the Accumulation of shares
of Pioneer Fund, Inc.) made by you or the investor to cover orders from any
one investor within any one period of thirteen months commencing after the
Initial Offering Period if his purchases, plus any credit under the "right of
accumulation" within that period, aggregate $10,000 or more, provided that
the investor has on file with you and the Principal Underwriter a "Letter of
Intention" stating that he intends, within thirteen months. to make purchases
which, when added to any credit under the "right of accumulation," total at
least $10,000, and further provided that the shares so purchased are still
owned by the investor at the end of the thirteen-month period.
The foregoing scales of quantity discounts shall also apply to current
purchases of shares of the Funds, either alone or jointly, where the
aggregate quantity of such shares previously purchased or acquired (either
directly or through Pioneer Investment Plans for the Accumulation of shares
of Pioneer Fund, Inc,) and then owned by any one investor, determined at
current offering price, plus shares being purchased amounts to more than
$10,000 provided you or the investor give written notice to us each time such
a purchase is made which would so qualify.
As used herein, the term "any one investor" includes (i) an individual,
(ii) an individual, his spouse and theft children under the age of twenty-one
purchasing securities for his or their own account, (iii) a trustee or other
fiduciary purchasing securities for a single trust estate or single fiduciary
account, including pension, profit sharing and other employee benefit trusts
qualified under Section 401 of the Internal Revenue Code, although more than
one beneficiary is involved and (iv) for purposes of investing in individual
retirement accounts, the employees of a single employer or the numbers of a
single union.
5. You represent that you are and at the time of purchasing any shares
of the Funds will be a member in good standing of the National Association of
Securities Dealers, Inc.
6. Orders received from you will be accepted by us only at the public
offering price applicable to each order as established by the then current
prospectus of the Fund. The procedure relating to handling orders shall be
subject to instructions 'which we shall forward you from time to time. All
orders are subject to acceptance or rejection by us in our sole discretion.
7. You agree to purchase shares only from us or from your customers.
If you purchase shares from us, you agree that all such purchases shall be
made only to cover orders already received by you from your customers or for
your own bona fide investment. If you purchase shares from your customers,
you agree to pay such customers not less than the redemption price in effect
on the date of purchase, as defined in the Prospectus of the Fund. We, in
turn, agree that we will not purchase any shares from the issuer except for
the purpose of covering purchase orders which we have already received.
8. You shall sell shares only (a) to customers at the public offering
price then in effect or (b) to the issuer or to any dealer who is a member of
the National Association of Securities Dealers, Inc. at the redemption price
in effect on the date of sale.
<PAGE>
9. We will only accept from you unconditional orders for shares at a
definite specified price.
10. If any shares sold to you under the terms of this agreement are
repurchased by the issuer or are tendered for redemption within seven
business days after the date of our confirmation, it is agreed that you shall
forfeit your right to any discount received by you on such shares.
11. Remittance of the net amount due for shares purchased from us shall
be made payable to The First National Bank of Boston, Agent for the
Underwriter, in New York or Boston funds within seven days of our
confirmation of sale to you. Such payment should be sent, together with stock
transfer stamps required on account of the sale by you, to The First National
Bank of Boston, Mutual Funds Department, Box 1473, Boston, Massachusetts
02104, with your transfer instructions on the appropriate copy of our
confirmation of sale to you. If such payment is not received by the Bank, we
reserve the right, without notice, forthwith to cancel the sale.
12. Promptly upon receipt of payment, shares sold to you shall be
deposited by us or by our agent, The First National Bank of Boston, in a
Pioneer Investing Account. No certificates will be issued unless specifically
requested.
13. No person is authorized to make any representations concerning
shares of the Fund except those contained in the current Prospectus for the
Fund and in supplements thereto. In purchasing shares from us you shall rely
solely on the representations contained in the Prospectus for the Fund and
supplements thereto.
14. Additional copies of the current Prospectus and supplements thereto
and other literature will be supplied by us in reasonable quantities upon
request.
15. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of shares entirely or to modify or cancel this
agreement.
16. We both hereby agree Lo abide by the Rules of Fair Practice of the
National Association of Securities Dealers, Inc.
17. All communications to us should be sent to the above address. Any
notice to you shall be duly given if mailed or telegraphed to you at your
address specified above. This agreement shall be construed in accordance with
the laws of Massachusetts.
18. It is understood that this Agreement shall not become effective
until a registration statement with respect to shares of the Fund becomes
effective and that the contents of this Agreement may be changed by the
undersigned to reflect any comments of the Securities and Exchange Commission.
Very truly yours,
FUND RESEARCH AND MANAGEMENT, INC.
The undersigned hereby accepts the offer set forth in the above letter.
Firm United Services Planning Association, Inc.
-----------------------------------------------
Date September 1, 1978 By /s/ [Illegible]
---------------------------------------------
Authorized Representative Asst. Sec & Treas.
(RETAIN ONE COPY AND SIGN, DATE AND RETURN THE OTHER)
<PAGE>
FUND RESEARCH AND MANAGEMENT, INC.
60 State Street
Boston, Massachusetts 02109
August 28, 1978
PIONEER BOND FUND, INC.
COMMON STOCK
($1.00 par value)
TO SECURITIES DEALERS:
A copy of the Preliminary Prospectus dated August 24, 1978, relating to
the above issue, is enclosed herewith. A Registration Statement covering
these securities has been filed under the Securities Act of 1933 and they may
not be sold nor may offers to buy them be accepted before the Registration
Statement becomes effective. We call your attention to Rule 15c2-8 under the
Securities Exchange Act of 1934 relating to the obligation of underwriters
and dealers (i) to comply with written requests for Preliminary and final
Prospectuses and (ii) to furnish their associated persons with copies of
Preliminary and final Prospectuses prior to solicitation by such persons of
customers' orders. This Preliminary Prospectus, which is subject to change,
is being sent to a number of securities dealers and is merely for their
information in the event we are in a position to make an offering to dealers.
Also enclosed are two copies of a Dealer's Sales Agreement (the
"Agreement") relating to sales of shares of Pioneer Bond Fund, Inc. on and
after the effective date of the Registration Statement. If you wish to sell
such shares pursuant to the Agreement, please sign one copy on the line
provided at the end of the Agreement and return it to Fund Research and
Management, Inc., 60 State Street, Boston, Massachusetts, Attention: James
Spencer, Executive Vice President.
Very truly yours,
FUND RESEARCH AND MANAGEMENT, INC.
enclosures
<PAGE>
SINGLE PAYMENT PLANS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE AMOUNT CREATION AND SALES CHARGE DEALER CONCESSION
- ----------- ------------------------- -----------------
<S> <C> <C>
Up to $12,400 8.5% 7.0%
$12,500 to $24,900 7.5% 6.0%
$25,000 to $49,900 6.0% 5.0%
$50,000 to $99,900 4.5% 4.0%
$100,000 to $199,900 3.5% 3.0%
$200,000 to $399,900 2.5% 2.0%
$400,000 to $599,900 2.0% 1.5%
$600,000 and over 1.0% .75%
</TABLE>
<PAGE>
PIONEER INVESTMENT PLANS
DEALER'S AGREEMENT
June 27, 1974
United Services Planning Association, Inc.
Gentlemen:
Pursuant to a Distribution Agreement between us and Pioneer Plans
Corporation, we have been designated as distributor (hereinafter referred to
as the "Distributor") of the following Plans sponsored by Pioneer Plans
Corporation:
SINGLE PAYMENT PLANS
INSURED SYSTEMATIC INVESTMENT PLANS
which Plans (hereinafter referred to as the "Plans" provide for the
accumulation of shares of Pioneer Fund, Inc, (hereinafter referred to as the
"Fund"). As Distributor of the Plans we invite you to join a selling group to
distribute the Plans upon the following terms and conditions.
1. You will devote your best efforts to the promotion and solicitation
of the Plans. All applications for the Plans shall be made on application
forms supplied by us and all initial payments collected shall be remitted in
full without deduction of any discount representing your commission on the
sale of the Plans, as principal (hereinafter called "commission"), together
with such application forms, signed by each applicant (as "Investor") to our
principal office. Checks or money orders for initial payments shall be drawn
to the order of "The First National Bank of Boston, Custodian." The
application forms submitted for each Plan shall be accompanied by a separate
remittance. After the initial payment has been made and the Plan has been
issued, the investor shall make future payments directly to the Custodian.
The First National Bank of Boston, Mutual Funds Dept., P. O. Box 1473,
Boston, Mass. 02104, or such other address as it may from time to time
designate. Notices relating to payments made and to subsequent payments due
will be mailed to Investors regularly.
2. We shall receive all applications forwarded by you and give them
prompt consideration, but we reserve the right in our sole and uncontrolled
discretion to reject any Plan application, or to extend to any Investor to
whom a Systematic Investment Plan has been issued the privilege of cancelling
his Plan within 30 days of its issuance, and to return any payment made in
connection therewith. We also reserve the right to refund all or part of any
payment or payments made by any Investor in the event that we, in our sole
discretion, believe that the solicitation and/or sale associated therewith
was effected in violation of any applicable State or Federal law or rules or
regulations of the National Association of Securities Dealers, Inc. In the
event of any such refund or refunds you shall not be entitled to any
commissions thereon, and if such commissions have been paid, you shall
promptly refund same to us or we may at our option charge the same against
future commissions, and to this end you hereby grant to us a lien on any such
commissions.
3. On all sales of Plans made by you which have been approved by us,
we shall pay you commissions on the terms hereinafter set forth and in
accordance with "Schedule of Dealers Commissions" which is attached here to
and made a part of this agreement. Commissions on first year payments (1
through 13 on plans of $150 per month or less and payments 1 through 12 on
plans over $150 per month) may be paid, insofar as practicable, monthly as
the creation and sales charges applicable thereto are received by the
Custodian. (To provide for plans surrendered for refund of Creation and Sales
Charges pursuant to Section 27(d) of the Investment Company Act of 1940
("18-month refund option") 30% OF THE FIRST YEAR COMMISSIONS WILL BE HELD IN
A RESERVE ACCOUNT UNTIL THE 19TH MONTH AFTER COMMENCEMENT OF A PLAN. THE
WITHHELD RESERVE WILL BE PAID TO THE DEALER WHEN THE REFUND RIGHT UNDER
SECTION 27(d) IS NO LONGER APPLICABLE. The refund of any excess sales charge
under Section 27(d) will be charged against the reserve account for the
surrendered plan. Any refund in excess of the reserve will be charged against
commissions due to the dealer. No commissions will be payable on plans
refunded pursuant to Section 27(f) of the Investment Company Act of 1940 (45
day refund option). You shall be liable to refund any commissions paid by us
to you pursuant to Section 27(f)). Servicing fees payable from the 14th to
120th payments in the case of a 10-year Plan and from 14th to 180th payments
in the case of a 15-year Plan for (for Plans with monthly payments of $210 or
more, servicing fees become payable with the 13th payment) will be accrued as
payments are received and paid MONTHLY, subject, however, to the provisions
of paragraph 9 hereof. Nothing herein shall be construed so as to constitute
such servicing fees as earned commissions; rather such fees are designated
solely as continuing compensation for servicing the account of the Investor
under the terms of this agreement. If an Investor fails to pay any payment on
a Systematic Investment Plan for 12 consecutive months, the Plan account
shall revert back to us for collection, and in such event no further
commissions or servicing fees with respect to such account shall be due and
payable by us. Further, you shall not be entitled to any servicing fees or
commissions on payments made by an Investor during any extended investment
period on account of payments required during such period as a result of the
Investor's exercise of the Extended Investment Option granted him as a
Planholder. Your right to commissions on Plans sold during the term of this
agreement shall survive termination of the agreement only as set forth in
paragraph 9 hereof. IF THE HOLDER OF AN INSURED SYSTEMATIC INVESTMENT PLAN
DIES AND THE INSURANCE PROCEEDS ARE NOT PAID TO COVER THE UNPAID PLAN
PAYMENTS DUE ON HIS DEATH AND THE ESTATE EXERCISE ITS RIGHT UNDER THE PLAN TO
RECEIVE IN CASH THE NET ASSET VALUE OF SHARES HELD UNDER THE PLAN AND APPLIES
SUCH CASH TO THE UNPAID BALANCE OF THE PLAN, YOU WILL NOT BE ENTITLED TO
RECEIVE ANY COMMISSIONS ON THE PAYMENTS MADE BY THE APPLICATION OF SUCH CASH.
<PAGE>
but you will not be entitled to the payment of any servicing fees or any
other compensation hereunder in connection with subsequent years (i.e., after
the first year payments made by Investors with respect to Systematic
Investment Plans.
10. Additional copies of the current Plan Prospectus, any printed
information issued as supplemental to such Plan Prospectus, and the Plan
application forms will be supplied by us in reasonable quantities upon
request.
11. In all sales of the Plans to the public you shall act as a dealer
for your own account and in no transaction shall you have any authority to
act or hold yourself out as agent for us, the Fund, the Sponsor, or
Custodian, and nothing in this agreement shall constitute you a partner,
employee, or agent of ours or give you any authority to act for us. Neither
we nor the Fund shall be liable or any of your acts or obligations as a
dealer under this agreement.
12. This agreement may be terminated by us immediately upon our written
notice to you, by prepaid certified mail, of our belief that you have
violated any of the provisions of paragraph 8 hereof, and upon the giving of
such written notice this agreement will be automatically terminated. Our
failure so to terminate this agreement as a result of any such violation
shall not be construed as a waiver by us of any further, continued or other
violation. Either of the parties hereto may terminate this agreement without
assignment of a reason on at least thirty days's written notice to the other
party, such termination to be effective in the date specified in such notice.
This agreement shall automatically terminate upon its attempted assignment by
you, whether by operation of law or otherwise.
13. All communications to us shall be sent to the address below or to
such other address as we may authorize in writing. All communications and/or
notices to you shall be duly given, mailed or telegraphed to you, at the
address specified by you below, or at such other address as you may authorize
in writing.
14. This agreement shall be construed in accordance with the laws of
the State of Massachusetts and no modification hereof shall be valid unless
in writing.
15. This agreement or any monies due or to become due hereunder shall
not be assignable by you without prior written approval by us.
16. This agreement supersedes and cancels all previous agreements
between us whether oral or written.
Very truly yours,
FUND RESEARCH AND MANAGEMENT, INC.
By /s/ Sally A. Gibson
--------------------------------------
28 State Street
Boston, Massachusetts 02109
The undersigned hereby accepts your invitation to become a member of the
selling group referred to herein and agrees to abide by all the foregoing
terms and conditions.
Dated June 27, 1974 Firm United Services Planning Association, Inc.
-----------------------------------------------
By /s/ Carroll H. Payne
--------------------------------------------
(Authorized Signature)
Address Executive Suite - Rowan Building
P.O. Box 2387
Fort Worth, Texas 76101
<PAGE>
SCHEDULE OF DEALER'S COMMISSIONS
<TABLE>
<CAPTION>
PLANS FIRST YEAR PAYMENTS TEN YEAR TOTALS FIFTEEN YEAR TOTALS
- ------ ------------------- ----------------------------------- -------------------------------------
FIRST YEAR TRAIL YEARS TRAIL YEARS
------------------- ------------------------ ----------------------
MONTHLY TEN YEAR FIFTEEN FIFTEEN
PAYMENT UNIT MONTHLY TOTAL ANNUALLY TEN YEAR TOTAL TOTAL ANNUALLY YEAR TOTAL YEAR TOTAL
- ------------ -------- ----- -------- -------------- ----- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 25.00 $ 10.40(a) $ 135.20 $ 4.32 $ 38.52(b) $ 173.72 $ 6.96 $ 96.86(c) $ 232.06
30.00 12.35(a) 160.55 5.28 47.08(b) 207.63 8.40 116.90(c) 277.45
40.00 16.60(a) 215.80 6.72 59.92(b) 275.72 10.92 151.97(c) 367.77
50.00 20.75(a) 269.75 8.52 75.97(b) 345.72 14.52 202.07(c) 471.82
60.00 24.90(a) 323.70 10.20 90.95(b) 414.65 15.96 222.11(c) 545.81
75.00 31.10(a) 404.30 13.20 117.70(b) 522.00 19.80 275.55(c) 679.85
100.00 41.55(a) 540.15 16.92 150.87(b) 691.02 27.36 380.76(c) 920.91
125.00 51.95(a) 675.35 18.00 160.50(b) 835.85 33.48 465.93(c) 1,141.28
150.00 62.30(a) 809.90 26.28 234.33(b) 1,044.23 39.48 549.43(c) 1,359.33
210.00 78.45 941.40 19.20 172.80 1,114.20 40.80 571.20 1,512.60
250.00 96.15 1,153.80 22.80 205.20 1,359.00 45.00 630.00 1,783.80
300.00 103.85 1,246.20 24.00 216.00 1,462.20 60.00 840.00 2,086.20
425.00 107.70 1,292.40 36.00 324.00 1,616.40 72.00 1,008.00 2,300.40
500.00 123.10 1,477.20 66.00 594.00 2,071.20 84.00 1,176.00 2,653.20
600.00 125.00 1,500.00 108.00 972.00 2,472.00 96.00 1,344.00 2,844.00
750.00 177.00 2,124.00 84.00 756.00 2,880.00 103.00 1,512.00 3,636.00
1,000.00 200.00 2,400.00 84.00 756.00 3,156.00 120.00 1,680.00 4,080.00
5,000.00 320.00 3,840.00 60.00 540.00 4,380.00 120.00 1,680.00 5,520.00
</TABLE>
(a) Paid 13 times, because a double initial payment is required to open all
plans of $150 per month or less.
(b) In the 10th year only 11 months are paid because of double initial payment.
(c) In the 15th year only 11 months are paid because of double initial payment.
PERSISTENCY BONUS
With respect to each Plan covered by Section 5 completing 18 payments or
more and for which no notices to Planholders have been required pursuant to
Section 27(e) of the Investment Company Act of 1940, an additional $2.00 will
be paid for each $1,000 of face amount.
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC,
DIRECTORS AND OFFICERS
MAY 8, 1998
<TABLE>
<CAPTION>
SOC. SEC. NO./
DIRECTORS DATE OF BIRTH RESIDENCE ADDRESS BUSINESS ADDRESS
- --------- ------------- ----------------- ----------------
<S> <C> <C> <C>
Lamar C. Smith ###-##-#### 5111 Turtle Creek Court 4100 So. Hulen, P.O. Box 2387
06-21-47 Fort Worth TX 76116 Fort Worth TX 76113
James N. Lanier ###-##-#### 3500 Bellaire Park Court 4100 So. Hulen, P.O. Box 2387
07-02-39 Fort Worth TX 76109 Fort Worth TX 76113
Howard M. Crump ###-##-#### 3458 Bellwood Court 4100 So. Hulen, P.O. Box 2387
09-02-46 Fort Worth TX 76109 Fort Worth TX 76113
Jerry D. Gray ###-##-#### 5705 Cameron Hall Place 3525 Habersham at Northlake
06-15-48 Atlanta GA 30328 Tucker GA 30084
James J. Ellis ###-##-#### 4501 Glenwick Lane Regency Plaza, LB 72
12-01-33 Dallas TX 75205 3710 Rawlins, Suite 1010
Dallas TX 75219-4239
David P. Thoreson ###-##-#### 2016 Empire Mine Circle 11211 Gold Country Blvd., #108
12-07-31 Gold River CA 95670 Gold River CA 95670
Robert F. Watson ###-##-#### 4301 Kirkland Drive 4100 So. Hulen, P.O. Box 2387
01-09-36 Fort Worth TX 76109 Fort Worth TX 76113
Hal N. Craig ###-##-#### 4429 Dunwick Lane 4100 So. Hulen, P.O. Box 2387
03-16-37 Fort Worth TX 76109 Fort Worth TX 76113
Donaldson D. Frizzell ###-##-#### 6920 Tumbling Trail 4100 So. Hulen, P.O. Box 2387
07-07-32 Fort Worth TX 76116 Fort Worth TX 76113
Carroll H. Payne II ###-##-#### 6245 Locke Avenue 4100 So. Hulen, P.O. Box 2387
12-18-54 Fort Worth TX 76116 Fort Worth TX 76113
Naomi K. Payne ###-##-#### 11 Marion Terrace 4100 So. Hulen, P.O. Box 2387
01-27-58 Brookline MA 02146 Fort Worth TX 76113
Logan Dickinson ###-##-#### 4501 Briarhaven Road 314 Main Street, Suite 202
09-22-54 Fort Worth TX 76109 Fort Worth TX 76102
<CAPTION>
ADVISORY MEMBERS:
- ----------------
<S> <C> <C> <C>
Robert W. Blucke 21 Howland Lane
Hingham MA 02043
Arnold L. Punaro ###-##-#### 1730 Baldwin Drive 1710 Goodridge Dr., Mail Stop 1-14-1
08-10-46 McLean VA 22101 McLean VA 22102
<PAGE>
<CAPTION>
SOC. SEC. NO./
OFFICERS DATE OF BIRTH RESIDENCE ADDRESS BUSINESS ADDRESS
- --------- ------------- ----------------- ----------------
<S> <C> <C> <C>
Lamar C. Smith ###-##-#### 5111 Turtle Creek Court 4100 So. Hulen, P.O. Box 2387
Chairman and CEO 06-21-47 Fort Worth TX 76116 Fort Worth TX 76113
James N. Lanier ###-##-#### 3500 Bellaire Park Court 4100 So. Hulen, P.O. Box 2387
President and COO 07-02-39 Fort Worth TX 76109 Fort Worth TX 76113
Howard M. Crump ###-##-#### 3458 Bellwood Court 4100 So. Hulen, P.O. Box 2387
Sr Vice Pres & Dir Mktg 09-02-46 Fort Worth TX 76109 Fort Worth TX 76113
Martin R. Durbin ###-##-#### 5910 CR 805D 4100 So. Hulen, P.O. Box 2387
Treasurer & Chief Fin'l Off 12-23-60 Cleburne TX 76179 Fort Worth TX 76113
William M. Breit ###-##-#### 3833 Arundel Avenue 4100 So. Hulen, P.O. Box 2387
Vice Pres & Dir Pers & Adm 11-11-37 Fort Worth TX 76109 Fort Worth TX 76113
Paul W. Cozby ###-##-#### 1212 Clara Street 4100 So. Hulen, P.O. Box 2387
Vice President & Dir PR 02-23-55 Fort Worth TX 76110 Fort Worth TX 76113
Hal N. Craig ###-##-#### 4429 Dunwick Lane 4100 So. Hulen, P.O. Box 2387
Vice Pres & Dir Ins 03-16-37 Fort Worth TX 76109 Fort Worth TX 76113
Donaldson D. Frizzell ###-##-#### 6920 Tumbling Trail 4100 So. Hulen, P.O. Box 2387
Vice Pres & Dir Inv 07-07-32 Fort Worth TX 76116 Fort Worth TX 76113
Margaret L. Galda ###-##-#### 2741 Manorwood Trail 4100 So. Hulen, P.O. Box 2387
Vice Pres & Dir Clt Svcs 05-03-44 Fort Worth TX 76109 Fort Worth TX 76113
Philip G. Loignon ###-##-#### 6504 Riverbend Road 4100 So. Hulen, P.O. Box 2387
Vice Pres & Dir Fin Pgms 05-30-37 Fort Worth TX 76132 Fort Worth TX 76113
W. David White ###-##-#### 3717 Potomac 4100 So. Hulen, P.O. Box 2387
Vice Pres & Dir Bank Svcs 05-11-55 Fort Worth TX 76107 Fort Worth TX 76113
Robert F. Watson ###-##-#### 4301 Kirkland Drive 4100 So. Hulen, P.O. Box 2387
Secretary 01-09-36 Fort Worth TX 76109 Fort Worth TX 76113
Sandra T. Allen ###-##-#### 4601 Aspen Way 4100 So. Hulen, P.O. Box 2387
Asst. Secretary 09-08-38 Fort Worth TX 76137 Fort Worth TX 76113
</TABLE>
<PAGE>
IRA BOARD
Lamar C. Smith
Having previously served as an IRA Agent, District Agent, Regional Vice
President, Senior Vice President and Director of Marketing, Mr. Smith was
elected President and Chief Operating Officer of the company in December 1985.
He became President and Chief Executive Officer in December 1990, in which
capacities he served until January 1992 when he was named to his current
position of Chairman of the Board and Chief Executive Officer.
James N. Lanier
Mr. Lanier joined the company as an Agent in 1983 and was named a District Agent
in 1986, and an Assistant Regional Agent in 1987. In 1988, he was elected a
Director and Regional Vice President, earning the position of Senior Vice
President and Director of Marketing in 1990. He served in those positions until
January 1992 when he became President and Chief Operating Officer, in which
positions he continues to serve.
Howard M. Crump
Having been an Agent and District Agent, Mr. Crump was appointed Assistant
Regional Agent in 1983 and became Regional Agent in January 1990. Mr. Crump was
elected Director and Regional Vice President in April 1990, and in January 1992
he became Senior Vice President and Director of Marketing, in which positions he
continues to serve.
Hal N. Craig
Having previously been an Agent and Director of Programming, Mr. Craig became
the Director of Insurance Services in 1988. In 1990 Mr. Craig became the
Director of Management Information Systems and was elected Vice President
effective January 1992. He was elected a Director effective January 1, 1993. He
became Chief Information Officer in 1994. In 1997, he was named Director of
Insurance, in which capacity he now serves.
Donaldson D. Frizzell
Having previously been an Agent, Mr. Frizzell became Director of Investments in
1984 and was elected a Vice President effective January 1992. He continues to
serve in these capacities. He was elected a Director effective January 1, 1994.
<PAGE>
Jerry D. Gray
Having previously been an Agent and District Agent, Mr. Gray became an Assistant
Regional Agent in 1982, and was elected a Director and Regional Vice President
in 1986, in which capacities he served until 1988. That year he was elected a
Vice President and became the Director of Client Services. Beginning in 1990, he
was reelected a Director and Regional Vice President, in which capacities he
served through 1993. In 1994 he was reelected a Director.
David P. Thoreson
Having previously been an Agent and District Agent, Mr. Thoreson became a
Regional Agent in 1988 and was elected a Director in 1994, in which capacities
he continues to serve.
Robert F. Watson
Formerly an attorney with the Securities and Exchange Commission, Mr. Watson
joined the Fort Worth, Texas, law firm of Law, Snakard and Gambill in 1975 and
was a shareholder. In 1998, he joined USPA&IRA as the company's Secretary, Legal
Counsel and a member of its Board of Directors.
Carroll H. Payne II
Mr. Payne was elected a Director in 1983 and continues to serve in this
capacity. An established Architect, he was principally employed as such by
Albert S. Komatsu and Associates, Fort Worth, Texas from 1984 to 1988 and is
currently self-employed.
Naomi K. Payne
Ms. Payne was also elected a Director in 1983, and continues in that capacity.
She has heretofore been engaged in working with, and coordinating assistance
for, deaf and otherwise handicapped students through various agencies and
institutions dedicated to such students.
James J. Ellis, CLU
Mr. Ellis joined Mutual of New York in 1960, after graduating from the
University of Missouri. Spending most of his career in the Dallas agency, Mr.
Ellis was named Manager in 1976 and General Manager later that year. He served
as Chairman of the Products Committee, the Manager's Compensation Committee and
on the Manager's Advisory Committee for the Central Region until his retirement
in 1992. Since that time, he has managed his personal investments and his
insurance practice.
<PAGE>
Logan Dickinson
Mr. Dickinson is President and Managing Principal of Compensation Strategies
Group of Texas Inc. in Fort Worth, Texas. With bachelor's and master's degrees
from the University of Texas, Mr. Dickinsen is a Chartered Life Underwriter,
Charter Financial Consultant, Registered Health Underwriter and a CPA. He has
worked 16 years in the insurance, benefits and retirement industry.
ADVISORY MEMBERS
Robert W. Blucke
Mr. Blucke started his career with IBM after graduating from Harvard Business
School and the University of Illinois. He served as Senior Vice President of
State Street Bank for 10 years, prior to joining FMR Corp., the parent of
Fidelity Investments, where he served as a Managing Director of FMR, and
President of Fidelity Services Co., Fidelity Trust Co. and National Finance
Services. He also served as a Director of several Fidelity Subsidiaries.
Arnold L. Punaro
Mr. Punaro is Senior Vice President for Corporate Development at Science
Applications International Corporation, which he joined in 1997. From 1973 to
1997, he worked for Senator Sam Nunn in National Security matters. He currently
serves as a Major General in the Marine Corps Reserve and is Commanding General,
4th Marine Division, in New Orleans. He joined the IRA board in 1998.
<PAGE>
USPA&IRA
MISSION STATEMENT
--
We are committed to improve significantly the long term financial security and
success of deserving American families. Financial success requires careful
planning and disciplined execution over one's lifetime.
Our clients confront the present and control their futures with their USPA&IRA
Family Financial Programs. These programs are based on client realistic needs
and goals, as well as proven financial philosophies and products. We do not
offer less than the best.
We will remain independent and endure so as to serve our clients. Their success
assures our success. We operate with courage and attack obstacles to our
client's well being. We tell the truth. We believe in capitalism and will grow
to offer our service to more clients by continuing to attract, develop, and
retain high quality people.
By example we will influence our industry to consider client benefit first,
improve ethics, and increase effectiveness.
<PAGE>
[PHOTOGRAPH]
CARROLL H. PAYNE (1914-1984)
FOUNDER OF USPA&IRA
When a B-36 bomber from Carswell Air Force Base crashed in 1951, Air Force
Lieutenant Colonel Carroll Payne was deeply affected. The fact that the widows
and children of five crewmen were left with insurmountable financial problems
prompted his founding in 1958 of what would become today's USPA&IRA.
Thanks to Carroll Payne's vision, USPA&IRA has become the world's largest
and best-staffed organization providing personalized financial programming to
the men and women of the uniformed services. With this Program and USPA&IRA's
continual support, our military family clients truly have the opportunity to
achieve financial independence!
<PAGE>
THE GOAL
FINANCIAL INDEPENDENCE
- - HOW DO YOU DEFINE IT?
Owning what you want? Going where you want? Spending time how you want?
- - AT USPA&IRA, WE DEFINE IT THIS WAY:
Financial independence means having the control, freedom, and ability to
convert your dreams to reality.
- - OUR ONE GOAL:
Since 1958, United Services Planning Association, Inc. and Independent
Research Agency for Life Insurance, Inc. have been providing the
opportunity for every professional military family to achieve financial
independence. In 1997, First Command Bank opened to further aid our
military families' journey.
- - ASK YOURSELF NOW:
"Where am I on the road to my goal?" Then look at the strategy we recommend
for pursuing it.
[PHOTOGRAPH]
<PAGE>
THE PLAN
FAMILY FINANCIAL PROGRAMMING
- - IT'S A SAD FACT:
Fewer than 7 percent of Americans retire financially independent. Do they
plan to fail? No. Most simply fail to plan.
- - STRAIGHT TALK:
Through no-cost, no-obligation seminars, we clearly explain the
conservative, consistent approach we recommend aimed at placing you among
that successful 7 percent. No fast talk. No "get rich quick" schemes. Just
a group of financial professionals who speak your language and will take
the time to understand your needs.
- - THREE CARDINAL CORNERSTONES:
At a minimum, each Family Financial Program we recommend includes a
comprehensive emergency plan that coordinates government benefits and
quality life insurance; a solid savings plan; and prudently selected,
professionally managed investments.
- - SOLID, YET FLEXIBLE:
With four decades of helping people just like you, our logical,
straight-forward approach to financial programming has stood the test of
time. And with the experience we've gained, we can help you analyze your
needs and design a plan of attack specifically tailored to your goals and
capabilities.
[GRAPH]
<PAGE>
THE COMMITMENT
A LIFETIME OF SERVICE
- - FROM THE BEGINNING:
Our clients - officers and NCOs in grades E-6 and above - often start a
Program early in their careers. Regardless of financial circumstance, we
begin walking with you as you pursue your goals.
- - THROUGH EVERY TRANSITION:
As your career takes you to installations throughout the world and,
eventually, into the civilian sector, USPA&IRA stays right with you. No
matter where you are, through periodic reviews and updating of your Family
Financial Program, we'll encourage you toward your goal and help you adjust
your plan to meet your changing needs.
- - A TRADITION OF PERSONAL ATTENTION:
From the beginning, USPA&IRA has been dedicated to understanding the
needs of our clients, to knowing their dreams, and to being a partner with
them in the pursuit of financial independence. We build relationships that
last a lifetime, defining our success by how well we help you meet your
goals. It is this "clients for life" philosophy that sets USPA&IRA apart.
[PHOTOGRAPH]
<PAGE>
THE RESOURCES
USPA & IRA TODAY
- - WHAT IS USPA&IRA?
The numbers are impressive. USPA&IRA is an international financial
services group based in Fort Worth, Texas. Our client families have
investment accounts recommended by USPA valued at more than $11.1 billion*
and more than $30.7 billion* in life insurance in force through IRA. We
offer annuities, when appropriate, and can recommend coverage designed to
meet the needs of military families. First Command Bank offers attractive
deposit accounts and competitive debt consolidation loans.
*AS OF DECEMBER 31, 1997
- - MORE THAN NUMBERS:
Beyond the figures, over 220,000 client families know us through the
personal service and attention they receive from 675 agents who live and
work near military installations across the United States, Europe, and
Guam. As a USPA&IRA client, you'll never be without a personal agent nearby
or a dedicated client service specialist available through our 800 number.
- - DEDICATED PROFESSIONALS:
Our agents know your needs because they are clients themselves, and
virtually all joined USPA&IRA after active military service to their
country. Backing them up are more than 1,960 professionally trained field
and home office personnel.
- - INDEPENDENT STRENGTH:
We are committed to remaining independent so that we can use our financial
strength to identify cost-effective insurance products and services ideally
suited to the specific needs of our clients. Investments we recommend are
registered with the Securities and Exchange Commission, professionally
managed, conservative in philosophy, and diversified to reduce risk. The
insurance we place is with firms rated A+ or higher with at least $6
billion of coverage in force and the reserves to pay claims. Our banking
services are specifically designed with the military lifestyle in mind. You
expect the best from yourself; you'll get it from us.
[MAP]
<PAGE>
1997 TOP PRODUCERS
<TABLE>
<CAPTION>
AGENT AMOUNT
----- ------
<S> <C>
Ken Davey 305,317
Paul Smith 269,756
John Winkler 261,521
Mike Fellenz 245,683
Dwight Smith 230,283
Karen Hollis 222,100
Jon Castle 221,115
Laura Matter 220,593
Paul Carmichael 220,103
Bob Hooker 218,945
Mark Dierlam 218,899
Matt Sebenoler 215,888
Stan Obrey 207,381
Eric Wheaton 205,067
Monte Ferguson 195,618
Rick Amelon 193,856
Wayne Holdsworth 191,526
Joe Bertagnolli 190,071
Jim Agostini 189,886
Paul Soderlund 189,722
</TABLE>
1996 TOP PRODUCERS
<TABLE>
<CAPTION>
AGENT AMOUNT
----- ------
<S> <C>
John Sciancalepore 322,172
Paul Smith 286,996
Jeff Miller 276,537
Mike Fellenz 254,061
Jim Agostini 251,167
John Winkler 243,222
Dwight Smith 241,227
Ken Davey 235,921
Matt Sebenoler 232,344
Homer Worrell 231,552
Hugh Blomeke 228,953
Paul Carmichael 223,390
Barry Bridger 219,539
Ralph Kelly 207,428
Al Lucas 206,750
Wanda Bell 201,668
Wayne Holdsworth 200,906
Joe Bertagnolli 199,741
Clint Booth 193,719
Sue Hickey 187,677
</TABLE>
<PAGE>
1995 TOP PRODUCERS
<TABLE>
<CAPTION>
AGENT AMOUNT
----- ------
<S> <C>
Ken Davey 371,166
Wanda Bell 357,379
Will Morris 340,934
Mike Fellenz 292,597
Jeff Miller 277,466
Karen Hollis 271,934
John Winkler 261,993
Paul Smith 261,192
John Sciancalepore 258,919
Keith Beaty 233,235
Lindsay Blanton 226,047
Dwight Smith 225,517
Mark Dierlam 223,067
Mark Cincotta 219,709
Randy Golden 213,416
Al Lucas 205,689
Hugh Blomeke 204,911
Ralph Kelly 204,206
Frank Ordonio 195,060
</TABLE>
1994 TOP PRODUCERS
<TABLE>
<CAPTION>
AGENT AMOUNT
----- ------
<S> <C>
Jeff Miller 315,203
Ken Davey 303,081
Will Morris 299,119
Mike Fellenz 287,863
Paul Smith 273,446
Karen Johnson 254,840
Jeff Geraci 252,555
Bernie David 245,416
Jim Provo 243,105
Al Lucas 243,054
John Winkler 237,781
Gary Collins 237,440
Homer Worrell 236,414
Ed Clark 229,717
Harlan Humphrey 225,043
Dwight Smith 223,971
Mark Dierlam 221,669
Barry Bridger 221,244
Clint Booth 218,544
Bob Jeffus 216,213
</TABLE>
<PAGE>
1993 TOP PRODUCERS
<TABLE>
<CAPTION>
AGENT AMOUNT
----- ------
<S> <C>
Jeff Geraci 288,575
Mike Fellenz 254,786
John Winkler 241,658
Mark Dierlam 237,865
Mike Conway 237,792
Karen Johnson 233,749
Ron Hagler 230,754
Barry Bridger 224,572
Al Lucas 223,325
Ted Smith 221,524
Rick Rein 218,715
Will Morris 209,878
Brad Berger 208,541
Dave Washnock 207,155
Ed Clark 198,496
Steve Cardenas 196,887
John Leder 194,106
Dave Surgent 192,283
John Drake 188,967
Burt Walrath 187,806
Frank Ordonio 184,220
</TABLE>
<PAGE>
IRA OWNS THE FOLLOWING PROPERTIES:
1 4100 South Hulen at 5.5 acres with a 125,000 square foot building.
Vacant land adjacent to 4100 South Hulen
2 -Remainder of Lot 4 Block C, Overton West Addition, 0.86 acres
3 -Tracts 1B and 1B2 of the BBB&C RR Co Survey, Abstract 217,
1.63 acres.
4 -Tracts 1J and 1N of the BBB&C RR Co Survey, Abstract 217, 4.99 acres.
5 -Tracts 2B and 2M of the James Howard Survey, Abstract 693,
1.29 acres.
6 7205 Falling Spring Rd, single family residence.
<PAGE>
[Map of Plat]
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
SCHEDULE OF DISCRETIONARY OR NONRECURRING ITEMS
INCLUDED IN THE STATE OF OPERATIONS
FOR THE FIVE YEARS ENDED SEPTEMBER 30, 1997.
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1 DISTRIBUTION FORM
MUTUAL FUND INVESTMENTS 3,218,777 3,272,036 3,616,571 3,216,870 4,749,604
2 STATE INCOME TAX REFUNDS - - - - 156,548
</TABLE>
<PAGE>
STOCK AGREEMENT
This Agreement, made on this ____ day of __________________, 19___, between
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC., a Texas Corporation having
its principal place of business in Fort Worth, Texas, hereinafter referred to as
"Company" and _________________________________, hereinafter referred to as
"Stockholder" ;
WITNESSETH:
WHEREAS, Company desires to issue to Stockholder shares of the Class B
Nonvoting Common Stock ("Stock") of the Company, and Company may have previously
issued shares of Stock to Stockholder and may hereafter issue additional shares
of Stock to Stockholder, and Company desires to grant to Stockholder the right
to sell said shares to Company under certain circumstances and conditions; and,
whereas, in partial consideration thereof, Stockholder desires to agree to
limitations on the transferability of such Stock, and to grant, transfer and
assign to Company the right to purchase said shares of Stock under certain
circumstances and conditions.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto do hereby agree as follows:
1. This Agreement shall apply to all Stock of the Company presently owned
or held by Stockholder, directly or beneficially, and to any Stock of the
Company acquired by or held by Stockholder, directly or beneficially, in the
future.
2. Stockholder understands and agrees that, in accordance with Texas law
pertaining to incorporated insurance agencies, Stockholder must be duly licensed
as a Texas life insurance agent (resident or non-resident as applicable) in
order to own Stock of the Company. In the event Stockholder ceases to be so
licensed, Stockholder and the Company agree that Stockholder's Stock will be
repurchased by the Company under the same terms and conditions as hereinafter
described for repurchase in the event of Stockholder's desire to sell same,
Stockholder's death or Stockholder's ceasing to be an agent appointed by the
Company.
3. In the event Stockholder desires to sell or otherwise dispose of the
Stock currently owned or held by Stockholder or issued to Stockholder under the
terms hereof, Stockholder shall in writing notify the Company of such desire.
The Company agrees to repurchase such shares within ninety (90) days after
receipt of such notice from Stockholder for the price described in paragraph
"5", below. The price paid by Company shall be such price as of the date of
closing of such repurchase. At the closing of such repurchase, Stockholder shall
deliver to Company the certificate(s) representing such Stock duly endorsed for
transfer and the Company shall pay to Stockholder the repurchase price. The
Company will determine to pay the repurchase price in cash, by delivery of the
Company's unsecured promissory note containing such terms and provisions as
Company shall determine in the exercise of its reasonable discretion, or by a
combination of cash and such promissory note. In the event of Stockholder's
death, or Stockholder's ceasing to be a duly authorized agent of the Company
pursuant to a current written agency agreement, the Company also agrees to
repurchase such Stock and the Stockholder shall have an obligation to sell such
Stock within ninety (90) days of such event, under the same terms and conditions
described immediately above. Stockholder agrees not to transfer, pledge, assign,
or otherwise in any manner encumber any of such shares of stock except as
expressly provided herein.
4. In the event Stockholder at any time is the owner or holder, directly
or beneficially, of shares of Stock representing more than five percent (5%) of
the Company's outstanding shares of common stock, the Company shall have the
right, on thirty (30) days written notice to Stockholder, to repurchase that
number of shares of common stock of Stockholder representing the shares in
excess of such five percent (5%) limitation, taking into account all other
planned redemptions of Stock by the Company at that time, under the same terms
and conditions described in paragraph "3" above. Stockholder hereby acknowledges
and agrees that the Company can exercise such right of repurchase at any time
and that the Company intends to effect a redemption of shares prior to the
declaration or payment of a dividend on shares of common stock of the Company so
that a dividend is not paid on shares owned or held by Stockholder which are in
excess of five percent (5%) of the Company's outstanding shares of common stock.
5. The Company shall, at least annually, advise Stockholder in writing of
the price of the common stock of the Company of the same class of stock as held
by Stockholder, as determined by the Company, in the exercise of its sole and
absolute discretion, for the purpose of establishing the repurchase price of
such Stock, and it is specifically agreed that this price, as of the most recent
date provided by the Company, shall be the purchase price paid by the Company
for Stockholder's shares upon their repurchase from Stockholder or Stockholder's
estate.
6. All stock issued to Stockholder shall be legended in accordance with
Texas law as to incorporated insurance agencies and with the following
statement:
"The shares represented by this certificate are subject to the
provisions of that certain Stock Agreement executed on
_____________________ 19___, by and between Independent Research
Agency for Life Insurance, Inc. (the "Company"), and
___________________________________________, a copy of which Agreement
is on file in the Company's office."
7. This Agreement shall be binding upon the parties hereto, and all
provisions hereof shall inure to the benefit of and shall be binding upon the
heirs, executors, legal representatives, successors and assigns of the parties
hereto.
8. This Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, oral and written, between the parties
hereto with respect to the subject matter hereof. No amendment, modification, or
waiver of any provision of this Agreement shall be valid unless made in writing
and signed by both parties hereto.
EXECUTED on this _____ day of___________, 19___.
____________________________
Stockholder
INDEPENDENT RESEARCH AGENCY FOR LIFE
INSURANCE, INC.
ATTEST: By:________________________
President
______________________________
Secretary
<PAGE>
STOCK AGREEMENT
This Agreement, made on this 22nd day of March, 1983, between
INDEPENDENT RESEARCH AGENCY FOIL LIFE INSURANCE, INC., a Texas Corporation
having its principal place of business in Fort Worth, Texas, hereinafter
referred to as "Company" and Carroll H. Payne, Freda J. Payne, Debra Sue
Payne, Carroll H. Payne II, and Naomi K. Payne, hereinafter referred to as
"Payne family shareholders":
WITNESSETH:
WHEREAS, the Company has heretofore issued shares of the common stock of
the Company to Payne family shareholders and has heretofore entered into Stock
Agreements pertaining to such shares; and
WHEREAS, the Payne family shareholders desire to have certain of such
shares transferred and reissued subject to specific terms and conditions as
hereinafter stated.
NOW, THEREFORE, in consideration of the acts and promises of the parties
hereto as hereinafter described, it is agreed by and between them as follows:
1. This Agreement shall apply to all stock of the Company issued to
the parties hereto currently and in the future, and this Agreement supersedes
any prior Stock Agreement existing between the Company and any party here to.
2. "Payne family shareholders," for the purpose of this Agreement,
shall consist of Carroll H. Payne; Freda J. Payne, spouse of Carroll H. Payne;
and Carroll H. Payne's three children: Debra Sue Payne, Carroll H. Payne II, and
Naomi K. Payne.
3. Carroll H. Payne has heretofore owned a majority of the Class A
Voting common stock of the Company. Concurrent with the execution of this
Agreement, the Company shall purchase from Carroll H. Payne that portion of such
Class A Voting shares owned by him which shall result immediately after such
purchase in Carroll H. Payne owning a minority by one share of all outstanding
Class A Voting common shares of the Company. Also, concurrent with the execution
of this Agreement and after such purchase by the Company, Carroll H. Payne shall
transfer the balance owned by him of Class A Voting common shares of the Company
in equal portions to Freda J. Payne, Debra Sue Payne, Carroll H. Payne II, and
Naomi K. Payne. The following conditions shall apply to Class A Voting common
shares of the Company stock owned by these parties:
a. In the event at any time hereafter the Company issues any
additional Class A Voting common shares of the Company stock to any party or
parties which issuance results in the Payne family shareholders owning, as a
group, a minority of such Class A Voting shares by more than one share, then the
Company shall also issue to Freda J. Payne, Debra Sue Payne, Carroll H. Payne
II, and Naomi K. Payne individually equal portions (by fractional shares if
required) of that amount of such Class A Voting shares as are then required in
order for Freda J. Payne, Debra Sue Payne, Carroll H. Payne II, and Naomi K.
Payne to again own, as a group, a minority by one share of all outstanding Class
A Voting common shares of the Company stock.
b. Each of Freda J. Payne, Debra Sue Payne, Carroll H. Payne
II, and Naomi K. Payne does hereby constitute and appoint Carroll H. Payne as
his or her true and lawful attorney with full power of substitution and
revocation to represent him or her and to vote all Class A Voting shares of the
Company stock owned by him or her at any meeting of voting shareholders of the
Company. This shall be a continuing appointment by each of these parties of
Carroll H. Payne until the earliest of the following:
(1.) The Company and said Voting shareholders are advised in
writing by Carroll H. Payne of his voluntary relinquishment of said
appointments; or
(2.) The death of Carroll H. Payne, at which time said
appointments shall automatically terminate; or
(3.) It is legally determined that Carroll H. Payne is mentally
incompetent, at which time said appointments shall automatically terminate.
<PAGE>
-2-
c. In the event any of Freda J. Payne, Debra Sue Payne, Carroll
H. Payne II, or Naomi K. Payne desires to sell or otherwise dispose of all or
any portion of the Class A Voting common-shares of the Company stock issued to
them individually, the individual desiring to do so shall in writing notify the
Company and each of the other Payne family shareholders then owning Class A
Voting shares of such desire. The other Payne family shareholders receiving such
notice shall have the option for a period of sixty (60) days after receipt of
such notice, to purchase from the selling Payne family shareholder such Class A
Voting shares, for the price per share described in paragraph "6" below. If any
Payne family shareholder recipients of such notice do not choose to exercise
such option, the remaining Payne family shareholders shall be entitled to
purchase the shares available under that party's option. Each party electing to
purchase such shares shall be entitled to purchase equal amounts of such Class A
Voting shares being offered, so that immediately after such purchases, Payne
family shareholders then owning Class A Voting shares shall, as between
themselves, continue to own equal portions of same.
d. In the event that no Payne family shareholders, having been
given the option to purchase Class A Voting shares from an offering Payne family
shareholder, as described in "3.c." above, choose to purchase the offered
shares, then said offerees shall in writing notify the offering shareholder and
the Company of same. The Company shall then purchase such Class A Voting shares
from the offering shareholder, for cash, at the price per share described in
paragraph "6" below. In the event of such purchase of Class A Voting shares by
the Company from a Payne family shareholder, the Company shall have no
obligation to issue any additional voting shares to remaining Payne family
shareholders, notwithstanding the provisions of paragraph "3.a." above.
e. In the event of the death of Freda J. Payne, Debra Sue
Payne, Carroll H. Payne II, or Naomi K. Payne, while owning Class A Voting
shares of the Company stock, the deceased's estate shall be obligated to offer
such shares first to other Payne family shareholders in equal amounts and, if
not purchased by same, then to the Company, as described in "3.c." and "3.d."
immediately above, as if the offering shareholder were still living and desired
to make such offer, and the estate of each Payne family shareholder is
specifically bound to do so by this Agreement.
4. Carroll H. Payne, Freda J. Payne, Debra Sue Payne, Carroll H.
Payne II, and Naomi K. Payne own, or have a community property interest in,
Class B Nonvoting common shares of the Company stock. The following conditions
shall apply to such Class B Nonvoting common shares:
a. Company recognizes and agrees that said Payne family
shareholders may hereafter offer for sale to third parties all or a portion of
its interests in Class B Nonvoting common stock of the Company and the parties
hereto agree that such offers shall be subject to the following limitations:
(1.) Any third party to whom such Class B Nonvoting stock is
offered must be a duly contracted agent of the Company, and must be properly
licensed to sell insurance, including possessing a Texas insurance agent's
license, resident or nonresident as applicable.
(2.) Payne family shareholders will not transfer Class B
Nonvoting stock to a third party unless the third party shall, prior there to,
execute a Stock Agreement with the Company in the form shown in "Exhibit A"
attached here to, which Stock Agreement limits the ownership and transferability
of such stock and provides for the repurchase of the stock by the Company under
certain prescribed circumstances.
(3.) Payne family shareholders shall not offer Class B Nonvoting
stock to any third party whose acceptance of such offer would result in said
third party and members of his immediate family owning, in the aggregate, stock
in the Company in excess of five percent (5%) of all outstanding shares of stock
of the Company upon such acceptance.
(4.) No Class 13 Nonvoting stock of the Company owned by Payne
family shareholders shall be offered to any third party subsequent to the death
of Carroll H. Payne unless otherwise mutually agreed upon in writing by the
Company and Stockholder. In the absence of any such agreement, such stock shall
be purchased by the Company under the terms of paragraph "4.b." of this
Agreement, immediately below.
<PAGE>
-3-
b. In the event any Payne family shareholder, during his or her
lifetime, desires to sell Class B Nonvoting shares other than to third parties,
as described in "4.a." above, such Payne family shareholder shall in writing
notify the company of such desire. The company shall have an option for 120 days
after receipt of such notice to repurchase such Class B Nonvoting shares from
the party desiring to sell same, at the price per share described in paragraph
"6" below, and on the terms described in paragraph "7" below, as if such shares
were being purchased upon the death of the party desiring to sell same.
c. Upon the death of Carroll H. Payne:
(1.) All Class B Nonvoting common shares of the Company stock
then owned by Carroll H. Payne shall be subject to a 120-day first option to
purchase by the Company at the price per share described in paragraph "6" below,
and on the terms described in paragraph "7" below; provided, however, that in
the event Freda J. Payne is specifically given the right in Carroll H. Payne's
last will to inherit a portion of Carroll H. Payne's separate property interest
in such Class B Nonvoting stock, then Freda J. Payne shall be given the option,
at the death of Carroll H. Payne, of inheriting and retaining Company Class B
Nonvoting stock in her own name not to exceed five percent (5%) of all of the
outstanding Class B Nonvoting shares of the Company stock. In the event Freda J.
Payne wishes to own such interest of 5% or less and is eligible under the terms
of Carroll H. Payne's last will to do so, Freda J. Payne shall so advise the
Company and the Executor of Carroll H. Payne's estate, and the Company shall
then only purchase from Carroll H. Payne's estate such Class B Nonvoting stock
which, taking into consideration all other purchases of such stock from Payne
family shareholders at the death of Carroll H. Payne (as described immediately
below), will result in Freda J. Payne owning 5% or less of all of the
outstanding Class B Nonvoting shares of the Company stock when all of such
purchases have taken place.
(2.) All Class B Nonvoting common stock then owned by Debra Sue
Payne, Carroll H. Payne II, and Naomi K. Payne shall be subject to a 120-day
option to purchase by the Company at the price per share described in paragraph
"6" below and on the terms described in paragraph "7" below; provided, however,
that in the event any of Debra Sue Payne, Carroll H. Payne II, or Naomi K. Payne
desire to do so, each may retain up to 5% of the outstanding Class B Nonvoting
shares of the Company. In the event any of such parties wishes to retain this
interest of 5% or less, he or she shall so advise the Company and the Company
shall then only have the option to purchase from such party that number of Class
B Nonvoting shares which, taking into consideration all purchases of such stock
from the estate of Carroll H. Payne and Payne family shareholders at Carroll H.
Payne's death, will result in such party continuing to own said 5% or less of
all outstanding Class B Nonvoting shares of the Company stock when all such
purchases by the Company have taken place.
d. Upon the death of any of Freda J. Payne, Debra Sue Payne,
Carroll H. Payne II, or Naomi K. Payne, after the death of Carroll H. Payne, the
Executor of the estate of the deceased shall notify in writing the Company and
each of the other surviving Payne family shareholders. The surviving Payne
family shareholders receiving such notice shall have the option for a period of
sixty (60) days after receipt of such notice, to purchase from the estate of the
deceased, in equal shares if more than one party desires to exercise such
option, all of the Class B Nonvoting shares owned by the deceased; provided,
such purchase will not result in any surviving Payne family purchaser owning,
immediately after such purchase, more than 5% of the then outstanding Class B
Nonvoting shares of the Company. If such would be the result, then the purchaser
may purchase that number of shares from the deceased's estate up to an amount
which, when combined with Class B Nonvoting shares already owned by purchaser,
does not exceed such 5% of all outstanding Class B Nonvoting shares. To the
extent this option to purchase Class B Nonvoting shares from the estate of a
deceased Payne family shareholder is not exercised by surviving Payne family
shareholders, then the Company, at the expiration of the sixty (60) days
provided to surviving Payne family members for such exercise, shall have an
additional sixty (60) days option to purchase all, or the remaining, Class B
Nonvoting shares in the estate of the deceased. The price per share for any
sales/purchases made under the terms of this subparagraph shall be the price
described in paragraph "6" below, and on the terms described in paragraph "7,"
below.
<PAGE>
-4-
5. All parties here to understand and agree that, in accordance with
Texas law pertaining to incorporated insurance agencies, a Company stockholder
must be licensed as a Texas life insurance agent. In the event any Payne family
shareholder ceases to be so licensed, said party shall be obligated to dispose
of all shares of Company stock, Voting and Nonvoting, owned by him or her, under
the same terms and conditions described herein as if said party's death had
occurred.
6. The Company shall, at least annually, advise the parties hereto
in writing of the price per share which the Company will pay to any and all
shareholders for shares offered to it under its options to purchase, and it is
specifically agreed that this price, as of the most recent date provided by the
Company, shall be the price payable by the Company for any shares purchased by
it pursuant to such options.
7. Payment for Class B Nonvoting shares offered by Payne family
shareholders or their estates to other Payne family shareholders or the Company,
shall be in cash within sixty (60) days of the acceptance of such offer(s).
However, the offering party may, at its sole discretion, arrange with the
purchasing party, for an alternative method of payment.
8. All stock currently owned by Payne family shareholders or any
stock hereafter issued to them shall be legended in accordance with Texas law as
to incorporated insurance agencies and with the following statement:
"The shares represented by this certificate are subject to the provisions
of that certain Stock Agreement executed on March 22, 1983, by and
between Independent Research Agency for Life Insurance, Inc. ("Company"),
and Carroll H. Payne, Freda J. Payne, Debra Sue Payne, Carroll H. Payne II,
and Naomi K. Payne, a copy of which Agreement is on file in the Company's
office."
9. This Agreement shall be binding upon the parties hereto, and all
provisions thereof shall inure to the benefit of and shall be binding upon the
heirs, executors, legal representatives, successors, and assigns of the parties
hereto.
10. No amendment, modification, nor waiver of any provision of this
Agreement shall be valid unless made in writing and signed by all parties
hereto.
EXECUTED on this 22nd day of March, 1983.
PAYNE FAMILY SHAREHOLDERS:
/s/ Carroll H. Payne /s/ Freda J. Payne
----------------------------- --------------------------
Carroll H. Payne Freda J. Payne
/s/ Debra Sue Payne /s/ Carroll H. Payne, II
----------------------------- --------------------------
Debra Sue Payne Carroll H. Payne, II
-----------------------------
Naomi K. Payne
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
By: /s/ Ralph F. Smith Attest: /s/ G. Norman Coder
----------------------------- ----------------------------
Ralph F. Smith, President G. Norman Coder, Secretary
<PAGE>
-5-
ACKNOWLEDGMENT OF STOCKHOLDER
STATE OF TEXAS )
COUNTY OF TARRANT )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared Carroll H. Payne, II, known to
me to be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he/she executed the same for the purposes and
consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this, the 18th day of March, 1983.
/s/ Mira E. Murray
---------------------------------------
Notary Public
(SEAL)
ACKNOWLEDGMENT OF STOCKHOLDER
STATE OF TEXAS )
COUNTY OF TARRANT )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared Debra Sue Payne, known to me to be
the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he/she executed the same for the purposes and
consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this, the 21st day of March, 1983.
/s/ Mira E. Murray
---------------------------------------
Notary Public
(SEAL)
ACKNOWLEDGMENT OF STOCKHOLDER
STATE OF TEXAS )
COUNTY OF TARRANT )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared Freda J. Payne, known to me to be
the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he/she executed the same for the purposes and
consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this, the 21st day of March, 1983.
/s/ Betty J. Epperson
---------------------------------------
Notary Public
My Commission Expires 2/13/84
(SEAL)
<PAGE>
-6-
ACKNOWLEDGMENT OF STOCKHOLDER
STATE OF TEXAS )
COUNTY OF TARRANT )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared Carroll H. Payne, known to me to be
the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he/she executed the same for the purposes and
consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this, the 21st day of March, 1983.
/s/ Betty J. Epperson
---------------------------------
Notary Public
My Commission Expires 2/13/84
(SEAL)
ACKNOWLEDGMENT OF STOCKHOLDER
STATE OF _____________ )
COUNTY OF _____________ )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared ______________________, known to me to
be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he/she executed the same for the purposes and
consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this, the _______ day of
___________, 19 ___.
---------------------------------------
Notary Public
(SEAL)
ACKNOWLEDGMENT OF STOCKHOLDER
STATE OF TEXAS )
COUNTY OF TARRANT )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared Ralph F. Smith, known to me to be the
person whose name is subscribed to the foregoing instrument, and acknowledged
to me that he/she executed the same for the purposes and consideration
therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this, the 22nd day of March, 1983.
/s/ Louise O. Schomirus
--------------------------------
Notary Public
(SEAL)
<PAGE>
-4-
5. All parties here to understand and agree that, in accordance with
Texas law pertaining to incorporated insurance agencies, a Company stockholder
must he licensed as a Texas life insurance agent. In the event any Payne family
shareholder ceases to be so licensed, said party shall be obligated to dispose
of all shares of Company stock, Voting and Nonvoting, owned by him or her, under
the same terms and conditions described herein as if said party's death had
occurred.
6. The Company shall, at least annually, advise the parties hereto
in writing of the price per share which the Company will pay to any and all
shareholders for shares offered to it under its options to purchase, and it is
specifically agreed that this price, as of the most recent date provided by the
Company, shall be the price payable by the Company for any shares purchased by
it pursuant to such options.
7. Payment for Class B Nonvoting shares offered by Payne family
shareholders or their estates to other Payne family shareholders or the Company,
shall be in cash within sixty (60) days of the acceptance of such offer(s).
However, the offering party may, at its sole discretion, arrange with the
purchasing party, for an alternative method of payment.
8. All stock currently owned by Payne family shareholders or any
Stock hereafter issued to them shall be legended in accordance with Texas law as
to incorporated insurance agencies and with the following statement:
"The shares represented by this certificate are subject to the provisions
of that certain Stock Agreement executed on March 22, 1983, by and
between Independent Research Agency for Life Insurance, Inc. ("Company"),
and Carroll H. Payne, Freda J. Payne, Debra Sue Payne, Carroll H. Payne II,
and Naomi K. Payne, a copy of which Agreement is on file in the Company's
office."
9. This Agreement shall be binding upon the parties hereto, and all
provisions thereof shall inure to the benefit of and shall be binding upon the
heirs, executors, legal representatives, successors, and assigns of the parties
hereto.
10. No amendment, modification, nor waiver of any provision of this
Amendment shall be valid unless made in writing and signed by all parties here
to.
EXECUTED on this 22nd day of March, 1983.
PAYNE FAMILY SHAREHOLDERS:
---------------------------- ---------------------------
Carroll H. Payne Freda J. Payne
---------------------------- ---------------------------
Debra Sue Payne Carroll H. Payne, II
/s/ Naomi K. Payne
----------------------------
Naomi K. Payne
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE INC.:
By: /s/ Ralph F. Smith Attest: /s/ G. Norman Coder
--------------------------- ----------------------------
Ralph F. Smith, President G. Norman Coder, Secretary
<PAGE>
-5-
ACKNOWLEDGMENT OF STOCKHOLDER
STATE OF MASSACHUSETTS )
COUNTY OF SUFFOLK )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared Naomi K. Payne, known to me to be the
person whose name is subscribed to the foregoing instrument, and acknowledged
to me that he/she executed the same far the purposes and consideration
therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this, the 11th day of April, 1983.
/s/ ILLEGIBLE
--------------------------------------
Notary Public
ACKNOWLEDGMENT OF STOCKHOLDER
STATE OF ______________ )
COUNTY OF _____________ )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared __________________________________, known
to me to be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he/she executed the same far the purposes and
consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this, the ____ day of _____________,
19___.
-------------------------------------
Notary Public
ACKNOWLEDGMENT OF STOCKHOLDER
STATE OF ______________ )
COUNTY OF _____________ )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared __________________________________, known
to me to be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he/she executed the same far the purposes and
consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this, the ____ day of _____________,
19___.
-------------------------------------
Notary Public
<PAGE>
-6-
ACKNOWLEDGMENT OF STOCKHOLDER
STATE OF ______________ )
COUNTY OF _____________ )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared __________________________________, known
to me to be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he/she executed the same far the purposes and
consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this, the ____ day of _____________,
19___.
-------------------------------------
Notary Public
ACKNOWLEDGMENT OF STOCKHOLDER
STATE OF ______________ )
COUNTY OF _____________ )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared __________________________________, known
to me to be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he/she executed the same far the purposes and
consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this, the ____ day of _____________,
19___.
-------------------------------------
Notary Public
ACKNOWLEDGMENT OF COMPANY PRESIDENT
STATE OF TEXAS )
COUNTY OF TARRANT )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared Ralph F. Smith, known to me to be
the person or officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said INDEPENDENT RESEARCH
AGENCY FOR LIFE INSURANCE, INC., a corporation, and that he executed the same as
the act of such corporation for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this, the 22nd day of March,
1983.
/s/ Louise O. Schomirus
-------------------------------------
Notary Public
<PAGE>
STOCK AGREEMENT
This Agreement, made on this 5th day of December, 1997, between
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC., a Texas Corporation having
its principal place of business in Fort Worth, Texas, hereinafter referred to as
"Company" and Margaret L. Galda, hereinafter referred to as "Stockholder";
WITNESSETH:
WHEREAS, Company desires to sell to Stockholder one share of the Class A
Voting Common Stock of the Company and, in consideration thereof, Stockholder
hereby desires to agree to limitations on the transferability of such stock and
to grant, transfer and assign to Company the right to purchase said shares under
certain circumstances and conditions.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto do mutually agree as follows:
1. This Agreement shall apply to the Class A Voting share of stock of the
Company issued to Stockholder, hereafter referred to as "the Class A Voting
stock."
2. The Company reserves the right to repurchase the Class A Voting stock
which is the subject hereof at any time upon written notice to Stockholder.
Additionally, the Company will repurchase the Class A Voting stock in the event
any of the following occur:
a. The Stockholder ceases to be licensed as a Texas life insurance
agent.
b. The Stockholder ceases, for any reason, to be an agent appointed
by the Company.
c. The Stockholder advises the Company in writing that the
stockholder desires to sell the Class A Voting stock back to the
Company.
3. If the Class A Voting stock has not been repurchased from Stockholder
by the Company as a result of the occurrence of any of the events described in
paragraph "2," above, by December 31, 2000, then the Company will repurchase the
Class A Voting stock on that date.
4. The consideration which Stockholder has paid the Company for the share
of Class A Voting stock which is the subject of this Agreement is five (5) times
the price which the Company is currently paying for the Company's Class B
Nonvoting stock. The Company will, at least annually, publish, or advise the
Stockholder of, the price or prices which the Company will pay for both the
Class A Voting and Class B Nonvoting stock of the Company. It is recognized and
specifically agreed that such price or prices shall be determined by the Company
in its sole and absolute discretion.
5. All stock issued to Stockholder shall be legended in accordance with
Texas law as to incorporated insurance agencies and with the following
statement.
"The shares represented by this certificate are subject to the
provisions of that certain Stock Agreement executed on
December 5, 1997, by and between Independent Research Agency for
Life Insurance, Inc. ("Company"), and Margaret L. Galda, a copy of
which Agreement is on file in the Company's office."
6. Stockholder agrees not to transfer, pledge, assign or otherwise in any
manner encumber the Class A Voting stock. This Agreement shall be binding upon
the parties hereto, and all provisions hereof shall inure to the benefit of and
shall be binding upon the heirs, executors, legal representatives, successors
and assigns of the parties hereto.
7. No amendment, modification, nor waiver of any provision of this
Agreement shall be valid unless made in writing and signed by both parties
hereto.
EXECUTED on this 5th day of December, 1997
/s/ Margaret L. Galda
----------------------------------------
Stockholder
INDEPENDENT RESEARCH AGENCY FOR LIFE
INSURANCE, INC.
ATTEST: By: /s/ James N. Lanier
-----------------------------------
President
/s/ ILLEGIBLE
- -------------------------------
Secretary
<PAGE>
RATIFICATION
For good and valuable considerations, the receipt of which is hereby
acknowledged the undersigned, spouse of Margaret L. Galda does hereby join in
the execution of this Agreement and does hereby ratify and acknowledge that this
agreement is entirely fair, just, and equitable and to his best interests and
that he desires to bind his community interest, if any, in the performance of
this Agreement.
EXECUTED on this 5 day of December, 1997.
/s/ Dwight W. Galda
---------------------------------------
Spouse
ACKNOWLEDGEMENT OF COMPANY PRESIDENT
STATE OF TEXAS )
COUNTY OF TARRANT )
BEFORE ME, the undersigned, a Notary Public in and for said County and State, on
this day personally appeared James N. Lanier known to be the person or officer
whose name is subscribed to the foregoing instrument and acknowledges to me that
the same was the act of the said INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE,
INC., a corporation, and that he executed the same as the act of such
corporation for the purposes and considerations therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the ___ day of December, 1997.
---------------------------------------
Notary Public
ACKNOWLEDGEMENT OF STOCKHOLDER
STATE OF TEXAS )
COUNTY OF TARRANT )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared Margaret L. Galda known to be the person
whose name is subscribed to the foregoing instrument and acknowledged to me that
she executed the same for the purposes and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 5th day of December,
1997.
/s/ Mira E. Murray
---------------------------------------
Notary Public
ACKNOWLEDGEMENT OF STOCKHOLDER'S SPOUSE
STATE OF TEXAS )
COUNTY OF TARRANT )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared Dwight W. Galda known to be the person
whose name is subscribed to the foregoing instrument and acknowledged to me that
he executed the same for the purposes and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 5th day of December, 1997.
/s/ Mira E. Murray
---------------------------------------
Notary Public
<PAGE>
THE STATE OF TEXAS
SECRETARY OF STATE
CERTIFICATE OF INCORPORATION
OF
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
----------------------------------------------------
CHARTER NO. 542129
The undersigned, as Secretary of State of the State of Texas, hereby
certifies that Articles of Incorporation for the above corporation duly
signed and verified pursuant to the provisions of the Texas Business
Corporation Act, have been received in this office and are found to conform
to law.
ACCORDINGLY the undersigned, as such Secretary of State, and by virtue
of the authority vested in him by law, hereby issues this Certificate of
Incorporation and attaches hereto a copy of the Articles of Incorporation.
Dated DEC. 9 1980.
---------------------------
/s/ GW Strake, Jr.
--------------------------------------
Secretary of State
[SEAL]
dae
<PAGE>
THE STATE OF TEXAS
SECRETARY OF STATE
THE UNDERSIGNED, AS SECRETARY OF STATE OF THE STATE OF TEXAS, HEREBY
CERTIFIES THAT THE ATTACHED IS A TRUE AND CORRECT COPY OF THE FOLLOWING
DESCRIBED INSTRUMENTS ON FILE IN THIS OFFICE:
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
Articles of incorporation December 9, 1980
Articles of Amendment January 25, 1982
Change of Registered Office or Registered Agent April 11, 1985
Change of Registered Office or Registered Agent March 13, 1986
Articles of Amendment November 1, 1988
Articles of Amendment May 23, 1989
Change of Registered Office or Registered Agent March 19, 1992
IN TESTIMONY WHEREOF, I HAVE HEREUNTO SIGNED MY NAME
OFFICIALLY AND CAUSED TO BE IMPRESSED HEREON THE SEAL
OF STATE AT MY OFFICE IN THE CITY OF AUSTIN, THIS
11th DAY OF January , A.D. 1993 dem
[SEAL] /s/ John Hannah Jr.
---------------------------
SECRETARY OF STATE
<PAGE>
ARTICLES OF INCORPORATION
OF
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
I, the undersigned, a natural person of the age of twenty-one (21) years
or more, and a citizen of the State of Texas, acting as Incorporator of a
corporation under the Texas Business Corporation Act, do hereby adopt the
following Articles of Incorporation for such corporation:
ARTICLE ONE
The name of the corporation is INDEPENDENT RESEARCH AGENCY FOR LIFE
INSURANCE, INC.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The purpose or purposes for which the corporation is organized are: the
transaction of any and all lawful business for which corporations may be
incorporated under the Texas Business Corporation Act.
ARTICLE FOUR
The corporation is authorized to issue two classes of shares to be
designated respectively "Class A Voting Common" and "Class B Nonvoting
Common." The total number of shares which the corporation is authorized to
issue is One Hundred Million One Thousand (100,001,000.00) shares. The
number of Class A Voting Common shares authorized is One Thousand (1,000)
shares, and the par value of each such share is Ten Cents ($.10) per share.
The number of Class B Nonvoting Common shares authorized is One Hundred
Million (100,000,000) and the par value of each such share is Ten Cents
($.10).
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of One Thousand Dollars
($1,000.00) consisting of money, labor done or property actually received.
<PAGE>
ARTICLE FIVE
The right to cumulative voting is hereby denied.
ARTICLE SIX
The shareholders of this corporation shall not be allowed pre-emptive
rights in the purchase of newly issued shares of stock.
ARTICLE SEVEN
Section 1. REGISTERED OFFICE. The address of the initial registered
office of the corporation is 6000 Camp Bowie Boulevard, Fort Worth, Texas
76116.
Section 2. REGISTERED AGENT. The name of the initial registered agent of
the corporation at such address is Carroll H. Payne.
ARTICLE EIGHT
The number of directors constituting the initial Board of Directors is
one (1), and the name and address of the person who is to serve as Director
until the first annual meeting of the shareholders or until his successor is
elected and qualified is:
Carroll H. Payne 6000 Camp Bowie Boulevard
Fort Worth, Texas 76116
ARTICLE NINE
The name and address of the incorporator is as follows:
Carroll H. Payne 6000 Camp Bowie Boulevard
Fort Worth, Texas 76116
IN WITNESS WHEREOF, I have executed these Articles of Incorporation on
this 18th day of November, 1980.
/s/ Carroll H. Payne
----------------------------------------
Carroll H. Payne
<PAGE>
THE STATE OF TEXAS )
)
COUNTY OF TARRANT )
BEFORE ME, the undersigned Notary Public in and for the said county and
state, on this date personally appeared B. Carroll H. Payne, who after being
by me first duly sworn declared that he was the person who signed the
foregoing document as an incorporator, and that the statements therein
contained are true.
DATED this 18th day of November, 1980.
/s/ Louise O. Schomerus
------------------------------------
Louise O. Schomerus
Notary Public in and for
Tarrant County, Texas
<PAGE>
ARTICLES OF AMENDMENT
BY THE SHAREHOLDERS
TO THE ARTICLES OF INCORPORATION OF
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation which provides an additional
purpose clause.
ARTICLE ONE
The name of the corporation is INDEPENDENT RESEARCH AGENCY FOR LIFE
INSURANCE, INC.
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted by
unanimous vote of the Class A Voting Common Stock shareholders on November
23, 1981:
Article Three of the Articles of Incorporation is hereby amended so as
to read in full as follows:
"ARTICLE THREE
The purpose or purposes for which the corporation is organized are: the
transaction of any and all lawful business for which corporations may be
incorporated under the Texas Business Corporation Act.
To engage as an agent, managing general agent and/or broker in all
classes of insurance now or hereafter permitted by statute."
IN WITNESS WHEREOF, we have executed these Articles of Amendment on the
23th day of November, 1981.
/s/ W. F. Rankin Jr.
--------------------------------
W. F. Rankin Jr.
Vice President
/s/ G. Norman Coder
--------------------------------
G. Norman Coder
Secretary
<PAGE>
THE STATE OF TEXAS )
)
COUNTY OF TARRANT )
BEFORE ME, the undersigned authority, on this day personally appeared
WARNER F. RANKIN, JR., who being first duly sworn on oath says:
That he is a Vice President of Independent Research Agency for Life
Insurance, Inc., a Texas corporation; the resolution approving the amendment
of the Articles of Incorporation of said corporation was adopted by unanimous
vote of the Class A Voting Common Stock shareholders on November 23, 1981;
that such resolution has not been rescinded or amended.
/s/ WARNER F. RANKIN, JR.
------------------------------------
WARNER F. RANKIN, JR.
SUBSCRIBED AND SWORN TO BEFORE ME by the said WARNER F. RANKIN, JR. this
23rd day of November, 1981, to certify which witness my hand and seal of
office.
/s/ June M. Rountree
-------------------------------------
June M. Rountree
NOTARY PUBLIC
The State of Texas
My Commission Expires:
Sept 21, 1984
<PAGE>
STATEMENT OF CHANGE OF REGISTERED
OFFICE OR REGISTERED AGENT OR BOTH
BY A TEXAS DOMESTIC CORPORATION
1. The name of the corporation
----------------------------------------------
Independent Research Agency for Life Insurance, Inc.
--------------------------------------------------------------------------
2. The address, including street and number, of its present registered office
as shown in the records of the Secretary of State of the State of Texas
prior to filing this statement is 6000 Camp Bowie Boulevard, P.O. Box 2387
----------------------------------------
Fort Worth, Texas 76113
--------------------------------------------------------------------------
3. The address, including street and number, to which its registered office is
to be changed is
--------------------------------------------------------
No Change
--------------------------------------------------------------------------
(Give new address or state "no change")
4. The name of its present registered agent, as shown in the records of the
Secretary of State of the State of Texas, prior to filing this statement is
Carroll H. Payne
--------------------------------------------------------------------------
5. The name of its new registered agent is
-----------------------------------
George C. Talley, Jr.
--------------------------------------------------------------------------
(Give new name or state "no change")
6. The address of its registered office and the address of the business office
of its registered agent, as changed, will be identical.
7. Such change was authorized by its board of directors.
/s/ George C. Talley, Jr.
----------------------------------------
George C. Talley, Jr.
President or Vice President
Sworn to March 18, 1985
-----------------
(date)
/s/ Louise O. Schomerus
------------------------------------
Louise O. Schomerus
Notary Public
Tarrant County, Texas
<PAGE>
STATEMENT OF CHANGE OF REGISTERED
OFFICE OR REGISTERED AGENT OR BOTH
BY A TEXAS DOMESTIC CORPORATION
1. The name of the corporation
----------------------------------------------
Independent Research Agency for Life Insurance, Inc.
--------------------------------------------------------------------------
2. The address, including street and number, of its present registered office
as shown in the records of the Secretary of State of the State of Texas
prior to filing this statement is 6000 Camp Bowie Boulevard, P.O. Box 2387
-----------------------------------------
Fort Worth, Texas 76113
--------------------------------------------------------------------------
3. The address, including street and number, to which its registered office is
to be changed is 4100 South Hulen, P.O. Box 2387
--------------------------------------------------------------------------
Fort Worth, Texas 76113
--------------------------------------------------------------------------
(Give new address or state "no change")
4. The name of its present registered agent, as shown in the records of the
Secretary of State of the State of Texas, prior to filing this statement is
George C. Talley, Jr.
--------------------------------------------------------------------------
5. The name of its new registered agent is
-----------------------------------
No Change
--------------------------------------------------------------------------
(Give new name or state "no Change")
6. The address of its registered office and the address of the business office
of its registered agent, as changed, will be identical.
7. Such change was authorized by its board of directors.
/s/ Lamar C. Smith
----------------------------------------
Lamar C. Smith
President
Sworn to March 11, 1986
-----------------
(date)
/s/ Louise O. Schomerus
------------------------------------
Louise O. Schomerus
Notary Public
Tarrant County, Texas
<PAGE>
THE STATE OF TEXAS
SECRETARY OF STATE
CERTIFICATE OF AMENDMENT
OF
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
----------------------------------------------------
CHARTER NO. 542129-0
The undersigned, as Secretary of State of the State of Texas, hereby
certifies that the attached Articles of Amendment, duly signed, have been
received in this Office and are found to conform to law.
ACCORDINGLY the undersigned, as such Secretary of State, and by virtue
of the authority vested in the Secretary by law, issues this Certificate and
attaches hereto a copy.
Dated NOVEMBER 1, 1988.
/s/ [Illegible]
[SEAL] ------------------------------------
SECRETARY OF STATE
<PAGE>
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
Independent Research Agency for Life Insurance, Inc. pursuant to the
provisions of Article 4.04 of the Texas Business Corporation Act, as amended,
hereby adopts the following Articles of Amendment to its Articles of
Incorporation.
ARTICLE ONE
The name of the corporation is INDEPENDENT RESEARCH AGENCY FOR LIFE
INSURANCE, INC.
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted by
the shareholders of Class A Voting Common shares of the corporation on
October 17, 1988 and by the shareholders of Class B Nonvoting Common shares
of the corporation on October 31, 1988. The amendment effects a five-for-one
stock split of the outstanding Class B Nonvoting Common shares. The
amendment alters ARTICLE FOUR of the original Articles of Incorporation, and
the full text of ARTICLE FOUR, as amended, is as follows:
The corporation is authorized to issue two classes of shares to
be designated respectively "Class A Voting Common" and "Class B
Nonvoting Common." The total number of shares which the corporation is
authorized to issue is One Hundred Million One Thousand (100,001,000)
shares. The number of Class A Voting Common shares authorized is One
Thousand (1,000) shares, with a par value of ten cents ($.10) per
share. The number of Class B Nonvoting Common shares authorized is
One Hundred Million (100,000,000) shares. On the effective date of
this amendment of
-1-
<PAGE>
ARTICLE FOUR, each outstanding Class B Nonvoting Common share, with a
par value of ten cents ($.10) per share, shall be split-up and
converted into five (5) Class B Nonvoting Common shares, with a par
value of two cents ($.02) per share.
ARTICLE THREE
The number of shares of the corporation outstanding at the time of such
adoption was 25 Class A Voting Common shares and 316,534 Class B Nonvoting
Common shares. The number of shares entitled to vote thereon was 25 Class A
Voting Common shares and 316,534 Class B Nonvoting Common shares.
ARTICLE FOUR
The number of shares voted for such amendment was 307,339, and the
number of shares voted against such amendment was 150. The description and
number of outstanding shares of each class voted for and against such
amendment was as follows:
<TABLE>
<CAPTION>
Class Number of Shares Voted
----- ----------------------
For Against
--- -------
<S> <C> <C>
Class A Voting Common 25 -0-
Class B Nonvoting Common 307,314 150
</TABLE>
ARTICLE FIVE
The manner in which any exchange, reclassification or cancellation of
issued shares provided for in the amendment shall be effected is as follows:
the present holder of one share of Class B Nonvoting Common, with a par value
of ten cents ($.10) per share, may exchange the share for five (5) shares of
Class B Nonvoting Common, with a par value of two cents ($.02) per share.
-2-
<PAGE>
DATED THIS 31st day of October, 1988.
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
By: /s/ George C. Talley, Jr.
------------------------------------
George C. Talley, Jr.
Chairman of the Board and
Chief Executive Officer
VER:dg:#V10
ARTICLES
-3-
<PAGE>
THE STATE OF TEXAS
SECRETARY OF STATE
CERTIFICATE OF AMENDMENT
FOR
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
CHARTER NUMBER 00542129
THE UNDERSIGNED, AS SECRETARY OF STATE OF THE STATE OF TEXAS, HEREBY
CERTIFIES THAT ARTICLES OF AMENDMENT HAVE BEEN RECEIVED IN THIS OFFICE AND
ARE FOUND TO CONFORM TO LAW.
ACCORDINGLY THE UNDERSIGNED, AS SUCH SECRETARY OF STATE, AND BY VIRTUE
OF THE AUTHORITY VESTED IN THE SECRETARY BY LAW, ISSUES THIS CERTIFICATE AND
ATTACHES HERETO A COPY OF THE ARTICLES OF AMENDMENT.
DATED MAY 23, 1989
[Illegible]
[SEAL] ------------------------------------
Secretary of State
<PAGE>
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
Independent Research Agency for Life Insurance, Inc. pursuant to the
provisions of Article 4.04 of the Texas Business Corporation Act, as amended,
hereby adopts the following Articles of Amendment to its Articles of
Incorporation.
ARTICLE ONE
The name of the corporation is INDEPENDENT RESEARCH AGENCY FOR LIFE
INSURANCE, INC.
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted by
the shareholders of Class A Voting Common shares of the corporation on April
24, 1989. The amendment provides a fair-price condition for certain business
combination transactions if a certain supermajority approval of the
transaction is not obtained. The amendment adopts a new ARTICLE TEN as an
addition to the Articles of Incorporation, as amended, and the full text of
the new ARTICLE TEN is as follows:
The stockholder vote required to approve any Business
Combination (as hereinafter defined) shall be as set forth in
this Article Ten.
(A) (1) Except as otherwise expressly provided in
section (B) of this Article Ten:
(i) any merger or consolidation of the corporation
or any Subsidiary (as hereinafter defined) with (a) any
Interested Shareholder (as hereinafter defined) or (b)
any other corporation
-1-
<PAGE>
(whether or not itself an Interested Shareholder) which
is, or after such merger or consolidation would be, an
Affiliate (as hereinafter defined) of any Interested
Shareholder;
(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a
series of transactions) to or with any Interested
Shareholder or any Affiliate of any Interested Shareholder
of all or substantially all of the assets of the corporation
or any Subsidiary;
(iii) the issuance or transfer by the corporation or
any Subsidiary (in one transaction or a series of
transactions) of any securities of the corporation or
any Subsidiary to any Interested Shareholder or any
Affiliate of any Interested Shareholder in exchange for
cash, securities or other property (or a combination
thereof) having an aggregate fair market value of
$2,000,000 or more;
(iv) the adoption of any plan or proposal for the
liquidation or dissolution of the corporation proposed
by or on behalf of any Interested Shareholder or any
Affiliate of any Interested Shareholder; or
(v) any reclassification of securities (including
any reverse stock split), or recapitalization of the
corporation, or any merger or consolidation of the
corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise
involving any Interested Shareholder) which has the
effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any
class of equity or convertible securities of the
corporation or any Subsidiary which is directly or
indirectly owned by any Interested Shareholder or any
Affiliate of any Interested Shareholder;
shall require the affirmative vote of the holders of at least ninety-five
percent (95%) of all of the then-
-2-
<PAGE>
outstanding shares of the capital stock of the corporation, voting
together as a single class. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required or that a
lesser percentage may be specified by law.
(2) The term "Business Combination" as used in this Article Ten
shall mean any transaction which is referred to in any one or
more of subparagraphs (i) through (v) of paragraph (1) of this
section (A).
(B) The provisions of section (A) of this Article Ten shall not be
applicable to any particular Business Combination, and such Business
Combination shall require only such affirmative vote as is required by
law or any other provision of the corporation's Articles of
Incorporation or Bylaws if the conditions specified below are met:
(1) the "Continuing Directors" (as hereinafter defined) of the
corporation by at least an eighty percent (80%) vote:
(i) have expressly approved in advance the acquisition
of the outstanding shares of capital stock of the
corporation that caused such Interested Person to become an
Interested Person, or
(ii) have expressly approved such Business Combination
either in advance of or subsequent to such Interested
Person's having become an Interested Person; or
(2) the cash or fair market value (as determined by at least a
majority of the Continuing Directors) of the property, securities
or "Other Consideration to be Received" (as hereinafter defined)
per share paid by the Interested Person to holders of the capital
stock of the corporation in the Business Combination is not less
than the "Fair Price" (as hereinafter defined) paid by the
Interested Person in acquiring any of its holdings of the
corporation's capital stock.
(C) For the purposes of this Article Ten:
(1) A "person" shall mean any individual, firm, corporation or
other entity.
-3-
<PAGE>
(2) "Interested Shareholder" shall mean any person (other than
the corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or indirectly, of
more than ten percent (10%) of the shares of any class of
the outstanding capital stock of the corporation;
(ii) is an Affiliate of the corporation and at any time
within the two-year period immediately prior to the date in
question was the beneficial owner, directly or indirectly,
of ten percent (10%) or more of the shares of any class of
the outstanding capital stock of the corporation; or
(iii) is an assignee of or has otherwise succeeded to any
shares of any class of the outstanding capital stock of the
corporation which were at any time within the two-year
period immediately prior to the date in question
beneficially owned by any Interested Shareholder, if such
assignment or succession shall have occurred in the course
of a transaction or series of transactions not involving a
public offering within the meaning of the Securities Act of
1933.
(3) A person shall be a "beneficial owner" of any capital stock
of the corporation:
(i) which such person or any of its Affiliates or
Associates (as hereinafter defined) beneficially owns,
directly or indirectly;
(ii) which such person or any of its Affiliates or
Associates has (a) the right to acquire (whether such right
is exercisable immediately or only after the passage of
time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (b)
the right to vote pursuant to any agreement, arrangement or
understanding; or
-4-
<PAGE>
(iii) which are beneficially owned, directly or
indirectly, by any other person with which such person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of such capital
stock.
(4) For the purposes of determining whether a person is an
Interested Shareholder pursuant to paragraph (2) of this section
(C), the number of shares of capital stock of the corporation
deemed to be outstanding shall include shares deemed owned
through application of paragraph (3) of this section (C) but
shall not include any other shares of capital stock which may be
issuable pursuant to any agreement, arrangement or understanding,
or upon exercise of conversion rights, warrants or options, or
otherwise.
(5) "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934.
(6) "Subsidiary" means any corporation of which a majority of
any class of equity security is owned, directly or indirectly, by
the corporation; provided, however, that for the purposes of the
definition of Interested Shareholder set forth in paragraph (2)
of this section (C), the term "Subsidiary" shall mean only a
corporation of which a majority of each class of equity security
is owned, directly or indirectly, by the corporation.
(7) "Continuing Director" means any member of the Board of
Directors of the corporation (the "Board") who is unaffiliated
with the Interested Shareholder and was a member of the Board
prior to the time that the Interested Shareholder became an
Interested Shareholder, and any successor of a Continuing
Director who is unaffiliated with the Interested Shareholder and
is recommended to succeed a Continuing Director by a majority of
Continuing Directors then on the Board.
-5-
<PAGE>
(8) "Fair Price" shall mean the following: If there is only one
class of capital stock of the corporation issued and
outstanding, the Fair Price shall mean the highest price that can
be determined by a majority of the Continuing Directors to have
been paid at any time by the Interested Person for any share or
shares of that class of capital stock. If there is more than one
class of capital stock of the corporation issued and outstanding,
the Fair Price shall mean with respect to each class and series
of capital stock of the corporation, the amount determined by a
majority of the Continuing Directors to be the highest per share
price equivalent of the highest price that can be determined to
have been paid at any time by the Interested Person for any share
or shares of any class or series of capital stock of the
corporation. In determining the Fair Price, all purchases by the
Interested Person shall be taken into account regardless of
whether the shares were purchased before or after the Interested
Person became an Interested Person. Also, the Fair Price shall
include any brokerage commissions, transfer taxes and soliciting
dealers' fees paid by the Interested Person with respect to the
shares of capital stock of the corporation acquired by the
Interested Person. In the case of any Business Combination with
an Interested Person, a majority of the Continuing Directors
shall determine the Fair Price for each class and series of the
capital stock of the corporation. The Fair Price shall also
include interest compounded annually from the date an Interested
Person became an Interested Person through the date the Business
Combination is consummated at the rate of seven percent (7%) per
annum less the aggregate amount of any cash dividends paid, and
the fair market value of any dividends paid in other than cash,
on each share of capital stock in the same time period, in an
amount up to but not exceeding the amount of interest so payable
per share of capital stock.
(9) "Other Consideration to be Received" shall include, without
limitation, Common Stock or other capital stock of the
corporation retained by its existing stockholders other than
Interested Persons or other parties
-6-
<PAGE>
to such Business Combination in the event of a Business
Combination in which the corporation is the surviving
corporation.
(D) A majority of the Board of Directors of the corporation shall
have the power and duty to determine, on the basis of information
known to them after reasonable inquiry, whether a person is an
Interested Shareholder. Once the Board has made a determination
pursuant to the preceding sentence that a person is an Interested
Shareholder, a majority of the number of Directors who are Continuing
Directors shall have the power and duty to interpret all of the terms
and provisions of this Article Ten, and to determine on the basis of
information known to them after reasonable inquiry all facts
necessary to determine compliance with this Article Ten, including,
without limitation, (1) the number of shares of capital stock of the
corporation beneficially owned by any person, (2) whether a person is
an Affiliate or Associate of another, and (3) whether the applicable
conditions set forth in section (B) have been met with respect to any
Business Combination.
(E) Nothing contained in this Article Ten shall be construed to
relieve any Interested Shareholder from any fiduciary obligation
imposed by law.
(F) Notwithstanding any other provisions of the corporation's
Articles of Incorporation or Bylaws or any provision of law which
might otherwise permit a lesser vote or no vote, but in addition to
any affirmative vote of the holders of any particular class or series
of the capital stock of the corporation required by law, or by the
corporation's Articles of Incorporation or Bylaws, the affirmative
vote of the holders of at least ninety-five percent (95%) of the
then-outstanding shares of the capital stock of the corporation,
voting together as a single class, shall be required to alter, amend
or repeal this Article Ten.
ARTICLE THREE
The number of shares of the corporation outstanding at the time of such
adoption was 25 Class A Voting Common shares
-7-
<PAGE>
and 316,534 Class B Nonvoting Common shares. The number of shares entitled to
vote thereon was 25 Class A Voting Common shares.
ARTICLE FOUR
The number of shares voted for such amendment was 25 Class A Voting
Common shares, and the number of shares voted against such amendment was -0-.
DATED THIS 30th day of April, 1989.
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
By: /s/ George C. Talley, Jr.
-------------------------------------
George C. Talley, Jr.
Chairman of the Board and
Chief Executive Officer
-8-
VER:dg:#V13
AMENDED
<PAGE>
STATEMENT OF CHANGE OF REGISTERED OFFICE
OR REGISTERED AGENT OR BOTH BY
A PROFIT CORPORATION
1. The name of the corporation is Independent Research Agency for Life
-------------------------------------------
Insurance, Inc.
--------------------------------------------------------------------------
The corporation's charter number is 542 129-0 .
--------------------------------------
2. The address of the CURRENT registered office as shown in the records of the
Texas secretary of state is: (Please provide street address, city, state
add zip code. The address must be in Texas).
4100 South Hulen, P.0. Box 2387
--------------------------------------------------------------------------
Fort Worth, Texas 76113
--------------------------------------------------------------------------
3. A. The address of the NEW registered office is:
----- (Please provide street address, city, state and zip code. The
address must be in Texas).
--------------------------------------------------------------------------
--------------------------------------------------------------------------
OR B. X The registered office address will not change.
-----
4. The name of the CURRENT registered agent as shown in the records of the
Texas secretary of state is George C. Talley Jr.
----------------------------------------------
5. A. X The name of the NEW registered agent is Lamar C. Smith
----- ------------------------
OR B. The registered agent will not change.
-----
6. Following the changes shown above, the address of the registered office and
the address of the office of the registered agent will continue to be
identical, as required by law.
7. The changes shown above were authorized by: (check one)
A. X The board of directors.
-----
B. An officer of the corporation so authorized
----- by the board of directors.
/s/ James N. Lanier
------------------------------------------
An Authorized Officer
James N. Lanier, President
(Please refer to the back of this form for additional Instructions)
<PAGE>
AS AMENDED 12/5/96
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
BY LAWS
ARTICLE I-OFFICES
(a) The principal office of the corporation shall be maintained in the city
of Fort Worth, Tarrant County, Texas, or its environs.
(b) The corporation may also have offices and transact business at such
other places in the state of Texas or elsewhere as the Board of Directors may
from time to time appoint or the business of the corporation may require.
ARTICLE II-SEAL
The corporation seal shall have inscribed thereon the name of the
corporation and the word "SEAL." Said seal may be used by causing it, or a
facsimile thereof to be impressed or affixed, or reproduced, or otherwise.
ARTICLE III-MEETING OF STOCKHOLDERS
(a) PLACE OF MEETINGS: Stockholders' meetings shall be held at the principal
office and place of business of the corporation in Fort Worth, Texas, or its
environs, or at such other place as may be designated in the notice of such
meeting and authorized by the Board of Directors, Stockholders "entitled to
vote" as hereinafter described shall be only those stockholders of Class A
Voting stock.
(b) ANNUAL MEETINGS: The annual meeting of the stockholders of this
corporation shall be held at the principal office of the corporation in Fort
Worth, Texas, on the first business day following the 5th of December of each
year unless amended by notice duly given, at which time there shall be
elected by the company stockholders of Class A Voting stock, members of the
Board of Directors as hereinafter described in Article V, section (a), of
these Bylaws, and the stockholders shall transact such other business as
shall properly come before them. If the annual meeting of the stockholders be
not held as herein prescribed, the election of directors may be held at any
meeting hereafter called pursuant to these Bylaws.
(c) NOTICE OF ANNUAL MEETING: A notice setting out the time and place of
such annual meeting shall be delivered personally or shall be mailed, postage
prepaid, to each stockholder of record entitled to vote, and if mailed, to
the stockholder's address as the same appears on the stock book of the
company, or if no such address appears, at the stockholder's last known place
of address, at least ten (10) days prior to the annual meeting. The company
will also publish the notice of its annual meeting in the company's sales
bulletin.
(d) ADJOURNMENT OF ANNUAL MEETING: If a quorum of stockholders entitled to
vote be not present at the annual meeting, the stockholders present in person
or by proxy may adjourn to
-1-
<PAGE>
some future time, as shall be agreed upon by them, and notice of such
adjournment shall be mailed, postage prepaid, to each stockholder at least
three (3) days before such adjourned meeting; but if a quorum is present,
they may adjourn from day to day as they see fit, and no notice of such
adjournment need be given.
(e) SPECIAL MEETINGS: Special meetings of the stockholders shall be held at
the same place as the annual meeting as hereinbefore provided or at such
other location as may be designated by the Chairman of the Board or the
President. Such meeting may be called at any time by the Chairman of the
Board or the President or the holders of fifty percent (50%) of the
outstanding capital stock of the company entitled to vote. The Secretary
shall mail or personally deliver a notice of such call to each stockholder of
the company entitled to vote at least ten (10) days but not more than sixty
(60) days prior to the date of the special meeting, and such notice shall
state the time and place of such meeting and the object thereof. No business
shall be transacted at the special meeting except as stated in the notice
sent to the stockholders, unless all such outstanding voting stock is
represented at the meeting, either in person or by proxy, and all such voting
stock unanimously consents in writing to transaction of other business.
(f) QUORUM: A majority of the stock issued and outstanding and entitled to
vote in person or by proxy, shall constitute a quorum for the transacting of
business at any meeting of the stockholders.
(g) NUMBER OF VOTES FOR EACH STOCKHOLDER: Each stockholder shall be entitled
to one vote for each share of Class A Voting stock standing in his own name
on the books of the company, whether represented in person or by proxy.
(h) PROXIES: All proxies shall be in writing and properly signed.
(i) ORDER OF BUSINESS: The following order of business shall be observed at
all annual and special meetings of the stockholders so far as practicable:
(1) Calling the roll;
(2) Reading, correcting and approval of minutes of previous meetings;
(3) Report of Officers;
(4) Report of Committees;
(5) Election of Directors;
(6) Unfinished Business.
(j) NOTICES: All notices herein provided for may be waived by a waiver in
writing signed by a stockholder entitled to vote, and upon such waiver,
meetings of stockholders may be held at such time and place as may by the
stockholders be agreed upon.
ARTICLE IV-STOCK
(a) CERTIFICATES OF STOCK: Certificates of stock shall be in a form adopted
by the Board of Directors and shall be signed by the President, or
appropriate Vice President, and countersigned by the Secretary, with the seal
of the corporation affixed thereto, certifying the number of shares
-2-
<PAGE>
of the stock of the corporation owned by the shareholders. All certificates
of stock within each class, Class A Voting and Class B Nonvoting, shall be
consecutively numbered. The name of the person owning the shares represented
thereby, with the number of such shares and the date of issue, shall be
entered on the company's books. All certificates of stock transferred by
endorsements thereof shall be surrendered for cancellation and new
certificates issued to the purchaser or assignee. All certificates issued
shall bear an imprint upon their face to the effect that there exists as a
limitation upon the transferability of the shares of stock of the
corporation. No certificates shall be issued to any party unless said party
shall agree with the corporation as to the limitations on transferability of
such stock in accordance with the requirements of the Texas Insurance Code
and the laws of such other states as may be required and as the Board of
Directors may otherwise establish.
(b) TRANSFER OF STOCK: Shares of stock shall be transferred only on the
books of the company by the holder thereof in person or by his attorney.
Stockholders desiring to sell and transfer their stock shall immediately
advise the company of their intention to do so. Any such transfer shall be
subject to the restrictions described in "(a)," above.
(c) LOST OR DESTROYED CERTIFICATES: Issuance of certificates in lieu of
certificates lost or destroyed may be made upon such regulations as may be
prescribed by the Board of Directors.
ARTICLE V-DIRECTORS
(a) NUMBER, ELECTION AND TERM OF OFFICE: The Board of Directors shall
consist of not less than three (3) nor more than twelve (12) directors. The
number of directors may be increased or decreased by the affirmative vote of
the holders of not less than eighty percent (80%) of the outstanding shares
of Class A Voting stock of the corporation at any annual meeting or at any
special meeting called for that purpose, provided, however, that the number
of directors shall in no event be less than three (3) nor more than twelve
(12). The Board shall be divided into three (3) classes, Class I, Class II,
and Class III. The number of directors in each class shall be the whole
number contained in the quotient arrived at by dividing the authorized number
of directors by three and if a fraction is also contained in such quotient,
then if such fraction is one-third (1/3) the extra director shall be a member
of Class III and if the fraction is two-thirds (2/3) one of the directors
shall be a member of Class III and the other shall be a member of Class II.
Each director shall serve for a term ending on the third annual meeting
following the annual meeting at which such director was elected; provided,
however, that the directors first elected to Class I shall serve for a term
ending on the annual meeting next ensuing, the directors first elected to
Class II shall serve for a term ending on the second annual meeting following
the meeting at which such directors were first elected, and the directors
first elected to Class III shall serve a full term as hereinabove provided.
The foregoing notwithstanding, each director shall serve until his successor
shall have been duly elected and qualified unless he shall die, resign,
become disqualified, disabled or shall otherwise be removed.
For purposes of the preceding paragraph, reference to the first election
of directors shall signify the first election of directors subsequent to the
approval by the directors of this amendment to the corporation's Bylaws. At
each annual election held thereafter, the directors chosen to succeed those
whose terms then expire shall be identified as being of the same class as the
directors they succeed. If for any reason the number of directors in the
various classes shall
-3-
<PAGE>
not conform with the formula set forth in the preceding paragraph, the Board
of Directors may redesignate any director into a different class in order
that the balance of directors in such classes shall conform thereto.
(b) REMOVAL AND VACANCIES OF DIRECTORS: Any director of the corporation may
be removed from the Board, with or without cause, only by a vote of the
holders of not less than eighty percent (80%) of the outstanding shares of
Class A Voting stock entitled to vote thereon. Vacancies in the Board of
Directors by reason of death, resignation, an increase in the number of
directors, removal or other cause shall be filled by the vote of a majority
of the remaining directors although less than a quorum. A director so
selected by the remaining directors to fill a vacancy shall serve for the
unexpired term of and in the same class as the director whose position is
vacated, unless the person is selected to fill a vacancy created by an
increase in the number of directors, in which event the remaining directors
shall fill such vacancy consistent with the formula for classes of directors
set forth in section "(a)" above.
(c) MEETINGS OF DIRECTORS: The annual meeting of the Board of Directors
shall be held immediately following the annual meeting of the stockholders.
Special meetings of the Board may be called by the Chairman of the Board or
President or any two (2) directors by giving seven (7) days notice to each
director.
(d) QUORUM: A majority of the directors shall constitute a quorum.
(e) NOTICES: Notices herein provided for may be waived by a waiver in
writing signed by the directors and upon such waiver meetings of the
directors shall be held at the time and place as the directors may agree upon.
(f) POWERS OF DIRECTORS: The directors shall have the general management and
control of the business and affairs of the company and shall exercise all the
powers that may be exercised or performed by the corporation, under the
statutes, the certificate of incorporation and the Bylaws.
(g) AMENDMENT OF THIS ARTICLE V: Notwithstanding the provisions of Article X
of the Bylaws of this corporation with respect to amendment of the Bylaws,
Article V of the Bylaws of the corporation relating to a Classified Board,
may not be amended, altered, changed or repealed in any respect unless such
action is approved by the affirmative vote of the holders of not less than
eighty percent (80%) of the outstanding shares of Class A Voting stock.
If and when the directors shall severally or collectively consent in
writing to any action to be taken by the corporation, such action shall be
valid corporate action as though it had been authorized at any annual or
special meeting of the directors.
ARTICLE VI-EXECUTIVE COMMITTEE
(a) NUMBER, ELECTION AND TERM OF OFFICE: The directors shall, at their
annual meeting, elect from among them by a majority vote of all directors, an
Executive Committee consisting of not less than three (3) or more than five
(5) directors. Said Executive Committee shall have a term of office of one
year.
-4-
<PAGE>
(b) VACANCIES: Vacancies for any reason in the Executive Committee shall be
filled by a vote of a majority of the Board of Directors.
(c) MEETINGS: The Executive Committee shall meet from time to time as
required for the purpose of conducting its business, upon due notice by any
member thereof to the other committee members.
(d) QUORUM: A majority of the Executive Committee shall constitute a quorum.
(e) NOTICES: Notices herein provided for may be waived by written waiver
signed by a committee member, and upon such waiver meetings of the Executive
Committee shall be held at the time and place as the committee may agree upon.
(f) POWERS OF EXECUTIVE COMMITTEE: The Executive Committee of the Board of
Directors shall, to the extent allowable by law, have the same authority and
control of the business and affairs of the company as the Board of Directors,
shall act on behalf of the entire Board between meetings thereof, and acts by
the Executive Committee shall have the same force and effect as if performed
by said entire Board of Directors.
In lieu of meeting, the Executive Committee may severally or
collectively act by written unanimous consent, and any such written unanimous
consent shall be valid corporate action as though it had been authorized at
any meeting of the Executive Committee.
ARTICLE VII-OFFICERS
(a) ENUMERATION: The offices of the corporation may consist of a Chairman of
the Board, a President, Vice Presidents, a Secretary and a Treasurer and such
other officers as shall from time to time be chosen and appointed by the
Board of Directors.
(b) CHAIRMAN OF THE BOARD: The Board of Directors may elect a Chairman of
the Board. The Chairman of the Board shall preside at all meetings of the
directors and stockholders. When designated as such by the Board, the
Chairman of the Board shall be the corporation's Chief Executive Officer.
(c) PRESIDENT: The President shall have general charge over the affairs of
the corporation. When the Chairman of the Board is designated as Chief
Executive Officer, the President shall be subject to the direction of the
Chairman of the Board. If the Chairman is not designated as Chief Executive
Officer, then the President shall be Chief Executive Officer, subject only to
the direction of the Board of Directors. The President shall, in any case,
be the Chief Operating Officer of the corporation.
(d) VICE PRESIDENT/SENIOR VICE PRESIDENT: Each Vice President shall perform
such duties as may be assigned to him by the Chairman or the President. A
Senior Vice President may be designated as such based upon tenure or
responsibility.
(e) SECRETARY: The Secretary shall be ex-officio Secretary of the Board of
Directors, shall give or cause to be given all required meeting notices to
the stockholders, and directors, shall record
-5-
<PAGE>
all proceedings of the meetings of the stockholders and directors in a book
to be kept for that purpose; and shall perform such other duties as may be
assigned to him by the Board of Directors; he shall have custody of the seal
of the corporation and shall affix the same to any instrument when duly
authorized to do so and attest the same, and he shall be sworn to the
faithful discharge of his duties. This office may be combined with the office
of Treasurer.
(f) TREASURER: The Treasurer shall keep account of all monies of the company
received or disbursed, and shall deposit all monies and valuables in the name
and to the credit of the company in such banks and depositories as the Board
of Directors shall designate. This office may be combined with any other
office of the corporation.
(g) COMPENSATION: The salad and other remuneration in any form of the
Chairman of the Board shall be fixed and may be changed by the Board of
Directors. The salaries and other remuneration of those officers who are
members of the Executive Committee of the Board of Directors other than the
Chairman of the Board shall be fixed and may be changed by the Chairman of
the Board if authorized by the Board to do so or, if the Chairman is not so
authorized or there is no Chairman of the Board, by the Board of Directors.
The salaries and remuneration in any form of all other officers may be fixed
and may be changed by the Board of Directors or its Executive Committee.
(h) TERM OF OFFICE: Each of such officers shall serve for the term of one
year or until their successors have been duly elected and qualified.
(i) VACANCIES AND REMOVAL OF OFFICERS: In case of the death, disability,
resignation or otherwise of one or more of the officers, the Board of
Directors, although less than a quorum shall fill the vacancies for the
unexpired term. Any officer of this corporation may be removed with or
without cause by the affirmative vote of the Board of Directors at any
regular or special meeting called for that purpose. A vacancy in the office
Chairman or President shall be filled only by an officer who has held the
positions of a Vice President and a Regional Agent.
ARTICLE VIII-DIVIDENDS
(a) Dividends may be declared by the Board of Directors at its discretion
from surplus or net profits of the corporation.
(b) Dividends shall be payable only to the stockholders of record on the
books of the company at the time fixed for such payment.
ARTICLE IX-INDEMNIFICATION
(a) DEFINITIONS: For purposes of this Article IX:
(1) References to the "Corporation" shall include any domestic or
foreign predecessor entity of the Corporation in a merger, consolidation or
other transaction in which the liabilities of the predecessor are transferred
to the Corporation by operation of law and in any other transaction in which
the Corporation assumes the liabilities of the predecessor but does not
specifically exclude liabilities that are the subject matter of this Article.
-6-
<PAGE>
(2) "Indemnitee" means (a) any present or former director, advisory
director, or officer of the Corporation, (b) any person who, while serving in
any of the capacities referred to in clause (a) hereof served at the
Corporation's request as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another foreign or
domestic corp oration, partnership, joint venture, trust, employee benefit
plan or other enterprise, and (c) any person nominated or designated by (or
pursuant to authority granted by) the Board of Directors or any committee
thereof to serve in any of the capacities referred to in clauses (a) or (b)
hereof.
(3) "Official Capacity" means (a) when used with respect to a director,
the office of director of the Corporation, and (b) when used with respect to
a person other than a director, the elective or appointive office of the
Corporation held by such person or the employment or agency relationship
undertaken by such person at the request of or on behalf of the Corporation,
but in each case does not include service for any other foreign or domestic
corporation or any partnership, joint venture, sole proprietorship, trust,
employee benefit plan or any other enterprise.
(4) "Proceeding" means any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, arbitrative or
investigative, any appeal in such an action, suit or proceeding, and any
inquiry or investigation that could lead to such an action, suit or
proceeding.
(b) INDEMNIFICATION: The Corporation shall indemnify an Indemnitee who was,
is, or is threatened to be made a named defendant, respondent or witness in a
Proceeding by reason, in whole or in part, of such person serving or having
served, or having been nominated or designated to serve, in any of the
capacities referred to in Subparagraph (a)(2) above, against any judgments,
penalties (including excise and similar taxes), fines, settlements, and
reasonable expenses actually incurred by the person in connection with the
Proceeding if it is determined, in the manner described in Paragraph (c)
below, that the person (1) conducted himself in good faith, (2) reasonably
believed, in the case of conduct in his Official Capacity, that his conduct
was in the Corporation's best interests, and in all other cases, that his
conduct was at least not opposed to the Corporation's best interests, and (3)
in the case of any criminal Proceeding, had no reasonable cause to believe
his conduct was unlawful; provided, however, that if the person is found
liable to the Corporation or is found liable on the basis that personal
benefit was improperly received by him, the indemnification (i) shall be
limited to reasonable expenses actually incurred by the person in connection
with the Proceeding and (ii) shall not be made in respect of any Proceeding
in which the person shall have been found liable for willful or intentional
misconduct in the performance of his duty to the Corporation. The termination
of a Proceeding by judgment, order, settlement or conviction, or on a plea of
nolo contendere or its equivalent is not of itself determinative that the
person did not meet the requirements for indemnification set forth above. A
person shall be deemed to have been found liable in respect of any claim,
issue or matter only after the person shall have been so adjudged by a court
of competent jurisdiction after exhaustion of all appeals therefrom.
Notwithstanding any other provision of this Article, the Corporation shall
pay or reimburse expenses incurred by an Indemnitee in connection with his
appearance as a witness or other participant in a Proceeding at a time when
he is not a named defendant or respondent in the Proceeding. Reasonable
expenses shall include, without limitation, all court costs and all fees and
disbursements of attorneys for the Indemnitee.
-7-
<PAGE>
(c) DETERMINATIONS: The determinations required in Paragraph (b) above that
an Indemnitee has satisfied the prescribed conduct and belief standards must
be made (1) by a majority vote of a quorum consisting of directors who at the
time of the vote are not named defendants or respondents in the Proceeding,
(2) if such a quorum cannot be obtained, by a majority vote of a committee of
the Board of Directors, designated to act in the matter by a majority vote of
all directors, consisting solely of two or more directors who at the time of
the vote are not named defendants or respondents in the Proceeding, (3) by
special legal counsel selected by the Board of Directors or a committee of
the Board by vote as set forth in clause (1) or (2) of this sentence, or, if
such a quorum cannot be obtained and such a committee cannot be established,
by a majority vote of all directors, or (4) by the holders of Class A Voting
stock in a vote that excludes the voting shares held by the directors who are
named defendants or respondents in the Proceeding. The determination as to
reasonableness of expenses must be made in the same manner as the
determination that the person has satisfied the prescribed conduct and belief
standards, except that if the determination that the person has satisfied the
prescribed conduct and belief standards is made by special legal counsel, the
determination as to reasonableness of expenses must be made by the Board of
Directors or a committee of the Board by vote as set forth in clauses (1) and
(2) of the immediately preceding sentence or, if such a quorum cannot be
obtained and such a committee cannot be established, by a majority vote of
all directors.
(d) ADVANCEMENT OF EXPENSES: Reasonable expenses incurred by an Indemnitee
who was, is, or is threatened to be made a named defendant or respondent in a
Proceeding shall be paid or reimbursed by the Corporation, in advance of the
final disposition of the Proceeding and without any of the determinations
specified in Paragraph (c) above, after the Corporation receives a written
affirmation by the Indemnitee of his good faith belief that he has met the
standard of conduct necessary for indemnification under Paragraph (b) above
and a written undertaking by or on behalf of such director to repay the
amount paid or reimbursed if it is ultimately determined that he has not met
those requirements. The written undertaking described in the immediately
preceding sentence to repay the amount paid or reimbursed to him by the
Corporation must be an unlimited general obligation of the Indemnitee but
need not be secured, and it may be accepted without reference to financial
ability to make repayment.
(e) INSURANCE AND OTHER INDEMNIFICATION: The Corporation, may purchase and
maintain insurance or establish and maintain another arrangement on behalf of
any Indemnity against or in respect of any liability asserted against him and
incurred by him, both as to action in his Official Capacity and as to action
in any other capacity, whether or not the Corporation would have the power to
indemnify him against that liability under those Bylaws or by statute. If the
insurance or other arrangement is with a person or entity that is not
regularly engaged in the business of providing insurance coverage, the
insurance or arrangement may provide for payment of a liability with respect
to which the Corporation would not have the power to indemnity the person
only if including coverage for the additional liability has been approved by
the holders of the Class A Voting stock of the Corporation. Without limiting
the power of the Corporation to purchase, procure, establish or maintain any
kind of insurance or other arrangement, the Corporation may, for the benefit
of Indemnitees, (1) create a trust fund, (2) establish any form of
self-insurance (3) secure its indemnity obligation by grant of a security
interest or other lien on the assets of the Corporation, or (4) establish a
letter of credit, guaranty or surety arrangement. The insurance or other
arrangement may be purchased, procured, maintained or established within the
corporation or with any insurer or other person deemed appropriate by the
Board of Directors regardless of
-8-
<PAGE>
whether all or part of the stock or other securities of the insurer or other
person are owned in whole or part by the Corporation. In the absence of
fraud, the judgment of the Board of Directors as to the terms and conditions
of the insurance or other arrangement and the identity of the insurer or
other person participating in an arrangement shall be conclusive, and the
insurance or arrangement shall not be voidable and shall not subject the
directors approving the insurance or arrangement to liability, on any ground,
regardless of whether directors participating in the approval are
beneficiaries of the insurance or arrangement.
(f) REPORT TO SHAREHOLDERS: Any indemnification of or advancement of
expenses to an indemnitee in accordance with this Article or the provisions
of any statute shall be reported in writing to the shareholders with or
before the notice or waiver of notice of the next shareholders' meeting or
with or before the next submission to shareholders of a consent to action
without a meeting and, in any case, within the 12-month period immediately
following the date of the indemnification or advance.
(g) ENTITLEMENT: The indemnification provided by this Article shall (1) not
be deemed exclusive of or to preclude, any other rights to which those
seeking indemnification may at any time be entitled under the Corporation's
Articles of Incorporation, any law, agreement or vote of shareholders or
disinterested directors, or otherwise, (2) continue as to a person who has
ceased to be in the capacity by reason of which he was an Indemnitee with
respect to matters arising during the period he was in such capacity, and (3)
inure to the benefit of the heirs, executors and administrators of such a
person.
(h) EMPLOYEE BENEFIT PLANS: The Corporation is deemed to have requested an
Indemnitee to serve an employee benefit plan whenever the performance by him
of his duties to the Corporation also imposes duties on or otherwise involves
services by him to the plan or participants or beneficiaries of the plan.
Excise taxes assessed on an Indemnitee with respect to an employee benefit
plan pursuant to applicable law are deemed fines Action taken or omitted to
be taken by an Indemnitee with respect to an employee benefit plan in the
performance of his duties for a purpose reasonably believed by him to be in
the best interest of the participants and beneficiaries of the plan is deemed
to be for a purpose which is not opposed to the best interests of the
Corporation.
(i) SEVERABILITY: The provisions of this Article are intended to comply with
Articles 2.02A(16) and 2.02-1 of the Texas Business Corporation Act. To the
extent that any provision of this Article authorizes or requires
indemnification or the advancement of expenses contrary to such statutes or
the Articles of Incorporation, the Corporation's power to indemnity or
advance expenses under such provision shall be limited to that permitted by
such statutes and the Articles of Incorporation and any limitation required
by such statutes or the Articles of Incorporation shall not affect the
validity of any other provision of this Article.
(j) EFFECT OF AMENDMENT: No amendment, modification or repeal of this
Article or any provision hereof shall in any manner terminate, reduce or
impair the right of any past, present or future Indemnitees to be indemnified
by the Corporation, nor the obligation of the Corporation to indemnity any
such Indemnitees, under and in accordance with the provisions of this Article
as in effect immediately prior to such amendment, modification or repeal with
respect to claims rising
-9-
<PAGE>
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise
or be asserted.
(k) STATUTORY CHANGES: In the event the indemnification provided by this
Article is more restrictive than the provisions of indemnification allowed by
Article 2.02-1 of the Texas Business Corporation Act, and those persons
seeking indemnification shall be indemnified to the flaIl extent permitted by
Article 2.02-1 of the Texas Business Corporation Act as it may exist from
time to time.
ARTICLE X-AMENDMENTS
Other than as otherwise specifically provided herein, any of the Bylaws
of this corporation may be altered, changed or amended by a majority of the
Directors or of the shares of the company entitled to vote at any annual or
special meeting properly and legally called for that purpose.
ARTICLE XI-VOTING RIGHTS
Only Class A Voting common shares shall be entitled to vote except on
matters on which all shareholders are entitled to vote under the Texas
Business Corporation Act.
-10-
<PAGE>
USPA & IRA
CONSOLIDATED STATEMENTS FOR THE FISCAL YR
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMISSIONS REVENUE
Insurance Sales
First year 34,128,232 35,649,312 37,268,595 41,004,912 44,039,574 45,870,236
Trails 19,403,346 24,082,690 26,098,427 28,160,212 29,346,058 31,288,653
Mutual Fund Sales
First year 18,662,824 20,902,580 22,588,378 24,640,502 27,740,745 28,093,394
Trails 4,095,168 4,798,993 4,994,847 5,335,628 5,676,867 6,054,326
Voluntary 6,476,132 6,326,610 6,698,685 5,947,731 5,867,189 5,876,455
12-B1 1,120,184 2,007,769 2,842,701 3,354,825 3,961,636 5,146,537
----------------------------------------------------------------------------
Total Commissions Revenue 83,885,886 93,767,954 100,491,633 108,443,810 116,632,069 122,329,601
----------------------------------------------------------------------------
BANKING REVENUE
Net interest income 308,295
Provision for loan losses (260,200)
Other operating income 10,363
----------------------------------------------------------------------------
Net Banking Revenue 58,458
----------------------------------------------------------------------------
OPERATING EXPENSES
Commissions, Bonuses and Agent Expenses 61,007,722 68,242,476 73,902,369 80,507,964 86,309,517 87,809,129
General and Administrative Expenses 16,366,496 17,981,793 19,519,267 22,002,350 22,730,849 25,719,662
----------------------------------------------------------------------------
Total Operating Expenses 77,374,218 86,224,269 93,421,636 102,510,314 109,040,366 113,528,791
----------------------------------------------------------------------------
INCOME FROM OPERATIONS 6,511,668 7,543,685 7,069,997 5,933,496 7,591,703 8,859,268
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Other Income (Expenses)
Interest Income 422,297 285,793 417,149 777,897 846,607 914,929
Investment Income 3,023,374 3,218,777 3,272,036 3,616,571 3,216,870 4,749,604
Rental and Other Income (Expense) 198,745 (137,366) (155,222) (116,795) (268,148) (385,791)
Interest Expense (134,998) (24,363) (23,033) (23,925) (66,100) (61,304)
Gain (Loss) on Disposals of
Property & Equipment (91,362) (62,557) (46,677) (52,270) (9,436) (1,324)
----------------------------------------------------------------------------
Total Other Income 3,368,056 3,280,284 3,464,253 4,201,478 3,719,793 5,216,114
----------------------------------------------------------------------------
Income Before Federal Income Tax 9,879,724 10,823,969 10,534,250 10,134,974 11,311,496 14,075,382
----------------------------------------------------------------------------
Federal Income Tax Expense 3,592,814 3,567,212 3,561,062 3,417,024 3,842,639 4,639,886
----------------------------------------------------------------------------
NET INCOME 6,286,910 7,256,757 6,973,188 6,717,950 7,468,857 9,435,496
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Change in Net Income from Prior Year -2.62% 15.43% -3.91% -3.66% 11.18% 26.33%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Shares Outstanding at Year End 978,459 985,369 899,638 1,008,055 982,792 1,053,357
Weighted Average Shares Outstanding 1,067,387 948,596 928,520 935,648 937,224 937,502
Share Price at Year End 22.24 22.24 22.24 25.12 27.04 28.24
Book Value Per Share Outstanding (Less Dividend) 22.24 22.24 30.91 35.20 37.09 43.47
Adjusted Book Value (w/out Unrealized Gains) 22.24 22.24 25.12 27.04 27.04 28.24
Earnings Per Share 5.89 7.65 7.51 7.18 7.97 10.06
Dividend Declared Per Share 6.59 7.31 4.88 4.50 7.63 7.73
Number of Field Agents at Year End 586 595 602 600 608 665
Agent Expenses as Percent of Revenue 72.73% 72.78% 73.54% 74.24% 74.00% 71.78%
G&A as Percent of Revenue 19.51% 19.18% 19.42% 20.29% 19.49% 21.02%
Operating Margin (Operating Income / Gross Revenue) 7.76% 8.05% 7.04% 5.47% 6.51% 7.24%
Agent expenses as a % of First Year Commissions 102.94% 108.53% 111.04% 112.45% 111.16% 109.98%
Return on Equity (Net Inc. / Total Equity Beg. Year) 20.79% 25.72% 23.95% 20.87% 18.67% 21.47%
Return on Assets (Net Inc. / Total Assets Beg. Year) 11.95% 12.90% 12.77% 10.16% 9.38% 10.64%
Return on Share Price (EPS / Price) 29.45% 34.40% 33.77% 32.28% 31.73% 37.22%
</TABLE>
<PAGE>
USPA & IRA
CONSOLIDATED STATEMENTS FOR THE FISCAL YR
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash - Demand Deposits 696,007 411,187 1,792,100 454,159 659,899 289,074
Cash - Money Markets 12,215,240 11,698,727 14,481,829 16,319,038 18,789,033 18,735,189
Cash - Certificates of Deposit 0
Commissions Receivable 1,590,993 2,000,126 2,060,310 2,319,856 2,671,831 3,003,639
Agent Loans and Advances 396,866 441,691 834,728 940,067 745,189 493,891
Accounts Receivable - Customers 661,449 103,000 231,718 115,000 266,746
Accounts Receivable - Other 51,999 241,384 78,649 643,179 79,641 54,499
Accounts Receivable - Profit Sharing Plan 0
Stock Subscription Notes Receivable 0
Accounts Receivable - Employees 0
Accrued Interest Receivable 875 0
Income Taxes Receivable 101,711 432,526 0 374,799 336,579 744,881
Prepaid Expenses 64,775 58,570 54,529 48,803 110,139 83,396
Current Portion of Marketable Securities 4,313,700 O 0 0
Current Portion of Mortgage Notes Receivable 37,268 0
Deferred Income Taxes 0 533,360 152,128 534,016 189,377
----------------------------------------------------------------------------
Total Current Assets 15,817,183 19,700,911 20,067,223 21,367,029 23,926,327 23,860,693
----------------------------------------------------------------------------
PROPERTY AND EQUIPMENT:
Land 1,938,640 1,938,640 1,963,930 3,528,333 3,528,333 3,528,333
Office Building 8,992,871 9,087,870 9,182,167 9,383,158 9,403,496 9,568,786
Other Buildings and Improvements 131,746 131,746 131,746 131,748 131,746 131,746
Office / Computer Equipment and Furniture 4,204,076 4,243,258 4,831,049 6,393,679 6,543,017 7,065,463
Computer Equipment / Construction in Progress 19,113
Automobiles 259,133 237,949 265,039 296,218 300,497 262,187
----------------------------------------------------------------------------
Total 15,526,466 15,639,463 16,373,931 19,732,134 19,907,089 20,575,628
----------------------------------------------------------------------------
Less Accumulated Depreciation (4,146,445) (4,720,742) (5,490,561) (6,428,646) (7,292,895) (8,429,667)
----------------------------------------------------------------------------
Total Property and Equipment 11,380,021 10,918,721 10,883,370 13,303,488 12,614,194 12,145,960
----------------------------------------------------------------------------
OTHER ASSETS:
Marketable Securities 28,961,111 28,110,461 35,047,540 44,852,015 52,036,944 67,714,208
Less: Current Portion of Marketable Securities (4,313,700) 0 0
Memberships 44,030 45,108 47,467 62,467 62,467 62,467
Mortgage Notes Receivable 9,942
Notes Receivable - Other 50,000 50,000 50,000 50,000 50,000 50,000
Deferred Income Taxes 78,532 0 0 0
----------------------------------------------------------------------------
Total Other Assets 29,065,083 23,970,401 35,145,007 44,964,482 52,149,411 67,826,675
----------------------------------------------------------------------------
First Command assets:
Cash and due from banks 4,611,643
Net loans 17,098,580
Equipment and lease improv. 203,776
Other assets 148,981
----------------------------------------------------------------------------
Total assets-First Command 22,062,980
----------------------------------------------------------------------------
TOTAL ASSETS 56,262,287 54,590,033 66,095,600 79,634,999 88,689,932 125,896,308
----------------------------------------------------------------------------
----------------------------------------------------------------------------
</TABLE>
<PAGE>
USPA & IRA
CONSOLIDATED STATEMENTS FOR THE FISCAL YR
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT LIABILITIES:
Accounts Payable 949,052 57,128 227,652 486,402 423,714 597,578
Accrued Commissions Payable 1,542,167 2,127,188 2,243,633 2,533,614 2,758,258 2,970,066
Accrued Bonuses Payable 9,547,996 7,618,521 8,516,428 9,210,740 9,959,319 10,232,017
Accrued Profit Sharing Plan Payable 960,600 957,738 952,952 941,601 1,058,617 993,511
Deferred Career Commission Plan Payable 0 O 423,114 489,502 1,156,257
Accrued Sales Meeting Expense 1,250,000 125,008 1,430,867 275,000 1,557,397 543,750
Other Accrued Liabilities 486,254 401,547 354,644 426,536 418,168 463,560
Federal Income Tax Payable 124,370 0 1,285,017 626,927 4,981 0
Current Portion of Notes Payable (IRA Stock) 71,369 613,716 594,650
Loans from Insurance Companies 12,528,037 10,681,383 11,128,518 12,319,485 10,458,853 15,842,192
Accounts Payable to Broker Dealers 243,283 505,256 0
Retainage on Construction
----------------------------------------------------------------------------
Total Current Liabilities 27,459,845 22,211,796 26,644,967 27,243,419 27,742,525 33,393,582
----------------------------------------------------------------------------
LONG TERM OBLIGATIONS
Accrued Sales Meeting Expense 250,000 0 287,500 0 395,110
Notes Payable - IRA Stock Repurchase 494,650 0
Less: Current Portion Shown Above
Building Tenant Deposits 1,761 1,761 1,611 1,611 1,611 1,611
Deferred Career Commission Plan Payable 3,004,862 5,208,298 9,796,309 14,571,565 20,557,266
Deferred Federal Income Tax 587,863 0 2,046,925 2,291,415 1,930,874 4,175,136
----------------------------------------------------------------------------
Total Long-Term Obligations 589,624 3,256,623 7,256,834 12,376,835 16,998,700 25,129,123
----------------------------------------------------------------------------
Liabilities of First Command:
Demand Deposits 5,185,658
Time Deposits 8,107,090
----------------------------------------------------------------------------
Total deposits 13,292,748
Other liabilities 144,772
----------------------------------------------------------------------------
Total liabilities 13,437,520
----------------------------------------------------------------------------
STOCKHOLDERS EQUITY:
Common Stock:
Class A - Voting 10 10 10 10 10 10
Class B - Non-Voting 55,729 55,729 55,729 55,729 55,729 55,729
Additional Paid-In Capital 111,081 2,329,704 424,761 3,472,253 2,830,260 4,708,239
Retained Earnings 28,082,165 26,772,200 26,542,341 28,305,327 31,223,388 33,160,181
Net Unrealized Gain (Loss) on Mktbl. Securities 5,208,702 8,217,001 9,875,400 16,046,593
Treasury Stock - Class A at Par (8) (8) (8) (8) (8) (8)
Treasury Stock - Class B at Par (36,159) (36,021) (37,736) (35,567) (36,072) (34,661)
----------------------------------------------------------------------------
Total Stockholders' Equity 28,212,818 29,121,614 32,193,799 40,014,745 43,948,707 53,936,084
----------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY 56,262,287 54,590,033 66,095,600 79,634,999 88,689,932 125,896,308
----------------------------------------------------------------------------
----------------------------------------------------------------------------
0 1
Rates of Increase
IRA - First year 4.6% 4.5% 4.5% 10.0% 7.4% 4.2%
IRA - Trails 11.4% 24.1% 8.4% 7.9% 4.2% 6.6%
USPA - First Year 27.9% 12.0% 8.1% 9.1% 12.6% 1.3%
USPA - Trails 35.3% 30.5% 15.1% 10.9% 10.9% 16.2%
USPA Trails 5,215,352 6,806,762 7,837,548 8,690,453 9,638,503 11,200,863
Adjusted Agent Exp w/o DCCP 61,007,722 65,237,614 71,785,792 76,117,159 81,604,939 84,104,274
Agent Adj Exp to First Year 102.9% 103.8% 107.9% 106.3% 105.1% 105.3%
</TABLE>
<PAGE>
USPA & IRA
CONSOLIDATED STATEMENTS FOR THE FISCAL YR
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
----------------------------------------------------------------------------
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
IRA Share Price at Fiscal Year-End 22.24 22.24 22.24 25.12 27.04 28.24
Book Value Per Share Outstanding (Less Dividend) 22.24 22.24 30.91 35.20 37.09 43.47
Adjusted Book Value (w/out Unrealized Gains) 22.24 22.24 25.12 27.04 27.04 28.24
Weighted Average Earnings Per Share 5.89 7.65 7.51 7.18 7.97 10.06
Dividend Declared Per Outstanding Share 6.59 7.31 4.88 4.50 7.63 7.73
Total Dividend Paid 6,448,045 7,203,047 4,390,233 4,536,248 7,498,703 8,142,450
Dividend as a Percent of Earnings 102.56% 99.26% 62.96% 67.52% 100.40% 86.30%
Total Annual Return on Share Price 8.83 7.31 4.88 7.38 9.55 8.93
Current Return on Reinvested Dividends 34.70 54.86 75.81 107.47 154.54 215.72
Value of Reinvested Dividends 41.29 62.17 80.69 111.97 162.17 223.45
Total Shareholder Value w/ Reinvested Dividends 63.53 84.41 102.93 137.09 189.21 251.69
One Year Compounded Rate of Return 44.15% 32.87% 21.94% 33.18% 38.02% 33.03%
Three Year Compounded Rate of Return 38.33% 36.69% 32.68% 29.22% 30.87% 34.72%
Five Year Compounded Rate of Return 39.10% 37.69% 33.80% 32.91 % 33.83% 31.70%
Ten Year Compounded Rate of Return 36.54% 35.35%
</TABLE>
<PAGE>
IRA CLASS B STOCK APPRECIATION SCHEDULE
<TABLE>
<CAPTION>
FY1990 FY1991 FY1992 FY1993 FY1994 FY1995 FY1996 FY1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
October $15.25 $18.17 $20.19 $22.24 $22.24 $22.48 $25.28 $27.14
November $15.50 $18.34 $20.38 $22.24 $22.24 $22.72 $25.44 $27.24
December $15.75 $18.51 $20.57 $22.24 $22.24 $22.96 $25.60 $27.34
January $16.00 $18.68 $20.76 $22.24 $22.24 $23.20 $25.76 $27.44
February $16.75 $18.85 $20.95 $22.24 $22.24 $23.44 $25.92 $27.54
March $16.75 $19.02 $21.14 $22.24 $22.24 $23.68 $26.08 $27.64
April $16.75 $19.19 $21.33 $22.24 $22.24 $23.92 $26.24 $27.74
May $17.00 $19.36 $21.52 $22.24 $22.24 $24.16 $26.40 $27.84
June $17.25 $19.53 $21.71 $22.24 $22.24 $24.40 $26.56 $27.94
July $17.50 $19.70 $21.90 $22.24 $22.24 $24.64 $26.72 $28.04
August $17.75 $19.87 $22.09 $22.24 $22.24 $24.88 $26.88 $28.14
September $18.00 $20.00 $22.24 $22.24 $22.24 $25.12 $27.04 $28.24
</TABLE>
<PAGE>
MARKET AND INDUSTRY DATA:
22. We compete with all insurance and investment companies doing business in
the United States. There are about 2000 insurance companies and 8000 mutual
funds. Competition is stiff. Our primary competition comes from the
following organizations or groups in this priority:
INSURANCE INVESTMENT
--------- ----------
USAA All "No-Load" Funds
All Military Group Term Co.'s American Century Funds
All major life insurers Janus Funds
All other life insurers All other funds
Additional competition comes from financial magazines, advisory letters,
and the Internet.
23. The only major study conducted was a Harris poll in March 1997 on the
effects of a program on military clients. The study and our marketing
flyers about this study are included in the information provided.
24. Several magazines are provided which discuss the nature of both the
investment and insurance industries. Any national newspaper or magazine
will contain similar information concerning the state of these industries.
25. We are regulated by all federal and state regulations pertaining to the
banking, investment, and insurance industries, plus the Department of
Defense rules and guidelines for solicitation to military personnel.
26. Our business is not seasonal in the usual sense. Fall, Winter, Summer or
Spring are all good business periods. Our business is affected by two major
events. The first is deployment of troops from any particular base to
another part of the world. This splits families and makes our job of
developing financial programs impossible until the family is reunited. The
second event is the military move or PCS, permanent change of station.
Every military family moves from one base to another about every three to
four years. During this move process, the families are too involved in the
challenges of the move to think about starting or revising a financial
program. While most of these moves occur during the April to October time
frame, they can and do occur at any time. Because not everyone moves every
year, there is generally adequate business available during the moving
period.
<PAGE>
AMENDMENT NO. 2
TO
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
(Name of Registrant as Specified in Its Charter)
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
Class B Non-Voting Common Stock, $0.02 par value per share
--------------------------------------------------------------------
2) Aggregate number of securities to which transaction
applies: 947,483 (1)
----------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: $28.24 (1)
-------------------------------
4) Proposed maximum aggregate value of transaction: $26,756,919.92
------------------
5) Total Fee Paid: $5,351.38
--------------
(1) Total number of shares of Class B Non-Voting Common Stock estimated to be
outstanding as of June 15, 1998.
(2) Pursuant to Rule 0-11, the filing fee was computed on the basis of a $28.24
per share cash price.
/X/ Fee paid previously with preliminary materials.
/X/ Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $5,351.38
----------------------------------------------
2) Form Schedule or Registration Statement No.: Schedule 14A-Preliminary
------------------------
3) Filing Party: Independent Research Agency for Life Insurance, Inc.
------------------------------------------------------
4) Date Filed: July 6, 1998
---------------------------------------------------------
<PAGE>
[LOGO]
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
4100 SOUTH HULEN STREET
FORT WORTH, TEXAS 76109
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Independent Research Agency for Life Insurance, Inc. (the "Company") to be held
at :00 a.m. local time on _____________, 1998, at 4100 South Hulen Street,
Fort Worth, Texas 76109 (the "Special Meeting"). At the Special Meeting you
will be asked to consider and vote upon a proposal to approve an Agreement and
Plan of Merger, dated as of July 1, 1998 (the "Merger Agreement"), between the
Company and First Command Financial Corporation ("First Command"). Pursuant to
the Merger Agreement, the Company will be merged (the "Merger") with and into
First Command, which will continue in existence (the "Surviving Corporation").
Pursuant to the Merger, each share of Class A Voting Common Stock, par
value $0.10 per share ("Class A Stock"), of the Company issued and outstanding
(other than shares of Class A Stock held in treasury by the Company) immediately
prior to the effective time of the Merger (the "Effective Time"), which the
Board of Directors anticipates will be 12:01 a.m. on October 1, 1998, subject to
and upon the terms and conditions of the Merger Agreement, will be converted
into five shares of Voting Common Stock, par value $0.01 per share ("Surviving
Corporation Voting Stock"), of the Surviving Corporation (the "Class A
Consideration"). Further, (i) each share of Class B Non-Voting Common Stock,
par value $0.02 per share ("Class B Stock"), held by a holder of Class B Stock
(a "Class B Shareholder") that is not a holder of Class A Stock, issued and
outstanding immediately prior to the Effective Time, subject to and upon the
terms and conditions of the Merger Agreement, will be converted into $28.24 in
cash, without interest (the "Class B Cash Consideration"), and (ii) each share
of Class B Stock held by a Class B Shareholder that is also a holder of Class A
Stock (a "Class A/B Shareholder"), issued and outstanding immediately prior to
the Effective Time, subject to and upon the terms and conditions of the Merger
Agreement, will be converted into one share of Nonvoting Common Stock, par value
$0.01 per share ("Surviving Corporation Nonvoting Stock"), of the Surviving
Corporation (the "Class B Nonvoting Stock Consideration," and, together with the
Class B Cash Consideration, the "Class B Consideration"); provided, however that
each Class A/B Shareholder may elect to receive, in lieu of receiving the Class
B Nonvoting Stock Consideration, the Class B Cash Consideration for all shares
of Class B Stock held immediately prior to the Effective Time. Each holder of
Common Stock, $0.01 par value per share of First Command ("First Command Common
Stock"), issued and outstanding immediately prior to the Effective Time, subject
to and upon the terms and conditions of the Merger Agreement, will receive one
share of Surviving Corporation Nonvoting Stock for each 25 shares of First
Command Common Stock held by such shareholder. A copy of the Merger Agreement,
which sets forth, among other things, the terms and conditions concerning the
receipt of the Class A Consideration and the Class B Consideration
(collectively, the "Merger Consideration"), is attached as Annex A to the
accompanying Proxy Statement. You are urged to and should read the accompanying
Proxy Statement and related materials, which, among other things, provide a more
detailed description of the Merger Agreement, the Merger and the other
transactions contemplated thereby.
Your Board of Directors, based upon the unanimous recommendation of a
special committee of independent directors (the "Special Committee"), has
determined that the terms of the proposed Merger are fair to and in the best
interests of the shareholders of the Company (the "IRA Shareholders"), and has
unanimously approved the Merger
<PAGE>
Agreement and the Merger. In arriving at its decision, the Board of Directors
gave careful consideration to a number of factors, including the opinion of
PricewaterhouseCoopers LLP, financial advisor to the Special Committee, to the
effect that, as of the date of such opinion and based on, and subject to the
assumptions, limitations and qualifications set forth in such opinion, the
Merger Consideration to be received by the IRA Shareholders is fair to the Class
A Shareholders and the Class B Shareholders, from a financial point of view. THE
BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT.
The Merger requires the approval at the Special Meeting of (i) the
holders of at least 66-2/3% of the outstanding shares of Class A Stock and
Class B Stock, voting together as a single class, (ii) the holders of at
least 66-2/3% of the outstanding shares of Class A Stock and Class B Stock,
each voting separately as a class, and (iii) the holders of a majority of the
outstanding shares of Class B Stock not held by Class A/B Shareholders. As
of August 15, 1998, Lamar C. Smith, James N. Lanier, Howard M. Crump, Hal N.
Craig, Donaldson D. Frizzell, Jerry D. Gray, David P. Thoreson, Carroll H.
Payne II and Naomi K. Payne (collectively, the "Management Group"), each of
whom is an officer or director of the Company or First Command and is also a
Class A Shareholder, beneficially owned an aggregate of 16 shares of Class A
Stock and 238,504 shares of Class B Stock (representing approximately 64% and
25% of the outstanding Class A Stock and Class B Stock, respectively). Each
member of the Management Group intends to vote all shares of Class A Stock
and Class B Stock beneficially owned by him or her for approval of the Merger
Agreement.
WHETHER OR NOT YOU PLAN TO VOTE IN FAVOR OF THE MERGER AGREEMENT, IF YOU
ARE A CLASS A/B SHAREHOLDER, YOU SHOULD COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED FORM OF ELECTION IN THE ENCLOSED PRE-ADDRESSED POSTAGE-PREPAID
ENVELOPE. FAILURE TO RETURN A PROPERLY COMPLETED AND EXECUTED FORM OF ELECTION
TO THE PAYING AGENT BY THE ELECTION DEADLINE (AS DEFINED IN THE ACCOMPANYING
PROXY STATEMENT) WILL BE TREATED AS A NON-ELECTION (AS DEFINED IN THE
ACCOMPANYING PROXY STATEMENT) AND WILL RESULT IN YOUR RECEIVING THE CLASS B
NONVOTING STOCK CONSIDERATION IN RESPECT OF YOUR SHARES OF CLASS B STOCK, IN
ADDITION TO THE CLASS A CONSIDERATION IN RESPECT OF YOUR SHARES OF CLASS A
STOCK. AN ELECTION TO RECEIVE THE CLASS B NONVOTING STOCK CONSIDERATION OR THE
CLASS B CASH CONSIDERATION IN RESPECT OF YOUR CLASS B STOCK WILL NOT CONSTITUTE
A VOTE IN FAVOR OF THE APPROVAL OF THE MERGER AGREEMENT.
AS DESCRIBED ABOVE, AS A RESULT OF THE MERGER, THE CLASS B SHAREHOLDERS
WILL RECEIVE $28.24 FOR EACH SHARE OF CLASS B STOCK EXCHANGED, THE CLASS B STOCK
WILL BE ELIMINATED AND THE COMPANY WILL BE PRIVATELY OWNED BY THE CURRENT
HOLDERS OF CLASS A STOCK.
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the Special
Meeting, you are requested to complete, date, sign and return the enclosed proxy
card in the enclosed pre-addressed postage-prepaid envelope. Your shares will be
voted in accordance with the instructions you have given in your proxy. If no
instructions are given on your proxy, the shares represented by the proxy will
be voted at the Special Meeting in favor of the Merger Agreement and in
accordance with the Proxy Statement on any other business that may properly come
before the Special Meeting or any adjournments or postponements thereof. If you
do not return the accompanying form of proxy, your shares will not be voted in
favor of approval of the Merger Agreement and will have the same effect as a
vote against approval of the Merger Agreement. The proxy may be revoked at any
time prior to the vote at the Special Meeting by following the procedures set
forth in the accompanying Proxy Statement. If you attend the Special Meeting,
you may vote in person even if you have previously returned your proxy card.
The Board of Directors and management of the Company appreciate your
continued support. If you need assistance in completing your proxy card or Form
of Election, or if you have any questions about the Proxy Statement, please feel
free to contact Sandy Allen, Corporate Secretary of the Company, at (817)
731-8621.
Sincerely,
Lamar C. Smith
Chairman of the Board
<PAGE>
[LOGO]
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
4100 SOUTH HULEN STREET
FORT WORTH, TEXAS 76109
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON __________________, 1998
To the Shareholders of Independent Research Agency for Life Insurance, Inc.:
Notice is hereby given that a Special Meeting of Shareholders of
Independent Research Agency for Life Insurance, Inc., a Texas corporation (the
"Company"), will be held at :00 a.m. local time on _____________, 1998, at
4100 South Hulen Street, Fort Worth, Texas 76109 (the "Special Meeting") for the
following purposes:
1. To consider and vote on a proposal to approve the Agreement and Plan
of Merger, dated as of July 1, 1998 (the "Merger Agreement"), between the
Company and First Command Financial Corporation, a Texas corporation
("First Command"). Pursuant to the Merger Agreement, the Company will be
merged (the "Merger") with and into First Command, which will continue in
existence (the "Surviving Corporation").
2. To consider such other matters as may properly come before the Special
Meeting or any adjournment or postponement thereof.
The record date for determining the holders of shares of Class A Voting
Common Stock, par value $0.10 per share ("Class A Stock"), and Class B
Non-Voting Common Stock, par value $0.02 per share ("Class B Stock"), of the
Company entitled to receive notice of, and to vote at, the Special Meeting or
any adjournment or postponement thereof has been fixed as of the close of
business on _________________, 1998.
As a result of the Merger, the Class B Shareholders will receive $28.24
for each share of Class B Stock exchanged, the Class B Stock will be
eliminated and the Company will be privately owned by the current holders of
Class A Stock.
The Merger requires the approval at the Special Meeting of (i) the
holders of at least 66-2/3% of the outstanding shares of Class A Stock and
Class B Stock, voting together as a single class, (ii) the holders of at
least 66-2/3% of the outstanding shares of Class A Stock and Class B Stock,
each voting separately as a class, and (iii) the holders of a majority of the
outstanding shares of Class B Stock not held by Class A/B Shareholders.
You are urged to and should read the accompanying Proxy Statement and
related materials, which are incorporated herein by reference and form a part of
this Notice.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" APPROVAL OF THE MERGER AGREEMENT.
If the Merger is consummated, holders of either Class A Stock or Class B
Stock who properly demand appraisal of their Class A Stock or Class B Stock, as
applicable, prior to the shareholder vote, do not vote in favor of the approval
of the Merger Agreement, and otherwise comply with the requirements of Articles
5.12 and 5.13 of the Texas Business Corporation Act (the "TBCA") (all as more
fully described in the accompanying Proxy Statement) will be entitled to
statutory appraisal rights. A copy of Articles 5.11 through 5.13 of the TBCA is
attached as Annex C to the accompanying Proxy Statement.
_________________, 1998 By order of the Board of Directors
Sandra T. Allen, Corporate Secretary
<PAGE>
PRELIMINARY PROXY MATERIALS CONFIDENTIAL
FOR USE OF THE COMMISSION ONLY
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
PROXY STATEMENT
----------------------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON [DAY], [DATE], 1998
This Proxy Statement is being furnished to the shareholders of Independent
Research Agency for Life Insurance, Inc., a Texas corporation ("IRA" or the
"Company"), in connection with a special meeting of shareholders of IRA (the
"Special Meeting") to be held on __________, ___________, 1998 at
__________________ a.m., local time, at 4100 South Hulen Street, Fort Worth,
Texas 76109. The accompanying proxy is being solicited by IRA's Board of
Directors and is to be voted at the Special Meeting or at any adjournments or
postponements thereof.
At the Special Meeting, shareholders of IRA will be asked to consider and
vote upon a proposed merger (the "Merger") of IRA with and into First Command
Financial Corporation ("First Command"), a Texas corporation, pursuant to an
Agreement and Plan of Merger, dated as of July 1, 1998 (the "Merger Agreement"),
by and between the Company and First Command. In the Merger, the Company will be
merged with and into First Command, which will continue in existence (the
"Surviving Corporation").
As a result of the Merger, the Surviving Corporation will be privately
owned by the current holders of Class A Stock.
Upon the terms and conditions set forth in the Merger Agreement, in the
Merger, each share of Class A Voting Common Stock, par value $0.10 per share
("Class A Stock"), of the Company issued and outstanding immediately prior to
the Effective Time (as defined below) (other than shares of Class A Stock held
in treasury by the Company), subject to and upon the terms and conditions of the
Merger Agreement, will be converted into five shares of Voting Common Stock, par
value $0.01 per share ("Surviving Corporation Voting Stock"), of the Surviving
Corporation (the "Class A Consideration"). Further, (i) each share of Class B
Non-Voting Common Stock, par value $0.02 per share ("Class B Stock"), held by a
holder of Class B Stock (a "Class B Shareholder") that is not a holder of Class
A Stock, issued and outstanding immediately prior to the Effective Time, subject
to and upon the terms and conditions of the Merger Agreement, will be converted
into $28.24 in cash, without interest (the "Class B Cash Consideration"), and
(ii) each share of Class B Stock held by a Class B Shareholder that is also a
holder of Class A Stock (a "Class A/B Shareholder"), issued and outstanding
immediately prior to the Effective Time, subject to and upon the terms and
conditions of the Merger Agreement, will be converted into one share of
Nonvoting Common Stock, par value $0.01 per share ("Surviving Corporation
Nonvoting Stock"), of the Surviving Corporation (the "Class B Nonvoting Stock
Consideration," and, together with the Class B Cash Consideration, the "Class B
Consideration"); provided, however that each Class A/B Shareholder may elect to
receive, in lieu of receiving the Class B Nonvoting Stock Consideration, the
Class B Cash Consideration for all shares of Class B Stock held immediately
prior to the Effective Time. Each holder of Common Stock, $0.10 par value per
share, of First Command ("First Command Common Stock"), issued and outstanding
immediately prior to the Effective Time, subject to and upon the terms and
conditions of the Merger Agreement, will receive one share of Surviving
Corporation Nonvoting Stock for each 25 shares of First Command Common Stock
held by such shareholder. See "THE PROPOSED MERGER--Conversion of Shares."
A Form of Election (the "Form of Election") with which Class A/B
Shareholders may elect to receive the Class B Nonvoting Stock Consideration or
the Class B Cash Consideration for their shares of Class B Stock accompanies
this Proxy Statement. In order to elect the Class B Nonvoting Stock
Consideration or the Class B Cash Consideration, each Class A/B Shareholder must
submit a Form of Election to First Command Bank (the "Paying Agent") by no later
than 5:00 p.m. Central Daylight time on ____________________, 1998, (the
"Election
<PAGE>
Deadline"). The Form of Election accompanying this Proxy Statement contains
important information for Class A/B Shareholders concerning the timing and
procedures for making an election. Please read such materials carefully.
The Merger requires the approval at the Special Meeting of (i) the
holders of at least 66-2/3% of the outstanding shares of Class A Stock and
Class B Stock, voting together as a single class, (ii) the holders of at
least 66-2/3% of the outstanding shares of Class A Stock and Class B Stock,
each voting separately as a class, and (iii) the holders of a majority of the
outstanding shares of Class B Stock not held by Class A/B Shareholders.
Accordingly, failure to vote or abstentions will have the effect of a vote
against the Merger for the purpose of determining whether the requisite
approval by the holders of Class A Stock and Class B Stock is obtained. As
of August 15, 1998, Lamar C. Smith, James N. Lanier, Howard M. Crump, Hal N.
Craig, Donaldson D. Frizzell, Jerry D. Gray, David P. Thoreson, Carroll H.
Payne II and Naomi K. Payne (collectively, the "Management Group"), each of
whom is an officer or director of the Company or First Command and is also a
Class A Shareholder, beneficially owned an aggregate of 16 shares of Class A
Stock and 238,504 shares of Class B Stock (representing approximately 64% and
25% of the outstanding Class A Stock and Class B Stock, respectively). Each
member of the Management Group intends to vote all shares of Class A Stock
and Class B Stock beneficially owned by him or her for approval of the Merger
Agreement.
Approval of the Merger Agreement by the shareholders of First Command
requires the affirmative vote of more than 66-2/3% of the shares of First
Command Common Stock. As of the date hereof, members of the Management Group
beneficially own an aggregate of 975 shares of First Command Common Stock
(representing 97.5% of the outstanding First Command Common Stock). Each
such member of the Management Group intends to vote all shares of First
Command Common Stock beneficially owned by him or her for approval of the
Merger Agreement.
----------------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF THIS
TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN THIS DOCUMENT.
ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
IF THE PROPOSED MERGER IS CONSUMMATED, HOLDERS OF CLASS A STOCK AND
CLASS B STOCK WHO COMPLY WITH THE REQUIREMENTS OF ARTICLES 5.12 AND 5.13 OF
THE TEXAS BUSINESS CORPORATION ACT (THE "TBCA") ARE ENTITLED TO STATUTORY
DISSENTERS' APPRAISAL RIGHTS. TO PERFECT DISSENTERS' RIGHTS, A SHAREHOLDER
MUST SEND A NOTICE TO THE CORPORATION BEFORE THE DATE OF THE VOTE AND MUST
NOT VOTE IN FAVOR OF THE MERGER BY PROXY OR OTHERWISE. A COPY OF ARTICLES
5.11 THROUGH 5.13 OF THE TBCA IS ATTACHED TO THIS PROXY STATEMENT AS ANNEX C.
SEE "THE PROPOSED MERGER--RIGHTS OF DISSENTING SHAREHOLDERS."
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT IN CONNECTION
WITH THE SOLICITATION OF PROXIES AND, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY FIRST
COMMAND OR THE COMPANY. THIS PROXY STATEMENT DOES NOT CONSTITUTE THE
SOLICITATION OF A PROXY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT
IS UNLAWFUL TO MAKE SUCH SOLICITATION.
<PAGE>
Only holders of record of Class A Shares and/or Class B Shares at the
close of business on [RECORD DATE] are entitled to notice of and to vote at
the Special Meeting. At the close of business on [RECORD DATE], a total of
25 Class A Shares and ______________ Class B Shares were outstanding. Each
share of Class A Stock and Class B Stock is entitled to one vote with respect
to the approval of the Merger Agreement at the Special Meeting. With regard
to any other matters presented at the Special Meeting, each share of Class A
Stock will be entitled to one vote, and the Class B Shareholders will not be
entitled to vote on such matters. See "THE SPECIAL MEETING--Votes Required;
Voting Rights." This Proxy Statement is first being sent to shareholders on
or about [MAILING DATE].
In addition to solicitation by use of the mails, proxies may be solicited
by directors, officers and employees of IRA in person or by telephone, telegram
or other means of communications. Such directors, officers and employees will
not be additionally compensated but may be reimbursed for reasonable
out-of-pocket expenses in connection with such solicitation. No proxy
solicitation firm has been retained to assist with soliciting and tabulating
proxies for the Special Meeting. Expenses in connection with the solicitation of
proxies will be paid by the Company.
THE DATE OF THIS PROXY STATEMENT IS ________________, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS. . . . . . . . . . . . . . . 1
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Independent Research Agency for Life Insurance, Inc. . . . . . . . . 2
First Command Financial Corporation. . . . . . . . . . . . . . . . . 2
Trading Markets and Market Price Data. . . . . . . . . . . . . . . . 2
Special Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . 3
Source and Amount of Funds . . . . . . . . . . . . . . . . . . . . . 3
Purpose and Structure of the Merger. . . . . . . . . . . . . . . . . 3
Certain Effects of the Merger; Plans for the Company Following
the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Contracts with Respect to Surviving Corporation Common Stock . . . . 5
Recommendation of the IRA Board and the Special Committee; Fairness
of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 5
Position of Management Group and First Command . . . . . . . . . . . 5
Opinion of the Financial Advisor . . . . . . . . . . . . . . . . . . 5
Interests of Certain Persons in the Merger . . . . . . . . . . . . . 6
Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . 6
Certain Transactions in IRA Common Stock . . . . . . . . . . . . . . 6
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . 6
Regulatory Filings and Approvals . . . . . . . . . . . . . . . . . . 7
Certain Federal Income Tax Consequences of the Merger. . . . . . . . 7
The Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Time, Date and Place . . . . . . . . . . . . . . . . . . . . . . . . 7
Purpose of the Special Meeting . . . . . . . . . . . . . . . . . . . 7
Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Voting Rights; Votes Required. . . . . . . . . . . . . . . . . . . . 8
Security Ownership of IRA's Management . . . . . . . . . . . . . . . 8
Revocability of Proxy. . . . . . . . . . . . . . . . . . . . . . . . 8
The Proposed Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Closing; Effective Time. . . . . . . . . . . . . . . . . . . . . . . 8
Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . 9
Class A/B Shareholders Election; Procedures. . . . . . . . . . . . . 9
Charter and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . .10
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . .10
Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Rights of Dissenting Shareholders. . . . . . . . . . . . . . . . . .12
SELECTED FINANCIAL DATA OF IRA . . . . . . . . . . . . . . . . . . . . . . . .13
SELECTED FINANCIAL DATA OF FIRST COMMAND . . . . . . . . . . . . . . . . . . .15
SUMMARY PRO FORMA DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
i
<PAGE>
SPECIAL FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Background of the Merger. . . . . . . . . . . . . . . . . . . . . . . . .18
Source and Amount of Funds. . . . . . . . . . . . . . . . . . . . . . . .20
Credit Facility. . . . . . . . . . . . . . . . . . . . . . . . . . .21
Purpose and Structure of the Merger . . . . . . . . . . . . . . . . . . .22
Certain Effects of the Merger; Plans for the Company after
the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Contracts with Respect to Surviving Corporation Common Stock. . . . . . .24
Surviving Corporation Shareholders' Agreement. . . . . . . . . . . .24
Recommendation of the IRA Board and the Special Committee;
Fairness of the Merger . . . . . . . . . . . . . . . . . . . . . . .25
Position of the Management Group and First Command as to the
Fairness of the Merger . . . . . . . . . . . . . . . . . . . . . . .26
Opinion of the Financial Advisor. . . . . . . . . . . . . . . . . . . . .26
Income Approach. . . . . . . . . . . . . . . . . . . . . . . . . . .27
Transaction Approach . . . . . . . . . . . . . . . . . . . . . . . .27
Market Multiple Approach. . . . . . . . . . . . . . . . . . . . . . . . .27
American Annuity Group, Inc. . . . . . . . . . . . . . . . . . . . .27
Cotton States Life Insurance Company . . . . . . . . . . . . . . . .27
Kansas City Life Insurance Company . . . . . . . . . . . . . . . . .27
Current/Historical Market Pricing and Shareholder Agreement
Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Adjusted Book Value Approach. . . . . . . . . . . . . . . . . . . . . . .28
Interests of Certain Persons in the Merger. . . . . . . . . . . . . . . .29
Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . .30
Certain Transactions in IRA Common Stock. . . . . . . . . . . . . . . . .30
Purchases By IRA . . . . . . . . . . . . . . . . . . . . . . . . . .30
Recent Transactions. . . . . . . . . . . . . . . . . . . . . . . . .31
Purchases By Management Group. . . . . . . . . . . . . . . . . . . .31
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . .31
Regulatory Filings and Approvals. . . . . . . . . . . . . . . . . . . . .31
Certain Federal Income Tax Considerations . . . . . . . . . . . . . . . .31
Certain Consequences of Reorganization Status. . . . . . . . . . . .32
The Company and the Surviving Corporation . . . . . . . . . . .32
Class A/B Shareholders. . . . . . . . . . . . . . . . . . . . .32
Shareholders Who Own Only Class B Stock . . . . . . . . . . . .33
Certain Post-Merger Considerations for Surviving
Shareholders . . . . . . . . . . . . . . . . . . . . . . .33
Treatment as an S Corporation . . . . . . . . . . . . . . . . .33
Taxation of Surviving Corporation . . . . . . . . . . . . . . .33
Taxation of Surviving Corporation Shareholders. . . . . . . . .34
Tax Opinion Engagement . . . . . . . . . . . . . . . . . . . . . . .34
CERTAIN INFORMATION CONCERNING IRA . . . . . . . . . . . . . . . . . . . . . .34
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Directors and Executive Officers of IRA . . . . . . . . . . . . . . . . .35
Mission Accomplishment Plan . . . . . . . . . . . . . . . . . . . . . . .35
ii
<PAGE>
CERTAIN INFORMATION CONCERNING FIRST COMMAND . . . . . . . . . . . . . . . . .36
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Directors and Executive Officers of First Command . . . . . . . . . . . .38
CERTAIN INFORMATION CONCERNING THE MANAGEMENT GROUP. . . . . . . . . . . . . .39
THE SPECIAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Votes Required; Voting Rights . . . . . . . . . . . . . . . . . . . . . .40
Dissenters' Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . .41
Revocability of Proxies . . . . . . . . . . . . . . . . . . . . . . . . .42
THE PROPOSED MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Closing; Effective Time . . . . . . . . . . . . . . . . . . . . . . . . .42
Conversion of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . .42
Shareholder Elections . . . . . . . . . . . . . . . . . . . . . . . . . .43
The Merger Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . .44
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . .44
Charter and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . .44
Filings; Other Actions; Notification . . . . . . . . . . . . . . . .44
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . .45
Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . .45
Takeover Statute . . . . . . . . . . . . . . . . . . . . . . . . . .46
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . .46
Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
IRA Charter Business Combination Provision. . . . . . . . . . . . . . . .47
State Anti-takeover Statutes. . . . . . . . . . . . . . . . . . . . . . .48
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . . . . .49
MARKET PRICE DATA, DISTRIBUTIONS AND SECURITY OWNERSHIP OF IRA
COMMON STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
Number of Security Holders. . . . . . . . . . . . . . . . . . . . . . . .51
Distribution History. . . . . . . . . . . . . . . . . . . . . . . . . . .51
Security Ownership of Management and Certain Beneficial Owners of IRA
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
MARKET PRICE DATA, DISTRIBUTIONS AND SECURITY OWNERSHIP OF FIRST COMMAND
COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
Number of Security Holders. . . . . . . . . . . . . . . . . . . . . . . .54
Distribution History. . . . . . . . . . . . . . . . . . . . . . . . . . .54
Security Ownership of Management and Certain Beneficial Owners of First
Command Common Stock . . . . . . . . . . . . . . . . . . . . . . . .54
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF IRA . . . . . . . . .54
iii
<PAGE>
DESCRIPTION OF IRA CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . .62
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
Class A Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
Class B Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
Distributions; Preemptive Rights; Liquidation . . . . . . . . . . . . . .63
DESCRIPTION OF THE SURVIVING CORPORATION CAPITAL STOCK . . . . . . . . . . . .64
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
Restrictions on Transfer of Shares. . . . . . . . . . . . . . . . . . . .64
Subchapter S Provisions . . . . . . . . . . . . . . . . . . . . . . . . .65
Revocation of Election . . . . . . . . . . . . . . . . . . . . . . .65
Inadvertent Termination of Subchapter S Election . . . . . . . . . .65
Provision in Shareholder Wills . . . . . . . . . . . . . . . . . . .66
Distributions to Pay Tax Liabilities . . . . . . . . . . . . . . . .66
Nonrecognition of Certain Transfers. . . . . . . . . . . . . . . . .67
Legends on Share Certificates. . . . . . . . . . . . . . . . . . . .67
Election to Close Books. . . . . . . . . . . . . . . . . . . . . . .67
Business Combination Provision. . . . . . . . . . . . . . . . . . . . . .67
Classified Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . .67
INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
OTHER MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . . . . . . . . .69
FIRST COMMAND FINANCIAL CORPORATION INDEX TO BALANCE SHEETS. . . . . . . . . F-1
</TABLE>
ANNEX A -- Agreement and Plan of Merger
ANNEX B -- Opinion of the Financial Advisor
ANNEX C -- Provisions of the Texas Business Corporation Act Relating to
Rights of Dissenting Shareholders
ANNEX D -- IRA Annual Report on Form 10-K for the Fiscal Year Ended
September 30, 1997, and Quarterly Report on Form 10-Q for the
Period Ended June 30, 1998
ANNEX E -- Articles of Incorporation, as Proposed to be Amended, and
Bylaws, as Proposed to be Amended, of Surviving Corporation
ANNEX F -- Tax Opinion of Ernst & Young LLP
iv
<PAGE>
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this Proxy Statement and in
documents incorporated herein by reference may be considered forward-looking
statements, including, without limitation, (i) the financial data provided in
"PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS" and the statements in
"SUMMARY PRO FORMA DATA," (ii) the statements in "SPECIAL FACTORS--Purpose
and Structure of the Merger" and "--Certain Effects of the Merger; Plans for
the Company after the Merger," (iii) the statements in "SPECIAL FACTORS--
Recommendation of the IRA Board, the Special Committee and First Command;
Fairness of the Merger" and "--Opinion of the Financial Advisor" concerning,
among other things, prospective considerations that the IRA Board of
Directors (the "IRA Board") took into account in arriving at its
recommendation in favor of the Merger and (iv) variations in the foregoing
statements whenever they appear in this Proxy Statement and the documents
incorporated herein by reference. Forward-looking statements are made based
upon either IRA management's current expectations and beliefs concerning
future developments and their potential effects upon IRA and, if applicable,
the Surviving Corporation. There can be no assurance that future developments
affecting IRA or the Surviving Corporation will be those anticipated by their
respective managements. Actual results may differ materially from those
included in the forward-looking statements. These forward-looking statements
involve risks and uncertainties including, but not limited to, the following:
the event of armed conflict; changes that affect the number of active U.S.
military personnel; changes in general economic conditions, including the
performance of financial markets, interest rates and the level of personal
bankruptcies; customer responsiveness to existing and new services;
competitive, regulatory or tax changes that affect the cost of or demand for
IRA's or the Surviving Corporation's services; adverse litigation results;
and other factors set forth elsewhere in this Proxy Statement and in the
documents incorporated by reference herein.
While IRA reassesses material trends and uncertainties affecting its
financial condition and results of operations, in connection with its
preparation of management's discussion and analysis of financial condition and
results of operations contained in the Company's quarterly and annual reports,
neither IRA nor the Surviving Corporation intends to review or revise in light
of future events any particular forward-looking statement referenced in this
Proxy Statement or incorporated herein by reference.
The information referred to above should be considered by shareholders
of IRA (the "IRA Shareholders") when reviewing any forward-looking statements
contained in this Proxy Statement, in any documents incorporated herein by
reference, in any of IRA's public filings or press releases or in any oral
statements made by either IRA, First Command, the Surviving Corporation, or
any of their respective officers or other persons acting on their behalf.
1
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT. IT IS NOT, AND IS NOT INTENDED TO BE, COMPLETE IN ITSELF.
REFERENCE IS MADE TO, AND THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, THE
MORE DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS PROXY STATEMENT,
INCLUDING THE ANNEXES HERETO WHICH ARE A PART OF THIS PROXY STATEMENT.
SHAREHOLDERS ARE ENCOURAGED TO READ CAREFULLY ALL OF THE INFORMATION CONTAINED
IN THIS PROXY STATEMENT.
IRA SHAREHOLDERS SHOULD CONSIDER CAREFULLY THE INFORMATION SET FORTH
HEREIN UNDER THE HEADING "SPECIAL FACTORS" IN ADDITION TO THE OTHER INFORMATION
PRESENTED HEREIN.
<TABLE>
<CAPTION>
THE COMPANIES
<S> <C>
Independent Research IRA was incorporated in 1980 under the laws of the
Agency for Life State of Texas and is engaged, directly and
Insurance, Inc. . . . indirectly through subsidiaries, in the business
of a life insurance general agency for sales to
United States military personnel. The Company
conducts its operations in all fifty states, the
District of Columbia, the territory of Guam, the
United Kingdom, Germany and Italy. The Company's
wholly-owned subsidiary, United Services Planning
Association, Inc., is also a Texas corporation and
is a broker-dealer of securities. The Company's
wholly-owned subsidiary, First Command Bank, is a
federal savings bank. The Company's principal
executive offices are located at 4100 South Hulen
Street, Fort Worth, Texas 76109, and its telephone
number is (817) 731-8621. See "CERTAIN
INFORMATION CONCERNING IRA."
First Command Financial First Command, a Texas corporation, was
Corporation . . . . . incorporated on April 1, 1998, for the purpose of
constructing and operating a parking garage (the
"Parking Garage") adjacent to the current
executive offices of IRA. First Command plans to
rent parking spaces to current and future tenants
leasing space in IRA's building with the remaining
parking spaces to be rented to IRA's employees.
IRA has agreed to loan First Command funds to
complete the garage construction. The principal
executive offices of First Command are located at
4100 South Hulen Street, Fort Worth, Texas 76109,
and its telephone number is (817) 731-8621. See
"CERTAIN INFORMATION CONCERNING FIRST COMMAND."
First Command is owned by certain Class A
Shareholders of the Company and is not a subsidiary
of the Company.
The Management The Merger is a "going private transaction"
Group . . . . . . . . under the federal securities laws. Certain
individuals who (i) are executive officers and
directors of IRA, (ii) are Class A
Shareholders, (iii) will retain their position
in the Surviving Corporation after the Merger
and (iv) will retain their equity interest in
the Surviving Corporation, are affiliates
engaged in the going private transaction.
These individuals, each a director of IRA, are
(i) Lamar C. Smith, Chairman of the Board and
Chief Executive Officer of IRA, and Chairman of
the Board, Chief Executive Officer and a
director of First Command, (ii) James N.
Lanier, President and Chief Operating Officer
of IRA, and President, Chief Operating Officer
and a director of First command, (iii) Howard
M. Crump, Senior Vice President and Director of
Marketing of IRA, and Vice President and a
director of First Command, (iv) Carroll H.
Payne II, who is also a director of First
Command, (v) Naomi K. Payne, (vi) Hal N. Craig,
(vii) Donaldson D. Frizzell, (viii) Jerry D.
Gray, and (ix) David P. Thoreson (collectively,
the "Management Group"). See "CERTAIN
INFORMATION CONCERNING THE MANAGEMENT GROUP."
Trading Markets and There is not now and never has been a trading
Market Price Data . . market for shares of either Class A Stock or Class
B Stock, because of certain statutory and
contractual restrictions concerning the ownership
and disposition of such shares. See "MARKET PRICE
DATA, DISTRIBUTIONS AND SECURITY OWNERSHIP OF IRA
COMMON STOCK."
There is currently no market, and it is
anticipated that no market will develop, for the
Surviving Corporation Voting Common Stock or the
Surviving Corporation Nonvoting Common Stock
(collectively, the "Surviving Corporation Common
Stock"), because of certain statutory and
contractual restrictions concerning the ownership
of such shares. See "MARKET PRICE DATA,
DISTRIBUTIONS AND SECURITY OWNERSHIP OF FIRST
COMMAND COMMON STOCK."
2
<PAGE>
<CAPTION>
SPECIAL FACTORS
<S> <C>
Background of the For a description of events leading to the
Merger . . . . . . . . . approval and adoption of the Merger Agreement by
the Boards of Directors of the Company and First
Command, see "SPECIAL FACTORS--Background of the
Merger."
Source and Amount of Approximately $16.9 million will be required to
Funds . . . . . . . . . . pay the Merger Consideration (assuming that no
Class A/B Shareholder elects to receive the Class
B Cash Consideration), and approximately $1.2
million will be required to pay fees and expenses
related to the Merger. Approximately $2.1 million
of the cash required in connection with the Merger
will be provided by the working capital of IRA,
and approximately $16 million of the cash required
in connection with the Merger will be provided
from the Credit Facility (as defined below). See
"SPECIAL FACTORS--Source and Amount of Funds."
Purpose and Structure of First Command was formed on April 1, 1998, as a
the Merger . . . . . Texas corporation, to construct, own and operate
the Parking Garage adjacent to the executive
offices of IRA. IRA has agreed to provide First
Command with funds pursuant to an interest-bearing
loan to construct the Parking Garage. First
Command was organized as an entity distinct from
IRA to limit potential liability of IRA with
respect to the ownership, construction and
operation of the Parking Garage. As First Command
presently has a limited number of shareholders and
meets the other requirements of S corporation
status, First Command elected S corporation status
in order for its taxable items to "flow through"
to its shareholders. See "SPECIAL
FACTORS--Certain Effects of the Merger; Plans for
the Company after the Merger."
One objective of the Company is to deregister the
Class B Stock under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), which
will cause the Company to no longer be subject to
the reporting requirements of the Exchange Act.
The Company currently incurs costs related to its
status as a public reporting corporation under the
federal securities laws, including indirect costs
as a result of, among other things, the executive
time expended to prepare and review various
filings, furnish information to shareholders and
to attend to other shareholder matters. The
Company anticipates that termination of
registration under the Exchange Act will eliminate
the costs and expenses of various federal
securities filings incurred by the Company with
respect to regulatory and reporting requirements
of the Exchange Act and will reduce the amount of
time devoted by management in connection
therewith. Further, the Company has faced certain
competitive disadvantages resulting from the
public reporting requirements of the Exchange Act.
Also, management of the Company believes that
access to public markets by the Company and its
shareholders will not occur because of the
restrictions on ownership of the Class B Stock.
Additionally, the Company believes that it will
qualify for S corporation status immediately
following the elimination of the Class B Stock.
Management of the Company recognized that, if the
Class B Stock were eliminated, both IRA and First
Command would qualify for S corporation status.
As a result, in order to achieve administrative
simplicity, reduce compliance responsibilities and
eliminate public reporting requirements as
described above, the management of IRA and the
management of First Command decided that IRA
should merge with and into First
3
<PAGE>
Command, rather than to continue both as separate
S corporations. Immediately prior to the Merger,
First Command will transfer all of its assets,
subject to all of its liabilities, to a newly-formed
limited liability company or Qualified Subchapter S
Subsidiary (as defined in the Internal Revenue
Code of 1986, as amended (the "Code")) in return
for all of the capital stock of such subsidiary to
keep the planned operations of First Command
separate and distinct from IRA subsequent to the
Merger. Because First Command currently has
elected to be treated as an S corporation under
the federal tax laws, upon the consummation of the
Merger, the holders of Class A Stock that do not
seek appraisal rights under Articles 5.12 and 5.13
of the TBCA will be shareholders of the Surviving
Corporation, which should be an S corporation.
Accordingly, such holders of Class A Stock, as
holders of Surviving Corporation Voting Stock, and
Class A/B Shareholders that elect to receive
Surviving Corporation Nonvoting Stock for their
Class B Stock will be entitled to the tax
treatment that shareholders of an S corporation
receive under the federal tax laws. See "SPECIAL
FACTORS--Certain Effects of the Merger; Plans for
the Company after the Merger."
The Management Group has engaged in the
transactions contemplated by the Merger
Agreement to assist the Company in attaining
the objectives described above. See "SPECIAL
FACTORS--Purpose and Structure of the Merger."
Certain Effects of the Following the Merger, (i) the holders of Class A
Merger; Plans for the Stock (the "Class A Shareholders"), (ii) the Class
Company Following the A/B Shareholders that elect to receive Surviving
Merger . . . . . . . . . Corporation Nonvoting Stock and (iii) the holders
of First Command Common Stock (the "First Command
Shareholders") will own 100% of the capital stock
of the Surviving Corporation, to the extent that
such shareholders do not elect to seek appraisal
rights. As such, these persons will be the direct
beneficiaries of any future earnings and growth of
the Surviving Corporation, and will have the
ability to benefit from any divestitures,
strategic acquisitions or other corporate
opportunities that may be pursued by the
Company in the future. Upon consummation of the
Merger, the Class B Shareholders that are not
Class A/B Shareholders will cease to have any
direct ownership interest in the Company or
other rights as shareholders of the Company,
including the right to receive distributions.
After the Merger, such shareholders will
benefit from any increases in the cash flow or
the value of the Surviving Corporation only as
a result of any MAP Units (as defined herein)
that such shareholders may then hold. As a
result of the Merger, the Surviving Corporation
will be privately held by the current holders
of Class A Stock, including the Management
Group. See "SPECIAL FACTORS--Certain Effects of
the Merger; Plans for the Company after the
Merger."
Pursuant to the Articles of Incorporation of the
Surviving Corporation and the Surviving
Corporation Shareholders' Agreement (as defined
below), the Surviving Corporation has agreed to
declare and make distributions to all shareholders
of the Surviving Corporation (the "Surviving
Corporation Shareholders") to allow them to pay
their federal income tax liability attributable to
their distributive share of the Surviving
Corporation's taxable income. In addition, the
IRA Board has provided the Class A/B Shareholders
the right to receive the Class B Nonvoting Stock
Consideration. See "SPECIAL FACTORS--Background of
the Merger." Further, the IRA Board, which will
be the Board of the Surviving Corporation upon
consummation of the Merger, anticipates that the
Surviving Corporation, subject to the fiduciary
duties of the Board of Directors of the Surviving
Corporation and the ongoing financial condition of
the Surviving Corporation, will declare and make
distributions that are pro rata to all
shareholders on the
4
<PAGE>
Surviving Corporation Common Stock that
are intended to approximate the income that the
Class A/B Shareholder would have received
from the competitive reinvestment of the Class B
Cash Consideration, taking into account certain
income tax considerations. In the event the
Surviving Corporation makes ongoing repurchases of
the Surviving Corporation Voting Stock or
Surviving Corporation Nonvoting Stock, the IRA
Board presently anticipates that the repurchase
price for such shares will be $28.24 per share,
unless otherwise determined by the Board of
Directors of the Surviving Corporation. See
"SPECIAL FACTORS--Certain Effects of the Merger;
Plans for the Company after the Merger."
Contracts with Respect to Upon the Effective Time, the management of the
Surviving Corporation Surviving Corporation will request that all
Common Stock . . . . . . Surviving Corporation Shareholders, including
the Management Group, execute the Surviving
Corporation Shareholders' Agreement. The
Surviving Corporation Shareholders' Agreement
provides for, among other things, certain
restrictions on the transfer of the Surviving
Corporation Common Stock held by such Agreeing
Parties and the requirement that shareholders
tender their shares to the Surviving
Corporation upon the occurrence of certain
operative events, such as prior to any transfer
of the shares, the death or divorce of the
shareholder, the termination of the shareholder
as a duly authorized agent of the Surviving
Corporation or the termination of the
shareholder as a Texas life insurance agent.
The Surviving Corporation Shareholders'
Agreement also contains certain provisions
concerning the S corporation status of the
Surviving Corporation. Further, pursuant to
the Surviving Corporation Shareholders'
Agreement, the Surviving Corporation has agreed
to declare and make distributions to all of its
shareholders, including the Management Group,
in a timely manner to allow them to pay their
federal income tax liability attributable to
their distributive share of the Surviving
Corporation's taxable income. See "SPECIAL
FACTORS--Contracts with Respect to Surviving
Corporation Common Stock."
Recommendation of the IRA The IRA Board, based upon the unanimous
Board and the Special recommendation of the Special Committee, has
Committee; Fairness of the determined that the terms of the proposed Merger
Merger . . . . . . . . . are fair to and in the best interests of the IRA
Shareholders, including Class B Shareholders who
do not own Class A Stock, and unanimously approved
the Merger Agreement. In arriving at its decision,
the IRA Board gave careful consideration to a
number of factors, including the written opinion
of PricewaterhouseCoopers LLP, formerly known
as Coopers & Lybrand LLP (the "Financial
Advisor"), financial advisor to the Special
Committee. ACCORDINGLY, THE IRA BOARD
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT. The Board of
Directors of First Command has also unanimously
approved the Merger Agreement. See "SPECIAL
FACTORS--Recommendation of the IRA Board and
the Special Committee; Fairness of the Merger."
Position of the The members of the Management Group have
Management Group and considered the process by which the Company
First Command . . . . determined the terms of the Merger and certain
additional factors examined by the Special
Committee and the IRA Board (described in
detail in "SPECIAL FACTORS--Recommendation of
the IRA Board and the Special Committee;
Fairness of the Merger). Members of the
Management Group believe that these factors,
when considered together, provide a reasonable
basis for them to believe, as they do, that the
Merger is fair to the IRA Shareholders,
including Class B Shareholders who do not own
Class A Stock.
The rules of the Securities and Exchange
Commission require First Command to express its
belief as to the fairness of the Merger to the IRA
Shareholders. While First Command has not
undertaken any independent evaluation of the
Merger from the standpoint of fairness to the
Company's shareholders, it has considered the
factors that were taken into account by the
Special Committee and the IRA Board (described in
detail in "SPECIAL FACTORS--Recommendation of the
IRA Board and the Special Committee; Fairness of
the Merger) and by the members of the Management
Group. Based solely on these factors, First
Command believes that the Merger is fair to the
IRA Shareholders, including Class B Shareholders
who do not own Class A Stock.
These beliefs should not, however, be construed as
a recommendation to the IRA Shareholders by the
members of the Management Group in their capacity
as shareholders or First Command to vote or
approve the Merger Agreement. See "SPECIAL
FACTORS--Position of the Management Group and
First Command." Members of the Management Group
and the officers, directors and principal
shareholders of First Command are executive
officers or directors of the Company and have an
interest in the contemplated Merger. See "SPECIAL
FACTORS--Interests of Certain Persons in the
Merger."
Opinion of the Financial On June 27, 1998, the Financial Advisor delivered
Advisor . . . . . . . . . its report and form of written opinion to the
Special Committee and the IRA Board to the effect
that as of such date and based upon and subject to
the assumptions, limitations and qualifications
set forth in such opinion, the Merger is fair to
the Class A Shareholders and the Class B
Shareholders from a financial point of view. The
Financial Advisor indicated that it was prepared
to deliver its written opinion in such form when
requested to do so by the Special Committee. The
Financial Advisor subsequently confirmed such
opinion by delivery of its written opinion, dated
as of the date of this Proxy Statement (the
"Financial Advisor Opinion"). A copy of the
Financial
5
<PAGE>
Advisor Opinion which sets forth the
assumptions made, procedures followed, other
matters considered and limits of its review is
attached hereto as Annex B. Shareholders are urged
to and should read the Financial Advisor Opinion
in its entirety. See "SPECIAL FACTORS--Opinion of
the Financial Advisor."
Interests of Certain Class B Shareholders should be aware in
Persons in the Merger . . considering whether to vote in favor of the Merger
that the Management Group, along with other
Class A/B Shareholders, have interests in the
Merger in addition to their interests as
shareholders of IRA generally. Those interests
relate to, among other things, the fact that
each of the members of the Management Group is
a Class A Shareholder and, as such, upon
consummation of the Merger will be a
shareholder of the Surviving Corporation,
unless such member of the Management Group
elects to seek appraisal rights for his Class A
Stock. Further, the IRA Board and the
executive officers of IRA will be the directors
and executive officers of the Surviving
Corporation upon consummation of the Merger.
As a result, each member of the Management
Group that is currently an officer or director
of the Company will retain his or her position
with the Surviving Corporation upon
consummation of the Merger. See "CERTAIN
INFORMATION CONCERNING IRA--Directors and
Executive Officers of IRA."
The Merger Agreement provides that IRA, and, after
the Effective Time (as defined below), the
Surviving Corporation, will indemnify (and advance
expenses to) each present and former director,
officer and employee of IRA and its subsidiaries
(the "Indemnified Parties") to the fullest extent
permitted under applicable law or under the
Articles of Incorporation and Bylaws of IRA and
the Surviving Corporation against any costs
incurred in connection with any claim, proceeding
or investigation relating to matters occurring
prior to or at the Effective Time, including the
transactions contemplated by the Merger Agreement.
See "THE PROPOSED MERGER--The Merger
Agreement--Indemnification."
Employment Agreements . . The IRA Board anticipates that the Surviving
Corporation will enter into employment agreements
with each of the Surviving Corporation
Shareholders who are also employees of the
Surviving Corporation. See "SPECIAL
FACTORS--Employment Agreements."
Certain Transactions in See "SPECIAL FACTORS--Certain Transactions in
IRA Common Stock . . . . Company Stock."
Accounting Treatment . . The Merger of the Company into First Command
will be accounted for at carryover historical
cost basis, as the controlling voting
shareholders of the Company retain the voting
control of the Surviving Corporation.
The conversion of each share of Class A Stock
issued and outstanding into five shares of
Surviving Corporation Voting Stock will, in
effect, result in the net assets of the Company
being recorded at their existing carrying value on
the accounting records of the Surviving
Corporation in conformity with generally accepted
accounting principles ("GAAP"). The purchase of
the Class B Stock for the Class B Cash
Consideration will reduce the shareholders' equity
of the Surviving Corporation by a corresponding
amount. See "SPECIAL FACTORS--Accounting
Treatment."
6
<PAGE>
Regulatory Filings and See "SPECIAL FACTORS--Regulatory Filings and
Approvals . . . . . . . . Approvals."
Certain Federal Income A Class A/B Shareholder should not recognize gain
Tax Consequences of the or loss upon the exchange of Class A Stock solely
Merger . . . . . . . . . into Surviving Corporation Voting Common Stock
and Class B Stock solely into Surviving
Corporation Nonvoting Common Stock, unless he
or she elects the cash option with respect to
his or her Class B Stock. Assuming the Class
A/B Shareholder does not elect the cash option,
his or her tax basis in shares of Surviving
Corporation Common Stock received pursuant to
the Merger should be the same as the tax basis
of the shares of Class A/B Shareholder
surrendered in exchange therefor. A Class A/B
Shareholder who elects the cash option should
consult his or her own tax advisor(s)
concerning the election of that option. A
Class B Shareholder that is not a Class A/B
Shareholder and is not related to any
shareholder of the Surviving Corporation should
recognize gain or loss equal to the difference
between the amount of the Class B Cash
Consideration and the Class B Shareholder's tax
basis in all the shares of Class B Stock
surrendered in exchange therefor. The Company
should not recognize any gain or loss as a
result of the Merger for U.S. federal income
tax purposes. See "SPECIAL FACTORS--Certain
Federal Income Tax Consequences of the Merger."
Ernst & Young LLP ("Ernst & Young") has provided
the Company with an opinion (the "Tax Opinion"),
attached as Annex F, with respect to certain
United States federal income tax consequences that
should arise from the Merger and the
implementation of the Mission Accomplishment Plan
(as described herein).
<CAPTION>
THE SPECIAL MEETING
<S> <C>
Time, Date and Place . . The Special Meeting will be held on ____________,
1998, _________ a.m., local time, at 4100 South
Hulen Street, Fort Worth, Texas 76109.
Purpose of the Special Class A Shareholders and Class B Shareholders will
Meeting . . . . . . . . . consider and vote upon a proposal to approve the
Merger Agreement between the Company and First
Command. Class A Shareholders and Class B
Shareholders, to the extent that Class B Stock is
permitted to vote on such matters, will also
consider and vote upon all other matters as may
properly be brought before the Special Meeting.
See "THE SPECIAL MEETING" and "THE PROPOSED
MERGER."
Record Date . . . . . . . Only shareholders of record of Class A Stock
and/or Class B Stock at the close of business on
____________, 1998 (the "Record Date"), are
entitled to notice of and to vote at the Special
Meeting. On such date, there were outstanding
25 shares of Class A Stock and ________________
shares of Class B Stock held by holders of record.
See "THE SPECIAL MEETING--Record Date."
Quorum . . . . . . . . . The presence, in person or by proxy, of the
holders of a majority of Class A Stock and the
holders of a majority of Class B Stock entitled to
vote at the Special Meeting is necessary to
constitute a quorum for the transaction of
business at such meeting. See "THE SPECIAL
MEETING--Quorum." Abstentions are counted for
purposes of determining whether a quorum exists at
the Special Meeting. However, proxies that
reflect abstentions and proxies that are not
returned will have the same effect as a vote
against approval of the Merger Agreement because
the affirmative vote of (i) the holders of at
least 66-2/3% of the outstanding shares
7
<PAGE>
of Class A Stock and Class B Stock, voting together
as a single class, (ii) the holders of at
least 66-2/3% of the outstanding shares of
Class A Stock and Class B Stock, each voting
separately as a class, and (iii) the holders of
at least a majority of the outstanding shares of
Class B Stock not held by Class A/B Shareholders,
is required to approve the Merger Agreement. See
"THE SPECIAL MEETING-- Votes Required; Voting
Rights."
Voting Rights; Votes Each share of Class A Stock and Class B Stock is
Required . . . . . . . . entitled to one vote with respect to the approval
of the Merger at the Special Meeting. With regard
to any other matters presented at the Special
Meeting, each share of Class A Stock will be
entitled to one vote, and the Class B Shareholders
will not be entitled to vote. See "THE SPECIAL
MEETING--Votes Required; Voting Rights."
As of the Record Date, there were ___________
shares of Class B Stock held by persons other
than the Management Group. _____________
shares of Class B Stock will be needed to
approve the Merger in addition to the number of
shares of Class B Stock held by Class A/B
Shareholders.
The affirmative vote of (i) the holders of at
least 66-2/3% of the outstanding shares of Class A
Stock and Class B Stock, voting together as a
single class, (ii) the holders of at least
66-2/3% of the outstanding shares of Class A Stock
and Class B Stock, each voting separately as a
class, and (iii) the holders of at least a
majority of the outstanding shares of Class B
Stock not held by Class A/B Shareholders, is
required to approve the Merger Agreement.
Security Ownership of As of the Record Date, the Management Group
the Management beneficially owns an aggregate of 16 shares of
Group . . . . . . . . . . Class A Stock and ___________ shares of Class B
Stock (representing approximately 64% and
__________% of the outstanding Class A Stock
and Class B Stock, respectively). Each member
of the Management Group intends to vote all
shares of Class A Stock and Class B Stock
beneficially owned by him or her for approval of
the Merger Agreement. See "THE SPECIAL
MEETING--Votes Required; Voting Rights." There
are five First Command Shareholders, who
beneficially own an aggregate of 1,000 shares
of First Command Common Stock (representing
100% of the outstanding shares of First Command
Common Stock). Each of the First Command
Shareholders, other than Freda J. Payne, is a
member of the executive committee of the IRA
Board, and each, other than Freda J. Payne, is
an executive officer or director of First
Command and a member of the Management Group.
To the knowledge of First Command, each of the
First Command Shareholders intends to vote all
shares of First Command Common Stock
beneficially owned by him or her for approval of
the Merger Agreement. See "MARKET PRICE DATA,
DISTRIBUTIONS AND SECURITY OWNERSHIP OF FIRST
COMMAND COMMON STOCK--Security Ownership of
Management and Certain Beneficial Owners of
First Command Common Stock."
Revocability of Proxy . . Any IRA Shareholder who executes and returns a
proxy may revoke such proxy at any time before it
is voted by (i) notifying in writing the Corporate
Secretary of IRA at 4100 South Hulen Street, Fort
Worth Texas 76109, (ii) granting a subsequent
proxy or (iii) appearing in person and voting at
the Special Meeting. Attendance at the Special
Meeting will not in and of itself constitute
revocation of a proxy.
<CAPTION>
THE PROPOSED MERGER
<S> <C>
General . . . . . . . . . At the Effective Time, pursuant to the Merger
Agreement, the Company will be merged with and
into First Command in accordance with the
applicable provisions of the Texas Business
Corporation Act ("TBCA").
Closing; Effective Time . The closing of the Merger (the "Closing") will
take place on the first date that all
8
<PAGE>
conditions to the Merger shall be satisfied or waived
in accordance with the Merger Agreement or such date
as the Company and First Command may agree in
writing (the "Closing Date"). Pursuant to the
Articles of Merger to be filed with the Secretary
of State of the State of Texas, the Merger will
become effective at 12:01 a.m. on October 1, 1998
(the "Effective Time"). See "THE PROPOSED
MERGER--Closing; Effective Time."
Conversion of Shares . . In the Merger, each share of Class A Stock of the
Company issued and outstanding at the Effective
Time (other than shares of Class A Stock held in
treasury by the Company), subject to and upon the
terms and conditions of the Merger Agreement, will
be converted into five shares of Surviving
Corporation Voting Stock. Further, (i) each share
of Class B Stock held by a Class B Shareholder
that is not a Class A/B Shareholder that is issued
and outstanding immediately prior to the Effective
Time, subject to and upon the terms and conditions
of the Merger Agreement, will be converted into
$28.24 in cash, without interest, and (ii) each
share of Class B Stock held by a Class A/B
Shareholder issued and outstanding immediately
prior to the Effective Time, subject to and upon
the terms and conditions of the Merger Agreement,
will be converted into one share of Surviving
Corporation Nonvoting Stock; provided, however
that each Class A/B Shareholder may elect to
receive, in lieu of receiving the Class B
Nonvoting Stock Consideration, the Class B Cash
Consideration for all shares of Class B Stock held
immediately prior to the Effective Time. Each
holder of First Command Common Stock, issued and
outstanding immediately prior to the Effective
Time, subject to and upon the terms and conditions
of the Merger Agreement, will receive one share of
Surviving Corporation Nonvoting Stock for each 25
shares of First Command Common Stock held by such
shareholder. See "THE PROPOSED MERGER--Conversion
of Shares."
Class A/B Shareholders Subject to certain allocation procedures, Class
Election; Procedures . . A/B Shareholders as of the Record Date will be
entitled to, in addition to receiving the Class A
Consideration for their Class A Stock, elect to
receive for each share of Class B Stock held
thereby either (A) the Class B Nonvoting Stock
Consideration or (B) the Class B Cash
Consideration. A Class A/B Shareholder may not
elect to receive both the Class B Nonvoting Stock
Consideration and the Class B Cash Consideration.
If such Class A/B Shareholder indicates that such
record holder has no preference as to the receipt
of Class B Nonvoting Stock Consideration or the
Class B Cash Consideration or fails to make a
timely election (a "Non-Election"), such Class A/B
Shareholder shall be deemed to have elected to
receive the Class B Nonvoting Stock Consideration.
The Company will use its best efforts to make a
Form of Election available to all persons who
become Class A/B Shareholders of record between
the date of mailing of this Proxy Statement and
the Election Deadline.
In the event a Form of Election is delivered to
the Paying Agent on behalf of a record holder of
Class B Stock (as defined below) who is a Class
A/B Shareholder (as defined below) prior to the
Election Deadline and not revoked prior to such
deadline, or if a Form of Election is delivered to
the Paying Agent after the Election Deadline, the
Company or the Surviving Corporation, as the case
may be, will deem such delivery a revocation of
any objections to the Merger previously filed with
the Company for purposes of exercising dissenter's
9
<PAGE>
rights and a waiver of any future rights to such
exercise. See "THE PROPOSED MERGER--Rights of
Dissenting Shareholders."
All such elections shall be made on the Form of
Election mailed to Class A/B Shareholders as of
the Record Date along with this Proxy Statement.
To be effective, a Form of Election must be
returned, properly completed, to the Paying Agent
no later than the Election Deadline. A Class A/B
Shareholder that fails to submit an effective Form
of Election prior to the Election Deadline shall
be deemed to have made a Non-Election.
Elections may be revoked or amended upon written
notice to the Paying Agent prior to the Election
Deadline. See "THE PROPOSED MERGER--Shareholder
Elections."
Charter and Bylaws . . . Pursuant to the Merger Agreement, the Articles of
Incorporation and Bylaws of First Command as in
effect immediately prior to the Effective Time
will be the Articles of Incorporation and Bylaws,
respectively, of the Surviving Corporation
following the Merger until duly amended as
provided therein and by applicable law. The Merger
Agreement provides that at the Effective Time the
Articles of Incorporation of the Surviving
Corporation shall be amended to provide for the
change of the name of the Surviving Corporation to
"Independent Research Agency for Life Insurance,
Inc." A copy of the Articles of Incorporation, as
proposed to be amended, and the Bylaws, as
proposed to be amended, of the Surviving
Corporation are attached hereto as Annex E. See
"THE PROPOSED MERGER--The Merger Agreement--
Charter and Bylaws."
Conditions to the Merger . The obligation of First Command to consummate the
Merger is subject to the satisfaction of a number
of conditions, including, among others (i) the
performance and compliance of IRA in all material
respects with all agreements, obligations and
conditions required by the Merger Agreement to be
performed or complied with by IRA on or prior to
the Closing Date; (ii) the holders of (A) two-
thirds (2/3) of the outstanding shares of Class A
Stock and Class B Stock, voting as a single class,
(B) two-thirds (2/3) of the outstanding shares
of Class A Stock and Class B Stock, each voting
separately as a class, and (C) holders of a
majority of the outstanding shares of Class B
Stock not held by Class A/B Shareholders, that
are eligible to vote at the Special Meeting shall
have voted for approval and adoption of the
Merger Agreement; (iii) the holders of two-thirds
(2/3) of the outstanding shares of First Command
Common Stock shall have voted for approval and
adoption of the Merger Agreement; (iv) all
approvals, consents, authorizations and waivers
from governmental and other regulatory agencies
and other third parties required to consummate
the transactions contemplated by the Merger
Agreement, which either individually or in the
aggregate, if not obtained, would have a
materially adverse effect on the financial
condition, results of operations or business of
IRA or would prevent consummation of the Merger
and the other transactions contemplated by the
Merger Agreement, shall have been obtained;
(v) on the Closing Date, there shall be no
effective injunction, writ, temporary restraining
order or any order of any nature issued by a court
of competent jurisdiction or other governmental
authority directing that the transactions provided
for in the Merger Agreement or any of them not be
consummated as so provided or imposing any
conditions on the consummation of the transactions
contemplated by the Merger Agreement that First
Command deems unacceptable in its sole discretion;
(vi) no suit, action, or other proceeding seeking
to restrain, prevent
10
<PAGE>
or change the transactions contemplated by the
Merger Agreement or otherwise questioning the
validity or legality of such transactions shall have
been instituted and be pending; and (vii) the
holders of no more than 20% of either of the
outstanding Class A Stock or the Class B Stock
shall have delivered notice of their intent to
exercise their right to dissent under the TBCA.
The obligation of IRA to consummate the Merger is
subject to the satisfaction of a number of
conditions, including, among others (i) the
performance and compliance of First Command with
all agreements, obligations and conditions
required by the Merger Agreement to be performed
or complied with by First Command on or prior to
the Closing Date; (ii) IRA shall not have received
written notice from the Financial Advisor that it
has withdrawn, revoked or modified its opinion as
to the fairness of the Merger to the IRA
Shareholders, from a financial point of view;
(iii) the holders of (A) two-thirds (2/3) of the
outstanding shares of Class A Stock and Class B
Stock, voting as a single class, (B) two-thirds
(2/3) of the outstanding shares of Class A Stock
and Class B Stock, each voting separately as a
class, and (C) holders of a majority of the
outstanding shares of Class B Stock not held by
Class A/B Shareholders, that are eligible to vote
at the Special Meeting shall have voted for
approval and adoption of the Merger Agreement;
(iv) the holders of two-thirds (2/3) of the
outstanding shares of First Command Common Stock
shall have voted for approval and adoption of the
Merger Agreement; (v) all approvals, consents,
authorizations and waivers from governmental and
other regulatory agencies and other third parties
required to consummate the transactions
contemplated by the Merger Agreement, which either
individually or in the aggregate, if not obtained,
would have a materially adverse effect on the
financial condition, results of operations or
business of IRA or would prevent consummation of
the Merger and the other transactions contemplated
by the Merger Agreement, shall have been
obtained; (vi) on the Closing Date, there shall
be no effective injunction, writ, temporary
restraining order or any order of any nature
issued by a court of competent jurisdiction or
other governmental authority directing that the
transactions provided for in the Merger Agreement
or any of them not be consummated as so provided
or imposing any conditions on the consummation of
the transactions contemplated by the Merger
Agreement that IRA deems unacceptable in its sole
discretion; (vii) no suit, action, or other
proceeding seeking to restrain, prevent or change
the transactions contemplated by the Merger
Agreement or otherwise questioning the validity
or legality of such transactions shall have been
instituted and be pending; and (viii) the holders
of no more than 20% of either of the outstanding
Class A Stock or the Class B Stock shall have
delivered notice of their intent to exercise
their right to dissent under the TBCA.
The conditions to each of the parties' obligations
to consummate the Merger are for the sole benefit
of such party and may be waived by such party in
whole or in part to the extent permitted by
applicable law. In the event a modification or
waiver by IRA or First Command is contemplated
that requires shareholder approval under
applicable law, a supplement to this Proxy
Statement will be distributed to IRA Shareholders,
and proxies will be resolicited. See "SPECIAL
MEETING OF IRA SHAREHOLDERS--Solicitation of
Proxies." Neither First Command nor IRA currently
contemplates waiving or modifying any of the
foregoing conditions. See "THE PROPOSED
MERGER--The Merger Agreement--Conditions to the
Merger."
11
<PAGE>
Termination . . . . . . . The Merger Agreement may be terminated and the
Merger abandoned at any time prior to the
Effective Time, (i) by mutual consent of the
Boards of Directors of First Command and IRA; (ii)
by either IRA or First Command if at the Special
Meeting, or any adjournment thereof, the
shareholders of IRA fail to adopt and approve the
Merger; (iii) by either IRA or First Command if
the shareholders of First Command fail to adopt
and approve the Merger; and (iv) by either IRA or
First Command if a court of competent jurisdiction
or governmental, regulatory or administrative
agency or commission shall have issued an order,
decree or ruling or taken any other action, in
each case permanently restraining, enjoining or
otherwise prohibiting the transactions
contemplated by the Merger Agreement, and such
order, decree, ruling or other action shall have
become final and nonappealable. See "THE PROPOSED
MERGER--The Merger Agreement--Termination."
Rights of Dissenting If the Merger is consummated, shareholders that
Shareholders . . . . . . comply with certain requirements of the TBCA
("Dissenting Shareholders") will be entitled to
exercise their appraisal rights with regard to
their shares of Class A Stock or Class B Stock in
accordance with the procedures set forth in
Articles 5.12 and 5.13 of the TBCA. Shareholders
wishing to exercise dissenters' rights must (i)
not vote in favor of approval of the Merger
Agreement (which would include submitting a signed
proxy without voting instructions); (ii) deliver
to the Company, prior to the Meeting, written
notice of their objection to the Merger stating
that they will exercise their right to dissent
under the TBCA if the Merger is effected; and
(iii) strictly comply with the other requirements
of the TBCA. Failure to follow the procedures
required by Articles 5.12 and 5.13 of the TBCA may
result in the loss of dissenters' rights (in which
event a shareholder will be entitled to receive
the Merger Consideration with respect to such
shareholder's shares of Class A Stock or Class B
Stock in accordance with the Merger Agreement).
See "THE PROPOSED MERGER--Rights of Dissenting
Shareholders."
</TABLE>
12
<PAGE>
SELECTED FINANCIAL DATA OF IRA
The following table presents summary historical financial data of IRA and
its consolidated subsidiaries for the periods indicated. The related data for
the five years ended September 30, 1997 are derived from the audited financial
statements of IRA and its subsidiaries. IRA's Annual Report on Form 10-K for
the fiscal year ended September 30, 1997 (the "IRA 10-K") is incorporated by
reference in this Proxy Statement and enclosed herewith. The financial data as
of and for the nine months ended June 30, 1998 and 1997 were derived from IRA's
unaudited quarterly financial statements included in IRA's Quarterly Report on
Form 10-Q for the nine months ended June 30, 1998 and incorporated by reference
in this Proxy Statement and enclosed herewith, and, in the opinion of IRA's
management, reflect all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation of such data. The data for the nine months
ended June 30, 1998 and 1997 are not necessarily indicative of results of
operations for the entire year. The data should be read in conjunction with the
consolidated financial statements, related notes and other financial
information of IRA included and incorporated by reference in this Proxy
Statement.
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Commissions revenue . . . . . $ 122,329,601 $ 116,632,069 $ 108,443,810 $ 100,491,633 $ 93,767,954
Bank operations . . . . . . . 58,458 -0- -0- -0- -0-
Operating expenses . . . . . (113,528,791) (109,040,366) (102,510,314) (93,421,636) (86,224,269)
-------------- -------------- -------------- -------------- --------------
Operating income . . . . . . 8,859,268 7,591,703 5,933,496 7,069,997 7,543,685
Other income . . . . . . . . 5,216,114 3,719,793 4,201,478 3,464,253 3,280,284
-------------- -------------- -------------- -------------- --------------
Income before income taxes 14,075,382 11,311,496 10,134,974 10,534,250 10,823,969
Income taxes . . . . . . . . (4,639,886) (3,842,639) (3,417,024) (3,561,062) (3,567,212)
-------------- -------------- -------------- -------------- --------------
Net income . . . . . . . . . $ 9,435,496 $ 7,468,857 $ 6,717,950 $ 6,973,188 $ 7,256,757
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
Basic earnings per share . . $ 10.06 $ 7.97 $ 7.18 $ 7.51 $ 7.65
<CAPTION>
As of September 30,
--------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Current assets . . . . . . . $ 23,860,692 $ 23,926,327 $ 21,367,029 $ 20,067,223 $ 19,700,911
Property and equipment . . . 12,145,961 12,614,194 13,303,488 10,883,370 10,918,721
Bank assets . . . . . . . . . 22,062,980 -0- -0- -0- -0-
Other assets . . . . . . . . 67,826,675 52,149,411 44,964,482 35,145,007 23,970,401
-------------- -------------- -------------- -------------- --------------
Total assets . . . . . . $ 125,896,308 $ 88,689,932 $ 79,634,999 $ 66,095,600 $ 54,590,033
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
Current liabilities . . . . . $ 33,395,193 $ 27,742,525 $ 27,243,419 $ 26,644,967 $ 22,211,796
Bank liabilities . . . . . . 13,437,520 -0- -0- -0- -0-
Long-term obligations . . . . 25,127,512 16,998,700 12,376,835 7,256,834 3,256,623
Equity . . . . . . . . . . . 53,936,083 43,948,707 40,014,745 32,193,799 29,121,614
-------------- -------------- -------------- -------------- --------------
Total liabilities and
equity. . . . . . . . . . . $ 125,896,308 $ 88,689,932 $ 79,634,999 $ 66,095,600 $ 54,590,033
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
Per Share Data:
Book value per share . . . . $ 51.20 $ 44.72 $ 39.70 $ 35.79 $ 29.55
Cash dividends per share . . (7.73) (7.63) (4.50) (4.88) (7.31)
Unrealized gains per share,
net (1). . . . . . . . . . . (15.23) (10.05) (8.16) (5.79) -
-------------- -------------- -------------- -------------- --------------
Per share price (2) . . . . . $ 28.24 $ 27.04 $ 27.04 $ 25.12 $ 22.24
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
<CAPTION>
Nine Months Ended
June 30,
----------------------------
1998 1997
-------------- -------------
<S> <C> <C>
Income Statement Data:
Commissions revenue . . . . . $ 95,006,492 $ 90,834,961
Bank operations . . . . . . . 1,087,339 41,995
Operating expenses . . . . . (92,511,232) (84,944,354)
-------------- -------------
Operating income . . . . . . 3,582,599 5,932,602
Other income . . . . . . . . 7,416,922 5,472,678
-------------- -------------
Income before income taxes 10,999,521 11,405,280
Income taxes . . . . . . . . (3,467,015) (3,728,593)
-------------- -------------
Net income . . . . . . . . . $ 7,532,506 $ 7,676,687
-------------- -------------
-------------- -------------
Basic earnings per share. . . $ 7.64 $ 8.23
<CAPTION>
As of June 30,
----------------------------
1998 1997
-------------- -------------
<S> <C> <C>
Balance Sheet Data:
Current assets . . . . . . . $ 13,750,383 $ 23,860,692
Property and equipment . . . 12,668,931 12,145,961
Bank assets . . . . . . . . . 59,685,034 22,062,980
Other assets . . . . . . . . 78,028,243 67,826,675
-------------- -------------
Total assets . . . . . . $ 164,132,591 $ 125,896,308
-------------- -------------
-------------- -------------
Current liabilities . . . . . $ 33,962,103 $ 33,395,193
Bank liabilities . . . . . . 50,874,747 13,437,520
Long-term obligations . . . . 27,613,452 25,127,512
Equity . . . . . . . . . . . 51,682,289 53,936,083
-------------- -------------
Total liabilities and
equity. . . . . . . . . . . $ 164,132,591 $ 125,896,308
-------------- -------------
-------------- -------------
Per Share Data:
Book value per share . . . . $ 54.55 $ 50.30
Cash dividends per share . . - -
Unrealized gains per share,
net (1). . . . . . . . . . . (18.27) (14.78)
-------------- -------------
Per share price (2) . . . . . (3) (3)
-------------- -------------
-------------- -------------
</TABLE>
- --------------------
(1) Beginning in fiscal year 1994, as required by Statement of Financial
Accounting Standards ("SFAS") 115 "Accounting for Certain Investments in
Debt and Equity Securities," the Company accounted for unrealized
investment gains in its balance sheet's equity section, net of federal
income taxes. Since the appreciation is unrealized, it is not, and has
never been, included in the determination of the Company's per share
price.
(2) The increase in per share price over the previous year's share price is
added incrementally, 1/12th per month for the ensuing 12 months, to the
current September 30 share price (based upon the prior year's
computation). For example, the book value per share exclusive
13
<PAGE>
of unrealized gains at September 30, 1996, less the dividends declared as
of that date, resulted in a Class B Stock price per share at September 30,
1997 of $27.04. The increase in book value per share, exclusive of
unrealized gains (and net of the fiscal 1996 dividend paid in December
1996), for the fiscal year ended September 30, 1997 was $8.93, of which
$7.73 was paid as a dividend in December 1997. The remaining $1.20 per
share has been allocated at $0.10 per month throughout fiscal year 1998,
which will result in a per share price of $28.24 as of September 1998.
(3) The share price at interim periods is based on the prior year's book value
per share, net of unrealized gains, net of tax, and dividends per share.
Current year net income is either paid as a dividend as of the end of the
year or included in the stock price the following year (see Note 2 above).
14
<PAGE>
SELECTED FINANCIAL DATA OF FIRST COMMAND
The following table presents summary historical financial data of First
Command as of the periods indicated. The historical financial data as of May
31, 1998, are derived from First Command's audited balance sheet enclosed
herewith. The historical financial data as of June 30, 1998, are derived from
First Command's unaudited balance sheet enclosed herewith. Because First
Command had only three months of operations as of June 30, 1998, only balance
sheet data have been presented. The data should be read in conjunction with
the balance sheet, related notes and other financial information of First
Command included elsewhere in this Proxy Statement. See "FIRST COMMAND
FINANCIAL CORPORATION BALANCE SHEET."
<TABLE>
<CAPTION>
AS OF AS OF
MAY 31, 1998 JUNE 30, 1998
------------ -------------
<S> <C> <C>
Balance Sheet Data:
Current assets. . . . . . . . . . . $ 893 $ 1,000
Total assets. . . . . . . . . . . . 13,203 34,265
Current liabilities . . . . . . . . 12,310 -0-
Stockholders' equity. . . . . . . . 893 (6,746)
Per Share Data:
Book value per share. . . . . . . . $ 0.89 $ (6.75)
Cash dividends per share. . . . . . -- --
</TABLE>
15
<PAGE>
SUMMARY PRO FORMA DATA
The following table sets forth selected unaudited pro forma financial data
derived from the Pro Forma Condensed Consolidated Financial Statements included
under the section "PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
IRA." The pro forma balance sheet data and the pro forma statement of
operations data gives effect to the Merger as if it were consummated on June
30, 1998 and October 1, 1996, respectively. The pro forma financial information
is based on assumptions that management believes are reasonable and such
information is presented for comparative and informational purposes only. The
pro forma financial information does not purport to represent what the Company's
results of operations or financial condition would have actually been had the
Merger in fact occurred on such dates or to project the Company's results of
operations for any future period or financial condition of any future date.
This table should be read in conjunction with the Pro Forma Condensed
Consolidated Financial Statements included under the section "PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF IRA" and the IRA 10-K, the
Company's Quarterly Reports on Form 10-Q for the nine months ended June 30,
1998, the Consolidated Financial Statements of the Company and related notes
thereto, the Balance Sheet of First Command and related notes thereto and the
other financial information contained in the documents included or incorporated
by reference herein. See "INCORPORATION BY REFERENCE."
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC. AND
FIRST COMMAND CORPORATION
SELECTED UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE NINE MONTHS
SEPTEMBER 30, 1997 ENDED JUNE 30, 1998
------------------ -------------------
<S> <C> <C>
Income Statement Data:
Commissions revenue . . . . . . . . . . . . . $ 122,329,601 $ 95,006,492
Bank operations . . . . . . . . . . . . . . . 58,458 1,087,339
Operating expenses. . . . . . . . . . . . . . (126,484,173) (102,665,308)
---------------- ------------------
Operating income. . . . . . . . . . . . . . . (4,096,114) (6,571,477)
Other income. . . . . . . . . . . . . . . . . 4,096,114 6,571,477
---------------- ------------------
Income before income taxes. . . . . . . . . . -- --
Income taxes. . . . . . . . . . . . . . . . . -- --
---------------- ------------------
Net income. . . . . . . . . . . . . . . . . . $ -- $ --
---------------- ------------------
---------------- ------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1998
-------------
<S> <C>
Balance Sheet Data:
Current assets. . . . . . . . . . . . . . . . $ 12,608,585
Property and equipment. . . . . . . . . . . . 12,695,701
Bank assets . . . . . . . . . . . . . . . . . 59,685,034
Other assets. . . . . . . . . . . . . . . . . 78,034,738
-------------
Total assets . . . . . . . . . . . . . . $ 163,024,058
-------------
-------------
Current liabilities . . . . . . . . . . . . . $ 33,962,103
Bank liabilities. . . . . . . . . . . . . . . 50,874,747
Long-term obligations . . . . . . . . . . . . 42,240,784
Equity. . . . . . . . . . . . . . . . . . . . 35,946,058
-------------
Total liabilities and equity . . . . . . $ 163,024,058
-------------
-------------
Book value per share (1). . . . . . . . . . . $ 99.96
</TABLE>
(1) Pro forma book value per share does not include the anticipated charge
to equity to reflect the Mission Accomplishment Plan compensation
that is expected to be recorded for subsequent periods. Per the Pro
Forma Condensed Consolidated Income Statement, the charge to equity
for the nine months ending June 30, 1998 is expected to have been
$10,154,076.
<TABLE>
<CAPTION>
Per share data:
First Command
Independent Financial Pro Forma
Research Agency Corporation Combined
--------------- ------------- ---------
<S> <C> <C> <C>
Basic earnings per share
Fiscal year ended 9/30/97 $10.06 $ 0.00 $0.00
Nine months ended 6/30/98 7.64 (7.75) 0.00
Dividends per share
Fiscal year ended 9/30/97 7.73 0.00 0.00
Nine months ended 6/30/98 0.00 0.00 0.00
Book value per share
At June 30, 1998 54.55 (6.75) 99.96
</TABLE>
17
<PAGE>
SPECIAL FACTORS
BACKGROUND OF THE MERGER
In early 1997, because of the costs associated with its being a public
company and the competitive disadvantages of having to make public
disclosures in Exchange Act filings, the Company began to consider becoming a
privately-held company pursuant to a transaction in which the registration of
the Class B Stock under the Exchange Act would be terminated. The Company is
a managing general insurance agency that sells life insurance to United
States military personnel. Most of the Company's competitors are not public
companies, so they do not have to make public disclosures regarding their
earnings, products, relationships with insurance carriers and other matters.
Consequently, certain information about the Company that is publicly
available is not similarly available about the Company's competitors. In the
event that the Merger is approved by the Company's shareholders, the Company
will not have to make public disclosures that can be competitively
disadvantageous. Additionally, the costs associated with compiling
information creates an additional disadvantage to IRA as compared to the
Company's competitors that do not have similar public filing requirements.
These costs include the compilation of the information for such filings, the
expense of attorneys and accountants and the management time required to make
such filings.
During this period, Ernst & Young advised the Company
that, based upon the facts presented at that time, upon the elimination of the
Class B Stock, the Company could be eligible for S corporation status. In the
ensuing months of 1997, the Company continued to study the feasibility and
ramifications of such a transaction. The Company selected Ernst & Young based
on its experience with respect to tax issues. Ernst & Young has been engaged
by the Company as its principal independent accounts. The Company will pay
Ernst & Young a fee of $150,000 with respect its engagement as the Company's
principal independent accountants for its fiscal year ended September 30,
1998. In addition, Ernst & Young issued the Tax Opinion for the Company. See
"--Certain Federal Income Tax Considerations--Tax Opinion Engagement."
In March 1998, Ernst & Young, the principal independent accountants for
the Company and First Command, prepared a report for the Company that
summarized the major advantages and disadvantages of IRA electing S
corporation status. The letter contained an example of the tax savings
available to IRA, assuming IRA had elected to be taxed as an S corporation
for federal income tax purposes for the tax year ended September 30, 1998. An
example in the letter indicated that the Company would pay approximately 54%
less income tax by electing S corporation status, assuming all items of
income and expense are treated equally by taxpayers of the S corporation and C
corporation and the Company declares a dividend of all of its income to the
shareholders. In addition, the example assumes a tax rate of 39.6% for the
shareholders of the S corporation. The letter also provided certain
cautionary language regarding potential built-in gains tax, excess passive
income tax and eligibility requirements for electing S corporation status.
In summary, the letter stated that, after reviewing the dividend history of
IRA (pursuant to which all of its earnings are paid as dividends to its
shareholders), the benefits discussed in the letter provide a significant
level of support for the Company's electing S corporation status. A copy of
this report has been filed as an exhibit to the Schedule 13E-3, and it will
be made available for inspection and copying at the principal executive
offices of the Company during its regular business hours by any IRA
Shareholder or his representative who has been so designated in writing.
Alternatively, the Company will transmit a copy of the report to such IRA
Shareholder (or his or her designated representative) upon written request
and at the expense of such IRA Shareholder.
Additionally, during 1997 the Company established plans to construct and
operate a parking garage for employees of the Company and current and future
tenants in IRA's building. Management was concerned, however, about the
potential liability of IRA in connection with the construction and operation of
a parking garage. As a result, First Command was formed on April 1, 1998, to
limit this potential liability of IRA. At its inception, First Command
qualified for, and elected, S corporation status. See "CERTAIN INFORMATION
CONCERNING FIRST COMMAND--Business."
First Command was formed to construct and manage the parking garage
facilities adjacent to the building currently occupied by IRA. The parking
garage facilities will be used almost exclusively by IRA and its affiliates'
employees and independent contractors. The Company is leasing the land to First
Command for a nominal payment of $1.00 per year. First Command is leasing all
of the parking spaces in the Garage to IRA for a base rent of $51,250.00 per
month, which will provide First Command with funds to service its debt and meet
operating costs of the parking garage. IRA will pay all real estate and
personal property taxes associated with the garage and land that it occupies.
IRA will sublease some of the parking spaces to other tenants who occupy IRA's
office building. The contractual arrangements between First Command and IRA do
not result in a financial benefit to First Command or a financial detriment to
IRA. The terms of the agreements are at least as beneficial to the Company as
would have been obtained in an arms-length transaction with an unaffiliated
third party. See "CERTAIN INFORMATION CONCERNING FIRST COMMAND--Business" and
"CERTAIN INFORMATION CONCERNING FIRST COMMAND--Properties."
In April 1998, management of the Company determined that it would be in the
best interests of the Company to further investigate the deregistration of the
Class B Stock, thereby eliminating the Company's reporting requirements under
the Exchange Act and minimizing the administrative duties that correspond with
such reporting requirements. Additionally, management believed that the Company
would qualify for S corporation status after the elimination of its Class B
Stock.
On April 27, 1998, at a special meeting of the IRA Board attended by all
directors except Naomi K. Payne, after a presentation by Lamar C. Smith,
Chairman of the Board and Chief Executive Officer of IRA, and Martin R. Durbin,
Chief Financial Officer of IRA, the IRA Board adopted by a unanimous vote of all
directors present a resolution authorizing and instructing the officers of the
Company to pursue a plan that would allow the Company to achieve operating
efficiencies through elimination of the Class B Stock and its subsequent
qualification for S corporation status. The Company then retained Haynes and
Boone, LLP, Fort Worth, Texas as special securities and tax counsel. The
Company also engaged Ernst & Young LLP, as tax advisors. The Company selected
these firms because of their reputation in corporate and securities and tax law
matters.
The IRA Board held a special meeting on May 8, 1998, which was attended by
all directors other than Mr. Arnold Punaro. Because Texas law requires all
directors of a Texas insurance company be licensed insurance agents and because
Mr. Punaro was not a licensed insurance agent, Mr. Punaro resigned and became an
advisory director of the Company at this special meeting. Martin R. Durbin and
Lamar C. Smith updated the IRA Board regarding the plan to achieve the IRA
Board's objectives of eliminating its Class B Stock and qualifying for S
corporation status. As part of this plan, management contemplated that, upon
the elimination of the Class B Stock, IRA should qualify as an S corporation.
As a result, in order to achieve administrative simplicity associated with the
elimination of costs and time necessary to prepare two sets of tax returns and
to reduce compliance responsibilities and reporting requirements that would
result from the deregistration of the Class B Stock, management of IRA and First
Command proposed a merger between IRA and First Command, pursuant to which IRA
would merge with and into First Command, which would be the surviving
corporation.
Following this presentation and a discussion, the IRA Board determined
that it would be advisable to establish a special committee of independent
directors (the "Special Committee") to determine whether the terms of the
proposed transaction were fair to and in the best interests of the IRA
Shareholders, which includes the Class B Shareholders who do not own Class A
Stock (and certain Class A/B Shareholders who are not officers or directors).
As the IRA Board had no members that did not own Class A Stock or Class B
Stock, pursuant to the Bylaws of IRA, the IRA Board elected James J. Ellis to
serve in the class of directors whose term expires on December 31, 1999, and
Logan Dickinson to
18
<PAGE>
serve in the class of directors whose term expires on December 31, 2000. Mr.
Ellis and Mr. Dickinson were also appointed as the members of the Special
Committee.
Mr. Ellis and Mr. Dickinson were elected to fill two
vacancies that existed on the IRA Board and have agreed to serve on the IRA
Board at least through the end of their respective terms. Both Mr. Ellis and
Mr. Dickinson were selected to serve as directors and members of the Special
Committee because each has many years of experience in the insurance
industry. Mr. Dickinson also has extensive experience in the investment
industry. Messrs. Ellis and Dickinson had (i) no prior relations with the
Company or its affiliates and (ii) little, if any, knowledge of the Company's
operations, prior to their election to the IRA Board. Each of Messrs. Ellis
and Dickinson is paid $1,000 per Special Committee meeting, unless such
meeting is held in conjunction with or immediately prior to a full meeting of
the IRA Board, in which case each receives $500 per Special Committee
meeting. Each of them will receive compensation in his capacity as a member
of the IRA Board to the same extent as other members of the IRA Board receive
compensation.
The Special Committee met on May 18, 19, 20 and 26
for the purposes of holding initial discussions regarding the Merger,
engaging Gardere & Wynne, LLP, Dallas, Texas, as independent legal counsel
for the Special Committee and interviewing potential financial advisors.
During each of these meetings, the Special Committee members, among
themselves, with legal counsel, and with prospective financial advisors,
discussed their understanding of the Company's history and business, the
proposed structure and effect of the Merger and the incentive compensation
plans in effect and to be implemented by the Company. At its meeting on May
26, 1998, the Special Committee determined to engage Coopers & Lybrand LLP,
now known as PricewaterhouseCoopers LLP, as the Financial Advisor, reviewed
the Financial Advisor's proposed engagement letter and directed the Special
Committee's independent legal counsel to review the proposed engagement
letter and provide comments to the Financial Advisor. The engagement letter
was finalized on and dated June 4, 1998, and executed on behalf of the
Special Committee and the Company on June 8, 1998.
The Financial Advisor had no prior material relationships with the
Company, its affiliates or members of the Special Committee. The Company has
engaged the Financial Advisor to assist the Company in making its information
systems Year 2000 compliant. The Financial Advisor will be paid $74,000 as
compensation for such services.
On June 4, 1998, the Special Committee met by telephone conference call
with representatives of the Financial Advisor and the Special Committee's
independent legal counsel for further discussions regarding the Merger and to
determine the due diligence plan and schedule for the Financial Advisor's
engagement. The primary purpose of the meeting was to ensure that the
Financial Advisor had sufficient information to form the foundation of an
effective due diligence effort and to gain the benefit of the Special
Committee's analysis in progress of the Company. The Special Committee
members discussed in more detail with the representatives of the Financial
Advisor the Special Committee's growing understanding of the business of the
Company, the proposed terms of the Merger and the Mission Accomplishment Plan
anticipated to be implemented by the Company. On June 5, 1998,
representatives of the Financial Advisor and the Special Committee's
independent legal counsel began a due diligence review of documents and
information related to the Company and the Merger and due diligence
discussions with Martin Durbin, the Company's Chief Financial Officer, and
Robert F. Watson, the Company's General Counsel. On June 10, 1998, the
Special Committee again met by telephone conference call with representatives
of the Financial Advisor and the Special Committee's independent legal
counsel to discuss the schedule for the Financial Advisor's review and
analysis, the status of the due diligence and the detailed terms of the
Merger, which had been distributed to the Special Committee and the Financial
Advisor by the Company.
On June 15, 1998, the Special Committee, its independent legal counsel
and representatives of the Financial Advisor met at the Company's offices for
due diligence meetings with Lamar Smith, the Company's Chief Executive
Officer, James Lanier, the Company's Chief Operating Officer, Mr. Watson, Mr.
Durbin and Howard Crump, Director of Marketing (Agency Relations). During
this meeting, the Company's management presented a detailed overview of the
Company's history, business and philosophy, as well as the Company's intent
in proposing the Merger, and responded to questions from the Special
Committee and the Financial Advisor. Messrs. Watson and Durbin outlined the
proposed structure and terms of the Merger, the effect on the IRA
Shareholders as a whole and on each category of IRA Shareholders. Messrs.
Watson and Durbin also responded to detailed questions from the Special
Committee and the Financial Advisor.
During the meeting on June 15, 1998, the members of the Special
Committee and representatives of the Financial Advisor interviewed an agent
and a district agent, each of whom is a Class B Shareholder and has been
associated with the Company for approximately 20 years and 6 years,
respectively. During this interview, the agent and district agent were asked
questions regarding the Company's operations, their respective positions with
the Company, their roles as Class B Shareholders and the restrictive nature
of the Class B Shareholder Agreements, and their understanding with respect
to the proposed transaction. The agents informed the Special Committee that
they viewed the Class B Stock as compensatory in nature. Based on the
Special Committee's and the Financial Advisor's discussions with the Company
and other due diligence, the Special Committee believed these two individuals
were representative of the Company's agents, the agent being a long-time and
larger Class B Shareholder and the district agent being a more recent and
smaller Class B Shareholder. The Special Committee did not assign, and did
not find it practicable to assign, a specific weight to these discussions,
but considered them along with other due diligence by the Special Committee
with respect to the Company and its operations and shareholders.
On June 24, 1998, the Special Committee, representatives of the
Financial Advisor and the Special Committee's independent legal counsel met
by telephone conference call to discuss the Financial Advisor's preliminary
analysis regarding the Merger and the rendering by the Financial Advisor of a
fairness opinion. The Special Committee members and the representatives of
the Financial Advisor discussed in detail the effect of the Merger on the IRA
Shareholders and on each category of the IRA Shareholders.
Prior to the June 24, 1998, meeting, the Financial Advisor provided the
Special Committee with a package of information marked "DRAFT," for
discussion at the meeting. The package consisted of an Executive Summary, a
Transaction Summary and Risk Assessment, a draft form of fairness opinion,
and information for joining the planned conference call. The discussion at
the meeting centered around the information in the draft package.
The Executive Summary included in the draft package described the
proposed transaction, enumerated actions performed or then being undertaken
by the Financial Advisor, and set forth the Financial Advisor's preliminary
conclusion that the transaction was fair from a financial point of view. The
Financial Advisor's actions, as outlined in the Executive Summary, included a
discounted cash flow analysis provided to it by the Company (without being
impacted for marketability or share restriction considerations), analysis of
a limited set of companies that might be considered meaningful comparable
companies and a comprehensive transaction search that yielded a very limited
set of transactions that might be considered comparable transactions. See
"SPECIAL FACTORS--Opinion of Financial Advisor."
The Transaction Summary and Risk Assessment included in the draft
package first set forth background information regarding the Company and a
detailed description of the proposed transaction. The Transaction Summary
outlined the historical purchases of the Company's Class B Stock, the lack of
a public market for the Class B Stock and the proposed adoption of the
Mission Accomplishment Plan. The Risk Assessment outlined various issues to
be brought to the attention of the Financial Advisor's internal fairness
opinion committee, including (i) the desire to preserve S corporation status,
which is not assured, (ii) the inability of former Class B Shareholders to
vote on material corporate actions, (iii) the change in tax treatment for the
Class B Shareholders from capital appreciation with the Class B Stock versus
ordinary income with stock appreciation rights for those Class B Shareholders
holding MAP units, (iv) the Financial Advisor's understanding that at least
one Class A Shareholder would exercise dissenter's rights (although no oral
or written notice of such intent has been received by the Company), and (v)
the option of Class A/B Shareholders to elect different treatment than the
Class B Shareholders in the Merger.
The exhibits in the draft package to the Transaction Summary and Risk
Assessment included the following: (i) a graphic presentation of the proposed
transaction prepared by management; (ii) pre-transaction features in the form
of an analysis prepared by the Financial Advisor of the terms of the various
shareholder agreements governing the rights of the IRA Shareholders; (iii)
post-transaction features in the form of a description of the Surviving
Corporation Stock from a recent draft of the proxy statement; (iv) the
Financial Advisor's pre- and post-transaction analysis; and (v) a list of
Class B Shareholders provided by the Company.
The Financial Advisor's pre- and post-transaction analysis included in
the draft package consisted of the following items: (i) a summary prepared by
the Financial Advisor of the features of each of the three groups of IRA
Shareholders both before and after the proposed transaction; (ii) a
shareholder value summary for each group of shareholders based upon holding
period and basis in stock showing status quo value per share, proposed new
structure value per share or unit equivalent, and percent increase value per
share or unit equivalent; and (iii) discounted cash flow models for the
status quo and the proposed new structure for each group of shareholders
based upon basis in stock.
The final substantive item included in the draft package was a draft
form of fairness opinion prepared by the Financial Advisor for the Special
Committee's review. The draft form included the Financial Advisor's
preliminary conclusion that the proposed transaction was fair from a
financial point of view.
A copy of the above-described materials provided by the Financial
Advisor to the Special Committee in connection with its June 24, 1998 meeting
has been filed as an exhibit to the Schedule 13-E-3, and it will be made
available for inspection and copying at the principal executive offices of
the Company during its regular business hours by any IRA Shareholder or his
representative who has been so designated in writing. Alternatively, the
Company will transmit a copy of the report to such IRA Shareholder (or his or
her designated representative) upon written request and at the expense of
such IRA Shareholder.
At the meeting of the Special Committee on June 27, 1998, which was held
immediately prior to the IRA Board meeting, the Financial Advisor provided
the members of the Special Committee and the Special Committee's independent
legal counsel with its "Presentation to the Board of Directors" and the
proposed form of fairness opinion the Financial Advisor was prepared to
render when requested to do so. The Financial Advisor also indicated that it
was prepared to make such a presentation to the IRA Board.
19
<PAGE>
On June 27, 1998, the IRA Board held a special
meeting. During the special meeting of the IRA Board, the Special Committee
made a presentation regarding its review of the Merger. At the conclusion of
such presentation, the Special Committee announced that it had determined
that the Merger was fair to the IRA Shareholders, including the Class B
Shareholders who do not own Class A Stock. Subsequent to the presentation of
the Special Committee, the IRA Board approved the Merger.
The IRA Board based the amount of the Class B Cash Consideration on the
methodology used by the Company in previous years to determine the price of
Class B Stock in its offerings to agents of the Company, using September 1998
as the month of the stock price calculation. This methodology has been used
by the Company to establish each purchase and sales price for shares of Class
B Stock since 1981. See "DESCRIPTION OF IRA CAPITAL STOCK--Class B Stock" and
note 2 to "SELECTED FINANCIAL DATA OF IRA."
The IRA Board decided that Class A Shareholders who own Class B Stock
should be entitled to receive Surviving Corporation Nonvoting Stock pursuant
to the Merger because the Class A/B Shareholders otherwise would be taxed at
ordinary income tax rates (rather than at capital gain tax rates) if they
could receive only Class B Cash Consideration for the Class B Stock pursuant
to the Merger. The IRA Board, which will be the Board of the Surviving
Corporation upon consummation of the Merger, anticipates that the Surviving
Corporation, subject to the fiduciary duties of the Board of Directors of the
Surviving Corporation and the ongoing financial condition of the Surviving
Corporation, will declare and pay dividends that are pro rata to all
shareholders on the Surviving Corporation Common Stock that are intended to
approximate the income that the Class A/B Shareholder would have received
from the competitive reinvestment of the Class B Cash Consideration, taking
into account income tax considerations. See "--Certain Effects of the
Merger; Plans for the Company after the Merger." However, if a Class A/B
Shareholder would prefer not to receive the Surviving Corporation Nonvoting
Stock for such shareholder's Class B Stock pursuant to the Merger, the IRA
Board has provided the Class A/B Shareholders with the alternative to receive
the Class B Cash Consideration instead of the Surviving Corporation Nonvoting
Stock.
The IRA Board determined that the consideration to be paid to the
holders of Class A Stock was fair because the Class A Stock is the voting
class of common stock and is primarily held by members of the IRA Board and
officers of the Company.
On September 4, 1998, Debra S. Payne, a Class A/B Shareholder, delivered
a letter to Carroll H. Payne II, Freda J. Payne and Naomi K. Payne, who are
also Class A/B Shareholders, requesting that they tender their shares to
Debra S. Payne, pursuant to the terms of the Payne Family Stock Agreement.
Debra S. Payne claimed, among other things, that the filing of the Schedule
13E-3 by the Company triggered the provision of the Payne Family Stock
Agreement that requires Carroll H. Payne II, Freda J. Payne and Naomi K.
Payne to sell their shares of Class A Stock to Debra S. Payne. The Company
is also a party to the Payne Family Stock Agreement. See "DESCRIPTION OF IRA
CAPITAL STOCK--Class A Stock." The Company, Carroll H. Payne II, Freda J.
Payne and Naomi K. Payne believe that Debra S. Payne's claims as described in
the September 11, 1998 letter are without merit and intend to vigorously
contest any claim by Debra S. Payne that the buy-sell provision contained in
the Payne Family Stock Agreement has been or will be triggered as a result of
the transactions contemplated by the proposed Merger.
SOURCE AND AMOUNT OF FUNDS
Approximately $16.9 million will be required to pay the Class B Cash
Consideration in the Merger (assuming no Class A/B Shareholder elects to
receive Class B Cash Consideration), and the Surviving Corporation will pay
approximately $1.2 million in fees and expenses associated with the Merger. The
cash required in connection with the Merger will be provided (i) by working
capital of the Company and (ii) pursuant to the terms of a loan described in the
Credit Facility Commitment Letter (as defined below). The following table sets
forth the estimated sources and uses of funds in connection with the Merger,
assuming consummation of the Merger effective October 1, 1998. In the event
that a Class A/B Shareholder elects to receive the Class B Consideration, or in
the event that any IRA Shareholder elects to seek appraisal rights, the Company
will pay such amounts from working capital or through increases in its
outstanding lines of credit.
<TABLE>
<CAPTION>
SOURCES OF FUNDS AMOUNT
---------------------------------------- ------------
<S> <C>
Cash . . . . . . . . . . . . . . . . . . $ 2,056,000
Credit facility. . . . . . . . . . . . . 16,000,000
------------
Total sources. . . . . . . . . . . . $ 18,056,000
------------
------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
USES OF FUNDS AMOUNT
---------------------------------------- ------------
<S> <C>
Class B Cash Consideration . . . . . . . $ 16,890,000
Professional fees. . . . . . . . . . . . 1,095,000
Filing fees. . . . . . . . . . . . . . . 6,000
Printing and mailing costs . . . . . . . 25,000
Miscellaneous. . . . . . . . . . . . . . 40,000
-------------
Total uses . . . . . . . . . . . . . $ 18,056,000
-------------
-------------
</TABLE>
CREDIT FACILITY. The Company has received a commitment letter from Norwest
Bank Texas, N.A. ("Norwest"), dated June 26, 1998 (the "Credit Facility
Commitment Letter") pursuant to which Norwest has agreed to provide a $16
million senior secured term loan to IRA (the "Credit Facility"), upon the terms
and conditions set forth in the Credit Facility Commitment Letter.
Principal and interest payments under the Credit Facility will be made
monthly in equal payments of $185,362. Interest on indebtedness outstanding
under the Credit Facility is expected to be payable at a rate per annum equal to
the 90-day LIBOR rate plus 127 basis points fixed at the funding date of the
Credit Facility. The maturity date of the Credit Facility will be September 20,
1008. The Company would incur no fees as a result of the Credit Facility, and
there would be no prepayment penalty imposed for early repayments of amounts
owed under the Credit Facility. The Company would be required to pay all
expenses of Norwest in connection with the negotiation, preparation and
documentation of the Credit Facility, including standard closing costs and all
reasonable legal fees and expenses.
Borrowings under the Credit Facility would be secured by a first perfected
security interest in specifically pledged marketable securities acceptable to
Norwest and owned by IRA and its subsidiaries, and the market value of the
securities pledged at the date of the funding of the Credit Facility by Norwest
must be equivalent to 140% of the funded loan amount. Further, the market value
of these securities may not be less than 120% of the loan balance outstanding at
any time. In the event that the market value of the securities does decrease
below 120% of the loan balance, the Credit Facility provides for a cure period
as follows: (i) if the value is between 110% and 119%, there will be a cure
period of 30 days; (ii) if the value is between 100% and 109%, there will be a
cure period of 15 days; and (iii)) if the value is below 100%, there will be a
cure period of 5 days.
The Credit Facility Commitment Letter provides that the Credit Facility
must be closed on or before October 1, 1998. In the event the Credit Facility
is not closed by such date, all of Norwest's obligations under the Credit
Facility Commitment Letter automatically expire. The Credit Facility Commitment
Letter also provides that there must be no material adverse change in the
business or financial condition of the Company from the condition described in
its most recent financial statements presented to Norwest as of the date of the
Credit Facility Commitment Letter, and there must be no material adverse change
with respect to the collateral.
The Credit Facility would be evidenced and governed by the provisions of a
loan agreement, a note and supporting documentation and would contain various
conditions precedent to each advance, standard reporting requirements,
covenants, events of default, representations and warranties, covenants and
other provisions customary for credit facilities of this type. Norwest would
require the Company to deliver copies of audited annual financial statements and
monthly borrowing base certificates within the time periods described in the
Credit Facility Commitment Letter.
The foregoing discussion of the Credit Facility Commitment Letter and does
not purport to be complete and is qualified in its entirety by reference to the
Credit Facility Commitment Letter, a copy of which have been filed as
21
<PAGE>
an exhibit to the Rule 13e-3 Transaction Statement on Schedule 13E-3 (the
"Schedule 13E-3"), which has been filed with the Commission. See "AVAILABLE
INFORMATION."
The Company intends that the Surviving Corporation will utilize tax
savings available after the Merger to repay any debts incurred as a result of
the Merger. On a pro forma basis, S corporation status would have reduced
the Company's income tax expense by $4,639,886 for the year ended September
30, 1997, and $3,467,015 for the nine months ended June 30, 1998. The
Company believes that these tax savings are adequate to service its debt
pursuant to the Credit Facility incurred as a result of the Merger, which the
Company anticipates will be approximately $2,224,344 annually. The Company
believes that, until such debt is repaid, distributions under the Mission
Accomplishment Plan will be at least equal to those made on the Class B
Stock. See "THE PROPOSED MERGER" and "PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS OF IRA."
PURPOSE AND STRUCTURE OF THE MERGER
First Command was formed on April 1, 1998, as a Texas corporation, to
construct, own and operate the Parking Garage on the Adjacent Land. IRA has
agreed to provide First Command with funds pursuant to an interest- bearing loan
to construct the Parking Garage. See "CERTAIN INFORMATION CONCERNING FIRST
COMMAND--Business." First Command was organized as an entity distinct from IRA
to limit potential liability of IRA with respect to the ownership, construction
and operation of the Parking Garage. As First Command presently has a limited
number of shareholders and meets the other requirements of S corporation status,
First Command elected S corporation status in order for its taxable items to
"flow through" to its shareholders. See "SPECIAL FACTORS--Certain Effects of
the Merger; Plans for the Company after the Merger."
One objective of the Company is to deregister the Class B Stock under the
Exchange Act, which will cause the Company to no longer be subject to the
reporting requirements of the Exchange Act. The Company currently incurs costs
related to its status as a public reporting corporation under the federal
securities laws, including indirect costs as a result of, among other things,
the executive time expended to prepare and review various filings, furnish
information to shareholders and to attend to other shareholder matters. The
Company anticipates that termination of registration under the Exchange Act will
eliminate the costs and expenses of various federal securities filings incurred
by the Company with respect to regulatory and reporting requirements of the
Exchange Act and will reduce the amount of time devoted by management in
connection therewith. Further, the Company has faced certain competitive
disadvantages resulting from the public reporting requirements of the Exchange
Act. Also, management of the Company believes that access to public markets by
the Company and its shareholders will not occur because of the restrictions on
ownership and transfer of the Class B Stock.
The Company did consider commencing an issuer tender offer in order to
accomplish this goal. However, a successful issuer tender offer could not
ensure that there would not still be shares of Class B Stock outstanding upon
such tender offer's conclusion. In the event that the IRA Shareholders approve
the Merger by the requisite vote, the Class B Stock will be eliminated in
accordance with the terms of the Merger Agreement, which will enable the Company
to deregister the Class B Stock under the Exchange Act.
Additionally, the Company believes that it will qualify for S corporation
status immediately following the elimination of the Class B Stock. Management
of the Company recognized that, if the Class B Stock were eliminated, both IRA
and First Command would qualify for S corporation status. As a result, in order
to achieve administrative simplicity, reduce compliance responsibilities and
eliminate public reporting requirements as described above, the management of
IRA and the management of First Command decided that IRA should merge with and
into First Command, rather than continue both companies as separate S
corporations. Immediately prior to the Merger, First Command will transfer all
of its assets, subject to all of its liabilities, to a newly-formed limited
liability company or Qualified Subchapter S Subsidiary in return for all of the
capital stock of such subsidiary in order to keep the planned operations of
First Command separate and distinct from IRA subsequent to the Merger. Because
First Command currently has elected to be treated as an S corporation under the
federal tax laws, upon the consummation of the Merger, the holders of Class A
Stock that do not seek appraisal rights under Articles 5.12 and 5.13 of the TBCA
will be shareholders of the Surviving Corporation, which will also be an S
corporation. Accordingly, such holders of Class A Stock, as holders of
Surviving Corporation Voting Stock, and Class A/B Shareholders that elect to
receive Surviving Corporation Nonvoting Stock for their Class B Stock will be
entitled to the tax treatment that shareholders of an S corporation receive
under the federal tax laws.
The Management Group has engaged in the transactions contemplated by the
Merger Agreement to assist the Company in attaining the objectives described
above.
CERTAIN EFFECTS OF THE MERGER; PLANS FOR THE COMPANY AFTER THE MERGER
Following the Merger, (i) the Class A Shareholders, (ii) the Class A/B
Shareholders that elect to receive Surviving Corporation Nonvoting Stock and
(iii) the First Command Shareholders will own 100% of the capital stock of the
Surviving Corporation, to the extent that such shareholders do not elect to seek
appraisal rights. As such, these persons will be the direct beneficiaries of
any future earnings and growth of the Surviving Corporation
22
<PAGE>
and will have the ability to benefit from any divestitures, strategic
acquisitions or other corporate opportunities that may be pursued by the
Company in the future. Upon consummation of the Merger, the Class B
Shareholders that are not Class A/B Shareholders will cease to have any
direct ownership interest in the Company or other rights as shareholders of
the Company, including the right to receive distributions. After the Merger,
such shareholders will benefit from any increases in the cash flow or the
value of the Surviving Corporation only as a result of any MAP Units that
such shareholders may then hold. However, the Class B Shareholders that are
not Class A/B Shareholders will be entitled to receive $28.24 per share for
their Class B Stock, which the IRA Board, First Command and the Management
Group have determined is fair consideration to the holders of Class B Stock.
Additionally, the IRA Board traditionally has utilized the dividends
declared and paid on the Class B Stock as a means of compensating its agents,
members of management and key employees, who are the holders of Class B Stock.
After the Merger, the Class B Stock will be eliminated and dividends on Class B
Stock will no longer be paid. However, the IRA Board intends to make similar
payments of compensation to holders of MAP Units pursuant to the Mission
Accomplishment Plan.
Class B Stock has been sold exclusively to agents of the Company as
incentive stock since its inception. Periodic offerings were made of Class B
Stock that had been redeemed by the Company following agent terminations. In
all such offerings, more shares were subscribed for than offered.
Subscriptions were prioritized solely by giving consideration to past
contributions and future potential of the agent-subscriber to Company
objectives, as determined by the Executive Committee of the Board of Directors
of the Company. The Executive Committee gave consideration to any
recommendations which it received, with respect to these criteria, from District
and Regional Agents of the Company. MAP unit awards will also be based on
individual merit of agents, in a manner similar to that used with respect to
grants for shares of Class B Stock.
Class B Stock has provided two valuable financial benefits to agents. It
appreciated in value until such time as agents terminated or otherwise desired
to receive cash for their shares. Additionally, annual cash dividends were paid
on all outstanding shares of Class B Stock. The Mission Accomplishment Plan was
designed to mirror these two financial benefits. A MAP unit is composed of one
SAR and one DER. Through SARs, agents will participate in the undistributed
earnings of the Company. When agents leave the Company, their SARs will be
exercised and they will receive a lump sum of cash for the value that will have
accumulated since the MAP units were granted. Through DERs, agents will
participate in annual cash dividend equivalents that will be paid on all MAP
units until such time as agents terminate their agreements with the Company.
Because agents have no cost basis in the MAP units, any return resulting
from the liquidation of the MAP units will be taxed to the holders of the MAP
units as ordinary income. In contrast, holders of Class B Stock were entitled
to receive capital gain tax treatment upon liquidation of their shares of Class
B Stock.
Holders of Class B Stock have the right to vote only in the event of
certain extraordinary transactions (such as the Merger) as provided by the TBCA,
or as otherwise provided by law. See "DESCRIPTION OF IRA CAPITAL STOCK--Class
B Stock." Holders of MAP units will have no voting rights.
Class A/B Shareholders who are not affiliates of the Company will
receive following the Merger shares of Surviving Corporation Voting Stock
representing the same proportionate interest of voting stock owned by such
Class A/B Shareholder in IRA prior to the Merger. The Class A/B Shareholders
who are not affiliates of the Company will be entitled to receive $28.24 per
share of Class B Stock owned by them. As these Class A/B Shareholders would
be subject to income tax at ordinary income rates on any resulting gain,
these Class A/B Shareholders may elect instead to receive Surviving
Corporation Nonvoting Stock in exchange for their Class B Stock.
The impact on Class A/B Shareholders who are affiliates of the Company
will be the same as for Class A/B Shareholders who are not affiliates except
the Class A/B Shareholders who are affiliates of the Company will also remain
as officers and/or directors of the Surviving Corporation. Under Texas law,
each IRA Shareholder has the right to exercise statutory appraisal rights in
the event any shareholder disagrees with the consideration to be paid
pursuant to the Merger. See "THE PROPOSED MERGER--Rights of Dissenting
Shareholders."
Class B Stock is currently registered under the Exchange Act, which
requires, among other things, that the Company furnish certain information to
its shareholders and to the Securities and Exchange Commission (the
"Commission") and comply with the Commission's proxy rules in connection with
meetings of the Company's Class B Shareholders. After the Merger, the Surviving
Company will no longer be subject to the reporting requirements of the Exchange
Act with respect to Class B Stock, and Class B Stock will be subject to
termination of registration under Section 12(g)(4) of the Exchange Act. After
the Merger, the Company will no longer be subject to the reporting requirements
of the Exchange Act.
The termination of the registration of Class B Stock under the Exchange Act
will substantially reduce the information required to be furnished by the
Company to its shareholders and to the Commission and would render inapplicable
certain provisions of the Exchange Act, including requirements that the Company
file periodic reports (including financial statements), the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions,
requirements that the Company's officers, directors and ten-percent shareholders
file certain reports concerning ownership of the Company's equity securities and
provisions that any profit by such officers, directors and shareholders through
purchases and sales of the Company's equity securities within any six month
period may be recaptured by the Company.
It is expected that following the Merger the business and operations of
the Company will be continued by the Surviving Corporation in the Merger,
substantially as they are being conducted presently through IRA and First
Command. There are no known facts or trends that may indicate that the
Company's agency relationships with represented insurance companies will
change as a result of the consummation of the Merger. The Surviving
Corporation's corporate headquarters are expected to remain in Fort Worth,
Texas, and the current directors and executive officers of IRA are expected
to be the directors and executive officers of the Surviving Corporation. See
"CERTAIN INFORMATION CONCERNING IRA--Directors and Executive Officers of IRA."
For a discussion of the federal tax implications for holders of Class B
Stock, see "--Certain Federal Income Tax Considerations."
First Command is currently an S corporation for federal income tax
purposes. All corporate income, losses, deductions and other taxable items of
an S corporation are "passed through" and taxed at the shareholder level. As a
result, generally an S corporation does not pay federal income taxes on
corporate income; instead, the shareholders of the S corporation are taxed for
their proportionate share of the net income of the S corporation, based on
their respective ownership of the corporation. Consequently, to the extent that
an S corporation generates taxable income, the shareholders of the S
corporation may be subject to tax liability as a result of that corporate
income. Upon consummation of the Merger, management believes that the
Surviving Corporation should be treated as an S corporation, and, as a result
of the Merger, (i) each Class A Shareholder, (ii) each Class A/B Shareholder
electing to receive Surviving Corporation Nonvoting Stock and (iii) each
First Command Shareholder, that do not elect to seek appraisal rights, will
be a shareholder in an S corporation and could be subject to personal tax
liability arising from any taxable income generated by the Surviving
Corporation. After the Merger, however, there can be no assurance that the
Surviving Corporation will continue to maintain its status as an S
corporation. If the Surviving Corporation fails to maintain the requirements
for S corporation, the shareholders of the Surviving Corporation will not
receive the tax treatment accorded to shareholders of S corporations.
The Company has made distributions in the past only on Class B Stock.
Pursuant to the Articles of Incorporation of the Surviving Corporation and the
Surviving Corporation Shareholders' Agreement, the Surviving Corporation will
agree to declare and make distributions pro rata to all the Surviving
Corporation Shareholders to allow them to pay the federal income tax
liability attributable to their distributive share of the Surviving
Corporation's taxable income. In addition, the IRA Board has provided the
Class A/B Shareholders the right to receive the Class B
23
<PAGE>
Nonvoting Stock Consideration. See "SPECIAL FACTORS--Background of the Merger."
Further, the IRA Board, which will be the Board of the Surviving Corporation
upon consummation of the Merger, anticipates that the Surviving Corporation,
subject to the fiduciary duties of the Board of Directors of the Surviving
Corporation and the ongoing financial condition of the Surviving Corporation,
will declare and make distributions that are pro rata to all shareholders on the
Surviving Corporation Common Stock that are intended to approximate the income
that the Class A/B Shareholder would have received from the competitive
reinvestment of the Class B Cash Consideration, taking into account certain
income tax considerations. See "--Purpose and Structure of the Merger."
The purpose of this provision is to provide a minimum return to the
Class A/B Shareholders that elect to receive the Class B Nonvoting Stock
Consideration. This minimum return is to be determined based on the
hypothetical after-tax proceeds that would have resulted if the Class A/B
Shareholder had received the Class B Cash Consideration and received capital
gains tax treatment for federal income tax purposes. For example, assuming a
reasonable after-tax return of 5%, an annual dividend of $1.13 (or $28.24
- -($28.24 x 20%) x 5%) would be paid on each outstanding share of First
Command Common Stock after the Merger. The distribution will apply to both
the Surviving Corporation Voting Stock and the Surviving Corporation
Nonvoting Stock held by the Class A/B Shareholders. The consideration to be
paid for the Class B Stock held by the Class A/B Shareholders is economically
the same as that to be received by the Class B Shareholders that do not own
Class A Stock. The Class A/B Shareholders can elect to receive the Class B
Cash Consideration, or the Class A/B Shareholders can elect to receive the
Class B Nonvoting Stock Consideration with a value equal to the Class B Cash
Consideration.
In the event the Surviving Corporation makes ongoing repurchases of the
Surviving Corporation Nonvoting Stock, the IRA Board presently anticipates
that the repurchase price for such shares will be $28.24 per share, unless
otherwise determined by the Board of Directors of the Surviving Corporation.
The IRA Board also anticipates that such Surviving Corporation Nonvoting
Stock will only be repurchased by the Surviving Corporation in the event that
a Surviving Corporation Shareholder is required to tender his or her shares
to the Surviving Corporation pursuant to the terms of the Surviving
Corporation Shareholders' Agreement. See "--Contracts With Respect to
Surviving Corporation Common Stock."
After the Merger, the Surviving Corporation intends to adopt IRA's
Mission Accomplishment Plan and award MAP Units pursuant to the Mission
Accomplishment Plan to the former Class B Shareholders who are agents, members
of management or employees at the time of award as well as to other active
agents and employees of the Surviving Corporation.
Except as otherwise indicated in this Proxy Statement, the Company and
First Command do not have any plans or proposals subsequent to the Merger that
relate to or would result in an extraordinary corporate transaction, such as a
merger, reorganization or liquidation, involving the Company, a sale or transfer
of a material amount of the assets of the Company or any material change in the
Company's corporate structure.
CONTRACTS WITH RESPECT TO SURVIVING CORPORATION COMMON STOCK
SURVIVING CORPORATION SHAREHOLDERS' AGREEMENT. Upon the Effective Time,
the management of the Surviving Corporation will request that all Surviving
Corporation Shareholders execute the Surviving Corporation Shareholders'
Agreement (the parties to the Surviving Corporation Shareholders' Agreement
referred to as the "Agreeing Parties"). The Surviving Corporation Shareholders'
Agreement provides for, among other things, (i) restrictions on the transfer of
Surviving Corporation Common Stock that would cause the Surviving Corporation's
status as an S corporation to terminate; (ii) a requirement that a shareholder
tender his or her shares to the Surviving Corporation (at a price to be
determined by the Surviving Corporation at least annually) in the event of any
threatened or actual transfer of the shares, the death of such Agreeing Party,
any termination of marriage of a Agreeing Party by death or divorce in which
such shareholder does not receive his or her spouse's community interest in the
Surviving Corporation Common Stock, any threatened or actual bankruptcy of the
Agreeing Party, the termination of such Agreeing Party as a Texas life insurance
agent, the cessation of the shareholder as a duly authorized agent of the
Surviving Corporation pursuant to a current written agency agreement (except
that with respect to an involuntary termination as a duly authorized agent of
the Surviving Corporation, such termination requires approval by a vote of 80%
of the Board of Directors of the Surviving Corporation), the change in status of
an Agreeing Party to a "nonresident alien" (as defined in the Code) or any
threatened or actual levy by a creditor or claimant upon the Surviving
Corporation Common Stock held by the Agreeing Party; and (iii) certain
provisions with respect to the S corporation status of the Surviving
Corporation. However, the Surviving Corporation Shareholders' Agreement does
permit, under certain circumstances, Surviving Corporation Shareholders to
pledge the Surviving Corporation Common Stock with the prior written consent of
the executive committee of the Surviving Corporation, subject to such terms,
conditions and restrictions as the executive committee of the Board of Directors
of the Surviving Corporation determines to be appropriate. Pursuant to the
Surviving Corporation Shareholders' Agreement, the Surviving Corporation has
agreed to declare and make annual distributions to all of its shareholders in a
timely manner to allow them to pay their federal income tax liability
attributable to their distributive share of the Surviving Corporation's taxable
income.
24
<PAGE>
RECOMMENDATION OF THE IRA BOARD AND THE SPECIAL COMMITTEE;
FAIRNESS OF THE MERGER
The IRA Board, based upon the unanimous recommendation of the Special
Committee, determined that the terms of the proposed Merger are fair to and
in the best interests of the IRA Shareholders, including Class B Shareholders
who do not own Class A Stock, and unanimously approved the Merger Agreement
and the Merger and recommended that the Merger Agreement be submitted for
approval at a special meeting of the Company's shareholders. In arriving at
its decision, the IRA Board gave careful consideration to a number of
factors, including the opinion of the Financial Advisor. ACCORDINGLY, THE IRA
BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE MERGER
AGREEMENT.
The IRA Board's approval and recommendation to the Company's shareholders
and the Special Committee's recommendation to the IRA Board were based upon
the following material positive factors:
(1) the Merger will provide the Class B Shareholders with an
opportunity to receive the fair value for their Class B Stock because the
price per share of $28.24 was determined pursuant to a methodology utilized
by the Company since 1981 to establish the price pursuant to which (i) sales
of Class B Stock have been made in offerings to its agents, members of
management and key employees and (ii) purchases of Class B Stock have been
made by the Company pursuant to the terms of shareholder's agreements between
the Company and each Class B Shareholder;
(2) the flexibility provided by the additional resources available to
the Company after the Merger because savings resulting from the Company being
an S corporation under federal income tax laws and no longer being a public
reporting company following the Merger, will be utilized to make compensation
payments pursuant to the Mission Accomplishment Plan, including persons who
owned Class B Stock, after the payment of debt incurred to finance the Merger
and the use of such funds for general corporate purposes;
(3) the opinion of the Financial Advisor that the Merger is fair to the
Class A Shareholders and the Class B Shareholders, from a financial point of
view;
(4) the belief of the IRA Board that the costs, both economic as well as
in personnel time, in complying with the many obligations of being a public
company have not provided a commensurate benefit to the Company or the Class B
Shareholders because the Company and its shareholders have not accessed the
public capital markets due to the restrictions on ownership and transfer of
the Class B Stock;
(5) the ability of Class A Shareholders that do not seek appraisal rights
to maintain their proportionate interest in the Surviving Corporation, which
the management of IRA currently anticipates will be an S corporation for
federal income tax purposes;
(6) the previous adoption of the Mission Accomplishment Plan, pursuant
to which the IRA Board intends to utilize the earnings of the Company to make
compensation payments to its agents, members of management and key employees,
including persons who owned Class B Stock, thereby diminishing the
availability of earnings for appreciation and distributions on its stock; and
(7) the belief of the IRA Board that the funds generated after the
Merger will be sufficient to service debt incurred as a result of the Merger
and to make distributions on MAP units that are at least equal to those
historically paid on the Class B Stock.
Neither the Special Committee nor the IRA Board considered the following
factors, for the reasons specified: (i) current or historical market values,
because of the lack of a trading market for the Class A Stock and the Class B
Stock (see "MARKET PRICE DATA, DISTRIBUTIONS AND SECURITY OWNERSHIP OF IRA
COMMON STOCK"); (ii) liquidation value, given the Company's unique structure;
and (iii) firm offers, because neither the Company, First Command nor the
Management Group were aware of any firm offer for the merger or consolidation of
the Company, the sale or transfer of all or any substantial part of the assets
of the Company or securities of the Company that would enable the holder
thereof to exercise control of the Company.
Because the Financial Advisor considered the following factors, the Special
Committee and the IRA Board adopted the analysis of the Financial Advisor with
respect to such factors: (i) net book value of the Company (see "--Opinion of
the Financial Advisor--Adjusted Book Value Approach"); (ii) going concern value
of the Company (see "--Financial Advisor--Income Approach; --Market Multiple
Approach"); and (iii) historical purchase prices paid in previous purchases (see
"--Financial Advisor--Current/historical Market Pricing and Shareholder
Agreement Analysis").
With respect to comparable transactions, the Special Committee and the
IRA Board adopted the Financial Advisor's conclusion that the companies that
the Financial Advisor analyzed were inapplicable to the proposed transaction
and the Company. None of the "comparables" involved companies with a
security ownership like that of the Company, with all shareholders being
licensed Texas life insurance agents and parties to a restrictive
shareholder's agreement.
The foregoing discussion of the information and factors considered and
given weight by the Special Committee and the IRA Board is not intended to be
exhaustive. In view of the variety of factors considered in connection with
their evaluation of the Merger, the Special Committee and the IRA Board did not
find it practicable to, and did not, quantify or otherwise assign relative
weights to the specific factors considered in reaching their determinations.
Neither the Special Committee nor the IRA Board concluded that any factor
weighed against the fairness of the transaction to the IRA Shareholders.
The Special Committee and the IRA Board evaluated the factors described
above in light of their knowledge of the business and operations of the Company,
and their business judgment, and concluded that the Merger and Merger Agreement
and the transactions contemplated thereby are fair to, and in the best interests
of, the Company and its shareholders.
The Special Committee and the IRA Board believe that the terms of the
Merger are procedurally fair because: (i) the Special Committee was
disinterested and was appointed to represent the interests of the Company's
shareholders, including its unaffiliated shareholders; (ii) the Special
Committee retained and was advised by counsel separate from counsel for the
Company; (iii) the Special Committee obtained an opinion concerning the
fairness, from a financial point of view, of the Merger to the IRA
Shareholders; and (iv) the Merger requires the approval at the Special Meeting
of the holders of at least a majority of the outstanding shares of Class B
Stock not held by Class A/B Shareholders. The Special Committee was not
retained to act solely on behalf of unaffiliated shareholders, and the
Special Committee did not negotiate the terms of the Merger.
25
<PAGE>
POSITION OF THE MANAGEMENT GROUP AND FIRST COMMAND AS TO THE FAIRNESS OF THE
MERGER
The members of the Management Group have considered the process by which
the Company determined the terms of the Merger and certain additional factors
examined by the Special Committee and the IRA Board (described in detail in
"SPECIAL FACTORS--Recommendation of the IRA Board and the Special Committee;
Fairness of the Merger). Members of the Management Group believe that these
factors, when considered together, provide a reasonable basis for them to
believe, as they do, that the Merger is fair to the IRA Shareholders,
including Class B Shareholders who do not own Class A Stock. As a result, the
members of the Management Group specifically adopted the analysis of the IRA
Board and the Special Committee. See "RECOMMENDATION OF THE IRA BOARD AND
THE SPECIAL COMMITTEE; FAIRNESS OF THE MERGER."
The rules of the Securities and Exchange Commission require First
Command to express its belief as to the fairness of the Merger to the IRA
Shareholders. While First Command has not undertaken any independent
evaluation of the Merger from the standpoint of fairness to the Company's
shareholders, it has considered the factors that were taken into account by
the Special Committee and the IRA Board (described in detail in "SPECIAL
FACTORS--Recommendation of the IRA Board and the Special Committee; Fairness
of the Merger) and by the members of the Management Group. Based solely on
these factors, First Command believes that the Merger is fair to the IRA
Shareholders, including Class B Shareholders who do not own Class A Stock. As
a result, First Command specifically adopted the analysis of the IRA Board
and the Special Committee. See "RECOMMENDATION OF THE IRA BOARD AND THE
SPECIAL COMMITTEE; FAIRNESS OF THE MERGER."
These beliefs should not, however, be construed as a recommendation to the
IRA Shareholders by the members of the Management Group in their capacity as
shareholders or First Command to vote or approve the Merger Agreement. Members
of the Management Group and the officers, directors and principal shareholders
of First Command are executive officers or directors of the Company and have an
interest in the contemplated Merger. Neither First Command nor any member of the
Management Group has assigned specific relative weights to the factors
considered in reaching its belief as to fairness.
OPINION OF THE FINANCIAL ADVISOR
The Special Committee retained PricewaterhouseCoopers LLP, formerly
known as Coopers & Lybrand LLP, as the Financial Advisor in June 1998 to
render an opinion to the Special Committee and the IRA Board as to the
fairness, from a financial point of view, of the Merger to the IRA
Shareholders.
PricewaterhouseCoopers, LLP (the "Financial Advisor") was formed by the
merger of Price Waterhouse L.L.P. and Coopers & Lybrand L.L.P. The Financial
Advisor maintains an internationally recognized valuation services group which
is continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions and for other purposes. The Financial
Advisor implements a rigorous internal review process prior to issuing a
fairness opinion.
On June 27, 1998, the Financial Advisor made its presentation to the IRA
Board and delivered its form of written opinion to the Special Committee and
the IRA Board that the Transaction (as defined below) is fair from a
financial point of view to the Class A Shareholders and Class B Shareholders.
On __________, 1998, the Financial Advisor delivered its signed, written
opinion to the Special Committee and the IRA Board that, as of the date of
the opinion, the Transaction (as defined below) is fair from a financial
point of view to the Class A Shareholders and Class B Shareholders.
In rendering its opinion, the Financial Advisor considered the following
contemplated transactions: (i) the merger of IRA with and into First Command;
(ii) the simultaneous exchange of the Surviving Corporation Voting Stock for
the Class A Stock; (iii) the simultaneous exchange of the Class B Cash
Consideration for the Class B Stock held by Class B Shareholders that are not
Class A Shareholders; (iv) the simultaneous conversion of the Class B Stock
held by the Class A/B Shareholders into the Class B Cash Consideration or an
equivalent amount of the Surviving Corporation Nonvoting Stock; and (v) the
conversion of the Company's status from a C Corporation to an S corporation
(collectively, the "Transaction").
The full text of the Financial Advisor Opinion, which includes the
assumptions made, general procedures followed and matters considered is set
forth as Annex B to this Proxy Statement. The Financial Advisor relied upon and
assumed the accuracy and completeness of all financial and historical and
prospective operating information that was publicly available or furnished to
the Financial Advisor and did not attempt to independently verify any of such
information nor did it make or obtain any independent evaluations or appraisal
of any assets of the Company. The Financial Advisor was not requested to and
did not solicit third party indications of interest in acquiring all or any part
of the Company. No limitations were imposed by the IRA Board or the Special
Committee upon the Financial Advisor with respect to the investigation made, or
procedures followed by the Financial Advisor in rendering its opinion. The
Financial Advisor did not determine or recommend the amount of the consideration
to be paid by the Company in connection with the Merger.
In rendering its opinion, the Financial Advisor carried out various
procedures and considered certain facts, including: (i) the terms of the Merger
Agreement; (ii) the various incentive compensation plans contemplated by the
management of the Company as of the date of its analysis; (iii) the fact that
the benefit of additional compensation (in the form of future dividend
equivalency rights and stock appreciation rights) will be available to
participants in the aforementioned incentive compensation plans, and thus
will be unavailable to current shareholders; (iv) the financial and operating
implications of the Company's proposed conversion to S corporation status; (v)
management's ongoing commitment to the Company's agents and the maintenance of
the Company's mission and corporate culture; (vi) certain financial and other
operating information relating to the Company that was publicly available or
furnished to it by the Company, including cash flow analyses prepared by the
Company's management; (vii) that the Financial Advisor met with members of the
Company's management to discuss the business, operations, historical financial
results and future prospects of the Company, including the prospective
implications of the Company's S corporation election and post transaction
incentive plan; (viii) certain financial and securities data of the Company and
compared that data with similar data for other companies in businesses similar
to those of the Company; (ix) the financial terms of certain recent acquisitions
of companies in businesses similar to those of the Company; (x) that the
Financial Advisor performed a discounted cash flow analysis; and (xi) such other
information, financial studies, tax opinions, analyses and investigations and
financial, economic and market criteria as it deemed relevant and appropriate
for purposes of the Financial Advisor Opinion.
During its analysis, the Financial Advisor reviewed certain documents
provided by the Company. The following is a summary of certain of the documents
provided. The Financial Advisor reviewed (i) certain documents pertaining to
the Mission Accomplishment Plan, including a summary of the Mission
Accomplishment Plan, the form of respective agreements and plan descriptions for
certain members of management, certain agents and certain employees of the
Company and the Board Grant Declaration and Administrative Policies; (ii) a
computer listing of IRA shareholders by name, number of shares owned, and
percentage of ownership; (iii) a plan of merger chart, reflecting a graphical
representation of the going private transaction, a chart depicting the Company
and its subsidiaries prior to the Merger, and a chart depicting the Company and
its subsidiaries after the Merger; (iv) an agent listing by region, which
contains a listing of all active IRA agents in region and district order; (v) an
organizational chart of the Company; (vi) a stock transaction printout
containing a computer listing in chronological order of shares sold and
purchased during the past two years; (vii) certain documents with respect to
prior litigation of the Company, pursuant to which the terms of the Class B
Shareholder's Agreements were held to be binding on a former agent of the
Company; (viii) forms of the Company's agreements with its agents, which contain
information concerning the duties of the agents and their compensation and
commissions; (ix) copies of the Company's agency agreements with certain
insurance companies, which describe the obligations, duties, and
responsibilities of the parties as well as compensation to be paid to IRA for
services provided; (x) copies of the Company's dealer agreements with certain
investment dealers, which describe the obligations, duties, and responsibilities
of the parties as well as compensation to be paid to USPA for services provided;
(xi) a listing of the directors and officers of the Company and a description of
the members of the IRA Board, containing short biographical sketches of current
IRA Board members; (xii) the mission statement of the Company and a history of
the Company, containing excerpts from Company marketing material reflecting the
Company's history, purpose, goals, and mission; (xiii) a list of the top
producing agents by year for the past ten years; (xiv) a list containing a legal
description of the real property that IRA owns, along with a copy of the plat;
(xv) a list of non-recurring items, describing significant financial items that
have occurred over the past several years which are not predictable and/or
non-recurring such as distributions from Company investments in equity
securities and state and federal income tax refunds; (xvi) the Class B
Shareholder Agreement, used by all Class B shareholders; (xvii) the Payne Class
A Shareholder Agreement, which is signed by all members of the Payne family who
own Class A shares; (xviii) the Class A Shareholder Agreement, which is used for
all Class A shareholders except members of the Payne Family; (xix) a copy of the
Articles of Incorporation of the Company, as amended and filed with the State of
Texas, along with a copy of the bylaws of the Company as amended; (xx) certain
internal financial statements, showing financial highlights of the Company for
the past five years and various ratios calculated for internal use; (xxi) the
stock appreciation history of the Class B Stock, by month and year for the past
10 years; and (xxii) certain military customer demographics, summarizing the
significant market niches of the Company and its major competitors within those
markets.
Copies of these documents have been filed as exhibits to the Schedule 13E-3
and will be made available for inspection and copying at the principal executive
offices of the Company during its regular business hours by any IRA Shareholder
or his representative who has been so designated in writing. Alternatively, the
Company will transmit a copy of the documents to such IRA Shareholder (or his or
her designated representative) upon written request and at the expense of such
IRA Shareholder.
In addition, prospective operating information (the "Model") was
provided to the Financial Advisor and the Special Committee that included a
financial model intended to demonstrate the financial and tax effects of the
Merger and subsequent S corporation status of the Surviving Corporation.
The Model has been filed as an exhibit to the Schedule 13E-3. The Model and
summary information contained therein does not purport to show increasing
levels of operating revenue or cost savings that may occur as a result of the
Merger. The Model was prepared for the purpose of ensuring the required cash
flow would be available to service the debt incurred as a result of the
Merger based on current operating conditions. The assumptions and cautionary
statement included in the Model are an integral part of the analysis.
The most significant assumptions used in the Model include the following:
(1) The Company has assumed no growth in net income as the purpose of the
Model is to evaluate the Company's ability to service the debt under
current operating conditions. Revenue generating assets and
liabilities have been assumed to remain constant while certain other
assets have been projected based on historical trends.
(2) The Mission Accomplishment Plan replaces certain financial elements of
the Company's Class B Stock which was created in order to reward key
employees and agents and allow them the opportunity to share the
Company's growth through dividends and stock appreciation. The
Mission Accomplishment Plan is more financially efficient than Class B
Stock as a way to meet the objective of rewarding key employees and
agents. All current shareholders are key employees and licensed
agents of the Company.
(3) The Company has assumed that 100% of all net income after taxes, on a
GAAP basis, will be distributed to Class B Shareholders in the event
that the Company continues to operate as a C corporation. In the
event the Company changes its tax status to an S corporation it has
been assumed that 85% of taxable income before Mission Accomplishment
Plan distributions will be paid out as Dividend Equivalent Rights with
the remainder increasing the value of the Stock Appreciation Rights.
The 85% represents a limit imposed by cash flow and tax
considerations.
(4) The Company believes that all Class A/B Shareholders will elect to
exchange their Class B Stock for Surviving Corporation Nonvoting
Stock. Consequently, this is the scenario that is contained in the
Model. In order to compensate the Class A/B Shareholders for not
receiving any cash consideration for their Class B Stock, a special
distribution will be paid to them annually based on the performance
of the Company. The purpose of this distribution is to provide a
minimum return to the Class A/B Shareholders that receive the Class B
Nonvoting Stock Consideration pursuant to the Merger. The minimum
return will be based on the hypothetical after-tax proceeds that
would have resulted from the exchange of Class B Stock for the Class B
Cash Consideration and assumes that any gain will be taxed at capital
gain rates for federal income tax purposes.
(5) The Model includes information for each year until the Company's
2009 fiscal year, which is one year following the anticipated payoff
of the debt incurred as a result of the Merger. At that point, in
order to adequately compare the C corporation and S corporation
status of the Company in the Model, all Class B Stock and SAR units
have been converted to cash. Tax effects on the Company,
shareholders and MAP holders have been taken into account.
Additional information in the Model reflects the summary of cash flow
analysis and balance sheet data from 1998 through 2009. The following are
similarities and differences between IRA as if the Merger had never occurred
("Old IRA") and First Command after the consummation of the Merger ("New
First Command") that are described in the Model:
(1) Old IRA and New First Command reflect the same net income before
corporate taxes and interest.
(2) New First Command as an S corporation would not pay corporate federal
income taxes as Old IRA would continue to do in the future. New First
Command would, however, make distributions to shareholders in order to
pay federal income taxes resulting from taxable income, deductions,
credits and other items that flow through to them.
(3) During fiscal year 1999, the Model indicates that Old IRA would pay
$8.17 million in dividends to Class B Shareholders. New First Command
would make DER payments to MAP participants of $10.76 million even
after appropriate payments are made on debt incurred as a result of
the Merger and appropriate distributions are made to New First Command
shareholders. Similar differences occur each year thereafter due to
the S election.
(4) The balance sheet reflects that in addition to (3) above, during 1999
the Company will accrue a SAR payable liability of $8.91 million.
The Model also contains a summary of shareholder cash flows during the
period from 1998 through 2009. Shareholder and MAP participant income taxes
have been taken into account in the summary of shareholder cash flows. The
following are significant differences and similarities between Old IRA and
New First Command and also between Class A/B Shareholders and Class B
Shareholders as described in the Model:
(1) The per share redemption price for Class B Stock is $28.24 under
both Old IRA and New First Command.
(2) The net cash flow per share after taxes over the time period as
described in the Model is $86.52 for both Class A/B Shareholders
and Class B Shareholders. These amounts include stock sale proceeds
and dividends.
(3) The net cash flow per share and per MAP unit after taxes under First
Command over the time period described in the Model is $125.55 for
both Class A/B Shareholders and Class B Shareholders. These amounts
include stock sale proceeds, MAP payments, earnings on stock sale
proceeds of the Class B Shareholders, and Company distributions to
Class A/B Shareholders who exchanged Class B Stock for Surviving
Corporation Nonvoting Stock.
(4) Both Class A/B Shareholders and Class B Shareholders, based on the
assumptions described in the Model, would receive 45.11% more cash
after taxes under the New First Command scenario than under the IRA
scenario.
(5) If all cash flows are discounted back to 1998 at 4%, both the Class
A/B Shareholders and Class B Shareholders would be 43.56% better off
under the New First Command scenario.
While this information is not intended to predict future performance of
the Company, it does demonstrate the dynamics of the transaction and the
intent of the Company to keep the financial rewards to the Class A/B
Shareholder and Class B Shareholders the same after the Merger. This
information intends to show the benefits that will be available to the Class
A/B Shareholders and Class B Shareholders through this more financially
efficient method of rewarding key employees and agents through the Mission
Accomplishment Plan.
Copies of the Model will be made available for inspection and copying at
the principal executive offices of the Company during its regular business
hours by any IRA Shareholder or his representative who has been so designated
in writing. Alternatively, the Company will transmit a copy of this
information to such IRA Shareholder (or his or her designated representative)
upon written request and at the expense of such IRA Shareholder.
26
<PAGE>
The Financial Advisor considered the following approaches in its analysis:
INCOME APPROACH. The concept underlying this approach is that realistic
valuation of any investment in an income-producing property is directly related
to the future cash flow attributable to such property. Therefore, future cash
flow represents the recovery of investments as well as a return on investment.
The ability of an enterprise to create adequate cash flow, fund the proper cash
disbursements and provide for related financing activities is the primary
determinant of value in that enterprise.
A major requirement of the income approach is a cash flow analysis, which
is management's estimate of what will occur in the future as it pertains to
revenues, expenses, capital expenditures and working capital requirements. This
analysis is compared to the forecasted financial and operating results of
comparable businesses with an emphasis on growth and profitability.
Another important component of the income approach is the determination of
the cost of equity. Since the cash flow analyses provided by the Company's
management included debt proceeds, principal repayment and interest expense, the
resulting cash flows were appropriately discounted at a cost of equity
ranging from 15% to 20%. The cost of equity is utilized to convert to
present value the operating cash flow the subject property is expected to
generate in the future. Various financial tools and modes are used to
calculate these returns. Central to this analysis was the assumption that
the majority of the future cash flow generated by the Company will accrue to
the benefit of the participants of the Company's incentive compensation plans.
Since virtually all prospective earnings for the Company will accrue to
the participants of the incentive compensation plans, the "Income Approach"
yielded value indications for the Class B Stock below the $28.24 per share
price. This is consistent with management's assertions that there will be
insufficient cash flow prospectively to fund dividends or capital appreciation
on the Class B Stock. However, because the current per share price of Class B
Stock as determined by the Company is $28.24 and the Class B Shareholders can
"put" the Class B Stock to the Company at that price, the Financial Advisor
considered the indications of value derived from the "Income Approach" as
supportive of its ultimate conclusion.
TRANSACTION APPROACH. This approach required an analysis of recent
transactions involving financial planning companies deemed comparable to the
Company. Market derived multiples, based on revenue, EBDIT (earnings before
depreciation, interest and taxes) and book value of equity were developed and
analyzed to consider differences between the Company and the comparable
transactions used in the analysis for factors such as size, product
concentration, market share, growth potential and profitability. Central to
this analysis was the assumption that the majority of the future cash flow
generated by the Company will accrue to the benefit of the participants in
the Company's incentive compensation plans, and, therefore, the growth
potential and profit available to the Class A Stock and Class B Stock would
be significantly reduced.
The Financial Advisor conducted an analysis of transactions over the past
twenty-four months for companies in the life insurance and insurance agency
business. Although the life insurance and financial planning industry is
undergoing consolidation, the majority of the transactions identified involved
companies that did not possess qualities similar to the Company. For example, a
large majority of the target companies maintained underwriting operations for
their own insurance products and securities. The few transactions that did
contain pure agency and/or financial planning operations were small in deal size
and considered immaterial by the acquiror. Therefore, financial data pertaining
to the operations of these target companies was unavailable.
However, two transactions relating to pure agency and/or financial planning
operations for which adequate financial information was available were
identified. In September 1997, Amerus Life Insurance Company acquired Delta
Life Corporation for approximately $163 million, and in November 1996, the
annuity division of John Alden Financial Corp. was acquired by SunAmerica Inc.
for approximately $238 million. These transactions posed several issues when
comparing the Company to the targets mentioned above. The issues can be
summarized as follows:
(1) the products offered by both target companies were not from
contractual relationships with independent underwriters, but rather
from affiliations with parent companies;
(2) these transactions were synergistic acquisitions, not
recapitalizations;
(3) the equity of the targets was not severely restricted by shareholder
agreements (as is the case with the Class A Stock and the Class B
Stock of the Company);
(4) the targets' equity was not principally owned by the agents who are
responsible for the generation of revenue (as is the case with the
Company); and
(5) the equity owners of the targets did not have to be registered life
insurance agents in the state of Texas.
Based on these factors and the fact that virtually all earnings generated by
the Company in the future will accrue to the participants of the various
incentive compensation plans the Financial Advisor assigned minimal weight to
the value indications generated by the "Transaction Approach."
In order to apply transaction multiples to the historical parameters of
the Company, the Financial Advisor first needed to adjust the historical
financial performance of the Company to reflect the impact of the various
incentive compensation plans enacted by the IRA Board prior to the
Transaction. After making such adjustments, the Financial Advisor concluded
that the "Transaction Approach" yielded value indications below the $28.24
per share price to be paid to the holders of Class B Stock through
application of the valuation multiples suggested by the foregoing
transactions to the pro forma operating results of the Company. This is
consistent with management's position that there will be insufficient cash
flow prospectively to fund dividends or capital appreciation on the Class B
Stock. However, since the current stock price as determined by the Company
is $28.24 and the Class B Shareholders can "put" the stock on the Company at
that price, the Financial Advisor considered the indications of value derived
from the "Transaction Approach" to be supportive of its ultimate conclusion.
MARKET MULTIPLE APPROACH. This approach required an analysis of the
publicly traded companies operating in the relevant industry. Market valuation
multiples were developed from the financial statements of the identified
guideline companies. The guideline companies used in this analysis included
American Annuity Group, Cotton States Life Insurance and Kansas City Life
Insurance Company. The Financial Advisor conducted an analysis of
comprehensive lists and directories of public companies engaged in life
insurance sales and/or financial planning. The following criteria were used
in choosing potential guideline companies for this analysis: (i) the company
has been profitable; (ii) the company provides similar services to those
provided by IRA (i.e., life insurance agencies); (iii) the company is not
involved in the underwriting of its own insurance or financial products;
(iv) adequate financial data is available for the company; and (v) the
company's stock is traded on an exchange or in the over the counter market.
Central to this analysis was the assumption that the majority of the future
cash flow generated by the Company will accrue to the benefit of the
participants in the Company's incentive compensation plans. The companies
considered by the Financial Advisor in its analysis are described more fully
below.
Due to the nature of the industry, the majority of publicly traded life
insurance and financial planning companies engage in many diverse lines of
business (most underwrite insurance and/or sell mutual funds in which they
manage themselves). Therefore, the guideline company search yielded only three
companies deemed remotely comparable to IRA.
AMERICAN ANNUITY GROUP, INC. ("AAG"). AAG is a holding company whose
subsidiaries are engaged primarily in the marketing of single premium annuities
for retirement planning. Operations in this area accounted for approximately
80% of premiums in 1997. Within the past three years however, AAG has made a
concentrated effort to expand their operations into the areas of life insurance
and pre-need funeral financing. Through acquisitions, AAG nearly doubled its
asset base from $4.5 billion in 1992 to over $7.7 billion in 1997, AAG markets
its products in every state except New York through approximately 1,500
registered agents.
COTTON STATES LIFE INSURANCE COMPANY ("COTTON STATES"). Cotton States is a
holding company whose subsidiaries market individual life insurance, payroll
deduction life insurance, guaranteed-simplified issue life insurance and
individual annuities. Life insurance related premiums accounted for 25% of
revenue in 1997 while investment income constituted 60%. The maximum individual
insurance policy that is offered is $100,000. Cotton States markets its
products through an agency force of 1,400. All of its business is conducted
in the southeastern United States.
KANSAS CITY LIFE INSURANCE COMPANY ("KANSAS CITY"). Kansas City markets
life insurance and annuities through their wholly owned subsidiaries Sunset
Life Insurance Company of America and Old American Insurance Company. The
life insurance segment constituted 86% of Kansas City's revenue in 1997. The
company focuses its marketing efforts primarily on the senior market to cover
retirement and funeral needs. Marketing is executed through an agent force
of approximately 1,000 in 48 states.
In analyzing these "comparable" companies and assessing their comparability
to the Company, the Financial Advisor considered certain key facts (e.g., size,
target market, profitability, etc.). The following provides an overview of
significant differences between the "comparable" companies and the Company:
(1) AAG offers only annuity products. Over one third of the Company's
revenues are derived from life insurance premiums. Also AAG's total
asset base is ten times greater than the Company's;
(2) the operations of Cotton States are concentrated only in the southern
region of the United States; the Company, on the other hand, has a
defined global presence;
(3) agents employed by Cotton States also serve as underwriters for the
parent company;
(4) the products sold by the "comparable" companies are underwritten by
parent or related companies;
(5) none of the "comparable" companies has a customer base or agent base
similar to the Company's;
(6) the equity of the "comparable" companies was not severely restricted
by shareholder agreements (as is the case with the Class A Stock and
the Class B Stock of the Company);
(7) the "comparable" companies' equity was not principally owned by the
agents who are responsible for the generation of revenue (as is the
case with the Company); and
(8) the equity owners of the "comparable" companies did not have to be
registered life insurance agents in the state of Texas.
Based on these factors and the fact that virtually all earnings generated by
the Company in the future will accrue to the participants of the various
incentive compensation plans, the Financial Advisor concluded that the $28.24
cash price to be paid to the Class B Shareholders is greater than the
indicated value of the Company on a per share basis derived through
application of the valuation multiples suggested by the comparable companies
to the pro forma operating results of the Company. Consequently, the
Financial Advisor did not assign significant weight to market "comparables."
In order to apply multiples derived from the "Market Multiple Approach" to
the historical parameters of the Company, the Financial Advisor first needed to
adjust the historical financial performance of the Company to reflect the impact
of the various incentive compensation plans enacted by the IRA Board prior to
the Transaction. After making such adjustments, the "Market Multiple Approach"
yielded minimal value indications for the class B Stock. This is consistent
with management's position that there will be insufficient cash flow
prospectively to fund dividends or capital appreciation on the Class B Stock.
However, since the current stock price as determined by the Company is $28.24
and the Class B Shareholders can "put" the Class B Stock to the Company at that
price, the Financial Advisor considered the indications of value derived from
the "Market Multiple Approach" to be supportive of its ultimate conclusion.
27
<PAGE>
CURRENT/HISTORICAL MARKET PRICING AND SHAREHOLDER AGREEMENT ANALYSIS. In
addition to the traditional valuation, the Financial Advisor considered the
financial implications of the agreements signed by each of the Class A
Shareholders and Class B Shareholders as key to its determination of fairness
to the IRA Shareholders. According to the Class B Shareholder agreements,
the Class B Stock price is set at the discretion of management on an annual
basis. Company management has historically adjusted the per share price of
Class B Stock based on a consistently applied formulaic approach, and $28.24
reflects the stock price determined in 1998 utilizing that approach. The
valuation methodologies described above and applied to the Company's pro
forma operating results yield value indications for the Class B Stock below
the $28.24 cash consideration to be received in the transaction by the
holders of Class B Stock. The pro forma operating results of the Company
reflect implementation by the IRA Board of various incentive compensation
plans that will significantly diminish the Company's ability to fund future
dividends and capital appreciation for the Class A Stock and the Class B
Stock. The foregoing fact pattern was a key element in the Financial
Advisor's determination that the transaction is fair to the Class B
Shareholders and the Class A Shareholders from a financial point of view.
Further, the Class B Shareholders have the right to "put" the Class B Stock
back to the Company at the price determined by management. Based on this
fact, and the fact that the various incentive compensation plans enacted by
the IRA Board will severely reduce the ability of the Company to fund future
dividends and capital appreciation on the Class B Stock, the Class B
Shareholders maximize the present value of their investment in the Company by
accepting the cash payment of $28.24.
For the Class B Stock owned by Class A Shareholders, the above analysis is
also appropriate. However, due to negative tax implications of redeeming the
Class B Stock while accepting Surviving Corporation Voting Stock for the Class A
Stock, the Class A Shareholders have also been given the option to accept
Surviving Corporation Nonvoting Stock in exchange for their Class B Stock.
Although the Surviving Corporation Nonvoting Stock will have a fixed price of
$28.24 per share, the owners of the Surviving Corporation Nonvoting Stock will
receive a "competitive reinvestment" dividend to compensate for the lack of
reinvestment opportunity.
For the Class A Stock, the price is set at five times the price of the
Class B Stock, and holders of Class A Stock have never been paid dividends. The
Class A Shareholders will receive five shares of Surviving Corporation Voting
Stock in exchange for each share of their Class A Stock. Since the Surviving
Corporation Voting Stock and the Surviving Corporation Nonvoting Stock will have
a fixed price of $28.24 per share, the five-for-one exchange fairly adjusts for
the value as delineated in the Class A Shareholder Agreements.
Based upon the proposed Surviving Corporation Shareholder Agreement, the
Surviving Corporation Voting Stock and the Surviving Corporation Nonvoting
Stock will receive dividends to pay tax liabilities that will offset the S
corporation tax liabilities. In addition, all Surviving Corporation Common
Stock will receive a competitive reinvestment dividend on the current price
of $28.24 set by the Surviving Corporation's Board of Directors. The
operative events set forth in the Surviving Corporation Shareholders'
Agreement, which trigger repurchase of the Surviving Corporation Common Stock
by the Company, are comparable to the events outlined in the existing
shareholder agreements that trigger repurchase of the Class A Stock or Class
B Stock by the Company.
ADJUSTED BOOK VALUE APPROACH. Due to the fact that the Company is an
insurance agency (and is therefore not asset intensive) and is not contemplating
liquidation, the Adjusted Book Value Approach was deemed inappropriate for the
valuation of the stock of the Company on a going concern basis.
Based upon the foregoing, it is the Financial Advisor's opinion that, as of
the date of this opinion, the Transaction is fair, from a financial point of
view, to the Class A Shareholders and the Class B Shareholders. The
Financial Advisor believes that its analyses must be considered as a whole
and that selecting portions of its analyses and of the factors considered by
it, without considering all factors and analyses, could create a misleading
view of the processes underlying its opinion. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description.
28
<PAGE>
As compensation for the professional services rendered by the Financial
Advisor, the Company agreed to pay the Financial Advisor a non-refundable
professional fee on the terms outlined below. The Financial Advisor's total fee
for services in rendering the Financial Advisor Opinion was $250,000. Of such
fee, $100,00 was due and payable upon execution of the engagement letter,
$100,000 was due and payable when the Financial Advisor informed IRA that it was
prepared to render the Financial Advisor Opinion, and the balance was due and
payable upon issuance of the Financial Advisor Opinion. Additionally, IRA
agreed to reimburse the Financial Advisor for its actual out-of-pocket expenses
(including the fees and expenses of outside counsel) incurred by the Financial
Advisor in connection with the engagement (not to exceed an aggregate of $25,000
without the mutual written agreement of the Financial Advisor and the
Committee). Neither the employment to conduct its analysis, nor the
compensation for its engagement, was contingent upon the tenor of the
conclusions ultimately reported.
The Financial Advisor has performed numerous valuation and fairness opinion
engagements encompassing a wide and diversified range of industries, including
the insurance industry. The Financial Advisor was retained by the Special
Committee after consideration by it of several candidate firms.
As noted above, certain internal management cash flow analyses were
provided by the Company to the Financial Advisor for purposes of its analysis
in arriving at its Opinion. These analyses were based upon pessimistic
assumptions with the intent of ascertaining whether the Company could
adequately service debt resulting from the Merger. As a matter of course,
the Company does not publish or make generally available internal forecasts
as to its future performance, earnings or financial condition, and such
information was not prepared with a view to public disclosure or in
accordance with applicable accounting guidelines. These analyses were based
on numerous variables and assumptions which are inherently uncertain,
difficult to predict and may not be within the control of the Company,
including without limitation economic and competitive conditions.
Consequently, actual results may differ materially from those set forth in
such analyses.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Class B Shareholders should be aware in considering whether to vote in
favor of the Merger that the Management Group along with other Class A/B
Shareholders, have interests in the Merger in addition to their interests as
shareholders of IRA generally. Those interests relate to, among other things,
the fact that each of the members of the Management Group is a Class A
Shareholder and, as such, upon consummation of the Merger will be a
shareholder of the Surviving Corporation, unless such member of the
Management Group elects to seek appraisal rights for his Class A Stock. As a
result, each member of the Management Group that is currently an officer or
director of the Company will retain his or her position with the Surviving
Corporation upon consummation of the Merger. Further, the IRA Board and the
executive officers of IRA will be the directors and executive officers of the
Surviving Corporation upon consummation of the Merger.
Upon consummation of the Merger, the Surviving Corporation will be owned
by the following persons, assuming that none of such persons elects to seek
appraisal rights with respect to his or her shares: (i) the Class A
Shareholders; (ii) the Class A/B Shareholders that elect to receive the Class
B Nonvoting Stock Consideration with respect to their Class B Stock; and
(iii) the First Command Shareholders.
29
<PAGE>
The following table sets forth ownership information with respect to the
Surviving Corporation, assuming that all of the Class A/B Shareholders elect to
receive the Class B Nonvoting Stock Consideration with respect to their shares
of Class B Stock and assuming that none of the Class A/B Shareholders or the
First Command Shareholders elect to seek appraisal rights with respect to their
shares. Members of the Management Group are denoted with an *.
<TABLE>
POSITION WITH AMOUNT AND
NAME AND ADDRESS THE SURVIVING TITLE NATURE OF PERCENT
OF BENEFICIAL OWNER CORPORATION OF CLASS BENEFICIAL OWNERSHIP OF CLASS
------------------- ----------- -------- -------------------- --------
<S> <C> <C> <C> <C>
Lamar C. Smith (1)* Director, Chairman of Voting 10 shares 8.00
the Board and Chief Nonvoting 40,010 shares 11.13
Executive Officer MAP Units 1,500 units 1.08
James N. Lanier (1)* Director, President and Voting 10 shares 8.00
Chief Operating Officer Nonvoting 18,010 shares 5.01
MAP Units 1,500 units 1.08
Howard M. Crump (1)* Director and Senior Vice Voting 10 shares 8.00
President and Director Nonvoting 26,010 shares 7.24
of Marketing MAP Units 1,500 units 1.08
Hal N. Craig (1)* Director and Vice Voting 5 shares 4.00
President and Director Nonvoting 5,600 shares 1.56
of Insurance MAP Units 400 units 0.29
Donaldson D. Frizzell (1)* Director and Vice Voting 5 shares 4.00
President of Investments Nonvoting 7,100 shares 1.97
MAP Units 400 units 0.29
Jerry D. Gray* Director and Regional Voting 5 shares 4.00
5705 Cameron Hall Place Agent Nonvoting 20,000 shares 5.56
Atlanta, GA 30328 MAP Units 800 units 0.58
David P. Thoreson* Director and Regional Voting 5 shares 4.00
2016 Empire Mine Circle Agent Nonvoting 27,850 shares 7.75
Gold River, CA 95670 MAP Units 800 units 0.58
Carroll H. Payne II* Director Voting 15 shares 12.00
1814 8th Avenue Nonvoting 46,986 shares 13.07
Suite A-3 MAP Units 500 units 0.36
Fort Worth, TX 76110
Naomi K. Payne* Director Voting 15 shares 12.00
11 Marion Terrace Nonvoting 46,977 shares 13.07
Brookline, MA 02146 MAP Units 500 units 0.36
Freda J. Payne Voting 15 shares 12.00
6812 Riverdale Nonvoting 46,978 shares 13.07
Fort Worth, TX 76132 MAP Units 500 units 0.36
Debra S. Payne Voting 15 shares 12.00
5910 N. Central Expressway Suite Nonvoting 46,528 shares 12.94
1000 MAP Units 500 units 0.36
Dallas, TX 75206
Richard E. Giles Voting 5 shares 4.00
13003 Richards Nonvoting 5,400 shares 1.50
Overland Park, KS 66213 MAP Units 800 units 0.58
Margaret L. Galda Voting 5 shares 4.00
2741 Mannerwood Trail Nonvoting 4,500 shares 1.25
Fort Worth, TX 76109 MAP Units 400 units 0.29
Edward T. Elmendorf Jr. Voting 5 shares 4.00
6410 Southwest Blvd. Nonvoting 17,550 shares 4.88
Suite 200 MAP Units 600 units 0.43
Fort Worth, TX 76109
Total Voting 125 shares 100.00
Nonvoting 359,499 shares 100.00
MAP Units 10,700 units 7.74 (2)
</TABLE>
- ------------------
(1) The business address of this person is 4100 South Hulen, Fort Worth, Texas
76113.
(2) MAP Unit holdings and percentages are based on June 30, 1998 numbers. As
of June 30, 1998, there were 138,275 MAP Units outstanding.
In addition, upon consummation of the Merger, these shareholders of the
Surviving Corporation will be entitled to receive any dividends that are
declared by the Board of Directors of the Surviving Corporation. The IRA Board,
which will be the Board of the Surviving Corporation, subject to the fiduciary
duties of the Board of Directors of the Surviving Corporation and the ongoing
financial condition of the Surviving Corporation, will declare and pay dividends
that are pro rata to all shareholders on the Surviving Corporation Common Stock
that are intended to approximate the income that the Class A/B Shareholder would
have received from the competitive reinvestment of the Class B Cash
Consideration, taking into account income tax considerations. See "--Certain
Effects of the Merger; Plans for the Company after the Merger."
The Merger Agreement provides that IRA, and, after the Effective Time, the
Surviving Corporation, will indemnify (and advance expenses to) each present and
former director, officer and employee of IRA and its subsidiaries (the
"Indemnified Parties") to the fullest extent permitted under applicable law or
under the Articles of Incorporation and Bylaws of IRA and the Surviving
Corporation against any costs incurred in connection with any claim, proceeding
or investigation relating to matters occurring prior to or at the Effective
Time, including the transactions contemplated by the Merger Agreement. See "THE
PROPOSED MERGER--The Merger Agreement--Indemnification."
Other than the recommendation of the Special Committee, the IRA Board,
First Command and the Management Group, neither IRA nor First Command is
aware of any recommendations in support of or in opposition to the Merger.
EMPLOYMENT AGREEMENTS
The IRA Board anticipates that the Surviving Corporation will enter into
employment agreements with each of the Surviving Corporation Shareholders who
are also employees of the Surviving Corporation. Pursuant to these
employment agreements, it is expected that each of the Surviving Corporation
Shareholders will receive compensation for services rendered to the Surviving
Corporation and reimbursement for certain expenditures in furtherance of the
Surviving Corporation's business paid by the Surviving Corporation
Shareholder. The actual amount of compensation to be received by the
Surviving Corporation Shareholders will not be described in or affected by
the employment agreements. Such compensation will be determined as currently
done so by the Board of Directors or Chief Executive Officer and will be
initially the same after the consummation of the Merger as prior to the
Merger. In addition, the IRA Board believes that the Surviving Corporation
will offer to the Surviving Corporation Shareholders, pursuant to the
employment agreements, (i) the right to participate in the Mission
Accomplishment Plan and any other equity-based compensation incentives
offered by the Surviving Corporation in the future and (ii) tax preparation
assistance due to the complexity of preparing the Surviving Corporation
Shareholder's individual tax return because of the S corporation status of
the Surviving Corporation. The Surviving Corporation will reimburse the cost
of preparation of such income tax returns up to $1,000.
CERTAIN TRANSACTIONS IN IRA COMMON STOCK
PURCHASES BY IRA. The following table sets forth the purchases by IRA of
the Class B Stock since October 1, 1995, including the number of shares of Class
B Stock purchased, the range of prices paid by IRA and the average purchase
price for each quarterly period of IRA during such period.
<TABLE>
<CAPTION>
Number of Highest Price Lowest Price Average Price
Quarter Ended Shares Purchased Per Share Per Share Per Share
------------- ---------------- --------- --------- ---------
<S> <C> <C> <C> <C>
December 31, 1995 25,975 $25.60 $25.28 $25.30
March 31, 1996 48,976 26.08 25.76 25.84
June 30, 1996 53,088 26.56 26.24 26.39
September 30, 1996 3,475 27.04 26.72 26.92
December 31, 1996 24,810 27.04 27.04 27.04
March 31, 1997 35,725 27.04 27.04 27.04
June 30, 1997 16,375 27.04 27.04 27.04
September 30, 1997 1,675 27.04 27.04 27.04
December 31, 1997 10,575 27.34 27.14 27.15
March 31, 1998 85,324 27.64 27.44 27.45
June 30, 1998 10,075 27.94 27.74 27.75
------- ------
Total 316,073 26.80
</TABLE>
30
<PAGE>
RECENT TRANSACTIONS. Within the last sixty days, IRA has purchased Class B
Stock from certain agents of IRA in private repurchases, on the date, in the
amounts and at the price per share indicated:
<TABLE>
<CAPTION>
Date Number of Shares Price Per Share
---- ---------------- ---------------
<S> <C> <C>
May 5, 1998 125 $ 27.84
May 5, 1998 300 27.84
June 1, 1998 100 27.94
June 11, 1998 125 27.94
July 1, 1998 175 28.04
July 1, 1998 250 28.04
July 23, 1998 175 28.04
</TABLE>
PURCHASES BY MANAGEMENT GROUP. The following table sets forth the
purchases by certain members of the Management Group of the Class B Stock since
October 1, 1995, including the member, the number of shares of Class B Stock
purchased, the range of prices paid by such member and the average purchase
price for each quarterly period of such member during such period.
<TABLE>
Number of Highest Lowest Average
Member Quarter Ended Shares Purchased Price Per Share Price Per Share Price Per Share
------ ------------- ---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Lamar C. Smith September 30, 1996 2,000 26.56 26.56 26.56
September 30, 1997 4,000 27.04 27.04 27.04
James N. Lanier September 30, 1996 2,000 26.56 26.56 26.56
September 30, 1997 4,000 27.04 27.04 27.04
Howard M. Crump September 30, 1996 2,000 26.56 26.56 26.56
September 30, 1997 4,000 27.04 27.04 27.04
Hal N. Craig September 30, 1996 500 26.56 26.56 26.56
September 30, 1997 600 27.04 27.04 27.04
Donaldson D. Frizzell September 30, 1996 500 26.56 26.56 26.56
September 30, 1997 600 27.04 27.04 27.04
Jerry D. Gray September 30, 1997 1,500 27.04 27.04 27.04
David P. Thoreson September 30, 1996 1,000 26.56 26.56 26.56
September 30, 1997 1,500 27.04 27.04 27.04
Carroll H. Payne II September 30, 1996 2,000 26.56 26.56 26.56
Naomi K. Payne September 30, 1996 2,000 26.56 26.56 26.56
</TABLE>
Except as described above, none of IRA, First Command nor any of their
respective executive officers or directors have participated in any transaction
involving Class B Stock in the last sixty days.
ACCOUNTING TREATMENT
The Merger of the Company into First Command will be accounted for at
carryover historical cost basis, as the controlling voting shareholders of
the Company retain the voting control of the Surviving Corporation. The
conversion of each share of Class A Stock of the Company issued and
outstanding into five shares of Surviving Corporation Voting Stock will, in
effect, result in the net assets of the Company being recorded at their
existing carrying value on the accounting records of First Command in
conformity with GAAP. The purchase of the Class B Stock for cash will reduce
shareholders' equity of the Company by a like amount.
In addition, certain accounting adjustments will be made as a result of
the Merger to the financial statements of the Surviving Corporation. For
GAAP purposes, certain deferred tax asset accounts will not be reversed at
the Effective Date. The majority of the Company's deferred tax asset account
is comprised of the effect of the future tax deduction of agent Deferred
Career Commission Plan. Also for GAAP purposes, certain deferred tax
liability accounts, with the exception of those related to depreciable assets
expected to be used in operations, will not be reversed at the Effective
Time. The remainder of the deferred tax liability account should remain on
the books of the Surviving Corporation for ten years until the built-in gain
income tax provision expires. The majority of the Company's deferred tax
liability account is comprised of the effect of the potential future tax
recognition of its current unrealized gains on investments.
REGULATORY FILINGS AND APPROVALS
After the Merger, the Surviving Corporation will file a disclosure document
with the Office of Thrift Supervision as the holding company of First Command
Bank. Also after the Merger, the Surviving Corporation will file a report
notifying the Texas Department of Insurance of the change in the corporate
members of the Surviving Corporation and the change from IRA's Articles of
Incorporation to those of the Surviving Corporation.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary discussion of the material U.S. federal
income tax considerations for Class A Shareholders and Class B Shareholders
regarding the Merger and for Surviving Corporation Shareholders regarding the
ownership of Surviving Corporation Common Stock after the Merger. This
summary discussion includes, where so indicated, certain of the opinions
rendered by Ernst & Young in its Tax Opinion, which is attached hereto as
Annex F. (Except as otherwise specifically indicated herein, the following
federal income tax considerations are not included in the Tax Opinion.) The
Tax Opinion is based on certain assumptions, facts and representations
provided by IRA and First Command management and is subject to certain
limitations and qualifications as noted therein. The facts and
representations provided by management have not been verified by Ernst &
Young in rendering its Tax Opinion.
31
<PAGE>
The Company has not requested, and does not intend to request, a ruling from the
Internal Revenue Service (the "IRS") with regard to any of the matters discussed
in the Tax Opinion or herein. Unlike a ruling from the IRS, an opinion is not
binding on the IRS, and there can be no assurance that the IRS will not take a
position contrary to one or more of the positions included in the Tax Opinion or
discussed herein or that such positions will be upheld by the courts if
challenged by the IRS.
This summary discussion does not address all of the tax considerations that
may be relevant to an IRA shareholder in light of his or her particular
circumstances. For this summary discussion, the Company has assumed that the
shares of Class A Stock and Class B Stock are held as "capital assets" (within
the meaning of Section 1221 of the Code). In addition, this summary discussion
does not consider the effect of any applicable foreign, state, local or other
tax law, or of U.S. estate and gift tax laws.
This summary discussion is based upon an interpretation of the Code,
Treasury Regulations promulgated thereunder, court decisions and administrative
rulings and practice, all in effect as of the date hereof. As noted above, the
IRS is not precluded from adopting a contrary position. In addition, there can
be no assurance that future legislation or judicial or administrative changes or
interpretations will not adversely affect the accuracy of the statements and
conclusions set forth herein. Any such changes or interpretations could be
applied retroactively and could affect the tax consequences of the Merger and
the considerations of Surviving Corporation Shareholders after the Merger.
THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW IS INTENDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE TO A PARTICULAR SHAREHOLDER'S
SITUATION. PERSONS CONSIDERING AN EXCHANGE OF CLASS A STOCK AND/OR CLASS B STOCK
FOR THE MERGER CONSIDERATION SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE
PARTICULAR TAX CONSEQUENCES OF THE EXCHANGE, INCLUDING THE TAX CONSEQUENCES
UNDER FOREIGN, STATE, LOCAL OR OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF
CHANGES (POSSIBLY INCLUDING RETROACTIVE CHANGES) IN U.S. FEDERAL AND OTHER TAX
LAWS.
CERTAIN CONSEQUENCES OF REORGANIZATION STATUS. The Tax Opinion includes
an opinion that the Merger should constitute a "reorganization" (within the
meaning of Section 368(a) of the Code), and that the Merger should have the
following U.S. federal income tax consequences:
THE COMPANY AND THE SURVIVING CORPORATION. The Tax Opinion includes an
opinion that no gain or loss should be recognized by either the Company or
the Surviving Corporation as a result of the Merger (Sections 361, 357(a) and
1031(a) of the Code). The Tax Opinion also includes an opinion that the tax
basis and holding period of the Company's assets in the hands of the
Surviving Corporation should be the same as the tax basis and holding period
of the Company immediately prior to the Merger (Sections 362(b) and 1223(a)
of the Code).
CLASS A/B SHAREHOLDERS. The Tax Opinion includes an opinion that a
Class A/B Shareholder should not recognize gain or loss upon the exchange of
his or her Class A Stock and Class B Stock solely for Surviving Corporation
Common Stock (Section 354(a) of the Code). The Tax Opinion also includes an
opinion that such shareholder's aggregate tax basis in his or her shares of
Surviving Corporation Common Stock should be the same as his or her aggregate
tax basis in
32
<PAGE>
his or her shares of Class A Stock and Class B Stock surrendered in exchange
therefor, decreased by the amount of cash or the fair market value of boot
received and increased by any gain recognized on the exchange (Section 358(a)
of the Code). The Tax Opinion includes an opinion that such shareholder's
holding period in shares of Surviving Corporation Common Stock should include
his or her holding period in his or her shares of Class A Stock and Class B
Stock surrendered in exchange solely therefor (Section 1223(i) of the Code).
A Class A/B Shareholder who (i) exchanges his or her Class A Stock for
Surviving Corporation Voting Stock and (ii) elects to take cash in exchange
for his or her Class B Stock, should recognize income to the extent of the
lesser of (x) the excess of the value of his or her Class A and Class B Stock
over his or her tax basis in such stock, and (y) the amount of cash received.
Such income should be treated as a dividend unless such shareholder is
entitled, based on his or her particular circumstances and certain other
factors, to take the position that the exchange, as to such shareholder, does
not have the effect of the distribution of a dividend under Section 356(a)(2)
of the Code. If the exchange has the effect of a dividend, income will be
ordinary income taxable at rates up to 39.6%. If the exchange, as to a
shareholder, does not have the effect of a dividend, such income will be
capital gain. Any Class A/B Shareholder electing the Class B Cash
Consideration should consult his or her own tax advisor(s) concerning the
tax consequences of electing that option.
Each Class A/B Shareholder will be required to attach a statement to
his or her federal income tax return for the year of the Merger that contains
information listed in Treasury Regulation Section 1.368-3(b).
SHAREHOLDERS WHO OWN ONLY CLASS B STOCK. The Tax Opinion includes an
opinion that a Class B Shareholder who does not own any Class A Stock and is
not related, under the constructive ownership rules of Section 318 of the
Code, to any Surviving Corporation Shareholder after the Merger, who
exchanges his or her Class B Stock solely for cash should recognize capital
gain (or loss) to the extent the cash received exceeds (or is exceeded by)
the tax basis in his or her Class B Stock (Section 302(b) of the Code).
Shareholders should consult their own tax advisor concerning the tax
consequences of receiving solely cash for Class B Stock with respect to the
new capital gains tax rates and holding period rules effective for
transactions after January 1, 1998.
CERTAIN POST-MERGER CONSIDERATIONS FOR SURVIVING SHAREHOLDERS.
TREATMENT AS AN S CORPORATION. The Tax Opinion includes an opinion that
the Surviving Corporation should be an S corporation immediately after the
Merger. However, the Tax Opinion does not provide assurance as to future
facts and circumstances that could affect the tax status of the Surviving
Corporation. The Surviving Corporation intends to be organized and operated
in a manner to meet, on a continuing basis, the Code requirements for
qualification as an S corporation for federal income tax purposes. In order
to qualify as an S corporation, the Surviving Corporation cannot be an
ineligible corporation (as defined in Section 1361(b)(2) of the Code and
cannot have (i) more than 75 shareholders, (ii) as a shareholder a person
(other than certain specified estates, trusts and tax exempt organizations)
who is not an individual, (iii) a nonresident alien as a shareholder, and
(iv) more than one (1) class of stock (other than differences in voting
rights). The Articles of Incorporation of the Surviving Corporation and the
Surviving Corporation Shareholders' Agreement provide for, among other
things, certain restrictions on the transfer of the Surviving Corporation
Common Stock and the requirement that Surviving Corporation Shareholders
tender their shares to the Surviving Corporation upon the occurrence of
certain operative events, each of which is provided at least in part to
preserve the Surviving Corporation's status as an S corporation. See
"DESCRIPTION OF THE SURVIVING CORPORATION CAPITAL STOCK--Restrictions on
Transfers of Shares." However, no assurance can be given that such
requirements will be met or that the Company will be so qualified at any time.
TAXATION OF SURVIVING CORPORATION. Provided the Surviving Corporation is
an S corporation, it generally will not pay any federal income tax. Instead,
its items of income, gains, losses, deductions and credits will be allocated
to the Surviving Corporation Shareholders and taken into account on their
individual federal income tax returns. However, as indicated in the Tax
Opinion, the Surviving
33
<PAGE>
Corporation will be subject to the "built-in gains tax" provisions of Section
1374 of the Code to the extent any asset received in the Merger has a "net
unrealized built-in gain" (within the meaning of Section 1374(d)(1) of the Code)
at the Effective Time and is disposed of by the Surviving Corporation during the
ten-year "recognition period" (within the meaning of Section 1374(d)(7) of the
Code) after that date. In addition, if an S corporation has subchapter C
earnings and profits at the close of its tax year and more than 25% of its
gross receipts are "passive investment income" (within the meaning of Section
1362(d)(3)(C) of the Code), the corporation may be subject to tax on its
"excess net passive" income (within the meaning of Section 1375(b) of the
Code). In addition, if these two conditions are met for three successive
years, its S corporation status will be automatically terminated. The Company
believes that, although the Surviving Corporation will have subchapter C
earnings and profits after the Merger, the Surviving Corporation will be
operated in such a manner to avoid such termination.
TAXATION OF SURVIVING CORPORATION SHAREHOLDERS. Provided the Surviving
Corporation is an S corporation, the Surviving Corporation will allocate to
and among the Surviving Corporation Shareholders its items of income, gains,
losses, deductions and credits for federal income tax purposes. Each
shareholder will be required to report on his or her federal income tax
return his or her such distributive share of such items and will be subject
to tax on such amounts. Pursuant to the Articles of Incorporation of the
Surviving Corporation and the Surviving Corporation Shareholders' Agreement,
the Surviving Corporation has agreed to declare and make distributions to the
Surviving Corporation Shareholders in a timely manner to allow them to pay
their tax liability attributable to their distributive shares of its taxable
income. See "DESCRIPTION OF THE SURVIVING CORPORATION CAPITAL
STOCK--Subchapter S Provisions--Distributions to Pay Tax Liabilities."
Although there can be no assurances that a Surviving Corporation Shareholder
will not have a tax burden from such allocation in an amount in excess of the
amount of cash previously distributed by the Surviving Corporation to such
shareholder (thus requiring such shareholder to use funds from other sources
to pay any tax liability arising from such allocation), the Surviving
Corporation believes this result is highly unlikely. EACH SURVIVING
CORPORATION SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR(S)
CONCERNING HIS OR HER OWNERSHIP OF SURVIVING CORPORATION COMMON STOCK.
TAX OPINION ENGAGEMENT. Ernst & Young, who is also the principal
independent accountants for the Company and First Command, has agreed to be
paid by the Company a non-refundable professional fee for its engagement with
respect to the Tax Opinion of $180,000, payable upon delivery of the Tax
Opinion. Additionally, the Company has agreed that, in the event Ernst &
Young is requested or authorized by the Company (including its successor) or
is required by legal process to produce its documents or its personnel
as witnesses with respect to services for the Company, the Company will, so
long as Ernst & Young is not a party to the proceeding or the subject of the
investigation, as the case may be, in which information is sought, reimburse
Ernst & Young for its professional time and expenses, as well as the fees
and expenses of its counsel, incurred in responding to such requests.
CERTAIN INFORMATION CONCERNING IRA
GENERAL
The Company began operations in January 1964, as a sole proprietorship
owned by Carroll H. Payne, doing business as the "Carroll H. Payne Agency." On
January 1, 1971, the name was changed to "Independent Research Agency for Life
Insurance." On January 1, 1977, the Company was organized as a partnership (the
"IRA Partnership") under the general partnership laws of the State of Texas. On
March 9, 1981, the IRA Partnership exchanged all of its assets relating to the
operation of its life insurance business (which constituted substantially all of
its assets) to Independent Research Agency for Life Insurance, Inc. ("IRA"), a
Texas corporation formed by the partners of the IRA Partnership on December 9,
1980. Thereafter, the IRA Partnership continued in existence under another
name, but all of its former life insurance operations are now owned and
conducted by the Company. The IRA Partnership was dissolved in 1992. IRA is
engaged in the business of a life insurance general agency for sales to United
States military personnel. IRA has six wholly-owned subsidiaries engaged in the
same business in the states of Hawaii, Wyoming, Montana, New York, Nevada and
Alabama, respectively. IRA's wholly-owned subsidiary, United Services Planning
Association, Inc., is also a Texas corporation and is a broker-dealer of
securities. IRA's wholly-owned subsidiary, First Command Bank, is a federal
savings bank. IRA's principal executive offices are located at 4100 South Hulen
Street, Fort Worth, Texas 76109, and its telephone number is (817) 731-8621.
For more information regarding the business and other information regarding
IRA, see the IRA 10-K, which has been delivered to the Class A Shareholders and
the Class B Shareholders as Annex D to this Proxy Statement.
RECENT DEVELOPMENTS
On June 25, 1998, IRA entered into a Line of Credit Agreement (the "United
American Line of Credit") with United American Insurance Company ("United
American Insurance"), pursuant to which United American Insurance agreed to
loan IRA up to $27,000,000. IRA intends to advance approximately $7,000,000
of the proceeds under the United American Line of Credit to First Command
pursuant to the Line of Credit (as defined herein) that First Command has
entered into with IRA. See "CERTAIN INFORMATION CONCERNING FIRST
COMMAND--Business." The remainder of the United American Line of Credit will
be used, if at all, for general corporate purposes. The interest rate on
funds advanced under the United American Line of Credit is 7% per annum, and
advances may be made from time to time until November 30, 2001, upon the
request of IRA. Prior to December 1, 2001, interest on the unpaid principal
balance outstanding under the United American Line of Credit is due and
payable monthly as it accrues, commencing on the last day of the month in
which the first advance is made by United American Insurance. However, if IRA
is entitled to advances under the United American Line of Credit, United
American Insurance will, at IRA's request, make an advance under the United
American Line of Credit that is sufficient to pay the accrued interest that
is then due and payable. After November 30, 2001, the unpaid principal and
accrued and unpaid interest on principal amounts outstanding under the United
American Line of Credit shall be converted into a term loan and shall be due
and payable in 180 equal quarterly installments, with the final payment on
November 30, 2016. The United American Line of Credit is secured by shares
in mutual fund holdings of IRA. IRA intends to repay amounts due under the
United American Line of Credit through cash flow from its operations. In the
event of the failure of IRA to pay any amount when due, the failure of IRA to
perform certain covenants, false representations by IRA, bankruptcy or
insolvency of IRA, the execution of the collateral, or decrease in the value
of the collateral such that the collateral does not exceed 90% of the loan
balance, United American Insurance may (i) exercise all rights with respect
to the collateral; (ii) foreclose or reduce its claim to judgment; (iii) sell
the collateral; (iv) purchase the collateral; (v) apply for a receiver for
the collateral; (vi) retain the collateral in satisfaction of the
indebtedness; or (vii) realize upon the collateral in any other manner
permitted by the issuer of the mutual funds.
34
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF IRA
The directors and executive officers of IRA will be the directors and
executive officers of the Surviving Corporation after the Merger. For more
information concerning IRA's directors and executive officers, including certain
information regarding executive compensation, see the IRA 10-K, which has been
delivered to the Class A Shareholders and the Class B Shareholders as Annex D to
this Proxy Statement.
On May 8, 1998, the IRA Board elected James J. Ellis and Logan Dickinson as
directors of IRA. See "SPECIAL FACTORS--Background of the Merger."
James J. Ellis has operated his own insurance practice since retiring as
General Manager of Mutual of New York in January of 1992. Mr. Ellis joined
Mutual of New York in 1960 and was appointed General Manager in 1976. Mr. Ellis
is a member of the Board of Jack Henry and Associates and the Advisory Board of
Westwood Trust, the First National Bank Park Cities, Merit Medical Systems,
Inc. and Sentir, Inc. His business address is Regency Plaza, LB 72, 3710
Rawlins, Suite 1010, Dallas, Texas 75219-4239.
Logan Dickinson has served since 1982 as President and Managing Principal
of Compensation Strategies Group of Texas, Inc., which provides planning for
employee benefits, life and health insurance and administers qualified
retirement and benefit plans. Mr. Dickinson is a Chartered Life Underwriter,
Chartered Financial Consultant and a CPA. His business address is 314 Main
Street, Suite 202, Fort Worth, Texas 76102.
Each of the directors and executive officers of IRA is a United States
citizen, and, to the knowledge of IRA, none of the directors or executive
officers of IRA has, during the last 5 years, (i) been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining further violations of, or prohibiting activities
subject to, federal or state securities laws or finding any violation of such
laws.
MISSION ACCOMPLISHMENT PLAN
On June 27, 1998, the IRA Board authorized the Mission Accomplishment Plan,
pursuant to which certain agents, members of management and key employees of IRA
will be awarded stock appreciation rights ("SARs"), along with dividend
equivalent rights ("DERs" and, together with SARs, "MAP Units").
The SARs award holders the right to participate in changes in the value of
the Company, based on a formula established by the IRA Board. While the IRA
Board may change such formula, the initial policy of the IRA Board is to value
each SAR based on the change in the Company's per SAR unit value as reported by
the Company using GAAP; provided, however, that this per unit value will be
reduced by the dividend equivalent declared by the Company for payment based on
the current year's earnings, if any. For this purpose, the per SAR unit value
does not include the effect of reporting the Company's investments at market
value net of estimated federal income taxes as stated in SFAS 115. Each SAR
will carry a basis equal to the SAR unit value at the time of issuance, and the
appreciation in the value of the SAR will be paid to participants following
their termination from the Company or upon the maturity of the SAR ten years
after the issuance of the SAR. The Company expects that the value of each SAR
will be established no less frequently than monthly. A holder of a SAR may
exercise such SAR, upon compliance with certain requirements, following the
participant's termination from the Company, termination of the participant as a
licensed Texas life insurance agent, death or disability of the participant or
at the end of the exercise period (which is typically ten years), and such
holder will be entitled to receive a cash payment equal to the difference
between (i) the per SAR unit value as of the last day of the calendar quarter
during which such holder provides a request for such payment and (ii) the per
SAR unit value as of the date of the grant. The Company may unilaterally
exercise SARs of any participant who holds unexercised SARs exceeding 5% of
total unexercised SARs outstanding.
35
<PAGE>
The DERs provide holders the right to participate in certain dividend
equivalents that may be declared by the IRA Board. The Company expects that the
DERs will reflect payments of annual profits realized by the Company that are
not included in the SARs.
Holders of MAP Units have no voting rights with regard to the Company, and
the MAP Units are not intended to confer any other rights as a shareholder to
such holder. The MAP Units may not be transferred, pledged, assigned or
otherwise encumbered by a holder and are subject to immediate forfeiture if,
among other things, the agency appointment or employment of the holder of the
MAP Units is terminated for cause.
MAP Units will be awarded pursuant to a policy that is adopted from time to
time by the IRA Board, and only licensed agents of IRA will be eligible to
receive the MAP Units. Recipients of MAP Units will not be required to pay
any consideration for the receipt of the MAP Units.
On July 22, 1998 the Company issued 138,275 MAP Units to 563 of its agents
and employees, including members of the Management Group. The following table
sets forth the number of MAP Units issued to members of the Management Group.
<TABLE>
Member of Management Group Number of MAP Units Distributed
-------------------------- -------------------------------
<S> <C>
Lamar C. Smith 1,500
James N. Lanier 1,500
Howard M. Crump 1,500
Hal N. Craig 400
Donaldson D. Frizzell 400
Jerry D. Gray 800
David P. Thoreson 800
Carroll H. Payne II 500
Naomi K. Payne 500
-----
Total MAP Units
held by Management Group 7,900
-----
-----
</TABLE>
After the Merger, the Surviving Corporation intends to implement the
Mission Accomplishment Plan and to award MAP Units pursuant to the Mission
Accomplishment Plan to the former Class B Shareholders who are agents, members
of management or employees at the time of award as well as to other active
agents and employees of the Surviving Corporation.
CERTAIN INFORMATION CONCERNING FIRST COMMAND
GENERAL
First Command, a Texas corporation, was incorporated on April 1, 1998, to
construct, own and operate a parking garage (the "Parking Garage") adjacent
to the current executive offices of IRA. The principal executive offices of
First Command are located at 4100 South Hulen Street, Fort Worth, Texas
76109, and its telephone number is (817) 731-8621.
BUSINESS
IRA owns the building in Fort Worth, Texas, in which its home office
operation is conducted, and leases a small portion (approximately 4%) to
third parties. During 1997, the management of IRA determined that it was
necessary to construct the Parking Garage on certain land that is adjacent to
IRA's building (the "Adjacent Land") in order to efficiently use the property
and to provide sufficient parking space for IRA and its tenants. The IRA
Board desired to limit the liability of IRA and its subsidiaries in
connection with the construction and operation of the parking facility.
Consequently, First Command was formed on April 1, 1998, as a Texas
corporation, to construct, own and operate the Parking Garage on the Adjacent
Land. Four of the five shareholders of First Command are members of the
executive committee of the IRA Board: Lamar C. Smith, who is the Chairman and
Chief Executive Officer of IRA, James N. Lanier, who is the President and
Chief Operating Officer of IRA, Howard M. Crump, who is the Senior Vice
President and Director of Marketing of IRA, and Carroll H. Payne, II, who is
a director of IRA. Freda J. Payne, who is the fifth shareholder of First
Command, is a Class A/B Shareholder. Freda J. Payne became a shareholder of
First Command on June 26, 1998. Because First Command is owned by such
shareholders and not by the Company, First Command is not a subsidiary of the
Company.
Each First Command Shareholder will be entitled to receive, pursuant to
the Merger, one share of Surviving Corporation Nonvoting Stock for each 25
shares of First Command Common Stock held by such shareholder.
Pursuant to a Line of Credit Agreement dated June 1, 1998 (the "Line of
Credit"), IRA has agreed to loan up to $7,000,000 to First Command for the
construction of the Parking Garage. The interest rate on funds advanced under
the Line of Credit is 7% per annum. Advances may be made under the Line of
Credit from time to time until November 30, 1999, upon the request of First
Command, provided that the total amount of all advances under the Line of Credit
will not exceed $7,000,000 plus up to $1,500,000 to pay interest accruing on
amounts advanced. Prior to December 1, 1999, interest on the unpaid principal
balance outstanding under the Line of Credit is due and payable monthly as it
accrues, commencing on July 1, 1998. However, if First Command is entitled to
advances under the Line of Credit, IRA will, at First Command's request, make an
advance under the Line of Credit that is sufficient
36
<PAGE>
to pay the accrued interest that is then due and payable. After November 30,
1999, the unpaid principal of and accrued and unpaid interest on amounts
outstanding under the Line of Credit shall be converted into a term loan and
shall be due and payable in 60 equal quarterly installments, with the final
payment on December 1, 2014. The Line of Credit is secured by the Adjacent
Land, the Parking Garage and rents, deposits and other revenues with respect to
the Parking Garage. First Command intends to repay amounts due under the Line
of Credit through revenues generated from the Parking Garage. In the event of
the failure of First Command to pay any amount when due, IRA may (i) declare the
outstanding principal balance, along with any accrued but unpaid interest, due;
(ii) refuse to make further advancements under the Line of Credit; and (iii)
pursue any other legal remedies it may have.
First Command currently has two employees who manage the day-to-day
operations of First Command, including, but not limited to, negotiating
contracts with architecture firms and construction firms, working with municipal
authorities with regard to building code issues and ordinances, overseeing the
progress of the construction of the garage, responding to issues and requests
from the construction companies, and administering other duties such as the
authorization of payment of construction invoices.
In addition, pursuant to a Management Agreement (the "Management
Agreement"), dated June 1, 1998, between IRA and First Command, First Command
has retained IRA, as an independent contractor, to perform various services on
behalf of First Command, including (i) the preparation and processing of payroll
and payroll records for First Command's business, (ii) the processing of
accounts payable for First Command's business and (iii) the administration of
benefits for employees of First Command. Pursuant to the Management Agreement,
IRA will provide certain facilities, equipment and supplies necessary to conduct
these services. First Command will pay IRA a monthly fee of $2,030 for services
rendered under the Management Agreement. The term of the Management Agreement
is one year, and it is automatically renewed thereafter unless otherwise
terminated by (i) mutual agreement or (ii) notice by First Command or IRA at
least 30 days prior to the anniversary of the Management Agreement. First
Command and IRA have agreed to indemnify one another for all claims arising from
each of their negligence or willful misconduct.
First Command also entered into an administrative agreement (the
"Administrative Agreement") with IRA on June 1, 1998 to manage IRA's building.
Under the agreement, IRA is required to pay a monthly fee to First Command in
the amount of $2,080 for the services rendered by First Command. The term of
the Administrative Agreement is one year, and it is automatically renewed
thereafter unless otherwise terminated by (i) mutual agreement or (ii) notice by
First Command or IRA at least 30 days prior to the anniversary of the Management
Agreement. First Command and IRA have agreed to indemnify one another for all
claims arising from each of their negligence or willful misconduct.
First Command is not currently a party to any legal proceedings.
PROPERTIES
On June 1, 1998, pursuant to a Ground Lease (the "Ground Lease") between
IRA and First Command, IRA leased the Adjacent Land to First Command for a term
of 99 years and for a nominal annual rental payment. The approximate value of
the transaction was $99.00. Pursuant to the Ground Lease, First Command is
permitted to use the Adjacent Land only for the Parking Garage. First Command
is required to maintain general public liability insurance covering the Adjacent
Land and business operations conducted on the Adjacent Land, property damage
insurance, casualty insurance, builder's risk insurance and such other insurance
as may reasonably be required by IRA. IRA and its agents and employees are not
liable for damages resulting from any accident occurring on the Adjacent Land,
and First Command has agreed to indemnify IRA for any claims against IRA for any
such accidents. First Command is required to conform with all applicable
environmental laws with regard to operations and maintenance of the Adjacent
Land and has agreed to indemnify IRA with respect to environmental claims
imposed on IRA with respect to the Adjacent Land.
First Command entered into an agreement on May 4, 1998 with an independent
third party ("Contractor") to act as a general contractor with respect to the
construction of the Parking Garage. The Parking Garage is expected
37
<PAGE>
to be an 801-car parking garage with a surface parking lot. Construction on
this project commenced on or about June 15, 1998. It is anticipated that the
Parking Garage will be completed in the summer of 1999.
On June 1, 1998, pursuant to a Lease Agreement (the "Lease Agreement")
between First Command and IRA, First Command leased to IRA the Adjacent Land,
along with all buildings located on the Adjacent Land, commencing after
substantial completion of the Parking Garage and continuing for fifteen years
thereafter. First Command is obligated under the Lease Agreement to erect the
Parking Garage on the leased premises. IRA is required under the Lease
Agreement to pay rent in the amount of $51,250 per month plus operating expenses
associated with the Parking Garage. In addition, IRA is obligated under the
Lease Agreement to maintain utilities and liability insurance of at least
$1,000,000 for injury and death and at least $100,000 for property damage and
pay all applicable taxes. First Command is required to maintain the premises
and maintain fire and extended coverage insurance in an amount equal to at least
80% of the replacement cost of the Parking Garage. IRA has agreed to indemnify
First Command for any claims resulting from injuries or death of any person or
damages on the leased premises, the negligence of IRA or the use of the leased
premises by IRA. If First Command receives an offer to purchase the leased
premises from a third party during the term of the Lease Agreement, and First
Command wishes to accept the offer, IRA has the right to purchase the leased
premises under the same terms as presented in the third party's offer to
purchase.
Immediately prior to the Merger, First Command will transfer all of its
assets, subject to liabilities, to a newly-formed limited liability company or
Qualified Subchapter S Subsidiary in return for all of the capital stock of such
subsidiary. This transfer will keep the planned operations of First Command
separate and distinct from IRA subsequent to the Merger.
DIRECTORS AND EXECUTIVE OFFICERS OF FIRST COMMAND
The following is a list of all directors and executive officers of First
Command as of August 15, 1998, describing their respective names, ages as
positions held with First Command, along with the period of time they have
served in such position. No arrangements or understandings exist between any of
these individuals and any other persons pursuant to which they have been, or
will be, selected as a director or executive officer of First Command. The term
of office of all executive officers and directors is one year. The term of
office of a Director, under the classified board system of election provided in
First Command's Bylaws, is three years.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Lamar C. Smith 50 Director, Chairman of the
Board and Chief Executive
Officer
James N. Lanier 58 Director, President and
Chief Operating Officer
Howard M. Crump 51 Director
Carroll H. Payne II 43 Director
Martin R. Durbin 37 Treasurer
Robert F. Watson 62 Secretary
</TABLE>
Each of the directors and executive officers of First Command is currently
a director or executive officer of IRA. Members of the Board of Directors of
First Command receive a fee of $100 for each meeting. Other than this
attendance fee, none of the executive officers or directors of First Command
receive compensation from First
38
<PAGE>
Command for services provided to First Command. For more information concerning
the directors and executive officers, including certain information concerning
executive compensation, see the IRA 10-K, which has been delivered to the Class
A Shareholders and the Class B Shareholders attached as Annex D to this Proxy
Statement.
CERTAIN INFORMATION CONCERNING THE MANAGEMENT GROUP
The Management Group consists of Lamar C. Smith, James N. Lanier, Howard M.
Crump, Hal N. Craig, Donaldson D. Frizzell, Jerry D. Gray, David P. Thoreson,
Carroll H. Payne II, and Naomi K. Payne. Each member of the Management Group is
a Class A Shareholder.
The following contains certain information with respect to each member of
the Management Group. Each member of the Management Group is a citizen of the
United States and, unless otherwise noted, has a business address of 4100 South
Hulen, Fort Worth, Texas 76113.
Mr. Smith has served as the Company's Chairman of the Board and Chief
Executive Officer since 1992 and has served as a Director of the Company since
1983. Mr. Smith also has served as Chairman of the Board and Chief Executive
Officer and a Director of First Command since its incorporation in 1998.
Mr. Lanier has served as President and Chief Operating Officer of the
Company since 1992 and has served as a Director of the Company since 1988. Mr.
Lanier also has served as President and Chief Operating Officer and a Director
of First Command since its incorporation in 1998.
Mr. Crump has served as Senior Vice President and Director of Marketing of
the Company since 1992 and as a Director of the Company since 1990. Mr. Crump
also has served as a Director of First Command since its incorporation in 1998.
Mr. Craig has served as Vice President and Director of Insurance of the
Company since 1997 and as a Director of the Company since 1993. From 1994 to
1997, Mr. Craig served as Vice President and Chief Information Officer of the
Company, and from 1992 to 1993 he served as Vice President and Director of
Management Information Systems of the Company.
Mr. Frizzell has served as Vice President and Director of Investments of
the Company since 1992 and as a Director of the Company since 1993.
Mr. Gray has been Regional Agent of the Company's South Atlantic Region
since 1996 and has served as a Director of the Company since 1990. Prior to
such time, he served as a Regional Agent in the midwestern United States for the
Company. His business address is 5705 Cameron Hall Place, Atlanta, Georgia
30328.
Mr. Thoreson has been a Regional Agent with respect to the Company's
activities in California and in the Pacific area since 1994 and has served as a
Director of the Company since 1994. Prior to such time, he served as a regional
agent with respect to the Company's activities in Europe. His business address
is 2016 Empire Mine Circle, Gold River, California 95670.
Mr. Payne has been a Director of the Company since 1983 and as a Director
of First Command since its incorporation in 1998. Mr. Payne has been an
architect since 1988. His business address is 1814 8th Avenue, Suite A-3, Fort
Worth, Texas 76110-1354.
Ms. Payne has been a Director of the Company since 1983. Ms. Payne works
with, and coordinates assistance for, deaf and otherwise handicapped students
through various agencies and institutions dedicated to such students. Her
business address is 11 Marion Terrace, Brookline, Massachusetts 02146-4937.
THE SPECIAL MEETING
GENERAL
This Proxy Statement is being furnished to Class A Shareholders and Class B
Shareholders in connection with the solicitation of proxies by the IRA Board for
use at the Special Meeting and any adjournment or postponement thereof.
At the Special Meeting, the Class A Shareholders and Class B Shareholders
will be asked to consider and vote upon a proposal (the "Merger Proposal") to
approve and adopt the Merger Agreement entered into between First Command and
the Company, and the transactions contemplated thereby, including the Merger. If
the Merger is approved by the IRA Shareholders, the Company will merge with and
into First Command, and each share of Class A Stock of the Company issued and
outstanding immediately prior to the Effective Time (other than shares of Class
A Stock held in treasury by the Company), subject to and upon the terms and
conditions of the Merger Agreement, will be converted into five shares of
Surviving Corporation Voting Stock. Further, (i) each share of Class B Stock
held by a Class B Shareholder that is not a Class A/B Shareholder that is issued
and outstanding immediately prior to the Effective Time, subject to and upon the
terms and conditions of the Merger Agreement, will be converted into $28.24 in
cash, without interest, and (ii) each share of Class B Stock held by a Class A/B
Shareholder issued and outstanding immediately prior to the Effective Time,
subject to and upon the terms and conditions of the Merger Agreement, will be
converted into one share of Surviving Corporation Nonvoting Stock; provided,
however that each Class A/B Shareholder may elect to receive, in lieu of
receiving the Class B Nonvoting Stock Consideration, the Class B Cash
Consideration for all shares of Class B Stock held immediately prior to the
Effective Time. Each holder of First Command Common Stock, issued and
outstanding immediately prior to the Effective Time, subject to and upon the
terms and conditions of the Merger Agreement, will receive one share of
Surviving Corporation Nonvoting Stock for each 25 shares of First Command Common
Stock held by such shareholder. If the Merger is approved, all of the
outstanding shares of Surviving Corporation Common Stock will be held by (i) the
Class A Shareholders, (ii) the Class
39
<PAGE>
A/B Shareholders who do not elect to receive Class B Cash Consideration and
(iii) the First Command Shareholders, to the extent that such shareholders do
not seek appraisal rights (see "THE PROPOSED MERGER--Conversion of Shares" and
"RISK FACTORS--Risk Factors Pertaining to the Merger--Loss of Voting Rights").
The Merger Agreement (including the principal exhibits thereto) is attached to
this Proxy Statement as Annex A. See "THE PROPOSED MERGER." The IRA Board,
based upon the unanimous recommendation of the Special Committee, determined
that the terms of the proposed Merger are fair to and in the best interests of
the IRA Shareholders, including the Class B Shareholders who do not own Class A
Stock, and unanimously approved the Merger Agreement and the Merger and
recommended that the Merger Agreement be submitted for approval at a special
meeting of the IRA Shareholders. In arriving at its decision, the IRA Board
gave careful consideration to a number of factors, including the opinion of the
Financial Advisor, the financial advisor to the Special Committee. ACCORDINGLY,
THE IRA BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE MERGER
AGREEMENT.
RECORD DATE
The IRA Board has fixed the close of business on _______________, 1998, as
the Record Date for the determination of holders of Class A Stock and Class B
Stock entitled to vote at and receive notice of the Special Meeting. Only Class
A Shareholders and Class B Shareholders as of the Record Date will be entitled
to vote at the Special Meeting. At the close of business on the Record Date, the
Company had outstanding and entitled to vote 25 shares of Class A Stock held by
14 holders of record and _________________ shares of Class B Stock held by
_______________ holders of record.
QUORUM
The presence, in person or by proxy, of the holders of a majority of Class
A Stock and the holders of a majority of Class B Stock entitled to vote at the
Special Meeting is necessary to constitute a quorum for the transaction of
business at such meeting.
Abstentions are counted for purposes of determining whether a quorum exists
at the Special Meeting. However, proxies that reflect abstentions and proxies
that are not returned will have the same effect as a vote against approval of
the Merger Agreement because the affirmative vote of (i) the holders of at least
66-2/3% of the outstanding shares of Class A Stock and Class B Stock, voting
together as a single class, (ii) the holders of at least 66-2/3% of the
outstanding shares of Class A Stock and Class B Stock, each voting separately as
a class, and (iii) the holders of at least a majority of the outstanding
shares of Class B Stock not held by Class A/B Shareholders, is required to
approve the Merger Agreement. See "--Votes Required; Voting Rights."
VOTES REQUIRED; VOTING RIGHTS
Each share of Class A Stock and Class B Stock is entitled to one vote
with respect to the approval of the Merger at the Special Meeting. The
affirmative vote of (i) the holders of at least 66-2/3% of the outstanding
shares of Class A Stock and Class B Stock, voting together as a single class,
(ii) the holders of at least 66-2/3% of the outstanding shares of Class A
Stock and Class B Stock, each voting separately as a class, and (iii) the
holders of at least a majority of the outstanding shares of Class B Stock not
held by Class A/B Shareholders, is required to approve the Merger Agreement.
As of August 15, 1998, Lamar C. Smith, James N. Lanier, Howard M. Crump, Hal
N. Craig, Donaldson D. Frizzell, Jerry D. Gray, David P. Thoreson, Carroll H.
Payne II and Naomi K. Payne (collectively, the "Management Group"), each of
whom is an officer or director of the Company or First Command and is also a
Class A Shareholder, beneficially owned an aggregate of 16 shares of Class A
Stock and 238,504 shares of Class B Stock (representing approximately 64% and
25% of the outstanding Class A Stock and Class B Stock, respectively). Each
of the Management Group intends to vote all shares of Class A Stock and Class
B Stock beneficially owned by him or her for approval of the Merger Agreement.
With regard to any other matters presented at the Special Meeting, each
share of Class A Stock will be entitled to one vote, and the Class B
Shareholders will not be entitled to vote on such matters.
If fewer shares of either Class A Stock or Class B Stock are voted in favor
of the Merger Proposal than the number required for approval, it is expected
that the Special Meeting will be postponed or adjourned for the purpose
40
<PAGE>
of allowing additional time for soliciting and obtaining additional proxies or
votes. If a motion to adjourn the meeting is presented for the purpose of
allowing additional time to solicit proxies, shareholders providing proxies that
are not voted against the Merger Proposal will be deemed to have conferred
discretionary authority to vote for such adjournment, and shares voted against
the Merger Proposal shall be voted against a motion to adjourn such meeting. See
"--Solicitation of Proxies."
Because 25 shares of Class A Stock and _________________ shares of Class
B Stock were outstanding as of the Record Date, the affirmative vote of at
least 17 shares of Class A Stock and ________________ shares of Class B Stock
is a condition to the consummation of the Merger. As of the Record Date,
there were _______ shares of Class B Stock held by persons other than the
Management Group. ___________ shares of Class B Stock will be needed to
approve the Merger in addition to the number of shares of Class B Stock held
by Class A/B Shareholders.
DISSENTERS' RIGHTS
Holders of Class A Stock or Class B Stock who comply with the applicable
requirements of the TBCA may dissent from the vote on the Merger and exercise
appraisal rights with respect to their Class A Stock or Class B Stock. See "THE
PROPOSED MERGER--Rights of Dissenting Shareholders" and the excerpted sections
of the TBCA attached hereto as Annex C.
SOLICITATION OF PROXIES
If a shareholder attends the Special Meeting, he or she may vote by ballot.
However, many of IRA's shareholders may be unable to attend the Special Meeting.
Therefore, the IRA Board is soliciting proxies so that each holder of Class A
Stock or Class B Stock on the Record Date has the opportunity to vote on the
proposals to be considered at the Special Meeting.
When a proxy is returned properly signed and dated, the shares represented
thereby will be voted in accordance with the instructions on the proxy. If a
shareholder does not return a signed proxy or vote in person at the Special
Meeting, his or her shares will not be voted. Shareholders are urged to mark the
boxes on the proxy to indicate how their shares are to be voted. If a holder of
Class A Stock or Class B Stock returns a signed proxy, but does not indicate how
his or her shares are to be voted, the shares represented by the proxy will be
voted FOR approval and adoption of the Merger Proposal. A properly executed
proxy marked "ABSTAIN," although counted for purposes of determining whether
there is a quorum and for purposes of determining the aggregate voting power and
number of shares represented and entitled to vote at the Special Meeting, will
not be voted and will have the effect of a vote against the Merger Proposal.
The IRA Board does not know of any matters other than those described in
the notice of the Special Meeting that are to come before the Special Meeting.
If any other matters are properly brought before the Special Meeting, including,
among other things, a motion to adjourn or postpone the Special Meeting to
another time and/or place for the purpose of, among other things, permitting
dissemination of information regarding material developments relating to the
Merger or soliciting additional proxies in favor of the Merger Proposal, one or
more of the persons named on the proxy card will vote the shares represented by
such proxy upon such matters as determined in their best judgment and consistent
with the voting rights of such shares as provided by the IRA Bylaws and the
TBCA; provided, however, that no proxy that is voted against the Merger Proposal
will be voted in favor of any adjournment or postponement for the purpose of
soliciting additional proxies. At any subsequent reconvening of the Special
Meeting, all proxies will be voted in the same manner as such proxies would have
been voted at the original convening of the Special Meeting, except for proxies
that have been effectively revoked or withdrawn prior to the time such Proxies
are voted at such reconvened meeting. See "--Votes Required; Voting Rights."
In addition to solicitation by use of the mails, proxies may be solicited
by directors, officers and employees of IRA in person or by telephone, telegram
or other means of communications. Such directors, officers and employees will
not be additionally compensated but may be reimbursed for reasonable
out-of-pocket expenses in connection with
41
<PAGE>
such solicitation. No proxy solicitation firm has been retained to assist with
soliciting and tabulating proxies for the Special Meeting. Expenses in
connection with the solicitation of proxies will be paid by the Company.
PLEASE DO NOT SEND ANY SHARE CERTIFICATES WITH YOUR PROXY CARD OR THE
FORM OF ELECTION.
REVOCABILITY OF PROXIES
Any IRA Shareholder who executes and returns a proxy may revoke such proxy
at any time before it is voted by (i) notifying in writing Sandra T. Allen,
Corporate Secretary of IRA, at 4100 South Hulen Street, Fort Worth, Texas 76109,
(ii) granting a subsequent proxy or (iii) appearing in person and voting at the
Special Meeting. Attendance at the Special Meeting will not in and of itself
constitute revocation of a proxy.
THE PROPOSED MERGER
GENERAL
The following is a brief summary of certain aspects of the Merger. This
summary does not purport to be complete and is qualified in its entirety by
reference to the Merger Agreement, a copy of which is included in this Proxy
Statement as Annex A and is incorporated herein by reference.
CLOSING; EFFECTIVE TIME
The Closing will take place on the first date that all conditions to the
Merger shall be satisfied or waived in accordance with the Merger Agreement or
such date as the Company and First Command may agree in writing. Pursuant to
the Articles of Merger to be filed with the Secretary of State of the State of
Texas, the Merger will become effective at 12:01 a.m. on October 1, 1998 (the
"Effective Time").
CONVERSION OF SHARES
Upon the terms and subject to the conditions set forth in the Merger
Agreement, each share of Class A Stock of the Company issued and outstanding
immediately prior to the Effective Time (other than shares of Class A Stock held
in treasury by the Company), subject to and upon the terms and conditions of the
Merger Agreement, will be converted into five shares of Surviving Corporation
Voting Stock. Further, (i) each share of Class B Stock held by a Class B
Shareholder that is not a Class A/B Shareholder that is issued and outstanding
immediately prior to the Effective Time, subject to and upon the terms and
conditions of the Merger Agreement, will be converted into $28.24 in cash,
without interest, and (ii) each share of Class B Stock held by a Class A/B
Shareholder issued and outstanding immediately prior to the Effective Time,
subject to and upon the terms and conditions of the Merger Agreement, will be
converted into one share of Surviving Corporation Nonvoting Stock; provided,
however that each Class A/B Shareholder may elect to receive, in lieu of
receiving the Class B Nonvoting Stock Consideration, the Class B Cash
Consideration for all shares of Class B Stock held thereby immediately prior to
the Effective Time. Each holder of First Command Common Stock, issued and
outstanding immediately prior to the Effective Time, subject to and upon the
terms and conditions of the Merger Agreement, will receive one share of
Surviving Corporation Nonvoting Stock for each 25 shares of First Command Common
Stock held by such shareholder.
On the first business day following the Effective Time, the Surviving
Corporation will deposit in trust with the Paying Agent the following amounts
and forms of Merger Consideration required for conversion at the Effective Time
of the Class A Stock and Class B Stock (such deposit being the "Payment Fund"):
(i) certificates representing the requisite number of shares of Surviving
Corporation Voting Common Stock, (ii) cash representing the Class B Cash
Consideration and (iii) certificates representing the requisite number of shares
of Surviving Corporation Nonvoting Common Stock.
42
<PAGE>
Promptly after the Effective Time, the Paying Agent will mail to each
record holder of Class A Stock or Class B Stock, a transmittal letter and
instructions for the surrender of the certificates for payment. Upon surrender
to the Paying Agent of certificates, together with a duly executed letter of
transmittal, the holder will be entitled to receive the appropriate Merger
Consideration. No interest will be paid or accrue on the Merger Consideration
payable in cash upon the surrender of the certificates. The Paying Agent shall
pay the Merger Consideration attributable to a certificate that has been lost or
destroyed upon receipt of satisfactory evidence of ownership of the shares of
Class A Stock or Class B Stock and of appropriate indemnification. After the
Effective Time, until surrendered in accordance with these provisions, each
certificate (other than certificates representing Dissenting Shares) shall
represent only the right to receive the Merger Consideration as set forth in the
Merger Agreement.
After the Effective Time, there shall be no transfers on the stock transfer
books of the Surviving Corporation of the shares of IRA Common Stock or First
Command Common Stock which were outstanding immediately prior to the Effective
Time. Certificates presented to the Surviving Corporation after the Effective
Time shall be cancelled.
Any portion of the Payment Fund that remains unclaimed by the shareholders
of IRA or First Command for six months after the Effective Time shall be repaid
to the Surviving Corporation, upon demand, and any shareholders of IRA or First
Command who have not complied with the herein provisions shall look as a general
creditor only to the Surviving Corporation for payment of their claims for the
Merger Consideration. Notwithstanding the foregoing, the Surviving Corporation
shall not be liable to a holder of shares of IRA Common Stock or First Command
Common Stock for any amounts delivered to a public official pursuant to any
applicable abandoned property, escheat or similar laws.
At the Effective Time, all shares of either Class A Stock or Class B Stock
that are held in treasury by the Company will cease to be outstanding, shall be
cancelled and retired without payment of any consideration therefor and will
cease to exist.
SHAREHOLDER ELECTIONS
All shareholder elections by Class A/B Shareholders shall be made on the
Form of Election which will be provided by the Paying Agent and mailed to IRA
Shareholders as of the Record Date along with this Proxy Statement. To be
effective, a Form of Election must be returned, properly completed, to the
Paying Agent no later than the Election Deadline. A Class A/B Shareholder
that fails to submit an effective Form of Election prior to the Election
Deadline shall be deemed to have made a Non-Election, which will result in
the Class A/B Shareholder receiving the Class B Nonvoting Stock
Consideration. An election by a Class A/B Shareholder to receive either the
Class B Nonvoting Stock Consideration or the Class B Cash Consideration will
not constitute a vote in favor of the approval of the Merger Agreement. A
Class A/B Shareholder may not elect to receive both the Class B Nonvoting
Stock Consideration and the Class B Cash Consideration.
In the event a Form of Election is delivered to the Paying Agent on behalf
of a record holder of Class B Stock (as defined below) who is a Class A/B
Shareholder (as defined below) prior to the Election Deadline and not revoked
prior to such deadline, or if a Form of Election is delivered to the Paying
Agent after the Election Deadline, the Company or the Surviving Corporation, as
the case may be, will deem such delivery a revocation of any objections to the
Merger previously filed with the Company for purposes of exercising dissenter's
rights and a waiver of any future rights to such exercise. See "--Rights of
Dissenting Shareholders."
Elections may be revoked or amended by a Class A/B Shareholder upon written
notice to the Paying Agent prior to the Election Deadline. If a Class A/B
Shareholder revokes the Form of Election and does not properly resubmit such
form thereafter, the Class A/B Shareholder shall be deemed to have made a
Non-Election.
The Company will use its best efforts to make a Form of Election available
to all persons who become Class A/B Shareholders between the date of mailing of
this Proxy Statement and the Election Deadline.
43
<PAGE>
THE MERGER AGREEMENT
The following is a summary of certain material provisions of the Merger
Agreement not summarized elsewhere in this Proxy Statement. A copy of the Merger
Agreement is attached as Annex A to this Proxy Statement and is incorporated
herein by reference. The following summary does not purport to be complete and
is qualified in its entirety by reference to the Merger Agreement.
THE MERGER. The Merger Agreement provides that, on the first date that all
conditions to the Merger shall be satisfied or waived in accordance with the
Merger Agreement or such date as the Company and First Command may agree in
writing and at the time the Articles of Merger are filed with the Secretary of
State of the State of Texas in accordance with the TBCA, IRA will be merged with
and into First Command in accordance with the TBCA, the separate corporate
existence of IRA will cease, and First Command will continue as the Surviving
Corporation in the Merger.
DIRECTORS AND OFFICERS. Pursuant to the Merger Agreement, the directors and
officers of IRA immediately prior to the Effective Time shall, from and after
the Effective Time, be the directors and officers of the Surviving Corporation,
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Articles of Incorporation and Bylaws of the Surviving Corporation. See "CERTAIN
INFORMATION CONCERNING IRA--Directors and Executive Officers of IRA." Because
the Bylaws of the Surviving Corporation will contain a provision for a
classified board similar to that of the Bylaws of IRA, the Merger Agreement
provides that the directors will retain their respective current classes after
the Merger.
CHARTER AND BYLAWS. Pursuant to the Merger Agreement, the Articles of
Incorporation and Bylaws of First Command as in effect immediately prior to
the Effective Time will be the Articles of Incorporation and Bylaws,
respectively, of the Surviving Corporation following the Merger until duly
amended as provided therein and by applicable law. The Merger Agreement
provides that at the Effective Time the Articles of Incorporation of the
Surviving Corporation shall be amended to provide for the change of the name
of the Surviving Corporation to "Independent Research Agency for Life
Insurance, Inc." A copy of the Articles of Incorporation, as proposed to be
amended, and the Bylaws of the Surviving Corporation, as proposed to be
amended, are attached hereto as Annex E.
FILINGS; OTHER ACTIONS; NOTIFICATION. Pursuant to the Merger Agreement,
the parties have agreed, among other things, that (i) each party will provide
certain information, or access to such information, to the other party; (ii)
each party will hold certain information received pursuant to the
contemplated Merger confidential; (iii) IRA will call and hold the Special
Meeting as soon as reasonably practicable after the date of the Merger
Agreement, and subject to their fiduciary duties as advised by counsel, the
directors of IRA will recommend approval and adoption of the Merger
Agreement; (iv) IRA and First Command will prepare and file, and each will
cooperate with the other in the preparation and filing of the Schedule 13E-3
with respect to the transactions described in this Proxy Statement; IRA will
prepare, file and distribute, and First Command will cooperate with IRA in
the preparation and filing of, this Proxy Statement; and each party will
notify the other party of certain communications with the Commission
concerning these documents; (v) each of IRA and First Command will use its
reasonable best efforts to obtain any waivers, consents or approvals under
the terms of any agreement or commitment to which IRA or First Command is a
party that are necessary for the consummation of the Merger; (vi) IRA and
First Command will consult with each other concerning certain publicity
issues; (vii) IRA will attempt to obtain all required approvals, consents,
authorizations and waivers, and First Command will cooperate with IRA in
obtaining such consents; and (viii) certain written information supplied or
to be supplied by IRA or First Command will not contain any untrue statement
of a material fact or omit any material fact necessary in order to make the
statements made, in light of the circumstances under which they are made, not
misleading.
EXPENSES. The Merger Agreement provides that IRA will pay all expenses
incurred by the parties in connection with the preparation, negotiation,
execution, delivery and consummation of the Merger Agreement and the
transactions contemplated by the Merger Agreement.
44
<PAGE>
INDEMNIFICATION. The Merger Agreement provides that IRA will indemnify and,
after the Effective Time, the Surviving Corporation will indemnify each present
and former employee, agent, officer or director of IRA or, after the Effective
Time, First Command (the "Indemnified Parties"), to the fullest extent permitted
under applicable law or under the Articles of Incorporation and Bylaws of IRA
and the Surviving Corporation against any losses, claims, damages, liabilities,
costs, expenses, judgments and amounts paid in settlement in connection with any
threatened, pending or contemplated claim, action, suit, proceeding or
investigation arising out of or pertaining to any action or omission occurring
prior to or at the Effective Time (including, without limitation, any claim,
action, suit, proceeding or investigation to which he is a party or is
threatened to be made a party by reason of such relationship with IRA and which
arises out of or relates to the transactions contemplated by the Merger
Agreement) (a "Claim"). The Merger Agreement further provides that the
Surviving Corporation agrees that the provisions of the Surviving Corporation's
Articles of Incorporation or Bylaws as in effect at the Effective Time of the
Merger with respect to exculpation of liability and indemnification of officers,
directors and employees shall not be modified, changed or amended in any manner
adverse to an Indemnified Party except as required by law. In addition, IRA
and, after the Effective Time, the Surviving Corporation, to the fullest extent
permitted under applicable law, will periodically advance reasonable expenses as
incurred with respect to any Claim or potential claim provided that the person
to whom expenses are advanced, if required by applicable law, provides an
undertaking to repay such advances if it is ultimately determined by a court of
competent jurisdiction that such person is not entitled to indemnification
pursuant to these provisions of the Merger Agreement.
In the event any Claim is brought against any Indemnified Party (whether
before or after the Effective Time) in connection with which such Indemnified
Party asserts that he is entitled to be indemnified and held harmless pursuant
to these provisions of the Merger Agreement, (i) the Indemnified Parties may
retain counsel which will be reasonably satisfactory to IRA (or the Surviving
Corporation after the Effective Time), (ii) IRA (or, after the Effective Time,
the Surviving Corporation) shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received, and (iii) IRA (or, after the Effective Time, the Surviving
Corporation) will use their reasonable best efforts to assist in the vigorous
defense of any such matter. Neither IRA nor the Surviving Corporation shall be
liable for any settlement effected without their written consent, which consent,
however, shall not be unreasonably withheld. Any Indemnified Party wishing to
claim indemnification under these provisions of the Merger Agreement, upon
learning of any such Claim, shall notify IRA or the Surviving Corporation
thereof but any failure to so notify IRA or the Surviving Corporation shall not
relieve IRA or the Surviving Corporation of their obligations under these
provisions of the Merger Agreement unless it has been actually prejudiced by
such lack of notice. The Indemnified Parties as a group may retain only one law
firm in each jurisdiction to represent them with respect to any such matter
unless there is, under applicable standards of professional conduct, a conflict
of interest on any significant issue between the positions of any two or more
Indemnified Parties. Any determination required to be made with respect to
whether an Indemnified Party's conduct complied with the standards set forth
under applicable law or the Bylaws of IRA or the Surviving Corporation shall be
made by independent counsel selected by such Indemnified Party and reasonably
satisfactory to IRA or the Surviving Corporation (which shall pay such counsel's
reasonable fees and expenses).
EMPLOYEE BENEFITS. The Merger Agreement provides that the Surviving
Corporation will honor and be bound by the terms and conditions of each
Compensation and Benefit Plan (as defined in the Merger Agreement) and each
employee or executive benefit plan, program or agreement of IRA or any of its
subsidiaries in effect prior to the date of the Merger Agreement. The Surviving
Corporation will also, or will cause its subsidiaries to, make available to each
person who is an employee of IRA and its subsidiaries immediately prior to the
Effective Time benefits that are either (a) the same as are made available to
the employees of IRA, on terms and conditions as are generally applicable to the
employees of IRA or (b) no less favorable than those provided under IRA's
benefit plans prior to the effectiveness of the Merger. Any employee benefit
plan or program in which any IRA employee participates after the Effective Time
will (x) waive any pre-existing condition limitation, (y) credit against any
deductible or co-payment requirement subject to a maximum out-of-pocket
limitation any costs incurred by such IRA employee during the comparable period
under the terms of the corresponding IRA plan, program or arrangement, and (z)
credit service
45
<PAGE>
with IRA or its subsidiaries prior to the Effective Time for purposes of meeting
any eligibility or vesting waiting periods.
TAKEOVER STATUTE. The Merger Agreement provides that if any takeover
statute is or may become applicable to the Merger, each of First Command and IRA
and their respective Board of Directors shall grant such approvals and take such
actions as are necessary so that such transactions may be consummated as
promptly as practicable and otherwise act to minimize the effects of such
statute or regulation.
CONDITIONS TO THE MERGER. The obligation of First Command to consummate
the Merger is subject to the satisfaction of a number of conditions, including,
among others (i) the performance and compliance of IRA in all material respects
with all agreements, obligations and conditions required by the Merger Agreement
to be performed or complied with by IRA on or prior to the Closing Date; (ii)
the holders of (A) two-thirds (2/3) of the outstanding shares of Class A Stock
and Class B Stock, voting as a single class, (B) two-thirds (2/3) of the
outstanding shares of Class A Stock and Class B Stock, each voting separately as
a class, and (C) a majority of the outstanding shares of Class B Stock not
held by Class A/B Shareholders, that are eligible to vote at the Special
Meeting shall have voted for approval and adoption of the Merger Agreement;
(iii) the holders of two-thirds (2/3) of the outstanding shares of First
Command Common Stock shall have voted for approval and adoption of the Merger
Agreement; (iv) all approvals, consents, authorizations and waivers from
governmental and other regulatory agencies and other third parties required
to consummate the transactions contemplated by the Merger Agreement, which
either individually or in the aggregate, if not obtained, would have a
materially adverse effect on the financial condition, results of operations
or business of IRA or would prevent consummation of the Merger and the other
transactions contemplated by the Merger Agreement, shall have been obtained;
(v) on the Closing Date, there shall be no effective injunction, writ,
temporary restraining order or any order of any nature issued by a court of
competent jurisdiction or other governmental authority directing that the
transactions provided for in the Merger Agreement or any of them not be
consummated as so provided or imposing any conditions on the consummation of
the transactions contemplated by the Merger Agreement that First Command
deems unacceptable in its sole discretion; (vi) no suit, action, or other
proceeding seeking to restrain, prevent or change the transactions
contemplated by the Merger Agreement or otherwise questioning the validity or
legality of such transactions shall have been instituted and be pending; and
(vii) the holders of no more than 20% of either of the outstanding Class A
Stock or the Class B Stock shall have delivered notice of their intent to
exercise their right to dissent under the TBCA.
The obligation of IRA to consummate the Merger is subject to the
satisfaction of a number of conditions, including, among others (i) the
performance and compliance of First Command with all agreements, obligations and
conditions required by the Merger Agreement to be performed or complied with by
First Command on or prior to the Closing Date; (ii) IRA shall not have received
written notice from the Financial Advisor that it has withdrawn, revoked or
modified its opinion as to the fairness of the Merger to the IRA Shareholders,
from a financial point of view; (iii) the holders of (A) two-thirds (2/3) of the
outstanding shares of Class A Stock and Class B Stock, voting as a single class,
(B) two-thirds (2/3) of the outstanding shares of Class A Stock and Class B
Stock, each voting separately as a class, and (C) a majority of the outstanding
shares of Class B Stock not held by Class A/B Shareholders, that are eligible
to vote at the Special Meeting shall have voted for approval and adoption of the
Merger Agreement; (iv) the holders of two-thirds (2/3) of the outstanding shares
of First Command Common Stock shall have voted for approval and adoption of the
Merger Agreement; (v) all approvals, consents, authorizations and waivers from
governmental and other regulatory agencies and other third parties required to
consummate the transactions contemplated by the Merger Agreement, which either
individually or in the aggregate, if not obtained, would have a materially
adverse effect on the financial condition, results of operations or business of
IRA or would prevent consummation of the Merger and the other transactions
contemplated by the Merger Agreement, shall have been obtained; (vi) on the
Closing Date, there shall be no effective injunction, writ, temporary
restraining order or any order of any nature issued by a court of competent
jurisdiction or other governmental authority directing that the transactions
provided for in the Merger Agreement or any of them not be consummated as so
provided or imposing any conditions on the consummation of the transactions
contemplated by the Merger Agreement that IRA deems unacceptable in its sole
discretion; (vii) no suit, action, or other proceeding seeking to restrain,
prevent or change the transactions contemplated by the Merger Agreement or
otherwise questioning the validity or legality of such transactions shall have
been instituted and be pending; and (viii) the holders of no more than 20% of
either of the
46
<PAGE>
outstanding Class A Stock or the Class B Stock shall have delivered notice of
their intent to exercise their right to dissent under the TBCA.
The conditions to each of the parties' obligations to consummate the Merger
are for the sole benefit of such party and may be waived by such party in whole
or in part to the extent permitted by applicable law. In the event a
modification or waiver by IRA or First Command is contemplated that requires
shareholder approval under applicable law, a supplement to this Proxy Statement
will be distributed to IRA Shareholders, and proxies will be resolicited. See
"SPECIAL MEETING OF IRA SHAREHOLDERS--Solicitation of Proxies." Neither First
Command nor IRA currently contemplates waiving or modifying any of the foregoing
conditions.
TERMINATION. The Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time: (i) by mutual consent of the
Boards of Directors of First Command and IRA; (ii) by either IRA or First
Command if at the Special Meeting, or any adjournment thereof, the shareholders
of IRA fail to adopt and approve the Merger; (iii) by either IRA or First
Command if the shareholders of First Command fail to adopt and approve the
Merger; and (iv) by either IRA or First Command if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued an order, decree or ruling or taken any other action, in each
case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Merger Agreement, and such order, decree,
ruling or other action shall have become final and nonappealable.
In the event of termination of the Merger Agreement by either IRA or First
Command as described above, all information received by any party with respect
to the business of the other party (other than information which is a matter of
public knowledge or which has been or is published in any publication for public
distribution or filed as public information with any governmental authority)
shall not at any time be used for the advantage of, or disclosed to third
parties by, such party for any reason, and neither party shall have any
liability or further obligations to the other party, except as stated in the
preceding clause.
IRA CHARTER BUSINESS COMBINATION PROVISION
Under Article Ten of the Articles of Incorporation of IRA, any business
combination with an interested shareholder (as defined below) shall require the
affirmative vote of the holders of at least 95% of the then outstanding shares
of the capital stock of the Company, voting together as a single class, unless
(a) the IRA Board, by an 80% vote, (i) expressly approves in advance the
acquisition of shares that caused the interested shareholder to become an
interested shareholder or (ii) expressly approves the business combination, or
(b) the interested shareholder pays to the holders of the capital stock of the
Company not less than the fair price (as defined below) paid by such person in
acquiring any of its holdings of the Company's capital stock. Under Article Ten
of the Company's Articles of Incorporation, the following terms are defined as
follows:
(a) a "business combination" shall mean (1) any merger or
consolidation of the Company with an interested shareholder or any other
corporation which is, or after such merger or consolidation would be, an
affiliate of an interested shareholder; (2) a sale or other disposition to
or with an interested shareholder or affiliate of an interested shareholder
of substantially all of the assets of the Company; (3) the issuance or
transfer by the Company of the securities of the Company to an interested
shareholder in a transaction having a fair market value of $2,000,000 or
more; (4) the adoption of a plan or proposal for liquidation or dissolution
of the Company proposed by or on behalf of an interested shareholder or an
affiliate of an interested shareholder; and (5) any reclassification of
securities or recapitalization of the Company or any other transaction
which has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of equity of the
Company which is directly or indirectly owned by an interested shareholder
or an affiliate of an interested shareholder;
47
<PAGE>
(b) an "interested shareholder" shall mean any person who is a
beneficial owner, directly or indirectly, of more than 10 percent of the
shares of any class of the outstanding capital Stock of the Company, or is
an assignee of or has otherwise succeeded to any shares of any class of the
capital Stock of the Company which were at any time within the two year
period immediately preceding the date in question beneficially owned by an
interested shareholder; and
(c) a "fair price" shall mean the amount determined by the majority
of the Board of Directors to be the highest per share equivalent price that
can be determined to have been paid at any time by the interested
shareholder for any share or shares of any class or series of the capital
stock of the Company, plus interest from the date the interested
shareholder became an interested shareholder through the date of the
business combination at the rate of 7 percent per annum, less the aggregate
amount of any dividends paid during such time period.
The above description of the Article 10 of the Articles of Incorporation of IRA
is a summary only, and is qualified in its entirety by reference to the Articles
of Incorporation of IRA.
To the extent that the Merger may constitute a "business combination," as
defined in the Articles of Incorporation of IRA, the Company believes that the
provisions of Article 10 of the Articles of Incorporation of IRA will not apply
to the Merger because the IRA Board has approved the Merger by a unanimous vote.
STATE ANTI-TAKEOVER STATUTES
Articles 13.01 through 13.03 of the TBCA (the "Business Combination Law")
prevents, under certain circumstances, an "Affiliated Shareholder" (generally
defined as a person beneficially owning 20% or more of an issuing corporation's
voting shares (as defined in Article 13.02 of the TBCA)) from engaging in a
"Business Combination" (as defined in Article 13.02 of the TBCA) for three years
following the date such person became an Affiliated Shareholder unless (i) the
business combination or the purchase or acquisition of shares made by the
Affiliated Shareholder on the Affiliated Shareholder's share acquisition date is
approved by the Board of Directors before the Affiliated Shareholder's share
acquisition date or (ii) the business combination is approved, by the
affirmative vote of the holders of at least two-thirds of the outstanding voting
shares of the issuing public corporation not beneficially owned by the
Affiliated Shareholder or an affiliate or associate of the Affiliated
Shareholder. The "voting shares" are those shares of capital stock of the
corporation entitled to vote generally in the election of directors;
consequently, only Class A Stock is considered to be voting shares under the
TBCA. The Company believes that the Business Combination Law is inapplicable to
the Merger.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, shareholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In 1982, in EDGAR V. MITE CORP., the Supreme
Court of the United States invalidated on constitutional grounds the Illinois
Business Takeover Statute, which, as a matter of state securities law, made
takeovers of corporations meeting certain requirements more difficult. However,
in 1987, in CTS CORP. V. DYNAMICS CORP. OF AMERICA, the Supreme Court held that
the State of Indiana may, as a matter of corporate law, and, in particular, with
respect to those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of a
target corporation without the prior approval of the remaining shareholders. The
state law before the Supreme Court was by its terms applicable only to
corporations that had a substantial number of shareholders in the state and were
incorporated there.
IRA conducts business, directly or through subsidiaries, in a number of
states throughout the United States, some of which have enacted takeover laws.
IRA does not know whether any of these laws will, by their terms, apply to the
Merger and has not complied with any such laws. Should any person seek to apply
any state takeover law, IRA will take such action as then appears desirable,
which may include challenging the validity or applicability of any such
48
<PAGE>
statute in appropriate court proceedings. In the event it is asserted that one
or more state takeover laws is applicable to the Merger, and an appropriate
court does not determine that it is inapplicable or invalid as applied to the
Merger and/or IRA might be required to file certain information with, or
receive approvals from, the relevant state authorities.
RIGHTS OF DISSENTING SHAREHOLDERS
If the Merger Agreement is approved by the required vote of the Company's
shareholders and is not abandoned or terminated, IRA Shareholders who did not
vote in favor of the Merger may, by complying with Articles 5.12 and 5.13 of the
TBCA, be entitled to dissenters' rights as described therein. If a shareholder
of the Company has a beneficial interest in shares of Class A Stock or Class B
Stock that are held of record in the name of another person, such as a broker or
nominee, and such shareholder desires to perfect whatever dissenters' rights
such beneficial shareholder may have, such beneficial shareholder must act
promptly to cause the holder of record timely and properly to follow the steps
summarized below.
A VOTE IN FAVOR OF THE MERGER BY AN IRA SHAREHOLDER WILL RESULT IN A WAIVER
OF THE SHAREHOLDER'S DISSENTERS' RIGHTS.
IN THE EVENT A FORM OF ELECTION IS DELIVERED TO THE PAYING AGENT ON
BEHALF OF A RECORD HOLDER OF CLASS B STOCK WHO IS A CLASS A/B SHAREHOLDER
PRIOR TO THE ELECTION DEADLINE AND NOT REVOKED PRIOR TO SUCH DEADLINE, OR IF
A FORM OF ELECTION IS DELIVERED TO THE PAYING AGENT AFTER THE ELECTION
DEADLINE, THE COMPANY OR THE SURVIVING CORPORATION, AS THE CASE MAY BE, WILL
DEEM SUCH DELIVERY A REVOCATION OF ANY OBJECTIONS TO THE MERGER PREVIOUSLY
FILED WITH THE COMPANY FOR PURPOSES OF EXERCISING DISSENTER'S RIGHTS AND A
WAIVER OF ANY FUTURE RIGHTS TO SUCH EXERCISE.
The Company's shareholders will have the right to dissent from the Merger
and to obtain an appraisal of their shares of Class A Stock or Class B Stock in
the event that the Merger Agreement is approved and is not abandoned or
terminated. Appraisal value will be determined as of the day immediately
preceding the Meeting.
The summary set forth below does not purport to be a complete statement
of the provisions of Texas law relating to shareholders' rights to dissent
and to obtain an appraisal of Class A Stock or Class B Stock in connection
with the Merger and is qualified in its entirety by reference to Articles
5.12 and 5.13 of the TBCA, which are attached hereto as Annex D, and the
other relevant provisions of the TBCA. The TBCA contains provisions that, in
the case of the merger of a corporation organized under the laws of Texas,
grant Dissenting Shareholders who comply with the procedures set forth in
Articles 5.12 and 5.13 the right to receive payment in cash equal to the
appraisal value of their shares. The principal provisions of Articles 5.12
and 5.13 as they apply to the Merger are summarized below.
To claim dissenters' rights, a shareholder must (i) prior to the
shareholder vote on the Merger, file a written objection to the Merger setting
out that the shareholder's right to dissent will be exercised if the Merger is
effective and giving such shareholder's address to which notice of the Merger
shall be mailed in the event it occurs; (ii) not vote such shareholder's Class A
Stock or Class B Stock in favor of approval of the Merger; (iii) if the Merger
is approved by the Company's shareholders and consummated, demand, in writing,
payment of the fair value of such shareholder's shares of Class A Stock or Class
B Stock from the Surviving Corporation (stating therein the number and class of
shares of Class A Stock or Class B Stock owned by such shareholder and an
estimate of the fair market value of such shares) within ten days after the date
the notice that the Merger has become effective is delivered or mailed to the
shareholder, which notice must be provided to all shareholders who complied with
(i) and (ii) above within ten days after the Effective Time of the Merger; and
(iv) within twenty days of filing such written demand for payment, submit to the
Surviving Corporation the certificate or certificates representing such
shareholder's shares of Class A Stock or Class B Stock for the purpose of having
a notation placed thereon to the effect that a demand for payment with respect
thereto has been made.
49
<PAGE>
Neither an abstention from voting on the Merger proposal nor a vote against
the Merger will be deemed to satisfy the requirement that a written objection be
filed with the Company before the vote on the Merger. However, a shareholder who
has filed a written objection to the Merger as provided above will not be deemed
to have waived such shareholder's dissenter's rights by abstaining from voting
on the Merger proposal or otherwise not voting; however, such a shareholder will
be deemed to have waived such shareholder's dissenters' rights if such
shareholder votes in favor of the Merger. A shareholder who fails to make the
written demand within the ten-day period described above will be bound by the
Merger as if such shareholder had voted in favor thereof. If a shareholder fails
to submit such shareholder's certificates within the twenty-day period described
above, such shareholder's rights to receive payment pursuant to dissenters'
rights shall terminate unless a court for good and sufficient cause determines
otherwise.
In the event that the Merger is approved by the Company's shareholders and
a shareholder elects to exercise such shareholder's dissenters' rights, the
Surviving Corporation shall, within twenty days of the date it receives such
shareholder's written demand for payment, deliver or mail to such shareholder a
written notice that either (i) provides that the Surviving Corporation accepts
the amount claimed by the Dissenting Shareholder as the fair value of such
shareholder's shares and that the Surviving Corporation agrees to pay such
amount within ninety days after the Effective Time of the Merger and upon
surrender of the certificates for such shareholder's shares duly endorsed; or
(ii) contains an estimate by the Surviving Corporation of the fair value of the
shares and an offer to pay such amount within ninety days after the Effective
Time of the Merger, but only if the Surviving Corporation receives from the
shareholder, within sixty days after such date, a notice from the shareholder
that such shareholder agrees to accept such amount upon surrender of such
shareholder's share certificate or certificates duly endorsed.
If the Dissenting Shareholder and the Surviving Corporation fail to agree
on a value within sixty days after the Effective Time of the Merger, either the
shareholder or the Surviving Corporation may, within sixty days after the
expiration of such sixty day period, file a petition in any court of competent
jurisdiction in Tarrant County, Texas for the purpose of obtaining a
determination of the fair value of the shares of the Dissenting Shareholder.
Then, if the court determines that the shareholder has complied with the
requirements for a Dissenting Shareholder under Articles 5.12 and 5.13 of the
TBCA, the court will appoint one or more appraisers to determine the value of
the shareholder's shares. All Dissenting Shareholders who do not reach agreement
with the Surviving Corporation as to the value of their shares within sixty days
of the Effective Time of the Merger will receive notice of such court
proceeding, and those who are found to have complied with Articles 5.12 and 5.13
of the TBCA will be bound by the final judgment of the court as to the value of
their shares.
A Dissenting Shareholder who makes a written demand for payment of such
shareholder's shares will not thereafter be entitled to vote or to exercise any
other rights of a shareholder, except the right to receive payment for such
shareholder's shares pursuant to the TBCA.
A Dissenting Shareholder may withdraw such shareholder's demand for payment
for such shareholder's shares at any time before such payment is made; however,
the demand may not be withdrawn after payment by the Surviving Corporation has
been made nor may the demand be withdrawn after a petition has been filed with a
court for such payment unless the Surviving Corporation consents to the
withdrawal of the demand.
In the absence of fraud in the transaction, the remedy provided by Article
5.12 of the TBCA is the exclusive remedy for the recovery of the value of shares
or money damages by a Dissenting Shareholder. If the Surviving Corporation
complies but a Dissenting Shareholder fails to comply with the requirements of
Articles 5.12 and 5.13 of the TBCA, such shareholder is not entitled to bring an
action for the recovery of the value of such shareholder's shares or for money
damages.
ANY SHAREHOLDER CONTEMPLATING THE EXERCISE OF THE RIGHTS SUMMARIZED ABOVE
IN CONNECTION WITH THE MERGER IS URGED TO CONSULT SUCH SHAREHOLDER'S OWN
COUNSEL. THE FAILURE BY A SHAREHOLDER TO FOLLOW PRECISELY ALL OF THE STEPS
REQUIRED BY ARTICLES 5.12 AND 5.13 OF THE TBCA WILL RESULT IN THE LOSS OF THOSE
RIGHTS.
50
<PAGE>
MARKET PRICE DATA, DISTRIBUTIONS AND
SECURITY OWNERSHIP OF IRA COMMON STOCK
There is presently no trading market for the Company's common stock, of
either class, and it is very unlikely that a market will develop in the future.
As an insurance agency incorporated in Texas, only insurance agents licensed in
Texas can, under Texas law, own the Company's stock. Therefore, the stock price
cannot be and is not determined by actions and considerations of any such
market.
NUMBER OF SECURITY HOLDERS
As of August 15, 1998, the Company had 14 shareholders of record of its
Class A Stock, and 504 shareholders of record of its Class B Stock.
DISTRIBUTION HISTORY
The following is a history of the distributions paid by the Company since
inception. Distributions have only been paid on Class B Stock.
<TABLE>
<CAPTION>
DATE OF RECORD PAYMENT DATE PER SHARE
- ------------------------ ---------------------- -------------
<C> <C> <C>
October 20, 1987 December 3, 1987 $ 8.00
September 30, 1988 November 30, 1988 2.10
September 30, 1989 November 30, 1989 2.65
September 30, 1990 November 28, 1990 3.00
September 30, 1991 November 30, 1991 4.00
September 30, 1992 December 1, 1992 6.59
September 30, 1993 December 1, 1993 7.31
September 30, 1994 December 1, 1994 4.88
September 30, 1995 December 1, 1995 4.50
September 30, 1996 December 2, 1996 7.63
September 30, 1997 December 1, 1997 7.73
</TABLE>
On October 31, 1988, the Company's shareholders approved an amendment to
the Company's Articles of Incorporation whereby Class B Stock would split on a
basis of five new shares for each one share then outstanding. The par value of
Class B Stock was correspondingly reduced from a par value of $0.10 per share to
a par value of $0.02 per share. The stock split became effective on November 1,
1988.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS OF IRA
COMMON STOCK
51
<PAGE>
The following table sets forth, as of August 15, 1998, the number of
shares of Class A Stock and Class B Stock and the percentage of outstanding
shares of each class owned of record by (i) each director of the Company;
(ii) each executive officer of the Company; (iii) all directors and officers
of the Company as a group; and (iv) each person who beneficially owns more
than five percent of a class of common stock. Members of the Management
Group are denoted with an *. Prior to the consummation of the Merger, First
Command does not beneficially own shares of Class A Stock or Class B Stock.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS POSITION WITH TITLE NATURE OF PERCENT
OF BENEFICIAL OWNER THE COMPANY OF CLASS BENEFICIAL OWNERSHIP OF CLASS
- ------------------- ----------- -------- -------------------- --------
<S> <C> <C> <C> <C>
Lamar C. Smith (1)* Director, Chairman of Class A 2 shares 8.00
the Board and Chief Class B 40,000 shares 4.22
Executive Officer
James N. Lanier (1)* Director, President and Class A 2 shares 8.00
Chief Operating Officer Class B 18,000 shares 1.90
Howard M. Crump (1)* Director and Senior Vice Class A 2 shares 8.00
President and Director Class B 26,000 shares 2.74
of Marketing
Hal N. Craig (1)* Director and Vice Class A 1 share 4.00
President and Director Class B 5,600 shares (2)
of Insurance
Donaldson D. Frizzell (1)* Director and Vice Class A 1 share 4.00
President of Investments Class B 7,100 shares (2)
Jerry D. Gray* Director and Regional Class A 1 share 4.00
5705 Cameron Hall Place Agent Class B 20,000 shares 2.11
Atlanta, GA 30328
David P. Thoreson* Director and Regional Class A 1 share 4.00
2016 Empire Mine Circle Agent Class B 27,850 shares 2.94
Gold River, CA 95670
Carroll H. Payne II* Director Class A 3 shares 12.00
1814 8th Avenue Class B 46,977 shares 4.96
Suite A-3
Fort Worth, TX 76110
Naomi K. Payne* Director Class A 3 shares 12.00
11 Marion Terrace Class B 46,977 shares 4.96
Brookline, MA 02146
James J. Ellis Director Class A -- --
Regency Plaza, LB 72 Class B -- --
3710 Rawlings, Suite 1010
Dallas, TX 75219-4239
Logan Dickinson Director Class A -- --
314 Main Street Class B -- --
Suite 202
Fort Worth, TX 76102
Martin R. Durbin (1) Treasurer and Chief Class A -- --
Financial Officer Class B 1,725 shares (2)
Robert F. Watson (1) Director and Corporate Class A -- --
Counsel Class B -- --
52
<PAGE>
Freda J. Payne Class A 3 shares 12.00
6812 Riverdale Class B 46,977 shares 4.96
Fort Worth, TX 76132
Debra S. Payne Class A 3 shares 12.00
5910 N. Central Class B 46,528 shares 4.91
Expressway Suite 1000
Dallas, TX 75206
Richard E. Giles Class A 1 share 4.00
13003 Richards Class B 5,400 shares (2)
Overland Park, KS 66213
Margaret L. Galda Class A 1 share 4.00
2741 Mannerwood Trail Class B 4,500 shares (2)
Fort Worth, TX 76109
Edward T. Elmendorf Jr. Class A 1 share 4.00
6410 Southwest Blvd. Class B 17,550 shares 1.85
Suite 200
Fort Worth, TX 76109
All directors and executive Class A 16 shares 64.00
officers as a group Class B 240,229 shares 25.37
(13 persons)
</TABLE>
- ---------------
(1) The business address of this person is 4100 South Hulen, Fort Worth,
Texas 76113.
(2) Represents less than 1% of the class.
MARKET PRICE DATA, DISTRIBUTIONS AND SECURITY OWNERSHIP
OF FIRST COMMAND COMMON STOCK
There is presently no market for the First Command Common Stock. Upon
consummation of the Merger, the Surviving Corporation will be an insurance
agency incorporated in Texas, and only insurance agents licensed in Texas will
be permitted, under Texas law, to own the Surviving Corporation Common Stock.
Therefore, it is anticipated that no market will develop for the Surviving
Corporation Common Stock, and the stock price will not be determined by actions
and considerations of any such market.
53
<PAGE>
NUMBER OF SECURITY HOLDERS
As of August 15, 1998, First Command had five shareholders of record of its
Common Stock.
DISTRIBUTION HISTORY
To date, First Command has paid no distributions on its Common Stock.
After the Merger, pursuant to the Surviving Corporation Shareholders' Agreement,
the Surviving Corporation will pay distributions on the Surviving Corporation
Common Stock that are pro rata to all shareholders, to the extent that Surviving
Corporation Shareholders may be deemed to receive income as the result of
Surviving Corporation's status as an S corporation. Further, the IRA Board,
which will be the Board of the Surviving Corporation upon consummation of the
Merger, anticipates that the Surviving Corporation, subject to the fiduciary
duties of the Board of Directors of the Surviving Corporation and the ongoing
financial condition of the Surviving Corporation, will declare and pay
distributions that are pro rata to all shareholders on the Surviving Corporation
Common Stock that are intended to approximate the income that the Class A/B
Shareholder would have received from the competitive reinvestment of the Class B
Cash Consideration, taking into account income tax considerations. Further,
holders of MAP Units will be entitled to any distribution equivalents that the
Board of Directors of the Surviving Corporation may declare pursuant to the
Mission Accomplishment Plan.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS OF FIRST
COMMAND COMMON STOCK
The following table sets forth, as of August 15, 1998, the number of
shares of First Command Common Stock and the percentage of outstanding shares
of each class owned of record by (i) each director of First Command; (ii)
each executive officer of First Command; (iii) all directors and officers of
First Command as a group; and (iv) each person who beneficially owns more
than five percent of First Command Common Stock. Members of the Management
Group are denoted with an *.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS POSITION WITH NATURE OF PERCENT
OF BENEFICIAL OWNER FIRST COMMAND BENEFICIAL OWNERSHIP OF CLASS
- ------------------- ------------- -------------------- --------
<S> <C> <C> <C>
Lamar C. Smith (1)* Director, Chairman 250 shares 25.00
of the Board and
Chief Executive
Officer
James N. Lanier (1)* Director, President 250 shares 25.00
and Chief Operating
Officer
Howard M. Crump (1)* Director 250 shares 25.00
Carroll H. Payne II* Director 225 shares 22.50
1814 8th Avenue
Suite A-3
Fort Worth, TX 76110
Martin R. Durbin (1) Treasurer -- --
Robert F. Watson (1) Secretary -- --
Freda J. Payne 25 shares 2.50
6812 Riverdale
Fort Worth, TX 76132
All directors and
executive officers as
a group (6 persons) 975 shares 97.50
</TABLE>
- ---------------
(1) The business address of this person is 4100 South Hulen, Fort Worth,
Texas 76113.
Each of the First Command Shareholders, other than Freda J. Payne, is a
member of the executive committee of the IRA Board and a member of the
Management Group. On April 1, 1998, each of the First Command Shareholders,
other than Freda J. Payne, acquired 250 shares of First Command Common Stock
at a price of $1.00 per share. On June 26, 1998, Carroll H. Payne, II gifted
25 shares of First Command Common Stock to Freda J. Payne. See "CERTAIN
INFORMATION CONCERNING FIRST COMMAND."
Upon consummation of the Merger, all of the Surviving Corporation Common
Stock will be held by (i) the Class A Shareholders, (ii) the Class A/B
Shareholders who do not elect to receive Class B Cash Consideration and (iii)
the First Command Shareholders, to the extent that such shareholders do not
elect to seek appraisal rights.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF IRA
The following unaudited pro forma condensed consolidated income statements
(the "Pro Forma Condensed Consolidated Financial Statements") have been based on
the historical consolidated financial statements of the Company for the year
ended September 30, 1997 and the nine months ended June 30, 1998 as if the
Merger was consummated on October 1, 1996. The pro forma condensed consolidated
balance sheet gives effect to the Merger as if it was consummated on June 30,
1998. The pro forma adjustments are described more fully in the accompanying
notes.
The information contained in the Pro Forma Condensed Consolidated
Financial Statements assumes that all of the shares of Class B Stock held by
Class B Shareholders who do not own Class A Stock are repurchased and that no
Class A/B shareholder elects to receive the Class B Cash Consideration with
respect to his or shares of Class B Stock. See "THE PROPOSED
MERGER--Conversion of Shares." In event that any of the Class A/B
shareholders elects to receive the Class B Cash Consideration with respect to
his or shares of Class B Stock, although remote, the amount of Class B Cash
Consideration paid to such Class A/B shareholder would decrease shareholders'
equity and either decrease cash or increase long term liabilities by a
similar amount. In the event that all of the Class A/B Shareholders elect to
receive the Class B Cash Consideration with respect to their Class B Stock,
the total merger consideration would be approximately $27 million, which
would result in a further reduction in shareholders' equity and a
corresponding increase in long term liabilities.
The Pro Forma Condensed Consolidated Financial Statements are presented for
informational purposes only and do not purport to be indicative of the results
of operations that actually would have been achieved had such transactions been
consummated on the date or for the periods indicated and do not purport to be
indicative of the balance sheet data or results of operations as of any future
date or for any future period. The Pro Forma Condensed Consolidated Financial
Statements should be read in conjunction with the Company's historical
consolidated financial statements and notes thereto and other information
contained in the documents incorporated by reference herein.
54
<PAGE>
The pro forma adjustments were applied to the respective historical
statements to reflect and account for the Merger similar to a business
combination accounted for as a pooling of interests. Accordingly, the
historical basis of the Company's assets and liabilities has not been affected
by the Merger.
55
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC. AND
FIRST COMMAND FINANCIAL CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
First
Independent Command
Research Financial Pro Forma
Agency Corporation Adjustments Notes Combined
------------- ------------ ------------- ------ --------------
<S> <C> <C> <C> <C> <C>
Commission revenue . . . . . . . . . . . . . . . . $122,329,601 $ 0 $ 0 $ 122,329,601
First Command Bank operating income. . . . . . . . 58,458 58,458
Commissions, bonuses & agent expenses. . . . . . . (87,809,129) (12,955,382) (c) (100,764,511)
General & administrative expenses. . . . . . . . . (25,719,662) (25,719,662)
------------- ------------ ------------- --------------
Income (loss) from operations . . . . . . 8,859,268 0 (12,955,382) (4,096,114)
Other income, net. . . . . . . . . . . . . . . . . 5,216,114 (1,120,000) (a) 4,096,114
------------- ------------ ------------- --------------
Income before taxes . . . . . . . . . . . 14,075,382 0 (14,075,382) 0
Provision for income taxes . . . . . . . . . . . . (4,639,886) 4,639,886 (b) 0
------------- ------------ ------------- --------------
Net income. . . . . . . . . . . . . . . . $ 9,435,496 $ 0 $ (9,435,496) $ 0
------------- ------------ ------------- --------------
------------- ------------ ------------- --------------
Weighted average shares outstanding. . . . . . . . 937,502 0 (577,878) 359,624
Net income per share . . . . . . . . . . . . . . . $ 10.06 $ 0.00 (10.06) $ 0.00
</TABLE>
56
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(a) Interest expense at 7% on $16.0 million note payable used to repurchase
Class B Stock. The amount financed is based on cash available at June 30,
1998. The Merger is expected to be consummated on September 30, 1998. At
that time, substantially more cash should be available from operations
which would reduce the reliance on borrowed funds to support the repurchase
of the Class B Stock and result in a lower interest cost to the Merger.
(b) To eliminate federal income taxes payable at the corporate level as a
result of S corporation status.
(c) To accrue Mission Accomplishment Plan compensation. On July 22, 1998 the
Company issued 138,275 MAP Units, consisting of 138,275 SARs and 138,275
DERs, to certain of its agents and employees. These units have an exercise
period of five to ten years, with the SAR portion of each MAP Unit
initially valued at $1. The value of the SARs is to be determined by the
IRA Board. The Company will record monthly accruals for Mission
Accomplishment Plan compensation based on its GAAP earnings as
SAR expense. The Company will record DER expense with a corresponding
adjustment to SAR expense at the time a dividend equivalent is declared by
the IRA Board.
(d) The pro forma condensed consolidated income statement does not include
anticipated one-time Merger costs of approximately $1.2 million or any
potential one-time adjustments related to changes in deferred taxes as a
result of conversion to S corporation federal income tax status.
57
<PAGE>
Unaudited Pro Forma Condensed Consolidated Income Statement
Nine Months Ended June 30, 1998
<TABLE>
<CAPTION>
First
Independent Command
Research Financial Pro Forma
Agency Corporation Adjustments Notes Combined
--------------- -------------- --------------- ----- ----------------
<S> <C> <C> <C> <C> <C>
Commission revenue . . . . . . . . . . . . $ 95,006,492 $ 0 $ 0 $ 85,006,492
First Command Bank operating income. . . . 1,087,339 1,087,339
Commissions, bonuses & agent expenses. . . (70,335,809) (10,154,076) (c) (80,488,885)
General & administrative expenses. . . . . (22,175,423) (22,175,423)
--------------- -------------- --------------- ----------------
Income (loss) from operations . . . . 3,582,599 0 (10,154,076) (6,571,477)
Other income, net. . . . . . . . . . . . . 7,416,922 (7,746) (837,699) (a) 6,571,477
--------------- -------------- --------------- ----------------
Income before taxes . . . . . . . . . 10,999,521 (7,746) (10,991,775) 0
Provision for income taxes . . . . . . . . (3,467,015) 3,467,015 (b) 0
--------------- -------------- --------------- ----------------
Net income. . . . . . . . . . . . . . $ 7,532,506 $ (7,746) $ (7,524,780) $ 0
--------------- -------------- --------------- ----------------
--------------- -------------- --------------- ----------------
Weighted average shares outstanding. . . . 986,144 25 (626,520) 359,624
Basic earnings . . . . . . . . . . . . . . $ 7.64 $ (309.84) $ (302.20) $ 0.00
</TABLE>
58
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
NINE MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
(a) Interest expense at 7% on $16.0 million note payable used to repurchase
Class B Stock. The amount financed is based on cash available at June 30,
1998. The Merger is expected to be consummated on September 30, 1998. At
that time, substantially more cash should be available from operations
which would reduce the reliance on borrowed funds to support the repurchase
of the Class B Stock and result in a lower interest cost to the Merger.
(b) To eliminate federal income taxes payable at the corporate level as a
result of S corporation status.
(c) To accrue Mission Accomplishment Plan compensation. On July 22, 1998 the
Company issued 138,275 MAP Units to certain of its agents and employees.
These units have an exercise period of five to ten years, with the SAR
portion of each MAP Unit initially valued at $1. The value of the SARs is
to be determined by the IRA Board. The Company will record monthly accruals
for Mission Accomplishment Plan compensation based on its GAAP earnings as
SAR expense. The Company will record DER expense with a corresponding
adjustment to SAR expense at the time a dividend equivalent is declared by
the IRA Board.
(d) The pro forma condensed consolidated income statement does not include
$537,000 of the anticipated one-time Merger costs of approximately
$1.2 million or any potential one-time adjustments related to changes
in deferred taxes as a result of conversion to S corporation federal
income tax status. Merger costs of $663,000 have been expensed as
incurred through June 30, 1998.
59
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
<TABLE>
<CAPTION>
Independent First Command
Research Financial
Agency Corporation Adjustments Notes Combined
------------- ------------ ------------- ----- -------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents . . . . . $ 10,420,754 $ 1,000 $ (605,798) (a)
(537,000) (b) $ 9,275,956
Other current assets. . . . . . . . 3,329,629 3,329,629
------------- ------------ ------------- -------------
Total current assets. . . . . . . 13,750,383 1,000 (1,142,798) 12,608,585
Property and equipment . . . . . . . . . 12,668,931 26,770 12,695,701
First Command Bank assets. . . . . . . . 59,685,034 59,685,034
Other assets . . . . . . . . . . . . . . 78,028,243 6,495 78,034,738
------------- ------------ ------------- -------------
Total assets. . . . . . . . . . . . $164,132,581 $ 34,265 $ (1,142,798) $163,024,058
------------- ------------ ------------- -------------
------------- ------------ ------------- -------------
Current liabilities:
Loans from insurance companies. . . $ 17,176,789 $ 0 $ 17,176,789
Other current liabilities . . . . . 16,785,314 16,785,314
------------- ------------ ------------- -------------
Total current liabilities . . . . 33,982,103 0 0 33,962,103
Stock appreciation rights payable. . . . 0
Long term liabilities. . . . . . . . . . 27,613,452 41,011 16,000,000 (a)
(1,413,679) (c) 42,240,784
First Command Bank liabilities . . . . . 50,874,747 50,874,747
------------- ------------ ------------- -------------
Shareholders' equity:
Common stock - Class A. . . . . . . 10 10 (8) (d)
3,584 (d) 3,596
Common stock - Class B. . . . . . . 55,729 (48,539) (d)
(7,190) (d) 0
Additional paid-in capital. . . . . 1,798,308 990
(1,798,308) (a)
3,605 (d) 4,595
Retained Earnings . . . . . . . . . 32,551,010 (7,746) (14,795,729) (a)
1,413,679 (c)
(537,000) (b) 18,624,214
Unrealized holding gains. . . . . . 17,314,019 17,314,019
Treasury stock - Class A -
at par. . . . . . . . . . . . . . (8) 8 (d) 0
Treasury stock - Class B -
at par. . . . . . . . . . . . . . (36,779) (11,760) (a)
48,539 (d) 0
------------- ------------ ------------- -------------
Total Shareholders' equity. . . . 51,682,289 (6,746) (15,729,119) 35,946,424
------------- ------------ ------------- -------------
Total liabilities and equity. . . $164,132,591 $ 34,265 $ (1,142,798) $163,024,058
------------- ------------ ------------- -------------
Book value per share . . . . . . . . . . $ 54.55 $ (269.84) $ -- (e) $ 99.96
</TABLE>
60
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998
(UNAUDITED)
(a) Assumes excess cash of $605,798 is used in conjunction with a $16.0 million
note payable to buy back 588,024 shares of Class B Stock at $28.24 per
share. These amounts are based on cash available at June 30, 1998. The
Merger is expected to be consummated on September 30, 1998. At that
time, substantially more cash should be available from operations which
would reduce the reliance on borrowed funds to support the repurchase of
the Class B Stock. Also, these amounts exclude shares of Class B Stock
held by Class A/B Shareholders that, pursuant to the terms of the Merger,
will be converted into Surviving Corporation Nonvoting Stock. Additionally,
these amounts assume that no Class A/B Shareholders will elect to receive
the Class B Cash Consideration in lieu of receiving shares of Surviving
Corporation Nonvoting Stock. If any Class A/B shareholders do elect to
receive the Class B Cash Consideration for his or her Class B Stock,
shareholders' equity will be further reduced by $28.24 per share redeemed.
As of June 30, 1998, there were 947,483 shares of Class B Stock
outstanding, of which 588,024 shares are being repurchased. The par
value of the Class B Stock outstanding at June 30, 1998 of $55,729
net of treasury stock of $36,779 represents 947,483 shares
outstanding at a $.02 par value. The repurchase price for Class B
Stock has historically been based on the book value per share less
unrealized gains and dividends per share as of the preceding fiscal
year end. The increase in per share price over the previous year's
share price is added incrementally, 1/12th per month for the
ensuing 12 months, to the current September 30 share price (based
upon the prior year's computation).
(b) Costs associated with the Merger are anticipated to be approximately
$1.2 million. Of this amount, $663,000 have been expensed as incurred
through June 30, 1998, with the remainder ($537,000) reflected in the pro
forma financial statements. A substantial portion of these expenses are
not expected to be tax deductible and thus have not been tax effected.
(c) Assumes deferred federal income tax payable related to the book versus
tax depreciation temporary differences are removed from liabilities and
credited to equity upon conversion to S corporation status. The deferred
tax asset related to the future tax deduction of the agent Deferred Career
Commission Plan expenses as well as the deferred tax liability related to
unrealized holding gains will remain on the books for a ten year period
until the built-in gain income tax provision expires. If during this
ten-year period the related assets or liabilities are sold or paid, the
tax impact will be recorded to the deferred tax accounts accordingly.
See "SPECIAL FACTORS--Accounting Treatment."
(d) Upon the effective date of the merger, the treasury stock account will
be closed to the common stock account as the treasury stock will be
canceled. In addition, the now reduced par value related to all
outstanding common shares will be reflected in the common stock account
with the remainder increasing paid-in capital.
(e) Pro forma book value per share does not include the anticipated charge
to equity to reflect the Mission Accomplishment Plan compensation that is
expected to be recorded for subsequent periods. See "CERTAIN INFORMATION
CONCERNING IRA--Mission Accomplishment Plan. Per the Pro Forma Condensed
Consolidated Income Statement, the charge to equity for the nine months
ending June 30, 1998 is expected to have been $10,154,076.
61
<PAGE>
DESCRIPTION OF IRA CAPITAL STOCK
GENERAL
The Company is authorized to issue two classes of shares which are
designated Class A Voting Common and Class B Nonvoting Common. The total number
of shares that the Company is authorized to issue is 1,000 shares of Class A
Stock, par value $0.10 per share, and 100,000,000 shares of Class B Common, par
value of $0.02 per share. The following is a summary of certain of the rights
and privileges pertaining to Class A Stock and Class B Stock.
The Merger and the Merger Agreement require for the approval thereof, of
(i) the holders of at least 66-2/3% of the outstanding shares of Class A Stock
and Class B Stock, voting together as a single class, (ii) the holders of at
least 66-2/3% of the outstanding shares of Class A Stock and Class B Stock, each
voting separately as a class, and (iii) the holders of at least a majority of
the outstanding shares of Class B Stock not held by Class A/B Shareholders.
CLASS A STOCK
Holders of Class A Stock are entitled to cast one vote for each share held
of record in all matters presented to the shareholders, including election of
the IRA Board. As of August 15, 1998, there were 25 shares of Class A Stock
issued and outstanding. The holders of Class A Stock do not have cumulative
voting rights; therefore, the holders of more than 50% of the outstanding shares
of Class A Stock can elect all directors. Class A Stock is primarily held by
directors, executive officers and certain insurance agents of IRA and by certain
descendants of Carroll H. Payne, the founder of the Company.
Freda J. Payne, Debra S. Payne, Carroll H. Payne II and Naomi K. Payne (the
"Payne Family Members") are subject to a stock agreement, dated March 22, 1983
("Payne Family Stock Agreement"), between such family members and the Company
that provides, among other things, that in the event a Payne Family Member
desires to sell or otherwise dispose of all or any portion of his or her Class A
Stock, or in the event of the death of a Payne Family Member, the other Payne
Family Members shall have the option to purchase such shares, on a proportionate
basis, for a period of sixty (60) days. In addition, the Payne Family Stock
Agreement provides that, in the event a Payne Family Member desires to sell any
Class B Stock, the person to whom Class B Stock is offered must be a properly
licensed insurance agent under contract with the Company; further, such
recipient of Class B Stock must execute a stock agreement with the Company
limiting the ownership and transferability of Class B Stock, and such recipient,
after the transfer, must not own, along with members of his or her immediate
family, more than 5% of the outstanding shares of stock in the Company. The
Payne Family Stock Agreement also provides that in the event any Payne Family
Member ceases to be a licensed Texas life insurance agent, such Payne Family
Member shall be obligated to dispose of all Class A Stock and Class B Stock
owned by him or her. The Payne Family Stock Agreement further provides that
payment for Class B Stock offered by Payne Family Members to other Payne Family
Members or the Company shall be in cash within sixty days of the acceptance of
such offer.
The other holders of Class A Stock that are not Payne Family Members are
subject to a stock agreement with IRA (the "Class A Stock Agreement"), in
which, among other things, IRA will acquire such Class A Stock within a
period of ninety (90) days in the event such shareholder fails to continue as
a licensed insurance agent, ceases to be a duly authorized agent of IRA,
dies, or desires to sell his or her shares.
CLASS B STOCK
Holders of Class B Stock have no voting rights, except for certain voting
rights in the event of certain extraordinary transactions (such as the Merger)
as provided by the TBCA, or as otherwise provided by law. All holders of Class
B Stock are subject to either the Class B Stock Agreement (as defined below)
and/or the Payne Family Stock Agreement. Consequently, the primary voting
control of the Company is vested in the holders of Class
62
<PAGE>
A Stock. Because the voting rights are limited and significant restrictions
exist on the transfer of Class B Stock, Class B Stock is viewed primarily as
means to distribute distribution income to shareholders of the Company. As
of August 15, 1998, there were 946,883 shares of Class B Stock outstanding.
Shares of Class B Stock are held by agents and other employees of IRA; in
addition, all of the holders of Class A Stock hold shares of Class B Stock.
Class B Stock was issued by IRA through ten separate offerings. Three of such
offerings occurred in May 1995, September 1996 and June 1997 and were registered
with the Commission under the Securities Act, pursuant to three registration
statements on Form S-1.
Because the number of holders of Class B Stock was equal to or exceeded
500, on January 22, 1997, IRA registered Class B Stock under Section 12(g) of
the Exchange Act pursuant to a registration statement on Form 8-A. As a result
of the registration of Class B Stock under the Exchange Act, IRA is required to
furnish certain information to its Class B Shareholders and to the Commission.
As required by Texas law, only persons licensed as insurance agents by
the state of Texas are permitted to own shares in an insurance agency
incorporated in the state of Texas. Each holder of Class B Stock has
executed an agreement with IRA (the "Class B Stock Agreement"). Pursuant to
the Class B Stock Agreement, each Class B Shareholder agrees that, in
accordance with Texas law pertaining to incorporated insurance agencies, the
holder must be duly licensed as a Texas life insurance agent, and, in the
event the holder ceases to be so licensed, the holder and the Company agree
that the holder's shares will be repurchased by the Company. The shares will
also be repurchased by the Company (1) in the event that the holder ceases to
be a duly authorized agent of the Company, (2) in the event of the holder's
death, or (3) in the event that the holder desires to sell or otherwise
dispose of his/her shares. Upon the receipt of written notice of any such
event, the Company has ninety (90) days within which to close the repurchase
of such shares. Under the terms of the Class B Stock Agreement, the price at
which the Company will repurchase such shares is determined by the Company,
in its sole and absolute discretion, at least annually. The Company will
determine to pay the repurchase price in cash, by delivery of the Company's
unsecured promissory note containing such terms and provisions as Company
shall determine, or by a combination of cash and such a promissory note.
Under the Class B Stock Agreement, the holder agrees not to transfer, pledge,
assign, or otherwise in any manner encumber any such shares, except pursuant
to the terms of the Class B Stock Agreement.
While the Company may change its methodology or adjust the Class B Stock
price based on other factors at any time in the future, the price at which the
Company has purchased Class B Stock in the past has been determined from the per
share book value of the Class B Stock at the end of the Company's current fiscal
year, reduced by distributions declared for payment on the current year's
earnings. The resultant net increase in per share book value over the previous
year's similarly computed Class B Stock price is then added incrementally,
1/12th per month for the ensuing 12 months to the current September 30 Class B
Stock price (based upon the prior year's computation). For the purposes of
determining the purchase price of Class B Stock, the calculation of per share
book value does not include the effect of reporting the Company's investments at
market value as a result of the application by the Company of SFAS 115.
DISTRIBUTIONS; PREEMPTIVE RIGHTS; LIQUIDATION
All IRA Shareholders are entitled to receive distributions as may be
declared on the Class A Stock or the Class B Stock by the IRA Board from funds
legally available therefor. The Company has paid distributions on Class B Stock
in each of the years from 1987 through 1997. No distributions have been declared
on Class A Stock. See "MARKET PRICE DATA, DISTRIBUTIONS AND SECURITY OWNERSHIP
OF IRA COMMON STOCK."
IRA Shareholders do not have preemptive rights to subscribe to any
additional shares issued by the Company. In the event of liquidation, all IRA
Shareholders are entitled to share pro rata in any distribution of the Company's
assets after payment of liabilities.
63
<PAGE>
DESCRIPTION OF THE SURVIVING CORPORATION CAPITAL STOCK
GENERAL
The following is a summary of certain of the rights and privileges that,
after the Effective Time, will pertain to the stock of the Surviving
Corporation. For a full description of such stock, reference is made to, and
the following summary is qualified in its entirety by, the Articles of
Incorporation and the Bylaws of the Surviving Corporation, as proposed to be
amended, a copy of which are attached hereto as Annex E.
COMMON STOCK
Following the Merger, the Surviving Corporation will be authorized by its
Articles of Incorporation, as amended, to issue an aggregate of 10,000 shares of
Surviving Corporation Voting Stock and an aggregate of 10,000,000 shares of
Surviving Corporation Nonvoting Stock.
The Surviving Corporation Voting Stock will be entitled to one vote per
share on all matters submitted for action by the shareholders. Accordingly,
the holders of more than 50% of the shares of Surviving Corporation Voting
Stock will be able to elect all of the directors. In such event, the holders
of the remaining shares will not be able to elect any directors. Holders of
Surviving Corporation Nonvoting Stock have no voting rights, except for
certain voting rights in the event of certain extraordinary transactions as
provided by the TBCA, or as otherwise provided by law. There is no provision
for cumulative voting with respect to the election of directors.
All shares of Surviving Corporation Voting Stock will be entitled to share
proportionately in such distributions as the Board of Directors may from time to
time declare from sources legally available therefor.
Upon liquidation or dissolution of the Surviving Corporation, whether
voluntary or involuntary, all shares of Surviving Corporation Common Stock are
entitled to share equally in the assets available for distribution to
shareholders after payment of all prior obligations of the Surviving
Corporation, including all agent and employee compensation plan obligations.
RESTRICTIONS ON TRANSFER OF SHARES
Article Seven of the Articles of Incorporation of the Surviving
Corporation, as amended, provides for certain restrictions on the transfer of
Surviving Corporation Common Stock. Except as otherwise provided therein, the
Articles prohibit a shareholder from selling, assigning, donating, pledging,
encumbering or otherwise disposing of any shares of Surviving Corporation Common
Stock.
The Articles further provide that no shareholder may transfer or encumber,
and no person may acquire, the legal or beneficial ownership of any share of
Surviving Corporation Common Stock now or hereafter owned by him or her if that
transfer, encumbrance or acquisition would cause the S corporation status of the
Surviving Corporation to terminate. Specifically, no transfer may be made to,
and no acquisition may be made by, any person who would cause the Surviving
Corporation to have more than the maximum permitted number of shareholders under
the Code as then in effect or to any person that is not eligible to be a
shareholder of an S corporation under the provisions of the Code. However, the
Articles do permit, under certain circumstances, Surviving Corporation
Shareholders to pledge, mortgage, hypothecate or otherwise encumber his or her
Surviving Corporation Common Stock with the prior written consent of the
executive committee of the Surviving Corporation but subject to such terms,
conditions and restrictions as the executive committee determines to be
appropriate in the exercise of its sole discretion.
In addition, upon the occurrence of certain Operative Events (as defined
below) with respect to a shareholder, such shareholder (or spouse or estate, as
applicable) must tender all of his or her shares to the Surviving Corporation,
and the Surviving Corporation shall have the option, the term of which is 120
days, to purchase all shares of
64
<PAGE>
Surviving Corporation Common Stock owned by such shareholder. The purchase
price shall be the amount determined by the Surviving Corporation, which it
shall advise the shareholders in writing of at least annually. To facilitate
such purchases, the Surviving Corporation is permitted to obtain life
insurance policies concerning its shareholders. The purchase price for such
purchases by the Surviving Corporation is to be determined at least annually
by the Surviving Corporation and is to be proportionately adjusted for
subsequent changes in the number of issued and outstanding shares, stock
distributions or other increases or decreases in the number of shares
outstanding. The Surviving Corporation may pay the purchase price in full to
such shareholder or may pay 20% of such purchase price in cash and pay the
remainder in four equal annual installments at prime interest rates.
As used in the Articles of Incorporation, an Operative Event shall mean:
(i) any threatened or actual transfer or encumbrance of Surviving Corporation
Common Stock in any manner whatsoever by a shareholder; (ii) the death of a
shareholder; (iii) the termination of the marital relationship of a
shareholder by death or divorce if that shareholder does not succeed to his
or her spouse's community interest in the Surviving Corporation Common Stock
or the entering into of any property settlement arrangement or agreement in
connection therewith, pursuant to which that shareholder's interest in his or
her Surviving Corporation Common Stock is to be diluted, lessened, encumbered
or impaired; (iv) any threatened or actual (a) bankruptcy or insolvency of a
shareholder or (b) institution of legal proceedings because or by reason of
the bankruptcy or insolvency of a shareholder; (v) the termination of the
status of a shareholder as a duly licensed Texas life insurance agent; (vi)
the cessation of a shareholder as a duly authorized agent of the Surviving
Corporation pursuant to a current written agency agreement, except that with
respect to an involuntary termination as a duly authorized agent of the
Surviving Corporation, such termination shall require approval by 80% of the
Board of Directors; (vii) the change of status of a shareholder to a
"non-resident alien" as defined in the Code; or (viii) any threatened or
actual levy by a creditor or claimant upon the shares of Surviving
Corporation Common Stock held by a shareholder or any other seizure or sale
by legal process, if it is determined by legal counsel for the Surviving
Corporation that such levy is made in good faith and based upon a bona fide
claim.
SUBCHAPTER S PROVISIONS
Article Eight of the Articles of Incorporation of the Surviving Corporation
contains certain provisions with regard to the Surviving Corporation's status as
an S corporation. Each shareholder must provide to the Surviving Corporation,
immediately upon the Surviving Corporation's request, such properly signed
consents or other documents as, in the opinion of the Surviving Corporation, may
be necessary or useful to maintain the Surviving Corporation's status as an S
corporation, and each shareholder is obligated to refrain from any actions that
would interfere with the Surviving Corporation's maintenance of its status as an
S corporation. In addition, Article Eight contains provisions that address the
following matters related to the Surviving Corporation's status as an S
corporation.
REVOCATION OF ELECTION. In the event that the shareholders, by the
affirmative vote of at least 80% of the votes that all of the shareholders are
entitled to cast, determine to terminate the Surviving Corporation's status as
an S corporation, each shareholder, if requested, must execute a consent to such
revocation and deliver this consent to the secretary of the Surviving
Corporation within 60 days. In the event of a termination of the Surviving
Corporation's S status, the shareholders and the Surviving Corporation shall
elect, if applicable, to have Section 1362(e)(2) of the Code not apply, as
provided in Section 1362(e)(3) of the Code. Any person who was a shareholder
at any time during the S Short Year (as defined in the Code) or who is a
shareholder on the first day of the C Short Year (as defined in the Code) must
consent to such election.
INADVERTENT TERMINATION OF SUBCHAPTER S ELECTION. In the event of a
termination of the Surviving Corporation's status as an S corporation other than
as described in the immediately preceding paragraph, if the Surviving
Corporation desires that the Surviving Corporation's status as an S corporation
be continued, the Surviving Corporation and all shareholders as of and/or after
the terminating event must use their best efforts to obtain from the IRS a
waiver of the terminating event on the ground of inadvertency. The Surviving
Corporation and the shareholders must take such steps, and make such
adjustments, as may be required by the IRS pursuant to Section 1362(f)(3) and
(4) of the Code. If a shareholder caused the terminating event to occur, he or
she will bear the expense of obtaining the waiver and of making such adjustments
as may be required. If the inadvertent termination is not waived by the IRS and
the Surviving Corporation's S status is permanently terminated, the Surviving
Corporation and the
65
<PAGE>
shareholders will make the election under Section 1362(e)(3) of the Code
described in the immediately preceding paragraph.
PROVISION IN SHAREHOLDER WILLS. Each shareholder shall include in his or
her will a direction and authorization to his or her executor in substantially
the following form:
My Executor is hereby directed and authorized to hold stock of an
S Corporation, as defined in the Code (hereinafter "S Stock"), to make
an election to have any corporation treated as an S Corporation, to
enter into agreements with other shareholders or with the corporation
relating to a transfer (including, without limitation, a sale,
assignment, exchange, gift, donation, mortgage, hypothecation, or
other encumbrance or other disposition) (a "Transfer") of S Stock or
the management of the S Corporation, and to allocate amounts received
and the tax on undistributed income between income and principal.
During the administration of my estate, my Executor may allocate the
tax deductions and credits arising from ownership of S Stock between
income and principal. In making any such allocations, my Executor
shall consider that the beneficiary is to have enjoyment of the
property at least equal to that ordinarily associated with an income
interest and in all events shall provide the required beneficial
enjoyment to the beneficiary until such time as the S Stock is
distributed to him or her.
Any beneficiary of my estate who receives stock in an S
Corporation as part of his or her distribution shall, prior to such
distribution, enter into a written agreement with said S Corporation
(i) to consent to any election to qualify the S Corporation as such;
(ii) to do nothing to interfere with the S Corporation's maintenance
of its status as such; (iii) to not Transfer the S Stock to any
transferee who does not agree to execute a similar consent; (iv) to
not Transfer the S Stock in such manner as will cause the S
Corporation to lose its status as an S Corporation under the then
applicable federal and state income tax statutes and regulations; and
(v) if S status is inadvertently terminated, to join in any endeavor
to obtain a waiver of the terminating event on the grounds of
inadvertency from the Internal Revenue Service if the S Corporation or
any shareholder desires that the S status should continue.
Any S Stock distributed to a beneficiary shall bear an
appropriate legend on the stock certificate stating that the Transfer
of the stock is subject to and restricted to the extent set forth in
the subparagraph above.
DISTRIBUTIONS TO PAY TAX LIABILITIES. With respect to all taxable periods
of the Surviving Corporation during which it is an S Corporation, the Surviving
Corporation shall make the distributions described in this paragraph in a timely
manner to allow the tax (including, without limitation, estimated tax payments)
attributable to the income passed through the Surviving Corporation to the
shareholders to be paid when due. To satisfy this requirement, the Surviving
Corporation shall make distributions in an amount equal to the excess of (i)
the sum of the products of (A) the Surviving Corporation's negative taxable
income attributable to such shareholders during each of such taxable periods
multiplied by (B) the sum of the maximum federal individual income tax rates
in effect for each of such taxable periods (without regard to exemptions or
phase-outs of lower tax rates but with consideration of the deductibility of
state taxes for federal income tax purposes), over (ii) the sum of the
products of (A) the Surviving Corporation's positive taxable income
attributable to such shareholders during each of such taxable periods
multiplied by (B) the sum of the maximum federal individual income tax rate in
effect for each of such taxable periods (without regard to exemptions or
phase-outs of lower tax rates but with consideration of the deductibility of
state taxes for federal income tax purposes). The Surviving Corporation's
obligation to declare and pay such a distribution to the shareholders in such
an amount is subject to the restrictions governing distributions under the
Texas Business Corporation Act and such other pertinent governmental or
contractual restrictions as are now, or may hereafter become effective. If
the Surviving Corporation does not have sufficient funds available to permit
it lawfully to declare and pay such distribution, the shareholders and the
Surviving Corporation shall take such action, adopt such resolutions, and
cause such certificates and other
66
<PAGE>
documents to be filed as may be necessary to create sufficient funds to permit
the payment of such distribution, whereupon the Surviving Corporation shall
declare and pay such distribution.
The Articles of Incorporation provide that in no event may the total
distribution made with respect to any outstanding shares of stock of the
Surviving Corporation to differ from the amounts paid with respect to any other
outstanding shares of stock of the Surviving Corporation, and in no event shall
these provisions be construed to limit the ability of the Surviving Corporation
to declare and pay additional distributions to shareholders out of the assets of
the Surviving Corporation legally available for such payment at such time or
times as the Board of Directors may determine.
NONRECOGNITION OF CERTAIN TRANSFERS. The Surviving Corporation will not
recognize any transfers that could disqualify the Surviving Corporation as an S
corporation or that are made in violation of the terms of the Articles of
Incorporation.
LEGENDS ON SHARE CERTIFICATES. The following legend will be imprinted
conspicuously on the face of each certificate representing shares of Stock:
NOTICE IS HEREBY GIVEN THAT THE TRANSFER (INCLUDING, WITHOUT
LIMITATION, THE SALE, ASSIGNMENT, EXCHANGE, GIFT, DONATION, PLEDGE,
MORTGAGE, HYPOTHECATION OR OTHER ENCUMBRANCE OR OTHER DISPOSITION) OF THE
SHARES OF CAPITAL STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO AND
RESTRICTED BY THE PROVISIONS OF THE ARTICLES OF INCORPORATION OF THE
CORPORATION, AND ALL OF THE PROVISIONS OF THE ARTICLES OF INCORPORATION
ARE INCORPORATED BY REFERENCE IN THIS CERTIFICATE, SPECIFICALLY
INCLUDING BUT NOT LIMITED TO THOSE PROVISIONS OF THE ARTICLES OF
INCORPORATION RELATING TO THE CORPORATION'S TAX STATUS AS AN S
CORPORATION.
ELECTION TO CLOSE BOOKS. The Surviving Corporation, in the event the
executive committee of the Board of Directors of the Surviving Corporation so
determines, shall consent to close the books of the Surviving Corporation
pursuant to Section 1377(a)(2) of the Code whenever a shareholder sells all of
his Stock on a day other than the last day of the Surviving Corporation's
fiscal year if all "affected shareholders" (as defined in Section
1377(a)(2)(B) of the Code) shall consent thereto.
BUSINESS COMBINATION PROVISION
The Articles of Incorporation of the Surviving Corporation contain a
business combination provision identical to that of Article Ten of the Articles
of Incorporation of IRA, including the requirement that a "fair price" be paid
under certain circumstances. See "THE PROPOSED MERGER--IRA Charter Business
Combination Provision." This provision may have certain anti-takeover effects,
including making it more difficult for the Surviving Corporation to enter into
transactions with certain interested shareholders without the approval of the
Board of Directors of the Surviving Corporation.
CLASSIFIED BOARD
The Bylaws of the Surviving Corporation, like the Bylaws of IRA, provide
for a Board of Directors divided into three classes of directors serving
staggered three-year terms. The classification of directors has the effect of
making it more difficult for shareholders to change the composition of the Board
of Directors of the Surviving Corporation in a short period of time. At least
two annual meetings of shareholders, instead of one, will generally be required
to effect a change in a majority of the Board of Directors of the Surviving
Corporation.
67
<PAGE>
INDEPENDENT AUDITORS
The consolidated financial statements of IRA as of September 30, 1997 and
1996 and for the three years in the period ended September 30, 1997, 1996 and
1995, included in the IRA 10-K included and incorporated by reference in this
Proxy Statement, have been audited by Brantley, Frazier, Rogers & Company, P.C.,
independent auditors.
The balance sheet of First Command as of May 31, 1998, included herein,
has been audited by Ernst & Young LLP, independent auditors.
Representatives of Ernst & Young LLP, principal independent accountants
to IRA, will be present at the Special Meeting.
OTHER MATTERS
The IRA Board does not presently know of any matters to be presented for
consideration at the Special Meeting other than matters described in the Notice
of Special Meeting mailed together with this Proxy Statement, but if other
matters are presented, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment. The proxy confers discretionary authority to vote only with respect
to matters that the IRA Board did not know, within a reasonable time before the
mailing of these materials, were to be presented at the Special Meeting.
The Company has enclosed with this Proxy Statement as Annex D its Annual
Report on Form 10-K for the fiscal year ended September 30, 1997 and its
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1998,
which are incorporated herein by reference.
68
<PAGE>
AVAILABLE INFORMATION
IRA is subject to the informational requirements of the Exchange Act, and
in accordance therewith files reports, proxy statements and other information
with the Commission. First Command is not subject to the informational
requirements of the Exchange Act. IRA and First Command have filed with the
Commission the Schedule 13E-3. As permitted by the rules and regulations of the
Commission, this Proxy Statement omits certain exhibits contained in the
Schedule 13E-3. Copies of the Schedule 13E-3 and the exhibits thereto, as well
as such reports, proxy statements and other information, can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
following Regional Offices of the Commission: Seven World Trade Center, 13th
Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission also maintains a Web Site
at http://www.sec.gov which contains reports and other information regarding
registrants that file electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by IRA (File No. 000-
22021) pursuant to the Exchange Act are incorporated by reference in this Proxy
Statement:
(1) Quarterly Report on Form 10-Q for the period ended June 30, 1998,
filed on August 14, 1998.
(2) Quarterly Report on Form 10-Q for the period ended March 31, 1998,
filed on May 12, 1998.
(3) Quarterly Report on Form 10-Q for the period ended December 31, 1997,
filed on February 17, 1998.
(4) Annual Report on Form 10-K for the fiscal year ended September 30,
1997, filed on December 29, 1997.
(5) Current Report on Form 8-K, filed on May 1, 1998.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein or in any other subsequently filed document, which also is or is deemed
to be incorporated by reference herein, modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement.
THIS PROXY STATEMENT INCORPORATES BY REFERENCE DOCUMENTS RELATING TO THE
COMPANY THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS
(NOT INCLUDING EXHIBITS TO SUCH DOCUMENTS OTHER THAN EXHIBITS SPECIFICALLY
INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE TO
ANY PERSON, INCLUDING ANY BENEFICIAL OWNER OF CLASS A STOCK OR CLASS B STOCK, TO
WHOM THIS PROXY STATEMENT IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF SUCH
PERSON. REQUESTS FOR SUCH DOCUMENTS RELATING TO IRA SHOULD BE DIRECTED TO
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC., 4100 SOUTH HULEN STREET,
FORT WORTH, TEXAS 76109, ATTENTION: INVESTOR RELATIONS, TELEPHONE NUMBER (817)
731-8621. TO ASSURE TIMELY DELIVERY OF SUCH DOCUMENTS, REQUESTS FOR SUCH
DOCUMENTS SHOULD BE MADE NO LATER THAN _________________ , 1998.
69
<PAGE>
By Order of the Board of Directors,
/s/ Sandra T. Allen
Sandra T. Allen
Secretary
Fort Worth, Texas
_____________, 1998
70
<PAGE>
FIRST COMMAND FINANCIAL CORPORATION
INDEX TO BALANCE SHEETS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . F-2
Balance Sheet as of May 31, 1998 . . . . . . . . . . . . . . . . . . . . . . F-3
Notes to Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Balance Sheet as of June 30, 1998 (unaudited). . . . . . . . . . . . . . . . F-6
Notes to Balance Sheet (unaudited) . . . . . . . . . . . . . . . . . . . . . F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
First Command Financial Corporation
We have audited the balance sheet of First Command Financial Corporation as of
May 31, 1998. This balance sheet is the responsibility of the Company's
management. Our responsibility is to express an opinion on this balance sheet
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 balance sheet is free of material misstatement. An
audit also includes examining, on a test basis, evidence supporting the amounts
and significant estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of First Command Financial Corporation
at May 31, 1998, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Dallas, Texas
June 18, 1998
F-2
<PAGE>
FIRST COMMAND FINANCIAL CORPORATION
BALANCE SHEET
MAY 31, 1998
<TABLE>
<S> <C>
Assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 893
Construction in progress . . . . . . . . . . . . . . . . . 12,310
-------
Total assets. . . . . . . . . . . . . . . . . . . . . $13,203
-------
-------
Liabilities:
Advance payable. . . . . . . . . . . . . . . . . . . . . . $12,310
-------
Total liabilities . . . . . . . . . . . . . . . . . . $12,310
Shareholders' equity:
Common stock (1,000 shares authorized, 1,000 shares
outstanding at $0.01 par value). . . . . . . . . . . 10
Paid in capital. . . . . . . . . . . . . . . . . . . . . . 883
-------
Shareholders' equity . . . . . . . . . . . . . . . . 893
-------
Total liabilities and shareholders' equity . . . $13,203
-------
-------
</TABLE>
See notes to balance sheet.
F-3
<PAGE>
NOTES TO BALANCE SHEET
MAY 31, 1998
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATION
First Command Financial Corporation ("FCFC") was chartered in Texas in April
1998. FCFC was incorporated for the purpose of entering into agreements for the
lease of real estate, the construction of a parking garage on that leased real
estate, the financing of said construction and the leasing of space in the
completed garage.
Four individuals, who are members of the executive committee of Independent
Research Agency for Life Insurance, Inc. ("IRA, Inc.") are the shareholders of
FCFC.
FEDERAL INCOME TAXES
In order to qualify for the flow-through benefits of an S-Corporation, FCFC must
have, among other things, only one class of stock and less than 75 shareholders.
Since FCFC meets these requirements, FCFC shareholders elected to be taxed as a
S-Corporation.
NOTE 2 - ADVANCE PAYABLE
At May 31, 1998 FCFC has received $12,310 in advances from IRA, Inc. This
advance will become subject to the IRA, Inc. borrowing agreement as discussed in
Note 3 below.
NOTE 3 - SUBSEQUENT EVENTS AND OTHER AGREEMENTS
On June 1, 1998, FCFC entered into an agreement with IRA, Inc. to lease land
from IRA, Inc. on which FCFC will construct an 801 space parking garage. The
agreement allows FCFC to lease the property for $1 each year from the date of
the agreement for the next 99 years.
On June 1, 1998, FCFC entered into a borrowing agreement with IRA, Inc. for
$8.5 million. Under the terms of the agreement, FCFC may borrow up to $7 million
during the next 18 months at an interest rate of 7%. Interest will accrue
monthly, and up to $1.5 million may be added to the outstanding balance of the
loan during the construction period. At the end of the construction period, the
total outstanding debt will be repaid through quarterly payments over the
following fifteen years.
On May 4, 1998, FCFC entered into an agreement with a third party construction
company to act as a general contractor for the purpose of constructing the
parking garage. The construction is expected to be completed in the summer of
1999 with the total costs approximating $6 million for the garage, plus
interest.
On June 1, 1998, FCFC entered into an agreement with IRA, Inc. for the leasing
of the to-be constructed parking garage. Under the terms of the agreement, IRA,
Inc. will lease the garage for $51,250 per month, plus operating expenses, for
fifteen years after the completion of the garage.
On June 1, 1998, FCFC entered into a management agreement with IRA, Inc. for
IRA, Inc. to provide FCFC specified administrative services, facilities,
equipment and supplies necessary to operate the business. FCFC is to pay IRA,
Inc. $2,030 per month in management fees. The agreement term ends May 31, 1999,
but automatically renews itself from year to year unless otherwise terminated as
provided in the agreement.
F-4
<PAGE>
On June 1, 1998, FCFC entered into an administrative agreement with IRA, Inc. to
manage the IRA building as specified in the agreement. IRA, Inc. is to pay
$2,080 per month to FCFC for these services. The agreement term ends May 31,
1999, but automatically renews itself from year to year unless otherwise
terminated as provided in the agreement.
NOTE 4 - IMPACT OF YEAR 2000
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the FCFC's
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions or engage in similar
normal business activities.
FCFC, through its management agreement with IRA, is primarily reliant upon IRA
to utilize and appropriately modify its software so that the FCFC's data
processing will function properly with respect to dates in the Year 2000 and
thereafter. However, if such modifications are not successfully made, or are not
completed timely, the Year 2000 Issue could adversely impact the operations of
FCFC. IRA has formed a committee to review these areas and is studying the
impact of the new millennium on all areas of IRA. In addition, IRA plans to
engage a third party specialist to ensure its review and corrective actions are
appropriate.
F-5
<PAGE>
FIRST COMMAND FINANCIAL CORPORATION
BALANCE SHEET
JUNE 30, 1998
(unaudited)
<TABLE>
<S> <C>
Assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000
Construction in progress . . . . . . . . . . . . . . . . . 26,770
Other assets . . . . . . . . . . . . . . . . . . . . . . . 6,495
-------
Total assets. . . . . . . . . . . . . . . . . . . . . $34,265
-------
-------
Liabilities:
Advance payable. . . . . . . . . . . . . . . . . . . . . . $41,011
-------
Total liabilities . . . . . . . . . . . . . . . . . . $41,011
Shareholders' equity:
Common stock (1,000 shares authorized, 1,000 shares
outstanding at $0.01 par value). . . . . . . . . . . 10
Paid in capital. . . . . . . . . . . . . . . . . . . . . . 990
Current year earnings (loss) . . . . . . . . . . . . . . . (7,746)
-------
Shareholders' equity . . . . . . . . . . . . . . . . (6,746)
-------
Total liabilities and shareholders' equity . . . $34,265
-------
-------
</TABLE>
See notes to balance sheet.
F-6
<PAGE>
NOTES TO BALANCE SHEET
JUNE 30, 1998
(unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATION
First Command Financial Corporation ("FCFC") was chartered in Texas in April
1998. FCFC was incorporated for the purpose of entering into agreements for the
lease of real estate, the construction of a parking garage on that leased real
estate, the financing of said construction and the leasing of space in the
completed garage.
Four individuals, who are members of the executive committee of Independent
Research Agency for Life Insurance, Inc. ("IRA, Inc.") are the shareholders of
FCFC.
FEDERAL INCOME TAXES
In order to qualify for the flow-through benefits of an S-Corporation, FCFC must
have, among other things, only one class of stock and less than 75 shareholders.
Since FCFC meets these requirements, FCFC shareholders elected to be taxed as a
S-Corporation.
NOTE 2 - ADVANCE PAYABLE
At June 30, 1998 FCFC has received $41,011 in advances from IRA, Inc. This
advance will become subject to the IRA, Inc. borrowing agreement as discussed in
Note 3 below.
NOTE 3 - OTHER AGREEMENTS
On June 1, 1998, FCFC entered into an agreement with IRA, Inc. to lease land
from IRA, Inc. on which FCFC will construct an 801 space parking garage. The
agreement allows FCFC to lease the property for $1 each year from the date of
the agreement for the next 99 years.
On June 1, 1998, FCFC entered into a borrowing agreement with IRA, Inc. for
$8.5 million. Under the terms of the agreement, FCFC may borrow up to $7 million
during the next 18 months at an interest rate of 7%. Interest will accrue
monthly, and up to $1.5 million may be added to the outstanding balance of the
loan during the construction period. At the end of the construction period, the
total outstanding debt will be repaid through quarterly payments over the
following fifteen years.
On May 4, 1998, FCFC entered into an agreement with a third party construction
company to act as a general contractor for the purpose of constructing the
parking garage. The construction is expected to be completed in the summer of
1999 with the total costs approximating $6 million for the garage, plus
interest.
On June 1, 1998, FCFC entered into an agreement with IRA, Inc. for the leasing
of the to-be constructed parking garage. Under the terms of the agreement, IRA,
Inc. will lease the garage for $51,250 per month, plus operating expenses, for
fifteen years after the completion of the garage.
On June 1, 1998, FCFC entered into a management agreement with IRA, Inc. for
IRA, Inc. to provide FCFC specified administrative services, facilities,
equipment and supplies necessary to operate the business. FCFC is to pay IRA,
Inc. $2,030 per month in management fees. The agreement term ends May 31, 1999,
but automatically renews itself from year to year unless otherwise terminated as
provided in the agreement.
F-7
<PAGE>
On June 1, 1998, FCFC entered into an administrative agreement with IRA, Inc. to
manage the IRA building as specified in the agreement. IRA, Inc. is to pay
$2,080 per month to FCFC for these services. The agreement term ends May 31,
1999, but automatically renews itself from year to year unless otherwise
terminated as provided in the agreement.
NOTE 4 - IMPACT OF YEAR 2000
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the FCFC's
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions or engage in similar
normal business activities.
FCFC, through its management agreement with IRA, is primarily reliant upon IRA
to utilize and appropriately modify its software so that the FCFC's data
processing will function properly with respect to dates in the Year 2000 and
thereafter. However, if such modifications are not successfully made, or are not
completed timely, the Year 2000 Issue could adversely impact the operations of
FCFC. IRA has formed a committee to review these areas and is studying the
impact of the new millennium on all areas of IRA. In addition, IRA plans to
engage a third party specialist to ensure its review and corrective actions are
appropriate.
F-8
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
FIRST COMMAND FINANCIAL CORPORATION
AND
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
A-1
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is dated as of July 1,
1998, and is by and between Independent Research Agency for Life Insurance,
Inc., a Texas corporation ("IRA"), and First Command Financial Corporation, a
Texas corporation ("First Command").
R E C I T A L S
The Boards of Directors of IRA and First Command have approved the merger
of IRA with and into First Command (the "Merger") upon the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the above premises, the mutual promises
and covenants herein contained, and for other good and valuable consideration,
the full receipt and sufficiency of which are hereby expressly acknowledged by
the parties hereto, it is hereby agreed as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2 hereof),
and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Texas Business Corporation Act (the "TBCA"), IRA
shall be merged with and into First Command, the separate existence of IRA shall
cease, and First Command shall be the surviving corporation (sometimes called
the "Surviving Corporation") and shall continue its corporate existence under
the laws of the State of Texas. The name of the Surviving Corporation shall be
"Independent Research Agency for Life Insurance, Inc."
1.2 EFFECTIVE TIME. The Merger shall be effected by the filing of the
Articles of Merger, in the form required by the TBCA and otherwise conforming to
the requirements of the TBCA, with the Secretary of State of the State of Texas.
The Merger shall become effective at 12:01 a.m. on October 1, 1998 (the
"Effective Time").
1.3 EFFECT OF THE MERGER. At the Effective Time, First Command, as the
surviving corporation in the Merger, shall possess all of the rights,
privileges, immunities, powers and franchises of each of First Command and IRA;
all of the property, real, personal and mixed, including subscription of shares,
choses in action and every other asset of each of First Command and IRA shall
vest in the Surviving
<PAGE>
Corporation without further act or deed; the Surviving Corporation shall assume
and be liable for all the liabilities and obligations of each of First Command
and IRA; and all other effects presumed in a merger including, without
limitation, those set forth in Section 5.06 of the TBCA, shall result from the
Merger.
ARTICLE II
CONVERSION AND EXCHANGE OF SHARES
2.1 CONVERSION OF SHARES. At the Effective Time, by virtue of the Merger
and without any action on the part of First Command, IRA, or the holders of any
of the following securities:
2.1.1 Each share of Class A Voting Common Stock, par value $0.10 per
share, of IRA ("Class A Stock"), issued and outstanding immediately prior
to the Effective Time (other than shares of Class A Stock to be cancelled
pursuant to Section 2.1.4 below and other than the Dissenting Shares, as
defined in Section 2.2 below) shall be converted into five validly issued,
fully paid and nonassessable shares of Voting Common Stock, par value $0.01
per share ("Surviving Corporation Voting Stock"), of the Surviving
Corporation (the "Class A Consideration"). From and after the Effective
Time, each outstanding certificate that represented shares of Class A Stock
shall evidence ownership of and represent the number of shares of Surviving
Corporation Voting Stock into which such shares of Class A Stock shall have
been converted.
2.1.2 Each share of Class B Non-voting Common Stock, par value $0.02
per share, of IRA ("Class B Stock") that is held by a holder of Class B
Stock (a "Class B Shareholder") that is not a holder of Class A Stock
issued and outstanding immediately prior to the Effective Time (other than
the Dissenting Shares, as defined in Section 2.2 below) shall be converted
into the right to receive $28.24 in cash, without interest thereon ("Class
B Per Share Amount"), payable to the holders thereof upon surrender of the
certificates representing such shares.
2.1.3 Each share of Class B Stock that is held by a Class B
Shareholder that is also a holder of Class A Stock (a "Class A/B
Shareholder") issued and outstanding immediately prior to the Effective
Time (other than the Dissenting Shares, as defined in Section 2.2 below)
shall be converted into, at the election of the Class A/B Shareholder,
either (i) the right to receive one share of Nonvoting Common Stock, par
value $0.01 per share ("Surviving Corporation Nonvoting Stock"), of the
Surviving Corporation (the "Class B Nonvoting Stock Consideration") or (ii)
the Class B Per Share Amount (together with the Class
- 2 -
<PAGE>
B Nonvoting Stock Consideration, the "Class B Consideration"), payable to
the holders thereof upon surrender of the certificates representing such
shares; provided, however, that a Class A/B Shareholder may not elect to
receive a combination of the Class B Nonvoting Stock Consideration and the
Class B Cash Consideration with respect to shares of Class A Stock held by
such Class A/B Shareholder. The Class A Stock and Class B Stock are
hereafter sometimes collectively referred to as "IRA Common Stock," and the
Class A Consideration and the Class B Consideration are hereafter sometimes
collectively referred to as "Merger Consideration."
2.1.4 Each share of Class A Stock or Class B Stock held in treasury
by IRA immediately prior to the Effective Time shall be cancelled and
extinguished without any conversion thereof, and no payment shall be made
in respect thereof.
2.1.5 Each share of common stock, par value $0.01 per share, of First
Command ("First Command Common Stock"), issued and outstanding immediately
prior to the Effective Time (other than shares of First Command Common
Stock to be cancelled pursuant to Section 2.1.6 below and other than the
Dissenting Shares, as defined in Section 2.2 below) shall be converted into
0.04 validly issued, fully paid and nonassessable shares of Surviving
Corporation Nonvoting Stock (the "First Command Consideration"). From and
after the Effective Time, each outstanding certificate that represented
shares of First Command Common Stock shall evidence ownership of and
represent the number of shares of Surviving Corporation Nonvoting Stock
into which such shares of First Command Common Stock shall have been
converted.
2.1.6 Each share of First Command Common Stock held in treasury by
First Command immediately prior to the Effective Time shall be cancelled
and extinguished without any conversion thereof, and no payment shall be
made in respect thereof.
2.2 DISSENTING SHARES. To the extent required by applicable provisions of
the TBCA, shares of IRA Common Stock and shares of First Command Common Stock
that are issued and outstanding immediately prior to the Effective Time and are
held by holders of IRA Common Stock or holders of First Command Common Stock who
comply with all the provisions of the TBCA concerning the right of holders of
IRA Common Stock or holders of First Command Common Stock, as the case may be,
to dissent from the Merger and demand payment of the fair value of their shares
of IRA Common Stock or First Command Common Stock, as the case may be
("Dissenting Shareholders"), shall not be converted into the right to receive
the Merger Consideration but shall instead be converted into the right to
receive such consideration as may be determined to be due such Dissenting
Shareholders pursuant
- 3 -
<PAGE>
to the laws of the State of Texas (such shares being the "Dissenting Shares");
provided, however, if any Dissenting Shareholder fails to establish and perfect
his dissenter's rights as provided by applicable law, then such Dissenting
Shareholder shall forfeit all dissenter's rights including the right to obtain
payment of the fair value of the shares held by him, and such Dissenting
Shareholder shall be entitled to receive, as of the Effective Time, only the
Merger Consideration for each share of IRA Common Stock or share First Command
Common Stock, as the case may be, held by him, payable upon surrender of the
certificate representing such shares and such shares shall no longer be
Dissenting Shares. The Surviving Corporation shall comply with all of the
obligations pursuant to the TBCA of a surviving corporation after the
effectiveness of a merger with respect to dissenting shareholders, and the
Surviving Corporation shall direct all negotiations and proceedings with respect
to demands for payment of fair value under Texas law.
2.3 ELECTION PROCEDURES.
2.3.1 Subject to allocation, conversion and proration in accordance
with the provisions of this Section 2.3, each Class A/B Shareholder shall
be entitled, with respect to each share of Class B Stock held by such Class
A/B Shareholder immediately prior to the Effective Time, (a) to elect to
receive in respect of each such share of Class B Stock (i) the Class B
Nonvoting Stock Consideration (a "Stock Election") or (ii) the Class B Cash
Consideration (a "Cash Election") or (b) to indicate that such recordholder
has no preference as to the receipt of Cash Consideration or Stock
Consideration for such Class B Stock (a "Non-Election"). A Class A/B
Shareholder may not make a combination of a Stock Election and a Cash
Election with respect to shares of Class A Stock held by such Class A/B
Shareholder. Class B Stock in respect of which a Non-Election is made
(including shares in respect of which such an election is deemed to have
been made pursuant to this Agreement (collectively, "Non-Election Shares"))
shall be deemed Class B Stock in respect of which Stock Elections have been
made. Class B Stock in respect of which a Stock Election has been made,
together with Class B Stock in respect of which a Stock Election is deemed
to be made, is hereafter referred to as "Stock Election Shares," and Class
B Stock in respect of which a Cash Election has been made is hereafter
referred to as "Cash Election Shares."
2.3.2 Elections pursuant to Section 2.3.1 shall be made on a form and
with such other provisions to be reasonably agreed upon by IRA (a "Form of
Election"), to be provided to holders of record of Class B Stock, together
with appropriate transmittal materials, at the time of mailing to holders
of record of IRA Common Stock of the Proxy Statement (as defined in Section
4.4) in connection with the stockholders meeting referred to in Section
4.3. Elections shall be made by mailing to First Command Bank (the "Paying
Agent") a duly
- 4 -
<PAGE>
completed Form of Election. To be effective, a Form of Election must be (a)
properly completed, signed and submitted to the Paying Agent at its
designated office, by 5:00 p.m. Central Daylight time, on
_____________________, 1998 (the "Election Deadline"). The Company shall
use its best efforts, as promptly as practicable, to make a Form of
Election available to all persons who become holders of record of Class B
Stock between the date of mailing described in the first sentence of this
Section 2.3.2 and the Election Deadline. Neither IRA nor the Paying Agent
will be under any obligation to notify any person of any defect in a Form
of Election submitted to the Paying Agent. A holder of Class B Stock that
does not submit an effective Form of Election prior to the Election
Deadline shall be deemed to have made a Non-Election.
2.3.3 An election may be revoked or amended, but only by written
notice received by the Paying Agent prior to the Election Deadline. Upon
any such revocation, unless a duly completed Form of Election is thereafter
submitted in accordance with paragraph (b)(ii), such Shares shall be
Non-Election Shares.
2.3.4 All Cash Election Shares shall be converted into the right to
receive the Class B Cash Consideration, and all Stock Election Shares shall
be converted into the right to receive the Class B Nonvoting Stock
Consideration.
2.4 PAYMENT FOR SHARES; STOCK TRANSFER BOOKS.
2.4.1 On the first business day following the Effective Time, the
Surviving Corporation shall deposit in trust with the Paying Agent, the
following amounts and forms of Merger Consideration required for conversion
at the Effective Time of the Class A Stock and Class B Stock (such deposit
being the "Payment Fund"): (i) the number of shares of Surviving
Corporation Voting Stock equal to the number of shares of Class A Stock
issued and outstanding immediately prior to the Effective Time multiplied
by five; (ii) the funds equal to the Class B Per Share Amount times the
aggregate number of shares of Class B Stock issued and outstanding
immediately prior to the Effective Time held by Class B Shareholders who
are not Class A/B Shareholders; (iii) the number of shares of Surviving
Corporation Nonvoting Stock equal to the number of Stock Election Shares
issued and outstanding immediately prior to the Effective Time; (iv) the
funds equal to the Class B Per Share Amount times the aggregate number of
Cash Election Shares issued and outstanding immediately prior to the
Effective Time; and (v) the number of shares of Surviving Corporation
Nonvoting Stock equal to the number of shares of First Command Common Stock
issued and outstanding immediately prior to the Effective Time multiplied
by 0.04. The Paying Agent shall, pursuant to irrevocable instructions,
make the payments provided for in Section 2.1 out of the Payment Fund.
Pending such payments, the Paying Agent shall, as directed
- 5 -
<PAGE>
by the Surviving Corporation, invest cash portions of the cash portion of
the Payment Fund in short-term obligations of, or obligations fully
guaranteed by, the United States of America, or any agency of the United
States of America. Any earnings on the investment of the Payment Fund
shall be paid to the Surviving Corporation as and when requested by the
Surviving Corporation. If, at any time after the Effective Time a
Dissenting Shareholder ceases to be a Dissenting Shareholder by virtue of
failing to perfect dissenter's rights, and (i) such Dissenting Shareholder
is not a Class A/B Shareholder and holds Class B Stock or (ii) such
Dissenting Shareholder is a Class A/B Shareholder and has made a Cash
Election with respect the Class B Stock, upon such occurrence the Surviving
Corporation shall promptly deposit to the Payment Fund an amount of Merger
Consideration in cash required for the conversion of such Class B Stock at
the Effective Time.
2.4.2 Promptly after the Effective Time, the Paying Agent shall mail
and otherwise make available to each record holder who held at the
Effective Time an outstanding certificate or certificates that represented
shares of Class A Stock, Class B Stock and First Command Common Stock (the
"Certificates") a form of letter of transmittal and instructions for its
use in effecting the surrender of the Certificates for payment. Upon
surrender to the Paying Agent of a Certificate or Certificates, together
with a duly executed letter of transmittal, the holder of such Certificate
shall be entitled to receive (after taking into account all shares of
Class A Stock then held of record by such holder) in exchange (i) in the
case of a holder of Class A Stock, a certificate evidencing that number of
shares of Surviving Corporation Voting Stock that such holder has the right
to receive in respect of the shares of Class A Stock formerly evidenced by
such Certificate; (ii) in the case of a holder of Class B Stock that is not
a Class A/B Shareholder, Class B Cash Consideration in an amount equal to
the product of the number of shares of Class B Stock represented by such
Certificate multiplied by the Class B Per Share Amount; (iii) in the case
of a Class A/B Shareholder, with respect to the Class B Stock held by such
Class A/B Shareholder, (A) a certificate evidencing that number of shares
of Surviving Corporation Nonvoting Stock that such holder has the right to
receive in respect of the Stock Election Shares formerly evidenced by such
Certificate or (B) Class B Cash Consideration in an amount equal to the
product of the number of Cash Election Shares represented by such
Certificate multiplied by the Class B Per Share Amount; and (iv) in the
case of a holder of First Command Common Stock, a certificate evidencing
that number of shares of Surviving Corporation Nonvoting Stock that such
holder has the right to receive in respect of the shares of First Command
Common Stock formerly evidence by such Certificate. Thereafter, such
Certificates shall be cancelled. No interest will be paid or accrue on the
Merger Consideration payable in cash upon the surrender of the
Certificates. If payment is to be made to a person
- 6 -
<PAGE>
other than the person in whose name the surrendered Certificate is
registered, the Certificate must be properly endorsed or otherwise in
proper form for transfer and the person requesting such payment must agree
to pay any applicable transfer or other taxes or establish to the
satisfaction of the Paying Agent and the Surviving Corporation that such
tax has been paid or is not applicable. The Paying Agent shall pay the
Merger Consideration attributable to a Certificate which has been lost or
destroyed upon receipt of satisfactory evidence of ownership of the shares
of IRA Common Stock or First Command Common Stock and of appropriate
indemnification. After the Effective Time, until surrendered in accordance
with these provisions, each Certificate (other than Certificates
representing Dissenting Shares) shall represent only the right to receive
the Merger Consideration as set forth in this Agreement.
2.4.3 After the Effective Time, there shall be no transfers on the
stock transfer books of the Surviving Corporation of the shares of IRA
Common Stock or First Command Common Stock that were outstanding
immediately prior to the Effective Time. Certificates presented to the
Surviving Corporation after the Effective Time shall be cancelled.
2.4.4 Any portion of the Payment Fund that remains unclaimed by the
shareholders of IRA for six months after the Effective Time shall be repaid
to the Surviving Corporation, upon demand, and any shareholders of IRA who
have not complied with the herein provisions shall look as a general
creditor only to the Surviving Corporation for payment of their claims for
the Merger Consideration. Notwithstanding the foregoing, the Surviving
Corporation shall not be liable to a holder of shares of IRA Common Stock
or First Command Common Stock for any amounts delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
laws.
ARTICLE III
ARTICLES OF INCORPORATION;
BYLAWS; DIRECTORS AND OFFICERS
3.1 ARTICLES OF INCORPORATION. From and after the Effective Time, the
Articles of Incorporation of First Command, as in effect immediately prior to
the Effective Time, shall be and remain the Articles of Incorporation of the
Surviving Corporation until thereafter amended in accordance with the provisions
thereof or Texas law, provided that Article One of such Articles of
Incorporation shall be amended in its entirety to read as follows: "The name of
the Corporation is "Independent Research Agency for Life Insurance, Inc."
- 7 -
<PAGE>
3.2 BYLAWS. From and after the Effective Time, the Bylaws of First
Command, as in effect immediately prior to the Effective Time, shall be and
remain the Bylaws of the Surviving Corporation until thereafter amended in
accordance with the provisions thereof or Texas law.
3.2 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. From and after
the Effective Time, the directors of IRA serving immediately prior to the
Effective Time shall become the directors of the Surviving Corporation, each
such director to hold office, subject to the applicable provisions of the
Articles of Incorporation and Bylaws of the Surviving Corporation, until his
successor shall be duly elected or appointed and qualified. Pursuant to Section
3:6 of the Bylaws of the Surviving Corporation, the directors shall be divided
into the following classes and shall accordingly serve the term designated in
Section 3:6 of the Bylaws of the Surviving Corporation:
Class Director
----- --------
Class I Hal N. Craig
Howard M. Crump
Jerry D. Gray
James J. Ellis
Class II Logan Dickinson
Naomi K. Payne
Lamar C. Smith
Robert F. Watson
Class III Donaldson D. Frizzell
James N. Lanier
Carroll H. Payne II
David P. Thoreson
From and after the Effective Time, the officers of IRA serving immediately
prior to the Effective Time shall, subject to the applicable provisions of the
Articles of Incorporation and Bylaws of the Surviving Corporation, become the
officers of the Surviving Corporation until their respective successors shall be
duly elected or appointed and qualified.
- 8 -
<PAGE>
ARTICLE IV
CERTAIN OBLIGATIONS OF THE PARTIES
IRA covenants and agrees with First Command, and First Command covenants
and agrees with IRA, that between the date of this Agreement and the Closing
Date:
4.1 FULL ACCESS. IRA shall, upon reasonable request, afford to First
Command and its affiliates, counsel, accountants and other authorized
representatives full access during normal business hours to the properties,
books and records of IRA in order that First Command may have the opportunity to
make such reasonable investigations as it shall desire to make of the affairs of
IRA, and IRA will cause its officers and employees to furnish such additional
financial and operating data and other information as First Command shall from
time to time reasonably request. First Command shall, upon reasonable request,
provide IRA, its counsel, accountants and other authorized representatives with
such information concerning First Command as may be reasonably necessary for IRA
to ascertain the accuracy and completeness of the information supplied by First
Command for inclusion in the required proxy statement (or any amendment or
supplement to such materials). IRA shall, upon reasonable request, provide
First Command, its counsel, accountants and other authorized representatives
with such information concerning IRA as may be reasonably necessary for First
Command to ascertain the accuracy and completeness of the information supplied
by IRA for inclusion in the required Rule 13e-3 Transaction Statement on
Schedule 13E-3 (or any amendment thereto) (the "Schedule 13E-3").
4.2 CONFIDENTIALITY. Except as required by law, First Command and its
affiliates will, and will use its best efforts to cause its counsel, accountants
and other authorized representatives to, hold in strict confidence and not
disclose to others for any reason whatsoever, without the prior written consent
of IRA, any information received by them from IRA in connection with the
transactions contemplated by this Agreement. In the event this Agreement is
terminated, IRA and First Command each agrees to return promptly, if so
requested by the other party, every document furnished to any of them by the
other party or any subsidiary, division, associate or affiliate of such other
party, in connection with the transactions contemplated by this Agreement and
any copies of documents which may have been made and to cause their
representatives and others to whom such documents were furnished promptly to
return such documents and any copies, other than documents filed with the
Securities and Exchange Commission ("SEC") or otherwise publicly available.
4.3 SHAREHOLDERS' MEETING. IRA shall, in accordance with the provisions
of the TBCA and its Articles of Incorporation and Bylaws, cause a special
meeting of its shareholders (the "Shareholders' Meeting") to be duly called and
held as soon as reasonably practicable after the date of this Agreement for the
purpose of approving
- 9 -
<PAGE>
and adopting this Agreement. Subject to their fiduciary duties as advised by
counsel, the directors of IRA shall recommend approval and adoption of this
Agreement and that recommendation shall be contained in the Definitive Proxy
Statement (defined below).
4.4 PROXY STATEMENT; SCHEDULE 13E-3. IRA and First Command prepare and
file, and each will cooperate with the other in the preparation and filing of,
the Schedule 13E-3 with the SEC with respect to the transactions contemplated by
this Agreement. In connection with the Shareholders' Meeting, IRA will prepare
and file, and First Command will cooperate with IRA in the preparation and
filing of, a preliminary proxy statement relating to the transactions
contemplated by this Agreement (the "Preliminary Proxy Statement") with the SEC
and will use its best efforts to respond to the comments of the SEC and cause
the Definitive Proxy Statement (herein so called) to be mailed to IRA's
shareholders, all as soon as reasonably practicable. IRA shall prepare and file
with the SEC the Definitive Proxy Statement. Each party to this Agreement will
notify the others promptly of the receipt of the comments of the SEC, if any,
and of any request by the SEC for amendments or supplements to the Schedule
13E-3, the Preliminary Proxy Statement or the Definitive Proxy Statement or for
additional information, and will supply the others with copies of all
correspondence between such party or its representatives and the SEC or members
of its staff with respect to the Schedule 13E-3, the Preliminary Proxy
Statement, the Definitive Proxy Statement or the Merger. Whenever any event
occurs which should be set forth in an amendment of, or a supplement to, the
Definitive Proxy Statement, or an amendment to the Schedule 13E-3, IRA and First
Command will promptly notify the other party and will cooperate with each other
in the prompt preparation, filing, and mailing of such amendment of, or
supplement to, Definitive Proxy Statement, or the preparation and filing of such
amendment to the Schedule 13E-3.
4.5 WAIVERS, CONSENTS AND APPROVALS. Each of IRA and First Command will
use its reasonable best efforts to obtain any waivers, consents or approvals
under the terms of any agreement or commitment to which IRA or First Command is
a party that are necessary for the consummation of the Merger. In obtaining
such waivers, consents and approvals, IRA and First Command shall not, without
the consent of the other party hereto, agree to any amendment to or modification
of any such instrument.
4.6 PUBLICITY. IRA and First Command agree to consult with each other in
issuing any press release and with respect to the general content of other
public statements about the transactions contemplated by this Agreement, and
shall not issue any such press release prior to such consultation.
4.7 COOPERATION WITH RESPECT TO FILINGS. IRA shall use its reasonable
best efforts to obtain at the earliest practicable date, and, in any event,
prior to the Closing
- 10 -
<PAGE>
Date, all approvals, consents, authorizations and waivers as may be required
from governmental and other regulatory agencies and other third parties in
connection with the transactions contemplated by this Agreement which, either
individually or in the aggregate, if not obtained, would have a materially
adverse effect on the financial condition, results of operations or business of
IRA or would prevent consummation of the Merger and the other transactions
contemplated by this Agreement. First Command will, and will cause its
representatives and affiliates to, provide such information and cooperate fully
with IRA in making such applications, filings and other submissions which may be
required or reasonably necessary in order to obtain all approvals, consents,
authorizations and waivers as may be required from governmental and other
regulatory agencies and other third parties in connection with the transactions
contemplated by this Agreement; provided, however, that neither First Command
nor any of its affiliates shall be obligated to execute any guarantees or
undertakings or otherwise incur or assume any liability, other than as a result
of the Merger, in connection with obtaining any such approval, consent,
authorization or waiver. In the event of any action, suit, proceeding or
investigation of the nature specified in Section 5.5 of this Agreement is
commenced, the parties agree to cooperate and use their best efforts to defend
against such actions.
4.8 ACCURACY OF INFORMATION. The written information supplied or to be
supplied by IRA or First Command specifically for inclusion in the Definitive
Proxy Statement, the Schedule 13E-3 and any supplement or amendment to any one
of them, as the case may be, will not contain any untrue statement of a material
fact or omit any material fact necessary in order to make the statements made,
in light of the circumstances under which they are made, not misleading.
4.9 EMPLOYEE BENEFITS.
(a) From and after the Effective Time, the Surviving Corporation shall
honor and be bound by the terms and conditions of each Compensation and Benefit
Plan and each employee or executive benefit plan, program or agreement,
including, without limitation, severance agreements, sponsored or maintained by
IRA, or any subsidiary of IRA, or to which the IRA or any subsidiary of IRA is
party or which has been adopted by the board of directors of the IRA prior to
the date hereof (a "Company Benefit Arrangement"). Nothing in the immediately
preceding sentence shall be construed to limit the right of the Surviving
Corporation, following the Effective Time to amend, modify or terminate any such
Company Benefit Arrangement pursuant to the terms and conditions thereof as in
effect immediately prior to the Effective Time. A "Compensation and Benefit
Plan" shall mean each material bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock option, employment, termination,
severance, compensation, medical, health or other plan, agreement, policy or
arrangement that covers employees, directors, former employees or former
directors.
- 11 -
<PAGE>
(b) Without limiting the generality of the foregoing, from and after the
Effective Time, the Surviving Corporation shall make available to each person
who is an employee of IRA and its subsidiaries immediately prior to the
Effective Time (the "IRA Employees") employee benefit plans and programs which
are either (i) the same as are made available to the employees of IRA, on terms
and conditions generally applicable to the employees of IRA or (ii) no less
favorable to the IRA Employees than the terms and conditions of the Company
Benefit Arrangements in which they were participating immediately prior to the
Effective Time. Notwithstanding the foregoing, in no event shall any employee
receive duplicate benefits with respect to any period of service. To the extent
any employee benefit plan or program in which any IRA Employee participates
after the Effective Time (x) imposes any pre-existing condition limitation, such
condition shall be waived, (y) has a deductible or requires a co-payment by the
IRA Employee that is subject to a maximum out-of-pocket limitation, there shall
be credited against any such deductible or limitation any costs incurred by such
IRA Employee during the comparable period under the terms of the corresponding
Company Benefit Arrangement prior to the Effective Time or (z) imposes a waiting
period, for purposes of eligibility or vesting, the IRA Employees will receive
credit for service with IRA or its subsidiaries prior to the Effective Time.
4.10 TAKEOVER STATUTE. If any Takeover Statute (as defined below) is or
may become applicable to the Merger, each of IRA and First Command and their
respective Board of Directors shall grant such approvals and take such actions
as are necessary so that such transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement or by the Merger and
otherwise act to eliminate or minimize the effects of such statute or regulation
on such transactions. A "Takeover Statute" shall mean any "fair price,"
"moratorium," "control share acquisition" or other similar anti-takeover statute
or regulation, including, without limitation, Article 13 of the TBCA.
ARTICLE V
CONDITIONS TO FIRST COMMAND'S OBLIGATIONS
The obligations of First Command under this Agreement (to be performed on
or before the Closing Date) shall be subject to the satisfaction, on or before
the Closing Date, of each of the following conditions:
5.1 PERFORMANCE. IRA shall have performed and complied in all material
respects with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
- 12 -
<PAGE>
5.2 ADOPTION BY IRA SHAREHOLDERS. The holders of (i) two-thirds (2/3) of
the outstanding shares of Class A Stock and Class B Stock, voting as a single
class and (ii) two-thirds (2/3) of the outstanding shares of Class A Stock and
Class B Stock, each voting separately as a class, that are eligible to vote at
the Shareholders' Meeting shall have voted for approval and adoption of this
Agreement.
5.3 ADOPTION BY FIRST COMMAND SHAREHOLDERS. The holders of two-thirds
(2/3) of the outstanding shares of First Command Common Stock shall have voted
for approval and adoption of this Agreement.
5.4 CONSENTS. All approvals, consents, authorizations and waivers from
governmental and other regulatory agencies and other third parties required to
consummate the transactions contemplated by this Agreement, which either
individually or in the aggregate, if not obtained, would have a materially
adverse effect on the financial condition, results of operations or business of
IRA or would prevent consummation of the Merger and the other transactions
contemplated by this Agreement, shall have been obtained.
5.5 NO INJUNCTION. On the Closing Date there shall be no effective
injunction, writ, temporary restraining order or any order of any nature issued
by a court of competent jurisdiction or other governmental authority directing
that the transactions provided for in this Agreement or any of them not be
consummated as so provided or imposing any conditions on the consummation of the
transactions contemplated by this Agreement that First Command deems
unacceptable in its sole discretion.
5.6 NO PROCEEDING OR LITIGATION. No suit, action, or other proceeding
seeking to restrain, prevent or change the transactions contemplated by this
Agreement or otherwise questioning the validity or legality of such transactions
shall have been instituted and be pending.
5.7 NOTICE OF DISSENT. The holders of no more than 20% of either of the
outstanding Class A Stock or the Class B Stock shall have delivered notice of
their intent to exercise their right to dissent under the TBCA.
ARTICLE VI
CONDITIONS TO IRA'S OBLIGATIONS
The obligations of IRA under this Agreement (to be performed on or before
the Closing Date) shall be subject to the satisfaction, on or before the Closing
Date, of each of the following conditions:
- 13 -
<PAGE>
6.1 PERFORMANCE. First Command shall have performed and complied with all
agreements, obligations and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing Date.
6.2 FAIRNESS OPINION. IRA shall not have received written notice from
Coopers & Lybrand, LLP that it has withdrawn, revoked or modified its opinion as
to the fairness of the Merger to the shareholders of IRA from a financial point
of view.
6.3 ADOPTION BY IRA SHAREHOLDERS. The conditions set forth in Section 5.2
shall have been satisfied.
6.4 ADOPTION BY FIRST COMMAND SHAREHOLDERS. The conditions set forth in
Section 5.3 shall have been satisfied.
6.5 CONSENTS. All approvals, consents, authorizations and waivers from
governmental and other regulatory agencies and other third parties required to
consummate the transactions contemplated by this Agreement, which either
individually or in the aggregate, if not obtained, would have a materially
adverse effect on the financial condition, results of operations or business of
IRA or would prevent consummation of the Merger and the other transactions
contemplated by this Agreement, shall have been obtained.
6.6 NO INJUNCTION. On the Closing Date, there shall be no effective
injunction, writ, temporary restraining order or any order of any nature issued
by a court of competent jurisdiction or other governmental agency directing that
the transactions provided for in this Agreement or any of them not be
consummated as so provided for in this Agreement or any of them not be
consummated as so provided or imposing any conditions on the consummation of the
transactions contemplated by this Agreement that IRA deems unacceptable in its
sole discretion.
6.7 NO PROCEEDING OR LITIGATION. No suit, action, or other proceeding
seeking to restrain, prevent or change the transactions contemplated by this
Agreement or otherwise questioning the validity or legality of such transactions
shall have been instituted and be pending.
6.8 NOTICE OF DISSENT. The holders of no more than 20% of either of the
outstanding Class A Stock or the Class B Stock shall have delivered notice of
their intent to exercise their right to dissent under the TBCA.
- 14 -
<PAGE>
ARTICLE VII
CLOSING
7.1 CLOSING. The Closing of the Merger (the "Closing") shall take
place at 4100 South Hulen Street, Fort Worth, Texas 76109, at __:00 a.m.,
local time, on the first date that all conditions contained in Articles VI
and VII of this Agreement have been satisfied or waived in accordance with
this Agreement, or such later date and time as the parties may agree in
writing. The date of the Closing as set forth in this Agreement shall be
called the "Closing Date."
ARTICLE VIII
TERMINATION AND ABANDONMENT
8.1 METHODS OF TERMINATION. Notwithstanding approval by the shareholders
of IRA, this Agreement may be terminated and the Merger may be abandoned at any
time before the Effective Time:
(a) by mutual consent of the Boards of Directors of First Command
and IRA;
(b) by either IRA or First Command if at the Shareholders' Meeting,
or any adjournment thereof, the shareholders of IRA fail to adopt and
approve this Agreement;
(c) by either IRA or First Command if the shareholders of First
Command fail to adopt and approve the Agreement; or
(d) by either IRA or First Command if a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any other
action (which order, decree or ruling the parties hereto shall use their
best efforts to lift), in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement, and
such order, decree, ruling or other action shall have become final and
nonappealable.
8.2 PROCEDURE UPON TERMINATION. In the event of termination and
abandonment by the Board of Directors of First Command or by the Board of
Directors of IRA pursuant to Section 8.1(b), (c) or (d) of this Agreement,
delivery of written notice from the terminating party to the other party shall
automatically terminate this
- 15 -
<PAGE>
Agreement and shall cause it to be abandoned without further action by First
Command or IRA. If this Agreement is terminated as provided in this Agreement:
(a) All information received by any party with respect to the
business of the other party (other than information which is a matter of
public knowledge or which has been or is published in any publication for
public distribution or filed as public information with any governmental
authority) shall not at any time be used for the advantage of, or disclosed
to third parties by, such party for any reason; and
(b) Neither party shall have any liability or further obligations
to the other party, except as stated in this Section 8.2.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 AMENDMENT AND MODIFICATION. Subject to applicable law, this Agreement
may be amended, modified or supplemented before or after the vote of the
shareholders of IRA by written agreement of the respective Boards of Directors
of First Command and IRA or their respective officers authorized by such Board
of Directors at anytime prior to the Closing Date with respect to any of the
terms contained in this Agreement.
9.2 EXTENSION; WAIVER. At any time prior to the Effective Time, any party
may by appropriate board action (i) extend the time for the performance of any
of the obligations or other acts of the other party or (ii) waive compliance
with any of the agreements or conditions contained in this Agreement. Any such
waiver or failure to insist upon strict compliance shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure. Any agreement
on the part of any party to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
9.3 FEES AND EXPENSES. IRA will pay all expenses incurred by the parties
in connection with the preparation, negotiation, execution, delivery and
consummation of this Agreement and the transactions contemplated by this
Agreement.
9.4 NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered by hand, mailed by certified or
registered mail with postage prepaid or by overnight mail (next day guaranteed
delivery), or if sent by cable, telegram, telex or telecopy (with receipt
confirmation) as follow:
- 16 -
<PAGE>
(a) If to IRA, to:
Robert F. Watson
USPA&IRA
4100 South Hulen
Fort Worth, Texas 76109
Telephone: (817) 731-8621, ext. 2220
Fax: (800) 472-8772, ext. 2176
with a copy to:
Brian D. Barnard
Haynes and Boone, LLP
201 Main Street
Suite 2200
Fort Worth, Texas 76102
or to such other person or address as IRA shall furnish to First Command in
writing.
(b) If to First Command, to:
Robert F. Watson
First Command Financial Corporation
4100 South Hulen
Fort Worth, Texas 76109
Telephone: (817) 731-8621, ext. 2220
Fax: (800) 472-8772, ext. 2176
or to such other person or address as First Command shall furnish to IRA in
writing.
9.5 ASSIGNMENT. This Agreement and all of the provisions of this
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
either of the parties without the prior written consent of the other party;
provided, however, that this Section 9.5 is not intended to limit or restrict
the class of persons entitled to the benefits of Section 9.6 of this Agreement
or to limit or restrict any such person's standing or capacity to enforce the
provisions of Section 9.6.
9.6 INDEMNIFICATION AND INSURANCE.
(a) It is understood and agreed that IRA shall indemnify and hold
harmless, and, after the Effective Time, the Surviving Corporation shall
indemnify and hold
- 17 -
<PAGE>
harmless, each present and former employee, agent, officer or director of IRA
or, after the Effective Time, First Command (the "Indemnified Parties") to the
fullest extent permitted under applicable law or under the Articles of
Incorporation and Bylaws of IRA and Surviving Corporation against any losses,
claims, damages, liabilities, costs, expenses, judgments and amounts paid in
settlement ("Damages") in connection with any threatened, pending or
contemplated claim, action, suit, proceeding or investigation arising out of or
pertaining to any action or omission occurring prior to or at the Effective Time
(including, without limitation, any claim, action, suit, proceeding or
investigation to which he is a party or is threatened to be made a party by
reason of such relationship with IRA and which arises out of or relates to the
transactions contemplated hereby) (a "Claim"). The Surviving Corporation agrees
that the provisions of the Surviving Corporation's Articles of Incorporation or
Bylaws as in effect at the Effective Time of the Merger with respect to
exculpation of liability and indemnification of officers, directors and
employees shall not be modified, changed or amended in any manner adverse to an
Indemnified Party except as required by law. These rights to indemnification
and the obligations set forth in this Section 9.6(a) shall survive the Merger.
Without limiting the foregoing, IRA and, after the Effective Time the Surviving
Corporation, to the fullest extent permitted under applicable law, will
periodically advance reasonable expenses as incurred with respect to any Claim
or potential claim provided that the person to whom expenses are advanced, if
required by applicable law, provides an undertaking to repay such advances if it
is ultimately determined by a court of competent jurisdiction that such person
is not entitled to indemnification pursuant to this Section 9.6.
(b) In the event any Claim is brought against any Indemnified Party
(whether before or after the Effective Time) in connection with which such
Indemnified Party asserts that he is entitled to be indemnified and held
harmless pursuant to Section 9.6(a) hereof, (i) the Indemnified Parties may
retain counsel which will be reasonably satisfactory to IRA (or the Surviving
Corporation after the Effective Time), (ii) IRA (or, after the Effective Time,
the Surviving Corporation) shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received, and (iii) IRA (or, after the Effective Time, the Surviving
Corporation) will use their reasonable best efforts to assist in the vigorous
defense of any such matter. Neither IRA nor the Surviving Corporation shall be
liable for any settlement effected without their written consent, which consent,
however, shall not be unreasonably withheld. Any Indemnified Party wishing to
claim indemnification under Section 9.6(a) hereof, upon learning of any such
Claim, shall notify IRA or the Surviving Corporation thereof but any failure to
so notify IRA or the Surviving Corporation shall not relieve IRA or the
Surviving Corporation of their obligations under this Section 9.6 unless it has
been actually prejudiced by such lack of notice. The Indemnified Parties as a
group may retain only one law firm in each jurisdiction to represent them with
respect to any such matter unless there is, under applicable standards of
professional conduct, a conflict of interest on any significant
- 18 -
<PAGE>
issue between the positions of any two or more Indemnified Parties. Any
determination required to be made with respect to whether an Indemnified Party's
conduct complied with the standards set forth under applicable law or the Bylaws
of IRA or the Surviving Corporation shall be made by independent counsel
selected by such Indemnified Party and reasonably satisfactory to IRA or the
Surviving Corporation (which shall pay such counsel's reasonable fees and
expenses).
(c) This Section 9.6 shall survive the closing of the transactions
contemplated hereby, is intended to benefit each of the Indemnified Parties
(each of whom shall be entitled to enforce this Section 9.6 against IRA (or the
Surviving Corporation, as the case may be) and shall be binding on all
successors and assigns of IRA and the Surviving Corporation. In the event IRA
or the Surviving Corporation or any of their successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers all or substantially all of its properties and assets to any
person, then, and in each case, proper provisions shall be made so that the
successors and assigns of IRA and the Surviving Corporation assume the
obligations set forth in this Section 9.6.
9.7 GOVERNING LAW. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of Texas.
9.8 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
9.9 HEADINGS. The headings in this Agreement are inserted for convenience
only and shall not constitute a part of this Agreement.
9.10 ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding of the parties in respect of the subject matter contained in this
Agreement. There are no restrictions, promises, warranties, covenants or
undertakings, other than those set forth or referred to in this Agreement. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to the subject matter hereof.
* * * * *
- 19 -
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement on the date
first above written.
INDEPENDENT RESEARCH AGENCY FOR
LIFE INSURANCE, INC.
By: /s/ Lamar C. Smith
-----------------------------
Name: Lamar C. Smith
-----------------------------
Title: Chairman of the Board/C.E.O.
-----------------------------
FIRST COMMAND FINANCIAL CORPORATION
By: /s/ James N. Lanier
-----------------------------
Name: James N. Lanier
-----------------------------
Title: President
-----------------------------
- 20 -
<PAGE>
ANNEX B
OPINION OF THE FINANCIAL ADVISOR
B-1
<PAGE>
June xx, 1998
Special Committee of the Board of Directors
C/O Independent Research Agency for Life Insurance, Inc.
USPA&IRA Building
4100 South Hulen Street
P.O. Box 2387
Fort Worth, Texas 76113
Special Committee of the Board of Directors:
You have requested our opinion as to the fairness to the Class A and
Class B shareholders of Independent Research Agency for Life Insurance, Inc.
(the "Company"), from a financial point of view, of the transaction detailed in
the proposed Agreement and Plan of Merger, dated as of __________, 1998 the
("Merger Agreement"). The Merger Agreement provides for, among other things:
1) a merger of the Company into First Command Financial Corporation (the
"Merger"); 2) the simultaneous exchange of the voting stock of First Command
Financial Corporation for the Class A Voting Common Stock, par value $0.10 per
share ("Class A Stock"), of the Company; 3) the simultaneous exchange of cash
for the Class B Non-Voting Common Stock, par value $0.02 per share ("Class B
Stock"), of the Company held by Class B stockholders, and not by Class A
stockholders; 4) the simultaneous conversion of the Class B Stock held by the
Class A stockholders into cash or an equivalent amount of Surviving Corporation
Non-Voting Stock (as defined in the Company's proxy statement); and 5)
conversion of the Company's corporate status from C-Corporation to
S-Corporation. Hereafter the foregoing will be collectively referred to as the
Transaction. Prior to the Merger, the Company plans to create an incentive
compensation plan for agents and employees and make awards pursuant to said
plan. Subsequent to the Merger, the Surviving Corporation plans to make
additional awards pursuant to the incentive compensation plans to agents and
employees, including those Class B stockholders of the Company who are still
agents or employees at the time of such award.
In connection with our opinion, we have:
(a) considered the terms of the Merger Agreement;
(b) considered various incentive compensation plans contemplated by
the management of the Company as of the date of our analysis;
<PAGE>
Special Committee of the Board of Directors
June xx, 1998
Page 2
(c) considered the fact that the benefit of additional compensation
(in the form of future dividend equivalency rights and stock appreciation
rights) will be available to participants in the aforementioned incentive
compensation plans, and thus be unavailable to current stockholders;
(d) considered the financial and operating implications of the
Company's proposed conversion to S-Corporation status;
(e) considered management's ongoing commitment to the Company's
agents and the maintenance of the Company's mission and corporate culture;
(f) considered certain financial and other operating information
relating to the Company that was publicly available or furnished to us by the
Company, including cash flow analyses prepared by the Company's management;
(g) met with members of the Company's management to discuss the
business, operations, historical financial results and future prospects of the
Company, including the prospective implications of the Company's S-Corporation
election and post transaction incentive plan;
(h) considered certain financial and securities data of the Company
and compared that data with similar data for other companies in businesses
similar to those of the Company;
(i) considered the financial terms of certain recent acquisitions
of companies in businesses similar to those of the Company;
(j) performed a discounted cash flow analysis; and
(k) considered such other information, financial studies, tax
opinions, analyses and investigations and financial, economic and market
criteria as we deemed relevant and appropriate for purposes of this opinion.
The opinion expressed below is subject to the following qualifications
and limitations:
(i) In arriving at our opinion, we have relied upon and assumed,
without independent verification, the accuracy and completeness of all financial
and other information that was publicly available or furnished to us by the
Company. With respect to management's cash flow projections, we have assumed
that they have been reasonably prepared by management and we accept no
responsibility as to their accuracy.
<PAGE>
Special Committee of the Board of Directors
June xx, 1998
Page 3
(ii) We have not made an independent evaluation or appraisal of
specific tangible or intangible assets of the Company, nor have we been
furnished with any such appraisals. We have not been requested to, and did
not, solicit third party indications of interest in acquiring all or any part
of the Company. The Company has indicated that, as of the date of our
analysis, an acquisition of all or any part of the Company was contrary to
the Company's mission and extremely unlikely.
(iii) Our services with respect to the Transaction do not constitute,
nor should they be construed to constitute in any way, a review or audit of or
any other procedures with respect to any financial information nor should such
services be relied upon by any person to disclose weaknesses in internal
controls or financial statement errors or irregularities.
(iv) Our opinion does not address, and should not be construed to
address, either the underlying business decision to effect the Transaction or
whether the consideration to be received by the stockholders in the Transaction
represents the highest price obtainable.
(v) We express no view as to the federal, state or local tax
consequences of the Transaction.
(vi) Our opinion is based on business, economic, market and other
conditions as they exist as of the date hereof or as of the date of the
information provided to us.
(vii) This opinion is effective as of the date hereof. We have no
obligation to update the opinion unless requested by you in writing to do so and
expressly disclaim any responsibility to do so in the absence of any such
request.
Based upon and subject to the foregoing, it is our opinion that as of
the date hereof, the Transaction is fair to the Company's Class A and Class B
stockholders from a financial point of view.
We will receive a fee as compensation for our services in rendering
this opinion. Neither the employment to conduct this analysis, nor the
compensation for this engagement, is contingent upon conclusions ultimately
reported.
<PAGE>
Special Committee of the Board of Directors
June xx, 1998
Page 4
This letter is for the information of the Special Committee of the
Board of Directors, in their capacity as advisors to the Board of Directors of
the Company, and the Board of Directors, in connection with the Transaction
described herein. This opinion may not be quoted or referred to, in whole or in
part, filed with, or furnished or disclosed to any other party, or used for any
other purpose, without our prior written consent. Coopers & Lybrand L.L.P. has
agreed to permit the Company to include Coopers & Lybrand L.L.P.'s opinion, in
its entirety, in the proxy statement filed by the Company with the Securities
and Exchange Commission in connection with the Transaction.
Very truly yours,
COOPERS & LYBRAND L.L.P.
By
----------------------------
<PAGE>
ANNEX C
PROVISIONS OF THE TEXAS BUSINESS CORPORATION ACT
RELATING TO
RIGHTS OF DISSENTING SHAREHOLDERS
(ARTICLES 5.11 THROUGH 5.13)
Article 5.11. Rights of Dissenting Shareholders in the Event of Certain
Corporate Actions
A. Any shareholder of a domestic corporation shall have the right to
dissent from any of the following corporate actions:
(1) Any plan of merger to which the corporation is a party if
shareholder approval is required by Article 5.03 or 5.16 of this Act and
the shareholder holds shares of a class or series that was entitled to vote
thereon as a class or otherwise;
(2) Any sale, lease, exchange or other disposition (not including any
pledge, mortgage, deed of trust or trust indenture unless otherwise
provided in the articles of incorporation) of all, or substantially all,
the property and assets, with or without good will, of a corporation if
special authorization of the shareholders is required by this Act and the
shareholders hold shares of a class or series that was entitled to vote
thereon as a class or otherwise;
(3) Any plan of exchange pursuant to Article 5.02 of this Act in which the
shares of the corporation of the class or series held by the shareholder are to
be acquired.
B. Notwithstanding the provisions of Section A of this Article, a
shareholder shall not have the right to dissent from any plan of merger in which
there is a single surviving or new domestic or foreign corporation, or from any
plan of exchange, if:
(1) the shares held by the shareholder are part of a class or series,
shares of which are on the record date fixed to determine the shareholders
entitled to vote on the plan of merger or plan of exchange:
(a) listed on a national securities exchange;
(b) listed on the Nasdaq Stock Market (or successor quotation
system) or designated as a national market security on an interdealer
quotation system by the National Association of Securities Dealers,
Inc., or successor entity; or
(c) held of record by not less than 2,000 holders;
(2) the shareholder is not required by the terms of the plan of
merger or plan of exchange to accept for the shareholder's shares any
consideration that is different than the consideration (other than cash in
lieu of fractional shares that the shareholder would otherwise be entitled
to receive) to be provided to any other holder of shares of the same class
or series of shares held by such shareholder; and
(3) the shareholder is not required by the terms of the plan of
merger or the plan of exchange to accept for the shareholder's shares any
consideration other than:
(a) shares of a domestic or foreign corporation that,
immediately after the effective time of the merger or exchange, will
be part of a class or series, shares of which are:
C-1
<PAGE>
(i) listed, or authorized for listing upon official notice
of issuance, on a national securities exchange;
(ii) approved for quotation as a national market security
on an interdealer quotation system by the National Association of
Securities Dealers, Inc., or successor entity; or
(iii) held of record by not less than 2,000 holders;
(b) cash in lieu of fractional shares otherwise entitled to be
received; or
(c) any combination of the securities and cash described in
Subdivisions (a) and (b) of this subsection.
Article 5.12. Procedure for Dissent by Shareholders as to Said Corporate
Actions
A. Any shareholder of any domestic corporation who has the right to
dissent from any of the corporate actions referred to in Article 5.11 of this
Act may exercise that right to dissent only by complying with the following
procedures:
(1)(a) With respect to proposed corporate action that is submitted
to a vote of shareholders at a meeting, the shareholder shall file with the
corporation, prior to the meeting, a written objection to the action,
setting out that the shareholder's right to dissent will be exercised if
the action is effective and giving the shareholder's address, to which
notice thereof shall be delivered or mailed in that event. If the action is
effected and the shareholder shall not have voted in favor of the action,
the corporation, in the case of action other than a merger, or the
surviving or new corporation (foreign or domestic) or other entity that is
liable to discharge the shareholder's right of dissent, in the case of a
merger, shall, within ten (10) days after the action is effected, deliver
or mail to the shareholder written notice that the action has been
effected, and the shareholder may, within ten (10) days from the delivery
or mailing of the notice, make written demand on the existing, surviving,
or new corporation (foreign or domestic) or other entity, as the case may
be, for payment of the fair value of the shareholder's shares. The fair
value of the shares shall be the value thereof as of the day immediately
preceding the meeting, excluding any appreciation or depreciation in
anticipation of the proposed action. The demand shall state the number and
class of the shares owned by the shareholder and the fair value of the
shares as estimated by the shareholder. Any shareholder failing to make
demand within the ten (10) day period shall be bound by the action.
(b) With respect to proposed corporate action that is approved
pursuant to Section A of Article 9.10 of this Act, the corporation, in the
case of action other than a merger, and the surviving or new corporation
(foreign or domestic) or other entity that is liable to discharge the
shareholder's right of dissent, in the case of a merger, shall, within ten
(10) days after the date the action is effected, mail to each shareholder
of record as of the effective date of the action notice of the fact and
date of the action and that the shareholder may exercise the shareholder's
right to dissent from the action. The notice shall be accompanied by a copy
of this Article and any articles or documents filed by the corporation with
the Secretary of State to effect the action. If the shareholder shall not
have consented to the taking of the action, the shareholder may, within
twenty (20) days after the mailing of the notice, make written demand on
the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, for payment of the fair value of the
shareholder's shares. The fair value of the shares shall be the value
thereof as of the date the written consent authorizing the action was
delivered to the corporation pursuant to Section A of Article 9.10 of this
Act, excluding any appreciation or depreciation in anticipation of the
action. The demand shall state the number and class of shares owned by the
dissenting shareholder and the fair value of the shares
C-2
<PAGE>
as estimated by the shareholder. Any shareholder failing to make demand
within the twenty (20) day period shall be bound by the action.
(2) Within twenty (20) days after receipt by the existing, surviving,
or new corporation (foreign or domestic) or other entity, as the case may
be, of a demand for payment made by a dissenting shareholder in accordance
with Subsection (1) of this Section, the corporation (foreign or domestic)
or other entity shall deliver or mail to the shareholder a written notice
that shall either set out that the corporation (foreign or domestic) or
other entity accepts the amount claimed in the demand and agrees to pay
that amount within ninety (90) days after the date on which the action was
effected, and, in the case of shares represented by certificates, upon the
surrender of the certificates duly endorsed, or shall contain an estimate
by the corporation (foreign or domestic) or other entity of the fair value
of the shares, together with an offer to pay the amount of that estimate
within ninety (90) days after the date on which the action was effected,
upon receipt of notice within sixty (60) days after that date from the
shareholder that the shareholder agrees to accept that amount and, in the
case of shares represented by certificates, upon the surrender of the
certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the corporate
action was effected, the value of the shares is agreed upon between the
shareholder and the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, payment for the shares shall
be made within ninety (90) days after the date on which the action was
effected and, in the case of shares represented by certificates, upon
surrender of the certificates duly endorsed. Upon payment of the agreed
value, the shareholder shall cease to have any interest in the shares or in
the corporation.
B. If, within the period of sixty (60) days after the date on which the
corporate action was effected, the shareholder and the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, do
not so agree, then the shareholder or the corporation (foreign or domestic) or
other entity may, within sixty (60) days after the expiration of the sixty (60)
day period, file a petition in any court of competent jurisdiction in the county
in which the principal office of the domestic corporation is located, asking for
a finding and determination of the fair value of the shareholder's shares. Upon
the filing of any such petition by the shareholder, service of a copy thereof
shall be made upon the corporation (foreign or domestic) or other entity, which
shall, within ten (10) days after service, file in the office of the clerk of
the court in which the petition was filed a list containing the names and
addresses of all shareholders of the domestic corporation who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the corporation (foreign or domestic) or other
entity. If the petition shall be filed by the corporation (foreign or domestic)
or other entity, the petition shall be accompanied by such a list. The clerk of
the court shall give notice of the time and place fixed for the hearing of the
petition by registered mail to the corporation (foreign or domestic) or other
entity and to the shareholders named on the list at the addresses therein
stated. The forms of the notices by mail shall be approved by the court. All
shareholders thus notified and the corporation (foreign or domestic) or other
entity shall thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court shall determine the
shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and shall
appoint one or more qualified appraisers to determine that value. The appraisers
shall have power to examine any of the books and records of the corporation the
shares of which they are charged with the duty of valuing, and they shall make a
determination of the fair value of the shares upon such investigation as to them
may seem proper. The appraisers shall also afford a reasonable opportunity to
the parties interested to submit to them pertinent evidence as to the value of
the shares. The appraisers shall also have such power and authority as may be
conferred on Masters in Chancery by the Rules of Civil Procedure or by the order
of their appointment.
D. The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their shares
and shall file their report of their value in the office of the clerk of the
court.
C-3
<PAGE>
Notice of the filing of the report shall be given by the clerk to the parties in
interest. The report shall be subject to exceptions to be heard before the court
both upon the law and the facts. The court shall by its judgment determine the
fair value of the shares of the shareholders entitled to payment for their
shares and shall direct the payment of that value by the existing, surviving, or
new corporation (foreign or domestic) or other entity, together with interest
thereon, beginning 91 days after the date on which the applicable corporate
action from which the shareholder elected to dissent was effected to the date of
such judgment, to the shareholders entitled to payment. The judgment shall be
payable to the holders of uncertificated shares immediately but to the holders
of shares represented by certificates only upon, and simultaneously with, the
surrender to the existing, surviving, or new corporation (foreign or domestic)
or other entity, as the case may be, of duly endorsed certificates for those
shares. Upon payment of the judgment, the dissenting shareholders shall cease to
have any interest in those shares or in the corporation. The court shall allow
the appraisers a reasonable fee as court costs, and all court costs shall be
allotted between the parties in the manner that the court determines to be fair
and equitable.
E. Shares acquired by the existing, surviving, or new corporation
(foreign or domestic) or other entity, as the case may be, pursuant to the
payment of the agreed value of the shares or pursuant to payment of the judgment
entered for the value of the shares, as in this Article provided, shall, in the
case of a merger, be treated as provided in the plan of merger and, in all other
cases, may be held and disposed of by the corporation as in the case of other
treasury shares.
F. The provisions of this Article shall not apply to a merger if, on the
date of the filing of the articles of merger, the surviving corporation is the
owner of all the outstanding shares of the other corporations, domestic or
foreign, that are parties to the merger.
G. In the absence of fraud in the transaction, the remedy provided by
this Article to a shareholder objecting to any corporate action referred to in
Article 5.11 of this Act is the exclusive remedy for the recovery of the value
of his shares or money damages to the shareholder with respect to the action. If
the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, complies with the requirements of this Article, any
shareholder who fails to comply with the requirements of this Article shall not
be entitled to bring suit for the recovery of the value of his shares or money
damages to the shareholder with respect to the action.
Article 5.13. Provisions Affecting Remedies of Dissenting Shareholders
A. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act shall not thereafter be entitled to
vote or exercise any other rights of a shareholder except the right to receive
payment for his shares pursuant to the provisions of those articles and the
right to maintain an appropriate action to obtain relief on the ground that the
corporate action would be or was fraudulent, and the respective shares for which
payment has been demanded shall not thereafter be considered outstanding for the
purposes of any subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting shareholder,
the corporation shall make an appropriate notation thereof in its shareholder
records. Within twenty (20) days after demanding payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act, each holder of
certificates representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such demand has been
made. The failure of holders of certificated shares to do so shall, at the
option of the corporation, terminate such shareholder's rights under Articles
5.12 and 5.16 of this Act unless a court of competent jurisdiction for good and
sufficient cause shown shall otherwise direct. If uncertificated shares for
which payment has been demanded or shares represented by a certificate on which
notation has been so made shall be transferred, any new certificate issued
therefor shall bear similar notation together with the name of the original
dissenting holder of such shares and a transferee of such shares shall acquire
by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making demand for payment of the fair
value thereof.
C-4
<PAGE>
C. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act may withdraw such demand at any
time before payment for his shares or before any petition has been filed
pursuant to Article 5.12 or 5.16 of this Act asking for a finding and
determination of the fair value of such shares, but no such demand may be
withdrawn after such payment has been made or, unless the corporation shall
consent thereto, after any such petition has been filed. If, however, such
demand shall be withdrawn as hereinbefore provided, or if pursuant to Section B
of this Article the corporation shall terminate the shareholder's rights under
Article 5.12 of 5.16 of this Act, as the case may be, or if no petition asking
for a finding and determination of fair value of such shares by a court shall
have been filed within the time provided in Article 5.12 or 5.16 of this Act, as
the case may be, or if after the hearing of a petition filed pursuant to Article
5.12 or 5.16, the court shall determine that such shareholder is not entitled to
the relief provided by those articles, then, in any such case, such shareholder
and all persons claiming under him shall be conclusively presumed to have
approved and ratified the corporate action from which he dissented and shall be
bound thereby, the right of such shareholder to be paid the fair value of his
shares shall cease, and his status as a shareholder shall be restored without
prejudice to any corporate proceedings which may have been taken during the
interim, and such shareholders shall be entitled to receive any dividends or
other distributions made to shareholders in the interim.
C-5
<PAGE>
ANNEX D
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
AND
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1998
D-1
<PAGE>
ANNEX E
ARTICLES OF INCORPORATION, AS PROPOSED TO BE AMENDED,
AND
BYLAWS, AS PROPOSED TO BE AMENDED,
OF SURVIVING CORPORATION
E-1
<PAGE>
RESTATED ARTICLES OF INCORPORATION
WITH AMENDMENT
OF
FIRST COMMAND FINANCIAL CORPORATION
FIRST COMMAND FINANCIAL CORPORATION, pursuant to the provisions of Article
4.07 of the Texas Business Corporation Act, hereby adopts Restated Articles of
Incorporation which accurately copy the Articles of Incorporation as amended by
such Restated Articles of Incorporation as hereinafter set forth and which
contain no other change in any provision thereof.
ARTICLE ONE
The Articles of Incorporation of the Corporation are amended by the
Restated Articles of Incorporation as follows:
1. Article 4 of the Articles of Incorporation is hereby amended in its
entirety to read as follows:
4. SHARES. The aggregate number of shares which the Corporation is
authorized to issue is ten million ten thousand (10,010,000) shares,
each having a par value of $.01. The shares are to be designated as
Common Stock and will have identical rights and privileges in every
respect, with the sole exception that ten thousand (10,000) of such
shares shall be designated as Voting Common Stock and shall possess
the right to vote on all matters that may come before the stockholders
of the Corporation, and ten million (10,000,000) of such shares shall
be designated as Nonvoting Common Stock and shall not possess the
right to vote on any matter except as specifically provided by the
Texas Business Corporation Act.
2. A new Article 7 is hereby added to the Articles of Incorporation which
shall read in its entirety as follows:
7. RESTRICTIONS ON TRANSFER OF SHARES. Except as otherwise
expressly provided and authorized herein, a Shareholder shall not
Transfer (as defined below) any shares of Stock that he or she now or
hereafter owns. The parties hereto understand that the Corporation
may refuse to Transfer the shares of Stock on its books and records
when that Transfer would not
<PAGE>
be in compliance with the terms hereof, and that any attempted
Transfer in violation hereof shall be null and void.
A. DEFINITIONS. As used herein:
(1) CODE. The term "CODE" shall mean the Internal Revenue
Code of 1986, as amended from time to time.
(2) DETERMINATION DATE. The term "DETERMINATION DATE"
shall mean the day upon which, in the case of a purchase of Stock
hereunder, the Disposition Notice referred to in Section 3.1 has been
received by the Corporation, except that with respect to a Disposition
Notice made in connection with the death of a Shareholder or the
termination of a Shareholder's marital relationship, "DETERMINATION
DATE" shall mean the date of that death or termination.
(3) DISPOSING SHAREHOLDER. The term "DISPOSING
SHAREHOLDER" shall mean that Shareholder (or the surviving spouse of
or estate of a deceased Shareholder in the case of a Shareholder's
death) required to tender shares of Stock to the Corporation upon the
occurrence of an Operative Event with respect to that Shareholder.
(4) DISPOSITION NOTICE. The term "DISPOSITION NOTICE"
shall mean the written notice required by paragraph C.(1) below to be
made by the Disposing Shareholder to the Corporation or allowed by
paragraph C.(1) to be made by the Corporation to the Disposing
Shareholder.
(5) OPERATIVE EVENT. The term "OPERATIVE EVENT" shall
mean, with respect to any Shareholder, any of the following events:
(a) Any threatened or actual Transfer of Stock in any
manner whatsoever by that Shareholder;
(b) The death of that Shareholder;
(c) The termination of the marital relationship of
that Shareholder by death or divorce if that Shareholder does not
succeed to his or her spouse's community interest in the Stock or the
entering into of any property settlement arrangement or agreement in
connection therewith, pursuant to which that Shareholder's interest in
his or her Stock is to be diluted, lessened, encumbered or impaired;
2
<PAGE>
(d) Any threatened or actual (i) bankruptcy or
insolvency of that Shareholder or (ii) institution of legal
proceedings because or by reason of the bankruptcy or insolvency of
that Shareholder;
(e) The termination of the status of that Shareholder
as a duly licensed Texas life insurance agent;
(f) The cessation of that Shareholder as a duly
authorized agent of the Corporation pursuant to a current written
agency agreement, except that with respect to an involuntary
termination as a duly authorized agent of the Corporation, such
termination shall require approval by a vote of eighty percent (80%)
of the Board of Directors of the Corporation;
(g) The change in status of that Shareholder to a
"non-resident alien" as defined in the Code; or
(h) Any threatened or actual levy by a creditor or
claimant upon the shares of Stock held by that Shareholder or any
other seizure or sale by legal process, if it is determined by legal
counsel for the Corporation that such levy is made in good faith and
based upon a bona fide claim.
It shall not be a requirement hereunder that the Executive Committee
of the Board of Directors of the Corporation (the "EXECUTIVE
COMMITTEE") make a determination in every instance that an Operative
Event has so occurred with respect to any Shareholder, but such
determination shall be made in those instances in which there may be
some question as to whether an Operative Event did in fact occur.
Upon such determination by the Executive Committee that an Operative
Event has in fact occurred, in order to inform the Shareholder of such
occurrence, the Corporation may deliver a written notice to the
Shareholder or his or her legal representative stating that (i) such
an Operative Event has occurred, (ii) the date thereof and (iii) the
reasons for the determination. The Shareholder affected or his or her
legal representative shall thereupon be required to tender to the
Corporation for sale his or her Stock to the Corporation upon the
terms and conditions as set forth in paragraph C. below.
(6) TRANSFER. The term "TRANSFER" shall mean, as a noun, a
transfer, sale, assignment, exchange, gift, donation, pledge,
mortgage, hypothecation or other encumbrance or other disposition, and
as a verb, to transfer, sell, assign, exchange, gift, donate, pledge,
mortgage, hypothecate or otherwise encumber or otherwise dispose.
3
<PAGE>
B. RESTRICTIONS ON TRANSFER OF SHARES.
Except as otherwise expressly provided and authorized in the
Articles of Incorporation, a Shareholder shall not Transfer any shares
of Stock that he or she now or hereafter owns. The Corporation may
refuse to Transfer the shares of Stock on its books and records when
that Transfer would not be in compliance with the terms of the
Articles of Incorporation, and any attempted Transfer in violation
hereof shall be null and void.
(1) RESTRICTIONS ON TRANSFER.
(a) No Shareholder may Transfer, and no person may
acquire, the legal or beneficial ownership of any share of Stock now
or hereafter owned by him or her if that Transfer or acquisition would
cause the S corporation status of the Corporation to terminate.
Specifically, no Transfer may be made to, and no acquisition may be
made by, any person who would cause the Corporation to have more than
the maximum permitted number of shareholders under the Code as then in
effect or to any person that is not eligible to be a shareholder of an
S corporation under the provisions of the Code.
(b) In addition to the requirements of paragraph
B.(1)(a) above, no Transfer of shares of Stock shall be permitted, and
no purported Transfer shall be effective, until the transferee has
followed all of the requirements of paragraph C. below.
(c) Notwithstanding B.(1)(a) and (b) above, with the
prior written consent of the Executive Committee, a Shareholder may
pledge, mortgage, hypothecate or otherwise encumber his or her Stock
subject to such terms, conditions and restrictions as the Executive
Committee shall determine to be appropriate in the exercise of its
sole discretion.
(2) EFFECT OF PURPORTED TRANSFER. Any purported Transfer
or acquisition of shares of Stock in violation of paragraph B.(1)
above shall be null and void. The purported transferee shall have no
interest in any of the shares of Stock purported to be transferred.
Any such purported Transfer or acquisition may and should be enjoined
by the Corporation in the event that the Executive Committee so
determines.
(3) BENEFICIAL OWNERSHIP. Any purported Transfer in
violation hereof will not affect the beneficial ownership of the
shares of Stock. Thus, the Shareholder making the purported transfer
will retain the right to vote and the right to receive distributions
and liquidation
4
<PAGE>
proceeds related to those shares. Additionally, a Shareholder making
the purported Transfer shall continue to report the portion of income
or loss allocated by the Corporation in accordance with the provisions
of the Code.
C. TENDER REQUIREMENT.
(1) TENDER FOR SALE. Upon the occurrence of any Operative
Event with respect to a Shareholder, the Disposing Shareholder, or his
or her legal representative, as the case may be, must tender for sale
all shares of Stock owned by the Disposing Shareholder. In the case
of an Operative Event, the Disposing Shareholder is required to mail a
Disposition Notice to the Corporation no less than one hundred twenty
(120) days prior to the date of the proposed Transfer. Alternatively,
upon an Operative Event of a Disposing Shareholder, the Corporation
may mail a Disposition Notice to that Disposing Shareholder. Upon its
receipt or its mailing of a Disposition Notice, the Corporation shall
have the exclusive right and option, exercisable at the sole
discretion of the Executive Committee, as described in paragraph C.(2)
to buy such shares of Stock, or any portion thereof, as provided
herein. The Disposition Notice shall be sent by certified mail, if to
the Corporation, to the attention of the president and the general
counsel of the Corporation at the principal address of the
Corporation, or if to the Disposing Shareholder at his or her last
known address. In the event that the Operative Event involves a
proposed Transfer pursuant to an offer to purchase or sell all or any
portion of a Shareholder's Stock received or made by such Shareholder
from or to a third party, the Disposition Notice shall set forth the
full details of such proposed Transfer including, among other things,
the name of the offeror or proposed purchaser or transferee, the
number of shares covered by the offer, the purchase price per share,
the terms of payment, whether for cash or credit (and if by credit,
the maturity and interest rate), any and all other consideration being
received or paid in connection with such proposed Transfer, and any
and all other terms, conditions and details of such offer.
(2) PURCHASE BY CORPORATION. Upon delivery of a valid
Disposition Notice, the Corporation shall have the exclusive right and
option, exercisable at any time within one hundred twenty (120) days
after the mailing of a Disposition Notice, to purchase all or part of
the Disposing Shareholder's shares of Stock at the Purchase Price and
on the terms and conditions set forth herein. If the Corporation
chooses to exercise the option (in whole or in part), it shall give
written notification (the "CORPORATE EXERCISE NOTICE") to that effect
to the Disposing Shareholder or his or her legal representative, as
the case may be, setting
5
<PAGE>
forth the number and type of shares being purchased and the price and
terms and conditions, in accordance with this Agreement, and such sale
and purchase shall be closed on the one hundred twentieth (120th) day
after the Corporate Exercise Notice is sent to the Disposing
Shareholder or to his or her legal representative (or, if such date is
not a business day, on the first business day thereafter).
(3) THIRD PARTY BOUND. If, in accordance with this
paragraph C., shares of Stock are Transferred to a third party, the
Disposing Shareholder shall require, as a condition of the sale to
such third party, that the purchaser or transferee of his or her
shares will become a party to this Agreement, but only if the
Corporation so desires and agrees to such purchaser becoming subject
to this Agreement in a written notice sent to the Disposing
Shareholder. All shares of Stock retained by the Disposing
Shareholder shall remain subject to all of the provisions of the
Articles of Incorporation.
D. INSURANCE. In order to facilitate the purchase of shares of
Stock upon the death of a Shareholder, the Corporation may, but is not
required to, apply for and obtain separate policies of insurance upon
the lives of each of the Shareholders payable to the Corporation;
provided, however, that the purchase price of the shares of Stock and
the manner and terms of payment therefor shall be governed in all
respect by paragraphs E and F below. The Corporation will pay the
premiums upon such policies and shall provide proof of payment of such
premiums to any Shareholder, upon his or her request. The Corporation
shall be the sole owner, and shall have the sole right to designate
the beneficiary or beneficiaries, of such policy or policies.
E. PURCHASE PRICE.
(1) PURCHASE PRICE. In the case of all Operative Events,
the purchase price per share of Stock to be paid by the Corporation
shall be the Purchase Price, as defined in paragraph (2) below.
(2) AGREED VALUE. The Corporation, at least annually,
shall advise the Shareholders in writing of the price per share of
Stock which the Corporation will pay to any and all Disposing
Shareholders for shares tendered pursuant hereto. Each such
determination of the "PURCHASE PRICE" shall become effective on the
date specified by the Corporation and shall remain effective until the
next determination of a new Purchase Price and shall be
proportionately adjusted for any subsequent increase or decrease of
the number of issued shares of Stock resulting from a subdivision or
consolidation of shares or other
6
<PAGE>
adjustment, or the payment of a stock dividend or other increase or
decrease in the number of shares of Stock outstanding, effective
without the receipt of consideration by the Corporation. It is
specifically agreed that this Purchase Price shall be the purchase
price paid by the Corporation hereunder to any Disposing Shareholder.
F. PAYMENT OF PURCHASE PRICE.
(1) TRANSFER AND DELIVERY OF STOCK. At the closing, or at
some other time or place designated by all of the parties, the
Disposing Shareholder or his or her legal representative shall deliver
to the Corporation in exchange for the concurrent payment of the
Purchase Price, the certificates of shares of the Stock being
purchased, free and clear of all liens, claims, security interests and
encumbrances, duly endorsed for transfer and bearing any necessary
documentary stamps, and such assignments, certificates of authority,
tax releases, consents to transfer by a fiduciary or representative of
the Disposing Shareholder, and any instruments in evidence of the
title of the Shareholder and of the parties' compliance with this
Agreement, the federal and state securities laws, and any other
agreements or regulations as may be recommended by counsel for the
Corporation.
(2) METHOD. The manner of payment of the Purchase Price
may be, at the option of the Corporation, either (i) the payment of
the entire Purchase Price, by cash or by certified, bank cashier, or
treasurer's check, of (ii) down payment of twenty percent (20%) of
such Purchase Price in cash at closing and delivery of a promissory
note or promissory notes for the balance, in non-negotiable form, to
the order of the Disposing Shareholder or his or her legal
representative, pursuant to which the Corporation agrees to pay the
balance in four (4) equal annual installments, with interest on the
unpaid balance at the lesser of (i) the rate of the prime rate
published in THE WALL STREET JOURNAL per annum on the date of the
closing or (ii) the highest non-usurious rate permitted by applicable
law, with each installment of principal and interest payable annually
on each anniversary date of the making of the promissory note, and
with the right of the Corporation to prepay at any time without
premium or penalty. The promissory note shall be secured by the
pledge of Stock purchased thereby, with executed security instruments
covering such pledged Stock, unless such pledge arrangement is waived
by the Disposing Shareholder or his or her legal representative, as
the case may be. Notwithstanding anything herein to the contrary, in
the event that the Disposing Shareholder dies, the down payment
provided for in clause (ii) above shall not be less than the proceeds
received by the Corporation under the insurance, if any, described in
paragraph D above.
7
<PAGE>
3. A new Article 8 is hereby added to the Articles of Incorporation which
shall read in its entirety as follows:
8. SUBCHAPTER S PROVISIONS.
A. SUBCHAPTER S REPRESENTATION. Each Shareholder acknowledges
that the Corporation has made a valid election to be treated, for
federal and state income tax purposes, as an S corporation. Each
Shareholder shall provide to the Corporation, immediately upon the
Corporation's request, such properly signed consents or other
documents as, in the opinion of the Corporation, may be necessary or
useful to maintain the Corporation's status as an S corporation, and
each Shareholder covenants that he or she will do nothing to interfere
with the Corporation's maintenance of its status as an S corporation.
B. REVOCATION OF ELECTION. In the event that the Shareholders,
by the affirmative vote of at least eighty percent (80%) of the votes
which all of the Shareholders are entitled to cast, determine to
terminate the Corporation's status as an S corporation, and thereafter
each Shareholder is provided with written notice of such
determination, within sixty (60) days after the delivery of such
notice, each Shareholder, if requested, will execute a consent to such
revocation in the form prescribed by the Internal Revenue Service or
any relevant state tax authority and shall deliver such consent to the
Secretary of the Corporation. If the Corporation's S status is
terminated under this paragraph B., in the event that the Executive
Committee so determines, the Shareholders and the Corporation shall
elect, if applicable, to have Section 1362(e)(2) of the Code not
apply, as provided in Section 1362(e)(3) of the Code. Any person who
was a Shareholder at any time during the S short year (as defined in
Section 1362(e)(1)(A) of the Code) or who is a Shareholder on the
first day of the C short year (as defined in Section 1362(e)(1)(B) of
the Code) shall consent to such election.
C. INADVERTENT TERMINATION OF SUBCHAPTER S ELECTION. In the
event of a termination of the Corporation's status as an S corporation
other than pursuant to paragraph B. above, if the Corporation and the
Shareholders remaining after such termination desire that the
Corporation's status as an S corporation be continued, the Corporation
and all Shareholders as of and/or after the terminating event shall
use their best efforts to obtain from the Internal Revenue Service a
waiver of the terminating event on the ground of inadvertency. The
Corporation and the Shareholders shall take such steps, and make such
adjustments, as may be required by the Internal Revenue Service
pursuant to Section 1362(f)(3) and (4) of the Code. If a Shareholder
caused the terminating event to occur, he or she shall bear the
expense of procuring the waiver, including the legal,
8
<PAGE>
accounting and tax costs of taking such steps, and of making such
adjustments as may be required. If the inadvertent termination is not
waived by the Internal Revenue Service and the Corporation's S status
is permanently terminated, in the event that the Executive Committee
so determines, the Corporation and the Shareholders shall make the
election under Section 1362(e)(3) of the Code contemplated by
paragraph B. above.
D. PROVISION IN SHAREHOLDER WILLS. Each Shareholder shall use
his or her best efforts to include in his or her will a direction and
authorization to his or her executor in substantially the following
form:
(a) My Executor is hereby directed and authorized to hold
stock of an S Corporation, as defined in the Code (hereinafter
"S Stock"), to make an election to have any corporation treated as an
S Corporation, to enter into agreements with other shareholders or
with the corporation relating to a transfer (including, without
limitation, a sale, assignment, exchange, gift, donation, mortgage,
hypothecation or other encumbrance or other disposition (a "TRANSFER")
of S Stock or the management of the S Corporation, and to allocate
amounts received and the tax on undistributed income between income
and principal. During the administration of my estate, my Executor
may allocate the tax deductions and credits arising from ownership of
S Stock between income and principal. In making any such allocations,
my Executor shall consider that the beneficiary is to have enjoyment
of the property at least equal to that ordinarily associated with an
income interest and in all events shall provide the required
beneficial enjoyment to the beneficiary until such time as the S Stock
is distributed to him or her.
(b) Any beneficiary of my estate who receives stock in an S
Corporation as part of his or her distribution shall, prior to such
distribution, enter into a written agreement with said S Corporation
(i) to consent to any election to qualify the S Corporation as such;
(ii) to do nothing to interfere with the S Corporation's maintenance
of its status as such; (iii) not to Transfer the S Stock to any
transferee who does not agree to execute a similar consent; (iv) not
to Transfer the S Stock in such manner as will cause the S Corporation
to lose its status as an S Corporation under the then applicable
federal and state income tax statutes and regulations; and (v) if S
status is inadvertently terminated, to join in any endeavor to obtain
a waiver of the terminating event on the grounds of inadvertency from
the Internal Revenue Service if the S Corporation desires that the S
status should continue.
(c) Any S Stock distributed to a beneficiary shall bear an
appropriate legend on the stock certificate stating that the Transfer
of
9
<PAGE>
the stock is subject to and restricted to the extent set forth in
subparagraph (b) above.
Notwithstanding the foregoing requirement, the failure of a
Shareholder so to direct his or her executor shall not affect the
validity of these Articles of Incorporation.
E. DISTRIBUTIONS TO PAY TAX LIABILITIES.
(a) For the period during which the Corporation is an S
Corporation (the "S CORP PERIOD"), the Corporation shall promptly
declare and make distributions during the S Corp Period to all
Shareholders in a timely manner to allow the federal income tax
(including, without limitation, estimated tax payments) attributable
to the Corporation's taxable income during the S Corp Period that is
passed through the Corporation to the Shareholders to be paid by such
Shareholders when due (each, a "DUE DATE"). To satisfy this
requirement, during the S Corp Period, the Corporation shall pay on or
before five (5) days prior to each Due Date, an amount so that the
cumulative amount of distributions during the S Corp. Period that have
been designated by the Corporation as "TAX DISTRIBUTIONS" are at least
equal to the excess of (i) the sum of the products of (A) the
Corporation's positive taxable income (as determined under Section
1366(a) of the Code) attributed to its Shareholders during each of its
taxable periods during the S Corp Period multiplied by (B) the sum of
the highest federal individual income tax rates in effect for each
such taxable period (without regard to exemptions or phase-outs of
lower tax rates, but with consideration of the character of any item
and the deductibility of state taxes for federal income tax purposes),
over (ii) the sum of the products of (A) the Corporation's negative
taxable income (as determined under Section 1366(a) of the Code)
attributable to its Shareholders during each of its taxable periods
during the S Corp Period multiplied by (B) the sum of the highest
federal income tax rates in effect for each such taxable period
(without regard to exemptions or phase-outs of lower tax rates, but
with consideration of the character of any item and the deductibility
of state taxes for federal income tax purposes). The Corporation's
obligation to declare and make any such distributions to the
Shareholders is subject to the restrictions governing dividends under
the Texas Business Corporation Act and such other pertinent
governmental or contractual restrictions as are now or may hereafter
become effective. If the Corporation does not have sufficient funds
available to permit it lawfully to declare and pay such distributions,
the Shareholders and the Corporation shall take such action, adopt
such resolutions, and cause such certificates and other documents to
be filed as may be necessary to create sufficient funds to
10
<PAGE>
permit the making of such distributions, whereupon the Corporation
shall declare and pay such distributions.
(b) No provision of this Article 8 shall cause the total
distributions made with respect to any outstanding shares of stock of
the Corporation to differ from the amounts paid with respect to any
other outstanding shares of stock of the Corporation.
(c) No provision of this Article 8 shall be construed to
limit the ability of the Corporation to declare and make additional
distributions to Shareholders out of the assets of the Corporation
legally available for such payment at such time or times as the
Executive Committee may determine.
(d) The Corporation's payment of taxes on behalf of any
Shareholder (by means of withholding or otherwise) shall be considered
a distribution for purposes hereof, and the amount of distributions
that the Shareholder is otherwise entitled to hereunder shall be
adjusted accordingly consistent with Regulations Section
1.1361-1(1)(2)(ii).
F. NONRECOGNITION OF CERTAIN TRANSFERS.
(a) The Corporation will not, nor will it be compelled to,
recognize any Transfer, or issue any certificate representing any
Stock to any person who has not delivered to the Corporation (i) a
written undertaking to be bound by the terms and conditions of this
Agreement, and (ii) for so long as the Corporation's status as an S
corporation continues, a written consent to the treatment of the
Corporation as an S corporation. The Corporation will not, nor will
it be compelled to, recognize any Transfer, or issue any certificate
representing any Stock to any person or entity the Transfer to whom or
to which in the opinion of the Corporation's counsel could disqualify
the Corporation as an S corporation or disqualify it from eligibility
for such status.
(b) The Corporation will not, nor be compelled to,
recognize any Transfer made other than in accordance with the terms of
the Articles of Incorporation, nor will it issue any certificate
representing the Stock to any person who has received such Stock in a
Transfer made other than in accordance with the terms of these
Articles of Incorporation.
G. LEGENDS ON SHARE CERTIFICATES. The following legend shall
be imprinted conspicuously on the face of each certificate
representing shares of Stock:
11
<PAGE>
NOTICE IS HEREBY GIVEN THAT THE TRANSFER (INCLUDING, WITHOUT
LIMITATION, THE SALE, ASSIGNMENT, EXCHANGE, GIFT, DONATION,
PLEDGE, MORTGAGE, HYPOTHECATION OR OTHER ENCUMBRANCE OR OTHER
DISPOSITION) OF THE SHARES OF CAPITAL STOCK REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO AND RESTRICTED BY THE PROVISIONS OF THE
ARTICLES OF INCORPORATION OF THE CORPORATION, AND ALL OF THE
PROVISIONS OF SUCH ARTICLES ARE INCORPORATED BY REFERENCE IN THIS
CERTIFICATE, SPECIFICALLY INCLUDING, BUT NOT LIMITED TO, THOSE
PROVISIONS OF THE ARTICLES RELATING TO THE CORPORATION'S TAX
STATUS AS AN S CORPORATION.
H. ELECTION TO CLOSE BOOKS. The Corporation, in the event the
Executive Committee so determines, shall consent to close the books of
the Corporation pursuant to Section 1377(a)(2) of the Code whenever a
Shareholder sells all of his or her Stock on a day other than the last
day of the Corporation's fiscal year if all "affected shareholders"
(as defined in Section 1377(a)(2)(B) of the Code) shall consent
thereto.
4. A new Article 10 is hereby added to the Articles of Incorporation
which shall read in its entirety as follows:
10. FAIR PRICE PROVISION. The stockholder vote required to approve
any Business Combination (as hereinafter defined) shall be as set
forth in this Article 10.
A. (1) Except as otherwise expressly provided in section B. of
this Article 10:
(i) any merger or consolidation of the corporation or
any Subsidiary (as hereinafter defined) with (a) any
Interested Shareholder (as hereinafter defined) or (b) any
other corporation (whether or not itself an Interested
Shareholder) which is, or after such merger of consolidation
would be, an Affiliate (as hereinafter defined) of any
Interested Shareholder;
(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a
series
12
<PAGE>
of transactions) to or with any Interested Shareholder or
any Affiliate of any Interested Shareholder of all or
substantially all of the assets of the corporation or any
Subsidiary;
(iii) the issuance or transfer by the corporation or
any Subsidiary (in one transaction or a series of
transactions) of any securities of the corporation or any
Subsidiary to any Interested Shareholder or any Affiliate of
any Interested Shareholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $2,000,000 or more;
(iv) the adoption of any plan or proposal for the
liquidation or dissolution of the corporation proposed by or
on behalf of any Interested Shareholder or any Affiliate of
any Interested Shareholder; or
(v) any reclassification of securities (including
any reverse stock split), or recapitalization of the
corporation, or any merger or consolidation of the
corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise
involving any Interested Shareholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Shareholder or any Affiliate of any Interested Shareholder;
shall require the affirmative vote of the holders of at least
ninety-five percent (95%) of all of the then-outstanding shares
of the capital stock of the corporation, voting together as a
single class. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required or that a
lesser percentage may be specified by law.
(2) The term "Business Combination" as used in this Article
Ten shall mean any transaction which is referred to in any one or
more of subparagraphs (i) through (v) of paragraph (1) of this
section A.
B. The provisions of section A. of this Article Ten shall not
be applicable to any particular Business Combination, and such
Business
13
<PAGE>
Combination shall require only such affirmative vote as is required by
law or any other provision of the corporation's Articles of
Incorporation or Bylaws if the conditions specified below are met:
(1) the "Continuing Directors" (as hereinafter defined) of
the corporation by at least an eighty percent (80%) vote:
(i) have expressly approved in advance the
acquisition of the outstanding shares of capital stock of
the corporation that caused such Interested Person to become
an Interested Person, or
(ii) have expressly approved such Business
Combination either in advance of or subsequent to such
Interested Person's having become an Interested Person; or
(2) the cash or fair market value (as determined by at
least a majority of the Continuing Directors) of the property,
securities or "Other Consideration to the Received" (as
hereinafter defined) per share paid by the Interested Person to
holders of the capital stock of the corporation in the Business
Combination is not less than the "Fair Price" (as hereinafter
defined) paid by the Interested Person in acquiring any of its
holdings of the corporation's capital stock.
C. For the purposes of this Article 10:
(1) A "person' shall mean any individual, firm, corporation
or other entity.
(2) "Interested Shareholder" shall mean any person (other
than the corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or
indirectly, of more than ten percent (10%) of the shares of
any class of the outstanding capital stock of the
corporation;
(ii) is an Affiliate of the corporation and at any
time within the two-year period immediately prior to the
date in question was the beneficial owner, directly or
indirectly, of ten percent (10%) or more of the shares of
any class of the outstanding capital stock of the
corporation; or
14
<PAGE>
(iii) is an assignee of or has otherwise succeeded to
any shares of any class of the outstanding capital stock of
the corporation which were at any time within the two-year
period immediately prior to the date in question
beneficially owned by any Interested Shareholder, if such
assignment or succession shall have occurred in the course
of a transaction or series of transactions not involving a
public offering within the meaning of the Securities Act of
1933.
(3) A person shall be a "beneficial owner" of any capital
stock of the corporation:
(i) which such person or any of its Affiliates or
Associates (as hereinafter defined) beneficially owns,
directly or indirectly;
(ii) which such person or any of its Affiliates or
Associates has (a) the right to acquire (whether such right
is exercisable immediately or only after the passage of
time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (b)
the right to vote pursuant to any agreement, arrangement or
understanding; or
(iii) which are beneficially owned, directly or
indirectly, by any other person with which such person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of such capital
stock.
(4) For the purposes of determining whether a person is an
Interested Shareholder pursuant to paragraph (2) of this section
C., the number of shares of capital stock of the corporation
deemed to be outstanding shall include shares deemed owned
through application of paragraph (3) of this section C. but shall
not include any other shares of capital stock which may be
issuable pursuant to any agreement, arrangement or understanding,
or upon exercise of conversion rights, warrants or options, or
otherwise.
15
<PAGE>
(5) "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934.
(6) "Subsidiary" means any corporation of which a majority
of any class of equity security is owned, directly or indirectly,
by the corporation; provided, however, that for the purposes of
the definition of Interested Shareholder set forth in paragraph
(2) of this section C., the term "Subsidiary" shall mean only a
corporation of which a majority of each class of equity security
is owned directly or indirectly, by the corporation.
(7) "Continuing Director" means any member of the Board of
Directors of the corporation (the "Board") who is unaffiliated
with the Interested Shareholder and was a member of the Board
prior to the time that the Interested Shareholder became an
Interested Shareholder, and any successor of a Continuing
Director who is unaffiliated with the Interested Shareholder and
is recommended to succeed a Continuing Director by a majority of
Continuing Directors then on the Board.
(8) "Fair Price" shall mean the following: If there is
only one class of capital stock of the corporation issued and
outstanding, the Fair Price shall mean the highest price that can
be determined by a majority of the Continuing Directors to have
been paid at any time by the Interested Person for any share or
shares of that class of capital stock. If there is more than one
class of capital stock of the corporation issued and outstanding,
the Fair Price shall mean with respect to each class and series
of capital stock of the corporation, the amount determined by a
majority of the Continuing Directors to be the highest per share
price equivalent of the highest price that can be determined to
have been paid at any time by the Interested Person for any share
or shares of any class or series of capital stock of the
corporation. In determining the Fair Price, all purchases by the
Interested Person shall be taken into account regardless of
whether the shares were purchased before or after the Interested
Person became an Interested Person. Also, the Fair Price shall
include any brokerage commissions, transfer taxes and soliciting
dealers' fees paid by the Interested Person with respect to the
shares of capital stock of the corporation acquired by the
Interested Person. In the case of any Business Combination with
an Interested Person, a majority of the Continuing Directors
shall determine the Fair Price for each class and series of the
Capital stock of the corporation.
16
<PAGE>
The Fair Price shall also include interest compounded annually
from the date an Interested Person became an Interested Person
through the date the Business Combination is consummated at the
rate of seven percent (7%) per annum less the aggregate amount of
any cash dividends paid, and the fair market value of any
dividends paid in other than cash, on each share of capital stock
in the same time period, in an amount up to but not exceeding the
amount of interest so payable per share of capital stock.
(9) "Other Consideration to be Received" shall include,
without limitation, Common Stock or other capital stock of the
corporation retained by its existing stockholders other than
Interested Persons or other parties to such Business Combination
in the event of a Business Combination in which the corporation
is the surviving corporation.
D. A majority of the Board of Directors of the corporation
shall have the power and duty to determine, on the basis of
information known to them after reasonable inquiry, whether a person
is an Interested Shareholder. Once the Board has made a determination
pursuant to the preceding sentence that a person is an Interested
Shareholder, a majority of the number of Directors who are Continuing
Directors shall have the power and duty to interpret all of the terms
and provisions of this Article Ten, and to determine on the basis of
information known to them after reasonable inquiry all facts
necessary to determine compliance with this Article Ten, including,
without limitation, (1) the number of shares of capital stock of the
corporation beneficially owned by any person, (2) whether a person is
an Affiliate or Associate of another, and (3) whether the applicable
conditions set forth in section B. have been met with respect to any
Business Combination.
E. Nothing contained in this Article Ten shall be construed to
relieve any Interested Shareholder from any fiduciary obligation
imposed by law.
F. Notwithstanding any other provisions of the corporation's
Articles of Incorporation or Bylaws or any provision of law which
might otherwise permit a lesser vote or no vote, but in addition to
any affirmative vote of the holders of any particular class or series
of the capital stock of the corporation required by law, or by the
corporation's Articles of Incorporation or Bylaws, the affirmative
vote of the holders of at least ninety-five percent (95%) of the
then-outstanding shares of the capital stock of the corporation,
voting together as a single class, shall be required to alter, amend
or repeal this Article.
17
<PAGE>
5. Current Articles 7, 8 and 9 of the Articles of Incorporation shall be
renumbered Articles 9, 11 and 12, respectively, but shall otherwise remain
unchanged.
ARTICLE TWO
Each such amendment made by the Restated Articles of Incorporation has been
effected in conformity with the provisions of the Texas Business Corporation Act
and such Restated Articles of Incorporation and each such amendment made by the
Restated Articles of Incorporation were duly adopted by the shareholders of the
Corporation on the ____ day of ___________, 1998.
ARTICLE THREE
The number of shares outstanding was 1,000; the number of shares entitled
to vote on the Restated Articles of Incorporation as so amended was 1,000; the
number of shares voted for such Restated Articles as so amended was 1,000; and
the number of shares voted against such Restated Articles as so amended was -0-.
ARTICLE FOUR
The Articles of Incorporation and all amendments and additions thereto are
hereby superseded by the following Restated Articles of Incorporation which
accurately copy the entire text thereof and as amended as above set forth:
1. NAME. The name of the Corporation is FIRST COMMAND FINANCIAL
CORPORATION.
2. DURATION. The period of its duration is perpetual.
3. PURPOSES. The Corporation is being organized under the Texas
Business Corporation Act for the purpose of carrying out any lawful purposes.
4. SHARES. The aggregate number of shares which the Corporation is
authorized to issue is ten million ten thousand (10,010,000) shares, each having
a par value of $.01. The shares are to be designated as Common Stock and will
have identical rights and privileges in every respect, with the sole exception
that ten thousand (10,000) of such shares shall be designated as Voting Common
Stock and shall possess the right to vote on all matters that may come before
the stockholders of the Corporation, and ten million (10,000,000) of such shares
shall be designated as Nonvoting Common Stock and shall not possess the right to
vote on any matter except as specifically provided by the Texas Business
Corporation Act.
5. COMMENCEMENT OF BUSINESS. The Corporation will not commence
business until it has received for the issuance of its shares consideration
having a minimum value of One
18
<PAGE>
Thousand and No/100 Dollars ($1,000.00) and consisting only of labor done or
money or property actually received.
6. NO PREEMPTIVE RIGHTS. No holder of any shares of any class of
stock of the Corporation shall, as such holder, have any preemptive or
preferential right to receive, purchase or subscribe to additional, unissued or
treasury shares of any class of stock of the Corporation, or securities,
obligations or evidences of indebtedness of the Corporation convertible into or
carrying a right to subscribe to or purchase such shares, or any other
securities that may hereafter from time to time be issued or sold by the
Corporation.
7. RESTRICTIONS ON TRANSFER OF SHARES. Except as otherwise
expressly provided and authorized herein, a Shareholder shall not Transfer (as
defined below) any shares of Stock that he or she now or hereafter owns. The
parties hereto understand that the Corporation may refuse to Transfer the shares
of Stock on its books and records when that Transfer would not be in compliance
with the terms hereof, and that any attempted Transfer in violation hereof shall
be null and void.
A. DEFINITIONS. As used herein:
(1) CODE. The term "CODE" shall mean the Internal Revenue
Code of 1986, as amended from time to time.
(2) DETERMINATION DATE. The term "DETERMINATION DATE"
shall mean the day upon which, in the case of a purchase of Stock hereunder, the
Disposition Notice referred to in Section 3.1 has been received by the
Corporation, except that with respect to a Disposition Notice made in connection
with the death of a Shareholder or the termination of a Shareholder's marital
relationship, "DETERMINATION DATE" shall mean the date of that death or
termination.
(3) DISPOSING SHAREHOLDER. The term "DISPOSING
SHAREHOLDER" shall mean that Shareholder (or the surviving spouse of or estate
of a deceased Shareholder in the case of a Shareholder's death) required to
tender shares of Stock to the Corporation upon the occurrence of an Operative
Event with respect to that Shareholder.
(4) DISPOSITION NOTICE. The term "DISPOSITION NOTICE"
shall mean the written notice required by paragraph C.(1) below to be made by
the Disposing Shareholder to the Corporation or allowed by paragraph C.(1) to be
made by the Corporation to the Disposing Shareholder.
(5) OPERATIVE EVENT. The term "OPERATIVE EVENT" shall
mean, with respect to any Shareholder, any of the following events:
(a) Any threatened or actual Transfer of Stock in
any manner whatsoever by that Shareholder;
19
<PAGE>
(b) The death of that Shareholder;
(c) The termination of the marital relationship of
that Shareholder by death or divorce if that Shareholder does not succeed to his
or her spouse's community interest in the Stock or the entering into of any
property settlement arrangement or agreement in connection therewith, pursuant
to which that Shareholder's interest in his or her Stock is to be diluted,
lessened, encumbered or impaired;
(d) Any threatened or actual (i) bankruptcy or
insolvency of that Shareholder or (ii) institution of legal proceedings because
or by reason of the bankruptcy or insolvency of that Shareholder;
(e) The termination of the status of that
Shareholder as a duly licensed Texas life insurance agent;
(f) The cessation of that Shareholder as a duly
authorized agent of the Corporation pursuant to a current written agency
agreement, except that with respect to an involuntary termination as a duly
authorized agent of the Corporation, such termination shall require approval by
a vote of eighty percent (80%) of the Board of Directors of the Corporation;
(g) The change in status of that Shareholder to a
"non-resident alien" as defined in the Code; or
(h) Any threatened or actual levy by a creditor or
claimant upon the shares of Stock held by that Shareholder or any other seizure
or sale by legal process, if it is determined by legal counsel for the
Corporation that such levy is made in good faith and based upon a bona fide
claim.
It shall not be a requirement hereunder that the Executive Committee of the
Board of Directors of the Corporation (the "EXECUTIVE COMMITTEE") make a
determination in every instance that an Operative Event has so occurred with
respect to any Shareholder, but such determination shall be made in those
instances in which there may be some question as to whether an Operative Event
did in fact occur. Upon such determination by the Executive Committee that an
Operative Event has in fact occurred, in order to inform the Shareholder of such
occurrence, the Corporation may deliver a written notice to the Shareholder or
his or her legal representative stating that (i) such an Operative Event has
occurred, (ii) the date thereof and (iii) the reasons for the determination.
The Shareholder affected or his or her legal representative shall thereupon be
required to tender to the Corporation for sale his or her Stock to the
Corporation upon the terms and conditions as set forth in paragraph C. below.
(6) TRANSFER. The term "TRANSFER" shall mean, as a noun, a
transfer, sale, assignment, exchange, gift, donation, pledge, mortgage,
hypothecation or other
20
<PAGE>
encumbrance or other disposition, and as a verb, to transfer, sell, assign,
exchange, gift, donate, pledge, mortgage, hypothecate or otherwise encumber or
otherwise dispose.
B. RESTRICTIONS ON TRANSFER OF SHARES.
Except as otherwise expressly provided and authorized in the Articles of
Incorporation, a Shareholder shall not Transfer any shares of Stock that he or
she now or hereafter owns. The Corporation may refuse to Transfer the shares of
Stock on its books and records when that Transfer would not be in compliance
with the terms of the Articles of Incorporation, and any attempted Transfer in
violation hereof shall be null and void.
(1) RESTRICTIONS ON TRANSFER.
(a) No Shareholder may Transfer, and no person may
acquire, the legal or beneficial ownership of any share of Stock now or
hereafter owned by him or her if that Transfer or acquisition would cause the S
corporation status of the Corporation to terminate. Specifically, no Transfer
may be made to, and no acquisition may be made by, any person who would cause
the Corporation to have more than the maximum permitted number of shareholders
under the Code as then in effect or to any person that is not eligible to be a
shareholder of an S corporation under the provisions of the Code.
(b) In addition to the requirements of paragraph
B.(1)(a) above, no Transfer of shares of Stock shall be permitted, and no
purported Transfer shall be effective, until the transferee has followed all of
the requirements of paragraph C. below.
(c) Notwithstanding B.(1)(a) and (b) above, with
the prior written consent of the Executive Committee, a Shareholder may pledge,
mortgage, hypothecate or otherwise encumber his or her Stock subject to such
terms, conditions and restrictions as the Executive Committee shall determine to
be appropriate in the exercise of its sole discretion.
(2) EFFECT OF PURPORTED TRANSFER. Any purported Transfer
or acquisition of shares of Stock in violation of paragraph B.(1) above shall be
null and void. The purported transferee shall have no interest in any of the
shares of Stock purported to be transferred. Any such purported Transfer or
acquisition may and should be enjoined by the Corporation in the event that the
Executive Committee so determines.
(3) BENEFICIAL OWNERSHIP. Any purported Transfer in
violation hereof will not affect the beneficial ownership of the shares of
Stock. Thus, the Shareholder making the purported transfer will retain the
right to vote and the right to receive distributions and liquidation proceeds
related to those shares. Additionally, a Shareholder making the purported
Transfer shall continue to report the portion of income or loss allocated by the
Corporation in accordance with the provisions of the Code.
21
<PAGE>
C. TENDER REQUIREMENT.
(1) TENDER FOR SALE. Upon the occurrence of any Operative
Event with respect to a Shareholder, the Disposing Shareholder, or his or her
legal representative, as the case may be, must tender for sale all shares of
Stock owned by the Disposing Shareholder. In the case of an Operative Event,
the Disposing Shareholder is required to mail a Disposition Notice to the
Corporation no less than one hundred twenty (120) days prior to the date of the
proposed Transfer. Alternatively, upon an Operative Event of a Disposing
Shareholder, the Corporation may mail a Disposition Notice to that Disposing
Shareholder. Upon its receipt or its mailing of a Disposition Notice, the
Corporation shall have the exclusive right and option, exercisable at the sole
discretion of the Executive Committee, as described in paragraph C.(2) to buy
such shares of Stock, or any portion thereof, as provided herein. The
Disposition Notice shall be sent by certified mail, if to the Corporation, to
the attention of the president and the general counsel of the Corporation at the
principal address of the Corporation, or if to the Disposing Shareholder at his
or her last known address. In the event that the Operative Event involves a
proposed Transfer pursuant to an offer to purchase or sell all or any portion of
a Shareholder's Stock received or made by such Shareholder from or to a third
party, the Disposition Notice shall set forth the full details of such proposed
Transfer including, among other things, the name of the offeror or proposed
purchaser or transferee, the number of shares covered by the offer, the purchase
price per share, the terms of payment, whether for cash or credit (and if by
credit, the maturity and interest rate), any and all other consideration being
received or paid in connection with such proposed Transfer, and any and all
other terms, conditions and details of such offer.
(2) PURCHASE BY CORPORATION. Upon delivery of a valid
Disposition Notice, the Corporation shall have the exclusive right and option,
exercisable at any time within one hundred twenty (120) days after the mailing
of a Disposition Notice, to purchase all or part of the Disposing Shareholder's
shares of Stock at the Purchase Price and on the terms and conditions set forth
herein. If the Corporation chooses to exercise the option (in whole or in
part), it shall give written notification (the "CORPORATE EXERCISE NOTICE") to
that effect to the Disposing Shareholder or his or her legal representative, as
the case may be, setting forth the number and type of shares being purchased and
the price and terms and conditions, in accordance with this Agreement, and such
sale and purchase shall be closed on the one hundred twentieth (120th) day after
the Corporate Exercise Notice is sent to the Disposing Shareholder or to his or
her legal representative (or, if such date is not a business day, on the first
business day thereafter).
(3) THIRD PARTY BOUND. If, in accordance with this
paragraph C., shares of Stock are Transferred to a third party, the Disposing
Shareholder shall require, as a condition of the sale to such third party, that
the purchaser or transferee of his or her shares will become a party to this
Agreement, but only if the Corporation so desires and agrees to such purchaser
becoming subject to this Agreement in a written notice sent to the Disposing
Shareholder. All shares of Stock retained by the Disposing Shareholder shall
remain subject to all of the provisions of the Articles of Incorporation.
22
<PAGE>
D. INSURANCE. In order to facilitate the purchase of shares of
Stock upon the death of a Shareholder, the Corporation may, but is not required
to, apply for and obtain separate policies of insurance upon the lives of each
of the Shareholders payable to the Corporation; provided, however, that the
purchase price of the shares of Stock and the manner and terms of payment
therefor shall be governed in all respect by paragraphs E and F below. The
Corporation will pay the premiums upon such policies and shall provide proof of
payment of such premiums to any Shareholder, upon his or her request. The
Corporation shall be the sole owner, and shall have the sole right to designate
the beneficiary or beneficiaries, of such policy or policies.
E. PURCHASE PRICE.
(1) PURCHASE PRICE. In the case of all Operative Events,
the purchase price per share of Stock to be paid by the Corporation shall be the
Purchase Price, as defined in paragraph (2) below.
(2) AGREED VALUE. The Corporation, at least annually,
shall advise the Shareholders in writing of the price per share of Stock which
the Corporation will pay to any and all Disposing Shareholders for shares
tendered pursuant hereto. Each such determination of the "PURCHASE PRICE" shall
become effective on the date specified by the Corporation and shall remain
effective until the next determination of a new Purchase Price and shall be
proportionately adjusted for any subsequent increase or decrease of the number
of issued shares of Stock resulting from a subdivision or consolidation of
shares or other adjustment, or the payment of a stock dividend or other increase
or decrease in the number of shares of Stock outstanding, effective without the
receipt of consideration by the Corporation. It is specifically agreed that
this Purchase Price shall be the purchase price paid by the Corporation
hereunder to any Disposing Shareholder.
F. PAYMENT OF PURCHASE PRICE.
(1) TRANSFER AND DELIVERY OF STOCK. At the closing, or at
some other time or place designated by all of the parties, the Disposing
Shareholder or his or her legal representative shall deliver to the Corporation
in exchange for the concurrent payment of the Purchase Price, the certificates
of shares of the Stock being purchased, free and clear of all liens, claims,
security interests and encumbrances, duly endorsed for transfer and bearing any
necessary documentary stamps, and such assignments, certificates of authority,
tax releases, consents to transfer by a fiduciary or representative of the
Disposing Shareholder, and any instruments in evidence of the title of the
Shareholder and of the parties' compliance with this Agreement, the federal and
state securities laws, and any other agreements or regulations as may be
recommended by counsel for the Corporation.
(2) METHOD. The manner of payment of the Purchase Price
may be, at the option of the Corporation, either (i) the payment of the entire
Purchase Price, by cash or by certified, bank cashier, or treasurer's check, or
(ii) down payment of twenty percent (20%)
23
<PAGE>
of such Purchase Price in cash at closing and delivery of a promissory note or
promissory notes for the balance, in non-negotiable form, to the order of the
Disposing Shareholder or his or her legal representative, pursuant to which the
Corporation agrees to pay the balance in four (4) equal annual installments,
with interest on the unpaid balance at the lesser of (i) the rate of the prime
rate published in THE WALL STREET JOURNAL per annum on the date of the closing
or (ii) the highest non-usurious rate permitted by applicable law, with each
installment of principal and interest payable annually on each anniversary date
of the making of the promissory note, and with the right of the Corporation to
prepay at any time without premium or penalty. The promissory note shall be
secured by the pledge of Stock purchased thereby, with executed security
instruments covering such pledged Stock, unless such pledge arrangement is
waived by the Disposing Shareholder or his or her legal representative, as the
case may be. Notwithstanding anything herein to the contrary, in the event that
the Disposing Shareholder dies, the down payment provided for in clause (ii)
above shall not be less than the proceeds received by the Corporation under the
insurance, if any, described in paragraph D above.
8. SUBCHAPTER S PROVISIONS.
A. SUBCHAPTER S REPRESENTATION. Each Shareholder acknowledges
that the Corporation has made a valid election to be treated, for federal and
state income tax purposes, as an S corporation. Each Shareholder shall provide
to the Corporation, immediately upon the Corporation's request, such properly
signed consents or other documents as, in the opinion of the Corporation, may be
necessary or useful to maintain the Corporation's status as an S corporation,
and each Shareholder covenants that he or she will do nothing to interfere with
the Corporation's maintenance of its status as an S corporation.
B. REVOCATION OF ELECTION. In the event that the Shareholders,
by the affirmative vote of at least eighty percent (80%) of the votes which all
of the Shareholders are entitled to cast, determine to terminate the
Corporation's status as an S corporation, and thereafter each Shareholder is
provided with written notice of such determination, within sixty (60) days after
the delivery of such notice, each Shareholder, if requested, will execute a
consent to such revocation in the form prescribed by the Internal Revenue
Service or any relevant state tax authority and shall deliver such consent to
the Secretary of the Corporation. If the Corporation's S status is terminated
under this paragraph B., in the event that the Executive Committee so
determines, the Shareholders and the Corporation shall elect, if applicable, to
have Section 1362(e)(2) of the Code not apply, as provided in Section 1362(e)(3)
of the Code. Any person who was a Shareholder at any time during the S short
year (as defined in Section 1362(e)(1)(A) of the Code) or who is a Shareholder
on the first day of the C short year (as defined in Section 1362(e)(1)(B) of the
Code) shall consent to such election.
C. INADVERTENT TERMINATION OF SUBCHAPTER S ELECTION. In the
event of a termination of the Corporation's status as an S corporation other
than pursuant to paragraph B. above, if the Corporation and the Shareholders
remaining after such termination desire that the Corporation's status as an S
corporation be continued, the Corporation and all Shareholders as of and/or
after the terminating event shall use their best efforts to obtain from the
Internal
24
<PAGE>
Revenue Service a waiver of the terminating event on the ground of inadvertency.
The Corporation and the Shareholders shall take such steps, and make such
adjustments, as may be required by the Internal Revenue Service pursuant to
Section 1362(f)(3) and (4) of the Code. If a Shareholder caused the terminating
event to occur, he or she shall bear the expense of procuring the waiver,
including the legal, accounting and tax costs of taking such steps, and of
making such adjustments as may be required. If the inadvertent termination is
not waived by the Internal Revenue Service and the Corporation's S status is
permanently terminated, in the event that the Executive Committee so determines,
the Corporation and the Shareholders shall make the election under Section
1362(e)(3) of the Code contemplated by paragraph B. above.
D. PROVISION IN SHAREHOLDER WILLS. Each Shareholder shall use
his or her best efforts to include in his or her will a direction and
authorization to his or her executor in substantially the following form:
(a) My Executor is hereby directed and authorized to hold
stock of an S Corporation, as defined in the Code (hereinafter "S Stock"), to
make an election to have any corporation treated as an S Corporation, to enter
into agreements with other shareholders or with the corporation relating to a
transfer (including, without limitation, a sale, assignment, exchange, gift,
donation, mortgage, hypothecation or other encumbrance or other disposition (a
"TRANSFER") of S Stock or the management of the S Corporation, and to allocate
amounts received and the tax on undistributed income between income and
principal. During the administration of my estate, my Executor may allocate the
tax deductions and credits arising from ownership of S Stock between income and
principal. In making any such allocations, my Executor shall consider that the
beneficiary is to have enjoyment of the property at least equal to that
ordinarily associated with an income interest and in all events shall provide
the required beneficial enjoyment to the beneficiary until such time as the S
Stock is distributed to him or her.
(b) Any beneficiary of my estate who receives stock in an S
Corporation as part of his or her distribution shall, prior to such
distribution, enter into a written agreement with said S Corporation (i) to
consent to any election to qualify the S Corporation as such; (ii) to do nothing
to interfere with the S Corporation's maintenance of its status as such; (iii)
not to Transfer the S Stock to any transferee who does not agree to execute a
similar consent; (iv) not to Transfer the S Stock in such manner as will cause
the S Corporation to lose its status as an S Corporation under the then
applicable federal and state income tax statutes and regulations; and (v) if S
status is inadvertently terminated, to join in any endeavor to obtain a waiver
of the terminating event on the grounds of inadvertency from the Internal
Revenue Service if the S Corporation desires that the S status should continue.
(c) Any S Stock distributed to a beneficiary shall bear an
appropriate legend on the stock certificate stating that the Transfer of the
stock is subject to and restricted to the extent set forth in subparagraph (b)
above.
25
<PAGE>
Notwithstanding the foregoing requirement, the failure of a Shareholder so to
direct his or her executor shall not affect the validity of these Articles of
Incorporation.
E. DISTRIBUTIONS TO PAY TAX LIABILITIES.
(a) For the period during which the Corporation is an S
Corporation (the "S CORP PERIOD"), the Corporation shall promptly declare and
make distributions during the S Corp Period to all Shareholders in a timely
manner to allow the federal income tax (including, without limitation, estimated
tax payments) attributable to the Corporation's taxable income during the S Corp
Period that is passed through the Corporation to the Shareholders to be paid by
such Shareholders when due (each, a "DUE DATE"). To satisfy this requirement,
during the S Corp Period, the Corporation shall pay on or before five (5) days
prior to each Due Date, an amount so that the cumulative amount of distributions
during the S Corp. Period that have been designated by the Corporation as "TAX
DISTRIBUTIONS" are at least equal to the excess of (i) the sum of the products
of (A) the Corporation's positive taxable income (as determined under Section
1366(a) of the Code) attributed to its Shareholders during each of its taxable
periods during the S Corp Period multiplied by (B) the sum of the highest
federal individual income tax rates in effect for each such taxable period
(without regard to exemptions or phase-outs of lower tax rates, but with
consideration of the character of any item and the deductibility of state taxes
for federal income tax purposes), over (ii) the sum of the products of (A) the
Corporation's negative taxable income (as determined under Section 1366(a) of
the Code) attributable to its Shareholders during each of its taxable periods
during the S Corp Period multiplied by (B) the sum of the highest federal
income tax rates in effect for each such taxable period (without regard to
exemptions or phase-outs of lower tax rates, but with consideration of the
character of any item and the deductibility of state taxes for federal income
tax purposes). The Corporation's obligation to declare and make any such
distributions to the Shareholders is subject to the restrictions governing
dividends under the Texas Business Corporation Act and such other pertinent
governmental or contractual restrictions as are now or may hereafter become
effective. If the Corporation does not have sufficient funds available to
permit it lawfully to declare and pay such distributions, the Shareholders
and the Corporation shall take such action, adopt such resolutions, and cause
such certificates and other documents to be filed as may be necessary to
create sufficient funds to permit the making of such distributions, whereupon
the Corporation shall declare and pay such distributions.
(b) No provision of this Article 8 shall cause the total
distributions made with respect to any outstanding shares of stock of the
Corporation to differ from the amounts paid with respect to any other
outstanding shares of stock of the Corporation.
(c) No provision of this Article 8 shall be construed to
limit the ability of the Corporation to declare and make additional
distributions to Shareholders out of the assets of the Corporation legally
available for such payment at such time or times as the Executive Committee may
determine.
26
<PAGE>
(d) The Corporation's payment of taxes on behalf of any
Shareholder (by means of withholding or otherwise) shall be considered a
distribution for purposes hereof, and the amount of distributions that the
Shareholder is otherwise entitled to hereunder shall be adjusted accordingly
consistent with Regulations Section 1.1361-1(1)(2)(ii).
F. NONRECOGNITION OF CERTAIN TRANSFERS.
(a) The Corporation will not, nor will it be compelled to,
recognize any Transfer, or issue any certificate representing any Stock to any
person who has not delivered to the Corporation (i) a written undertaking to be
bound by the terms and conditions of this Agreement, and (ii) for so long as the
Corporation's status as an S corporation continues, a written consent to the
treatment of the Corporation as an S corporation. The Corporation will not, nor
will it be compelled to, recognize any Transfer, or issue any certificate
representing any Stock to any person or entity the Transfer to whom or to which
in the opinion of the Corporation's counsel could disqualify the Corporation as
an S corporation or disqualify it from eligibility for such status.
(b) The Corporation will not, nor be compelled to,
recognize any Transfer made other than in accordance with the terms of the
Articles of Incorporation, nor will it issue any certificate representing the
Stock to any person who has received such Stock in a Transfer made other than in
accordance with the terms of these Articles of Incorporation.
G. LEGENDS ON SHARE CERTIFICATES. The following legend shall
be imprinted conspicuously on the face of each certificate representing shares
of Stock:
NOTICE IS HEREBY GIVEN THAT THE TRANSFER (INCLUDING, WITHOUT
LIMITATION, THE SALE, ASSIGNMENT, EXCHANGE, GIFT, DONATION, PLEDGE,
MORTGAGE, HYPOTHECATION OR OTHER ENCUMBRANCE OR OTHER DISPOSITION) OF
THE SHARES OF CAPITAL STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO AND RESTRICTED BY THE PROVISIONS OF THE ARTICLES OF INCORPORATION
OF THE CORPORATION, AND ALL OF THE PROVISIONS OF SUCH ARTICLES ARE
INCORPORATED BY REFERENCE IN THIS CERTIFICATE, SPECIFICALLY INCLUDING,
BUT NOT LIMITED TO, THOSE PROVISIONS OF THE ARTICLES RELATING TO THE
CORPORATION'S TAX STATUS AS AN S CORPORATION.
H. ELECTION TO CLOSE BOOKS. The Corporation, in the event the
Executive Committee so determines, shall consent to close the books of the
Corporation pursuant to Section 1377(a)(2) of the Code whenever a Shareholder
sells all of his or her Stock on a day other
27
<PAGE>
than the last day of the Corporation's fiscal year if all "affected
shareholders" (as defined in Section 1377(a)(2)(B) of the Code) shall consent
thereto.
9. SPECIAL PROVISIONS PERMITTED TO BE SET FORTH IN ARTICLES OF
INCORPORATION:
A. INTERESTED DIRECTORS AND OFFICERS.
(1) If paragraph (2) below is satisfied, no contract or
transaction between the Corporation and any of its directors or officers (or any
other corporation, partnership, association or other organization in which any
of them directly or indirectly have a financial interest) shall be void or
voidable solely because of this relationship or because of the presence or
participation of such director or officer at the meeting of the Board or
committee authorizing such contract or transaction, or because such person's
votes are counted for such purpose.
(2) Paragraph (1) above will apply only if:
(a) The contract or transaction is fair to the
Corporation as of the time it is authorized or ratified by the Board of
Directors, a committee of the Board, or the shareholders; or
(b) The material facts as to the relationship or
interest of each such director or officer as to the contract or transaction are
known or disclosed: (i) to the shareholders entitled to vote thereon and they
nevertheless in good faith authorize or ratify the contract or transaction by a
majority of the shares present, each such interested person to be counted for
quorum and voting purposes; or (ii) to the Board of Directors or the committee,
and the Board or committee nevertheless in good faith authorizes or ratifies the
contract or transaction by a majority of the disinterested directors present,
each such interested director to be counted in determining whether a quorum is
present but not in calculating the majority necessary to carry the vote.
B. LIMITATION OF LIABILITY. No Director of the Corporation
shall be personally liable to the Corporation or its shareholders for monetary
damages for any act or omission in the Director's capacity as a director, except
to the extent otherwise expressly provided by statute of the State of Texas.
Any repeal or modification of this Article shall be prospective only, and shall
not adversely affect any limitation of the personal liability of a Director of
the Corporation existing at the time of the repeal or modification.
C. INDEMNIFICATION. The Corporation shall, to the maximum
extent permitted from time to time under the laws of the State of Texas,
indemnify and upon request shall advance expenses to any person who is or was a
party to any threatened, pending, or completed action, suit, proceeding, or
claim, whether civil, criminal, administrative or investigative, by reason of
the fact that he or she is or was or has agreed to be a trustee, director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a trustee,
28
<PAGE>
director, officer, partner, venturer or proprietor of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees and expenses), judgments, fines, penalties and
amounts paid in settlement incurred in connection with the investigation,
preparation to defend or defense of any such action, suit, proceeding or claim.
Such indemnification shall not be exclusive of any other indemnification rights
arising under any bylaw, agreement, vote of Directors or shareholders or
otherwise and shall inure to the benefit of the heirs and legal representations
of such person. Any repeal or modification of this Article shall be prospective
only, and shall not adversely affect any rights to indemnification of any such
person existing at the time of the repeal or modification.
D. INSURANCE. The Corporation may purchase and maintain
insurance on any person who is or was a trustee, director or officer of the
Corporation or is or was serving at the request of the Corporation as a trustee,
director, officer, partner, venturer or proprietor of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
incurred by him in any such position arising out of his status as such, whether
or not the Corporation would have the power to indemnify him against such
liability under Article 9.C. above.
E. BYLAWS. The power to alter, amend, repeal, or adopt the
Bylaws is hereby vested in the Board of Directors, subject to repeal or change
by action of the Shareholders.
F. NON-CUMULATIVE VOTING. At each election for Directors,
every shareholder entitled to vote at such election shall have the right to vote
in person or by proxy the number of shares owned by him for as many persons as
there are Directors to be elected for whose election he has a right to vote. No
shareholder shall have the right to cumulate his votes in any election of
Directors.
G. SHAREHOLDER CONSENT. It is hereby provided that, in
accordance with Article 9.10.A of the Texas Business Corporation Act, any action
required to be taken at any annual or special meeting of shareholders, or any
action which may be taken at any annual or special meeting of shareholders, may
be taken without a meeting, without prior notice, and without a vote, if a
consent or consents in writing, setting forth the action so taken, shall be
signed by the holder or holders of shares having not less than the minimum
number of votes that would be necessary to take such action at a meeting at
which the holders of all shares entitled to vote on the action were present and
voted.
10. FAIR PRICE PROVISION. The stockholder vote required to approve
any Business Combination (as hereinafter defined) shall be as set forth in this
Article 10.
A. (1) Except as otherwise expressly provided in section B. of
this Article 10:
29
<PAGE>
(i) any merger or consolidation of the corporation
or any Subsidiary (as hereinafter defined) with (a) any Interested Shareholder
(as hereinafter defined) or (b) any other corporation (whether or not itself an
Interested Shareholder) which is, or after such merger of consolidation would
be, an Affiliate (as hereinafter defined) of any Interested Shareholder;
(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series of transactions)
to or with any Interested Shareholder or any Affiliate of any Interested
Shareholder of all or substantially all of the assets of the corporation or any
Subsidiary;
(iii) the issuance or transfer by the corporation or
any Subsidiary (in one transaction or a series of transactions) of any
securities of the corporation or any Subsidiary to any Interested Shareholder or
any Affiliate of any Interested Shareholder in exchange for cash, securities or
other property (or a combination thereof) having an aggregate fair market value
of $2,000,000 or more;
(iv) the adoption of any plan or proposal for the
liquidation or dissolution of the corporation proposed by or on behalf of any
Interested Shareholder or any Affiliate of any Interested Shareholder; or
(v) any reclassification of securities (including
any reverse stock split), or recapitalization of the corporation, or any merger
or consolidation of the corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving any Interested
Shareholder) which has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of equity or
convertible securities of the corporation or any Subsidiary which is directly or
indirectly owned by any Interested Shareholder or any Affiliate of any
Interested Shareholder;
shall require the affirmative vote of the holders of at least ninety-five
percent (95%) of all of the then-outstanding shares of the capital stock of the
corporation, voting together as a single class. Such affirmative vote shall be
required notwithstanding the fact that no vote may be required or that a lesser
percentage may be specified by law.
(2) The term "Business Combination" as used in this Article
Ten shall mean any transaction which is referred to in any one or more of
subparagraphs (i) through (v) of paragraph (1) of this section A.
B. The provisions of section A. of this Article Ten shall not
be applicable to any particular Business Combination, and such Business
Combination shall require only such affirmative vote as is required by law or
any other provision of the corporation's Articles of Incorporation or Bylaws if
the conditions specified below are met:
30
<PAGE>
(1) the "Continuing Directors" (as hereinafter defined) of
the corporation by at least an eighty percent (80%) vote:
(i) have expressly approved in advance the
acquisition of the outstanding shares of capital stock of the corporation that
caused such Interested Person to become an Interested Person, or
(ii) have expressly approved such Business
Combination either in advance of or subsequent to such Interested Person's
having become an Interested Person; or
(2) the cash or fair market value (as determined by at
least a majority of the Continuing Directors) of the property, securities or
"Other Consideration to the Received" (as hereinafter defined) per share paid by
the Interested Person to holders of the capital stock of the corporation in the
Business Combination is not less than the "Fair Price" (as hereinafter defined)
paid by the Interested Person in acquiring any of its holdings of the
corporation's capital stock.
C. For the purposes of this Article 10:
(1) A "person' shall mean any individual, firm, corporation
or other entity.
(2) "Interested Shareholder" shall mean any person (other
than the corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or
indirectly, of more than ten percent (10%) of the shares of any class of the
outstanding capital stock of the corporation;
(ii) is an Affiliate of the corporation and at any
time within the two-year period immediately prior to the date in question was
the beneficial owner, directly or indirectly, of ten percent (10%) or more of
the shares of any class of the outstanding capital stock of the corporation; or
(iii) is an assignee of or has otherwise succeeded to
any shares of any class of the outstanding capital stock of the corporation
which were at any time within the two-year period immediately prior to the date
in question beneficially owned by any Interested Shareholder, if such assignment
or succession shall have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning of the
Securities Act of 1933.
(3) A person shall be a "beneficial owner" of any capital
stock of the corporation:
31
<PAGE>
(i) which such person or any of its Affiliates or
Associates (as hereinafter defined) beneficially owns, directly or indirectly;
(ii) which such person or any of its Affiliates or
Associates has (a) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (b) the right to vote pursuant to
any agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or
indirectly, by any other person with which such person or any of its Affiliates
or Associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares of such capital stock.
(4) For the purposes of determining whether a person is an
Interested Shareholder pursuant to paragraph (2) of this section C., the number
of shares of capital stock of the corporation deemed to be outstanding shall
include shares deemed owned through application of paragraph (3) of this section
C. but shall not include any other shares of capital stock which may be issuable
pursuant to any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
(5) "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934.
(6) "Subsidiary" means any corporation of which a majority
of any class of equity security is owned, directly or indirectly, by the
corporation; provided, however, that for the purposes of the definition of
Interested Shareholder set forth in paragraph (2) of this section C., the term
"Subsidiary" shall mean only a corporation of which a majority of each class of
equity security is owned directly or indirectly, by the corporation.
(7) "Continuing Director" means any member of the Board of
Directors of the corporation (the "Board") who is unaffiliated with the
Interested Shareholder and was a member of the Board prior to the time that the
Interested Shareholder became an Interested Shareholder, and any successor of a
Continuing Director who is unaffiliated with the Interested Shareholder and is
recommended to succeed a Continuing Director by a majority of Continuing
Directors then on the Board.
(8) "Fair Price" shall mean the following: If there is
only one class of capital stock of the corporation issued and outstanding, the
Fair Price shall mean the highest price that can be determined by a majority of
the Continuing Directors to have been paid at any time by the Interested Person
for any share or shares of that class of capital stock. If there is more than
one class of capital stock of the corporation issued and outstanding, the Fair
Price shall mean with respect to each class and series of capital stock of the
corporation, the
32
<PAGE>
amount determined by a majority of the Continuing Directors to be the highest
per share price equivalent of the highest price that can be determined to have
been paid at any time by the Interested Person for any share or shares of any
class or series of capital stock of the corporation. In determining the Fair
Price, all purchases by the Interested Person shall be taken into account
regardless of whether the shares were purchased before or after the Interested
Person became an Interested Person. Also, the Fair Price shall include any
brokerage commissions, transfer taxes and soliciting dealers' fees paid by the
Interested Person with respect to the shares of capital stock of the corporation
acquired by the Interested Person. In the case of any Business Combination with
an Interested Person, a majority of the Continuing Directors shall determine the
Fair Price for each class and series of the Capital stock of the corporation.
The Fair Price shall also include interest compounded annually from the date an
Interested Person became an Interested Person through the date the Business
Combination is consummated at the rate of seven percent (7%) per annum less the
aggregate amount of any cash dividends paid, and the fair market value of any
dividends paid in other than cash, on each share of capital stock in the same
time period, in an amount up to but not exceeding the amount of interest so
payable per share of capital stock.
(9) "Other Consideration to be Received" shall include,
without limitation, Common Stock or other capital stock of the corporation
retained by its existing stockholders other than Interested Persons or other
parties to such Business Combination in the event of a Business Combination in
which the corporation is the surviving corporation.
D. A majority of the Board of Directors of the corporation
shall have the power and duty to determine, on the basis of information known to
them after reasonable inquiry, whether a person is an Interested Shareholder.
Once the Board has made a determination pursuant to the preceding sentence that
a person is an Interested Shareholder, a majority of the number of Directors
who are Continuing Directors shall have the power and duty to interpret all of
the terms and provisions of this Article Ten, and to determine on the basis of
information known to them after reasonable inquiry all facts necessary to
determine compliance with this Article Ten, including, without limitation, (1)
the number of shares of capital stock of the corporation beneficially owned by
any person, (2) whether a person is an Affiliate or Associate of another, and
(3) whether the applicable conditions set forth in section B. have been met with
respect to any Business Combination.
E. Nothing contained in this Article Ten shall be construed to
relieve any Interested Shareholder from any fiduciary obligation imposed by law.
F. Notwithstanding any other provisions of the corporation's
Articles of Incorporation or Bylaws or any provision of law which might
otherwise permit a lesser vote or no vote, but in addition to any affirmative
vote of the holders of any particular class or series of the capital stock of
the corporation required by law, or by the corporation's Articles of
Incorporation or Bylaws, the affirmative vote of the holders of at least
ninety-five percent (95%) of the then-outstanding shares of the capital stock of
the corporation, voting together as a single class, shall be required to alter,
amend or repeal this Article.
33
<PAGE>
11. REGISTERED OFFICE AND AGENT. The street address of the
Corporation's initial registered office and the name of its initial registered
agent at such address are as follows:
REGISTERED AGENT REGISTERED ADDRESS
Lamar C. Smith 4100 South Hulen Street
Fort Worth, Texas 76109
12. INITIAL DIRECTORS. The number of directors constituting the
initial board of director(s) is four (4), and the names and addresses of the
persons who will serve as directors until the first annual meeting of the
shareholders and until their successors have been elected and qualified are:
NAME ADDRESS
Lamar C. Smith 4100 South Hulen Street
Fort Worth, Texas 76109
James N. Lanier 4100 South Hulen Street
Fort Worth, Texas 76109
Howard M. Crump 4100 South Hulen Street
Fort Worth, Texas 76109
Carroll H. Payne II 4100 South Hulen Street
Fort Worth, Texas 76109
This instrument is dated and signed effective the _____ day of
________, 1998.
FIRST COMMAND FINANCIAL CORPORATION
By:
-----------------------------------------
LAMAR C. SMITH, Chairman of the Board and
Chief Executive Officer
34
<PAGE>
AS AMENDED ________, 1998
BYLAWS
OF
FIRST COMMAND FINANCIAL CORPORATION
(A TEXAS CORPORATION)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I: OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Sec. 1:1. Registered Office and Agent. . . . . . . . . . . . . . . 1
Sec. 1:2. Other Offices. . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II: SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . 1
Sec. 2:1. Place of Meetings. . . . . . . . . . . . . . . . . . . . 1
Sec. 2:2. Annual Meetings. . . . . . . . . . . . . . . . . . . . . 2
Sec. 2:3. Special Meetings . . . . . . . . . . . . . . . . . . . . 2
Sec. 2:4. Notice . . . . . . . . . . . . . . . . . . . . . . . . . 2
Sec. 2:5. Order of Business at Meetings. . . . . . . . . . . . . . 2
Sec. 2:6. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . 3
Sec. 2:7. Majority Vote; Withdrawal of Quorum. . . . . . . . . . . 3
Sec. 2:8. Method of Voting . . . . . . . . . . . . . . . . . . . . 4
Sec. 2:9. Election of Directors. . . . . . . . . . . . . . . . . . 4
Sec. 2:10. Voting List. . . . . . . . . . . . . . . . . . . . . . . 4
Sec. 2:11. Record Date; Closing Transfer Books. . . . . . . . . . . 5
Sec. 2:12. Action Without Meeting . . . . . . . . . . . . . . . . . 6
ARTICLE III: DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . 6
Sec. 3:1. Management . . . . . . . . . . . . . . . . . . . . . . . 6
Sec. 3:2. Place of Meetings. . . . . . . . . . . . . . . . . . . . 7
Sec. 3:3. Regular Meetings; Notice . . . . . . . . . . . . . . . . 7
Sec. 3:4. Special Meetings; Notice . . . . . . . . . . . . . . . . 7
Sec. 3:5. Quorum; Majority Vote. . . . . . . . . . . . . . . . . . 7
Sec. 3:6. Number; Qualification; Election; Term. . . . . . . . . . 8
Sec. 3:7. Removal and Vacancies of Directors . . . . . . . . . . . 9
Sec. 3:8. Advisory Director. . . . . . . . . . . . . . . . . . . . 9
Sec. 3:9. Amendment of this Article III. . . . . . . . . . . . . . 10
Sec. 3:10. Procedure. . . . . . . . . . . . . . . . . . . . . . . . 10
Sec. 3:11. Compensation . . . . . . . . . . . . . . . . . . . . . . 10
Sec. 3:12. Action Without Meeting . . . . . . . . . . . . . . . . . 11
ARTICLE IV: OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Sec. 4:1. Number and Qualification . . . . . . . . . . . . . . . . 11
Sec. 4:2. Term and Compensation. . . . . . . . . . . . . . . . . . 12
Sec. 4:3. Removal; Vacancies . . . . . . . . . . . . . . . . . . . 12
Sec. 4:4. Authority. . . . . . . . . . . . . . . . . . . . . . . . 12
Sec. 4:5. Chairman of the Board. . . . . . . . . . . . . . . . . . 13
Sec. 4:6. President. . . . . . . . . . . . . . . . . . . . . . . . 13
Sec. 4:7. Vice President/Senior or Executive Vice President. . . . 13
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Sec. 4:8. Secretary. . . . . . . . . . . . . . . . . . . . . . . . 13
Sec. 4:9. Treasurer. . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE V: CERTIFICATES OF STOCK. . . . . . . . . . . . . . . . . . . . . 14
Sec. 5:1. Certificates . . . . . . . . . . . . . . . . . . . . . . 14
Sec. 5:2. Issuance . . . . . . . . . . . . . . . . . . . . . . . . 15
Sec. 5:3. Payment for Shares . . . . . . . . . . . . . . . . . . . 15
Sec. 5:4. No Preemptive Rights . . . . . . . . . . . . . . . . . . 15
Sec. 5:5. Lien . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Sec. 5:6. Lost, Stolen, or Destroyed Certificates. . . . . . . . . 16
Sec. 5:7. Registered Owner . . . . . . . . . . . . . . . . . . . . 16
Sec. 5:8. Registration of Transfer . . . . . . . . . . . . . . . . 17
ARTICLE VI: EXECUTIVE COMMITTEE . . . . . . . . . . . . . . . . . . . . . 17
Sec. 6:1. Designation; Authority; Responsibility . . . . . . . . . 17
Sec. 6:2. Procedure; Removal; Vacancies. . . . . . . . . . . . . . 18
Sec. 6:3. Meetings; Quorum; Majority Vote. . . . . . . . . . . . . 18
Sec. 6:4. Action Without Meeting . . . . . . . . . . . . . . . . . 19
ARTICLE VII: MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . 19
Sec. 7:1. Notice . . . . . . . . . . . . . . . . . . . . . . . . . 19
Sec. 7:2. Fiscal Year and Seal . . . . . . . . . . . . . . . . . . 20
Sec. 7:3. Checks and Notes; Books and Records. . . . . . . . . . . 20
Sec. 7:4. Resignation. . . . . . . . . . . . . . . . . . . . . . . 21
Sec. 7:5. Interested Directors, Officers, Shareholders . . . . . . 21
Sec. 7:6. Limitation of Liability. . . . . . . . . . . . . . . . . 22
Sec. 7:7. Indemnification. . . . . . . . . . . . . . . . . . . . . 22
Sec. 7:8. Dividends and Reserves . . . . . . . . . . . . . . . . . 23
Sec. 7:9. Purchase Own Shares. . . . . . . . . . . . . . . . . . . 23
Sec. 7:10. Annual Statement . . . . . . . . . . . . . . . . . . . . 24
Sec. 7:11. Construction . . . . . . . . . . . . . . . . . . . . . . 24
Sec. 7:12. Amendment of Bylaws. . . . . . . . . . . . . . . . . . . 24
</TABLE>
iii
<PAGE>
BYLAWS
OF
FIRST COMMAND FINANCIAL CORPORATION
(A TEXAS CORPORATION)
ARTICLE I
OFFICES
SEC. 1:1. REGISTERED OFFICE AND AGENT. The registered office of
First Command Financial Corporation (the "Corporation") is 4100 South Hulen,
Fort Worth, Texas 76109.
SEC. 1:2. OTHER OFFICES. The Corporation may also have offices at
such other places both within and without the State of Texas as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
SHAREHOLDERS
SEC. 2:1. PLACE OF MEETINGS. All meetings of the shareholders for
the election of directors are to be held at such time and place, within or
without the State of Texas, as is stated in the notice of the meeting or in a
duly executed waiver of notice thereof. Except as specifically provided by the
Texas Business Corporation Act, only holders of Voting Common Stock shall be
entitled to vote at meetings of the shareholders of the Corporation.
1
<PAGE>
SEC. 2:2. ANNUAL MEETINGS. An annual meeting of the shareholders
is to be held on the first business day following the 5th of December of each
year unless amended by notice duly given. At the meeting, the shareholders
shall elect directors and transact such other business as may properly be
brought before the meeting.
SEC. 2:3. SPECIAL MEETINGS. Special meetings of the shareholders
for any purpose or purposes, unless otherwise prescribed by statute, by the
Articles of Incorporation, or by these Bylaws, may be called by the President or
the Board of Directors. Business transacted at a special meeting is to be
confined to the objects stated in the notice of meeting.
SEC. 2:4. NOTICE. Written or printed notice stating the place,
day, and hour of the meeting, and in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
(10) nor more than sixty (60) days before the date of the meeting, either
personally or by mail, by or at the direction of the President, the Secretary,
or the officer or person calling the meeting, to each shareholder of record
entitled to vote at such meeting. If mailed, such notice will be deemed to be
delivered when deposited in the United States mail with postage thereon prepaid
addressed to the shareholder at such shareholder's address as it appears on the
stock transfer books of the Corporation.
SEC. 2:5. ORDER OF BUSINESS AT MEETINGS. The order of business at
annual meetings and so far as practicable at other meetings of shareholders will
be as follows unless changed by the Board of Directors:
(A) Call to order
(B) Proof of due notice of meeting
2
<PAGE>
(C) Determination of quorum and examination of proxies
(D) Announcement of distribution of annual statement
(E) Reading and disposing of minutes of last meeting of shareholders
(F) Reports of officers and committees
(G) Unfinished business
(H) New business
(I) Election of directors
(J) Other business
(K) Adjournment
SEC. 2:6. QUORUM. The holders of a majority of the shares entitled
to vote, represented at the meeting in person or by proxy, shall constitute a
quorum at a meeting of shareholders. If a quorum is not represented in person
or by proxy at a meeting of the shareholders, the shareholders entitled to vote
thereat, represented in person or by proxy, may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
represented in person or by proxy. At such adjourned meeting at which a quorum
is represented in person or by proxy, any business may be transacted which might
have been transacted at the meeting as originally notified.
SEC. 2:7. MAJORITY VOTE; WITHDRAWAL OF QUORUM. When a quorum is
present at any meeting, the vote of the holders of a majority of the shares
having voting power, present in person or represented by proxy, will decide any
question brought before such meeting; unless the question is one upon which, by
express provisions of the statutes, of the Articles of Incorporation, or of
these Bylaws, a different vote is required in which case such express provisions
will govern and control the decision of such question. The shareholders present
at a duly organized meeting may continue to transact business until adjournment
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
3
<PAGE>
SEC. 2:8. METHOD OF VOTING. Each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders, except to the extent that the voting rights of the
shares of any class or classes are limited or denied by the Articles of
Incorporation and except as otherwise provided in the Texas Business Corporation
Act. A shareholder may vote either in person or by proxy executed in writing by
the shareholder or by such shareholder's duly authorized attorney-in-fact. No
proxy will be valid after eleven months from the date of its execution unless
otherwise provided in the proxy. A proxy will be revocable unless expressly
provided therein to be irrevocable and unless otherwise made irrevocable by law.
Each proxy is to be filed with the Secretary of the Corporation prior to or at
the time of the meeting. Any vote may be taken orally or by show of hands
unless someone entitled to vote objects in which case written ballots are to be
used.
SEC. 2:9. ELECTION OF DIRECTORS. Directors are to be elected by
plurality vote. Cumulative voting is not permitted.
SEC. 2:10. VOTING LIST. The officer or agent having charge of the
stock transfer books for shares of the Corporation shall make, at least ten (10)
days before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of each and the number of voting shares
held by each, which list, for a period of ten (10) days prior to such meeting,
is to be kept on file at the registered office of the Corporation and is to be
subject to inspection by any shareholder at any time during usual business
hours. Such list
4
<PAGE>
is to be produced and kept open at the time and place of the meeting and will be
subject to the inspection of any shareholder during the whole time of the
meeting.
SEC. 2:11. RECORD DATE; CLOSING TRANSFER BOOKS. For the purpose of
determining shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors of the Corporation may provide that the
stock transfer books will be closed for a stated period not to exceed sixty
days. If the stock transfer books are closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, such
books are to be closed for at least ten (10) days immediately preceding such
meeting. In lieu of closing the stock transfer books, the Board of Directors
may fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than sixty days and, in case
of a meeting of shareholders, not less than ten (10) days prior to the date on
which the particular action, requiring such determination of shareholders, is to
be taken. If the stock transfer books are not closed and no record date is
fixed for the determination of shareholders entitled to notice of or to vote at
a meeting of shareholders, or the determination of shareholders entitled to
receive payment of a dividend, the date on which notice of the meeting is mailed
or the date on which the resolution of the Board of Directors declaring such
dividend is adopted, as the case may be, will be the record date for such
determination of shareholders. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided herein, such
determination will apply to any adjournment thereof except when the
5
<PAGE>
determination has been made through the closing of stock transfer books, and the
stated period of closing has expired.
SEC. 2:12. ACTION WITHOUT MEETING. Any action required by the Texas
Business Corporation Act to be taken at any annual or special meeting of
shareholders, or any action which may be taken at any annual or special meeting
of shareholders, may be taken without a meeting, without prior notice, and
without a vote, if a consent or consents in writing setting forth the actions so
taken, are signed by the holder or holders of shares having not less than the
minimum number of votes that would be necessary to take such action at a meeting
at which the holders of all shares entitled to vote on the action were present
and voting. Further, but subject to the provisions required or permitted for
notice of meetings, the shareholders may participate in and hold a meeting of
such shareholders 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 pursuant to this provision shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE III
DIRECTORS
SEC. 3:1. MANAGEMENT. The business and affairs of the Corporation
are to be managed by the Board of Directors who 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
6
<PAGE>
of Incorporation or by these Bylaws) directed or required to be exercised by, or
done or reserved to, the shareholders.
SEC. 3:2. PLACE OF MEETINGS. Meetings of the Board of Directors,
regular or special, may be held either within or without the State of Texas.
SEC. 3:3. REGULAR MEETINGS; NOTICE. Regular meetings of the Board
of Directors are to be held without notice immediately following the annual
meeting of shareholders and at the same place unless (by unanimous consent of
the directors then elected and serving) such time or place shall be changed.
SEC. 3:4. SPECIAL MEETINGS; NOTICE. Special meetings of the Board
of Directors may be called by the President on twenty-four (24) hours notice to
each director, either personally or by mail or telegram. Special meetings shall
be called by the President or Secretary in like manner and on like notice in
response to the written request of any two directors. Neither the business to
be transacted at, nor the purpose of, any special meeting of the Board of
Directors need be specified in the notice or waiver of notice of such meeting
unless required by these Bylaws. Attendance of a director at a meeting will
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
SEC. 3:5. QUORUM; MAJORITY VOTE. A majority of the number of
directors fixed by these Bylaws shall constitute a quorum for the transaction of
business. The act of the majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors, unless the
act of a greater number is required by the Articles
7
<PAGE>
of Incorporation or these Bylaws. If a quorum is not present at a meeting of
the Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, unless
a quorum is present.
SEC. 3:6. NUMBER; QUALIFICATION; ELECTION; TERM. The Board of
Directors shall consist of not less than three (3) nor more than fifteen (15)
directors. The number of directors may be increased or decreased by the
affirmative vote of the holders of not less than eighty percent (80%) of the
outstanding shares of Voting Common Stock of the corporation at any annual
meeting or at any special meeting called for that purpose, provided, however,
the number of directors shall in no event be less than three (3) nor more than
fifteen (15). The Board shall be divided into three (3) classes, Class I, Class
II, and Class III. The number of directors in each class shall be the whole
number contained in the quotient arrived at by dividing the authorized number of
directors by three and if a fraction is also contained in such quotient, then if
such fraction is one-third (1/3) the extra director shall be a member of Class
III and if the fraction is two-thirds (2/3) one of the directors shall be a
member of Class III and the other shall be a member of Class II. Each director
shall serve for a term ending on the third annual meeting following the annual
meeting at which such director was elected; provided, however, that the
directors first elected to Class I shall serve for a term ending on the annual
meeting next ensuing, the directors first elected to Class II shall serve for a
term ending on the second annual meeting following the meeting at which such
directors were first elected, and the directors first elected to Class III shall
serve a full term as hereinabove provided. The foregoing notwithstanding, each
director shall serve until his successor shall have been duly elected and
qualified unless he shall die,
8
<PAGE>
resign, become disqualified, disabled or shall otherwise be removed. At each
annual election, the directors chosen to succeed those whose terms then expire
shall be identified as being of the same class as the directors they succeed.
If for any reason the number of directors in the various classes shall not
conform with the formula set forth in the preceding paragraph, the Board of
Directors may redesignate any director into a different class in order that the
balance of directors in such classes shall conform thereto.
SEC. 3:7. REMOVAL AND VACANCIES OF DIRECTORS. Any director of the
Corporation may be removed from the Board, with or without cause, only by a vote
of the holders of not less than eighty percent (80%) of the outstanding shares
of Voting Common Stock entitled to vote thereon. Vacancies in the Board of
Directors by reason of death, resignation, an increase in the number of
directors, removal or other cause shall be filled by the vote of a majority of
the remaining directors although less than a quorum. A director so selected by
the remaining directors to fill a vacancy shall serve for the unexpired term of
and in the same class as the director whose position is vacated, unless the
person is selected to fill a vacancy created by an increase in the number of
directors, in which event the remaining directors shall fill such vacancy
consistent with the formula for classes of directors set forth in Section 3:6
above.
SEC. 3:8. ADVISORY DIRECTOR. The Board of Directors may appoint such
number of advisory directors as it shall from time to time determine. Each
advisory director appointed shall hold office for the term for which he is
elected or until his earlier death, resignation, retirement or removal by the
Board of Directors. The advisory directors may attend and be present at the
meetings of the Board of Directors, although a meeting of the
9
<PAGE>
Board of Directors may be held without notice to the advisory directors and the
advisory directors shall not be considered in determining whether a quorum of
the Board of Directors is present. The advisory directors shall advise and
counsel the Board of Directors on the business and operations of the Corporation
as requested by the Board of Directors; however, the advisory directors shall
not be entitled to vote on any matter presented to the Board of Directors.
SEC. 3:9. AMENDMENT OF THIS ARTICLE III. Notwithstanding the
provisions of Section 7:12 of these Bylaws with respect to amendment of the
Bylaws, Article III of the Bylaws of the Corporation relating to a Classified
Board, may not be amended, altered, changed or repealed in any respect unless
such action is approved by the affirmative vote of the holders of not less than
eighty percent (80%) of the outstanding shares of Voting Common Stock.
SEC. 3:10. PROCEDURE. The Board of Directors shall keep regular
minutes of its proceedings. The minutes are to be placed in the minute book of
the Corporation.
SEC. 3:11. COMPENSATION. By resolution of the Board of Directors,
the directors may be paid their expenses, if any, of attendance at each meeting
of the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as a director. No such
payment will preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of the executive
committee or of special or standing committees may, by resolution of the Board
of Directors, be allowed like compensation for attending committee meetings.
10
<PAGE>
SEC. 3:12. ACTION WITHOUT MEETING. Unless otherwise restricted by
the Articles of Incorporation or these Bylaws, any action required or permitted
to be taken at a meeting of the Board of Directors may be taken without a
meeting if a consent in writing, setting forth the action so taken, is signed by
all the members of the Board of Directors. Such consent will have the same
force and effect as a unanimous vote at a meeting. Any such signed consent, or
a signed copy thereof, is to be placed in the minute book of the Corporation.
Further, but subject to the provisions required or permitted for notice of
meetings, the directors may participate in and hold a meeting of such directors
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 pursuant to this provision will constitute presence
in person at such meeting except where a person participates in the meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
ARTICLE IV
OFFICERS
SEC. 4:1. NUMBER AND QUALIFICATION. The officers of the
Corporation shall consist of a Chairman of the Board, Chief Executive Officer,
President, a Secretary, and a Treasurer, each of whom shall be elected by the
Board of Directors on the expiration of an officer's term or whenever a vacancy
exists. The Corporation may also have such other officers (including
Vice-Presidents, Assistant Secretaries and Assistant Treasurers) and assistant
officers and agents as the Board of Directors may deem necessary, each of whom
may be elected by the Board at any meeting. Any two or more offices may be held
by the
11
<PAGE>
same person. No officer shall execute, acknowledge, verify or countersign any
instrument on behalf of the Corporation in more than one capacity, if such
instrument is required by law, by these Bylaws, or by any act of the Corporation
to be executed, acknowledged, verified or countersigned by two or more officers.
No officer or agent need be a director, and no officer or agent need be a
shareholder, or a resident of the State of Texas.
SEC. 4:2. TERM AND COMPENSATION. Unless otherwise specified by the
Board at the time of election or appointment or in an employment contract
approved by the Board, each officer's and agent's term is to end at the first
meeting of directors held after the next annual meeting of the shareholders.
Such officer or agent shall serve until the end of such person's term or, if
earlier, such person's death, resignation, or removal. The compensation of
officers and agents is to be fixed from time to time by the Board of Directors.
SEC. 4:3. REMOVAL; VACANCIES. Any officer or agent elected or
appointed by the Board of Directors may be removed by the Board of Directors
whenever in its judgment the best interests of the Corporation will be served
thereby, but such removal will be without prejudice to the contract rights, if
any, of the person so removed. Election or appointment of an officer or agent
will not of itself create contract rights. Any vacancy occurring in any office
of the Corporation (by death, resignation, removal, or otherwise) may be filled
by the Board of Directors.
SEC. 4:4. AUTHORITY. All officers and agents of the Corporation,
as between themselves and the Corporation, will have such authority and perform
such duties
12
<PAGE>
in the management of the Corporation as may be provided in these Bylaws or as
may be determined by resolution of the Board of Directors not inconsistent with
these Bylaws.
SEC. 4:5. CHAIRMAN OF THE BOARD. The Board of Directors may elect a
Chairman of the Board. The Chairman of the Board shall preside at all meetings
of the directors and shareholders. When designated as such by the Board, the
Chairman of the Board shall be the Corporation's Chief Executive Officer.
SEC. 4:6. PRESIDENT. The President shall have general charge over
the affairs of the Corporation. When the Chairman of the Board is designated as
Chief Executive Officer, the President shall be subject to the direction of the
Chairman of the Board. If the Chairman is not designated as Chief Executive
Officer, then the President shall be Chief Executive Officer, subject only to
the direction of the Board of Directors. The President shall, in any case, be
the Chief Operating Officer of the Corporation.
SEC. 4:7. VICE PRESIDENT/SENIOR OR EXECUTIVE VICE PRESIDENT. Each
Vice President shall perform such duties as may be assigned to him by the
Chairman or the President. A Senior or Executive Vice President may be
designated as such based upon tenure or responsibility.
SEC. 4:8. SECRETARY. The Secretary shall be ex-officio Secretary
of the Board of Directors, shall give or cause to be given all required meeting
notices to the shareholders and directors, shall record all proceedings of the
meetings of the shareholders and directors in a book to be kept for that
purpose; and shall perform such other duties as may be assigned to him by the
Board of Directors; he shall have custody of the seal of the Corporation and
shall affix the same to any instrument when duly authorized to do so and
13
<PAGE>
attest the same, and he shall be sworn to the faithful discharge of his duties.
This office may be combined with the office of Treasurer.
SEC. 4:9. TREASURER. The Treasurer shall keep account of all
monies of the Corporation received or disbursed, and shall deposit all monies
and valuables in the name and to the credit of the Corporation in such banks and
depositories as the Board of Directors shall designate. This office may be
combined with any other office of the Corporation.
ARTICLE V
CERTIFICATES OF STOCK
SEC. 5:1. CERTIFICATES. The Corporation shall deliver certificates
representing all shares to which shareholders are entitled; and such
certificates shall be signed by the President and by the Secretary, or such
other officers as the Directors of the Corporation may prescribe, and may be
sealed with the seal of the Corporation or a facsimile thereof. The signatures
of such officer or officers upon a certificate may be facsimiles if the
certificate is countersigned by a transfer agent or registered by a registrar,
either of which is other than the Corporation itself or an employee of the
Corporation. In case any officer who has signed or whose facsimile signature
has been placed upon such certificate ceases to be such officer before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer at the date of its issuance. Each
certificate representing shares is to state upon the face thereof: (A) that the
Corporation is organized under the laws of the State of Texas; (B) the name of
the person to whom issued; (C) the number and class of shares and the
designation of the
14
<PAGE>
series, if any, which such certificate represents; and (D) the par value of each
share represented by such certificate or a statement that the shares are without
par value.
SEC. 5:2. ISSUANCE. Shares (both treasury and authorized but
unissued) may be issued for such consideration (not less than par value) and to
such persons as the Board of Directors may from time to time determine. Shares
may not be issued until the full amount of the consideration, fixed as provided
by law, has been paid.
SEC. 5:3. PAYMENT FOR SHARES. The consideration paid for the
issuance of shares is to consist of any tangible or intangible benefit to the
Corporation, including cash, promissory notes, services performed, contracts for
services to be performed, or property (tangible or intangible) actually
received. In the absence of fraud in the transaction, the judgment of the Board
of Directors as to the value of the consideration received for shares will be
conclusive. When such consideration has been paid to the Corporation, the
shares will be deemed to have been issued, the shareholder entitled to receive
such issue will be a shareholder with respect to such shares, and the shares
will be considered fully paid and nonassessable. The consideration received for
shares will be allocated by the Board of Directors in accordance with law
between stated capital and capital surplus accounts.
SEC. 5:4. NO PREEMPTIVE RIGHTS. No shareholder or other person may
have any preemptive rights whatsoever to acquire additional, unissued, or
treasury shares of the Corporation, or securities of the Corporation convertible
into or carrying a right to subscribe to or acquire shares, or any other
securities or property whatsoever.
15
<PAGE>
SEC. 5:5. LIEN. For any indebtedness of a shareholder to the
Corporation, the Corporation will have a first and prior lien on all shares of
its stock owned by such shareholder and on all dividends or other distributions
declared thereon.
SEC. 5:6. LOST, STOLEN, OR DESTROYED CERTIFICATES. The Corporation
shall issue a new certificate in place of any certificate for shares previously
issued if the registered owner of the certificate: (A) makes proof in affidavit
form that it has been lost, destroyed, or wrongfully taken; (B) requests the
issuance of a new certificate before the Corporation has notice that the
certificate has been acquired by a purchaser for value in good faith and without
notice of an adverse claim; (C) gives a bond in such form, and with such surety
or sureties, with fixed or open penalty as the Corporation may direct, to
indemnify the Corporation (and its transfer agent and registrar, if any) against
any claim that may be made on account of the alleged loss, destruction, or theft
of the certificate; and (D) satisfies any other reasonable requirements imposed
by the Corporation. When a certificate has been lost, apparently destroyed, or
wrongfully taken, and the holder of record fails to notify the Corporation
within a reasonable time after such holder has notice of it, and the Corporation
registers a transfer of the shares represented by the certificate before
receiving such notification, the holder of record is precluded from making any
claim against the Corporation for the transfer or for a new certificate.
SEC. 5:7. REGISTERED OWNER. Prior to due presentment for
registration of transfer of a certificate for shares, the Corporation may treat
the registered owner as the person exclusively entitled to vote, to receive
notices, and otherwise to exercise all the rights and powers of a shareholder.
16
<PAGE>
SEC. 5:8. REGISTRATION OF TRANSFER. The Corporation shall register
the transfer of a certificate for shares presented to it for transfer if: (A)
the certificate is properly endorsed by the registered owner or by such owner's
duly authorized attorney; (B) the signature of such person has been guaranteed
by a national banking association or member of a national stock exchange, and
reasonable assurance is given that such endorsements are effective; (C) the
Corporation has no notice of an adverse claim or has discharged any duty to
inquire into such a claim; and (D) any applicable law relating to the collection
of taxes has been complied with.
ARTICLE VI
EXECUTIVE COMMITTEE
SEC. 6:1. DESIGNATION; AUTHORITY; RESPONSIBILITY. The Board of
Directors may, by resolution adopted by a majority of the full Board of
Directors fixed by the Bylaws, designate from among its members an executive
committee and one or more other committees, each of which shall be comprised of
one or more members and, to the extent provided in such resolution will have and
may exercise all of the authority of the Board of Directors, except that no such
committee may have the authority of the Board of Directors to amend the Articles
of Incorporation, approve a plan of merger or consolidation, recommend to the
shareholders the sale, lease, or exchange of all or substantially all of the
property and assets of the Corporation otherwise than in the usual and regular
course of its business, recommend to the shareholders a voluntary dissolution of
the Corporation or a revocation thereof, amend, alter, or repeal the Bylaws of
the Corporation or adopt new Bylaws for the Corporation, fill vacancies in or
remove members of the Board of Directors
17
<PAGE>
of any such committee, fix the compensation of any member of such committee, or
alter or repeal any resolution of the Board of Directors which by its terms
provides that it is not so amendable or repealable; and, unless such resolution,
the Articles of Incorporation, or these Bylaws of the Corporation expressly so
provide, no such committee may declare a dividend or authorize the issuance of
shares of the Corporation. The designation of such committee and the delegation
thereto of authority will not operate to relieve the Board of Directors or any
member thereof of any responsibility imposed by law.
SEC. 6:2. PROCEDURE; REMOVAL; VACANCIES. The executive committee
shall keep regular minutes of its proceedings and report the same to the Board
of Directors when required. The minutes of the proceedings of the executive
committee are to be placed in the minute book of the Corporation. Any member of
the executive committee elected or appointed by the Board of Directors may be
removed by the Board of Directors whenever in its judgment the best interests of
the Corporation will be served thereby. A vacancy occurring in the executive
committee (by death, resignation, removal, or otherwise) may be filled by the
Board of Directors in the manner provided above for original designation.
SEC. 6:3. MEETINGS; QUORUM; MAJORITY VOTE. The time, place, and
notice (if any) of executive committee meetings shall be determined by the
executive committee. At meetings of the executive committee, a majority of the
number of members designated by the Board of Directors will constitute a quorum
for the transaction of business. The act of a majority of the members present
at any meeting at which a quorum is present will be the act of the executive
committee except as otherwise specifically provided by statute or by the
Articles of Incorporation or by these Bylaws. If a quorum is not present at a
meeting
18
<PAGE>
of the executive committee, the members present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum is present.
SEC. 6:4. ACTION WITHOUT MEETING. Any action required or permitted
to be taken at a meeting of the executive committee may be taken without a
meeting if a consent in writing, setting forth the action so taken, is signed by
all the members of the executive committee. Any such signed consent, or a
signed copy thereof, is to be placed in the minute book of the Corporation.
Further, but subject to the provisions required or permitted for notice of
meetings, the members of the executive committee may participate in and hold a
meeting of such members of the executive 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
pursuant to this provision will constitute presence in person at such meeting
except where a person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SEC. 7:1. NOTICE. Whenever by statute, the Articles of
Incorporation, or these Bylaws notice is required to be given to a director or
shareholder, and no provision is made as to how the notice is to be given, it is
not to be construed to mean personal notice, but any notice may be given (A) in
writing, by mail, sufficient postage prepaid, addressed to the director or
shareholder at the address appearing on the books of the
19
<PAGE>
Corporation, or (B) in any other method permitted by law. Any notice required
or permitted to be given by mail will be deemed given at the time when the same
is deposited in the United States mail. Whenever any notice is required to be
given to a shareholder or director of the Corporation under the provisions of
the Texas Business Corporation Act or under the provisions of the Articles of
Incorporation or these Bylaws, a waiver thereof in writing signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, will be equivalent to the giving of such notice.
SEC. 7:2. FISCAL YEAR AND SEAL. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors. The corporate seal (of
which there may be one or more exemplars) shall contain the name of the
Corporation and the name of the state of incorporation. The seal may be used by
impressing it or reproducing a facsimile of it or otherwise.
SEC. 7:3. CHECKS AND NOTES; BOOKS AND RECORDS. All checks or
demands for money and notes of the Corporation are to be signed by such officer
or officers or such other person or persons as the Board of Directors may from
time to time designate. The Corporation shall keep correct and complete books
and records of account, shall keep minutes of the proceedings of its
shareholders and Board of Directors, and shall keep at its registered office or
principal place of business, or at the office of its transfer agent or
registrar, a record of its shareholders giving the names and addresses of all
shareholders and the number and class of the shares held by each. Any books,
records, and minutes may be in written form or in any other form capable of
being converted into written form within a reasonable time.
20
<PAGE>
SEC. 7:4. RESIGNATION. Any director, officer, or agent may resign
by giving written notice to the President or the Secretary. Any such
resignation will become effective at the time specified therein or immediately
if no time is specified therein. Unless otherwise so specified, the acceptance
of such resignation will not be necessary to make it effective.
SEC. 7:5. INTERESTED DIRECTORS, OFFICERS, SHAREHOLDERS.
(A) If paragraph (B) below is satisfied, no contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other Corporation, partnership,
association or other organization in which one or more of the Corporation's
directors or officers are directors or officers or have a financial interest,
shall be void or voidable solely for this reason, solely because the director or
officer is present at or participates in the meeting of the Board of Directors
or committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose.
(B) Paragraph (A) above will apply only if:
(1) The contract or transaction is fair to the
Corporation as of the time it is authorized, approved, or ratified by the Board
of Directors, a committee of the board, or the shareholders; or
(2) The material facts as to the relationship or
interest of the director or officer and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
or committee in good faith authorizes
21
<PAGE>
the contract or transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
(3) The material facts as to the relationship or
interest of the director or officer and as to the contract or transaction are
disclosed or are known to the shareholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by a vote of the
shareholders.
(C) For purposes of paragraphs (A) and (B) above, common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
SEC. 7:6. LIMITATION OF LIABILITY. No Director of the Corporation
shall be personally liable to the Corporation or its shareholders for monetary
damages for any act or omission in the Director's capacity as a director, except
to the extent otherwise expressly provided by statute of the State of Texas.
Any repeal or modification of this Article shall be prospective only, and shall
not adversely affect any limitation of the personal liability of a Director of
the Corporation existing at the time of the repeal or modification.
SEC. 7:7. INDEMNIFICATION. The Corporation shall, to the maximum
extent permitted from time to time under the laws of the State of Texas,
indemnify and upon request shall advance expenses to any person who is or was a
party to any threatened, pending, or completed action, suit, proceeding, or
claim, whether civil, criminal, administrative or investigative, by reason of
the fact that he or she is or was or has agreed to be a trustee, director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a trustee, director, officer, partner, venturer or proprietor of
another
22
<PAGE>
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees and expenses), judgments, fines, penalties
and amounts paid in settlement incurred in connection with the investigation,
preparation to defend or defense of any such action, suit, proceeding or claim.
Such indemnification shall not be exclusive of any other indemnification rights
arising under any bylaw,
23
<PAGE>
agreement, vote of Directors or shareholders or otherwise and shall inure to
the benefit of the heirs and legal representations of such person. Any
repeal or modification of this Section shall be prospective only, and shall
not adversely affect any rights to indemnification of any such person
existing at the time of the repeal or modification.
SEC. 7:8. DIVIDENDS AND RESERVES. Subject to statute and the
Articles of Incorporation, dividends may be declared by the Board of
Directors at any regular or special meeting and may be paid in cash, in
property, or in shares of the Corporation. The declaration and payment will
be at the discretion of the Board of Directors. By resolution the Board of
Directors may create such reserve or reserves out of the earned surplus of
the Corporation as the directors from time to time in their discretion think
proper to provide for contingencies, to equalize dividends, to repair or
maintain any property of the Corporation, or for any other purpose they
believe to be beneficial to the Corporation. The directors may modify or
abolish any such reserve in the manner in which it was created.
SEC. 7:9. PURCHASE OWN SHARES. The Corporation may, directly or
indirectly, purchase its own shares to the extent of the aggregate of
unrestricted capital surplus available therefor and unrestricted reduction
surplus available therefor.
24
<PAGE>
SEC. 7:10. ANNUAL STATEMENT. At least ten (10) days before each
annual meeting, the Board of Directors shall mail to each shareholder of record
a full and clear statement of the business and condition of the Corporation
including a reasonably detailed balance sheet, income statement, and surplus
statement, all prepared in conformity with generally accepted accounting
principles applied on a consistent basis.
SEC. 7:11. CONSTRUCTION. Whenever the context so requires, the
masculine will include the feminine and neuter, and the singular will include
the plural, and conversely. If any portion of these Bylaws is determined
invalid or inoperative, then, so far as is reasonable and possible, the
remainder of these Bylaws is to be considered valid and operative, and effect is
to be given to the intent manifested by the portion held invalid or inoperative.
The table of contents and headings used in these Bylaws have been inserted for
convenience only and do not constitute matters to be construed in
interpretation.
SEC. 7:12. AMENDMENT OF BYLAWS. These Bylaws may be altered,
amended, or repealed at any meeting of the Board of Directors at which a quorum
is present by the affirmative vote of a majority of the directors present at
such meeting, provided notice of the proposed alteration, amendment, or repeal
is contained in the notice of such meeting.
- END OF BYLAWS -
25
<PAGE>
I, the undersigned, being the Secretary of the Corporation DO HEREBY
CERTIFY THAT the foregoing, consisting of 25 pages total, are the Bylaws of
First Command Financial Corporation, as adopted by the unanimous written consent
of the Board of Directors of said Corporation effective April 3, 1998, and as
amended by the unanimous written consent of the Board of Directors of said
Corporation effective _____________, 1998.
-----------------------------------
Robert F. Watson, Secretary
26
<PAGE>
ANNEX F
TAX OPINION OF ERNST & YOUNG LLP
F-1
<PAGE>
e r Mergers & Acquisitions r Southwest Area/Dallas
July 6, 1998
Board of Directors
Independent Research Agency for Life Insurance, Inc.
USPA & IRA Building
4100 South Hulen Street
P.O. Box 2387
Fort Worth, TX 76113
Gentlemen:
Pursuant to your request, we submit this memorandum setting forth our opinion
with respect to certain U.S. federal income tax consequences that should
arise from the (i) proposed merger (the "Proposed Merger") of Independent
Research Agency for Life Insurance, Inc. ("IRA") with and into First Command
Financial Corporation ("First Command") pursuant to the Agreement and Plan of
Merger, dated July 1, 1998, and (ii) implementation by IRA prior to and
separate from Proposed Merger, of the proposed deferred compensation plan, as
described below.
In rendering the opinions expressed below, we have relied upon the completeness,
truth and accuracy, at all relevant times, of the following documents
(collectively, the "Documents"):
1. The Agreement and Plan of Merger, dated July 1, 1998, by and between IRA
and First Command;
2. The Preliminary Proxy Statement, dated July 6, 1998, to be furnished to the
shareholders of IRA in connection with the special meeting of shareholders;
3. The Statement of Facts and Representations, dated July 1, 1998, issued by
authorized representatives of IRA and First Command to Ernst & Young LLP;
4. Form of Shareholders' Agreement;
5. Form of Restated Articles of Incorporation, as proposed to be amended;
6. The Mission Accomplishment Plan for a Select Group of Management of
Independent Research Agency for Life Insurance, Inc., the Mission
Accomplishment Plan for Agents of Independent Research Agency for Life
Insurance, Inc., the Mission Accomplishment Plan for a Select Group of
Highly Compensated Employees of Independent Research Agency for Life
Insurance, Inc., and the Mission Accomplishment Plan for a Select Group of
Key Employees of Independent Research Agency for Life Insurance, Inc.
(collectively, the "MAP");
7. The IRA MAP Board Grant Declaration and Administrative Policies; and
<PAGE>
Independent Research Agency for Life Insurance, Inc.
First Command Financial Corporation Page 2
8. The MAP Award Agreement entered into by and between participating
individuals and IRA, and the accompanying MAP Certificate and Plan Summary.
Additionally, in rendering the opinions expressed below, you have represented to
us and we are relying upon, without any independent investigation or review
thereof, that the following are true:
1. The authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as
copies, and the authenticity of the originals of such documents; and
2. The genuineness of all signatures, the due authorization, execution, and
delivery of all relevant documents by all parties thereto, and the due
authority of all persons executing such documents.
Authorized representatives of IRA and First Command have represented to us that
the Documents provide a complete and accurate description of the facts and
circumstances surrounding the Proposed Merger. We have made no independent
investigation of such facts and circumstances, and any change or modification to
such facts and circumstances or to the Documents may materially affect the
opinions expressed herein.
STATEMENT OF BUSINESS PURPOSE
Authorized representatives of IRA and First Command have represented to us that
the primary business purpose for the Proposed Merger is to de-register the Class
B stock under the Securities Exchange Act of 1934 (the "Exchange Act"), which
will allow IRA to avoid the reporting requirements of the Exchange Act. IRA
currently incurs significant costs related to its status as a public reporting
corporation under the federal securities laws, including indirect costs arising
from, among other things, the time and effort expended by executives of the
company preparing and reviewing public filings, furnishing information to
shareholders, and attending to various other shareholder matters. IRA
anticipates that the termination of its registration under the Exchange Act will
eliminate such significant costs and expenses (both direct and indirect) arising
from various regulatory and reporting requirements imposed by federal securities
laws.
An additional business purpose for the Proposed Merger is to achieve
administrative simplicity and reduce the compliance responsibilities that
would be present if both IRA and First Command operated as separate S
corporations going forward.
<PAGE>
Independent Research Agency for Life Insurance, Inc.
First Command Financial Corporation Page 3
STATEMENT OF FACTS AS REPRESENTED BY IRA
BACKGROUND
IRA, a Texas corporation, was formed in December, 1980, as a Texas insurance
agency. IRA began operations in March, 1981, upon the receipt of all the assets
and liabilities of Independent Research Agency for Life Insurance, a Texas
general partnership. Included in the transfer of the assets and liabilities
from the general partnership to IRA was all the outstanding stock of Independent
Research Agency for Life Insurance, Inc., a Hawaii corporation.
In March, 1981, IRA acquired all the outstanding stock of United States Planning
Association, Inc. ("USPA"), a Texas corporation. IRA subsequently organized
several operating subsidiaries which currently operate in Wyoming, Montana, New
York, Nevada, and Alabama. All IRA subsidiaries (the "IRA Subsidiaries") except
USPA and First Command Bank ("FCB") were formed and are being maintained to
permit IRA to do business in those states in which the entities are registered
to do business. Neither IRA nor any IRA Subsidiary is, or at any relevant time
has been, a life insurance company within the meaning of Treas. Reg. Section
1.801-3.
IRA and the IRA Subsidiaries (excluding USPA and FCB) are engaged in the sale of
insurance products to United States active duty and former commissioned, warrant
and noncommissioned military personnel. IRA and the IRA Subsidiaries (excluding
USPA and FCB) conduct their business through independent contractors (typically
referred to as "agents") located in approximately 149 cities throughout the
United States, in one U.S. territory, and in three foreign countries. All IRA
Subsidiaries are, and at all relevant times have been, wholly-owned by IRA.
USPA acts as a broker/dealer of several widely-owned mutual funds pursuant to
written agreements with certain investment companies. Such agreements give USPA
the non-exclusive right to sell shares of such mutual funds through USPA agents
and/or the agents of IRA. USPA is, and its selling agents are, registered with
the Securities and Exchange Commission ("SEC") and the National Association of
Securities Dealers, Inc.
In November of 1996, IRA received approval from the Office of Thrift Supervision
to organize and operate a federal savings bank. In March of 1997, IRA formed
FCB as a wholly-owned first-tier subsidiary. FCB commenced banking operations
on April 21, 1997. FCB makes commercial and consumer loans and receives
deposits primarily from clients of IRA and the IRA Subsidiaries. FCB is a bank
as defined in Section 581 of the Internal Revenue Code of 1986, as amended (the
"IRC").
<PAGE>
Independent Research Agency for Life Insurance, Inc.
First Command Financial Corporation Page 4
IRA and the IRA Subsidiaries share common employees, sales agents and
representatives, and office facilities. The home offices of IRA and the IRA
Subsidiaries are located in Fort Worth, Texas.
STOCKHOLDER'S EQUITY
IRA has, and at all relevant times has had, two classes of common stock
outstanding - Class A and Class B. IRA does not currently have, nor at any
relevant time has it had, any preferred stock issued and outstanding. IRA does
not currently have, nor at any relevant time has it had, any outstanding
options, warrants, or convertible debt instruments.
Class A common stock is VOTING common stock. There are currently 25 shares of
Class A voting common stock issued and outstanding, all of which are owned by 14
individuals. Carroll Payne, II, the son of IRA's founder, and persons related
to Carroll Payne, II own 12 shares (48% of the vote and value) of the Class A
common stock.(1) Members of the Board of Directors of IRA (unrelated to Carroll
Payne, II) own 10 shares (40% of the vote and value) of the Class A common
stock. The remaining three shares are owned by other unrelated individuals.
All owners of Class A common stock have owned their respective shares for at
least two years except one Class A shareholder who purchased her one share of
Class A stock in December of 1997 from a retiring Class A shareholder, and one
Class A shareholder who purchased his one share of Class A stock in March of
1998. As of June 15, 1998, the individuals owning Class A common stock also own
approximately 38% of the Class B common stock.
The Class B common stock is NONVOTING common stock. As of September 30, 1997,
there were approximately 1,053,357 shares of Class B common stock issued and
outstanding, which were owned by approximately 549 individuals. The Class B
shares are registered with the SEC pursuant to Section 12(g) of the Exchange
Act. A majority of the Class B shareholders are independent insurance agents
through which IRA sells its products. IRA has historically paid a substantial
portion of its annual operating profits to its stockholders in the form of an
annual dividend. Substantially all the owners of Class B common stock have
owned their respective shares for at least two years.
All shares of issued and outstanding IRA common stock are subject to varying
degrees of limited transferability, and, according to IRA legal counsel, cannot
be owned by persons other than insurance agents licensed in the State of Texas.
The stock owned by the Payne family members described in footnote 1, supra (the
"Payne Family Members"), are subject to a stock agreement, dated March 22, 1983
(the
- --------------------------
(1) Carroll Payne, II currently owns three shares of the Class A common stock.
Naomi Payne and Debra Payne, Carroll's sisters, each own three shares of the
Class A common stock, and Freda Payne, Carroll's stepmother, owns an additional
three shares of such stock.
<PAGE>
Independent Research Agency for Life Insurance, Inc.
First Command Financial Corporation Page 5
"Payne Family Stock Agreement"), between such family members and IRA that
provides (among other things) that in the event a Payne Family Member desires to
sell or otherwise dispose of all or any portion of his or her Class A common
stock, or in the event of the death of a Payne Family Member, the other Payne
Family Members shall have the option to purchase such shares, on a proportionate
basis, for a period of sixty (60) days. If the other Payne Family Members
choose not to exercise their right of first refusal with respect to the Class A
stock, the Payne Family Stock Agreement provides that IRA shall purchase such
stock. With respect to the Class B stock, the Payne Family Stock Agreement
provides that, in the event a Payne Family Member desires to sell any Class B
common stock, IRA has a right of first refusal with respect to such stock and if
it fails to exercise such right, the person to whom Class B common stock is
offered must be a properly licensed insurance agent under contract with IRA and
must execute a stock agreement with IRA limiting his or her ownership and
transferability rights.
The owners of Class A common stock who are not Payne Family Members are subject
to a stock agreement (the "Class A Stock Agreement") pursuant to which (among
other things) IRA has the right to acquire the Class A stock within a period of
ninety (90) days in the event the shareholder (i) fails to continue as a
licensed insurance agent, (ii) ceases to be a duly authorized agent of IRA,
(iii) dies, or (iv) desires to sell his or her shares. The terms of the Class A
Stock Agreement provide that IRA, in its sole discretion, shall annually
determine the price at which IRA will repurchase any Class A shares.
The owners of Class B common stock who are not Payne Family Members are subject
to a stock agreement (the "Class B Stock Agreement") pursuant to which the Class
B stock will be repurchased by IRA, within ninety (90) days, if the shareholder
(i) fails to continue as a licensed insurance agent, (ii) ceases to be a duly
authorized agent of IRA, (iii) dies, or (iv) desires to sell or dispose of his
or her shares. The terms of the Class B Stock Agreement provide that IRA, in
its sole discretion, shall annually determine the price at which IRA will
repurchase any Class B shares.(2)
SAR AND DER PLAN
On June 27, 1998, IRA's Board of Directors approved and adopted the MAP. The
primary purpose of the MAP is to provide agents and a select group of key
employees and independent contractors of IRA (and its affiliates) an opportunity
to participate in the success of IRA. Under the MAP, IRA will award "stock
appreciation rights" ("SARs") along with "dividend equivalent rights" ("DERs")
to agents and employees for services rendered. A SAR is the right to
participate in the undistributed earnings of IRA.
- --------------------------
(2) The Class B common stock has an expected redemption price as of September
30, 1998, as determined by the Board of Directors in accordance with the
Class B Stock Agreement, of $28.24 per share. The Class A common stock has
an expected redemption price as of September 30, 1998, as determined by the
Board of Directors in accordance with the Class A Stock Agreement, of five
times that of the Class B stock.
<PAGE>
Independent Research Agency for Life Insurance, Inc.
First Command Financial Corporation Page 6
A DER is the right to participate when the Board of Directors declares a
dividend equivalent based upon the earnings of IRA. The number of SAR/DER units
that are awarded will vary from time to time as determined by IRA in its sole
discretion. Participation in the MAP is limited to agents, a select group of
management employees, and certain other key employees of IRA ("Participants") as
determined from time to time by the Board of Directors in its sole discretion
for services rendered.
There are two types of MAP awards: (1) a SAR which increases in value as
determined by IRA, and (2) a DER that participates in an annual cash dividend
equivalent declared by the Board. The Board will grant a Participant one or
more MAP Units for services rendered, each of which refers collectively to a
single SAR unit and a single DER unit. IRA will determine annually the number
of MAP Units to grant based on IRA's Future Incentive Commission needs, Profit
Sharing Plan needs, and other factors. The value of each SAR will be
established no less frequently than annually.
At the end of the exercise period or following separation of service, SAR
holders are entitled to exercise their rights to receive a cash payment equal to
the difference between (1) the per SAR unit value determined by IRA as of the
last day of the calendar quarter during which the participant provides the Plan
Administrator with a written request for a cash payment on an approved form,
less (2) the per SAR unit value as of the date of grant. A DER unit is
exercised when the Board declares a cash dividend equivalent to be paid before
the end of the plan year.
SARs and DERs may not be transferred, pledged, assigned, or otherwise encumbered
in any manner except as specified in the MAP Agreement. There will be no
separate account, fund, trust, insurance policy, or other source of funding
related to the grant of SARs or DERs under the MAP. Payment of SAR awards will
be made in cash from the general assets of IRA. IRA may maintain and transfer
property to satisfy obligations arising under a DER. The Board, in its sole and
absolute discretion, has the power to interpret and administer the MAP
including, but not limited to, setting MAP policy, determining award amounts,
and determining valuation methods.
FIRST COMMAND FINANCIAL CORPORATION
IRA currently owns land adjacent to its current headquarters on which IRA
intended to construct a parking garage (the "Facilities"). In April, 1998, Lamar
Smith, Jim Lanier, Howard Crump and Carroll Payne, II formed First Command with
the intention that First Command would construct the Facilities.(3) In June of
1998, Carroll Payne gifted 25 shares of First Command stock to Freda Payne. It
was anticipated that First Command would rent parking spaces to current and
future tenants leasing space in IRA's building, and that
- --------------------------
(3) The individuals who formed First Command were (and are) members of the
Executive Committee of IRA and currently hold both Class A and Class B common
stock of IRA.
<PAGE>
Independent Research Agency for Life Insurance, Inc.
First Command Financial Corporation Page 7
the remaining parking spaces would be rented to IRA employees. The Board of
Directors of IRA believed it prudent (and continue to believe it prudent) to
utilize a separate legal entity to design, construct and operate the Facilities
in an effort to minimize IRA's legal liability risk with respect to such
activities.
First Command currently employs two full-time employees, has its own officers
and directors separate and distinct from IRA,(4) and, according to First Command
legal counsel, has complied with all corporate formalities necessary to be
respected as a separate legal entity for Texas law purposes. Authorized
representatives of First Command have entered into executory legal contracts for
the design and construction of the Facilities, and have executed a 99-year
ground lease with IRA with respect to the property upon which the Facilities
will be constructed. Construction of the Facilities began on June 20, 1998.
First Command anticipates hiring additional employees in the near future as
construction of the Facilities progresses and operations expand.
First Command has made a timely election under IRC Section 1362 to be treated as
an S corporation for federal income tax purposes.
PROPOSED ACTION STEPS
For the business purposes stated above, the Board of Directors of IRA and the
Board of Directors of First Command have decided to consolidate the operations
of IRA and First Command by effecting the Proposed Merger pursuant to the
following steps:
1. The operating assets and liabilities of First Command will be contributed
to a wholly-owned subsidiary of First Command prior to the Proposed Merger
in an effort to continue to segregate potential liabilities arising from
the parking garage from the assets of IRA. The subsidiary will be either a
single member limited liability company or will be a corporation that
elects under IRC Section 1361(b)(3) to be a qualified subchapter S
subsidiary.
2. First Command will obtain the financing (approximately $18 million) from
IRA necessary to effect the Proposed Merger. IRA will obtain financing
from an unrelated third-party lender (approximately $15 million).(5) In
the Proposed Merger, First Command will assume IRA's obligation to the
third-party lender.
3. IRA will merge (pursuant to Texas law) with and into First Command, with
First Command as the surviving corporation, in exchange for (i) First
Command voting
- --------------------------
(4) First Command's Board Members own stock of IRA and currently serve on either
IRA's Board of Directors or Executive Committee. Not all members of IRA's Board
of Directors and/or Executive Committee serve on First Command's Board. The
meetings of the Board of Directors of First Command and IRA are held at separate
times and are evidenced by separate minutes.
(5) Such financing will likely be supplied by Norwest Bank, N.A.
<PAGE>
Independent Research Agency for Life Insurance, Inc.
First Command Financial Corporation Page 8
common stock, (ii) First Command nonvoting common stock, and (iii)
approximately $18 million. As part of the Proposed Merger, (i) IRA's
Class A shareholders will exchange their IRA Class A stock solely for First
Command voting common stock (except to the extent any Class A shareholders
exercise dissenters rights and receive solely cash for their stock), (ii)
IRA's Class B shareholders who also own IRA Class A stock will exchange
their IRA Class B stock solely for First Command nonvoting common stock
(except to the extent such shareholders choose the cash option or
dissenters rights and receive cash for their stock), and (iii) IRA's
Class B shareholders who do not own IRA Class A stock will exchange their
IRA Class B stock solely for cash of approximately $28.24 per share
(without interest). The voting and nonvoting stock to be issued by First
Command will carry shareholder rights identical in all respects except for
the right to vote. The First Command shareholders immediately before
the Proposed Merger will continue to own their equity in First Command
after the Proposed Merger.
4. First Command will change its name to IRA.
5. First Command will make a timely election under IRC Section 1361(b)(3)
causing IRA Subsidiaries to be qualified subchapter S subsidiaries for
federal income tax purposes.
NEW SHAREHOLDERS' AGREEMENT
Authorized representatives of IRA have represented that in connection with the
Proposed Merger, the existing shareholder agreements will be terminated and a
new Shareholders' Agreement will be entered into by and between First Command
(which will have changed its name to IRA) and its shareholders. The new
Shareholders' Agreement will provide for, among other things, (i) restrictions
on the transfer of First Command stock that could cause First Command to exceed
the maximum number of shareholders permitted for an S corporation under the IRC,
(ii) a right of first refusal of First Command to purchase its stock from its
shareholders in the event of a sale or other disposition of such stock, the
death of a shareholder, any termination of marriage by death or divorce, any
threatened or actual bankruptcy of a shareholder for the purpose of protecting
the First Command's S election, the termination of a shareholder as a Texas life
insurance agent, or any threatened or actual levy by a creditor or claimant upon
First Command stock held by a shareholder, and (iii) certain provisions with
respect to the S corporation status of First Command. The new Shareholders'
Agreement will also provide that all First Command stock (voting and nonvoting)
will carry identical distribution and transfer rights, and that annual
distributions will be paid to shareholders to enable shareholders to pay federal
and state income tax resulting from the corporate income passed through to such
shareholders. Additionally, the new Shareholders' Agreement provides that no
binding agreement has been, or will be entered into altering a shareholder's
right to distribution or liquidation proceeds.
STATEMENT OF REPRESENTATIONS
<PAGE>
Independent Research Agency for Life Insurance, Inc.
First Command Financial Corporation Page 9
The following representations have been made by authorized representatives of
IRA and First Command, as reflected in the Statement of Facts and
Representations, dated July 1, 1998, with respect to the Proposed Merger:
a) The Proposed Merger will qualify as a statutory merger pursuant to
applicable provisions of the Texas Business Corporation Act.
b) The value of First Command stock and other consideration received by each
IRA shareholder will be approximately equal to the value of the IRA stock
surrendered in the exchange.
c) To the best knowledge and belief of the management of IRA, there is no plan
or intention on the part of the shareholders of IRA to sell, exchange, or
otherwise dispose of, reduce the risk of loss (by short sale or otherwise)
of the holding of, enter into any contract or other arrangement with
respect to, or consent to the sale or other disposition of (each of the
foregoing, a "disposition") a number of shares of First Command stock
received in the Proposed Merger that would reduce the IRA shareholders'
ownership of First Command stock to a number of shares having a value, as
of the date of the Proposed Merger, of less than 50% of the value of the
formerly outstanding IRA stock as of the same date. In addition, (i) there
has been no "disposition" of shares of IRA stock in anticipation of the
Proposed Merger and (ii) there is no plan or intention on the part of any
shareholders of IRA to effect a "disposition" of shares of IRA stock in
anticipation of the Proposed Merger. Moreover, (i) there has been no
distribution of property by IRA to a shareholder of IRA with respect to its
stock in anticipation of the Proposed Merger and (ii) there is no plan or
intention on the part of IRA to effect a distribution of property to a
shareholder of IRA with respect to its stock in anticipation of the
Proposed Merger. For purposes of this representation, IRA stock exchanged
for cash or other property, surrendered by dissenters, or exchanged for
cash in lieu of fractional shares of First Command stock have been treated
as outstanding IRA stock on the date of the Proposed Merger.
d) First Command has no plan or intention to reacquire any of its stock issued
in the Proposed Merger, other than pursuant to the right of first refusal
in Article III of the new Shareholders' Agreement.
e) There is no plan or intention to liquidate First Command; to merge First
Command with or into another corporation; or to cause First Command to sell
or otherwise dispose of any of the assets of IRA acquired in the Proposed
Merger, except for dispositions made in the ordinary course of business.
<PAGE>
Independent Research Agency for Life Insurance, Inc.
First Command Financial Corporation Page 10
f) The liabilities of IRA to be assumed by First Command and the liabilities
to which the assets of IRA are subject were incurred by IRA in the ordinary
course of business and are associated with the assets to be transferred.
g) Following the Proposed Merger, First Command will continue the historic
business of IRA or will use a significant portion of IRA's historic
business assets in a business.
h) There is no intercorporate indebtedness existing between IRA and First
Command which was acquired, or will be settled, at a discount.
i) Neither IRA nor First Command is an "investment company" as that term is
defined in IRC Section 368(a)(2)(F)(iii), or if either IRA or First Command
is an "investment company" pursuant to IRC Section 368(a)(2)(F)(iii),
neither is a company in which (i) more than 25% of the value of the
company's total assets is invested in the stock or securities of any one
issuer, nor in which (ii) more than 50% of the value of the company's
total assets is invested in the stock or securities of five or fewer
issuers, disregarding each company's ownership of its 50% or more owned
subsidiaries and deeming each company to own its ratable share of the
assets of each of such subsidiaries. For purposes of this representation,
the term "total assets" is defined in IRC Section 368(a)(2)(F)(iv).
j) The Class B nonvoting common stock of IRA constitutes stock for federal
income tax purposes.
k) IRA is not under the jurisdiction of a court in a Title 11 or similar case
within the meaning of IRC Section 368(a)(3)(A).
l) The total adjusted basis AND the fair market value of the assets of IRA to
be transferred by IRA to First Command will equal or exceed the sum of the
liabilities to be assumed by First Command plus the amount of the
liabilities to which the assets to be transferred are subject.
m) No options will be issued by IRA pursuant to any compensation plan prior to
or in connection with the Proposed Merger.
n) First Command will have a valid S election in effect at the time of the
Proposed Merger.
<PAGE>
Independent Research Agency for Life Insurance, Inc.
First Command Financial Corporation Page 11
o) IRA is not a financial institution eligible to use the reserve method of
accounting for bad debts as described in IRC Section 585.
p) At no relevant time has IRA been a life insurance company pursuant to
Subchapter L of the IRC.
q) At no relevant time has IRA had in effect an election pursuant to IRC
Section 936 (Puerto Rico and possession tax credit).
r) At no relevant time has IRA been a domestic international sales
corporation as defined in IRC Section 992(a).
s) All shareholders of IRA receiving stock in First Command pursuant to the
Proposed Merger are eligible S corporation shareholders with the meaning of
IRC Section 1361(b)(1).
t) The First Command nonvoting common stock issued in connection with the
Proposed Merger will have shareholder rights (in particular, rights to
distribution and liquidation proceeds) identical in all respects to the
shareholder rights of the First Command voting stock except for the right
to vote. No binding agreement has been, or will be entered into altering a
shareholder's right to distribution or liquidation proceeds.
u) The new Shareholder Agreement and the restrictions on the transfer of First
Command common stock reflected therein and in the Articles of Incorporation
(to which restrictions all First Command stock will be subject) do not have
as a principal purpose the avoidance of the "one class of stock"
requirement in IRC Section 1361(b)(1)(D).
v) At the time of the Proposed Merger or pursuant to the Proposed Merger,
neither IRA nor First Command will have issued a call option, warrant,
convertible debt or similar instrument, that is substantially certain to be
exercised by the holder and has a strike price substantially below the fair
market value of the underlying stock (other than the SARs or DERs issued
pursuant to the MAP).
<PAGE>
Independent Research Agency for Life Insurance, Inc.
First Command Financial Corporation Page 12
w) Compensation paid to any shareholder-employee of IRA (or any affiliate of
IRA) prior to or subsequent to the Proposed Merger will be for services
actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's-length for similar services.
x) Awards made under the MAP will be unfunded and unsecured obligations of IRA
and will not confer voting rights to participating individuals.
y) All MAP Participants who will receive awards under the MAP prior to or
pursuant to the Proposed Merger will either be employees or independent
contractors of IRA and will receive such awards in connection with the
performance of services to IRA or its subsidiaries. Subsequent to the
Proposed Merger, all MAP Participants will receive such awards in
connection with the performance of services to First Command or its
subsidiaries.
z) All compensation to be paid or accrued in connection with the MAP Units
will, after considering all other compensation to be paid or accrued,
constitute "reasonable compensation" as that term is defined in Treas. Reg.
Section 1.162-7 (and case law thereunder).
FEDERAL INCOME TAX CONSEQUENCES
Based on the foregoing statements of fact, business purpose and representations,
and based on the information set forth in the Documents, but subject to the
limitations and qualifications set forth in the Scope section below, it is our
opinion that:
1. The Proposed Merger should constitute a reorganization within the meaning
of IRC Section 368(a).
2. IRA and First Command should both be parties to the reorganization within
the meaning of IRC Section 368(b).
3. No gain or loss should be recognized by IRA upon the transfer of its assets
to First Command in exchange for First Command common stock, cash
(including cash in lieu of fractional shares and cash for dissenters, if
any), and the assumption by First Command of the liabilities of IRA (IRC
Section 361; IRC Section 357(a)).
4. No gain or loss should be recognized by First Command upon the issuance of
its common stock as partial consideration for the assets of IRA (IRC
Section 1032(a)).
5. The basis of the assets of IRA in the hands of First Command should be the
same as the basis of such assets in the hands of IRA immediately prior to
the Proposed Merger (IRC Section 362(b)).
6. The holding period of the assets of IRA in the hands of First Command
should include the holding period of such assets in the hands of IRA
immediately prior to the Proposed Merger (IRC Section 1223(2)).
7. No gain or loss should be recognized by an IRA shareholder upon the
exchange of his or her IRA stock solely for First Command stock (IRC
Section 354(a)).
<PAGE>
Independent Research Agency for Life Insurance, Inc.
First Command Financial Corporation Page 13
8. Provided that he or she is not related, under the constructive ownership
rules of IRC Section 318, to any First Command shareholder after the
Proposed Merger, an IRA shareholder who exchanges his or her IRA stock
solely for cash should recognize capital gain (or capital loss) to the
extent the cash received exceeds (or is exceeded by) the basis in his or
her IRA shares (IRC Section 302(b)).
9. The basis of First Command common stock received by an IRA shareholder
should be the same as his or her basis in the IRA stock surrendered in the
exchange, decreased by the amount of cash or the fair market value of boot
received, if any, and increased by any gain recognized on the exchange (IRC
Section 358(a)).
10. The holding period of First Command stock received by an IRA shareholder
should include the period during which the IRA shareholder held the IRA
stock surrendered in the exchange (provided the IRA stock was a capital
asset in the hands of such shareholder on the date of the exchange (IRC
Section 1223(1)).
11. The Proposed Merger should not constitute a reorganization under IRC
Section 368(a)(1)(F).
12. The conversion of SARs and DERs of IRA into SARs and DERs of First Command
should not constitute boot in the Proposed Merger. Consequently, those
individuals owning IRA SARs and DERs immediately prior to the Proposed
Merger should not recognize gain or loss on the exchange of such SARs and
DERs for First Command SARs and DERs.
13. The S election currently in effect for First Command should remain in
effect during the Proposed Merger, and the combined IRA/First Command
entity should be an S corporation immediately after the Proposed Merger.
14. The new Shareholder Agreement should not cause First Command to be
considered to have more than a single class of stock for purposes of IRC
Section 1361(b)(1)(D).
15. The grant or holding of an SAR and/or DER should not result in the
individual plan participant being treated as a shareholder for purposes of
subchapter S.
16. First Command will be subject to the built-in gains tax provisions of IRC
Section 1374 to the extent any asset received pursuant to the Proposed
Merger has an unrealized built-in gain at the time of the Proposed Merger
and such asset is disposed of by First Command during the recognition
period (as defined in IRC Section 1374(d)(7)) after the
<PAGE>
Independent Research Agency for Life Insurance, Inc.
First Command Financial Corporation Page 14
Proposed Merger. If an asset received in the Proposed Merger is disposed
of after the recognition period, IRC Section 1374 should not apply.
Based on the foregoing statement of fact and representations, and based on
the information set forth in the Documents, but subject to the limitations
and qualifications set forth in the Scope section below, it is our opinion as
to the issues related to IRA's reporting and withholding requirements under
the IRC in conjunction with the implementation of the MAP that:
1. The grant or holding of a SAR should not trigger the constructive receipt
of income to the individual plan participant under IRC Section 451.
2. The grant or holding of a DER should not trigger the constructive receipt
of income to the individual plan participant under IRC Section 451.
3. The payment made by IRA under the MAP should be deductible by IRA in the
year, and in the amount, included in each individual participant's taxable
income.
4. The benefits under the MAP should be subject to Federal Insurance
Contributions Act ("FICA") taxes and Self Employment Contributions Act
("SECA") taxes in the year the individual participant actually or
constructively receives payment.
5. Under the current design and drafting of the MAP, the MAP benefits should
not be subject to IRC Section 280G "excess parachute payment" penalties.
SCOPE OF OPINION
The scope of this opinion is expressly limited to the federal income tax issues
specifically addressed above in the section entitled "Federal Income Tax
Consequences." Specifically, our opinion has not been requested and none is
expressed with regard to any foreign, state, or local income tax consequences
for IRA, First Command or any of their shareholders. Our opinion has not been
requested and none is expressed with regard to the federal, state, or local bank
regulatory consequences for IRA, FCB, and First Command or with regard to
federal, state or local insurance agency regulatory laws. We have made no
determination nor expressed any opinion as to any limitations, including those
which may be imposed under IRC Section 382, on the availability of net operating
loss carryovers (or built-in gains or losses), if any, after the Proposed
Merger, nor on the application (if any) of the alternative minimum tax to this
transaction. We have not expressed any opinion on any issues relating to the
IRA Subsidiaries nor on the application of any consolidated return rules. We
have not expressed an opinion on employee benefit issues, unless expressly
stated above. Further, we have made no determination as to whether IRA's
dividend distributions have been sufficient to eliminate any undistributed
personal holding company tax liability, if applicable. We
<PAGE>
Independent Research Agency for Life Insurance, Inc.
First Command Financial Corporation Page 15
have made no determination nor expressed any opinion as to the fair market value
of the (i) SARs, (ii) DERs, (iii) MAP benefits, (iv) any assets to be
transferred in connection with the Proposed Merger, and/or (v) any stock
exchanged or canceled in connection with the Proposed Merger.
Our opinion, as stated in this letter, is based upon the analysis of the IRC,
the Regulations thereunder, current case law, and published rulings as of the
date of this letter (the "Authorities"), as well as the Statement of Facts and
Representations provided us by the managements of IRA and First Command (and
their representatives). The foregoing Authorities are subject to change, and
such change may be retroactively effective. If so, our views, as set forth
above, may be affected and may not be relied upon. Further, any variation or
differences in the facts or representations recited herein, for any reason,
might affect our conclusions, perhaps in an adverse manner, and make them
inapplicable. In addition, we have undertaken no obligation to update, and
therefore will not be updating, this opinion for changes in facts or law
occurring subsequent to the date hereof.
This opinion is being rendered only to the addressees in connection with the
Proposed Merger, and is solely for their benefit and solely for the purpose set
forth above. This opinion may not be relied upon by any other person or
persons, or used for any other purposes, including, but not necessarily limited
to, filings with governmental agencies without our prior written consent.
However, we do consent to have this opinion included in a preliminary proxy
filing with the SEC and the Office of Thrift Supervision on or around July 6,
1998.
This letter is an opinion of our firm as to the interpretation of existing law
and, as such, is not binding on the Internal Revenue Service or the courts.
This letter may be used by IRA and First Command in responding to inquiries from
the Internal Revenue Service regarding the Proposed Merger.
Very truly yours,
/s/ Ernst & Young LLP
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
___________________, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Robert F. Watson and Martin R. Durbin, as
Proxies, each with the power to appoint his or her substitute, and hereby
authorizes them to represent and to vote, as designated below, all the shares of
(i) Class A Voting Common Stock, $0.10 par value per share and (ii) Class B
Non-Voting Common Stock, $0.02 par value per share, of INDEPENDENT RESEARCH
AGENCY FOR LIFE INSURANCE, INC. (the "Company"), that the undersigned is
entitled to vote at the Special Meeting of Shareholders of the Company to be
held on ___________________, 1998, at ____ a.m., Fort Worth, Texas time, and at
any adjournment or postponement thereof, on all matters set forth in the Notice
of Special Meeting and Proxy Statement dated ________________, 1998, a copy of
which has been received by the undersigned, as follows:
SEE REVERSE SIDE
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
THIS PROXY, WHEN PROPERLY EXECUTED AND DELIVERED, WILL BE VOTED AS SPECIFIED
BELOW. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR EACH OF THE
PROPOSALS. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU PROPERLY SIGN AND
RETURN THIS CARD.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR EACH OF THE
PROPOSALS. PLEASE REVIEW CAREFULLY THE PROXY STATEMENT DELIVERED WITH THIS
PROXY.
- --------------------------------------------------------------------------------
1. Approval and adoption of the Agreement and Plan of Merger, dated as of July
1, 1998, by and among the Company and First Command Financial Corporation.
/ / FOR / / AGAINST / / ABSTAIN
2. The Proxies are authorized to vote upon such matters as may properly come
before the meeting or any adjournment or postponement thereof as they
determine to be in the best interests of the Company.
The undersigned hereby revokes all proxies heretofore given by the undersigned
to vote at said meeting or any adjournment or postponement thereof.
------------------------------------------
Signature
Dated: , 1998
------------ --- ------------------------------------------
Signature, if held jointly
IMPORTANT: Please mark, sign, date and return this Proxy in the enclosed
envelope. No postage is required if mailed in the United States. Please date
this Proxy and sign your name exactly as it appears hereon. Where there is more
than one owner, each should sign. When signing as an attorney, administrator,
executor, guardian or trustee, please add your title as such. If executed by a
corporation, the Proxy should be signed by a duly authorized officer and state
the full name of the corporation.
Notwithstanding shareholder approval of the proposal, the Company reserves the
right to terminate the Merger Agreement and abandon the Merger, upon the terms
and subject to the conditions set forth in the Merger Agreement.
2
<PAGE>
FORM OF ELECTION OF
CLASS A/B SHAREHOLDERS OF
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC. ("COMPANY")
This Form of Election, when properly submitted by a holder of Class B
Non-Voting Common Stock of the Company, par value $0.02 per Share ("Class B
Stock"), who is also a holder of Class A Voting Common Stock of the Company,
par value $0.10 per Share (a "Class A/B Shareholder"), will permit such Class
A/B Shareholder to elect to receive either (i) one share of Nonvoting Common
Stock, par value $0.01 per share ("Surviving Corporation Nonvoting Stock"),
of First Command Financial Corporation, a Texas corporation (the "Class B
Nonvoting Stock Consideration"), for each share of Class B Stock held by such
Class A/B Shareholder or (ii) $28.24 in cash (the "Class B Cash
Consideration") for each share of Class B Stock held by such Class A/B
Shareholder, in connection with the merger (the "Merger") of the Company with
and into
FIRST COMMAND FINANCIAL CORPORATION ("FIRST COMMAND").
-----------------------------------
A CLASS A/B SHAREHOLDER MAY NOT ELECT TO RECEIVE BOTH THE CLASS B NONVOTING
STOCK CONSIDERATION AND THE CLASS B CASH CONSIDERATION.
-----------------------------------
-----------------------------------
BY HAND DELIVERY FACSIMILE BY
OR OVERNIGHT: TRANSMISSION: MAIL:
First Command Bank (888) 763-7600 First Command Bank
4100 South Hulen Street or 4100 South Hulen Street
Fort Worth, Texas 76109 (817) 763-0557 Fort Worth, Texas 76109
Attention: Paying Agent Attention: Paying Agent
CONFIRM BY TELEPHONE:
(888) 763-7600 or (817) 763-0000
-----------------------------------
-----------------------------------
First Command Bank is the Paying Agent.
FOR INFORMATION, CALL (888) 763-7600 OR (817) 763-0000
-------------------------
-------------------------
<PAGE>
PLEASE READ THE INSTRUCTIONS IN THIS FORM OF ELECTION CAREFULLY BEFORE
COMPLETING THIS FORM OF ELECTION.
ELECTION OF CLASS B STOCK
(Attach additional sheets if necessary).
See "Election" and Instruction 6.
MARK ONLY ONE BOX.
Number of Shares of Class B Stock
held by the Class A/B Shareholder:
Name and Address of Registered Holder(s)
(Please fill in, if blank, exactly as
name(s) appear(s) on certificate(s))
Class B Nonvoting Stock Election:
/ /
Class B Cash Election:
/ /
/ / Check this box if this election represents a revocation of any earlier
election.
________________________, 1998, IS THE ELECTION DEADLINE BY WHICH DATE A
COMPLETED FORM OF ELECTION MUST BE RECEIVED BY THE PAYING AGENT IN ORDER FOR ANY
CLASS B NONVOTING STOCK ELECTION OR CLASS B CASH ELECTION (AS SUCH TERMS ARE
DEFINED BELOW) CONTAINED HEREIN TO BE VALID. ANY FORM OF ELECTION RECEIVED BY
THE PAYING AGENT AFTER THE ELECTION DEADLINE SHALL BE DEEMED TO INDICATE A
NON-ELECTION (AS DEFINED BELOW).
IN THE EVENT A FORM OF ELECTION IS DELIVERED TO THE PAYING AGENT ON
BEHALF OF A CLASS A/B SHAREHOLDER PRIOR TO THE ELECTION DEADLINE AND NOT
REVOKED PRIOR TO SUCH DEADLINE, OR IF A FORM OF ELECTION IS DELIVERED TO THE
PAYING AGENT AFTER THE ELECTION DEADLINE, THE COMPANY OR THE SURVIVING
CORPORATION, AS THE CASE MAY BE, WILL DEEM SUCH DELIVERY A REVOCATION OF ANY
OBJECTIONS TO THE MERGER PREVIOUSLY FILED WITH THE COMPANY FOR PURPOSES OF
EXERCISING DISSENTER'S RIGHTS AND A WAIVER OF ANY FUTURE RIGHTS TO SUCH
EXERCISE.
Information as to the federal income tax consequences of receiving Class B
Nonvoting Stock Consideration or Class B Cash Consideration in exchange for your
Class B Stock is set forth under the caption "SPECIAL FACTORS--Certain Federal
Income Tax Consequences of the Merger" in the Proxy Statement furnished to you
concurrently herewith. You are urged, in addition, to consult with your tax
advisor.
TO FIRST COMMAND BANK:
In connection with the Merger, and pursuant to an Agreement and Plan of
Merger, dated as of July 1, 1998, (the "Merger Agreement"), between the
Company and First Command, the undersigned hereby makes the election set
forth herein concerning the Class B Stock held by the undersigned, who is a
Class A/B Shareholder. Pursuant to such election set forth herein, the
undersigned elects that each share of Class B Stock held by the undersigned
issued and outstanding immediately prior to the effective time of the Merger,
subject to and upon the terms and conditions of the Merger Agreement, will be
converted into (i) the right to receive the Class B Nonvoting Stock
Consideration (a "Class B Nonvoting Stock Election"), (ii) the Class B Cash
Consideration (the "Class B Cash Election") or (iii) the right to make no
election
2
<PAGE>
(a "Non-Election"), in which case the undersigned will receive the Class B
Nonvoting Stock Consideration. See "THE PROPOSED MERGER--Shareholder
Elections." Except as expressly provided herein, capitalized terms shall have
the meanings ascribed to them in the Proxy Statement.
The undersigned understands that the elections referred to above are
subject to certain terms, conditions and limitations that are set forth in
the Merger Agreement, the Instructions below and the Proxy Statement with
respect to the Merger (including all documents incorporated therein, and as
it may be amended from time to time, the "Proxy Statement") delivered prior
hereto. The Merger Agreement is included as Annex A to the Proxy Statement.
Extra copies of this Form of Election and the Proxy Statement may be
requested from the Paying Agent, at the addresses or phone numbers shown
above. The filing of this Form of Election with the Paying Agent is
acknowledgment of the receipt of the Proxy Statement. The undersigned
understands and acknowledges that all questions as to the validity, form and
eligibility of any election shall be reasonably determined by the Paying
Agent, and such determination shall be final and binding.
ELECTION
The appropriate election(s) must be made in the box above in order to
make a Class B Nonvoting Stock Election, a Cash Election or Non-Election with
respect to all the shares of Class B Stock held of record by such Class A/B
Shareholder.
ALL CLASS A/B SHAREHOLDERS WISHING TO MAKE A CLASS B NONVOTING STOCK
ELECTION OR A CLASS B CASH ELECTION MUST ENSURE THAT THE PAYING AGENT RECEIVES A
PROPERLY COMPLETED FORM OF ELECTION PRIOR TO THE ELECTION DEADLINE. ALL CLASS
A/B SHAREHOLDERS SUBMITTING ELECTION FORMS AFTER SUCH TIME WILL BE DEEMED TO
HAVE MADE A NON-ELECTION REGARDLESS OF THE ELECTION SPECIFIED ON SUCH FORM.
THE PAYING AGENT RESERVES THE RIGHT TO DEEM THAT YOU HAVE MADE A
NON-ELECTION IF:
A. NO ELECTION CHOICE IS INDICATED IN THE BOX ABOVE;
B. YOU FAIL TO FOLLOW THE INSTRUCTIONS ON THIS FORM OF ELECTION OR
OTHERWISE FAIL TO PROPERLY MAKE AN ELECTION;
C. A COMPLETED FORM OF ELECTION IS NOT ACTUALLY RECEIVED BY THE ELECTION
DEADLINE; OR
D. YOU MARK BOTH THE "CLASS B NONVOTING STOCK ELECTION" BOX AND THE
"CLASS B CASH ELECTION" BOX.
CONSUMMATION OF THE MERGER IS SUBJECT TO THE SATISFACTION OF CERTAIN
CONDITIONS. NO PAYMENTS WILL BE MADE PRIOR TO THE EFFECTIVE TIME OF THE MERGER.
INSTRUCTIONS
This Form of Election is to be completed and submitted to the Paying Agent
prior to the Election Deadline by those Class A/B Shareholders desiring to make
a Class B Nonvoting Stock Election or Class B Cash Election.
Your election is subject to certain terms, conditions and limitations
that have been set out in the Merger Agreement and the Proxy Statement. The
Merger Agreement is included as Annex A to the Proxy Statement. Extra copies
of the Proxy Statement may be requested from the Paying Agent at the
addresses or phone numbers shown above. The filing of this Form of Election
with the Paying Agent is acknowledgment of the receipt of the Proxy Statement.
1. ELECTION DEADLINE. For any Class B Nonvoting Stock Election or Class B
Cash Election contained herein to be considered, this Form of Election, properly
completed, must be received by the Paying Agent at one of the addresses shown
above on this Form of Election no later than 5:00 p.m. Central Daylight Time on
the Election Deadline.
3
<PAGE>
2. REVOCATION OR AMENDMENT OF FORM OF ELECTION. An election may be
revoked or amended, but only by written notice received by the Paying Agent
prior to the Election Deadline. Upon any such revocation, unless a duly
completed Form of Election is thereafter submitted in accordance with the
procedures set forth in the Proxy Statement, such shareholder will be deemed to
have made a Non-Election.
3. DELIVERY OF FORM OF ELECTION. This Form of Election, properly
completed and duly executed, should be delivered to the Paying Agent at one of
the addresses set forth above.
4. INADEQUATE SPACE. If the space provided herein is inadequate, the
number of shares of Class B Stock held by the Class A/B Shareholder should be
listed on additional sheets and attached hereto.
5. SIGNATURES ON ELECTION FORM.
(a) All signatures must correspond exactly with the name written on the
face of the certificate(s) representing the Class B Stock, without alteration,
variation or any change whatsoever.
(b) If the certificate(s) representing the Class B Stock is (are) held
of record by two or more joint owners, all such owners must sign this Form of
Election.
(c) If the shares of Class B Stock held by a Class A/B Shareholder are
registered in different names on several certificates, it will be necessary to
complete, sign and submit as many separate Forms of Election as there are
different registrations of certificates.
6. ELECTIONS. Each Class A/B Shareholder is entitled to make a Class
B Nonvoting Stock Election and/or a Class B Cash Election with respect to his
or her Class B Stock, provided the Form of Election for any holder making
such election(s) is properly completed and received by the Paying Agent prior
to the Election Deadline. To properly complete the box, the number of shares
of Class B Stock held by each Class B Shareholder must be written in the
column under the heading "Number of Shares of Class B Stock," and either the
"Class B Nonvoting Stock Election" box or the "Class B Cash Election" box
should be marked. MARK ONLY ONE BOX. A Class A/B Shareholder submitting a
Form of Election may not elect to receive both the Class B Nonvoting Stock
Consideration and the Class B Cash Consideration.
7. MISCELLANEOUS. Neither the Company nor the Paying Agent is under any
duty to give notification of defects in any Form of Election. The Company and
the Paying Agent shall not incur any liability for failure to give such
notification, and each of the Company and the Paying Agent has the absolute
right to reject any and all Forms of Election not in proper form or to waive any
irregularities in any Form of Election.
8. INFORMATION AND ADDITIONAL COPIES. Information and additional copies
of this Form of Election may be obtained by telephoning toll-free (888)
763-7600, or, in Fort Worth, (817) 763-0000.
4
