UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Filed by the Registrant þ
Filed by a Party other than the Registrant o

Check the appropriate box:

þ		Preliminary Proxy Statement
o		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Pursuant to Rule 14a-12

AMERUS GROUP CO.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

o		No fee required.
þ		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)		Title of each class of securities to which transaction applies:
		Common Stock, no par value, of AmerUs Group Co. (“Company common stock”)
(2)		Aggregate number of securities to which transaction applies:
		46,211,721 shares of Company common stock (includes an estimated 4,886,163 shares of Company common stock expected to be issued upon settlement of purchase contracts associated with the Company’s Income PRIDESsm and 3,155,576 shares of Company common stock reserved for issuance upon exercise or payment of outstanding stock options, stock units or other awards).
(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filing fee was calculated by multiplying .000107 by the sum of: (a) the product of 43,056,145 shares of Company common stock and the per share amount of $69.00 in cash per share of Company common stock, (b) the product of 2,806,370 shares of Company common stock underlying options and $33.33 (the difference between $69.00 and $35.67, the weighted average exercise price per share of Company common stock underlying the options), (c) the product of 486,586 stock units, performance units and similar awards and $69.00 and (d) the product of 56,037 outstanding stock appreciation rights and $29.76 (the difference between $69.00 and $39.24, the weighted average of the fair market value of the outstanding stock appreciation rights on their respective dates of grant).

(4)		Proposed maximum aggregate value of transaction:
		$3,099,652,384
(5)		Total fee paid:
		$331,663
o		Fee paid previously with preliminary materials.
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1)		Amount Previously Paid:
(2)		Form, Schedule or Registration Statement No.:
(3)		Filing Party:
(4)		Date Filed:

 

[ • ], 2006

 

Dear Shareholder:

 

You are cordially invited to attend a special meeting of shareholders of the Company to be held on [ • ], 2006, at [ • ], Des Moines local time, at [ • ].

 

At the special meeting, you will be asked to approve an agreement and plan of merger that the Company entered into on July 12, 2006, providing for the merger of an indirect wholly owned subsidiary of Aviva plc with and into the Company. Aviva is the world’s fifth-largest insurance group and is one of the leading providers of life and pension products in Europe. If the merger is completed, the Company’s shareholders will receive $69.00 in cash for each share of Company common stock they own, and the Company will become 100% owned by Aviva. The $69.00 per share being paid in the merger represents a premium of approximately 20% over the average closing price of the Company’s shares for the 30-day trading period prior to the announcement of the merger.

 

The Company cannot complete the merger unless the conditions to closing are satisfied, including obtaining the approval of the Company’s common shareholders and the receipt of specified government and regulatory approvals. The Company currently expects that these government and regulatory approvals will be obtained and that the closing of the merger will occur before December 31, 2006.

 

The Company’s board of directors has determined that the merger agreement and the merger are fair to and in the best interests of the Company and its shareholders, and has unanimously approved and adopted the merger agreement and the transactions contemplated by the merger agreement. The Company’s board of directors unanimously recommends that the Company’s common shareholders vote “FOR” the proposal to approve the merger agreement.

 

The attached notice of special meeting and proxy statement explain the proposed merger and provide specific information concerning the special meeting. Please read these materials (including the annexes) carefully.

 

Your vote is important. Whether or not you plan to attend the special meeting, you should read the proxy statement and follow the instructions on your proxy card to vote by mail, telephone or Internet to ensure that your shares will be represented at the special meeting. If you attend the special meeting and wish to vote in person, you may revoke your proxy and do so.

 

Sincerely,

 

Thomas C. Godlasky

Chairman, President and
Chief Executive Officer

 

This transaction has not been approved or disapproved by the Securities and Exchange Commission, nor has the Securities and Exchange Commission passed upon the fairness or merits of this transaction or the accuracy or adequacy of the information contained in this proxy statement. Any representation to the contrary is unlawful.

 

This proxy statement is dated [ • ], 2006, and is first being mailed, along with the attached proxy card, to shareholders of the Company on or about [ • ], 2006.

 

 

Dear AmerUs Group shareholder:

 

If any or all of the shares of AmerUs Group Co. common stock you own were received as a result of the demutualization (what demutualization means is on reverse side) of American Mutual Holding Company or Indianapolis Life Insurance Company, please note this special information:

 

The information contained in this mailing and the proposal described and recommended by AmerUs Groups’ board of directors for your approval do not and will not affect any insurance policy or annuity contract you may own with AmerUs Life Insurance Company or Indianapolis Life Insurance Company.

 

As always, your policy premiums, benefits, values and guarantees will continue to be governed by the terms of your policy.

 

What the enclosed mailing is about

 

As you may be aware, on July 13, 2006, AmerUs Group announced it had signed a definitive agreement to be acquired by Aviva plc, the world’s fifth largest insurance group. Subject to shareholder and regulatory approvals, Aviva will buy AmerUs Group for $69.00 in cash for each share of AmerUs Group stock you own.

 

What your board of directors recommends

 

As a shareholder of AmerUs Group, you are being asked to vote on the proposed acquisition. Please read the proxy statement accompanying this letter for more information on the transaction. AmerUs Group’s board of directors unanimously approved and adopted the merger agreement and the transactions contemplated by the merger agreement. AmerUs Group’s board of directors unanimously recommends that you vote “FOR” the proposal to approve the merger agreement on the enclosed proxy card.

 

If you have questions

 

Any policy or annuity contract you may own with one of AmerUs Group’s companies is not affected by this proposed transaction; if you have questions about your policy or contract, the phone numbers for customer service are provided below for your convenience.

 

If you have questions about the enclosed proxy material, please call the AmerUs Group Proxy Call Center, Monday through Friday between [ • ] a.m. eastern time and [ • ] p.m. eastern time, toll-free, at [ • ].

 

Sincerely,

 

Thomas C. Godlasky
Chairman, President and Chief Executive Officer

 

To talk with a customer service representative about your policy or contract please call:

 

 

A review of demutualization

 

If you received any or all of your shares of AmerUs Group Co. stock as a result of the demutualization of American Mutual Holding Company or Indianapolis Life Insurance Company, key information follows.

 

Demutualization simply means the company converted from a mutual company to a stock company. When the company converted to a stock company, you received shares of AmerUs Group stock in exchange for membership interests (primarily the right to vote for the company’s directors).

 

The demutualization — the conversion to a stock company — did not affect the contract rights of your insurance policy or annuity contract from AmerUs Life Insurance Company (including its predecessor companies American Mutual Life Insurance Company, Central Life Assurance Company and Interstate Assurance Company) or Indianapolis Life Insurance Company. Your policy or contract status reflects only changes that the owner(s) of the policy may have made.

 

The transaction described in this proxy statement also does not affect the contract rights of any insurance policy or annuity contract you may own with any of AmerUs Group’s companies.

 

If you have any questions about your policy or annuity contract, please contact a customer service representative. The phone numbers for customer service are provided at the bottom on the front side of this letter.

 

699 Walnut Street

Des Moines, Iowa 50309-3948

 

NOTICE OF SPECIAL MEETING

OF SHAREHOLDERS

To Be Held on [ • ], 2006

To the Shareholders:

 

A special meeting of shareholders of AmerUs Group Co. will be held on [ • ], 2006, at [ • ], Des Moines local time, at [ • ], for the following purposes:

 

1. to consider and vote on the proposal to approve the Agreement and Plan of Merger, dated as of July 12, 2006, by and among Aviva plc, Libra Acquisition Corporation and AmerUs Group Co.; and

 

2. to transact any other business as may properly come before the special meeting or at any adjournment or postponement of the special meeting.

 

The board of directors has fixed the close of business on [ • ], 2006, as the record date for the determination of shareholders entitled to notice of and to vote at the special meeting. Accordingly, only shareholders of record on that date are entitled to vote at the special meeting or any adjournments thereof.

 

The Company’s board of directors has determined that the merger agreement and the merger are fair to and in the best interests of the Company and its shareholders, and has unanimously approved and adopted the merger agreement and the transactions contemplated by the merger agreement. The Company’s board of directors unanimously recommends that the Company’s common shareholders vote “FOR” the proposal to approve the merger agreement.

 

YOUR VOTE IS IMPORTANT

 

All shareholders are invited to attend the special meeting in person. Whether or not you plan to attend the special meeting, you should read the proxy statement and follow the instructions on your proxy card to vote by mail, telephone or Internet to ensure that your shares will be represented at the special meeting. If you attend the special meeting and wish to vote in person, you may revoke your proxy and do so.

 

By Order of the Board of Directors,

 

James A. Smallenberger

Senior Vice President and Secretary

 

Des Moines, Iowa

[ • ], 2006

TABLE OF CONTENTS

 

 

699 Walnut Street

Des Moines, Iowa 50309-3948

 

This summary term sheet highlights material information contained in this proxy statement, but does not contain all of the information in this proxy statement that is important to your voting decision. To understand the merger agreement fully and for a more complete description of the terms of the merger, you should carefully read this entire proxy statement, including the attached annexes. In addition, the Company encourages you to read the information incorporated by reference into this proxy statement, which includes important business and financial information about the Company that has been filed with the Securities and Exchange Commission, which is referred to as the SEC. See “Where You Can Find More Information.”

 

Page references are included in parentheses to direct you to more complete descriptions of the topics presented in this summary term sheet. The merger agreement is attached as Annex A to this proxy statement. You are encouraged to read the merger agreement, because it is the legal document that contains the terms and conditions of the merger.

 

AmerUs Group Co.

 

699 Walnut Street

Des Moines, Iowa 50309-3948

Tel: 515-362-3600

 

AmerUs is an Iowa corporation located in Des Moines, Iowa, engaged through its subsidiaries in the business of marketing, underwriting and distributing individual life insurance and annuity products in 50 states, the District of Columbia and the U.S. Virgin Islands. Its major operating subsidiaries include AmerUs Life Insurance Company, American Investors Life Insurance Company, Inc., Indianapolis Life Insurance Company and Bankers Life Insurance Company of New York.

 

Aviva plc

 

St Helen’s

1 Undershaft

London EC3P 3DQ

United Kingdom

Tel: +44 0 207 283 2000

 

Aviva plc, a public limited company organized under the laws of England and Wales, is the world’s fifth-largest insurance group and the United Kingdom’s largest insurance services provider (based on gross worldwide premiums at December 31, 2005), and is one of the leading providers of life and pension products in Europe, with substantial positions in other markets around the world. Aviva’s principal business activities are life insurance and long-term savings, investment management and property and casualty insurance.

 

Libra Acquisition Corporation

 

c/o Aviva USA Corporation

108 Myrtle Street

North Quincy, Massachusetts 02171-1753

Tel: 617-405-6245

Libra Acquisition Corporation, an Iowa corporation, is an indirect wholly owned subsidiary of Aviva formed for the sole purpose of effecting the merger. Libra Acquisition Corporation has not conducted any business operations other than in connection with the transactions contemplated by the merger agreement.

Special Meeting of the Company’s Shareholders (page 10)

 

Date, Time and Place.  A special meeting of shareholders of the Company will be held on [ • ], 2006, at [ • ], Des Moines local time, at [ • ], for the following purposes:

 

 

Record Date and Shares Entitled to Vote.  Only holders of record of shares of Company common stock at the close of business on [ • ], 2006, the record date, are entitled to vote at the special meeting. Each record holder will have one vote at the special meeting for each share of Company common stock as of the close of business on the record date. On the record date, [ • ] shares of Company common stock were issued and outstanding and held by approximately [ • ] holders of record.

 

Required Vote.  Under the IBCA, in order for the merger agreement to be approved, the votes cast favoring the merger agreement must exceed the votes cast opposing the merger agreement at a meeting of the Company’s common shareholders, provided that a quorum is present. A quorum exists if at least a majority of the votes entitled to be cast at the meeting are present in person or by proxy. While abstentions will be treated as present at the meeting for purposes of determining the presence of a quorum, they will not be counted as votes cast on the proposal to approve the merger agreement, and a decision by a shareholder to abstain will have no effect in determining whether the merger agreement is approved. The failure of a shareholder to vote or abstain could have a negative effect on the ability of the Company to obtain a quorum at the meeting in accordance with the IBCA, but assuming that the required quorum is present at the meeting, such failure will have no effect in determining whether the merger agreement is approved.

 

Brokers, banks or other nominees who hold shares of Company common stock in “street name” for customers who are the beneficial owners of such shares may not give a proxy to vote those customers’ shares in the absence of specific instructions from those customers. These non-voted shares, which are referred to as “broker non-votes,” will be treated as present at the meeting for purposes of determining the presence of a quorum but will have no effect in determining whether the merger agreement is approved. Properly executed proxies that do not contain voting instructions will be voted “FOR” the proposal to approve the merger agreement.

 

Voting by the Company’s Directors and Executive Officers.  At the close of business on [ • ], 2006, the record date for the special meeting, the directors and executive officers of the Company and their affiliates beneficially owned and were entitled to vote [ • ] outstanding shares of Company common stock, or approximately [ • ]% of the shares of Company common stock outstanding on that date. To the Company’s knowledge, these directors and executive officers intend to vote their shares in favor of the proposal to approve the merger agreement.

 

The principal purposes of the merger are to enable Aviva to acquire all of the outstanding shares of Company common stock and to provide the Company’s common shareholders with the opportunity to receive a cash payment for their shares at a premium over the market prices at which Company common stock traded before the public announcement of the merger agreement. If the merger is completed, each share of Company common stock will be converted into the right to receive $69.00 in cash.

 

Following completion of the merger, the Company will become an indirect wholly owned subsidiary of Aviva and Company common stock will be delisted from the New York Stock Exchange, or NYSE, will no longer be publicly traded and will be deregistered under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

the breach or failure to perform is not curable, or if curable, has not been cured within 60 days following receipt of written notice from the non-breaching party of such breach or failure to perform; or

 

 

 

The Company has agreed to pay Aviva a termination fee of $90,000,000 and to reimburse Aviva for up to $12,500,000 of its out-of-pocket fees and expenses incurred in connection with the merger in the event that the merger agreement is terminated under the following circumstances, such payment to occur on the business day following termination in the case of the second and third bullets below, or entry into or completion of a third-party acquisition proposal in the case of the first and fourth bullets below:

 

proposal with respect to a majority of the Company’s or its subsidiaries’ total voting power or a majority of the Company’s and its subsidiaries’ total assets.

 

When considering the recommendation by the Company’s board of directors, you should be aware that a number of the Company’s directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of the Company’s other shareholders. The Company’s board of directors was aware of these interests and considered them, among other matters, in unanimously adopting and approving the merger agreement and the transactions contemplated by the merger agreement.

 

Such interests relate to, or arise from, among other things, (1) the fact that one of the Company’s executive officers has a supplemental benefit agreement with the Company that provides for certain benefits upon termination of employment following a change of control; (2) the fact that eight of the Company’s executive officers have entered into employment agreements with the Company at the request of Aviva that will become effective upon completion of the merger and will replace their supplemental benefit agreements; (3) the fact that unvested stock options, stock units, performance units and similar awards will vest in connection with the merger; (4) the fact that, with respect to pre-merger acts, omissions, facts or events, the surviving corporation will continue to (a) provide indemnification and advancement of expenses of former or present directors and officers and (b) for a period of six years after the effective time of the merger, maintain directors’ and officers’ liability insurance policies on terms no less favorable in the aggregate than those presently provided or maintained by the Company, subject to certain limitations; and (5) the fact that, during the 24-month period following the merger, Aviva has agreed to provide employees of the Company who continue their employment with the surviving corporation after the effective time of the merger with compensation and benefits that are not less favorable in the aggregate than those currently provided by the Company.

 

All these additional interests are described in this proxy statement, to the extent material, and, except as described in the proxy statement, such persons have, to the knowledge of the Company, no material interest in the merger apart from those of the Company’s common shareholders generally. Please see “The Merger — Interests of the Company’s Directors and Executive Officers in the Merger.”

 

Aviva has represented in the merger agreement that it has or will have available, prior to the effective time of the merger, sufficient cash in immediately available funds to pay or to cause Merger Sub to pay the merger consideration to the Company’s common shareholders and to complete the merger and the transactions contemplated by the merger agreement. The receipt of financing by Aviva is not a condition to the obligations of either party to complete the merger under the terms of the merger agreement.

 

Shares of Company common stock are listed on the NYSE. For a description of the market price and the payment of dividends, please see “Market Price Data and Dividend Information.”

 

This proxy statement contains statements which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which include words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” and other similar and related expressions. Forward-looking statements are made based upon management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such forward-looking statements are not guarantees of future events. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the following factors: (1) the shareholders of the Company may not approve the merger agreement and the transactions contemplated by the merger agreement at the special meeting; (2) the parties may be unable to obtain governmental and regulatory approvals required for the merger, or required governmental and regulatory approvals may delay the merger or result in the imposition of conditions that could cause the parties to abandon the merger; (3) the parties may be unable to complete the merger because, among other reasons, conditions to the closing of the merger may not be satisfied or waived; or (4) other factors that may be referred to in the Company’s reports filed with or furnished to the SEC from time to time. There can be no assurance that other factors not currently anticipated by the Company will not materially and adversely affect future events. Security holders are cautioned not to place undue reliance on any forward-looking statements made by the Company or on its behalf. Forward-looking statements speak only as of the date the statement was made. The Company undertakes no obligation to update or revise any forward-looking statement.

 

Company common stock is listed and traded on the NYSE under the symbol “AMH.” The following table sets forth, for the periods indicated, the high and low per share price of Company common stock as quoted on the NYSE and the dividends per share declared during such period:

 

 

 

 

The following table sets forth the closing sale price per share of Company common stock as quoted on the NYSE on June 23, 2006, the last trading day before the Company received Aviva’s $69.00 per share verbal proposal, July 6, 2006, the last trading day before the public announcement of discussions between the Company and Aviva regarding the merger and [ • ], 2006, the latest practicable trading day before the date of this proxy statement:

 

 

If the merger is completed, Company common stock will be delisted from the NYSE and Company common stock will be deregistered under the Exchange Act.

 

The Company is furnishing this proxy statement to holders of Company common stock as part of the solicitation of proxies by the Company’s board of directors for use at the special meeting of shareholders.

 

The Company will hold the special meeting on [ • ], 2006, at [ • ], Des Moines local time, at [ • ].

 

The special meeting will be held for the following purposes:

 

 

After careful consideration, the Company’s board of directors has determined that the merger agreement and the transactions contemplated by the merger agreement are fair to and in the best interests of the Company and its shareholders. Accordingly, the Company’s board of directors has unanimously approved and adopted the merger agreement and the transactions contemplated by the merger agreement. The board of directors unanimously recommends that you vote “FOR” the proposal to approve the merger agreement.

 

Only holders of record of shares of Company common stock at the close of business on [ • ], 2006, the record date for the special meeting, are entitled to vote at the special meeting. Each record holder will have one vote at the special meeting for each share of Company common stock as of the close of business on the record date. On the record date, [ • ] shares of Company common stock were issued and outstanding and held by approximately [ • ] holders of record. A quorum exists if at least a majority of the votes entitled to be cast at the special meeting are present in person or by proxy. In the event that a quorum is not present at the special meeting, it is expected that the special meeting will be adjourned or postponed to solicit additional proxies.

 

On August 10, 2006, the Company sent a notice of redemption to the holders of all of its issued and outstanding shares of Series A Preferred Stock. The Company currently anticipates that all of its Series A Preferred Stock will be redeemed prior to completion of the merger. Regardless of whether the redemption is completed prior to the special meeting, holders of the Company’s Series A Preferred Stock will not be entitled to vote at the special meeting.

 

Under the IBCA, in order for the merger agreement to be approved, the votes cast favoring the merger agreement must exceed the votes cast opposing the merger agreement at a meeting of the Company’s shareholders, provided that a quorum is present. A quorum exists if at least a majority of the votes entitled to be cast at the meeting are present in person or by proxy. While abstentions will be treated as present at the meeting for purposes of determining the presence of a quorum, they will not be counted as votes cast on the proposal to approve the merger agreement, and a decision by a shareholder to abstain will have no effect in determining whether the merger agreement is approved. The failure of a shareholder to vote or abstain could have a negative effect on the ability of the Company to obtain a quorum at the meeting in accordance with the IBCA, but assuming that the required quorum is present at the meeting, such failure will have no effect in determining whether the merger agreement is approved. Brokers, banks or other nominees who hold shares of Company common stock in “street name” for customers who are the beneficial owners of such shares may not give a proxy to vote those customers’ shares in the absence of specific instructions from those customers. These non-voted shares, which are referred to as “broker non-votes,” will be treated as present at the meeting for purposes of determining the presence of a quorum but will have no effect in determining whether the merger agreement is approved.

 

At the close of business on the record date, the directors and executive officers of the Company and their affiliates beneficially owned and were entitled to vote [ • ] outstanding shares of Company common stock, or approximately [ • ]% of the shares of Company common stock outstanding on that date. To the Company’s knowledge, these directors and executive officers intend to vote their shares in favor of the proposal to approve the merger agreement.

 

Shareholders may vote their shares by attending the special meeting and voting their shares of Company common stock in person, or by marking, signing and dating the enclosed proxy card and mailing it in the enclosed postage-prepaid envelope or by submitting the proxy by telephone or the Internet by following the instructions printed on the proxy card. Shareholders who hold such shares through a broker, bank or other nominee must follow the instructions on the proxy form supplied by their broker, bank or other nominee, which may provide for voting by telephone or via the Internet.

 

All shares represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in the manner specified by the holders of such shares. Properly executed proxies that do not contain voting instructions will be voted “FOR” the proposal to approve the merger agreement.

 

Shares of Company common stock represented at the special meeting but not voted, including broker non-votes, and shares of Company common stock for which proxies have been received but for which shareholders have abstained, will be treated as present at the special meeting for purposes of determining the presence of a quorum for the transaction of all business.

 

Only shares affirmatively voted “FOR” the approval of the merger agreement and properly executed proxies that do not contain voting instructions will be counted as favorable votes for the proposal.

 

The Company does not expect that any matter other than those described in this proxy statement will come before the special meeting. If any other matters are properly brought before the special meeting for action, however, the Company intends that the persons named as proxies on the enclosed proxy card will vote in accordance with their best judgment. These matters may include an adjournment or postponement of the special meeting from time to time if the Company’s board of directors so determines, except that proxies that are voted against the merger proposal may not be voted by the persons named on the enclosed proxy card for an adjournment or postponement of the special meeting. If any adjournment or postponement is made, the Company may solicit additional proxies during the adjournment or postponement period.

 

Your vote is important. Please return your marked proxy card or submit your proxy by telephone or Internet so your shares can be represented, even if you plan to attend the special meeting in person.

 

The grant of a proxy on the enclosed proxy card or by telephone or Internet does not preclude a shareholder from voting in person at the special meeting. A shareholder may revoke a proxy at any time prior to its exercise by (1) filing a written notice with the Secretary of the Company or the acting Secretary of the special meeting stating that the shareholder would like to revoke his proxy, (2) submitting a duly executed proxy to the Secretary of the Company bearing a later date or (3) appearing at the special meeting and giving oral notice to the presiding officer during the special meeting. Attendance at the special meeting will not in and of itself constitute a revocation of the proxy. If you have instructed your broker, bank or other nominee to vote your shares, you must follow the procedures provided by your broker, bank or other nominee to change those instructions.

 

The Company and its proxy solicitation firm, Georgeson, may solicit proxies in person or by telephone, fax or other means. The Company will pay Georgeson a fee of $16,000, plus reasonable expenses, for its services. The Company will also pay all other reasonable expenses for solicitation. In addition, proxies may be solicited by

officers and directors and other employees of the Company, without additional remuneration, in person or by telephone, fax or other means.

 

You should send in your proxy by mail or vote by telephone or the Internet without delay. If you hold shares of Company common stock through a broker, bank or other nominee, please follow the instructions on the proxy form supplied by your broker, bank or other nominee, which may provide for voting by telephone or through the Internet. The Company will also reimburse brokers, banks and other nominees for their expenses in sending these materials to you and obtaining your voting instructions.

 

You should not send your stock certificate(s) evidencing your shares of Company common stock with your proxy. As soon as reasonably practicable after completion of the merger, a letter of transmittal with written instructions for the surrender of stock certificates will be mailed to holders of shares of Company common stock. If you hold your shares in book-entry form — that is, without a stock certificate — the exchange agent will automatically send you the per share amount of $69.00 in cash in exchange for the cancellation of your shares of Company common stock after completion of the merger, provided that you comply with applicable tax certification requirements. If your shares of Company common stock are held in “street name” by your broker, you will receive instructions from your broker as to how to surrender your “street name” shares and receive cash for those shares.

 

AmerUs is an Iowa corporation located in Des Moines, Iowa, engaged through its subsidiaries in the business of marketing, underwriting and distributing individual life insurance and annuity products in 50 states, the District of Columbia and the U.S. Virgin Islands. Its major operating subsidiaries include AmerUs Life Insurance Company, American Investors Life Insurance Company, Inc., Indianapolis Life Insurance Company and Bankers Life Insurance Company of New York.

 

AmerUs was founded in 1896 as the mutual insurer Central Life Assurance Company. In 1996, it became the first Mutual Insurance Holding Company in the United States, or MIHC, a structure that allows mutuals to access the public equity markets, which AmerUs did in 1997 with its initial public offering. In 2000, AmerUs reorganized its MIHC structure through a full demutualization and became a 100% public stock company. The Company’s principal executive offices are located at 699 Walnut Street, Des Moines, Iowa 50309-3948, and its telephone number is 515-362-3600.

 

Aviva plc, a public limited company organized under the laws of England and Wales, is the world’s fifth-largest insurance group and the United Kingdom’s largest insurance services provider (based on gross worldwide premiums at December 31, 2005), and is one of the leading providers of life and pension products in Europe, with substantial positions in other markets around the world. Aviva’s principal business activities are life insurance and long-term savings, investment management and property and casualty insurance.

 

Aviva was created following the merger of CGU and Norwich Union in May 2000. The group was called CGNU until rebranding as Aviva in July 2002. Aviva can trace its history back over three centuries. Aviva’s principal executive offices are located at St Helen’s, 1 Undershaft, London EC3P 3DQ, United Kingdom, and its telephone number is +44 0 207 283 2000.

 

Libra Acquisition Corporation, an Iowa corporation, is an indirect wholly owned subsidiary of Aviva formed for the sole purpose of effecting the merger. Libra Acquisition Corporation has not conducted any business operations other than in connection with the transactions contemplated by the merger agreement.

 

Libra Acquisition Corporation’s principal executive offices are located at 108 Myrtle Street, North Quincy, Massachusetts 02171-1753, and its telephone number is 617-405-6245.

 

The following is a description of the material aspects of the merger. While the Company believes that the following description covers the material terms of the merger, the description may not contain all of the information that is important to you. The Company encourages you to carefully read this entire proxy statement, including the merger agreement attached to this proxy statement as Annex A, for a more complete understanding of the merger.

 

The board of directors regularly evaluates the Company’s strategic direction and ongoing business plans, with a view towards strengthening the Company’s core businesses and improving shareholder value. A focus of this evaluation has, for some time, been centered on the Company’s competitive position in the industry. Many of the Company’s competitors are better capitalized, have higher ratings and have significantly greater resources. As part of its ongoing evaluation of the Company, the board of directors has considered a variety of strategic alternatives. In that regard, representatives of the Company have from time to time discussed potential business relationships with representatives of various companies in the insurance industry that might expand the Company’s business, improve its competitive position and enhance shareholder value. During its investigations of these strategic alternatives, the policy of the Company has been neither to actively seek nor oppose the sale of the Company, but rather to act at all times in the best interests of the Company and its shareholders.

 

In the third quarter of 2004, a large U.S. life insurance company, referred to as Company A, approached the Company and expressed an interest in acquiring the Company. Following the execution of a confidentiality agreement and due diligence, discussions with Company A were terminated in October 2004, after the Company and Company A were unable to reach agreement as to the price to be paid for the shares of the Company. At the same time, discussions were held with three other North American life insurance companies with respect to a potential acquisition transaction, but none of these entities expressed interest in pursuing such a transaction.

 

In June 2005, Roger K. Brooks, then Chairman and Chief Executive Officer of the Company, and Thomas C. Godlasky, then President and Chief Operating Officer of the Company, attended a meeting of the Company’s insurance sales agents in London. While in London, Messrs. Brooks and Godlasky also arranged and attended a meeting with David Ball, Corporate Development Director of Aviva International Holdings Limited, an indirect wholly owned subsidiary of Aviva that is referred to as Aviva International, and Gavin Dixon, then M&A Director of Aviva, at which potential business relationships between the Company and Aviva were discussed.

 

In November 2005, Aviva indicated that it wished to further pursue its interest in a strategic transaction with the Company. Subsequently, Messrs. Brooks and Godlasky had discussions regarding such a transaction with Philip G. Scott, Group Executive Director of Aviva, Mark Dearsley, Finance Director of Aviva International, and Mr. Ball, including at an in-person meeting in Chicago. Aviva signed a confidentiality agreement with the Company on November 14, 2005, and thereafter Aviva was provided with selected information regarding the Company.

 

On December 29, 2005, Mr. Brooks retired from his positions as an officer and employee of the Company. Mr. Godlasky continued as President and became Chairman and Chief Executive Officer of the Company, concurrent with Mr. Brooks’ retirement.

 

In early January 2006, the discussions that had begun in November 2005 were terminated without Aviva having made a proposal to acquire the Company.

 

On May 3, 2006, Mr. Scott made a telephone call to Mr. Godlasky to inquire as to whether the Company would be interested in reopening discussions regarding a strategic transaction between the two companies, and suggesting that the two meet in Chicago to discuss the matter. Mr. Godlasky summarized his telephone conversation with Mr. Scott during regularly scheduled meetings of the board of directors held on May 4 and 5, 2006. After discussion, the board of directors authorized Mr. Godlasky to meet with Mr. Scott.

 

Messrs. Godlasky and Scott met in Chicago on May 18, 2006 to discuss recent business developments at their respective companies and to discuss Aviva’s interest in a possible strategic transaction with the Company. Mr. Scott indicated that Aviva expected to review its strategic planning options at meetings of its board of directors scheduled for the end of June, and that he was hopeful of reviving discussions between the two companies before that time.

Mr. Godlasky told Mr. Scott that he would discuss with the Company’s board of directors whether it was interested in pursuing discussions with Aviva. In addition, Mr. Godlasky indicated to Mr. Scott his belief that the board of directors would seek a price in the range of $70.00 per share of Company common stock.

 

The board of directors met telephonically on May 22, 2006, for the purpose of discussing the substance of Mr. Godlasky’s May 18, 2006 meeting with Mr. Scott. Representatives from Goldman Sachs and the Company’s special outside counsel, Skadden, Arps, Slate, Meagher & Flom LLP, which is referred to as Skadden, also attended the meeting. Mr. Godlasky summarized his recent discussions with Mr. Scott and indicated he would not recommend entering into discussions with Aviva at the present time unless Aviva was willing to proceed on a timely basis. Following Mr. Godlasky’s presentation, the board of directors deliberated on the matter. The discussion included, among other things, the topics of price, confidentiality, timing, financing and the cross-border nature of the proposed transaction. After concluding its discussion, the board of directors authorized Mr. Godlasky to continue discussions with Aviva.

 

Mr. Scott and Mr. Godlasky spoke several times over the following week. The board of directors met telephonically on May 31, 2006 for the purpose of monitoring the progress of Mr. Godlasky’s discussions with Aviva. Also present at the meeting were representatives of Goldman Sachs and Skadden. At the meeting, Mr. Godlasky updated the board of directors on his discussions with Aviva. He relayed Aviva’s willingness to proceed with negotiations on a timely basis. Mr. Godlasky then outlined a proposed time schedule of negotiations with Aviva. Mr. Godlasky also described plans for opening an electronic data room on June 2, 2006, for use by Aviva and its representatives for the purpose of conducting due diligence, and noted that the electronic data room would contain (1) an actuarial appraisal of the insurance operations of the Company as of September 30, 2005 prepared by Milliman, Inc., which is referred to as the Milliman Report, (2) a memo from Milliman, Inc. dated June 1, 2006 which rolled forward the actuarial appraisal value of the insurance operations of the Company from September 30, 2005 to March 31, 2006, which is referred to as the Milliman Memo, and (3) an internal memo and analysis prepared by the Company and dated June 1, 2006, which estimated the actuarial appraisal valuation for the insurance operations of the Company as of June 30, 2006 and September 30, 2006 in the aggregate and on a per share basis, net of holding company assets and liabilities, which is referred to as the Company Memo. After discussion, the board of directors authorized Mr. Godlasky to release the Milliman Report, the Milliman Memo and the Company Memo, open the electronic data room on June 2, 2006, and continue discussions with Aviva and its representatives.

 

On June 2, 2006, the electronic data room and the Milliman Report, the Milliman Memo and the Company Memo were made available to Aviva. After review of the Milliman Report, the Milliman Memo and the Company Memo, Aviva requested the opportunity to meet and discuss the contents of the documents with members of the senior management of the Company and representatives of Milliman, Inc. This meeting took place among representatives of the parties in Chicago on June 15, 2006. The meeting was attended by Mr. Godlasky, Brian J. Clark, Executive Vice President and Chief Product Officer of the Company, Christopher J. Littlefield, Executive Vice President and General Counsel of the Company, Denis Tauscheck, Vice President — Financial Forecasting of the Company, representatives from Milliman, Inc., Mr. Ball, Jim Webber, Director of Financial Management of Aviva International, and representatives of Aviva’s consultant, Tillinghast. At the meeting, the representatives from the Company and Milliman, Inc. answered questions from Aviva with respect to the Company’s actuarial valuation, litigation and other regulatory matters.

 

On June 16, 2006, Mr. Godlasky and Mr. Scott had a telephone conversation in which the two discussed a tentative timeline for the negotiations. Mr. Scott proposed that the two companies proceed with the goal of completing the negotiations (should they continue to a definitive agreement) and announcing a transaction by July 14, 2006. Mr. Godlasky summarized the substance of his telephone conversation with Mr. Scott in a telephonic meeting of the board of directors on June 16, 2006.

 

Following meetings of Aviva’s board of directors that took place on June 21 and 22, 2006, Mr. Scott called Mr. Godlasky on June 23, 2006 to indicate that he wished to meet with Mr. Godlasky in Chicago on June 26, 2006, and that he was authorized to proceed with respect to a possible transaction. However, Mr. Scott shared Aviva’s current views on pricing in light of the Company’s share price (then approximately $53.00 per share) and said that due to the general downward trend in the share prices for companies in the insurance industry since the end of April

2006, Aviva was prepared only to offer $66.00 per share of Company common stock. Mr. Scott also said Aviva would seek a 4% breakup fee and the termination of further dividends after execution of a definitive agreement.

 

Mr. Godlasky relayed the substance of his conversation with Mr. Scott to the Company’s board of directors in a meeting held on June 23, 2006. The meeting involved an extensive discussion of price and included advice from the Company’s financial advisor, Goldman Sachs. Based on their experience and knowledge of the Company, the board of directors believed that a price closer to $70.00 per share of Company common stock was more appropriate, and Goldman Sachs provided preliminary advice as to factors to be considered by the board of directors with respect to the per share consideration. Following the meeting of the board of directors, Mr. Godlasky informed Mr. Scott on June 24, 2006 that neither he nor the board of directors was prepared to proceed on the basis of the proposed price of $66.00; rather, it would be necessary for Aviva to improve its price. Mr. Scott took this under advisement and it was determined that the parties would proceed with the meeting scheduled in Chicago on June 26, 2006.

 

The meeting on June 26, 2006 in Chicago involved Messrs. Godlasky and Littlefield and Melinda S. Urion, Executive Vice President, Chief Financial Officer and Treasurer of the Company, together with Messrs. Scott and Ball, Graham Jones, Group Legal Services Director of Aviva, Clifford Abrahams, M&A Director of Aviva, and Andrew Moss, Group Finance Director of Aviva. A number of subjects were discussed at the meeting, including price, primary conditions for the transaction, additional due diligence to be completed and a request for a breakup fee in the event that a third party sought to pay a higher price for the Company. After a lengthy discussion, Mr. Scott agreed to increase Aviva’s per share offer to $69.00 per share and to consider a 3% breakup fee.

 

On June 27, 2006, the board of directors received a letter from Aviva confirming its interest in proceeding with a transaction, which was unanimously endorsed by Aviva’s board of directors. The letter was non-binding and subject to additional due diligence, site visits and the execution of a definitive agreement, but served to formally express Aviva’s continuing pursuit of a transaction. The key terms of the non-binding proposal were as follows:

 

 

On June 28, 2006, the board of directors convened a special telephonic meeting in order to receive an update with respect to a possible transaction with Aviva. Representatives from Goldman Sachs and Skadden were also in attendance at the meeting. Mr. Godlasky discussed with the board of directors his conversation with Mr. Scott on June 24, 2006 and the results of the meeting with Mr. Scott on June 26, 2006. Mr. Godlasky then reviewed the key terms of the non-binding proposal received from Aviva on June 27, 2006, focusing on the proposed per share price of $69.00 and the 3% break-up fee. Mr. Godlasky indicated that while Mr. Scott had discussed Aviva’s desire to retain Mr. Godlasky and members of the senior management team of the Company following the transaction, there had been no discussion of which members of senior management Aviva wished to retain or the specific details of any post-transaction management arrangements. Mr. Godlasky then summarized the due diligence proposed to be undertaken by Aviva in connection with the transaction. Following this review, representatives from Goldman Sachs presented their preliminary financial analysis of Aviva’s proposal. A representative from Skadden then reviewed the terms of the non-binding proposal with the board of directors from a legal perspective, and outlined the directors’ fiduciary duties with respect to the non-binding proposal. Upon hearing each of these presentations, the board of directors deliberated on the non-binding proposal and unanimously authorized Mr. Godlasky and the management of the Company to go forward and continue the process of negotiating a definitive agreement based on proposed per share price of $69.00 in cash.

Aviva initially distributed a draft of the merger agreement to the Company through its legal counsel, LeBoeuf, Lamb, Greene & MacRae LLP, on the evening of June 29, 2006, which was thereafter negotiated between representatives of the two companies through July 12, 2006.

 

After discussions with Mr. Godlasky, on July 3, 2006, Aviva sent proposed employment terms with respect to eight executives of the Company that Aviva desired to retain after completion of the proposed transaction. Drafts of employment agreements were later exchanged on July 8, 2006 and were thereafter negotiated through July 12, 2006.

 

Concurrently with the negotiation of the draft merger agreement, on July 5 and 6, 2006, members of the Company’s and Aviva’s senior management met in Chicago to conduct due diligence and attend meetings to discuss certain business, legal, regulatory, tax and other matters in connection with the proposed merger, and to discuss the major terms of the proposed transaction.

 

On the evening of July 6, 2006 (London time), the Financial Times, an international daily newspaper, contacted Aviva regarding its negotiations with the Company, on which Aviva declined to comment. The Financial Times later reported on its website that Aviva was engaged in discussions with the Company with respect to a potential acquisition of the Company. On July 7, 2006, Aviva issued the following press release in response to the Financial Times article:

 

Further to recent speculation, Aviva plc (“Aviva”) confirms it is in discussions with AmerUs Group Co. (“AmerUs”), which may or may not lead to the acquisition of AmerUs. A transaction, if agreed, is expected to be funded from a combination of Aviva’s internal resources, external debt and a market placing of Aviva shares. If a transaction is agreed, any equity placing will be accompanied by an update on Aviva’s current trading. These discussions are consistent with Aviva’s stated strategy of pursuing value creating acquisition opportunities in key growth segments of the major global long term savings markets.

 

Later on July 6, 2006, the Company’s board of directors convened a special telephonic meeting to discuss this development. Representatives from Goldman Sachs and Skadden were also present at the telephonic meeting. During the meeting, the board of directors reviewed the article and also the proposed press release to be issued by the Company in response to the Financial Times article. Following the meeting, the Company issued a press release, dated July 7, 2006, which stated as follows:

 

AmerUs Group Co. (NYSE:AMH), a leading producer of life insurance and annuity products, confirmed today that it is engaged in discussions with Aviva plc regarding a potential acquisition of the company by Aviva. The Company said that there can be no assurance that these discussions will result in any transaction. The Company said that it does not intend to comment or provide updates on the discussions until they are concluded.

 

On July 7, 2006, the board of directors had a telephonic meeting in order to receive an update on the status of the merger agreement discussions. Mr. Godlasky briefly reviewed recent developments with the board of directors, including the Financial Times article and the press releases issued earlier that day by the Company and Aviva, the Company’s stock price and trading volume prior to the meeting, and the visit to the corporate offices of the Company by Messrs. Scott and Dearsley, which had occurred earlier that day. Following Mr. Godlasky’s presentation, representatives from Goldman Sachs presented their further preliminary financial analysis of the transaction to the board of directors. A representative from Skadden then reported on the structure, terms and conditions of the draft merger agreement, and discussed the directors’ fiduciary duties with respect to the transaction. A representative from Skadden also provided an overview of the post-merger employee benefits and discussed the change-of-control benefits that certain executive officers would be entitled to under their existing change-of-control agreements if they chose to terminate their own employment immediately after the closing of the proposed merger, and Aviva’s request to have eight of those change-of-control agreements replaced by management employment agreements. The board of directors also scheduled another telephonic meeting for July 11, 2006 in order to further study how the existing change-of-control agreements would operate in the context of the proposed transaction and to receive an update at that time on the status of Aviva’s negotiations with the eight executives with respect to the proposed management employment agreements.

At the telephonic meeting on July 11, 2006, which was attended by representatives from both Goldman Sachs and Skadden, the directors explored the potential costs of the existing change-of-control agreements and the costs and terms of the management employment agreements, which had been substantially finalized, as between Aviva and the executives. At Aviva’s request, the management employment agreements would be entered into by the executives and the Company at the execution of the merger agreement, but would only become effective upon the completion of the merger. The management employment agreements are discussed in more detail in “— Interests of the Company’s Directors and Executive Officers in the Merger.”

 

During the period between July 7 and July 12, 2006, representatives of the Company and Aviva engaged in extensive negotiations regarding the terms of the merger agreement.

 

On July 12, 2006, a meeting of the board of directors of the Company was convened in Chicago to consider whether to approve the merger agreement. At the meeting, Mr. Godlasky informed the board of directors that the proposed merger agreement had been substantially finalized. A representative from each of Skadden and Nyemaster, Goode, West, Hansell & O’Brien P.C., Iowa counsel to the Company, then outlined the directors’ fiduciary duties in relation to the merger agreement and the transactions contemplated by the merger agreement. Following this presentation, management and the board of directors reviewed certain aspects of the proposed transaction, including the consideration to be paid in the merger, the conditions to closing, the provisions with respect to termination events and termination fees and expenses, the limitations that would be placed on the Company with respect to third-party acquisition proposals, and the proposed management employment agreements to be executed with eight executives of the Company in connection with the execution of the merger agreement. Following this discussion, Goldman Sachs presented its financial analysis of the proposed transaction and delivered its oral opinion to the board of directors, which was subsequently confirmed by delivery of a written opinion, dated as of July 12, 2006, that, as of that date and based upon and subject to the factors and assumptions set forth in the written opinion, the $69.00 per share in cash to be received by the holders of the outstanding shares of Company common stock pursuant to the merger agreement was fair from a financial point of view to such holders. A description of this opinion appears under “— Opinion of Financial Advisor.” Following these presentations, the board of directors unanimously approved and adopted the merger agreement, the transactions contemplated by the merger agreement and the eight management employment agreements. Remaining details with respect to the merger agreement were finalized and it was executed later that day, as were the management employment agreements.

 

The transaction was announced via separate press releases issued by both Aviva and the Company prior to the opening of the London markets on July 13, 2006.

 

The principal purposes of the merger are to enable Aviva to acquire all of the outstanding shares of Company common stock and to provide the Company’s common shareholders with the opportunity to receive a cash payment for their shares at a premium over the market prices at which Company common stock traded before the public announcement of the merger agreement. The acquisition will be accomplished by a merger of Merger Sub with and into the Company, with the Company surviving the merger as an indirect wholly owned subsidiary of Aviva. If the merger is completed, each outstanding share of Company common stock will be converted into the right to receive $69.00 in cash. You will receive the per share amount of $69.00 in cash after you remit your certificate(s) evidencing your shares of Company common stock in accordance with the instructions contained in a letter of transmittal to be sent to you as soon as reasonably practicable after completion of the merger, together with a properly completed and signed letter of transmittal and any other documentation required to be completed pursuant to the written instructions. If you hold your shares in book-entry form — that is, without a stock certificate — the exchange agent will automatically send you the per share amount of $69.00 in cash in exchange for the cancellation of your shares of Company common stock after completion of the merger, provided that you comply with applicable tax certification requirements. If your shares of Company common stock are held in “street name” by your broker, you will receive instructions from your broker as to how to surrender your “street name” shares and receive cash for those shares.

 

At the effective time of the merger, each outstanding option to purchase shares of Company common stock, whether vested or unvested, will be converted into the right to receive an amount in cash per share subject to the

option equal to the excess, if any, of the per share amount of $69.00 in cash for holders of Company common stock over the exercise price of such option, less any required withholding taxes.

 

Each stock unit, performance unit or similar award, whether vested or unvested, that is outstanding immediately prior to the effective time of the merger shall be converted into the right to receive an amount of cash per unit or award equal to the per share amount of $69.00 in cash for holders of Company common stock, less any required withholding taxes. Each SAR, whether vested or unvested, that is outstanding immediately prior to the effective time shall be converted into the right to receive an amount of cash per stock unit to which the SAR relates equal to the product of (1) the total number of unexercised stock units to which the SAR relates multiplied by (2) the excess of the per share amount of $69.00 in cash for holders of Company common stock over the fair market value of a share of Company common stock on the SAR’s date of grant, less any required withholding taxes.

 

The merger will terminate all interests in Company common stock held by the Company’s common shareholders, the Company will become an indirect wholly owned subsidiary of Aviva and Aviva will be the sole beneficiary of any earnings and growth of the Company following the merger. Upon completion of the merger, Company common stock will be delisted from the NYSE, will no longer be publicly traded and will be deregistered under the Exchange Act.

 

On August 10, 2006, the Company sent a notice of redemption to the holders of all of its issued and outstanding shares of Series A Preferred Stock. The Company currently anticipates that all of its Series A Preferred Stock will be redeemed prior to completion of the merger. If such redemption does not occur, however, each share of the Company’s Series A Preferred Stock that is outstanding immediately prior to completion of the merger will remain outstanding after completion of the merger as a share of the preferred stock of the surviving corporation, until redeemed, purchased or otherwise acquired by the surviving corporation.

 

If the merger is not completed for any reason, the Company’s common shareholders and holders of stock options and other awards will not receive the merger consideration. Instead, the Company will remain a public company and shares of Company common stock will continue to be listed on the NYSE. If the merger is not completed, the Company expects to continue to conduct its business in a manner similar to the manner in which it is presently conducted. In such event, the value of shares of Company common stock would continue to be subject to current risks and opportunities, including the various factors described in the Company’s past filings with the SEC, such as the condition of the insurance industry and prevailing economic and market conditions. If the merger is not completed, Company common stock may trade at pre-announcement levels or below due to adverse market reaction. If the merger is not completed, there can be no assurance that any other transaction similar to the merger would be available to the Company. Even if such a transaction were available, there can be no assurance that such transaction would be acceptable to the Company’s board of directors and would offer the Company’s common shareholders the opportunity to receive a cash payment for their shares of Company common stock at a premium over the market prices at which Company common stock traded before the public announcement of any such transaction.

 

After careful consideration, the board of directors has determined that the merger agreement and the transactions contemplated by the merger agreement are fair to and in the best interests of the Company and its shareholders. Accordingly, the board of directors has unanimously approved and adopted the merger agreement and the transactions contemplated by the merger agreement. The board of directors unanimously recommends that you vote “FOR” the proposal to approve the merger agreement and the transactions contemplated by the merger agreement. In making this determination, the board of directors considered a number of factors which supported its decision to approve and adopt the merger agreement and the transactions contemplated by the merger agreement, including the following:

 

 

 

 

 

In the course of its deliberations, the board of directors also considered a variety of risks and other potentially negative factors, including the following:

 

 

In addition, the board of directors was aware of and considered the interests that certain directors and executive officers may have with respect to the merger that differ from, or are in addition to, their interests as shareholders of the Company generally, as described in “— Interests of the Company’s Directors and Executive Officers in the Merger.”

 

The foregoing discussion of the information and factors considered by the board of directors includes material positive and potentially negative factors considered by the board of directors, but it is not intended to be exhaustive

and may not include all of the factors the board of directors considered. In reaching its determination to approve and adopt the merger agreement and the transactions contemplated by the merger agreement, the board of directors did not quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination that the merger agreement and the transactions contemplated by the merger agreement are fair to and in the best interests of the Company and the holders of Company common stock. Rather, the determination and recommendation of the board of directors were based on an analysis of the totality of the information presented to, and the factors considered by, the board of directors. In addition, in considering the factors described above, individual members of the board of directors may have accorded greater or lesser relative importance to specific factors considered than did other members of the board of directors.

 

Goldman Sachs acted as the Company’s financial advisor in connection with the merger. On July 12, 2006, Goldman Sachs delivered its oral opinion to the board of directors, which was subsequently confirmed by delivery of a written opinion, dated as of July 12, 2006, that, as of that date and based upon and subject to the factors and assumptions set forth in the written opinion, the $69.00 per share in cash to be received by the holders of the outstanding shares of Company common stock pursuant to the merger agreement was fair from a financial point of view to such holders.

 

The full text of the written opinion of Goldman Sachs, dated as of July 12, 2006, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Goldman Sachs in connection with the opinion, is attached as Annex B to this proxy statement. Goldman Sachs provided its opinion for the information and assistance of the board of directors in connection with its consideration of the merger. The Goldman Sachs opinion is not a recommendation as to how any holder of Company common stock should vote with respect to the merger.

 

In connection with rendering the opinion described above, Goldman Sachs reviewed, among other things:

 

 

Goldman Sachs also has held discussions with members of the Company’s senior management regarding their assessment of the past and current business operations, financial condition and future prospects of the Company. In addition, Goldman Sachs:

 

 

Goldman Sachs relied upon the accuracy and completeness of all of the financial, accounting, legal, tax and other information discussed with or reviewed by it and assumed such accuracy and completeness for purposes of rendering the opinion described above. In that regard, Goldman Sachs assumed, with the consent of the Company’s board of directors, that the internal financial forecasts prepared by the Company’s management were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the Company.

 

Goldman Sachs discussed the Milliman Report, the Milliman Memo and the Company Memo with the management of the Company, and the Company has consented to Goldman Sachs’ reliance on the Milliman Report, Milliman Memo and the Company Memo in performing its analyses. Goldman Sachs is not an actuarial firm and its services did not include any actuarial determination or evaluation or any attempt to evaluate actuarial assumptions, and it has relied on the actuaries of the Company with respect to the adequacy of reserves for the Company’s insurance and investment contract liabilities. In that regard, Goldman Sachs made no analysis of, and expressed no opinion as to, the adequacy of reserves for the insurance and investment contract liabilities of the Company.

 

In addition, Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of the Company or any of its subsidiaries and, except for the Milliman Report, the Milliman Memo and the Company Memo, Goldman Sachs was not furnished with any such evaluation or appraisal.

 

The following is a summary of the material financial analyses used by Goldman Sachs in connection with rendering the opinion described above. The order of analyses described does not represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before July 10, 2006 and is not necessarily indicative of current market conditions.

 

Historical Stock Trading Analysis

 

Goldman Sachs reviewed the historical trading prices and volumes for shares of Company common stock for the time periods from January 29, 1997 to June 23, 2006, the last trading day prior to receiving the $69.00 per share verbal proposal from Aviva, and from June 23, 2006 to July 10, 2006. Goldman Sachs calculated the weighted average price per share of Company common stock for such periods and compared the results of such analysis to the per share amount of $69.00 in cash to be received by holders of outstanding shares of Company common stock. Goldman Sachs also reviewed the number of shares of Company common stock traded on the NYSE for the periods from January 29, 1997 to June 23, 2006 and from June 23, 2006 to July 10, 2006. The result of this analysis is summarized below:

 

 

Comparison of Selected Life Insurance Companies

 

Using median estimates from the Institutional Brokerage Estimate System, or IBES, a data service provided by First Call that compiles estimates of securities research analysts, Goldman Sachs reviewed and compared selected financial information and multiples for the Company to corresponding financial information and multiples for the following life insurance companies:

 

 

 

Although none of the selected companies is directly comparable to the Company, the companies included were chosen because they are publicly traded companies with operations that, for purposes of analysis, may be considered similar to the operations of AmerUs.

 

Goldman Sachs calculated the price to earnings multiples, or P/E multiples, and the price to book value multiples, or P/BV multiples, for the Company at, among other dates and amounts, (1) $69.00 per share of Company common stock, (2) the closing price of $65.97 per share for shares of Company common stock on the NYSE on July 10, 2006 and (3) the closing price of $53.00 per share for shares of Company common stock on the NYSE on June 23, 2006, the last trading day prior to receiving the $69.00 per share verbal proposal from Aviva. The multiples and other financial information calculated by Goldman Sachs are based on the closing prices on July 10, 2006 for shares of the Company and the selected companies’ common stock and the most recent publicly available information for the Company and the selected companies as of July 10, 2006. Goldman Sachs’ analysis of the selected companies compared the following to the results for the Company:

 

 

The results of these analyses with respect to the Company are summarized below:

 

 

The results of these analyses with respect to the selected life insurance companies are as follows:

 

 

Comparison of Selected North American Life Insurance Transactions Since 2001

 

Goldman Sachs analyzed information relating to the following 17 transactions in the life insurance industry since 2001:

 

 

Goldman Sachs compared the following information relating to the selected transactions to the proposed merger:

 

 

The results of this analysis of the selected transactions were as follows:

 

 

Implied Premiums/Multiples at Transaction Price Analysis

 

Goldman Sachs calculated the implied premiums and multiples represented by $69.00 per share in cash to be received by the holders of Company common stock pursuant to the merger based on the following trading prices for Company common stock:

 

 

The results of Goldman Sachs’ calculations of implied premiums at the transaction price of $69.00 per share are as follows:

 

 

The results of Goldman Sachs’ calculations of implied multiples at the transaction price of $69.00 per share are as follows:

 

 

 

Price to Book Value versus Projected Return on Average Common Equity Regression Analysis

 

Goldman Sachs analyzed the implied relationship between a company’s multiple of trading price to book value versus its projected ROACE. Goldman Sachs examined this relationship by performing a regression analysis on the

selected companies utilizing IBES median EPS estimates and the latest available financial statements. This analysis indicated an implied relationship between the P/BV (ex-AOCI) multiple and 2006E ROACE. Applying this general relationship to the Company’s 2006E ROACE produced an implied or theoretical P/BV (ex-AOCI) multiple of approximately 1.6x, although the actual multiple as of June 23, 2006 was 1.3x. The following table sets forth the P/BV (ex-AOCI) multiples for the Company at the transaction price of $69.00 per share and the closing price of each of July 10 and June 23, 2006.

 

 

Dividend Discount Analysis

 

Goldman Sachs performed a dividend discount analysis to determine a range of potential equity values of Company common stock. The range was determined by adding the present value of an estimated future dividend stream for the Company over the five-year period from 2006 through 2010, and the present value of an estimated terminal value of Company common stock at the end of 2010. In performing its analysis, Goldman Sachs made the following assumptions, among others:

 

 

This analysis implied a fully diluted equity value of $45.36 to $70.18 per share of Company common stock, as illustrated by the following table:

 

 

Company-Prepared Estimate of Actuarial Appraisal and Group Net Value

 

The Company engaged Milliman, Inc. to prepare the Milliman Report and the Milliman Memo in connection with the transactions contemplated by the merger agreement in order to obtain a third-party opinion as to the actuarial value of the Company. Based on the Milliman Report and the Milliman Memo, the Company’s actuaries prepared the Company Memo, in which the Company calculated the total net actuarial value per share of Company common stock and the actuarial value of new business per share of Company common stock, assuming various numbers of years of new business and various discount rates. These values were calculated assuming risk-based capital, or RBC, ratios of 250% and 300%. The RBC ratio is derived by dividing the total adjusted capital of an insurance company (as determined by the RBC formula set forth by the National Association of Insurance

Commissioners, or the NAIC) by the company’s RBC (as determined by the RBC formula set forth by the NAIC). For purposes of these calculations and the review by Goldman Sachs of the Company Memo, the Company advised Goldman Sachs that it believed the 300% RBC ratio was the appropriate level to review, as the Company’s RBC ratio is currently in excess of 300% and because the Company believed a 300% RBC ratio was appropriate and consistent with the valuation RBC levels of companies of similar size and with similar ratings. Goldman Sachs did not participate in the preparation of this analysis or determination of any of the assumptions or levels of variables employed by the Company in its preparation, and it relied without independent verification upon the Company’s calculations.

 

The results of the calculation of total net actuarial value per share as of June 30, 2006 are as follows:

 

 

The results of the calculation of actuarial value of new business per share as of June 30, 2006 are as follows:

 

 

The results of the calculation of actuarial value of new business per share as of June 30, 2006, expressed as a percentage of total net actuarial value per share are as follows:

 

 

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to the Company or the merger.

 

Goldman Sachs prepared these analyses for the purpose of providing its opinion to the Company’s board of directors as to the fairness from a financial point of view to the holders of the outstanding shares of Company common stock of the per share amount of $69.00 in cash to be received by such holders. These analyses do not purport to be appraisals or necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject

to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, neither the Company nor Goldman Sachs nor any other person assumes responsibility if future results are materially different from those forecast.

 

The per share amount of $69.00 in cash to be paid in the merger was determined through arm’s-length negotiations between the Company and Aviva and was approved by the board of directors. Goldman Sachs provided advice to the Company during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to the Company or its board of directors or that any specific amount of consideration constituted the only appropriate consideration for the merger.

 

As described above, Goldman Sachs’ opinion to the board of directors was one of many factors taken into consideration by the board of directors in making its determination to approve and adopt the merger agreement and the transactions contemplated by the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex B.

 

Goldman Sachs and its affiliates, as part of their investment banking business, are continually engaged in performing financial analyses with respect to businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and other transactions as well as for estate, corporate and other purposes. Goldman Sachs has acted as the Company’s financial advisor in connection with, and has participated in certain negotiations leading to, the merger. Goldman Sachs has provided certain investment banking services to the Company from time to time, including having acted as a book-running underwriter for the issuance of the Company’s 5.95% Senior Notes Due 2015 (aggregate principal amount $300,000,000) in August 2005, a book-running underwriter for the issuance of the Company’s Series A Non-Cumulative Perpetual Preferred Stock (aggregate principal amount $150,000,000) in September 2005 and a book-running underwriter in connection with the remarketing of the Company’s 6.583% Senior Notes due May 16, 2011 (aggregate principal amount $143,750,000) in May 2006. Goldman Sachs is also a lender in the Company’s $300 million revolving credit facility. Goldman Sachs also has provided certain investment banking services to Aviva from time to time, including having acted as financial advisor to Aviva in the sale of its general insurance businesses in Australia and New Zealand in January 2003, financial advisor to Aviva in the sale of its joint venture interest in Global Aerospace Underwriting Managers Ltd. in March 2003, a book-running underwriter for the issuance of Aviva’s 5.25% Step-up Bonds due 2023 (aggregate principal amount €650,000,000) in September 2003, a book-running underwriter for the issuance of Aviva’s 4.729% Perpetual Fixed/Straight Bonds due 2014 (aggregate principal amount €700,000,000) in November 2004, a book-running underwriter for the issuance of Aviva’s 5.902% Perpetual Fixed/Straight Bonds due 2020 (aggregate principal amount £500,000,000) in November 2004, financial advisor to Aviva in the sale of its Asian general insurance business in March 2005, financial advisor to Aviva in connection with its acquisition of RAC plc in June 2005 and financial advisor to Aviva in connection with its acquisition of Ark Life Assurance Company Limited in December 2005. Goldman Sachs also may provide investment banking services to the Company and Aviva in the future.

 

Goldman Sachs is a full-service securities firm engaged, either directly or through its affiliates, in securities trading, investment management, financial planning and benefits counseling, risk management, hedging, financing and brokerage activities for both companies and individuals. In the ordinary course of these activities, Goldman Sachs and its affiliates may provide such services to the Company, Aviva and their respective affiliates, may actively trade the debt and equity securities (or related derivative securities) of the Company and Aviva for their own account and for the accounts of their customers and may at any time hold long and short positions of such securities.

 

The Company’s board selected Goldman Sachs as a financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the merger. Pursuant to a letter agreement dated March 1, 2006, the Company engaged Goldman Sachs to act as its financial advisor in the event of a possible sale of the Company. Pursuant to the terms of this engagement letter, the Company agreed to pay Goldman Sachs a transaction fee equal to 0.625% of the aggregate consideration paid for the Company’s equity securities (including amounts paid to holders of options, warrants and convertible securities) plus the principal amount of all indebtedness for borrowed money as set forth on the balance sheet of the Company as existing immediately prior to the completion of the sale, or approximately $23 million, all of which is contingent upon

completion of the merger. In addition, the Company has agreed to reimburse Goldman Sachs for its reasonable expenses, including attorneys’ fees and disbursements (which shall not exceed $50,000 for attorneys’ fees and disbursements or $150,000 for other expenses without the prior consent of the Company, which shall not be unreasonably withheld), and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.

 

When considering the recommendation by the Company’s board of directors, you should be aware that a number of the Company’s directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of the Company’s other shareholders. The Company’s board of directors was aware of these interests and considered them, among other matters, in unanimously adopting and approving the merger agreement and the transactions contemplated by the merger agreement. Such interests relate to, or arise from, among other things:

 

 

All these additional interests are described below, to the extent material, and, except as described below, such persons have, to the knowledge of the Company, no material interest in the merger apart from those of the Company’s common shareholders generally.

 

Supplemental Benefit Agreements (also called change-of-control agreements)

 

The Company’s executive officers have entered into change-of-control agreements with the Company, most of which were amended and restated in 2003. Completion of the merger would constitute a change of control under these agreements. In an effort to retain the executive officers and encourage them to continue their employment with the Company following the merger, at the request of Aviva, the Company entered into employment agreements with each of the executive officers, other than Ms. Urion. The employment agreements will become effective upon

completion of the merger and will replace each of the executive officers’ change-of-control agreements. Accordingly, only Ms. Urion has retained the right to receive severance payments under the change-of-control agreements in connection with the merger. Ms. Urion’s agreement provides that in the event of a change of control of the Company followed by a termination by her for “good reason” or a termination of her employment without “cause” (as such terms are defined in the change-of-control agreement), she will be entitled to: (1) a cash severance payment in an amount equal to three times her annual base compensation and target bonus; (2) continuation of employee medical benefits; and (3) immediate vesting of benefits under the All«AmerUs Supplemental Executive Retirement Plan and the All«AmerUs Excess Benefit Plan. Under her agreement, upon completion of the merger, Ms. Urion would have good reason to terminate employment and receive change-of-control cash severance and other benefits under the agreements, because she will cease to be an executive officer of a public company. The approximate value of the severance benefit that would be payable to Ms. Urion under her change-of-control agreement, if she were to terminate employment immediately after the merger would be $2,185,000. Ms. Urion will also be entitled to receive a payment intended to make her whole with respect to the imposition of any parachute excise tax with respect to any payments or benefits.

 

Employment Agreements

 

Aviva desired to have the remaining change-of-control agreements replaced by employment agreements, which would not entitle the executive officers to such change-of-control payments. Following negotiations with Aviva as to the terms of the proposed employment agreements, Mr. Godlasky, Mr. Boal, Mr. Boltz, Mr. Clark, Mr. Heitz, Mr. Littlefield, Mr. McPhail and Ms. Cushing entered into employment agreements with the Company on July 12, 2006, which will become effective upon completion of the merger and replace the change-of-control agreements.

 

Each employment agreement has a term of three years, with subsequent automatic one-year renewals unless notice is given. Each executive will be entitled to participate in all employee benefit plans and welfare benefits which are generally available to the Company’s senior executives and will receive an automobile allowance of $10,000 per year. Each executive will also participate in annual incentive and long-term incentive plans. These plans will generally provide payments to the executives only upon attainment of performance goals set by Aviva in consultation with Mr. Godlasky, who will serve as Chief Executive Officer of the surviving corporation. Pursuant to their individual agreements, the following executives will initially serve in these capacities as officers of the Company: Mr. Boal, Executive Vice President and Chief Investment Officer; Mr. Boltz, Executive Vice President and Chief Information Officer; Mr. Clark, Executive Vice President and Chief Product Officer; Mr. Heitz, Executive Vice President — Annuities; Mr. Littlefield, Executive Vice President and General Counsel; Mr. McPhail, Executive Vice President — Life; and Ms. Cushing, Senior Vice President and Controller. The base salaries provided in the respective agreements are as follows: Mr. Godlasky, $750,000; Mr. Boal, $475,000; Mr. Boltz, $310,000; Mr. Clark, $450,000; Mr. Heitz, $460,000; Mr. Littlefield, $400,000; Mr. McPhail, $460,000; and Ms. Cushing, $250,000.

 

Each agreement provides two retention bonuses as consideration for the executive’s continued services after the merger, including the additional responsibilities and duties that will result from the merger, and for the restrictive covenants to which the executive agrees. The first retention bonus becomes payable on the first anniversary of completion of the merger, if the executive’s employment continues on that date or upon an earlier change of control or termination by the Company without “cause” or for “disability” or by the executive with “good reason” (as those terms are defined in the agreements) or by the executive’s death. The first retention bonus for each executive was determined to represent a fair-value payment to the executive for entering into the employment agreements and agreeing to the restrictive covenants contained in the agreements. The amount of each executive’s first retention bonus will be as follows: Mr Godlasky, $5,178,000; Mr. Boal, $3,195,000; Mr. Boltz, $1,477,000; Mr. Clark, $2,695,000; Mr. Heitz, $3,049,000; Mr. Littlefield, $1,653,000; Mr. McPhail, $2,739,000; and Ms. Cushing, $825,000.

 

The second retention bonus becomes payable on the third anniversary of completion of the merger, if the executive’s employment continues on that date. The amount of each executive’s second retention bonus will be as follows: Mr. Godlasky, $3,222,000; Mr. Boal, $1,988,000; Mr. Boltz, $919,000; Mr. Clark, $1,677,000; Mr. Heitz, $1,780,000; Mr. Littlefield, $1,028,000; Mr. McPhail, $1,704,000; and Ms. Cushing, $513,000. If, prior to the third

anniversary of completion of the merger, there is a termination of the executive’s employment by the Company without “cause” or for “disability” or by the executive with “good reason” (as those terms are defined in the agreements) or by the executive’s death, the executive will receive a pro-rata payment determined by multiplying the executive’s second retention bonus by a fraction, the numerator of which is the number of days of employment between the completion of the merger and the date of termination and the denominator of which is 1095.

 

If the executive’s employment is terminated by the Company during the term of the agreement other than for “cause” or “disability” or the executive terminates employment for “good reason” (as such terms are defined in the agreement), among other things, the executive will receive a severance amount equal to the sum of his annual base salary and target bonus, with the severance amount being doubled if the termination is in connection with a change of control after the merger. The executive will also receive a pro-rata payment calculated with respect to the executive’s target annual bonus in the year in which the termination occurs and, at the time when any payments of long-term incentive awards are made to other participants in the long-term incentive plan, a pro-rata payment with respect to the actual award (based on the extent of actual achievement of the long-term incentive goals) which the executive would have received but for such termination. The executive’s benefits, including medical benefits and life insurance, will continue for 12 months (or 24 months if the termination is in connection with a change of control after the merger).

 

If the executive incurs legal fees or costs to enforce his rights under the agreement, and the executive is the prevailing party, the Company will reimburse the executive for such fees and costs, and provide a tax gross-up for any resulting imputed income taxable to the executive. The executives (other than Ms. Cushing) will also be entitled to receive a payment intended to make them whole with respect to the imposition of any parachute excise tax on any payments or benefits.

 

Each executive agrees to protect the Company’s “confidential information” (as defined in the agreement), both during and after employment. Each executive agrees to provide testimony or assistance to the Company with respect to litigation or proceedings relating to the executive’s employment period with the Company, as reasonably requested. The executives are not currently subject to any non-competition or non-solicitation agreement. However, in the employment agreement which will become effective upon completion of the merger, each executive agrees that during employment and the 12 months after termination the executive will not engage in competition with the Company or any affiliate. During the 12 months after termination the executive will not solicit, attempt to do business with, or otherwise interfere with, the Company’s business relationships with those who were customers or clients (or prospective customers or clients) of the Company at any time during the 12 months immediately prior to the executive’s termination.

 

When Aviva delivered proposed terms for the employment agreements with the executives, Mr. Godlasky retained Proskauer Rose LLP, or Proskauer Rose, to negotiate with Aviva regarding his employment agreement. Since the proposals for the eight executives were substantially similar, the employment agreement negotiated on behalf of Mr. Godlasky became the model for the Company’s agreements with all eight executives. Because retention of management was a key consideration for Aviva, the board of directors determined that the fees of Proskauer Rose would be paid by the Company.

 

Management Incentive Plan

 

Pursuant to the merger agreement if any participant in the Management Incentive Plan, or MIP, including an executive officer, is involuntarily terminated without cause within the 24-month period immediately following completion of the merger, the terminated participant will receive a pro-rated target bonus for the year of termination, and, with respect to any completed year as to which payment has not yet been made, a payment equal to the participant’s target bonus for such year.

 

MIP Deferral Plan

 

Participants in the Management Incentive Plan, including executive officers, may elect to defer bonus amounts, which are deemed invested in stock units, under the MIP Deferral Plan. Limited employer matches of the deferred amounts are made and also deemed invested in stock units, which vest after a restricted period of at least three years, or earlier upon a change of control. Pursuant to the merger agreement, upon completion of the merger each stock unit will

be converted into the right to receive the per share amount of $69.00 in cash to be received by holders of the Company common stock in the merger. The following table sets forth the amounts that the indicated executive officer will receive upon conversion of their stock units in connection with the completion of the merger, more than 85% of the stock units being attributable to previously earned bonus amounts which were deferred.

 

 

Long-Term Incentive Plan

 

Upon a change of control each non-vested performance unit vests. Pursuant to the merger agreement the performance unit vests at target level and is converted upon completion of the merger into the right to receive the per share amount of $69.00 in cash to be received by holders of the Company common stock in the merger. The following table sets forth the amounts that the indicated executive officers will receive upon conversion of their performance units in connection with the completion of the merger. The table includes some performance units which were determined to be earned and vested in February 2006, but were scheduled to be paid in February 2007.

 

 

Post-Retirement Consulting and Non-competition Agreement and Restricted Stock Units

 

The Company entered into a consulting agreement as of December 31, 2005, with Roger K. Brooks, who retired as chief executive officer of the Company on December 29, 2005. The consulting agreement includes non-competition and non-solicitation covenants which remain in effect through December 31, 2008. Pursuant to his consulting agreement, Mr. Brooks was granted 35,296 restricted stock units which would normally vest in five installments, on December 29, 2006, July 1, 2007, December 28, 2007, July 1, 2008, and January 2, 2009, and also vest upon a change of control. Pursuant to the merger agreement, upon completion of the merger each stock unit will be converted into the right to receive the per share amount of $69.00 in cash to be received by holders of the Company common stock in the merger. Upon completion of the merger and conversion of his stock units, Mr. Brooks will receive $2,435,424.

 

Also, on February 11, 2005, prior to his retirement and in lieu of being granted performance units under the Long-Term Incentive Plan, Mr. Brooks was granted 22,000 restricted stock units, vesting ratably on February 11,

2006, 2007 and 2008. Pursuant to the merger agreement, upon completion of the merger each restricted stock unit will be converted into the right to receive the per share amount of $69.00 in cash to be received by holders of the Company common stock in the merger. Upon completion of the merger Mr. Brooks will receive $1,011,954 upon conversion of his remaining 14,666 restricted stock units, 7,334 restricted stock units having vested on February 11, 2006.

 

Conversion in the Merger of Restricted Shares of Directors

 

The non-employee directors are each granted 2,500 restricted shares of Company common stock upon their initial appointment or election to the board. The shares would normally vest and the restrictions would lapse three years after the date of grant. Pursuant to the award agreements, the restrictions will also lapse upon completion of the merger and pursuant to the merger agreement each outstanding share will be converted into the right to receive the per share amount of $69.00 in cash to be received by holders of the Company common stock in the merger. The initial grant to each of the following directors is still subject to restrictions. Upon completion of the merger, each of them will receive $172,500 upon the vesting and conversion of the granted shares: Messrs. Holland, Klein and Strome and Ms. Steiger.

 

The non-employee directors may elect to receive all or part of their director fees in shares of Company common stock, pursuant to an adjustment formula. Any such shares are subject to restrictions on transfer for not less than two years from the purchase date. Shares held by some of the directors are still subject to such restrictions. Upon completion of the merger those restrictions will lapse. The following table sets forth the amounts that the indicated director will receive upon conversion of these shares in connection with the completion of the merger.

 

 

Stock Options

 

Each of the Company’s non-employee directors and executive officers holds options to acquire shares of Company common stock. See “Securities Ownership of Certain Beneficial Owners and Management.” At the effective time of the merger, each outstanding option to purchase shares of Company common stock, whether vested or unvested, will be converted into the right to receive an amount in cash per share subject to the option equal to the excess, if any, of the per share amount of $69.00 in cash for holders of Company common stock over the exercise price of such option, less any required withholding taxes.

The following table sets forth the number of stock options to acquire shares of Company common stock held by the Company’s directors and executive officers as of the date of this proxy statement and an estimate of the total cash amount to be paid with respect to such options in the merger.

 

 

Directors’ and Officers’ Indemnification and Insurance

 

From and after the effective time of the merger, the surviving corporation, to the fullest extent permitted by applicable law, will indemnify, defend and hold harmless and provide advancement of expenses to the Company’s and its subsidiaries’ current and former officers, directors and employees against all losses paid in connection with any claim based on acts or omissions by them in their capacities as such prior to the effective time of the merger, to the extent provided under the Company’s articles of incorporation, bylaws, indemnification agreements and resolutions, if any, in effect on the date of the merger agreement.

 

For a period of six years after the effective time of the merger, the surviving corporation will maintain coverage under an officers’ and directors’ liability insurance policy on terms and conditions no less advantageous to the directors and officers than the liability insurance policy that the Company maintained for its directors and officers prior to the merger, with respect to claims arising from facts or events that occurred at or before the effective time of the merger, provided that the surviving corporation will not be obligated to pay annual premiums with respect thereto to the extent that they exceed 200% of the last annual premium paid by the Company prior to the effective time of the merger, and if the premiums do exceed such amount, then the surviving corporation will be required to maintain insurance policies that, in the surviving corporation’s reasonably determination, provide maximum coverage available at an annual premium equal to 200% of such last annual premium paid. Alternatively, the surviving corporation may purchase a prepaid “tail” policy for such coverage, which the Company may obtain prior to the effective time of the merger.

Continuation of Employee Benefits

 

Following the completion of the merger:

 

 

Aviva has also agreed to permit the Company to amend (1) the Company’s 401(k) plan to provide that, upon an involuntary termination without cause within 24 months following the effective time, the terminated participant’s account shall immediately be fully vested to the extent permitted by law, (2) the Company’s severance and termination plans to cover position eliminations made within the 24-month period immediately following the effective time of the merger and (3) each of the Company’s annual incentive plans to provide that, upon an involuntary termination within 24 months after the effective time of the merger, the terminated participant will receive a pro-rated bonus payment for the plan year in which the termination occurs.

 

If the merger is completed, Company common stock will be delisted from the NYSE and will be deregistered under the Exchange Act.

 

On November 14, 2005, Aviva and the Company entered into a confidentiality agreement with respect to the Company’s confidential information given to Aviva for Aviva’s due diligence in connection with the merger. Under the terms of the confidentiality agreement, Aviva is required to keep confidential all of the confidential information it has received from the Company (other than materials that become generally available to the public other than as a result of disclosure by Aviva or its representatives and other than materials available to Aviva on a non-confidential basis), and is generally restricted from using such confidential information for any purposes other than in connection with the merger. The confidentiality agreement also contains a “standstill” provision which provides that, for a period of two years following the date of the confidentiality agreement, Aviva and its affiliates will not, unless specifically requested by the Company, (1) acquire or offer or agree to acquire any securities of the Company, (2) make or participate in any solicitation of proxies of the Company or seek to influence any person or entity with respect to the voting of the securities of the Company, (3) submit to the Company any shareholder proposal under Rule 14a-8 of the Exchange Act, (4) make any public announcement with respect to any extraordinary transaction involving the Company and its securities or assets, (5) form, join in or participate in any group in connection with any of the foregoing, (6) seek to have the “standstill” provisions of the confidentiality agreement amended, modified or waived or (7) otherwise take any actions with the purpose or effect of avoiding or circumventing the “standstill” provisions of the confidentiality agreement. Aviva has also agreed that, until the earlier of the completion of the merger or three years following the date of the confidentiality agreement, Aviva will not solicit

any person for employment who within 180 days prior to such solicitation was an employee of the Company, or induce any employee of the Company to leave the employ of the Company.

 

On December 22, 2005, Aviva and the Company entered into a confidentiality agreement with respect to Aviva’s confidential information given to the Company for the Company’s due diligence undertaking in connection with the merger. Under the terms of the confidentiality agreement, the Company is required to keep confidential all of the confidential information it has received from Aviva (other than materials that become generally available to the public other than as a result of disclosure by the Company or its representatives and other than materials available to the Company on a non-confidential basis), and is generally restricted from using such confidential information for any purposes other than in connection with the merger. The agreement does not contain any “standstill” provisions with respect to the securities of Aviva.

 

Other than the two confidentiality agreements discussed above, there are no present or proposed material agreements, arrangements, understandings or relationships between the Company or any of its executive officers, directors, controlling persons or subsidiaries, on the one hand, and Aviva, Merger Sub or any of their respective executive officers, directors, controlling persons or subsidiaries, on the other hand, other than the merger agreement or with respect to the merger agreement or the transactions contemplated by the merger agreement. Aviva and its affiliates do not own any shares of Company common stock, except as may be held indirectly through mutual funds.

 

Holders of Company common stock will not have any appraisal rights under the IBCA or under the Company’s articles of incorporation in connection with the merger, and neither the Company nor Aviva will independently provide holders of Company common stock with any such rights.

 

Aviva has represented in the merger agreement that it has or will have available, prior to the effective time of the merger, sufficient cash in immediately available funds to pay or to cause Merger Sub to pay the merger consideration to the Company’s common shareholders and to complete the merger and the transactions contemplated by the merger agreement. The receipt of financing by Aviva is not a condition to the obligations of either party to complete the merger under the terms of the merger agreement.

 

The following is a summary of the material U.S. federal income tax consequences of the merger to shareholders of the Company whose shares of Company common stock are converted into the right to receive cash in the merger. The following summary is based on the Internal Revenue Code of 1986, as amended, the Treasury regulations promulgated thereunder, judicial decisions and administrative rulings, all of which are subject to change, possibly with retroactive effect. The summary does not address all of the U.S. federal income tax consequences that may be relevant to particular shareholders in light of their individual circumstances or to shareholders who are subject to special rules, including: non-U.S. persons, U.S. expatriates, insurance companies, dealers or brokers in securities or currencies, tax-exempt organizations, financial institutions, mutual funds, cooperatives, pass-through entities and investors in such entities, shareholders who have a functional currency other than the U.S. Dollar, shareholders who hold their shares of Company common stock as a hedge or as part of a hedging, straddle, conversion, synthetic security, integrated investment or other risk-reduction transaction or who are subject to alternative minimum tax or shareholders who acquired their shares of Company common stock upon the exercise of employee stock options or otherwise as compensation. Further, this discussion does not address any U.S. federal estate and gift or alternative minimum tax consequences or any state, local or foreign tax consequences relating to the merger.

 

The Merger

 

The receipt of cash pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes, and may also be a taxable transaction under applicable state, local or foreign income or other tax laws. Generally, for U.S. federal income tax purposes, a shareholder will recognize gain or loss equal to the difference between the

amount of cash received by the shareholder in the merger and the shareholder’s adjusted tax basis in the shares of Company common stock converted into cash in the merger. If shares of Company common stock are held by a shareholder as capital assets, gain or loss recognized by such shareholder will be capital gain or loss, which will be long-term capital gain or loss if the shareholder’s holding period for the shares of Company common stock exceeds one year. Capital gains recognized by an individual upon a disposition of a share of Company that has been held for more than one year generally will be subject to a maximum U.S. federal income tax rate of 15% or, in the case of a share that has been held for one year or less, will be subject to tax at ordinary income tax rates. In addition, there are limits on the deductibility of capital losses. The amount and character of gain or loss must be determined separately for each block of Company common stock (i.e., shares acquired at the same cost in a single transaction) converted into cash in the merger.

 

Backup Withholding

 

A shareholder (other than certain exempt shareholders, including, among others, all corporations and certain foreign individuals) whose shares of Company common stock are converted into the per share amount of $69.00 in cash may be subject to backup withholding at the then-applicable rate (under current law, the backup withholding rate is 28%) unless the shareholder provides the shareholder’s taxpayer identification number, or TIN, and certifies under penalties of perjury that such TIN is correct (or properly certifies that it is awaiting a TIN) and certifies as to no loss of exemption from backup withholding and otherwise complies with the applicable requirements of the backup withholding rules. A shareholder that does not furnish a required TIN or that does not otherwise establish a basis for an exemption from backup withholding may be subject to a penalty imposed by the Internal Revenue Service, or the IRS. Each shareholder should complete and sign the Substitute Form W-9 included as part of the letter of transmittal that will be sent to shareholders promptly following closing of the merger so as to provide the information and certification necessary to avoid backup withholding. Backup withholding is not an additional tax. Rather, the amount of the backup withholding can be credited against the U.S. federal income tax liability of the person subject to the backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund can be obtained by the shareholder by filing a U.S. federal income tax return.

 

THE SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR GENERAL INFORMATION ONLY AND IS BASED ON THE LAW IN EFFECT ON THE DATE HEREOF. SHAREHOLDERS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE MERGER.

 

Antitrust

 

Under the HSR Act and the rules promulgated under that act by the FTC, the merger may not be completed until notifications have been given and information furnished to the Antitrust Division and the FTC, and until the specified waiting period has expired or been terminated. The Company and Aviva each filed notification and report forms under the HSR Act with the Antitrust Division and the FTC on August 7, 2006 and, absent a request from the Antitrust Division or the FTC for additional information, the waiting period will expire at 11:59 p.m. on September 6, 2006. The Company and Aviva have also requested early termination of the HSR Act waiting period, which could be granted at any time before the initial HSR Act waiting period expires.

 

At any time before or after completion of the merger, the Antitrust Division or the FTC could take any action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin completion of the merger or seeking divestiture of substantial assets of the Company or Aviva. Private parties could also take action under the antitrust laws, including seeking an injunction prohibiting or delaying the merger, divestiture or damages under certain circumstances. Under the merger agreement, Aviva is not required to divest assets or agree to any other condition imposed by a regulatory authority if doing so would be reasonably likely to have a material adverse effect on the Company or a material adverse effect on the benefits, taken as a whole, that Aviva reasonably expects to derive from the merger. See “The Merger Agreement — Covenants and Agreements.”

Additionally, at any time before or after the completion of the merger, any state could take action under its antitrust laws as it deems necessary or desirable in the public interest.

 

Insurance Regulations

 

The insurance laws and regulations of all 50 U.S. states, the District of Columbia and the U.S. Virgin Islands generally require that, prior to the acquisition of an insurance company, either through the acquisition of or merger with the insurance company or a holding company of that insurance company, the acquiring company must obtain approval from the insurance commissioner of the insurance company’s state of domicile. Accordingly, Aviva is in the process of making the necessary applications with the insurance commissioners of Iowa, Indiana, Kansas and New York, the states of domicile of the Company’s U.S. insurance company subsidiaries.

 

In addition, the insurance laws and regulations of Arizona, Hawaii, Kentucky, Minnesota, Oklahoma and South Dakota require that, prior to an acquisition of an insurance company doing business in or licensed by that state (or the acquisition of its holding company), a notice filing disclosing certain market share data in the applicable jurisdiction must be made and an applicable waiting period must expire or be terminated. Aviva is in the process of preparing these notice filings.

 

Other Regulatory Authorities

 

Applications or notifications are being filed with certain state and foreign regulatory authorities, including the Ontario Securities Commission, and with self-regulatory organizations, including the National Association of Securities Dealers, in connection with acquisitions or changes in control of subsidiaries of the Company, including broker-dealers and investment advisers, that may be deemed to result from the merger.

 

Obtaining Regulatory Approvals

 

Although the Company and Aviva do not expect that any of the foregoing regulatory authorities will raise any significant concerns in connection with their review of the merger, there can be no assurance that the Company and Aviva will obtain all required regulatory approvals, or that those approvals will not include terms, conditions or restrictions that may have a material adverse effect on the Company or the benefits, taken as a whole, that Aviva reasonably expects to derive from the merger.

 

Other than the filings described above, neither the Company nor Aviva is aware of any regulatory approvals required to be obtained, or waiting periods that must expire, to complete the merger. If they discover that other approvals or waiting periods are necessary, they will seek to comply with them. If any additional approval or action is needed, however, the Company and Aviva may be unable to obtain it, as is the case with respect to other necessary approvals. Even if the Company and Aviva do obtain all necessary approvals, conditions may be placed on any such approval that could cause Aviva to abandon the merger.

 

The following summary describes selected material provisions of the merger agreement and is qualified by reference to the merger agreement, which is attached to this proxy statement as Annex A. This summary may not contain all of the information about the merger agreement that is important to you. You are encouraged to carefully read the merger agreement in its entirety, as it is the legal document that contains the terms and conditions of the merger.

 

The merger agreement has been included to provide you with information regarding its terms. It is not intended to provide any other factual information about the Company. Such information can be found elsewhere in this document and in the public filings that the Company makes with the SEC, which are available without charge through the SEC’s website at www.sec.gov.

 

The representations and warranties described below and included in the merger agreement were made by the Company to Aviva and Merger Sub and by Aviva and Merger Sub to the Company. These representations and warranties were made as of specific dates and are in some cases subject to important exceptions, limitations and supplemental information contained in the confidential disclosure letter the Company provided to Aviva and Merger Sub in connection with the signing of the merger agreement, and are additionally subject to contractual standards of materiality that may be different from that generally applicable under federal securities laws. In addition, the representations and warranties may have been included in the merger agreement for the purpose of allocating risk between Aviva and the Company, rather than to establish matters as facts. While the Company does not believe that its disclosure letter contains information the securities laws require it to disclose, other than information that has already been so disclosed, the disclosure letter contains information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the merger agreement. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts, since the representations and warranties are subject, in important part, to the Company’s underlying disclosure letter. The Company’s disclosure letter contains information that has been included in its prior public disclosures, as well as additional non-public information. Information concerning the subject matter of the Company’s representations and warranties may have changed since the date of the merger agreement, and subsequent information may or may not be fully reflected in its public disclosures.

 

If all the conditions to the merger are satisfied or waived in accordance with the terms of the merger agreement, Merger Sub, an indirect wholly owned subsidiary of Aviva, will merge with and into the Company. The separate corporate existence of Merger Sub will cease, and the Company will continue as the surviving corporation and will become an indirect wholly owned subsidiary of Aviva.

 

The closing of the merger will occur on the second business day after all of the conditions to completion of the merger contained in the merger agreement are satisfied or waived, unless another date is agreed to by the Company and Aviva. The merger will become effective upon the filing of the articles of merger with the Secretary of State of the State of Iowa or at such later time as is specified in the articles of merger.

 

Company Common Stock.  At the effective time of the merger, each issued and outstanding share of Company common stock will be automatically cancelled, extinguished and converted into the right to receive $69.00 in cash, without interest and less any applicable withholding taxes, less any required withholding taxes. Shares of Company common stock held in treasury by the Company or held by any of the Company’s subsidiaries immediately prior to the effective time of the merger will be cancelled, and no payment will be made with respect to such shares.

 

Stock Options and Other Awards.  At the effective time of the merger, each outstanding option to purchase shares of Company common stock, whether vested or unvested, will be converted into the right to receive an amount

in cash per share subject to the option equal to the excess, if any, of the per share amount of $69.00 in cash for holders of Company common stock over the exercise price of such option, less any required withholding taxes.

 

Each stock unit, performance unit or similar award, whether vested or unvested, that is outstanding immediately prior to the effective time of the merger shall be converted into the right to receive an amount of cash per unit or award equal to the per share amount of $69.00 in cash for holders of Company common stock, less any required withholding taxes. Each SAR, whether vested or unvested, that is outstanding immediately prior to the effective time shall be converted into the right to receive an amount of cash per stock unit to which the SAR relates equal to the product of (1) the total number of unexercised stock units to which the SAR relates multiplied by (2) the excess of the per share amount of $69.00 in cash for holders of Company common stock over the fair market value of a share of Company common stock on the SAR’s date of grant, less any required withholding taxes.

 

The cash into which the shares of Company common stock and the outstanding stock options, stock units, performance awards, SARs and similar awards is to be converted is collectively referred to as the “merger consideration.”

 

Exchange Procedures.  At the effective time of the merger, Aviva will deposit cash in an amount sufficient to pay the merger consideration to holders of the Company common stock with the exchange agent. Promptly after the effective time of the merger, Aviva will cause the exchange agent to mail to each record holder of Company common stock a letter of transmittal for use in the exchange of such holder’s certificates representing shares of Company common stock for the per share amount of $69.00 in cash payable with respect to such certificates. Those holders of Company common stock who properly surrender their certificates representing shares of Company common stock in accordance with the exchange agent’s instructions will receive an amount in cash equal to the per share amount of $69.00 in cash multiplied by the number of shares of Company common stock represented by such certificate immediately prior to the effective time of the merger, plus any dividends or other distributions with a record date prior to July 12, 2006 remaining unpaid with respect to such Company common stock. After the effective time of the merger, each certificate formerly representing shares of Company common stock that has not been surrendered will represent only the right to receive the per share amount of $69.00 in cash multiplied by the number of shares of Company common stock represented by such certificate immediately prior to the effective time of the merger, plus any dividends or other distributions with a record date prior to July 12, 2006 remaining unpaid with respect to such Company common stock.

 

You should not send your Company common stock certificates to the exchange agent until you have received the transmittal materials from the exchange agent. Do not return your Company common stock certificates with the enclosed proxy, and do not forward your stock certificates to the exchange agent without a letter of transmittal.

 

If you hold your shares in book-entry form — that is, without a stock certificate — the exchange agent will automatically send you the per share amount of $69.00 in cash in exchange for the cancellation of your shares of Company common stock after completion of the merger, provided that you comply with applicable tax certification requirements. If your shares of Company common stock are held in “street name” by your broker, you will receive instructions from your broker as to how to surrender your “street name” shares and receive cash for those shares.

 

Transfers of Ownership and Lost Stock Certificates.  Following the effective time of the merger, the Company will not register or transfer any shares of Company common stock on its stock transfer books.

 

If a certificate representing Company common stock is lost, stolen or destroyed, the holder of such certificate will be required to deliver an affidavit (and may be required to enter into an indemnity agreement) prior to receiving the per share amount of $69.00 in cash and any dividends or other distributions payable in respect of the shares of Company common stock represented by such certificate.

 

Conclusion of Exchange Period; Unclaimed Merger Consideration.  The exchange agent will return to Aviva any portion of the merger consideration, certificates and other documents in the exchange agent’s possession that remain unclaimed by holders of Company common stock one year after the effective time of the merger. Thereafter, a holder of Company common stock, stock options or other awards must look only to the surviving corporation for payment of the merger consideration to which the holder is entitled under the terms of the merger agreement. Aviva, the surviving corporation and the exchange agent will not be liable to any holder of shares of Company common

stock for any amount paid to a public authority under any applicable abandoned property, escheat or similar law. Any portion of the merger consideration remaining unclaimed by holders of Company common stock, stock options or other awards as of a date that is immediately prior to such time as such amount would otherwise escheat to or become property of any governmental entity will, to the extent permitted by law, become the property of the surviving corporation, free and clear of any claims or interest of any person previously entitled to such merger consideration.

 

Articles of Incorporation and Bylaws of the Surviving Corporation

 

The Company’s articles of incorporation as in effect immediately prior to the effective time of the merger will be the articles of incorporation of the surviving corporation. The bylaws of Merger Sub as in effect immediately prior to the effective time of the merger will be the bylaws of the surviving corporation.

 

Directors and Officers of the Surviving Corporation

 

The directors of Merger Sub immediately prior to the effective time of the merger will be the directors of the surviving corporation, except that the president and chief executive officer of the Company will also be a director of the surviving corporation, with each director holding office until the next annual meeting (or the earlier of their resignation or removal) and until their respective successors are duly elected and qualified.

 

The Company’s officers immediately prior to the effective time of the merger will be the officers of the surviving corporation until the earlier of their resignation or removal or until their respective successors are duly appointed and qualified.

 

The Company’s representations and warranties in the merger agreement relate to, among other things, corporate matters, including due organization, subsidiaries, standing, the power to conduct the Company’s business and its qualification to do business; capital structure; the authorization, execution, delivery, performance and enforceability of the merger agreement; the absence of conflicts with, or violations of, the Company’s organizational documents, contracts, applicable law or judgments, orders or decrees or other obligations; required consents and approvals; SEC filings, financial statements and regulatory reports; compliance with applicable laws and reporting requirements; compliance with the Sarbanes-Oxley Act of 2002; legal proceedings; the filing of tax returns, the status of unpaid taxes and other tax matters; material contracts; employee benefit plans, employees and labor matters; the Company’s subsidiaries; agreements with regulators; the absence of material adverse effects and specified changes; board approval of the merger agreement and the vote required to approve the merger; owned and leased property; intellectual property; brokers and finders; the opinion of the Company’s financial advisor; takeover laws; the accuracy of information contained in this proxy statement; the licensing and registration of the Company’s broker-dealers; insurance reports; insurance business matters; risk management instruments; producer sales and marketing matters; and reinsurance matters.

 

Certain of the Company’s representations and warranties are qualified as to materiality or as to “material adverse effect.” When used with respect to the Company or any of its subsidiaries, the term “material adverse effect” means any event, change, circumstance, state of facts or effect, alone or in combination, that has had or is reasonably likely to have a material adverse effect on (1) the financial condition, properties, assets, liabilities, businesses or results of operations of the Company and its subsidiaries, taken as a whole, or (2) the Company’s ability to timely perform its obligations under the merger agreement. With respect to (1) above, a material adverse effect does not include any effect to the extent resulting from or arising in connection with:

 

 

 

The Company’s representations and warranties are subject to information disclosed in the confidential disclosure letter that it delivered to Aviva. In addition, the representations and warranties are subject to information in the Company’s SEC filings, excluding information provided under the headings “Safe Harbor Statement,” “Risk Factors,” or any similar sections and any disclosures of risks included in the Company’s SEC filings that are predictive or forward-looking in nature.

 

The merger agreement also contains representations and warranties made by Aviva and Merger Sub to the Company relating to, among other things, corporate matters, including due organization, subsidiaries, standing, the power to conduct their businesses and qualification to do business; the authorization, execution, delivery, performance and enforceability of the merger agreement; the absence of conflicts with, or violations of, their organizational documents, certain contracts, applicable law or judgments, orders or decrees or other obligations; required consents and approvals; the accuracy of information provided by Aviva and Merger Sub for inclusion in this proxy statement; Aviva’s ability to pay the merger consideration; the absence of any requirement to have Aviva’s shareholders approve the merger agreement or the transactions contemplated by the merger agreement; the absence of any record or beneficial ownership of Company common stock; and the formation and operations of the Merger Sub.

 

Certain of Aviva’s and Merger Sub’s representations and warranties are qualified as to materiality or as to “material adverse effect.” When used with respect to Aviva or Merger Sub, the term “material adverse effect” means any event or events that would, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of Aviva or Merger Sub to perform their respective obligations under the merger agreement.

 

Conduct of the Company.  The Company has agreed that, until the effective time of the merger or termination of the merger agreement, it will conduct its operations in the ordinary course consistent with past practice and use all reasonable efforts to preserve intact its business organizations and relationships with third parties (including employees, customers, suppliers and those persons with whom the Company has business dealings) and maintain their rights, franchises, licenses and other authorizations issued by governmental entities. The merger agreement also provides that, without the prior written consent of Aviva, the Company will not, and will not permit any of its subsidiaries to:

 

 

 

 

Recommendations of the Boards of Directors; Shareholders’ Meetings.  The Company has agreed to file this proxy statement with the SEC as promptly as practicable following the date of the merger agreement, but in no case later than 45 days after the date of the merger agreement, and to use its reasonable best efforts to respond as promptly as practicable to any comments of the SEC and to cause the proxy statement to be mailed to shareholders as promptly as practicable following the date of the merger agreement.

 

The merger agreement requires the Company to take all action necessary to convene a meeting of its shareholders as promptly as practicable for the purpose of obtaining approval of the transactions contemplated by the merger agreement, and, subject to applicable law, to provide notice of the meeting to all holders of the Company’s Series A Preferred Stock. The board of directors will use its reasonable best efforts to solicit approval of the merger agreement by the Company’s common shareholders and will recommend that the Company’s common shareholders vote to approve the merger agreement. The board of directors is not obligated to make such recommendation to the extent that it reasonably determines in good faith, after consultation with outside legal counsel, that failure of the board of directors to so recommend is required in order to comply with the directors’ fiduciary obligations under applicable law. However, the board of directors is obligated to submit the merger agreement to the Company’s common shareholders for a vote on approval to the extent consistent with applicable law, unless the merger agreement has been terminated in accordance with its terms before the meeting.

 

The Company has also agreed that after consultation with Aviva it may adjourn or postpone the special meeting (1) to the extent necessary to ensure that any required supplement or amendment to the proxy statement is provided to shareholders; (2) if as of the time of the meeting there are insufficient shares of common stock represented to constitute a quorum necessary to conduct the business of the meeting; or (3) to solicit additional proxies if there are insufficient proxies at the time of the meeting to provide the required shareholder vote.

 

The merger agreement provides that nothing will prohibit or impede the Company from taking and disclosing to the shareholders a position as required by applicable law if, in the good faith judgment of the Company’s board of directors, after consultation with outside legal counsel, failure to so disclose would be inconsistent with applicable law.

 

Access to Information.  To the extent permitted by applicable law, the Company has agreed to provide Aviva, its officers, employees, accountants, counsel, financial advisors and other representatives with reasonable access to

the Company’s properties, books, contracts, records, commitments, officers and employees, and to make available to Aviva a copy of each document filed or received by the Company pursuant to the requirements of applicable laws and all other information concerning the Company’s business, properties and personnel as Aviva may reasonably request. All such information is to remain confidential in accordance with the terms of the confidentiality agreement between Aviva and the Company.

 

Reasonable Best Efforts.  The Company, Aviva and Merger Sub will cooperate and will use all reasonable best efforts to:

 

 

In order to comply with its agreement to use its reasonable best efforts to complete the merger, neither Aviva nor any of its subsidiaries will be required to (1) sell, divest, hold separate, or otherwise dispose of any of their or the Company’s respective businesses, product lines or assets, (2) conduct their or the Company’s respective businesses in a specified manner or (3) agree to take any such action, or agree to take any other action or agree to any restriction, limitation or condition that would or would reasonably be likely to have (a) a material adverse effect on the Company or (b) a material adverse effect on the benefits, taken as a whole, that Aviva reasonably expected to derive from the merger, other than those customarily imposed by regulatory agencies in transactions similar to the merger.

 

In order to comply with its agreement to use its reasonable best efforts to complete the merger, the Company will agree to divest, hold separate or otherwise take or commit to take any action with respect to its businesses, services or assets or any of its subsidiaries only if requested to do so by Aviva in writing; provided that any such action shall be conditioned upon the completion of the merger.

 

The merger agreement provides that each of the Company and Aviva are required to file a notification form under the HSR Act with the Antitrust Division and the FTC, and to make as soon as practicable, but in no event later than 30 days after the date of the merger agreement, the filings for such approvals and consents as are required under the insurance laws of the states where the Company’s insurance subsidiaries are domiciled or commercially domiciled or any foreign state where they are licensed to do business. See “The Merger — Regulatory Matters.”

 

Other Offers.  The merger agreement provides that neither the Company nor any of its subsidiaries nor any officers or directors will, and that the Company will cause its employees, investment bankers, attorneys, accountants, representatives and other agents not to, directly or indirectly, take any action to:

 

 

For purposes of the merger agreement, an “acquisition proposal” is any offer or proposal for, or any indication of interest in:

 

 

However, the Company’s board of directors, prior to the approval of the merger agreement by the Company’s common shareholders, may engage in discussions and negotiations with a third party that has made a bona fide unsolicited written acquisition proposal, and, subject to entry into a confidentiality agreement with such third party on terms no less favorable to the Company than those in the confidentiality agreement the Company entered into with Aviva, may provide non-public information or data to such third party, if the Company’s board of directors determines in good faith by majority vote, after consultation with its financial advisor and outside legal counsel, that the acquisition proposal is or is reasonably likely to lead to a superior proposal; provided that the Company’s board of directors determines in good faith, after consultation with outside legal counsel, that failure to take such action would be a breach of its fiduciary duties under applicable law.

 

For purposes of the merger agreement, a “superior proposal” is any bona fide unsolicited written acquisition proposal that is not attributable to actions initiated by the Company or its subsidiaries, or any of their directors, officers, employees or agents, for a majority of the Company’s or its subsidiaries’ total voting power or a majority of the Company’s and its subsidiaries’ total assets, that its board of directors determines in good faith, after consultation with its financial advisors and outside legal advisor, taking into account, among other things, its obligations under applicable law, the terms and conditions of the proposal, including price, form of consideration, financing conditions, closing conditions and other aspects of the proposal and the person making the proposal (including any break-up fees and expense reimbursement provisions):

 

 

The merger agreement obligates the Company to promptly notify Aviva upon receipt of any acquisition proposal, request for non-public information by any third party that has made or is considering making an acquisition proposal or inquiry from a third party seeking to discuss a possible acquisition proposal. Such notice must be given (both orally and confirmed in writing) no later than 24 hours after the receipt of such acquisition proposal, request or inquiry and must identify the third party and set forth the material terms and conditions of the acquisition proposal. The merger agreement also provides that the Company must promptly notify Aviva, both orally and in writing, within 24 hours, if the Company enters into discussions or negotiations concerning any acquisition proposal or provides non-public information to any third person, and must keep Aviva informed of the status and material terms of any such acquisition proposal or negotiation.

 

The merger agreement also provides that the Company will and will cause its subsidiaries and its officers, directors, agents, representatives and advisors to immediately cease and terminate any and all existing activities, discussions or negotiations with third parties conducted prior to the date of the merger agreement with respect to any acquisition proposal, and will not release any third party from, or waive any provisions of, any confidentiality or standstill agreement with respect to any acquisition proposal.

 

Fees and Expenses.  Aviva and the Company will each pay all their own costs and expenses incurred in connection with the merger agreement and the transactions contemplated by the merger agreement, except for the termination fees described below.

Directors’ and Officers’ Liability.  The merger agreement provides that following the effective time of the merger, the surviving corporation will, to the fullest extent permitted by applicable law, indemnify, defend and hold harmless and provide advancement of expenses to the Company’s and its subsidiaries’ current and former officers, directors and employees against all losses paid in connection with any claim based on acts or omissions by them in their capacities as such at or prior to the effective time of the merger, to the extent provided under the Company’s articles of incorporation, bylaws, indemnification agreements and resolutions, if any, in effect on the date of the merger agreement.

 

The merger agreement further requires the surviving corporation, for a minimum of six years following the effective time of the merger, to maintain coverage under an officers’ and directors’ liability insurance policy on terms and conditions no less advantageous to the directors and officers than the liability insurance policy that the Company maintained for its directors and officers prior to the merger, with respect to claims arising from facts or events that occurred at or before the effective time of the merger, provided that the surviving corporation will not be obligated to pay such annual premiums to the extent that they exceed 200% of the last annual premium paid by the Company prior to the effective time of the merger, and if the premiums do exceed 200% of the Company’s last annual premium paid, then the surviving corporation will cause to be maintained insurance policies that, in the surviving corporation’s reasonable determination, provide maximum coverage available at an annual premium equal to 200% of such last annual premium paid. Alternatively, the surviving corporation may purchase a prepaid “tail” policy for such coverage, which the Company may obtain prior to the effective time of the merger.

 

Employee Benefit Matters.  Aviva has agreed that those individuals who are employed by the Company or any of its subsidiaries prior to the effective time of the merger will continue to be employees of the surviving corporation or its subsidiaries, subject to the ability of the applicable employer to terminate the employment of such employees. For a period of 24 months after the effective time of the merger, Aviva or the surviving corporation will provide all individuals who are employed by the Company as of closing and who remain employees of the surviving corporation or its subsidiaries after the effective time of the merger with compensation, benefits and coverage that are, in the aggregate, no less favorable (as reasonably determined by Aviva in good faith) than those provided to such employees immediately prior to the effective time of the merger. Aviva has agreed that it or the surviving corporation will honor all of the Company’s benefit plans in accordance with their terms, including full credit for purposes of eligibility, vesting and determination of level of benefits. Aviva and the surviving corporation will waive all limitations as to pre-existing conditions, exclusions, waiting periods and certain other requirements under welfare benefit plans, provide credit for co-payments and deductibles paid and generally recognize prior service with the Company prior to closing for purposes of any employee benefit plans. The surviving corporation will honor all employment, severance, consulting, retention and similar arrangements and all of the Company’s benefit plans as in effect as of the date of the merger agreement, subject to any amendment or termination that may be permitted by the terms of any plan.

 

Aviva has also agreed to permit the Company to amend (1) the Company’s 401(k) plan to provide that, upon an involuntary termination without cause within 24 months following the closing date, the terminated participant’s account shall immediately be fully vested to the extent permitted by law, (2) the Company’s severance and termination plans to cover position eliminations made within the 24-month period immediately following the closing date and (3) each of the Company’s annual incentive plans to provide that, upon an involuntary termination without cause within 24 months after the closing date, the terminated participant will receive a pro-rated bonus payment for the plan year in which the termination occurs.

 

Tax Treatment.  The Company and its subsidiaries will cooperate with Aviva in the preparation, execution and filing or all tax returns or other documents regarding any taxes or similar fees and any additional amount imposed in connection with such fees, taxes, or charges as levied by any taxing authority in connection with the transactions contemplated by the merger agreement and take all reasonable steps necessary to obtain any exemptions from such transfer taxes.

 

Public Announcements.  Aviva and the Company have agreed to use their reasonable best efforts to (1) develop a joint communications plan, (2) ensure that all press releases and other public statements with respect to the transactions contemplated by merger agreement are consistent with such communications plan and (3) consult with each other before issuing any press release or any public statement with respect to the merger

agreement, unless otherwise required by applicable law or any listing agreement with any national securities exchange.

 

Stock Exchange Delisting.  Aviva and the Company have agreed to cooperate with each other in taking, or causing to be taken, all actions necessary to delist Company common stock from the NYSE and to terminate registration under the Exchange Act, effective as of the effective time of the merger.

 

Exempt Transactions.  The Company’s board of directors may adopt a resolution before the effective time of the merger providing that the dispositions of equity securities by the officers and directors of the Company and its subsidiaries, who immediately prior to the closing are subject to the reporting requirements of Section 16(a) of the Exchange Act, are intended to be exempt pursuant to Rule 16b-3 under the Exchange Act.

 

Takeover Statute.  The Company’s board of directors has agreed to (1) take all actions reasonably necessary to ensure that no takeover statute or similar statute or regulation is or becomes applicable to the merger agreement and the related transactions and (2) if any takeover statute or similar regulation becomes applicable to the merger agreement or the related transactions, take all actions reasonably necessary to ensure that the merger and related transactions may be completed as promptly as practicable on the terms contemplated by the merger agreement and minimize the effect of such statute or regulation on the merger and the transactions contemplated by the merger agreement.

 

Obligations of Merger Sub.  Aviva has agreed to take all actions necessary to cause Merger Sub to perform its obligations, when due, under the merger agreement.

 

Headquarters; Community Commitments.  Aviva has acknowledged its intention to maintain the surviving corporation’s principal executive offices in Des Moines, Iowa. Aviva has also agreed to cause the surviving corporation to engage in charitable and community giving and other charitable and community activities to at least the same degree as currently undertaken by the Company, and to honor and fulfill all charitable and community commitments made by the Company prior to the date of the merger agreement.

 

The obligations of Aviva and the Company to complete the merger are subject to the satisfaction or waiver, where legally permissible, of the following conditions:

 

 

In addition, the obligations of Aviva and Merger Sub to complete the merger are subject to the satisfaction or waiver, prior to the effective time of the merger, of the following conditions: