Life USA Holding Inc/MN – ‘PREM14A’ on 6/25/99

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Preliminary Proxy Solicitation Material — Merger or Acquisition   —   Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: PREM14A     Preliminary Proxy Solicitation Material -- Merger    101    491K 
                          or Acquisition                                         

Document Table of Contents

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Proxy Statement Pursuant to Section 14(a) 
of the Securities Exchange Act of 1934  

Filed by the Registrant   /X/                                                   

Filed by a party other than the Registrant   / /                                

Check the appropriate box:                                    

/X/      Preliminary Proxy Statement                                            

/ /      Confidential, for Use of the Commission Only (as permitted by          
Rule 14a-6(e)(2))                                             

/ /      Definitive Proxy Statement                                             

/ /      Definitive Additional Materials                                        

/ /      Soliciting Material Pursuant to Section 240.14a-11(c) or               
Section 24.14a-12                                             

Life USA Holding, Inc.

(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):            

/ /      No fee required                                                        

/X/      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      

       (2)      Aggregate number of securities to which transaction applies:

18,143,982                

  (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):                            

$20.75 per share          

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(4)      Proposed maximum aggregate value of transaction:     

$418,509,457*             

(5)      Total fee paid:                                      

$83,702.00                

/ /      Fee paid previously with preliminary materials.                        

/ /      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:                                          

* For purposes of calculting fee only. Assumed the purchase at $20.75 per       
share of 18,143,982 outstanding shares of Registrant's Common Stock and     
payment of $42,021,831 in settlement of shares subject to stock options.    

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LIFE USA HOLDING, INC.
 300 South Highway 169, Suite 95
Minneapolis, Minnesota 55426

 _______ ___, 1999

To Our Shareholders:                                                            

You are cordially invited to attend a Special Meeting of      
Shareholders of Life USA Holding, Inc. ("Life USA"), to be held on              
__________, 1999 at 9:00 a.m., local time, in the Training Center located on    
the second floor of Life USA's offices at 300 South Highway 169, Minneapolis,   
Minnesota 55426. Shareholders of record as of _________, 1999 are entitled to   
vote at the Special Meeting.                                                    

     At the Special Meeting, you will be asked to consider and vote upon
the approval of an Agreement and Plan of Merger, dated May 17, 1999 (the        
"Merger Agreement"), among Life USA, Allianz Life Insurance Company of North    
America ("Allianz Life") and Nova New Co., a wholly-owned subsidiary of         
Allianz Life ("Acquisition Sub"). After receipt of regulatory approvals,        
approval by the shareholders of Life USA and satisfaction of other              
conditions, the Merger Agreement provides for the merger of Acquisition Sub     
with and into Life USA (the "Merger"). If the proposed Merger is completed,     
each issued and outstanding share of common stock of Life USA (the "Common      
Stock") (other than shares owned by Life USA or its wholly-owned                
subsidiaries, by Allianz Life and by shareholders who exercise their            
dissenters' rights) will be converted into the right to receive $20.75 in       
cash.                                                                           

      In the Merger, Life USA will be the surviving corporation. After the
Merger, Life USA will be a wholly-owned subsidiary of Allianz Life, and Life    
USA will no longer be publicly traded. As of April 30, 1999, Allianz Life       
beneficially owned 5,699,118 shares of Common Stock, or approximately 24.2%,    
of the outstanding shares of the Common Stock. A copy of the Merger Agreement   
is attached as Appendix A to the accompanying Proxy Statement. The Merger       
Agreement is also described in the Proxy Statement.                             

THE TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE   
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE       
FAIRNESS OR MERITS OF THE TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF      
THE INFORMATION CONTAINED IN THIS DOCUMENT, INCLUDING THE ACCOMPANYING PROXY    
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.                      

The Life USA Board of Directors approved the Merger after     
negotiations with Allianz Life. Although the Board of Directors did not         
solicit any other offers, the Board of Directors considered the Merger to be the
most effective means to maximize value for Life USA shareholders. The Merger    
Agreement provides that Life USA and its affiliates are not permitted to        
solicit, initiate or encourage discussions, offers or proposals for an          
alternative transaction to the Merger, except if necessary to permit the Life   
USA Board of Directors to satisfy its fiduciary duties to Life USA              
shareholders. The Merger Agreement allows Life USA to terminate the Merger      
Agreement under certain conditions to pursue a superior acquisition proposal    
with another party upon payment of a $20 million termination fee to Allianz     
Life.                                                                           

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In connection with its evaluation of the Merger, the Board of 
Directors engaged Donaldson Lufkin & Jenrette Securities Corporation ("DLJ")    
to act as its investment banker. DLJ has rendered its opinion that, as of the   
date of the opinion, based upon and subject to the assumptions, limitations     
and qualifications in the opinion, the consideration to be received by the      
holders of the Common Stock in the Merger is fair to the holders from a         
financial point of view. The written opinion of DLJ is attached as Appendix B   
to and is described in the accompanying Proxy Statement.                        

   THE BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO AND IN
THE BEST INTEREST OF THE SHAREHOLDERS OF LIFE USA. THE BOARD OF DIRECTORS       
RECOMMENDS THAT THE SHAREHOLDERS APPROVE THE MERGER AGREEMENT.                  

      Approval of the Merger Agreement at the Special Meeting requires the
affirmative vote of the holders of a majority of the outstanding shares of      
Common Stock entitled to vote at the Special Meeting. The accompanying Proxy    
Statement provides a summary of the proposed Merger and additional              
information about the parties involved and their interests.                     

     Whether or not you plan to attend the Special Meeting in person, it
is important that your shares are represented. Accordingly, please promptly     
complete, sign and date the enclosed proxy card and return it in the envelope   
provided whether or not you plan to attend the Special Meeting. This will not   
prevent you from voting your shares in person if you later choose to attend     
the Special Meeting. If the Merger is approved by the shareholders, you will    
receive instructions as soon as practicable after completion of the Merger on   
how to receive payment for your shares by surrendering the shares.              

        Sincerely,

                      Robert W. MacDonald, CLU
                                  Chairman and Chief Executive Officer

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LIFE USA HOLDING, INC.
 300 South Highway 169, Suite 95
Minneapolis, Minnesota 55426

 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON ________, 1999

TO THE SHAREHOLDERS OF LIFE USA HOLDING, INC.                                   

  Notice is hereby given that a Special Meeting of shareholders of
Life USA Holding, Inc. ("Life USA"), will be held on ___________, 1999 at       
9:00 a.m., local time, in the Training Center located on the second floor of    
Life USA's offices at 300 South Highway 169, Minneapolis, Minnesota 55426 for   
the following purposes:                                                         

        (1)      To consider and vote upon a proposal to approve the Agreement
             and Plan of Merger, dated as of May 17, 1999 (the "Merger
            Agreement"), pursuant to which Nova New Co., a Minnesota
               corporation ("Acquisition Sub") and wholly-owned subsidiary
       of Allianz Life Insurance Company of North America,
                 a Minnesota corporation ("Allianz Life"), will be merged (the
                "Merger") with and into Life USA, and each outstanding share
                  of Life USA common stock, $.01 par value (the "Common Stock"),
               will be converted into the right to receive $20.75 in cash,
           other than shares owned by Life USA or its wholly-owned
                  subsidiaries, by Allianz Life and by shareholders who exercise
               their dissenters' rights. A copy of the Merger Agreement is
               attached as Appendix A to the accompanying Proxy Statement.
        The Merger Agreement is also summarized in the Proxy
Statement.                                  

      (2)      To consider and act upon such other matters as may properly
         come before the Special Meeting or any adjournment or
adjournments thereof.                       

A Proxy Card and a Proxy Statement containing more detailed   
information with respect to the matters to be considered at the Special         
Meeting accompany this Notice.                                                  

      THE BOARD OF DIRECTORS OF LIFE USA HAS APPROVED THE MERGER AGREEMENT
AND RECOMMENDS THAT THE SHAREHOLDERS APPROVE THE MERGER AGREEMENT.              

    Only holders of Common Stock of record at the close of business on
_______, 1999, are entitled to notice of, and to vote at, the Special           
Meeting. The quorum required to hold the Special Meeting is a majority of the   
shares of Common Stock entitled to vote at the meeting, present in person or    
by proxy. If a quorum is present, the affirmative vote of the holders of a      
majority of the outstanding shares of Common Stock is required to approve the   
Merger Agreement. Each shareholder who signs and returns a proxy in the form    
enclosed with this Proxy Statement may revoke the same at any time prior to     
its use by giving notice of such revocation to Life USA in writing or in        
person at the Special Meeting. Unless so revoked, the shares represented by     
each proxy will be voted at the Special Meeting and at any adjournments         
thereof. Presence at the Special Meeting of a shareholder who has signed a      
proxy does not alone revoke that proxy.                                         

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      Holders of Common Stock who do not vote their shares in favor of the
Merger Agreement and who strictly comply with Sections 302A.471 and 302A.473    
of the Minnesota Business Corporation Act (the "MBCA") have the right to        
dissent from the Merger Agreement and make written demand for payment of the    
"fair value" of their shares (the "Dissenting Shares"). For a description of    
the rights of holders of Dissenting Shares, see Sections 302A.471 and           
302A.473 of the MBCA, a copy of which is attached as Appendix C to the          
accompanying Proxy Statement. In addition, the description of the procedures    
to be followed in order to obtain payment for Dissenting Shares is set forth    
in the accompanying Proxy Statement.                                            

     It is very important that your shares be represented at the Special
Meeting. You are urged to complete and sign the accompanying Proxy Card,        
which is solicited by the Board of Directors of Life USA, and mail it           
promptly in the enclosed envelope.                                              

                                BY ORDER OF THE BOARD OF DIRECTORS

                 Robert W. MacDonald
                                  Chairman and Chief Executive Officer

Minneapolis, Minnesota                                                          
_____________, 1999                                                             

PLEASE DO NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME. IF THE MERGER IS       
COMPLETED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF YOUR        
STOCK CERTIFICATES.                                                             

WHETHER OR NOT YOU ARE ABLE TO ATTEND THE MEETING, PLEASE SIGN, DATE AND        
RETURN THE ACCOMPANYING PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE WHICH      
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.                             

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LIFE USA HOLDING, INC.
 300 South Highway 169, Suite 95
Minneapolis, Minnesota 55426

 PROXY STATEMENT
 FOR SPECIAL MEETING OF SHAREHOLDERS
 TO BE HELD ON _________, 1999

QUESTIONS AND ANSWERS ABOUT THE MERGER

Q:  What will happen in the Merger?                                             

A:  In the Merger, Acquisition Sub will be merged into Life USA, and Life USA   
will be the surviving corporation (the "Surviving Corporation"). Each share     
of Life USA Common Stock at the time of the Merger (other than shares owned     
by Life USA and its wholly-owned subsidiaries, by Allianz Life and by           
shareholders who exercise their dissenters' rights) will be converted into      
the right to receive $20.75 per share in cash. After the Merger, Life USA       
will no longer be publicly traded and will be a wholly-owned subsidiary of      
Allianz Life. To review the structure of the Merger in greater detail, see      
pages ___ through ____ of this Proxy Statement.                                 

Q:  What risks are associated with the Merger for shareholders of Life USA?     

A:  Upon completion of the Merger, you will no longer have an equity interest   
in Life USA and will no longer participate in any future earnings or growth     
of Life USA. You might receive a greater return if Life USA were to remain a    
public company rather than entering into the Merger Agreement. Also, the        
"fair value" of any dissenting shares has not been determined and may be        
greater than $20.75 per share. To review special factors concerning the         
Merger, including the background of and reasons for the Merger, see pages       
____ through ____ of this Proxy Statement. To review the rights of dissenting   
shareholders, see pages ___ through ___ of this Proxy Statement and Appendix    
C setting forth the text of Sections 302A.471 and 302A.473 of the Minnesota     
Business Corporations Act.                                                      

Q:  Why is Life USA being acquired?                                             

A:  The Board of Directors believes that the acquisition of Life USA is in      
the best interests of shareholders of Life USA other than Allianz Life by       
providing the right to receive $20.75 per share in cash to Life USA's           
shareholders and that, as a private company, Life USA will have greater         
operating flexibility to focus on long-term profitability while continuing to   
operate as an independent enterprise. To review the background of and reasons   
for the Merger in greater detail, see pages ___ through ___ of this Proxy       
Statement.                                                                      

Q:  What will I receive in the Merger?                                          

A:  You will have the right to receive $20.75 in cash, without interest, for    
each share of Life USA Common Stock that you own. This amount is called the     
"Per Share Amount," and the aggregate amount you will receive for your shares   
of Common Stock is called the "Merger Consideration." For example: If you own   
100 shares of Life USA Common Stock, the Merger Consideration you will have a   
right to receive $2,075.00 in cash upon completion of the Merger and            
surrender of your stock certificates.                                           

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Q:  What happens if I have received Life USA Stock Options?                     

A:  Upon completion of the Merger, your options to purchase Life USA Common     
Stock ("Stock Options") will be exercisable in full (whether or not then        
vested), and each Stock Option will be converted into the right to receive a    
cash payment equal to (a) the excess of $20.75 over the exercise price of the   
Stock Option, multiplied by (b) the number of shares of Common Stock            
purchasable upon exercise of the Stock Option, net of withholding and           
applicable taxes.                                                               

Q:  When do you expect the Merger to be completed?                              

A:  We are working to complete the Merger by __________, 1999.                  

Q:  What are the tax consequences of the Merger to me?                          

A:  The Merger will be a taxable transaction for federal income tax purposes    
to Life USA shareholders and option holders. To review the federal income tax   
consequences to you in greater detail, see pages ___ through ___ of this        
Proxy Statement. Your tax consequences will depend on your personal             
situation. You should consult your tax advisor for a full understanding of      
the tax consequences of the Merger to you.                                      

Q:  What am I being asked to vote upon?                                         

A:  You are being asked to approve the Merger Agreement which provides for      
the merger of Acquisition Sub into Life USA so that Life USA becomes a          
wholly-owned subsidiary of Allianz Life. After the Merger, Life USA will be a   
privately held company and you will no longer own an equity interest in Life    
USA. Following completion of the Merger, you will have a right to receive the   
Merger Consideration for your shares of Common Stock from funds deposited in    
trust by Allianz Life for approximately six months and, thereafter, directly    
from Allianz Life. The Board of Directors has approved the Merger Agreement     
and recommended that the Life USA shareholders vote to approve the Merger       
Agreement.                                                                      

Q:  What do I need to do now?                                                   

A:  Just indicate on your proxy card how you want to vote and sign, date and    
mail the Proxy Card in the enclosed envelope as soon as possible so that your   
shares will be represented at the Special Meeting.                              

Approval of the proposal requires the affirmative vote of a majority of 
the outstanding shares of Life USA Common Stock. A failure to vote or a vote    
to abstain will have the same legal effect as a vote against the Merger.        

 The Special Meeting will be held on ___________, 1999 at 9:00 a.m., local
time, in the Training Center located on the second floor of Life USA's          
offices at 300 South Highway 169, Minneapolis, Minnesota 55426. You may         
attend the Special Meeting and vote your shares in person, rather than voting   
by proxy. In addition, you may withdraw your proxy up to and including the      
day of the Special Meeting and either change your vote or attend the Special    
Meeting and vote in person.                                                     

Q:  If my shares are held in "street name" by my broker, will my broker vote    
my shares for me?                                                               

A:  Your broker will vote your shares of Common Stock only if you provide       
instructions on how to vote. You should instruct your broker how to vote your   
shares by following the directions your broker                                  

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provides to you. If you do not provide instructions to your broker, your        
shares will not be voted and they will be counted as votes against the          
proposal to approve and adopt the Merger Agreement.                             

Q:  Should I send in my stock certificates now?                                 

A:  No. After the Merger is completed we will send you written instructions     
for exchanging your Common Stock certificates for the Merger Consideration.     

Q:  Whom can I contact if I have additional questions or would like             
additional copies of the Proxy Statement or Proxy Card?                         

A:  If you have additional questions or would like additional copies of this    
Proxy Statement or the Proxy Card you should contact:                           

Mark A. Zesbaugh, Chief Financial Officer                     
Life USA Holding, Inc.                                        
300 South Highway 169, Suite 95                               
Minneapolis, Minnesota 55426                                  
Telephone:  (612) 546-7386                                    

 CAUTIONARY STATEMENT CONCERNING
 FORWARD-LOOKING INFORMATION

      THIS PROXY STATEMENT, THE SCHEDULE 13E-3 TRANSACTION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION AND OTHER STATEMENTS MADE FROM      
TIME TO TIME BY LIFE USA, ALLIANZ LIFE, ACQUISITION SUB OR THEIR                
REPRESENTATIVES CONTAIN FORWARD-LOOKING STATEMENTS. THOSE STATEMENTS INCLUDE    
STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF LIFE USA,    
ALLIANZ LIFE AND ACQUISITION SUB AND MEMBERS OF THEIR RESPECTIVE MANAGEMENT     
TEAMS, AS WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE BASED. SUCH      
FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND         
INVOLVE RISKS AND UNCERTAINTIES. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM      
THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS        
CURRENTLY KNOWN TO MANAGEMENT OF LIFE USA, ALLIANZ LIFE AND ACQUISITION SUB     
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN              
FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, THE RISKS           
DETAILED IN THIS PROXY STATEMENT AND THE SCHEDULE 13E-3 TRANSACTION             
STATEMENT, AND THOSE FACTORS SET FORTH FROM TIME TO TIME IN REPORTS OF LIFE     
USA FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE PROTECTION FROM      
LIABILITY OF THE SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS CONTAINED IN THE    
PRIVATE SECURITIES REFORM ACT OF 1995 IS NOT APPLICABLE TO THE INFORMATION      
CONTAINED IN THIS PROXY STATEMENT OR THE SCHEDULE 13E-3 TRANSACTION STATEMENT   
OR IN STATEMENTS INCORPORATED BY REFERENCE IN EITHER DOCUMENT.                  

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 TABLE OF CONTENTS

                                                                [Download Table]
                                                                           
Summary.................................................................  1
   The Companies........................................................  1
   The Special Meeting..................................................  2
   Record Date;  Voting Power; Votes Required...........................  2
   Recommendation of the Board of Directors.............................  2
   Opinion of Financial Advisor.........................................  2
   Terms of the Merger Agreement........................................  3
      General...........................................................  3
      Conditions to the Merger..........................................  3
      No Solicitation...................................................  3
      Termination.......................................................  3
      Fees and Expenses.................................................  4
   Accounting Treatment.................................................  4
   Conflicts of Interests...............................................  4
      Allianz Life......................................................  4
      Board of Directors and Officers of Life USA.......................  4
      Counsel and Consultants to Life USA...............................  4
   Regulatory Approvals.................................................  5
   Dissenters' Rights...................................................  5
The Special Meeting.....................................................  6
   General..............................................................  6
   Proposal to be Considered at the Special Meeting.....................  6
   Record Date; Voting Power; Votes Required............................  6
   Proxies..............................................................  6
Historical Market Information...........................................  7
Selected Consolidated Financial Data of Life USA........................  8
Special Factors.........................................................  9
   Background of the Merger.............................................  9
   Purpose and Structure of the Merger.................................. 13
   Reasons for the Merger............................................... 13
   Recommendation of the Board of Directors............................. 15
   Opinion of Financial Advisor......................................... 15
      Fairness Opinion With Respect to the Merger....................... 15
      Opinion of Donaldson, Lufkin & Jenrette........................... 15
      Fees Payable to DLJ............................................... 23
   Perspective of Allianz Life on the Merger............................ 23
   Plans for Life USA after the Merger.................................. 23
   Certain Effects of the Merger........................................ 23
   Conflicts of Interest................................................ 24
      Arrangements with Allianz Life.................................... 24
      Directors and Officers of Life USA................................ 24
      Legal Counsel and Consultants; Ownership by Outside Directors..... 25
      Indemnification................................................... 25

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                                                                [Download Table]
                                                                           
Summary of Material Features of the Merger............................. 26 
   The Merger.......................................................... 26 
      General.......................................................... 26 
      Merger Consideration............................................. 26 
      Payment for Shares............................................... 26 
      Stock Options.................................................... 26 
      Closing of Transfer Books........................................ 26 
      Conditions to the Merger......................................... 26 
      Representations and Warranties................................... 27 
      Certain Covenants................................................ 28 
      No Solicitation of Transactions.................................. 28 
      Voting Rights of Allianz Life.................................... 29 
      Termination...................................................... 29 
      Termination Fee.................................................. 30 
      Indemnification.................................................. 31 
      Amendment and Waiver............................................. 31 
      Expenses......................................................... 32 
   Effective Time...................................................... 32 
   Conversion of Common Stock.......................................... 32 
   Payment for Stock Options........................................... 33 
   Conduct of Business Pending the Merger.............................. 33 
   Regulatory Filings and Approvals.................................... 33 
   Conditions to the Merger............................................ 33 
   Federal Income Tax Consequences of the Transaction.................. 33 
   Financing of the Merger; Source of Funds............................ 34 
   Anticipated Accounting Treatment.................................... 34 
   Dissenters' Rights.................................................. 34 
Management of Life USA, Allianz Life and Acquisition Sub............... 37 
   Management of Life USA.............................................. 37 
   Management of Allianz Life and Acquisition Sub...................... 37 
Interest in Securities of Life USA..................................... 38 
Certain Transactions in Common Stock and Stock Options................. 40 
Expenses of the Transaction............................................ 40 
Independent Auditors................................................... 41 
Where You Can Find More Information.................................... 41 
Incorporation of Certain Documents by Reference........................ 42 
Shareholder Proposals.................................................. 42 
Other Matters.......................................................... 43 
Appendix to the Proxy Statement........................................ 44 

APPENDICES                                                                 

APPENDIX A -- Agreement and Plan of Merger............................. A-1
APPENDIX B -- Opinion of Donaldson Lufkin & Jenrette Securities            
                Corporation............................................ B-1
APPENDIX C -- Text of Sections 302A.471 and 302A.473 of the Minnesota      
                Business Corporations Act.............................. C-1


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 SUMMARY

This summary highlights selected information from this Proxy  
Statement and may not contain all of the information that is important to       
you. For a more complete understanding of the Merger and for a more complete    
description of the legal terms of the Merger, you should read this Proxy        
Statement carefully, as well as the appendices to this Proxy Statement,         
including the Merger Agreement. For additional information on Life USA, see     
"Where You Can Find More Information" (page __).                                

THE COMPANIES                                                                   

Life USA Holding, Inc.                                        
300 South Highway 169, Suite 95                               
Minneapolis, Minnesota 55426                                  
Telephone:  (612) 546-7386                                    

 Life USA is a national financial services holding and marketing
company with $5.53 billion in consolidated assets and three wholly-owned        
subsidiaries. LifeUSA Insurance Company, its largest and most significant       
wholly-owned subsidiary ("LifeUSA Insurance"), is licensed to write and sell    
life insurance and several forms of annuities in the District of Columbia and   
all states except New York and is represented by over 150 marketing             
organizations and 70,000 independent agents nationwide. LifeUSA Marketing,      
Inc. conducts a variety of marketing activities, including acquiring equity     
interests in independent marketing organizations. LifeUSA Securities, Inc. is   
a retail broker-dealer that processes general securities transactions and       
distributes a full range of securities products, including non-proprietary      
mutual funds, variable life insurance and annuity contracts. The common         
stock, $.01 par value, of Life USA (the "Common Stock") trades on Nasdaq        
National Market tier of The Nasdaq Stock Market under the symbol LUSA.          

Allianz Life Insurance Company of North America               
1750 Hennepin Avenue                                          
Minneapolis, MN  55403                                        
Telephone:  (612) 347-6500                                    

Allianz Life is a leading provider of life, health and annuity
products through independent distribution networks and financial institutions   
in the United States and Canada. Allianz Life is a wholly-owned subsidiary of   
Allianz of America, Inc., the holding company for the North American            
companies of Allianz Aktiengescllshaft ("Allianz AG"), an international         
insurance holding company headquartered in Munich, Germany (collectively,       
the "Allianz Group"). The Allianz Group is ranked as one of the five largest    
insurance groups in the world. As of April 30, 1999, Allianz Life beneficially  
owned 5,699,118 shares of Life USA Common Stock or approximately 24.2% of the   
outstanding shares.                                                             

Nova New Co.                                                  
1750 Hennepin Avenue                                          
Minneapolis, MN  55403                                        
Telephone:  (612) 347-6500                                    

 Nova New Co., a Minnesota corporation ("Acquisition Sub"), is a
wholly-owned subsidiary of Allianz Life. Allianz Life formed Acquisition Sub    
for the purpose of carrying out the Merger.                                     

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THE SPECIAL MEETING (PAGE ___)                                                  

  The Special Meeting will be held on ______________, 1999 at 9:00
a.m., local time, in the Training Center on the second floor of Life USA's      
offices at 300 South Highway 169, Minneapolis, Minnesota 55426. At the          
Special Meeting, Life USA shareholders will be asked to consider and vote       
upon a proposal to approve the Merger Agreement. The Special Meeting has been   
called by order of the Board of Directors of Life USA.                          

RECORD DATE; VOTING POWER; VOTES REQUIRED (PAGE ___)                            

Holders of record of Common Stock at the close of business on 
______________, 1999 (the "Record Date") are entitled to notice of and to       
vote at the Special Meeting. As of the Record Date, there were ________         
shares of Common Stock issued and outstanding held by approximately _____       
holders of record. Holders of record of Common Stock on the Record Date are     
entitled to one vote per share on any matter that may properly come before      
the Special Meeting. On the Record Date, Allianz Life owned 5,699,118 shares    
of Common Stock or approximately ___% of the outstanding shares of Common       
Stock; Allianz Life will vote its shares of Common Stock for approval of the    
Merger Agreement. Five executive officers of Life USA own an aggregate of       
1,680,431 shares of Common Stock or ___% of the outstanding shares of Common    
Stock; these executive officers have agreed to vote their shares of Common      
Stock for approval of the Merger Agreement.                                     

Approval by the Life USA shareholders of the Merger Agreement 
requires the affirmative vote of a majority of the shares of Common Stock       
outstanding on the Record Date.                                                 

RECOMMENDATION OF THE BOARD OF DIRECTORS (PAGE ____)                            

  At a special meeting held on May 16, 1999, the Life USA Board of
Directors determined that the Merger is in furtherance of and consistent with   
the long-term business strategies of Life USA and is fair to and in the best    
interest of Life USA shareholders other than Allianz Life. The Board of         
Directors recommends that the Life USA shareholders approve the Merger          
Agreement. You should refer to the matters considered by the Board of           
Directors in determining whether to approve the Merger Agreement, beginning     
at page ____.                                                                   

OPINION OF FINANCIAL ADVISOR (PAGE ___)                                         

Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), a
nationally recognized investment banking firm, rendered an opinion to the       
Board of Directors dated June 7, 1999, that, based upon and subject to the      
assumptions, limitations and qualifications in the opinion, the consideration   
to be received by the holders of the Common Stock in the Merger is fair to      
the holders from a financial point of view. A summary of the procedures         
followed, findings and recommendations, basis for and methods of arriving at    
the findings and recommendations and additional information concerning the      
preparation of the opinion of the financial advisor is included in this Proxy   
Statement. A copy of the fairness opinion, setting forth the information        
reviewed, assumptions made and matters considered, is attached to this Proxy    
Statement as Appendix B. You should read the fairness opinion of DLJ in its     
entirety.                                                                       

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TERMS OF THE MERGER AGREEMENT (PAGE ___)                                        

      The Merger Agreement is attached to this Proxy Statement as Appendix
A. You should read the Merger Agreement in its entirety. It is the legal        
document that governs the Merger.                                               

     GENERAL. The Merger Agreement provides that Acquisition Sub will be
merged into Life USA and Life USA will be the Surviving Corporation. As a       
result of the Merger, the shareholders of Life USA will have the right to       
receive $20.75 in cash, without interest, for each share of Common Stock that   
they own, other than shares owned by Life USA or its wholly-owned               
subsidiaries, by Allianz Life or by shareholders who exercise their             
dissenter's rights.                                                             

     CONDITIONS TO THE MERGER. The completion of the Merger depends upon
the satisfaction of a number of conditions, including:                          

  -  approval of the Merger Agreement by the holders of a majority
of the outstanding shares of Life USA Common Stock;     

 -  receipt of all necessary orders and consents of governmental
authorities and other persons and the expiration of any 
regulatory waiting periods;                             

   -  accuracy of the representations and warranties of the parties;

-  absence of any court or governmental entity rendering the  
Merger illegal; and                                     

   -  absence of litigation having a material adverse effect on Life
USA or Allianz Life.                                    

Each party may waive the satisfaction of any condition to its obligations       
under the Merger Agreement, other than approval of the Merger Agreement by      
the Life USA shareholders. EVEN IF THE SHAREHOLDERS APPROVE THE MERGER, THERE   
CAN BE NO ASSURANCE THAT THE MERGER WILL BE COMPLETED.                          

      NO SOLICITATION. Until completion or abandonment of the Merger, Life
USA and its affiliates are not permitted to solicit any acquisition proposals   
from any other party, except that Life USA may furnish information in           
response to unsolicited requests and enter into discussions with a third        
party that wants to make an acquisition proposal if the Board of Directors      
determines the discussions are necessary to fulfill its fiduciary obligations   
after receiving the advice of counsel.                                          

TERMINATION. Either Life USA or Allianz Life may terminate the
Merger Agreement under certain circumstances, including if:                     

-  Life USA and Allianz Life mutually consent in writing;     

-  the Merger is not completed by the close of business on    
December 31, 1999;                                      

-  legal constraints or prohibitions prevent the completion of
the Merger;                                             

-  Life USA shareholders do not approve the Merger Agreement; 

-  the other party breaches in a material manner any of its   
 representations, warranties or covenants under the Merger
  Agreement and the breach is not cured within 30 days after
notice; or                                              

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-  Life USA enters into or its Board of Directors approves an 
  agreement for Life USA to be acquired by another party for
      consideration to Life USA shareholders that is superior to the
consideration to Life USA shareholders under the Merger 
  Agreement (a "Superior Proposal") if (a) Life USA notifies
      Allianz Life of the Superior Proposal, (b) Allianz Life has an
    opportunity to respond, and (c) Life USA pays Allianz Life a
termination fee of $20 million.                         

     In addition, Allianz Life may terminate the Merger Agreement if the
Life USA Board of Directors withdraws or modifies its recommendation that       
Life USA shareholders approve the Merger Agreement, recommends an alternative   
acquisition proposal or fails to recommend against a tender or exchange offer   
by another party for 20% or more of the Common Stock.                           

      FEES AND EXPENSES. Whether or not the Merger is consummated, each of
Life USA and Allianz Life will pay its own fees and expenses, except that (a)   
all printing expenses and filing fees will be divided equally, (b) Life USA     
will pay out-of-pocket fees of Allianz Life if the Merger Agreement is          
terminated by reason of a Superior Proposal permitting termination of the       
Merger Agreement by Life USA or Allianz Life or is terminated by Allianz Life   
because the Life USA Board of Directors does not recommend approval of the      
Merger Agreement to the Life USA shareholders, recommends a tender offer or     
acquisition proposal by another party, or does not recommend against a tender   
offer by another party for more than 20% of Life USA's outstanding Common       
Stock, and (c) Life USA will pay a termination fee of $20,000,000 to Allianz    
Life if the Merger Agreement is terminated by reason of a Superior Proposal     
permitting termination of the Merger Agreement or if Life USA is acquired by    
another party within 18 months following termination of the Merger Agreement    
under specified circumstances.                                                  

ACCOUNTING TREATMENT (PAGE ___)                                                 

    Life USA believes that the Merger will be accounted for by Allianz
Life using the purchase method of accounting in accordance with generally       
accepted accounting principles.                                                 

CONFLICTS OF INTERESTS (PAGE ___)                                               

      ALLIANZ LIFE. As of the close of business on April 30, 1999, Allianz
Life beneficially owned 5,699,118 shares of Life USA Common Stock or            
approximately 24.2% of the outstanding shares of Common Stock. In January       
1998, Life USA and Allianz Life entered into an agreement for Allianz Life to   
purchase $100 million of Life USA Common Stock over five years in semi-annual   
installments of $10 million. In addition, Allianz Life is a party to            
marketing, administration and reinsurance agreements with Life USA or its       
subsidiaries, and two executives of Allianz Life are members of the Life USA    
Board of Directors.                                                             

  BOARD OF DIRECTORS AND OFFICERS OF LIFE USA. Five members of the
Board of Directors are senior executives of Life USA, own or have options to    
purchase a substantial number of shares of Common Stock and, except for one     
officer, are parties to employment agreements which will continue in effect     
following the consummation of the Merger. All four outside directors of Life    
USA own or have options to purchase a substantial number of shares of Common    
Stock.                                                                          

      COUNSEL AND CONSULTANTS TO LIFE USA. Three outside directors of Life
USA receive fees for providing legal or consulting services to Life USA.        

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REGULATORY APPROVALS (PAGE ____)                                                

    Life USA is required to make filings with or obtain approvals from
regulatory authorities in connection with the Merger. These filings and         
approvals include filings with the Federal Trade Commission, the Department     
of Justice and the Minnesota Department of Commerce. An application and         
notice was filed with the Federal Trade Commission and the Department of        
Justice as required by the Hart-Scott-Rodino Antitrust Improvements Act of      
1976 (the "HSR Act") on ___________, 1999. The necessary application was        
filed with the Minnesota Department of Commerce on ________, 1999.              

     Life USA cannot predict whether or when it will obtain all required
regulatory approvals or the timing of these approvals.                          

DISSENTERS' RIGHTS (PAGE ___)                                                   

Any shareholder of Life USA who does not vote in favor of the 
proposal to approve the Merger Agreement and who strictly complies with the     
applicable provisions of Sections 302A.471 and 302A.473 of the Minnesota        
Business Corporation Act (the "MBCA") has the right to dissent and be paid      
cash for the "fair value" for such holder's shares of Common Stock, which may   
be more than, the same as, or less than the agreed consideration of $20.75 a    
share. "Fair value" will be determined based on the value of the dissenting     
shares immediately before completion of the Merger without any appreciation     
or depreciation in anticipation of the Merger. If Life USA and a dissenting     
shareholder are unable to agree upon the "fair value" for the holder's shares   
of Common Stock, the District Court of Hennepin County, Minnesota, will         
determine the "fair value." To perfect dissenters rights with respect to the    
Merger, you must follow the required procedures precisely, which include the    
requirement to give written notice to Life USA before the Special Meeting of    
your intent to demand payment. The provisions of Sections 302A.471 and          
302A.473 of the MBCA are attached to this Proxy Statement as Appendix C.        

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 THE SPECIAL MEETING

GENERAl                                                                         

This Proxy Statement is furnished in connection with the      
solicitation of proxies by the Board of Directors of Life USA for a Special     
Meeting of Shareholders of Life USA to be held on __________, 1999 at 9:00      
a.m., local time, in the Training Center located on the second floor of Life    
USA's offices at 300 South Highway 169, Minneapolis, Minnesota 55426, and at    
any adjournments thereof.                                                       

PROPOSAL TO BE CONSIDERED AT THE SPECIAL MEETING                                

    At the Special Meeting, the shareholders will be asked to consider
and vote upon the approval of the Merger Agreement. Subject to the receipt of   
regulatory approvals, approval by the shareholders of Life USA and              
satisfaction of other conditions, the Merger Agreement provides for the         
merger of Acquisition Sub with and into Life USA. If the proposed Merger is     
completed, each issued and outstanding share of Common Stock at the effective   
time of the Merger (other than shares owned by Life USA or its wholly-owned     
subsidiaries, by Allianz Life and by shareholders who exercise their            
dissenters' rights) will be converted into the right to receive $20.75 in       
cash.                                                                           

RECORD DATE; VOTING POWER; VOTES REQUIRED                                       

Only holders of record of Common Stock at the Record Date are 
entitled to notice of and to vote at the Special Meeting. As of the Record      
Date, there were ________ shares of Common Stock issued and outstanding held    
by approximately _____ holders of record. Holders of record of Common Stock     
on the Record Date are entitled to one vote per share on any matter that may    
properly come before the Special Meeting. The quorum required to hold the       
Special Meeting is a majority of the shares of Common Stock entitled to vote    
at the meeting, present in person or by proxy. If a quorum is present, the      
affirmative vote of the holders of a majority of the outstanding shares of      
Common Stock is required to approve the Merger Agreement.                       

   On the Record Date, Allianz Life owned 5,699,118 shares of Common
Stock or approximately _____% of the outstanding shares of Common Stock.        
Allianz Life will vote its shares of Common Stock for approval of the Merger    
Agreement. Five executive officers of Life USA owned an aggregate of            
1,680,431 shares of Common Stock or approximately ___% of the outstanding       
shares of Common Stock; these executive officers have agreed to vote their      
shares of Common Stock for approval of the Merger Agreement.                    

    Approval by the Life USA shareholders of the Merger Agreement will
require the affirmative vote of a majority of the shares of Common Stock        
outstanding on the Record Date.                                                 

PROXIES                                                                         

     Each shareholder who signs and returns a proxy in the form enclosed
with this Proxy Statement may revoke the same at any time prior to its use by   
giving notice of such revocation to Life USA in writing or in person at the     
Special Meeting. Presence at the Special Meeting of a shareholder who has       
signed a proxy does not alone revoke that proxy. Unless so revoked, all of      
the shares represented by each proxy will be voted at the Special Meeting and   
at any adjournments thereof. IF NO INSTRUCTIONS ARE INDICATED, SUCH PROXIES     
WILL BE VOTED FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT AND, IN THE      
DISCRETION OF THE PERSONS NAMED IN THE PROXY, ON SUCH OTHER MATTERS AS MAY      
PROPERLY BE PRESENTED AT THE SPECIAL MEETING.                                   

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     The cost of preparing, assembling and mailing this Proxy Statement,
the notice, the form of Proxy and other material which may be sent to the       
shareholders will be borne by Life USA, except that Allianz Life will share     
the cost of printing this Proxy Statement. In addition, directors, officers     
and regular employees of Life USA and its subsidiaries, at no additional        
compensation, may solicit proxies by telephone, telegram or in person. Upon     
request, Life USA will reimburse brokers and other persons holding shares for   
the benefit of others for their expenses in forwarding proxies and              
accompanying material and in obtaining authorization from beneficial owners     
of Common Stock to give proxies.                                                

In order to assure the presence of the necessary quorum at the
Annual Meeting, please sign and mail the enclosed Proxy promptly in the         
envelope provided. No postage is required if mailed within the United States.   
The signing of the Proxy will not prevent you from attending the meeting and    
voting in person, should you so desire.                                         

HISTORICAL MARKET INFORMATION 

  The Common Stock is traded on Nasdaq National Market tier of The
Nasdaq Stock Market under the symbol LUSA. The following table sets forth the   
high and low bid quotations for each quarterly period since January 1, 1997,    
and for the current fiscal year to date from the quotations published in THE    
WALL STREET JOURNAL.                                                            

                                                                [Download Table]

1999:                                                 HIGH              LOW   
                                                      ----              ---   
                                                                              
First Quarter.......................................  $12.75            $ 9.88
Second Quarter......................................  $20.22            $ 9.75

1998:                                                                         

First Quarter.......................................  $17.56            $12.50
Second Quarter......................................  $17.00            $11.13
Third Quarter.......................................  $14.00            $10.75
Fourth Quarter......................................  $13.75            $ 9.50

1997:                                                                         

First Quarter.......................................  $11.88            $ 9.00
Second Quarter......................................  $14.25            $ 9.13
Third Quarter.......................................  $17.25            $13.75
Fourth Quarter......................................  $18.00            $16.00


    On May 14, 1999, the last trading day prior to announcement of the
execution of the Merger Agreement, the closing sale price per share of Common   
Stock as reported by The Nasdaq Stock Market was $10.25. On _________, 1999,    
the closing sale price per share of Common Stock as reported by The Nasdaq      
Stock Market was $________.                                                     

      Prior to April 1998, Life USA had not paid any cash dividends on its
Common Stock. In April 1998 Life USA began paying regular quarterly cash        
dividends of $.025 per share. The Merger Agreement permits, and Life USA        
intends to continue, the regular quarterly dividend declarations. Under the     
Merger Agreement, Life USA has agreed not to pay any other dividends on the     
Common Stock prior to completion of the Merger. In addition, applicable laws    
generally limit the ability of Life USA's                                       

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subsidiaries to pay dividends to the extent that required regulatory capital    
would be impaired, which could limit Life USA's ability to pay dividends.       

SELECTED CONSOLIDATED FINANCIAL DATA OF LIFE USA

  The following selected consolidated historical financial data of
Life USA as of December 31, 1998, 1997, 1996, 1995 and 1994 and for each of     
the years then ended has been derived from the audited financial statements     
of Life USA, except that the data as of March 31, 1999 and 1998 and for each    
of the three months then ended is unaudited. The selected financial data        
should be read in conjunction with the Consolidated Financial Statements of     
Life USA, related notes and other financial information incorporated by         
reference into this Proxy Statement.                                            

                                                        [Enlarge/Download Table]

                                        THREE MONTHS                                                                         
                                            ENDED                                                                            
                                          MARCH 31,                               YEARS ENDED DECEMBER 31,                   
                                      1999         1998          1998         1997          1996         1995        1994    
                                      ----         ----          ----         ----          ----         ----        ----    
                                            (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)                                    
                                                                                                                             
INCOME STATEMENT DATA:                                                                                                       
Total revenues                        $ 92,532     $ 92,078     $ 362,648     $ 369,903    $ 316,898    $ 272,781   $ 206,313
Net income                               4,001        6,009        21,907        26,978       23,454       19,097      14,469

PER COMMON SHARE DATA:                                                                                                       
Net income:                                                                                                                  
  Basic                                $  0.16      $  0.23       $  0.85       $  1.24      $  1.13      $  0.94     $  0.72
  Diluted                                 0.16         0.23          0.83          1.11         1.04         0.88        0.71
Dividends declared                       0.025            -         0.075             -            -            -           -

BALANCE SHEET DATA:                                                                                                          
At period end:                                                                                                               
  Total assets                      $5,526,760   $5,219,459    $5,458,719    $5,062,774   $4,386,723   $3,867,539  $3,065,271
  Long-term debt                        15,000        5,000        15,000         5,000            -            -           -
  Convertible subordinated                                                                                                   
    Debentures                           5,898        6,021         5,898        36,030       36,030       36,030       6,041
  Total shareholders' equity           273,039      269,278       279,985       222,400      172,615      156,896     106,916
  Book value per common                                                                                                      
    Share                                11.41        10.38         11.30          9.77         8.23         7.72        5.30

RATIO OF EARNINGS TO FIXED CHARGES       1009%        1824%         1784%         1925%                                      

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 SPECIAL FACTORS

BACKGROUND OF THE MERGER                                                        

      The relationship between Allianz Life and Life USA spans the history
of Life USA.                                                                    

     In 1988, soon after the founding of Life USA, Allianz Life and Life
USA entered into a service agreement (the "1988 Service Agreement") under       
which Life USA marketed and serviced Allianz Life products in nine states       
(Connecticut, Maryland, Massachusetts, New Hampshire, New Jersey, Ohio,         
Pennsylvania, Rhode Island and Vermont) where LifeUSA Insurance was not         
authorized to issue insurance policies. In 1990, LifeUSA Insurance began to     
assume a portion of the business produced by Life USA for Allianz Life.         

In 1995, in order to provide additional capital and surplus to
LifeUSA Insurance, Allianz Life purchased a 15-year $30 million convertible     
debenture from Life USA. In addition, Life USA issued Allianz Life a warrant    
to purchase Common Stock to enable Allianz Life to maintain its ownership in    
Life USA at 10.5% of the outstanding Common Stock if Life USA issued            
additional shares of Common Stock after Allianz Life bought the convertible     
debenture. Life USA paid Allianz Life interest of $1.5 million in 1997 and      
$715,000 in 1998 on the debenture. As part of the debenture purchase, Life      
USA agreed to expand and extend the 1988 Service Agreement by entering into a   
new joint marketing agreement (the "1995 Marketing Agreement"). Under the       
1995 Marketing Agreement, life insurance agents of Life USA Insurance are       
also licensed as agents of Allianz Life and sell Allianz Life products          
similar to Life USA products in all states other than New York. In connection   
with the sale of Allianz Life products under the 1995 Marketing Agreement,      
Life USA provides all administrative and other home office services, pays       
commissions due agents and pays applicable premium taxes on the business        
produced for Allianz Life ("Allianz/LUSA Business"). Allianz Life pays Life     
USA service fees on the business produced for Allianz Life under the 1995       
Marketing Agreement. In addition, LifeUSA Insurance assumes 25% of the          
Allianz/LUSA Business and pays commission and expense allowances on the         
assumed business to Allianz Life. For the years 1997 and 1998 and for the       
first six months of 1999, premiums of approximately $549.3 million, $439.2      
million and $____ million, respectively, were collected on the Allianz/LUSA     
Business and LifeUSA Insurance assumed approximately $132.1 million, $115.5     
million and $___ million, respectively, of the Allianz/LUSA Business. For the   
years 1997 and 1998 and for the first six months of 1999, commission and        
expense allowances paid to Life USA by Allianz Life for the production of       
Allianz/LUSA Business were approximately $80.3 million, $69.6 million and       
$___ million, respectively, and commission and expense allowances paid to       
Allianz Life by LifeUSA Insurance for the Allianz/LUSA Business assumed by      
LifeUSA Insurance were approximately $21.7 million, $18.8 million and $____     
million, respectively.                                                          

      In early 1998, Allianz Life and Life USA entered into a sequentially
timed equity placement agreement (the "STEP Agreement") under which Allianz     
Life converted the debenture purchased in 1995 and agreed to provide Life USA   
with $100 million of capital over a period of five years through $10 million    
semi-annual purchases of Common Stock. Under the STEP Agreement, Life USA       
issues Common Stock to Allianz Life at a per share price equal to 250% of the   
average GAAP book value per share of Life USA for the previous six months,      
unless the per share price is more than 200% of the current market price, in    
which case Allianz Life could decline the purchase but Life USA could instead   
require Allianz Life to purchase a convertible debenture. As part of the STEP   
Agreement, Life USA extended the 1995 Marketing Agreement through 2001, and     
Allianz Life is entitled to 37.5% of the total new life insurance and annuity   
business produced by LifeUSA Insurance under the 1995 Marketing Agreement. As   
a result, Allianz Life assumed $40.6 million of the new business produced by    
LifeUSA Insurance in 1998 and approximately $____ million for the first six     
months of 1999, and Allianz Life paid                                           

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commissions and allowances to LifeUSA Insurance of $7.0 million in 1998 and     
$____ million for the first six months of 1999 for the assumed business. The    
STEP Agreement also gave Allianz Life the right to purchase, from management    
and on the open market, up to 10% of the outstanding Common Stock. It was       
anticipated that once the STEP Agreement was fully funded in 2002, Allianz      
Life would own up to 35% of Life USA's outstanding Common Stock. The STEP       
Agreement also granted Allianz Life the right to nominate two members of the    
Life USA Board of Directors and to receive information about any possible       
sale of Life USA.                                                               

Pursuant to the STEP Agreement, in February 1998 Allianz Life 
converted its debenture into 2,431,118 shares of Common Stock at a conversion   
price of $12.34 per share, exercised its warrant to purchase 241,846 shares     
of Common Stock at $12.36 per share from Life USA, and purchased 925,000        
shares of Common Stock at $16.44 per share from Life USA management. In         
addition, Allianz Life purchased 1,300,000 shares of Common Stock in the open   
market during the period from February 10, 1998 through July 29, 1998. Also,    
under the terms of the STEP Agreement, Life USA sold Allianz Life 406,092       
shares of Common Stock at $24.625 per share in August 1998, and 395,062         
shares at $25.3125 per share in February 1999. From February 1998 through       
February 1999, an aggregate of 5,669,118 shares of Common Stock were acquired   
by Allianz Life.                                                                

      As of April 30, 1999, Allianz Life owned slightly more than 24.2% of
the outstanding Common Stock of Life USA and two representatives of Allianz     
Life served on the Life USA Board of Directors. LifeUSA Insurance               
administered 125,700 Allianz Life policies representing $2.8 billion of         
reserves, and most of the independent agents contracted by LifeUSA Insurance    
were authorized to sell both LifeUSA Insurance and Allianz Life products.       

    Prior to 1999, Life USA had held informal discussions with various
investment bankers and companies about industry consolidation and possible      
transactions or relationships, but it had not received any proposals or         
undertaken substantive negotiations of any possible transaction. On January     
25, 1999, Mr. MacDonald and Ralph Strangis, a director of Life USA and a        
member of the law firm serving as general counsel to Life USA, met with         
representatives of an investment banking firm that had not been engaged by      
Life USA. An objective of the meeting was for the investment banking firm to    
present its views as to the prospects for a transaction with Allianz Life. At   
the meeting, based upon available public information, the investment banking    
firm also presented its informal and preliminary view of the perceived value for
Life USA in the event of a sale. Messrs. MacDonald and Strangis concluded       
that a sale of Life USA to a party other than Allianz Life would not achieve    
an amount that would be fully reflective of the inherent value of Life USA.     
They decided not to pursue any discussions for a sale of Life USA other than    
as might emanate from direct discussions with Allianz Life. This decision was   
based on the belief that the close relationship between the two companies       
would enable Allianz Life to better understand the inherent value of Life USA   
and to make an offer consistent with that understanding. Also, the dependence   
of Allianz Life on the volume of business produced by Life USA would provide    
additional incentive on the part of Allianz Life to assure continuation of      
the relationship, an incentive not available to any other company interested    
in the acquisition of Life USA. Messrs. MacDonald and Strangis concluded that   
any "public auction" of Life USA would fail to bring an acceptable value and    
would have a damaging effect on the performance of Life USA and its employees   
and agents and that any discussions with Allianz Life should occur through      
direct communications by Mr. MacDonald.                                         

   As the decade-long relationship between Allianz Life and Life USA
developed and expanded, there were occasional informal discussions regarding    
the benefits of combining the two companies. None of these discussions were     
substantive until January 1999, when Robert MacDonald, Chairman and Chief       
Executive Officer of Life USA, responded in a positive manner to comments       
made by Robert James and Edward Bonach, Allianz Life executives who are the     
representatives of Allianz Life on the Life USA Board of Directors,             
concerning the possibility of Allianz Life acquiring Life USA. No               

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specifics of a potential offer were discussed at that time. The average         
trading price of Common Stock during January 1999 was $11.31 per share.         

      In mid-February 1999, Mr. MacDonald again met with Mr. James. During
the meeting Mr. James indicated that Allianz Life may be interested in more     
substantive discussions concerning the acquisition of Life USA and sought       
assurances that any such approach would be welcome. Mr. MacDonald gave such     
assurances, conditioned on an offering price at a significant premium to        
current market. In late February, Messrs. MacDonald, James and Bonach met in    
Naples, Florida. The February meeting did not deal with the specifics of a      
potential offer, but rather centered on an outline of the manner in which any   
discussions would proceed. While in Naples, Mr. MacDonald also met with         
Lowell Anderson, Chairman, President and Chief Executive Officer of Allianz     
Life, who indicated his interest in a potential transaction.                    

      On March 10, 1999, Mr. MacDonald met in Minneapolis with Mr. Herbert
Hansmeyer, director of American insurance operations for Allianz AG, and Paul   
Saffert, Chief Financial Officer of Allianz of America, Inc. ("Allianz of       
America"), the holding company for the North American companies of Allianz      
AG. Mr. Hansmeyer was clear that the purpose of the meeting was not to          
discuss the acquisition of Life USA, but rather to determine Mr. MacDonald's    
willingness to enter into discussions and his interest in remaining with Life   
USA should an acquisition be completed. Toward the end of March, Mr. Bonach     
telephoned Mr. MacDonald and indicated that Allianz AG had authorized           
specific discussions that could lead to an offer to acquire Life USA.           
Mr. Bonach advised Mr. MacDonald that Mr. Saffert would represent Allianz Life  
in the early discussions.                                                       

      On April 21, 1999, Mr. MacDonald met with Messrs. Saffert, James and
Bonach at the Allianz Life offices in Minneapolis. Leading the meeting, Mr.     
Saffert indicated that Allianz Life did have a serious interest in acquiring    
all of the outstanding Common Stock. He indicated that, "while he was not       
authorized to make an offer," preliminary analysis by Allianz Life indicated    
a potential offering price "in the mid-teens." Mr. MacDonald responded that     
he would not recommend any offer in the mid-teens to the Life USA Board of      
Directors. Mr. MacDonald indicated that, for an offer from Allianz Life to be   
considered, "it must be at least $20 per share." On April 30, 1999, Mr.         
MacDonald received a telephone call from Mr. Saffert who indicated that         
Allianz Life "might be able to offer $20 per share," for all of the             
outstanding Common Stock. He sought to determine if such an offer would be      
acceptable to the Life USA Board of Directors. Mr. MacDonald responded that     
he believed that the Board of Directors "would be more comfortable at $21 per   
share." During this conversation, Mr. Saffert also indicated that any offer,    
should it be forthcoming, would be conditioned on Mr. MacDonald agreeing to     
remain with Life USA and assume responsibilities as the chief executive         
officer for Allianz Life as well.                                               

     Soon after the telephone conversation between Messrs. MacDonald and
Saffert, Messrs. MacDonald and Strangis met to discuss options for Life USA.    
While no specific offer from Allianz Life to acquire Life USA had been made,    
Messrs. MacDonald and Strangis determined that discussions had become           
substantive in nature and that the outside directors of Life USA should be      
notified of the discussions between Life USA and Allianz Life. The outside      
directors of Life USA responded favorably to the discussions with Allianz       
Life, conditioned on an offer of at least $20 per share for the Common Stock    
and receipt of a fairness opinion from an investment banking firm. Based upon   
the desire to keep negotiations confidential, Messrs. MacDonald and Strangis    
decided that no significant benefit could be derived from engaging an           
investment banking firm to participate in continuing discussions with Allianz   
Life.                                                                           

    With all parties apparently in general agreement as to the outline
of an offer from Allianz Life to purchase all of the outstanding Common         
Stock, a meeting was scheduled between Messrs. Hansmeyer and MacDonald for      
May 12, 1999. During a flight from Washington, DC to Milan, Italy, Messrs.      

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Hansmeyer and MacDonald discussed the details of an offer and the management    
structure of the companies should a transaction be completed. Mr. Hansmeyer     
initially offered $20.00 per share and Mr. MacDonald counter offered $21.00     
per share. Subsequently, Mr. Hansmeyer increased Allianz Life's offer to        
$20.50 per share. After further discussions, Mr. MacDonald stated that he       
would not be comfortable with less than $20.75 per share, and Mr. Hansmeyer     
then offered $20.75 per share. At the conclusion of the meeting with Mr.        
Hansmeyer, Mr. MacDonald agreed to recommend that the Life USA Board of         
Directors accept the Allianz Life offer of $20.75 per share in cash for all     
of the outstanding Common Stock.                                                

    On May 13, 1999, Life USA received a draft of the Merger Agreement
from Allianz Life. From May 13 through 15, 1999, the document was reviewed      
and revised. The May 13, 1999 draft of the Merger Agreement was air expressed   
to all members of the Life USA Board of Directors; they received the draft on   
May 14, 1999. Agreement on the final form of the Merger Agreement was reached   
on the afternoon of May 16, 1999 and presented to the Life USA Board of         
Directors during a telephonic board meeting that evening. At the meeting,       
counsel reviewed the terms of the Merger Agreement and the changes that had     
been made to the May 13, 1999 draft of the agreement previously received by     
the directors. Mark A. Zesbaugh, Life USA's Chief Financial Officer, provided   
a financial analysis of the proposed transaction with Allianz. At a price of    
$20.75 per share, the total value of Life USA, including in-the-money Stock     
Options, implicit in the transaction was approximately $540 million. Based on   
an implicit value of $540 million, Mr. Zesbaugh indicated that the proposed     
transaction was (a) 1.86 times Life USA's book value as of March 31, 1999,      
(b) 27.3 times the earnings of Life USA during the last twelve months ending    
March 31, 1999, and (c) 22 to 23 times the 1999 earnings estimates for Life     
USA by the two analysts covering Life USA. In addition, Mr. Zesbaugh            
determined that Allianz Life's offer of the $20.75 per share represented a      
102% premium to the closing price of $10.25 per share for Life USA Common       
Stock on May 14, 1999, which was the last trading day preceding the Board       
meeting. The premium to the average closing price for both the five and         
thirty trading days ending on May 14, 1999 was also 102%. Mr. Zesbaugh          
generally discussed information on merger and acquisition transactions          
involving life insurance companies since January 1, 1995 prepared by            
Mergerstat, a service bureau that compiles publicly available information for   
a fee. The Life USA Board of Directors, with Messrs. Bonach and James           
(Allianz Life's representatives on the Life USA Board of Directors) absent      
from the meeting, unanimously approved the Merger Agreement, conditioned on     
receipt of a "fairness opinion" from an investment banking firm, and the        
Board of Directors recommended that the Life USA shareholders approve the       
Merger Agreement. All non-employee directors (other than Messrs. Bonach and     
James who did not participate in the vote) voted to approve the Merger          
Agreement.                                                                      

On June 7, 1999, the Life USA Board of Directors held another 
telephonic meeting. At this meeting representatives of DLJ, Life USA's          
investment banker, presented DLJ's analysis and delivered an opinion            
addressed to the Life USA Board of Directors that, based upon and subject to    
the assumptions, limitations and qualifications in the opinion, the             
consideration to be received by the holders of Life USA Common Stock in the     
Merger is fair to the holders from a financial point of view. See "Special      
Factors -- Opinion of Financial Advisor" for a further discussion of the DLJ    
analysis and fairness opinion. Following the presentation, the Life USA Board   
of Directors, with Messrs. Bonach and James not voting due to their conflict    
of interest, unanimously confirmed its recommendation that Life USA             
shareholders approve the Merger Agreement. Messrs. Bonach and James attended    
portions of the June 7, 1999 meeting of the Board of Directors of Life USA,     
but excused themselves before, and were absent during, the DLJ presentation     
and the discussion by the other directors on DLJ's analysis and opinion.        

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PURPOSE AND STRUCTURE OF THE MERGER                                             

     The purpose for the Merger is to enable Allianz Life to acquire the
entire equity interest in Life USA. The transaction is structured as a cash     
merger in order to provide the shareholders of Life USA with cash for all       
their shares and to provide a prompt and orderly transfer of ownership of       
Life USA from the shareholders of Life USA to Allianz Life.                     

    The primary benefit of the Merger to Life USA's shareholders other
than Allianz Life is the opportunity to sell all of their Common Stock at a     
price which represents a substantial premium over trading prices in effect      
immediately prior to the announcement of the Merger. The structure of the       
transaction as a cash merger provides a cash payment at a premium price to      
all holders of outstanding Common Stock (other than Life USA and its wholly     
owned subsidiaries and Allianz Life) and ensures the acquisition by Allianz     
Life of all the outstanding shares of Life USA.                                 

REASONS FOR THE MERGER                                                          

      The Life USA Board of Directors has determined that the Merger is in
furtherance of and consistent with the long-term business strategies of Life    
USA and is fair to and in the best interest of the shareholders of Life USA.    
In approving the Merger, the Board of Directors considered and analyzed a       
number of factors, including those described below.                             

  1.       The equities market has failed to adequately value Life
USA's Common Stock. Recognizing that fact, the Life USA Board of Directors      
authorized repurchases by Life USA of its Common Stock in July 1998             
(4,000,000 shares) and April, 1999 (an additional 2,500,000 shares). Pursuant   
to the authorizations, Life USA purchased an aggregate of 3,385,000 shares      
for $41,091,582 or an average of $12.139 per share.                             

  2.       A decision by Life USA to retain additional business in
order to enhance the long-term profitability of Life USA would have an          
adverse effect on short-term profitability over the next three or four years    
and potentially reduce the market price of Life USA's Common Stock in a stock   
market environment emphasizing earnings growth.                                 

      3.       Information was presented to the Board by Mark A. Zesbaugh,
Chief Financial Officer of Life USA, analyzing the financial aspects of the     
terms of the Merger and reviewing comparable market data of recent insurance    
company merger and acquisition transactions available through Mergerstat. The   
information indicated that the terms of the Merger were favorable by            
comparing key financial valuation indicators, including premium to market (1    
day, 5 day and 30 day averages), price to book multiple and price to trailing   
earnings multiple. The Board also conditioned its approval of the Merger        
Agreement upon receiving a fairness opinion from an investment banking firm     
that would provide a more detailed financial analysis.                          

    4.       The Board of Directors has received an opinion dated June
7, 1999 from DLJ, its investment banker, to the effect that the consideration   
to be received by the holders of Life USA Common Stock in the Merger is fair    
to the holders from a financial point of view. The full text of the opinion,    
setting forth the assumptions made, matters considered and limitations on the   
review undertaken in connection with the opinion, is attached as Appendix B.    
The shareholders of Life USA are urged to read the opinion in its entirety.     
In reaching its opinion as to the fairness from a financial point of view of    
the Merger Consideration, DLJ employed generally accepted valuation methods.    
These methods included an analysis of comparable public company trading         
multiples, which indicated a range of implied value of $10 to $14 per share;    
a discounted cash flow analysis, which indicated a range of implied value of    
$17 to $20 per                                                                  

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share; a comparable transactions analysis, which indicated a range of implied   
value of $13 to $20 per share; a premiums paid in comparable transactions       
analysis, which indicated a range of implied value of $12 to $16 per share;     
and a dividend discount model, which indicated a range of implied value of      
$16 to $19 per share. These analyses are all described further under "Opinion   
of the Financial Advisor" (page ___).                                           

 5.       Life USA's relationship with Allianz Life has expanded
throughout Life USA's history from an initial service agreement in 1988 to      
the 1998 $100 million STEP Agreement. In addition, the businesses of Life USA   
and Allianz Life complement each other: Life USA offers Allianz Life a large    
distribution network, innovative fixed annuity products, experienced            
management, a creative corporate culture and efficient policy service           
personnel, and Allianz Life offers Life USA a source of capital for growth      
and retention of new business, variable annuity products and a long term care   
group to enhance Life USA's emerging long term care business.                   

     6.       Allianz Life is willing to pay an amount for each share of
Common Stock that is reflective of the long-term relationship and potential     
benefits of a combination of Life USA and Allianz Life and that is not likely   
to be matched by another party.                                                 

 7.       Allianz Life has the financial ability to complete the
Merger so that the Merger is not conditioned on financing. In addition,         
Allianz Life has committed to advance to Life USA funds necessary to pay or     
discharge all indebtedness for borrowed money under Life USA's existing         
credit facility and to retire Life USA's convertible subordinated debentures    
prior to the Merger if Life USA does not have sufficient funds available.       

8.       The Merger Agreement provides for acceleration of all
options to purchase shares of Common Stock (the "Stock Options") granted to     
employees and agents of Life USA and payment to the holders of Stock Options    
of the difference between $20.75 and the exercise price per share of the        
options, thereby rewarding the employees and agents who have built the value    
of Life USA.                                                                    

9.       The Merger Agreement permits the Life USA Board of   
Directors to provide responsive information for a takeover proposal from        
another party that is superior to Allianz Life's proposal and allows the Life   
USA Board of Directors to terminate the Merger Agreement in the event it        
determines to accept a Superior Proposal upon notice to Allianz Life and        
payment to Allianz Life of a $20 million termination fee.                       

10.      The Merger must be approved by a majority of the     
outstanding shares of Common Stock. At April 30, 1999, approximately 7.4% of    
the shares of outstanding Common Stock were held by directors and executive     
officers of Life USA and approximately 24.2% of the shares of outstanding       
Common Stock were held by Allianz Life. Five executive officers of Life USA,    
representing beneficial ownership of 7.1% of the shares outstanding, have       
executed agreements agreeing to vote in favor of the Merger. Approval of a      
majority of unaffiliated shareholders is not required to approve the Merger.    

    11.      Shareholders of Life USA who do not support the Merger or
are dissatisfied with the consideration to be received by the holders of        
Common Stock are able to obtain "fair value" for their shares if they           
properly exercise their dissenters' rights under Minnesota law.                 

     In view of the variety of factors considered in connection with its
evaluation of the Merger, the Board of Directors found it impracticable to,     
and did not, quantify, rank or otherwise assign relative weights to the         
reasons for the Merger described above or determine that any reason was of      
particular importance in reaching its determination that the Merger is in       
furtherance of and consistent with the long-term business strategies of Life    
USA and is fair to and in the best interest of the shareholders of Life         

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USA. Rather, the Board of Directors viewed its recommendation as being based    
upon its judgment, in light of the totality of the information presented and    
considered, as summarized in the reasons for the Merger described above, and    
the overall effect of the Merger on Life USA's shareholders compared to         
continuing the business of Life USA in the ordinary course or seeking other     
potential parties to effect a business combination.                             

RECOMMENDATION OF THE BOARD OF DIRECTORS                                        

On May 16, 1999, the Board of Directors approved the Merger   
Agreement conditioned on receipt of a fairness opinion from its investment      
banker. Following a presentation by and receipt of a fairness opinion from      
DLJ on June 7, 1999, the Board confirmed its earlier approval and recommended   
that Life USA shareholders approve the Merger Agreement. Messrs. Bonach and     
James, the Allianz Life executives who serve on the Life USA Board at Allianz   
Life's request were not present at the May 16th meeting and were present at     
the June 7th meeting but did not participate in the Board deliberations or      
vote. All other directors of Life USA who are not employees of Life USA         
joined in the approval of the Merger Agreement and recommendation to Life USA   
shareholders. A majority of directors who are not employees of Life USA did     
not retain an unaffiliated representative to act solely on behalf of            
unaffiliated shareholders to negotiate the terms of the Merger or prepare a     
report concerning the fairness of the Merger. All non-employee directors        
(other than Messrs. Bonach and James who did not participate in the vote)       
voted to approve the Merger Agreement.                                          

THE BOARD OF DIRECTORS OF LIFE USA HAS APPROVED THE MERGER AGREEMENT AND        
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT.     

OPINION OF FINANCIAL ADVISOR                                                    

FAIRNESS OPINION WITH RESPECT TO THE MERGER                   

  Life USA requested DLJ, in its role as investment banker to Life
USA, to render an opinion to the Board of Directors of Life USA as to the       
fairness, from a financial point of view, of the consideration to be received   
by the shareholders of Life USA pursuant to the Merger Agreement. On June 7,    
1999, DLJ delivered its opinion to the Life USA Board of Directors that, as     
of that date, and based on and subject to the assumptions, limitations and      
qualifications set forth in its opinion, the consideration to be received       
pursuant to the Merger Agreement is fair to the shareholders of Life USA        
from a financial point of view. The full text of the written opinion of DLJ,    
dated June 7, 1999, which sets forth assumptions made, matters considered and   
limitations on the review undertaken in connection with the opinion, is         
attached as Appendix B to this Proxy Statement. Furthermore, the written        
opinion to DLJ is available for inspection and copying at the principal         
executive offices of Life USA during its regular business hours by any          
interested equity security holder of Life USA or its representative who has     
been so designated in writing. Shareholders are urged to read the opinion in    
its entirety.                                                                   

OPINION OF DONALDSON, LUFKIN & JENRETTE                       

   GENERAL. DLJ delivered a written opinion to the Life USA Board of
Directors that, as of the date of the opinion, the consideration to be          
received by the shareholders of Life USA pursuant to the Merger Agreement is    
fair to the shareholders from a financial point of view. The full text of the   
written opinion of DLJ, dated June 7, 1999, which sets forth assumptions        
made, matters considered and limitations on the review undertaken in            
connection with the opinion, is attached as Appendix B to this Proxy            
Statement. The summary below is qualified in its entirety                       

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by reference to the full text of the opinion. Shareholders are urged to read    
the opinion in its entirety.                                                    

      DLJ is an internationally recognized investment banking firm and, as
part of its investment banking business, is continually engaged in the          
valuation of businesses and their securities in connection with mergers and     
acquisitions, underwritings, distributions of securities and similar            
activities. DLJ was selected by the Life USA Board of Directors on the basis    
of its experience and expertise relating to the life insurance and annuity      
industry.                                                                       

   DLJ was engaged by the Life USA Board of Directors only to render
its written opinion. DLJ did not participate on behalf of Life USA in           
negotiations with Allianz Life, nor did it consider or evaluate other           
strategic alternatives. The opinion relates only to the fairness of the         
consideration to be received by the shareholders of Life USA from a financial   
point of view. The opinion does not address the merits of the underlying        
decision of Life USA to engage in the merger and does not constitute a          
recommendation to any Life USA shareholder as to how such shareholder should    
vote on the proposed merger. The opinion is necessarily based on information    
available, and financial, stock market, economic and other conditions and       
circumstances as they existed and could be calculated as of the date of the     
opinion. Although subsequent developments may affect the opinion, DLJ does      
not have any obligation to update, revise or reaffirm the opinion. DLJ will     
receive a fee from Life USA for its services. In addition, Life USA has         
agreed to indemnify DLJ for certain liabilities arising out of its              
engagement. See "Fees payable to DLJ" below.                                    

     MATERIALS AND INFORMATION CONSIDERED WITH RESPECT TO THE MERGER. No
restrictions or limitations were imposed on DLJ by the Life USA Board of        
Directors with respect to the investigations made or the procedures followed    
by DLJ in rendering its opinion. In arriving at its opinion, DLJ reviewed       
financial and other information that was publicly available or furnished to     
it by Life USA, including information provided during discussions with its      
management. In addition, DLJ:                                                   

                 - reviewed the historical stock prices and trading volumes of
Common Stock;                           

                - compared certain financial and securities data of Life USA
                 with such data of selected companies whose securities are
traded in public markets;               

                 - reviewed prices and premiums paid in certain other selected
               business combinations in the life insurance and annuity
industry;                               

                - performed a discounted cash flow analysis of Life USA; and

               - performed a discounted dividend analysis of Common Stock.

DLJ also discussed the past and current operations, financial 
condition and prospects of Life USA with management of Life USA, received       
financial projections for Life USA from its management, and conducted such      
other financial studies, analyses and investigations as DLJ deemed              
appropriate for purposes of rendering its opinion. DLJ also reviewed the        
Merger Agreement in connection with its analysis.                               

     In rendering its opinion, DLJ relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that    
was available to it from public sources, that was provided to DLJ by Life USA   
or its representatives or that was otherwise reviewed by DLJ. With respect to   
the                                                                             

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financial projections supplied to DLJ, DLJ has assumed that they were           
reasonably prepared and reflected the best currently available estimates and    
judgments of the management of Life USA as to the future operating and          
financial performance of Life USA. DLJ did not assume any responsibility for    
making and did not make any independent evaluation of Life USA's assets or      
liabilities or any independent verification of any of the information           
reviewed by DLJ. DLJ did not express any opinion with respect to legal          
matters relating to the Merger.                                                 

   The following is a summary of the material factors considered and
principal financial analyses performed by DLJ in connection with rendering      
the DLJ opinion. The analysis provides the resulting ranges of implied share    
prices of Common Stock based on DLJ's analyses and compares these ranges with   
the consideration to be received by Life USA shareholders pursuant to the       
Merger Agreement. For a detailed description of each of DLJ's analyses, see     
the individual analysis discussions in the following paragraphs.                

   STOCK TRADING HISTORY. To provide contextual data and comparative
market data, DLJ reviewed the daily closing prices during the period from       
June 4, 1998 to June 4, 1999 and compared the closing stock prices during       
such period with the S&P 500 Index and an index comprised of publicly traded    
peer insurance companies. In addition, DLJ analyzed the consideration to be     
received by the shareholders pursuant to the Merger Agreement in relation to    
the market price of the Common Stock at various dates before the announcement   
of the Merger. Such analysis indicated that the price per share to be           
received by the shareholders pursuant to the Merger Agreement represents a      
premium of 102.4% to the closing price of $10.25 per share on May 14, 1999,     
and a premium of 112.8% to the closing price of $9.75 per share on April 5,     
1999 (30 trading days prior to the announcement of the Merger) and a premium    
of 76.6% to the closing price of $11.75 per share on January 6, 1999 (90        
trading days prior to the announcement of the Merger). In addition, the price   
represents a premium of 85.9% to the year to date average closing price prior   
to the announcement of the Merger Agreement (as of May 14, 1999) of $11.16      
per share and a premium of 48.9% to the 1998 average closing price of $13.94    
per share.                                                                      

 ANALYSIS OF CERTAIN PUBLICLY TRADED COMPANIES. DLJ compared the
consideration to be received to the range of values of Common Stock implied     
by the relative valuation multiples of the following publicly traded peer       
insurance companies:                                                            

-  Guarantee Life Companies Inc.,           

-  ARM Financial Group Inc.,                

-  Kansas City Life Insurance Co.,          

-  American Annuity Group Inc.,             

-  Presidential Life Corp.,                 

-  FBL Financial Group Inc.,                

-  AmerUS Life Holdings Inc.,               

-  Liberty Financial Companies, and         

-  MONY Group Inc.                          

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    DLJ analyzed the equity value of each of the peer companies, using
trading valuations as of June 4, 1999 as a multiple of selected financial       
data, including (a) earnings per share for the last twelve months ended March   
31, 1999, (b) estimated 1999 and 2000 earnings per share and (c) March 31,      
1999 book value per share. The 1999 and 2000 estimated earnings per share for   
the peer companies were provided by Institutional Brokers Estimating Service    
(IBES). Based on this analysis, DLJ developed the following ranges of           
valuation multiples:                                                            

                - 6.9x -- 18.2x, with a mean of 12.7x and a median of 12.0x,
                   for last twelve months earnings per share compared to 28.4x
for the Merger;                         

                - 6.3x -- 13.3x, with a mean of 11.1x and a median of 11.9x,
                   for estimated 1999 earnings per share compared to 21.6x for
the Merger;                             

               - 5.8x -- 11.5x, with a mean of 9.8x and a median of 10.6x,
                   for estimated 2000 earnings per share compared to 20.1x for
the Merger; and                         

                 - 0.75x -- 1.83x, with a mean of 1.14x and a median of 0.99x,
                 for March 31, 1999 book value per share compared to 1.86x
for the Merger.                         

  These valuation multiples were then applied to Life USA's actual
last twelve months earnings and March 31, 1999 book value per share and         
management's estimates for 1999 and 2000 earnings to determine the range of     
implied equity values of Life USA. This analysis resulted in the following      
ranges of implied Life USA value per share:                                     

               - $5.02 -- $13.27, based on last twelve months earnings per
share;                                  

           - $6.08 -- $12.80, based on estimated 1999 earnings per
share;                                  

           - $5.63 -- $12.22, based on estimated 2000 earnings per
share; and                              

             - $8.81 -- $20.64, based on March 31, 1999 book value per
share.                                  

     TRANSACTION ANALYSIS. DLJ compared the consideration to be received
by Life USA shareholders pursuant to the Merger Agreement to the range of       
values of Common Stock implied by the relative purchase price multiples         
generated from 13 selected acquisitions of life insurance companies with        
significant annuity operations that have occurred since January 1, 1995 with    
total transaction values less than $2 billion. DLJ analyzed the equity value    
of each of the acquired companies, measured as a multiple of selected           
financial data, including (a) last twelve months operating earnings, (b) next   
twelve months estimated earnings and (c) March 31, 1999 book value. Based on    
this analysis, DLJ developed the following ranges of acquisition multiples:     

                 - 10.4x -- 22.4x, with a mean of 16.2x and a median of 14.6x,
                    for latest twelve months earnings per share ending March 31,
1999 compared to 28.4x for the Merger;  

                - 9.3x -- 18.8x, with a mean of 13.5x and a median of 12.8x,
                    for estimated next twelve months earnings per share compared
to 19.8x for the Merger; and            

                - 0.70x -- 2.50x, with a mean of 1.33x and a median of 1.20x
                 for March 31, 1999 book value per share compared to 1.86x
for the Merger.                         

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These acquisition multiples were then compared with the       
corresponding multiples based on Life USA's actual last twelve months           
earnings and March 31, 1999 book value and management's estimates for next      
twelve months earnings to determine the range of implied equity values of       
Life USA. This analysis resulted in the following ranges of implied Life USA    
value per share:                                                                

                 - $7.59 -- $16.35, based on the latest twelve months earnings
per share as of March 31, 1999;         

             - $9.77 -- $19.74 , based on estimated next twelve months
earnings per share; and                 

             - $7.80 -- $27.86, based on March 31, 1999 book value per
share.                                  

PREMIUMS PAID ANALYSIS. DLJ compared the consideration to be  
received by Life USA's shareholders to the range of values of the Common        
Stock implied by the relative premiums paid over current market prices paid     
in selected recent acquisitions of life insurance and annuity companies. DLJ    
analyzed 17 selected acquisitions of life insurance and annuity publicly        
traded companies that have occurred since January 1, 1996. DLJ analyzed the     
equity value of each of the acquired companies, measured as a percentage of     
the premiums paid over the acquired companies' common stock closing prices      
for the following periods: (a) one day prior, (b) one week prior, and (c)       
three months prior to the announcement of the transaction. Based on this        
analysis, DLJ developed the following ranges of premiums paid percentages:      

                 - (6.1%) -- 51.1%, with a mean of 15.4% and a median of 6.7%,
                over the closing price one day prior to the announcement
compared to 102.4% for the Merger;      

                  - (6.8%) -- 51.1%, with a mean of 18.5% and a median of 20.4%,
                 over the closing price one week prior to the announcement
compared to 107.5% for the Merger; and  

            - (29.2%) -- 74.7%, with a mean of 39.0% and a median of
               43.8%, over the closing price three months prior to the
       announcement compared to 112.8% for the Merger.

These premium paid percentages were then applied to Life USA's
Common Stock closing prices prior to the Merger to determine the range of       
implied equity values of Life USA. This analysis resulted in the following      
ranges of implied Life USA value per share:                                     

              - $9.62 -- $15.49, based on premiums paid over the closing
price 1 day prior to the Merger;        

               - $9.32 -- $15.11 , based on premiums paid over the closing
price 1 week prior to the Merger; and   

              - $6.90 -- $17.03, based on premiums paid over the closing
price 3 months prior to the Merger.     

 No company or transaction used in the Transaction Analysis, the
Analysis of Certain Publicly Traded Companies or Premiums Paid Analysis         
described above was directly comparable to Life USA or the Merger.              
Accordingly, an analysis of the results of the foregoing was not simply         
mathematical nor necessarily precise; rather, it involved complex               
considerations and judgments concerning differences in financial and            
operating characteristics of companies, the form of consideration and the       
date of the respective transaction, and other factors that could affect the     
transaction values and trading prices. For example, many qualitative factors    
are involved in valuing a company or analyzing a transaction in the life        

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insurance and annuity industries including assessments of the quality of        
management, the attractiveness of the company's target market, the economics    
of the products being sold and the company's market position relative to its    
competitors. Other factors that could affect the transaction values or          
trading prices include differences in distribution, products, geographic or     
demographic customer concentration, size, accounting practices, asset           
portfolio quality, interest rate sensitivity and other factors. These factors   
may affect transaction values or trading prices in each case by affecting in    
varying degrees investors' expectations of such factors as the company's risk   
and future operating profitability.                                             

     DISCOUNTED CASH FLOW ANALYSIS. DLJ performed a discounted cash flow
analysis of Life USA assuming a range of capital levels, estimated gross        
written premiums for 1999 and expense savings which may be able to be           
achieved by a buyer of the company. DLJ relied on cash flows as projected by    
Life USA management under different scenarios. The discounted cash flow         
analysis was based on discount rates ranging from 10.0% to 14.0%, and           
assuming risk based capital levels of 400%, 350% and 300%, respectively of      
the "Company Action Level" of capital required pursuant to the risk based       
capital requirements of the National Association of Insurance Commissioners.    
Statutory dividends were estimated to include amounts of capital generated in   
excess of that required under the respective risk-based capital levels. The     
terminal value for this analysis was computed by multiplying Life USA's         
projected terminal earnings and book value by a range of multiples. DLJ         
relied on its understanding of required equity returns in the life insurance    
and annuity business to derive discount rates and on the public equity market   
analysis of selected life insurance and annuity companies and selected merger   
market transactions to derive the multiples used to calculate terminal          
values. Based on its analysis of discounted flow, DLJ developed the following   
ranges of implied value of the Common Stock, in each case depending on the      
discount rate and terminal multiple used:                                       

               - $14.19 -- $21.82, based on a multiple of earnings ranging
                    from 10.0x to 14.0x and discount rates ranging from 10.0% to
    14.0% at a risk based capital level of 400%;

                 - $12.12 -- $17.96, based on a multiple of book value ranging
                   from 1.10x to 1.50x at discount rates ranging from 10.0% to
     14.0% at a risk based capital level of $400%;

               - $14.97 -- $22.61, based on a multiple of earnings ranging
                    from 10.0x to 14.0x and discount rates ranging from 10.0% to
    14.0% at a risk based capital level of 350%;

                 - $12.39 -- $17.92, based on a multiple of book value ranging
                   from 1.10x to 1.50x at discount rates ranging from 10.0% to
    14.0% at a risk based capital level of 350%;

               - $15.75 -- $23.40, based on a multiple of earnings ranging
                    from 10.0x to 14.0x and discount rates ranging from 10.0% to
        14.0% at a risk based capital level of 300%; and

                 - $12.90 -- $18.29, based on a multiple of book value ranging
                   from 1.10x to 1.50x at discount rates ranging from 10.0% to
    14.0% at a risk based capital level of 300%.

    DIVIDEND DISCOUNT ANALYSIS. DLJ also performed a dividend discount
analysis of Life USA on a stand-alone basis assuming, among other things,       
Life USA management's projections, continued payment of dividends to common     
shareholders, common equity issuances under the STEP Agreement with Allianz     
Life and repurchases of Life USA shares in the open market with excess          
capital. The dividend discount analysis was based on discount rates ranging     
from 10.0% to 14.0%. The terminal value for this analysis was computed by       
multiplying Life USA's projected terminal earnings and book value by a range    
of multiples. DLJ relied on its understanding of required equity returns in     
the life insurance and annuity business to derive discount rates and the        
public equity market analysis of selected life insurance and annuity            
companies and selected merger market transactions to derive the multiples of    
earnings and book                                                               

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value used to calculate terminal values. Based on its analysis discounted       
flow, DLJ developed the following ranges of implied value of the Common         
Stock, in each case depending on the discount rate and terminal multiple used:  

                - $15.39 -- $17.48, based on a multiple of earnings of 10.0x
       and discount rates ranging from 10.0% to 14.0%;

                - $19.98 -- $22.78, based on a multiple of earnings of 14.0x
       and discount rates ranging from 10.0% to 14.0%;

                  - $14.01 -- $15.89, based on a multiple of book value of 1.10x
           and discount rates ranging from 10.0% to 14.0%; and

                  - $17.68--  $20.13, based on a multiple of book value of 1.50x
       and discount rates ranging from 10.0% to 14.0%.

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     Based on the valuation methodologies discussed above, DLJ developed
a selected summary valuation range. The chart below sets forth the range of     
implied values under the various methodologies compared to the consideration    
of $20.75 per share pursuant to the Merger.                                     

 [CHART]

                                                                [Download Table]

                                                         
                                          Range Per Share
Comparable Public Companies               $10.00 - $14.00
Comparable Transactions                   $13.00 - $20.00
Premiums Paid in Comparable Transactions  $12.00 - $16.00
Discounted Cash Flow Analysis             $17.00 - $20.00
Dividend Discount Model                   $16.00 - $19.00

The summary set forth above does not purport to be a complete 
description of the analyses performed by DLJ. The preparation of a fairness     
opinion involves various determinations as to the most appropriate and          
relevant methods of financial analysis and the application of these methods     
to the particular circumstances and, therefore, such an opinion is not          
readily susceptible to summary description. The preparation of a fairness       
opinion does not involve a mathematical evaluation or weighing of the results   
of the individual analyses performed, but requires DLJ to exercise its          
professional judgment, based on its experience and expertise, in considering    
a wide variety of analyses taken as a whole. Each of the analyses conducted     
by DLJ was carried out in order to provide a different perspective on the       
transaction and add to the total mix of information available. DLJ did not      
form a conclusion as to whether any individual analysis, considered in          
isolation, supported or failed to support an opinion as to fairness. Rather,    
in reaching its conclusion, DLJ considered the results of the analyses in       
light of each other and did not place particular reliance or weight on any      
individual analysis and ultimately reached its opinion based on the results     
of all analyses taken as a whole. Accordingly, notwithstanding the separate     
factors summarized above, DLJ believes that its analyses must be considered     
as a whole and that selecting portions of its analyses and the factors          
considered by it, without considering all analyses and factors, may create an   
incomplete view of the evaluation process underlying its opinion. In            
performing its analyses, DLJ made numerous assumptions with respect to          
industry performance, business and economic conditions and other matters.       
These assumptions include but are not limited to assumptions regarding: (a)     
macro-economic business conditions, (b) competitive dynamics and general        
trends in the life insurance and annuity industries, (c) competition from       
other industries including the banking and mutual fund industries, (d)          
current and projected interest rates, and (e) industry regulatory               
environment. The analyses                                                       

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performed by DLJ are not necessarily indicative of actual values or future      
results, which may be significantly more or less favorable than suggested by    
such analyses.                                                                  

     FEES PAYABLE TO DLJ The Life USA Board of Directors selected DLJ as
its financial advisor because it is a nationally recognized investment          
banking firm that has substantial experience in transactions similar to the     
Merger and is familiar with Life USA, its businesses and the annuity            
industry. Pursuant to the terms of an engagement letter dated May 20, 1999      
between Life USA and DLJ, Life USA paid DLJ a fee of $350,000 for the DLJ       
opinion. Life USA also agreed to reimburse DLJ for all out-of-pocket expenses   
(including the reasonable fees and out-of-pocket expenses of counsel)           
incurred by DLJ in connection with its engagement not in excess of $25,000 in   
the aggregate, and to indemnify DLJ and certain related persons against         
certain liabilities in connection with its engagement, including liabilities    
under the federal securities laws. The terms of the fee arrangement with DLJ,   
which DLJ and Life USA believe are customary in transactions of this nature,    
were negotiated at arm's length between Life USA and DLJ, and the Life USA      
Board of Directors was aware of such arrangement.                               

PERSPECTIVE OF ALLIANZ LIFE ON THE MERGER                                       

   As discussed under "Special Factors--Background of the Merger" on
page ___, the determination of the Per Share Amount resulted from extensive     
arm's-length negotiation between Life USA and Allianz Life and their            
respective representatives. At the conclusion of the negotiation process,       
Allianz Life offered to acquire Life USA for a price of $20.75 per share.       

     Allianz Life did not undertake any formal or informal evaluation of
its own as to the fairness of the Per Share Amount to Life USA's unaffiliated   
shareholders. Based solely upon the determination by Life USA's Board of        
Directors that the Merger is fair to, and in the best interest of, the          
shareholders of Life USA other than Allianz Life, Allianz Life believes that    
the Per Share Amount is fair to such shareholders from a financial point of     
view. Allianz Life did not attach specific weights to any factors in reaching   
its belief as to fairness. Messrs. Bonach and James, Allianz Life's             
representatives on Life USA's Board of Directors, abstained from, and did not   
participate in, discussion by the Board of Directors of Life USA concerning     
the fairness of the Per Share Amount.                                           

PLANS FOR LIFE USA AFTER THE MERGER                                             

      After the Merger, Allianz Life anticipates that it will continue its
review of Life USA and its assets, businesses, operations, properties,          
policies, corporate structure, dividend policy, capitalization and management   
and consider whether any changes would be desirable in light of the             
circumstances then existing. Effective upon the completion of the Merger, the   
directors of Acquisition Sub will be the initial directors of the Surviving     
Corporation.                                                                    

    Except for the foregoing, and as otherwise indicated in this Proxy
Statement, Allianz Life does not have any other present plans or proposals      
which relate to or would result in an extraordinary corporate transaction,      
such as a merger, reorganization or liquidation, involving Life USA or any of   
its subsidiaries, a sale or transfer of a material amount of assets of Life     
USA or any of its subsidiaries or any material change in Life USA's             
capitalization or any other material changes in Life USA's corporate            
structure or business.                                                          

CERTAIN EFFECTS OF THE MERGER                                                   

   As a result of the Merger, the entire equity interest of Life USA
will be owned by Allianz Life, and the current shareholders other than          
Allianz Life will have no continuing interest in Life USA. Therefore,           
following the Merger, the shareholders of Life USA other than Allianz Life      
will no longer                                                                  

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benefit from any increases in the value of Life USA and will no longer bear     
the risk of any decreases in the value of Life USA. Following the Merger,       
Allianz Life will own 100% of Life USA and will have complete control over      
the management and conduct of Life USA's business, all income generated by      
Life USA and any future increase in Life USA's value. Similarly, Allianz Life   
will also bear the risk of any losses incurred in the operation of Life USA     
and any decrease in the value of Life USA.                                      

Following the Merger, the Common Stock will no longer meet the
requirements of the Nasdaq National Market for continued listing and will,      
therefore, be delisted from The Nasdaq National Market.                         

   The Common Stock is currently registered as a class of securities
under the Securities Exchange Act of 1934 (the "Exchange Act"). Registration    
of the Common Stock under the Exchange Act may be terminated upon application   
of Life USA to the Commission if the Common Stock is not listed on a national   
securities exchange or quoted on the Nasdaq National Market and there are       
fewer than 300 record holders of the Common Stock. Termination of               
registration of the Common Stock under the Exchange Act would substantially     
reduce the information required to be furnished by Life USA to its              
shareholders and to the Commission and would make certain provisions of the     
Exchange Act, such as the short-swing trading provisions of Section 16(b),      
the requirement of furnishing a proxy statement in connection with the          
shareholders' meetings pursuant to Section 14(a), and the requirements of       
Rule 13e-3 under the Exchange Act with respect to "going private"               
transactions, no longer applicable to Life USA. It is the present intention     
of Allianz Life to cause Life USA to make an application for the termination    
of the registration of the Common Stock under the Exchange Act as soon as       
practicable after completion of the Merger.                                     

CONFLICTS OF INTEREST                                                           

      In considering the recommendations of the Board of Directors of Life
USA with respect to the Merger, shareholders should be aware that directors     
and officers of Life USA, as well as Allianz Life, have interests in            
connection with the Merger which may present them with actual or potential      
conflicts of interest as summarized below. The Board was aware of these         
interests and considered them among the other matters described, but such       
conflicts, individually or in the aggregate, did not have a negative impact     
on the determination of the Board of Directors of Life USA that the Merger is   
fair to and in the best interests of the shareholders.                          

    ARRANGEMENTS WITH ALLIANZ LIFE. As of the close of business on May
17, 1999, Allianz Life beneficially owned 5,699,118 shares of Common Stock,     
or approximately 24.2% of the outstanding shares of Common Stock (based on      
23,593,716 shares outstanding on April 30, 1999), including shares of Common    
Stock Allianz Life purchased pursuant to the STEP Agreement with Life USA       
entered into in January 1998. The commitment of Allianz Life to purchase        
Common Stock under the STEP Agreement, and the resulting purchases during       
1998, as well as marketing, service and insurance agreements between Allianz    
Life and Life USA, are described under "Background of the Merger" (page ___).   
In connection with the STEP Agreement, Allianz Life nominated two persons to    
Life USA's Board of Directors, Edward J. Bonach and Robert S. James, who are    
executives of Allianz Life. Messrs. Bonach and James were elected directors     
of Life USA in April 1998. In January 1999, Life USA entered into an            
investment management agreement with Allianz Investment Corporation with        
respect to a portion of its assets.                                             

  DIRECTORS AND OFFICERS OF LIFE USA. Five members of the Board of
Directors are executive officers of Life USA, own or have options to purchase   
an aggregate of 2,131,069 shares of Common Stock and, except for Daniel         
Rourke, are parties to employment agreements which will continue in effect      
following completion of the Merger. In addition, the Merger Agreement           
provides that Robert W. MacDonald will be the Chief Executive Officer of        
Allianz Life and a member of the Board of Directors of Allianz Life and of      
Life USA, in addition to continuing as Chief Executive Officer of Life USA      
after the                                                                       

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Merger. None of the executive officers of Life USA will receive any payment     
under the "change of control provisions" of their respective employment         
agreement as a result of the Merger since their employment agreements have      
been amended to provide that the Merger does not constitute a change of         
control under the employment agreements. The five executive officers of Life    
USA who are also directors and who own a total of 1,680,481 shares of Common    
Stock have also agreed to vote their shares for approval of the Merger          
Agreement.                                                                      

      LEGAL COUNSEL AND CONSULTANTS; OWNERSHIP BY OUTSIDE DIRECTORS. Three
of the four outside directors of Life USA receive fees for providing legal or   
consulting services to Life USA, and all four outside directors own or have     
options to purchase a substantial number of shares of Common Stock. Ralph       
Strangis is a member of Kaplan, Strangis and Kaplan, P.A., a law firm which     
provides general counsel legal services to Life USA and received $680,000 in    
legal fees from Life USA for 1998. Mr. Strangis owns 58,000 shares of Common    
Stock and options to purchase 21,000 shares of Common Stock, and other          
members of the law firm beneficially own an aggregate of 223,830 shares of      
Common Stock. Hugh Alexander is a member of Alexander & Crabtree, P.C., a law   
firm which provides legal services to Life USA and received $127,172 in legal   
fees from Life USA for 1998. Mr. Alexander owns 7,300 shares of Common Stock    
and options to purchase 27,202 shares of Common Stock. Barbara Lautzenheiser    
is a member of Lautzenheiser & Associates, a consulting firm which provides     
actuarial and other consulting services to Life USA and received $941,641 in    
consulting fees and expenses for 1998. Ms. Lautzenheizer owns 3,500 shares of   
Common Stock and options to purchase 23,000 shares of Common Stock. Jack        
Blaine, the fourth outside director, does not provide legal or consulting       
services to Life USA. Mr. Blaine owns 3,000 shares of Common Stock and          
options to purchase 25,368 shares of Common Stock.                              

INDEMNIFICATION. Section 302A.521 of the MBCA provides that a 
Minnesota corporation will indemnify directors and officers against expenses    
and liabilities in connection with any proceeding by reason of his or her       
being or having been a director or officer if (a) such person acted in good     
faith and in a manner he or she reasonably believed to be in or not opposed     
to the best interest of the corporation and (b) with respect to any criminal    
proceeding, he or she had no reasonable cause to believe his or her conduct     
was unlawful, unless a corporation's articles of incorporation or by-laws       
prohibit or limit indemnification. Life USA's Articles of Incorporation and     
By-laws do not prohibit or limit the indemnification under Section 302A.521     
of the MBCA.                                                                    

     In addition, the Articles of Incorporation of Life USA provide that
a director or officer of Life USA will not be personally liable to Life USA     
or its shareholders for damages arising from a breach of any duty owed to       
Life USA or its shareholders, except for any breach of duty based upon an act   
or omission (a) in breach of his or her duty of loyalty to Life USA or its      
shareholders, (b) not in good faith or involving a knowing violation of law     
or (c) resulting in receipt of an improper personal benefit.                    

    The Merger Agreement provides that for six years after the Merger,
Allianz Life will cause Life USA to indemnify all past and present officers     
and directors of Life USA and its subsidiaries to the same extent as is         
indemnified at the date of the Merger Agreement for acts or omissions           
occurring at or prior to the Merger. Allianz Life also agrees to provide, for   
not less than six years after the Merger, a directors' and officers'            
insurance and indemnification policy providing coverage for events occurring    
prior to the Merger with coverage substantially similar to Life USA's           
existing policy or, if substantially similar coverage is unavailable, then      
best available coverage. Allianz Life is not required to pay premiums           
aggregating more than $1,750,000 during the six-year period.                    

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SUMMARY OF MATERIAL FEATURES OF THE MERGER

THE MERGER                                                                      

GENERAL The Merger Agreement provides that, subject to its    
conditions and in accordance with the MBCA, Acquisition Sub will be merged      
into Life USA when the Articles of Merger are filed with the Minnesota          
Secretary of State or such other date or time as is stated in the Articles of   
Merger (the "Effective Time"). Following the Merger, the separate existence     
of Acquisition Sub will cease, and Life USA will continue as the surviving      
corporation and will be a wholly-owned subsidiary of Allianz Life. At the       
Effective Time, each issued and outstanding share of Common Stock, other than   
shares owned by Life USA or its wholly-owned subsidiaries, by Allianz Life or   
by shareholders who exercise their dissenters' rights, will be converted into   
the right to receive, upon surrender of the certificate formerly representing   
the shares of Common Stock (the "Certificate"), $20.75 in cash. As a result     
of the Merger, the Common Stock will no longer be publicly traded and the       
equity of the Surviving Corporation will be 100% owned by Allianz Life.         

   MERGER CONSIDERATION. When the Merger is completed, each share of
Common Stock issued and outstanding immediately prior to the Effective Time     
will no longer be outstanding and will automatically be canceled and retired.   
Each holder of a Certificate will have only the right to receive an amount in   
cash equal to the number of such shares multiplied by $20.75 per share (the     
"Merger Consideration") at the time the Certificate is surrendered.             

    PAYMENT FOR SHARES. Promptly after the Effective Time, Harris Bank
and Trust Company (the "Payment Agent") will mail to each holder of record of   
a Certificate a form of letter of transmittal which instructs Life USA          
shareholders how to surrender their shares of Common Stock and receive the      
Merger Consideration. Risk of loss and title to the Certificate will pass       
only when the Payment Agent receives delivery. When a record holder has         
delivered to the Payment Agent all Certificates for its shares of Common        
Stock together with the duly executed letter of transmittal, the Payment        
Agent will issue a check for the Merger Consideration and mail the check to     
the record holder.                                                              

      STOCK OPTIONS. The Merger Agreement provides that, immediately prior
to the Effective Time, each outstanding Stock Option will become exercisable    
in full. At the Effective Time all Stock Options will be canceled and the       
holder will have the right to receive, upon execution and delivery to the       
Payment Agent of an option termination agreement, a cash payment equal to the   
(a) excess of $20.75 over the exercise price of the Stock Option, multiplied    
by (b) the total number of shares of Common Stock under the Stock Option.       
Promptly after the Effective Time, the Payment Agent will mail the option       
termination agreement to holders of Stock Options. The payment of the           
consideration for a Stock Option, net of any withholding or other applicable    
taxes, upon delivery to the Payment Agent of an option termination agreement,   
will constitute full satisfaction of all rights pertaining to the Stock         
Option.                                                                         

      CLOSING OF TRANSFER BOOKS. At the Effective Time, the stock transfer
books of Life USA will be closed and no further transfer of shares of Common    
Stock will be made on the records of Life USA. On or after the Effective        
Time, any Certificates presented to Surviving Corporation or the Payment        
Agent will be canceled and exchanged for the Merger Consideration.              

   CONDITIONS TO THE MERGER. Each party's obligation to complete the
Merger is conditioned upon the following: (a) approval of the Merger            
Agreement by the vote of a majority of the outstanding shares of Life USA       
Common Stock, (b) expiration or termination of the waiting period (and any      
extension thereof) applicable to the Merger under the HSR Act, (c) obtaining    
of all authorizations, consents, orders, declarations or approvals of, or       
filings with, or terminations or expirations of waiting periods imposed by,     
any governmental entity, the failure of which would have the effect of making   
the Merger or any                                                               

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transaction described in the Merger Agreement illegal or would have,            
individually or in the aggregate, a material adverse effect on Allianz Life     
(assuming the Merger has taken place), and (d) the absence of any law, rule,    
regulation, order, decree, injunction or other order making the Merger          
illegal promulgated, enforced or entered by any court or other governmental     
entity.                                                                         

     The obligation of Life USA to complete the Merger is subject to the
satisfaction of the following conditions at or prior to the Effective Time:     
(a) each of Allianz Life and Acquisition Sub has performed in all material      
respects each of its agreements contained in the Merger Agreement and the       
representations and warranties of Allianz Life and Acquisition Sub contained    
in the Merger Agreement are true and complete in all material respects, and     
Life USA has received officers' certificates signed on behalf of Allianz Life   
and Acquisition Sub to that effect, (b) all approvals or consents required      
for the Merger have been obtained, and (c) no governmental entity has imposed   
any requirement which, individually or in the aggregate, would have a           
material adverse effect on Allianz Life.                                        

     The obligations of Allianz Life and Acquisition Sub to complete the
Merger are subject to the satisfaction of the following conditions at or        
prior to the Effective Time: (a) Life USA has performed in all material         
respects each of its agreements contained in the Merger Agreement and the       
representations and warranties of Life USA contained in the Merger Agreement    
are true and complete in all material respects, and Allianz Life has received   
an officers' certificate signed on behalf of Life USA to that effect, (b)       
Life USA has obtained the consent or approval of each person or governmental    
entity whose consent or approval is required in connection with the Merger      
under any loan or credit agreement or other agreement of Life USA or any        
subsidiary or any law, rule or regulation applicable to Life USA or any of      
its subsidiaries, except if failure to obtain such consents and approvals       
would not, individually or in the aggregate, have a material adverse effect     
on Life USA or Allianz Life or upon completion of the Merger, (c) no            
governmental entity has imposed any requirement which, individually or in the   
aggregate, would have a material adverse effect on Life USA or Allianz Life,    
and (d) there has not been instituted any proceeding before any governmental    
entity as a result of the Merger Agreement or any transactions contemplated     
therein which would have a material adverse effect on Life USA or Allianz       
Life.                                                                           

EVEN IF THE SHAREHOLDERS APPROVE THE MERGER AS PROVIDED IN THE
MERGER AGREEMENT, THERE CAN BE NO ASSURANCE THAT THE MERGER WILL BE COMPLETED.  

   REPRESENTATIONS AND WARRANTIES. Life USA made representations and
warranties in the Merger Agreement, qualified in certain instances by           
materiality or as disclosed in Life USA's disclosure letter (the "Life USA      
Letter") regarding the following: its organization and good standing;           
authority to enter into the Merger Agreement and complete the transactions      
contemplated by the Merger Agreement; capital structure of Life USA and its     
subsidiaries; noncontravention of the Merger Agreement to Life USA's Articles   
of Incorporation, Bylaws, any contract or law; requisite governmental and       
other consents and approvals; compliance with the Securities and Exchange       
Commission (the "Commission") filing requirements; its financial statements;    
the accuracy of information in this Proxy Statement and compliance with the     
Exchange Act; the absence of certain material changes since December 31,        
1998; possession of permits and compliance with governing documents and laws;   
absence of undisclosed material contracts; absence of material events of        
default or basis for material events of default; requisite tax filings and      
examinations; absence of outstanding orders, judgments, injunctions and         
similar actions and absence of disputes involving Life USA or its               
subsidiaries or their businesses; agreements relating to certain employment,    
consulting and benefit matters of Life USA; compliance with worker safety,      
labor and employment and environmental laws; ownership of intellectual          
property rights; absence of state takeover laws applicable to Life USA; the     
required vote of shareholders of Life USA necessary to approve the Merger       
Agreement; Year 2000 compliance; absence of brokers or similar fees other       
than the investment banker giving the fairness opinion; insurance coverage;     
and conflicts of interest.                                                      

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CERTAIN COVENANTS.                                            

      Until the Merger is completed, Life USA has agreed that Life USA and
its subsidiaries will conduct their business in the ordinary course and use     
their best efforts to preserve their current business organizations, keep       
available the services of its current officers and employees and preserve       
their third party relationships.                                                

     Life USA has also agreed that, without the consent of Allianz Life,
neither Life USA nor its subsidiaries will: (a) declare or pay any dividend     
on or make any other distribution in respect of its capital stock other than    
the regular quarterly dividend of not more than $.025 per share by Life USA     
and distributions by wholly-owned subsidiaries with respect to specified        
equity interests, or split, combine or reclassify any class of stock of Life    
USA or purchase, redeem or acquire any shares of capital stock of Life USA;     
(b) issue or encumber any shares of its capital stock or other securities       
other than the issuance of shares of Common Stock upon the exercise of Stock    
Options, to Life USA's Employee Savings Plan (401(k) Plan), upon conversion     
of Life USA's outstanding convertible debentures, and the issuance of shares    
of capital stock of its long term care subsidiary; (c) amend its governing      
documents; (d) acquire by merger or consolidation or asset purchase or equity   
purchase any entity or division other than transactions in the ordinary         
course of business consistent with past practice which are not material to      
Life USA; (e) sell or otherwise dispose of assets other than in the ordinary    
course of business consistent with past practice; (f) incur indebtedness for    
borrowed money or make loans or investments other than in the ordinary          
course, except for borrowings under existing credit facilities and              
transactions between or among Life USA and its subsidiaries; (g) alter the      
corporate structure or ownership of Life USA or its subsidiaries; (h) adopt     
or amend existing benefit plans, severance plans or employment or consulting    
agreements, except as required by applicable law; (i) increase compensation     
to directors, officers or employees (except in the case of non-officer          
employees in the ordinary course of business consistent with past practice),    
grant severance or termination pay or enhance or accelerate rights under any    
plan or arrangement for the benefit of any director, officer or employee; (j)   
knowingly violate or fail to perform any obligation imposed by material         
federal, state or local law rule or regulation; (k) change any accounting       
policies or procedures, except as required to by generally accepted             
accounting principles; (l) file tax returns inconsistent with past practice     
or take any position inconsistent with prior positions; (m) make tax election   
or settle or compromise any material tax liability; (n) enter into or amend     
any material contract except in the ordinary course or make or agree to make    
new capital expenditures in excess of $4 million in the aggregate, including    
capital expenditures since December 31, 1998; or (n) pay or discharge any       
obligations other than the payment or discharge of obligations in the           
ordinary course of business consistent with past practice that are reflected    
in or as contemplated by the most recent financial statements, or the payment   
of indebtedness owed by Life USA or a subsidiary under an existing credit       
facility.                                                                       

     NO SOLICITATION OF TRANSACTIONS. The Merger Agreement provides that
Life USA will not, directly or indirectly (a) solicit, initiate or encourage    
the submission of, any Takeover Proposal (as defined below), (b) enter into     
any agreement with respect to any Takeover Proposal, or (c) participate in      
any discussions or negotiations regarding, or furnish to any person any         
information with respect to, or take any other action to facilitate any         
inquiries or the making of any proposal that constitutes, or may reasonably     
be expected to lead to, any Takeover Proposal. If, prior to the Special         
Meeting, the Board of Directors of Life USA reasonably determines the           
Takeover Proposal constitutes a Superior Proposal (as defined below), then,     
to the extent required by the fiduciary obligations of the Board of Directors   
of Life USA, as determined in good faith by a majority of the disinterested     
members after receiving the advice of independent counsel, Life USA may, in     
response to an unsolicited request, furnish information with respect to Life    
USA to, and enter into discussions with, any person pursuant to a customary     
confidentiality agreement.                                                      

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The Merger Agreement defines a "Takeover Proposal" to mean any
proposal for a merger or other business combination involving Life USA or any   
of its subsidiaries or any proposal or offer to acquire in any manner,          
directly or indirectly, a substantial equity interest in, a substantial         
portion of the voting securities of, or a substantial portion of the assets     
of Life USA or any of its subsidiaries, other than the transactions             
contemplated by the Merger Agreement. A "Superior Proposal" means a bona fide   
Takeover Proposal made by a third party which a majority of the disinterested   
members of the Board of Directors of Life USA determines in its reasonable      
good faith judgment to be more favorable to Life USA's shareholders than the    
Merger, and for which financing, to the extent required, is then committed or   
which, in the reasonable good faith judgment of a majority of such              
disinterested members is highly likely to be financed by the third party. In    
making these determinations and judgments, the Life USA Board of Directors      
must receive a written opinion from its independent financial advisor that      
the value of the consideration provided for in alternative proposal exceeds     
the value of the consideration provided for in the Merger and written advice    
as to the likelihood of the third party obtaining any necessary financing.      

      The Merger Agreement requires Life USA to advise Allianz Life of (a)
any Takeover Proposal or inquiry with respect to or which could lead to any     
Takeover Proposal, (b) the material terms of such Takeover Proposal, and (c)    
the identity of the person making any such Takeover Proposal or inquiry. The    
Merger Agreement also requires Life USA to keep Allianz Life fully informed     
of the status and details of any such Takeover Proposal or inquiry. Under the   
Merger Agreement, Life USA may not terminate, amend, modify or waive any        
provision of any confidentiality agreement relating to a Takeover Proposal or   
standstill agreement to which Life USA or any of its subsidiaries is a party    
(other than any involving Allianz Life). During such period, Life USA agrees    
to enforce, to the fullest extent permitted under applicable law, the           
provisions of any such agreements, including, but not limited to, obtaining     
injunctions to prevent any breaches of such agreements and to enforce           
specifically the terms and provisions of such agreements in any court of the    
United States or any state thereof having jurisdiction.                         

   VOTING RIGHTS OF ALLIANZ LIFE. The Merger Agreement provides that
notwithstanding certain restrictions placed on Allianz Life's ability to vote   
its shares of Common Stock by the STEP Agreement, until the earlier of (a)      
the Effective Time, or (b) termination of the Merger Agreement, Allianz Life    
may vote all of its shares of Common Stock in any and all matters presented     
to the shareholders of Life USA, may solicit proxies and may attempt to         
influence the vote of other shareholders of Life USA as Allianz Life deems      
appropriate.                                                                    

 TERMINATION. The Merger Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the matters    
presented in connection with the Merger by the shareholders of Life USA:        

1.       by mutual consent of Allianz Life and Life USA;      

      2.       by either Allianz Life or Life USA if the other party fails
to comply in any material respect with any of its covenants or agreements in    
the Merger Agreement, and the failure is not cured within 30 business days      
following receipt of notice, except for a breach by Life USA discussed in       
item 7 below;                                                                   

     3.       by either Allianz Life or Life USA if there has been (a) a
breach by the other party (in the case of Allianz Life including a material     
breach by Acquisition Sub) of any representation or warranty that is not        
qualified as to materiality which has the effect of making such                 
representation or warranty not true and correct in all material respects or     
(b) a breach by the other party (in the case of Allianz Life including a        
material breach by Acquisition Sub) of any representation or warranty that is   
qualified as to                                                                 

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materiality, in each case which breach has not been cured within 30 business    
days following receipt of notice;                                               

     4.       by Allianz Life or Life USA if (a) the Merger has not been
effected on or prior to December 31, 1999 for a reason other than the failure   
of the terminating party to comply with its obligations under the Merger        
Agreement, or (b) any court or other governmental entity having jurisdiction    
has issued an order or taken other action permanently enjoining or otherwise    
prohibiting the transactions contemplated by the Merger Agreement and such      
action has become final and nonappealable;                                      

      5.       by Allianz Life or Life USA if the shareholders of Life USA
do not approve the Merger Agreement at the Special Meeting or any adjournment   
or postponement thereof;                                                        

6.       by Allianz Life or Life USA if Life USA enters into a
merger, acquisition or other agreement to effect a Superior Proposal or the     
Board of Directors of Life USA resolves to do so, provided that Life USA has    
(a) delivered to Allianz Life a written notice of intent to enter into an       
agreement to effect a Superior Proposal, (b) five business days have elapsed    
following the notice, (c) Life USA has cooperated with Allianz Life during      
the notice period and informed Allianz Life of the terms and conditions of      
the Takeover Proposal and the identity of the person making the proposal with   
the intent of enabling Allianz Life to agree to a modification of the terms     
and conditions of the Merger Agreement, (d) the Board of Directors of Life      
USA has continued reasonably to believe following the notice period that the    
Takeover Proposal constitutes a Superior Proposal, and (e) Life USA has paid    
Allianz Life a termination fee of $20,000,000; or                               

    7.       by Allianz Life if (a) the Board of Directors of Life USA
has not recommended or has resolved not to recommend or has qualified,          
modified or withdrawn its recommendation of the Merger Agreement or             
declaration that the Merger is advisable and fair to and in the best interest   
of Life USA and its shareholders or has resolved to do so, (b) the Board of     
Directors of Life USA has recommended to the shareholders of Life USA any       
Takeover Proposal or has resolved to do so, or (c) a third party tender offer   
or exchange offer for 20% or more of the outstanding Common Stock is            
commenced and the Board of Directors of Life USA has failed to recommend        
against acceptance of such tender offer or exchange by its shareholders         
(including by taking no position with respect to the acceptance of the offer    
by its shareholders).                                                           

     The Merger Agreement could also have been terminated (a) by Allianz
Life on or prior to June 1, 1999 if the Merger Agreement and the transactions   
contemplated under the Merger Agreement had not been duly approved by the       
Board of Management of Allianz AG, or (b) by either Allianz Life or Life USA    
prior to June 8, 1998 if Life USA had received either the written opinion of    
its investment banker that the Per Share Amount is unfair to Life USA's         
shareholders from a financial point of view or a written statement of its       
investment banker that the investment banker is not able to render an opinion   
that the Per Share Amount is fair to Life USA's shareholders from a financial   
point of view. The Board of Management of Allianz AG approved the Merger        
Agreement and the transactions contemplated under the Merger Agreement on May   
31, 1999, and, as discussed under "Fairness of the Transaction" (page __) and   
"Opinion of Financial Advisor" (page __), on June 7, 1999 Life USA received a   
written opinion of its investment banker that the consideration to be           
received by the holders of the Common Stock in the Merger is fair to the        
holders from a financial point of view.                                         

    TERMINATION FEE. If (a) the Merger Agreement is terminated by Life
USA or Allianz Life at a time when Allianz Life is entitled to terminate this   
Agreement pursuant to paragraphs 2, 3 or 5 of the preceding section and,        
concurrently with or within 18 months after such a termination a Third Party    
Acquisition Event (as defined below) occurs, or (b) the Merger Agreement is     
terminated pursuant to paragraphs 6 or 7 of the preceding section or by Life    
USA or Allianz Life at a time when Allianz Life is                              

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entitled to terminate pursuant to such paragraphs then, in each case Life USA   
will pay to Allianz Life a termination fee of $20,000,000 in cash (the          
"Termination Fee"), in addition to any obligation of Life USA to pay expenses   
upon termination and without prejudice to any other rights Allianz Life may     
have against Life USA for breach of the Merger Agreement. In the case of        
clause (a) of the preceding sentence, but only with respect to a termination    
of the Merger Agreement by Life USA or Allianz Life as a result of a breach     
of a representation or warranty where the representations and warranties of     
Life USA were true and correct in all material respect as of the date of the    
Merger Agreement or a termination where the Third Party Acquisition Event       
constitutes an event described in clause (d) of the definition of that term,    
Life USA will be required to pay the Termination Fee to Allianz Life only if    
the Takeover Proposal giving rise to the Third Party Acquisition Event          
constitutes a Superior Proposal.                                                

      A "Third Party Acquisition Event" means any of the following events:
(a) any person other than Allianz Life or its affiliates acquires or becomes    
the beneficial owner of 20% of more of the outstanding shares of Common         
Stock, (b) any group (other than a group which includes Allianz Life or any     
affiliate) is formed which, at the time of formation, beneficially owns 20%     
or more of the outstanding shares of Common Stock, (c) any person (other than   
Allianz Life or its affiliates) has commenced a tender or exchange offer for    
20% or more of the then outstanding shares of Common Stock or publicly          
proposed any bona fide merger, consolidation or acquisition of all or           
substantially all of the assets of Life USA, or other similar business          
combination involving Life USA, (d) Life USA enters into or announces that it   
proposes to enter into an agreement (including an agreement in principle)       
providing for a merger or other business combination involving Life USA or a    
"significant subsidiary" (as defined in Rule 1.02(v) of Regulation S-X as       
promulgated by the SEC) of Life USA or the acquisition of a substantial         
interest in or substantial portion of the assets, business or operations of     
Life USA or a significant subsidiary (other than the transactions               
contemplated by the Merger Agreement), (e) any person (other than Allianz       
Life or its affiliates) is granted any option or right to become the            
beneficial owner of shares of Common Stock which, together with all shares of   
Common Stock beneficially owned by such person, results or would result in      
such person being the beneficial owner of 20% or more of the outstanding        
shares of Common Stock, or (f) there is a public announcement with respect to   
a plan by Life USA or any person, other than Allianz Life and its affiliates,   
to effect any of the foregoing.                                                 

   INDEMNIFICATION. The Merger Agreement provides that for six years
from the Effective Time, Allianz Life will cause the Surviving Corporation to   
indemnify and hold harmless all past and present officers and directors of      
Life USA to the same extent as such persons are indemnified at the date of      
the Merger Agreement for acts or omissions occurring at or prior to the         
Effective Time. Allianz Life has agreed to provide for not less than six        
years from the Effective Time a directors and officers insurance and            
indemnification policy providing coverage for events occurring prior to the     
Effective Time with coverage substantially similar to Life USA's existing       
policy or if substantially similar coverage is unavailable, then best           
available, provided that Allianz Life shall not be required to pay premiums     
aggregating more than $1,750,000 for the six year period.                       

    AMENDMENT AND WAIVER. The Merger Agreement may be amended pursuant
to action taken or authorized by the respective Boards of Directors of          
Allianz Life and Life USA at any time prior to or after approval of the         
Merger Agreement by the shareholders of Allianz Life and Life USA but, after    
such approval, no amendment will be made without the further approval of the    
shareholders if further approval is required by law. At any time prior to the   
Effective Time, either of the parties to the Merger Agreement may extend, in    
writing, the time for performance of any obligations or other acts of the       
other party, waive any inaccuracies in the representations and warranties       
contained in the Merger Agreement or any document delivered pursuant to the     
Merger Agreement and waive compliance with any of the agreements or             
conditions contained in the Merger Agreement.                                   

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   EXPENSES. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with the Merger Agreement and the               
transactions contemplated thereby will be paid by the party incurring such      
expense, except that all printing expenses and all filing fees (including       
filing fees under the Exchange Act and the HSR Act) will be divided equally     
between Allianz Life and Life USA. If the Merger Agreement is terminated by     
Life USA or Allianz Life pursuant to paragraph 6 of the Termination section     
above, by Allianz Life pursuant to paragraph 7 of the Termination section       
above or by Life USA or Allianz Life at a time when Allianz Life is entitled    
to terminate pursuant to paragraphs 6 or 7 of the Termination section above,    
Life USA must reimburse Allianz Life for out-of-pocket fees and expenses,       
without prejudice to any other rights Allianz Life may have against Life USA    
for breach of the Merger Agreement.                                             

EFFECTIVE TIME                                                                  

The Merger will become effective at the Effective Time. It is 
expected that the Effective Time will be the date of closing of the Merger,     
which is expected to be _______, 1999, or as soon thereafter as is              
practicable subject to satisfaction or waiver of the conditions to closing.     
Subject to certain limitations, the Merger Agreement may be terminated by       
either party if, among other reasons, the Merger has not been completed by      
December 31, 1999.                                                              

CONVERSION OF COMMON STOCK                                                      

 As of the Effective Time, each share of Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares owned    
by Life USA or its wholly-owned subsidiaries, by Allianz Life or by             
shareholders who exercise their dissenters' rights) will be converted into      
the right to receive the Merger Consideration when the Certificate formerly     
representing such share of Common Stock is surrendered and a duly executed      
letter of transmittal is delivered to the Payment Agent. The Payment Agent      
will mail to each record holder of Common Stock, as soon as practicable after   
the Effective Time, a letter of transmittal which will contain instructions     
for surrendering the Certificates for Common Stock in exchange for the Merger   
Consideration. When so converted, all such shares of Common Stock will no       
longer be outstanding and will automatically be canceled and retired and each   
holder of a Certificate formerly representing any such shares will have only    
the right to receive the Merger Consideration in cash (without interest) upon   
the surrender of the Certificate. Holders of Stock Options will receive         
payment in accordance with the procedures described below under "Payment for    
Stock Options."                                                                 

    As soon as practicable after the Effective Time, Allianz Life will
deposit with the Payment Agent, in trust for the holders of the Common Stock    
converted in the Merger and holders of Stock Options, an amount of cash equal   
to or exceeding the aggregate Merger Consideration and the consideration for    
the Stock Options.                                                              

     LIFE USA'S SHAREHOLDERS SHOULD NOT FORWARD THEIR STOCK CERTIFICATES
TO THE PAYMENT AGENT WITHOUT A LETTER OF TRANSMITTAL. STOCK CERTIFICATES        
SHOULD NOT BE RETURNED WITH THE ENCLOSED PROXY CARD.                            

The payment of the Merger Consideration upon surrender of any 
Certificate will be deemed to constitute full satisfaction of all rights        
pertaining to the shares of Common Stock represented by the Certificate.        
Until surrendered as contemplated by the Merger Agreement, each Certificate     
for Common Stock will be deemed at any time after the Effective Time to         
represent only the right to receive the Merger Consideration upon surrender;    
no interest will be paid or will accrue on any Merger Consideration payable     
to shareholders. At the Effective Time, the stock transfer books of Life USA    
will be closed. Neither Allianz Life nor the Surviving Corporation will be      
liable to any former shareholder or holder of a                                 

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Stock Option for any cash held in the payment fund which is delivered to a      
public official pursuant to any applicable abandoned property, escheat or       
similar law.                                                                    

PAYMENT FOR STOCK OPTIONS                                                       

 Each Stock Option which is outstanding immediately prior to the
Effective Time will become exercisable in full (to the extent not previously    
exercised) and will be canceled, and the holder will have the right to          
receive, upon execution and delivery to the Payment Agent of an option          
termination agreement, a cash payment equal to the (a) excess of $20.75 over    
the exercise price of the Stock Option, multiplied by (b) the total number of   
shares of Common Stock purchasable upon exercise of the Stock Option. The       
payment of the consideration for a Stock Option, net of any withholding or      
other applicable taxes, upon delivery to the Payment Agent of an option         
termination agreement signed by the holder of the Stock Option, will            
constitute full satisfaction of all rights pertaining to the Stock Option.      

CONDUCT OF BUSINESS PENDING THE MERGER                                          

   Pursuant to the Merger Agreement, Life USA has agreed to carry on
its business prior to the Effective Time in all material respects in the        
ordinary course of its business as conducted on the date of the Merger          
Agreement, subject to certain covenants by Life USA in the Merger Agreement.    

REGULATORY FILINGS AND APPROVALS                                                

Life USA believes that the following filings and approvals are
required with respect to the Merger: (a) filings with and/or approvals of       
state insurance regulatory authorities, (b) filings by Life USA and Allianz     
Life with the Federal Trade Commission and the Department of Justice pursuant   
to the requirements of the HSR Act, (c) filings by Life USA and Allianz Life    
with the Securities and Exchange Commission pursuant to the Exchange Act, and   
(d) filing of Articles of Merger with the Secretary of State of the State of    
Minnesota and appropriate documents with the relevant authorities of other      
states in which Life USA is qualified to do business.                           

CONDITIONS TO THE MERGER                                                        

  The obligations of Allianz Life, Acquisition Sub and Life USA to
effect the Merger are subject to the fulfillment of certain conditions          
described more fully under "Summary of Material Features of the Merger          
Agreement--Conditions to the Merger" (page ___).                                

FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTION                              

     The following discussion summarizes the material federal income tax
considerations relevant to the Merger that are generally applicable to          
holders of Common Stock and Stock Options. This discussion is based on          
currently existing provisions of the Internal Revenue Code, existing and        
proposed Treasury Regulations and current administrative rulings and court      
decisions, all of which are subject to change. Any change, which may or may     
not be retroactive, could alter the tax consequences to the holders of the      
Common Stock or Stock Options as described here. Special tax consequences not   
described below may be applicable to particular classes of taxpayers,           
including financial institutions, broker-dealers, persons who are not           
citizens or residents of the United States or who are foreign corporations,     
foreign partnerships or foreign estates or trusts and shareholders who          
acquired Common Stock through the exercise of Stock Options or otherwise as     
compensation prior to the Effective Time of the Merger.                         

        The conversion of the Common Stock at the Effective Time of the Merger
into the right to receive the Merger Consideration will be a taxable transaction
for federal income tax purposes and may                                         

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also be a taxable transaction under applicable state and other tax laws. In     
general, a shareholder will recognize gain or loss equal to the difference      
between the tax basis of the Common Stock and the amount of Merger              
Consideration received in exchange for the Common Stock. The gain or loss       
will be treated as capital gain or loss if the Common Stock is a capital        
asset in the hands of the shareholder.                                          

     The receipt of the consideration for Stock Options upon delivery to
the Payment Agent of an option termination agreement will be taxable as         
ordinary income for federal and state income and other tax purposes. The        
consideration for Stock Options will be paid to the holders of Stock Options    
net of withholding and other applicable taxes.                                  

     The federal income tax consequences set forth above are for general
information only. Each shareholder and each holder of Stock Options is urged    
to consult his or her own tax advisor to determine the particular tax           
consequences to him or her of the Merger, including the applicability and       
effect of state and other tax laws.                                             

FINANCING OF THE MERGER; SOURCE OF FUNDS                                        

  Allianz Life has represented in the Merger Agreement that it has
sufficient capital resources necessary to perform its obligations under the     
Merger Agreement. Allianz Life intends to finance the transaction with          
working capital funds and a capital contribution from Allianz of America.       

ANTICIPATED ACCOUNTING TREATMENT                                                

    Life USA believes that the Merger will be accounted for by Allianz
Life using the purchase method of accounting in accordance with generally       
accepted accounting principles.                                                 

DISSENTERS' RIGHTS                                                              

     Sections 302A.471 and 302A.473 of the MBCA provide each shareholder
the right to dissent from the Merger, and obtain payment for the "fair value"   
of the shareholder's shares following the consummation of the Merger.           

The following summary of the applicable provisions of Sections
302A.471 and 302A.473 of the MBCA is not intended to be a complete statement    
of the provisions and is qualified in its entirety, by reference to the full    
texts of the Sections attached as Appendix C to this Proxy Statement. These     
sections should be reviewed carefully by any shareholder who wishes to          
exercise dissenters' rights or who wishes to preserve the right to do so,       
since failure to comply with the procedures set forth in the Sections will      
result in the loss of dissenters' rights.                                       

    Under the MBCA, holders of Life USA's Common Stock have the right,
by fully complying with the applicable provisions of Sections 302A.471 and      
302A.473, to dissent with respect to the Merger and to receive from the         
Surviving Corporation payment in cash of the "fair value" of their shares of    
Common Stock after the Merger is completed. The term "fair value" means the     
value of the shares of Common Stock immediately before the Effective Time       
without any appreciation or depreciation in anticipation of the Merger.         

      All references in Sections 302A.471 and 302A.473 and in this summary
to a "shareholder" are to a record holder of the shares of Common Stock as to   
which dissenters' rights are asserted. A person having beneficial ownership     
of shares of Common Stock that are held of record in the name of another        
person, such as a broker, nominee, trustee or custodian, must act promptly to   
cause the record holder to                                                      

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follow the steps summarized below properly and in a timely manner in order to   
perfect whatever dissenters' rights the beneficial owner may have.              

 Shareholders of record who desire to exercise their dissenters'
rights must satisfy all of the following conditions. A written notice of        
intent to demand fair value for shares must be delivered to the executive       
offices of Life USA before the taking of the shareholder vote on the Merger.    
This written demand must be in addition to and separate from any proxy or       
vote against the Merger. Voting against, abstaining from voting or failing to   
vote on the Merger does not constitute a demand for appraisal within the        
meaning of the MBCA.                                                            

      Shareholders electing to exercise their dissenters' rights under the
MBCA must not vote for approval of the Merger Agreement. A shareholder's        
failure to vote against the Merger will not constitute a waiver of              
dissenters' rights. However, if a shareholder returns a signed proxy but does   
not specify a vote against adoption of the Merger or direction to abstain,      
the proxy will be voted for adoption of the Merger, which will have the         
effect of waiving that shareholder's dissenters' rights.                        

   Company shareholders may not assert dissenters' rights as to less
than all of the shares registered in such holder's name except where certain    
shares are beneficially owned by another person but registered in such          
holder's name. If a record owner, such as a broker, nominee, trustee or         
custodian, wishes to dissent with respect to shares beneficially owned by       
another person, such shareholder must dissent with respect to all of such       
shares and must disclose the name and address of the beneficial owner on        
whose behalf the dissent is made. A beneficial owner of shares of Common        
Stock who is not the record owner of such shares may assert dissenters'         
rights as to shares held on such person's behalf, provided that such            
beneficial owner submits a written consent of the record owner to Life USA at   
or before the time such rights are asserted.                                    

   A shareholder who elects to exercise dissenters' rights must send
his or her written demand, before the taking of the vote on the Merger, to      
the Secretary of Life USA Holding, Inc., 300 South Highway 169, Suite 95,       
Minneapolis, Minnesota 55426. The written demand should specify the             
shareholder's name and mailing address, the number of shares owned and that     
the shareholder intends to demand the value of his or her shares.               

   After approval of the Merger Agreement by the shareholders at the
Special Meeting, the Surviving Corporation will send a written notice to each   
shareholder who filed a written demand for dissenters' rights. The notice       
will contain the address to which the shareholder must send a demand for        
payment and the stock certificates in order to obtain payment and the date by   
which they must be received and other related information.                      

    In order to receive fair value for his or her shares, a dissenting
shareholder must, within 30 days after the date the Surviving Corporation       
gives the notice described in the preceding paragraph, send his or her stock    
certificates, and all other information specified in the notice from the        
Surviving Corporation, to the address specified in the notice. A dissenting     
shareholder will retain all rights as a shareholder until the Effective Time.   
After a valid demand for payment and the related stock certificates and other   
information are received, or after the Effective Time, whichever is later,      
the Surviving Corporation will remit to each dissenting shareholder who has     
complied with statutory requirements the amount that the Surviving              
Corporation estimates to be the fair value of the dissenting shareholder's      
shares, with interest commencing five days after the Effective Time at a rate   
prescribed by statute. The Surviving Corporation will also send its closing     
balance sheet and statement of income for a fiscal year ending not more than    
16 months before the Effective Time, together with the latest available         
interim financial statements, an estimate of the fair value of the              
shareholder's shares and a brief description of the method used to reach the    
estimate, a brief description of the procedure to be followed if the            
dissenting shareholder decides to                                               

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make a demand for a supplemental payment and copies of Sections 302A.471 and    
302A.473 of the MBCA.                                                           

    If the dissenting shareholder believes that the amount remitted by
the Surviving Corporation is less than the fair value of such holder's          
shares, plus interest, the shareholder may give written notice to the           
Surviving Corporation of such holder's own estimate of the fair value of the    
shares, plus interest, within 30 days after the mailing date of the             
remittance and demand payment of the difference. Such notice must be given at   
the executive offices of Company at the address set forth above. A              
shareholder who fails to give such written notice within this time period is    
entitled only to the amount remitted by the Surviving Corporation.              

    Within 60 days after receipt of a demand for supplemental payment,
the Surviving Corporation must either (a) pay the shareholder the amount        
demanded or agreed to by the shareholder after discussion with the Surviving    
Corporation, or (b) petition a court for the determination of the fair value    
of the shares, plus interest. The petition must name as parties all             
shareholders who have demanded supplemental payment and have not reached an     
agreement with the Surviving Corporation. The court, after determining that     
the shareholder or shareholders in question have complied with all statutory    
requirements, may use any valuation method or combination of methods it deems   
appropriate to use, whether or not used by the Surviving Corporation or the     
dissenting shareholder, and may appoint appraisers to recommend the amount of   
the fair value of the shares. The court's determination will be binding on      
all Company shareholders who properly exercised dissenters' rights and did      
not agree with the Surviving Corporation as to the fair value of the shares.    
Dissenting shareholders are entitled to judgment for the amount by which the    
court-determined fair value per share, plus interest, exceeds the amount per    
share, plus interest, remitted to the shareholders by the Surviving             
Corporation. The shareholders shall not be liable to the Surviving              
Corporation for any amounts paid by the Surviving Corporation which exceed      
the fair value of the shares as determined by the court, plus interest. The     
costs and expenses of such a proceeding, including the expenses and             
compensation of any appraisers, will be determined by the court and assessed    
against the Surviving Corporation, except that the court may, in its            
discretion, assess part or all of those costs and expenses against any          
shareholder whose action in demanding supplemental payment is found to be       
arbitrary, vexatious or not in good faith. The court may award fees and         
expenses to an attorney for the dissenting shareholders out of the amount, if   
any, awarded to such shareholders. Fees and expenses of experts or attorneys    
may also be assessed against any person who acted arbitrarily, vexatiously or   
not in good faith in bringing the proceeding.                                   

   Life USA may withhold the remittance of the estimated fair value,
plus interest, for any shares owned by any person who was not a shareholder     
or who is dissenting on behalf of a person who was not a beneficial owner on    
May 17, 1999, the date on which the proposed Merger was first announced to      
the public (the "Public Announcement Date"). The Surviving Corporation will     
forward to any dissenting shareholder who has complied with all requirements    
in exercising dissenters' rights the notice and all other materials sent        
after shareholder approval of the Merger to all shareholders who have           
properly exercised dissenters' rights, together with a statement of the         
reason for withholding the remittance and an offer to pay the dissenting        
shareholder the amount listed in the materials if the shareholder agrees to     
accept that amount in full satisfaction. The shareholder may decline this       
offer and demand payment by following the same procedure as that described      
for demand of supplemental payment by shareholders who owned their shares as    
of the Public Announcement Date. Any shareholder who did not own shares on      
the Public Announcement Date and who fails properly to demand payment will be   
entitled only to the amount offered by Life USA. Upon proper demand by any      
shareholder, rules and procedures applicable in connection with receipt by      
Life USA of the demand for supplemental payment given by a dissenting           
shareholder who owned shares on the Public Announcement Date will also apply    
to any shareholder properly giving a demand but who did not own shares of       
record or beneficially on the Public Announcement Date, except that any such    
shareholder is not entitled to receive any remittance from Life                 

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USA until the fair value of the shares, plus interest, has been determined      
pursuant to such rules and procedures.                                          

    Shareholders considering exercising dissenters' rights should bear
in mind that the fair value of their shares determined under Sections           
302A.471 and 302A.473 of the MBCA could be more than, the same as or, in        
certain circumstances, less than the consideration they would receive           
pursuant to the Merger Agreement if they do not seek appraisal of their         
shares.                                                                         

     Cash received pursuant to the exercise of dissenters' rights may be
subject to federal or state income tax. See "Federal Income Tax Consequences"   
(page ___).                                                                     

   ANY HOLDER WHO FAILS TO COMPLY FULLY WITH THE STATUTORY PROCEDURE
SUMMARIZED ABOVE WILL FORFEIT HIS OR HER RIGHTS OF DISSENT AND WILL RECEIVE     
THE MERGER CONSIDERATION FOR HIS OR HER SHARES. SEE APPENDIX C.                 

MANAGEMENT OF LIFE USA, ALLIANZ LIFE AND ACQUISITION SUB

MANAGEMENT OF LIFE USA                                                          

Information concerning the management of Life USA, the names, 
principal occupations and employment history of the directors and executive     
officers of Life USA, is provided in Life USA's Annual Report on Form 10-K for  
the fiscal year ended December 31, 1998 that is incorporated by reference in    
this Proxy Statement. All of the directors and executive officers of Life USA   
are citizens of the United States. The business addresses of each director      
and executive officer of Life USA is listed in footnote 1 to the table under    
"Interests in Securities of Life USA."                                          

MANAGEMENT OF ALLIANZ LIFE AND ACQUISITION SUB                                  

  Allianz Life is a wholly owned subsidiary of Allianz of America.
Allianz AG holds 90% of the voting securities of Allianz of America. Allianz    
AG's business address is Koniginstrasse 28, 80802 Munich, Federal Republic of   
Germany. Allianz of America's business address is 55 Green Farms Road,          
Westport, Connecticut 06881.                                                    

ALLIANZ AG. The names, positions and five years of employment 
history of the directors and executive officers of Allianz AG are listed        
below. Unless otherwise specified below, the directors and executive officers   
of Allianz AG are German citizens, have held the positions listed below since   
at least five years prior to the date of this Proxy Statement and their         
business addresses are Koniginstrasse 28, 80802 Munich, Germany.                

    Dr. Henning Schulte-Noelle is Chairman of the Board of Management,
Allianz AG and Director, President and Chief Executive Officer, Allianz of      
America. Detlev Bremkamp is a Member of the Board of Management, Allianz AG.    
Dr. Reiner Hagemann is a Member of the Board of Management, Allianz AG. Dr.     
Gerhard Rupprecht is a Chairman, Allianz Lebensversicherungs-AG, P.O. Box       
D-70151, Stuttgart, Germany, Member of the Board of Management, Allianz AG,     
and Director, Allianz Life. Dr. Diethart Breipohl is a Member of the Board of   
Management, Allianz AG and Director, Allianz of America. Dr. Helmut Perlet is   
a Member of the Board of Management, Allianz AG. Herbert Hansmeyer is a         
Member of the Board of Management, Allianz AG, Director, Allianz of America,    
and Chairman of the Board, Fireman's Fund Insurance Company, 777 San Marin      
Drive, Novato, CA 94998.                                                        

 ALLIANZ LIFE. The names, positions and five years of employment
history of the directors of Allianz Life are listed below. Unless otherwise     
specified below or as indicated above, the directors are United States          
citizens, have held the positions listed below since at least five years        
prior to the date of this Proxy Statement, and their business addresses are     
1750 Hennepin Avenue, Minneapolis, MN 55403.                                    

     Lowell C. Anderson is Chairman of the Board of Directors, President
and Chief Executive Officer of Allianz Life. James R. Campbell is Chairman      
and CEO of Norwest Bank MN, N.A., Norwest Center, Sixth and Marquette,          
Minneapolis, MN 55479-0116 and Director, Allianz Life. Reverend Dennis J.       
Dease is President, University of St. Thomas, AQU100 2115 Summit Avenue, St.    
Paul, MN 55105-1096, and Director, Allianz Life. Herbert F. Hansmayer is        
Chairman, Allianz of America, Member of the Board of Management of Allianz      
AG, and Director, Allianz Life. Robert M. Kimmitt, Esq. is a Partner of         
Wilmer, Cutler & Pickering, 2445 M Street, NW, Washington, DC 20037-1420        
(prior to May of 1997 Mr. Kimmitt held the position of Managing Director,       
Lehman Brothers, 3 World Financial Center, New York, NY 10285), and Director,   
Allianz Life. Michael P. Sullivan is President and Chief Executive Officer,     
International Dairy Queen, Inc., 7505 Metro Boulevard, Minneapolis, MN 55439,   
and Director, Allianz Life. Dr. Gerhard G. Rupprecht is Chairman, Allianz       
Lebensversicherungs-AG, P.O. Box D-70151, Stuttgart, Germany, Member of the     
Board of Management of Allianz AG, and Director, Allianz Life.                  

  The names, positions and five years of employment history of the
executive officers of Allianz Life are set forth below. Unless otherwise        
specified below or as indicated above, the executive officers of Allianz Life   
are United States citizens, have held the positions listed below since at       
least five years prior to the date of this Proxy Statement and their business   
addresses are 1750 Hennepin Avenue, Minneapolis, MN 55403.                      

     Lowell C. Anderson is Chairman of the Board of Directors, President
and Chief Executive Officer of Allianz Life. Thomas D. Barta has been Vice      
President, Controller Mass Marketing since March 10, 1999 (Second Vice          
President, Controller Mass Marketing, July 1, 1998 to March 10, 1998; Second    

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Vice President, Corporate Controller and Treasurer, October 17, 1996 to July    
1, 1998; Second Vice President, Corporate Controller, April 1, 1994 to          
October 17, 1996). Stephen P. Blaske has been Second Vice President and         
Corporate Actuary since March 10, 1999 (Assistant Vice President, Corporate     
Actuary, March 11, 1996 to March 10, 1999; Associate Actuary, September, 1991   
to January, 1996, Aegon USA, 4333 Edgewood Road NE, Cedar Rapids, Iowa          
52499). Edward J. Bonach has been Executive Vice President, Chief Financial     
Officer since March 10, 1999 (Senior Vice President, Chief Financial Officer,   
February 1, 1997 to March 10, 1999; Senior Vice President, Chief Financial      
Officer and Treasurer, April 1, 1994 to February 1, 1997). Carol J. Buteyn      
has been Second Vice President, Mass Marketing since April 1, 1998 (Assistant   
Vice President, Director Mass Marketing, December 1, 1997 to April 1, 1998;     
Assistant Vice President, Mass Marketing Insurance, April 1, 1996 to December   
1, 1997; Senior Marketing Manager, Mass Marketing, January 1, 1994 to April     
1, 1996). Timothy W. Edelbrock has been Second Vice President, Information      
Systems since August 1, 1995 (Second Vice President, Information Systems Mass   
Marketing, April 1, 1994 to August 1, 1995). Edward V. Fitzpatrick has Second   
Vice President, PreNeed since March 10, 1999 (Assistant Vice President, Human   
Resources, April 1, 1995 to March 10, 1999; Human Resources Manager, January    
1, 1994 to April 1, 1995). Shannon D. Hendricks has been Vice President,        
Corporate Controller and Treasurer since March 10, 1999 (Second Vice            
President, Corporate Controller, July 1, 1998 to March 10, 1999; Second Vice    
President, Controller Mass Marketing, April 1, 1994 to July 1, 1998). Paul M.   
Howman has been Vice President, Underwriting Individual Marketing since April   
1, 1997 (Vice President, Reinsurance, November 27, 1995 to April 1, 1997;       
Assistant Vice President, Selection, Mutual of New York, 1 Mony Plaza,          
Syracuse, NY 13212, 1992 to 1995). Robert S. James has been President,          
Individual Marketing, since April 1, 1995 (President, Financial Markets, July   
1, 1992 to April 1, 1995). James P. Kelso has been Vice President, Mass         
Marketing since March 31, 1999 (Vice President, Variable Products, April 1,     
1994 to March 31, 1999). Douglas M. Landry is Senior Vice President,            
Reinsurance. James A. LoSapio is Vice President, Human Resources. Thomas J.     
Lynch is Senior Vice President, Mass Marketing. Christopher H. Pinkerton has    
been Vice President, Variable Products since April 12, 1999 (Vice President,    
Marketing/Retail Marketing Officer, Nationwide Insurance Enterprise, One        
Nationwide Plaza, Columbus, OH 43215, 1996 to 1999; Vice President, Sales       
Operations, Nationwide Insurance Enterprise, 1992 to 1996). Kenneth P.          
Schrapp has been Second Vice President and Actuary since April 1, 1999          
(Second Vice President and Actuary, Mass Marketing, March 10, 1999 to April     
1, 1999; Assistant Vice President and Actuary, April 1, 1996 to March 10,       
1999; Assistant Vice President, Associate Actuary April 1, 1995 to April 1,     
1996; Associate Actuary February 1, 1994 to April 1, 1995). Carolyn B. Shaw     
has been Second Vice President, Individual Marketing Actuary since January 1,   
1999 (Second Vice President, Preferred Life, April 1, 1995 to January 1,        
1999; Assistant Vice President, Preferred Life, January 1, 1993 to April 1,     
1995). Timothy J. Tongson has been Vice President, Individual Marketing since   
January 1, 1999 (Second Vice President, Individual Marketing Actuary, October   
1, 1995 to January 1, 1999; Second Vice President and Corporate Actuary,        
April 1, 1994 to October 1, 1995). Dr. Robert W. Watson has been Vice           
President, Chief Medical Director since July 1, 1998 (Vice President, Medical   
Director, September 16, 1996 to July 1, 1998; Vice President, Chief Medical     
Officer, April 1, 1991 to September 16, 1996). Michael T. Westermeyer has       
been Vice President, Corporate Legal Officer and Secretary since July 1, 1997   
(Second Vice President and Senior Counsel, April 1, 1997 to July 1, 1997;       
Vice President and Senior Counsel, April 1, 1994 to April 1, 1997). Ronald L.   
Wobbeking is President, Mass Marketing.                                         

The sole director of Acquisition Sub is Edward J. Bonach. The 
officers of Acquisition Sub are as follows: Edward J. Bonach, President, and    
Michael T. Westermeyer, Secretary and Treasurer                                 

INTEREST IN SECURITIES OF LIFE USA

    The following table sets forth certain information with respect to
the beneficial ownership of the Common Stock as of April 30, 1999 by (a) all    
persons known to Life USA to own beneficially more than 5% of the Common        
Stock, (b) each executive officer and each director of Life USA, (c) all        
executive officers and directors of Life USA as a group, (d) the Employee       
Savings Plan (401(k) Plan) of Life USA, (e) Allianz Life and (f) the            
executive officers of Allianz Life (two of whom are also directors of Life      
USA.) No other executive officer or director of Allianz Life or its ultimate    
parent, Allianz AG, beneficial owns the Common Stock. As of April 30, 1999,     
there were 23,593,716 outstanding shares of Common Stock.                       

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                                                        [Enlarge/Download Table]

NAME AND ADDRESS                      NUMBER OF SHARES OWNED  PERCENTAGE OF OUTSTANDING SHARES AS
OF BENEFICIAL OWNER(1)                                        OF APRIL 30, 1999                  
                                                                                                 
Hugh Alexander                        34,502 (2)              *                                  
Stephen P. Blaske                     250 (3)                 *                                  
Jack H. Blaine                        28,368 (4)              *                                  
Edward J. Bonach                      300                     *                                  
Margery G. Hughes                     261,592 (5)             1.1%                               
Robert S. James                       --                      --                                 
Barbara J. Lautzenheiser              26,500 (6)              *                                  
Robert W. MacDonald                   793,963                 3.4%                               
Daniel J. Rourke                      429,533                 1.8%                               
Ralph Strangis                        79,000 (7, 8)           *                                  
Donald J. Urban                       435,965                 1.8%                               
Mark A. Zesbaugh                      210,016 (9)             *                                  
FMR Corporation                       1,960,000 (10)          8.3%                               
David L. Babson & Company, Inc.       2,132,977 (11)          9.0%                               
Dimensional Fund Advisors             1,280,900 (12)          5.4%                               
Allianz Life Insurance Company of     5,699,188 (13)          24.2%                              
North America                                                                                    
Life USA Holding, Inc. Employee       661,684                 2.8%                               
Savings Plan (401(k))                                                                            
All Directors and Executive Officers  2,299,739 (14)          9.8%                               
of Life USA as a Group (11 Persons)                                                              

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------------------------------                                                  

*   Indicates less than one percent (1%) of Common Stock outstanding on         
April 30, 1999.                                                                 

(1) The address of Messrs. MacDonald, Rourke, Urban, and Zesbaugh and Ms.       
Hughes and the 401k Employee Savings Plan is Interchange North Building, 300    
South Highway 169, Minneapolis, MN 55426. The address of Mr. Alexander is 216   
16th Street, Suite 1300, Denver, CO 80202. The address of Mr. Blaine is 2864    
Sutton Oaks Lane, Vienna, VA 22181. The address of Ms. Lautzenheiser is City    
Place II, 11th Floor, Hartford, CT 06103. The address of Mr. Strangis is 5500   
Norwest Center, 90 South Seventh Street, Minneapolis, MN 55402. The address     
for Messrs. Blaske, Bonach and James and Allianz Life Insurance Company of      
North America is 1750 Hennepin Avenue, Minneapolis, MN 55403. The principal     
address of FMR corporation is 82 Devonshire Street, Boston, MA 02109. The       
principal address for David L. Babson & Company, Inc. is One Memorial Drive,    
Cambridge, MA 02142. The principal address of Dimensional Fund Advisors is      
1299 Ocean Ave., 11th Floor, Santa Monica, CA 90401.                            

(2) Includes shares issuable upon the exercise of options to acquire 26,202     
shares of Common Stock at prices ranging from $6.00 to $17.75 per share which   
are presently exercisable and options to acquire 1,000 shares of Common Stock   
at $10.25 which vest on July 14, 1999. Excludes shares issuable upon the        
exercise of options to acquire 1,000 shares of Common Stock at $10.3125 which   
vest on October 13, 1999.                                                       

(3) Mr. Blaske is a Second Vice President and Corporate Actuary of Allianz Life.

(4) Includes shares issuable upon the exercise of options to acquire 24,368     
shares of Common Stock at prices ranging from $6.00 to $16.25 per share which   
are presently exercisable. Includes 1,000 shares at $10.25 which vest on July   
14, 1999. Excludes share issuable upon the exercise of options to acquire       
1,000 shares of Common Stock at $10.3125 which vest on October 13, 1999.        

(5) Includes shares issuable upon the exercise of options to acquire 252,000    
shares of Common Stock at prices ranging from $10.50 to $24.00 per share        
which are presently exercisable. Excludes shares issuable upon the exercise     
of options to acquire 25,000 shares of Common Stock at $16.3125 which vest on   
December 22, 2000.                                                              

(6) Includes shares issuable upon the exercise of options to acquire 22,000     
shares of Common Stock at prices ranging from $8.25 to $17.75 per share which   
are presently exercisable and options to acquire 1,000 shares of Common Stock   
at $10.25 per share which vest on July 14, 1999. Excludes shares issuable       
upon the exercise of options to acquire 1,000 shares of Common Stock at         
$10.3125 which vest on October 13, 1999.                                        

(7) Includes shares issuable upon the exercise of options to acquire 20,000     
shares of Common Stock at prices ranging from $8.25 to $17.75 per share which   
are presently exercisable and options to acquire 1,000 shares of Common Stock   
at $10.25 per share which vest on July 14, 1999. Excludes shares issuable       
upon the exercise of options to acquire 1,000 shares of Common Stock at         
$10.3125 which vest on October 13, 1999.                                        

(8) Other members of the law firm of Kaplan, Strangis and Kaplan, P.A., of      
which Mr. Strangis is a member and which serves as counsel for Life USA,        
beneficially own an aggregate of 225,830 shares of Common Stock or, with Mr.    
Strangis' shares, including the shares issuable upon exercise of options        
presently exercisable or exercisable on July 14, 1999, 302,830 shares           
(approximately 1.0% of the outstanding shares of Common Stock at February 12,   
1999).                                                                          

(9) Includes shares issuable upon the exercise of options to acquire 198,638    
shares of Common Stock at prices ranging from $6.00 to $18.75 per share which   
are presently exercisable. Excludes shares issuable upon the exercise of the    
following options: options to acquire 33,334 shares of Common Stock at          
$11.5625 per share which vest on January 15, 2000.                              

(10) The information set forth herein is based on a Schedule 13G, dated         
February 11, 1999, filed with the Securities and Exchange Commission.           

(11) The information set forth herein is based on a Schedule 13G, dated         
January 21, 1999, filed with the Securities and Exchange Commission.            

(12) The information set forth herein is based on a Schedule 13G, dated         
February 11, 1999, filed with the Securities and Exchange Commission.           

(13) The information set forth herein is based on a Schedule 13D, dated         
February 26, 1999, filed with the Securities and Exchange Commission.           

(14) Includes 547,208 shares issuable upon the exercise of options presently    
exercisable or exercisable within 60 days.                                      

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CERTAIN TRANSACTIONS IN COMMON STOCK AND STOCK OPTIONS

     No transactions in Common Stock or Stock Options have been effected
during the 60 days preceding the date of the Proxy Statement by Life USA or     
by the persons named in the "Interest in Securities of Life USA" section        
except that Hugh Alexander, Jack Blaine, Barbara Lautzenheiser and Ralph        
Strangis have exercised the following stock options:                            

[DESCRIBE WHEN PROXY DATE IS KNOWN].

The following table sets forth shares of Common Stock purchased by Life USA     
under its stock repurchase program since the commencement of Life USA's         
second full fiscal year preceding the date of this Proxy Statement, the         
amount of shares purchased, the range of prices paid for the shares and the     
average purchase price per share for each quarterly period:                     

                                                        [Enlarge/Download Table]

                                                                    Purchase Price                  
                                           ---------------------------------------------------------
      Quarter          Shares Purchased    Total Purchase Price     High         Low        Average 
----------------------------------------------------------------------------------------------------
                                                                                                    
1999                                                                                                

First Quarter:             1,440,100            $  16,959,409     $  12.88     $  10.70     $  11.78
Second Quarter                                                                                      
(through April 22,                                                                                  
1999):                       119,200            $   1,305,623     $  11.17     $  10.50     $  10.95

1998                                                                                                

Third Quarter:             1,297,400            $  16,030,182     $  13.94     $  11.29     $  12.36
Fourth Quarter:              528,300            $   6,796,369     $  13.56     $  12.06     $  12.86

TOTAL:                     3,385,000         $    41,091,583                                        

The following table sets forth shares of Common Stock purchased or acquired     
by Allianz Life since the commencement of Life USA's second full fiscal year    
preceding the date of this Proxy Statement, the amount of shares purchased,     
the range of prices paid for the shares and the average purchase price per      
share for each quarterly period:                                                

                                                        [Enlarge/Download Table]

                                                                    Purchase Price                  
                                           ---------------------------------------------------------
      Quarter          Shares Purchased    Total Purchase Price     High         Low        Average 
----------------------------------------------------------------------------------------------------
                                                                                                    
1999                                                                                                

First Quarter:              395,062         $  10,000,006.88      $25.3125     $25.3125     $25.3125

1998                                                                                                

First Quarter:            4,597,964         $  65,107,439.42      $  17.06     $  12.34     $  14.16
Second Quarter:             200,000         $   2,840,950.50      $15.3125     $  12.04     $  14.20
Third Quarter:              506,092         $  11,142,015.50      $  24.63     $  11.42     $  22.02

TOTAL:                    5,699,118         $     89,090,412                                        

 EXPENSES OF THE TRANSACTION

  The aggregate fees and expenses paid and estimated to be paid by
Life USA and Allianz Life in connection with the Merger and related             
transactions are as follows:                                                    

                                                                [Download Table]
                                                            
Investment Banking Fee                      $    350,000 (1)
Legal and Accounting                             775,000 (2)
Printing and Distribution                         40,000    
SEC and Regulatory Filings                       128,702    
Miscellaneous                                     20,000    
                                            ------------    
         Total                              $  1,213,702    


(1) DLJ is entitled to reimbursement of out-of-pocket expenses incurred in      
connection with its engagement (including fees and expenses of counsel) not     
in excess of $25,000.                                                           

(2) Includes an estimated $650,000 payable to Kaplan, Strangis & Kaplan, P.A.   
of which Ralph Strangis, a director of Life USA, and Bruce J. Parker and        
Catherine A. Bartlett, Assistant Secretaries of Life USA, are members.          

Under the Merger Agreement, the printing expenses and SEC and 
regulatory filing fees are shared equally by Life USA and Allianz Life          
regardless of which party incurred the expense or fee.                          

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INDEPENDENT AUDITORS

      Ernst & Young LLP, independent certified public accountants, are the
independent auditors for Life USA. A representative of Ernst & Young, LLP,      
will be available at the Special Meeting to answer questions.                   

 WHERE YOU CAN FIND MORE INFORMATION

Life USA files annual, quarterly and special reports, proxy   
statements and other information with the Commission. You may read and copy     
any such reports, statements or other information at the Commission's public    
reference rooms in Washington, DC, New York, New York and Chicago, Illinois.    
Please call the Commission at 1-800-SEC-0330 for further information on the     
public reference rooms. Life USA's Commission filings are also available to     
the public from commercial document retrieval services and at the world wide    
web site maintained by the Commission at http://www.sec.gov. Reports, proxy     
statements and other information concerning Life USA also may be inspected at   
the offices of the National Association of Securities Dealers, Inc., 1735 K     
Street, N.W., Washington, DC 2006.                                              

The Commission allows Life USA to incorporate by reference    
information into this document, which means that Life USA can disclose          
important information to you by referring you to another document filed         
separately with the Commission. The information incorporated by reference is    
deemed to be a part of this document, except for any information superseded     
by information contained directly in this document. This document               
incorporates by reference certain documents that Life USA has previously        
filed with the Commission. These documents contain important business           
information about Life USA and its financial condition.                         

     Life USA may have sent to you some of the documents incorporated by
reference, but you can obtain any of them through Life USA or the Commission    
or the Commissions World Wide Web site described above. Documents               
incorporated by reference are available from Life USA without charge,           
excluding all exhibits, unless specifically incorporated by reference as an     
exhibit to this document. Shareholders may obtain documents incorporated by     
reference in this document by requesting them in writing or by telephone at     
the following address:                                                          

Life USA Holding, Inc.                                        
300 South Highway 169, Suite 95                               
95 Interchange North Building                                 
Minneapolis, MN 55426                                         
Attention:  Mark A. Zesbaugh, Chief Financial Officer         
Telephone:  (612) 546-7386                                    

  Life USA, Allianz Life and Acquisition Sub have filed a Schedule
13E-3 with the Commission with respect to the Merger. The Schedule 13E-3,       
including any amendments and exhibits filed or incorporated by reference as a   
part thereof, is available for inspection or copying as set forth above.        
Statements contained in this Proxy Statement or in any document incorporated    
herein by reference as to the contents of any contract or other document        
referred to herein or therein are not necessarily complete and in each          
instance reference is made to such contract or other document filed as an       
exhibit to the Schedule 13E-3 or such other document, and each such statement   
shall be deemed qualified in its entirely by such reference.                    

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    IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM LIFE USA, PLEASE DO SO
AT LEAST FIVE BUSINESS DAYS BEFORE THE DATE OF THE SPECIAL MEETING IN ORDER     
TO RECEIVE TIMELY DELIVERY OF SUCH DOCUMENTS PRIOR TO THE SPECIAL MEETING.      

      You should rely only on the information contained or incorporated by
reference in this document to vote your shares at the Special Meeting. Life     
USA has not authorized anyone to provide you with information that is           
different from what is contained in this document. This document is dated       
_______, 1999. You should not assume that the information contained in this     
document is accurate as of any date other than that date, and the mailing of    
this document to shareholders does not create any implication to the            
contrary. This Proxy Statement does not constitute a solicitation of a proxy    
in any jurisdiction where, or to or from any person to whom, it is unlawful     
to make such proxy solicitation in such jurisdiction.                           

 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

      The following documents previously filed with the Commission by Life
USA are incorporated by reference in this Proxy Statement:                      

       (i)   Life USA's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998;                                                              

        (ii)  Life USA's Quarterly Report on Form 10-Q for quarter ended March
31, 1999; and                                                                   

    (iii) Life USA's Current Report on Form 8-K filed on May 19, 1999.

 All documents filed by Life USA with the Commission pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of       
this document and prior to the date of the Special Meeting will be deemed to    
be incorporated by reference in this document. Information filed with the       
Commission in future documents will automatically update and supersede the      
information in this document.                                                   

 SHAREHOLDER PROPOSALS

If the Merger is not completed for any reason, proposals of   
shareholders intended to be presented at the 2000 Annual Meeting of             
Shareholders must be received by Mark A. Zesbaugh, Executive Vice President     
and Chief Financial Officer, Life USA Holding, Inc., 300 North Highway 169,     
Suite 95, Minneapolis, Minnesota 55426 on or prior to November 5, 1999 to be    
eligible for inclusion in Life USA's Proxy Statement and Proxy Card relating    
to that meeting. Life USA is not required to include in its Proxy Statement     
and Proxy Card for the 2000 Annual Meeting any shareholder proposals which      
do not meet all of the requirements then in effect for inclusion.               

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 OTHER MATTERS

      Management knows of no other business to be presented at the Special
Meeting. If other matters do properly come before the meeting, or any           
adjournment or adjournments thereof, it is the intention of the persons named   
in the proxy to vote on such matters according to their best judgment unless    
the authority to do so is withheld in such proxy.                               

                                By Order of the Board of Directors

                 Robert W. MacDonald
                                  Chairman and Chief Executive Officer

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APPENDIX TO THE PROXY STATEMENT 

                                                        [Enlarge/Download Table]
                                                                                       
APPENDIX A -- Agreement and Plan of Merger......................................... A-1
APPENDIX B -- Opinion of Donaldson Lufkin & Jenrette Securities Corporation........ B-1
APPENDIX C -- Text of Sections 302A.471 and 302A.473 of the Minnesota                  
              Business Corporations Act............................................ C-1


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                                                          APPENDIX A

    AGREEMENT AND PLAN OF MERGER

   AMONG

    ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA,

    NOVA NEW CO.

   AND

    LIFE USA HOLDING, INC.

    DATED AS OF MAY 17, 1999

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   TABLE OF CONTENTS

    AGREEMENT AND PLAN OF MERGER

                                                                [Download Table]
                                                                               
Recitals                                                                    A-5

ARTICLE I THE MERGER                                                        A-5
     Section 1.1    The Merger                                              A-5
     Section 1.2    Effective Time                                          A-6
     Section 1.3    Effects of the Merger                                   A-6
     Section 1.4    Charter and By-Laws; Directors and Officers             A-6
     Section 1.5    Conversion of Securities                                A-6
     Section 1.6    Payment Agent                                           A-7
     Section 1.7    Transfer Taxes; Withholding                             A-8
     Section 1.8    Return of Payment Fund                                  A-8
     Section 1.9    No Further Ownership Rights in Company Common Stock     A-8
     Section 1.10   Closing of Company Transfer Books                       A-8
     Section 1.11   Lost Certificates                                       A-8
     Section 1.12   Further Assurances                                      A-9
     Section 1.13   Closing                                                 A-9

ARTICLE II REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB                A-10
     Section 2.1    Organization, Standing and Power                       A-10
     Section 2.2    Authority                                              A-10
     Section 2.3    Consents and Approvals; No Violation                   A-10
     Section 2.4    Proxy Statement                                        A-11
     Section 2.5    Actions and Proceedings                                A-11
     Section 2.6    Operations of Sub                                      A-12
     Section 2.7    Brokers                                                A-12
     Section 2.8    Financing                                              A-12

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY                  A-12
     Section 3.1    Organization, Standing and Power                       A-12
     Section 3.2    Capital Structure                                      A-13
     Section 3.3    Authority                                              A-13
     Section 3.4    Consents and Approvals; No Violation                   A-14
     Section 3.5    SEC Documents and Other Reports                        A-15
     Section 3.6    Proxy Statement                                        A-16
     Section 3.7    Absence of Certain Changes or Events                   A-16
     Section 3.8    Pen-nits and Compliance                                A-16
     Section 3.9    Tax Matters                                            A-17
     Section 3.10   Actions and Proceedings                                A-18
     Section 3.11   Certain Agreements                                     A-18
     Section 3.12   ERISA                                                  A-19

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                                                                [Download Table]
                                                                               
     Section 3.13   Compliance with Worker Safety and Environmental Laws   A-20
     Section 3.14   Labor Matters.                                         A-20
     Section 3.15   Intellectual Property                                  A-21
     Section 3.16   State Takeover Statutes; Certain Charter Provisions    A-21
     Section 3.17   Required Vote of Company Stockholders                  A-21
     Section 3.18   Year 2000 Compliance                                   A-21
     Section 3.19   Brokers                                                A-22
     Section 3.20   Insurance Coverage                                     A-22
     Section 3.21   Conflicts of Interest                                  A-22

ARTICLE IV COVENANTS                                                       A-22
     Section 4.1    Conduct of Business Pending the Merger                 A-22
     Section 4.2    No Solicitation                                        A-25
     Section 4.3    Third Party Standstill Agreements                      A-26

ARTICLE V ADDITIONAL AGREEMENTS                                            A-26
     Section 5.1    Stockholder Meeting.                                   A-26
     Section 5.2    Preparation of the Proxy Statement.                    A-26
     Section 5.3    Access to Information                                  A-26
     Section 5.4    Fees and Expenses                                      A-27
     Section 5.5    Company Stock Options                                  A-28
     Section 5.6    Best Efforts                                           A-28
     Section 5.7    Public Announcements                                   A-29
     Section 5.8    Real Estate Transfer and Gains Tax                     A-29
     Section 5.9    Indemnification; Directors and Officers Insurance      A-30
     Section 5.10   Notification of Certain Matters                        A-30
     Section 5.11   Employee Benefit Plans and Agreements                  A-30
     Section 5.12   Stock Purchase Agreement                               A-31
     Section 5.13   Dissenting Shares                                      A-31
     Section 5.14   Chief Executive Officer                                A-32
     Section 5.16   Convertible Debentures                                 A-32
     Section 5.17   Advance of Funds                                       A-32

ARTICLE VI CONDITIONS PRECEDENT TO THE MERGER                              A-32
     Section 6.1    Conditions to Each Party's Obligation to Effect            
                    the Merger                                             A-32
     Section 6.2    Conditions to Obligation of the Company to Effect          
                    the Merger                                             A-33
     Section 6.3    Conditions to Obligations of Parent and Sub to Effect      
                    the Merger                                             A-34

ARTICLE VII TERMINATION, AMENDMENT AND WAIVER                              A-34
     Section 7.1    Termination                                            A-34
     Section 7.2    Effect of Termination                                  A-36
     Section 7.3    Amendment                                              A-36
     Section 7.4    Waiver                                                 A-36

ARTICLE VIII GENERAL PROVISIONS                                            A-37
     Section 8.1    Non-Survival of Representations and Warranties.        A-37

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                                                                [Download Table]
                                                                               
     Section 8.2    Notices.                                               A-38
     Section 8.3    Interpretation                                         A-38
     Section 8.4    Counterparts                                           A-38
     Section 8.5    Entire Agreement; No Third-Party Beneficiaries         A-38
     Section 8.6    Governing Law                                          A-38
     Section 8.7    Assignment                                             A-38
     Section 8.8    Severability                                           A-38
     Section 8.9    Enforcement of this Agreement                          A-39

Signatures                                                                 A-39


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    AGREEMENT AND PLAN OF MERGER

    THIS AGREEMENT AND PLAN OF MERGER, dated as of May 17, 1999 (the
"Agreement"), is executed by and among ALLIANZ LIFE INSURANCE COMPANY OF        
NORTH AMERICA, a Minnesota corporation ("Parent"), NOVA NEW CO., a Minnesota    
corporation and a wholly owned subsidiary of Parent ("Sub"), and LIFE USA       
HOLDING, INC., a Minnesota corporation (the "Company") (Sub and the Company     
being hereinafter collectively referred to as the "Constituent Corporations").  

    W I T N E S S E T H:

      WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved and declared advisable the merger of Sub with and into    
the Company (the "Merger"), upon the terms and subject to the conditions set    
forth herein, whereby each issued and outstanding share of common stock, par    
value $.01 per share, of the Company ("Company Common Stock") not owned         
directly or indirectly by Parent or the Company other than Dissenting Shares    
(as hereinafter defined) will be converted into a right to receive $20.75 per   
share; and                                                                      

 WHEREAS, the respective Boards of Directors of Parent and the
Company have determined that the Merger is in furtherance of and consistent     
with their respective long-term business strategies and is in the best          
interest of their respective stockholders.                                      

      NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:       

ARTICLE I   

THE MERGER  

 Section 1.1    THE MERGER.  Upon the terms and subject to the
conditions hereof, and in accordance with the Minnesota Business Corporation    
Act (the "MBCA"), Sub shall be merged with and into the Company at the          
Effective Time (as hereinafter defined).  Following the Merger, the separate    
corporate existence of Sub shall cease and the Company shall continue as the    
surviving corporation (the "Surviving Corporation") and shall succeed to and    
assume all the rights and obligations of Sub in accordance with the MBCA.       
Notwithstanding anything to the contrary herein, at the election of Parent,     
any direct wholly owned Subsidiary (as hereinafter defined) of Parent may be    
substituted for Sub as a constituent corporation in the Merger; provided that   
such substituted corporation is a Minnesota corporation which is formed         
solely for the purpose of engaging in the transactions contemplated by this     
Agreement and has engaged in                                                    

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no other business activities.  In such event, the parties agree to execute an   
appropriate amendment to this Agreement, in form and substance reasonably       
satisfactory to Parent and the Company, in order to reflect such                
substitution.                                                                   

     Section 1.2    EFFECTIVE TIME.  The Merger shall become effective
when Articles of Merger (the "Articles of Merger"), executed in accordance      
with the relevant provisions of the MBCA, are filed with the Secretary of       
State of the State of Minnesota; PROVIDED, HOWEVER, that, upon the mutual       
consent of the Constituent Corporations, the Articles of Merger may provide     
for a later date or time of effectiveness of the Merger.  When used in this     
Agreement, the term "Effective Time" shall mean the date and time at which      
the Articles of Merger are accepted for record or such later date or time       
established by the Articles of Merger.  The filing of the Articles of Merger    
shall be made on the date of the Closing (as hereinafter defined).              

    Section 1.3    EFFECTS OF THE MERGER.  The Merger shall have the
effects set forth in Section 302A.641 subd. 2 of the MBCA.                      

Section 1.4    CHARTER AND BY-LAWS; DIRECTORS AND OFFICERS  

(a)  ARTICLES OF INCORPORATION.  At the Effective Time, the 
Articles of Incorporation of the Company, as in effect immediately prior to     
the Effective Time, shall be amended so that (i) Article III of such Articles   
of Incorporation reads in its entirety as follows: "The aggregate number of     
shares of common stock which this corporation shall have authority to issue     
is One Hundred (100) shares, par value $.01 per share." and (ii) Article IV     
of such Articles of Incorporation is deleted in its entirety.  As so amended,   
such Articles of Incorporation of the Company shall be the Articles of          
Incorporation of the Surviving Corporation until thereafter changed or          
amended as provided therein or by applicable law.  At the Effective Time, the   
By-Laws of the Company, as in effect immediately prior to the Effective Time,   
shall be amended and restated to read as did the By-Laws of Sub immediately     
prior to the Effective Time, except that the name of the Surviving              
Corporation shall remain unchanged.  As so amended and restated, such By-Laws   
of the Company shall be the By-Laws of the Surviving Corporation until          
thereafter changed or amended as provided therein or by applicable law.         

       (b)   DIRECTORS.  The directors of Sub at the Effective Time of the
Merger shall be the directors of the Surviving Corporation, until the earlier   
of their resignation or removal or until their respective successors are duly   
elected and qualified, as the case may be.  The officers of the Company at      
the Effective Time of the Merger shall be the officers of the Surviving         
Corporation, until the earlier of their resignation or removal or until their   
respective successors are duly elected and qualified, as the case may be.       

       Section 1.5    CONVERSION OF SECURITIES.  As of the Effective Time,
by virtue of the Merger and without any action on the part of Sub, the          
Company or the holders of any securities of the Constituent Corporations:       

     (a)  Each issued and outstanding share of common stock, par value
$.01 per share, of Sub shall be converted into one validly issued, fully paid   
and nonassessable share of common stock of the Surviving Corporation.           

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(b)  All shares of Company Common Stock that are held in the
treasury of the Company or by any wholly owned Subsidiary of the Company and    
any shares of Company Common Stock owned by Parent shall be canceled and no     
cash or other consideration shall be delivered in exchange therefor.            

  (c)  Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be canceled in    
accordance with Section 1.5(b) and Dissenting Shares) shall be converted into   
the right to receive, upon surrender of the certificate (the "Certificate")     
formerly representing such share of Company Common Stock, an amount of cash     
equal to $20.75 (the "Per Share Amount").  All such shares of Company Common    
Stock, when so converted, shall no longer be outstanding and shall              
automatically be canceled and retired and each holder of a Certificate or       
Certificates formerly representing any such shares shall cease to have any      
rights with respect thereto, except the right to receive the cash to be paid    
to such holder pursuant to Article I hereof  (the "Merger Consideration")       
upon the surrender of a Certificate or Certificates in accordance with          
Section 1.6 hereof.                                                             

  (d)  Each Convertible Debenture (as hereinafter defined) shall
cease to be convertible into shares of Company Common Stock and instead shall   
only be convertible into a right to receive from Parent an amount of cash       
equal to the Merger Consideration the holder of such Convertible Debenture      
would have received pursuant to Article I hereof had such Convertible           
Debenture been converted into Company Common Stock immediately prior to the     
Effective Time.                                                                 

  (e)  The Dissenting Shares shall be handled in accordance with
Section 5.13 hereof.                                                            

Section 1.6    PAYMENT AGENT                                

       (a)  EXCHANGE OF CERTIFICATES.  Parent shall authorize a commercial
bank (or such other person or persons as shall be reasonably acceptable to      
Parent and the Company) to act as Payment Agent hereunder (the "Payment         
Agent").  As soon as practicable after the Effective Time, Parent shall         
deposit with the Payment Agent, in trust for the holders of shares of Company   
Common Stock converted in the Merger and holders of Company Stock Options (as   
hereinafter defined), an amount of cash equal to or exceeding the aggregate     
Merger Consideration to be paid to holders of Company Common Stock pursuant     
to Article I hereof and any Option Consideration (as hereinafter defined) to    
be paid to holders of Company Stock Options pursuant to the terms of Section    
5.5 (such amount hereinafter the "Payment Fund").                               

       (b)  EXCHANGE PROCEDURES.  Parent shall instruct the Payment Agent,
as soon as practicable after the Effective Time, to mail to each record         
holder of a Certificate or Certificates a letter of transmittal, which shall    
specify that delivery shall be effected, and risk of loss and title to the      
Certificates shall pass, only upon actual delivery of the Certificates to the   
Payment Agent, and shall contain instructions for use in effecting the          
surrender of the Certificates in exchange for the Merger Consideration.  Upon   
surrender for cancellation to the Payment Agent of all Certificates held by     
any record holder of a Certificate, together with such letter of transmittal,   
duly executed, the holder of such Certificate shall be entitled to receive in   
exchange therefor a check representing the Merger Consideration, and any        
Certificate so surrendered shall forthwith                                      

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be canceled.  Holders of Company Stock Options shall receive payment, if any,   
for such Company Stock Options pursuant to the procedures set forth in          
Section 5.5.                                                                    

Section 1.7    TRANSFER TAXES; WITHHOLDING.  If any Merger  
Consideration is to be paid to any person other than to the person named in     
the Certificate surrendered in exchange therefor, it shall be a condition of    
such exchange that the Certificate so surrendered shall be properly endorsed    
and otherwise in proper form for transfer and that the person requesting such   
exchange shall pay to the Payment Agent any transfer or other taxes required    
by reason of the payment of the Merger Consideration to a person other than     
to the person named in the Certificate surrendered, or shall establish to the   
satisfaction of the Payment Agent that such tax has been paid or is not         
applicable.  Parent or the Payment Agent shall be entitled to deduct and        
withhold from the consideration otherwise payable pursuant to this Agreement    
to any holder of shares of Company Common Stock or holder of a Company Stock    
Option such amounts as Parent or the Payment Agent is required to deduct and    
withhold with respect to the making of such payment under the Internal          
Revenue Code of 1986, as amended (the "Code") or under any provision of         
state, local or foreign tax law.  To the extent that amounts are so withheld    
by Parent or the Payment Agent, such withheld amounts shall be treated for      
all purposes of this Agreement as having been paid to the holder of the         
shares of Company Common Stock or the holder of a Company Stock Option in       
respect of which such deduction and withholding was made by Parent or the       
Payment Agent.                                                                  

      Section 1.8    RETURN OF PAYMENT FUND.  Any portion of the Payment
Fund which remains undistributed for six months after the Effective Time        
shall be delivered to Parent, upon demand of Parent, and any such former        
stockholders who have not theretofore complied with this Article I and          
holders of Company Stock Options who have not theretofore complied with         
Section 5.5 hereof shall thereafter look only to Parent for payment of their    
claim for any Merger Consideration or Option Consideration, as the case may     
be.  Neither Parent nor the Surviving Corporation shall be liable to any        
former holder of Company Common Stock or holder of a Company Stock Option for   
any cash held in the Payment Fund which is delivered to a public official       
pursuant to any applicable abandoned property, escheat or similar law.          

       Section 1.9    NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK.
The payment of the Merger Consideration upon surrender of any Certificate       
shall be deemed to constitute full satisfaction of all rights pertaining to     
the shares of Company Common Stock represented by such Certificate.             

       Section 1.10   CLOSING OF COMPANY TRANSFER BOOKS.  At the Effective
Time, the stock transfer books of the Company shall be closed and no transfer   
of shares of Company Common Stock shall thereafter be made on the records of    
the Company.  If, after the Effective Time, Certificates are presented to the   
Surviving Corporation, the Payment Agent or the Parent, such Certificates       
shall be canceled and exchanged as provided in this Article I.                  

    Section 1.11   LOST CERTIFICATES.  If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact    
by the person claiming such Certificate to be lost, stolen or destroyed and,    
if required by Parent or the Payment Agent, the posting by such person of a     
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indemnity against any claim that may be made against them with respect to       
such Certificate, the Payment Agent will pay the Merger Consideration in        
exchange for such lost, stolen or destroyed Certificate.                        

Section 1.12   FURTHER ASSURANCES.  If at any time after the
Effective Time the Surviving Corporation shall consider or be advised that      
any deeds, bills of sale, assignments or assurances or any other acts or        
things are necessary, desirable or proper (a) to vest, perfect or confirm, of   
record or otherwise, in the Surviving Corporation its right, title or           
interest in, to or under any of the rights, privileges, powers, franchises,     
properties or assets of either of the Constituent Corporations, or (b)          
otherwise to carry out the purposes of this Agreement, the Surviving            
Corporation and its proper officers and directors or their designees shall be   
authorized to execute and deliver, in the name and on behalf of either of the   
Constituent Corporations, all such deeds, bills of sale, assignments and        
assurances and to do, in the name and on behalf of either Constituent           
Corporation, all such other acts and things as may be necessary, desirable or   
proper to vest, perfect or confirm the Surviving Corporation's right, title     
or interest in, to or under any of the rights, privileges, powers,              
franchises, properties or assets of such Constituent Corporation and            
otherwise to carry out the purposes of this Agreement.                          

Section 1.13   CLOSING.  The closing of the transactions    
contemplated by this Agreement (the "Closing") and all actions specified in     
this Agreement to occur at the Closing shall take place at the offices of       
Dorsey & Whitney LLP, 220 South Sixth Street, Minneapolis, Minnesota, at        
10:00 a.m., local time, no later than the second business day following the     
day on which the last of the conditions set forth in Article VI shall have      
been fulfilled or waived (if permissible) or at such other time and place as    
Parent and the Company shall agree.                                             

    ARTICLE II

    REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB

   Parent and Sub represent and warrant to the Company as follows:

    Section 2.1    ORGANIZATION, STANDING AND POWER.  Each of Parent
and Sub is a corporation duly organized, validly existing and in good           
standing under the laws of its place of incorporation and has the requisite     
corporate power and authority to carry on its business as now being             
conducted.  Parent is duly qualified to do business, and is in good standing    
in each jurisdiction where the character of the properties owned or held        
under lease by it or the nature of its activities makes such qualification      
necessary, except where the failure to be so qualified would not,               
individually or in the aggregate, have a Material Adverse Effect (as            
hereinafter defined) on Parent.  For purposes of this Agreement (a) "Material   
Adverse Change" or "Material Adverse Effect" means, when used with respect to   
Parent or the Company, as the case may be, any change or effect that is or      
could reasonably be expected (as far as can be foreseen at the time) to be      
materially adverse to the business, assets, liabilities, financial condition    
or results of operations of Parent and its Subsidiaries, taken as a whole, or   
the Company and its Subsidiaries, taken as a whole, as the case may be;         
PROVIDED, HOWEVER, that in determining whether a Material Adverse Change or     
Material Adverse Effect has occurred with respect to either referenced party,   

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any change or effect, to the extent it is attributable to changes in            
prevailing interest rates or to any change in general economic conditions       
affecting companies in industries similar to the industries in which the        
Company and its Subsidiaries or Parent and its Subsidiaries, as the case may    
be, operate, shall not be considered when determining if a Material Adverse     
Change or Material Adverse Effect has occurred; and (b) "Subsidiary" means      
any corporation, partnership, limited liability company, joint venture or       
other legal entity of which Parent or the Company, as the case may be (either   
alone or through or together with any other Subsidiary), owns, directly or      
indirectly, 50% or more of the stock or other equity interests the holders of   
which are generally entitled to vote for the election of the board of           
directors or other governing body of such corporation, partnership, limited     
liability company, joint venture or other legal entity.                         

Section 2.2    AUTHORITY.  On or prior to the date of this  
Agreement, the Boards of Directors of Parent and Sub have each declared the     
merger advisable and fair to and in the best interest of Parent and Sub, and    
the Board of Directors of Sub has recommended the adoption of this Agreement    
by Parent as sole stockholder of Sub and Parent has approved this Agreement     
as sole stockholder of Sub.  Each of Parent and Sub has the requisite           
corporate power and authority to enter into this Agreement and to consummate    
the transactions contemplated hereby.  The execution and delivery of this       
Agreement by Parent and Sub and the consummation by Parent and Sub of the       
transactions contemplated hereby have been duly and validly authorized by all   
necessary corporate action on the part of Parent or Sub, as the case may be,    
subject to the filing of the Articles of Merger with the Secretary of State     
of the State of Minnesota.  This Agreement has been duly executed and           
delivered by Parent and Sub and (assuming the valid authorization, execution    
and delivery of this Agreement by the Company and the validity and binding      
effect of the Agreement on the Company) constitutes the valid and binding       
obligations of each of Parent or Sub, as the case may be, enforceable against   
them in accordance with its terms, except as the enforceability hereof may be   
limited by bankruptcy, insolvency, moratorium or other similar laws affecting   
the enforcement of creditors' rights generally and to judicial limitations on   
the enforcement of specific performance and other equitable remedies.           

       Section 2.3    CONSENTS AND APPROVALS; NO VIOLATION.  Assuming that
all consents, approvals, authorizations and other actions described in this     
Section 2.3 have been obtained and all filings and obligations described in     
this Section 2.3 have been made, the execution and delivery of this Agreement   
and the consummation of the transactions contemplated hereby and compliance     
with the provisions hereof will not result in any violation of, or default      
(with or without notice or lapse of time, or both) under, or give to others a   
right of termination, cancellation or acceleration of any obligation or the     
loss of a material benefit under, or result in the creation of any lien,        
security interest, charge or encumbrance upon any of the properties or assets   
of Parent or any of its Subsidiaries under, any provision of (i) the Articles   
of Incorporation or the By-Laws of Parent or the Articles of Incorporation or   
By-Laws of Sub, (ii) any provision of the comparable charter or organization    
documents of any of Parent's Subsidiaries, (iii) any loan or credit             
agreement, note, bond, mortgage, indenture, lease or other agreement,           
instrument, permit, concession, franchise or license applicable to Parent or    
any of its Subsidiaries or (iv) any judgment, order, decree, statute, law,      
ordinance, rule or regulation applicable to Parent or any of its Subsidiaries   
or any of their respective properties or assets, other than, in the case of     
clauses (ii), (iii) or (iv), any such violations, defaults, rights, liens,      
security interests, charges or encumbrances that, individually or in the        
aggregate, would not have a Material Adverse Effect                             

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on Parent, materially impair the ability of Parent or Sub to perform their      
respective obligations hereunder or prevent the consummation of any of the      
transactions contemplated hereby.  No filing or registration with, or           
authorization, consent or approval of, any domestic (federal and state),        
foreign or supranational court, commission, governmental body, regulatory       
agency, authority or tribunal (a "Governmental Entity") is required by or       
with respect to Parent or any of its Subsidiaries in connection with the        
execution and delivery of this Agreement by Parent or Sub or is necessary for   
the consummation of the Merger and the other transactions contemplated by       
this Agreement, except for (i) in connection, or in compliance, with the        
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as      
amended (the "HSR Act") and the Securities Exchange Act of 1934, as amended     
(together with the rules and regulations promulgated thereunder, the            
"Exchange Act"), (ii) the filing of the Articles of Merger with the Secretary   
of State of the State of Minnesota and appropriate documents with the           
relevant authorities of other states in which the Company or any of its         
Subsidiaries is qualified to do business, (iii) such filings, authorizations,   
orders, notices and approvals as may be required by state takeover laws (the    
"State Takeover Approvals") and state insurance laws (the "State Insurance      
Approvals"), and (iv) such consents, orders, authorizations, registrations,     
declarations and filings the failure of which to be obtained or made would      
not, individually or in the aggregate, have a Material Adverse Effect on        
Parent, materially impair the ability of Parent or Sub to perform its           
obligations hereunder or prevent the consummation of any of the transactions    
contemplated hereby.                                                            

  Section 2.4    PROXY STATEMENT.  None of the information to be
supplied by Parent or Sub for inclusion or incorporation by reference in the    
Schedule 13e-3 (as hereinafter defined) or the proxy statement relating to      
the Stockholder Meeting (as hereinafter defined) (together with any             
amendments or supplements thereto, the "Proxy Statement") will, (i) in the      
case of the Schedule 13e-3, at the time of its filing, contain any untrue       
statement of a material fact or omit to state any material fact required to     
be stated therein or necessary in order to make the statements therein not      
misleading or (ii) in the case of the Proxy Statement, at the time of the       
mailing of the Proxy Statement, at the time of the Stockholder Meeting and at   
the Effective Time, contain any untrue statement of a material fact or omit     
to state any material fact required to be stated therein or necessary in        
order to make the statements therein, in light of the circumstances under       
which they are made, not misleading.  If at any time prior to the Effective     
Time any event with respect to Parent, its officers and directors or any of     
its Subsidiaries shall occur, which is required to be described in the          
Schedule 13e-3 or the Proxy Statement, such event shall be so described, and,   
in the case of the Schedule 13e-3, an appropriate amendment or supplement       
shall be promptly filed with the SEC and, in the case of the Proxy Statement,   
Parent will promptly give notice of such event to the Company.                  

     Section 2.5    ACTIONS AND PROCEEDINGS.  There are no outstanding
orders, judgments, injunctions, awards or decrees of any Governmental Entity    
against or involving Parent or any of its Subsidiaries, or against or           
involving any of the present or former directors, officers, employees,          
consultants, agents or stockholders of Parent or any of its Subsidiaries, as    
such, or any of its or their properties, assets or business that,               
individually or in the aggregate, would  materially impair the ability of       
Parent to perform its obligations hereunder.  As of the date of this            
Agreement, there are no actions, suits or claims or legal, administrative or    
arbitrative proceedings or investigations pending or, to the Knowledge of       
Parent, threatened against or                                                   

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involving Parent or any of its Subsidiaries or any of its or their present or   
former directors, officers, employees, consultants, agents or stockholders,     
as such, or any of its or their properties, assets or business that,            
individually or in the aggregate, would materially impair the ability of        
Parent to perform its obligations hereunder.  As of the date hereof, there      
are no actions, suits, labor disputes or other litigation, legal or             
administrative proceedings or governmental investigations pending or, to the    
Knowledge of Parent, threatened against or affecting Parent or any of its       
Subsidiaries or any of its or their present or former officers, directors,      
employees, consultants, agents or stockholders, as such, or any of its or       
their properties, assets or business relating to the transactions               
contemplated by this Agreement.  For purposes of this Agreement, "Knowledge     
of Parent" means the actual knowledge of the executive officers of Parent.      

    Section 2.6    OPERATIONS OF SUB.  Sub is a direct, wholly owned
subsidiary of Parent, was formed solely for the purpose of engaging in the      
transactions contemplated hereby, has engaged in no other business activities   
and has conducted its operations only as contemplated hereby.                   

  Section 2.7    BROKERS.  No broker, investment banker or other
person is entitled to any broker's, finder's or other similar fee or            
commission in connection with the transaction contemplated by this Agreement    
based upon the arrangements made by or on behalf of Parent or Sub.              

      Section 2.8    FINANCING.  Parent has sufficient capital resources
necessary to perform its obligations under this Agreement.                      

   ARTICLE III

   REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company represents and warrants to Parent and Sub as follows:

      Section 3.1    ORGANIZATION, STANDING AND POWER.  The Company is a
corporation duly organized, validly existing and in good standing under the     
laws of the State of Minnesota and has the requisite corporate power and        
authority to carry on its business as now being conducted.  Each Subsidiary     
of the Company is duly organized, validly existing and in good standing under   
the laws of the jurisdiction in which it is organized and has the requisite     
corporate (in the case of a Subsidiary that is a corporation) or other power    
and authority to carry on its business as now being conducted, except where     
the failure to be so organized, existing or in good standing or to have such    
power or authority would not, individually or in the aggregate, have a          
Material Adverse Effect on the Company.  The Company and each of its            
Subsidiaries are duly qualified to do business, and are in good standing, in    
each jurisdiction where the character of their properties owned or held under   
lease or the nature of their activities makes such qualification necessary,     
except where the failure to be so qualified would not, individually or in the   
aggregate, have a Material Adverse Effect on the Company.                       

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 Section 3.2    CAPITAL STRUCTURE.  As of the date hereof, the
authorized capital stock of the Company consists of 60,000,000 shares of        
Company Common Stock and 15,000,000 shares of undesignated preferred stock,     
par value $.01 per share ("Company Preferred Stock").  At the close of          
business on March 31, 1999, (i) 23,920,839 shares of Company Common Stock       
were issued and outstanding, all of which were validly issued, fully paid and   
nonassessable and free of preemptive rights, (ii) no shares of Company Common   
Stock were held in the treasury of the Company or by Subsidiaries of the        
Company and (iii) 5,695,790 shares of Company Common Stock were reserved for    
issuance pursuant to outstanding options under the Company's stock plans        
described under Section 3.2 of the letter dated the date hereof and delivered   
on the date hereof by the Company to Parent, which letter relates to this       
Agreement and is designated therein as the Company Letter (the "Company         
Letter") (collectively, the "Company Stock Plans").  Except as set forth in     
Section 3.2 of the Company Letter, no options have been granted since March     
31, 1999.  At the close of business on March 31, 1999, the Company's            
outstanding 8% convertible subordinated debentures (the "Convertible            
Debentures") were convertible into approximately 231,373 shares of Company      
Common Stock.  Except as set forth in Section 3.2 of the Company Letter, the    
Company Stock Plans are the only benefit plans of the Company or its            
Subsidiaries under which any securities of the Company or any of its            
Subsidiaries are issuable. No shares of Company Preferred Stock are             
outstanding.  As of the date of this Agreement, except (i) as set forth above   
or (ii) as set forth in Section 3.2 of the Company Letter, no shares of         
capital stock or other voting securities of the Company or any Subsidiary       
were issued, reserved for issuance or outstanding.  As of the date of this      
Agreement, except as set forth in Section 3.2 of the Company Letter, there      
are no options, warrants, calls, rights or agreements to which the Company or   
any of its Subsidiaries is a party or by which any of them is bound             
obligating the Company or any of its Subsidiaries to issue, deliver or sell,    
or cause to be issued, delivered or sold, additional shares of capital stock    
of the Company or any of its Subsidiaries or obligating the Company or any of   
its Subsidiaries to grant, extend or enter into any such option, warrant,       
call, right or agreement.  Each outstanding share of capital stock of each      
Subsidiary of the Company that is a corporation is duly authorized, validly     
issued, fully paid and nonassessable and, except as set forth in Section 3.2    
of the Company Letter, each such share is owned by the Company or another       
Subsidiary of the Company, free and clear of all security interests, liens,     
claims, pledges, options, rights of first refusal, agreements, limitations on   
voting rights, charges and other encumbrances of any nature whatsoever.         
Other than the Convertible Debentures, the Company does not have any            
outstanding bonds, debentures, notes or other obligations the holders of        
which have the right to vote (or convertible into or exercisable for            
securities having the right to vote) with the stockholders of the Company on    
any matter.  Exhibit 21 to the Company's Annual Report on Form 10-K for the     
year ended December 31, 1998, as filed with the SEC (the "Company Annual        
Report"), is a true, accurate and correct statement in all material respects    
of all of the information as of December 31, 1998 required to be set forth      
therein by the regulations of the SEC.                                          

Section 3.3    AUTHORITY.  On or prior to the date of this  
Agreement, the Board of Directors of the Company has declared the Merger        
advisable and fair to and in the best interest of the Company and its           
stockholders, approved this Agreement in accordance with the MBCA, resolved     
to recommend the adoption of this Agreement by the Company's stockholders and   
directed that this Agreement be submitted to the Company's stockholders for     
adoption.  The Company has all requisite corporate power and authority to       
enter into this Agreement and,                                                  

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subject to approval by the stockholders of the Company of this Agreement, to    
consummate the transactions contemplated hereby.  The execution and delivery    
of this Agreement by the Company and the consummation by the Company of the     
transactions contemplated hereby have been duly authorized by all necessary     
corporate action on the part of the Company, subject to (x) approval of this    
Agreement by the stockholders of the Company and (y) the filing of the          
Articles of Merger with the Secretary of State of the State of Minnesota.       
This Agreement has been duly executed and delivered by the Company and          
(assuming the valid authorization, execution and delivery of this Agreement     
by Parent and Sub and the validity and binding effect of the Agreement on       
Parent and Sub) constitutes the valid and binding obligation of the Company     
enforceable against the Company in accordance with its terms, except as the     
enforceability hereof may be limited by bankruptcy, insolvency, moratorium or   
other similar laws affecting the enforcement of creditors' rights generally     
and to judicial limitations on the enforcement of specific performance and      
other equitable remedies.  The filing of the Proxy Statement with the SEC has   
been duly authorized by the Company's Board of Directors.                       

       Section 3.4    CONSENTS AND APPROVALS; NO VIOLATION.  Assuming that
all consents, approvals, authorizations and other actions described in this     
Section 3.4 have been obtained and all filings and obligations described in     
this Section 3.4 have been made, except as set forth in Section 3.4 of the      
Company Letter, the execution and delivery of this Agreement does not, and      
the consummation of the transactions contemplated hereby and compliance with    
the provisions hereof will not, result in any violation of, or default (with    
or without notice or lapse of time, or both) under, or give to others a right   
of termination, cancellation or acceleration of any obligation or the loss of   
a material benefit under, or result in the creation of any lien, security       
interest, charge or encumbrance upon any of the properties or assets of the     
Company or any of its Subsidiaries under, any provision of (i) the Articles     
of Incorporation or By-Laws of the Company, (ii) any provision of the           
comparable charter or organization documents of any of the Company's            
Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,         
indenture, lease or other agreement, instrument, permit, concession,            
franchise or license applicable to the Company or any of its Subsidiaries or    
(iv) any judgment, order, decree, statute, law, ordinance, rule or regulation   
applicable to the Company or any of its Subsidiaries or any of their            
respective properties or assets, other than, in the case of clauses (ii),       
(iii) or (iv), any such violations, defaults, rights, liens, security           
interests, charges or encumbrances that, individually or in the aggregate,      
would not have a Material Adverse Effect on the Company, materially impair      
the ability of the Company to perform its obligations hereunder or prevent      
the consummation of any of the transactions contemplated hereby or thereby.     
No filing or registration with, or authorization, consent or approval of, any   
Governmental Entity is required by or with respect to the Company or any of     
its Subsidiaries in connection with the execution and delivery of this          
Agreement by the Company or is necessary for the consummation of the Merger     
and the other transactions contemplated by this Agreement, except for (i) in    
connection, or in compliance, with the provisions of the HSR Act, the           
Securities Act and the Exchange Act, (ii) the filing of the Articles of         
Merger with the Secretary of State of the State of Minnesota and appropriate    
documents with the relevant authorities of other states in which the Company    
or any of its Subsidiaries is qualified to do business, (iii) such filings,     
authorizations, notices, orders and approvals as may be required to obtain      
the State Takeover Approvals and State Insurance Approvals, (iv) applicable     
requirements, if any, of Blue Sky Laws and the Nasdaq National Market or as     
may be required pursuant to the laws, rules and regulations of states and       
state                                                                           

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commissions regulating the business of securities broker-dealers, and (v)       
such other consents, orders, authorizations, registrations, declarations and    
filings the failure of which to be obtained or made would not, individually     
or in the aggregate, have a Material Adverse Effect on the Company,             
materially impair the ability of the Company to perform its obligations         
hereunder or prevent the consummation of any of the transactions contemplated   
hereby.                                                                         

    Section 3.5    SEC DOCUMENTS AND OTHER REPORTS.  The Company has
filed all required documents with the SEC since January 1, 1996 (the "Company   
SEC Documents").  Except as set forth in Section 3.5 of the Company Letter,     
as of their respective dates, the Company SEC Documents complied in all         
material respects with the requirements of the Securities Act or the Exchange   
Act, as the case may be, and, at the respective times they were filed, none     
of the Company SEC Documents contained any untrue statement of a material       
fact or omitted to state a material fact required to be stated therein or       
necessary to make the statements therein, in light of the circumstances under   
which they were made, not misleading.  Except as set forth in Section 3.5 of    
the Company Letter, the consolidated financial statements (including, in each   
case, any notes thereto) of the Company included in the Company SEC Documents   
(the "Financial Statements") complied as to form in all material respects       
with applicable accounting requirements and the published rules and             
regulations of the SEC with respect thereto, were prepared in accordance with   
generally accepted accounting principles (except, in the case of the            
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a        
consistent basis during the periods involved (except as may be indicated        
therein or in the notes thereto), are in accordance with the books and          
records of the Company and fairly presented in all material respects the        
consolidated financial position of the Company and its consolidated             
Subsidiaries as at the respective dates thereof and the consolidated results    
of their operations and their consolidated cash flows for the periods then      
ended (subject, in the case of unaudited statements, to normal year-end audit   
adjustments and to any other adjustments described therein).  Except as         
disclosed in the Company SEC Documents or as required by generally accepted     
accounting principles, the Company has not, since December 31, 1998, made any   
change in the accounting practices or policies applied in the preparation of    
financial statements.  Except as and to the extent set forth in Section 3.5     
of the Company Letter or in the Company Annual Report, neither the Company      
nor any of its Subsidiaries had as of December 31, 1998 any liabilities or      
obligations of any nature, whether or not accrued, contingent or otherwise,     
that would be required by generally accepted accounting principles to be        
reflected on the consolidated balance sheet of the Company and its              
Subsidiaries (including the notes thereto) included in the Financial            
Statements that are not so reflected. The Company has delivered to Parent the   
following statutory financial statements of Life USA Insurance Company (the     
"Insurance Subsidiary") which have been filed with insurance regulators (the    
"Statutory Statements"): (a) the Statutory Quarterly Statement for the          
quarter ended March 31, 1999 for the Insurance Subsidiary as filed with state   
insurance regulatory authorities, and (b) the Annual Statutory Statements for   
the years ended December 31, 1998, 1997, 1996, 1995 and 1994 as filed with      
state insurance regulatory authorities.  The Statutory Statements (i) fairly    
present the financial position of the Insurance Subsidiary and the results of   
its operations as of the dates thereof and periods then ended, (ii) were        
prepared in accordance with statutory accounting principles prescribed or       
permitted at the date of such financial statements by the insurance             
regulatory authority of its state of domicile, and (iii) all investments in     
stocks and bonds shown thereon were carried at values determined in             
accordance with the National Association of Insurance Commissioners'            
guidelines.                                                                     

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       Section 3.6    PROXY STATEMENT.  The Proxy Statement will comply in
all material respects with the provisions of the Exchange Act.  Neither the     
Proxy Statement (other than with respect to information contained in the        
Proxy Statement that is provided to the Company by Parent for inclusion in      
the Proxy Statement) nor any of the information supplied by the Company for     
inclusion or incorporation by reference in the Schedule 13e-3, together with    
any amendments or supplements thereto, will (i) in the case of the Proxy        
Statement, at the time of the mailing of the Proxy Statement, at the time of    
the Stockholder Meeting and at the Effective Time, contain any untrue           
statement of a material fact or omit to state any material fact required to     
be stated therein or necessary in order to make the statements therein, in      
light of the circumstances under which they are made, not misleading, and       
(ii) in the case of information supplied by the Company for inclusion or        
incorporation by reference in the Schedule 13e-3, at the time its filing,       
contain any untrue statement of a material fact or omit to state any material   
fact required to be stated therein or necessary in order to make the            
statements therein not misleading.  If at any time prior to the Effective       
Time any event with respect to the Company, its officers and directors or any   
of its Subsidiaries shall occur which is required at that time to be            
described in the Proxy Statement or the Schedule 13e-3, such event shall be     
so described, and, in the case of the Proxy Statement, an appropriate           
amendment or supplement shall be promptly filed with the SEC and, as required   
by law, disseminated to the stockholders of the Company, and, in the case of    
the Schedule 13e-3, the Company shall promptly notify Parent of such event.     

   Section 3.7    ABSENCE OF CERTAIN CHANGES OR EVENTS.  Except as
disclosed in the Company SEC Documents filed with the SEC prior to the date     
of this Agreement or as disclosed in Section 3.7 of the Company Letter, since   
December 31, 1998, (A) the Company and its Subsidiaries have not incurred any   
material liability or obligation (indirect, direct or contingent), or entered   
into any material oral or written agreement or other transaction, that is not   
in the ordinary course of business or that would result in a Material Adverse   
Effect on the Company, (B) there has been no change in the capital stock of     
the Company except for the issuance of shares of the Company Common Stock       
pursuant to the Company Stock Plans or the conversion of the Convertible        
Debentures and no dividend or distribution of any kind declared, paid or made   
by the Company on any class of its stock, except for the regular quarterly      
dividend of not more than $.025 per share of Company Common Stock, (C) there    
has not been (x) any granting by the Company or any of its Subsidiaries to      
any executive officer of the Company or any of its Subsidiaries of any          
increase in compensation, except in the ordinary course of business             
consistent with prior practice or as was required under employment agreements   
in effect as of the date of the most recent audited financial statements        
included in the Company SEC Documents, (y) any granting by the Company or any   
of its Subsidiaries to any such executive officer of any increase in            
severance or termination agreements in effect as of the date of the most        
recent audited financial statements included in the Company SEC Documents or    
(z) any entry by the Company or any of its Subsidiaries into any employment,    
severance or termination agreement with any such executive officer and (D)      
there has been no event causing a Material Adverse Effect on the Company, nor   
any development that would, individually or in the aggregate, result in a       
Material Adverse Effect on the Company.                                         

       Section 3.8    PERMITS AND COMPLIANCE.  Each of the Company and its
Subsidiaries is in possession of all franchises, grants, authorizations,        
licenses, permits, easements, variances,                                        

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exceptions, consents, certificates, approvals and orders of any Governmental    
Entity necessary for the Company or any of its Subsidiaries to own, lease and   
operate its properties or to carry on its business as it is now being           
conducted (the "Company Permits"), except where the failure to have any of      
the Company Permits would not, individually or in the aggregate, have a         
Material Adverse Effect on the Company, and, as of the date of this             
Agreement, no suspension or cancellation of any of the Company Permits is       
pending or, to the Knowledge of the Company (as hereinafter defined),           
threatened, except where the suspension or cancellation of any of the Company   
Permits would not, individually or in the aggregate, have a Material Adverse    
Effect on the Company.  Neither the Company nor any of its Subsidiaries is in   
violation of (A) its Articles of Incorporation, by-laws or other                
organizational documents, (B) any applicable law, ordinance, administrative     
or governmental rule or regulation or (C) any order, decree or judgment of      
any Governmental Entity having jurisdiction over the Company or any of its      
Subsidiaries, except, in the case of clauses (B) and (C), for any violations    
that, individually or in the aggregate, would not have a Material Adverse       
Effect on the Company.  Except as disclosed in the Company SEC Documents        
filed prior to the date of this Agreement or as disclosed in Section 3.8 of     
the Company Letter, as of the date hereof there is no contract or agreement     
that is material to the business, properties, assets, liabilities, condition    
(financial or otherwise), results of operations or prospects of the Company     
and its Subsidiaries, taken as a whole. Except as set forth in the Company      
SEC Documents filed prior to the date of this Agreement or as disclosed in      
Section 3.8 of the Company Letter, no event of default or event that, but for   
the giving of notice or the lapse of time or both, would constitute an event    
of default exists or, upon the consummation by the Company of the               
transactions contemplated by this Agreement, will exist under any indenture,    
mortgage, loan agreement, note or other agreement or instrument for borrowed    
money, any guarantee of any agreement or instrument for borrowed money or any   
lease, contractual license or other agreement or instrument to which the        
Company or any of its Subsidiaries is a party or by which the Company or any    
such Subsidiary is bound or to which any of the properties, assets or           
operations of the Company or any such Subsidiary is subject, other than any     
defaults that, individually or in the aggregate, would not have a Material      
Adverse Effect on the Company.  As of the date of this Agreement, set forth     
in Section 3.8 of the Company Letter is a description of any material changes   
to the amount and terms of the indebtedness of the Company and its              
Subsidiaries as described in the Company Annual Report.  For purposes of this   
Agreeent, "Knowledge of the Company" means the actual knowledge of the          
executive officers of the Company.                                              

 Section 3.9    TAX MATTERS.  Except as otherwise set forth in
Section 3.9 of the Company Letter, (i) the Company and each of its              
Subsidiaries have filed all federal, and all material state, local, foreign     
and provincial, Tax Returns required to have been filed or appropriate          
extensions therefor have been properly obtained, and such Tax Returns are       
correct and complete, except to the extent that any failure to so file or any   
failure to be correct and complete would not, individually or in the            
aggregate, have a Material Adverse Effect on the Company; (ii) all Taxes        
shown to be due on such Tax Returns have been timely paid or extensions for     
payment have been properly obtained, or such Taxes are being timely and         
properly contested; (iii) the Company and each of its Subsidiaries have         
complied in all material respects with all rules and regulations relating to    
the withholding of Taxes except to the extent that any failure to comply with   
such rules and regulations would not, individually or in the aggregate, have    
a Material Adverse Effect on the Company; (iv) neither the Company nor any of   
its Subsidiaries has waived                                                     

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any statute of limitations in respect of its Taxes; (v) any Tax Returns         
referred to in clause (i) relating to federal and state income Taxes have       
been examined by the IRS or the appropriate state taxing authority or the       
period for assessment of the Taxes in respect of which such Tax Returns were    
required to be filed has expired; (vi) no material issues that have been        
raised in writing by the relevant taxing authority in connection with the       
examination of the Tax Returns referred to in clause (i) are currently          
pending; (vii) all deficiencies asserted or assessments made as a result of     
any examination of such Tax Returns by any taxing authority have been paid in   
full or are being timely and properly contested; and (viii) no withholding is   
required under Section 1445 of the Code in connection with the Merger.  For     
purposes of this Agreement:  (i) "Taxes" means any federal, state, local,       
foreign or provincial income, gross receipts, property, sales, use, license,    
excise, franchise, employment, payroll, withholding, alternative or added       
minimum, ad valorem, value-added, transfer or excise tax, or other tax,         
custom, duty, governmental fee or other like assessment or charge of any kind   
whatsoever, together with any interest or penalty imposed by any Governmental   
Entity, and (ii) "Tax Return" means any return, report or similar statement     
(including the attached schedules) required to be filed with respect to any     
Tax, including, without limitation, any information return, claim for refund,   
amended return or declaration of estimated Tax.                                 

       Section 3.10   ACTIONS AND PROCEEDINGS.  Except as set forth in the
Company SEC Documents filed prior to the date of this Agreement or in Section   
3.10 of the Company Letter, there are no outstanding orders, judgments,         
injunctions, awards or decrees of any Governmental Entity against or            
involving (i) the Company or any of its Subsidiaries, (ii) to the Knowledge     
of the Company, any of the present or former directors, officers, employees,    
consultants, agents or stockholders of the Company or any of its                
Subsidiaries, as such, (iii) any of the properties, assets or businesses of     
the Company or any of its Subsidiaries or (iv) any Company Plan (as             
hereinafter defined) that, individually or in the aggregate, would have a       
Material Adverse Effect on the Company or materially impair the ability of      
the Company to perform its obligations hereunder.  As of the date of this       
Agreement, there are no actions, suits or claims or legal, administrative or    
arbitrative proceedings or investigations pending or, to the Knowledge of the   
Company, threatened against or involving (i) the Company or any of its          
Subsidiaries, (ii) to the Knowledge of the Company, any of its or their         
present or former directors, officers, employees, consultants, agents or        
stockholders, as such, (iii) any of the properties, assets or businesses of     
the Company or any of its subsidiaries or (iv) any Company Plan (as             
hereinafter defined) that, individually or in the aggregate, would have a       
Material Adverse Effect on the Company or materially impair the ability of      
the Company to perform its obligations hereunder.  As of the date hereof,       
there are no actions, suits, labor disputes or other litigation, legal or       
administrative proceedings or governmental investigations pending or, to the    
Knowledge of the Company, threatened against or affecting (i) the Company or    
any of its Subsidiaries, (ii) to the Knowledge of the Company, any of its or    
their present or former officers, directors, employees, consultants, agents     
or stockholders, as such, (iii) any of the properties, assets or businesses     
of the Company or ay of its Subsidiaries or (iv) any Company Plan, in each      
case relating to the transactions contemplated by this Agreement.  The          
Company is not in default with respect to any material final judgment, order    
or decree of any court or any governmental agency or instrumentality.           

      Section 3.11   CERTAIN AGREEMENTS.  Except as set forth in Section
3.11 of the Company Letter or as provided pursuant to Section 5.5 hereof,       
neither the Company nor any of its                                              

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Subsidiaries is a party to any oral or written agreement or plan, including     
any employment agreement, severance agreement, stock option plan, stock         
appreciation rights plan, restricted stock plan or stock purchase plan, any     
of the benefits of which will be increased, or the vesting of the benefits of   
which will be accelerated, by the occurrence of any of the transactions         
contemplated by this Agreement or the value of any of the benefits of which     
will be calculated on the basis of any of the transactions contemplated by      
this Agreement (collectively, "Transaction Agreements").  No holder of any      
option to purchase shares of Company Common Stock, or shares of Company         
Common Stock granted in connection with the performance of services for the     
Company or its Subsidiaries, is or will be entitled to receive cash from the    
Company or any Subsidiary in lieu of or in exchange for such option or shares   
as a result of the transactions contemplated by this Agreement, other than      
the Stock Option Consideration to be paid to holders of Company Stock Options   
pursuant to Section 5.5.  Section 3.11 of the Company Letter sets forth (i)     
for each officer, director or employee who is a party to, or will receive       
benefits under, any Transaction Agreement, the total amount that each such      
person may receive, or is eligible to receive, if this Agreement were to be     
consummated on the date hereof and whether such amount (or portion thereof)     
constitutes or will constitute a "parachute payment" to a "disqualified         
individual" as those terms are defined in section 280G of the Code, and (ii)    
the total amount of indebtedness owed to the Company or its Subsidiaries as     
of April 30, 1999 from each officer or director of the Company and its          
Subsidiaries.                                                                   

Section 3.12   ERISA                                        

      (a)  COMPANY PLANS.  Each Company Plan (as hereinafter defined) is
listed in Section 3.12(a) of the Company Letter.  Except as would not have a    
Material Adverse Effect on the Company, each Company Plan complies in all       
respects with the Employee Retirement Income Security Act of 1974, as amended   
("ERISA"), the Code and all other applicable statutes and governmental rules    
and regulations, and (i) no "reportable event" (within the meaning of Section   
4043 of ERISA) has occurred with respect to any Company Plan that is likely     
to have individually or in the aggregate, a Material Adverse Effect on the      
Company, and (ii) no action has been taken, or is currently being considered,   
to terminate any Company Plan subject to Title IV of ERISA.  No Company Plan,   
nor any trust created thereunder, has incurred any "accumulated funding         
deficiency" (as defined in Section 302 of ERISA), whether or not waived.        

      (b)  PLAN LIABILITIES.  Except as listed in Section 3.12(b) of the
Company Letter, with respect to the Company Plans, no event has occurred and,   
to the Knowledge of the Company, there exists no condition or set of            
circumstances in connection with which the Company or any ERISA Affiliate or    
Company Plan fiduciary could be subject to any liability under the terms of     
such Company Plans, ERISA, the Code or any other applicable law, other than     
liabilities for benefits payable in the normal course, which would have a       
Material Adverse Effect on the Company.  All Company Plans that are intended    
to be qualified under Section 401(a) of the Code have been determined by the    
IRS to be so qualified, or a timely application for such determination is now   
pending or a request for such a determination filed within the remedial         
amendment period of Section 401(b) of the Code is pending, and the Company is   
not aware of any reason why any such Company Plan is not so qualified in        
operation.  Neither the Company nor any entity which is treated as a single     
employer along with the Company under Section 414(b), (c), (m) or (o) of the    
Code maintains or contributes to, or has ever maintained or                     

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contributed to, or been required to contribute to a "multiemployer plan"        
within the meaning of Section 3(37) of ERISA or any plan subject to Title IV    
of ERISA.  Except as disclosed in Section 3.12(b) of the Company Letter,        
neither the Company nor any of its ERISA Affiliates has any liability or        
obligation under any welfare plan to provide benefits after termination of      
employment to any employee or dependent other than as required by Section       
4980B of the Code.                                                              

 (c)  DEFINITIONS.  As used herein, (i) "Company Plan" means a
"pension plan" (as defined in Section 3(2) of ERISA), a "welfare plan" (as      
defined in Section 3(1) of ERISA), or any bonus, profit sharing, deferred       
compensation, incentive compensation, stock ownership, stock purchase, stock    
option, phantom stock, holiday pay, vacation, severance, death benefit, sick    
leave, fringe benefit, personnel policy, insurance or other plan, arrangement   
or understanding, in each case established or maintained by the Company or      
any of its ERISA Affiliates or as to which the Company or any of its ERISA      
Affiliates has contributed or otherwise may have any liability.                 

      (d)  EMPLOYMENT AGREEMENTS.  Section 3.12(d) of the Company Letter
contains a list of all (i) severance and employment agreements with employees   
of the Company and each ERISA Affiliate, (ii) severance programs and policies   
of the Company and each ERISA Affiliate with or relating to its employees and   
(iii) plans, programs, agreements and other arrangements of the Company and     
each ERISA Affiliate with or relating to its employees containing change of     
control or similar provisions.                                                  

  Section 3.13   COMPLIANCE WITH WORKER SAFETY AND ENVIRONMENTAL
LAWS. The properties, assets and operations of the Company and its              
Subsidiaries are in compliance with all applicable federal, state, local and    
foreign laws, rules and regulations, orders, decrees, judgments, permits and    
licenses relating to public and worker health and safety (collectively,         
"Worker Safety Laws") and the protection and clean-up of the environment and    
activities or conditions related thereto, including, without limitation,        
those relating to the generation, handling, disposal, transportation or         
release of hazardous materials (collectively, "Environmental Laws"), except     
for any violations that, individually or in the aggregate, would not have a     
Material Adverse Effect on the Company.  With respect to such properties,       
assets and operations, including any previously owned, leased or operated       
properties, assets or operations, there are no events, conditions,              
circumstances, activities, practices, incidents, actions or plans of the        
Company or any of its Subsidiaries that may interfere with or prevent           
compliance or continued compliance with applicable Worker Safety Laws and       
Environmental Laws, other than any such interference or prevention as would     
not, individually or in the aggregate with any such other interference or       
prevention, have a Material Adverse Effect on the Company.                      

    Section 3.14   LABOR MATTERS. Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or labor         
contract.  Neither the Company nor any of its Subsidiaries has engaged in any   
unfair labor practice with respect to any persons employed by or otherwise      
performing services primarily for the Company or any of its Subsidiaries (the   
"Company Business Personnel"), and there is no unfair labor practice            
complaint or grievance against the Company or any of its Subsidiaries by the    
National Labor Relations Board or any comparable state agency pending or        
threatened in writing with respect to the Company Business Personnel, except    
where such unfair labor practice, complaint or grievance would not have a       

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Material Adverse Effect on the Company.  There is no labor strike, dispute,     
slowdown or stoppage pending or, to the Knowledge of the Company, threatened    
against or affecting the Company or any of its Subsidiaries which may           
interfere with the respective business activities of the Company or any of      
its Subsidiaries, except where such dispute, strike or work stoppage would      
not have a Material Adverse Effect on the Company.                              

  Section 3.15   INTELLECTUAL PROPERTY.  To the Knowledge of the
Company, the Company (a) owns or has the exclusive right in the life            
insurance and annuity industry to use the "LifeUSA" trademark without           
infringing upon or otherwise acting adversely to the right or claimed right     
of any person under or with respect to any of the foregoing, (b) owns or has    
the right in the ordinary course of its business to use all patents,            
trademarks, trade names, service marks, copyrights, trade secrets (including    
without limitation know-how, show-how, customer lists, inventions, designs,     
processes, computer programs and technical data), and all other intellectual    
property rights (collectively, "Proprietary Rights") necessary to its           
operations and the sale of all products and services sold or proposed to be     
sold by it, free and clear of any rights, liens, or claims of others, except    
for customary restrictions or provisions under any agreement pursuant to        
which any of the foregoing is licensed from a third party, which restrictions   
and provisions do not significantly interfere with the conduct of the           
Company's business in the ordinary course, and (c) to the Knowledge of the      
Company and except as set forth in Section 3.15 of the Company Letter, is not   
using any Proprietary Rights of any third party which violates the rights of    
such third party.                                                               

       Section 3.16   STATE TAKEOVER STATUTES; CERTAIN CHARTER PROVISIONS.
Minnesota Statutes Section 302A.671 is not applicable to the Company, and no    
charter or by-law takeover provision nor, to the Knowledge of the Company,      
any state takeover statute is applicable to the Merger or the Agreement and     
the transactions contemplated hereby.                                           

Section 3.17   REQUIRED VOTE OF COMPANY STOCKHOLDERS.  The  
affirmative vote of the holders of a majority of the outstanding shares of      
Company Common Stock is required to adopt this Agreement.  No other vote of     
the security holders of the Company is required by law, the Articles of         
Incorporation or By-laws of the Company or otherwise in order for the Company   
to consummate the Merger and the transactions contemplated hereby.              

Section 3.18   YEAR 2000 COMPLIANCE.  The Company and its   
Subsidiaries have established, and are adhering to, a written year 2000         
compliance plan to facilitate the continued, effective operation of the         
Company's business before and after January 1, 2000.  Such plan includes,       
without limitation, (a) adequate procedures for verification that all           
material software, hardware, systems and equipment (collectively                
"Technology") purchased, leased, licensed or otherwise used by the Company or   
any of its Subsidiaries is capable of accurately processing date/time data      
within, from, into and between the twentieth and twenty-first centuries,        
including leap year calculations and the processing of four-digit date data     
("Year 2000 Compliant"), (b) verification of adequate year 2000 planning by     
all providers of products and services to the Companies, and (c) adequate       
contingency plans in the event of  a failure of mission-critical systems or     
products, or interruption in the provision of mission-critical services         
utilized by the Company.  The material Technology of the Company and its        
Subsidiaries is Year 2000 Compliant, and the Company and its Subsidiaries (i)   
have obtained confirmation from their                                           

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respective providers of material products and services that such products and   
services are Year 2000 Compliant in all material respects or (ii) the Company   
has alternative providers of such products or services such that, to the        
Knowledge of the Company, any interruption or failure of such third party       
products or services would not have a Material Adverse Effect on the Company.   

  Section 3.19   BROKERS.  No broker, investment banker or other
person, other than a nationally recognized investment bank, reasonably          
acceptable to Parent and the fees and expenses of which will be paid by the     
Company, that may be retained by the Company to opine as to the "fairness" of   
the transaction contemplated hereunder, is entitled to any broker's, finder's   
or other similar fee or commission in connection with the transactions          
contemplated by this Agreement based upon arrangements made by or on behalf     
of the Company.                                                                 

   Section 3.20   INSURANCE COVERAGE.  There are in full force and
effect policies of insurance issued by insurers of recognized responsibility    
insuring the Company and its properties and business against such losses and    
risks, and in such amounts, as in the Company's reasonable judgment, are        
acceptable for the nature and extent of such business and its resources.  A     
summary of the insurance policies carried by the Company as of the date         
hereof has been furnished previously to Parent.                                 

    Section 3.21   CONFLICTS OF INTEREST.  As of the date hereof, no
officer or director of the Company or any "Affiliate" (as such term is          
defined in Rule 405 under the Securities Act) of any such person has any        
direct or indirect interest (a) in any entity which does business with the      
Company, (b) in any property, asset or right which is used by the Company in    
the conduct of its business, or (c) in any contractual relationship with the    
Company other than as an employee, except as disclosed in the Company's proxy   
statement for its 1999 annual shareholders meeting or except as with Parent     
or any of Parent's Affiliates.                                                  

    ARTICLE IV

    COVENANTS OF THE COMPANY

     Section 4.1    CONDUCT OF BUSINESS PENDING THE MERGER.  Except as
expressly permitted by clauses (i) through (xvi) of this Section 4.1, during    
the period from the date of this Agreement through the Effective Time, the      
Company shall, and shall cause each of its Subsidiaries to, in all material     
respects carry on its business in the ordinary course of its business as        
currently conducted and, to the extent consistent therewith, use best efforts   
to preserve intact its current business organizations, keep available the       
services of its current officers and employees and preserve its relationships   
with customers, suppliers and others having business dealings with it to the    
end that its goodwill and ongoing business shall be unimpaired at the           
Effective Time. Without limiting the generality of the foregoing, and except    
as otherwise expressly contemplated by this Agreement or as set forth in the    
Company Letter (with specific reference to the applicable subsection below),    
the Company shall not, and shall not permit any of its Subsidiaries to,         
without the prior written consent of Parent (which consent shall not be         
unreasonably withheld or delayed):                                              

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   (i)    (A)  declare, set aside or pay any dividends on, or make any
other actual, constructive or deemed distributions in respect of, any of its    
capital stock, or otherwise make any payments to its stockholders in their      
capacity as such (other than (1) regular quarterly dividends of not more than   
$.025 per share of Company Common Stock declared and paid on dates consistent   
with past practice and (2) dividends and other distributions by wholly owned    
Subsidiaries or LifeSales, LLC), (B) other than in the case of any              
Subsidiary, split, combine or reclassify any of its capital stock or issue or   
authorize the issuance of any other securities in respect of, in lieu of or     
in substitution for shares of its capital stock or (C) purchase, redeem or      
otherwise acquire any shares of capital stock of the Company or any other       
securities thereof or any rights, warrants or options to acquire any such       
shares or other securities;                                                     

    (ii)    issue, deliver, sell, pledge, dispose of or otherwise encumber
any shares of its capital stock, any other voting securities or equity          
equivalent or any securities convertible into, or any rights, warrants or       
options to acquire any such shares, voting securities, equity equivalent or     
convertible securities, other than (A) the issuance of shares of Company        
Common Stock (x) upon the exercise of Company Stock Options outstanding on      
the date of this Agreement in accordance with their current terms, (y) to the   
401k plan of the Company pursuant to its current terms and in accordance with   
past practices, (z) upon the conversion of Convertible Debentures outstanding   
on the date of this Agreement in accordance with their current terms or (B)     
the issuance by LTCAmerica, Inc. of securities and rights pursuant to the       
programs described in Section 4.1 of the Company Letter.                        

(iii)    amend its Articles of Incorporation or charter or By-Laws; 

   (iv)    acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of or equity in, or by     
any other manner, any business or any corporation, limited liability company,   
partnership, association or other business organization or division thereof     
or otherwise acquire or agree to acquire any assets, other than transactions    
that are in the ordinary course of business consistent with past practice and   
not material to the Company and its Subsidiaries taken as a whole;              

   (v)    sell, lease or otherwise dispose of, or agree to sell, lease
or otherwise dispose of, any of its assets, other than transactions that are    
in the ordinary course of business consistent with past practice;               

   (vi)    incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to, or        
other investments in, any other person, other than (A) in the ordinary course   
of business consistent with past practices, PROVIDED, THAT the Company may      
not, without the written consent of Parent, incur any indebtedness for          
borrowed money, other than borrowings under credit facilities existing on the   
date hereof and (B) indebtedness, loans, advances, capital contributions and    
investments between the Company and any of its wholly owned Subsidiaries or     
between any of such wholly owned Subsidiaries;                                  

(vii)    alter (through merger, liquidation, reorganization,        
restructuring or in any other fashion) the corporate structure or ownership     
of the Company or of any of its Subsidiaries;                                   

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(viii)   enter into or adopt any, or amend any existing, severance  
plan, agreement or arrangement or enter into or amend any Company Plan or       
employment or consulting agreement, except as required by applicable law;       

   (ix)    increase the compensation payable or to become payable to its
directors, officers or employees (except for increases in the ordinary course   
of business consistent with past practice in salaries or wages of employees     
of the Company or any of its Subsidiaries who are not officers of the Company   
or any of its Subsidiaries) or grant any severance or termination pay to, or    
enter into or amend any employment or severance agreement with, any director    
or officer of the Company or any of its Subsidiaries, or establish, adopt,      
enter into, or, except as may be required to comply with applicable law,        
amend in any material respect or take action to enhance in any material         
respect or accelerate any rights or benefits under, any labor, collective       
bargaining, bonus, profit sharing, thrift, compensation, stock option,          
restricted stock, pension, retirement, deferred compensation, employment,       
termination, severance or other plan, agreement, trust, fund, policy or         
arrangement for the benefit of any director, officer or employee;               

    (x)    knowingly violate or knowingly fail to perform any obligation
or duty imposed upon it or any of its Subsidiaries by any applicable material   
federal, state or local law, rule, regulation, guideline or ordinance;          

 (xi)    make any change to accounting policies or procedures (other
than actions required to be taken by generally accepted accounting              
principles);                                                                    

   (xii)    prepare or file any Tax Return inconsistent with past practice
or, on any such Tax Return, take any position, make any election, or adopt      
any method that is inconsistent with positions taken, elections made or         
methods used in preparing or filing similar Tax Returns in prior periods;       

(xiii)    make any tax election or settle or compromise any material  
federal, state, local or foreign income tax liability;                          

  (xiv)    enter into or amend any agreement or contract material to the
Company and its Subsidiaries, taken as a whole, except in the ordinary course   
of business consistent with past practices; or make or agree to make any new    
capital expenditure or expenditures which in the aggregate together with all    
capital expenditures made by the Company or any of its Subsidiaries since       
December 31, 1998 are in excess of $4,000,000;                                  

(xv)    pay, discharge or satisfy any claims, liabilities or      
obligations (absolute, accrued, asserted or unasserted, contingent or           
otherwise), other than (a) the payment, discharge or satisfaction, in the       
ordinary course of business consistent with past practice or in accordance      
with their terms, of liabilities reflected or reserved against in, or           
contemplated by, the most recent financial statements (or the notes thereto)    
of the Company included in the Company SEC Documents or incurred in the         
ordinary course of business consistent with past practice or (b) the payment,   
discharge or satisfaction of any indebtedness owed by the Company or any of     
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 (xvi)    authorize, recommend, propose or announce an intention to do
any of the foregoing, or enter into any contract, agreement, commitment or      
arrangement to do any of the foregoing.                                         

Section 4.2    NO SOLICITATION                              

 (a)  TAKEOVER PROPOSALS.  The Company shall not, nor shall it
permit any of its Subsidiaries to, nor shall it authorize or permit any         
officer, director or employee of or any financial advisor, attorney or other    
advisor or representative of, the Company or any of its Subsidiaries to, (i)    
solicit, initiate or encourage the submission of, any Takeover Proposal (as     
hereafter defined), (ii) enter into any agreement with respect to any           
Takeover Proposal or (iii) participate in any discussions or negotiations       
regarding, or furnish to any person any information with respect to, or take    
any other action to facilitate any inquiries or the making of any proposal      
that constitutes, or may reasonably be expected to lead to, any Takeover        
Proposal; PROVIDED, HOWEVER, that prior to the Stockholder Meeting (as          
hereinafter defined), if the Board of Directors of the Company reasonably       
determines the Takeover Proposal constitutes a Superior Proposal (as defined    
below), then, to the extent required by the fiduciary obligations of the        
Board of Directors of the Company, as determined in good faith by a majority    
of the disinterested members thereof after receiving the advice of              
independent counsel, the Company may, in response to an unsolicited request     
therefor, furnish information with respect to the Company to, and enter into    
discussions with, any person pursuant to a customary confidentiality            
agreement.  Without limiting the foregoing, it is understood that any           
violation of the restrictions set forth in the preceding sentence by any        
executive officer of the Company or any of its Subsidiaries or any financial    
advisor, attorney or other advisor or representative of the Company or any of   
its Subsidiaries, whether or not such person is purporting to act on behalf     
of the Company or any of its Subsidiaries or otherwise, shall be deemed to be   
a breach of this Section 4.2(a) by the Company.  For purposes of this           
Agreement, "Takeover Proposal" means any proposal for a merger or other         
business combination involving the Company or any of its Subsidiaries or any    
proposal or offer to acquire in any manner, directly or indirectly, a           
substantial equity interest in, a substantial portion of the voting             
securities of, or a substantial portion of the assets of the Company or any     
of its Subsidiaries, other than the transactions contemplated by this           
Agreement, and "Superior Proposal" means a bona fide Takeover Proposal made     
by a third party which a majority of the disinterested members of the Board     
of Directors of the Company determines in its reasonable good faith judgment    
to be more favorable to the Company's stockholders than the Merger (after       
receiving the written opinion, with only customary qualifications, of the       
Company's independent financial advisor that the value of the consideration     
provided for in such proposal exceeds the value of the consideration provided   
for in the Merger) and for which financing, to the extent required, is then     
committed or which, in the reasonable good faith judgment of a majority of      
such disinterested members (after receiving the written advice of the           
Company's independent financial advisor), is highly likely to be financed by    
such third party.                                                               

     (b)  RECOMMENDATION OF THE BOARD OF DIRECTORS.  Neither the Board
of Directors of the Company nor any committee thereof shall (i) withdraw or     
modify, or propose to withdraw or modify, in a manner adverse to Parent or      
Sub, the approval or recommendation by such Board of Directors or any such      
committee of this Agreement or the Merger or (ii) approve or recommend, or      
propose to approve or recommend, any Takeover Proposal.                         

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      (c)  NOTICE OF TAKEOVER PROPOSAL.  The Company shall advise Parent
orally (within one business day) and in writing (as promptly as practicable)    
of (i) any Takeover Proposal or any inquiry with respect to or which could      
lead to any Takeover Proposal, (ii) the material terms of such Takeover         
Proposal and (iii) the identity of the person making any such Takeover          
Proposal or inquiry. The Company will keep Parent fully informed of the         
status and details of any such Takeover Proposal or inquiry.                    

 Section 4.3    THIRD PARTY STANDSTILL AGREEMENTS.  During the
period from the date of this Agreement through the Effective Time, the          
Company shall not terminate, amend, modify or waive any provision of any        
confidentiality agreement relating to a Takeover Proposal or standstill         
agreement to which the Company or any of its Subsidiaries is a party (other     
than any involving Parent). During such period, the Company agrees to           
enforce, to the fullest extent permitted under applicable law, the provisions   
of any such agreements, including, but not limited to, obtaining injunctions    
to prevent any breaches of such agreements and to enforce specifically the      
terms and provisions thereof in any court of the United States or any state     
thereof having jurisdiction.                                                    

ARTICLE V   

ADDITIONAL AGREEMENTS 

    Section 5.1    STOCKHOLDER MEETING  The Company will, as soon as
practicable following the date of this Agreement, duly call, give notice of,    
convene and hold a meeting of stockholders (the "Stockholder Meeting") for      
the purpose of considering the approval of this Agreement and the               
transactions contemplated hereby.  The Company will, through its Board of       
Directors, recommend to its stockholders the adoption or approval of the        
Agreement, shall use all reasonable efforts to solicit such approvals by its    
stockholders and shall not withdraw such recommendation.  Without limiting      
the generality of the foregoing, the Company agrees that its obligations        
pursuant to the first sentence of this Section 5.1 shall not be affected by     
the commencement, public proposal, public disclosure or communication to the    
Company of a Takeover Proposal.                                                 

      Section 5.2    PREPARATION OF THE PROXY STATEMENT. The Company and
Parent shall promptly prepare and file with the SEC the Proxy Statement and     
Parent shall prepare and file, with the reasonable cooperation and assistance   
of the Company, a Schedule 13e-3 with the SEC (the "Schedule 13e-3").  The      
Company shall mail the Proxy Statement to its stockholders at the earliest      
practical date.                                                                 

Section 5.3    ACCESS TO INFORMATION.  Subject to currently 
existing contractual and legal restrictions applicable to the Company or any    
of its Subsidiaries, the Company shall, and shall cause each of its             
Subsidiaries to, afford to the accountants, counsel, financial advisors and     
other representatives of Parent hereto reasonable access to, and permit them    
to make such inspections as they may reasonably require of, during normal       
business hours during the period from the date of this Agreement through the    
Effective Time, all their respective properties, books, contracts,              

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commitments and records (including, without limitation, the work papers of      
independent accountants, if available and subject to the consent of such        
independent accountants) and, during such period, the Company shall, and        
shall cause each of its Subsidiaries to, furnish promptly to Parent (i) a       
copy of each report, schedule, registration statement and other document        
filed by it during such period pursuant to the requirements of federal or       
state securities laws and (ii) all other information concerning its business,   
properties and personnel as Parent may reasonably request.  No investigation    
pursuant to this Section 5.3 shall affect any representation or warranty in     
this Agreement of any party hereto or any condition to the obligations of the   
parties hereto.  All information obtained by Parent pursuant to this Section    
5.3 shall be kept confidential in accordance with Section 7.2 of the Stock      
Purchase Agreement, dated January 13, 1998 between Parent and the Company       
(the "Stock Purchase Agreement").                                               

Section 5.4    FEES AND EXPENSES                            

      (a)  EXPENSES.  Except as provided in this Section 5.4 and Section
5.7, whether or not the Merger is consummated, all costs and expenses           
incurred in connection with this Agreement and the transactions contemplated    
hereby including, without limitation, the fees and disbursements of counsel,    
financial advisors and accountants, shall be paid by the party incurring such   
costs and expenses, provided that all printing expenses and all filing fees     
(including, without limitation, filing fees under the Exchange Act and the      
HSR Act) shall be divided equally between Parent and the Company.               

     (b)  EXPENSES UPON TERMINATION.  Notwithstanding any provision in
this Agreement to the contrary, if this Agreement is terminated (A) by the      
Company or Parent pursuant to Section 7.1(f), (B) by Parent pursuant to         
Section 7.1(g) or (C) by the Company or Parent at a time when Parent is         
entitled to terminate this Agreement pursuant to Section 7.1(f) or 7.1(g),      
then, in each case, the Company shall (without prejudice to any other rights    
Parent may have against the Company for breach of this Agreement) reimburse     
Parent upon demand for all out-of-pocket fees and expenses incurred or paid     
by or on behalf of Parent or any Affiliate of Parent in connection with this    
Agreement and the transactions contemplated herein, including all fees and      
expenses of counsel, investment banking firms, accountants and consultants.     

(c)  TERMINATION FEE.  Notwithstanding any provision in this
Agreement to the contrary, if (i) this Agreement is terminated by the Company   
or Parent at a time when Parent is entitled to terminate this Agreement         
pursuant to Section 7.1(b), (c), (e) or (i), and, concurrently with or within   
eighteen months after such a termination a Third Party Acquisition Event (as    
defined below) occurs, or (ii) this Agreement is terminated pursuant to         
Section 7.1(f) or 7.1(g) or by the Company or Parent at a time when Parent is   
entitled to terminate this Agreement pursuant to Section 7.1(f) or 7.1(g),      
then, in each case, the Company shall (in addition to any obligation under      
this Section 5.4(b) and without prejudice to any other rights that Parent may   
have against the Company for a breach of this Agreement) pay to Parent a        
termination fee of $20,000,000 in cash (the "Termination Fee"), such payment    
to be made promptly, but in no event later than the second business day         
following, in the case of clause (i), the later to occur of such termination    
and such Third Party Acquisition Event or, in the case of clause (ii), such     
termination; provided, however, that in the case of clause (i) but only with    
respect to a termination of this Agreement by the Company or Parent pursuant    
to Section 7.1(c) (in the circumstance where the representations                

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and warranties of the Company are true and correct in all material respects     
as of the date hereof), (e) or (i) where the applicable Third Party             
Acquisition Event constitutes an event described under clause (D) of the        
definition of such term, the Company shall only be required to pay the          
Termination Fee to Parent if the Takeover Proposal relating or giving rise to   
such Third Party Acquisition Event constitutes a Superior Proposal.             

A "Third Party Acquisition Event" means any of the following
events: (A) any person (other than Parent or its Affiliates) acquires or        
becomes the beneficial owner of 20% or more of the outstanding shares of        
Company Common Stock; (B) any group (other than a group which includes or may   
reasonably be deemed to include Parent or any of its Affiliates) is formed      
which, at the time of formation, beneficially owns 20% or more of the           
outstanding shares of Company Common Stock; (C) any person (other than Parent   
or its Affiliates) shall have commenced a tender or exchange offer for 20% or   
more of the then outstanding shares of Company Common Stock or publicly         
proposed any bonafide merger, consolidation or acquisition of all or            
substantially all the assets of the Company, or other similar business          
combination involving the Company; (D) the Company enters into, or announces    
that it proposes to enter into, an agreement, including, without limitation,    
an agreement in principle, providing for a merger or other business             
combination involving the Company or a "significant subsidiary" (as defined     
in Rule 1.02(v) of Regulation S-X as promulgated by the SEC) of the Company     
or the acquisition of a substantial interest in, or a substantial portion of    
the assets, business or operations of, the Company or a significant             
subsidiary (other than the transactions contemplated by this Agreement); (E)    
any person (other than Parent or its Affiliates) is granted any option or       
right, conditional or otherwise, to acquire or otherwise become the             
beneficial owner of shares of Company Common Stock which, together with all     
shares of Company Common Stock beneficially owned by such person, results or    
would result in such person being the beneficial owner of 20% or more of the    
outstanding shares of Company Common Stock; or (F) there is a public            
announcement with respect to a plan or intention by the Company or any          
person, other than Parent and its Affiliates, to effect any of the foregoing    
transactions.  For purposes of this Section 5.4(c), the terms "group,"          
"beneficial owner" and "person" shall be defined by reference to Section        
13(d) of the Exchange Act.                                                      

  Section 5.5    COMPANY STOCK OPTIONS. Immediately prior to the
Effective Time, each Company Stock Option which is outstanding immediately      
prior to the Effective Time shall become exercisable in full (to the extent     
not previously exercised), and shall be canceled and the holder thereof shall   
have the right to receive upon execution and delivery to the Payment Agent of   
an option termination agreement, in form and substance reasonably acceptable    
to Parent (which agreement shall be mailed by the Payment Agent to holders of   
Company Stock Options promptly following the Effective Time), an amount of      
cash equal to the result of (x) the Merger Consideration such holder would      
have received pursuant to Article I hereof had such Company Stock Option been   
exercised immediately prior to the Effective Time LESS (y) the exercise price   
of such Company Stock Option (such amount hereinafter the "Option               
Consideration"). The payment of the Option Consideration, net of any            
withholding or other applicable taxes, upon delivery to the Payment Agent of    
an option termination agreement shall be deemed to constitute full              
satisfaction of all rights pertaining to such Company Stock Option.             

Section 5.6    BEST EFFORTS                                 

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       (a)  CONSUMMATION OF THE MERGER.  Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use       
best efforts to take, or cause to be taken, all actions, and to do, or cause    
to be done, and to assist and cooperate with the other parties in doing, all    
things necessary, proper or advisable to consummate and make effective, in      
the most expeditious manner practicable, the Merger and the other               
transactions contemplated by this Agreement, including, but not limited to:     
(i) the obtaining of all necessary actions or non-actions, waivers, consents    
and approvals from all Governmental Entities and the making of all necessary    
registrations and filings (including filings with Governmental Entities) and    
the taking of all reasonable steps as may be necessary to obtain an approval    
or waiver from, or to avoid an action or proceeding by, any Governmental        
Entity (including those in connection with the HSR Act, State Takeover          
Approvals and State Insurance Approvals), (ii) the obtaining of all necessary   
consents, approvals or waivers from third parties, (iii) the defending of any   
lawsuits or other legal proceedings, whether judicial or administrative,        
challenging this Agreement and the consummation of the transactions             
contemplated hereby, including seeking to have any stay or temporary            
restraining order entered by any court or other Governmental Entity vacated     
or reversed, (iv) the taking of all reasonable actions to minimize the          
effects of any State Takeover Approval or State Insurance Approval on the       
transactions contemplated hereby, and (v) the execution and delivery of any     
additional instruments necessary to consummate the transactions contemplated    
by this Agreement.  No party to this Agreement shall consent to any voluntary   
delay of the consummation of the Merger at the behest of any Governmental       
Entity without the consent of the other parties to this Agreement, which        
consent shall not be unreasonably withheld.                                     

       (b)  REPRESENTATIONS AND WARRANTIES.  Each party shall not take any
action, or enter into any transaction, which would cause any of its             
representations or warranties contained in this Agreement to be untrue or       
result in a breach of any covenant made by it in this Agreement.                

(c)  DIVESTITURE.  Notwithstanding anything to the contrary 
contained in this Agreement, in connection with any filing or submission        
required or action to be taken by either Parent or the Company to effect the    
Merger and to consummate the other transactions contemplated hereby, the        
Company shall not, without Parent's prior written consent, commit to any        
divestiture transaction, and neither Parent nor any of its Affiliates shall     
be required to divest or hold separate or otherwise take or commit to take      
any action that limits its freedom of action with respect to, or its ability    
to retain, the Company or any of the material businesses, product lines or      
assets of Parent or any of its Subsidiaries or that otherwise would have a      
Material Adverse Effect on Parent.                                              

     Section 5.7    PUBLIC ANNOUNCEMENTS.  Parent and the Company will
not issue any press release with respect to the transactions contemplated by    
this Agreement or otherwise issue any written public statements with respect    
to such transactions without prior consultation with the other party, except    
as may be required by applicable law or by obligations pursuant to any          
listing agreement with any national securities exchange or the Nasdaq           
National Market.                                                                

      Section 5.8    REAL ESTATE TRANSFER AND GAINS TAX.  Parent and the
Company agree that either the Company or the Surviving Corporation will pay any 
state or local tax which is attributable to the transfer of the beneficial      
ownership of the Company's or its Subsidiaries' real                            

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property, if any (collectively, the "Gains Taxes"), and any penalties or        
interest with respect to the Gains Taxes, payable in connection with the        
consummation of the Merger.  The Company and Parent agree to cooperate with     
the other in the filing of any returns with respect to the Gains Taxes,         
including supplying in a timely manner a complete list of all real property     
interests held by the Company and its Subsidiaries and any information with     
respect to such property that is reasonably necessary to complete such          
returns.  The portion of the consideration allocable to the real property of    
the Company and its Subsidiaries shall be determined by Parent in its           
reasonable discretion.                                                          

     Section 5.9    INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE.
For six years from and after the Effective Time, Parent agrees to cause the     
Surviving Corporation to, and shall guarantee the obligation of the Surviving   
Corporation to, indemnify and hold harmless all past and present officers and   
directors of the Company and of its Subsidiaries to the same extent such        
persons are indemnified as of the date of this Agreement by the Company         
pursuant to the Company's Articles of Incorporation, By-Laws or agreements in   
existence on the date hereof for acts or omissions occurring at or prior to     
the Effective Time. Parent shall provide, or shall cause the Surviving          
Corporation to provide, for an aggregate period of not less than six years      
from the Effective Time, the Company's current directors and officers an        
insurance and indemnification policy that provides coverage for events          
occurring prior to the Effective Time (the "D&O Insurance") that is             
substantially similar (with respect to limits and deductibles) to the           
Company's existing policy or, if substantially equivalent insurance coverage    
is unavailable, the best available coverage; PROVIDED, HOWEVER, that the        
Surviving Corporation shall not be required to pay premiums aggregating more    
than $1,750,000 for D&O Insurance for the six year period commencing on the     
Effective Time.                                                                 

     Section 5.10   NOTIFICATION OF CERTAIN MATTERS.  Parent shall use
its best efforts to give prompt notice to the Company, and the Company shall    
use its best efforts to give prompt notice to Parent, of:  (i) the              
occurrence, or non-occurrence, of any event the occurrence, or                  
non-occurrence, of which it is aware and which would be reasonably likely to    
cause (x) any representation or warranty contained in this Agreement to be      
untrue or inaccurate in any material respect or (y) any covenant, condition     
or agreement contained in this Agreement not to be complied with or satisfied   
in all material respects, (ii) any failure of Parent or the Company, as the     
case may be, to comply in a timely manner with or satisfy any covenant,         
condition or agreement to be complied with or satisfied by it hereunder or      
(iii) any change or event which would be reasonably likely to have a Material   
Adverse Effect on the Company; PROVIDED, HOWEVER, that the delivery of any      
notice pursuant to this Section 5.10 shall not limit or otherwise affect the    
remedies available hereunder to the party receiving such notice.                

Section 5.11   EMPLOYEE BENEFIT PLANS AND AGREEMENTS        

       (a)  COMPANY PLANS.  Except as set forth in Section 5.11(b), Parent
agrees that it will cause the Surviving Corporation from and after the          
Effective Time to honor all Company Plans (other than the Company Stock         
Plans) and all employment agreements entered into by the Company prior to the   
date hereof; PROVIDED, HOWEVER, that nothing in this Agreement shall be         
interpreted as limiting the power of Parent or the Surviving Corporation to     
amend or terminate any Company Plan or any other individual employee benefit    
plan, program, agreement or policy                                              

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or as requiring Parent or the Surviving Corporation to offer to continue        
(other than as required by its terms) any written employment contract.          

   (b)  401(k) PLAN.  Effective as of the Closing Date, the 401(k)
plan of the Company shall be amended to terminate and discontinue the stock     
participation feature in Company Common Stock of such plan.                     

  (c)  CREDIT FOR PRIOR SERVICE.  In the event that Parent shall
merge any Company Plan with any benefit plan of Parent, pre-Closing service     
with the Company or any of its Subsidiaries will be counted for purposes of     
employee eligibility, seniority and vesting under such benefit plan, and any    
pre-existing condition shall be waived.                                         

    Section 5.12   STOCK PURCHASE AGREEMENT.  The Company and Parent
agree that, notwithstanding the provisions of Section 11.2(b) of the Stock      
Purchase Agreement, from the date hereof until the earlier to occur of (i)      
the Effective Time or (ii) termination of this Agreement, Parent and any        
Restricted Holder (as defined in the Stock Purchase Agreement) may vote any     
shares of Common Stock held by Parent or such Restricted Holder in any and      
all matters presented to the stockholders of the Company, may solicit proxies   
and may attempt to influence the vote of other stockholders of the Company as   
Parent, or such Restricted Holder, as applicable, deems appropriate.  None of   
the execution or performance of this Agreement, the execution or performance    
of agreements between Parent and certain officers and directors of the          
Company concerning the voting of shares of Common Stock held by such officers   
and directors or the consummation of the transactions contemplated herein by    
the Company or its Subsidiaries or by Parent or Sub shall constitute a breach   
or other default under the terms of the Stock Purchase Agreement by Company     
and its Subsidiaries or by Parent and Sub, as the case may be.                  

Section 5.13   DISSENTING SHARES.                           

    (a)  DISSENTERS' RIGHTS.  Notwithstanding any provisions of this
Agreement to the contrary, any shares of Company Common Stock held by a         
holder who has exercised such holder's dissenters' rights in accordance with    
the MBCA and who, as of the Effective Time, has not effectively withdrawn or    
lost such dissenters' rights ("Dissenting Shares"), shall not be converted      
into or represent a right to receive the Merger Consideration, but the holder   
of the Dissenting Shares shall only be entitled to such rights as are granted   
by the MBCA.                                                                    

(b)  WITHDRAWAL OF DISSENTERS' RIGHTS.  Notwithstanding the 
provisions of subsection (a) above, if any holder of shares of Company Common   
Stock who demands dissenters' rights with respect to such shares shall          
effectively withdraw or lose (through the failure to perfect or otherwise)      
such holder's dissenters' rights under the MBCA, then, as of the Effective      
Time or the occurrence of such event, such holder's shares shall                
automatically be converted into and represent only the right to receive the     
Merger Consideration upon surrender of the applicable Certificate(s) as         
provided herein.                                                                

       (c)   DEMAND FOR PAYMENT.  The Company shall give Parent (i) prompt
written notice of any written demands for payment with respect to any shares    
of Company Common Stock pursuant to dissenters' rights, and any withdrawals     
of such demands or losses of such rights, and any other instruments served      
pursuant to the MBCA, and (ii) the opportunity to participate in all            

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negotiations and proceedings with respect to demands for dissenters' rights.    
The Company shall not, except with the prior written consent of Parent,         
voluntarily make any payment with respect to demands for dissenters' rights     
or offer to settle or settle any such demands.                                  

       Section 5.14   CHIEF EXECUTIVE OFFICER.  As promptly as practicable
following the Effective Time, Robert W. MacDonald shall be appointed and        
elected by the Board of Directors of Parent as (i) the Chief Executive          
Officer of Parent and (ii) a member of the Board of Directors of Parent and     
the Company.                                                                    

     Section 5.15   CHANGE OF CONTROL.  Following the date hereof, the
Company shall use its best efforts to amend the terms of any employment         
agreement and shall take all such action as may be otherwise necessary so       
that neither the execution or performance of this Agreement nor the             
consummation of the transactions contemplated hereunder shall trigger the       
acceleration of any benefit with respect to, or require any severance or        
other payment to be paid to, any employee of the Company or any of its          
Subsidiaries upon the termination of employment of such employee.               

    Section 5.16   CONVERTIBLE DEBENTURES.  The Company shall redeem
all Convertible Debentures in accordance with their terms as a result of        
consummation of the Merger.                                                     

Section 5.17   ADVANCE OF FUNDS.  Immediately prior to the  
Effective Time, Parent shall advance, or shall cause to be advanced, to the     
Company funds necessary to pay, discharge and satisfy any indebtedness for      
borrowed money under any existing credit facility and to redeem and retire      
the Convertible Debentures to the extent such repayment or redemption is        
required to be made at or prior to the Effective Time.                          

ARTICLE VI  

  CONDITIONS PRECEDENT TO THE MERGER

      Section 6.1    CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER.  The respective obligations of each party to effect the Merger shall    
be subject to the fulfillment at or prior to the Effective Time of the          
following conditions:                                                           

   (a)  STOCKHOLDER APPROVAL.  This Agreement shall have been duly
approved by the requisite vote of stockholders of the Company in accordance     
with applicable law and the Articles of Incorporation and By-laws of the        
Company.                                                                        

  (b)  HSR AND OTHER APPROVALS.  (i) The waiting period (and any
extension thereof) applicable to the consummation of the Merger under the HSR   
Act shall have expired or been terminated.                                      

(ii) All authorizations, consents, orders, declarations or  
approvals of, or filings with, or terminations or expirations of waiting        
periods imposed by, any Governmental Entity, which the failure to obtain,       
make or occur would have the effect of making the Merger or any of the          

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transactions contemplated hereby illegal or would have, individually or in      
the aggregate, a Material Adverse Effect on Parent (assuming the Merger had     
taken place), shall have been obtained, shall have been made or shall have      
occurred.                                                                       

(c)  NO ORDER.  No court or other Governmental Entity having
jurisdiction over the Company or Parent, or any of their respective             
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered      
any law, rule, regulation, executive order, decree, injunction or other order   
(whether temporary, preliminary or permanent) which is then in effect and has   
the effect of making the Merger or any of the transactions contemplated         
hereby illegal.                                                                 

        Section 6.2    CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT
THE MERGER.  The obligation of the Company to effect the Merger shall be        
subject to the fulfillment at or prior to the Effective Time of the following   
additional conditions:                                                          

    (a)  PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND WARRANTIES.
Each of Parent and Sub shall have performed in all material respects each of    
its agreements contained in this Agreement required to be performed on or       
prior to the Effective Time, each of the representations and warranties of      
Parent and Sub contained in this Agreement that is qualified by materiality     
shall be true and correct on and as of the Effective Time as if made on and     
as of such date (other than representations and warranties which address        
matters only as of a certain date which shall be true and correct as of such    
certain date) and each of the representations and warranties that is not so     
qualified shall be true and correct in all material respects on and as of the   
Effective Time as if made on and as of such date (other than representations    
and warranties which address matters                                            

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only as of a certain date which shall be true and correct in all material       
respects as of such certain date), in each case except as contemplated or       
permitted by this Agreement, and the Company shall have received certificates   
signed on behalf of each of Parent and Sub by its Chief Executive Officer and   
its Chief Financial Officer to such effect.                                     

(b)  CERTAIN CONSENTS.  In obtaining any approval or consent
required to consummate any of the transactions contemplated herein, no          
Governmental Entity shall have imposed or shall have sought to impose any       
condition, penalty or requirement which, in the reasonable opinion of the       
Company, individually or in the aggregate, would have a Material Adverse        
Effect on Parent (assuming the consummation of the Merger).                     

      (b)  CONSENTS.  (i) The Company shall have obtained the consent or
approval (or, with respect to any agreement concerning indebtedness for         
borrowed money owed by the Company or any of its Subsidiaries to any            
reinsurer of the Company or any of its Subsidiaries, paid such indebtedness     
in full) (and shall have provided Parent with evidence, reasonably              
satisfactory to Parent, of such consent, approval or payment) of each person    
or Governmental Entity whose consent or approval shall be required in           
connection with the transactions contemplated hereby under any loan or credit   
agreement, note, mortgage, indenture, lease or other agreement or instrument    
of the Company or any Subsidiary or any law, rule or regulation applicable to   
the Company or any of its Subsidiaries, except as to which the failure to       
obtain such consents and approvals would not, in the reasonable opinion of      
Parent, individually or in the aggregate, have a Material Adverse Effect on     
the Company or Parent or upon the consummation of the transactions              
contemplated in this Agreement.                                                 

    (ii) In obtaining any approval or consent required to consummate
any of the transactions contemplated herein, no Governmental Entity shall       
have imposed or shall have sought to impose any condition, penalty or           
requirement which, in the reasonable opinion of Parent, individually or in      
aggregate would have a Material Adverse Effect on the Company or Parent.        

  (c)  LITIGATION.  There shall not be instituted or pending any
suit, action or proceeding before any Governmental Entity as a result of this   
Agreement or any of the transactions contemplated herein or therein which       
would have a Material Adverse Effect on the Company or Parent.                  

ARTICLE VII 

 TERMINATION, AMENDMENT AND WAIVER

    Section 7.1    TERMINATION.  This Agreement may be terminated at
any time prior to the Effective Time, whether before or after any approval of   
the matters presented in connection with the Merger by the stockholders of      
the Company or Parent:                                                          

(a)  by mutual written consent of Parent and the Company;   

     (b)  except for a breach by the Company of Section 5.1, by either
Parent or the Company if the other party shall have failed to comply in any     
material respect with any of its covenants or agreements contained in this      
Agreement required to be complied with prior to the date of such termination,   
which failure to comply has not been cured within thirty business days          
following receipt by such other party of written notice from the                
non-breaching party of such failure to comply;                                  

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       (c)  by either Parent or the Company if there has been (i) a breach
by the other party (in the case of Parent, including any material breach by     
Sub) of any representation or warranty that is not qualified as to              
materiality which has the effect of making such representation or warranty      
not true and correct in all material respects or (ii) a breach by the other     
party (in the case of Parent, including any material breach by Sub) of any      
representation or warranty that is qualified as to materiality, in each case    
which breach has not been cured within thirty business days following receipt   
by the breaching party from the non-breaching party of written notice of the    
breach;                                                                         

  (d)  by Parent or the Company if:  (i) the Merger has not been
effected on or prior to the close of business on December 31, 1999; PROVIDED,   
HOWEVER, that the right to terminate this Agreement pursuant to this Section    
7.1(d)(i) shall not be available to any party whose failure to fulfill any of   
its obligations contained in this Agreement has been the cause of, or           
resulted in, the failure of the Merger to have occurred on or prior to the      
aforesaid date; or (ii) any court or other Governmental Entity having           
jurisdiction over a party hereto shall have issued an order, decree or ruling   
or taken any other action permanently enjoining, restraining or otherwise       
prohibiting the transactions contemplated by this Agreement and such order,     
decree, ruling or other action shall have become final and nonappealable;       

       (e)  by Parent or the Company if the stockholders of the Company do
not approve this Agreement at the Stockholder Meeting or at any adjournment     
or postponement thereof;                                                        

      (f)  by Parent or the Company if the Company enters into a merger,
acquisition or other agreement (including an agreement in principle) to         
effect a Superior Proposal or the Board of Directors of the Company resolves    
to do so; PROVIDED, HOWEVER, that the Company may not terminate this            
Agreement pursuant to this Section 7.1(f) unless (i) the Company has            
delivered to Parent a written notice of the Company's intent to enter into      
such an agreement to effect the Superior Proposal, (ii) five business days      
have elapsed following delivery to Parent of such written notice by the         
Company and (iii) during such five business day period the Company has fully    
cooperated with Parent, including, without limitation, informing Parent of      
the terms and conditions of the Takeover Proposal and the identity of the       
person making the Takeover Proposal, with the intent of enabling Parent to      
agree to a modification of the terms and conditions of this Agreement so that   
the transactions contemplated hereby may be effected; PROVIDED, FURTHER, that   
the Company may not terminate this Agreement pursuant to this Section 7.1(f)    
unless at the end of such five business day period the Board of Directors of    
the Company continues reasonably to believe that the Takeover Proposal          
constitutes a Superior Proposal and prior to such termination the Company       
pays to Parent the amounts specified under Sections 5.4(a), (b) and (c);        

   (g)  by Parent if (i) the Board of Directors of the Company, in
breach of Section 5.1, shall not have recommended, or shall have resolved not   
to recommend, or shall have qualified, modified or withdrawn its                
recommendation of the Merger or declaration that the Merger is advisable and    
fair to and in the best interest of the Company and its stockholders, or        
shall have resolved to do so, (ii) the Board of Directors of the Company        
shall have recommended to the stockholders of the Company any Takeover          
Proposal or shall have resolved to do so or (iii) a                             

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third party tender offer or exchange offer for 20% or more of the outstanding   
shares of capital stock of the Company is commenced, and the Board of           
Directors of the Company fails to recommend against acceptance of such tender   
offer or exchange offer by its stockholders (including by taking no position    
with respect to the acceptance of such tender offer or exchange offer by its    
stockholders);                                                                  

     (h)  by Parent on or prior to June 1, 1999, if this Agreement and
the consummation of the transactions contemplated hereunder shall not have      
been duly approved by the Board of Management of Allianz Aktiengesellschaft,    
the indirect parent company of Parent.                                          

      (i)  by either Parent or the Company prior to June 8, 1998, if the
Company shall have received (A) the written opinion of a nationally             
recognized investment bank reasonably acceptable to Parent (the "Opinion        
Provider") that, as of the date of the Agreement, the Per Share Amount is       
unfair to the Company's stockholders from a financial point of view, a copy     
of which opinion and other materials presented to the Company's Board of        
Directors shall be delivered to Parent, or (B) a written statement from         
Opinion Provider that it is not able to render an opinion that as of the date   
of the Agreement the Per Share Amount is fair to the Company's stockholders     
from a financial point of view, a copy of which statement and any other         
materials presented to the Company's Board of Directors shall be delivered to   
Parent.                                                                         

      The right of any party hereto to terminate this Agreement pursuant
to this Section 7.1 shall remain operative and in full force and effect         
regardless of any investigation made by or on behalf of any party hereto, any   
person controlling any such party or any of their respective officers or        
directors, whether prior to or after the execution of this Agreement.           

      Section 7.2    EFFECT OF TERMINATION.  In the event of termination
of this Agreement by either Parent or the Company, as provided in Section       
7.1, this Agreement shall forthwith become void and there shall be no           
liability hereunder on the part of the Company, Parent, Sub or their            
respective officers or directors (except for the last sentence of Section 5.3   
and the entirety of Section 5.4, which shall survive the termination);          
PROVIDED, HOWEVER, that nothing contained in this Section 7.2 shall relieve     
any party hereto from any liability for any willful breach of a                 
representation or warranty contained in this Agreement or the breach of any     
covenant contained in this Agreement.                                           

   Section 7.3    AMENDMENT.  This Agreement may be amended by the
parties hereto, by or pursuant to action taken by their respective Boards of    
Directors, at any time before or after approval of the matters presented in     
connection with the Merger by the stockholders of Parent and the Company,       
but, after any such approval, no amendment shall be made which by law           
requires further approval by such stockholders without such further approval.   
This Agreement may not be amended except by an instrument in writing signed   
on behalf of each of the parties hereto.                                        

    Section 7.4    WAIVER.  At any time prior to the Effective Time,
the parties hereto may (i) extend the time for the performance of any of the    
obligations or other acts of the other parties hereto, (ii) waive any           
inaccuracies in the representations and warranties contained herein or in any   
document delivered pursuant hereto and (iii) waive compliance with any of the   
agreements                                                                      

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or conditions contained herein which may legally be waived.  Any agreement on   
the part of a party hereto to any such extension or waiver shall be valid       
only if set forth in an instrument in writing signed on behalf of such party.   

    ARTICLE VIII

    GENERAL PROVISIONS

      Section 8.1    NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES  The
representations and warranties in this Agreement or in any instrument           
delivered pursuant to this Agreement shall terminate at the Effective Time.     

Section 8.2    NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given when delivered          
personally, one day after being delivered to an overnight courier or when       
sent via facsimile (with a confirmatory copy sent by overnight courier) to      
the parties at the following addresses (or at such other address for a party    
as shall be specified by like notice):                                          

(a)  if to Parent or Sub, to                                

       Allianz Life Insurance Company of North America
1750 Hennepin Avenue South              
Minneapolis, Minnesota 55403            
Attention: Edward J. Bonach,            
                               Senior Vice President and Chief Financial Officer
Facsimile No.: (612) 347-6657           

with a copy to:                                   

Dorsey & Whitney LLP                    
Pillsbury Center South                  
220 South Sixth Street                  
Minneapolis, Minnesota 55402            
Attention:  William B. Payne            
Facsimile No.: (612) 340-8738           

(b)  if to the Company, to                                  

Life USA Holding, Inc.                  
700 Interchange Building North          
300 South Highway 169                   
Minneapolis, Minnesota 55425            
Attention: Robert W. MacDonald          
Chairman and CEO  
Facsimile No.: (612) 525-6141           

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with a copy to:                                   

Kaplan, Strangis and Kaplan, P.A.       
5500 Norwest Center                     
Minneapolis, Minnesota 55402            
Attention: Bruce J. Parker              
Facsimile No.: (612) 375-1143           

    Section 8.3    INTERPRETATION.  When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this            
Agreement unless otherwise indicated.  The table of contents and headings       
contained in this Agreement are for reference purposes only and shall not       
affect in any way the meaning or interpretation of this Agreement.  Whenever    
the words "include," "includes" or "including" are used in this Agreement,      
they shall be deemed to be followed by the words "without limitation."          

   Section 8.4    COUNTERPARTS.  This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement,      
and shall become effective when one or more counterparts have been signed by    
each of the parties and delivered to the other parties.                         

  Section 8.5    ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.
This Agreement, except and as provided in the last sentence of Section 5.3,     
constitutes the entire agreement and supersedes all prior agreements and        
understandings, both written and oral, among the parties with respect to the    
subject matter hereof.  Except as provided pursuant to Section 5.9 and 5.11,    
this Agreement is not intended to confer upon any person other than the         
parties hereto any rights or remedies hereunder.                                

       Section 8.6    GOVERNING LAW.  This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Minnesota,           
regardless of the laws that might otherwise govern under applicable             
principles of conflicts of laws thereof.                                        

    Section 8.7    ASSIGNMENT.  Subject to Section 1.1, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be    
assigned by any of the parties hereto (whether by operation of law or           
otherwise) without the prior written consent of the other parties.              

   Section 8.8    SEVERABILITY.  If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule   
of law, or public policy, all other terms, conditions and provisions of this    
Agreement shall nevertheless remain in full force and effect so long as the     
economic and legal substance of the transactions contemplated hereby are not    
affected in any manner materially adverse to any party.  Upon such              
determination that any term or other provision is invalid, illegal or           
incapable of being enforced, the parties shall negotiate in good faith to       
modify this Agreement so as to effect the original intent of the parties as     
closely as possible in a mutually acceptable manner in order that the           
transactions contemplated by this Agreement may be consummated as originally    
contemplated to the fullest extent possible.                                    

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     Section 8.9    ENFORCEMENT OF THIS AGREEMENT.  The parties hereto
agree that irreparable damage would occur in the event that any of the          
provisions of this Agreement were not performed in accordance with their        
specific wording or were otherwise breached.  It is accordingly agreed that     
the parties hereto shall be entitled to seek an injunction or injunctions to    
prevent breaches of this Agreement and to enforce specifically the terms and    
provisions hereof in any court of the United States or any state having         
jurisdiction, such remedy being in addition to any other remedy to which any    
party is entitled at law or in equity.                                          

    IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized   
all as of the date first written above.                                         

                            ALLIANZ LIFE INSURANCE COMPANY
                  OF NORTH AMERICA

                       By:  /s/ Edward J. Bonach
                                    --------------------------------
                          Name: Edward J. Bonach
                                          Title: Senior Vice President and Chief
                                   Financial Officer

          NOVA NEW CO.

                       By:  /s/ Edward J. Bonach
                                    --------------------------------
                          Name: Edward J. Bonach
                    Title: President

                    LIFE USA HOLDING, INC.

                          By:  /s/ Robert W. Macdonald
                                    --------------------------------
                             Name: Robert W. MacDonald
                                       Title: Chairman and Chief Executive
                         Officer

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                                                          APPENDIX B

[FAIRNESS OPINION OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION] 

                                          June 7, 1999

Board of Directors                                                              
Life USA Holdings, Inc.                                                         
300 South Highway 169                                                           
Suite #600                                                                      
Minneapolis MN 55426                                                            

Attention:  Robert W. MacDonald                                                 
Chairman                                                
Gentlemen:                                                                      

You have requested our opinion as to the fairness, from a financial   
point of view, to the stockholders of Life USA Holdings, Inc. (the "Company")   
of the consideration to be received by the Company's stockholders pursuant to   
the terms of the Agreement and Plan of Merger, dated as of May 17, 1999 (the    
"Agreement"), by and among Allianz Life Insurance Company of North America      
("Allianz Life"), Nova New Co. ("Merger Sub"), a wholly owned subsidiary of     
Allianz Life and the Company, pursuant to which Merger Sub will be merged       
(the "Merger") with and into the Company.                                       

Pursuant to the Agreement, each share of common stock, par value $.01 
per share, ("Company Common Stock") of the Company will be converted (other     
than shares owned by Allianz Life and subject to certain other exceptions)      
into the right to receive $20.75 per share in cash.                             

In arriving at our opinion, we have reviewed the Agreement.  We also  
have reviewed financial and other information that was publicly available or    
furnished to us by the Company including information provided during            
discussions with management.  Included in the information provided during       
discussions with management were certain financial projections of the Company   
prepared by the management of the Company.  In addition, we have compared       
certain financial and securities data of the Company with various other         
companies whose securities are traded in public markets, reviewed the           
historical stock prices and trading volumes of Company Common Stock, reviewed   
prices and premiums paid in certain other business combinations and conducted   
such other financial studies, analyses and investigations as we deemed          
appropriate for purposes of this opinion.                                       

In rendering our opinion, we have relied upon and assumed the accuracy
and completeness of all of the financial and other information that was         
available to us from public sources, that was provided to us by the Company     
or its representatives, or that was otherwise reviewed by us.  With respect     
to the financial projections supplied to us, we have assumed that they have     
been reasonably prepared on the basis reflecting the best currently available   
estimates and judgments of the management of the Company as to the future       
operating and financial performance of the Company.  We have not assumed any    
responsibility for making an independent evaluation of any assets or            
liabilities or for making any independent verification of any of the            
information reviewed by us.                                                     

Our opinion is necessarily based on economic, market, financial and   
other conditions as they exist on, and on the information made available to     
us as of, the date of this letter.  It should be understood that, although      
subsequent developments may affect this opinion, we do not have any             
obligation to update, revise or reaffirm this opinion.  Our opinion does not    
address the relative merits of the Merger and the other business strategies     
being considered by the Company's Board of Directors, nor does it address the   

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Board's decision to proceed with the Merger.  Our opinion does not constitute   
a recommendation to any stockholder as to how such stockholder should vote on   
the proposed Merger.                                                            

 Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of
its investment banking services, is regularly engaged in the valuation of       
businesses and securities in connection with mergers, acquisitions,             
underwritings, sales and distributions of listed and unlisted securities,       
private placements and valuations for corporate and other purposes.  DLJ has    
been retained by the Company to serve as its exclusive financial advisor in     
connection with the evaluation of the fairness, from a financial point of       
view, of the consideration to be received in connection with the Merger.        

 Based upon the foregoing and such other factors as we deem relevant, we
are of the opinion that the consideration to be received by the holders of      
Company Common Stock pursuant to the Agreement is fair to such holders from a   
financial point of view.                                                        

               Very truly yours,

                          DONALDSON, LUFKIN & JENRETTE
                    SECURITIES CORPORATION

                        By:   /s/ David M. Platter
                                    --------------------------------
                          David M. Platter
                           Managing Director

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                                                          APPENDIX C

   SECTIONS 302A.471 AND 302A.473 OF THE MINNESOTA
   BUSINESS CORPORATION ACT - DISSENTERS' APPRAISAL RIGHTS

302A.471. Rights of dissenting shareholders.                                    

  Subdivision 1.  Actions creating rights.  A shareholder of a corporation
may dissent from, and obtain payment for the fair value of the shareholder's    
shares in the event of, any of the following corporate actions:                 

 (a)  An amendment of the articles that materially and adversely affects
the rights or preferences of the shares of the dissenting shareholder in that   
it:                                                                             

(1)  alters or abolishes a preferential right of the shares;          

 (2)  creates, alters, or abolishes a right in respect of the redemption
of the shares, including provision respecting a sinking fund for the            
redemption or repurchase of the shares;                                         

 (3)  alters or abolishes a preemptive right of the holder of the shares
to acquire shares, securities other than shares, or rights to purchase shares   
or securities other than shares;                                                

 (4)  excludes or limits the right of a shareholder to vote on a matter,
or to cumulate votes, except as the right may be excluded or limited through    
the authorization or issuance of securities of an existing or new class or      
series with similar or different voting rights; except that an amendment to     
the articles of an issuing public corporation that provides that section        
302A.671 does not apply to a control share acquisition does not give rise to    
the right to obtain payment under this section;                                 

(b)  A sale, lease, transfer, or other disposition of all or          
substantially all of the property and assets of the corporation, but not        
including a transaction permitted without shareholder approval in section       
302A.661, subdivision 1, or a disposition in dissolution described in section   
302A.725, subdivision 2, or a disposition pursuant to an order of a court, or   
a disposition for cash on terms requiring that all or substantially all of      
the net proceeds of disposition be distributed to the shareholders in           
accordance with their respective interests within one year after the date of    
disposition;                                                                    

  (c)  A plan of merger, whether under this chapter or under chapter 322B,
to which the corporation is a party, except as provided in subdivision 3;       

(d)  A plan of exchange, whether under this chapter or under chapter  
322B, to which the corporation is a party as the corporation whose shares       
will be acquired by the acquiring corporation, if the shares of the             
shareholder are entitled to be voted on the plan; or                            

(e)  Any other corporate action taken pursuant to a shareholder vote  
with respect to which the articles, the bylaws, or a resolution approved by     
the board directs that dissenting shareholders may obtain payment for their     
shares.                                                                         

 Subdivision 2.  Beneficial owners.  (a)  A shareholder shall not assert
dissenters' rights as to less than all of the shares registered in the name     
of the shareholder, unless the shareholder dissents with respect to all the     
shares that are beneficially owned by another person but registered in the      
name of the shareholder and discloses the name and address of each beneficial   
owner on whose behalf the shareholder                                           

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dissents.  In that event, the rights of the dissenter shall be determined as    
if the shares as to which the shareholder has dissented and the other shares    
were registered in the names of different shareholders.                         

(b)  The beneficial owner of shares who is not the shareholder may    
assert dissenters' rights with respect to shares held on behalf of the          
beneficial owner, and shall be treated as a dissenting shareholder under the    
terms of this section and section 302A.473, if the beneficial owner submits     
to the corporation at the time of or before the assertion of the rights a       
written consent of the shareholder.                                             

Subdivision 3.  Rights not to apply.  (a)  Unless the articles, the   
bylaws, or a resolution approved by the board otherwise provide, the right to   
obtain payment under this section does not apply to a shareholder of the        
surviving corporation in a merger, if the shares of the shareholder are not     
entitled to be voted on the merger.                                             

(b)  If a date is fixed according to section 302A.445, subdivision 1, 
for the determination of shareholders entitled to receive notice of and to      
vote on an action described in subdivision 1, only shareholders as of the       
date fixed, and beneficial owners as of the date fixed who hold through         
shareholders, as provided in subdivision 2, may exercise dissenters' rights.    

Subdivision 4.  Other rights.  The shareholders of a corporation who  
have a right under this section to obtain payment for their shares do not       
have a right at law or in equity to have a corporate action described in        
subdivision 1 set aside or rescinded, except when the corporate action is       
fraudulent with regard to the complaining shareholder or the corporation.       

302A.473. Procedures for asserting dissenters' rights.                          

Subdivision 1.  Definitions.  (a) For purposes of this section, the   
terms defined in this subdivision have the meanings given them.                 

(b)  "Corporation" means the issuer of the shares held by a dissenter 
before the corporate action referred to in section 302A.471, subdivision 1 or   
the successor by merger of that issuer.                                         

(c)  "Fair value of the shares" means the value of the shares of a    
corporation immediately before the effective date of the corporate action       
referred to in section 302A.471, subdivision 1.                                 

 (d)  "Interest" means interest commencing five days after the effective
date of the corporate action referred to in section 302A.471, subdivision 1,    
up to and including the date of payment, calculated at the rate provided in     
section 549.09 for interest on verdicts and judgments.                          

 Subdivision 2.  Notice of action.  If a corporation calls a shareholder
meeting at which any action described in section 302A.471, subdivision 1 is     
to be voted upon, the notice of the meeting shall inform each shareholder of    
the right to dissent and shall include a copy of section 302A.471 and this      
section and a brief description of the procedure to be followed under these     
sections.                                                                       

Subdivision 3.  Notice of dissent.  If the proposed action must be    
approved by the shareholders, a shareholder who is entitled to dissent under    
section 302A.471 and who wishes to exercise dissenters' rights must file with   
the corporation before the vote on the proposed action a written notice of      
intent to demand the fair value of the shares owned by the shareholder and      
must not vote the shares in favor of the proposed action.                       

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Subdivision 4.  Notice of procedure; deposit of shares.  (a) After the
proposed action has been approved by the board and, if necessary, the           
shareholders, the corporation shall send to all shareholders who have           
complied with subdivision 3 and to all shareholders entitled to dissent if no   
shareholder vote was required, a notice that contains:                          

(1)  The address to which a demand for payment and certificates of    
certificated shares must be sent in order to obtain payment and the date by     
which they must be received;                                                    

(2)  Any restrictions on transfer of uncertificated shares that will  
apply after the demand for payment is received;                                 

 (3)  A form to be used to certify the date on which the shareholder, or
the beneficial owner on whose behalf the shareholder dissents, acquired the     
shares or an interest in them and to demand payment; and                        

  (4)  A copy of section 302A.471 and this section and a brief description
of the procedures to be followed under these sections.                          

(b)  in order to receive the fair value of the shares, a dissenting   
shareholder must demand payment and deposit certificated shares or comply       
with any restrictions on transfer of uncertificated shares within 30 days       
after the notice required by paragraph (a) was given, but the dissenter         
retains all other rights of a shareholder until the proposed action takes       
effect.                                                                         

Subdivision 5.  Payment; return of shares.  (a) After the corporate   
action takes effect, or after the corporation receives a valid demand for       
payment, whichever is later, the corporation shall remit to each dissenting     
shareholder who has complied with subdivisions 3 and 4 the amount the           
corporation estimates to be the fair value of the shares, plus interest,        
accompanied by:                                                                 

  (1)  The corporation's closing balance sheet and statement of income for
a fiscal year ending not more than 16 months before the effective date of the   
corporate action, together with the latest available interim financial          
statements;                                                                     

 (2)  An estimate by the corporation of the fair value of the shares and
a brief description of the method used to reach the estimate; and               

(3)  A copy of section 302A.471 and this section, and a brief         
description of the procedure to be followed in demanding supplemental payment.  

 (b)  The corporation may withhold the remittance described in paragraph
(a) from a person who was not a shareholder on the date the action dissented    
from was first announced to the public or who is dissenting on behalf of a      
person who was not a beneficial owner on that date.  If the dissenter has       
complied with subdivisions 3 and 4, the corporation shall forward to the        
dissenter the materials described in paragraph (a) a statement of the reason    
for withholding the remittance, and an offer to pay to the dissenter the        
amount listed in the materials if the dissenter agrees to accept that amount    
in full satisfaction. The dissenter may decline the offer and demand payment    
under subdivision 6. Failure to do so entitles the dissenter only to the        
amount offered.  If the dissenter makes demand, subdivisions 7 and 8 apply.     

(c)  If the corporation fails to remit payment within 60 days of the  
deposit of certificates or the imposition of transfer restrictions on           
uncertificated shares, it shall return all deposited certificates and           

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cancel all transfer restrictions.  However, the corporation may again give      
notice under subdivision 4 and require deposit or restrict transfer at a        
later time.                                                                     

Subdivision 6.  Supplemental payment; demand.  If a dissenter believes
that the amount remitted under subdivision 5 is less than the fair value of     
the shares plus interest, the dissenter may give written notice to the          
corporation of the dissenter's own estimate of the fair value of the shares,    
plus interest, within 30 days after the corporation mails the remittance        
under subdivision 5, and demand payment of the difference.  Otherwise, a        
dissenter is entitled only to the amount remitted by the corporation.           

 Subdivision 7.  Petition; determination.  If the corporation receives a
demand under subdivision 6, it shall, within 60 days after receiving the        
demand, either pay to the dissenter the amount demanded or agreed to by the     
dissenter after discussion with the corporation or file in court a petition     
requesting that the court determine the fair value of the shares, plus          
interest.  The petition shall be filed in the county in which the registered    
office of the corporation is located, except that a surviving foreign           
corporation that receives a demand relating to the shares of a constituent      
domestic corporation shall file the petition in the county in this state in     
which the last registered office of the constituent corporation was located.    
The petition shall name as parties all dissenters who have demanded payment     
under subdivision 6 and who have not reached agreement with the corporation.    
The corporation shall, after filing the petition, serve all parties with a      
summons and copy of the petition under the rules of 180 civil procedure.        
Nonresidents of this state may be served by registered or certified mail or     
by publication as provided by law. Except as otherwise provided, the rules of   
civil procedure apply to this proceeding.  The jurisdiction of the court is     
plenary and exclusive.  The court may appoint appraisers, with powers and       
authorities the court deems proper, to receive evidence on and recommend the    
amount of the fair value of the shares. The court shall determine whether the   
shareholder or shareholders in question have fully complied with the            
requirements of this section, and shall determine the fair value of the         
shares, taking into account any and all factors the court finds relevant,       
computed by any method or combination of methods that the court, in its         
discretion, sees fit to use, whether or not used by the corporation or by a     
dissenter.  The fair value of the shares as determined by the court is          
binding on all shareholders, wherever located.  A dissenter is entitled to      
judgment in cash for the amountby which the fair value of the shares as         
determined by the court, plus interest, exceeds the amount, if any, remitted    
under subdivision 5, but shall not be liable to the corporation for the         
amount, if any, by which the amount, if any, remitted to the dissenter under    
subdivision 5 exceeds the fair value of the shares as determined by the         
court, plus interest.                                                           

Subdivision 8.  Costs; fees; expenses.  (a) The court shall determine 
the costs and expenses of a proceeding under subdivision 7, including the       
reasonable expenses and compensation of any appraisers appointed by the         
court, and shall assess those costs and expenses against the corporation,       
except that the court may assess part or all of those costs and expenses        
against a dissenter whose action in demanding payment under subdivision 6 is    
found to be arbitrary, vexatious, or not in good faith.                         

(b)  If the court finds that the corporation has failed to Comply     
substantially with this section, the court may assess all fees and expenses     
of any experts or attorneys as the court deems equitable.  These fees and       
expenses may also be assessed against a person who has acted arbitrarily,       
vexatiously, or not in good faith in bringing the proceeding, and may be        
awarded to a party injured by those actions.                                    

(c)  The court may award, in its discretion, fees and expenses to an  
attorney for the dissenters out of the amount awarded to the dissenters, if     
any.                                                                            

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Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘PREM14A’ Filing		Date		First		Last			Other Filings
		12/22/00		51
		1/15/00		51
		1/1/00		77
		12/31/99		14		91
		11/5/99		54
		10/13/99		51					SC 13D/A
		7/14/99		51
Filed on:		6/25/99							SC 13E3
		6/7/99		13		96
		6/4/99		28		29
		6/1/99		41		92
		5/31/99		41
		5/20/99		34
		5/19/99		54					8-K,  SC 13D/A
		5/17/99		3		96			8-K
		5/16/99		13		26
		5/14/99		18		28			10-Q
		5/13/99		23
		5/12/99		22
		4/30/99		3		75			SC 13D/A
		4/22/99		52
		4/21/99		22
		4/12/99		49
		4/5/99		28
		4/1/99		49
		3/31/99		19		71			10-Q
		3/10/99		22		49			SC 13G/A
		2/26/99		51
		2/12/99		51					SC 13G/A
		2/11/99		51					SC 13G
		1/25/99		21
		1/21/99		51					SC 13G/A
		1/6/99		28
		1/1/99		49
		12/31/98		19		80			10-K
		7/29/98		21
		7/1/98		48		49
		6/8/98		41		92
		6/4/98		28
		4/1/98		49
		3/31/98		19					10-Q
		3/10/98		48
		2/10/98		21					SC 13D/A,  SC 13G/A
		1/13/98		83					8-K
		12/31/97		19		71			10-K,  10-K/A
		12/1/97		49
		7/1/97		49
		4/1/97		49
		2/1/97		49
		1/1/97		18
		12/31/96		19		71			10-K
		10/17/96		49
		9/16/96		49
		4/1/96		49
		3/11/96		49
		1/1/96		30		71
		12/31/95		19		71
		11/27/95		49
		10/1/95		49
		8/1/95		49
		4/1/95		49
		1/1/95		23		29
		12/31/94		19		71
		4/1/94		49
		2/1/94		49
		1/1/94		49
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