<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1998.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ARM FINANCIAL GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 63 61-1244251
(State or other jurisdiction (Primary standard industrial (I.R.S. Employer
of incorporation or organization) Classification code number) Identification No.)
</TABLE>
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ARM FINANCIAL GROUP, INC.
515 WEST MARKET STREET
LOUISVILLE, KENTUCKY 40202
(502) 582-7900
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------
ROBERT H. SCOTT
ARM FINANCIAL GROUP, INC.
515 WEST MARKET STREET
LOUISVILLE, KENTUCKY 40202
(502) 582-7900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
Copies to:
FAITH D. GROSSNICKLE, ESQ.
SHEARMAN & STERLING
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
(212) 848-4000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: From time to time after the effective date of this Registration
Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
- ------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ------------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SECURITY PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Preferred Stock(2)...................
$75,000,000 -- $75,000,000 $22,125
Depositary Shares(3).................
=================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
(2) There are being registered hereby such indeterminate number of shares of
Preferred Stock as may from time to time be issued at indeterminate prices.
(3) There are being registered hereby such indeterminate number of Depositary
Shares as may be issued in the event that ARM Financial Group, Inc. elects
to offer fractional interests in shares of the Preferred Stock registered
hereby.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS (Subject to Completion)
Issued May 29, 1998
ARM Financial Group, Inc.
PREFERRED STOCK
------------------------
ARM Financial Group, Inc. (the "Company") may issue from time to time, in
one or more series, shares of its preferred stock, par value $.01 per share (the
"Preferred Stock"), which may be issued in the form of depositary shares (the
"Depositary Shares") evidenced by depositary receipts, in amounts, at prices and
on terms to be determined at or prior to the time of any such offering. The
specific number of shares, designation, stated value and liquidation preference
of each share, issuance price, dividend rate or method of calculation, dividend
periods, dividend payment dates, voting rights, any redemption or sinking fund
provisions, any conversion or exchange provisions, and other specific terms of
each series of Preferred Stock in respect of which this Prospectus is being
delivered shall be set forth in an accompanying Prospectus Supplement (the
"Prospectus Supplement").
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The Preferred Stock may be sold directly by the Company or through agents,
underwriters or dealers designated from time to time. If any agents or
underwriters of the Company are involved in the sale of the Preferred Stock, the
names of such agents or underwriters and any applicable fees, commissions or
discounts shall be set forth in the Prospectus Supplement. The net proceeds to
the Company from such sale also shall be set forth in the Prospectus Supplement.
------------------------
, 1998
<PAGE> 3
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE DEPOSITARY SHARES.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, THE DEPOSITARY SHARES IN THE OPEN MARKET.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission (the "Commission") are incorporated herein by reference:
(a) The Annual Report of the Company on Form 10-K for the year ended
December 31, 1997;
(b) The Quarterly Report of the Company on Form 10-Q for the quarter
ended March 31, 1998;
(c) The Current Reports of the Company on Form 8-K dated March 4, 1998
and April 22, 1998; and
(d) The description of the Company's outstanding 9 1/2% Cumulative
Perpetual Preferred Stock (the "Existing Preferred Stock") contained in the
Company's Registration Statement on Form 8-A filed with the Commission on
November 12, 1993, including any amendment or report filed for the purposes
of updating such description.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), subsequent to the date of this Prospectus and prior to the
termination of the offering made hereby shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained herein or in a document all or any
portion of which is incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus 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 Prospectus. As used herein, the terms "Prospectus"
and "herein" mean this Prospectus, including the documents incorporated by
reference, as the same may be amended, supplemented, or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other documents referred to herein do not purport to be complete and
are qualified in all respects by reference to all of the provisions of such
contract or other document.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY
OF ANY OR ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH HAVE BEEN OR MAY BE
INCORPORATED IN THIS PROSPECTUS BY REFERENCE, OTHER THAN EXHIBITS TO SUCH
DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH
DOCUMENTS. REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO: PETER S. RESNIK,
TREASURER, ARM FINANCIAL GROUP, INC., 515 WEST MARKET STREET, LOUISVILLE,
KENTUCKY 40202 (TELEPHONE (502) 582-7900).
No person is authorized to give any information or to make any
representations, other than those contained or incorporated by reference in this
Prospectus or the Prospectus Supplement, in connection with the offering
contemplated hereby, and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company or any
underwriter, dealer or agent. This Prospectus and the Prospectus Supplement do
not constitute an offer to sell or a solicitation of an offer to buy any
securities other than the Preferred Stock to which they relate and do not
constitute an offer to sell or a solicitation of an offer to buy any securities
in any jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this Prospectus or
the Prospectus Supplement, nor any sale made hereunder or thereunder, shall,
under any circumstances, create any implication that there has been no change in
the affairs of the Company since the date hereof or thereof or
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<PAGE> 4
that the information contained or incorporated by reference herein or therein is
correct as of any time subsequent to such date.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, is required to file reports, proxy statements
and other information with the Commission. Such reports, proxy statements and
other information can be inspected and copied at the Public Reference Section of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's regional offices at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of the reports, proxy statements and
other information can be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549, at prescribed rates. The Commission
maintains a web site on the Internet at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The Company's Existing
Preferred Stock is traded on the American Stock Exchange and such reports, proxy
statements and other information concerning the Company can be inspected at the
offices of the American Stock Exchange, 86 Trinity Place, New York, New York
10006. The Company's Class A Convertible Common Stock, par value $.01 per share
(the "Class A Common Stock") is traded on the New York Stock Exchange and such
reports, proxy statements and other information concerning the Company can be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the securities offered by this Prospectus. The Registration Statement
has been filed electronically through the Commission's Electronic Data
Gathering, Analysis, and Retrieval System and may be accessed electronically by
means of the Commission's home page on the Internet at http://www.sec.gov. As
permitted by the rules and regulations of the Commission, this Prospectus does
not contain all of the information set forth in the Registration Statement. For
further information about the Company and the securities offered hereby,
reference is made to the Registration Statement and to the financial statements,
exhibits and schedules filed therewith. The statements contained in this
Prospectus about the contents of any contract or other document referred to are
not necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. Copies of each such document may be obtained from the Commission at
its principal office in Washington, D.C. upon payment of the charges prescribed
by the Commission.
THE COMPANY
The Company specializes in the growing asset accumulation business with
particular emphasis on retirement savings and investment products. The Company's
earnings are derived from investment spread (the difference between income
earned on investments and interest credited on customer deposits) and fee
income. The Company's retail products include a variety of fixed, indexed and
variable annuities and face-amount certificates sold through a broad spectrum of
distribution channels including independent broker-dealers, independent agents,
stockbrokers, and financial institutions. The Company offers institutional
products, such as funding agreements, installment face-amount certificates and
guaranteed investment contracts ("GICs"), directly to bank trust departments,
plan sponsors, cash management funds, corporate treasurers, and other
institutional investors.
The principal offices of the Company are located at 515 West Market Street,
Louisville, Kentucky 40202 and its telephone number is (502) 582-7900.
3
<PAGE> 5
RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the consolidated ratios of earnings to
combined fixed charges and preferred stock dividends for the Company for the
periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS YEARS ENDED DECEMBER 31,
ENDED ----------------------------------
MARCH 31, 1998 1997 1996 1995 1994(3) 1993(3)
-------------- ---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Excluding interest
credited on customer deposits(1)......... 6.4x 4.3x 3.4x 2.0x -- --
Including interest credited on customer
deposits(2).............................. 1.2x 1.1x 1.1x 1.1x -- --
</TABLE>
- ---------------
(1) In computing the ratio of earnings to combined fixed charges and preferred
stock dividends (excluding interest credited on customer deposits), combined
fixed charges and preferred stock dividends consist of interest expense on
debt, the portion of operating lease rentals representative of the interest
factor and dividends on the preferred stock of the Company on a tax
equivalent basis. Earnings are computed by adding fixed charges to pretax
income.
(2) In computing the ratio of earnings to combined fixed charges and preferred
stock dividends (including interest credited on customer deposits), combined
fixed charges and preferred stock dividends consist of interest expense on
debt, the portion of operating lease rentals representative of the interest
factor, interest credited on customer deposits, and dividends on the
preferred stock of the Company on a tax equivalent basis. Earnings are
computed by adding fixed charges to pretax income.
(3) Earnings were inadequate to cover combined fixed charges and preferred stock
dividends by $29.2 million and $41.0 million for the years ended December
31, 1994 and 1993, respectively.
USE OF PROCEEDS
Except as otherwise provided in the Prospectus Supplement, the net proceeds
from the sale of the Preferred Stock will be used for general corporate
purposes, which may include redemption of the Company's Existing Preferred
Stock, which may be redeemed on or after December 15, 1998.
4
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DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 150 million shares
of Class A Common Stock, 50 million shares of Class B Convertible Common Stock,
par value $.01 per share (the "Class B Common Stock" and, together with the
Class A Common Stock, the "Common Stock"), and 10 million shares of Preferred
Stock. The Board of Directors of the Company has the power, without further
action by the stockholders unless action is required by applicable laws or
regulations or by the terms of outstanding Preferred Stock, to issue Preferred
Stock in one or more series and to fix the voting rights, designations,
preferences and relative, participating, optional and other special rights, and
the qualifications, limitations and restrictions applicable thereto.
The rights of holders of the Preferred Stock offered hereby (the "Offered
Preferred Stock") will be subject to, and may be adversely affected by, the
rights of holders of any shares of Preferred Stock that may be issued in the
future. The Board of Directors may cause shares of Preferred Stock to be issued
in public or private transactions for any proper corporate purpose, which may
include issuance to obtain additional financing in connection with acquisitions
or otherwise, and issuance to officers, directors and employees of the Company
and its subsidiaries pursuant to benefit plans or otherwise. Shares of Preferred
Stock issued by the Company may have the effect, under certain circumstances,
alone or in combination with certain other provisions of the Company's Restated
Certificate of Incorporation dated June 24, 1997, as amended (the "Certificate
of Incorporation"), described below, of rendering more difficult or discouraging
an acquisition of the Company deemed undesirable by the Board of Directors of
the Company.
At May 26, 1998, the Company had 23,397,471 shares of Class A Common Stock
and no shares of Class B Common Stock outstanding. The Company also had
outstanding on such date 2,000,000 shares of Preferred Stock designated as the
Existing Preferred Stock. The following summary does not purport to be complete
and is subject to the detailed provisions of, and qualified in its entirety by
reference to, the Company's Certificate of Incorporation and the Company's
By-laws (the "By-laws") and to the applicable provisions of the General
Corporation Law of the State of Delaware (the "DGCL").
OFFERED PREFERRED STOCK
The following description of the terms of the Offered Preferred Stock sets
forth certain general terms and provisions of the Offered Preferred Stock to
which any Prospectus Supplement may relate. Certain other terms of any series of
Offered Preferred Stock offered by any Prospectus Supplement will be specified
in the applicable Prospectus Supplement. If so specified in the applicable
Prospectus Supplement, the terms of any series of Offered Preferred Stock may
differ from the terms set forth below. The description of the terms of the
Offered Preferred Stock set forth below and in any Prospectus Supplement does
not purport to be complete and is subject to and qualified in its entirety by
reference to the Certificate of Designations relating to the applicable series
of Offered Preferred Stock (the "Certificate of Designations"), which
Certificate of Designations will be filed as an exhibit to or incorporated by
reference in the Registration Statement of which this Prospectus forms a part.
Under the Certificate of Incorporation, the Company's Board of Directors is
authorized, without further stockholder action, to issue any or all the
authorized Preferred Stock from time to time in one or more series, and for such
consideration, and with such voting powers (not to exceed one vote per share) as
the Board may determine and to determine the designations, preferences and
relative participating, optional or other special rights, and qualifications,
limitations, or restrictions thereon, as shall be stated and expressed in the
resolution or resolutions providing for the issue thereof adopted by the Board
of Directors of the Company and as are not stated and expressed in the
Certificate of Incorporation. Prior to the issuance of each series of Preferred
Stock, the Board of Directors of the Company will adopt resolutions creating and
designating such series as a series of Preferred Stock and such resolutions will
be filed in the Certificate of Designations as an amendment to the Certificate
of Incorporation. As used herein the term "Board of Directors of the Company"
means the Board of Directors of the Company and includes any duly authorized
committee thereof. Stockholders do not have
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any preemptive rights with respect to any of the presently authorized but
unissued shares of authorized Preferred Stock. Other than the Existing Preferred
Stock described below, as of the date of this Prospectus, the Board of Directors
of the Company has not authorized any series of Preferred Stock and there are no
agreements or understandings for the issuance of any shares of Preferred Stock.
As described under "Depositary Shares" below, the Company may, at its
option, elect to offer Depositary Shares evidenced by depositary receipts, each
representing a fraction (to be specified in the Prospectus Supplement relating
to the particular series of Offered Preferred Stock) of a share of the
particular series of Offered Preferred Stock issued and deposited with a
depositary, in lieu of offering full shares of such series of Offered Preferred
Stock. In the event that the Company elects to issue Depositary Shares, subject
to the terms of the Deposit Agreement (as defined below), each such Depositary
Share will be entitled, in proportion to the applicable fraction of a share of
Offered Preferred Stock represented by such Depositary Share, to all the rights
and preferences of the Offered Preferred Stock represented thereby (including
dividends, voting, redemption and liquidation rights). See "Depositary Shares"
below. The statements below concerning Depositary Shares, Depositary Receipts
(as defined below) and the Deposit Agreement do not purport to be complete and
are qualified in their entirety by reference to the forms of such documents,
which have been filed as exhibits to the Registration Statement of which this
Prospectus is a part.
General
The Offered Preferred Stock shall have the dividend, liquidation,
redemption, voting and conversion or exchange rights set forth below unless
otherwise specified in the applicable Prospectus Supplement. Reference is made
to the Prospectus Supplement relating to the particular series of Offered
Preferred Stock offered thereby for specific terms, including: (i) the
designation, stated value and liquidation preference of such Offered Preferred
Stock and the number of shares offered; (ii) the initial public offering price
at which such shares will be issued; (iii) the dividend rate or rates (or method
of calculation), the dividend periods, the date on which dividends shall be
payable and whether such dividends shall be cumulative or noncumulative and, if
cumulative, the dates from which dividends shall commence to cumulate; (iv) any
redemption or sinking fund provisions; (v) any conversion or exchange
provisions; and (vi) any additional dividend, liquidation, redemption, sinking
fund and other rights, preferences, privileges, limitations and restrictions of
such Offered Preferred Stock.
The Offered Preferred Stock will, when issued against payment therefor, be
fully paid and nonassessable. Unless otherwise specified in the applicable
Prospectus Supplement, the shares of each series of Offered Preferred Stock will
upon issuance rank on a parity in all respects with the outstanding shares of
Preferred Stock of the Company. Holders of the Preferred Stock will have no
preemptive rights to subscribe for any additional securities which may be issued
by the Company. Unless otherwise specified in the applicable Prospectus
Supplement, ChaseMellon Shareholder Services LLC (or its successors or assigns)
will be the transfer agent and registrar for the Offered Preferred Stock.
Dividends
The holders of the Offered Preferred Stock will be entitled to receive,
when and as declared by the Board of Directors of the Company, out of funds
legally available therefor, dividends at such rates and on such dates as will be
specified in the applicable Prospectus Supplement. Such rates may be fixed or
variable or both. If variable, the formula used for determining the dividend
rate for each dividend period will be specified in the applicable Prospectus
Supplement. Dividends will be payable to the holders of record as they appear on
the stock books of the Company on such record dates as will be fixed by the
Board of Directors of the Company. Dividends may be paid in the form of cash,
Preferred Stock (of the same or a different series) or Common Stock of the
Company, in each case as specified in the applicable Prospectus Supplement.
Dividends on any series of Offered Preferred Stock may be cumulative or
noncumulative, as specified in the applicable Prospectus Supplement. If the
Board of Directors of the Company fails to declare a dividend payable on a
dividend payment date on any Offered Preferred Stock for which dividends are
noncumulative ("Noncumulative Offered Preferred Stock"), then the holders of
such Offered Preferred Stock will have no
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right to receive a dividend in respect of the dividend period relating to such
dividend payment date, and the Company will have no obligation to pay the
dividend accrued for such period, whether or not dividends on such Offered
Preferred Stock are declared or paid on any future dividend payment dates.
The Company shall not declare or pay or set apart for payment any dividends
on any series of its Preferred Stock ranking, as to dividends, on a parity with
or junior to the outstanding Offered Preferred Stock of any series unless (i) if
such Offered Preferred Stock has a cumulative dividend ("Cumulative Offered
Preferred Stock"), full cumulative dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for such payment on such Offered Preferred Stock for all dividend periods
terminating on or prior to the date of payment of any such dividends on such
other series of Preferred Stock of the Company, or (ii) if such Offered
Preferred Stock is Noncumulative Offered Preferred Stock, full dividends for the
then-current dividend period on such Offered Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for such payment. When dividends are not paid in full
upon Offered Preferred Stock of any series and any other shares of preferred
stock of the Company ranking on a parity as to dividends with such Offered
Preferred Stock, all dividends declared upon such Offered Preferred Stock and
any other Preferred Stock of the Company ranking on a parity as to dividends
with such Offered Preferred Stock shall be declared pro rata so that the amount
of dividends declared per share on such Offered Preferred Stock and such other
shares shall in all cases bear to each other the same ratio that the accrued
dividends per share on such Offered Preferred Stock (which shall not, if such
Offered Preferred Stock is Noncumulative Offered Preferred Stock, include any
accumulation in respect of unpaid dividends for prior dividend periods) and such
other Preferred Stock bear to each other. Except as set forth in the preceding
sentence, unless full dividends on the outstanding Cumulative Offered Preferred
Stock of any series have been declared and paid or set apart for payment for all
past dividend periods and full dividends for the then-current dividend period on
the outstanding Noncumulative Offered Preferred Stock of any series have been
declared and paid or declared and a sum sufficient for the payment thereof set
apart for such payment, no dividends (other than in Common Stock of the Company
or other shares of the Company ranking junior to such Offered Preferred Stock as
to dividends and upon liquidation) shall be declared or paid or set aside for
payment, nor shall any other distribution be made, on the Common Stock of the
Company or on any other shares of the Company ranking junior to or on a parity
with such Offered Preferred Stock as to dividends or upon liquidation. Unless
full dividends on the Cumulative Offered Preferred Stock of any series have been
declared and paid or set apart for payment for all past dividend periods and
full dividends for the then-current dividend period on the Noncumulative Offered
Preferred Stock of any series have been declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment, no Common Stock
or any other shares of the Company ranking junior to or on a parity with such
Offered Preferred Stock as to dividends or upon liquidation shall be redeemed,
purchased or otherwise acquired for any consideration (or any moneys be paid or
made available for a sinking fund for the redemption of any such shares) by the
Company or any subsidiary of the Company except by conversion into or exchange
for shares of the Company ranking junior to such Offered Preferred Stock as to
dividends and upon liquidation.
The ability of the Company, as a holding company, to pay dividends on the
Offered Preferred Stock will be dependent upon, among other factors, the
Company's earnings, financial condition and cash requirements at the time such
payment is considered and the payment to it of dividends or principal and
interest by, or the availability of other funds from, its subsidiaries. The
Company's assets consist primarily of the capital stock of Integrity Holdings,
Inc., which owns Integrity Life Insurance Company ("Integrity") and National
Integrity Life Insurance Company ("National Integrity" and, together with
Integrity, the "Integrity Companies") (domiciled in the States of Ohio and New
York, respectively), SBM Certificate Company and ARM Securities Corporation. The
ability of the Integrity Companies to pay dividends to the Company is subject,
among other things, to regulatory restrictions of their respective states of
domicile and will depend on their statutory surplus and earnings. Because
National Integrity is a subsidiary of Integrity, dividend payments by National
Integrity to Integrity must be made in compliance with New York standards, and
the ability of Integrity to pass those dividends on to the Company is subject to
compliance with Ohio standards. From time to time, the National Association of
Insurance Commissioners and various state insurance regulators have
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considered, and may in the future consider, proposals to further restrict
dividend payments that may be made by an insurance company without regulatory
approval.
Redemption
Offered Preferred Stock may be redeemable, in whole or in part, at the
option of the Company, out of funds legally available therefor, and may be
subject to mandatory redemption pursuant to a sinking fund or otherwise, in each
case upon terms, at the times and at the redemption prices specified in the
applicable Prospectus Supplement and subject to the rights of holders of other
securities of the Company. Offered Preferred Stock redeemed by the Company will
be restored to the status of authorized but unissued shares of Preferred Stock.
The Prospectus Supplement relating to a series of Offered Preferred Stock
that is subject to mandatory redemption will specify the number of shares of
such Offered Preferred Stock that shall be redeemed by the Company in each year
commencing after a date to be specified, at a redemption price per share to be
specified, together with an amount equal to all accrued and unpaid dividends
thereon (which shall not, if such Offered Preferred Stock is Noncumulative
Offered Preferred Stock, include any accumulation in respect of unpaid dividends
for prior dividend periods) to the date of redemption. The redemption price may
be payable in cash or other property, as specified in the applicable Prospectus
Supplement.
If fewer than all the outstanding shares of Offered Preferred Stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Board of Directors of the Company and such shares may be
redeemed pro rata from the holders of record of such shares in proportion to the
number of such shares held by such holders (with adjustments to avoid redemption
of fractional shares) or by lot in a manner determined by the Board of Directors
of the Company.
Notwithstanding the foregoing, if any dividends, including any
accumulation, on Cumulative Offered Preferred Stock of any series are in
arrears, no Offered Preferred Stock of such series shall be redeemed unless all
outstanding Preferred Stock of such series is simultaneously redeemed, and the
Company shall not purchase or otherwise acquire any Offered Preferred Stock of
such series; provided, however, that the foregoing shall not prevent the
purchase or acquisition of Preferred Stock of such series pursuant to a purchase
or exchange offer provided such offer is made on the same terms to all holders
of the Offered Preferred Stock of such series.
Notice of redemption shall be given by mailing the same to each record
holder of the Offered Preferred Stock to be redeemed, not less than 30 nor more
than 60 days prior to the date fixed for redemption thereof, at the address of
such holder as the same shall appear on the stock books of the Company. Each
notice shall state: (i) the redemption date; (ii) the number of shares and
series of the Offered Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Offered Preferred
Stock are to be surrendered for payment of the redemption price; (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date; and (vi) the date upon which the holder's conversion or exchange rights,
if any, as to such shares, shall terminate. If fewer than all the shares of
Offered Preferred Stock of any series are to be redeemed, the notice mailed to
each such holder thereof shall also specify the number of shares of Offered
Preferred Stock to be redeemed from each such holder.
If notice of redemption of any shares of Offered Preferred Stock has been
given and if the funds necessary for such redemption have been set aside by the
Company, separate and apart from its other funds, in trust for the pro rata
benefit of the holders of any shares of Offered Preferred Stock so called for
redemption, from and after the redemption date for such shares, dividends on
such shares shall cease to accrue and such shares shall no longer be deemed to
be outstanding, and all rights of the holders thereof as stockholders of the
Company (except the right to receive the redemption price) shall cease. If fewer
than all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares without cost to
the holder thereof.
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Conversion or Exchange Rights
The Prospectus Supplement relating to a series of Offered Preferred Stock
that is convertible or exchangeable will state the terms on which shares of such
series are convertible or exchangeable into Common Stock of the Company or
another series of Preferred Stock.
Rights Upon Liquidation
In the event of any voluntary or involuntary liquidation, dissolution or
winding-up of the Company, the holders of Offered Preferred Stock shall be
entitled to receive out of the assets of the Company available for distribution
to stockholders, before any distribution of assets is made to holders of Common
Stock or any other class or series of shares ranking junior to such Offered
Preferred Stock upon liquidation, liquidating distributions in the amount of the
liquidation preference of such Offered Preferred Stock plus accrued and unpaid
dividends (which shall not, if such Offered Preferred Stock is Noncumulative
Offered Preferred Stock, include any accumulation in respect of unpaid dividends
for prior dividend periods). If, upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, the amounts payable with respect to
Offered Preferred Stock of any series and any other shares of the Company
ranking as to any such distribution on a parity with such Offered Preferred
Stock are not paid in full, the holders of such Offered Preferred Stock and of
such other shares will share ratably in any such distribution of assets of the
Company in proportion to the full respective preferential amounts to which they
are entitled. After payment of the full amount of the liquidating distribution
to which they are entitled, the holders of Offered Preferred Stock of any series
will not be entitled to any further participation in any distribution of assets
by the Company.
Substantially all of the assets of the Company are owned by its
subsidiaries. Therefore, the Company's rights and the rights of its creditors
and preferred stockholders to participate in the assets of any subsidiary upon
such subsidiary's liquidation or recapitalization will be subject to (or
effectively subordinated to) the prior claims of such subsidiary's creditors (if
any) and policyholders and to the rights and preferences of such subsidiary's
preferred stockholders (if any), except to the extent that the Company may
itself be a creditor with recognized claims against the subsidiary or a holder
of preferred stock of such subsidiary.
Voting Rights
Except as indicated below or in the applicable Prospectus Supplement, or
except as expressly required by applicable law, the holders of the Offered
Preferred Stock will not be entitled to vote.
Whenever dividends on any shares of Cumulative Offered Preferred Stock
shall be in arrears for six consecutive quarterly periods, the holders of such
shares of Cumulative Offered Preferred Stock (voting separately as a class with
all other series of cumulative preferred stock upon which like voting rights
have been conferred and are exercisable) will be entitled to vote for the
election of two additional directors of the Company at the next annual meeting
of stockholders and at each subsequent meeting until all dividends accumulated
on such shares of Cumulative Offered Preferred Stock shall have been fully paid
or set aside for payment. In such case, the entire Board of Directors of the
Company will be increased by two directors.
So long as any shares of Offered Preferred Stock remain outstanding, the
Company shall not, without the affirmative vote of the holders of at least
two-thirds of the votes of the shares of Offered Preferred Stock outstanding at
the time, given in person or by proxy, at a meeting (voting separately as one
class): (i) authorize, create or issue, or increase the authorized or issued
amount of, any class or series of stock ranking prior to the Offered Preferred
Stock with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding-up, or (ii) amend, alter or repeal the
provisions of the Certificate of Incorporation, including the Certificate of
Designations relating to the Offered Preferred Stock, whether by merger,
consolidation or otherwise, so as to materially and adversely affect any right,
preference, privilege or voting power of such shares of Offered Preferred Stock
or the holders thereof; provided, however, that any increase in the amount of
the authorized Preferred Stock or any outstanding series of Preferred Stock or
any other capital stock of the Company, or the creation and issuance of other
series of Preferred Stock including the Offered Preferred Stock, or of any other
capital stock of the Company, in each case ranking on a parity with or junior to
the Offered Preferred Stock with respect to the payment of dividends and the
distribution of
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assets upon liquidation, dissolution or winding-up shall not be deemed to
materially and adversely affect such rights, preferences, privileges or voting
powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of Offered Preferred Stock shall have been
redeemed or sufficient funds shall have been deposited in trust to effect such
redemption.
DEPOSITARY SHARES
The description set forth below of certain material provisions of the
Deposit Agreement (as defined below) and of the Depositary Shares and Depositary
Receipts (as defined below) is subject to and qualified in its entirety by
reference to the forms of Deposit Agreement and Depositary Receipt relating to
the Offered Preferred Stock, which will be filed or incorporated by reference,
as the case may be, as exhibits to the Registration Statement of which this
Prospectus forms a part at or prior to the issuance of Depositary Shares. The
particular terms of any Depositary Shares, any Depositary Receipts and any
Deposit Agreement relating to a particular series of Offered Preferred Stock
which vary from the terms set forth below will be set forth in the applicable
Prospectus Supplement.
General
The Company may, at its option, elect to offer fractional shares of Offered
Preferred Stock, rather than full shares of Offered Preferred Stock. In such
event, the Company will issue receipts for Depositary Shares, each of which will
represent a fraction (to be set forth in the Prospectus Supplement relating to a
particular series of Offered Preferred Stock) of a share of a particular series
of Offered Preferred Stock as described below.
The shares of any series of Offered Preferred Stock represented by
Depositary Shares will be deposited under a Deposit Agreement (the "Deposit
Agreement") between the Company and a bank or trust company selected by the
Company having its principal office in the United States and having a combined
capital and surplus of at least $50,000,000 (the "Preferred Stock Depositary").
Subject to the terms of the Deposit Agreement, each owner of a Depositary Share
will be entitled, in proportion to the applicable fraction of a share of Offered
Preferred Stock represented by such Depositary Share, to all the rights and
preferences of the Offered Preferred Stock represented thereby (including
dividend, voting, redemption, conversion and liquidation rights).
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement (the "Depositary Receipts"). Depositary
Receipts will be distributed to those persons purchasing the fractional shares
of Offered Preferred Stock in accordance with the terms of the applicable
Prospectus Supplement.
Pending the preparation of definitive Depositary Receipts, the Preferred
Stock Depositary may, upon the written order of the Company or any holder of
deposited Offered Preferred Stock, execute and deliver temporary Depositary
Receipts which are substantially identical to, and entitle the holders thereof
to all the rights pertaining to, the definitive Depositary Receipts. Depositary
Receipts will be prepared thereafter without unreasonable delay, and temporary
Depositary Receipts will be exchangeable for definitive Depositary Receipts.
Dividends and Other Distributions
The Preferred Stock Depositary will distribute all cash dividends or other
cash distributions received in respect of the deposited Offered Preferred Stock
to the record holders of Depositary Shares relating to such Offered Preferred
Stock in proportion to the number of such Depositary Shares owned by such
holders.
In the event of a distribution other than in cash, the Preferred Stock
Depositary will distribute property received by it to the record holders of
Depositary Shares entitled thereto. If the Preferred Stock Depositary determines
that it is not feasible to make such distribution, it may, with the approval of
the Company, sell such property and distribute the net proceeds from such sale
to such holders.
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Redemption of Preferred Stock
If a series of Offered Preferred Stock represented by Depositary Shares is
to be redeemed, the Depositary Shares will be redeemed from the proceeds
received by the Preferred Stock Depositary resulting from the redemption, in
whole or in part, of such series of Offered Preferred Stock held by the
Preferred Stock Depositary. The Depositary Shares will be redeemed by the
Preferred Stock Depositary at a price per Depositary Share equal to the
applicable fraction of the redemption price per share payable in respect of the
shares of Preferred Stock so redeemed. Whenever the Company redeems shares of
Offered Preferred Stock held by the Preferred Stock Depositary, the Preferred
Stock Depositary will redeem as of the same date the number of Depositary Shares
representing shares of Offered Preferred Stock so redeemed. If fewer than all
the Depositary Shares are to be redeemed, the Depositary Shares to be redeemed
will be selected by the Preferred Stock Depositary by lot or pro rata or by any
other equitable method as may be determined by the Preferred Stock Depositary.
Withdrawal of Preferred Stock
Any holder of Depositary Shares may, upon surrender of the Depositary
Receipts at the corporate trust office of the Preferred Stock Depositary (unless
the related Depositary Shares have previously been called for redemption),
receive the number of whole shares of the related series of Offered Preferred
Stock and any money or other property represented by such Depositary Receipts.
Holders of Depositary Shares making such withdrawals will be entitled to receive
whole shares of Offered Preferred Stock on the basis set forth in the related
Prospectus Supplement for such series of Offered Preferred Stock, but holders of
such whole shares of Offered Preferred Stock will not thereafter be entitled to
deposit such Offered Preferred Stock under the Deposit Agreement or to receive
Depositary Receipts therefor. If the Depositary Shares surrendered by the holder
in connection with such withdrawal exceed the number of Depositary Shares that
represent the number of whole shares of Offered Preferred Stock to be withdrawn,
the Preferred Stock Depositary will deliver to such holder at the same time a
new Depositary Receipt evidencing such excess number of Depositary Shares.
Voting Deposited Offered Preferred Stock
Upon receipt of notice of any meeting at which the holders of any series of
deposited Offered Preferred Stock are entitled to vote, the Preferred Stock
Depositary will mail the information contained in such notice of meeting to the
record holders of the Depositary Shares relating to such series of Offered
Preferred Stock. Each record holder of such Depositary Shares on the record date
(which will be the same date as the record date for the relevant series of
Offered Preferred Stock) will be entitled to instruct the Preferred Stock
Depositary as to the exercise of the voting rights pertaining to the amount of
the Offered Preferred Stock represented by such holder's Depositary Shares. The
Preferred Stock Depositary will endeavor, insofar as practicable, to vote the
amount of such series of Offered Preferred Stock represented by such Depositary
Shares in accordance with such instructions, and the Company will agree to take
all reasonable actions that may be deemed necessary by the Preferred Stock
Depositary in order to enable the Preferred Stock Depositary to do so. The
Preferred Stock Depositary will vote all shares of any series of Offered
Preferred Stock held by it proportionately with instructions received, to the
extent it does not receive specific instructions from the holders of Depositary
Shares representing such series of Offered Preferred Stock.
Amendment and Termination of the Deposit Agreement
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Preferred Stock Depositary. However, any amendment
that imposes additional charges or materially and adversely alters any
substantial existing right of the holders of Depositary Shares will not be
effective unless such amendment has been approved by the holders of at least a
majority of the affected Depositary Shares then outstanding. Every holder of an
outstanding Depositary Receipt at the time any such amendment becomes effective,
or any transferee of such holder, shall be deemed, by continuing to hold such
Depositary Receipt, or by reason of the acquisition thereof, to consent and
agree to such amendment and to be bound by the Deposit Agreement as amended
thereby. The Deposit Agreement automatically terminates if (i) all outstanding
Depositary Shares
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have been redeemed; or (ii) each share of Offered Preferred Stock has been
converted into or exchanged for Common Stock; or (iii) there has been a final
distribution in respect of the Offered Preferred Stock in connection with any
liquidation, dissolution or winding-up of the Company and such distribution has
been distributed to the holders of Depositary Shares. The Deposit Agreement may
be terminated by the Company at any time and the Preferred Stock Depositary will
provide notice of such termination to the record holders of all outstanding
Depositary Receipts not less than 30 days prior to the termination date, in
which event the Preferred Stock Depositary will deliver or make available for
delivery to holders of Depositary Shares, upon surrender of such Depositary
Shares, the number of whole or fractional shares of the related series of
Offered Preferred Stock as are represented by such Depositary Shares.
Charges of Depositary; Taxes and Other Governmental Charges
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay all charges of the Preferred Stock Depositary in connection with the
initial deposit of the relevant series of Offered Preferred Stock and any
redemption of such Offered Preferred Stock. Holders of Depositary Receipts will
pay other transfer and other taxes and governmental charges and such other
charges or expenses as are expressly provided in the Deposit Agreement to be for
their accounts.
Resignation and Removal of Depositary
The Preferred Stock Depositary may resign at any time by delivering to the
Company notice of its intent to do so, and the Company may at any time remove
the Preferred Stock Depositary, any such resignation or removal to take effect
upon the appointment of a successor Preferred Stock Depositary and its
acceptance of such appointment. Such successor Preferred Stock Depositary must
be appointed within 60 days after delivery of the notice of resignation or
removal and must be a bank or trust company having its principal office in the
United States and having a combined capital and surplus of at least $50,000,000.
Miscellaneous
The Preferred Stock Depositary will forward all reports and communications
from the Company which are delivered to the Preferred Stock Depositary and which
the Company is required to furnish to the holders of the deposited Preferred
Stock.
Neither the Preferred Stock Depositary nor the Company will be liable if it
is prevented or delayed by law or any circumstances beyond its control from
performing its obligations under the Deposit Agreement. The obligations of the
Company and the Preferred Stock Depositary under the Deposit Agreement will be
limited to performance in good faith of their duties thereunder and they will
not be obligated to prosecute or defend any legal proceeding in respect of any
Depositary Shares, Depositary Receipts or shares of Preferred Stock unless
satisfactory indemnity is furnished. The Company and the Preferred Stock
Depositary may rely upon written advice of counsel or accountants, or upon
information provided by holders of Depositary Receipts or other persons believed
to be competent and on documents believed to be genuine.
EXISTING PREFERRED STOCK
General
The Company has designated 2,300,000 authorized shares of Preferred Stock
as the Existing Preferred Stock and has issued 2,000,000 of such shares. The
Existing Preferred Stock of the Company is traded on the American Stock Exchange
under the symbol ARM Pr. The following description of the Existing Preferred
Stock is qualified in its entirety by reference to the Company's Certificate of
Incorporation and the Certificate of Designations, Preferences and Rights
relating to the Existing Preferred Stock (the "Existing Certificate of
Designations"), which is filed with the Secretary of State of the State of
Delaware and incorporated by reference as an exhibit to the Registration
Statement of which this Prospectus is a part.
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Holders of the Existing Preferred Stock do not have, by virtue of such
ownership, any preemptive rights with respect to any shares of capital stock of
the Company or any other securities of the Company convertible into or carrying
rights or options to purchase any such shares. The Existing Preferred Stock has
a perpetual maturity and is not subject to any sinking fund or other obligation
of the Company to redeem or retire the Existing Preferred Stock.
Dividends
Holders of shares of the Existing Preferred Stock are entitled to receive,
when, as and if declared by the Board of Directors of the Company, cash
dividends at a rate of 9 1/2% per annum per share, payable quarterly on the
fifteenth day of March, June, September and December of each year, or, if such
date is not a business day, on the next succeeding business day. Dividends are
cumulative, accrue from the date of original issue and are payable to holders of
record of the Existing Preferred Stock as they appear on the books of the
Company on such respective dates, not exceeding 60 days preceding such dividend
payment date, as may be fixed by the Board of Directors of the Company in
advance of the payment of each particular dividend. Dividends on the Existing
Preferred Stock accrue whether or not the Company has earnings, whether or not
there are funds legally available for the payment of such dividends and whether
or not such dividends are declared and will accumulate to the extent they are
not paid on the dividend payment date for the quarter for which they accrue. All
dividends paid with respect to shares of Existing Preferred Stock are paid pro
rata to the holders entitled thereto. Accruals of dividends do not bear
interest.
The Existing Preferred Stock ranks prior to the Common Stock of the
Company. Before any dividends (other than dividends payable in Common Stock) on
any class or series of stock of the Company ranking junior to the Existing
Preferred Stock as to dividends or upon liquidation shall be declared or paid or
set apart for payment, the holders of shares of the Existing Preferred Stock are
entitled to receive full cumulative cash dividends, but only when and as
declared by the Board of Directors, at the annual rate set forth above. When
dividends are not paid in full upon the Existing Preferred Stock, any dividends
declared or paid upon shares of Existing Preferred Stock and any class or series
of stock ranking on a parity with the Existing Preferred Stock ("Dividend Parity
Stock") shall be declared or paid, as the case may be, pro rata so that the
amount of dividends declared or paid, as the case may be, per share on the
Existing Preferred Stock and such Dividend Parity Stock in all cases bear to
each other the same ratio that accumulated and unpaid dividends per share on the
shares of Existing Preferred Stock and such Dividend Parity Stock bear to each
other. Unless full accumulated dividends on all outstanding shares of the
Existing Preferred Stock have been paid, the Company may not declare or pay or
set apart for payment any dividends or make any distribution in cash or other
property on, or redeem, purchase or otherwise acquire, any other class or series
of stock ranking junior to the Existing Preferred Stock either as to dividends
or upon liquidation.
The amount of dividends payable per share for each full quarterly dividend
period is computed by dividing the 9 1/2% annual rate by four and multiplying
the resulting rate by $25. The amount of dividends payable for the initial
dividend period or any period shorter than a full dividend period is computed on
the basis of a 360-day year of twelve 30-day months.
Optional Redemption
The shares of Existing Preferred Stock may not be redeemed prior to
December 15, 1998. On or after December 15, 1998, the Company may, at its
option, redeem all or a part of the shares of Existing Preferred Stock at any
time and from time to time, upon at least 30 but not more than 60 days' notice,
at a redemption price of $25 per share, plus an amount equal to all accrued and
unpaid dividends and distributions thereon (the "redemption price"), whether or
not declared, to the date fixed for redemption.
The Company shall, on or prior to the date fixed for redemption, but not
earlier than 45 days prior to the redemption date, deposit with its transfer
agent or other redemption agent, as a trust fund, a sum sufficient to redeem the
shares called for redemption, with irrevocable instructions and authority to
such agent to give or complete the required notice of redemption and to pay the
holders of such shares the redemption price upon surrender of their
certificates. Such deposit shall be deemed to constitute full payment of such
shares to their
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holders and from and after the date of such deposit, notwithstanding that any
certificates for such shares shall not have been surrendered for cancellation,
the shares represented thereby shall no longer be deemed outstanding, the right
to receive dividends and distributions shall cease to accrue from and after the
redemption date, and all rights of the holders of the Existing Preferred Stock
called for redemption as stockholders of the Company will cease and terminate,
except the right to receive the redemption price, without interest, upon the
surrender of their respective certificates.
Unless full accumulated dividends on all outstanding shares of the Existing
Preferred Stock shall have been or contemporaneously are declared and paid or
set apart for payment for all past dividend periods, the Existing Preferred
Stock may not be redeemed unless all the outstanding Existing Preferred Stock is
redeemed and neither the Company nor any subsidiary may purchase any shares of
the Existing Preferred Stock otherwise than pursuant to a purchase offer made on
the same terms to all holders of Existing Preferred Stock, provided that the
Company may complete the purchase or redemption of shares of Existing Preferred
Stock for which a purchase contract was entered into, or notice of redemption of
which was initially given, prior to any time at which the Company becomes in
arrears with respect to any dividends.
Notice of redemption shall be mailed to each holder of Existing Preferred
Stock to be redeemed at the address shown on the books of the Company not fewer
than 30 days nor more than 60 days prior to the redemption date. If less than
all of the outstanding shares of Existing Preferred Stock are to be redeemed,
the Company will select the shares to be redeemed by lot, pro rata (as nearly as
may be practicable), or in such other equitable manner as the Board of Directors
may determine.
Voting Rights
Except as indicated herein or provided by law, the holders of Existing
Preferred Stock are not entitled to vote.
Whenever dividends on the Existing Preferred Stock are in arrears for at
least six quarterly dividends, whether or not consecutive, the holders of
Existing Preferred Stock (voting as a class with all other series of authorized
Preferred Stock ranking on a parity with the Existing Preferred Stock either as
to dividends or upon liquidation and upon which like voting rights have been
conferred and are exercisable) will be entitled to vote for the election of two
additional directors on the terms set forth below until, in the case of the
Existing Preferred Stock, all past dividends in arrears on the Existing
Preferred Stock shall have been paid in full. Holders of all such series of
authorized Preferred Stock which are granted such voting rights (none of which
is currently outstanding), together with the Existing Preferred Stock, will vote
as a single class. In such case, the Board of Directors of the Company will be
increased by two directors, and the holders of all such series of authorized
Preferred Stock, together with the holders of Existing Preferred Stock, will
have the exclusive right as a class, as outlined above, to elect two directors
(the "Additional Directors") at the next annual meeting of stockholders or at a
special meeting of holders of all such series of authorized Preferred Stock and
the Existing Preferred Stock. At any time when such voting rights shall have
vested, a proper officer of the Company shall, upon written request of holders
of record of 10% of the shares of Existing Preferred Stock then outstanding,
call a special meeting of holders of all such series of authorized Preferred
Stock and the Existing Preferred Stock for the purpose of such election. For
purposes of the foregoing, each share of Existing Preferred Stock shall have one
vote per share, except that when any other series of authorized Preferred Stock
shall have the right to vote with the Preferred Stock as a single class on any
matter, then the Preferred Stock and such other series of authorized Preferred
Stock shall have with respect to such matters one vote per $25 of stated
liquidation preference. Upon termination of the right of the holders of all such
series of authorized Preferred Stock to vote for directors, the term of office
of all directors then in office elected by all such series of authorized
Preferred Stock voting as a class shall terminate. For so long as the holders of
all such series of authorized Preferred Stock shall have the right to vote for
directors, any vacancy in the office of an Additional Director may be filled
(except in the case of the removal of an Additional Director) by a person
appointed by the remaining Additional Director. In the case of the removal of an
Additional Director, or, if there is no remaining Additional Director, the
vacancy may be filled by a person elected by the holders of all such series of
authorized Preferred Stock.
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The affirmative vote or consent of the holders of at least two-thirds of
the outstanding shares of the Existing Preferred Stock, voting as a class, will
be required to (i) authorize, create or issue, or increase the authorized or
issued amount of shares of, any class or series of stock ranking prior to the
Existing Preferred Stock, either as to dividends or upon liquidation, or (ii)
amend, alter or repeal (whether by merger, consolidation or otherwise) any
provision of the Certificate of Incorporation or of the Certificate of
Designations so as to materially and adversely affect the preferences, special
rights or powers of the Preferred Stock; provided, however, that any increase in
the authorized Preferred Stock or the creation and issuance of any other series
of authorized Preferred Stock ranking on a parity with or junior to the Existing
Preferred Stock shall not be deemed to materially and adversely affect such
preferences, special rights or powers.
Except as set forth above or as required by law, the holders of Existing
Preferred Stock will not be entitled to vote on any merger or consolidation
involving the Company or a sale of all or substantially all of the assets of the
Company.
Liquidation Rights
In the event of any liquidation, dissolution or winding-up of the Company,
whether voluntary or involuntary, before any payment or distribution of the
assets of the Company or proceeds thereof (whether capital or surplus) shall be
made to or set apart for the holders of any class or series of stock of the
Company ranking junior to the Existing Preferred Stock upon liquidation, holders
of the Existing Preferred Stock shall be entitled to receive $25 per share (the
"stated liquidation preference"), plus an amount equal to all dividends (whether
or not earned or declared) accrued and unpaid to the date of final distribution
(together with the stated liquidation preference, the "preferential amount"),
but such holders shall not be entitled to any further payment. If, upon any
liquidation, dissolution or winding-up of the Company the assets of the Company,
or proceeds thereof, distributable among the holders of shares of Preferred
Stock and any other class or series of stock ranking on a parity with the
Preferred Stock as to payments upon liquidation, dissolution or winding-up shall
be insufficient to pay in full the preferential amount payable on all such
shares of stock, then such assets, or the proceeds thereof, shall be distributed
among such holders ratably in accordance with the respective amounts that would
be payable on such shares if all amounts payable thereon were paid in full. The
voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all the
property or assets of the Company to, or a consolidation or merger of the
Company with or into, one or more other corporations (whether or not the Company
is the corporation surviving such consolidation or merger) will not be deemed to
be a liquidation, dissolution or winding-up, voluntary or involuntary.
Transfer Agent
The transfer agent, dividend disbursing agent and registrar for the
Existing Preferred Stock is ChaseMellon Shareholder Services LLC.
COMMON STOCK
General
At May 26, 1998, the Company had 23,397,471 shares of Class A Common Stock
and no shares of Class B Common Stock outstanding.
Class A Common Stock and Class B Common Stock
Holders of Class A Common Stock are entitled to one vote for each share of
Class A Common Stock on each matter submitted to a vote of stockholders,
including the election of directors. Holders of Class A Common Stock are not
entitled to cumulative voting. Shares of Class A Common Stock have no preemptive
or other subscription rights and were, until May 13, 1998, convertible by the
Morgan Stanley Stockholders into an equal number of shares of Class B Common
Stock.
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Holders of Class B Common Stock have no right to vote on matters submitted
to a vote of stockholders, except (i) as otherwise required by law; and (ii)
that the holders of Class B Common Stock shall have the right to vote as a class
on any amendment, repeal or modification to the Certificate of Incorporation
that adversely affects the powers, preferences or special rights of the holders
of the Class B Common Stock. Shares of Class B Common Stock have no preemptive
or other subscription rights and are convertible into an equal number of shares
of Class A Common Stock (x) at the option of the holder thereof to the extent
that, following such conversion, the Morgan Stanley Stockholders will not, in
the aggregate, own more than 49% of the outstanding shares of Class A Common
Stock; and (y) automatically upon the transfer of such shares by any Morgan
Stanley Stockholder to a person that is not a Morgan Stanley Stockholder or an
affiliate of a Morgan Stanley Stockholder.
The Morgan Stanley Stockholders sold their interests in the Company on May
13, 1998. Accordingly, the shares of Class A Common Stock are no longer
convertible into shares of Class B Common Stock, there are no shares of Class B
Common Stock outstanding and the Certificate of Incorporation does not authorize
the issuance of any additional shares of Class B Common Stock.
Dividends
All holders of Common Stock are entitled to receive such dividends or other
distributions, if any, as may be declared from time to time by the Board of
Directors in its discretion out of funds legally available therefor, subject to
the prior rights of any Preferred Stock then outstanding, and to share equally,
share for share, in such dividends or other distributions as if all shares of
Common Stock were a single class. Dividends or other distributions declared or
paid in shares of Common Stock, or options, warrants or rights to acquire such
stock or securities convertible into or exchangeable for shares of such stock,
are payable to all of the holders of Common Stock ratably according to the
number of shares held by them, in shares of Class A Common Stock to holders of
that class of stock and in shares of Class B Common Stock to holders of that
class of stock. Delaware law generally requires that dividends be paid only out
of the Company's surplus or current net profits in accordance with the DGCL.
Liquidation
Subject to the rights of any holders of Preferred Stock outstanding, upon
the dissolution, liquidation or winding-up of the Company, the holders of Common
Stock are entitled to share equally and ratably in the assets available for
distribution after payments are made to the Company's creditors.
Full Payment and Nonassessability
All of the outstanding shares of Common Stock are fully paid and
nonassessable.
Listing
The Class A Common Stock is listed on the New York Stock Exchange under the
symbol "ARM."
Registrar and Transfer Agent
ChaseMellon Shareholder Services LLC is the registrar and transfer agent
for the Common Stock.
CERTIFICATE OF INCORPORATION AND BY-LAWS
Stockholders' rights and related matters are governed by the DGCL, the
Certificate of Incorporation and the By-laws. Certain provisions of the
Certificate of Incorporation and By-laws, which are summarized below, may have
the effect, either alone or in combination with each other, of discouraging or
making more difficult a tender offer or takeover attempt that is opposed by the
Company's Board of Directors but that a stockholder might consider to be in its
best interest. Such provisions may also adversely affect prevailing market
prices for the Offered Preferred Stock.
16
<PAGE> 18
Classified Board of Directors and Related Provisions
The Certificate of Incorporation provides for the classification of the
Board of Directors into three classes with each class of directors serving
staggered three-year terms. The term of the initial Class I directors will
terminate on the date of the 1998 annual meeting of stockholders; the term of
the initial Class II directors will terminate on the date of the 1999 annual
meeting of stockholders; and the term of the initial Class III directors shall
terminate on the date of the 2000 annual meeting of stockholders. At each annual
meeting of stockholders beginning in 1998, successors to the class of directors
whose term expires at that annual meeting will be elected for a three-year term.
Accordingly, approximately one-third of the Company's Board of Directors will be
elected each year. In addition, subject to certain limited exceptions, if the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class as
nearly equal as possible, and any additional director of any class elected to
fill a vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining term of that class, but in no case
will a decrease in the number of directors shorten the term of any incumbent
director. Subject to the rights of holders of any outstanding preferred stock
issued by the Company, vacancies on the Board of Directors may be filled only by
the Board of Directors, the stockholders acting at an annual meeting or, if the
vacancy is with respect to a director elected by a voting group, by action of
any other directors elected by such voting group or such voting group.
The Certificate of Incorporation also provides that, subject to the rights
of holders of any preferred stock then outstanding and any requirements of law,
directors may be removed only for cause.
Action by Written Consent; Special Meeting
Any action required or permitted to be taken at an annual or special
meeting of stockholders will not be permitted to be taken by written consent in
lieu of a meeting of stockholders, and, thus, stockholders will only be
permitted to take action at an annual or special meeting called in accordance
with the By-laws. The Certificate of Incorporation and By-laws provide that
special meetings of stockholders may only be called by the Chief Executive
Officer of the Company or by a majority of the Board of Directors. Special
meetings may not be called by the stockholders.
Advance Notice Requirements for Stockholder Proposals and Director Nominations
The Certificate of Incorporation and By-laws establish advance notice
procedures with regard to stockholder proposals and the nomination, other than
by or at the direction of the Board of Directors or a committee thereof, of
candidates for election as directors. These procedures provide that the notice
of stockholder proposals and stockholder nominations for the election of
directors at an annual meeting must be in writing and received by the Secretary
of the Company not less than 60 days nor more than 90 days prior to the
anniversary date of the previous year's annual meeting or, if the date of the
annual meeting is not within 30 days before or after the anniversary date of the
previous year's annual meeting, not later than the close of business on the
tenth day following the day on which notice of the date of such meeting was
mailed or public disclosure of the date of the meeting of stockholders was made,
whichever first occurs. The notice of stockholder nominations must set forth
certain information with respect to the stockholder giving the notice and with
respect to each nominee.
Indemnification
The Certificate of Incorporation and By-laws provide that the Company shall
advance expenses to and indemnify each director and officer of the Company to
the fullest extent permitted by law.
Amendments
Stockholders may adopt, alter, amend or repeal provisions of the By-laws
only by vote of the holders of 80% or more of the outstanding Common Stock and
any other voting securities. In addition, the affirmative vote of the holders of
80% or more of the outstanding Common Stock and any other voting securities is
required to amend certain provisions of the Certificate of Incorporation,
including filling vacancies on the
17
<PAGE> 19
Board of Directors, removal of directors only for cause, prohibiting stockholder
action by written consent, prohibiting the calling of special meetings by
stockholders, approval of amendments to the By-laws and the provisions referred
to above relating to the classification of the Company's Board of Directors.
LIMITATIONS ON DIRECTORS' LIABILITY
The Certificate of Incorporation provides that no director of the Company
shall be personally liable to the Company or its stockholders for monetary
damages for any breach of fiduciary duty as a director, except for liability:
(i) for any breach of the director's duty of loyalty to the Company or its
stockholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) in respect of
certain unlawful dividend payments or stock redemptions or purchases or (iv) for
any transaction from which the director derived an improper personal benefit.
The effect of these provisions is to eliminate the rights of the Company and its
stockholders (through stockholders' derivative suits on behalf of the Company)
to recover monetary damages against a director for breach of fiduciary duty as a
director (including breaches resulting from grossly negligent behavior), except
in the situations described above. These provisions do not limit the liability
of directors under federal securities laws and do not affect the availability of
equitable remedies such as an injunction or rescission based upon a director's
breach of his duty of care.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 of the DGCL prohibits certain transactions between a Delaware
corporation and an "interested stockholder," which is defined as a person who,
together with any affiliates and/or associates of such person, beneficially
owns, directly or indirectly, 15% or more of the outstanding voting shares of a
Delaware corporation. This provision prohibits certain business combinations
(defined broadly to include mergers, consolidations, sales or other dispositions
of assets having an aggregate value of 10% or more of the consolidated assets of
the corporation, and certain transactions that would increase the interested
stockholder's proportionate share ownership in the corporation) between an
interested stockholder and a corporation for a period of three years after the
date the interested stockholder acquired its stock, unless: (i) the business
combination is approved by the corporation's board of directors prior to the
date the interested stockholder acquired shares; (ii) the interested stockholder
acquired at least 85% of the voting stock of the corporation in the transaction
in which it became an interested stockholder or (iii) the business combination
is approved by a majority of the board of directors and by the affirmative vote
of two-thirds of the outstanding voting stock owned by disinterested
stockholders at an annual or special meeting. A Delaware corporation, pursuant
to a provision in its certificate of incorporation or by-laws, may elect not to
be governed by Section 203 of the DGCL. The Company has not made such an
election and, as a result, the Company is subject to the provisions of Section
203 of the DGCL.
18
<PAGE> 20
PLAN OF DISTRIBUTION
The Company may sell any series of Offered Preferred Stock or Depositary
Shares (collectively, the "Offered Securities") in one or more of the following
ways from time to time: (i) to or through underwriters or dealers, (ii) directly
to purchasers, or (iii) through agents. The Prospectus Supplement with respect
to any Offered Securities will set forth (i) the terms of the offering of the
Offered Securities, including the name or names of any underwriters, dealers or
agents, (ii) the purchase price of the Offered Securities and the proceeds to
the Company from such sale, (iii) any underwriting discounts and commissions or
agency fees and other items constituting underwriters' or agents' compensation,
(iv) any initial public offering prices, (v) any discounts or concessions
allowed or reallowed or paid to dealers and (vi) any securities exchange on
which such Offered Securities may be listed. Any initial public offering price,
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time.
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The Offered Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. The underwriter or underwriters with
respect to a particular underwritten offering of Offered Securities will be
named in the Prospectus Supplement relating to such offering and, if an
underwriting syndicate is used, the managing underwriter or underwriters will be
set forth on the cover of such Prospectus Supplement. Unless otherwise set forth
in the Prospectus Supplement relating thereto, the obligations of the
underwriters to purchase the Offered Securities will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all the
Offered Securities if any are purchased.
In connection with underwritten offerings of the Offered Securities and in
accordance with applicable law and industry practice, underwriters may
over-allot or effect transactions which stabilize, maintain or otherwise affect
the market price of the Offered Securities at levels above those which might
otherwise prevail in the open market, including by entering stabilizing bids,
effecting syndicate covering transactions or imposing penalty bids. A
stabilizing bid means the placing of any bid, or the effecting of any purchase,
for the purpose of pegging, fixing or maintaining the price of a security. A
syndicate covering transaction means the placing of any bid on behalf of the
underwriting syndicate or the effecting of any purchase to reduce a short
position created in connection with the offering. A penalty bid means an
arrangement that permits the managing underwriter to reclaim a selling
concession from a syndicate member in connection with the offering when Offered
Securities originally sold by the syndicate member are purchased in syndicate
covering transactions. Such transactions may be effected on a stock exchange, in
the over-the-counter market, or otherwise. Underwriters are not required to
engage in any of these activities. Any such activities, if commenced, may be
discontinued at any time.
If dealers are utilized in the sale of Offered Securities, the Company will
sell such Offered Securities to the dealers as principals. The dealers may then
resell such Offered Securities to the public at varying prices to be determined
by such dealers at the time of resale. The names of the dealers and the terms of
the transaction will be set forth in the Prospectus Supplement relating thereto.
Offered Securities may be sold directly by the Company to one or more
institutional purchasers, or through agents designated by the Company from time
to time, at a fixed price, or prices, which may be changed, or at varying prices
determined at time of sale. Any agent involved in the offer or sale of the
Offered Securities in respect to which this Prospectus is delivered will be
named, and any commissions payable by the Company to such agent will be set
forth in the Prospectus Supplement relating thereto. Unless otherwise indicated
in the Prospectus Supplement, any such agent will be acting on a best efforts
basis for the period of its appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers from certain types of
institutions to purchase Offered Securities from the Company at the public
offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts (the "Contracts") providing for payment and delivery on a
specified date or dates in the future. Such Contracts will
19
<PAGE> 21
not be subject to any conditions except (a) the purchase by an institution of
the Offered Securities covered by its Contracts shall not at the time of
delivery be prohibited under the laws of any jurisdiction in the United States
to which such institution is subject and (b) if the Offered Securities are being
sold to underwriters, the Company shall have sold to such underwriters the total
principal amount of the Offered Securities less the principal amount thereof
covered by the Contracts. The Prospectus Supplement will set forth the
commission payable for solicitation of such Contracts.
Agents, dealers and underwriters may be entitled, under agreements with the
Company, to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act of 1933, as amended, or to
contribution with respect to payments that such agents, dealers or underwriters
may be required to make in respect thereof. Agents, dealers and underwriters may
be customers of, engage in transactions with, or perform services for the
Company in the ordinary course of business.
Each series of Offered Securities will be a new issue of securities and
will have no established trading market. Any underwriters to whom Offered
Securities are sold for public offering and sale may make a market in such
Offered Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. The Offered Securities
may or may not be listed on a national securities exchange. No assurance can be
given that there will be a market for the Offered Securities.
The place and time of delivery of the Preferred Stock are set forth in the
Prospectus Supplement.
LEGAL MATTERS
The validity of the Offered Preferred Stock will be passed upon for the
Company by Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022,
and, if underwriters are utilized, on behalf of such underwriters by such
counsel, which will be named in the Prospectus Supplement, as such underwriters
may select.
EXPERTS
The consolidated financial statements and financial statement schedules for
the Company at December 31, 1997 and 1996, and for each of three years in the
period ended December 31, 1997, appearing in and/or incorporated by reference
into this Prospectus and Registration Statement have been audited by Ernst &
Young LLP, independent auditors, as set forth in their reports thereon appearing
elsewhere herein and/or incorporated herein by reference, and are included
and/or incorporated by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
ERISA MATTERS FOR PENSION PLANS AND INSURANCE COMPANIES
The Offered Preferred Stock may, subject to certain legal restrictions, be
purchased and held by an employee benefit plan (a "Plan") subject to Title I of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or an
individual retirement account or an employee benefit plan subject to section
4975 of the Internal Revenue Code of 1986, as amended (the "Code"). A fiduciary
of a Plan must determine that the purchase and holding of Offered Preferred
Stock is consistent with its fiduciary duties under ERISA and does not result in
a non-exempt prohibited transaction as defined in section 406 of ERISA or
section 4975 of the Code. Employee benefit plans that are governmental plans (as
defined in section 3(32) of ERISA) and certain church plans (as defined in
section 3(33) of ERISA) are not subject to Title I of ERISA or section 4975 of
the Code. The Offered Preferred Stock may, subject to certain legal
restrictions, be purchased and held by such plans.
20
<PAGE> 22
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following fees and expenses shall be borne by the Company in connection
with this offering. All fees and expenses other than the SEC and listing fees
are estimated.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $22,125
NASD Filing Fee............................................. 8,000
Listing Fee................................................. 29,500
Rating Agency Fees.......................................... 75,000
Printing and Engraving Expenses............................. 75,000
Legal Fees and Expenses..................................... 100,000
Accountants' Fees and Expenses.............................. 50,000
Blue Sky Qualification Fees and Expenses.................... 10,000
Preferred Stock Depositary's Fees and Expenses.............. 5,000
Miscellaneous............................................... 50,375
-------
TOTAL............................................. 425,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides, in summary,
that directors and officers of Delaware corporations are entitled, under certain
circumstances, to be indemnified against all expenses and liabilities (including
attorneys' fees) incurred by them as a result of suits brought against them in
their capacity as a director or officer, if they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, if they
had no reasonable cause to believe their conduct was unlawful; provided that no
indemnification may be made against expenses in respect of any claim, issue or
matter as to which they shall have been adjudged to be liable to the
corporation, unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, they
are fairly and reasonably entitled to indemnity for such expenses which the
court shall deem proper. Any such indemnification may be made by the corporation
only as authorized in each specific case upon a determination by the
stockholders or disinterested directors that indemnification is proper because
the indemnitee has met the applicable standard of conduct.
The Restated Certificate of Incorporation of the Registrant (the
"Certificate of Incorporation") provides that no director of the Registrant
shall be personally liable to the Registrant or its stockholders for monetary
damages for any breach of fiduciary duty as a director, except for liability:
(i) for any breach of the director's duty of loyalty to the Registrant or its
stockholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) in respect of
certain unlawful dividend payments or stock redemptions or purchases or (iv) for
any transaction from which the director derived an improper personal benefit.
The Certificate of Incorporation and the By-laws of the Registrant provide
for indemnification of its directors and officers to the fullest extent
permitted by Delaware law, as the same may be amended from time to time. In
addition, Morgan Stanley Dean Witter & Co. ("MSDW") indemnifies those directors
of the Registrant who are also officers of Morgan Stanley & Co. Incorporated.
The Underwriting Agreement (Exhibit 1.1 hereto) contains provisions for
certain indemnification rights to the directors and officers of the Registrant.
In addition, the Registrant and MSDW maintain directors' and officers'
liability insurance for their respective directors and officers.
II-1
<PAGE> 23
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
NUMBER
ASSIGNED IN
REGULATION S-K,
ITEM 601 DESCRIPTION OF EXHIBIT
- --------------- ----------------------
<S> <C>
1.1* Form of underwriting agreement.
2.1 Asset Purchase Agreement, dated as of January 5, 1995, among
Kleinwort Benson Investment Management Holdings Ltd.,
Kleinwort Benson Investment Management Americas Inc., ARM
Financial Group, Inc., and ARM Capital Advisors, Inc.+
2.2 Stock and Asset Purchase Agreement by and between SBM
Company and ARM Financial Group, Inc. dated as of February
16, 1995.+
2.3 Amended and Restated Stock and Asset Purchase Agreement,
dated as of April 7, 1995, by and between SBM Company and
ARM Financial Group, Inc.++, amending the Stock and Asset
Purchase Agreement, dated as of February 16, 1995.+
2.4 Subscription Agreement dated as of June 12, 1995, among ARM
Financial Group, Inc. and New ARM, LLC, Dudley J. Godfrey,
Jr. and Edward Powers.+++
4.1 Second Amended and Restated Stockholders Agreement dated as
of June 24, 1997, among ARM Financial Group, Inc., The
Morgan Stanley Leveraged Equity Fund II, L.P., John Franco,
Martin H. Ruby, Oldarm L.P., Morgan Stanley Capital Partners
III, L.P., Morgan Stanley Capital Investors, L.P., MSCP III
892 Investors, L.P. and New ARM, LLC.++++
4.2** Form of Certificate of Designation of Offered Preferred
Stock.
4.3** Form of Certificate of Offered Preferred Stock.
4.4** Form of Deposit Agreement.
5.1** Opinion of Shearman & Sterling.
12.1* Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends.
23.1** Consent of Shearman & Sterling (included in its opinion
delivered under Exhibit No. 5.1)
23.2* Consent of Ernst & Young LLP.
24.1* Powers of Attorney.
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Filed herewith.
** To be filed by amendment.
+ Incorporated by reference to the Form 10-K filed by the
Registrant on March 30, 1995.
++ Incorporated by reference to the Form 10-Q filed by the
Registrant on May 15, 1995.
+++ Incorporated by reference to the Form 10-K filed by the
Registrant on March 29, 1996.
++++ Incorporated by reference to Amendment No. 3 to the Form S-1
Registration Statement filed by the Registrant on May 23,
1997.
</TABLE>
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales of the
securities are being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if
II-2
<PAGE> 24
the total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
Registration Statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information set forth in the Registration
Statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section
do not apply if the Registration Statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the Registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant for expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(d) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Louisville, State of Kentucky, on May 29, 1998.
ARM FINANCIAL GROUP, INC.
By: /s/ MARTIN H. RUBY
------------------------------------
Name: Martin H. Ruby
Title: Chairman of the Board of
Directors and Chief Executive
Officer (Principal Executive
Officer)
POWER OF ATTORNEY
The undersigned Directors and Officers of ARM Financial Group, Inc. hereby
constitute and appoint Martin H. Ruby and Robert H. Scott, and each of them
acting singly, as true and lawful attorneys-in-fact for the undersigned, with
full power of substitution and resubstitution, for, and in the name, place, and
stead of the undersigned, to sign and file with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act"), any and all
amendments (including post-effective amendments) and exhibits to this
Registration Statement, any related registration statement and its amendments
and exhibits filed pursuant to Rule 462(b) under the Act and any and all
applications and other documents to be filed with the Securities and Exchange
Commission pertaining to the registration of the securities covered hereby or
under any related registration statement or any amendment hereto or thereto,
with full power and authority to do and perform each and every act and thing
requisite and necessary or desirable, hereby ratifying and confirming all that
each of such attorneys-in-fact or its substitute shall lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MARTIN H. RUBY Chairman of the Board of May 29, 1998
- ----------------------------------------------------- Directors and Chief
Martin H. Ruby Executive Officer (Principal
Executive Officer) and
Director
/s/ JOHN R. LINDHOLM President -- Retail Business May 29, 1998
- ----------------------------------------------------- Division and Director
John R. Lindholm
/s/ EDWARD L. ZEMAN Executive Vice May 29, 1998
- ----------------------------------------------------- President -- Chief Financial
Edward L. Zeman Officer (Principal Financial
Officer)
/s/ BARRY G. WARD Controller (Principal May 29, 1998
- ----------------------------------------------------- Accounting Officer)
Barry G. Ward
/s/ DUDLEY J. GODFREY, JR. Director May 29, 1998
- -----------------------------------------------------
Dudley J. Godfrey, Jr.
/s/ EDWARD D. POWERS Director May 29, 1998
- -----------------------------------------------------
Edward D. Powers
</TABLE>
II-4
<PAGE> 26
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ COLIN F. RAYMOND Director May 29, 1998
- -----------------------------------------------------
Colin F. Raymond
/s/ IRWIN T. VANDERHOOF Director May 29, 1998
- -----------------------------------------------------
Irwin T. Vanderhoof
</TABLE>
II-5
<PAGE> 27
<TABLE>
<CAPTION>
NUMBER
ASSIGNED IN SEQUENTIALLY
REGULATION S-K, NUMBERED
ITEM 601 DESCRIPTION OF EXHIBIT PAGE
- --------------- ---------------------- ------------
<S> <C> <C>
1.1* Form of underwriting agreement.
2.1 Asset Purchase Agreement, dated as of January 5, 1995, among
Kleinwort Benson Investment Management Holdings Ltd.,
Kleinwort Benson Investment Management Americas Inc., ARM
Financial Group, Inc., and ARM Capital Advisors, Inc.+
2.2 Stock and Asset Purchase Agreement by and between SBM
Company and ARM Financial Group, Inc. dated as of February
16, 1995.+
2.3 Amended and Restated Stock and Asset Purchase Agreement,
dated as of April 7, 1995, by and between SBM Company and
ARM Financial Group, Inc.++, amending the Stock and Asset
Purchase Agreement, dated as of February 16, 1995.+
2.4 Subscription Agreement dated as of June 12, 1995, among ARM
Financial Group, Inc. and New ARM, LLC, Dudley J. Godfrey,
Jr. and Edward Powers.+++
4.1 Second Amended and Restated Stockholders Agreement dated as
of June 24, 1997, among ARM Financial Group, Inc., The
Morgan Stanley Leveraged Equity Fund II, L.P., John Franco,
Martin H. Ruby, Oldarm L.P., Morgan Stanley Capital Partners
III, L.P., Morgan Stanley Capital Investors, L.P., MSCP III
892 Investors, L.P. and New ARM, LLC.++++
4.2** Form of Certificate of Designation of Offered Preferred
Stock.
4.3** Form of Certificate of Offered Preferred Stock.
4.4** Form of Deposit Agreement.
5.1** Opinion of Shearman & Sterling.
12.1* Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends.
23.1** Consent of Shearman & Sterling (included in its opinion
delivered under Exhibit No. 5.1)
23.2* Consent of Ernst & Young LLP.
24.1* Powers of Attorney.
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Filed herewith.
** To be filed by amendment.
+ Incorporated by reference to the Form 10-K filed by the
Registrant on March 30, 1995.
++ Incorporated by reference to the Form 10-Q filed by the
Registrant on May 15, 1995.
+++ Incorporated by reference to the Form 10-K filed by the
Registrant on March 29, 1996.
++++ Incorporated by reference to Amendment No. 3 to the Form S-1
Registration Statement filed by the Registrant on May 23,
1997.
</TABLE>
<PAGE> 1
EXHIBIT 1.1
UNDERWRITING AGREEMENT
________ __, 199_
ARM FINANCIAL GROUP, INC.
515 West Market Street
Louisville, Kentucky 40202
Dear Sirs:
We (the "Manager") are acting on behalf of the underwriter or
underwriters (including ourselves) named below (such underwriter or underwriters
being herein called the "Underwriters"), and we understand that ARM Financial
Group, Inc., a Delaware corporation (the "Company"), proposes to [issue and sell
_______ shares of its ___% Cumulative Preferred Stock, par value $___ per share,
stated value $___ per share (the "Firm Offered Securities")]* [sell _______
Depositary Shares (the "Firm Offered Securities"), each representing a
[fraction] interest in its ___% Cumulative Preferred Stock, par value $___ per
share, stated value $___ per share].** The Company also proposes to [issue and
sell not more than an additional _______ shares of its ___% Cumulative Preferred
Stock, par value $___ per share, stated value $___ per share (the "Additional
Offered Securities"),]* [sell not more than an additional _______ Depositary
Shares (the "Additional Offered Securities"), each representing a [fraction]
interest in its ___% Cumulative Preferred Stock, par value $___ per share,
stated value $___ per share,]** if and to the extent that we shall have
determined to exercise, on behalf of the Underwriters, the right to purchase
such Additional Offered Securities referred to below. The Firm Offered
Securities and the Additional Offered Securities are hereinafter collectively
referred to as the "Offered Securities" or as the ["Preferred
Shares"/"Depositary Shares"].*** [The Depositary Shares will be issued by
_______ (the "Depositary") pursuant to the terms of a Deposit Agreement (the
"Deposit Agreement") to be entered into among the
- -----------------------
* Include only for issuances of Preferred Stock.
** Include only for issuances of Depositary Shares representing interests
in Preferred Stock.
*** Delete as appropriate.
<PAGE> 2
2
Company, the Depositary, and the holders from time to time of Depositary
Receipts (as defined herein) issued thereunder. The Depositary Shares will be
evidenced by Depositary Receipts issued pursuant to the Deposit Agreement (the
"Depositary Receipts"). The shares of the Company's ___% Cumulative Preferred
Stock, par value $___ per share, stated value $___ per share, relating to the
Depositary Shares are hereinafter referred to as the "Underlying Preferred
Shares."]*
Subject to the terms and conditions set forth or incorporated
by reference herein, the Company hereby agrees to sell and the Underwriters
agree to purchase, severally and not jointly, the number of Firm Offered
Securities set forth below opposite their names at $___ per share plus accrued
dividends, if any, from _______ __, 199_ to the date of payment and delivery:
Number of
Offered Securities
Underwriter To Be Purchased
[Insert syndicate list]
Total ......
The Underwriters will pay for such Firm Offered Securities
upon delivery thereof at [office] at ____ a.m. (New York time) on _______ __,
199_, or at such other time, not later than 5:00 p.m. (New York time) on _______
__, 199_, as shall be designated by the Manager. The time and date of such
payment and delivery are hereinafter referred to as the "Closing Date."
Subject to the terms and conditions set forth herein and
incorporated by reference herein, the Company hereby agrees to sell to the
Underwriters the Additional Offered Securities, and the Underwriters shall have
a one-time right to purchase, severally and not jointly, up to_______ Additional
Offered Securities at the purchase price set forth above plus accrued dividends,
if any. Additional Offered Securities may be purchased solely for the purpose of
covering over-allotments made in connection with the offering of the Firm
Offered Securities. If any Additional Offered Securities are to be purchased,
each Underwriter agrees, severally and not jointly, to purchase the number of
Additional Offered Securities (subject to such adjustments to eliminate
fractional shares as we may determine) that bears the same
- ----------------------
* Include only for issuances of Depositary Shares representing interests in
Preferred Stock.
<PAGE> 3
3
proportion to the total number of Additional Offered Securities to be purchased
as the number of Firm Offered Securities set forth above opposite the name of
such Underwriter bears to the total number of Firm Offered Securities.
The Underwriters will pay for any Additional Offered
Securities upon delivery thereof at [office] at ____ a.m. (New York time) on
such date (which may be the same as the Closing Date but shall in no event be
earlier than the Closing Date nor later than ten business days after the giving
of the notice hereinafter referred to) as shall be designated in a written
notice from us to the Company of our determination, on behalf of the
Underwriters, to purchase a number, specified in such notice, of Additional
Offered Securities. The time and date of such payment are hereinafter referred
to as the "Option Closing Date." The notice of the determination to exercise the
option to purchase Additional Offered Securities may be given at any time within
30 days after the date of this Agreement. The several obligations of the
Underwriters to purchase Additional Offered Securities are subject to the
delivery to us on the Option Closing Date of such documents as we may reasonably
request with respect to the good standing of the Company, the due authorization
and issuance of the Additional Offered Securities [, the Underlying Preferred
Shares]* and other matters related to the issuance of the Additional Offered
Securities [and the Underlying Preferred Shares].*
The Offered Securities [and the Underlying Preferred Shares]*
shall have the terms set forth in the Prospectus dated _______ __, 199_ and the
Prospectus Supplement dated _______ __, 199_, including the following:
Terms of [Underlying]* Preferred Shares
Dividends:
Rate:
Dividend
Payment Dates: _______ __, _______ __, _______ __ and
_______ __, commencing _______ __, 199_.
Dividends cumulate from _______ __, 199_
Liquidation Preference: $___ per share
Redemption:
[Other Terms:]
- --------
* Include only for issuances of Depositary Shares representing interests in
Preferred Stock.
<PAGE> 4
4
[Terms of Depositary Shares
Dividends:
Rate:
Dividend
Payment Dates: _______ __, _______ __, _______ __ and
_______ __, commencing _______ __, 199_.
Dividends cumulate from _______ __, 199_
Liquidation Preference: $___ per share (equivalent to $___ per
Underlying Preferred Share)
Redemption:
[Other Terms:]]*
All the provisions contained in the document entitled ARM
Financial Group, Inc. Underwriting Agreement Standard Provisions (Preferred
Stock and Depositary Shares) dated _______ __, 199_ (the "Standard Provisions"),
a copy of which is attached hereto, are herein incorporated by reference in
their entirety and shall be deemed to be a part of this Agreement to the same
extent as if such provisions had been set forth in full herein, except that
[(i)]** if any term defined in such document is otherwise defined herein, the
definition set forth herein shall control [and (ii) all references in such
document to Depositary Shares, Depositary Receipts, Underlying Preferred Shares
and the Deposit Agreement shall not be deemed to be part of this Agreement].**
- -----------------------
* Include only for issuances of Depositary Shares representing interests in
Preferred Stock.
** Include only for issuances of Preferred Stock.
<PAGE> 5
5
Please confirm your agreement by having an authorized officer
sign a copy of this Agreement in the space set forth below.
Very truly yours,
[Names of Lead Managers]
On behalf of themselves and the
other Underwriters named herein
By [Lead Manager]
By:
---------------------------------------
Name:
Title:
Accepted:
ARM FINANCIAL GROUP, INC.
By:
---------------------------------------
Name:
Title:
<PAGE> 6
ARM FINANCIAL GROUP, INC.
UNDERWRITING AGREEMENT
STANDARD PROVISIONS
(PREFERRED STOCK AND DEPOSITARY SHARES)
_______ __, 199_
From time to time, ARM Financial Group, Inc., a Delaware
corporation (the "Company"), may enter into one or more underwriting agreements
that provide for the sale of designated securities to the several underwriters
named therein. The standard provisions set forth herein may be incorporated by
reference in any such underwriting agreement (an "Underwriting Agreement"). The
Underwriting Agreement, including the provisions incorporated therein by
reference, is herein referred to as this Agreement. Terms defined in the
Underwriting Agreement are used herein as therein defined.
The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement including a prospectus
relating to the Offered Securities and the Underlying Preferred Shares and has
filed with, or transmitted for filing to, or shall promptly hereafter file with
or transmit for filing to, the Commission a prospectus supplement (the
"Prospectus Supplement") specifically relating to the Offered Securities and the
Underlying Preferred Shares pursuant to Rule 424 under the Securities Act of
1933, as amended (the "Securities Act"). The term Registration Statement means
the registration statement as amended to the date of this Agreement. The term
Basic Prospectus means the prospectus included in the Registration Statement.
The term Prospectus means the Basic Prospectus together with the Prospectus
Supplement. The term preliminary prospectus means a preliminary prospectus
supplement specifically relating to the Offered Securities and the Underlying
Preferred Shares together with the Basic Prospectus. As used herein, the terms
"Basic Prospectus," "Prospectus" and "preliminary prospectus" shall include in
each case the documents, if any, incorporated by reference therein. The terms
"supplement," "amendment" and "amend" as used herein shall include all documents
deemed to be incorporated by reference in the Prospectus that are filed
subsequent to the date of the Basic Prospectus by the Company with the
Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
1. Representations and Warranties. The Company represents
and warrants to each of the Underwriters that:
(a) The Registration Statement has become effective; no
stop order suspending the effectiveness of the Registration Statement
is in effect, and no
<PAGE> 7
2
proceedings for such purpose are pending before or, to the knowledge of
the Company, threatened by the Commission.
(b) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the Securities Act
and the rules and regulations of the Commission thereunder.
(c)(i) Each document, if any, filed or to be filed pursuant to
the Exchange Act and incorporated by reference in the Prospectus
complied or will comply when so filed in all material respects with the
Exchange Act and the applicable rules and regulations of the Commission
thereunder, (ii) each part of the Registration Statement, when such
part became effective, did not contain and each such part, as amended
or supplemented, if applicable, will not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, (iii) the Registration Statement and the Prospectus comply
and, as amended or supplemented, if applicable, will comply in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iv) the Prospectus does
not contain and, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except
that the representations and warranties set forth in this paragraph (c)
do not apply to statements or omissions in the Registration Statement
or the Prospectus based upon information concerning the Underwriters
furnished to the Company in writing by any Underwriter through the
Manager expressly for use therein.
(d) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(e) Each subsidiary of the Company has been duly incorporated,
is validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification,
except to the extent that
<PAGE> 8
3
the failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as a
whole.
(f) The authorized capital stock of the Company, the Offered
Securities, any Underlying Preferred Shares, any Depositary Shares and
any Deposit Agreement conform as to legal matters to the descriptions
thereof contained in the Prospectus.
(g) The Preferred Shares or the Underlying Preferred Shares,
as the case may be, have been duly authorized and, when such shares are
issued and delivered as contemplated by the terms of this Agreement,
such shares will be validly issued, fully paid and non-assessable, and
the issuance of such shares is not subject to any preemptive or similar
rights.
(h) The deposit of the Underlying Preferred Shares by the
Company in accordance with any Deposit Agreement has been duly
authorized and, when the Depositary Shares are issued and delivered in
accordance with the terms of this Agreement, the Depositary Shares will
represent legal and valid interests in the Underlying Preferred Shares.
(i) Assuming due authorization, execution and delivery of any
Deposit Agreement by the Depositary, each Depositary Share, if any,
will represent the interest described in the Prospectus in a validly
issued, outstanding, fully paid and non-assessable Underlying Preferred
Share; assuming due execution and delivery of the Depositary Receipts,
if any, by the Depositary pursuant to such Deposit Agreement, the
Depositary Receipts will entitle the holders thereof to the benefits
provided therein and in the Deposit Agreement.
(j) Upon the closing of the offering of the Shares, the
authorized, issued and outstanding capital stock of the Company will be
as set forth in the Prospectus under the caption "Capitalization" in
the column entitled "As Adjusted," and the authorized capital stock of
the Company will conform as to legal matters to the description thereof
contained in the Prospectus.
(k) This Agreement has been duly authorized, executed and
delivered by the Company.
(l) The Deposit Agreement, if any, has been duly authorized,
executed and delivered by the Company and is a valid and binding
agreement of the Company.
(m) (i) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement,
the Certificate of Designation relating to the Preferred Shares or the
Underlying Preferred Shares, as the case may be (the "Preferred Shares
Certificate of Designation"), and the Deposit Agreement, if any,
<PAGE> 9
4
will not contravene any provision of applicable law or the certificate
of incorporation or by-laws of the Company or any agreement or other
instrument binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries except for such judgments,
orders or decrees, the violation of which would neither (x) have a
material adverse effect on the Company and its subsidiaries, taken as a
whole, nor (y) materially and adversely affect the ability of the
Company to consummate the transactions contemplated by this Agreement
and (ii) no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, the
Preferred Shares Certificate of Designation and the Deposit Agreement,
if any, except such as have been obtained under the Securities Act and
any insurance laws and regulations, such as may be required by the
securities or Blue Sky laws of the various states in connection with
the offer and sale of the Offered Securities and such consents,
approvals, authorizations, orders or qualifications, the failure to
have which would neither (x) have a material adverse effect on the
Company and its subsidiaries, taken as a whole nor (y) materially and
adversely affect the ability of the Company to consummate the
transactions contemplated by this Agreement, the Preferred Shares
Certificate of Designation and the Deposit Agreement, if any.
(n) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Prospectus (exclusive of any amendments or
supplements thereto effected subsequent to the date of the Underwriting
Agreement).
(o) There are no legal or governmental proceedings pending or,
to the best knowledge of the Company, threatened to which the Company
or any of its subsidiaries is a party or to which any of the properties
of the Company or any of its subsidiaries is subject that are required
to be described in the Registration Statement or the Prospectus and are
not so described or any statutes, regulations, contracts or other
documents known to the Company that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement or incorporated therein by reference that
are not described, filed or incorporated therein by reference as
required.
(p) The Company and each of its subsidiaries holds all such
licenses, authorizations, certificates and permits as are necessary to
conduct its business under the laws of each jurisdiction in which it
conducts its business, except where the failure to have such licenses,
authorizations, certificates or permits would not, individually or in
the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole; all such licenses, authorizations,
certificates and permits are in full force and effect; and neither the
Company nor any of its subsidiaries has received any
<PAGE> 10
5
notice of any event, inquiry, investigation or proceeding that would
reasonably be expected to result in the suspension, revocation or
limitation of any such license, authorization, certificate or permit,
or otherwise impose any limitation on the conduct of the business of
such subsidiaries, except for such events, inquiries, investigations or
proceedings which would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(q) Each document, if any, filed or to be filed pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and incorporated by reference in the Prospectus complied or will comply
when so filed in all material respects with the Exchange Act and the
applicable rules and regulations of the Commission thereunder.
(r) Neither the Company nor any of its subsidiaries (other
than SBM Certificate Company) is, and, after giving effect to the
offering and sale of the Offered Securities and the application of the
proceeds thereof as described in the Prospectus, neither the Company
nor any of its subsidiaries (other than SBM Certificate Company) will
be, an "investment company" as such term is defined in the Investment
Company Act of 1940, as amended (the "Investment Company Act").
(s) The 1996 and 1997 statutory annual statements of Integrity
Life Insurance Company ("Integrity") and National Integrity Life
Insurance Company ("National Integrity") and the statutory balance
sheets and income statements included in such statutory annual
statements have been prepared in conformity with statutory accounting
principles or practices required or permitted by the Insurance
Department of the states of Ohio and New York, respectively, and such
statutory accounting practices have been applied on a consistent basis
throughout the periods involved, except as may otherwise be indicated
in the notes thereto, and present fairly the statutory financial
position of Integrity and National Integrity as of the dates thereof,
and the statutory basis results of operations of Integrity and National
Integrity for the periods covered thereby.
(t) The Company is not aware of any threatened or pending
downgrading in the ratings assigned by A.M. Best Company, Inc.,
Standard & Poor's Corporation, Duff & Phelps or Moody's Investors
Service to Integrity or National Integrity.
(u) The Company has complied with all provisions of Section
517.075, Florida Statutes relating to doing business with the
Government of Cuba or with any person or affiliate located in Cuba.
2. Public Offering. The Company is advised by the Manager
that the Underwriters propose to make a public offering of their respective
portions of the Offered Securities as soon after this Agreement has been entered
into as in the Manager's judgment is
<PAGE> 11
6
advisable. The terms of the public offering of the Offered Securities are set
forth in the Prospectus.
3. Purchase and Delivery. Payment for the Firm Offered
Securities and any Additional Offered Securities shall be made in Federal or
other funds immediately available in New York City at the time and place set
forth in the Underwriting Agreement.
Payment for any Firm Offered Securities and Additional Offered
Securities which are in the form of Depositary Shares shall be made against
delivery to you on the Closing Date or the Option Closing Date, as the case may
be, for the respective accounts of the several Underwriters of Depositary
Receipts evidencing such Firm Offered Securities or Additional Offered
Securities, as the case may be, registered in such names and in such
denominations as the underwriters shall request in writing not later than two
full business days prior to the Closing Date or the Option Closing Date, as the
case may be, with any transfer taxes payable in connection with the transfer of
such Offered Securities to the Underwriters duly paid.
Certificates for any Firm Offered Securities and Additional
Offered Securities shall be in definitive forms and registered in such names and
in such denominations as the underwriters shall request in writing not later
than two full business days prior to the Closing Date or the Option Closing
Date, as the case may be. The certificates evidencing such Firm Offered
Securities and Additional Offered Securities shall be delivered to you on the
Closing Date or the Option Closing Date, as the case may be, for the respective
accounts of the several Underwriters, with any transfer taxes payable in
connection with the transfer of such Offered Securities to the Underwriters duly
paid, against payment of the purchase price therefor.
4. Conditions to Closing. The several obligations of the
Underwriters hereunder are subject to the following conditions:
(a) Subsequent to the execution and delivery of the
Underwriting Agreement and prior to the Closing Date,
(i) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or
potential downgrading or of any review for a possible change
that does not indicate the direction of the possible change,
in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization," as
such term is defined for purposes of Rule 436(g)(2) under the
Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a
whole, from that set forth in the Prospectus (exclusive of any
amendments
<PAGE> 12
7
or supplements thereto effected subsequent to the execution
and delivery of the Underwriting Agreement), that, in the
judgment of the Manager, is material and adverse and that
makes it, in the judgment of the Manager, impracticable to
market the Offered Securities on the terms and in the manner
contemplated in the Prospectus.
(b) The Manager shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer
of the Company, to the effect set forth in clause (i) above and to the
effect that the representations and warranties of the Company contained
in this Agreement are true and correct as of the Closing Date and that
the Company has complied with all of the agreements and satisfied all
of the conditions on its part to be performed or satisfied on or before
the Closing Date.
The officer signing and delivering such certificate may rely
upon the best of his knowledge as to proceedings threatened.
(c) The Manager shall have received on the Closing Date an
opinion of Shearman & Sterling (which opinion shall not be required to
cover any insurance laws, rules, regulations or statutes), outside
counsel for the Company, dated the Closing Date, to the effect that:
(i) the Company is a corporation duly incorporated
and validly existing in good standing under the laws of the
State of Delaware, with corporate power and authority under
such laws to own, lease and operate its property and conduct
its business as described in the Prospectus, except to the
extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole;
(ii) National Integrity is a corporation duly
incorporated and validly existing in good standing under the
laws of the State of New York, with the corporate power and
authority under such laws to own, lease and operate its
property and conduct its business as described in the
Prospectus, except to the extent that the failure to be so
qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries, taken as a
whole;
(iii) the authorized capital stock of the Company,
the Offered Securities, any Underlying Preferred Shares, any
Depositary Shares and any Deposit Agreement conform as to
legal matters to the descriptions thereof contained in the
Prospectus;
(iv) the Preferred Shares or the Underlying Preferred
Shares, as the case may be, have been duly authorized and,
when such shares are issued and delivered as contemplated by
the terms of this Agreement, such shares will be
<PAGE> 13
8
validly issued, fully paid and non-assessable, and the
issuance of such shares is not subject to any preemptive or
similar rights;
(v) the deposit of the Underlying Preferred Shares by
the Company in accordance with any Deposit Agreement has been
duly authorized by the Company and, when the Depositary Shares
are issued and delivered in accordance with the terms of this
Agreement, the Depositary Shares will represent legal and
valid interests in the Underlying Preferred Shares;
(vi) assuming due authorization, execution and
delivery of any Deposit Agreement by the Depositary, each
Depositary Share, if any, will represent the interest
described in the Prospectus in a validly issued, outstanding,
fully paid and non-assessable Underlying Preferred Share;
assuming due execution and delivery of the Depositary
Receipts, if any, by the Depositary pursuant to such Deposit
Agreement, the Depositary Receipts will entitle the holders
thereof to the benefits provided therein and in the Deposit
Agreement;
(vii) this Agreement has been duly authorized,
executed and delivered by the Company;
(viii) the Deposit Agreement, if any, has been duly
authorized, executed and delivered by the Company and,
assuming due authorization, execution and delivery by the
Depositary, is a valid and binding agreement of the Company;
(ix) the execution and delivery by the Company of,
and the performance by the Company of its obligations under,
this Agreement, the Preferred Shares Certificate of
Designation and the Deposit Agreement, if any, will not
contravene any provision of the laws of the State of New York,
the General Corporation Law of the State of Delaware or the
Federal laws of the United States or the certificate of
incorporation or by-laws of the Company or, to the best of
such counsel's knowledge, any agreement or other instrument
binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a
whole, or, to the best of such counsel's knowledge, any
judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any subsidiary,
and no consent, approval, authorization or order of, or
qualification with, any governmental body, agency or court of
the State of New York, the State of Delaware or the United
States is required for the performance by the Company of its
obligations under this Agreement, the Preferred Shares
Certificate of Designation and the Deposit Agreement, if any,
except such as may be required by the securities or
<PAGE> 14
9
Blue Sky laws of the various states in connection with the
offer and sale of the Offered Securities;
(x) the statements (1) in the Basic Prospectus under
"Description of Capital Stock" and "Plan of Distribution," (2)
in the Prospectus Supplement under "Description of Cumulative
Preferred Stock," "Description of Depositary Shares" and
"Underwriters" and (3) in the Registration Statement under
Item 15, in each case insofar as such statements constitute
summaries of the legal matters, documents or proceedings
referred to therein, fairly present the information called for
with respect to such legal matters, documents and proceedings
and fairly summarize the matters referred to therein;
(xi) neither the Company nor any of its subsidiaries
(other than SBM Certificate Company) is, and, after giving
effect to the offering and sale of the Offered Securities and
the application of the proceeds thereof as described in the
Prospectus, neither the Company nor any of its subsidiaries
(other than SBM Certificate Company) will be, required to
register as an "investment company" under the Investment
Company Act; and
(xii) after due inquiry, such counsel does not know
of any legal or governmental proceedings pending or threatened
to which the Company or any of its subsidiaries is a party or
to which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in
the Registration Statement or the Prospectus or incorporated
by reference therein and are not so described or incorporated
by reference therein;
(xiii) in such counsel's opinion (1) each document
filed pursuant to the Exchange Act and incorporated by
reference in the Prospectus (other than financial statements
and schedules and other financial and statistical data
contained therein or omitted therefrom, as to which such
counsel need not express any opinion) complied when so filed
as to form in all material respects with the Exchange Act and
the applicable rules and regulations of the Commission
thereunder, (2) the Registration Statement and Prospectus
(other than financial statements and schedules and other
financial and statistical data contained therein or omitted
therefrom, as to which such counsel need not express any
opinion) comply as to form in all material respects with the
Securities Act and the applicable rules and regulations of the
Commission thereunder, (3) no facts came to such counsel's
attention which gave such counsel reason to believe that (a)
the Registration Statement (other than financial statements
and schedules and other financial and statistical data
contained therein or omitted therefrom, as to which such
counsel need not express any opinion), at the time it became
effective contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or
<PAGE> 15
10
necessary to make the statements therein not misleading, or
(b) the Prospectus (other than financial statements and
schedules and other financial and statistical data contained
therein or omitted therefrom, as to which such counsel need
not express any opinion), as of its date or the Closing Date,
contained or contains an untrue statement of a material fact
or omitted or omits to state a material fact necessary to make
the statements therein, in light of the circumstances under
which they were made, not misleading and (4) such counsel does
not know of any contract or other document of a character
required to be filed as an exhibit to the Registration
Statement or incorporated by reference therein that is not so
filed or incorporated by reference therein.
With respect to paragraph (xiii) above, such counsel may state
that their opinion and belief are based upon their participation in the
preparation of the Registration Statement and Prospectus and any
amendments or supplements thereto (other than the documents
incorporated by reference therein), and review and discussion of the
contents thereof (including the documents incorporated by reference
therein), but are without independent check or verification, except as
specified.
In addition, such counsel may state that their opinion does
not cover any insurance laws, rules, regulations or statutes.
(d) The Manager shall have received on the Closing Date an
opinion of Robert H. Scott, Esq., General Counsel of the Company, dated
the Closing Date, to the effect that:
(i) the Company and each of Integrity Capital
Advisors, Inc., Integrity Holdings, Inc., ARM Face-Amount
Certificate Group, Inc., 312 Certificate Company and ARM
Securities Corporation (collectively, the "Subsidiaries") is a
corporation duly incorporated and validly existing in good
standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to carry
on its business and to own or hold under lease its properties
as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the
Company and its Subsidiaries, taken as a whole;
(ii) all of the outstanding shares of capital stock
of each of the Subsidiaries have been duly authorized and
validly issued and are fully paid and non-assessable; all of
the outstanding shares of capital stock of each of the
Subsidiaries, SBM Certificate Company, National Integrity and
20% of the outstanding membership interests of ARM Capital
Advisors, LLC are owned
<PAGE> 16
11
directly or indirectly by the Company, in each case free of
all liens, encumbrances, security interests and claims, except
as set forth (or incorporated by reference) in the Prospectus;
(iii) the Company and each of its subsidiaries (but
not including ARM Capital Advisors, LLC) holds all licenses,
authorizations, certificates and permits as are required to
conduct its business under the laws of each jurisdiction in
which it conducts business, except where the failure to have
such licenses, authorizations, certificates or permits would
not, individually or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole;
all such licenses, authorizations, certificates and permits
are in full force and effect; and, except as disclosed in the
Prospectus, to the best of such counsel's knowledge, neither
the Company nor any of its subsidiaries (but not including ARM
Capital Advisors, LLC) has received any notice of any event,
inquiry, investigation or proceeding that would reasonably be
expected to result in the suspension, revocation or limitation
of any such license, authorization, certificate or permit or
otherwise impose any limitation on the conduct of the business
of the Company or any of its subsidiaries, except for such
events, inquiries, investigations or proceedings which would
not have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(iv) the execution and delivery by the Company of,
and the performance by the Company of its obligations under,
this Agreement, the Preferred Shares Certificate of
Designation and the Deposit Agreement, if any, will not
contravene any provision of applicable law or the certificate
of incorporation or by-laws of the Company or any of its
subsidiaries (but not including ARM Capital Advisors, LLC) or,
to the best of such counsel's knowledge, any agreement or
other instrument binding upon the Company or any of its
subsidiaries that is material to the Company and its
subsidiaries, considered as one enterprise, or, to the best of
such counsel's knowledge, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over
the Company or any of its subsidiaries, and no consent,
approval or authorization or order of or qualification with
any governmental body or agency is required for the
performance by the Company of its obligations under this
Agreement, the Preferred Shares Certificate of Designation and
the Deposit Agreement, except such as may be required by the
securities or blue sky laws of the various states in
connection with the offer and sale of the Offered Securities;
(v) the statements (1) in the Registration Statement
in Item 15, (2) in "Item 3 - Legal Proceedings" of the
Company's most recent annual report on Form 10-K incorporated
by reference in the Prospectus and (3) in "Item 1 Legal
Proceedings," of Part II of the Company's quarterly reports on
Form
<PAGE> 17
12
10-Q, if any, filed since such annual report, in each case
insofar as such statements constitute summaries of the legal
matters, documents or proceedings referred to therein, fairly
present the information called for with respect to such legal
matters, documents and proceedings and fairly summarize the
matters referred to therein;
(vi) such counsel does not know of any legal or
governmental proceeding pending or threatened in writing to
which the Company or any of its subsidiaries (but not
including ARM Capital Advisors, LLC) is a party or to which
any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in
the Registration Statement or the Prospectus or incorporated
by reference therein and are not so described or of any
statutes, regulations, contracts or other documents applicable
to the Company or any of its subsidiaries that are required to
be described in the Registration Statement or the Prospectus
or incorporated by reference therein or to be filed as
exhibits to the Registration Statement or incorporated by
reference therein that are not described, filed or
incorporated by reference therein as required; and
(vii) no facts came to such counsel's attention which
gave such counsel reason to believe that (a) the Registration
Statement (other than the financial statements and schedules
and other financial and statistical data contained therein or
omitted therefrom, as to which such counsel need not comment),
at the time it became effective, contained an untrue statement
of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading, or (b) the Prospectus
(other than the financial statements and schedules and other
financial and statistical data contained therein or omitted
therefrom, as to which such counsel need not comment), as of
its date or the Closing Date, contained or contains an untrue
statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading.
With respect to paragraph (vii) above, such counsel may state
that his opinion and belief are based upon his participation, or the
participation of someone under his supervision, in the preparation of
the Registration Statement and Prospectus and any amendments or
supplements thereto and documents incorporated therein by reference and
review and discussion of the contents thereof, but are without
independent check or verification, except as specified.
(e) The Manager shall have received on the Closing Date an
opinion of ________, counsel for the Underwriters, dated the Closing
Date, covering the matters referred to in subparagraphs (iii), (iv),
(v), (vi), (vii), (viii), clauses (1) and (2) of (x) and clauses (2),
(3) and (4) of (xiii) of paragraph (c) above.
<PAGE> 18
13
With respect to subparagraph (xiii) of paragraph (c) above,
such counsel may state that their opinion and belief are based upon
their participation in the preparation of the Registration Statement
and Prospectus and any amendments or supplements thereto (other than
the documents incorporated by reference) and review and discussion of
the contents thereof (including documents incorporated by reference),
but are without independent check or verification except as specified.
(f) The Manager shall have received on the Closing Date a
letter, dated the Closing Date, in form and substance satisfactory to
the Manager, from the Company's independent auditors, containing
statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in or
incorporated by reference into the Prospectus.
5. Covenants of the Company. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants as
follows:
(a) To furnish the Manager, without charge, a conformed copy
of the Registration Statement (including exhibits and all amendments
thereto) and for delivery to each other Underwriter a conformed copy of
the Registration Statement (without exhibits thereto) and, during the
period mentioned in paragraph (c) below, as many copies of the
Prospectus, any documents incorporated by reference therein and any
supplements and amendments thereto or to the Registration Statement as
the Manager may reasonably request.
(b) Before amending or supplementing the Registration
Statement or the Prospectus with respect to the Offered Securities, to
furnish the Manager a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to
which the Manager reasonably objects.
(c) If, during such period after the first date of the public
offering of the Offered Securities as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall
occur or condition exist as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances existing when the Prospectus is
delivered to a purchaser, not misleading, or if in the opinion of
counsel for the Underwriters, it is necessary to amend or supplement
the Prospectus to comply with law, forthwith to prepare and furnish, at
its own expense, to the Underwriters and to the dealers (whose names
and addresses the Manager will furnish to the Company) to which Offered
Securities may have been sold by the Manager on behalf of the
Underwriters and to any other dealers upon request, either amendments
or supplements to the Prospectus, satisfactory in all respects to the
Manager, so that the statements in the Prospectus as so amended or
supplemented will
<PAGE> 19
14
not, in the light of the circumstances existing when the Prospectus is
delivered to a purchaser, be misleading or so that the Prospectus, as
so amended or supplemented, will comply with law and to cause such
amendments or supplements to be filed promptly with the Commission.
(d) To endeavor to qualify the Offered Securities for offer
and sale under the securities or Blue Sky laws of such jurisdictions as
the Manager shall reasonably request and to maintain such
qualifications for as long as the Manager shall reasonably request.
(e) To make generally available to the Company's security
holders and to the Manager as soon as practicable an earning statement
covering a twelve month period beginning on the first day of the first
full fiscal quarter after the date of the Underwriting Agreement, which
earning statement shall satisfy the provisions of Section 11(a) of the
Securities Act and the rules and regulations of the Commission
thereunder. If such fiscal quarter is the last fiscal quarter of the
Company's fiscal year, such earning statement shall be made available
not later than 90 days after the close of the period covered thereby
and in all other cases shall be made available not later than 45 days
after the close of the period covered thereby.
(f) To use its best efforts to accomplish the listing of the
Offered Securities on the New York Stock Exchange, if requested by the
Manager.
(g) During the period beginning on the date of the
Underwriting Agreement and continuing to and including the Closing
Date, not to offer, sell, contract to sell or otherwise dispose of any
preferred stock of the Company substantially similar to the Offered
Securities (other than the Offered Securities), without the prior
written consent of the Manager.
(h) Whether or not any sale of Offered Securities is
consummated, to pay all expenses incident to the performance of its
obligations under this Agreement, including: (i) the preparation and
filing of the Registration Statement and the Prospectus and all
amendments and supplements thereto, (ii) the preparation, issuance and
delivery of the Offered Securities, (iii) the fees and disbursements of
the Company's counsel and accountants and of the Depositary and its
counsel, (iv) the qualification of the Offered Securities under
securities or Blue Sky laws in accordance with the provisions of
Section 5(d), including filing fees and the fees and disbursements of
counsel for the Underwriters in connection therewith and in connection
with the preparation of any Blue Sky or Legal Investment Memoranda, (v)
the printing and delivery to the Underwriters in quantities as
hereinabove stated of copies of the Registration Statement and all
amendments thereto and of the Prospectus and any amendments or
supplements thereto, (vi) the printing and delivery to the Underwriters
of copies of any Blue Sky or Legal Investment Memoranda, (vii) any fees
charged by rating agencies for the rating
<PAGE> 20
15
of the Offered Securities, (viii) any expenses incurred by the Company
in connection with a "road show" presentation to potential investors
and (ix) any filing fees in connection with any review of the offering
of the Offered Securities by the National Association of Securities
Dealers, Inc.
6. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, any preliminary prospectus or the Prospectus
(as amended or supplemented if the Company shall have furnished any amendments
or supplements thereto), or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter through the
Manager expressly for use therein; provided, however, that the foregoing
indemnity agreement with respect to any preliminary prospectus shall not inure
to the benefit of any Underwriter from whom the person asserting any such
losses, claims, damages or liabilities purchased Offered Securities, or any
person controlling such Underwriter, if a copy of the Prospectus (as then
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Offered Securities to such person, and
if the Prospectus (as so amended or supplemented) would have cured the defect
giving rise to such losses, claims, damages or liabilities.
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, the directors of the Company, the
officers of the Company who sign the Registration Statement and each person, if
any, who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, any preliminary prospectus or the Prospectus
(as amended or supplemented if the Company shall have furnished any amendments
or supplements thereto), or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only with reference to information
relating to such Underwriter furnished to the Company in writing by such
Underwriter through the Manager
<PAGE> 21
16
expressly for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to paragraph (a) or (b) of this Section 6, such
person (the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the reasonable fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for (i) all Underwriters and
all persons, if any, who control any Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act and (ii) the
Company, its directors, its officers who sign the Registration Statement and
each person, if any, who controls the Company within the meaning of either such
Section, and that all such fees and expenses shall be reimbursed as they are
incurred. In the case of any such separate firm for the Underwriters and such
control persons of the Underwriters, such firm shall be designated in writing by
the Manager. In the case of any such separate firm for the Company, and such
directors, officers and control persons of the Company, such firm shall be
designated in writing by the Company. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional
<PAGE> 22
17
release of such indemnified party from all liability on claims that are the
subject matter of such proceeding.
(d) To the extent the indemnification provided for in
paragraph (a) or (b) of this Section 6 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party or parties on the one hand
and the indemnified party or parties on the other hand from the offering of the
Offered Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the indemnifying party or parties on the one hand and of the
indemnified party or parties on the other hand in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other hand
in connection with the offering of the Offered Securities shall be deemed to be
in the same respective proportions as the net proceeds from the offering of the
Offered Securities (before deducting expenses) received by the Company and the
total underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover of the Prospectus, bear to the
aggregate public offering price of the Offered Securities. The relative fault of
the Company on the one hand and the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The
Underwriters' respective obligations to contribute pursuant to this Section 6
are several in proportion to the respective number of Offered Securities they
have purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not
be just or equitable if contribution pursuant to this Section 6 were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) of this Section 6. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 6, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Offered Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages that such
Underwriter has otherwise been required
<PAGE> 23
18
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 6 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in
this Section 6 and the representations and warranties of the Company contained
in this Agreement shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement, (ii) any investigation made by or on
behalf of any Underwriter or any person controlling any Underwriter, or the
Company, its officers or directors or any person controlling the Company and
(iii) acceptance of and payment for any of the Offered Securities.
7. Termination. This Agreement shall be subject to termination
by notice given by the Manager to the Company, if (a) after the execution and
delivery of the Underwriting Agreement and prior to the Closing Date (i) trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange or the
National Association of Securities Dealers, Inc., (ii) trading of any securities
of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in the judgment of the Manager, is material and adverse and (b) in the
case of any of the events specified in clauses (a)(i) through (iv), such event,
singly or together with any other such event, makes it, in the judgment of the
Manager, impracticable to market the Offered Securities on the terms and in the
manner contemplated in the Prospectus.
8. Defaulting Underwriters. If, on the Closing Date or the
Option Closing Date, as the case may be, any one or more of the Underwriters
shall fail or refuse to purchase Offered Securities that it has or they have
agreed to purchase hereunder on such date, and the aggregate number of Offered
Securities which such defaulting Underwriter or Underwriters agreed but failed
or refused to purchase is not more than one-tenth of the aggregate number of the
Offered Securities to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Offered
Securities set forth opposite their respective names in the Underwriting
Agreement bears to the aggregate number of Firm Offered Securities set forth
opposite the names of all such non-defaulting Underwriters, or in such other
proportions as the Manager may specify, to purchase the Offered Securities which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase on such date; provided that in no event shall the number of Offered
Securities that any Underwriter has agreed to purchase pursuant to the
Underwriting Agreement be increased pursuant to this Section 8 by an amount in
excess of one-ninth of such number of Offered Securities without
<PAGE> 24
19
the written consent of such Underwriter. If, on the Closing Date, any
Underwriter or Underwriters shall fail or refuse to purchase Firm Offered
Securities and the aggregate number of Firm Offered Securities with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Offered Securities to be purchased on such date, and arrangements satisfactory
to the Manager and the Company for the purchase of such Firm Offered Securities
are not made within 36 hours after such default, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriter or the Company.
In any such case either the Manager or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and in the
Prospectus or in any other documents or arrangements may be effected. If, on the
Option Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Additional Offered Securities and the aggregate number of Additional
Offered Securities with respect to which such default occurs is more than
one-tenth of the aggregate number of Additional Offered Securities to be
purchased on such date, the non-defaulting Underwriters shall have the option to
(i) terminate their obligation hereunder to purchase Additional Offered
Securities or (ii) purchase not less than the number of Additional Offered
Securities that such non-defaulting Underwriters would have been obligated to
purchase in the absence of such default. Any action taken under this paragraph
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or
any of them, because of any failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Company shall be unable to perform its obligations under
this Agreement, the Company will reimburse the Underwriters or such Underwriters
as have so terminated this Agreement with respect to themselves, severally, for
all out-of-pocket expenses (including the fees and disbursements of their
counsel) reasonably incurred by such Underwriters in connection with the Offered
Securities.
9. Representations and Indemnities to Survive. The respective
indemnity and contribution agreements and the representations, warranties and
other statements of the Company, its officers and the Underwriters set forth in
this Agreement will remain in full force and effect, regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
any Underwriter or any person controlling any Underwriter or by or on behalf of
the Company, its officers or directors or any person controlling the Company and
(iii) acceptance of and payment for any of the Offered Securities.
10. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers, directors and controlling persons referred to in Section 6, and no
other person will have any right or obligation hereunder.
<PAGE> 25
20
11. Counterparts. The Underwriting Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
12. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
13. Headings. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed a
part of this Agreement.
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Excluding Interest Credited on Customer Deposits)
<TABLE>
<CAPTION>
Three Months
Ended Year Ended December 31,
March 31, --------------------------------------------------------
1998 1997 1996 1995 1994 1993
------------ --------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Pretax income (loss) $16,480 $41,738 $28,545 $18,916 $(22,789) $(40,324)
Add:
Interest expense on debt 617 2,517 3,146 3,461 3,136 378
Interest component of rent 301 763 580 383 410 1,036
------- ------------------------------------------------------
Total earnings $17,398 $45,018 $32,271 $22,760 $(19,243) $(38,910)
======= ======================================================
Fixed charges:
Interest expense on debt $ 617 $ 2,517 $ 3,146 $ 3,461 $ 3,136 $ 378
Interest component of rent 301 763 580 383 410 1,036
------- ------------------------------------------------------
Total fixed charges 918 3,280 3,726 3,844 3,546 1,414
Dividends on preferred stock, on a
tax equivalent basis 1,784 7,186 5,800 7,552 6,454 700
------- ------------------------------------------------------
Total combined fixed charges and
preferred stock dividends $ 2,702 $10,466 $9,526 $11,396 $10,000 $ 2,114
======= ======================================================
Ratio of earnings to combined fixed
charges and preferred stock
dividends (excluding interest
credited on customer deposits) 6.4x 4.3x 3.4x 2.0x -- --
======= ======================================================
Deficiency N/A N/A N/A N/A $29,243 $41,024
======= ======================================================
</TABLE>
<PAGE> 2
COMPUTATION OF RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Including Interest Credited on Customer Deposits)
<TABLE>
<CAPTION>
Three Months
Ended Year Ended December 31,
March 31, ----------------------------------------------------------------
1998 1997 1996 1995 1994 1993
------------ -----------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Pretax income (loss) $16,480 $ 41,738 $ 28,545 $ 18,916 $(22,789) $(40,324)
Add:
Interest expense on debt 617 2,517 3,146 3,461 3,136 378
Interest component of rent 301 763 580 383 410 1,036
Interest credited on customer
deposits 81,680 247,418 182,161 146,867 116,463 129,904
------- -------- -------- -------- --------- ---------
Total earnings $ 99,078 $292,436 $214,432 $169,627 $ 97,220 $ 90,994
======== ======== ======== ======== ========= =========
Fixed charges:
Interest expense on debt $ 617 $ 2,517 $ 3,146 $ 3,461 $ 3,136 $ 378
Interest component of
rent 301 763 580 383 410 1,036
Interest credited on
customer deposits 81,680 247,418 182,161 146,867 116,463 129,904
------- -------- -------- -------- --------- ---------
Total fixed charges 82,598 250,698 185,887 150,711 120,009 131,318
Dividends on preferred stock,
on a tax equivalent basis 1,784 7,186 5,800 7,552 6,454 700
------- -------- -------- -------- --------- ---------
Total combined fixed charges
and preferred stock dividends $ 84,382 $257,884 $191,687 $158,263 $126,463 $132,018
======== ======== ======== ======== ========= =========
Ratio of earnings to combined
fixed charges and preferred
stock dividends (including
interest credited on
customer deposits) 1.2x 1.1x 1.1x 1.1x -- --
======== ======== ======== ======== ========= =========
Deficiency N/A N/A N/A N/A $ 29,243 $ 41,024
======== ======== ======== ======== ========= =========
</TABLE>
<PAGE> 1
EXHIBIT 23.2
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 10, 1998, in the Registration Statement (Form
S-3 No. 333-00000) and related Prospectus of ARM Financial Group, Inc. dated
May 29, 1998.
We also consent to the incorporation by reference therein of our reports dated
February 10, 1998 with respect to the consolidated financial statements and
financial statement schedules of ARM Financial Group, Inc. included in the
Annual Report (Form 10-K) for 1997 filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Louisville, Kentucky
May 26, 1998
