EXHIBIT 10.1
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STOCK PURCHASE AGREEMENT
DATED JANUARY 13, 1998
AMONG
LIFE USA HOLDING, INC.
AND
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
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Table of Contents
Page
Section 1 Conversion of Debenture; Exercise of Preemptive Rights; and Cancellation
of Warrant........................................................................... 1
1.1 Conversion of Debenture.............................................................. 1
1.2 Exercise of Preemptive Rights........................................................ 2
1.3 Cancellation of Warrant.............................................................. 2
1.4 Initial Closing...................................................................... 2
Section 2 Sale and Purchase of Common Stock.................................................... 5
2.1 Purchase and Sale Commitment......................................................... 5
2.2 Price Notice and Purchase Price...................................................... 5
2.3 Closing.............................................................................. 5
2.4 Purchase Price Per Share exceeds 200% of Market Price Per Share...................... 7
2.5 Limitation on Percentage Ownership by Allianz........................................ 9
2.6 Special Limitation on Issuances of Shares Until February 18, 1999.................... 9
2.7 Waiver of Compliance................................................................. 10
Section 3 Representations, Warranties and Covenants by the Company............................. 10
3.1 Organization, Good Standing, Etc..................................................... 10
3.2 Governing Instruments................................................................ 10
3.3 Subsidiaries, Etc.................................................................... 10
3.4 Qualification........................................................................ 11
3.5 Financial and Statutory Statements................................................... 11
3.6 Tax Returns and Audits............................................................... 12
3.7 No Material Adverse Changes.......................................................... 12
3.8 Title to Properties and Encumbrances................................................. 12
3.9 Conditions of Properties............................................................. 12
3.10 Litigation and Governmental Proceedings.............................................. 12
3.11 Compliance With Applicable Laws and Other Instruments................................ 12
3.12 Issuance of Securities............................................................... 13
3.13 Securities Laws and Governmental Filings or Approval................................. 13
3.14 Intellectual Property................................................................ 13
3.15 Capital Stock........................................................................ 14
3.16 Outstanding Debt..................................................................... 14
3.17 Material Contracts................................................................... 14
3.18 Corporate Acts and Proceedings....................................................... 15
3.19 Insurance Coverage................................................................... 15
3.20 No Brokers or Finders................................................................ 15
3.21 Conflicts of Interest................................................................ 15
3.22 Licenses............................................................................. 15
3.23 Registration Rights.................................................................. 16
3.24 Environmental and Safety Laws........................................................ 16
3.25 Absence of Restrictive Agreements.................................................... 16
3.26 Disclosure........................................................................... 16
3.27 Minutes Books........................................................................ 16
3.28 Employee Benefit Plans............................................................... 16
Section 4 Representations and Warranties of Allianz............................................ 17
4.1 Investment Intent.................................................................... 17
4.2 Location of Principal Office, Qualification as an Accredited Investor,
Etc.................................................................................. 17
4.3 Corporate Acts and Proceedings....................................................... 18
4.4 No Brokers or Finders................................................................ 18
4.5 Governmental Filings or Approvals.................................................... 18
Section 5 Conditions to Allianz's Obligations.................................................. 18
5.1 Truth of Representations............................................................. 18
5.2 Compliance with Agreement............................................................ 19
5.3 Regulatory Approvals................................................................. 19
5.4 Concurrent Closing; Employment Agreements in Full Force and Effect................... 19
5.5 No Catastrophic Events............................................................... 19
Section 6 Conditions to the Company's Obligations.............................................. 20
6.1 Truth of Representations............................................................. 20
6.2 Compliance with Agreement............................................................ 20
6.3 Regulatory Approval.................................................................. 20
6.4 Concurrent Closing................................................................... 20
Section 7 Covenants and Agreements............................................................. 20
7.1 Furnishing of Financial Statements and Information................................... 21
7.2 Inspection and Confidentiality....................................................... 21
7.3 Boards of Directors Representation Rights............................................ 22
7.4 Ownership of LifeUSA................................................................. 22
7.5 Reservation of Shares................................................................ 22
7.6 Company May Consolidate, Etc., Only on Certain Terms................................. 23
7.7 SEC Reports.......................................................................... 23
7.8 Level of Business.................................................................... 23
7.9 Employment Agreements................................................................ 24
7.10 Shareholder Rights Plans............................................................. 24
7.11 Regulatory Matters................................................................... 24
7.12 Closing Conditions................................................................... 25
7.13 Shareholder Meeting.................................................................. 25
7.14 Listing of Shares.................................................................... 25
7.15 Rule 144............................................................................. 25
7.16 Regulation D Filings................................................................. 25
7.17 Negative Covenants................................................................... 25
7.18 Status of Dividends.................................................................. 26
7.19 Liability Insurance.................................................................. 27
7.20 Taxes and Assessments................................................................ 27
7.21 Maintenance of Corporate Existence................................................... 27
7.22 Governmental Consents................................................................ 27
7.23 Limitation of Option Grants.......................................................... 27
7.24 Notice............................................................................... 27
Section 8 Registration Rights.................................................................. 27
8.1 Required Registration................................................................ 28
8.2 Piggyback Registration............................................................... 28
8.3 Registration Procedures.............................................................. 29
8.4 Expenses............................................................................. 32
8.5 Indemnification...................................................................... 32
8.6 Availability of Rule 144............................................................. 34
8.7 Registration Rights of Transferees................................................... 34
8.8 Definition of Purchased Shares....................................................... 34
Section 9 Dilution Protection.................................................................. 34
9.1 Right to Purchase Additional Shares.................................................. 34
9.2 Right to Purchase in Public Offering................................................. 35
9.3 Right to Purchase Preferred Shares................................................... 35
9.4 Not Applicable to Sale............................................................... 35
Section 10 Default and Remedies................................................................. 35
10.1 Notice of Defaults................................................................... 36
10.2 Suits for Enforcement................................................................ 36
10.3 Remedies Cumulative.................................................................. 36
10.4 Remedies Not Waived.................................................................. 36
Section 11 Restrictions on Transfer and Standstill Agreements................................... 36
11.1 Restriction on Transfer.............................................................. 36
11.2 Standstill Agreements................................................................ 36
11.3 Termination of Standstill Agreements and Certain Other Agreements.................... 39
11.4 Legend............................................................................... 39
11.5 Removal of Legend.................................................................... 39
Section 12 Miscellaneous........................................................................ 40
12.1 Survival............................................................................. 40
12.2 Expenses............................................................................. 40
12.3 Dilution Protection.................................................................. 40
12.4 Waiver of Breach..................................................................... 40
12.5 Multiple Counterparts................................................................ 40
12.6 Notices.............................................................................. 40
12.7 Entire Agreement..................................................................... 41
12.8 Severability of Provisions........................................................... 41
12.9 Headings............................................................................. 41
12.10Governing Law; Jurisdiction Venue.................................................... 42
12.11Attorneys' Fees...................................................................... 42
12.12Parties Bound........................................................................ 42
12.13Special Termination.................................................................. 42
EXHIBITS
Exhibit A - Form of Employment Agreement for Xxxxxx X. XxxXxxxxx
Exhibit B - Form of Amendment to Employment Agreement for Xxxxxxx X. Xxxxxx
Exhibit C - Form of Employment Agreement for Xxxxxx X. Xxxxx
Exhibit D - Form of Amendment to Employment Agreement for Xxxx X. Xxxxxxxx
Exhibit E - Form of Employment Agreement for Xxxxxxx X. Xxxxx
Exhibit F - Form of Employment Agreement for Xxxxxxx X. Xxxxxxxx
Exhibit G - Form of Marketing Agreement Amendment
Exhibit H - Form of Debenture Purchase Agreement Termination
Exhibit I - Form of Allianz Reinsurance Agreement
Exhibit J - Form of LifeUSA Reinsurance Agreement Amendment
Exhibit K - Form of Claims Administration Agreement Amendment
Exhibit L - Matters for Xxxxxx, Xxxxxxxx and Xxxxxx, P.A. Opinion at Initial Closing
Exhibit M - Matters for Xxxxxx & Whitney LLP Opinion at Initial Closing
Exhibit N - Matters for Xxxxxx, Xxxxxxxx and Xxxxxx, P.A. Opinion at a Sale Closing
Exhibit O - Form of Convertible Debenture
Exhibit P - Matters for Xxxxxx, Xxxxxxxx and Xxxxxx, P.A. Opinion at a Debenture
Closing
Exhibit Q - Form of Management Stock Purchase Agreement
STOCK PURCHASE AGREEMENT
THIS AGREEMENT, made and entered into as of January 13, 1998, between
LIFE USA HOLDING, INC., a Minnesota corporation (the "Company"), and ALLIANZ
LIFE INSURANCE COMPANY OF NORTH AMERICA, a Minnesota corporation ("Allianz").
W I T N E S S E T H:
WHEREAS, the Company requires additional capital for its general
corporate purposes, including, but not limited to, support the capital and
surplus of its life insurance subsidiary, LifeUSA Insurance Company, a Minnesota
corporation ("LifeUSA"), and Allianz is willing to purchase $100,000,000 of the
Company's common stock, par value $.01 per share, (the "Common Stock") on the
terms and conditions set forth in this Agreement;
WHEREAS, the parties desire to make additional agreements relating to
the ownership of Allianz in the Company and the relationships between them and
between Allianz and LifeUSA;
WHEREAS, concurrently with the Initial Closing (as defined in Section
1.1 hereof), the Company will enter into employment agreements or amendments to
existing employment agreements ("Employment Agreements") with certain executives
of the Company in the forms of Exhibits A through F, attached hereto; and
WHEREAS, concurrently herewith, Allianz has entered into agreements
with certain executives of the Company for the purchase of an aggregate of
925,000 shares of Common Stock, conditioned upon the Initial Closing.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Allianz agree as follows:
SECTION 1
CONVERSION OF DEBENTURE; EXERCISE OF PREEMPTIVE RIGHTS; AND CANCELLATION OF
WARRANT.
1.1 Conversion of Debenture. The Company has authorized and issued, and
Allianz holds, the Variable Rate Convertible Subordinated Debenture dated
February 17, 1995 in the original principal amount of $30,000,000 (the
"Debenture"). Subject to satisfaction of the conditions in Sections 5 and 6,
Allianz will, within five business days after all conditions have been satisfied
(the "Initial Closing"), convert the Debenture in its entirety into shares of
the Common Stock on the terms set forth in the Debenture. The Conversion Price
(as defined in the Debenture) was $12.34 per share as of December 31, 1997, and,
assuming no change in the Conversion Price, the Company will issue to Allianz an
aggregate of 2,431,118 shares of Common Stock at the Initial Closing upon
conversion of the Debenture. For the purposes of converting the Debenture into
shares of Common Stock at the Initial Closing, the parties agree that the
Conversion Price under the Debenture shall be increased by $.02 per share to
take into
account the mutually agreed adjustment to the provisions in the Debenture
relating to the adjustment to the Conversion Price for issuances of shares of
Common Stock by the Company under the Company's employee savings plan (401-k
plan).
1.2 Exercise of Preemptive Rights. Pursuant to Section 9 of the
Debenture Purchase Agreement dated February 17, 1995 (the "Debenture Purchase
Agreement") between the Company and Allianz, Allianz has certain preemptive
rights (the "Preemptive Rights"). At the Initial Closing, Allianz will exercise
the Preemptive Rights to the fullest extent permitted under Section 9 of the
Debenture Purchase Agreement. Assuming there are no changes in the outstanding
shares of Common Stock (computed in accordance with Section 9.1 of the Debenture
Purchase Agreement) since December 31, 1997, the number of shares to be issued
to Allianz upon full exercise of the Preemptive Rights will be 239,165 shares of
Common Stock at a purchase price of $12.36 per share.
1.3 Cancellation of Warrant. The Company has authorized and issued, and
Allianz holds, the Warrant Certificate for Purchase of Shares of Common Stock
dated February 17, 1995 (the "Warrant"). At the Initial Closing, Allianz will
surrender the Warrant to the Company and the Warrant will be cancelled.
1.4 Initial Closing. At the Initial Closing, the following shall occur:
(a) Deliveries by the Company. The Company shall deliver or cause to be
delivered to Allianz the following:
(i) Issuance of Common Stock. Duly issued certificates for the
shares of Common Stock issuable upon conversion of the Debenture, the
exercise of the Preemptive Rights and the Additional Share Purchase.
(ii) Amendment to Marketing Agreement. An amendment duly
executed by the Company in the form of Exhibit G attached hereto (the
"Marketing Agreement Amendment") to the Administration and Marketing
Agreement effective January 1, 1997 as hereafter amended (the
"Marketing Agreement") between the Company and Allianz.
(iii) Termination of Debenture Purchase Agreement. The
termination of the Debenture Purchase Agreement in the form of Exhibit
H attached hereto (the Debenture Purchase Agreement Termination") duly
executed by the Company.
(iv) Allianz Reinsurance Agreement. The reinsurance agreement
between LifeUSA and Allianz in the form of Exhibit I attached hereto
(the "Allianz Reinsurance Agreement"), duly executed by LifeUSA.
(v) LifeUSA Reinsurance Agreement Amendment. A duly executed
amendment to the reinsurance agreement dated February 17, 1995 (as
heretofore and
hereafter amended, the "LifeUSA Reinsurance Agreement") between LifeUSA
and Allianz in the form of Exhibit J attached hereto.
(vi) Claims Administration Agreement Amendment. A duly
executed amendment in the form of Exhibit K attached hereto (the
"Claims Administration Agreement Amendment") to the claims
administration agreement dated December 30, 1996 (as hereafter amended,
the "Claims Administration Agreement") between LifeUSA and Allianz.
(vii) Officers' Certificate. A certificate, dated the date of
the Initial Closing and executed by the Chief Executive Officer and the
Chief Financial Officer of the Company, certifying that (A) the
representations and warranties of the Company set forth in Section 3
hereof are true and correct as of the date of the Initial Closing
(provided that, where any of such representations and warranties are
made "as of the date hereof" or another specific date, such
representations and warranties shall be true and correct as of January
13, 1998 which is the "date hereof" or such other specific date and are
not made as of the date of the Initial Closing), (B) the Company has
performed and complied with all agreements or conditions required by
this Agreement to be performed and complied with by it prior to or as
of the Initial Closing, and (C) the Conversion Price under the
Debenture, the purchase price per share for the Preemptive Rights and
the number of shares of Common Stock issuable upon exercise of the
Preemptive Rights are as set forth in such certificate and (D) all
conditions in Sections 5.1, 5.2, and 6.3 to the Initial Closing,
including all regulatory approvals, which approvals remain in full
force and effect, and the expiration of all applicable waiting periods,
have been satisfied.
(viii) Legal Opinion. The opinion dated the date of the
Initial Closing of Xxxxxx, Xxxxxxxx and Xxxxxx, P.A. covering the
matters set forth in Exhibit L attached hereto in a form reasonably
satisfactory to counsel for Allianz.
(ix) Company Secretary Certificate. A certificate, dated the
date of the Initial Closing and executed by the Secretary or any
Assistant Secretary of the Company, certifying (A) the Articles of
Incorporation, as amended, of the Company, (B) the By-laws of the
Company, (C) the resolutions adopted by the Board of Directors of the
Company approving this Agreement and the transactions contemplated
hereby, and (D) the incumbency of the officers of the Company.
(x) LifeUSA Secretary Certificate. A certificate, dated the
date of the Initial Closing and executed by the Secretary or any
Assistant Secretary of LifeUSA, certifying (A) the Articles of
Incorporation, as amended, of LifeUSA, (B) the By-laws of LifeUSA, (C)
the resolutions adopted by the Board of Directors of LifeUSA approving
the transactions involving LifeUSA contemplated by this Agreement, and
(D) the incumbency of the officers of LifeUSA.
(b) Deliveries by Allianz. Allianz shall deliver or cause to be
delivered to the Company and LifeUSA the following:
(i) Debenture. The Debenture for conversion in its entirety
and a written notice of conversion in accordance with the terms of the
Debenture.
(ii) Purchase Price. The purchase price in immediately
available United States Dollars for the shares of Common Stock to be
issued to Allianz in connection with its exercise of the Preemptive
Rights.
(iii) Debenture Purchase Agreement Termination. The Debenture
Purchase Agreement Termination duly executed by Allianz.
(iv) Allianz Reinsurance Agreement. The Allianz Reinsurance
Agreement duly executed by Allianz.
(v) Warrant. The Warrant for cancellation.
(vi) Marketing Agreement Amendment. The Marketing Agreement
Amendment duly executed by Allianz.
(vii) Claims Administration Agreement Amendment. The Claims
Administration Agreement Amendment duly executed by Allianz.
(viii) Officers' Certificate. A certificate, dated the date of
the Initial Closing and executed by the Chief Executive Officer and the
Chief Financial Officer of Allianz certifying that (A) the
representations and warranties of Allianz set forth in Section 4 hereof
are true and correct as of the date of the Initial Closing, (B) Allianz
has performed and complied with all agreements or conditions required
by this Agreement to be performed and complied with by it prior to or
as of the Initial Closing, and (C) all conditions in Sections 5.3, 6.1
and 6.2 to the Initial Closing, including all regulatory approvals,
which approvals remain in full force and effect, and the expiration of
all applicable waiting periods, have been satisfied.
(ix) Legal Opinion. The opinion dated the date of the Initial
Closing of Xxxxxx & Whitney LLP covering the matters set forth in
Exhibit M attached hereto in a form reasonably satisfactory to counsel
for the Company.
(x) Secretary Certificate. A certificate, dated the date of
the Initial Closing and executed by the Secretary or any Assistant
Secretary of Allianz, certifying (A) the Articles of Incorporation, as
amended, of Allianz, (B) the By-laws of Allianz, (C) the resolutions
adopted by the Board of Directors of Allianz approving the transactions
contemplated by this Agreement, and (D) the incumbency of the officers
of Allianz.
SECTION 2
SALE AND PURCHASE OF COMMON STOCK.
2.1 Purchase and Sale Commitment. Subject to the terms and conditions
set forth in Sections 5 and 6, the Company agrees to sell to Allianz and Allianz
agrees to purchase from the Company (or LifeUSA as the Company may designate)
shares of Common Stock having an aggregate purchase price of $100,000,000 with
respect to the five calendar years beginning with 1998 (the "Purchase Period")
at the rate of $20,000,000 with respect to each calendar year, subject to
reduction as provided in Section 2.4 below and extension as provided in Section
2.3 below.
2.2 Price Notice and Purchase Price. Subject to Section 2.4 below, the
Company will sell and Allianz will purchase $10,000,000 of Common Stock at a
price determined by reference to the Book Value Per Share (as defined below) of
the Common Stock as of June 30 and December 31 (each a "Determination Date") of
each calendar year during the Purchase Period, rounded to the nearest whole
share, unless the Company and Allianz mutually agree to a different date and/or
amount to be purchased. The purchase price per share of Common Stock to be
purchased by Allianz pursuant to this Section 2 (the "Purchase Price Per Share")
shall be equal to the average of the Book Value Per Share as of the respective
Determination Date and the Book Value Per Share as of the preceding
Determination Date (which Determination Date, in case of the first purchase
hereunder, shall be December 31, 1997), multiplied by two and one-half (2-1/2).
The Company will, within thirty (30) business days after each Determination
Date, give written notice (the "Price Notice") to Allianz of the Purchase Price
Per Share for such Determination Date and the number of shares to be purchased
by Allianz and shall deliver to Allianz with such Price Notice, the Company's
balance sheet as of such Determination Date, a computation of the Book Value Per
Share as of the Determination Date and a computation of the Market Price Per
Share (as defined in Section 2.4 below) for such Determination Date. The Company
will also provide Allianz such information as Allianz may reasonably request for
the purpose of confirming the Book Value Per Share calculation. If there is a
disagreement between the Company and Allianz as to Book Value Per Share, such
determination shall be made by the Company's independent auditors, which
determination shall be final and binding on the parties. The term "Book Value
Per Share" shall mean (a) total assets minus total liabilities, based on the
Company's consolidated balance sheet as of the Determination Date, determined in
accordance with generally accepted accounting principles in effect on the date
hereof and used by the Company in preparation of its audited consolidated
financial statements as of and for the year ended December 31, 1996 unless the
parties mutually agree to any change after the date hereof, excluding any
adjustment under Statement of Financial Standards No. 115, divided by (b) the
actual number of issued and outstanding shares of Common Stock as of the
Determination Date (excluding for purposes of this calculation the purchase
price to be received and the shares to be issued by the Company as of the
Determination Date). The determination of Book Value Per Share shall be made by
the Company and confirmed by Allianz.
2.3 Closing. Subject to Sections 2.4 and 2.5 and the conditions
precedent referred to in Sections 5 and 6, closing of the sale of the shares of
Common Stock covered by a Price Notice
(a "Sale Closing") shall occur within fifteen (15) business days after the date
of the Price Notice. If with respect to any particular Sale Closing, the
conditions precedent referred to in Section 5 or the deliveries required by the
Company in Section 2.3(a) below are not made, Allianz shall be relieved of its
obligation to purchase Common Stock at such Sale Closing. If the failure to
satisfy such conditions is due to a breach by the Company of its covenants under
Section 7 or if the representations in the officers certificate to be delivered
pursuant to Section 2.3(a)(ii) are not true and correct, the Company shall be in
breach and Allianz shall retain the right to purchase such Common Stock at any
subsequent date prior to December 31, 2002. Allianz's election not to purchase
Common Stock as of a particular Sale Date shall not be an election of remedies.
Each Sale Closing shall occur at the offices of Xxxxxx, Xxxxxxxx and Xxxxxx,
P.A., 0000 Xxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000, or such other location
as the parties may mutually agree.
At each Sale Closing, the following shall occur:
(a) Deliveries by the Company. The Company shall deliver or cause to be
delivered to Allianz the following:
(i) Issuance of Common Stock. A duly issued certificate for
the shares of Common Stock to be sold on such date.
(ii) Officers' Certificate. A certificate, dated the date of
such Sale Closing, executed by the Chief Executive Officer and the
Chief Financial Officer of the Company and certifying that (A) the
representations and warranties of the Company set forth in Sections
3.1, 3.2, 3.4, 3.6, 3.8, 3.10, 3.12, 3.13, the second sentence of
Section 3.15, 3.18, 3.19, 3.20, 3.22, 3.24, 3.25, 3.26, 3.27 and 3.28
hereof are true and correct as of the date of such Sale Closing
(provided that where any of such representations and warranties are
made "as of the date hereof" or another specific date, such
representations and warranties shall be true and correct as of January
13, 1998 which is the "date hereof" or such other specific date, as the
case may be, and are not made as of the date of the Sale Closing)
except if any inaccuracy, individually or in the aggregate, would not
have a material adverse effect on the Company as a whole, and (B) the
Company has performed and complied with all agreements or conditions
required by this Agreement to be performed and complied with by it
prior to or as of such Sale Closing.
(iii) Legal Opinion. The opinion dated the date of such Sale
Closing of Xxxxxx, Xxxxxxxx and Xxxxxx, P.A. covering the matters set
forth in Exhibit N attached hereto in a form reasonably satisfactory to
counsel for Allianz.
(iv) Company Secretary Certificate. A certificate, dated the
date of such Sale Closing, executed by the Secretary or any Assistant
Secretary of the Company certifying as of the date of such Sale Closing
(A) the Articles of Incorporation, as amended, of the Company, (B) the
By-laws of the Company, (C) the resolutions adopted by the Board of
Directors of the Company approving the issuance of the shares of Common
Stock at such Sale Closing, (D) the incumbency of the officers of the
Company.
(b) Deliveries by Allianz. Allianz shall deliver or cause to be
delivered to the Company and LifeUSA the following:
(i) Purchase Price. The purchase price for the shares of
Common Stock to be issued to Allianz pursuant to the Price Notice in
immediately available United States Dollars or as a credit against the
reinsurance allowances for commissions and expenses payable by LifeUSA
to Allianz under the LifeUSA Reinsurance Agreement (as defined in
Section 7.8), as the Company may determine; provided, that the Company
will provide Allianz written notice (the "Reinsurance Credit Notice")
at least sixty (60) days prior to the respective Determination Date of
the amount of the credit (the "Credit Election Amount") against
reinsurance allowance for commissions and expenses payable by LifeUSA
to Allianz under the LifeUSA Reinsurance Agreement. If the Reinsurance
Credit Notice is given, the Company shall, at such Sale Closing, issue
to Allianz the number of shares of Common Stock to be issued for cash
(and not for credit against the reinsurance allowances). As and when
LifeUSA owes Allianz reinsurance allowances under the LifeUSA
Reinsurance Agreement (which settlement shall be made no more
frequently than monthly), additional shares of Common Stock valued at
the Purchase Price Per Share under the related Price Notice (up to the
total Credit Election Amount) shall be issued to Allianz. In the event
all of the shares of Common Stock to be issued pursuant to the relevant
Price Notice have not been issued by the next Determination Date, the
Company will issue the balance of such shares and Allianz will pay the
Purchase Price Per Share for such shares within fifteen business (15)
days after such next Determination Date and there will be no further
credit with respect to such Reinsurance Credit Notice.
(ii) Officers' Certificate. A certificate, dated the date of
such Sale Closing, executed by the Chief Executive Officer and the
Chief Financial Officer of Allianz and certifying that (A) the
representations and warranties of Allianz set forth in Section 4 hereof
are true and correct as of the date of such Sale Closing, and (B)
Allianz has performed and complied with all agreements or conditions
required by this Agreement to be performed and complied with by it
prior to or as of such Sale Closing.
2.4 Purchase Price Per Share exceeds 200% of Market Price Per Share. In
the event the Purchase Price Per Share for any Sale Closing is more than 200% of
the Market Price Per Share (as defined below), Allianz may determine the number,
if any, of shares of Common Stock which it will purchase by giving the Company
written notice thereof (the "Modified Purchase Notice") within fifteen (15)
business days after the date of the Price Notice for such Sale Closing. In the
event Allianz fails to give a Modified Purchase Notice, Allianz shall be
required to purchase $10,000,000 of shares of Common Stock at the Sale Closing
as provided in Sections 2.2 and 2.3 but subject to the exceptions referred to
therein. If Allianz properly gives a Modified Purchase Notice, its obligation
with respect to a particular Determination Date shall be limited to (i) the
purchase of the number of shares of Common Stock set forth in the Modified
Purchase Notice and (ii) the next sentence. In the event Allianz properly gives
a Modified Purchase Notice, the Company may, at its option by giving written
notice (the "Debenture Purchase
Notice") to Allianz within fifteen (15) business days of the Modified Purchase
Notice, require Allianz to purchase from the Company at par a convertible
debenture in the form of Exhibit O attached hereto (the "Convertible Debenture")
in the principal amount up to an amount, as determined by the Company and stated
in the Debenture Purchase Notice, equal to the dollar amount of Common Stock
stated in the Modified Purchase Notice that Allianz has elected not to purchase,
with final maturity date ten years from the relevant Determination Date, bearing
interest thereon from its date at a rate equal to the ten (10)-year U.S.
Treasury Note rate in effect as of the Determination Date with respect to such
Price Notice (as set forth in the Midwest Edition of the Wall Street Journal),
and convertible into Common Stock at a price equal to 200% of the Market Price
Per Share for the Determination Date. The term "Market Price Per Share" shall
mean the average of the daily closing sale price of the Common Stock as listed
in the Midwest Edition of The Wall Street Journal during the twenty (20)
consecutive trading days immediately preceding the relevant Determination Date.
In the event Allianz is required to purchase a Convertible Debenture, closing
(the "Debenture Closing") of such sale shall occur within ten (10) business days
after the Debenture Purchase Notice at the offices of Xxxxxx, Xxxxxxxx and
Xxxxxx, P.A., 0000 Xxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000, or such other
location as the parties may mutually agree. At the Debenture Closing, the
following shall occur:
(a) Deliveries by the Company. The Company shall deliver or cause to be
delivered to Allianz the following:
(i) Issuance of Convertible Debenture. The Convertible
Debenture dated the date of the Debenture Closing in the principal
amount stated in the relevant Price Notice with the maturity date and
interest rate completed as provided above duly issued and executed by
the Company.
(ii) Officers' Certificate. A certificate, dated the date of
the Debenture Closing, executed by the Chief Executive Officer and the
Chief Financial Officer of the Company and certifying that (A) the
representations and warranties of the Company set forth in Sections
3.1, 3.2, 3.4, 3.6, 3.8, 3.10, 3.12, 3.13, the second sentence of
Section 3.15, 3.18, 3.19, 3.20, 3.22, 3.24, 3.25, 3.26, 3.27 and 3.28
hereof are true and correct as of the date of the Debenture Closing
(provided that where any of such representations and warranties are
made "as of the date hereof" or another specific date, such
representations and warranties shall be true and correct as of January
13, 1998 which is the "date hereof" or such other specific date, as the
case may be, and are not made as of the date of the Debenture Closing)
except if any inaccuracy, individually or in the aggregate, would not
have a material adverse effect on the Company as a whole, and (B) the
Company has performed and complied with all agreements or conditions
required by this Agreement to be performed and complied with by it
prior to or as of the Debenture Closing.
(iii) Legal Opinion. The opinion dated the date of the
Debenture Closing of Xxxxxx, Xxxxxxxx and Xxxxxx, P.A. covering the
matters set forth in Exhibit P attached hereto in a form reasonably
satisfactory to counsel for Allianz.
(iv) Company Secretary Certificate. A certificate, dated the
date of the Debenture Closing, executed by the Secretary or any
Assistant Secretary of the Company certifying as of the date of such
Sale Closing (A) the Articles of Incorporation, as amended, of the
Company, (B) the By-laws of the Company, (C) the resolutions adopted by
the Board of Directors of the Company approving the issuance of the
Convertible Debenture at such closing and reserving for issuance upon
conversion of the Convertible Debenture such number of shares of Common
Stock into which the Convertible Debenture is convertible, (D) the
incumbency of the officers of the Company.
(b) Deliveries by Allianz. Allianz shall deliver or cause to be
delivered to the Company and LifeUSA the following:
(i) Purchase Price. The purchase price for the Convertible
Debenture issued to Allianz pursuant to this Section 2.4 at the
Debenture Closing in immediately available United States Dollars or as
a credit against the reinsurance allowances for commissions expenses
payable by LifeUSA to Allianz under the LifeUSA Reinsurance Agreement,
as the Company may determine.
(ii) Officers' Certificate. A certificate, dated the date of
the Debenture Closing and executed by the Chief Executive Officer and
the Chief Financial Officer of Allianz, certifying that (A) the
representations and warranties of Allianz set forth in Section 4 hereof
are true and correct as of the date of the Debenture Closing, and (B)
Allianz has performed and complied with all agreements or conditions
required by this Agreement to be performed and complied with by it
prior to or as of the Debenture Closing.
2.5 Limitation on Percentage Ownership by Allianz. Notwithstanding
anything contained in this Section 2 to the contrary, the maximum number of the
issued and outstanding shares of Common Stock which Allianz and its affiliates
(as such term is defined in Rule 405 under the Securities Act of 1933, as
amended) may own shall be thirty-five percent (35%) of the actual number of
issued and outstanding shares of Common Stock (the "Maximum Ownership Percentage
Limitation"). If the Maximum Ownership Percentage Limitation would be exceeded
as a result of any closing under this Section 2, the number of shares of Common
Stock or the principal amount of the Convertible Debenture, as the case may be,
to be sold to Allianz at such closing shall be reduced so as to comply with the
Maximum Ownership Percentage Limitation.
2.6 Special Limitation on Issuances of Shares Until February 18, 1999.
The parties acknowledge and agree that Allianz became an "interested
shareholder" of the Company within the meaning of the Minnesota Business
Corporation Act on February 17, 1995 when the Debenture was issued by the
Company to Allianz and, therefore, is subject to the provisions of Section
302A.673 of Minnesota Statutes to and until February 17, 1999. The parties agree
and confirm that the transactions contemplated by this Agreement are in
compliance with and permitted by the provisions of Section 302A.673 of Minnesota
Statutes, except that the Company may not issue (and LifeUSA may not sell) more
than an aggregate of four and ninety-nine one-hundredth percent (4.99%) of the
outstanding and issued shares of Common Stock, including
shares issuable upon conversion of Convertible Debentures, (the "Special
Limitation") pursuant to Sections 1.2, 2.2 or 2.4. The determination of whether
the Special Limitation would be exceeded shall be made at the time of such
issuance or sale based on the then number of issued and outstanding shares of
Common Stock and the number of shares of Common Stock theretofor issued under
Sections 1.2, 2.2 or 2.4 and then proposed to be issued pursuant to Sections
1.2, 2.2 or 2.4. Notwithstanding anything to the contrary contained in this
Agreement, the parties agree that, if the application of Sections 1.2, 2.2 or
2.4 hereof would result in the issuance or sale of shares of Common Stock or
Convertible Debentures which would exceed the Special Limitation, such issuance
or sale shall be postponed to February 18, 1999 or as soon thereafter as
reasonably practicable subject to satisfaction of the conditions set forth in
this Agreement with respect to such issuance or sale.
2.7 Waiver of Compliance. Either party may waive compliance by the
other party of any of the conditions contained in this Section 2. Such waiver
will not constitute waiver of other conditions contained in this Agreement.
SECTION 3
REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE COMPANY.
In order to induce Allianz to enter into this Agreement and to purchase
the Debenture, the Company hereby represents and warrants to Allianz that,
except as disclosed in the Disclosure Schedule separately provided to Allianz by
the Company:
3.1 Organization, Good Standing, Etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota, and has the requisite corporate power and authority to own its
properties and to carry on its business in all material respects as it is now
being conducted. The Company has all necessary corporate power and authority to
issue the shares of Common Stock and the Convertible Debentures contemplated to
be issued by the Company pursuant to this Agreement and the shares of its Common
Stock into which any Convertible Debenture issued hereunder is convertible, to
grant the purchase rights set forth in Section 9 below and to otherwise perform
its obligations under this Agreement. LifeUSA has all necessary corporate power
and authority to sell shares of Common Stock contemplated to be sold by LifeUSA
pursuant to this Agreement.
3.2 Governing Instruments. True, correct and complete copies of the
restated articles of incorporation (including all amendments thereto) and
by-laws of the Company in effect as of the date hereof have been provided to
Allianz. Minnesota Statutes Section 302A.671 is not applicable to the Company.
Between February 17, 1995 and the date hereof, the Company has not (i) sold,
leased, exchanged or transferred assets of the Company or LifeUSA to or with
Allianz other than the sale of goods or services in the ordinary course of
business or (ii) provided any loan, advance, guarantee, pledge or other
financial assistance to Allianz.
3.3 Subsidiaries, Etc. The Company owns all of the outstanding shares
of capital stock of LifeUSA. As of the date hereof, the Company does not have
any direct or indirect ownership interest in any corporation, partnership, joint
venture, association or other business enterprise. Each of the representations
and warranties contained in this Section (other than the representations and
warranties contained in the last sentence of Section 3.1, the second sentence of
Section 3.2, the first sentence of this Section 3.3, and Sections 3.5, 3.12,
3.13, 3.15 and 3.18) are also being hereby made with respect to LifeUSA as
though "LifeUSA" were substituted for the "Company".
3.4 Qualification. The Company is duly qualified, licensed or
domesticated as a foreign corporation in good standing in each jurisdiction
wherein the nature of its activities or the properties owned or leased by it
makes such qualification, licensing or domestication necessary, and in which
failure to so qualify or be licensed or domesticated would have a material
adverse impact upon its business.
3.5 Financial and Statutory Statements. The Company has delivered to
Allianz the following financial statements (the "Financial Statements"): (a) the
consolidated balance sheets, as at December 31, 1996 and 1995 for the Company,
together with the related consolidated statements of income, shareholders'
equity and cash flows for the years ended December 31, 1996, 1995 and 1994 and
notes thereto which balance sheets and related statements have been audited by
Ernst & Young LLP, and (b) condensed consolidated unaudited balance sheet, as at
September 30, 1997 for the Company, together with the related condensed
consolidated unaudited statements of income and cash flows for the nine months
period then ended. The Financial Statements (i) are in accordance with the books
and records of the Company, (ii) present fairly the financial condition of the
Company at the balance sheet dates and the results of operations for the periods
therein specified, and (iii) have, in all material respects, been prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
basis consistent with prior accounting periods other than changes required by
changes in GAAP, subject, in the case of the unaudited interim financial
statements, to normal year end adjustments and to the fact that such unaudited
interim financial statements do not include footnotes. Without limiting the
generality of the foregoing, the balance sheets or notes thereto disclose all of
the debts, liabilities and obligations of any nature (whether absolute, accrued
or contingent and whether due or to become due) of the Company at December 31,
1996 and September 30, 1997 which, individually or in the aggregate, are
material and which in accordance with GAAP would be required to be disclosed in
such balance sheets or in notes thereto, and includes appropriate reserves for
all taxes and other liabilities accrued as of such dates but not yet payable.
The Company has delivered to Allianz the following statutory financial
statements of LifeUSA which have been filed with insurance regulators (the
"Statutory Statements"): (a) the Statutory Quarterly Statement for the quarters
ended March 31, June 30 and September 30, 1997 for LifeUSA as filed with state
insurance regulatory authorities, and (b) the Annual Statutory Statements for
the years ended December 31, 1996, 1995, 1994, 1993 and 1992 as filed with state
insurance regulatory authorities. The Statutory Statements (i) fairly present
the financial position of LifeUSA and the results of its operations as of the
dates thereof and periods then ended, (ii) were prepared in conformity with
statutory accounting principles prescribed or permitted at the date of such
financial statements by the insurance regulatory authority of its state of
domicile, and (iii) all investments in stocks and bonds shown thereon were
carried at values determined in accordance with the National Association of
Insurance Commissioners' guidelines.
3.6 Tax Returns and Audits. All required federal, state and local tax
returns or appropriate extension requests of the Company have been filed, and
all federal, state and local taxes shown due on such returns have been paid or
due provision for the payment thereof has been made. The Company is not
delinquent in the payment of any such tax or in the payment of any assessment or
governmental charge in any material respect. As of the date hereof, the Company
has not received notice of any material tax deficiency proposed or assessed
against it, and it has not executed any waiver of any statute of limitations on
the assessment or collection of any tax. As of the date hereof, none of the
Company's tax returns has been audited by governmental authorities in a manner
to bring such audits to the Company's attention. As of September 30, 1997, the
Company does not have any material tax liabilities except those reflected in the
Financial Statements.
3.7 No Material Adverse Changes. From September 30, 1997 through the
date hereof, there has been no material adverse change in the financial
condition, operations, results of operations, business or prospects of the
Company.
3.8 Title to Properties and Encumbrances. The Company has good and
marketable title to all of its owned material properties and assets and valid
leasehold interests in all of its material leased properties, including without
limitation the properties and assets used in the conduct of its business, which
properties and assets are not subject to any mortgage, pledge, lease, lien,
charge, security interest, encumbrance or restriction, except (a) liens for
taxes and assessments or governmental charges or levies not at the time due or
in respect of which the validity thereof shall currently be contested in good
faith by appropriate proceedings, (b) leases pursuant to which the Company's
leasehold interests arise, (c) those which do not materially affect the value of
or interfere with the use made of such properties and assets, and (d) any
mortgage, pledge, lease, lien, charge or security interest arising after the
date hereof.
3.9 Conditions of Properties. The offices and equipment of the Company
have been kept in good condition and repair in the ordinary course of business.
3.10 Litigation and Governmental Proceedings. As of the date hereof,
there are no legal actions, suits, arbitrations or other legal, administrative
or governmental proceedings or investigations pending or, to the knowledge of
the Company, threatened against the Company, or its properties or business which
could have a material adverse effect in the financial condition, operations,
results of operations, business or prospects of the Company and the Company is
not aware of any facts which are likely to result in or form the basis for any
such action, suit or other proceeding. The Company is not in default with
respect to any material final judgment, order or decree of any court or any
governmental agency or instrumentality. As of the date hereof, the Company has
not been threatened with any action or proceeding under any business or zoning
ordinance, law or regulation.
3.11 Compliance With Applicable Laws and Other Instruments. The
business and operations of the Company have been and are being conducted in all
material respects in accordance with all applicable laws, rules and regulations
of all governmental authorities. Neither the execution nor delivery of, nor the
performance of or compliance with, this Agreement nor the consummation of the
transactions contemplated hereby will, with or without the giving of notice or
passage of time, result in any breach of, or constitute a default under, or
result in the imposition of any lien or encumbrance upon any asset or property
of the Company pursuant to, any agreement or other instrument to which the
Company is a party or by which it or any of its properties, assets or rights is
bound or affected, and will not violate the restated articles of incorporation,
as amended, or by-laws of the Company. The Company is not in violation of its
restated articles of incorporation, as amended, or by-laws nor in violation of,
or in default under, any lien, indenture, mortgage, lease, agreement,
instrument, commitment or arrangement. The Company is not subject to any
restriction that would prohibit it from entering into or performing its
obligations under this Agreement or would require it to obtain any consent. To
the best of the Company's knowledge, all parties to any material agreement or
other instrument to which the Company is a party or by which the Company or any
of the Company's properties, assets or rights is bound or affected are in
substantial compliance therewith and none of such parties is in material default
in any respect thereunder.
3.12 Issuance of Securities. The shares of Common Stock to be issued
pursuant to this Agreement when issued will be duly authorized, validly issued
and outstanding, fully paid, nonassessable and free and clear of all pledges,
liens, encumbrances and, except as set forth in Section 11, restrictions. The
shares of Common Stock to be issued pursuant to this Agreement have been duly
reserved for issuance. On the date hereof the Company has reserved 3,300,000
shares of its authorized and unissued shares of Common Stock for issuance in
accordance with Section 2 hereof.
3.13 Securities Laws and Governmental Filings or Approvals. Based in
part upon the representations of Allianz in Sections 4.1 and 4.2, no consent,
authorization, approval, permit or order of or filing with any governmental or
regulatory authority is required to be made by the Company or LifeUSA in
connection with the execution and delivery of this Agreement or the offer,
issuance, sale or delivery of the shares of Common Stock or any Convertible
Debenture pursuant to Sections 1, 2 and 9 hereof or under Section 11.2(a)(ii)
hereof. Under the circumstances contemplated by this Agreement, the offer,
issuance, sale and delivery of the shares of Common Stock and any Convertible
Debenture under Sections 1 and 2 hereof will not, under the laws and regulations
in effect on the date hereof, require compliance with the prospectus delivery or
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act").
3.14 Intellectual Property. To the best of the Company's knowledge, the
Company (a) owns or has the exclusive right in the life insurance and annuity
industry to use the "LifeUSA" trademark without infringing upon or otherwise
acting adversely to the right or claimed right of any person under or with
respect to any of the foregoing, (b) owns or has the right in the ordinary
course of its business to use all trade secrets, including know-how, customer
lists,
inventions, designs, processes, computer programs and technical data necessary
to its operations and the sale of all products and services sold or proposed to
be sold by it, free and clear of any rights, liens, or claims of others, except
for customary restrictions or provisions under any agreement pursuant to which
any of the foregoing is licensed from a third party, which restrictions and
provisions do not significantly interfere with the conduct of the Company's
business in the ordinary course, and (c) is not using any confidential
information or trade secrets of others which violates the rights of others and
which use would result in a material liability of the Company.
3.15 Capital Stock. As of the date hereof, the authorized capital stock
of the Company consists of 45,000,000 shares of Common Stock, of which
22,620,760 were issued and outstanding as of December 31, 1997, and 15,000,000
undesignated preferred shares, of which no shares were designated or issued as
of December 31, 1997. All of the outstanding shares of Common Stock were duly
authorized, validly issued and are fully paid and nonassessable. As of the date
hereof, there are no outstanding subscriptions, options, warrants, calls,
contracts, demands, commitments, convertible securities or other agreements or
arrangements of any character or nature whatever, other than this Agreement,
under which the Company is obligated to issue any securities of any kind
representing an ownership interest in the Company. As of the date hereof,
neither the offer nor the issuance or sale of the shares of Common Stock under
Sections 1 and 2 hereof or the issuance of shares of Common Stock upon the
conversion of any Convertible Debenture issuable under Section 2 hereof,
constitutes an event, under any anti-dilution provisions of any securities
issued or issuable by the Company or any agreements with respect to the issuance
of securities by the Company, which will either increase the number of shares
issuable pursuant to such provisions or decrease the consideration per share to
be received by the Company pursuant to such provisions. As of the date hereof,
no holder of any security of the Company is entitled to any preemptive or
similar rights to purchase any securities of the Company from the Company,
except pursuant to the Debenture Purchase Agreement or this Agreement. All
outstanding securities of the Company have been issued in full compliance with
the Securities Act and applicable state securities laws or pursuant to an
exemption or exemptions from the registration and prospectus delivery
requirements of the Securities Act and from the registration and qualification
requirements of all applicable state securities laws. The Company is the owner
of all of the outstanding shares of capital stock of LifeUSA, and there are no
outstanding subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities or other agreements or arrangements of any
character or nature whatsoever relating to LifeUSA's unissued shares.
3.16 Outstanding Debt. As of September 30, 1997, the Company did not
have any indebtedness for borrowed money except as set forth in the condensed
consolidated unaudited balance sheet as of September 30, 1997 delivered to
Allianz as part of the Financial Statements. The Company is not in default in
the payment of the principal of or interest or premium on any such outstanding
indebtedness, and no event has occurred or is continuing under the provisions of
any instrument, document or agreement evidencing or relating to any such
indebtedness which with the lapse of time or the giving of notice, or both,
would constitute an event of default thereunder.
3.17 Material Contracts. The Company has delivered to Allianz copies of
its Form 10- K Annual Report for the year ended December 31, 1996 and its Form
10-Q Quarterly Reports for the quarters ended March 31, June 30 and September
30, 1997 (the "SEC Reports") as filed with the Securities and Exchange
Commission (the "Commission"). As of the date hereof, the Company does not have
any material contract which is required to be disclosed in the exhibits to its
periodic filings pursuant to the Securities and Exchange Act of 1934, as
amended, (the "Exchange Act") which has not been disclosed in the SEC Reports
except for this Agreement and the agreements or instruments contemplated hereby.
3.18 Corporate Acts and Proceedings. This Agreement has been duly
authorized by all necessary corporate action on behalf of the Company, has been
duly executed and delivered by authorized officers of the Company, and is a
valid and binding agreement on the part of the Company enforceable against the
Company in accordance with its terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, moratorium, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and to
judicial limitations on the enforcement of specific performance and other
equitable remedies.
3.19 Insurance Coverage. There are in full force and effect policies of
insurance issued by insurers of recognized responsibility insuring the Company
and its properties and business against such losses and risks, and in such
amounts, as in the Company's reasonable judgment, are acceptable for the nature
and extent of such business and its resources. A summary of the insurance
policies carried by the Company as of the date hereof has been furnished to
Allianz.
3.20 No Brokers or Finders. No person, firm or corporation has or will
have, as a result of any act or omission of the Company, any right, interest or
valid claim against the Company or Allianz for any commission, fee or other
compensation as a finder or broker in connection with the transactions
contemplated by this Agreement. The Company will indemnify and hold Allianz
harmless against any and all liability with respect to any such commission, fee
or other compensation which may be payable or determined to be payable as a
result of the actions of the Company in connection with the transactions
contemplated by this Agreement.
3.21 Conflicts of Interest. As of the date hereof, no officer or
director of the Company or any affiliate (as such term is defined in Rule 405
under the Securities Act) of any such person has any direct or indirect interest
(a) in any entity which does business with the Company, (b) in any property,
asset or right which is used by the Company in the conduct of its business, or
(c) in any contractual relationship with the Company other than as an employee,
except as disclosed in the Company's proxy statement for its 1997 annual
shareholders meeting or as with Allianz.
3.22 Licenses. The Company possesses from the appropriate agency,
commission, board and government body and authority, whether state, local or
federal, all licenses, permits, authorizations, approvals, franchises and rights
(a) which are necessary for it to engage in the business currently conducted by
it, and (b) which, if not possessed by the Company, would have a material
adverse impact on the Company's business. As of the date hereof, the Company has
no knowledge that would lead it to believe that it will not be able to obtain in
the ordinary course all licenses, permits, authorizations, approvals, franchises
and rights that may be required for any material business the Company proposes
to conduct.
3.23 Registration Rights. The Company does not have outstanding any
agreement or arrangement committing it to register any of its authorized or
outstanding securities under the Securities Act, except as provided in this
Agreement.
3.24 Environmental and Safety Laws. The Company is not in material
violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and no material expenditures are
or will be required in order to comply with any such existing statute, law or
regulation.
3.25 Absence of Restrictive Agreements. To the best of the Company's
knowledge prior to the time of hiring any employee, no employee of the Company
is subject to any secrecy or non-competition agreement or any agreement or
restriction of any kind that would impede in any way the ability of such
employee to perform materially such employee's duties in furtherance of the
business of the Company.
3.26 Disclosure. To the best of the Company's knowledge, the SEC
Reports (including amendments thereto) have been prepared in all material
respects in accordance with the provisions of the Securities Exchange Act of
1934 (the "Exchange Act") and the rules and regulations thereunder. The Company
has not knowingly withheld from Allianz any material facts relating to the
assets, business, operations, financial condition or prospects of the Company.
No representation or warranty in this Agreement or in any certificate, schedule,
statement or other document furnished or to be furnished to Allianz pursuant
hereto or in connection with the transactions contemplated hereby contains or
will contain any untrue statement of a material fact or omits or will omit to
state any material fact required to be stated herein or therein or necessary to
make the statements herein or therein not misleading.
3.27 Minutes Books. The minute books of the Company contain a complete
summary of all meetings of directors and shareholders since the time of
incorporation and reflect all transactions referred to in such minutes
accurately in all material respects.
3.28 Employee Benefit Plans. Each "employee pension benefit plan" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) maintained or contributed to by the Company (the
"Retirement Plans") and each "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA) and each other employee benefit plan, program,
arrangement, practice or contract, whether formal or informal, maintained by the
Company providing benefits or compensation to or on behalf of employees or
former employees of the Company (the "Benefits Plans") are in compliance with
the presently applicable provisions of ERISA and the Internal Revenue Code of
1986, as amended (the "Code"), and the Retirement Plans are qualified under
Section 401(a) of the Code. Neither the Company nor any entity which is treated
as a single employer along with the Company under Section 414(b), (c), (m) or
(o) of
the Code maintains or contributes to, or has ever maintained or contributed to,
or been required to contribute to a multiemployer plan within the meaning of
Section 3(37) of ERISA or any plan subject to Title IV of ERISA. The Company has
timely filed or caused to be filed all reports required to be filed by it with
the Internal Revenue Service or the Department of Labor under applicable
provisions of ERISA and the Code with respect to each of the Retirement Plans
and Benefits Plans. No liability to the Pension Benefit Guaranty Corporation has
been incurred with respect to any Retirement Plan subject to Title IV of ERISA
that has not been satisfied in full.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF ALLIANZ.
In order to induce the Company to enter into this Agreement and to sell
its securities as herein provided, Allianz hereby represents and warrants to the
Company that, except as disclosed in the Disclosure Schedule separately provided
to the Company by Allianz:
4.1 Investment Intent. The shares of Common Stock and any Convertible
Debenture acquired by Allianz pursuant to Sections 1, 2, 9 and 11.2(a)(ii)
hereof are purchased for investment for Allianz's own account and not with the
view to, or for resale in connection with, any distribution or public offering
thereof. Allianz understands that the shares of Common Stock and any Convertible
Debenture acquired by Allianz pursuant to Sections 1, 2, 9 and 11.2(a)(ii)
hereof will not be registered under the Securities Act or any state securities
laws by reason of their contemplated issuance in transactions exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) thereof
and applicable state securities laws, and that the reliance of the Company and
others upon these exemptions is predicated in part upon this representation by
Allianz. Allianz further understands that the shares of Common Stock and any
Convertible Debenture acquired by Allianz pursuant to Sections 1, 2, 9 and
11.2(a)(ii) hereof may not be transferred or resold without (i) registration
under the Securities Act and any applicable state securities laws, or (ii) an
exemption from the requirements of the Securities Act and applicable state
securities laws.
4.2 Location of Principal Office, Qualification as an Accredited
Investor, Etc. Allianz's principal office is located in the State of Minnesota.
Allianz qualifies as an "accredited investor" for purposes of Regulation D
promulgated under the Securities Act. Allianz acknowledges that the Company has
made available to it at a reasonable time prior to the execution of this
Agreement the opportunity to ask questions and receive answers concerning the
terms and conditions of the sale of securities contemplated by this Agreement
and to obtain any additional information (which the Company possesses or can
acquire without unreasonable effort or expense) as may be necessary to verify
the accuracy of information furnished to Allianz. Allianz (a) is able to bear
the loss of its entire investment in the shares of Common Stock and any
Convertible Debentures to be acquired by Allianz pursuant to Sections 1, 2, 9 or
11.2(a)(ii) hereof without any material adverse effect on its business,
operations or prospects, and (b) has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of
the investment to be made by it pursuant to this Agreement.
4.3 Corporate Acts and Proceedings. This Agreement has been duly
authorized by all necessary corporate action on behalf of Allianz, has been duly
executed and delivered by authorized officers of Allianz, and is a valid and
binding agreement on the part of Allianz enforceable against Allianz in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and to judicial
limitations on the enforcement of specific performance and other equitable
remedies.
4.4 No Brokers or Finders. No person, firm or corporation has or will
have, as a result of any act or omission by Allianz, any right, interest or
valid claim against the Company for any commission, fee or other compensation as
a finder or broker, or in any similar capacity, in connection with the
transactions contemplated by this Agreement. Allianz will indemnify and hold the
Company harmless against any and all liability with respect to any such
commission, fee or other compensation which may be payable or determined to be
payable as a result of the actions of Allianz in connection with the
transactions contemplated by this Agreement.
4.5 Governmental Filings or Approvals. No consent, authorization,
approval, permit or order of or filing with any governmental or regulatory
authority is required to be made by Allianz in connection with the execution and
delivery of this Agreement by Allianz or the purchase by Allianz of the shares
of Common Stock or any Convertible Debenture pursuant to Sections 1, 2, 9 and
11.2(a)(ii) hereof.
SECTION 5
CONDITIONS TO ALLIANZ'S OBLIGATIONS.
The obligation of Allianz to purchase the securities to be issued
pursuant to Sections 1 and 2 hereof are subject to the fulfillment prior to or
on the respective closing date thereunder of the conditions set forth in this
Section 5.
5.1 Truth of Representations. In the case of the Initial Closing, the
representations and warranties of Allianz under this Agreement shall be true in
all material respects as of the closing date with the same effect as though made
on and as of the closing date except to the extent that any such representation
or warranty which is stated to be as of a specific date (including the "date
hereof" which shall be the date on which this Agreement is executed as stated
above) prior to the closing date shall be true in all material respects as of
such prior date. In the case of any Sale Closing or any Debenture Closing, the
representations and warranties of the Company under Sections 3.1, 3.2, 3.4, 3.6,
3.8, 3.10, 3.12, 3.13, the second sentence of Section 3.15, 3.18, 3.19, 3.20,
3.22, 3.24, 3.25, 3.26, 3.27 and 3.28 of this Agreement shall be true as of the
closing date with the same effect as though made on and as of the closing date
except to the extent that any such representation or warranty which is stated to
be as of a specific date prior to the closing date shall be true in all material
respects as of such prior date and except if any inaccuracy, individually or in
the aggregate, would not have a material adverse effect on the Company as a
whole.
5.2 Compliance with Agreement. The Company shall have performed and
complied in all material respects with all agreements or conditions required by
this Agreement to be performed and complied with by it prior to or as of the
closing date.
5.3 Regulatory Approvals. All required regulatory approvals shall have
been obtained and shall remain in full force and effect for the acquisition by
Allianz of the securities of the Company to be issued at such closing and any
applicable waiting periods shall have expired. There shall not be any action
taken, or any statute, rule, regulation, judgment, order or injunction enacted,
entered, enforced, promulgated, issued or deemed applicable to the transactions
contemplated hereby by any federal, state or foreign court, government or
governmental authority or agency, directly or indirectly: (i) challenging or
seeking to make illegal, or to delay or otherwise directly or indirectly
restrain or prohibit, the consummation of the transactions contemplated hereby,
(ii) seeking to prohibit direct or indirect ownership or operation by Allianz of
all or a material portion of the shares of Common Stock to be acquired pursuant
to this Agreement as a result of the transactions contemplated hereby, (iii)
seeking to require direct or indirect transfer or sale by Allianz of all or a
material portion of the shares of Common Stock to be acquired pursuant to this
Agreement, or (iv) seeking to invalidate or render unenforceable any material
provision of this Agreement or any of the other agreements attached as exhibits
hereto.
5.4 Concurrent Closing; Employment Agreements in Full Force and Effect.
Concurrently with the Initial Closing, Allianz shall have purchased 925,000
shares of Common Stock pursuant to the Management Stock Purchase Agreements (as
defined in Section 11.2(a)(ii) below), and the Employment Agreements shall been
executed and delivered and shall be in full force and effect.
5.5 No Catastrophic Events. There shall not have occurred and be
continuing any of the following events: (a) LifeUSA's total adjusted capital
shall be below the trend test corridor level for risk-based capital at any
calendar year end (the terms "total adjusted capital," "trend test corridor" and
"risk-based capital" shall have the meanings prescribed by the National
Association of Insurance Commissioners); (b) either the Company or LifeUSA shall
(i) file a petition seeking relief under Title 11 of the United States Code or
any other applicable federal, state or foreign bankruptcy or other similar law,
(ii) consent to the institution of a proceeding thereunder or to the filing of
any such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator assignee, trustee or sequestrator (or similar official) of
the Company or LifeUSA, or (iii) fail generally to pay its debts as such debts
become due; (c) a case or proceeding shall have been commenced against the
Company or LifeUSA in any court having competent jurisdiction seeking a decree
or order in respect of the Company or LifeUSA (i) under Chapter 11 of the United
States Bankruptcy Code, or any applicable federal, state or foreign bankruptcy
or similar law, (ii) appointing a custodian, receiver, liquidator, assignee,
trustee or sequestrator (or similar official) of the Company or LifeUSA or of
any substantial part of its or their properties, or (iii) ordering the
winding-up or liquidation of the affairs of the Company or LifeUSA, and in each
instance such case or proceeding shall remain undismissed or unstayed for sixty
(60) consecutive days or such court shall enter a decree or order granting the
relief sought
in such case or proceeding; or (d) the officers, directors or employees of the
Company or LifeUSA knowingly violated any applicable laws, rules and regulations
of any governmental authority, its articles of incorporation or by-laws, or any
lien, indenture, mortgage, lease, agreement, instrument or arrangement and such
violations, individually or in the aggregate, will have a material adverse
effect on the Company and LifeUSA as a whole.
SECTION 6
CONDITIONS TO THE COMPANY'S OBLIGATIONS.
The obligation of the Company to sell and issue the securities to be
issued to Allianz pursuant to Sections 1 and 2 are subject to the fulfillment
prior to or on the respective closing date thereunder of the conditions set
forth in this Section 6.
6.1 Truth of Representations. The representations and warranties of
Allianz under this Agreement shall be true in all material respects as of the
closing date with the same effect as though made on and as of the closing date
except to the extent that any such representation or warranty which is stated to
be as of a specific date prior to the closing date shall be true in all material
respects as of such prior date.
6.2 Compliance with Agreement. Allianz shall have performed and
complied in all material respects with all agreements or conditions required by
this Agreement to be performed and complied with by it prior to or as of the
closing date.
6.3 Regulatory Approval. All required regulatory approvals, shall have
been obtained and shall remain in full force and effect for the issuance of the
securities of the Company to be issued to Allianz at such closing and any
applicable waiting periods shall have expired. There shall not be any action
taken, or any statute, rule, regulation, judgment, order or injunction enacted,
entered, enforced, promulgated, issued or deemed applicable to the transactions
contemplated hereby by any federal, state or foreign court, government or
governmental authority or agency, directly or indirectly: (i) challenging or
seeking to make illegal, or to delay or otherwise directly or indirectly
restrain or prohibit, the consummation of the transactions contemplated hereby,
(ii) seeking to prohibit direct or indirect ownership or operation by Allianz of
all or a material portion of the shares of Common Stock to be acquired pursuant
to this Agreement as a result of the transactions contemplated hereby, or (iii)
seeking to invalidate or render unenforceable any material provision of this
Agreement or any of the other agreements attached as exhibits hereto.
6.4 Concurrent Closing. Concurrently with the Initial Closing, Allianz
shall have purchased 925,000 shares of Common Stock pursuant to the Management
Stock Purchase Agreements.
SECTION 7
COVENANTS AND AGREEMENTS.
7.1 Furnishing of Financial Statements and Information. The Company
will deliver to Allianz so long as it owns ten percent (10%) of the issued and
outstanding shares of Common Stock the following financial statements and
information:
(a) as soon as available, but in any event within 45 days
after the end of each calendar quarter, an unaudited condensed
consolidated balance sheet of the Company as of the end of such month,
together with the related statements of condensed consolidated income
and cash flows for such quarter;
(b) as soon as available, but in any event within 90 days
after the end of each calendar year, a balance sheet of the Company, as
of the end of such year, together with the related consolidated
statements of income, shareholders' equity and cash flow for such year,
all in reasonable detail and duly certified by the Company's
independent public accountants, which accountants shall have given the
Company an opinion regarding such statements, together with a copy of
such opinion and any management letters and all other information
provided by such accountants to the Board of Directors of the Company;
(c) within five (5) business days after the Company learns of
the commencement or written threats of the commencement of any material
suit, legal or equitable, or of any material administrative,
arbitration or other proceeding against the Company or its business,
assets or properties, written notice of the nature and extent of such
suit or proceeding;
(d) promptly upon transmission thereof, copies of all reports,
proxy statements, registration statements and notifications filed by it
with the Commission pursuant to any act administered by the Commission
or furnished to shareholders of the Company or to any national
securities exchange or market;
(e) with reasonable promptness, such other financial data
relating to the business, affairs and financial condition of the
Company as is available to the Company and as from time to time such
holder may reasonably request; and
(f) promptly upon transmission thereof, copies of all material
filings made by LifeUSA with regulatory agencies.
7.2 Inspection and Confidentiality. The Company will permit
representatives of Allianz so long as it owns ten percent (10%) of the issued
and outstanding shares of Common Stock to visit and inspect, at Allianz's
expense, any of the properties of the Company, including its books and records
(and to make photocopies thereof or make extracts therefrom), and to discuss its
affairs, finances and accounts with its officers, lawyers and accountants, all
to such
reasonable extent and at such reasonable times and intervals as Allianz may
reasonably request. Allianz agrees to maintain, and shall require its
representatives to maintain, all information obtained from the Company pursuant
to Sections 7.1(c) and (e) and this Section 7.2 on a confidential basis unless
such information is otherwise public knowledge, provided that this limitation
shall not limit or otherwise affect Allianz's rights under the Marketing
Agreement, Allianz Reinsurance Agreement, LifeUSA Reinsurance Agreement and
Claims Administration Agreement.
7.3 Boards of Directors Representation Rights. Subject to the discharge
of the fiduciary duties of the directors relating to the qualification of the
persons designated by Allianz, (a) so long as Allianz owns more than ten percent
(10%) of the issued and outstanding shares of Common Stock, it shall have the
right to designate two persons (or a Proportionate Number, if greater) as
directors of the Company and two persons (or a Proportionate Number, if greater)
as directors of LifeUSA, and the Company shall use its best efforts, and shall
cause LifeUSA to use its best efforts, to nominate such persons for election as
directors and to cause such persons to be elected as directors. During the
Purchase Period, the Company shall also reasonably consider any request by
Allianz for additional representation of the Boards of Directors of the Company
and LifeUSA. The term "Proportionate Number" shall mean the whole number
(rounded to the nearer whole number) determined by multiplying (i) the number of
directors on the Board of Directors of the Company and LifeUSA, as the case may
be, by (ii) the quotient of the number of shares of Common Stock owned by
Allianz, divided by the number of issued and outstanding shares of Common Stock.
Concurrently with the Initial Closing, each of the Company and LifeUSA shall
increase the size of its Board of Directors by two or there shall otherwise have
been created two vacancies on the respective Boards of Directors, and the
respective Boards of Directors shall fill the resulting vacancies by electing
nominees designated by Allianz. The Company and LifeUSA shall not increase the
number of directors of their respective Boards of Directors without giving
effect to this Section 7.3 Any information received by such designees in their
capacities as directors may be disclosed to Allianz subject to the
confidentiality provisions of Section 7.2; provided, however, that if the
Company provides to such nominees an opinion of counsel that any proposed
disclosure pertaining to any current case or controversy may jeopardize the
attorney-client privilege pertaining thereto, then such nominees shall not
disclose such information to Allianz.
7.4 Ownership of LifeUSA. The Company shall maintain its ownership of
LifeUSA as a wholly-owned subsidiary.
7.5 Reservation of Shares. The Company covenants and agrees that the
Company will at all times have authorized and reserved a sufficient number of
shares of Common Stock for the purpose of issuance pursuant to this Agreement.
If, at any time, Allianz reasonably determines that an adequate number of shares
of Common Stock are not reserved for issuance pursuant to this Agreement, the
Company shall promptly take all necessary corporate action to so reserve an
adequate number of shares of its authorized and unissued Common Stock for
issuance pursuant to this Agreement. The Company will not issue additional
shares of Common Stock, securities convertible into Common Stock or options,
warrants or other rights exercisable into Common
Stock if at the time of issuance thereof the number of shares authorized under
the Company's Articles of Incorporation would be less than the sum of the number
of shares of Common Stock outstanding, the number of shares of Common Stock
reserved pursuant to this Agreement and the number of shares of Common Stock
that would be outstanding upon the conversion or exercise of any then
outstanding convertible securities, options, warrants or rights.
7.6 Company May Consolidate, Etc., Only on Certain Terms. The Company
shall not consolidate with or merge into any other person or convey, transfer or
lease its properties and assets substantially as an entirety to any person, and
the Company shall not permit any person to consolidate with or merge into the
Company or convey, transfer or lease its properties and assets substantially as
an entirety to the Company, unless:
(a) in case the Company shall consolidate with or merge into
another corporation, trust or entity or convey, transfer or lease its
properties and assets substantially as an entirety to any person, the
person formed by such consolidation or into which the Company is merged
or the person which acquires by conveyance or transfer, or which
leases, the properties and assets of the Company substantially as an
entirety (the "Acquiror") shall be a trust, corporation or other entity
organized and existing under the laws of the United States of America,
any State thereof or the District of Columbia and shall expressly
assume, by a supplemental agreement to this Agreement, this Agreement
and in form reasonably satisfactory to Allianz and its counsel, the due
and punctual payment of the principal of and interest on the
Convertible Debenture and the performance of every covenant of this
Agreement on the part of the Company to be performed or observed and
shall have provided for conversion rights in accordance with Section
5(e) of the Convertible Debenture; and
(b) immediately after giving effect to such transaction, the
Company shall remain in compliance with this Agreement.
Upon any consolidation or merger of the Company with or into any other
corporation, trust or other entity or any conveyance, transfer or lease of the
properties and assets of the Company substantially as an entirety to any person
in accordance with this Section 7.6, the successor person formed by such
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Agreement with the
same effect as if such successor person had been named as the Company herein,
and thereafter the predecessor person shall be relieved of all obligations and
covenants under this Agreement and the Convertible Debenture.
7.7 SEC Reports. So long as the Company is subject to the periodic
reporting requirements under the Exchange Act, the Company shall file all
reports required by the Exchange Act in a timely manner.
7.8 Level of Business. Subject to consummation of the Initial Closing,
commencing as of January 1, 1998 and continuing during the term of the Marketing
Agreement (the "Covered Period"), Allianz shall be entitled to thirty-seven and
one-half percent (37.5%) (the "Production Goal") of the Life and Annuity
Production (as defined below). The term "Life and Annuity Production" shall mean
the first year and single premiums received from life insurance and fixed
annuity products written during the Covered Period (a) by LifeUSA agents for
LifeUSA (the "LifeUSA Business"), and (b) by LifeUSA agents for Allianz under
the Marketing Agreement (the "Allianz Business"). The Production Goal shall be
achieved as follows: (a) LifeUSA shall reinsure 25% of the Allianz Business
pursuant to the LifeUSA Reinsurance Agreement; (b) Allianz shall reinsure 12.5%
of the LifeUSA Business pursuant to the Allianz Reinsurance Agreement
(commencing the first day of the calendar quarter following the Initial
Closing); (c) Allianz shall retain 25% of the Allianz Business; (d) if necessary
to achieve the Production Goal, Allianz shall retain up to an additional 50% of
the Allianz Business (not to exceed the Production Goal); and (e) if the
Production Goal has not been achieved and Allianz shall have retained 75% of the
Allianz Business, Allianz shall reinsure up to an additional 25% of the LifeUSA
business (not to exceed the Production Goal). Allianz agrees and the Company
agrees to cause LifeUSA to adjust the percentage of the Allianz Business assumed
by LifeUSA under the LifeUSA Reinsurance Agreement and the percentage of the
LifeUSA Business assumed by Allianz under the Allianz Reinsurance Agreement
semi-annually effective January 1st and July 1st on a prospective basis to
achieve as reasonably as possible the Production Goal in good faith taking into
account the Life and Annuity Production received by Allianz since January 1,
1998 and the reasonably anticipated levels of Allianz Business and LifeUSA
Business for the six months following the adjustment in order to meet the
Production Goal. In addition, during the term of the Marketing Agreement,
Allianz shall have a right of first refusal to assume up to 37.5% of the
premiums received from any other products written by LifeUSA if and to the
extent (not to exceed 37.5%) LifeUSA reinsures any such products. So long as the
provisions of this Section 7.8 are in effect, the Company agrees to cause
LifeUSA not to, and Allianz agrees not to, terminate the LifeUSA Reinsurance
Agreement or the Allianz Reinsurance Agreement.
7.9 Employment Agreements. Without the consent of Allianz, the Company
will not waive any provision of, terminate or amend in any manner materially
adverse to the Company any of the Employment Agreements.
7.10 Shareholder Rights Plans. Except with the prior written consent of
Allianz, the Company shall not distribute with respect to the shares of its
Common Stock any rights to acquire any other securities of the Company which may
be commonly considered a part of a shareholder rights or similar plan.
7.11 Regulatory Matters. The Company shall, and shall cause LifeUSA to,
make all filings or applications required by any applicable law, rule or
regulation to be made by it to consummate the transactions contemplated hereby,
including filings under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, (the "H-S-R Act"). The Company shall, and shall cause LifeUSA
to, promptly notify Allianz of any communication or request received by the
Company or LifeUSA from any governmental body in connection with such filings
and
applications. The Company shall, and shall cause LifeUSA to, reasonably
cooperate with Allianz in connection with preparing, making and prosecuting
filings and applications to be made by Allianz. The Company shall, and shall
cause LifeUSA to, use its best efforts to obtain all regulatory approvals for
the acquisition by Allianz of the securities of the Company to be issued at each
closing, use its best efforts to cause any regulatory approvals to remain in
full force and effect, request the early termination of any applicable waiting
periods if requested by Allianz and use its best efforts to cause any injunction
imposed against the purchase of any securities to be removed. Allianz shall make
all filings or applications required by any applicable law, rule or regulation
to be made by it to consummate the transactions contemplated hereby, including
filings under the H-S-R Act. Allianz shall promptly notify the Company of any
communication or request received by Allianz from any governmental body in
connection with such filings and applications. Allianz shall reasonably
cooperate with the Company and LifeUSA in connection with preparing, making and
prosecuting filings and applications to be made by the Company or LifeUSA.
Allianz shall use its best efforts to obtain all regulatory approvals for the
acquisition by Allianz of the securities of the Company to be issued at each
closing, use its best efforts to cause any regulatory approvals to remain in
full force and effect, request the early termination of any applicable waiting
periods and use its best efforts to cause any injunction imposed against the
purchase of any securities to be removed.
7.12 Closing Conditions. The Company shall not knowingly take any
action that would result in the failure to satisfy a closing condition for the
purchase of any securities and shall use its best efforts to assure that all
conditions to the purchase of any securities hereunder are satisfied.
7.13 Shareholder Meeting. At its next annual shareholder meeting, which
shall be held no later than May 31, 1998, the Company will recommend to its
shareholders, and will use its best efforts to obtain the approval of its
shareholders at such meeting for, an amendment to its articles of incorporation
to increase its authorized Common Stock to 60,000,000 shares. In connection
therewith, an appropriate proxy statement will be prepared by the Company that
will comply in all material respects with the provisions of the Exchange Act and
the rules and regulations thereunder.
7.14 Listing of Shares. As soon as practicable after the date hereof,
the Company will apply for, and use its best efforts to obtain, listing on
Nasdaq of all shares of Common Stock that are reserved for issuance to Allianz
pursuant to this Agreement.
7.15 Rule 144. The Company will comply with the current public
information requirements of Rule 144(c)(1) under the Securities Act. At all such
times as Rule 144 is available for use by Allianz, the Company will furnish
Allianz upon request with all information within the possession of the Company
required for the preparation and fling of Form 144.
7.16 Regulation D Filings. The Company will file on a timely basis all
notices of sale required to be filed with the Commission pursuant to Regulation
D under the Securities Act with respect to the transactions contemplated by this
Agreement.
7.17 Negative Covenants. The Company will not:
(a) sell, lease or otherwise dispose of its assets other than
in the ordinary course of business or liquidate, dissolve, recapitalize
or reorganize if the result of such action would materially and
adversely affect the ability of the Company to conduct its primary
business;
(b) repurchase any shares of its Common Stock from any of its
shareholders in any calendar year in excess of five percent (5%) of the
number of shares of Common Stock outstanding at the beginning of such
year;
(c) enter into any new agreement or amend any existing
agreement that by its terms would restrict the Company's performance of
its obligations pursuant to this Agreement or any agreement
contemplated hereby;
(d) enter into any agreement with any holder or prospective
holder of any securities of the Company or issue any securities of the
Company which grants such holder special voting rights, provided that
an agreement to elect a director of the Company or any Subsidiary shall
not be prohibited by this clause (d);
(e) sell its "LifeUSA" trademark;
(f) amend its articles of incorporation or by-laws or
designate any series of preferred stock which adversely affects the
rights of Allianz as a shareholder of the Company; or
(g) engage in any business outside the financial services
industry without the prior approval of its Board of Directors.
7.18 Status of Dividends. The Company shall not take any action that
would require or permit, or could reasonably be expected to require or permit,
the Company to treat the dividends on the Common Stock or any part thereof as
deductible interest payments on its books or its federal, state or local income
tax returns and shall take no such action which would require or permit, or
could reasonably be expected to require or permit, the Company to treat the
dividends on the Common Stock or any part thereof as deductible under any
provision of the Code, whether now in effect or hereafter enacted or adopted,
unless, in either case, such action would not result in denial of the dividends
received deduction presently provided by Section 243(a)(1) of the Code (the
"Dividends Received Deduction") or any successor dividends received deduction
provided by a similar successor provision of the Code (a "Successor Dividends
Received Deduction") to any holder of Purchased Shares who would otherwise be
eligible to claim such deduction. In addition, the Company shall not take any
action that could reasonably be expected to cause the Dividends Received
Deduction or a Successor Dividends Received Deduction to be eliminated or
reduced with respect to dividends on the Common Stock. The agreements contained
in this Section shall be inapplicable if the Code shall be amended after
delivery of the Purchased Shares in such a manner as to provide that dividends
on the Common Stock may not be treated as dividends for federal income tax
purposes or to permit all or a portion of the dividends on the Purchased Shares
to be deducted by the Company without causing the Dividends Received Deduction
or a Successor Dividends Received Deduction to be unavailable to any holder of
Purchased Shares.
7.19 Liability Insurance. The Company will maintain in full force and
effect a policy or policies issued by insurers of recognized responsibility
insuring the Company and its properties and business against such losses and
risks, and in such amounts as in the Company's reasonable judgment are
acceptable for the nature and extent of such business and its resources.
7.20 Taxes and Assessments. The Company will file, and cause its
subsidiaries to file, all required federal, state and local tax returns when the
same are required to be filed or timely file appropriate extension requests and
will pay or make due provision for payment, and cause its subsidiaries to pay or
make due provision for payment, of the amount of taxes shown due thereon, except
where a failure to file, pay or make provision would not have a material adverse
effect on the Company.
7.21 Maintenance of Corporate Existence. Unless otherwise determined by
the Board of Directors of the Company, each of the Company and LifeUSA will
preserve, renew and keep in full force and effect its corporate existence,
qualification in requisite jurisdictions and material governmental rights and
privileges which are necessary for it to engage in the business conducted by it,
from time to time.
7.22 Governmental Consents. Unless otherwise determined by the Board of
Directors, the Company will obtain or cause LifeUSA to obtain all material
consents, approvals, license and permits required by federal, state, local and
foreign law which are necessary for it to engage in the business conducted by
it, from time to time.
7.23 Limitation of Option Grants. During the five years ending December
31, 2002, the Company will not issue or sell options to purchase more than the
Maximum Number (as hereinafter defined) of shares of Common Stock to agents,
employees, officers and/or directors of, and/or consultants to, the Company or
any subsidiary of the Company. The term "Maximum Number" shall mean 110% of the
aggregate number of shares of Common Stock subject to options granted during the
five year period ending December 31, 1997 to agents, employees, officers and/or
directors of, and/or consultants to, the Company or any subsidiary of the
Company.
7.24 Notice. The Company will promptly notify its Board of Directors in
the event it has signed a confidentiality agreement relating to a proposed
transaction for a Sale (as defined in Section 11.2(b)(i)).
SECTION 8
REGISTRATION RIGHTS.
8.1 Required Registration. If the Company receives, at any time after
the second anniversary of the Initial Closing, a written request therefor from
the record holder or holders of an aggregate of at least sixty percent (60%) of
the Purchased Shares (as defined in Section 8.8 below) not theretofore
registered under the Securities Act and sold, the Company shall prepare and file
a registration statement under the Securities Act covering the Purchased Shares
which are the subject of such requests and shall use its best efforts to cause
such registration statement to become effective; provided, however, that all
Purchased Shares covered by such registration statement shall be converted into
shares of Common Stock prior to or at the time of sale in accordance with such
registration statement. In addition, upon the receipt of such request, the
Company shall promptly give written notice to all other record holders of
Purchased Shares that such registration is to be effected. The Company shall
include in such registration statement such Purchased Shares for which it has
received written requests to register by such other record holders within 30
days after the Company's written notice to such other record holders. The
Company shall be obligated to prepare, file and cause to become effective only
three (3) registration statements pursuant to this Section 8.1. In the event
that (a) the holders of a majority of the Purchased Shares for which
registration has been requested pursuant to this Section 8.1 determine for any
reason not to proceed with a registration at any time before the registration
statement has been declared effective by the Commission, and (b) the holders of
such Purchased Shares agree to bear their own expenses incurred in connection
therewith and to reimburse the Company for the expenses incurred by it
attributable to the registration of such Purchased Shares, then the holders of
such Purchased Shares shall not be deemed to have exercised their right to
require the Company to register Purchased Shares pursuant to this Section 8.1.
Without the written consent of the holders of a majority of the Purchased Shares
for which registration has been requested pursuant to this Section 8.1, neither
the Company nor any other holder of securities of the Company may include
securities in such registration if in the good faith judgment of the managing
underwriter of such public offering the inclusion of such securities would
interfere with the successful marketing of the Purchased Shares or require the
exclusion of any portion of the Purchased Shares to be registered. The Company
shall have the right to delay for up to 180 days the filing of a registration
statement pursuant to the exercise of the registration rights under this Section
8.1 if (a) the Company was, at the time it received the request for registration
of Purchased Shares under this Section 8.1, in the process of preparing a filing
or had made a filing with the Commission to register the sale of its securities
under the Securities Act, or (b) a registration statement covering securities of
the Company had, within 180 days prior to receipt of such request, been declared
effective by the Commission, and if either (i) the managing underwriter in an
underwritten offering referred to in clause (a) or (b) determines in its good
faith judgment that the registration of the Purchased Shares covered by a
request for registration would reduce the number of securities to be offered by
the Company or interfere with the successful marketing of the securities offered
or to be offered by the Company, or (ii) the Company is contractually restricted
from filing a registration statement for the sale of its Common Stock under the
terms of the offering referred to in clause (b).
8.2 Piggyback Registration. Each time the Company shall determine to
proceed with the actual preparation and filing of a registration statement under
the Securities Act in connection with the proposed offer and sale for money of
any of its equity securities by it or any of its security holders (other than
pursuant to a required registration under Section 8.1), the Company will give
written notice of its determination to all record holders of Purchased Shares.
Upon the written request of a record holder of any shares of Purchased Shares
given within 10 days after receipt of any such notice from the Company, the
Company will, except as herein provided, cause all such shares of Purchased
Shares, the record holders of which have so requested registration thereof, to
be included in such registration statement, all to the extent requisite to
permit the sale or other disposition by the prospective seller or sellers of the
Purchased Shares to be so registered; provided, however, that (a) the holders of
Purchased Shares shall not have the right to include Purchased Shares in any
registration statement on Form S-4 or S-8 (or similar registration) or in any
other registration statement that is being filed by the Company in connection
with the issuance or sale of equity securities exclusively to Company employees
or agents who sell the LifeUSA products, (b) all such Purchased Shares to be so
registered shall be converted into shares of Common Stock prior to sale pursuant
to such registration statement, and (c) nothing herein shall prevent the Company
from, at any time, abandoning or delaying any such registration initiated by it.
If any registration pursuant to this section shall be underwritten in whole or
in part, the Company may require that the Purchased Shares requested for
inclusion pursuant to this Section 8.2 be included in the underwriting on the
same terms and conditions as the securities otherwise being sold through the
underwriters. If in the good faith judgment of the managing underwriter of such
public offering the inclusion of all of the Purchased Shares originally covered
by a request for registration plus the inclusion of any other shares for which
the Company has concurrently received a request for registration would reduce
the number of shares to be offered by the Company or interfere with the
successful marketing of the shares of stock offered by the Company, the number
of Purchased Shares otherwise to be included in the underwritten public offering
may be reduced pro rata among the holders thereof requesting such registration
and any other persons who have requested registration of their Company shares in
the same underwritten public offering. Those shares of Purchased Shares which
are thus excluded from the underwritten public offering shall be withheld from
the market by the holders thereof for a period, not to exceed 180 days, which
the managing underwriter reasonably determines is necessary in order to effect
the underwritten public offering.
8.3 Registration Procedures. If and whenever the Company is required by
the provisions of Section 8.1 or Section 8.2 to effect the registration of any
Purchased Shares under the Securities Act, the Company will:
(a) prepare and file with the Commission a registration statement with
respect to such securities, and use its best efforts to cause such registration
statement to become and remain effective for such period as may be reasonably
necessary to effect the sale of such securities, not to exceed three (3) months
provided, however, that as far in advance as practical before filing such
registration statement or any amendment thereto, the Company will furnish to
counsel for the requesting holders copies of reasonably complete drafts of all
such documents proposed to be filed (including exhibits), and any such holder
shall have the opportunity to object to any
information pertaining solely to such holder that is contained therein and the
Company will make the corrections reasonably requested by such holder with
respect to such information prior to filing any such registration statement or
amendment;
(b) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective for such period
as may be reasonably necessary to effect the sale of such securities, not to
exceed three (3) months;
(c) furnish to the security holders participating in such registration
and to the underwriters of the securities being registered such reasonable
number of copies of the registration statement, preliminary prospectus, final
prospectus and such other documents as such security holders and underwriters
may reasonably request in order to facilitate the public offering of such
securities;
(d) use its best efforts to register or qualify the securities covered
by such registration statement under such state securities or blue sky laws of
such jurisdictions as such participating holders may reasonably request within
20 days following the original filing of such registration statement, except
that the Company shall not for any purpose be required to execute a general
consent to service of process or to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified;
(e) notify the security holders participating in such registration,
promptly after it shall receive notice thereof, of the time when such
registration statement has become effective or a supplement to any prospectus
forming a part of such registration statement has been filed;
(f) notify such holders promptly of any request by the Commission for
the amending or supplementing of such registration statement or prospectus or
for additional information;
(g) prepare and file with the Commission, promptly upon the request of
any such holders, any amendments or supplements to such registration statement
or prospectus which, in the opinion of counsel for such holders (and concurred
in by counsel for the Company), is required under the Securities Act or the
rules and regulations thereunder in connection with the distribution of the
Purchased Shares by such holder;
(h) prepare and promptly file with the Commission and promptly notify
such holders of the filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event shall have occurred
as the result of which any such prospectus or any other prospectus as then in
effect would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading;
(i) advise such holders, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such
registration statement or the initiation or threatening of any proceeding for
that purpose and promptly use its best efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be issued;
(j) not file any post-effective amendment or supplement (other than a
pricing amendment) to such registration statement or prospectus to which a
majority in interest of such holders shall have reasonably objected on the
grounds that such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act or the rules and
regulations thereunder, after having been furnished with a copy thereof at least
five (5) business days prior to the filing thereof, unless in the opinion of
counsel for the Company the filing of such amendment or supplement is reasonably
necessary to protect the Company from any liabilities under any applicable
federal or state law and such filing will not violate applicable law; and
(k) at the request of any such holder, furnish within five (5) business
days after the effective date of the registration statement and, if such
registration includes an underwritten public offering, at the closing provided
for in the underwriting agreement: (i) opinions, dated such respective dates, of
the counsel representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the holder or holders making such
request, covering such matters as such underwriters and holder or holders may
reasonably request, in which opinion such counsel shall state (without limiting
the generality of the foregoing) that (a) such registration statement has become
effective under the Securities Act; (b) to the best of such counsel's knowledge
no stop order suspending the effectiveness thereof has been issued and no
proceedings for that purpose have been instituted or are pending or contemplated
under the Securities Act; (c) the registration statement and each amendment or
supplement thereto comply as to form in all material respects with the
requirements of the Securities Act and the applicable rules and regulations of
the Commission thereunder (except that such counsel need express no opinion as
to financial statements contained therein); (d) to the best of the knowledge of
such counsel neither the registration statement nor any amendment nor supplement
thereto contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading (except that such counsel need express no opinion as to
financial statements contained therein); (e) to the best of such counsel's
knowledge, the description in the registration statement or any amendment or
supplement thereto of legal and governmental proceedings and contracts are
accurate and fairly present the information required to be shown; and (f) such
counsel does not know of any legal or governmental proceedings, pending or
threatened, required to be described in the registration statement or any
amendment or supplement thereto which are not described as required nor of any
contracts or documents or instruments of the character required to be described
in the registration statement or amendment or supplement thereto or to be filed
as exhibits to the registration statement, which are not described or filed as
required; and (ii) letters, dated within three (3) business days after such
respective dates, from the independent certified public accountants of the
Company, addressed to the underwriters, if any, and to the holder or holders
making such request, covering such matters as such underwriters and holder or
holders may reasonably request, in which letters such accountants shall state
(without limiting the generality of the foregoing) that they are independent
certified public accountants within the meaning of the
Securities Act and that in the opinion of such accountants the financial
statements and other financial data of the Company included in the registration
statement or any amendment or supplement thereto comply in all material respects
with the applicable accounting requirements of the Securities Act.
8.4 Expenses. With respect to any registration requested pursuant to
Section 8.1, the holders of the Purchased Shares included in any registration
under Section 8.1 shall bear and either pay directly or reimburse the Company
all fees and disbursements of accountants for the Company to perform any special
audit required to be included in such registration statement which has not been
completed by the Company. With respect to any registration pursuant to Section
8.1 or Section 8.2, the holders of the Purchased Shares included in any
registration thereunder shall pay and be directly responsible for the fees and
disbursements of counsel and accountants for such holders, the underwriting
discounts and commissions and transfer taxes relating to the Purchased Shares
sold therein, and a pro rata share (based on net proceeds received) of any
amounts which the Company is required to pay or reimburse to the underwriters,
including but not limited to out-of-pocket expenses and fees and expenses of
counsel for the underwriters.
8.5 Indemnification. In the event that any Purchased Shares are
included in a registration statement under Sections 8.1 or Section 8.2:
(a) The Company will indemnify and hold harmless each holder of
Purchased Shares which are included in a registration statement pursuant to the
provisions of this Section 8 and any underwriter (as defined in the Securities
Act) for such holder and each person, if any, who controls such holder or such
underwriter within the meaning of the Securities Act, from and against any and
all loss, damage, liability, cost and expense to which such holder or any such
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, damages, liabilities, costs or expenses are
caused by any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained therein or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, damage, liability, cost or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by such holder, such underwriter
or such controlling person. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such holder or any such
director, officer, partner or controlling person of such holder and shall
survive the transfer of such securities by such holder. The Company shall also
indemnify each other person who participates (including as an underwriter) in
the offering or sale of such securities, their officers and directors, and
partners, and each other person, if any, who controls any such participating
person within the meaning of the Securities Act to the same extent as provided
above with respect to holders of such securities.
(b) Each holder of Purchased Shares which are included in a
registration pursuant to the provisions of this Section 8 will indemnify and
hold harmless the Company, any controlling person and any underwriter from and
against any and all loss, damage, liability, cost or expense to which the
Company or any controlling person and/or any underwriter may become subject
under the Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue or alleged untrue
statement of any material fact contained in such registration statement, any
prospectus contained therein or any amendment or supplement thereto, or arise
out of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was so made in
reliance upon and in strict conformity with information furnished by such holder
specifically for use in the preparation of such registration statement;
provided, however, that the obligation to provide indemnification pursuant to
this Section 8.5(b) shall be several, and not joint, among the indemnifying
parties on the basis of the securities of each such indemnifying party included
in such registration statement; and provided, further, that the obligation of
each indemnifying party to provide indemnification pursuant to this Section
8.5(b) shall in no event exceed the net proceeds received by such party from the
sale of its securities pursuant to such registered public offering.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this section of notice of the commencement
of any action involving the subject matter of the foregoing indemnity
provisions, such indemnified party will, if a claim thereof is to be made
against the indemnifying party pursuant to the provisions of said paragraph (a)
or (b), promptly notify the indemnifying party of the commencement thereof; but
the omission to so notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than hereunder
unless such failure to notify on a timely basis has materially prejudiced the
rights of the indemnifying party. In case such action is brought against any
indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall have the right to participate in, and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party; provided, however, if the defendants in any action include
both the indemnified party and the indemnifying party and there is a conflict of
interest which would prevent counsel for the indemnifying party from also
representing the indemnified party, the indemnified party or parties shall have
the right to select separate counsel to participate in the defense of such
action on behalf of such indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party pursuant to the provisions of said paragraph (a) or (b) for any legal or
other expense subsequently incurred by such indemnified party in connection with
the defense thereof other than reasonable costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance with the proviso of
the preceding sentence (but in such event the indemnifying party shall not be
responsible for the fees of more than one (1) counsel employed by the
indemnified party or parties), (ii) the indemnifying party shall not have
employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after the notice of the commencement of the action, or (iii) the indemnifying
party has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. In addition, the indemnified party or
indemnified parties shall have the right to employ one counsel to represent it
or them if, in the reasonable judgment of the indemnified party or indemnified
parties, it is advisable for it or them to be represented by separate counsel by
reason of having legal defenses which are different from or in addition to those
available to the indemnifying party, and in that event the reasonable fees and
expenses of such one counsel shall be paid by the indemnifying party. If the
indemnifying party is not entitled to, or elects not to, assume the defense of a
claim, it will not be obligated to pay the fees and expenses of more than one
counsel for the indemnified parties with respect to such claim. No indemnifying
party shall consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation without the consent of the indemnified party. No
indemnifying party shall be subject to any liability for any settlement made
without its consent. An indemnified party may at any time elect to participate
in the defense of any claim or proceeding at its own expense.
(d) The indemnification required by this Section 8.5 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or any loss, damage, liability, cost
or expense is incurred.
8.6 Availability of Rule 144. Notwithstanding the foregoing provisions
of this Section 8, if any holder of Purchased Shares is entitled to utilize the
provisions of Rule 144 promulgated under the Securities Act in connection with
the sale in one transaction of all Purchased Shares which it desires to sell in
such transaction, then such holder shall not be entitled to exercise the
registration rights granted pursuant to this Section 8 for such transaction.
8.7 Registration Rights of Transferees. The registration rights granted
to the holders of Purchased Shares pursuant to this Section 8 shall also be for
the benefit of, and enforceable by, any subsequent holder of Purchased Shares,
whether or not any express assignment of such rights to any such subsequent
holder is made.
8.8 Definition of Purchased Shares. The term "Purchased Shares" means
(i) the shares of Common Stock issued to Allianz pursuant to Sections 1 and 2,
(ii) the shares of Common Stock purchased by Allianz pursuant to Section 9,
(iii) the shares of Common Stock into which any Convertible Debenture issued to
Allianz pursuant to Section 2 are convertible or have been converted, (iv) the
shares of Common Stock purchased by Allianz as contemplated by Section
11.2(a)(ii) and (iii), and (v) any shares of Common Stock or other equity
securities of the Company issued with respect to any of the shares of Common
Stock referred to in this definition.
SECTION 9
DILUTION PROTECTION.
9.1 Right to Purchase Additional Shares. In the event the Company
issues any shares of Common Stock during any calendar year, the Company shall
give Allianz written notice (the "Additional Purchase Notice") no later than
January 31st following the end of such calendar year of the Additional
Purchasable Shares (as hereinafter defined). Within one hundred twenty (120)
days after the Additional Purchase Notice, Allianz may purchase shares of Common
stock in open market or other transactions up to the aggregate of the Additional
Purchasable Shares. The term "Additional Purchasable Shares" shall mean the
Applicable Percentage Ownership multiplied by the Net Outstanding Share Increase
(as hereinafter defined). The term "Applicable Ownership Percentage" shall mean
the total number of shares of Common Stock owned by Allianz and its affiliates
as of the end of the calendar year with respect to which the Additional Purchase
Notice is given (the "Subject Calendar Year"), divided by the Subject Year
Adjusted Shares (as hereinafter defined). The term "Subject Year Adjusted
Shares" shall mean the number of shares of Common Stock actually issued and
outstanding (without regard to options, warrants, convertible securities or
other rights to acquire shares of Common Stock) as of the end of the Subject
Calendar Year less the number of shares of Common Stock actually issued during
the Subject Calendar Year to parties other than Allianz, excluding shares of
Common Stock issued during the Subject Calendar Year in an offering to which
Section 9.2 applies. The term "Net Outstanding Share Increase" shall mean the
number of shares of Common Stock actually issued during the Subject Calendar
Year, less (a) the number of shares of Common Stock repurchased by the Company
during the Subject Calendar Year, (b) the number of shares of Common Stock
acquired by Allianz during the Subject Calendar Year pursuant to Sections 1, 2,
9.2 or 11.2(a)(ii) or (iii) hereof or issued to Allianz or its affiliates upon
conversion of Convertible Debentures during the Calendar Year, and (c) the
number of shares of Common Stock issued under public offerings to which Section
9.2 applied during the Subject Calendar Year with respect to which the
Additional Purchase Notice is given.
9.2 Right to Purchase in Public Offering. In the event the Company
proposes to issue any shares of Common Stock in any registered public offering
other than a registration under Form S-4 or S-8 (or any successor forms),
Allianz shall have the right to purchase shares of Common Stock in such offering
such that Allianz will maintain the same percentage of the outstanding shares of
Common Stock immediately prior to the issuance of the shares of Common Stock in
such public offering after giving effect to the issuance of the shares of Common
Stock in such public offering.
9.3 Right to Purchase Preferred Shares. In the event the Company
proposes to sell shares of its preferred stock, the Company shall, as a
condition to selling such shares, offer to sell such shares on the same terms
and conditions as such shares are sold to any third party such that Allianz will
own a number of such shares of preferred stock equal to the aggregate number of
such shares being sold multiplied by Allianz's Applicable Percentage Ownership
as computed in accordance with Section 9.1 as of the date immediately preceding
such sale.
9.4 Not Applicable to Sale. The provisions of this Section 9 shall not
be applicable to any Sale (as defined in Section 11.2(b)(i)).
SECTION 10
DEFAULT AND REMEDIES.
10.1 Notice of Defaults. When, to its knowledge, any default by the
Company of its obligations under this Agreement has occurred or exists, the
Company shall give written notice within three (3) business days of the
occurrence of such default.
10.2 Suits for Enforcement. In case any default shall have occurred,
the aggrieved party may proceed to protect and enforce its rights by suit in
equity or action at law. It is agreed that in the event of such action, the
prevailing party shall be entitled to receive all reasonable fees, costs and
expenses incurred, including without limitation such reasonable fees and
expenses of attorneys (whether or not litigation is commenced) and reasonable
fees, costs and expenses of appeals.
10.3 Remedies Cumulative. No right, power or remedy conferred upon any
party hereunder shall be exclusive, and each such right, power or remedy shall
be cumulative and in addition to every other right, power or remedy, whether
conferred hereby or by any such security or now or hereafter available at law or
in equity or by statute or otherwise.
10.4 Remedies Not Waived. No course of dealing between the Company and
Allianz and no delay in exercising any right, power or remedy conferred hereby
or now or hereafter existing at law or in equity or by statute or otherwise,
shall operate as a waiver of or otherwise prejudice any such right, power or
remedy; provided, however, that this Section shall not be construed or applied
so as to negate the provisions and intent of any statute which is otherwise
applicable.
SECTION 11
RESTRICTIONS ON TRANSFER AND STANDSTILL AGREEMENTS.
11.1 Restriction on Transfer. The Purchased Shares and any Convertible
Debenture issued pursuant to Section 2 (collectively the "Covered Securities")
are only transferable pursuant to (a) a public offering registered under the
Securities Act, (b) Rule 144 or Rule 144A of the
Commission (or any similar rule then in effect) if either such rule is
available, or (c) any other legally available means of transfer. In the event of
any transfer of any Covered Securities other than pursuant to clause (a) of the
immediately preceding sentence, such transfer shall not be effected unless and
until the transferor provides to the Company an opinion of responsible
securities counsel reasonably acceptable to the Company to the effect that the
transfer may be legally made pursuant to clause (b) or (c) of the preceding
sentence and stating the basis for such opinion.
11.2 Standstill Agreements. The following restrictions, limitations and
agreements with respect to the Covered Securities shall apply to Allianz and, as
to paragraph (b), any subsequent holder of any of the Covered Securities that is
a person or group (a "Restricted Holder") holding 5% or more of the outstanding
Common Stock other than an underwriter in a registered public offering:
(a) Limitation on Acquisition of Company Securities. Neither Allianz
nor any of its affiliates will acquire, have any rights or options to acquire or
otherwise control the voting or disposition of any shares of Common Stock, any
Voting Securities or any debt securities of the Company which are convertible
into Voting Securities, except for (i) the acquisitions made pursuant to
Sections 1, 2 or 9 hereof, (ii) purchases of 925,000 shares of Common Stock made
in privately negotiated transactions with persons having a relationship with the
Company pursuant to the stock purchase agreement in the form of Exhibit Q
attached hereto (the "Management Stock Purchase Agreement"), (iii) open market
purchases of up to 1,604,104 shares of Common Stock within one year after the
date of the Initial Closing, (iv) the acquisition of shares of Common Stock
pursuant to a tender offer for all of the outstanding shares of Common Stock
made in accordance with all applicable rules and regulations, or (v) the number
of shares of Common Stock into which any Convertible Debenture issued pursuant
to Section 2.4 hereof was convertible (determined as of the time of its
prepayment) if the Company prepays such Convertible Debenture. The term "Voting
Securities" means any securities entitled to vote generally for the election of
directors of the Company.
(b) Voting Agreements. Allianz and each Restricted Holder agrees to
vote the Covered Securities registered in its name as follows:
(i) Sale of the Company. If a Sale (as defined below) is
recommended by the Company's Board of Directors and the fair market
value of the consideration per share (determined as of the date of such
recommendation by the Board of Directors) to be received by holders of
the Common Stock as a result of such Sale is equal to or greater than
the Allianz Cost Per Share (as defined below), Allianz and any
Restricted Holder shall attend (in person or by proxy) any meeting of
shareholders convened to vote on the proposal to approve the Sale for
the purpose of determining whether a quorum is present and shall vote
(in person or by proxy) the shares of Common Stock registered in its
respective name proportionately as the shares of Common Stock which are
not subject to this Section 11.2(b) are voted at such meeting and shall
not solicit any proxies or otherwise try to influence the vote of the
other shareholders against such proposal. If a
Sale is recommended by the Company's Board of Directors and the fair
value of the consideration per share (determined as of the date of such
recommendation by the Board of Directors) to be received by holders of
the Common Stock as a result of such Sale is less than the Allianz Cost
Per Share, Allianz and any Restricted Holder shall have the right to
vote their respective shares of Common Stock in such manner as they
respectively deem appropriate. The term "Sale" shall mean: (A) any
merger, consolidation or reorganization involving the Company if, after
giving effect thereto, the shareholders of the Company prior to such
transaction own less than sixty percent (60%) of the outstanding voting
power of the entity resulting from such transaction, (B) the sale,
transfer or lease of all or substantially all of the assets of the
Company (including the sale or transfer of all or substantially all of
the stock of LifeUSA), or (C) any similar transaction. The term
"Allianz Average Cost" is the amount equal to (x) the sum of the
aggregate amount paid by Allianz for the shares of Common Stock issued
to Allianz pursuant to Sections 1 or 2, the aggregate principal amount
of any Convertible Debentures issued pursuant to Section 2 which
Allianz has converted to shares of Common Stock, the aggregate amount
paid by Allianz for shares of Common Stock purchased by Allianz under
Section 9, the aggregate consideration paid by Allianz for any Subject
Securities (other than shares of Common Stock) which Allianz has
exercised or converted into shares of Common Stock pursuant to the
terms of the Subject Securities, any additional amounts paid by Allianz
to the Company in connection with the conversion or exercise of any
Subject Securities into shares of Common Stock, and the aggregate
amount paid by Allianz for the shares of Common Stock purchased by
Allianz in the transactions contemplated by Section 11.2(a)(ii) and
(iii), divided by (y) the number of shares of Common Stock acquired by
Allianz in the transactions referred to in clause (x) of this sentence.
(ii) Certain Shareholder Matters. In the event there is a
meeting of the shareholders of the Company convened to consider any
management proposal relating to the election, tenure of office or
removal of any director or directors, Allianz and any Restricted Holder
shall attend (in person or by proxy) such meeting for purpose of
determining whether a quorum is present at such meeting and shall vote
(in person or by proxy) the shares of Common Stock registered in its
respective name on such matter or matters proportionately as the shares
of Common Stock which are not subject to this Section 11.2(b) are voted
thereon at such meeting, provided, however, that management of the
Company shall make no proposal inconsistent with this Agreement,
including, but not limited to the provisions of Section 7.3 hereof. In
the event there is a meeting of the shareholders of the Company
convened to consider any proposal not made by management relating to
the election, tenure of office or removal of any director or directors
or otherwise relating to a change of management (other than incident to
a Sale which is covered in clause (i) above), Allianz and any
Restricted Holder shall attend (in person or by proxy) such meeting for
purpose of determining whether a quorum is present at such meeting and
shall vote (in person or by proxy) the shares of Common Stock
registered in its respective name on such matter or matters, at the
option of Allianz or such Restricted Holder, either (x) in accordance
with the recommendation or recommendations
made by the Company's Board of Directors with respect to such proposal
or proposals or (y) proportionally as the shares of Common Stock which
are not subject to this Section 11.2(b) are voted thereon at such
meeting.
(iii) Other Shareholder Matters. In all matters presented to
the holders of Common Stock except for the matters provided in clauses
(i) and (ii), Allianz and any Restricted Holder may vote their
respective shares as they respectively deem appropriate.
(c) Limitation on Disposition of Covered Securities. Allianz agrees
that it will not sell, transfer or otherwise dispose of Covered Securities
(including but not limited to any disposition pursuant to Section 11.1) to any
person or group if the voting power of the Covered Securities (determined by
taking into account the shares of Common Stock issuable upon conversion or
exercise of the Covered Securities) to be sold, transferred or otherwise
disposed of to such person or group is equal to or exceeds 5% of the then issued
and outstanding shares of Common Stock, except, in the case of an underwritten
public offering, to the underwriters therein provided that the underwriters
comply with the foregoing limitation in connection with their distribution of
the shares.
11.3 Termination of Standstill Agreements and Certain Other Agreements.
The provisions of Section 11.2 shall terminate (the "Standstill Termination
Date") in the event (a) upon consummation of a Sale, or (b) if either the
Company or Allianz gives notice of termination (the "Termination Notice") of the
Marketing Agreement, upon the earlier of (i) ninety (90) days after the
Termination Notice if Allianz so elects by giving the Company written notice
with fifteen (15) days after the Termination Notice is given or (ii) the
termination of the Marketing Agreement. On the Standstill Termination Date, the
rights of Allianz and any holder of any Convertible Debenture and Purchased
Shares and any obligations of the Company or LifeUSA under Sections 2, 7 (other
than Section 7.5), and 9 shall terminate, except that the right and obligation
of Allianz to purchase Common Stock shall be continued for 60 days to enable it
to complete such purchase required to be made by it with respect to a
Determination Date prior to such termination or, if a Reinsurance Credit Notice
has been given with respect to such Determination Date, then the right and
obligation of Allianz to purchase Common Stock hereunder shall be continued
until the purchases subject to such Reinsurance Credit Notice shall have been
completed in accordance with Section 2.3(b)(i) hereof. This Agreement shall
otherwise remain in full force and effect.
11.4 Legend. Each certificate or instrument evidencing or representing
Covered Securities shall be endorsed with the following legend:
"The securities represented by this instrument or certificate
may not be transferred without (i) the opinion of counsel
satisfactory to this corporation that such transfer may
lawfully be made without registration under the Federal
Securities Act of 1933, as amended, and all applicable state
securities laws or (ii) such registration. The securities
represented by this instrument or certificate are also subject
to certain restrictions on transfer and agreements relating to
voting the securities
contained in Section 11 of the Stock Purchase Agreement dated
January 13, 1998 (as the same may be amended from time to
time) between Life USA Holding, Inc. and Allianz Life
Insurance Company of North America, a copy of which is
available for inspection at the executive offices of Life USA
Holding, Inc."
11.5 Removal of Legend. The first sentence of any legend endorsed on an
instrument or a certificate representing or evidencing a security pursuant to
Section 11.4 hereof shall be removed, and the Company shall issue a certificate
without such legend to the holder of such security, if such security is being
disposed of pursuant to a registration under the Securities Act or if such
holder provides the Company with an opinion of counsel satisfactory to the
Company that a transfer of such security may be made without registration. The
second sentence of any legend endorsed on an instrument or a certificate
representing or evidencing a security pursuant to Section 11.4 hereof shall be
removed, and the Company shall issue a certificate without such legend to the
holder of such security, upon request of such holder made after the Standstill
Termination Date.
SECTION 12
MISCELLANEOUS.
12.1 Survival. All covenants, representations, warranties and
indemnities made herein shall survive the closing.
12.2 Expenses. Each party shall pay all of its own expenses (including
legal and accounting) incurred in connection with the transactions contemplated
hereby, whether or not the same are consummated.
12.3 Dilution Protection. In the event of a subdivision, split,
combination or reclassification of the Common Stock, the share and price numbers
and calculations set forth in this Agreement shall be appropriately adjusted.
12.4 Waiver of Breach. The waiver by either party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by any party.
12.5 Multiple Counterparts. This Agreement may be executed in a number
of identical counterparts, each of which for all purposes is to be deemed an
original, and all of which constitute, collectively, one agreement. In making
proof of this Agreement, it shall not be necessary to produce or account for
more than one such counterpart.
12.6 Notices. Any notice, payment, demand or communication required or
permitted to be given by the provisions of this Agreement shall be deemed to
have been effectively given and received on the date sent by facsimile (as
provided below) or personally delivered to the respective party to whom it is
directed, or two (2) days after the date when deposited by registered or
certified mail, with postage and charges prepaid and addressed as follows:
(a) To Allianz:
Allianz Life Insurance Company of North America
0000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
With a copy to:
Xxxxxxx X. Xxxxxxxxxxx
Allianz Life Insurance Company of North America
0000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
(b) To the Company:
Life USA Holding, Inc.
Suite 700 Interchange North Building
000 Xxxxx Xxxxxxx 000
Xxxxxxxxxxx, XX 00000
Attention: Chairman and Chief Executive Officer
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx, Xxxxxxxx and Xxxxxx, P.A.
0000 Xxxxxxx Xxxxxx
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Facsimile: (000) 000-0000
A notice sent by facsimile or other electronic transmission shall be deemed to
be effectively given and received (i) as of the date sent if sent before 4:00
p.m. or (ii) as of the following business day if sent after 4:00 p.m. Any party
may change its address by delivering a written change of address to all of the
other parties in the manner set forth in this Section.
12.7 Entire Agreement. Except with respect to the existing agreements
listed on Schedule 12.7, this Agreement constitutes the entire understanding of
the parties hereto and supersedes all prior understandings, whether written or
oral, between the parties with respect to the subject matter of this Agreement.
No amendment, modification or alteration of the terms of
this Agreement shall be binding unless in writing, dated subsequent to the date
of this Agreement and duly executed by all parties.
12.8 Severability of Provisions. If any term or provision of this
Agreement is finally adjudged to be illegal or invalid for any reason, such
illegality or invalidity shall not affect the validity or enforceability of the
remainder of this Agreement.
12.9 Headings. No heading or caption contained in this Agreement shall
be considered in interpreting any of its terms or provisions.
12.10 Governing Law; Jurisdiction Venue. This Agreement shall be
governed by and construed in accordance with the laws of the State of Minnesota,
and the obligations of the parties to this Agreement are performable in
Minneapolis, Minnesota. Each of the parties hereto hereby consents to the
exclusive jurisdiction of the state and federal courts located in the State of
Minnesota for any dispute arising under this Agreement.
12.11 Attorneys' Fees. If any action at law or in equity, including an
action for declaratory relief, is brought to enforce or interpret the provisions
of this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and all other costs and expenses of litigation from the other
party, which amounts may be set by the court in the trial of such action or may
be enforced in a separate action brought for that purpose, and which amounts
shall be in addition to any other relief which may be awarded. Each party
acknowledges that the other party shall be entitled to specific performance in
the event of a default by such party of any of its obligations under this
Agreement.
12.12 Parties Bound. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
12.13 Special Termination. In the event that all necessary regulatory
approvals are not obtained by April 30, 1998, a party not in default under
Section 7.11 hereof may terminate this Agreement by notice to the other, but the
Marketing Agreement, the LifeUSA Reinsurance Agreement and the Claims
Administration Agreement (without giving effect to the amendments contemplated
by this Agreement) shall remain in full force and effect in accordance with
their terms.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered.
LIFE USA HOLDING, INC.
By:\s\Xxxxxx X. XxxXxxxxx
Xxxxxx X. XxxXxxxxx
Chairman and Chief Executive Officer
ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
By:/s/Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
Senior Vice President and
Chief Financial Officer
EXHIBIT A
FORM OF EMPLOYMENT AGREEMENT FOR XXXXXX X. XXXXXXXXX
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of January 1, 1998 between
LIFE USA HOLDING, INC., a Minnesota corporation (the "Company"), and XXXXXX X.
XXXXXXXXX (the "Executive").
R E C I T A L S:
WHEREAS, the Executive is now and has been a director and the Chairman
and Chief Executive Officer of the Company and the Chief Executive Officer of
LifeUSA Insurance Company, the Company's wholly-owned stock life insurance
subsidiary ("LifeUSA"), and serves as an officer and/or director of certain
other subsidiaries of the Company;
WHEREAS, the Executive and the Company wish to enter into this
Agreement to provide for the continued employment of Executive; and
WHEREAS, the Executive and the Company are willing to enter into this
Agreement upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual premises and agreements
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Employment and Duties. The parties hereby agree that, during the
term of this Agreement as set forth in paragraph 2 below, the Executive shall be
employed as the Chairman and Chief Executive Officer of the Company and the
Chief Executive Officer of LifeUSA with the duties and responsibilities
attendant to such positions. In discharging such duties and responsibilities,
the Executive may also serve as an executive officer and/or director of any
direct or indirect subsidiary of the Company (collectively the "Subsidiaries").
The salary, other compensation and benefits provided herein may be allocated
among the Company and the Subsidiaries based upon the portion of the Executive's
services provided to the Company and each of the Subsidiaries, respectively, and
the Executive shall assist the Company in making such allocation as the Company
may reasonably request. During the term of this Agreement, the Executive shall
apply on a full-time basis (allowing for usual vacations and sick leave) all of
the Executive's skill and experience to the performance of the Executive's
duties hereunder with the Company and the Subsidiaries. It is understood that
the Executive may have other business investments and participate in charitable
organizations which may, from time to time, require minor portions of
Executive's time, but which shall not interfere or be inconsistent with the
Executive's duties under this Agreement. The Executive shall perform the
Executive's duties at the Company's principal executive offices in Minneapolis,
Minnesota or at such other location as may be mutually agreed upon by the
Executive and the Company; provided that the Executive shall travel to other
locations at such times as may be necessary for the performance of the
Executive's duties under this Agreement.
2. Term of Employment. Unless sooner terminated as provided in
paragraph 4 below, the term of this Agreement shall commence on the date hereof
and shall continue through December 31, 2002; provided that the term shall be
automatically extended for one year on each December 31st commencing December
31, 1998 unless either party gives written notice to the other prior to the date
on which the automatic extension would be effective; provided that the term
shall not be extended beyond Executive's sixty-fifth (65th) birthday.
3. Compensation and Benefits. During the term of this Agreement, the
Executive shall be entitled to the following compensation and benefits for
service to the Company and the Subsidiaries, including service as a director of
the Company or its Subsidiaries:
(a) Base Salary. The Executive shall be paid a base salary at a minimum
annual rate of $775,000 payable in accordance with the Company's customary
payroll policy, which salary shall be reviewed and may be increased from time to
time at the discretion of the Board of Directors of the Company or the
Compensation Committee of the Board of Directors (the "Base Salary"); provided
that the amount of the Base Salary shall not be reduced after it has been
increased by the Board of Directors or the Compensation Committee without the
Executive's written consent. The performance of the Executive shall be reviewed
at least once each calendar year which may be at the same time as any adjustment
to the Base Salary of Executive.
(b) Bonus. The Executive shall, in addition to the Base Salary, also be
entitled to a cash annual bonus (the "Annual Bonus") based on the achievement by
the Company of performance goals established by the Board of Directors or the
Compensation Committee of the Company's Board of Directors.
(c) Stock Incentives. The Executive shall be eligible to receive stock
options under any stock based plan from time to time adopted by the Company (the
"Stock Plans"), as from time to time determined by the Board of Directors or
Stock Option Committee of the Company's Board of Directors.
(d) Reimbursement of Expenses. The Company shall reimburse the
Executive for all business expenses properly documented in accordance with the
Company's expense reimbursement policy.
(e) Other Benefits. The Executive shall be entitled to participate and
shall be included in any employee benefit plan, medical/dental coverage plan,
life insurance plan, disability coverage plan, or similar benefit plan of the
Company now existing or established hereafter which are generally applicable to
executives of the Company.
(f) Deferred Compensation. As an incentive for his continued employment
with the Company, a deferred compensation plan on the terms of this paragraph
3(f) (the "Deferred Compensation") is hereby established for executive on the
terms set forth in this paragraph 3(f). The following amounts will be added to
the Deferred Compensation as of December 31st of each
complete year beginning December 31, 1998 through December 31, 2002 that
Executive has continued to be employed by the Company under this Agreement:
Date Amount Added to Deferred Compensation
----------------- -------------------------------------
December 31, 1998 $100,000
December 31, 1999 $200,000
December 31, 2000 $300,000
December 31, 2001 $400,000
December 31, 2002 $500,000
When an amount is added to the Deferred Compensation hereunder, the Executive
shall designate one of a type of annuities issued by LifeUSA (such designated
annuity is referred as the "Selected Annuity") and upon termination of his
employment for any reason he or his designated beneficiary in the event of his
death will receive a monthly payment during the ten years immediately following
such termination equal to the monthly payment which would be then made under the
Selected Annuity (as if purchased on the date on which the respective amounts
were added to Deferred Compensation and taking into consideration the interest
and any bonuses payable with respect to the Selected Annuity) for a ten year
certain payment option. The Deferred Compensation shall be an unsecured
obligation of the Company. When Executive designates the Selected Annuity and an
amount is added to the Deferred Compensation under this paragraph, the Company
shall purchase the Selected Annuity from LifeUSA for the purpose of determining
payment of its obligations under this paragraph 3(f). The Selected Annuity shall
continue its interest accumulation until the termination of Executive's
employment and such interest accumulation shall be taken into account in
determining the payments due Executive after termination of his employment.
4. Termination of Employment.
(a) Death or Disability. In the event of the Executive's death or
disability (as defined in the Company's long term disability plan then in
effect), the employment of the Executive hereunder shall terminate and the
Company's obligation to make further Base Salary and Annual Bonus (to the extent
not yet earned) payments hereunder shall thereupon terminate as of the end of
the month in which such death or disability occurs. The Executive's rights to
other compensation and benefits shall be determined under the Company's benefit
plans and policies applicable to Company executives then in effect.
(b) Termination for Cause by the Company. By following the procedure
set forth in paragraph 4(e), the Company shall have the right to terminate the
employment of the Executive for "Cause" in the event the Executive: (i) has
repeatedly failed to perform the Executive's duties under this Agreement, which
failure is willful and deliberate; (ii) has engaged in an act or acts of
dishonesty which is or are intended to result in substantial personal enrichment
for the Executive; (iii) has knowingly engaged in conduct which is materially
injurious to the Company; (iv) is convicted of, or pleads nolo contendere to (A)
any felony (other than any felony arising out of negligence), or (B) any crime
or offense involving dishonesty with respect to the Company
or any of the Subsidiaries; (v) has failed to comply with the covenants
contained in paragraph 5 of this Agreement; or (vi) knowingly provides
materially misleading information concerning the Company to the Board of
Directors of the Company or any of its Subsidiaries, any governmental body or
regulatory agency or to any lender or other financing source or proposed
financing source of the Company or its Subsidiaries. If the employment of the
Executive is terminated by the Company for Cause, the Company's obligation to
make further Base Salary and Annual Bonus (to the extent not yet earned)
payments hereunder shall thereupon terminate, except the Executive shall receive
the Base Salary through the end of the month during which such a termination
occurs. The Executive's rights to other compensation and benefits shall be
determined under the Company's benefit plans and policies applicable to
executives of the Company then in effect.
(c) Termination for Good Reason by the Executive. By following the
procedure set forth in paragraph 4(e), the Executive shall have the right to
terminate the Executive's employment with the Company for "Good Reason" in the
event (i) the Executive is not at all times the duly elected the Chairman and
Chief Executive Officer of the Company and Chief Executive Officer of LifeUSA;
(ii) there is any material reduction in the scope of the Executive's authority
and responsibility; (iii) there is a reduction in the Executive's Base Salary, a
material reduction in the amount of Annual Bonus for which the Executive is
eligible, an amendment to any Stock Plan or employee retirement plan applicable
to the Executive which is materially adverse to the Executive, or a material
reduction in the other benefits to which the Executive is entitled under
paragraph 3(e) above; (iv) the Company requires the Executive's principal place
of employment to be anywhere other than the Company's principal executive
offices, or there is a relocation of the Company's principal executive offices
outside of the Minneapolis/St. Xxxx, Minnesota metropolitan area; or (v) the
Company otherwise fails to perform its obligations under this Agreement. If the
employment of the Executive is terminated by the Executive for Good Reason
before a Change in Control (as defined below) or following twenty-four (24)
months after a Change in Control, the Executive shall be entitled to the
severance benefits set forth in paragraph 4(f) below. If the employment of the
Executive is terminated by the Executive for Good Reason upon or within (and
including) twenty-four (24) months after a Change in Control, the Executive
shall be entitled to the severance benefits set forth in paragraph 4(g) below.
In addition, in the event a Change in Control has occurred and the Executive
elects upon ten (10) days prior notice to the Company to terminate employment
with the Company within the sixty (60) day period following the first
anniversary of the Change in Control, such termination shall be considered a
termination by the Executive for Good Reason and the Executive shall be entitled
to the severance benefits under paragraph 4(g) below.
(d) Termination Without Cause. The Company may terminate the
Executive's employment without Cause prior to the expiration of the term of this
Agreement. If the employment of the Executive is terminated by the Company
without Cause before a Change in Control or following twenty-four (24) months
after a Change in Control, the Executive shall be entitled to the severance
benefits set forth in paragraph 4(f) below. If the employment of the Executive
is terminated by the Company without Cause upon or within (and including)
twenty-
four (24) months after a Change in Control, the Executive shall be entitled to
the severance benefits set forth in paragraph 4(g) below.
(e) Notice and Right to Cure.
(i) Termination by Company for Cause. If the Company proposes
to terminate the employment of the Executive for Cause under paragraph
4(b), the Company shall give written notice to the Executive specifying
the reasons for such proposed determination with particularity and, in
the case of a termination for Cause under paragraph 4(b)(i), the
Executive shall have a reasonable opportunity to correct any curable
situation to the reasonable satisfaction of the Board of Directors of
the Company, which period shall be no less than thirty (30) days from
the Executive's receipt of the notice of proposed termination.
Notwithstanding the foregoing, the Executive's employment shall not be
terminated for Cause unless and until there shall be delivered to the
Executive a copy of the resolution duly adopted by the affirmative vote
of not less than the majority of the members of the Board of Directors
of the Company at a meeting called and held for the purpose (after
reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive's legal counsel, to be heard
before the Board of Directors) finding that, in the opinion of the
Company's Board of Directors, the Executive has engaged in conduct
justifying a termination for Cause.
(ii) Termination by Executive for Good Reason. If the
Executive proposes to terminate the Executive's employment for Good
Reason under paragraph 4(c) above (other than the last sentence of
paragraph 4(c) above), the Executive shall give written notice to the
Company, specifying the reason therefor with particularity. In the
event the Executive proposes to terminate employment for Good Reason
under paragraph 4(c)(i), (ii), (iii) or (iv) above, the termination
shall be effective on the date of such notice. In the event the
Executive proposes to terminate employment for Good Reason under
paragraph 4(c)(v) above, the Company will have an opportunity to
correct any curable situation to the reasonable satisfaction of the
Executive within the period of time specified in the notice which shall
not be less than thirty (30) days. If such correction is not so made or
the circumstances or situation is such that it is not curable, the
Executive may, within thirty (30) days after the expiration of the time
so fixed within which to correct such situation, give written notice to
the Company that the Executive's employment is terminated for Good
Reason effective forthwith.
(f) Severance Benefits. If the Executive is entitled to severance
benefits under this paragraph 4(f) pursuant to paragraph 4(c) or (d) prior to a
Change in Control or following twenty-four months after a Change in Control, the
Executive shall be provided the following benefits (regardless of the death or
disability of the Executive after the Termination Date):
(i) Base Salary. The Company shall continue to pay to the
Executive the Base Salary when and as such Base Salary would have been
paid from the date of termination (the "Termination Date") through the
end of the term of this Agreement under paragraph
2 as if such termination did not occur and there were no further
automatic extensions of the term pursuant to paragraph 2 (the
"Severance Period") as if the Executive continued to be employed by the
Company during the Severance Period and regardless of the death or
disability of the Executive subsequent to the Termination Date.
(ii) Annual Bonus. If the effective date of such termination
occurs before the Annual Bonus for any preceding calendar year has been
paid, the Company shall, within thirty (30) days after the Termination
Date, pay to the Executive the amount of the Executive's Annual Bonus
for such preceding calendar year when and as it would have been paid if
the Executive remained employed by the Company. In addition, for each
calendar year within the Severance Period (including the calendar year
in which the Termination Date occurs), the Company shall, within thirty
(30) days after the end of each such calendar year, pay the Executive a
bonus equal to the Deemed Bonus (as defined below). The "Deemed Bonus"
shall be an amount equal to (A) prior to a Change in Control, the
average of the Annual Bonus paid to the Executive for the two complete
calendar years prior to the Termination Date, or (B) upon or after a
Change in Control, the greater of (x) the average of the Annual Bonus
paid to the Executive for the calendar year(s) after the Change in
Control (including the calendar year during which a Change in Control
occurs) or (y) the average of the Annual Bonus paid or payable to the
Executive in respect of the two calendar years immediately preceding
the calendar year in which the Change in Control occurs.
(iii) Disability, Life Insurance and Medical/Dental Coverage.
The Executive shall be entitled to the disability coverage, life
insurance and medical/dental coverage which the Executive and the
Executive's family received under paragraph 3(e) as if the Executive
continued to be employed by the Company during the Severance Period;
provided that if Executive obtains new employment with comparable
benefits during the Severance Period, all entitlements under this
paragraph 4(f)(iii) shall cease. Nothing in this paragraph shall be
construed as providing Executive with coverage under any plan of the
Company to which Executive would not otherwise be entitled, and in the
event any coverage is unavailable (e.g., if Executive is uninsurable),
the Company's obligations under this paragraph may be satisfied by
paying to Executive the cost of such coverage if it were available, as
determined in good faith by the Company.
(iv) Stock Options. Not later than thirty (30) days after the
date on which the Executive's employment terminates, the Company shall
pay the Executive a lump sum cash payment equal to the amount by which
the fair market value (determined as of the Termination Date) of the
number of shares of stock subject to any stock option granted under the
Stock Plans which was not exercisable on the Termination Date and which
would have become vested and exercisable during the Severance Period if
the Executive had remained employed by the Company during the Severance
Period.
(v) Deferred Compensation. Any remaining amount of Deferred
Compensation shall be considered earned as of the Termination and the
payments under the paragraph 3(f) shall commence upon the Termination
Date.
(g) Severance Benefits for Change in Control. In the event of a Change
in Control and either upon or within (and including) twenty-four (24) months
after such Change in Control, the Executive terminates employment for Good
Reason or the Executive's employment is terminated by the Company for any reason
other than Cause, then (regardless of the death or disability of the Executive
after the Termination Date) the Company shall pay the Executive a lump sum cash
payment within five (5) days after the Termination Date, in an amount equal to
the amounts referred to in paragraph 4(f)(i), (ii) and (iv), and the Company
shall also provide the Executive the severance benefits referred to in paragraph
4(f)(iii) as provided therein.
(h) Excise Tax Gross-Up. If Executive is subject to any Excise Tax (as
defined below) as a result of the severance payments and/or benefits to which
Executive is entitled under paragraphs 4(f) or 4(g), the Company shall also pay
the Executive the Gross-Up Payment in accordance with the following provisions:
(i) Gross-Up Payment. Anything to the contrary
notwithstanding, in the event it shall be determined that any payment,
distribution or benefit made or provided by the Company to or for the
benefit of the Executive (whether pursuant to this Agreement or
otherwise) (a "Payment"), would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended, (the
"Code") or any interest or penalties with respect to such excise tax
(such excise tax, together with any such interest and penalties, are
collectively referred to as the "Excise Tax"), then the Company shall
pay the Executive in cash an amount (the "Gross-Up Payment") such that
after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including but not
limited to income taxes (and any interest and penalties imposed with
respect thereto) and the Excise Tax, imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-up Payment equal to the
Excise Tax imposed on the Payments.
(ii) Determination of Gross-Up Payment. Subject to paragraph
4(h)(iii) below, all determinations required to be made under paragraph
4(h)(i), including whether a Gross-Up Payment is required and the
amount of the Gross-Up Payment, shall be made by the firm of
independent public accountants selected by the Company to audit its
financial statements for the year immediately preceding the Change in
Control (the "Accounting Firm") which shall provide detailed supporting
calculations to the Company and the Executive within thirty (30) days
after the Termination Date. In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations
required under this paragraph 4(h) (which accounting firm shall then be
referred to as the "Accounting Firm"). All fees and expenses of the
Accounting Firm in connection with the work it performs pursuant to
this
paragraph 4(h) shall be promptly paid by the Company. Any Gross-Up
Payment (as determined pursuant to paragraph 4(h)(i) above) shall be
paid by the Company to the Executive within five (5) days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall
furnish the Executive with a written opinion that failure to report the
Excise Tax on the Executive's applicable federal income tax return
would not result in the imposition of a negligence or a similar
penalty. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm, it is possible that Gross-up
Payments which will not have been made by the Company should have been
made ("Underpayment"). In the event that the Company exhausts its
remedies pursuant to paragraph 4(h)(iii) below, and the Executive is
thereafter required to make a payment of Excise Tax, the Accounting
Firm shall promptly determine the amount of the Underpayment that has
occurred and any such Underpayment shall be paid by the Company to the
Executive within five (5) days after such determination.
(iii) Contest. The Executive shall notify the Company in
writing of any claim made by the Internal Revenue Service that, if
successful, would require the Company to pay a Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than
ten (10) business days after the Executive knows of such claim and
shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the thirty (30) day period
following the date on which it gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to
contest such claim, the Employee shall:
(A) give the Company any information reasonably
requested by the Company relating to such claim;
(B) take such action in connection with contesting
such claim as the Company shall reasonably request in writing
from time to time, without limitation, accepting legal
representation with respect to such claim by an attorney
selected by the Company and reasonably acceptable to the
Executive;
(C) cooperate with the Company in good faith in order
effectively to contest such claim;
(D) permit the Company to participate in any
proceedings relating to such claim; provided, however, that
the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax
or income tax, including interest and
penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this paragraph
4(h)(iii), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and
xxx for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and xxx for a
refund, the Company shall advance the amount of such payment
to the Executive, on an interest-free basis, from any Excise
Tax or income tax, including interest or penalties with
respect thereto, imposed with respect to such advance or with
respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year
of the Executive with respect to which such contested amount
is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest
shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder, and the Executive shall be
entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other
taxing authority.
(iv) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to paragraph 4(h)(iii), the Executive
becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the
requirements of paragraph 4(h)(iii)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to paragraph
4(h)(iii), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does
not notify the Executive in writing of its intent to contest such
denial of refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid, and the amount of such advance shall offset, to
the extent thereof, the amount of Gross-Up Payment required to be paid.
(i) Benefits in Lieu of Severance Pay Policy. The severance benefits
provided for in this paragraph 4 are in lieu of any benefits that would
otherwise be provided to the Executive under the Company's severance pay policy,
and the Executive shall not be entitled to any benefits under the Company's
severance pay policy.
(j) No Funding of Severance. Nothing contained in this Agreement or
otherwise shall require the Company to segregate, earmark or otherwise set aside
any funds or other assets to provide for any payments required to be made under
this paragraph 4, and the rights of the
Executive to the severance benefits hereunder shall be solely those of a
general, unsecured creditor of the Company. However, the Company may, in its
discretion, deposit cash or property, or a combination of both, equal in value
to all or a portion of the amounts anticipated to be payable hereunder into a
trust, the assets of which are to be distributed by such times as determined by
the trustee of such trust; provided that such assets shall be subject at all
times to the rights of the Company's general creditors.
(k) Definition of Change in Control. A "Change in Control" shall be
deemed to have occurred if, prior to the expiration of the term of this
Agreement:
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934) (other than Allianz Life
Insurance Company of North America and its affiliates or the Company or
any of its Subsidiaries or any employee benefit plan of the Company or
any of its Subsidiaries) becomes a beneficial owner, directly or
indirectly, of securities of the Company representing 20% or more of
the voting power of all of the Company's then outstanding securities,
except for issuances of shares approved by a majority of the Incumbent
Directors (as defined below) then in office; or
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors
of the Company (the "Incumbent Directors") together with any director
(the "New Incumbent Director") whose nomination or election was
approved by at least two-thirds of the Incumbent Directors and any New
Incumbent Director who was previously elected, in each case who are
directors at the time of the nomination or election of such director,
cease for any reason to constitute at least a majority of the Board of
Directors of the Company; or
(iii) the shareholders of the Company approve the sale of all,
or substantially all, of the business or assets of the Company or the
liquidation or dissolution of the Company.
5. Confidentiality; Non-Solicitation Covenant; and Covenant Not to
Compete.
(a) Confidentiality. The Executive agrees that, at all times, both
during the Executive's employment and after the termination thereof, the
Executive shall not divulge to any other person, firm or corporation, or in any
way use for the Executive's own benefit, except as required in the conduct of
the business of the Company or any of its Subsidiaries or as authorized in
writing on behalf of the Company, any trade secrets or confidential information
of the Company or its Subsidiaries obtained during the course of the Executive's
employment with the Company or its Subsidiaries. The Executive also agrees that
the Executive will not, either subsequent to termination of employment or during
employment, except as required in the conduct of the business of the Company or
any of its Subsidiaries, or as authorized in writing on behalf of the Company,
interfere with or disturb or attempt to interfere with or disturb any
employment, contractual or business arrangements of the Company or any of its
Subsidiaries with
any of its employees, agents, suppliers, customers, reinsurers or other parties
with which the Company or any of its Subsidiaries has a contractual
relationship, as the case may be.
(b) Non-Solicitation Covenant. While the Executive is actively employed
with the Company and, in the event of a termination of employment with the
Company for any reason, for a period of two years after the Termination Date,
the Executive agrees that, except with the prior written permission of the Board
of Directors of the Company, the Executive will not offer to hire, entice away,
or in any manner attempt to persuade any officer, employee, or agent of the
Company or any of the Subsidiaries to discontinue his or her relationship with
the Company or any of the Subsidiaries nor will the Executive directly or
indirectly solicit, divert, take away or attempt to solicit any business of the
Company or any of its Subsidiaries as to which Executive has acquired any
knowledge during the term of the Executive's employment with the Company.
(c) Covenant Not to Compete. The Executive acknowledges and agrees with
the Company that during the course of the Executive's employment with the
Company, the Executive has had and will continue to have the opportunity to
develop relationships with existing employees, customers and other business
associates of the Company and the Subsidiaries, which relationships constitute
goodwill of the Company, and the Executive acknowledges and agrees that the
Company would be irreparably damaged if the Executive were to take actions that
would damage or misappropriate such goodwill. The Executive acknowledges that
the Company and its Subsidiaries currently engages throughout the United States
(the "Territory"), the business of the development, sale, marketing and
administration of life insurance, annuities and extended care insurance products
(the "Subject Business"). Accordingly, during the term of the Executive's
employment with the Company and (i) prior to a Change of Control, the balance of
the term of this Agreement under paragraph 2 as if no termination of employment
occurred but notice of termination of the automatic extension was given either
by the Executive or the Company on the Termination Date, or (ii) after a Change
in Control, one year after the Termination Date (the "Noncompete Period"), the
Executive shall not, directly or indirectly, enter into, engage in, assist, give
or lend funds to or otherwise finance, be employed by or consult with, or have a
financial or other interest in, any business which engages in the Subject
Business, whether for or by himself or as an independent contractor, agent,
stockholder, partner or joint venturer for any other person, provided that the
aggregate ownership by the Executive of no more than two percent of the
outstanding equity securities of any person, which securities are traded on a
national or foreign securities exchange, quoted on the Nasdaq Stock Market or
other automated quotation system or, in the case of the Company, of no more than
ten percent of the Company's outstanding equity securities shall not be deemed
to be giving or lending funds to, otherwise financing or having a financial
interest in a competitor. In the event that any person in which the executive
has any financial or other interest directly or indirectly enters into the
Subject Business in the Territory during the Noncompete Period, the Executive
shall divest all of his interest (other than any amount permitted under this
paragraph) in such person within 30 days after such person enters into the
Subject Business in the Territory. If the Termination Date is before a Change in
Control and the Executive is entitled to severance under paragraph 4(f), the
Executive may, at Executive's option, reduce the Noncompete Period if Executive
agrees to forego the severance benefits under paragraph 4(f)(i) and (ii) for the
period that Executive elects
to shorten the Noncompete Period except that the Noncompete Period may not be
shortened to be less than three years.
(d) Remedies. If the Executive commits a breach, or threatens to commit
a breach, of any of the provisions of this paragraph 5, the Company shall have
the following rights and remedies, in addition to any rights and remedies
otherwise available at law or equity:
(i) The right and remedy to have the provisions of this
paragraph 5 specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed by the Executive that
any such breach or threatened breach will cause irreparable injury to
the Company and the Subsidiaries and that money damages will not
provide an adequate remedy to the Company and the Subsidiaries; and
(ii) The right and remedy to require the Executive to account
for and pay over to the Company all compensation, profits, monies,
accruals, increments, or other benefits, other than those payable under
this Agreement, derived or received by the Executive or the enterprise
in competition with the Company or any of the Subsidiaries as the
result of any transactions constituting a breach of any part of this
paragraph 5, and Executive agrees to account for and pay over to the
Company such amounts promptly upon demand therefor.
6. Beneficiaries. In the event of the Executive's death after
termination of employment, any amount or benefit payable or distributable to him
pursuant to this Agreement shall be paid to the beneficiary designated by the
Executive for such purpose in the last written instrument received by the
Company prior to the Executive's death, if any, or, if no beneficiary has been
designated, to the Executive's estate, but such designation shall not be deemed
to supersede any beneficiary designation under any benefit plan of the Company.
Whenever this Agreement provides for the written designation of a beneficiary or
beneficiaries of the Executive, the Executive shall have the right to revoke
such designation and to redesignate a beneficiary or beneficiaries by written
notice to either the Company to such effect, except to the extent, if any,
restricted by law.
7. Rights in the Event of Dispute. In the event of a dispute between
the Company and the Executive regarding the Executive's employment or this
Agreement, it is the intention of this Agreement that the dispute shall be
resolved as expeditiously as possible, consistent with fairness to both sides,
and that during pendency of the dispute the Executive and the Company shall be
on equal footing, as follows:
(a) Arbitration. Any claim or dispute relating to the Executive's
employment or the terms and performance of this Agreement (other than
enforcement of paragraph 5) shall be resolved by binding private arbitration
before three arbitrators, and any award rendered by any arbitration panel, or a
majority thereof, may be filed and a judgment obtained in any court having
jurisdiction over the parties unless the relief granted in the award is
delivered within ten (10) days of the award. Either party may request
arbitration by written notice to the other party. Within
thirty (30) days of receipt of such notice by the opposing party, each party
shall appoint a disinterested arbitrator and the two arbitrators selected
thereby shall appoint a third neutral arbitrator; in the event the two
arbitrators cannot agree upon the third arbitrator within ten (10) days after
their appointment, then the neutral arbitrator shall be appointed by the Chief
Judge of Hennepin County (Minnesota) District Court. Any arbitration proceeding
conducted hereunder shall be in the City of Minneapolis and shall follow the
procedures set forth in the Rules of Commercial Arbitration of the American
Arbitration Association, and both sides shall cooperate in as expeditious a
resolution of the proceeding as is reasonable under the circumstances. The
arbitration panel shall have the power to enter any relief it deems fair and
just on any claim, including interim and final equitable relief, along with any
procedural order that is reasonable under the circumstances.
(b) Expenses of Prosecution/Defense of Claim. During the pendency of a
dispute between the Company and the Executive relating to the Executive's
employment or the terms or performance of this Agreement, the Company shall
promptly pay the Executive's reasonable expenses of representation upon delivery
of periodic xxxxxxxx for same, provided that (i) Executive (or a person claiming
on the Executive's behalf) shall promptly repay all amounts paid hereunder at
the conclusion of the dispute if the resolution thereof includes a finding that
the Executive did not act in good faith in the matter in dispute or in the
dispute proceeding itself, and (ii) no claim for expenses of representation
shall be submitted by the Executive or any person acting on the Executive's
behalf unless made in writing to the Board of Directors within one year of the
performance of the services for which such claim is made.
8. No Obligation to Mitigate Damages. In the event the Executive
becomes eligible to receive compensation or benefits subsequent to the
termination of the Executive's employment under this Agreement, the Executive
shall have no obligation to seek other employment in an effort to mitigate
damages. To the extent the Executive shall accept other employment after the
Executive's termination of employment, the compensation and benefits received
from such employment shall not reduce the compensation and benefits otherwise
due under this Agreement, except as provided in paragraph 4(f)(iii) above.
9. Other Benefits. The benefits provided under this Agreement shall,
except to the extent otherwise specifically provided herein, be in addition to,
and not in derogation or diminution of, any benefits that Executive or the
Executive's beneficiary may be entitled to receive under any other plan or
program now or hereafter maintained by the Company, or its Subsidiaries.
10. Successors. The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Company, to expressly
assume and agree to perform its obligations under this Agreement in the same
manner and to the same extent that the Company would be required to perform them
if no succession had taken place unless, in the opinion of legal counsel
mutually acceptable to the Company and the Executive, such obligations have been
assumed by the successor as a matter of law. Failure of the Company to obtain
such agreement prior to the
effectiveness of any such succession (unless the foregoing opinion is rendered
to the Executive) shall entitle the Executive to terminate the Executive's
employment and to receive the payments provided for in paragraph 4(f), 4(g) and
4(h), as the case may be, as if the Executive terminated this Agreement for Good
Reason. The Executive's rights under this Agreement shall inure to the benefit
of, and shall be enforceable by, the Executive's legal representative or other
successors in interest, but shall not otherwise be assignable or transferable.
The Company's rights under this Agreement shall inure to the benefit of, and
shall be enforceable by, the Company's successors and assigns, including any
person which may acquire LifeUSA.
11. Severability. If any provision of this Agreement or the application
thereof is held invalid or unenforceable, the invalidity or unenforceability
thereof shall not affect any other provisions or applications of this Agreement
which can be given effect without the invalid or unenforceable provision or
application.
12. Survival. The rights and obligations of the parties pursuant to
this Agreement shall survive the term of the employment to the extent that any
performance is required hereunder after the expiration or termination of such
term.
13. Notices. All notices under this Agreement shall be in writing and
shall be deemed effective when delivered in person (in the Company's case, to
its Secretary) or 48 hours after deposit thereof in the U.S. mails, postage
prepaid, addressed, in the case of the Executive, to the Executive's last known
address as carried on the personnel records of the Company and, in the case of
the Company, to the corporate headquarters, attention of the Secretary, or to
such other address as the party to be notified may specify by written notice to
the other party.
14. Amendments and Construction. This Agreement may only be amended in
a writing signed by the parties hereto. This Agreement shall be construed under
the laws of the State of Minnesota. Paragraph headings are for convenience only
and shall not be considered a part of the terms and provisions of the Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first written above.
LIFE USA HOLDING, INC.
By
-----------------------------------
Xxxxxxx X. Xxxxxx, President
-------------------------------------
Xxxxxx X. XxxXxxxxx
EXHIBIT B
FORM OF AMENDED AND RESTATED EMPLOYMENT AGREEMENT FOR XXXXXXX X. XXXXXX
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT is made and entered into as of
January 1, 1998 between LIFE USA HOLDING, INC., a Minnesota corporation (the
"Company"), and XXXXXXX X. XXXXXX (the "Executive").
R E C I T A L S:
WHEREAS, the Company and the Executive have entered into the employment
agreement dated as of January 1, 1997 (the "1997 Agreement");
WHEREAS, in connection with the anticipated investment in the Company
by Allianz Life Insurance Company of North America ("Allianz") pursuant to the
stock purchase agreement dated as of January 13, 1998 (the "Allianz Agreement")
between the Company and Allianz, Allianz has requested certain changes in the
1997 Agreement;
WHEREAS, the Executive desires to facilitate the investment by Allianz
in the Company by amending and restating the 1997 Agreement in its entirety as
set forth in this Agreement; and
WHEREAS, Allianz has agreed to purchase certain shares of the Company's
common stock owned by Executive pursuant to the stock purchase agreement dated
January 13, 1998 between Allianz and Executive, and, as a condition of Allianz's
obligations thereunder, Executive has agreed to enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and agreements
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Employment and Duties. The parties hereby agree that, during the
term of this Agreement as set forth in paragraph 2 below, the Executive shall be
employed as the President and Chief Operating Officer of the Company with the
duties and responsibilities attendant to such position. In discharging such
duties and responsibilities, the Executive may also serve as an executive
officer and/or director of any direct or indirect subsidiary of the Company
(collectively the "Subsidiaries"). The salary, other compensation and benefits
provided herein may be allocated among the Company and the Subsidiaries based
upon the portion of the Executive's services provided to the Company and each of
the Subsidiaries, respectively, and the Executive shall assist the Company in
making such allocation as the Company may reasonably request. During the term of
this Agreement, the Executive shall apply on a full-time basis (allowing for
usual vacations and sick leave) all of the Executive's skill and experience to
the performance of the Executive's duties hereunder with the Company and the
Subsidiaries. It is understood that the Executive may have other business
investments and participate in charitable organizations which may, from time to
time, require minor portions of Executive's time, but which shall not interfere
or be inconsistent with the Executive's duties under this Agreement. The
Executive
shall perform the Executive's duties at the Company's principal executive
offices in Minneapolis, Minnesota or at such other location as may be mutually
agreed upon by the Executive and the Company; provided that the Executive shall
travel to other locations at such times as may be necessary for the performance
of the Executive's duties under this Agreement.
2. Term of Employment. Unless sooner terminated as provided in
paragraph 4 below, the term of this Agreement shall commence on the date hereof
and shall continue through December 31, 2000; provided that the term shall be
automatically extended for one year on each December 31st commencing December
31, 1998 unless either party gives written notice to the other prior to the date
on which the automatic extension would be effective; provided that the term
shall not be extended beyond Executive's sixty-fifth (65th) birthday.
3. Compensation and Benefits. During the term of this Agreement, the
Executive shall be entitled to the following compensation and benefits for
service to the Company and the Subsidiaries, including service as a director of
the Company or its Subsidiaries:
(a) Base Salary. The Executive shall be paid a base salary at a minimum
annual rate of $349,375, payable in accordance with the Company's customary
payroll policy, which salary shall be reviewed and may be increased from time to
time at the discretion of the Board of Directors of the Company or the
Compensation Committee of the Board of Directors (the "Base Salary"); provided
that the amount of the Base Salary shall not be reduced after it has been
increased by the Board of Directors or the Compensation Committee without the
Executive's written consent. The performance of the Executive shall be reviewed
at least once each calendar year which may be at the same time as any adjustment
to the Base Salary of Executive.
(b) Bonus. The Executive shall, in addition to the Base Salary, also be
entitled to a cash annual bonus (the "Annual Bonus") based on the achievement by
the Company of performance goals established by the Board of Directors or the
Compensation Committee of the Company's Board of Directors.
(c) Stock Incentives. The Executive shall be eligible to receive stock
options under any stock based plan from time to time adopted by the Company (the
"Stock Plans"), as from time to time determined by the Board of Directors or
Stock Option Committee of the Company's Board of Directors.
(d) Reimbursement of Expenses. The Company shall reimburse the
Executive for all business expenses properly documented in accordance with the
Company's expense reimbursement policy.
(e) Other Benefits. The Executive shall be entitled to participate and
shall be included in any employee benefit plan, medical/dental coverage plan,
life insurance plan, disability coverage plan, or similar benefit plan of the
Company now existing or established hereafter which are generally applicable to
executives of the Company.
4. Termination of Employment.
(a) Death or Disability. In the event of the Executive's death or
disability (as defined in the Company's long term disability plan then in
effect), the employment of the Executive hereunder shall terminate and the
Company's obligation to make further Base Salary and Annual Bonus (to the extent
not yet earned) payments hereunder shall thereupon terminate as of the end of
the month in which such death or disability occurs. The Executive's rights to
other compensation and benefits shall be determined under the Company's benefit
plans and policies applicable to Company executives then in effect.
(b) Termination for Cause by the Company. By following the procedure
set forth in paragraph 4(e), the Company shall have the right to terminate the
employment of the Executive for "Cause" in the event the Executive: (i) has
repeatedly failed to perform the Executive's duties under this Agreement, which
failure is willful and deliberate; (ii) has engaged in an act or acts of
dishonesty which is or are intended to result in substantial personal enrichment
for the Executive; (iii) has knowingly engaged in conduct which is materially
injurious to the Company; (iv) is convicted of, or pleads nolo contendere to (A)
any felony (other than any felony arising out of negligence), or (B) any crime
or offense involving dishonesty with respect to the Company or any of the
Subsidiaries; (v) has failed to comply with the covenants contained in paragraph
5 of this Agreement; or (vi) knowingly provides materially misleading
information concerning the Company to the Board of Directors of the Company or
any of its Subsidiaries, any governmental body or regulatory agency or to any
lender or other financing source or proposed financing source of the Company or
its Subsidiaries. If the employment of the Executive is terminated by the
Company for Cause, the Company's obligation to make further Base Salary and
Annual Bonus (to the extent not yet earned) payments hereunder shall thereupon
terminate, except the Executive shall receive the Base Salary through the end of
the month during which such a termination occurs. The Executive's rights to
other compensation and benefits shall be determined under the Company's benefit
plans and policies applicable to executives of the Company then in effect.
(c) Termination for Good Reason by the Executive. By following the
procedure set forth in paragraph 4(e), the Executive shall have the right to
terminate the Executive's employment with the Company for "Good Reason" in the
event (i) the Executive is not at all times a duly elected President and Chief
Operating Officer of the Company; (ii) there is any material reduction in the
scope of the Executive's authority and responsibility; (iii) there is a
reduction in the Executive's Base Salary, a material reduction in the amount of
Annual Bonus for which the Executive is eligible, an amendment to any Stock Plan
or employee retirement plan applicable to the Executive which is materially
adverse to the Executive, or a material reduction in the other benefits to which
the Executive is entitled under paragraph 3(e) above; (iv) the Company requires
the Executive's principal place of employment to be anywhere other than the
Company's principal executive offices, or there is a relocation of the Company's
principal executive offices outside of the Minneapolis/St. Xxxx, Minnesota
metropolitan area; or (v) the Company otherwise fails to perform its obligations
under this Agreement. If the employment of the Executive is terminated by the
Executive for Good Reason before a Change in Control (as
defined below) or following twenty-four (24) months after a Change in Control,
the Executive shall be entitled to the severance benefits set forth in paragraph
4(f) below. If the employment of the Executive is terminated by the Executive
for Good Reason upon or within (and including) twenty-four (24) months after a
Change in Control, the Executive shall be entitled to the severance benefits set
forth in paragraph 4(g) below. In addition, in the event a Change in Control has
occurred and the Executive elects upon ten (10) days prior notice to the Company
to terminate employment with the Company within the sixty (60) day period
following the first anniversary of the Change in Control, such termination shall
be considered a termination by the Executive for Good Reason and the Executive
shall be entitled to the severance benefits under paragraph 4(g) below.
(d) Termination Without Cause. The Company may terminate the
Executive's employment without Cause prior to the expiration of the term of this
Agreement. If the employment of the Executive is terminated by the Company
without Cause before a Change in Control or following twenty-four (24) months
after a Change in Control, the Executive shall be entitled to the severance
benefits set forth in paragraph 4(f) below. If the employment of the Executive
is terminated by the Company without Cause upon or within (and including)
twenty-four (24) months after a Change in Control, the Executive shall be
entitled to the severance benefits set forth in paragraph 4(g) below.
(e) Notice and Right to Cure.
(i) Termination by Company for Cause. If the Company proposes
to terminate the employment of the Executive for Cause under paragraph
4(b), the Company shall give written notice to the Executive specifying
the reasons for such proposed determination with particularity and, in
the case of a termination for Cause under paragraph 4(b)(i), the
Executive shall have a reasonable opportunity to correct any curable
situation to the reasonable satisfaction of the Board of Directors of
the Company, which period shall be no less than thirty (30) days from
the Executive's receipt of the notice of proposed termination.
Notwithstanding the foregoing, the Executive's employment shall not be
terminated for Cause unless and until there shall be delivered to the
Executive a copy of the resolution duly adopted by the affirmative vote
of not less than the majority of the members of the Board of Directors
of the Company at a meeting called and held for the purpose (after
reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive's legal counsel, to be heard
before the Board of Directors) finding that, in the opinion of the
Company's Board of Directors, the Executive has engaged in conduct
justifying a termination for Cause.
(ii) Termination by Executive for Good Reason. If the
Executive proposes to terminate the Executive's employment for Good
Reason under paragraph 4(c) above (other than the last sentence of
paragraph 4(c) above), the Executive shall give written notice to the
Company, specifying the reason therefor with particularity. In the
event the Executive proposes to terminate employment for Good Reason
under paragraph 4(c)(i), (ii), (iii) or (iv) above, the termination
shall be effective on the date of such notice. In the event the
Executive proposes to terminate employment for Good Reason under
paragraph 4(c)(v) above, the Company will have an opportunity to
correct any curable situation to the reasonable satisfaction of the
Executive within the period of time specified in the notice which shall
not be less than thirty (30) days. If such correction is not so made or
the circumstances or situation is such that it is not curable, the
Executive may, within thirty (30) days after the expiration of the time
so fixed within which to correct such situation, give written notice to
the Company that the Executive's employment is terminated for Good
Reason effective forthwith.
(f) Severance Benefits. If the Executive is entitled to severance
benefits under this paragraph 4(f) pursuant to paragraph 4(c) or (d) prior to a
Change in Control or following twenty-four months after a Change in Control, the
Executive shall be provided the following benefits (regardless of the death or
disability of the Executive after the Termination Date):
(i) Base Salary. The Company shall continue to pay to the
Executive the Base Salary when and as such Base Salary would have been
paid from the date of termination (the "Termination Date") through the
end of the term of this Agreement under paragraph 2 as if such
termination did not occur and there were no further automatic
extensions of the term pursuant to paragraph 2 (the "Severance Period")
as if the Executive continued to be employed by the Company during the
Severance Period and regardless of the death or disability of the
Executive subsequent to the Termination Date.
(ii) Annual Bonus. If the effective date of such termination
occurs before the Annual Bonus for any preceding calendar year has been
paid, the Company shall, within thirty (30) days after the Termination
Date, pay to the Executive the amount of the Executive's Annual Bonus
for such preceding calendar year when and as it would have been paid if
the Executive remained employed by the Company. In addition, for each
calendar year within the Severance Period (including the calendar year
in which the Termination Date occurs), the Company shall, within thirty
(30) days after the end of each such calendar year, pay the Executive a
bonus equal to the Deemed Bonus (as defined below). The "Deemed Bonus"
shall be an amount equal to (A) prior to a Change in Control, the
average of the Annual Bonus paid to the Executive for the two complete
calendar years prior to the Termination Date, or (B) upon or after a
Change in Control, the greater of (x) the average of the Annual Bonus
paid to the Executive for the calendar year(s) after the Change in
Control (including the calendar year in which a Change in Control
occurs) or (y) the average of the Annual Bonus paid or payable to the
Executive in respect of the two calendar years immediately preceding
the calendar year in which the Change in Control occurs.
(iii) Disability, Life Insurance and Medical/Dental Coverage.
The Executive shall be entitled to the disability coverage, life
insurance and medical/dental coverage which the Executive and the
Executive's family received under paragraph 3(e) as if the Executive
continued to be employed by the Company during the Severance Period;
provided that if Executive obtains new employment with comparable
benefits during the
Severance Period, all entitlements under this paragraph 4(f)(iii) shall
cease. Nothing in this paragraph shall be construed as providing
Executive with coverage under any plan of the Company to which
Executive would not otherwise be entitled and in the event any coverage
is unavailable (e.g., if Executive is uninsurable), the Company's
obligations under this paragraph may be satisfied by paying to
Executive the cost of such coverage if it were available, as determined
in good faith by the Company.
(iv) Stock Options. Not later than thirty (30) days after the
date on which the Executive's employment terminates, the Company shall
pay the Executive a lump sum cash payment equal to the amount by which
the fair market value (determined as of the Termination Date) of the
number of shares of stock subject to any stock option granted under the
Stock Plans which was not exercisable on the Termination Date and which
would have become vested and exercisable during the Severance Period if
the Executive had remained employed by the Company during the Severance
Period.
(g) Severance Benefits for Change in Control. In the event of a Change
in Control and either upon or within (and including) twenty-four (24) months
after such Change in Control, the Executive terminates employment for Good
Reason or the Executive's employment is terminated by the Company for any reason
other than Cause, then (regardless of the death or disability of the Executive
after the Termination Date) the Company shall pay the Executive a lump sum cash
payment within five (5) days after the Termination Date, in an amount equal to
the amounts referred to in paragraph 4(f)(i), (ii) and (iv), plus the amount of
the Deemed Bonus (as defined below), and the Company shall also provide the
Executive the severance benefits referred to in paragraph 4(f)(iii) as provided
therein.
(h) Excise Tax Gross-Up. If Executive is subject to any Excise Tax (as
defined below) as a result of the severance payments and/or benefits to which
Executive is entitled under paragraphs 4(f) or 4(g), the Company shall also pay
the Executive the Gross-Up Payment in accordance with the following provisions:
(i) Gross-Up Payment. Anything to the contrary
notwithstanding, in the event it shall be determined that any payment,
distribution or benefit made or provided by the Company to or for the
benefit of the Executive (whether pursuant to this Agreement or
otherwise) (a "Payment"), would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended, (the
"Code") or any interest or penalties with respect to such excise tax
(such excise tax, together with any such interest and penalties, are
collectively referred to as the "Excise Tax"), then the Company shall
pay the Executive in cash an amount (the "Gross-Up Payment") such that
after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including but not
limited to income taxes (and any interest and penalties imposed with
respect thereto) and the Excise Tax, imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-up Payment equal to the
Excise Tax imposed on the Payments.
(ii) Determination of Gross-Up Payment. Subject to paragraph
4(h)(iii) below, all determinations required to be made under paragraph
4(h)(i), including whether a Gross-Up Payment is required and the
amount of the Gross-Up Payment, shall be made by the firm of
independent public accountants selected by the Company to audit its
financial statements for the year immediately preceding the Change in
Control (the "Accounting Firm") which shall provide detailed supporting
calculations to the Company and the Executive within thirty (30) days
after the Termination Date. In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations
required under this paragraph 4(h) (which accounting firm shall then be
referred to as the "Accounting Firm"). All fees and expenses of the
Accounting Firm in connection with the work it performs pursuant to
this paragraph 4(h) shall be promptly paid by the Company. Any Gross-Up
Payment (as determined pursuant to paragraph 4(h)(i) above) shall be
paid by the Company to the Executive within five (5) days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall
furnish the Executive with a written opinion that failure to report the
Excise Tax on the Executive's applicable federal income tax return
would not result in the imposition of a negligence or a similar
penalty. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm, it is possible that Gross-up
Payments which will not have been made by the Company should have been
made ("Underpayment"). In the event that the Company exhausts its
remedies pursuant to paragraph 4(h)(iii) below, and the Executive is
thereafter required to make a payment of Excise Tax, the Accounting
Firm shall promptly determine the amount of the Underpayment that has
occurred and any such Underpayment shall be paid by the Company to the
Executive within five (5) days after such determination.
(iii) Contest. The Executive shall notify the Company in
writing of any claim made by the Internal Revenue Service that, if
successful, would require the Company to pay a Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than
ten (10) business days after the Executive knows of such claim and
shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the thirty (30) day period
following the date on which it gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to
contest such claim, the Employee shall:
(A) give the Company any information reasonably
requested by the Company relating to such claim;
(B) take such action in connection with contesting
such claim as the Company shall reasonably request in writing
from time to time, without limitation, accepting legal
representation with respect to such claim by an attorney
selected by the Company and reasonably acceptable to the
Executive;
(C) cooperate with the Company in good faith in order
effectively to contest such claim;
(D) permit the Company to participate in any
proceedings relating to such claim; provided, however, that
the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax
or income tax, including interest and penalties with respect
thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the
foregoing provisions of this paragraph 4(h)(iii), the Company
shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forego any and
all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim
and may, at its sole option, either direct the Executive to
pay the tax claimed and xxx for a refund or contest the claim
in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the
Executive to pay such claim and xxx for a refund, the Company
shall advance the amount of such payment to the Executive, on
an interest-free basis, from any Excise Tax or income tax,
including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that
any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable
hereunder, and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(iv) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to paragraph 4(h)(iii), the Executive
becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the
requirements of paragraph 4(h)(iii)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to paragraph
4(h)(iii), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does
not notify
the Executive in writing of its intent to contest such denial of refund
prior to the expiration of thirty (30) days after such determination,
then such advance shall be forgiven and shall not be required to be
repaid, and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
(i) Benefits in Lieu of Severance Pay Policy. The severance benefits
provided for in this paragraph 4 are in lieu of any benefits that would
otherwise be provided to the Executive under the Company's severance pay policy
and the Executive shall not be entitled to any benefits under the Company's
severance pay policy.
(j) No Funding of Severance. Nothing contained in this Agreement or
otherwise shall require the Company to segregate, earmark or otherwise set aside
any funds or other assets to provide for any payments required to be made under
this paragraph 4 and the rights of the Executive to the severance benefits
hereunder shall be solely those of a general, unsecured creditor of the Company.
However, the Company may, in its discretion, deposit cash or property, or a
combination of both, equal in value to all or a portion of the amounts
anticipated to be payable hereunder into a trust, the assets of which are to be
distributed by such times as determined by the trustee of such trust; provided
that such assets shall be subject at all times to the rights of the Company's
general creditors.
(k) Definition of Change in Control. A "Change in Control" shall be
deemed to have occurred if, prior to the expiration of the term of this
Agreement:
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934) (other than Allianz Life
Insurance Company of North America and its affiliates or the Company or
any of its Subsidiaries or any employee benefit plan of the Company or
any of its Subsidiaries) becomes a beneficial owner, directly or
indirectly, of securities of the Company representing 20% or more of
the voting power of all of the Company's then outstanding securities,
except for issuances of shares approved by a majority of the Incumbent
Directors (as defined below) then in office; or
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors
of the Company (the "Incumbent Directors") together with any director
(the "New Incumbent Director") whose nomination or election was
approved by at least two-thirds of the Incumbent Directors and any New
Incumbent Director who was previously elected, in each case who are
directors at the time of the nomination or election of such director
cease, for any reason to constitute at least a majority of the Board of
Directors of the Company; or
(iii) the shareholders of the Company approve the sale of all,
or substantially all, of the business or assets of the Company or the
liquidation or dissolution of the Company.
5. Confidentiality; Non-Solicitation Covenant; and Covenant Not to
Compete.
(a) Confidentiality. The Executive agrees that, at all times, both
during the Executive's employment and after the termination thereof, the
Executive shall not divulge to any other person, firm or corporation, or in any
way use for the Executive's own benefit, except as required in the conduct of
the business of the Company or any of its Subsidiaries or as authorized in
writing on behalf of the Company, any trade secrets or confidential information
of the Company or its Subsidiaries obtained during the course of the Executive's
employment with the Company or its Subsidiaries. The Executive also agrees that
the Executive will not, either subsequent to termination of employment or during
employment, except as required in the conduct of the business of the Company or
any of its Subsidiaries, or as authorized in writing on behalf of the Company,
interfere with or disturb or attempt to interfere with or disturb any
employment, contractual or business arrangements of the Company or any of its
Subsidiaries with any of its employees, agents, suppliers, customers, reinsurers
or other parties with which the Company or any of its Subsidiaries has a
contractual relationship, as the case may be.
(b) Non-Solicitation Covenant. While the Executive is actively employed
with the Company and, in the event of a termination of employment with the
Company for any reason, for a period of two years after the Termination Date,
the Executive agrees that, except with the prior written permission of the Board
of Directors of the Company, the Executive will not offer to hire, entice away,
or in any manner attempt to persuade any officer, employee, or agent of the
Company or any of the Subsidiaries to discontinue his or her relationship with
the Company or any of the Subsidiaries nor will the Executive directly or
indirectly solicit, divert, take away or attempt to solicit any business of the
Company or any of its Subsidiaries as to which Executive has acquired any
knowledge during the term of the Executive's employment with the Company.
(c) Covenant Not to Compete. The Executive acknowledges and agrees with
the Company that during the course of the Executive's employment with the
Company, the Executive has had and will continue to have the opportunity to
develop relationships with existing employees, customers and other business
associates of the Company and the Subsidiaries, which relationships constitute
goodwill of the Company, and the Executive acknowledges and agrees that the
Company would be irreparably damaged if the Executive were to take actions that
would damage or misappropriate such goodwill. The Executive acknowledges that
the Company and its Subsidiaries currently engages throughout the United States
(the "Territory"), the business of the development, sale, marketing and
administration of life insurance, annuities and extended care insurance products
(the "Subject Business"). Accordingly, during the term of the Executive's
employment with the Company and (i) prior to a Change of Control, and in the
case of a voluntary termination by the Executive under paragraph 4(d) or a
termination by the Company for Cause under paragraph 4(b), the balance of the
term of this Agreement under paragraph 2 as if no termination of employment
occurred but notice of termination of the automatic extension was given either
by the Executive at the time of his notice of voluntary resignation or given by
the Company at the time of its notice of termination for Cause, or (ii) after a
Change in Control, one year after the Termination Date (the "Noncompete
Period"), the Executive shall not, directly or indirectly, enter into, engage
in, assist, give or lend funds to or otherwise finance, be employed by or
consult with, or have a financial or other interest in, any business which
engages in the Subject Business, whether for or by himself or as an independent
contractor, agent, stockholder,
partner or joint venturer for any other person, provided that the aggregate
ownership by the Executive of no more than two percent of the outstanding equity
securities of any person, which securities are traded on a national or foreign
securities exchange, quoted on the Nasdaq Stock Market or other automated
quotation system or, in the case of the Company, of no more than ten percent of
the Company's outstanding equity securities shall not be deemed to be giving or
lending funds to, otherwise financing or having a financial interest in a
competitor. In the event that any person in which the executive has any
financial or other interest directly or indirectly enters into the Subject
Business in the Territory during the Noncompete Period, the Executive shall
divest all of his interest (other than any amount permitted under this
paragraph) in such person within 30 days after such person enters into the
Subject Business in the Territory.
(d) Remedies. If the Executive commits a breach, or threatens to commit
a breach, of any of the provisions of this paragraph 5, the Company shall have
the following rights and remedies, in addition to any rights and remedies
otherwise available at law or equity:
(i) The right and remedy to have the provisions of this
paragraph 5 specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed by the Executive that
any such breach or threatened breach will cause irreparable injury to
the Company and the Subsidiaries and that money damages will not
provide an adequate remedy to the Company and the Subsidiaries; and
(ii) The right and remedy to require the Executive to account
for and pay over to the Company all compensation, profits, monies,
accruals, increments, or other benefits, other than those payable under
this Agreement, derived or received by the Executive or the enterprise
in competition with the Company or any of the Subsidiaries as the
result of any transactions constituting a breach of any part of this
paragraph 5, and Executive agrees to account for and pay over to the
Company such amounts promptly upon demand therefor.
6. Beneficiaries. In the event of the Executive's death after
termination of employment, any amount or benefit payable or distributable to him
pursuant to this Agreement shall be paid to the beneficiary designated by the
Executive for such purpose in the last written instrument received by the
Company prior to the Executive's death, if any, or, if no beneficiary has been
designated, to the Executive's estate, but such designation shall not be deemed
to supersede any beneficiary designation under any benefit plan of the Company.
Whenever this Agreement provides for the written designation of a beneficiary or
beneficiaries of the Executive, the Executive shall have the right to revoke
such designation and to redesignate a beneficiary or beneficiaries by written
notice to either the Company to such effect, except to the extent, if any,
restricted by law.
7. Rights in the Event of Dispute. In the event of a dispute between
the Company and the Executive regarding the Executive's employment or this
Agreement, it is the intention of this Agreement that the dispute shall be
resolved as expeditiously as possible, consistent with
fairness to both sides, and that during pendency of the dispute the Executive
and the Company shall be on equal footing, as follows:
(a) Arbitration. Any claim or dispute relating to the Executive's
employment or the terms and performance of this Agreement (other than
enforcement of paragraph 5) shall be resolved by binding private arbitration
before three arbitrators, and any award rendered by any arbitration panel, or a
majority thereof, may be filed and a judgment obtained in any court having
jurisdiction over the parties unless the relief granted in the award is
delivered within ten (10) days of the award. Either party may request
arbitration by written notice to the other party. Within thirty (30) days of
receipt of such notice by the opposing party, each party shall appoint a
disinterested arbitrator and the two arbitrators selected thereby shall appoint
a third neutral arbitrator; in the event the two arbitrators cannot agree upon
the third arbitrator within ten (10) days after their appointment, then the
neutral arbitrator shall be appointed by the Chief Judge of Hennepin County
(Minnesota) District Court. Any arbitration proceeding conducted hereunder shall
be in the City of Minneapolis and shall follow the procedures set forth in the
Rules of Commercial Arbitration of the American Arbitration Association, and
both sides shall cooperate in as expeditious a resolution of the proceeding as
is reasonable under the circumstances. The arbitration panel shall have the
power to enter any relief it deems fair and just on any claim, including interim
and final equitable relief, along with any procedural order that is reasonable
under the circumstances.
(b) Expenses of Prosecution/Defense of Claim. During the pendency of a
dispute between the Company and the Executive relating to the Executive's
employment or the terms or performance of this Agreement, the Company shall
promptly pay the Executive's reasonable expenses of representation upon delivery
of periodic xxxxxxxx for same, provided that (i) Executive (or a person claiming
on the Executive's behalf) shall promptly repay all amounts paid hereunder at
the conclusion of the dispute if the resolution thereof includes a finding that
the Executive did not act in good faith in the matter in dispute or in the
dispute proceeding itself, and (ii) no claim for expenses of representation
shall be submitted by the Executive or any person acting on the Executive's
behalf unless made in writing to the Board of Directors within one year of the
performance of the services for which such claim is made.
8. No Obligation to Mitigate Damages. In the event the Executive
becomes eligible to receive compensation or benefits subsequent to the
termination of the Executive's employment under this Agreement, the Executive
shall have no obligation to seek other employment in an effort to mitigate
damages. To the extent the Executive shall accept other employment after the
Executive's termination of employment, the compensation and benefits received
from such employment shall not reduce the compensation and benefits otherwise
due under this Agreement, except as provided in paragraph 4(f)(iii) above.
9. Other Benefits. The benefits provided under this Agreement shall,
except to the extent otherwise specifically provided herein, be in addition to,
and not in derogation or diminution of, any benefits that Executive or the
Executive's beneficiary may be entitled to
receive under any other plan or program now or hereafter maintained by the
Company, or its Subsidiaries.
10. Successors. The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Company, to expressly
assume and agree to perform its obligations under this Agreement in the same
manner and to the same extent that the Company would be required to perform them
if no succession had taken place unless, in the opinion of legal counsel
mutually acceptable to the Company and the Executive, such obligations have been
assumed by the successor as a matter of law. Failure of the Company to obtain
such agreement prior to the effectiveness of any such succession (unless the
foregoing opinion is rendered to the Executive) shall entitle the Executive to
terminate the Executive's employment and to receive the payments provided for in
paragraphs 4(f), 4(g) and 4(h), as the case may be, as if the Executive
terminated this Agreement for Good Reason. The Executive's rights under this
Agreement shall inure to the benefit of, and shall be enforceable by, the
Executive's legal representative or other successors in interest, but shall not
otherwise be assignable or transferable. The Company's rights under this
Agreement shall inure to the benefit of, and shall be enforceable by, the
Company's successors and assigns, including any person which may acquire LifeUSA
Insurance Company.
11. Severability. If any provision of this Agreement or the application
thereof is held invalid or unenforceable, the invalidity or unenforceability
thereof shall not affect any other provisions or applications of this Agreement
which can be given effect without the invalid or unenforceable provision or
application.
12. Survival. The rights and obligations of the parties pursuant to
this Agreement shall survive the term of the employment to the extent that any
performance is required hereunder after the expiration or termination of such
term.
13. Notices. All notices under this Agreement shall be in writing and
shall be deemed effective when delivered in person (in the Company's case, to
its Secretary) or 48 hours after deposit thereof in the U.S. mails, postage
prepaid, addressed, in the case of the Executive, to the Executive's last known
address as carried on the personnel records of the Company and, in the case of
the Company, to the corporate headquarters, attention of the Secretary, or to
such other address as the party to be notified may specify by written notice to
the other party.
14. Amendments and Construction. This Agreement may only be amended in
a writing signed by the parties hereto. This Agreement shall be construed under
the laws of the State of Minnesota. Paragraph headings are for convenience only
and shall not be considered a part of the terms and provisions of the Agreement.
15. Amended and Restated Agreement. This Agreement amends and restates
in its entirety the 1997 Agreement and the 1997 Agreement shall have no further
force or effect.
IN WITNESS WHEREOF, the parties have duly executed this Amended and
Restated Agreement as of the day and year first written above.
LIFE USA HOLDING, INC.
By
-----------------------------------------
Xxxxxx X. XxxXxxxxx, Chairman
and Chief Executive Officer
-------------------------------------------
Xxxxxxx X. Xxxxxx
EXHIBIT C
FORM OF EMPLOYMENT AGREEMENT FOR XXXXXX X. XXXXX
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of January 1, 1998 between
LIFE USA HOLDING, INC., a Minnesota corporation (the "Company"), and XXXXXX X.
XXXXX (the "Executive").
R E C I T A L S:
WHEREAS, the Executive is now and has been a director and the Senior
Vice President and Director of Sales of the Company and the President of LifeUSA
Insurance Company, the Company's wholly-owned stock life insurance subsidiary
("LifeUSA"), and serves as an officer and/or director of certain other
subsidiaries of the Company;
WHEREAS, the Executive and the Company wish to enter into this
Agreement to provide for the continued employment of Executive; and
WHEREAS, the Executive and the Company are willing to enter into this
Agreement upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual premises and agreements
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Employment and Duties. The parties hereby agree that, during the
term of this Agreement as set forth in paragraph 2 below, the Executive shall be
employed as the Senior Vice President and Director of Sales of the Company and
the President of LifeUSA with the duties and responsibilities attendant to such
positions. In discharging such duties and responsibilities, the Executive may
also serve as an executive officer and/or director of any direct or indirect
subsidiary of the Company (collectively the "Subsidiaries"). The salary, other
compensation and benefits provided herein may be allocated among the Company and
the Subsidiaries based upon the portion of the Executive's services provided to
the Company and each of the Subsidiaries, respectively, and the Executive shall
assist the Company in making such allocation as the Company may reasonably
request. During the term of this Agreement, the Executive shall apply on a
full-time basis (allowing for usual vacations and sick leave) all of the
Executive's skill and experience to the performance of the Executive's duties
hereunder with the Company and the Subsidiaries. It is understood that the
Executive may have other business investments and participate in charitable
organizations which may, from time to time, require minor portions of
Executive's time, but which shall not interfere or be inconsistent with the
Executive's duties under this Agreement. The Executive shall perform the
Executive's duties at the Company's principal executive offices in Minneapolis,
Minnesota or at such other location as may be mutually agreed upon by the
Executive and the Company; provided that the Executive shall travel to other
locations at such times as may be necessary for the performance of the
Executive's duties under this Agreement.
2. Term of Employment. Unless sooner terminated as provided in
paragraph 4 below, the term of this Agreement shall commence on the date hereof
and shall continue through December 31, 2000; provided that the term shall be
automatically extended for one year on each December 31st commencing December
31, 1998 unless either party gives written notice to the other prior to the date
on which the automatic extension would be effective; provided that the term
shall not be extended beyond Executive's sixty-fifth (65th) birthday.
3. Compensation and Benefits. During the term of this Agreement, the
Executive shall be entitled to the following compensation and benefits for
service to the Company and the Subsidiaries, including service as a director of
the Company or its Subsidiaries:
(a) Base Salary. The Executive shall be paid a base salary at a minimum
annual rate of $333,900, payable in accordance with the Company's customary
payroll policy, which salary shall be reviewed and may be increased from time to
time at the discretion of the Board of Directors of the Company or the
Compensation Committee of the Board of Directors (the "Base Salary"); provided
that the amount of the Base Salary shall not be reduced after it has been
increased by the Board of Directors or the Compensation Committee without the
Executive's written consent. The performance of the Executive shall be reviewed
at least once each calendar year which may be at the same time as any adjustment
to the Base Salary of Executive.
(b) Bonus. The Executive shall, in addition to the Base Salary, also be
entitled to a cash annual bonus (the "Annual Bonus") based on the achievement by
the Company of performance goals established by the Board of Directors or the
Compensation Committee of the Company's Board of Directors.
(c) Stock Incentives. The Executive shall be eligible to receive stock
options under any stock based plan from time to time adopted by the Company (the
"Stock Plans"), as from time to time determined by the Board of Directors or
Stock Option Committee of the Company's Board of Directors.
(d) Reimbursement of Expenses. The Company shall reimburse the
Executive for all business expenses properly documented in accordance with the
Company's expense reimbursement policy.
(e) Other Benefits. The Executive shall be entitled to participate and
shall be included in any employee benefit plan, medical/dental coverage plan,
life insurance plan, disability coverage plan, or similar benefit plan of the
Company now existing or established hereafter which are generally applicable to
executives of the Company.
4. Termination of Employment.
(a) Death or Disability. In the event of the Executive's death or
disability (as defined in the Company's long term disability plan then in
effect), the employment of the Executive hereunder shall terminate and the
Company's obligation to make further Base Salary and Annual
Bonus (to the extent not yet earned) payments hereunder shall thereupon
terminate as of the end of the month in which such death or disability occurs.
The Executive's rights to other compensation and benefits shall be determined
under the Company's benefit plans and policies applicable to Company executives
then in effect.
(b) Termination for Cause by the Company. By following the procedure
set forth in paragraph 4(e), the Company shall have the right to terminate the
employment of the Executive for "Cause" in the event the Executive: (i) has
repeatedly failed to perform the Executive's duties under this Agreement, which
failure is willful and deliberate; (ii) has engaged in an act or acts of
dishonesty which is or are intended to result in substantial personal enrichment
for the Executive; (iii) has knowingly engaged in conduct which is materially
injurious to the Company; (iv) is convicted of, or pleads nolo contendere to (A)
any felony (other than any felony arising out of negligence), or (B) any crime
or offense involving dishonesty with respect to the Company or any of the
Subsidiaries; (v) has failed to comply with the covenants contained in paragraph
5 of this Agreement; or (vi) knowingly provides materially misleading
information concerning the Company to the Board of Directors of the Company or
any of its Subsidiaries, any governmental body or regulatory agency or to any
lender or other financing source or proposed financing source of the Company or
its Subsidiaries. If the employment of the Executive is terminated by the
Company for Cause, the Company's obligation to make further Base Salary and
Annual Bonus (to the extent not yet earned) payments hereunder shall thereupon
terminate, except the Executive shall receive the Base Salary through the end of
the month during which such a termination occurs. The Executive's rights to
other compensation and benefits shall be determined under the Company's benefit
plans and policies applicable to executives of the Company then in effect.
(c) Termination for Good Reason by the Executive. By following the
procedure set forth in paragraph 4(e), the Executive shall have the right to
terminate the Executive's employment with the Company for "Good Reason" in the
event (i) the Executive is not at all times a duly elected Senior Vice President
of the Company and the President of LifeUSA; (ii) there is any material
reduction in the scope of the Executive's authority and responsibility; (iii)
there is a reduction in the Executive's Base Salary, a material reduction in the
amount of Annual Bonus for which the Executive is eligible, an amendment to any
Stock Plan or employee retirement plan applicable to the Executive which is
materially adverse to the Executive, or a material reduction in the other
benefits to which the Executive is entitled under paragraph 3(e) above; (iv) the
Company requires the Executive's principal place of employment to be anywhere
other than the Company's principal executive offices, or there is a relocation
of the Company's principal executive offices outside of the Minneapolis/St.
Xxxx, Minnesota metropolitan area; or (v) the Company otherwise fails to perform
its obligations under this Agreement. If the employment of the Executive is
terminated by the Executive for Good Reason before a Change in Control (as
defined below) or following twenty-four (24) months after a Change in Control,
the Executive shall be entitled to the severance benefits set forth in paragraph
4(f) below. If the employment of the Executive is terminated by the Executive
for Good Reason upon or within (and including) twenty-four (24) months after a
Change in Control, the Executive shall be entitled to the severance benefits set
forth in paragraph 4(g) below. In addition, in the event a Change
in Control has occurred and the Executive elects upon ten (10) days prior notice
to the Company to terminate employment with the Company within the sixty (60)
day period following the first anniversary of the Change in Control, such
termination shall be considered a termination by the Executive for Good Reason
and the Executive shall be entitled to the severance benefits under paragraph
4(g) below.
(d) Termination Without Cause. The Company may terminate the
Executive's employment without Cause prior to the expiration of the term of this
Agreement. If the employment of the Executive is terminated by the Company
without Cause before a Change in Control or following twenty-four (24) months
after a Change in Control, the Executive shall be entitled to the severance
benefits set forth in paragraph 4(f) below. If the employment of the Executive
is terminated by the Company without Cause upon or within (and including)
twenty-four (24) months after a Change in Control, the Executive shall be
entitled to the severance benefits set forth in paragraph 4(g) below.
(e) Notice and Right to Cure.
(i) Termination by Company for Cause. If the Company proposes
to terminate the employment of the Executive for Cause under paragraph
4(b), the Company shall give written notice to the Executive specifying
the reasons for such proposed determination with particularity and, in
the case of a termination for Cause under paragraph 4(b)(i), the
Executive shall have a reasonable opportunity to correct any curable
situation to the reasonable satisfaction of the Board of Directors of
the Company, which period shall be no less than thirty (30) days from
the Executive's receipt of the notice of proposed termination.
Notwithstanding the foregoing, the Executive's employment shall not be
terminated for Cause unless and until there shall be delivered to the
Executive a copy of the resolution duly adopted by the affirmative vote
of not less than the majority of the members of the Board of Directors
of the Company at a meeting called and held for the purpose (after
reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive's legal counsel, to be heard
before the Board of Directors) finding that, in the opinion of the
Company's Board of Directors, the Executive has engaged in conduct
justifying a termination for Cause.
(ii) Termination by Executive for Good Reason. If the
Executive proposes to terminate the Executive's employment for Good
Reason under paragraph 4(c) above (other than the last sentence of
paragraph 4(c) above), the Executive shall give written notice to the
Company, specifying the reason therefor with particularity. In the
event the Executive proposes to terminate employment for Good Reason
under paragraph 4(c)(i), (ii), (iii) or (iv) above, the termination
shall be effective on the date of such notice. In the event the
Executive proposes to terminate employment for Good Reason under
paragraph 4(c)(v) above, the Company will have an opportunity to
correct any curable situation to the reasonable satisfaction of the
Executive within the period of time specified in the notice which shall
not be less than thirty (30) days. If such correction is not so made or
the circumstances or situation is such that it is not curable, the
Executive may, within thirty
(30) days after the expiration of the time so fixed within which to
correct such situation, give written notice to the Company that the
Executive's employment is terminated for Good Reason effective
forthwith.
(f) Severance Benefits. If the Executive is entitled to severance
benefits under this paragraph 4(f) pursuant to paragraph 4(c) or (d) prior to a
Change in Control or following twenty-four months after a Change in Control, the
Executive shall be provided the following benefits (regardless of the death or
disability of the Executive after the Termination Date):
(i) Base Salary. The Company shall continue to pay to the
Executive the Base Salary when and as such Base Salary would have been
paid from the date of termination (the "Termination Date") through the
end of the term of this Agreement under paragraph 2 as if such
termination did not occur and there were no further automatic
extensions of the term pursuant to paragraph 2 (the "Severance Period")
as if the Executive continued to be employed by the Company during the
Severance Period and regardless of the death or disability of the
Executive subsequent to the Termination Date.
(ii) Annual Bonus. If the effective date of such termination
occurs before the Annual Bonus for any preceding calendar year has been
paid, the Company shall, within thirty (30) days after the Termination
Date, pay to the Executive the amount of the Executive's Annual Bonus
for such preceding calendar year when and as it would have been paid if
the Executive remained employed by the Company. In addition, for each
calendar year within the Severance Period (including the calendar year
in which the Termination Date occurs), the Company shall, within thirty
(30) days after the end of each such calendar year, pay the Executive a
bonus equal to the Deemed Bonus (as defined below). The "Deemed Bonus"
shall be an amount equal to (A) prior to a Change in Control, the
average of the Annual Bonus paid to the Executive for the two complete
calendar years prior to the Termination Date, or (B) upon or after a
Change in Control, the greater of (x) the average of the Annual Bonus
paid to the Executive for the calendar year(s) after the Change in
Control (including the calendar year during which a Change in Control
occurs) or (y) the average of the Annual Bonus paid or payable to the
Executive in respect of the two calendar years immediately preceding
the calendar year in which the Change in Control occurs.
(iii) Disability, Life Insurance and Medical/Dental Coverage.
The Executive shall be entitled to the disability coverage, life
insurance and medical/dental coverage which the Executive and the
Executive's family received under paragraph 3(e) as if the Executive
continued to be employed by the Company during the Severance Period;
provided that if Executive obtains new employment with comparable
benefits during the Severance Period, all entitlements under this
paragraph 4(f)(iii) shall cease. Nothing in this paragraph shall be
construed as providing Executive with coverage under any plan of the
Company to which Executive would not otherwise be entitled and in the
event any coverage is unavailable (e.g., if Executive is uninsurable),
the Company's obligations
under this paragraph may be satisfied by paying to Executive the cost
of such coverage if it were available, as determined in good faith by
the Company.
(iv) Stock Options. Not later than thirty (30) days after the
date on which the Executive's employment terminates, the Company shall
pay the Executive a lump sum cash payment equal to the amount by which
the fair market value (determined as of the Termination Date) of the
number of shares of stock subject to any stock option granted under the
Stock Plans which was not exercisable on the Termination Date and which
would have become vested and exercisable during the Severance Period if
the Executive had remained employed by the Company during the Severance
Period.
(g) Severance Benefits for Change in Control. In the event of a Change
in Control and either upon or within (and including) twenty-four (24) months
after such Change in Control, the Executive terminates employment for Good
Reason or the Executive's employment is terminated by the Company for any reason
other than Cause, then (regardless of the death or disability of the Executive
after the Termination Date) the Company shall pay the Executive a lump sum cash
payment within five (5) days after the Termination Date, in an amount equal to
the amounts referred to in paragraph 4(f)(i), (ii) and (iv), plus the amount of
the Deemed Bonus (as defined below), and the Company shall also provide the
Executive the severance benefits referred to in paragraph 4(f)(iii) as provided
therein.
(h) Excise Tax Gross-Up. If Executive is subject to any Excise Tax (as
defined below) as a result of the severance payments and/or benefits to which
Executive is entitled under paragraphs 4(f) or 4(g), the Company shall also pay
the Executive the Gross-Up Payment in accordance with the following provisions:
(i) Gross-Up Payment. Anything to the contrary
notwithstanding, in the event it shall be determined that any payment,
distribution or benefit made or provided by the Company to or for the
benefit of the Executive (whether pursuant to this Agreement or
otherwise) (a "Payment"), would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended, (the
"Code") or any interest or penalties with respect to such excise tax
(such excise tax, together with any such interest and penalties, are
collectively referred to as the "Excise Tax"), then the Company shall
pay the Executive in cash an amount (the "Gross-Up Payment") such that
after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including but not
limited to income taxes (and any interest and penalties imposed with
respect thereto) and the Excise Tax, imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-up Payment equal to the
Excise Tax imposed on the Payments.
(ii) Determination of Gross-Up Payment. Subject to paragraph
4(h)(iii) below, all determinations required to be made under paragraph
4(h)(i), including whether a Gross-Up Payment is required and the
amount of the Gross-Up Payment, shall be made by the firm of
independent public accountants selected by the Company to audit its
financial statements for the year immediately preceding the Change in
Control (the "Accounting Firm") which shall provide detailed supporting
calculations to the Company and the Executive within thirty (30) days
after the Termination Date. In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations
required under this paragraph 4(h) (which accounting firm shall then be
referred to as the "Accounting Firm"). All fees and expenses of the
Accounting Firm in connection with the work it performs pursuant to
this paragraph 4(h) shall be promptly paid by the Company. Any Gross-Up
Payment (as determined pursuant to paragraph 4(h)(i) above) shall be
paid by the Company to the Executive within five (5) days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall
furnish the Executive with a written opinion that failure to report the
Excise Tax on the Executive's applicable federal income tax return
would not result in the imposition of a negligence or a similar
penalty. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm, it is possible that Gross-up
Payments which will not have been made by the Company should have been
made ("Underpayment"). In the event that the Company exhausts its
remedies pursuant to paragraph 4(h)(iii) below, and the Executive is
thereafter required to make a payment of Excise Tax, the Accounting
Firm shall promptly determine the amount of the Underpayment that has
occurred and any such Underpayment shall be paid by the Company to the
Executive within five (5) days after such determination.
(iii) Contest. The Executive shall notify the Company in
writing of any claim made by the Internal Revenue Service that, if
successful, would require the Company to pay a Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than
ten (10) business days after the Executive knows of such claim and
shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the thirty (30) day period
following the date on which it gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to
contest such claim, the Employee shall:
(A) give the Company any information reasonably
requested by the Company relating to such claim;
(B) take such action in connection with contesting
such claim as the Company shall reasonably request in writing
from time to time, without limitation, accepting legal
representation with respect to such claim by an attorney
selected by the Company and reasonably acceptable to the
Executive;
(C) cooperate with the Company in good faith in order
effectively to contest such claim;
(D) permit the Company to participate in any
proceedings relating to such claim; provided, however, that
the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax
or income tax, including interest and penalties with respect
thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the
foregoing provisions of this paragraph 4(h)(iii), the Company
shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forego any and
all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim
and may, at its sole option, either direct the Executive to
pay the tax claimed and xxx for a refund or contest the claim
in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the
Executive to pay such claim and xxx for a refund, the Company
shall advance the amount of such payment to the Executive, on
an interest-free basis, from any Excise Tax or income tax,
including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that
any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable
hereunder, and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(iv) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to paragraph 4(h)(iii), the Executive
becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the
requirements of paragraph 4(h)(iii)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to paragraph
4(h)(iii), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does
not notify the Executive in writing of its intent to contest such
denial of refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid, and the amount of such advance shall offset, to
the extent thereof, the amount of Gross-Up Payment required to be paid.
(i) Benefits in Lieu of Severance Pay Policy. The severance benefits
provided for in this paragraph 4 are in lieu of any benefits that would
otherwise be provided to the Executive under the Company's severance pay policy,
and the Executive shall not be entitled to any benefits under the Company's
severance pay policy.
(j) No Funding of Severance. Nothing contained in this Agreement or
otherwise shall require the Company to segregate, earmark or otherwise set aside
any funds or other assets to provide for any payments required to be made under
this paragraph 4, and the rights of the Executive to the severance benefits
hereunder shall be solely those of a general, unsecured creditor of the Company.
However, the Company may, in its discretion, deposit cash or property, or a
combination of both, equal in value to all or a portion of the amounts
anticipated to be payable hereunder into a trust, the assets of which are to be
distributed by such times as determined by the trustee of such trust; provided
that such assets shall be subject at all times to the rights of the Company's
general creditors.
(k) Definition of Change in Control. A "Change in Control" shall be
deemed to have occurred if, prior to the expiration of the term of this
Agreement:
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934) (other than Allianz Life
Insurance Company of North America and its affiliates or the Company or
any of its Subsidiaries or any employee benefit plan of the Company or
any of its Subsidiaries) becomes a beneficial owner, directly or
indirectly, of securities of the Company representing 20% or more of
the voting power of all of the Company's then outstanding securities,
except for issuances of shares approved by a majority of the Incumbent
Directors (as defined below) then in office; or
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors
of the Company (the "Incumbent Directors") together with any director
(the "New Incumbent Director") whose nomination or election was
approved by at least two-thirds of the Incumbent Directors and any New
Incumbent Director who was previously elected, in each case who are
directors at the time of the nomination or election of such director
cease, for any reason to constitute at least a majority of the Board of
Directors of the Company; or
(iii) the shareholders of the Company approve the sale of all,
or substantially all, of the business or assets of the Company or the
liquidation or dissolution of the Company.
5. Confidentiality; Non-Solicitation Covenant; and Covenant Not to
Compete.
(a) Confidentiality. The Executive agrees that, at all times, both
during the Executive's employment and after the termination thereof, the
Executive shall not divulge to any other person, firm or corporation, or in any
way use for the Executive's own benefit, except as required in the conduct of
the business of the Company or any of its Subsidiaries or as authorized
in writing on behalf of the Company, any trade secrets or confidential
information of the Company or its Subsidiaries obtained during the course of the
Executive's employment with the Company or its Subsidiaries. The Executive also
agrees that the Executive will not, either subsequent to termination of
employment or during employment, except as required in the conduct of the
business of the Company or any of its Subsidiaries, or as authorized in writing
on behalf of the Company, interfere with or disturb or attempt to interfere with
or disturb any employment, contractual or business arrangements of the Company
or any of its Subsidiaries with any of its employees, agents, suppliers,
customers, reinsurers or other parties with which the Company or any of its
Subsidiaries has a contractual relationship, as the case may be.
(b) Non-Solicitation Covenant. While the Executive is actively employed
with the Company and, in the event of a termination of employment with the
Company for any reason, for a period of two years after the Termination Date,
the Executive agrees that, except with the prior written permission of the Board
of Directors of the Company, the Executive will not offer to hire, entice away,
or in any manner attempt to persuade any officer, employee, or agent of the
Company or any of the Subsidiaries to discontinue his or her relationship with
the Company or any of the Subsidiaries nor will the Executive directly or
indirectly solicit, divert, take away or attempt to solicit any business of the
Company or any of its Subsidiaries as to which Executive has acquired any
knowledge during the term of the Executive's employment with the Company.
(c) Covenant Not to Compete. The Executive acknowledges and agrees with
the Company that during the course of the Executive's employment with the
Company, the Executive has had and will continue to have the opportunity to
develop relationships with existing employees, customers and other business
associates of the Company and the Subsidiaries, which relationships constitute
goodwill of the Company, and the Executive acknowledges and agrees that the
Company would be irreparably damaged if the Executive were to take actions that
would damage or misappropriate such goodwill. The Executive acknowledges that
the Company and its Subsidiaries currently engages, throughout the United States
(the "Territory"), the business of the development, sale, marketing and
administration of life insurance, annuities and extended care insurance products
(the "Subject Business"). Accordingly, during the term of the Executive's
employment with the Company and (i) prior to a Change of Control and in the case
of a voluntary termination by the Executive under paragraph 4(d) or a
termination by the Company for Cause under paragraph 4(b), the balance of the
term of this Agreement under paragraph 2 as if no termination of employment
occurred but notice of termination of the automatic extension was given either
by the Executive at the time of his notice of voluntary resignation or given by
the Company at the time of its notice of termination for Cause, or (ii) after a
Change in Control, one year after the Termination Date (the "Noncompete
Period"), the Executive shall not, directly or indirectly, enter into, engage
in, assist, give or lend funds to or otherwise finance, be employed by or
consult with, or have a financial or other interest in, any business which
engages in the Subject Business, whether for or by himself or as an independent
contractor, agent, stockholder, partner or joint venturer for any other person,
provided that the aggregate ownership by the Executive of no more than two
percent of the outstanding equity securities of any person, which securities are
traded on a national or foreign securities exchange, quoted on the Nasdaq Stock
Market or other automated quotation system or, in the case of the Company, of no
more than ten
percent of the Company's outstanding equity securities shall not be deemed to be
giving or lending funds to, otherwise financing or having a financial interest
in a competitor. In the event that any person in which the executive has any
financial or other interest directly or indirectly enters into the Subject
Business in the Territory during the Noncompete Period, the Executive shall
divest all of his interest (other than any amount permitted under this
paragraph) in such person within 30 days after such person enters into the
Subject Business in the Territory.
(d) Remedies. If the Executive commits a breach, or threatens to commit
a breach, of any of the provisions of this paragraph 5, the Company shall have
the following rights and remedies, in addition to any rights and remedies
otherwise available at law or equity:
(i) The right and remedy to have the provisions of this
paragraph 5 specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed by the Executive that
any such breach or threatened breach will cause irreparable injury to
the Company and the Subsidiaries and that money damages will not
provide an adequate remedy to the Company and the Subsidiaries; and
(ii) The right and remedy to require the Executive to account
for and pay over to the Company all compensation, profits, monies,
accruals, increments, or other benefits, other than those payable under
this Agreement, derived or received by the Executive or the enterprise
in competition with the Company or any of the Subsidiaries as the
result of any transactions constituting a breach of any part of this
paragraph 5, and Executive agrees to account for and pay over to the
Company such amounts promptly upon demand therefor.
6. Beneficiaries. In the event of the Executive's death after
termination of employment, any amount or benefit payable or distributable to him
pursuant to this Agreement shall be paid to the beneficiary designated by the
Executive for such purpose in the last written instrument received by the
Company prior to the Executive's death, if any, or, if no beneficiary has been
designated, to the Executive's estate, but such designation shall not be deemed
to supersede any beneficiary designation under any benefit plan of the Company.
Whenever this Agreement provides for the written designation of a beneficiary or
beneficiaries of the Executive, the Executive shall have the right to revoke
such designation and to redesignate a beneficiary or beneficiaries by written
notice to either the Company to such effect, except to the extent, if any,
restricted by law.
7. Rights in the Event of Dispute. In the event of a dispute between
the Company and the Executive regarding the Executive's employment or this
Agreement, it is the intention of this Agreement that the dispute shall be
resolved as expeditiously as possible, consistent with fairness to both sides,
and that during pendency of the dispute the Executive and the Company shall be
on equal footing, as follows:
(a) Arbitration. Any claim or dispute relating to the Executive's
employment or the terms and performance of this Agreement (other than
enforcement of paragraph 5) shall be
resolved by binding private arbitration before three arbitrators, and any award
rendered by any arbitration panel, or a majority thereof, may be filed and a
judgment obtained in any court having jurisdiction over the parties unless the
relief granted in the award is delivered within ten (10) days of the award.
Either party may request arbitration by written notice to the other party.
Within thirty (30) days of receipt of such notice by the opposing party, each
party shall appoint a disinterested arbitrator and the two arbitrators selected
thereby shall appoint a third neutral arbitrator; in the event the two
arbitrators cannot agree upon the third arbitrator within ten (10) days after
their appointment, then the neutral arbitrator shall be appointed by the Chief
Judge of Hennepin County (Minnesota) District Court. Any arbitration proceeding
conducted hereunder shall be in the City of Minneapolis and shall follow the
procedures set forth in the Rules of Commercial Arbitration of the American
Arbitration Association, and both sides shall cooperate in as expeditious a
resolution of the proceeding as is reasonable under the circumstances. The
arbitration panel shall have the power to enter any relief it deems fair and
just on any claim, including interim and final equitable relief, along with any
procedural order that is reasonable under the circumstances.
(b) Expenses of Prosecution/Defense of Claim. During the pendency of a
dispute between the Company and the Executive relating to the Executive's
employment or the terms or performance of this Agreement, the Company shall
promptly pay the Executive's reasonable expenses of representation upon delivery
of periodic xxxxxxxx for same, provided that (i) Executive (or a person claiming
on the Executive's behalf) shall promptly repay all amounts paid hereunder at
the conclusion of the dispute if the resolution thereof includes a finding that
the Executive did not act in good faith in the matter in dispute or in the
dispute proceeding itself, and (ii) no claim for expenses of representation
shall be submitted by the Executive or any person acting on the Executive's
behalf unless made in writing to the Board of Directors within one year of the
performance of the services for which such claim is made.
8. No Obligation to Mitigate Damages. In the event the Executive
becomes eligible to receive compensation or benefits subsequent to the
termination of the Executive's employment under this Agreement, the Executive
shall have no obligation to seek other employment in an effort to mitigate
damages. To the extent the Executive shall accept other employment after the
Executive's termination of employment, the compensation and benefits received
from such employment shall not reduce the compensation and benefits otherwise
due under this Agreement, except as provided in paragraph 4(f)(iii) above.
9. Other Benefits. The benefits provided under this Agreement shall,
except to the extent otherwise specifically provided herein, be in addition to,
and not in derogation or diminution of, any benefits that Executive or the
Executive's beneficiary may be entitled to receive under any other plan or
program now or hereafter maintained by the Company, or its Subsidiaries.
10. Successors. The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Company, to expressly
assume and agree to perform its obligations under this
Agreement in the same manner and to the same extent that the Company would be
required to perform them if no succession had taken place unless, in the opinion
of legal counsel mutually acceptable to the Company and the Executive, such
obligations have been assumed by the successor as a matter of law. Failure of
the Company to obtain such agreement prior to the effectiveness of any such
succession (unless the foregoing opinion is rendered to the Executive) shall
entitle the Executive to terminate the Executive's employment and to receive the
payments provided for in paragraphs 4(f), 4(g) and 4(h), as the case may be, as
if the Executive terminated this Agreement for Good Reason. The Executive's
rights under this Agreement shall inure to the benefit of, and shall be
enforceable by, the Executive's legal representative or other successors in
interest, but shall not otherwise be assignable or transferable. The Company's
rights under this Agreement shall inure to the benefit of, and shall be
enforceable by, the Company's successors and assigns, including any person which
may acquire LifeUSA.
11. Severability. If any provision of this Agreement or the application
thereof is held invalid or unenforceable, the invalidity or unenforceability
thereof shall not affect any other provisions or applications of this Agreement
which can be given effect without the invalid or unenforceable provision or
application.
12. Survival. The rights and obligations of the parties pursuant to
this Agreement shall survive the term of the employment to the extent that any
performance is required hereunder after the expiration or termination of such
term.
13. Notices. All notices under this Agreement shall be in writing and
shall be deemed effective when delivered in person (in the Company's case, to
its Secretary) or 48 hours after deposit thereof in the U.S. mails, postage
prepaid, addressed, in the case of the Executive, to the Executive's last known
address as carried on the personnel records of the Company and, in the case of
the Company, to the corporate headquarters, attention of the Secretary, or to
such other address as the party to be notified may specify by written notice to
the other party.
14. Amendments and Construction. This Agreement may only be amended in
a writing signed by the parties hereto. This Agreement shall be construed under
the laws of the State of Minnesota. Paragraph headings are for convenience only
and shall not be considered a part of the terms and provisions of the Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first written above.
LIFE USA HOLDING, INC.
By
-------------------------------
Xxxxxx X. XxxXxxxxx, Chairman
and Chief Executive Officer
---------------------------------
Xxxxxx X. Xxxxx
EXHIBIT D
FORM OF AMENDMENT TO EMPLOYMENT AGREEMENT FOR XXXX X. XXXXXXXX
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT is made and entered into as of
January 1, 1998 between LIFE USA HOLDING, INC., a Minnesota corporation (the
"Company"), and XXXX X. XXXXXXXX (the "Executive").
R E C I T A L S:
WHEREAS, the Company and the Executive have entered into the employment
agreement dated as of January 1, 1997 (the "1997 Agreement");
WHEREAS, in connection with the anticipated investment in the Company
by Allianz Life Insurance Company of North America ("Allianz") pursuant to the
stock purchase agreement dated as of January 13, 1998 (the "Allianz Agreement")
between the Company and Allianz, Allianz has requested certain changes in the
1997 Agreement;
WHEREAS, the Executive desires to facilitate the investment by Allianz
in the Company by amending and restating the 1997 Agreement in its entirety as
set forth in this Agreement; and
WHEREAS, Allianz has agreed to purchase certain shares of the Company's
common stock owned by Executive pursuant to the stock purchase agreement dated
January 13, 1998 between Allianz and Executive, and, as a condition of Allianz's
obligations thereunder, Executive has agreed to enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and agreements
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Employment and Duties. The parties hereby agree that, during the
term of this Agreement as set forth in paragraph 2 below, the Executive shall be
employed as Executive Vice President and Chief Financial Officer of the Company
with the duties and responsibilities attendant to such position. In discharging
such duties and responsibilities, the Executive may also serve as an executive
officer and/or director of any direct or indirect subsidiary of the Company
(collectively the "Subsidiaries"). The salary, other compensation and benefits
provided herein may be allocated among the Company and the Subsidiaries based
upon the portion of the Executive's services provided to the Company and each of
the Subsidiaries, respectively, and the Executive shall assist the Company in
making such allocation as the Company may reasonably request. During the term of
this Agreement, the Executive shall apply on a full-time basis (allowing for
usual vacations and sick leave) all of the Executive's skill and experience to
the performance of the Executive's duties hereunder with the Company and the
Subsidiaries. It is understood that the Executive may have other business
investments and participate in charitable organizations which may, from time to
time, require minor portions of Executive's time, but which shall not interfere
or be inconsistent with the Executive's duties under this Agreement.
The Executive shall perform the Executive's duties at the Company's principal
executive offices in Minneapolis, Minnesota or at such other location as may be
mutually agreed upon by the Executive and the Company; provided that the
Executive shall travel to other locations at such times as may be necessary for
the performance of the Executive's duties under this Agreement.
2. Term of Employment. Unless sooner terminated as provided in
paragraph 4 below, the term of this Agreement shall commence on the date hereof
and shall continue through December 31, 2000; provided that the term shall be
automatically extended for one year on each December 31st commencing December
31, 1998 unless either party gives written notice to the other prior to the date
on which the automatic extension would be effective; provided that the term
shall not be extended beyond Executive's sixty-fifth (65th) birthday.
3. Compensation and Benefits. During the term of this Agreement, the
Executive shall be entitled to the following compensation and benefits for
service to the Company and the Subsidiaries, including service as a director of
the Company or its Subsidiaries:
(a) Base Salary. The Executive shall be paid a base salary at a minimum
annual rate of $268,750, payable in accordance with the Company's customary
payroll policy, which salary shall be reviewed and may be increased from time to
time at the discretion of the Board of Directors of the Company or the
Compensation Committee of the Board of Directors (the "Base Salary"); provided
that the amount of the Base Salary shall not be reduced after it has been
increased by the Board of Directors or the Compensation Committee without the
Executive's written consent. The performance of the Executive shall be reviewed
at least once each calendar year which may be at the same time as any adjustment
to the Base Salary of Executive.
(b) Bonus. The Executive shall, in addition to the Base Salary, also be
entitled to a cash annual bonus (the "Annual Bonus") based on the achievement by
the Company of performance goals established by the Board of Directors or the
Compensation Committee of the Company's Board of Directors.
(c) Stock Incentives. The Executive shall be eligible to receive stock
options under any stock based plan from time to time adopted by the Company (the
"Stock Plans"), as from time to time determined by the Board of Directors or
Stock Option Committee of the Company's Board of Directors.
(d) Reimbursement of Expenses. The Company shall reimburse the
Executive for all business expenses properly documented in accordance with the
Company's expense reimbursement policy.
(e) Other Benefits. The Executive shall be entitled to participate and
shall be included in any employee benefit plan, medical/dental coverage plan,
life insurance plan, disability coverage plan, or similar benefit plan of the
Company now existing or established hereafter which are generally applicable to
executives of the Company.
4. Termination of Employment.
(a) Death or Disability. In the event of the Executive's death or
disability (as defined in the Company's long term disability plan then in
effect), the employment of the Executive hereunder shall terminate and the
Company's obligation to make further Base Salary and Annual Bonus (to the extent
not yet earned) payments hereunder shall thereupon terminate as of the end of
the month in which such death or disability occurs. The Executive's rights to
other compensation and benefits shall be determined under the Company's benefit
plans and policies applicable to Company executives then in effect.
(b) Termination for Cause by the Company. By following the procedure
set forth in paragraph 4(e), the Company shall have the right to terminate the
employment of the Executive for "Cause" in the event the Executive: (i) has
repeatedly failed to perform the Executive's duties under this Agreement, which
failure is willful and deliberate; (ii) has engaged in an act or acts of
dishonesty which is or are intended to result in substantial personal enrichment
for the Executive; (iii) has knowingly engaged in conduct which is materially
injurious to the Company; (iv) is convicted of, or pleads nolo contendere to (A)
any felony (other than any felony arising out of negligence), or (B) any crime
or offense involving dishonesty with respect to the Company or any of the
Subsidiaries; (v) has failed to comply with the covenants contained in paragraph
5 of this Agreement; or (vi) knowingly provides materially misleading
information concerning the Company to the Board of Directors of the Company or
any of its Subsidiaries, any governmental body or regulatory agency or to any
lender or other financing source or proposed financing source of the Company or
its Subsidiaries. If the employment of the Executive is terminated by the
Company for Cause, the Company's obligation to make further Base Salary and
Annual Bonus (to the extent not yet earned) payments hereunder shall thereupon
terminate, except the Executive shall receive the Base Salary through the end of
the month during which such a termination occurs. The Executive's rights to
other compensation and benefits shall be determined under the Company's benefit
plans and policies applicable to executives of the Company then in effect.
(c) Termination for Good Reason by the Executive. By following the
procedure set forth in paragraph 4(e), the Executive shall have the right to
terminate the Executive's employment with the Company for "Good Reason" in the
event (i) the Executive is not at all times a duly elected Executive Vice
President and Chief Financial Officer of the Company; (ii) there is any material
reduction in the scope of the Executive's authority and responsibility; (iii)
there is a reduction in the Executive's Base Salary, a material reduction in the
amount of Annual Bonus for which the Executive is eligible, an amendment to any
Stock Plan or employee retirement plan applicable to the Executive which is
materially adverse to the Executive, or a material reduction in the other
benefits to which the Executive is entitled under paragraph 3(e) above; (iv) the
Company requires the Executive's principal place of employment to be anywhere
other than the Company's principal executive offices, or there is a relocation
of the Company's principal executive offices outside of the Minneapolis/St.
Xxxx, Minnesota metropolitan area; or (v) the Company otherwise fails to perform
its obligations under this Agreement. If the employment of the Executive is
terminated by the Executive for Good Reason before a Change
in Control (as defined below) or following twenty-four (24) months after a
Change in Control, the Executive shall be entitled to the severance benefits set
forth in paragraph 4(f) below. If the employment of the Executive is terminated
by the Executive for Good Reason upon or within (and including) twenty-four (24)
months after a Change in Control, the Executive shall be entitled to the
severance benefits set forth in paragraph 4(g) below. In addition, in the event
a Change in Control has occurred and the Executive elects upon ten (10) days
prior notice to the Company to terminate employment with the Company within the
sixty (60) day period following the first anniversary of the Change in Control,
such termination shall be considered a termination by the Executive for Good
Reason and the Executive shall be entitled to the severance benefits under
paragraph 4(g) below.
(d) Termination Without Cause. The Company may terminate the
Executive's employment without Cause prior to the expiration of the term of this
Agreement. If the employment of the Executive is terminated by the Company
without Cause before a Change in Control or following twenty-four (24) months
after a Change in Control, the Executive shall be entitled to the severance
benefits set forth in paragraph 4(f) below. If the employment of the Executive
is terminated by the Company without Cause upon or within (and including)
twenty-four (24) months after a Change in Control, the Executive shall be
entitled to the severance benefits set forth in paragraph 4(g) below.
(e) Notice and Right to Cure.
(i) Termination by Company for Cause. If the Company proposes
to terminate the employment of the Executive for Cause under paragraph
4(b), the Company shall give written notice to the Executive specifying
the reasons for such proposed determination with particularity and, in
the case of a termination for Cause under paragraph 4(b)(i), the
Executive shall have a reasonable opportunity to correct any curable
situation to the reasonable satisfaction of the Board of Directors of
the Company, which period shall be no less than thirty (30) days from
the Executive's receipt of the notice of proposed termination.
Notwithstanding the foregoing, the Executive's employment shall not be
terminated for Cause unless and until there shall be delivered to the
Executive a copy of the resolution duly adopted by the affirmative vote
of not less than the majority of the members of the Board of Directors
of the Company at a meeting called and held for the purpose (after
reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive's legal counsel, to be heard
before the Board of Directors) finding that, in the opinion of the
Company's Board of Directors, the Executive has engaged in conduct
justifying a termination for Cause.
(ii) Termination by Executive for Good Reason. If the
Executive proposes to terminate the Executive's employment for Good
Reason under paragraph 4(c) above (other than the last sentence of
paragraph 4(c) above), the Executive shall give written notice to the
Company, specifying the reason therefor with particularity. In the
event the Executive proposes to terminate employment for Good Reason
under paragraph 4(c)(i), (ii), (iii) or (iv) above, the termination
shall be effective on the date of such notice. In the event the
Executive proposes to terminate employment for Good Reason under
paragraph 4(c)(v) above, the Company will have an opportunity to
correct any curable situation to the reasonable satisfaction of the
Executive within the period of time specified in the notice which shall
not be less than thirty (30) days. If such correction is not so made or
the circumstances or situation is such that it is not curable, the
Executive may, within thirty (30) days after the expiration of the time
so fixed within which to correct such situation, give written notice to
the Company that the Executive's employment is terminated for Good
Reason effective forthwith.
(f) Severance Benefits. If the Executive is entitled to severance
benefits under this paragraph 4(f) pursuant to paragraph 4(c) or (d) prior to a
Change in Control or following twenty-four months after a Change in Control, the
Executive shall be provided the following benefits (regardless of the death or
disability of the Executive after the Termination Date):
(i) Base Salary. The Company shall continue to pay to the
Executive the Base Salary when and as such Base Salary would have been
paid from the date of termination (the "Termination Date") through the
end of the term of this Agreement under paragraph 2 as if such
termination did not occur and there were no further automatic
extensions of the term pursuant to paragraph 2 (the "Severance Period")
as if the Executive continued to be employed by the Company during the
Severance Period and regardless of the death or disability of the
Executive subsequent to the Termination Date.
(ii) Annual Bonus. If the effective date of such termination
occurs before the Annual Bonus for any preceding calendar year has been
paid, the Company shall, within thirty (30) days after the Termination
Date, pay to the Executive the amount of the Executive's Annual Bonus
for such preceding calendar year when and as it would have been paid if
the Executive remained employed by the Company. In addition, for each
calendar year within the Severance Period (including the calendar year
in which the Termination Date occurs), the Company shall, within thirty
(30) days after the end of each such calendar year, pay the Executive a
bonus equal to the Deemed Bonus (as defined below). The "Deemed Bonus"
shall be an amount equal to (A) prior to a Change in Control, the
average of the Annual Bonus paid to the Executive for the two complete
calendar years prior to the Termination Date, or (B) upon or after a
Change in Control, the greater of (x) the average of the Annual Bonus
paid to the Executive for the calendar year(s) after the Change in
Control (including the calendar year in which a Change in Control
occurs) or (y) the average of the Annual Bonus paid or payable to the
Executive in respect of the two calendar years immediately preceding
the calendar year in which the Change in Control occurs.
(iii) Disability, Life Insurance and Medical/Dental Coverage.
The Executive shall be entitled to the disability coverage, life
insurance and medical/dental coverage which the Executive and the
Executive's family received under paragraph 3(e) as if the Executive
continued to be employed by the Company during the Severance Period;
provided that if Executive obtains new employment with comparable
benefits during the
Severance Period, all entitlements under this paragraph 4(f)(iii) shall
cease. Nothing in this paragraph shall be construed as providing
Executive with coverage under any plan of the Company to which
Executive would not otherwise be entitled and in the event any coverage
is unavailable (e.g., if Executive is uninsurable), the Company's
obligations under this paragraph may be satisfied by paying to
Executive the cost of such coverage if it were available, as determined
in good faith by the Company.
(iv) Stock Options. Not later than thirty (30) days after the
date on which the Executive's employment terminates, the Company shall
pay the Executive a lump sum cash payment equal to the amount by which
the fair market value (determined as of the Termination Date) of the
number of shares of stock subject to any stock option granted under the
Stock Plans which was not exercisable on the Termination Date and which
would have become vested and exercisable during the Severance Period if
the Executive had remained employed by the Company during the Severance
Period.
(g) Severance Benefits for Change in Control. In the event of a Change
in Control and either upon or within (and including) twenty-four (24) months
after such Change in Control, the Executive terminates employment for Good
Reason or the Executive's employment is terminated by the Company for any reason
other than Cause, then (regardless of the death or disability of the Executive
after the Termination Date) the Company shall pay the Executive a lump sum cash
payment within five (5) days after the Termination Date, in an amount equal to
the amounts referred to in paragraph 4(f)(i), (ii) and (iv), plus the amount of
the Deemed Bonus (as defined below), and the Company shall also provide the
Executive the severance benefits referred to in paragraph 4(f)(iii) as provided
therein.
(h) Excise Tax Gross-Up. If Executive is subject to any Excise Tax (as
defined below) as a result of the severance payments and/or benefits to which
Executive is entitled under paragraphs 4(f) or 4(g), the Company shall also pay
the Executive the Gross-Up Payment in accordance with the following provisions:
(i) Gross-Up Payment. Anything to the contrary
notwithstanding, in the event it shall be determined that any payment,
distribution or benefit made or provided by the Company to or for the
benefit of the Executive (whether pursuant to this Agreement or
otherwise) (a "Payment"), would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended, (the
"Code") or any interest or penalties with respect to such excise tax
(such excise tax, together with any such interest and penalties, are
collectively referred to as the "Excise Tax"), then the Company shall
pay the Executive in cash an amount (the "Gross-Up Payment") such that
after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including but not
limited to income taxes (and any interest and penalties imposed with
respect thereto) and the Excise Tax, imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-up Payment equal to the
Excise Tax imposed on the Payments.
(ii) Determination of Gross-Up Payment. Subject to paragraph
4(h)(iii) below, all determinations required to be made under paragraph
4(h)(i), including whether a Gross-Up Payment is required and the
amount of the Gross-Up Payment, shall be made by the firm of
independent public accountants selected by the Company to audit its
financial statements for the year immediately preceding the Change in
Control (the "Accounting Firm") which shall provide detailed supporting
calculations to the Company and the Executive within thirty (30) days
after the Termination Date. In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations
required under this paragraph 4(h) (which accounting firm shall then be
referred to as the "Accounting Firm"). All fees and expenses of the
Accounting Firm in connection with the work it performs pursuant to
this paragraph 4(h) shall be promptly paid by the Company. Any Gross-Up
Payment (as determined pursuant to paragraph 4(h)(i) above) shall be
paid by the Company to the Executive within five (5) days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall
furnish the Executive with a written opinion that failure to report the
Excise Tax on the Executive's applicable federal income tax return
would not result in the imposition of a negligence or a similar
penalty. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm, it is possible that Gross-up
Payments which will not have been made by the Company should have been
made ("Underpayment"). In the event that the Company exhausts its
remedies pursuant to paragraph 4(h)(iii) below, and the Executive is
thereafter required to make a payment of Excise Tax, the Accounting
Firm shall promptly determine the amount of the Underpayment that has
occurred and any such Underpayment shall be paid by the Company to the
Executive within five (5) days after such determination.
(iii) Contest. The Executive shall notify the Company in
writing of any claim made by the Internal Revenue Service that, if
successful, would require the Company to pay a Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than
ten (10) business days after the Executive knows of such claim and
shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the thirty (30) day period
following the date on which it gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to
contest such claim, the Employee shall:
(A) give the Company any information reasonably
requested by the Company relating to such claim;
(B) take such action in connection with contesting
such claim as the Company shall reasonably request in writing
from time to time, without limitation, accepting legal
representation with respect to such claim by an attorney
selected by the Company and reasonably acceptable to the
Executive;
(C) cooperate with the Company in good faith in order
effectively to contest such claim;
(D) permit the Company to participate in any
proceedings relating to such claim; provided, however, that
the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax
or income tax, including interest and penalties with respect
thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the
foregoing provisions of this paragraph 4(h)(iii), the Company
shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forego any and
all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim
and may, at its sole option, either direct the Executive to
pay the tax claimed and xxx for a refund or contest the claim
in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the
Executive to pay such claim and xxx for a refund, the Company
shall advance the amount of such payment to the Executive, on
an interest-free basis, from any Excise Tax or income tax,
including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that
any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable
hereunder, and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(iv) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to paragraph 4(h)(iii), the Executive
becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the
requirements of paragraph 4(h)(iii)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to paragraph
4(h)(iii), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does
not notify
the Executive in writing of its intent to contest such denial of refund
prior to the expiration of thirty (30) days after such determination,
then such advance shall be forgiven and shall not be required to be
repaid, and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
(i) Benefits in Lieu of Severance Pay Policy. The severance benefits
provided for in this paragraph 4 are in lieu of any benefits that would
otherwise be provided to the Executive under the Company's severance pay policy
and the Executive shall not be entitled to any benefits under the Company's
severance pay policy.
(j) No Funding of Severance. Nothing contained in this Agreement or
otherwise shall require the Company to segregate, earmark or otherwise set aside
any funds or other assets to provide for any payments required to be made under
this paragraph 4 and the rights of the Executive to the severance benefits
hereunder shall be solely those of a general, unsecured creditor of the Company.
However, the Company may, in its discretion, deposit cash or property, or a
combination of both, equal in value to all or a portion of the amounts
anticipated to be payable hereunder into a trust, the assets of which are to be
distributed by such times as determined by the trustee of such trust; provided
that such assets shall be subject at all times to the rights of the Company's
general creditors.
(k) Definition of Change in Control. A "Change in Control" shall be
deemed to have occurred if, prior to the expiration of the term of this
Agreement:
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934) (other than Allianz Life
Insurance Company of North America and its affiliates or the Company or
any of its Subsidiaries or any employee benefit plan of the Company or
any of its Subsidiaries) becomes a beneficial owner, directly or
indirectly, of securities of the Company representing 20% or more of
the voting power of all of the Company's then outstanding securities,
except for issuances of shares approved by a majority of the Incumbent
Directors (as defined below) then in office; or
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors
of the Company (the "Incumbent Directors") together with any director
(the "New Incumbent Director") whose nomination or election was
approved by at least two-thirds of the Incumbent Directors and any New
Incumbent Director who was previously elected, in each case who are
directors at the time of the nomination or election of such director
cease, for any reason to constitute at least a majority of the Board of
Directors of the Company; or
(iii) the shareholders of the Company approve the sale of all,
or substantially all, of the business or assets of the Company or the
liquidation or dissolution of the Company.
5. Confidentiality; Non-Solicitation Covenant; and Covenant Not to
Compete.
(a) Confidentiality. The Executive agrees that, at all times, both
during the Executive's employment and after the termination thereof, the
Executive shall not divulge to any other person, firm or corporation, or in any
way use for the Executive's own benefit, except as required in the conduct of
the business of the Company or any of its Subsidiaries or as authorized in
writing on behalf of the Company, any trade secrets or confidential information
of the Company or its Subsidiaries obtained during the course of the Executive's
employment with the Company or its Subsidiaries. The Executive also agrees that
the Executive will not, either subsequent to termination of employment or during
employment, except as required in the conduct of the business of the Company or
any of its Subsidiaries, or as authorized in writing on behalf of the Company,
interfere with or disturb or attempt to interfere with or disturb any
employment, contractual or business arrangements of the Company or any of its
Subsidiaries with any of its employees, agents, suppliers, customers, reinsurers
or other parties with which the Company or any of its Subsidiaries has a
contractual relationship, as the case may be.
(b) Non-Solicitation Covenant. While the Executive is actively employed
with the Company and, in the event of a termination of employment with the
Company for any reason, for a period of two years after the Termination Date,
the Executive agrees that, except with the prior written permission of the Board
of Directors of the Company, the Executive will not offer to hire, entice away,
or in any manner attempt to persuade any officer, employee, or agent of the
Company or any of the Subsidiaries to discontinue his or her relationship with
the Company or any of the Subsidiaries nor will the Executive directly or
indirectly solicit, divert, take away or attempt to solicit any business of the
Company or any of its Subsidiaries as to which Executive has acquired any
knowledge during the term of the Executive's employment with the Company.
(c) Covenant Not to Compete. The Executive acknowledges and agrees with
the Company that during the course of the Executive's employment with the
Company, the Executive has had and will continue to have the opportunity to
develop relationships with existing employees, customers and other business
associates of the Company and the Subsidiaries, which relationships constitute
goodwill of the Company, and the Executive acknowledges and agrees that the
Company would be irreparably damaged if the Executive were to take actions that
would damage or misappropriate such goodwill. The Executive acknowledges that
the Company and its Subsidiaries currently engages throughout the United States
(the "Territory"), the business of the development, sale, marketing and
administration of life insurance, annuities and extended care insurance products
(the "Subject Business"). Accordingly, during the term of the Executive's
employment with the Company and (i) prior to a Change of Control, and in the
case of a voluntary termination by the Executive under paragraph 4(d) or a
termination by the Company for Cause under paragraph 4(b), the balance of the
term of this Agreement under paragraph 2 as if no termination of employment
occurred but notice of termination of the automatic extension was given either
by the Executive at the time of his notice of voluntary resignation or given by
the Company at the time of its notice of termination for Cause, or (ii) after a
Change in Control, one year after the Termination Date (the "Noncompete
Period"), the Executive shall not, directly or indirectly, enter into, engage
in, assist, give or lend funds to or otherwise finance, be employed by or
consult with, or have a financial or other interest in, any business which
engages in the Subject Business, whether for or by himself or as an independent
contractor, agent, stockholder,
partner or joint venturer for any other person, provided that the aggregate
ownership by the Executive of no more than two percent of the outstanding equity
securities of any person, which securities are traded on a national or foreign
securities exchange, quoted on the Nasdaq Stock Market or other automated
quotation system or, in the case of the Company, of no more than ten percent of
the Company's outstanding equity securities shall not be deemed to be giving or
lending funds to, otherwise financing or having a financial interest in a
competitor. In the event that any person in which the executive has any
financial or other interest directly or indirectly enters into the Subject
Business in the Territory during the Noncompete Period, the Executive shall
divest all of his interest (other than any amount permitted under this
paragraph) in such person within 30 days after such person enters into the
Subject Business in the Territory.
(d) Remedies. If the Executive commits a breach, or threatens to commit
a breach, of any of the provisions of this paragraph 5, the Company shall have
the following rights and remedies, in addition to any rights and remedies
otherwise available at law or equity:
(i) The right and remedy to have the provisions of this
paragraph 5 specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed by the Executive that
any such breach or threatened breach will cause irreparable injury to
the Company and the Subsidiaries and that money damages will not
provide an adequate remedy to the Company and the Subsidiaries; and
(ii) The right and remedy to require the Executive to account
for and pay over to the Company all compensation, profits, monies,
accruals, increments, or other benefits, other than those payable under
this Agreement, derived or received by the Executive or the enterprise
in competition with the Company or any of the Subsidiaries as the
result of any transactions constituting a breach of any part of this
paragraph 5, and Executive agrees to account for and pay over to the
Company such amounts promptly upon demand therefor.
6. Beneficiaries. In the event of the Executive's death after
termination of employment, any amount or benefit payable or distributable to him
pursuant to this Agreement shall be paid to the beneficiary designated by the
Executive for such purpose in the last written instrument received by the
Company prior to the Executive's death, if any, or, if no beneficiary has been
designated, to the Executive's estate, but such designation shall not be deemed
to supersede any beneficiary designation under any benefit plan of the Company.
Whenever this Agreement provides for the written designation of a beneficiary or
beneficiaries of the Executive, the Executive shall have the right to revoke
such designation and to redesignate a beneficiary or beneficiaries by written
notice to either the Company to such effect, except to the extent, if any,
restricted by law.
7. Rights in the Event of Dispute. In the event of a dispute between
the Company and the Executive regarding the Executive's employment or this
Agreement, it is the intention of this Agreement that the dispute shall be
resolved as expeditiously as possible, consistent with
fairness to both sides, and that during pendency of the dispute the Executive
and the Company shall be on equal footing, as follows:
(a) Arbitration. Any claim or dispute relating to the Executive's
employment or the terms and performance of this Agreement (other than
enforcement of paragraph 5) shall be resolved by binding private arbitration
before three arbitrators, and any award rendered by any arbitration panel, or a
majority thereof, may be filed and a judgment obtained in any court having
jurisdiction over the parties unless the relief granted in the award is
delivered within ten (10) days of the award. Either party may request
arbitration by written notice to the other party. Within thirty (30) days of
receipt of such notice by the opposing party, each party shall appoint a
disinterested arbitrator and the two arbitrators selected thereby shall appoint
a third neutral arbitrator; in the event the two arbitrators cannot agree upon
the third arbitrator within ten (10) days after their appointment, then the
neutral arbitrator shall be appointed by the Chief Judge of Hennepin County
(Minnesota) District Court. Any arbitration proceeding conducted hereunder shall
be in the City of Minneapolis and shall follow the procedures set forth in the
Rules of Commercial Arbitration of the American Arbitration Association, and
both sides shall cooperate in as expeditious a resolution of the proceeding as
is reasonable under the circumstances. The arbitration panel shall have the
power to enter any relief it deems fair and just on any claim, including interim
and final equitable relief, along with any procedural order that is reasonable
under the circumstances.
(b) Expenses of Prosecution/Defense of Claim. During the pendency of a
dispute between the Company and the Executive relating to the Executive's
employment or the terms or performance of this Agreement, the Company shall
promptly pay the Executive's reasonable expenses of representation upon delivery
of periodic xxxxxxxx for same, provided that (i) Executive (or a person claiming
on the Executive's behalf) shall promptly repay all amounts paid hereunder at
the conclusion of the dispute if the resolution thereof includes a finding that
the Executive did not act in good faith in the matter in dispute or in the
dispute proceeding itself, and (ii) no claim for expenses of representation
shall be submitted by the Executive or any person acting on the Executive's
behalf unless made in writing to the Board of Directors within one year of the
performance of the services for which such claim is made.
8. No Obligation to Mitigate Damages. In the event the Executive
becomes eligible to receive compensation or benefits subsequent to the
termination of the Executive's employment under this Agreement, the Executive
shall have no obligation to seek other employment in an effort to mitigate
damages. To the extent the Executive shall accept other employment after the
Executive's termination of employment, the compensation and benefits received
from such employment shall not reduce the compensation and benefits otherwise
due under this Agreement, except as provided in paragraph 4(f)(iii) above.
9. Other Benefits. The benefits provided under this Agreement shall,
except to the extent otherwise specifically provided herein, be in addition to,
and not in derogation or diminution of, any benefits that Executive or the
Executive's beneficiary may be entitled to
receive under any other plan or program now or hereafter maintained by the
Company, or its Subsidiaries.
10. Successors. The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Company, to expressly
assume and agree to perform its obligations under this Agreement in the same
manner and to the same extent that the Company would be required to perform them
if no succession had taken place unless, in the opinion of legal counsel
mutually acceptable to the Company and the Executive, such obligations have been
assumed by the successor as a matter of law. Failure of the Company to obtain
such agreement prior to the effectiveness of any such succession (unless the
foregoing opinion is rendered to the Executive) shall entitle the Executive to
terminate the Executive's employment and to receive the payments provided for in
paragraphs 4(f), 4(g) and 4(h), as the case may be, as if the Executive
terminated this Agreement for Good Reason. The Executive's rights under this
Agreement shall inure to the benefit of, and shall be enforceable by, the
Executive's legal representative or other successors in interest, but shall not
otherwise be assignable or transferable. The Company's rights under this
Agreement shall inure to the benefit of, and shall be enforceable by, the
Company's successors and assigns, including any person which may acquire LifeUSA
Insurance Company.
11. Severability. If any provision of this Agreement or the application
thereof is held invalid or unenforceable, the invalidity or unenforceability
thereof shall not affect any other provisions or applications of this Agreement
which can be given effect without the invalid or unenforceable provision or
application.
12. Survival. The rights and obligations of the parties pursuant to
this Agreement shall survive the term of the employment to the extent that any
performance is required hereunder after the expiration or termination of such
term.
13. Notices. All notices under this Agreement shall be in writing and
shall be deemed effective when delivered in person (in the Company's case, to
its Secretary) or 48 hours after deposit thereof in the U.S. mails, postage
prepaid, addressed, in the case of the Executive, to the Executive's last known
address as carried on the personnel records of the Company and, in the case of
the Company, to the corporate headquarters, attention of the Secretary, or to
such other address as the party to be notified may specify by written notice to
the other party.
14. Amendments and Construction. This Agreement may only be amended in
a writing signed by the parties hereto. This Agreement shall be construed under
the laws of the State of Minnesota. Paragraph headings are for convenience only
and shall not be considered a part of the terms and provisions of the Agreement.
15. Amended and Restated Agreement. This Agreement amends and restates
in its entirety the 1997 Agreement and the 1997 Agreement shall have no further
force or effect.
IN WITNESS WHEREOF, the parties have duly executed this Amended and
Restated Agreement as of the day and year first written above.
LIFE USA HOLDING, INC.
By
--------------------------------
Xxxxxx X. XxxXxxxxx, Chairman
and Chief Executive Officer
-----------------------------------
Xxxx X. Xxxxxxxx
EXHIBIT E
FORM OF EMPLOYMENT AGREEMENT FOR XXXXXXX X. XXXXX
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of January 1, 1998 between
LIFE USA HOLDING, INC., a Minnesota corporation (the "Company"), and XXXXXXX X.
XXXXX (the "Executive").
R E C I T A L S:
WHEREAS, the Executive is now and has been the Senior Vice President -
Finance of the Company;
WHEREAS, the Executive and the Company wish to enter into this
Agreement to provide for the continued employment of Executive; and
WHEREAS, the Executive and the Company are willing to enter into this
Agreement upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual premises and agreements
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Employment and Duties. The parties hereby agree that, during the
term of this Agreement as set forth in paragraph 2 below, the Executive shall be
employed as the Senior Vice President - Finance of the Company with the duties
and responsibilities attendant to such position. In discharging such duties and
responsibilities, the Executive may also serve as an executive officer and/or
director of any direct or indirect subsidiary of the Company (collectively the
"Subsidiaries"). The salary, other compensation and benefits provided herein may
be allocated among the Company and the Subsidiaries based upon the portion of
the Executive's services provided to the Company and each of the Subsidiaries,
respectively, and the Executive shall assist the Company in making such
allocation as the Company may reasonably request. During the term of this
Agreement, the Executive shall apply on a full-time basis (allowing for usual
vacations and sick leave) all of the Executive's skill and experience to the
performance of the Executive's duties hereunder with the Company and the
Subsidiaries. It is understood that the Executive may have other business
investments and participate in charitable organizations which may, from time to
time, require minor portions of Executive's time, but which shall not interfere
or be inconsistent with the Executive's duties under this Agreement. The
Executive shall perform the Executive's duties at the Company's principal
executive offices in Minneapolis, Minnesota or at such other location as may be
mutually agreed upon by the Executive and the Company; provided that the
Executive shall travel to other locations at such times as may be necessary for
the performance of the Executive's duties under this Agreement.
2. Term of Employment. Unless sooner terminated as provided in
paragraph 4 below, the term of this Agreement shall commence on the date hereof
and shall continue through
December 31, 2000; provided that the term shall be automatically extended for
one year on each December 31st commencing December 31, 1998 unless either party
gives written notice to the other prior to the date on which the automatic
extension would be effective; provided that the term shall not be extended
beyond Executive's sixty-fifth (65th) birthday.
3. Compensation and Benefits. During the term of this Agreement, the
Executive shall be entitled to the following compensation and benefits for
service to the Company and the Subsidiaries, including service as a director of
the Company or its Subsidiaries:
(a) Base Salary. The Executive shall be paid a base salary at a minimum
annual rate of $200,000, payable in accordance with the Company's customary
payroll policy, which salary shall be reviewed and may be increased from time to
time at the discretion of the Board of Directors of the Company or the
Compensation Committee of the Board of Directors (the "Base Salary"); provided
that the amount of the Base Salary shall not be reduced after it has been
increased by the Board of Directors or the Compensation Committee without the
Executive's written consent. The performance of the Executive shall be reviewed
at least once each calendar year which may be at the same time as any adjustment
to the Base Salary of Executive.
(b) Bonus. The Executive shall, in addition to the Base Salary, also be
entitled to a cash annual bonus (the "Annual Bonus") based on the achievement by
the Company of performance goals established by the Board of Directors or the
Compensation Committee of the Company's Board of Directors.
(c) Stock Incentives. The Executive shall be eligible to receive stock
options under any stock based plan from time to time adopted by the Company (the
"Stock Plans"), as from time to time determined by the Board of Directors or
Stock Option Committee of the Company's Board of Directors.
(d) Reimbursement of Expenses. The Company shall reimburse the
Executive for all business expenses properly documented in accordance with the
Company's expense reimbursement policy.
(e) Other Benefits. The Executive shall be entitled to participate and
shall be included in any employee benefit plan, medical/dental coverage plan,
life insurance plan, disability coverage plan, or similar benefit plan of the
Company now existing or established hereafter which are generally applicable to
executives of the Company.
4. Termination of Employment.
(a) Death or Disability. In the event of the Executive's death or
disability (as defined in the Company's long term disability plan then in
effect), the employment of the Executive hereunder shall terminate and the
Company's obligation to make further Base Salary and Annual Bonus (to the extent
not yet earned) payments hereunder shall thereupon terminate as of the end of
the month in which such death or disability occurs. The Executive's rights to
other
compensation and benefits shall be determined under the Company's benefit plans
and policies applicable to Company executives then in effect.
(b) Termination for Cause by the Company. By following the procedure
set forth in paragraph 4(e), the Company shall have the right to terminate the
employment of the Executive for "Cause" in the event the Executive: (i) has
repeatedly failed to perform the Executive's duties under this Agreement, which
failure is willful and deliberate; (ii) has engaged in an act or acts of
dishonesty which is or are intended to result in substantial personal enrichment
for the Executive; (iii) has knowingly engaged in conduct which is materially
injurious to the Company; (iv) is convicted of, or pleads nolo contendere to (A)
any felony (other than any felony arising out of negligence), or (B) any crime
or offense involving dishonesty with respect to the Company or any of the
Subsidiaries; (v) has failed to comply with the covenants contained in paragraph
5 of this Agreement; or (vi) knowingly provides materially misleading
information concerning the Company to the Board of Directors of the Company or
any of its Subsidiaries, any governmental body or regulatory agency or to any
lender or other financing source or proposed financing source of the Company or
its Subsidiaries. If the employment of the Executive is terminated by the
Company for Cause, the Company's obligation to make further Base Salary and
Annual Bonus (to the extent not yet earned) payments hereunder shall thereupon
terminate, except the Executive shall receive the Base Salary through the end of
the month during which such a termination occurs. The Executive's rights to
other compensation and benefits shall be determined under the Company's benefit
plans and policies applicable to executives of the Company then in effect.
(c) Termination for Good Reason by the Executive. By following the
procedure set forth in paragraph 4(e), the Executive shall have the right to
terminate the Executive's employment with the Company for "Good Reason" in the
event (i) the Executive is not at all times a duly elected Senior Vice President
- Finance of the Company; (ii) there is any material reduction in the scope of
the Executive's authority and responsibility; (iii) there is a reduction in the
Executive's Base Salary, a material reduction in the amount of Annual Bonus for
which the Executive is eligible, an amendment to any Stock Plan or employee
retirement plan applicable to the Executive which is materially adverse to the
Executive, or a material reduction in the other benefits to which the Executive
is entitled under paragraph 3(e) above; (iv) the Company requires the
Executive's principal place of employment to be anywhere other than the
Company's principal executive offices, or there is a relocation of the Company's
principal executive offices outside of the Minneapolis/St. Xxxx, Minnesota
metropolitan area; or (v) the Company otherwise fails to perform its obligations
under this Agreement. If the employment of the Executive is terminated by the
Executive for Good Reason before a Change in Control (as defined below) or
following twenty-four (24) months after a Change in Control, the Executive shall
be entitled to the severance benefits set forth in paragraph 4(f) below. If the
employment of the Executive is terminated by the Executive for Good Reason upon
or within (and including) twenty-four (24) months after a Change in Control, the
Executive shall be entitled to the severance benefits set forth in paragraph
4(g) below. In addition, in the event a Change in Control has occurred and the
Executive elects upon ten (10) days prior notice to the Company to terminate
employment with the Company within the sixty (60) day period following the first
anniversary of the Change
in Control, such termination shall be considered a termination by the Executive
for Good Reason and the Executive shall be entitled to the severance benefits
under paragraph 4(g) below.
(d) Termination Without Cause. The Company may terminate the
Executive's employment without Cause prior to the expiration of the term of this
Agreement. If the employment of the Executive is terminated by the Company
without Cause before a Change in Control or following twenty-four (24) months
after a Change in Control, the Executive shall be entitled to the severance
benefits set forth in paragraph 4(f) below. If the employment of the Executive
is terminated by the Company without Cause upon or within (and including)
twenty-four (24) months after a Change in Control, the Executive shall be
entitled to the severance benefits set forth in paragraph 4(g) below.
(e) Notice and Right to Cure.
(i) Termination by Company for Cause. If the Company proposes
to terminate the employment of the Executive for Cause under paragraph
4(b), the Company shall give written notice to the Executive specifying
the reasons for such proposed determination with particularity and, in
the case of a termination for Cause under paragraph 4(b)(i), the
Executive shall have a reasonable opportunity to correct any curable
situation to the reasonable satisfaction of the Board of Directors of
the Company, which period shall be no less than thirty (30) days from
the Executive's receipt of the notice of proposed termination.
Notwithstanding the foregoing, the Executive's employment shall not be
terminated for Cause unless and until there shall be delivered to the
Executive a copy of the resolution duly adopted by the affirmative vote
of not less than the majority of the members of the Board of Directors
of the Company at a meeting called and held for the purpose (after
reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive's legal counsel, to be heard
before the Board of Directors) finding that, in the opinion of the
Company's Board of Directors, the Executive has engaged in conduct
justifying a termination for Cause.
(ii) Termination by Executive for Good Reason. If the
Executive proposes to terminate the Executive's employment for Good
Reason under paragraph 4(c) above (other than the last sentence of
paragraph 4(c) above), the Executive shall give written notice to the
Company, specifying the reason therefor with particularity. In the
event the Executive proposes to terminate employment for Good Reason
under paragraph 4(c)(i), (ii), (iii) or (iv) above, the termination
shall be effective on the date of such notice. In the event the
Executive proposes to terminate employment for Good Reason under
paragraph 4(c)(v) above, the Company will have an opportunity to
correct any curable situation to the reasonable satisfaction of the
Executive within the period of time specified in the notice which shall
not be less than thirty (30) days. If such correction is not so made or
the circumstances or situation is such that it is not curable, the
Executive may, within thirty (30) days after the expiration of the time
so fixed within which to correct such situation, give written notice to
the Company that the Executive's employment is terminated for Good
Reason effective forthwith.
(f) Severance Benefits. If the Executive is entitled to severance
benefits under this paragraph 4(f) pursuant to paragraph 4(c) or (d) prior to a
Change in Control or following twenty-four months after a Change in Control, the
Executive shall be provided the following benefits (regardless of the death or
disability of the Executive after the Termination Date):
(i) Base Salary. The Company shall continue to pay to the
Executive the Base Salary when and as such Base Salary would have been
paid from the date of termination (the "Termination Date") through the
end of the term of this Agreement under paragraph 2 as if such
termination did not occur and there were no further automatic
extensions of the term pursuant to paragraph 2 (the "Severance Period")
as if the Executive continued to be employed by the Company during the
Severance Period and regardless of the death or disability of the
Executive subsequent to the Termination Date.
(ii) Annual Bonus. If the effective date of such termination
occurs before the Annual Bonus for any preceding calendar year has been
paid, the Company shall, within thirty (30) days after the Termination
Date, pay to the Executive the amount of the Executive's Annual Bonus
for such preceding calendar year when and as it would have been paid if
the Executive remained employed by the Company. In addition, for each
calendar year within the Severance Period (including the calendar year
in which the Termination Date occurs), the Company shall, within thirty
(30) days after the end of each such calendar year, pay the Executive a
bonus equal to the Deemed Bonus (as defined below). The "Deemed Bonus"
shall be an amount equal to (A) prior to a Change in Control, the
average of the Annual Bonus paid to the Executive for the two complete
calendar years prior to the Termination Date, or (B) upon or after a
Change in Control, the greater of (x) the average of the Annual Bonus
paid to the Executive for the calendar year(s) after the Change in
Control (including the calendar year in which a Change in Control
occurs) or (y) the average of the Annual Bonus paid or payable to the
Executive in respect of the two calendar years immediately preceding
the calendar year in which the Change in Control occurs.
(iii) Disability, Life Insurance and Medical/Dental Coverage.
The Executive shall be entitled to the disability coverage, life
insurance and medical/dental coverage which the Executive and the
Executive's family received under paragraph 3(e) as if the Executive
continued to be employed by the Company during the Severance Period;
provided that if Executive obtains new employment with comparable
benefits during the Severance Period, all entitlements under this
paragraph 4(f)(iii) shall cease. Nothing in this paragraph shall be
construed as providing Executive with coverage under any plan of the
Company to which Executive would not otherwise be entitled and in the
event any coverage is unavailable (e.g., if Executive is uninsurable),
the Company's obligations under this paragraph may be satisfied by
paying to Executive the cost of such coverage if it were available, as
determined in good faith by the Company.
(iv) Stock Options. Not later than thirty (30) days after the
date on which the Executive's employment terminates, the Company shall
pay the Executive a lump sum
cash payment equal to the amount by which the fair market value
(determined as of the Termination Date) of the number of shares of
stock subject to any stock option granted under the Stock Plans which
was not exercisable on the Termination Date and which would have become
vested and exercisable during the Severance Period if the Executive had
remained employed by the Company during the Severance Period.
(g) Severance Benefits for Change in Control. In the event of a Change
in Control and either upon or within (and including) twenty-four (24) months
after such Change in Control, the Executive terminates employment for Good
Reason or the Executive's employment is terminated by the Company for any reason
other than Cause, then (regardless of the death or disability of the Executive
after the Termination Date) the Company shall pay the Executive a lump sum cash
payment within five (5) days after the Termination Date, in an amount equal to
the amounts referred to in paragraph 4(f)(i), (ii) and (iv), plus the amount of
the Deemed Bonus (as defined below), and the Company shall also provide the
Executive the severance benefits referred to in paragraph 4(f)(iii) as provided
therein.
(h) Excise Tax Gross-Up. If Executive is subject to any Excise Tax (as
defined below) as a result of the severance payments and/or benefits to which
Executive is entitled under paragraphs 4(f) or 4(g), the Company shall also pay
the Executive the Gross-Up Payment in accordance with the following provisions:
(i) Gross-Up Payment. Anything to the contrary
notwithstanding, in the event it shall be determined that any payment,
distribution or benefit made or provided by the Company to or for the
benefit of the Executive (whether pursuant to this Agreement or
otherwise) (a "Payment"), would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended, (the
"Code") or any interest or penalties with respect to such excise tax
(such excise tax, together with any such interest and penalties, are
collectively referred to as the "Excise Tax"), then the Company shall
pay the Executive in cash an amount (the "Gross-Up Payment") such that
after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including but not
limited to income taxes (and any interest and penalties imposed with
respect thereto) and the Excise Tax, imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-up Payment equal to the
Excise Tax imposed on the Payments.
(ii) Determination of Gross-Up Payment. Subject to paragraph
4(h)(iii) below, all determinations required to be made under paragraph
4(h)(i), including whether a Gross-Up Payment is required and the
amount of the Gross-Up Payment, shall be made by the firm of
independent public accountants selected by the Company to audit its
financial statements for the year immediately preceding the Change in
Control (the "Accounting Firm") which shall provide detailed supporting
calculations to the Company and the Executive within thirty (30) days
after the Termination Date. In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, the Executive shall appoint another
nationally recognized
accounting firm to make the determinations required under this
paragraph 4(h) (which accounting firm shall then be referred to as the
"Accounting Firm"). All fees and expenses of the Accounting Firm in
connection with the work it performs pursuant to this paragraph 4(h)
shall be promptly paid by the Company. Any Gross-Up Payment (as
determined pursuant to paragraph 4(h)(i) above) shall be paid by the
Company to the Executive within five (5) days of the receipt of the
Accounting Firm's determination. If the Accounting Firm determines that
no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that failure to report the Excise Tax
on the Executive's applicable federal income tax return would not
result in the imposition of a negligence or a similar penalty. Any
determination by the Accounting Firm shall be binding upon the Company
and the Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by
the Accounting Firm, it is possible that Gross-up Payments which will
not have been made by the Company should have been made
("Underpayment"). In the event that the Company exhausts its remedies
pursuant to paragraph 4(h)(iii) below, and the Executive is thereafter
required to make a payment of Excise Tax, the Accounting Firm shall
promptly determine the amount of the Underpayment that has occurred and
any such Underpayment shall be paid by the Company to the Executive
within five (5) days after such determination.
(iii) Contest. The Executive shall notify the Company in
writing of any claim made by the Internal Revenue Service that, if
successful, would require the Company to pay a Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than
ten (10) business days after the Executive knows of such claim and
shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the thirty (30) day period
following the date on which it gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to
contest such claim, the Employee shall:
(A) give the Company any information reasonably
requested by the Company relating to such claim;
(B) take such action in connection with contesting
such claim as the Company shall reasonably request in writing
from time to time, without limitation, accepting legal
representation with respect to such claim by an attorney
selected by the Company and reasonably acceptable to the
Executive;
(C) cooperate with the Company in good faith in order
effectively to contest such claim;
(D) permit the Company to participate in any
proceedings relating to such claim; provided, however, that
the Company shall bear and pay directly all
costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax, including interest
and penalties with respect thereto, imposed as a result of
such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this paragraph
4(h)(iii), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and
xxx for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and xxx for a
refund, the Company shall advance the amount of such payment
to the Executive, on an interest-free basis, from any Excise
Tax or income tax, including interest or penalties with
respect thereto, imposed with respect to such advance or with
respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year
of the Executive with respect to which such contested amount
is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest
shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder, and the Executive shall be
entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other
taxing authority.
(iv) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to paragraph 4(h)(iii), the Executive
becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the
requirements of paragraph 4(h)(iii)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to paragraph
4(h)(iii), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does
not notify the Executive in writing of its intent to contest such
denial of refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid, and the amount of such advance shall offset, to
the extent thereof, the amount of Gross-Up Payment required to be paid.
(i) Benefits in Lieu of Severance Pay Policy. The severance benefits
provided for in this paragraph 4 are in lieu of any benefits that would
otherwise be provided to the Executive under the Company's severance pay policy
and the Executive shall not be entitled to any benefits under the Company's
severance pay policy.
(j) No Funding of Severance. Nothing contained in this Agreement or
otherwise shall require the Company to segregate, earmark or otherwise set aside
any funds or other assets to provide for any payments required to be made under
this paragraph 4 and the rights of the Executive to the severance benefits
hereunder shall be solely those of a general, unsecured creditor of the Company.
However, the Company may, in its discretion, deposit cash or property, or a
combination of both, equal in value to all or a portion of the amounts
anticipated to be payable hereunder into a trust, the assets of which are to be
distributed by such times as determined by the trustee of such trust; provided
that such assets shall be subject at all times to the rights of the Company's
general creditors.
(k) Definition of Change in Control. A "Change in Control" shall be
deemed to have occurred if, prior to the expiration of the term of this
Agreement:
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934) (other than Allianz Life
Insurance Company of North America and its affiliates or the Company or
any of its Subsidiaries or any employee benefit plan of the Company or
any of its Subsidiaries) becomes a beneficial owner, directly or
indirectly, of securities of the Company representing 20% or more of
the voting power of all of the Company's then outstanding securities,
except for issuances of shares approved by a majority of the Incumbent
Directors (as defined below) then in office; or
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors
of the Company (the "Incumbent Directors") together with any director
(the "New Incumbent Director") whose nomination or election was
approved by at least two-thirds of the Incumbent Directors and any New
Incumbent Director who was previously elected, in each case who are
directors at the time of the nomination or election of such director
cease, for any reason to constitute at least a majority of the Board of
Directors of the Company; or
(iii) the shareholders of the Company approve the sale of all,
or substantially all, of the business or assets of the Company or the
liquidation or dissolution of the Company.
5. Confidentiality; Non-Solicitation Covenant; and Covenant Not to
Compete.
(a) Confidentiality. The Executive agrees that, at all times, both
during the Executive's employment and after the termination thereof, the
Executive shall not divulge to any other person, firm or corporation, or in any
way use for the Executive's own benefit, except as required in the conduct of
the business of the Company or any of its Subsidiaries or as authorized in
writing on behalf of the Company, any trade secrets or confidential information
of the Company or its Subsidiaries obtained during the course of the Executive's
employment with the Company or its Subsidiaries. The Executive also agrees that
the Executive will not, either subsequent to termination of employment or during
employment, except as required in the conduct of the business of the Company or
any of its Subsidiaries, or as authorized in writing on
behalf of the Company, interfere with or disturb or attempt to interfere with or
disturb any employment, contractual or business arrangements of the Company or
any of its Subsidiaries with any of its employees, agents, suppliers, customers,
reinsurers or other parties with which the Company or any of its Subsidiaries
has a contractual relationship, as the case may be.
(b) Non-Solicitation Covenant. While the Executive is actively employed
with the Company and, in the event of a termination of employment with the
Company for any reason, for a period of two years after the Termination Date,
the Executive agrees that, except with the prior written permission of the Board
of Directors of the Company, the Executive will not offer to hire, entice away,
or in any manner attempt to persuade any officer, employee, or agent of the
Company or any of the Subsidiaries to discontinue his or her relationship with
the Company or any of the Subsidiaries nor will the Executive directly or
indirectly solicit, divert, take away or attempt to solicit any business of the
Company or any of its Subsidiaries as to which Executive has acquired any
knowledge during the term of the Executive's employment with the Company.
(c) Covenant Not to Compete. The Executive acknowledges and agrees with
the Company that during the course of the Executive's employment with the
Company, the Executive has had and will continue to have the opportunity to
develop relationships with existing employees, customers and other business
associates of the Company and the Subsidiaries, which relationships constitute
goodwill of the Company, and the Executive acknowledges and agrees that the
Company would be irreparably damaged if the Executive were to take actions that
would damage or misappropriate such goodwill. The Executive acknowledges that
the Company and its Subsidiaries currently engages throughout the United States
(the "Territory"), the business of the development, sale, marketing and
administration of life insurance, annuities and extended care insurance products
(the "Subject Business"). Accordingly, during the term of the Executive's
employment with the Company and (i) prior to a Change of Control, and in the
case of a voluntary termination by the Executive under paragraph 4(d) or a
termination by the Company for Cause under paragraph 4(b), the balance of the
term of this Agreement under paragraph 2 as if no termination of employment
occurred but notice of termination of the automatic extension was given either
by the Executive at the time of his notice of voluntary resignation or given by
the Company at the time of its notice of termination for Cause, or (ii) after a
Change in Control, one year after the Termination Date (the "Noncompete
Period"), the Executive shall not, directly or indirectly, enter into, engage
in, assist, give or lend funds to or otherwise finance, be employed by or
consult with, or have a financial or other interest in, any business which
engages in the Subject Business, whether for or by himself or as an independent
contractor, agent, stockholder, partner or joint venturer for any other person,
provided that the aggregate ownership by the Executive of no more than two
percent of the outstanding equity securities of any person, which securities are
traded on a national or foreign securities exchange, quoted on the Nasdaq Stock
Market or other automated quotation system or, in the case of the Company, of no
more than ten percent of the Company's outstanding equity securities shall not
be deemed to be giving or lending funds to, otherwise financing or having a
financial interest in a competitor. In the event that any person in which the
executive has any financial or other interest directly or indirectly enters into
the Subject Business in the Territory during the Noncompete Period, the
Executive
shall divest all of his interest (other than any amount permitted under this
paragraph) in such person within 30 days after such person enters into the
Subject Business in the Territory.
(d) Remedies. If the Executive commits a breach, or threatens to commit
a breach, of any of the provisions of this paragraph 5, the Company shall have
the following rights and remedies, in addition to any rights and remedies
otherwise available at law or equity:
(i) The right and remedy to have the provisions of this
paragraph 5 specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed by the Executive that
any such breach or threatened breach will cause irreparable injury to
the Company and the Subsidiaries and that money damages will not
provide an adequate remedy to the Company and the Subsidiaries; and
(ii) The right and remedy to require the Executive to account
for and pay over to the Company all compensation, profits, monies,
accruals, increments, or other benefits, other than those payable under
this Agreement, derived or received by the Executive or the enterprise
in competition with the Company or any of the Subsidiaries as the
result of any transactions constituting a breach of any part of this
paragraph 5, and Executive agrees to account for and pay over to the
Company such amounts promptly upon demand therefor.
6. Beneficiaries. In the event of the Executive's death after
termination of employment, any amount or benefit payable or distributable to him
pursuant to this Agreement shall be paid to the beneficiary designated by the
Executive for such purpose in the last written instrument received by the
Company prior to the Executive's death, if any, or, if no beneficiary has been
designated, to the Executive's estate, but such designation shall not be deemed
to supersede any beneficiary designation under any benefit plan of the Company.
Whenever this Agreement provides for the written designation of a beneficiary or
beneficiaries of the Executive, the Executive shall have the right to revoke
such designation and to redesignate a beneficiary or beneficiaries by written
notice to either the Company to such effect, except to the extent, if any,
restricted by law.
7. Rights in the Event of Dispute. In the event of a dispute between
the Company and the Executive regarding the Executive's employment or this
Agreement, it is the intention of this Agreement that the dispute shall be
resolved as expeditiously as possible, consistent with fairness to both sides,
and that during pendency of the dispute the Executive and the Company shall be
on equal footing, as follows:
(a) Arbitration. Any claim or dispute relating to the Executive's
employment or the terms and performance of this Agreement (other than
enforcement of paragraph 5) shall be resolved by binding private arbitration
before three arbitrators, and any award rendered by any arbitration panel, or a
majority thereof, may be filed and a judgment obtained in any court having
jurisdiction over the parties unless the relief granted in the award is
delivered within ten (10) days of the award. Either party may request
arbitration by written notice to the other party. Within
thirty (30) days of receipt of such notice by the opposing party, each party
shall appoint a disinterested arbitrator and the two arbitrators selected
thereby shall appoint a third neutral arbitrator; in the event the two
arbitrators cannot agree upon the third arbitrator within ten (10) days after
their appointment, then the neutral arbitrator shall be appointed by the Chief
Judge of Hennepin County (Minnesota) District Court. Any arbitration proceeding
conducted hereunder shall be in the City of Minneapolis and shall follow the
procedures set forth in the Rules of Commercial Arbitration of the American
Arbitration Association, and both sides shall cooperate in as expeditious a
resolution of the proceeding as is reasonable under the circumstances. The
arbitration panel shall have the power to enter any relief it deems fair and
just on any claim, including interim and final equitable relief, along with any
procedural order that is reasonable under the circumstances.
(b) Expenses of Prosecution/Defense of Claim. During the pendency of a
dispute between the Company and the Executive relating to the Executive's
employment or the terms or performance of this Agreement, the Company shall
promptly pay the Executive's reasonable expenses of representation upon delivery
of periodic xxxxxxxx for same, provided that (i) Executive (or a person claiming
on the Executive's behalf) shall promptly repay all amounts paid hereunder at
the conclusion of the dispute if the resolution thereof includes a finding that
the Executive did not act in good faith in the matter in dispute or in the
dispute proceeding itself, and (ii) no claim for expenses of representation
shall be submitted by the Executive or any person acting on the Executive's
behalf unless made in writing to the Board of Directors within one year of the
performance of the services for which such claim is made.
8. No Obligation to Mitigate Damages. In the event the Executive
becomes eligible to receive compensation or benefits subsequent to the
termination of the Executive's employment under this Agreement, the Executive
shall have no obligation to seek other employment in an effort to mitigate
damages. To the extent the Executive shall accept other employment after the
Executive's termination of employment, the compensation and benefits received
from such employment shall not reduce the compensation and benefits otherwise
due under this Agreement, except as provided in paragraph 4(f)(iii) above.
9. Other Benefits. The benefits provided under this Agreement shall,
except to the extent otherwise specifically provided herein, be in addition to,
and not in derogation or diminution of, any benefits that Executive or the
Executive's beneficiary may be entitled to receive under any other plan or
program now or hereafter maintained by the Company, or its Subsidiaries.
10. Successors. The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Company, to expressly
assume and agree to perform its obligations under this Agreement in the same
manner and to the same extent that the Company would be required to perform them
if no succession had taken place unless, in the opinion of legal counsel
mutually acceptable to the Company and the Executive, such obligations have been
assumed by the successor as a matter of law. Failure of the Company to obtain
such agreement prior to the
effectiveness of any such succession (unless the foregoing opinion is rendered
to the Executive) shall entitle the Executive to terminate the Executive's
employment and to receive the payments provided for in paragraphs 4(f), 4(g) and
4(h), as the case may be, as if the Executive terminated this Agreement for Good
Reason. The Executive's rights under this Agreement shall inure to the benefit
of, and shall be enforceable by, the Executive's legal representative or other
successors in interest, but shall not otherwise be assignable or transferable.
The Company's rights under this Agreement shall inure to the benefit of, and
shall be enforceable by, the Company's successors and assigns, including any
person which may acquire LifeUSA Insurance Company.
11. Severability. If any provision of this Agreement or the application
thereof is held invalid or unenforceable, the invalidity or unenforceability
thereof shall not affect any other provisions or applications of this Agreement
which can be given effect without the invalid or unenforceable provision or
application.
12. Survival. The rights and obligations of the parties pursuant to
this Agreement shall survive the term of the employment to the extent that any
performance is required hereunder after the expiration or termination of such
term.
13. Notices. All notices under this Agreement shall be in writing and
shall be deemed effective when delivered in person (in the Company's case, to
its Secretary) or 48 hours after deposit thereof in the U.S. mails, postage
prepaid, addressed, in the case of the Executive, to the Executive's last known
address as carried on the personnel records of the Company and, in the case of
the Company, to the corporate headquarters, attention of the Secretary, or to
such other address as the party to be notified may specify by written notice to
the other party.
14. Amendments and Construction. This Agreement may only be amended in
a writing signed by the parties hereto. This Agreement shall be construed under
the laws of the State of Minnesota. Paragraph headings are for convenience only
and shall not be considered a part of the terms and provisions of the Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first written above.
LIFE USA HOLDING, INC.
By
-------------------------------------
Xxxxxx X. XxxXxxxxx, Chairman
and Chief Executive Officer
----------------------------------------
Xxxxxxx X. Xxxxx
EXHIBIT F
FORM OF EMPLOYMENT AGREEMENT FOR XXXXXXX X. XXXXXXXX
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of January 1, 1998 between
LIFE USA HOLDING, INC., a Minnesota corporation (the "Company"), and XXXXXXX X.
XXXXXXXX (the "Executive").
R E C I T A L S:
WHEREAS, the Executive is now and has been the Senior Vice President of
LifeUSA Insurance Company, the Company's wholly-owned stock life insurance
subsidiary ("LifeUSA"), and serves as an officer and/or director of certain
other subsidiaries of the Company;
WHEREAS, the Executive and the Company wish to enter into this
Agreement to provide for the continued employment of Executive; and
WHEREAS, the Executive and the Company are willing to enter into this
Agreement upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual premises and agreements
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Employment and Duties. The parties hereby agree that, during the
term of this Agreement as set forth in paragraph 2 below, the Executive shall be
employed as a Senior Vice President of LifeUSA with the duties and
responsibilities attendant to such position. In discharging such duties and
responsibilities, the Executive may also serve as an executive officer and/or
director of any direct or indirect subsidiary of the Company (collectively the
"Subsidiaries"). The salary, other compensation and benefits provided herein may
be allocated among the Company and the Subsidiaries based upon the portion of
the Executive's services provided to the Company and each of the Subsidiaries,
respectively, and the Executive shall assist the Company in making such
allocation as the Company may reasonably request. During the term of this
Agreement, the Executive shall apply on a full-time basis (allowing for usual
vacations and sick leave) all of the Executive's skill and experience to the
performance of the Executive's duties hereunder with the Company and the
Subsidiaries. It is understood that the Executive may have other business
investments and participate in charitable organizations which may, from time to
time, require minor portions of Executive's time, but which shall not interfere
or be inconsistent with the Executive's duties under this Agreement. The
Executive shall perform the Executive's duties at the Company's principal
executive offices in Minneapolis, Minnesota or at such other location as may be
mutually agreed upon by the Executive and the Company; provided that the
Executive shall travel to other locations at such times as may be necessary for
the performance of the Executive's duties under this Agreement.
2. Term of Employment. Unless sooner terminated as provided in
paragraph 4 below, the term of this Agreement shall commence on the date hereof
and shall continue through December 31, 2000; provided that the term shall be
automatically extended for one year on each December 31st commencing December
31, 1998 unless either party gives written notice to the other prior to the date
on which the automatic extension would be effective; provided that the term
shall not be extended beyond Executive's sixty-fifth (65th) birthday.
3. Compensation and Benefits. During the term of this Agreement, the
Executive shall be entitled to the following compensation and benefits for
service to the Company and the Subsidiaries, including service as a director of
the Company or its Subsidiaries:
(a) Base Salary. The Executive shall be paid a base salary at a minimum
annual rate of $[1998 base salary to be inserted when determined], payable in
accordance with the Company's customary payroll policy, which salary shall be
reviewed and may be increased from time to time at the discretion of the Board
of Directors of the Company or the Compensation Committee of the Board of
Directors (the "Base Salary"); provided that the amount of the Base Salary shall
not be reduced after it has been increased by the Board of Directors or the
Compensation Committee without the Executive's written consent. The performance
of the Executive shall be reviewed at least once each calendar year which may be
at the same time as any adjustment to the Base Salary of Executive.
(b) Bonus. The Executive shall, in addition to the Base Salary, also be
entitled to a cash annual bonus (the "Annual Bonus") based on the achievement by
the Company of performance goals established by the Board of Directors or the
Compensation Committee of the Company's Board of Directors.
(c) Stock Incentives. The Executive shall be eligible to receive stock
options under any stock based plan from time to time adopted by the Company (the
"Stock Plans"), as from time to time determined by the Board of Directors or
Stock Option Committee of the Company's Board of Directors.
(d) Reimbursement of Expenses. The Company shall reimburse the
Executive for all business expenses properly documented in accordance with the
Company's expense reimbursement policy.
(e) Other Benefits. The Executive shall be entitled to participate and
shall be included in any employee benefit plan, medical/dental coverage plan,
life insurance plan, disability coverage plan, or similar benefit plan of the
Company now existing or established hereafter which are generally applicable to
executives of the Company.
4. Termination of Employment.
(a) Death or Disability. In the event of the Executive's death or
disability (as defined in the Company's long term disability plan then in
effect), the employment of the Executive
hereunder shall terminate and the Company's obligation to make further Base
Salary and Annual Bonus (to the extent not yet earned) payments hereunder shall
thereupon terminate as of the end of the month in which such death or disability
occurs. The Executive's rights to other compensation and benefits shall be
determined under the Company's benefit plans and policies applicable to Company
executives then in effect.
(b) Termination for Cause by the Company. By following the procedure
set forth in paragraph 4(e), the Company shall have the right to terminate the
employment of the Executive for "Cause" in the event the Executive: (i) has
repeatedly failed to perform the Executive's duties under this Agreement, which
failure is willful and deliberate; (ii) has engaged in an act or acts of
dishonesty which is or are intended to result in substantial personal enrichment
for the Executive; (iii) has knowingly engaged in conduct which is materially
injurious to the Company; (iv) is convicted of, or pleads nolo contendere to (A)
any felony (other than any felony arising out of negligence), or (B) any crime
or offense involving dishonesty with respect to the Company or any of the
Subsidiaries; (v) has failed to comply with the covenants contained in paragraph
5 of this Agreement; or (vi) knowingly provides materially misleading
information concerning the Company to the Board of Directors of the Company or
any of its Subsidiaries, any governmental body or regulatory agency or to any
lender or other financing source or proposed financing source of the Company or
its Subsidiaries. If the employment of the Executive is terminated by the
Company for Cause, the Company's obligation to make further Base Salary and
Annual Bonus (to the extent not yet earned) payments hereunder shall thereupon
terminate, except the Executive shall receive the Base Salary through the end of
the month during which such a termination occurs. The Executive's rights to
other compensation and benefits shall be determined under the Company's benefit
plans and policies applicable to executives of the Company then in effect.
(c) Termination for Good Reason by the Executive. By following the
procedure set forth in paragraph 4(e), the Executive shall have the right to
terminate the Executive's employment with the Company for "Good Reason" in the
event (i) the Executive is not at all times a duly elected Senior Vice President
of LifeUSA; (ii) there is any material reduction in the scope of the Executive's
authority and responsibility; (iii) there is a reduction in the Executive's Base
Salary, a material reduction in the amount of Annual Bonus for which the
Executive is eligible, an amendment to any Stock Plan or employee retirement
plan applicable to the Executive which is materially adverse to the Executive,
or a material reduction in the other benefits to which the Executive is entitled
under paragraph 3(e) above; (iv) the Company requires the Executive's principal
place of employment to be anywhere other than the Company's principal executive
offices, or there is a relocation of the Company's principal executive offices
outside of the Minneapolis/St. Xxxx, Minnesota metropolitan area; or (v) the
Company otherwise fails to perform its obligations under this Agreement. If the
employment of the Executive is terminated by the Executive for Good Reason
before a Change in Control (as defined below) or following twenty-four (24)
months after a Change in Control, the Executive shall be entitled to the
severance benefits set forth in paragraph 4(f) below. If the employment of the
Executive is terminated by the Executive for Good Reason upon or within (and
including) twenty-four (24) months after a Change in Control, the Executive
shall be entitled to the severance benefits set
forth in paragraph 4(g) below. In addition, in the event a Change in Control has
occurred and the Executive elects upon ten (10) days prior notice to the Company
to terminate employment with the Company within the sixty (60) day period
following the first anniversary of the Change in Control, such termination shall
be considered a termination by the Executive for Good Reason and the Executive
shall be entitled to the severance benefits under paragraph 4(g) below.
(d) Termination Without Cause. The Company may terminate the
Executive's employment without Cause prior to the expiration of the term of this
Agreement. If the employment of the Executive is terminated by the Company
without Cause before a Change in Control or following twenty-four (24) months
after a Change in Control, the Executive shall be entitled to the severance
benefits set forth in paragraph 4(f) below. If the employment of the Executive
is terminated by the Company without Cause upon or within (and including)
twenty-four (24) months after a Change in Control, the Executive shall be
entitled to the severance benefits set forth in paragraph 4(g) below.
(e) Notice and Right to Cure.
(i) Termination by Company for Cause. If the Company proposes
to terminate the employment of the Executive for Cause under paragraph
4(b), the Company shall give written notice to the Executive specifying
the reasons for such proposed determination with particularity and, in
the case of a termination for Cause under paragraph 4(b)(i), the
Executive shall have a reasonable opportunity to correct any curable
situation to the reasonable satisfaction of the Board of Directors of
the Company, which period shall be no less than thirty (30) days from
the Executive's receipt of the notice of proposed termination.
Notwithstanding the foregoing, the Executive's employment shall not be
terminated for Cause unless and until there shall be delivered to the
Executive a copy of the resolution duly adopted by the affirmative vote
of not less than the majority of the members of the Board of Directors
of the Company at a meeting called and held for the purpose (after
reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive's legal counsel, to be heard
before the Board of Directors) finding that, in the opinion of the
Company's Board of Directors, the Executive has engaged in conduct
justifying a termination for Cause.
(ii) Termination by Executive for Good Reason. If the
Executive proposes to terminate the Executive's employment for Good
Reason under paragraph 4(c) above (other than the last sentence of
paragraph 4(c) above), the Executive shall give written notice to the
Company, specifying the reason therefor with particularity. In the
event the Executive proposes to terminate employment for Good Reason
under paragraph 4(c)(i), (ii), (iii) or (iv) above, the termination
shall be effective on the date of such notice. In the event the
Executive proposes to terminate employment for Good Reason under
paragraph 4(c)(v) above, the Company will have an opportunity to
correct any curable situation to the reasonable satisfaction of the
Executive within the period of time specified in the notice which shall
not be less than thirty (30) days. If such correction is not so made or
the circumstances or situation is such that it is not curable, the
Executive may, within thirty
(30) days after the expiration of the time so fixed within which to
correct such situation, give written notice to the Company that the
Executive's employment is terminated for Good Reason effective
forthwith.
(f) Severance Benefits. If the Executive is entitled to severance
benefits under this paragraph 4(f) pursuant to paragraph 4(c) or (d) prior to a
Change in Control or following twenty-four months after a Change in Control, the
Executive shall be provided the following benefits (regardless of the death or
disability of the Executive after the Termination Date):
(i) Base Salary. The Company shall continue to pay to the
Executive the Base Salary when and as such Base Salary would have been
paid from the date of termination (the "Termination Date") through the
end of the term of this Agreement under paragraph 2 as if such
termination did not occur and there were no further automatic
extensions of the term pursuant to paragraph 2 (the "Severance Period")
as if the Executive continued to be employed by the Company during the
Severance Period and regardless of the death or disability of the
Executive subsequent to the Termination Date.
(ii) Annual Bonus. If the effective date of such termination
occurs before the Annual Bonus for any preceding calendar year has been
paid, the Company shall, within thirty (30) days after the Termination
Date, pay to the Executive the amount of the Executive's Annual Bonus
for such preceding calendar year when and as it would have been paid if
the Executive remained employed by the Company. In addition, for each
calendar year within the Severance Period (including the calendar year
in which the Termination Date occurs), the Company shall, within thirty
(30) days after the end of each such calendar year, pay the Executive a
bonus equal to the Deemed Bonus (as defined below). The "Deemed Bonus"
shall be an amount equal to (A) prior to a Change in Control, the
average of the Annual Bonus paid to the Executive for the two complete
calendar years prior to the Termination Date, or (B) upon or after a
Change in Control,the greater of (x) the average of the Annual Bonus
paid to the Executive for the calendar year(s) after the Change in
Control (including the calendar year during which a Change in Control
occurs) or (y) the average of the Annual Bonus paid or payable to the
Executive in respect of the two calendar years immediately preceding
the calendar year in which the Change in Control occurs.
(iii) Disability, Life Insurance and Medical/Dental Coverage.
The Executive shall be entitled to the disability coverage, life
insurance and medical/dental coverage which the Executive and the
Executive's family received under paragraph 3(e) as if the Executive
continued to be employed by the Company during the Severance Period;
provided that if Executive obtains new employment with comparable
benefits during the Severance Period, all entitlements under this
paragraph 4(f)(iii) shall cease. Nothing in this paragraph shall be
construed as providing Executive with coverage under any plan of the
Company to which Executive would not otherwise be entitled and in the
event any coverage is unavailable (e.g., if Executive is uninsurable),
the Company's obligations
under this paragraph may be satisfied by paying to Executive the cost
of such coverage if it were available, as determined in good faith by
the Company.
(iv) Stock Options. Not later than thirty (30) days after the
date on which the Executive's employment terminates, the Company shall
pay the Executive a lump sum cash payment equal to the amount by which
the fair market value (determined as of the Termination Date) of the
number of shares of stock subject to any stock option granted under the
Stock Plans which was not exercisable on the Termination Date and which
would have become vested and exercisable during the Severance Period if
the Executive had remained employed by the Company during the Severance
Period.
(g) Severance Benefits for Change in Control. In the event of a Change
in Control and either upon or within (and including) twenty-four (24) months
after such Change in Control, the Executive terminates employment for Good
Reason or the Executive's employment is terminated by the Company for any reason
other than Cause, then (regardless of the death or disability of the Executive
after the Termination Date) the Company shall pay the Executive a lump sum cash
payment within five (5) days after the Termination Date, in an amount equal to
the amounts referred to in paragraph 4(f)(i), (ii) and (iv), plus the amount of
the Deemed Bonus (as defined below), and the Company shall also provide the
Executive the severance benefits referred to in paragraph 4(f)(iii) as provided
therein.
(h) Excise Tax Gross-Up. If Executive is subject to any Excise Tax (as
defined below) as a result of the severance payments and/or benefits to which
Executive is entitled under paragraphs 4(f) or 4(g), the Company shall also pay
the Executive the Gross-Up Payment in accordance with the following provisions:
(i) Gross-Up Payment. Anything to the contrary
notwithstanding, in the event it shall be determined that any payment,
distribution or benefit made or provided by the Company to or for the
benefit of the Executive (whether pursuant to this Agreement or
otherwise) (a "Payment"), would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended, (the
"Code") or any interest or penalties with respect to such excise tax
(such excise tax, together with any such interest and penalties, are
collectively referred to as the "Excise Tax"), then the Company shall
pay the Executive in cash an amount (the "Gross-Up Payment") such that
after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including but not
limited to income taxes (and any interest and penalties imposed with
respect thereto) and the Excise Tax, imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-up Payment equal to the
Excise Tax imposed on the Payments.
(ii) Determination of Gross-Up Payment. Subject to paragraph
4(h)(iii) below, all determinations required to be made under paragraph
4(h)(i), including whether a Gross-Up Payment is required and the
amount of the Gross-Up Payment, shall be made by the firm of
independent public accountants selected by the Company to audit its
financial statements for the year immediately preceding the Change in
Control (the "Accounting Firm") which shall provide detailed supporting
calculations to the Company and the Executive within thirty (30) days
after the Termination Date. In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations
required under this paragraph 4(h) (which accounting firm shall then be
referred to as the "Accounting Firm"). All fees and expenses of the
Accounting Firm in connection with the work it performs pursuant to
this paragraph 4(h) shall be promptly paid by the Company. Any Gross-Up
Payment (as determined pursuant to paragraph 4(h)(i) above) shall be
paid by the Company to the Executive within five (5) days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall
furnish the Executive with a written opinion that failure to report the
Excise Tax on the Executive's applicable federal income tax return
would not result in the imposition of a negligence or a similar
penalty. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm, it is possible that Gross-up
Payments which will not have been made by the Company should have been
made ("Underpayment"). In the event that the Company exhausts its
remedies pursuant to paragraph 4(h)(iii) below, and the Executive is
thereafter required to make a payment of Excise Tax, the Accounting
Firm shall promptly determine the amount of the Underpayment that has
occurred and any such Underpayment shall be paid by the Company to the
Executive within five (5) days after such determination.
(iii) Contest. The Executive shall notify the Company in
writing of any claim made by the Internal Revenue Service that, if
successful, would require the Company to pay a Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than
ten (10) business days after the Executive knows of such claim and
shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the thirty (30) day period
following the date on which it gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to
contest such claim, the Employee shall:
(A) give the Company any information reasonably
requested by the Company relating to such claim;
(B) take such action in connection with contesting
such claim as the Company shall reasonably request in writing
from time to time, without limitation, accepting legal
representation with respect to such claim by an attorney
selected by the Company and reasonably acceptable to the
Executive;
(C) cooperate with the Company in good faith in order
effectively to contest such claim;
(D) permit the Company to participate in any
proceedings relating to such claim; provided, however, that
the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax
or income tax, including interest and penalties with respect
thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the
foregoing provisions of this paragraph 4(h)(iii), the Company
shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forego any and
all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim
and may, at its sole option, either direct the Executive to
pay the tax claimed and xxx for a refund or contest the claim
in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the
Executive to pay such claim and xxx for a refund, the Company
shall advance the amount of such payment to the Executive, on
an interest-free basis, from any Excise Tax or income tax,
including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that
any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable
hereunder, and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(iv) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to paragraph 4(h)(iii), the Executive
becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the
requirements of paragraph 4(h)(iii)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to paragraph
4(h)(iii), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does
not notify the Executive in writing of its intent to contest such
denial of refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid, and the amount of such advance shall offset, to
the extent thereof, the amount of Gross-Up Payment required to be paid.
(i) Benefits in Lieu of Severance Pay Policy. The severance benefits
provided for in this paragraph 4 are in lieu of any benefits that would
otherwise be provided to the Executive under the Company's severance pay policy
and the Executive shall not be entitled to any benefits under the Company's
severance pay policy.
(j) No Funding of Severance. Nothing contained in this Agreement or
otherwise shall require the Company to segregate, earmark or otherwise set aside
any funds or other assets to provide for any payments required to be made under
this paragraph 4 and the rights of the Executive to the severance benefits
hereunder shall be solely those of a general, unsecured creditor of the Company.
However, the Company may, in its discretion, deposit cash or property, or a
combination of both, equal in value to all or a portion of the amounts
anticipated to be payable hereunder into a trust, the assets of which are to be
distributed by such times as determined by the trustee of such trust; provided
that such assets shall be subject at all times to the rights of the Company's
general creditors.
(k) Definition of Change in Control. A "Change in Control" shall be
deemed to have occurred if, prior to the expiration of the term of this
Agreement:
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934) (other than Allianz Life
Insurance Company of North America and its affiliats or the Company or
any of its Subsidiaries or any employee benefit plan of the Company or
any of its Subsidiaries) becomes a beneficial owner, directly or
indirectly, of securities of the Company representing 20% or more of
the voting power of all of the Company's then outstanding securities,
except for issuances of shares approved by a majority of the Incumbent
Directors (as defined below) then in office; or
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors
of the Company (the "Incumbent Directors") together with any director
(the "New Incumbent Director") whose nomination or election was
approved by at least two-thirds of the Incumbent Directors and any New
Incumbent Director who was previously elected, in each case who are
directors at the time of the nomination or election of such director
cease, for any reason to constitute at least a majority of the Board of
Directors of the Company; or
(iii) the shareholders of the Company approve the sale of all,
or substantially all, of the business or assets of the Company or the
liquidation or dissolution of the Company.
5. Confidentiality; Non-Solicitation Covenant; and Covenant Not to
Compete.
(a) Confidentiality. The Executive agrees that, at all times, both
during the Executive's employment and after the termination thereof, the
Executive shall not divulge to any other person, firm or corporation, or in any
way use for the Executive's own benefit, except as required in the conduct of
the business of the Company or any of its Subsidiaries or as authorized
in writing on behalf of the Company, any trade secrets or confidential
information of the Company or its Subsidiaries obtained during the course of the
Executive's employment with the Company or its Subsidiaries. The Executive also
agrees that the Executive will not, either subsequent to termination of
employment or during employment, except as required in the conduct of the
business of the Company or any of its Subsidiaries, or as authorized in writing
on behalf of the Company, interfere with or disturb or attempt to interfere with
or disturb any employment, contractual or business arrangements of the Company
or any of its Subsidiaries with any of its employees, agents, suppliers,
customers, reinsurers or other parties with which the Company or any of its
Subsidiaries has a contractual relationship, as the case may be.
(b) Non-Solicitation Covenant. While the Executive is actively employed
with the Company and, in the event of a termination of employment with the
Company for any reason, for a period of two years after the Termination Date,
the Executive agrees that, except with the prior written permission of the Board
of Directors of the Company, the Executive will not offer to hire, entice away,
or in any manner attempt to persuade any officer, employee, or agent of the
Company or any of the Subsidiaries to discontinue his or her relationship with
the Company or any of the Subsidiaries nor will the Executive directly or
indirectly solicit, divert, take away or attempt to solicit any business of the
Company or any of its Subsidiaries as to which Executive has acquired any
knowledge during the term of the Executive's employment with the Company.
(c) Covenant Not to Compete. The Executive acknowledges and agrees with
the Company that during the course of the Executive's employment with the
Company, the Executive has had and will continue to have the opportunity to
develop relationships with existing employees, customers and other business
associates of the Company and the Subsidiaries, which relationships constitute
goodwill of the Company, and the Executive acknowledges and agrees that the
Company would be irreparably damaged if the Executive were to take actions that
would damage or misappropriate such goodwill. The Executive acknowledges that
the Company and its Subsidiaries currently engages throughout the United States
(the "Territory"), the business of the development, sale, marketing and
administration of life insurance, annuities and extended care insurance products
(the "Subject Business"). Accordingly, during the term of the Executive's
employment with the Company and (i) prior to a Change of Control and in the case
of a voluntary termination by the Executive under paragraph 4(d) or a
termination by the Company for Cause under paragraph 4(b), the balance of the
term of this Agreement under paragraph 2 as if no termination of employment
occurred but notice of termination of the automatic extension was given either
by the Executive at the time of his notice of voluntary resignation or given by
the Company at the time of its notice of termination for Cause, or (ii) after a
Change in Control, one year after the Termination Date (the "Noncompete
Period"), the Executive shall not, directly or indirectly, enter into, engage
in, assist, give or lend funds to or otherwise finance, be employed by or
consult with, or have a financial or other interest in, any business which
engages in the Subject Business, whether for or by himself or as an independent
contractor, agent, stockholder, partner or joint venturer for any other person,
provided that the aggregate ownership by the Executive of no more than two
percent of the outstanding equity securities of any person, which securities are
traded on a national or foreign securities exchange, quoted on the Nasdaq Stock
Market or other automated quotation system or, in the case of the Company, of no
more than ten
percent of the Company's outstanding equity securities shall not be deemed to be
giving or lending funds to, otherwise financing or having a financial interest
in a competitor. In the event that any person in which the executive has any
financial or other interest directly or indirectly enters into the Subject
Business in the Territory during the Noncompete Period, the Executive shall
divest all of his interest (other than any amount permitted under this
paragraph) in such person within 30 days after such person enters into the
Subject Business in the Territory.
(d) Remedies. If the Executive commits a breach, or threatens to commit
a breach, of any of the provisions of this paragraph 5, the Company shall have
the following rights and remedies, in addition to any rights and remedies
otherwise available at law or equity:
(i) The right and remedy to have the provisions of this
paragraph 5 specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed by the Executive that
any such breach or threatened breach will cause irreparable injury to
the Company and the Subsidiaries and that money damages will not
provide an adequate remedy to the Company and the Subsidiaries; and
(ii) The right and remedy to require the Executive to account
for and pay over to the Company all compensation, profits, monies,
accruals, increments, or other benefits, other than those payable under
this Agreement, derived or received by the Executive or the enterprise
in competition with the Company or any of the Subsidiaries as the
result of any transactions constituting a breach of any part of this
paragraph 5, and Executive agrees to account for and pay over to the
Company such amounts promptly upon demand therefor.
6. Beneficiaries. In the event of the Executive's death after
termination of employment, any amount or benefit payable or distributable to him
pursuant to this Agreement shall be paid to the beneficiary designated by the
Executive for such purpose in the last written instrument received by the
Company prior to the Executive's death, if any, or, if no beneficiary has been
designated, to the Executive's estate, but such designation shall not be deemed
to supersede any beneficiary designation under any benefit plan of the Company.
Whenever this Agreement provides for the written designation of a beneficiary or
beneficiaries of the Executive, the Executive shall have the right to revoke
such designation and to redesignate a beneficiary or beneficiaries by written
notice to either the Company to such effect, except to the extent, if any,
restricted by law.
7. Rights in the Event of Dispute. In the event of a dispute between
the Company and the Executive regarding the Executive's employment or this
Agreement, it is the intention of this Agreement that the dispute shall be
resolved as expeditiously as possible, consistent with fairness to both sides,
and that during pendency of the dispute the Executive and the Company shall be
on equal footing, as follows:
(a) Arbitration. Any claim or dispute relating to the Executive's
employment or the terms and performance of this Agreement (other than
enforcement of paragraph 5) shall be
resolved by binding private arbitration before three arbitrators, and any award
rendered by any arbitration panel, or a majority thereof, may be filed and a
judgment obtained in any court having jurisdiction over the parties unless the
relief granted in the award is delivered within ten (10) days of the award.
Either party may request arbitration by written notice to the other party.
Within thirty (30) days of receipt of such notice by the opposing party, each
party shall appoint a disinterested arbitrator and the two arbitrators selected
thereby shall appoint a third neutral arbitrator; in the event the two
arbitrators cannot agree upon the third arbitrator within ten (10) days after
their appointment, then the neutral arbitrator shall be appointed by the Chief
Judge of Hennepin County (Minnesota) District Court. Any arbitration proceeding
conducted hereunder shall be in the City of Minneapolis and shall follow the
procedures set forth in the Rules of Commercial Arbitration of the American
Arbitration Association, and both sides shall cooperate in as expeditious a
resolution of the proceeding as is reasonable under the circumstances. The
arbitration panel shall have the power to enter any relief it deems fair and
just on any claim, including interim and final equitable relief, along with any
procedural order that is reasonable under the circumstances.
(b) Expenses of Prosecution/Defense of Claim. During the pendency of a
dispute between the Company and the Executive relating to the Executive's
employment or the terms or performance of this Agreement, the Company shall
promptly pay the Executive's reasonable expenses of representation upon delivery
of periodic xxxxxxxx for same, provided that (i) Executive (or a person claiming
on the Executive's behalf) shall promptly repay all amounts paid hereunder at
the conclusion of the dispute if the resolution thereof includes a finding that
the Executive did not act in good faith in the matter in dispute or in the
dispute proceeding itself, and (ii) no claim for expenses of representation
shall be submitted by the Executive or any person acting on the Executive's
behalf unless made in writing to the Board of Directors within one year of the
performance of the services for which such claim is made.
8. No Obligation to Mitigate Damages. In the event the Executive
becomes eligible to receive compensation or benefits subsequent to the
termination of the Executive's employment under this Agreement, the Executive
shall have no obligation to seek other employment in an effort to mitigate
damages. To the extent the Executive shall accept other employment after the
Executive's termination of employment, the compensation and benefits received
from such employment shall not reduce the compensation and benefits otherwise
due under this Agreement, except as provided in paragraph 4(f)(iii) above.
9. Other Benefits. The benefits provided under this Agreement shall,
except to the extent otherwise specifically provided herein, be in addition to,
and not in derogation or diminution of, any benefits that Executive or the
Executive's beneficiary may be entitled to receive under any other plan or
program now or hereafter maintained by the Company, or its Subsidiaries.
10. Successors. The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Company, to expressly
assume and agree to perform its obligations under this
Agreement in the same manner and to the same extent that the Company would be
required to perform them if no succession had taken place unless, in the opinion
of legal counsel mutually acceptable to the Company and the Executive, such
obligations have been assumed by the successor as a matter of law. Failure of
the Company to obtain such agreement prior to the effectiveness of any such
succession (unless the foregoing opinion is rendered to the Executive) shall
entitle the Executive to terminate the Executive's employment and to receive the
payments provided for in paragraph 4(f), 4(g) and 4(h), as the case may be, as
if the Executive terminated this Agreement for Good Reason. The Executive's
rights under this Agreement shall inure to the benefit of, and shall be
enforceable by, the Executive's legal representative or other successors in
interest, but shall not otherwise be assignable or transferable. The Company's
rights under this Agreement shall inure to the benefit of, and shall be
enforceable by, the Company's successors and assigns, including any person which
may acquire LifeUSA.
11. Severability. If any provision of this Agreement or the application
thereof is held invalid or unenforceable, the invalidity or unenforceability
thereof shall not affect any other provisions or applications of this Agreement
which can be given effect without the invalid or unenforceable provision or
application.
12. Survival. The rights and obligations of the parties pursuant to
this Agreement shall survive the term of the employment to the extent that any
performance is required hereunder after the expiration or termination of such
term.
13. Notices. All notices under this Agreement shall be in writing and
shall be deemed effective when delivered in person (in the Company's case, to
its Secretary) or 48 hours after deposit thereof in the U.S. mails, postage
prepaid, addressed, in the case of the Executive, to the Executive's last known
address as carried on the personnel records of the Company and, in the case of
the Company, to the corporate headquarters, attention of the Secretary, or to
such other address as the party to be notified may specify by written notice to
the other party.
14. Amendments and Construction. This Agreement may only be amended in
a writing signed by the parties hereto. This Agreement shall be construed under
the laws of the State of Minnesota. Paragraph headings are for convenience only
and shall not be considered a part of the terms and provisions of the Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first written above.
LIFE USA HOLDING, INC.
By
---------------------------------
Xxxxxx X. XxxXxxxxx, Chairman
and Chief Executive Officer
------------------------------------
Xxxxxxx X. Xxxxxxxx
EXHIBIT G
FORM OF MARKETING AGREEMENT AMENDMENT
AMENDMENT NO. 1
TO
ADMINISTRATION AND MARKETING AGREEMENT
THIS AMENDMENT NO. 1, made and entered into as of _______________, 1998
between LIFE USA HOLDING, INC., a Minnesota corporation ("Holding"), and ALLIANZ
LIFE INSURANCE COMPANY OF NORTH AMERICA, a Minnesota corporation (the
"Company").
W I T N E S S E T H:
WHEREAS, Holding and the Company have entered into the Administration
and Marketing Agreement effective January 1, 1997 (the "Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement as provided
in this Amendment No. 1,
NOW, THEREFORE, in consideration for the mutual promises and
undertakings set forth herein and for other good and valuable consideration, the
parties hereby agree as follows:
1. Term. Section 11.1 of the Agreement is hereby amended in its
entirety to read as follows:
"11.1 The effective date of commencement of this Agreement
shall be January 1, 1997, and this Agreement shall continue
indefinitely for a minimum of four years and will be subject to
termination upon either party giving one-year advance notice of
cancellation, provided that such notice of termination may not be given
prior to December 31, 1999. In the event of the termination of this
Agreement, the Company shall not directly or indirectly (through
reinsurance or otherwise) sell any life or annuity products similar to
the Covered Products or the New Insurance Products during the one year
following such termination.
In the event of a termination of this Agreement, Holding may
not directly or indirectly (through reinsurance or otherwise) sell any
products similar to products of the Company other than Covered Products
during one year following such termination.
In the event of a termination of this Agreement, Holding shall
cause LifeUSA to take and Allianz shall take all reasonable business
measures to keep in full force and effect the Covered Products serviced
under this Agreement."
2. Continuing Binding Effect. Except as expressly set forth herein, the
Agreement as amended hereby shall continue in full force and effect in
accordance with its terms.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered.
LIFE USA HOLDING, INC.
By:_____________________________
Xxxxxx X. XxxXxxxxx
Chairman and Chief Executive Officer
ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
By:_____________________________
Xxxxxx X. Xxxxxx
Senior Vice President and
Chief Financial Officer
EXHIBIT H
FORM OF DEBENTURE PURCHASE AGREEMENT TERMINATION
DEBENTURE PURCHASE AGREEMENT TERMINATION
THIS TERMINATION, made and entered into as of _______________, 1998
between LIFE USA HOLDING, INC., a Minnesota corporation (the "Company"), and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA, a Minnesota corporation (the
"Allianz").
W I T N E S S E T H:
WHEREAS, the Company and Allianz have entered into the Debenture
Purchase Agreement dated February 17, 1995 (the "Agreement"); and
WHEREAS, the parties hereto desire to terminate and cancel the
Agreement effective the date hereof,
NOW, THEREFORE, in consideration for the mutual promises and
undertakings set forth herein and for other good and valuable consideration, the
parties hereby agree that the Agreement is hereby terminated and cancelled in
its entirety and shall have no further force or effect.
IN WITNESS WHEREOF, the parties have caused this Termination to be duly
executed and delivered.
LIFE USA HOLDING, INC.
By:_____________________________
Xxxxxx X. XxxXxxxxx
Chairman and Chief Executive Officer
ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
By:_____________________________
Xxxxxx X. Xxxxxx
Senior Vice President and
Chief Financial Officer
EXHIBIT I
FORM OF ALLIANZ REINSURANCE AGREEMENT
REINSURANCE AGREEMENT
THIS AGREEMENT, made and entered into as of _________________, 1998,
between LIFEUSA INSURANCE COMPANY, a Minnesota stock life insurance company (the
"Company"), and ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA, a Minnesota
stock life insurance company (the "Reinsurer").
W I T N E S S E T H:
WHEREAS, the parties hereto desire to enter into this Agreement to
provide for the reinsurance of certain policies written by the Company as
provided in this Agreement,
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Reinsurer agree as follows:
ARTICLE I - REINSURANCE COVERAGE
A. The Company's individual life insurance and annuities issued on the
policy forms specified in Exhibit I shall be reinsured automatically
with the Reinsurer, provided it meets the following requirements:
1. Policy issued according to the Company's then existing regular
new risk underwriting rules.
2. Mortality ratings from Standard to Table 16 (P), inclusive.
3. Issue age 80 or below for life insurance and issue age 85 or
below for annuities.
4. Resident of the United States or Canada.
5. Risk has not been submitted to the Reinsurer for facultative
reinsurance.
6. Company retains the coinsurance percentage specified in
Exhibit II.
7. The face amount of life insurance then applied for in all
companies, including the Company on the life, when added to
the face amount then in force in all companies including the
Company on that life, shall not exceed $2,500,000. For
accidental death benefits, the amount shall not exceed
$300,000.
8. The maximum amount to be reinsured automatically on any one
life shall not exceed $500,000 for life insurance and
$1,000,000 for annuities.
B. If the insurance does not meet the automatic requirements specified in
paragraph A, the Company may submit an application for facultative
reinsurance. An application for facultative reinsurance shall be made
by submitting to the Reinsurer a "Preliminary Application for
Reinsurance", Exhibit III, together with copies of all papers
pertaining to the insurability of the risk. The Reinsurer shall have
the option of accepting or rejecting or rating any application for
facultative reinsurance. The Reinsurer shall promptly notify the
Company of its underwriting action after the Reinsurer has examined the
evidence of insurability submitted.
If the amounts of life insurance issued and applied for in all
companies is less than $1,500,000, the Company shall submit the
information required in the preceding paragraph to Republic-Vanguard
Life Insurance Company as the designated lead underwriter for the
Reinsurer, and Republic-Vanguard Life's underwriting decision shall be
binding on the Reinsurer.
If the amount of life insurance issued and applied for in all companies
is $1,500,000 or more, the Company shall submit the information
required in the second preceding paragraph to each reinsurer with an
Interests and Liabilities Agreement to this Agreement, and each
reinsurer shall promptly notify the Company of its underwriting action.
C. The liability of the Reinsurer shall begin on the effective date of the
Company's liability on each policy reinsured hereunder. However, the
Reinsurer's liability for facultative reinsurance on a risk shall not
commence before the Reinsurer has accepted the application for
reinsurance. In no event shall the reinsurance be in force and binding
unless the issuance and delivery of such insurance constituted the
doing of business in the United States of America in a jurisdiction in
which the Company was properly licensed.
D. Reinsurance shall be coinsurance and shall follow the policy forms and
rates of the Company. The Company has furnished the Reinsurer with
copies of its policy forms, applications, rates and values and shall
submit to the Reinsurer policy modifications or new policy forms before
reinsurance shall become effective hereunder.
E. The Reinsurer's share of a policy reinsured hereunder shall remain
unchanged so long as the policy issued by the Company remains in force,
except as provided in ARTICLE VIII - REDUCTIONS, TERMINATIONS AND
CHANGES.
F. Receipt by the Reinsurer of the initial reinsurance premium and of each
subsequent reinsurance premium, in accordance with the provisions of
ARTICLE IV - REPORTS AND REMITTANCES of this Agreement shall be a
condition to the Reinsurer's continuing liability for reinsurance of
each policy reinsured.
G. The Company shall inform the Reinsurer of any reinsurance by means of
the monthly accounting report as described in ARTICLE IV - REPORTS AND
REMITTANCES.
H. If a policy reinsured is changed to a plan of insurance not included in
Exhibit I, reinsurance under this Agreement shall continue only with
the written agreement of the Reinsurer, except as provided in paragraph
A of ARTICLE VIII - REDUCTIONS, TERMINATIONS AND CHANGES.
I. The Reinsurer shall establish and assume liability for all statutory
reserves, as required under law by the State of Minnesota, in
proportion to the Reinsurer's liability for reinsurance on each policy
reinsured.
ARTICLE II - REINSURANCE PREMIUMS
A. The Company shall pay the Reinsurer as reinsurance premiums, the
reinsured portion of the premiums and deposits received by the Company
from its insureds, including the policy fee.
B. The Reinsurer shall pay the Company the allowances described in Exhibit
IV.
C. The Reinsurer shall not reimburse the Company for the amount of any
premium taxes.
ARTICLE III - CLAIMS
The Reinsurer shall reimburse the Company for the reinsured portion of all
claims. Reinsured claims shall be reported by the Company and paid by the
Reinsurer on the following basis:
A. The Reinsurer shall be liable to the Company for the insurance benefits
reinsured under this Agreement as the Company shall be liable for such
benefits. All reinsurance claim settlements shall be subject to the
terms and conditions of the particular form of contract under which the
Company is liable.
B. When the Company is advised of a claim, it shall promptly notify the
Reinsurer.
C. The Company shall submit to the Reinsurer a copy of each paper
connected with the claim to the extent that such papers are requested
by the Reinsurer in accordance with criteria established from time to
time by the Reinsurer. After reviewing such claim papers, the Reinsurer
shall give its opinion as to how it would have handled the claim had it
been a claim of the Reinsurer. The Reinsurer shall give its opinion
within ten
working days after the Reinsurer shall have received a copy of each
paper connected with the claim. If no response is received within this
ten-day period, it will be presumed the Reinsurer is agreeable to
payment of the claim.
D. Payment of reinsurance proceeds shall be on the same basis as
settlement is made by the Company under the policy reinsured hereunder.
E. The Company shall promptly notify the Reinsurer of its intention to
contest insurance reinsured under this Agreement or to assert defenses
to a claim for such insurance. if the Company's contest of such
insurance results in the reduction of its liability, the Reinsurer's
share of such reduction shall be the percentage set forth in Exhibit
II, based on the date the policy was first reinsured under this
Agreement.
If the Reinsurer should decline to participate in the contest or
assertion of defenses, the Reinsurer then shall discharge all of its
liability by the payment of the full amount of reinsurance to the
Company, and the Reinsurer shall not share in any subsequent reduction
in liability.
F. If the amount of insurance provided by a policy reinsured under this
Agreement is increased or reduced because of a misstatement of age or
sex established after the death of the insured, the Reinsurer's share
of such increase or reduction shall be the percentage set forth in
Exhibit II, based on the date the policy was first reinsured under this
Agreement.
G. The Company alone shall pay the routine expenses incurred in connection
with settling claims. These expenses may include compensation of agents
and employees and the cost of routine investigations.
H. The Reinsurer shall share with the Company all expenses which are not
routine. Expenses which are not routine shall be those directly
incurred in connection either with the contest of insurance or the
assertion of defenses to insurance or with the possibility of a contest
or assertion of defenses.
The Reinsurer's share of these expenses shall be the percentage set
forth in Exhibit II, based on the date the policy was first reinsured
under this Agreement. However, if the Reinsurer has discharged its
liability under paragraph E of this Article, the Reinsurer shall not
share in any expenses incurred after the date it has discharged its
liability. The term "claim expenses" shall mean statutory interest
payable on insurance proceeds, court costs, interest upon judgments,
and allocated investigation, adjustment and legal expenses, but the
term "claim expenses" shall not include salaries paid to employees of
the Company.
I. Any particular reinsurer shall be obligated to reimburse the Company
for the percentage set forth in that reinsurer's interests and
Liabilities Agreement of any
amount paid by the Company for punitive, exemplary or compensatory
damages arising out of the conduct of the Company in the investigation,
trial or settlement of any claim or failure to pay or delay in payment
of any benefit under a policy reinsured by this Agreement, but only if
that particular reinsurer shall have, in advance of any such conduct by
the Company, counseled with the Company and concurred in the Company's
course of conduct.
ARTICLE IV - REPORTS & REMITTANCES
The following rules for Monthly Reinsurance Accounting are required:
A. The reinsurance premiums required under this Agreement shall be payable
to the Reinsurer on the same basis as the insurance premiums and
deposits are payable to the Company.
B. Within ten days following the close of each month, the Company shall
provide the Reinsurer with a statement listing the total and the
reinsured portions of all premiums, deposits, refunds, allowances,
claims, surrender benefits, policy loans, reserves and other mutually
agreed upon items applicable to the month just ended. The format and
methods of calculation of such items shall be in a form mutually
acceptable to all parties.
C. For administrative purposes only, if a statement shows that a net
balance is payable to the Reinsurer, the Company shall include with the
statement its payment for the amount of the net balance due the
Reinsurer. If payment for the full amount of the net balance due the
Reinsurer is not included with the statement, the reinsurance premiums
for all of the risks listed on the statement shall be in default. If a
statement shall not be received by the Reinsurer within thirty days
after the close of the month, the reinsurance premiums for all of the
risks that would have been listed on such a statement shall be in
default.
Also for administrative purposes only, if a statement shows that a net
balance is payable to the Company, the Reinsurer shall pay to the
Company the amount of the net balance within thirty days after the day
on which the Reinsurer receives the monthly statement from the Company.
D. It is the understanding of both parties that both parties desire the
payment of net balances due no less frequently than weekly. Either
party may, at its option and with the cooperation and consent of the
other party, implement appropriate procedures designed to accomplish
such transfers along with the appropriate statements. Such procedures
may involve the establishment of special bank accounts and the use of
wires, express mail or equivalent means. The establishment of such
procedures, however, does not remove from either party any of the
rights or obligations set forth in the other paragraphs of this
Article.
E. The Reinsurer shall have the right to terminate the reinsurance on
risks for which reinsurance premiums are in default by giving ninety
days written notice of termination to the Company. The Insurance
Department of the State of Minnesota shall be sent a copy of such
written notice by registered mail. As of the close of the last day of
this ninety-day notice period, all of the Reinsurer's liability for
reinsurance on risks which are the subject of the termination notice
shall terminate unless the Reinsurer shall have been paid the amount in
default prior to that time.
Notwithstanding termination of reinsurance as provided by this
paragraph, the Company shall continue to be liable to the Reinsurer for
all unpaid reinsurance premiums earned by the Reinsurer under this
Agreement.
F. There shall be no reinstatement of reinsurance terminated under
paragraph E of this Article.
G. The first day of the ninety-day notice of termination under paragraph E
of this Article shall be the day the notice shall be deposited in the
mail addressed to the Company's Home Office, or, if the mail is not
used, the day it is delivered to the Company's Home Office or to an
officer of the Company.
H. Within thirty days following the close of each calendar quarter, the
Company shall prepare and submit to the Reinsurer an in force listing
of all risks reinsured under this Agreement setting forth pertinent
data mutually agreed upon by all parties.
I. All amounts payable under this Agreement shall be payable in the lawful
money of the United States; except, however, that they shall be payable
in the lawful money of Canada if the Company's insurance is based on
Canadian currency.
ARTICLE V - EXPENSES
The Company shall bear the expense of all medical examinations, inspection fees
and other charges incurred in connection with the issuance of the Company's
insurance policies reinsured. The Reinsurer will reimburse the Company for the
Reinsurer's share of any guaranty fund assessments with respect to the policies
reinsured hereunder based on the percentage of the policies reinsured hereunder.
ARTICLE VI - INTEREST ON STATEMENTS AND CLAIMS
A. Interest accrual on all amounts owed from one party to the other begins
on the tenth day following the end of the month. All interest credited
shall be simple interest.
B. This arrangement shall take effect beginning with the [MONTH AND YEAR]
statement. Interest accrual for the [MONTH AND YEAR] statement shall
begin on [10TH OF THE NEXT FOLLOWING MONTH].
C. On the twentieth day of the month preceding the end of each calendar
quarter (on the following business day if the twentieth day falls on a
weekend or holiday), the interest rate shall be established which shall
apply to any statements or claims due during the following calendar
quarter.
D. The interest rate shall be the three-month Treasury Xxxx rate as stated
in The Wall Street Journal.
ARTICLE VII - OVERSIGHTS
It is understood and agreed that if failure to comply with the terms of this
Agreement is shown to be unintentional and the result of a misunderstanding or
oversight on the part of either the Company or the Reinsurer, both the Company
and the Reinsurer shall be restored to the positions they would have occupied
had no such misunderstanding or oversight occurred, provided the failure is
rectified within a reasonable time after discovery.
ARTICLE VIII - REDUCTIONS, TERMINATIONS AND CHANGES
A. If there is a contractual or non-contractual replacement or change in
the insurance reinsured under this Agreement, the insurance shall
continue to be reinsured with the Reinsurer.
B. If the insurance reinsured under this Agreement increases and;
1. The increase is subject to new underwriting evidence, the
provisions of ARTICLE I - REINSURANCE COVERAGE shall apply to
the increase in reinsurance.
2. The increase is not subject to new underwriting evidence, the
Reinsurer shall accept automatically the increase in
reinsurance, provided that the total amount ceded does not
exceed the Reinsurer's automatic binding limit.
C. If the amount of insurance provided by a policy reinsured under this
Agreement is increased or reduced, the Reinsurer's share of such
increase or reduction shall be the percentage set forth in Exhibit II,
based on the date the policy was first reinsured under this Agreement.
D. If insurance reinsured under this Agreement is increased or, reduced,
the Reinsurer's share of any adjustments to cash values, reserves,
policy loans, or other shared values shall be the percentage set forth
in Exhibit II, based on the date the policy was first reinsured under
this Agreement.
E. If insurance reinsured under this Agreement is terminated, the
reinsurance for the individual risk involved shall be terminated on the
effective date of termination.
F. On facultative reinsurance, if the Company wishes to reduce the
mortality rating, this reduction shall be reunderwritten on a
facultative basis under the facultative provisions of this Agreement.
G. The Reinsurer shall refund to the Company all unearned reinsurance
premiums not including policy fees, less applicable allowances, arising
from reductions, terminations and changes as described in this Article.
H. If there is a contractual or non-contractual replacement or change in
the insurance reinsured under this Agreement, the reinsurance
allowances set forth in Exhibit IV shall be calculated, based on policy
duration from the original date of issue, unless full new underwriting
evidence according to the Company's regular underwriting rules is
required. If such evidence is required, then the reinsurance allowance
shall be based on the effective date of the replacement or change, but
only in the proportion and to the extent that full first year
compensation is payable, and subject to approval of the Reinsurer.
ARTICLE IX - ACCESS TO RECORDS
A. The Reinsurer, by its duly authorized and appointed representatives,
shall have the right at any reasonable time to examine at the office of
the Company or the offices of any of the agencies which produce
business for the Company, all papers and documents relating to
reinsurance under this Agreement.
B. At least once each year, the independent auditors of the Company shall
perform certain confirmation procedures, agreed upon by the Company and
the Reinsurer, in connection with the reinsurance. A copy of the report
of the independent auditor shall be furnished to the Reinsurer.
ARTICLE X - UNAUTHORIZED REINSURERS
The Reinsurer agrees to fund its share of the Company's ceded statutory reserves
by:
1. Escrow or trust accounts for the benefit of the Company; and/or
2. Cash advances;
if, without such funding, a penalty would accrue to the Company on any financial
statement it is required to file with the insurance regulatory authorities
involved.
ARTICLE XI - INSOLVENCY
A. In the event of the insolvency of the Company, all reinsurance shall be
payable on the basis of the policies reinsured directly to its
liquidator, receiver, conservator or statutory successor, without
diminution because of the insolvency of the Company or because such
liquidator, receiver, conservator or statutory successor has failed to
pay all or a portion of any claim.
B. In the event of the insolvency of the Company, the liquidator,
receiver, conservator or statutory successor shall give the Reinsurer
written notice of the pendency of a claim on a policy reinsured within
a reasonable time after such claim is filed in the insolvency
proceeding. During the pendency of a claim, the Reinsurer may
investigate such claim and interpose in the name of the Company, its
liquidator, receiver, conservator or statutory successor, but at its
own expense, in the proceeding where such claim is to be adjudicated,
any defense or defenses which the Reinsurer may deem available to the
Company or its liquidator, receiver, conservator or statutory
successor.
C. The expense thus incurred by the Reinsurer shall be chargeable, subject
to court approval, against the Company as part of the expenses of
conservation, liquidation or insolvency to the extent of a
proportionate share of the benefit which may accrue to the Company
solely as a result of the defense undertaken by the Reinsurer. Where
two or more reinsurers are involved in the same claim and a majority in
Interest elect to interpose a defense or defenses to such claim, the
expense shall be apportioned as though such expense had been incurred
by the Company.
ARTICLE XII - ARBITRATION
A. It is the intention of the parties that customs and usages of the
business of reinsurance shall be given full effect in the
interpretation of this Agreement. The parties shall act in all things
with the highest good faith. A dispute or difference between the
parties with respect to the operation or interpretation of this
Agreement on which an amicable under- standing cannot be reached shall
be decided by arbitration. The arbitrators are empowered to decide all
questions or issues and shall be free to reach their decisions from the
standpoint of equity and customary practices of the insurance and
reinsurance industry rather than from that of strict law.
B. There shall be three arbitrators who shall be active or retired
officers of life insurance companies other than the contracting parties
or their affiliates. Each of the contracting companies shall appoint
one of the arbitrators and these two arbitrators shall select the
third. In the event that either contracting party should fail to choose
an arbitrator within thirty days after the other contracting party has
given notice of its arbitrator appointment,
that contracting company may choose two arbitrators, who shall in turn
choose a third arbitrator before entering arbitration. If the two
arbitrators are unable to agree upon the selection of a third
arbitrator within thirty days following their appointment, each
arbitrator shall nominate three candidates within ten days thereafter,
two of whom the other shall decline and the decision shall be made by
drawing lots.
C. The arbitrators shall decide by a majority of votes and from their
written decision there can be no appeal. The cost of arbitration,
including the fees of the arbitrators, shall be borne by the losing
party unless the arbitrators decide otherwise.
ARTICLE XIII - RECAPTURE
Insurance reinsured under this Agreement shall not be eligible for recapture.
ARTICLE XIV - REINSTATEMENTS
If insurance shall lapse for nonpayment of premium and if it is reinstated in
accordance with its terms and the rules of the Company, the applicable
reinsurance shall be reinstated by the Reinsurer, subject to the condition that
the Company shall pay to the Reinsurer all reinsurance premiums in the same
manner as the Company shall receive its premiums under its policy.
ARTICLE XV - PARTIES TO THE AGREEMENT
This Agreement is for indemnity reinsurance solely between the Company and the
Reinsurer. The acceptance of reinsurance shall not create any right or legal
relation whatever between the Reinsurer and the insured or any other person
having an interest in any kind of insurance issued by the Company.
ARTICLE XVI - SCOPE AND DURATION OF AGREEMENT
A. This Agreement shall be effective on _________________, 1998. This
Agreement may be terminated with respect to new business to be
reinsured thereafter at any time, subject to paragraph B of this
Article, by either party giving both the following two written notices:
1. Ninety days notice of termination to the other party; and
2. Ninety days notice of termination to the Department of
Insurance of the State of Minnesota, by registered mail.
Reinsurance of policies in force on the date of termination shall
remain in force until the extinction of the Company's liability under
the policies reinsured.
B. The first day of the ninety-day notice period in subparagraph 2 of
paragraph A of this Article shall be:
1. The day immediately following the day in which the notice is
deposited as registered mail; or
2. If delivered by means other than mail, the day the notice is
delivered at the office of the Minnesota Insurance Department.
C. Notwithstanding the provisions of paragraph A of this Article, if the
Reinsurer terminates this Agreement with respect to new reinsurance and
the Company has not arranged for a replacement reinsurer for new
reinsurance prior to the date of termination under paragraph A of this
Article, the Company may, by written notice to the Reinsurer prior to
expiration of the ninety day period referred to in paragraph A of this
Article, require that this Agreement shall continue in effect for up to
an additional ninety days.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered.
LIFEUSA INSURANCE COMPANY
By:_____________________________
Xxxxxx X. XxxXxxxxx
Chief Executive Officer
ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
By:_____________________________
Xxxxxx X. Xxxxxx
Senior Vice President and
Chief Financial Officer
EXHIBIT J
FORM OF LIFEUSA REINSURANCE AGREEMENT AMENDMENT
AMENDMENT
TO
LIFE AND ANNUITY COINSURANCE AGREEMENT
THIS AMENDMENT, made and entered into as of _______________, 1998
between LIFEUSA INSURANCE COMPANY, a Minnesota corporation ("Reinsurer"), and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA, a Minnesota corporation (the
"Company").
W I T N E S S E T H:
WHEREAS, Reinsurer and the Company have entered into the Life and
Annuity Coinsurance Agreement effective January 1, 1995, as heretofore amended,
(the "Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement as provided
in this Amendment,
NOW, THEREFORE, in consideration for the mutual promises and
undertakings set forth herein and for other good and valuable consideration, the
parties hereby agree as follows:
1. Exhibit II. Exhibit II to the Agreement is hereby amended in its
entirety and replaced by Exhibit II attached to this Amendment.
2. Use of Stock to Pay Allowances. During the five year period
beginning July 1, 1998 and ending on June 30, 2003 (the "Five Year Period"),
Reinsurer may use shares of common stock, par value $.01 per share, (the "Common
Stock") of its parent company, Life USA Holding, Inc., a Minnesota corporation
(the "Parent"), to pay the amounts owing by Reinsurer to the Company under
Exhibit IV of this Agreement (the "Allowances"), subject to the provisions of
this paragraph. For each six month period beginning July 1 or January 1 (the
"Six Month Period") during the Five Year Period, the maximum amount of shares of
Common Stock which can be used to pay the Allowances shall be $10 million. For
each Six Month Period, the value (the "Purchase Price Per Share") of the shares
of Common Stock used to pay the Allowances will be an amount equal to the
Average Book Value Per Share (as defined herein) for the respective Six Month
Period, multiplied by two and one-half (2-1/2). The term "Average Book Value Per
Share" for each Six Month Period shall mean the average of the Book Value Per
Share (as herein defined) as of December 31 and June 30 (each a "Determination
Date") immediately preceding the Six Month Period. For the purposes of this
Agreement, the term "Book Value Per Share" shall mean (a) total assets minus
total liabilities of the Parent, based on the Parent's consolidated balance
sheet as of the Determination Date, determined in accordance with generally
accepted accounting principles in effect on the date hereof and used by the
Parent in the preparation of its audited consolidated financial statements as of
and for the year ended December 31, 1996 unless the parties mutually agree to
any change after the date hereof, excluding any adjustment under Statement of
Financial Standards No. 115, divided by (b) the actual number of issued and
outstanding shares of Common Stock as of the Determination Date.
3. Continuing Binding Effect. Except as expressly set forth herein, the
Agreement as amended hereby shall continue in full force and effect in
accordance with its terms.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered.
LIFEUSA INSURANCE COMPANY
By:_____________________________
Xxxxxx X. XxxXxxxxx
Chief Executive Officer
ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
By:_____________________________
Xxxxxx X. Xxxxxx
Senior Vice President and
Chief Financial Officer
EXHIBIT II
LIFE AND ANNUITY COINSURANCE AGREEMENT
Effective: January 1, 1995
between
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Minneapolis, Minnesota
and
LifeUSA INSURANCE COMPANY
Minneapolis, Minnesota
COINSURANCE PERCENTAGES
For all policies reinsured under this Agreement, the Company and the Reinsurer
shall share the risks in accordance with the following schedule of coinsurance
percentages:
LIFE
Policies First Reinsured Company's Reinsurer's
Between: Share Share
------------------------ --------- -----------
01/01/95 through 9/30/95 50.0% 50.0%
10/1/95 through __/__/98 75.0% 25.0%
__/1/98 and thereafter [__.0%] [__.0%]
ANNUITIES
Policies First Reinsured Company's Reinsurer's
Between: Share Share
------------------------ --------- -----------
01/01/95 through 9/30/95 50.0% 50.0%
10/1/95 through __/__/98 75.0% 25.0%
__/1/98 and thereafter [__.0%] [__.0%]
EXHIBIT K
FORM OF CLAIMS ADMINISTRATION AGREEMENT AMENDMENT
AMENDMENT NO. 1
TO
CLAIMS ADMINISTRATION AGREEMENT
THIS AMENDMENT NO. 1, made and entered into as of _______________, 1998
between LIFEUSA INSURANCE COMPANY, a Minnesota corporation ("LifeUSA"), and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA, a Minnesota corporation (the
"Company").
W I T N E S S E T H:
WHEREAS, LifeUSA and the Company have entered into the Claims
Administration Agreement effective January 1, 1997 (the "Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement as provided
in this Amendment No. 1,
NOW, THEREFORE, in consideration for the mutual promises and
undertakings set forth herein and for other good and valuable consideration, the
parties hereby agree as follows:
1. Term. Section 11.1 of the Agreement is hereby amended in its
entirety to read as follows:
"11.1 The effective date of commencement of this Agreement
shall be January 1, 1997, and this Agreement shall continue
indefinitely for a minimum of four years and will be subject to
termination upon either party giving one year advance notice of
cancellation, provided that such notice of termination may not be given
prior to December 31, 1999. In the event of the termination of this
Agreement, the Company shall not directly or indirectly (through
reinsurance or otherwise) sell any life or annuity products similar to
the Covered Products or the New Insurance Products during the one year
following such termination.
In the event of a termination of this Agreement, LifeUSA may
not directly or indirectly (through reinsurance or otherwise) sell any
products similar to products of the Company other than Covered Products
during one year following such termination."
2. Continuing Binding Effect. Except as expressly set forth herein, the
Agreement as amended hereby shall continue in full force and effect in
accordance with its terms.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered.
LIFEUSA INSURANCE COMPANY
By:_____________________________
Xxxxxx X. XxxXxxxxx
Chief Executive Officer
ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
By:_____________________________
Xxxxxx X. Xxxxxx
Senior Vice President and
Chief Financial Officer
EXHIBIT L
MATTERS FOR XXXXXX, XXXXXXXX AND XXXXXX, P.A. OPINION AT INITIAL CLOSING
1. Each of the Company and LifeUSA is a corporation duly organized and
validly existing in good standing under the laws of the state of its
incorporation, and has the corporate power and authority to own and hold the
properties owned and leased by it and to carry on the business in which it is
engaged. The Company has the corporate power and authority to enter into this
Agreement, the Marketing Agreement and the Debenture Purchase Agreement
Termination to issue and sell the shares of Common Stock to be sold to Allianz
pursuant to this Agreement on the date hereof, and to carry out the provisions
of this Agreement. LifeUSA has the corporate power and authority to enter into
the LifeUSA Reinsurance Agreement, the Allianz Reinsurance Agreement and the
Claims Administration Agreement.
2. This Agreement, the Marketing Agreement, the LifeUSA Reinsurance
Agreement, the Claims Administration Agreement, the Debenture Purchase Agreement
and the Allianz Reinsurance Agreement have been duly authorized, executed and
delivered by the Company or LifeUSA, as the case may be, are the legal, valid
and binding agreement of the Company or LifeUSA, as the case may be, and are
enforceable against the Company or LifeUSA, as the case may be, in accordance
with their respective terms, subject, as to the enforcement of remedies, to
limitations under applicable bankruptcy, insolvency, moratorium, reorganization,
and other laws affecting the rights of creditors generally and to judicial
limitations on the enforcement of the remedy of specific performance and other
equitable remedies.
3. The shares of Common Stock being issued on the date hereof pursuant
to Sections 1.1 and 1.2 of the Agreement have been duly authorized, validly
issued and delivered by the Company and are fully paid and nonassessable.
4. All corporate proceedings required by law or by the provisions of
this Agreement to be taken by the Board of Directors of the Company and LifeUSA
on or prior to such closing date in connection with the execution and delivery
of this Agreement, the issuance of the shares of Common Stock pursuant to
Sections 1, 2 and 9 of the Agreement and the consummation of the transactions
contemplated by this Agreement have been duly and validly taken.
5. The Company is authorized by its restated articles of incorporation,
as amended, to issue 45,000,000 shares of Common Stock, and 15,000,000
undesignated preferred shares. All shares outstanding immediately prior to the
closing date have been duly authorized and validly issued and are fully paid and
nonassessable. Except for such common shares and preferred shares, the Company
has no other authorized series or class of capital stock.
6. To the best of such counsel's knowledge, no security holder of the
Company is entitled to preemptive or similar rights as a result of the execution
or delivery of this Agreement or the issuance of the shares of Common Stock
pursuant thereto.
7. Assuming the accuracy of the representations made by Allianz in
Section 4 of the Agreement, the Company or LifeUSA has obtained the approval or
consent of all governmental
agencies or bodies required for (i) the legal and valid execution, delivery and
performance of this Agreement, the Marketing Agreement, the Debenture Purchase
Agreement Termination, the Allianz Reinsurance Agreement, the LifeUSA
Reinsurance Agreement and the Claims Administration Agreement, (ii) the legal
and valid offer, issuance and sale of the shares of Common Stock to be issued
pursuant to Sections 1, 2 and 9 of the Agreement and (iii) the performance of
the obligations of the Company under all provisions of this Agreement, the
Marketing Agreement, and the Debenture Purchase Agreement Termination and the
performance of the obligations of LifeUSA under the Allianz Reinsurance
Agreement, the LifeUSA Reinsurance Agreement and the Claims Administration
Agreement. To the best of such counsel's knowledge, the execution, delivery and
performance of this Agreement, the Marketing Agreement Amendment, the Debenture
Purchase Agreement Termination, the Allianz Reinsurance Agreement, the LifeUSA
Reinsurance Agreement and the Claims Administration Agreement by the Company or
LifeUSA, as the case may be to which it is a party, the issuance of the shares
of Common Stock to be issued pursuant to Sections 1, 2 and 9 of the Agreement,
and the consummation of the transactions contemplated by this Agreement will not
result in any violation of any material agreement or other instrument to which
the Company or LifeUSA is a party or by which either is bound or to which any of
its properties, assets or business is subject or any judgment, decree or order.
8. Assuming the accuracy of the representations made by Allianz in
Section 4 of the Agreement, the offer, sale, issuance and delivery of the shares
to be issued pursuant to Sections 1.2 and 1.3 of this Agreement on the date
hereof under the circumstances contemplated by this Agreement are exempt from
the registration and prospectus delivery requirements of the Securities Act and
the securities laws of the State of Minnesota.
9. Except for matters disclosed on the Disclosure Schedule, such
counsel has no knowledge of any litigation, proceeding or governmental
investigation pending or threatened against the Company or LifeUSA or their
respective properties or business that should have been described in the
Disclosure Schedule but is not so described.
10. The transactions contemplated by the Agreement are in compliance
with and permitted by the provisions of Section 302A.673 of the Minnesota
Statutes.
EXHIBIT M
MATTERS FOR XXXXXX & XXXXXXX OPINION AT INITIAL CLOSING
1. Allianz is a corporation duly organized and validly existing in good
standing under the laws of the state of its incorporation, and has the corporate
power to enter into this Agreement, the Allianz Reinsurance Agreement, the
Marketing Agreement Amendment and the Debenture Purchase Agreement Termination
and to carry out the respective provisions thereof.
2. This Agreement, the Allianz Reinsurance Agreement, the Marketing
Agreement Amendment and the Debenture Purchase Agreement Termination have been
duly authorized, executed and delivered by Allianz, are the legal, valid and
binding agreements of Allianz and are enforceable against Allianz in accordance
with their respective terms, subject, as to the enforcement of remedies, to
limitations under applicable bankruptcy, insolvency, moratorium, reorganization,
and other laws affecting the rights of creditors generally and to judicial
limitations on the enforcement of the remedy of specific performance and other
equitable remedies.
3. All corporate proceedings required by law or by the provisions of
this Agreement to be taken by the Board of Directors of Allianz on or prior to
such closing date in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement have been duly and validly taken.
EXHIBIT N
MATTERS FOR XXXXXX, XXXXXXXX AND XXXXXX, P.A. OPINION AT A SALE CLOSING
1. Each of the Company and LifeUSA is a corporation duly organized and
validly existing in good standing under the laws of the state of its
incorporation, and has the corporate power and authority to own and hold the
properties owned and leased by it and to carry on the business in which it is
engaged. The Company has the corporate power and authority to enter into this
Agreement, to issue and sell the shares of Common Stock to be issued on the date
hereof pursuant to Section 2.2 of the Agreement and the Preemptive Shares and to
carry out the provisions of this Agreement.
2. This Agreement has been duly authorized, executed and delivered by
the Company, is the legal, valid and binding agreement of the Company, and is
enforceable against the Company in accordance with its respective terms,
subject, as to the enforcement of remedies, to limitations under applicable
bankruptcy, insolvency, moratorium, reorganization, and other laws affecting the
rights of creditors generally and to judicial limitations on the enforcement of
the remedy of specific performance and other equitable remedies.
3. The shares of Common Stock to be issued on the date hereof pursuant
to Section 2.2 of the Agreement have been duly authorized, validly issued and
delivered by the Company and are fully paid and nonassessable.
4. All corporate proceedings required by law or by the provisions of
this Agreement to be taken by the Board of Directors of the Company on or prior
to such closing date in connection with the execution and delivery of this
Agreement, the issuance of the shares of Common Stock to be issued on the date
hereof pursuant to Section 2.2 of the Agreement, and the consummation of the
transactions contemplated by this Agreement have been duly and validly taken.
5. The Company is authorized by its restated articles of incorporation,
as amended, to issue ___________ shares of Common Stock, and ____________
undesignated preferred shares. All shares outstanding immediately prior to the
closing date have been duly authorized and validly issued and are fully paid and
nonassessable. Except for such common shares and preferred shares, the Company
has no other authorized series or class of capital stock.
6. To the best of such counsel's knowledge, no security holder of the
Company is entitled to preemptive or similar rights as a result of the execution
or delivery of this Agreement or the issuance of the shares of Common Stock
pursuant thereto.
7. Assuming the accuracy of the representations made by Allianz in
Section 4 of the Agreement, the Company has obtained the approval or consent of
all governmental agencies or bodies required for (i) the legal and valid
execution and delivery of this Agreement, (iii) the legal and valid offer,
issuance, sale or grant of the shares of Common Stock to be issued on the date
hereof pursuant to Section 2.2 of this Agreement, and (iii) the performance of
the obligations of the Company under all provisions of this Agreement. To the
best of such counsel's knowledge, the execution, delivery and performance of
this Agreement by the Company, the issuance of the
shares of Common Stock to be issued on the date hereof pursuant to Section 2.2
of this Agreement and the consummation of the transactions contemplated by this
Agreement will not result in any violation of any material agreement or other
instrument to which the Company is a party or by which it is bound or to which
any of its properties, assets or business is subject or any judgment, decree or
order.
8. Assuming the accuracy of the representations made by Allianz in
Section 4 of the Agreement, the offer, sale issuance and delivery of the shares
of Common Stock to be issued on the date hereof pursuant to Section 2.2 of this
Agreement, under the circumstances contemplated by this Agreement are exempt
from the registration and prospectus delivery requirements of the Securities Act
and the securities laws of the State of Minnesota.
EXHIBIT O
FORM OF CONVERTIBLE DEBENTURE
LIFE USA HOLDING, INC.
CONVERTIBLE DEBENTURE
$____________ Minneapolis, Minnesota
-----------, ----
Life USA Holding, Inc., a Minnesota corporation (hereinafter called the
"Company"), for value received hereby promises to pay Allianz Life Insurance
Company of North America (the "Purchaser") or to its successors and assigns (the
Purchaser and its successors and assigns, collectively the "Holder"), at the
principal office of the Company in Minneapolis, Minnesota, the principal sum of
______________________ Dollars ($__________) and to pay interest on the unpaid
principal balance hereof as described below, from the date hereof until payment
in full. All payments hereunder shall be made in lawful money of the United
States of America and in immediately available funds (funds with good value on
the date received in Minneapolis, Minnesota).
The principal and accrued interest are to be paid as follows:
A. On each June 30th and December 31st after the date hereof to and including
the Maturity Date (as defined below), the Company shall pay to the Holder
hereof the interest accrued (computed on the basis of actual days elapsed
in a 365 or 366-day year, as the case may be) on the unpaid principal
amount of this Debenture at the rate of [INSERT THE EFFECTIVE PERCENTAGE
INTEREST RATE IN ACCORDANCE WITH SECTION 2.4 OF THE AGREEMENT] percent
(_____%) per annum.
B. Commencing [INSERT THE DATE OF JUNE 30 OR DECEMBER 31 IMMEDIATELY FOLLOWING
THE FIFTH ANNIVERSARY OF THE DETERMINATION DATE WITH RESPECT TO WHICH THE
DEBENTURE IS ISSUED], and on each June 30th and December 31st thereafter to
and including the Maturity Date, the Company shall pay to the Holder hereof
principal installments of [INSERT ONE-TENTH OF THE ORIGINAL PRINCIPAL
AMOUNT OF THE DEBENTURE] Dollars ($_________).
C. The remaining principal amount hereof and any accrued and unpaid interest
hereunder shall be due and payable in full on [INSERT DATE WHICH IS THE
TENTH ANNIVERSARY OF THE DETERMINATION DATE WITH RESPECT TO WHICH THE
DEBENTURE IS ISSUED] (the "Maturity Date")
1. Issue. This Convertible Debenture (the "Debenture") is executed and
delivered by the Company pursuant to the Stock Purchase Agreement dated January
___, 1998 (the "Purchase Agreement") between the Company and the Purchaser.
2. Default. If any default in the Purchase Agreement shall occur or default
shall be made in the due and punctual payment of any principal of, or interest
on, this Debenture when and as such amounts shall become due and payable, at the
option of the Holder of this Debenture, exercised by written notice to the
Company, the outstanding principal balance of this Debenture, together with the
interest accrued thereon, shall forthwith become due and payable without
presentment, demand, protest or further notice of any kind, all of which are
expressly waived by the Company. The Company agrees to pay all reasonable costs
of collection, including reasonable attorneys' fees, in the event that payment
shall not be made under the terms and conditions of this Debenture.
3. Prepayment. This Debenture shall be subject to prepayment, without
penalty or premium, at any time at the option of the Company. The Company shall
give the Holder of this Debenture written notice of prepayment at least thirty
(30) days prior to the prepayment date. Such notice must conspicuously specify
the date the Holder's conversion rights, pursuant to Section 5 hereof,
terminate. Upon any prepayment, the Company shall pay the principal amount to be
prepaid, together with any accrued interest thereon to the date of prepayment.
4. Conversion Rights. This Debenture may be converted into shares of common
stock, $.01 par value per share ("Common Stock") of the Company subject to the
following provisions, terms and conditions:
This Debenture shall be convertible in whole at any time or in part from
time to time at the option of the Holder into the number of shares of Common
Stock equal to the number obtained by dividing the principal amount of this
Debenture by the conversion price per share (the "Conversion Price"). The
Conversion Price on the date hereof is [INSERT 200% OF THE MARKET PRICE PER
SHARE ON THE DETERMINATION DATE WITH RESPECT TO WHICH THE DEBENTURE IS ISSUED]
and shall be adjusted from time to time as hereinafter provided.
In order to exercise the conversion privilege, a Holder of this Debenture
shall surrender this Debenture to the Company at its principal office,
accompanied by written notice to the Company that the Holder elects to convert a
specified portion or all of the principal balance of this Debenture into Common
Stock. This Debenture shall be deemed to have been converted immediately prior
to the close of business on the day of surrender of this Debenture for
conversion in accordance with the foregoing provisions, and at such time the
rights of the Holder with respect to so much of the principal balance thereof as
is converted shall cease and the Holder shall be treated for all purposes as the
record owner of the shares of Common Stock issuable upon conversion. Within ten
(10) days of the conversion date, the Company shall issue and mail or deliver to
Holder a certificate or certificates for the number of shares of Common Stock
issuable upon conversion and, if this Debenture surrendered was not converted in
whole, a new Debenture to evidence the portion of this Debenture not converted.
No fractional shares of Common Stock shall be issued upon conversion. In lieu of
any fractional shares to which the Holder would otherwise be entitled, the
Company shall pay cash equal to such fraction multiplied
by the Market Value Per Share (as defined in Section 5) on the conversion date.
In addition, a cash payment shall be made in the amount of any accrued interest
on this Debenture, or portion thereof converted, as of the conversion date.
The Conversion Price is subject to adjustment from time to time as follows:
(a) If and whenever the Company shall (1) issue or sell any shares of
Common Stock for a consideration per share less than the Conversion Price in
effect immediately prior to the time of such issuance or sale, (2) issue or sell
any warrants, options or other rights to acquire shares of Common Stock at a
purchase price less than the Conversion Price in effect immediately prior to the
time of such issuance or sale, or (3) issue or sell any other securities that
are convertible into shares of Common Stock for a purchase or exchange price
less than the Conversion Price in effect immediately prior to the time of such
issuance or sale (in each case, except for (x) options and the issuance or sale
of shares of Common Stock pursuant to the exercise of options issued under any
employee or agent stock option plan or under any director option plan and (y)
the issuance or sale of shares of Common Stock to any employee benefit plan,
including a 401k plan, then, upon such issuance or sale, the Conversion Price
shall be reduced to the price (calculated to the nearest one-tenth of a cent)
determined by dividing (A) an amount equal to the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
multiplied by the then existing Conversion Price, and (2) the consideration, if
any, received by the Company upon such issue or sale, and the consideration to
be received by the Company upon the exercise of such stock purchase rights by
(B) an amount equal to the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issue or sale and (2) the number of the
shares of Common Stock thus issued or sold or issuable or salable upon the
exercise of such purchase rights or the conversion of such convertible
securities provided, however, that in the event that any such purchase right
expires or is terminated prior to the conversion of this Debenture, the
Conversion Price shall be recalculated by deleting such purchase right and
provided further that if an adjustment is made to the Conversion Price as a
result of the issuance or sale of any such purchase rights or convertible
securities, no further adjustment shall be made to the Conversion Price at the
time such purchase rights are exercised or convertible securities are converted.
(b) In case the Company shall declare a dividend upon its Common Stock
payable otherwise than in cash out of earnings from the immediately preceding
four fiscal quarters (including a dividend payable in Common Stock), then
thereafter the Holder of this Debenture upon the conversion thereof will be
entitled to receive the number of shares of Common Stock into which this
Debenture shall be converted, and, in addition and without payment therefor, the
cash, stock or other securities and other property (including Common Stock)
which such Holder would have received by way of dividends or distributions
(other than out of earnings from the immediately preceding four fiscal quarters)
if continuously since the record date for any such dividend or distribution such
Holder (i) had been the record Holder of the number of shares of Common Stock
then received, and (ii) had retained all dividends or distributions in stock or
securities
payable in respect of such Common Stock or in respect of any stock or securities
paid as dividends or distributions and originating directly or indirectly from
such shares of Common Stock.
(c) In case the Company shall at any time subdivide or split its
outstanding Common Stock into a greater number of shares, the Conversion Price
in effect immediately prior to such subdivision or split shall be
proportionately reduced, and conversely, in case the outstanding Common Stock of
the Company shall be combined into a smaller number of shares, the Conversion
Price in effect immediately prior to such combination shall be proportionately
increased.
(d) If the Company takes any other action, or if any other event occurs,
which does not come within the scope of the provisions of subsections 5(a), (b)
or (c), but which should result in an adjustment in the Conversion Price or the
number of shares of Common Stock receivable upon conversion of this Debenture in
order to fairly protect the conversion rights of the Holder hereof, an
appropriate adjustment in such conversion rights shall be made by the Company as
reasonably determined by the Company's board of directors.
(e) If any capital reorganization or reclassification of the capital stock
of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
entity shall be effected in such a way that holders of Common Stock shall be
entitled to receive stock, securities or assets with respect to or in exchange
for Common Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provision shall be made
whereby the Holder of this Debenture shall thereafter have the right to receive
upon the basis and upon the terms and conditions specified herein and in lieu of
the Common Stock of the Company receivable upon the conversion of this
Debenture, such shares of stock, securities or assets as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
Common Stock equal to the number of shares of Common Stock receivable upon the
conversion of this Debenture immediately prior to such reorganization,
reclassification, consolidation, merger or sale, and in any such case
appropriate provision shall be made with respect to the rights and interests of
the Holder of this Debenture to the end that the provisions hereof (including
without limitation provisions for adjustments of the Conversion Price and of the
number of shares of Common Stock receivable upon the conversion of the
Debenture) shall thereafter be applicable, as nearly as may be, in relation to
any shares of stock, securities or assets thereafter receivable upon the
conversion of this Debenture. The Company shall not effect any such
consolidation, merger or sale, unless prior to the consummation thereof the
surviving entity (if other than this Company), resulting from such consolidation
or the entity purchasing such assets shall assume by written instrument executed
and mailed to the Holder of this Debenture, the obligation to deliver to the
Holder the shares of stock, securities or assets as, in accordance with the
foregoing provisions, the Holder may be entitled to receive.
(f) Upon any adjustment of the Conversion Price, then and in each such case
the Company shall give written notice thereof to the Holder of this Debenture
affected by such adjustment at the address of the Holder as shown on the books
of the Company, which notice shall state the Conversion Price resulting from
such adjustment and the increase or decrease, if any, in the number of shares
receivable at such price upon the conversion of this Debenture, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(g) In case at any time:
(i) the Company shall pay any dividend payable in stock upon its
Common Stock or make any distribution (other than regular cash
dividends) to the holders of its Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class
or other rights;
(iii) there shall be any capital reorganization, reclassification
of the capital stock of the Company, or consolidation or merger of the
Company with, or sale of all or substantially all of its assets to
another corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give written
notice of the date on which (aa) the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription
rights, or (bb) such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up shall take place, as
the case may be. Such notice shall also specify the date as of which the
holders of Common Stock of record shall participate in such dividend,
distribution or subscription rights, or shall be entitled to exchange their
shares of Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, as the case may be. Such written
notice shall be given at least twenty (20) days prior to the action in
question and not less than twenty (20) days prior to the record date or the
date on which the Company's transfer books are closed in respect thereto.
5. Mandatory Conversion. The Debenture shall be converted on the first
business day after the Market Value Per Share (as defined below) is equal to or
greater than eighty percent (80%) of the then Conversion Price for twenty (20)
consecutive trading days. The Company shall give written notice to the Holder of
such mandatory conversion on the date of conversion. Promptly after such notice
of mandatory conversion by the Company, the Holder of this Debenture shall
surrender this Debenture to the Company at its principal office for conversion
in full into Common Stock. This Debenture shall be deemed to have been converted
as of the date of the Company's notice of mandatory conversion, and at such time
the rights of the Holder with respect to the principal balance thereof as is
converted shall cease and the Holder shall be treated
for all purposes as the record owner of the shares of Common Stock issuable upon
conversion. Within ten (10) days of receipt from the holder of the original
Debenture, the Company shall issue and mail or deliver to Holder a certificate
or certificates for the number of shares of Common Stock issuable upon
conversion. No fractional shares of Common Stock shall be issued upon
conversion. In lieu of any fractional shares to which the Holder would otherwise
be entitled, the Company shall pay cash equal to such fraction multiplied by the
Market Price Per Share on the conversion date. In addition, a cash payment shall
be made to the Holder in the amount of any accrued interest on this Debenture as
of the conversion date when the certificate or certificates for the shares into
which the Debenture are converted and delivered to the Holder. Until
surrendered, this Debenture shall represent the Common Stock into which it has
been converted. The term "Market Value Per Share" means the closing sale price
of the Common Stock as listed in the Midwest Edition of The Wall Street Journal.
6. Transfer and Exchange. By acceptance of this Debenture, Holder agrees to
give written notice to the Company before transferring this Debenture or
transferring any shares of the Company's Common Stock issuable or issued upon
the conversion of this Debenture, describing briefly the manner of any proposed
transfer of this Debenture or Holder's intention as to the shares of Common
Stock issuable upon the conversion hereof or the intended disposition to be made
of shares of Common Stock upon such conversion. Such written notice shall be
accompanied by an opinion of legal counsel reasonably acceptable to the Company
to the effect that the proposed transfer of this Debenture or disposition of
shares may be effected without registration or qualification (under any federal
or state law) of this Debenture or the shares of Common Stock issuable or issued
upon the conversion hereof. Holder shall thereafter be entitled to transfer this
Debenture, or to convert this Debenture in accordance with its terms and dispose
of the shares received upon such conversion or to dispose of shares of Common
Stock received upon the previous conversion of this Debenture, all in accordance
with the terms of the notice delivered by Holder to the Company, provided that
an appropriate legend in substantially the form set forth at the end of this
Debenture regarding the foregoing restrictions on transfer and disposition shall
be endorsed on this Debenture or the certificates for such shares. Upon
presentation by the Holder of this Debenture, the Company, shall issue a new
Debenture or Debentures of like aggregate principal amount and bearing the same
date, in accordance with the instructions of the Holder.
7. Registration Rights. The Holder of this Debenture or the Common Stock
issued upon the conversion hereof is entitled to the registration rights
provided by Section 8 of the Purchase Agreement.
8. Replacement. Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Debenture and (in
the case of loss, theft or destruction) upon delivery of an indemnity agreement
in an amount reasonably satisfactory to it, or (in the case of mutilation) upon
surrender and cancellation thereof, the Company will issue, in lieu thereof, a
new Debenture of like tenor; provided, however, if the Holder of this Debenture
at such time is other than the Purchaser or an Affiliate of the Purchaser (as
defined below), then the Company may require in its reasonable determination an
indemnity bond in addition to such
indemnity agreement. The term "Affiliate" shall mean an entity directly or
indirectly controlling, controlled or under direct or indirect common control
with the Purchaser, with "control" having the meaning given such term in Rule
12b-2 under the Securities Exchange Act of 1934. The terms "controlling" and
"controlled" shall have correlative meanings.
9. Successors and Assigns. Whenever in this Debenture any Holder or the
Company is referred to, such reference shall be deemed to refer to the
successors and assigns of such party and the provisions of this Debenture shall
be binding upon the Company and its successors and assigns and inure to the
benefit of the Holder and its successors and assigns.
10. Notices. All demands and notices to be given hereunder must be in
writing and hand delivered or sent by certified mail, return receipt requested
to the Company at its corporate headquarters and to the Holder of this Debenture
at the address shown on the books of the Company. Notice is deemed given and
delivered upon hand delivery or four (4) days after the day deposited in the
United States mail.
THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR CERTIFICATE MAY NOT BE
TRANSFERRED WITHOUT (I) THE OPINION OF COUNSEL SATISFACTORY TO THIS CORPORATION
THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE FEDERAL
SECURITIES ACT OF 1933, AS AMENDED, AND ALL APPLICABLE STATE SECURITIES LAWS OR
(II) SUCH REGISTRATION. THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR
CERTIFICATE ARE ALSO SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND AGREEMENTS
RELATING TO VOTING THE SECURITIES CONTAINED IN SECTION 11 OF THE STOCK PURCHASE
AGREEMENT DATED JANUARY 13, 1998 (AS THE SAME MAY BE AMENDED FROM TIME TO TIME,
BETWEEN LIFE USA HOLDING, INC. AND ALLIANZ LIFE INSURANCE COMPANY OF NORTH
AMERICA, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE EXECUTIVE OFFICES OF
LIFE USA HOLDING, INC.
IN WITNESS WHEREOF, the Company has caused this Debenture to be signed and
delivered by one of its duly authorized officers.
Dated: [INSERT DATE OF ISSUANCE]
ATTEST LIFE USA HOLDING, INC.
_______________________ By _________________________
Its Secretary Its _______________________
EXHIBIT P
MATTERS FOR XXXXXX, XXXXXXXX AND XXXXXX, P.A. OPINION AT A DEBENTURE CLOSING
1. Each of the Company and LifeUSA is a corporation duly organized and
validly existing in good standing under the laws of the state of its
incorporation, and has the corporate power and authority to own and hold the
properties owned and leased by it and to carry on the business in which it is
engaged. The Company has the corporate power and authority to enter into this
Agreement, to issue and sell the Convertible Debenture to be issued on the date
hereof pursuant to Section 2.4 of this Agreement and to carry out the provisions
of this Agreement.
2. This Agreement has been duly authorized, executed and delivered by
the Company, is the legal, valid and binding agreement of the Company, and is
enforceable against the Company in accordance with its respective terms,
subject, as to the enforcement of remedies, to limitations under applicable
bankruptcy, insolvency, moratorium, reorganization, and other laws affecting the
rights of creditors generally and to judicial limitations on the enforcement of
the remedy of specific performance and other equitable remedies.
3. The Convertible Debenture to be issued on the date hereof pursuant
to Section 2.4 of this Agreement has been duly authorized, validly issued and
delivered by the Company and is enforceable against the Company in accordance
with its terms.
4. All corporate proceedings required by law or by the provisions of
this Agreement to be taken by the Board of Directors of the Company on or prior
to such closing date in connection with the execution and delivery of this
Agreement, the issuance of the Convertible Debenture to be issued on the date
hereof pursuant to Section 2.4 of this Agreement, and the consummation of the
transactions contemplated by this Agreement have been duly and validly taken.
5. The Company is authorized by its restated articles of incorporation,
as amended, to issue ___________ shares of Common Stock, and ____________
undesignated preferred shares. All shares outstanding immediately prior to the
closing date have been duly authorized and validly issued and are fully paid and
nonassessable. Except for such common shares and preferred shares, the Company
has no other authorized series or class of capital stock.
6. To the best of such counsel's knowledge, no security holder of the
Company is entitled to preemptive or similar rights as a result of the execution
or delivery of this Agreement or the issuance of the shares of Common Stock
pursuant thereto.
7. The requisite number of shares of the Common Stock has been duly and
validly authorized and reserved for issuance upon conversion of the Convertible
Debenture to be issued on the date hereof pursuant to Section 2.4 of the
Agreement and when issued upon such conversion will be authorized, validly
issued and outstanding, fully paid and nonassessable.
8. Assuming the accuracy of the representations made by Allianz in
Section 4 of the Agreement, the Company has obtained the approval or consent of
all governmental agencies or bodies required for (i) the legal and valid
execution and delivery of this Agreement, (ii) the legal
and valid offer, issuance and sale of the Convertible Debenture to be issued on
the date hereof pursuant to Section 2.4 of the Agreement, the performance of the
obligations of the Company under all provisions of this Agreement. To the best
of such counsel's knowledge, the execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions contemplated
by this Agreement will not result in any violation of any material agreement or
other instrument to which the Company is a party or by which it is bound or to
which any of its properties, assets or business is subject or any judgment,
decree or order.
9. Assuming the accuracy of the representations made by Allianz in
Section 4 of the Agreement, the offer, sale, issuance and delivery of the
Convertible Debenture to be issued on the date hereof pursuant to Section 2.4 of
this Agreement to Allianz under the circumstances contemplated by this Agreement
are exempt from the registration and prospectus delivery requirements of the
Securities Act and the securities laws of the State of Minnesota.
EXHIBIT Q
FORM OF MANAGEMENT STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT
THIS AGREEMENT, made and entered into as of January 13, 1998, by and
between ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA, a Minnesota corporation
(the Purchaser") and _________________________ (the "Seller"):
W I T N E S S E T H:
WHEREAS, Seller desires to sell ____________ shares (the "Shares") of
the common stock, $.01 par value (the "Common Stock") of Life USA Holding, Inc.,
a Minnesota corporation (the "Company"), to Purchaser, and Purchaser desires to
purchase the Shares, all subject to the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of these premises and mutual covenants
and agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Purchase and Sale of Shares. Subject to the conditions set
forth in Section 4 below, Seller hereby agrees to sell, assign, transfer and
deliver to Purchaser, and Purchaser hereby agrees to purchase from Seller, the
Shares at $16.44 per share payable in immediately available funds at closing
which shall occur contemporaneous with the Initial Closing as defined in the
Stock Purchase Agreement dated January 13, 1998 (the "Company Agreement")
between the Company and the Purchaser. [Special Insert for Xxxxxx and Xxxxxxxx]*
Section 2. Representations and Warranties of Seller. Seller hereby
represents and warrants to Purchaser that, as of the date hereof and as of the
date of the sale of the Shares pursuant to this Agreement, Seller owns the
Shares, free and clear of any liens, encumbrances or restrictions (other than
those imposed under federal or state securities laws).
Section 3. Acknowledgements and Representations of Purchaser. Purchaser
hereby acknowledges and represents that:
(a) Investment Intent. Purchaser is acquiring the Shares for investment
for its own account and not with the view to, or for resale in connection with,
any distribution or public offering thereof. Purchaser understands that the
Shares will not be registered under the Securities Act of 1933, as amended (the
"Securities Act") or any state securities laws by reason of their contemplated
sale in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof and applicable state securities
laws, and that the reliance of Seller, the Company and others upon these
exemptions is predicated in part upon this representation by Purchaser.
Purchaser further understands that the Shares may not be transferred or resold
without (i) registration under the Securities Act and any applicable state
securities laws, or (ii) an exemption from the requirements of the Securities
Act and applicable state securities laws.
(b) Location of Principal Office, Qualification as an Accredited
Investor, Etc. Purchaser's principal office is located in the State of
Minnesota. Purchaser qualifies as an "accredited investor" for purposes of
Regulation D promulgated under the Securities Act. Purchaser acknowledges that
the Company has made available to it at a reasonable time prior to the execution
of this Agreement the opportunity to ask questions and receive answers
concerning the terms and conditions of the sale of securities contemplated by
this Agreement and to obtain any additional information (which the Company
possesses or can acquire without unreasonable effort or expense) as may be
necessary to verify the accuracy of information furnished to Purchaser.
Purchaser (a) is able to bear the loss of its entire investment in the Shares
without any material adverse effect on its business, operations or prospects,
and (b) has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of the investment to be made by
it pursuant to this Agreement.
(c) Corporate Acts and Proceedings. This Agreement has been duly
authorized by all necessary corporate action on behalf of Purchaser, has been
duly executed and delivered by authorized officers of Purchaser, and is a valid
and binding agreement on the part of Purchaser that is enforceable against
Purchaser in accordance with its terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, moratorium, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and to
judicial limitations on the enforcement of the remedy of specific performance
and other equitable remedies.
Section 4. Conditions Precedent. The sale of the Shares pursuant to
this Agreement is subject to the simultaneous Initial Closing under the Company
Agreement. This Agreement shall terminate if the Company Agreement has been
terminated prior to the Initial Closing.
Section 5. Miscellaneous. This Agreement shall inure to the benefit of
and be binding upon the parties named herein and upon their respective heirs,
successors, and personal representatives. Nothing contained in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies under or by reason of this Agreement. This Agreement shall be construed
and governed in accordance with the laws of the State of Minnesota. This
Agreement may be amended only in a writing signed by the parties hereto.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the date first above written.
ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
By _________________________________
Its _____________________________
------------------------------------
[Name of Seller]
---------------------------------
* Special Insert for Xxxxxx and Xxxxxxxx:
In partial consideration of the purchase of the Shares by Purchaser
from Seller, Seller agrees to enter into the amendment to Seller's
employment agreement with the Company as contemplated by the stock
purchase agreement dated Janaury 13, 1998 between Purchaser and the
Company.
