<PAGE>1
________________________________________________________________________________
________________________________________________________________________________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________________ to _____________________
Commission file number 1-5683
USLIFE Corporation
(Exact name of Registrant as specified in its charter)
New York 13-2578598
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
125 Maiden Lane, New York, N. Y. 10038
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 709-6000
_____________________
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
___________________ ______________________
New York Stock Exchange
Common Stock, par value $1 per share Chicago Stock Exchange
Common Stock Purchase Rights Pacific Stock Exchange
_____________________
Securities registered pursuant to Section 12(g) of the Act:
Preferred Stock, $4.50 Series A Preferred Stock, $5.00 Series B
Convertible, par value Convertible, par value
$1 per share $1 per share
_____________________
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes....X.... No.......
_____________________
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated herein by reference in Part III of this Form 10-K or any amendment
to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of February 22, 1996 was approximately $1,097,664,000.
_____________________
The number of shares outstanding of the Registrant's Common Stock as of
February 22, 1996 was 34,496,445.
________________________________________________________________________________
________________________________________________________________________________
DOCUMENTS INCORPORATED BY REFERENCE
Specified information in USLIFE Corporation's definitive proxy statement to
be filed within 120 days after the end of USLIFE's fiscal year ended December
31, 1995 for use in connection with the Annual Meeting of Shareholders to be
held on May 21, 1996, is incorporated by reference in Part III hereof.
<PAGE>2
Items 1, 6 and 7. - Business; Selected Financial Data; Management's Discussion
and Analysis of Financial Condition and Results of
Operations
USLIFE CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
The following Selected Financial Data of USLIFE Corporation and
subsidiaries should be read in conjunction with the related notes thereto and
with the financial statements and notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
Year Ended December 31
______________________________________________________________
1995 1994 1993 1992 1991
____ ____ ____ ____ ____
(In Thousands Except Per Share Statistics)
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Total income........................ $1,739,552 $1,651,187 $1,600,038 $1,529,452 $1,382,906
========== ========== ========== ========== ==========
Income from operations.............. $ 105,414 $ 96,185 $ 97,157 $ 69,612 $ 74,672
Cumulative effect of
accounting change (a).............. - - - (37,990) -
__________ __________ __________ __________ __________
Net income.......................... $ 105,414 $ 96,185 $ 97,157 $ 31,622 $ 74,672
========== ========== ========== ========== ==========
Income per share:(b)
Income from operations.............. $3.03 $2.79 $2.83 $2.04 $2.14
Cumulative effect of
accounting change (a).............. - - - (1.12) -
_____ _____ _____ _____ _____
Net income.......................... $3.03 $2.79 $2.83 $ .92 $2.14
===== ===== ===== ===== =====
Number of shares used in income
per share calculations............. 34,811 34,530 34,307 34,085 34,704
====== ====== ====== ====== ======
Dividends Per Common Share........... $ .91 $ .84 $ .81 $ .76 $ .71
===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
December 31
______________________________________________________________
1995 1994 1993 1992 1991
____ ____ ____ ____ ____
(In Thousands Except Per Share Statistics)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (c):
Total assets....................... $7,930,504 $7,004,262 $6,740,241 $6,095,272 $5,329,269
Long-term debt..................... 349,493 349,360 349,235 349,439 249,229
Equity Capital:
Reported......................... 1,308,254 877,888 966,029 890,441 884,436
Before unrealized gains and
losses on securities............ 1,112,804 1,034,136 966,058 890,606 884,449
Equity Capital per share (b):
Reported......................... 37.47 25.43 28.07 26.07 25.90
Before unrealized gains and
losses on securities............ 31.87 29.96 28.07 26.07 25.90
Number of shares used in Equity
Capital per share calculations.. 34,918 34,515 34,413 34,158 34,146
</TABLE>
__________
(a) Effective as of January 1, 1992, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The Company elected to recognize
the initial obligation under the Statement by means of a one-time charge to net
income for cumulative effect of the accounting change.
(b) See Note 1 of Notes to Financial Statements as to calculations of
income per share. Equity Capital per share was calculated by dividing Equity
Capital by the number of common and common equivalent shares outstanding at the
end of each period.
(c) Effective as of January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." See Note 1 of Notes to Financial Statements for
further information.
<PAGE>3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Financial Condition
Liquidity
The liquidity requirements of the Company are met primarily by cash flows
from operations of the life insurance subsidiaries and accumulated funds at the
subsidiary level. These internal sources of liquidity are complemented by such
external sources as available bank lines of credit and revolving credit
agreements and the ability of the Company to utilize capital markets for
intermediate and long-term financing.
Premium and investment income as well as maturities and sales of invested
assets provide the primary sources of cash available at the life insurance
subsidiaries, while cash is applied by such subsidiaries to payment of policy
benefits and loans, costs of acquiring new business (principally commissions),
and operating expenses, as well as purchases of new investments. Net cash
provided from operating activities of the life insurance subsidiaries amounted
to approximately $211 million in 1995.
Payment of dividends from the life insurance subsidiaries for application
toward liquidity needs at the parent company level (including overhead costs,
interest on indebtedness and dividends on preferred and common stocks) may
require regulatory approval in cases where such dividends exceed certain
guidelines. These guidelines are generally based on after-tax income and equity
capital as reported to regulatory authorities on the basis of statutory
accounting practices (see Note 18 of Notes to Financial Statements) and, at a
further threshold, may require payment of additional taxes under provisions of
Federal income tax law applicable to life insurance companies. In determining
the timing and amount of such dividend payments, management considers, among
other factors, insurance industry rating agency criteria which are based
primarily upon the statutory financial position of life insurance companies.
Historically, these self imposed criteria have been more restrictive in terms of
dividend availability than the aforementioned regulatory or tax considerations.
Cash dividends paid by all consolidated subsidiaries to the parent company in
1995 amounted to $42 million, including $6.5 million remitted by an inactive
life insurance subsidiary and then contributed to another life insurance
subsidiary in connection with the earlier combination of the two companies'
operations. Excluding the latter transaction, cash dividends totaling $36
million were received during 1995 from USLIFE's subsidiaries for application
toward parent company cash requirements, versus $46 million in 1994 and $61
million in 1993. All of the aforementioned cash dividends to the parent company
came from the life insurance subsidiaries. Additionally, during 1993, securities
with market value of $22 million were transferred from a life insurance
subsidiary to the parent company and subsequently contributed to another life
insurance subsidiary in connection with the combination of the two subsidiaries'
operations.
The reduced level of dividends to the parent company in 1995 as compared to
1994 reflected the Company's analysis of statutory capital requirements
associated with the growth of individual life insurance sales in 1995, for which
new annualized premiums increased 21% over the prior year, and its consequent
decision to limit the amount of such dividends in order to permit capital
accumulation at the subsidiary level. As a result, a portion of parent company
working capital requirements during 1995 was financed through a $26 million
increase in short term borrowings. The greater amount of cash dividends
received in 1993 versus the following years reflected capital made available at
the subsidiary level from the combination of operations of certain life
insurance subsidiaries, and a portion of the 1993 dividends was applied to repay
corporate borrowings.
Investment advisory and service fees paid by the life insurance subsidiaries,
and portfolio investment income comprise additional sources of liquidity at the
parent company. These sources totalled about $13 million in each of the three
years ended December 31, 1995. Parent company cash flows may also be
complemented by transactions such as repayment of advances by certain
subsidiaries and proceeds from investment securities sold, matured or redeemed.
<PAGE>4
In addition to the liquidity factors at the subsidiary level previously
discussed, cash requirements at the parent company for interest on indebtedness,
dividends on preferred and common stocks, and overhead costs are a key factor in
the Company's overall liquidity situation. On a pre-tax basis, interest and
overhead expense charges, less depreciation, amortization, and provisions for
future retirement benefits, amounted to $71 million, $65 million and $62 million
in 1995, 1994 and 1993, respectively, while dividends totalled $31 million, $29
million and $27 million, respectively. The major portion of the 1995 and 1994
increases in interest and overhead came primarily from interest expense,
reflecting higher interest rates applicable to short term corporate borrowings.
The Company's common stock repurchase program is also a factor in its cash
requirements. In October 1995, the Board of Directors extended this program
through November 1996 and authorized repurchase of up to 1.5 million common
shares. During 1995, 128,700 shares were repurchased by the Company at a total
cost of $3 million under this program, for an average cost of $25.12 per share.
These purchases were financed primarily by selective sales of bonds in the
parent company investment portfolio.
On a consolidated basis, net cash provided by operating activities amounted
to $180 million, $178 million and $98 million in 1995, 1994 and 1993
respectively. These reported amounts reflect fluctuations in accounts payable
and receivable and amounts due to policyholders that result from random timing
differences in securities transaction settlements, claims payments, and similar
matters. Excluding the impact of these fluctuations, net cash provided by
operating activities would be $179 million, $166 million, and $152 million in
1995, 1994 and 1993, respectively.
Cash flows from operating activities for 1995 included $102 million from the
change in liability for future policy benefits, versus $73 million in 1994. The
increase reflected increased sales of term insurance as well as greater written
premiums on credit life and disability products in 1995.
Interest credited to policyholder account balances increased to $210 million
in 1995 versus $194 million in 1994, reflecting the aggregate growth in
policyholder account balances from $3.3 billion at December 31, 1993 to $3.6
billion at December 31, 1994 and $3.8 billion at December 31, 1995. The
portion of policyholder account balances relating to individual annuities was
virtually unchanged at approximately $1.8 billion at both December 31, 1995 and
December 31, 1994. The balance, relating to universal life insurance contracts,
increased approximately $190 million during 1995.
Increases in rates of interest credited on substantially all of the Company's
deferred annuities, initiated during the second half of 1994 and effective for
renewing contracts either at contract anniversary or January 1, 1995, were also
a factor in the increase in interest credited to policyholder account balances
for 1995 versus 1994. As discussed under "Results of Operations," reductions in
interest rates offered and credited on the Company's universal life insurance
and annuity products were implemented during 1995, continuing into 1996.
Interest rates credited on universal life and individual deferred annuity
contracts may be adjusted periodically by the Company. Subject to any
applicable surrender charges, the Company's universal life insurance products
and individual deferred annuities may be surrendered by the holder. A cash
surrender value, based on contractual terms, is also available to the
policyholder upon surrender of many of the Company's traditional individual life
insurance policies under which cash values are accumulated. Such surrenders are
influenced by various factors including economic conditions, available
alternative investment returns, competition for investment and insurance funds,
and perceived financial strength of the insurer. These contracts are generally
supported by the Company's investment portfolios, which are primarily comprised
of investment grade, publicly traded corporate bonds.
Substantially all of the Company's interest sensitive life insurance and
annuity contracts provide for imposition of a surrender charge in the event of
policy surrender during a specified initial period commencing with contract
inception, typically ten to fifteen years for universal life insurance and five
to seven years for individual annuities, with the significance of this charge
often subject to reduction over the applicable period or during the later
portion thereof.
<PAGE>5
The Company's investment portfolios are continually monitored to determine
whether the distribution of investment maturities is considered appropriate for
expected levels of policy surrenders. The Company's fixed maturity investments
may be sold prior to maturity as part of the Company's asset / liability
management strategy and are classified as "available for sale" as discussed in
Note 1 of Notes to Financial Statements. Adjustments to the investment maturity
distribution, if necessary, may also be accomplished by actions concerning the
investment of incoming funds and/or reinvestment of the proceeds of securities
matured or redeemed. The Company monitors its surrenders on a monthly basis.
Any material deviation or emerging trend is traced to the product line and
agency of record, and remedial action is taken where appropriate. If an
acceleration of surrenders of these contracts were experienced, the cash flow
requirements associated with such surrenders could conceivably require the
Company to liquidate a portion of the underlying security investments prior to
maturity, at then-prevailing market prices. Any additional cash flow
requirements would be met through the sources of liquidity described earlier.
As of December 31, 1995, approximately 9% of the Company's deferred annuity
contracts and 15% of its universal life insurance policies, based on
policyholder account balances, were beyond the contractual period during which a
significant charge could be imposed in the event of termination. Based on the
Company's significant 1991 sales of individual annuities with five year
surrender charge periods, with gross deposits that year totalling approximately
$500 million, an increase in the proportion of annuity contracts beyond the
surrender charge period is anticipated during 1996. The Company's asset /
liability management strategies have contemplated the expected surrender pattern
for these annuities, and based on cash flow testing the Company believes that
its distribution of investments is appropriate for the cash requirements
associated with the expected level of surrenders.
Net additions to deferred policy acquisition costs amounted to $67 million in
1995, versus $45 million in 1994 and $36 million in 1993. The 1995 increase of
approximately $22 million reflected greater individual life insurance sales in
1995. New annualized premiums for traditional individual life insurance
products (primarily term insurance) increased $14 million or 26% over 1994,
while sales of interest-sensitive life insurance products increased $10 million
or 17%.
Current year Federal income tax payments amounted to $56 million, $55 million
and $61 million in 1995, 1994 and 1993, respectively. The Company and certain
subsidiaries also made payments to the Internal Revenue Service during 1994
amounting to approximately $6 million, relating to settlement of prior year tax
returns. Since the latter payments were associated with a previously recorded
liability, this settlement had no impact on reported results of operations.
Net cash used in investing activities amounted to $264 million, $457 million,
and $493 million in 1995, 1994 and 1993, respectively. The 1995 decrease
reflected a reduced level of individual annuity sales and a greater level of
surrenders on these contracts during 1995 as compared to 1994, both of which
affected the increase in policyholder account balances.
Individual annuity gross deposits decreased from $345 million in 1993 to $245
million in 1994 and to $94 million in 1995. The 1994 decrease reflected
previous management actions with objectives including diversification of sales
mix and production sources. The 1995 decrease resulted from various factors
including the negative impact on sales of declining interest rates offered on
these contracts during 1995.
Individual annuity surrender benefits increased to $208 million in 1995
versus $173 million in 1994 and $119 million in 1993, reflecting the greater
volume of annuity contracts in force and increased interest rates available to
consumers on certain alternative investments. It should be noted that the major
portion of these surrenders resulted in imposition of a surrender charge by the
Company as contractually permitted and consequently, these surrenders did not
have an adverse impact upon consolidated results of operations for 1995.
Reflecting the above factors, the increase in policyholder account balances
amounted to $99 million in 1995 versus $269 million in 1994 and $417 million in
1993.
<PAGE>6
The Company's investment management policies include continual evaluation of
securities market conditions and circumstances relating to particular investment
holdings which may result in selection of fixed maturity or other investments
for sale prior to maturity. Securities may also be sold as part of the
Company's asset/liability management strategy as indicated above in response to
changes in interest rates, resultant prepayment risk, and similar factors.
Valuation reserves are maintained for investments with a reduction in value
determined to be other than temporary.
The approximately $438 million, $1.1 billion, and $1.2 billion disposals of
fixed maturity investments included in cash flows from investing activities for
1995, 1994 and 1993 included, respectively, $115 million, $209 million and $928
million (adjusted cost) of securities which were called for redemption by the
respective issuers prior to maturity. Fixed maturity disposals also reflected
sales of certain securities as part of the Company's asset / liability
management strategy with objectives including maintenance of an appropriate
relationship of asset yields and maturities to current policy liabilities, as
well as sales of certain non-performing securities for which reserves had
previously been established. Substantially all of the proceeds from fixed
maturities sold or redeemed were directed to investment grade fixed maturity
investments.
Purchases of fixed maturity investments in 1995, 1994 and 1993 amounted to
approximately $799 million, $1.5 billion and $1.8 billion, respectively,
reflecting both reinvestment of the proceeds from fixed maturity disposals and
investment of funds corresponding to the increases in policyholder account
balances.
Net unrealized gains on the Company's fixed maturities portfolio, with
adjusted cost of $5.6 billion at December 31, 1995, amounted to $448 million at
that date. This amount reflects gross unrealized gains of $458 million and
gross unrealized losses of $10 million. Also at that date, the fixed maturities
portfolio includes defaulted securities totalling $7 million (at fair value).
The sales of selected fixed maturity investments in accordance with the
Company's asset / liability management strategies and the retention of certain
securities with current market value less than book value or currently in non-
performing status are not anticipated to result in a material adverse impact
upon the Company's net cash flows.
As discussed in Note 14 of Notes to Financial Statements, the Company's
$296 million consolidated investment in mortgage loans as of December 31, 1995
is characterized by a broad geographical distribution. The Company invests
principally in commercial mortgages which comprise substantially all of the
total investment in mortgages at December 31, 1995. Commercial mortgage
investments are generally made with a loan-to-value ratio not in excess of 75%
and emphasize fully occupied general purpose retail, office and industrial real
estate having broad user appeal on a diversified national basis. Investment in
real estate is limited typically to selected commercial real estate which is
substantially pre-leased or where the prospects of finding a user upon
completion are unusually attractive.
As of December 31, 1995 and 1994, consolidated invested assets included $18
million and $30 million book value of real estate acquired through foreclosure,
respectively. Consolidated net investment income includes net credits of
approximately $1 million and $500 thousand in 1995 and 1994, respectively,
relating to such properties. It is the Company's general policy to determine
the estimated net realizable value of foreclosed real estate based upon
appraisals relating to the underlying mortgage loans which are continually
reviewed and/or updated by management based upon market conditions furnished by
third party property managers or brokers. The Company maintains reserves so
that these assets are carried at the lower of cost or estimated net realizable
value. Based on current evaluation of real estate properties held as a result
of foreclosure and anticipated continuation of the Company's policies relating
to disposal of such properties, the retention of these properties until disposal
at terms believed to reflect their estimated net realizable values is not
anticipated to result in a material adverse impact upon consolidated net
investment income or the liquidity of the Company.
Net cash flows provided by consolidated financing activities amounted to $96
million, $270 million, and $380 million in 1995, 1994 and 1993, respectively.
The reduced levels of cash flows from financing activities in 1995 and 1994,
versus the respective prior year, reflect the smaller increases in policyholder
account balances as discussed above.
<PAGE>7
Cash flows from financing activities for 1995 reflect a $26 million increase
in notes payable relating to parent company working capital requirements as
discussed above. Financing activities for 1994 reflect a refinancing
transaction in which the Company borrowed $100 million, classified as notes
payable, under a revolving credit agreement which provided for term loan
borrowings of up to $150 million. The proceeds of this borrowing were utilized
to repay $100 million "current maturities of long-term debt" under a previous
two-year revolving credit facility. Subsequently in 1994, the Company borrowed
the remaining $50 million available under this agreement and utilized these
proceeds to repay a similar amount of short-term variable rate bank borrowings.
The aggregate 1994 increase of approximately $31 million in outstanding long-
term and short-term debt relates primarily to working capital requirements. In
1993 refinancing transactions, the Company issued a total of $300 million
principal amount of debt securities under shelf registration statements and
utilized the proceeds to repay $200 million long term debt and $100 million
short term variable rate bank debt. The $112 million decrease in notes payable
included in 1993 cash flows from financing activities reflects the noted
refinancing of short term variable rate bank debt as well as the application of
a portion of dividends received from the life insurance subsidiaries by the
parent company to repay short term bank borrowings as discussed earlier.
As of December 31, 1995, the Company had lines of credit with seven banks
amounting to $60 million, all of which was unused. However, at that date, the
Company had outstanding short-term borrowings with four banks, negotiated
independently of such lines to take advantage of more favorable available
interest rates, in the aggregate amount of $73 million, as well as $150 million
borrowings under a revolving credit agreement with The Bank of New York which
expires in April 1996. The Company currently anticipates, subject to
negotiations, that it will commence a generally similar revolving credit
agreement at that time for a term not to exceed three years. The Company also
has available a revolving credit agreement with Chemical Bank which expires in
February 1997 and provides short term borrowing facilities up to $100 million,
under which no borrowings were outstanding at December 31, 1995. The Company's
short term borrowings were utilized primarily for working capital requirements.
Capital Resources
Long term debt at December 31, 1995 includes a $150 million non-callable
issue of 6.75% Notes due 1998 and a $150 million non-callable issue of 6.375%
Notes due 2000, both issued in early 1993 under shelf registration statements.
The Company has filed an additional shelf registration statement which, as of
December 31, 1995, permits the issuance of up to $150 million principal amount
of debt securities subject to management's discretion as to timing and amount of
issues thereunder. The Company's remaining long term debt at December 31, 1995
consists of a $50 million issue of 9.15% Notes due 1999 which permits early
repayment at the option of the Company, commencing in June 1996.
While it is currently anticipated that the major portion of the long term
debt will be repaid using the net proceeds of debt and/or equity or combination
securities to be issued at future dates, determination of the timing and amount
of such repayments and securities issues will be dependent upon future market
conditions, future cash flows, and other unforeseen circumstances.
For the years ended December 31, 1995, 1994 and 1993, respectively,
consolidated interest expense amounted to $40 million, $36 million, and $32
million. The 1995 increase in interest expense came primarily from higher
interest rates applicable to the Company's short term borrowings, and also
reflected the $26 million increase in notes payable related to parent company
working capital requirements as previously discussed. The 1994 increase came
primarily from higher interest rates applicable to short-term borrowings.
Dividends paid on the Company's outstanding stock issues for 1995, 1994, and
1993, respectively, were $31 million, $29 million, and $27 million,
substantially all relating to common stock. The increases in these dividends
reflected increases in common stock dividends per share from 81 cents in 1993 to
84 cents in 1994 and to 91 cents in 1995.
<PAGE>8
As discussed in Note 13 of Notes to Financial Statements, the Company has
outstanding Standby Letters of Credit with two banks representing contingent
obligations to fund various trusts established in connection with certain
employment contracts of management employees and retirement plans in the event
of a Change in Control (as defined in the trust agreements), totalling $93
million, and the parent company has guaranteed certain obligations of its
subsidiaries.
Results of Operations
1995 Compared to 1994
For the year ended December 31, 1995, net income amounted to $105.4 million
versus $96.2 million for 1994.
Net income for 1995 included net capital gain transactions with an after-
tax impact of $4.2 million, while 1994 net income included net capital losses
with an after-tax impact of $902 thousand. The 1995 net capital gains reflect
disposals of several fixed maturity investments pursuant to tender offers of the
respective issuers, as well as certain redemptions as discussed under "Financial
Condition". The 1994 net capital losses came primarily from disposal of certain
real estate investments.
Capital gains and losses during 1995 reflect disposals of non-performing
securities with adjusted cost of approximately $26 million, as well as several
real estate properties that were acquired through foreclosure, with aggregate
cost of approximately $24 million. Since reserves had been previously recorded
to recognize the reduction in value of these investments, these disposals did
not have a material impact on current reported results.
Excluding the capital gains and losses discussed above, consolidated after-
tax income amounted to $101.3 million for 1995 versus $97.1 million for 1994, an
increase of $4.2 million or 4%. On a similar basis, after-tax income of the
life insurance subsidiaries increased $7.7 million or 6%. Also on a similar
basis, after-tax corporate charges (including the operating results of the
Company's servicing units) amounted to $40.6 million in 1995 versus $37.1
million for 1994, resulting in a negative comparative impact of $3.5 million on
after-tax consolidated results that partially offset the improvement in life
insurance subsidiary results.
The improvement in life insurance subsidiary results came primarily from an
increase in pre-tax profits from the individual life and annuity product line,
partially offset by unfavorable results from the employer/association group
health insurance line.
The negative variance in corporate charges reflected increased interest
expense at the corporate level. The Company's consolidated interest expense,
which increased to $39.7 million in 1995 from $35.6 million in 1994, relates to
borrowings at the parent company level for general corporate purposes. As
discussed under "Financial Condition," the 1995 increase in interest expense
came primarily from higher interest rates applicable to the Company's short term
borrowings, and also reflected a $26.4 million increase in notes payable related
to parent company working capital requirements.
Pre-tax income of the life insurance subsidiaries, excluding the previously
discussed capital gains and losses, was $215.0 million in 1995 versus $204.7
million in 1994. The major portion of the life insurance subsidiaries' pre-tax
income is attributed to the individual life insurance and annuity product line.
Other product lines include group life and health insurance, sold principally
through employers and associations, and credit life and disability products
which are sold primarily to customers of financial institutions. A discussion
of the Company's various product lines, excluding the impact of capital gains
and losses, follows.
<PAGE>9
Individual life and annuity pre-tax profits, including income attributable
to capital and surplus, amounted to $206.1 million for 1995 versus $186.3
million for 1994. The increase of $19.8 million or 11% reflected contributions
from major sources of profit including mortality experience, investment income,
and voluntary policy termination experience ("persistency"). Gains from
investment income are affected by changes in rates of return available to the
Company on portfolio investments, and adjustments that may be made by the
Company on credited rates of interest for certain contracts, as discussed below.
A pre-tax profit of approximately $900 thousand was reported for credit
life insurance coverages for 1995, versus $1.1 million in 1994. The negative
variance of $200 thousand came primarily from somewhat less favorable mortality
experience during the 1995 period. Written premiums from credit life insurance
products increased $8.0 million or 12% versus 1994. It should be noted that
pre-tax profits on credit insurance products are anticipated to be realized when
currently written premiums are earned in future periods rather than during the
period of sale.
Pre-tax profits from the Company's group life insurance lines of business
amounted to $5.8 million for 1995, versus $5.5 million for 1994, for a positive
variance of approximately $300 thousand. These lines include
employer/association group life insurance, mortgage life insurance, and certain
specialty coverages. The positive variance came primarily from the group
mortgage life insurance line, reflecting more favorable mortality experience.
Pre-tax income from employer/association group life insurance products amounted
to $5.1 million in 1995, approximating the $5.2 million reported in 1994.
The Company's group health insurance lines of business reported a pre-tax
loss of approximately $5 million for 1995 versus a pre-tax profit of $6 million
for 1994. The negative variance of $11 million was primarily attributed to the
employer/association group health insurance line, which reported a pre-tax loss
of $5.2 million for 1995 versus a pre-tax profit of $5.6 million a year ago.
Premium revenues on employer/association group health insurance products
declined from $397 million in 1994 to $358 million in 1995, with the decline
primarily attributed to traditional indemnity major medical cases associated
with a shift in market emphasis toward managed care products. This change in
market emphasis resulted both in a reduction of new sales of the Company's
indemnity major medical products as well as erosion of business in force, over
the past several years.
Although a significant portion of the Company's 1995 major medical sales
came from managed care products, historically the majority of its group
insurance premium revenues were derived from indemnity major medical coverages.
As a result, about 60% of current employer/association group health and
disability premium in force at year end 1995 relates to traditional indemnity
products.
The Company has taken a number of actions to address the decline in
revenues, including refinement of "ancillary" group products such as long-term
disability and dental insurance, with goals including an increase in the
proportion of group business from non-major medical lines, and has introduced
new managed care products in several states (using provider networks made
available through unrelated companies).
The Company has also initiated expense reduction measures to alleviate the
impact of reduced group health revenues. Despite these measures, the revenue
decline outpaced reductions in overhead and other expenses during 1995. This
revenue shortfall, together with expense charges of approximately $1 million
related to the closing of a claims office, resulted in the reported pre-tax loss
for 1995. The claims office closing represents the substantial completion of a
program to consolidate these offices in order to achieve future economies.
In January, 1996, the Company announced that it would discontinue offering
its traditional indemnity major medical products, and that it would restrict its
new sales of managed care major medical products to eight states where it has
significant market presence and an appropriate managed care network in place.
The Company will, however, continue to provide full support and service to all
existing indemnity customers regardless of location and will seek to convert
cases from indemnity coverage to managed care in order to conserve the business.
As discussed in Note 4 of Notes to Financial Statements, the Company will
continue to monitor this business in order to determine whether future financial
statement adjustments are necessary.
<PAGE>10
Profitability of the Company's group health insurance lines is dependent
upon various factors including the ability of the Company to match premiums
charged to benefit costs and to maintain underwriting standards so that premium
charged is consistent with risk assumed on an overall basis. Market acceptance
of products currently offered and those being introduced is also a key factor in
the prospective profitability of these product lines.
Pre-tax income from credit disability products amounted to $6.9 million in
1995, versus $5.2 million in 1994, reflecting an increased base of earned
premiums and more favorable claims experience in 1995.
Total revenues of the life insurance subsidiaries in 1995 amounted to $1.72
billion, an increase of $88 million or 5% over 1994, primarily on increases of
$47 million (or 4%) and $27 million (or 6%) in premiums and considerations and
net investment income, respectively.
The increase in premiums and considerations came primarily from the
individual life insurance and annuity product line and the credit life and
disability lines, with declining employer/association group health premiums a
partial offset as previously discussed.
Premiums and other considerations from individual life insurance and
annuity products amounted to $487 million in 1995, compared to $434 million in
1994, with the increase from both interest sensitive and traditional products
and reflecting a larger base of in-force business as well as increased sales
during 1995.
Net premium income on credit life and disability products increased $17
million to $149 million in 1995, reflecting increased written premium for both
credit life and credit disability products. The increased written premium is
attributed to various factors including increased sales through bank sources of
business.
Net investment income of the life insurance subsidiaries increased $27
million, as noted above, reflecting a larger investment base in the 1995 period.
The pre-tax annual yield was 7.93% in 1995 versus 7.92% in 1994.
The Company's interest sensitive life insurance and annuity contracts are
subject to periodic adjustment of credited interest rates which are determined
by management based on factors including available market interest rates and
portfolio rates of return. Recent rate actions are discussed below.
Total benefits and expenses of the life insurance subsidiaries increased
$70 million or 5% over 1994.
Benefits to policyholders and beneficiaries amounted to $715 million in
1995, a decrease of $13 million versus the $728 million reported for 1994. A
$39 million decrease in employer/association group health benefits, reflecting
the decline in volume on that line, was the primary cause of the overall
decrease in benefits. Volume related increases in benefits on various product
lines, including increases of $10 million in death benefits on individual life
insurance products and $4 million in credit life and disability benefits,
partially offset the impact of the decline in employer/association group health
benefits.
Interest credited to policyholder account balances increased $16 million
(or 8%) over 1994. This increase reflected the greater volume of universal
life-type contracts in 1995 as well as credited interest rate adjustments on
individual annuities initiated in late 1994. Recognizing the rise in available
interest rates during the second half of 1994, credited interest rates offered
on substantially all of the Company's deferred annuities were increased during
that period, with the amount of increase varying based on type of contract.
Increases in credited renewal rates of interest on these contracts were
effective either at contract anniversary or January 1, 1995 based on type of
contract.
<PAGE>11
Interest rates credited on the Company's deferred annuity contracts,
exclusive of first year bonuses on certain products, typically ranged from 4.5%
to 4.8% during 1994. Giving effect to the late 1994 rate actions, the rates
credited on these contracts as of January 1, 1995 and during 1995 (on a similar
basis) typically ranged from 4.8% to 5.5%, with a weighted average (based on
account value) of about 5%. In 1995, a series of reductions in interest rates
offered on newly issued deferred annuity contracts were implemented, together
with various adjustments of credited interest rates on renewing contracts. As a
result of actions taken during the fourth quarter of 1995, credited rate
reductions of 25 to 50 basis points affecting the major portion of the Company's
deferred annuities in force were implemented on January 1, 1996 for calendar
year contracts and are being implemented on policy anniversary dates during 1996
for other contracts.
Interest rates credited on the Company's universal life insurance contracts
typically ranged from 6.0% to 7.0% during 1994 and during the first half of
1995. Reductions in credited rates, generally amounting to 25 basis points,
were implemented during the third and fourth quarters of 1995 with respect to
the major portion of the Company's universal life insurance policies in force as
well as substantially all of its currently offered universal life insurance
policies. Further credited rate reductions of 25 to 50 basis points were
implemented on January 1, 1996. As a result of these actions, credited rates on
the Company's universal life insurance contracts generally range from 5.3% to
6.8% commencing January 1, 1996.
The prospective impact of these rate adjustments on reported results will
be dependent upon various factors including future sales and surrender levels.
Investment portfolio yield will also be a key factor in profitability of these
lines.
In the event of future general increases in market interest rates, the
market value of certain of the Company's investments including its fixed
maturity portfolio would be expected to decrease, and the contribution to the
Company's earnings from the difference between interest earned on investments
and interest credited on deferred annuity and universal life-type products could
be adversely affected, depending on the timing and extent of adjustments in
credited rates of interest on in-force business and in the investment portfolio
in response to such changes.
An increase in future policy benefits of $112 million was recorded for
1995, versus $79 million for 1994, with the $33 million variance primarily
associated with the increase in premiums on traditional individual life
insurance and credit insurance coverages.
Aggregate commissions, general expenses, and insurance taxes and licenses
increased from $262 million in 1994 to $293 million in 1995. The $31 million
increase reflects approximately $7 million volume related expenses which are
directly associated with premiums from a specialty group insurance product
marketed in conjunction with a consumer retailer, as well as expenses of about
$1 million from closing of a group claims office as previously discussed. The
remainder of the increase is primarily attributed to increased volume in the
individual life insurance and annuity product line and greater credit insurance
written premiums.
At December 31, 1995, consolidated invested assets included approximately
$246 million (at fair value) of less than investment grade corporate securities,
based on ratings assigned by recognized rating agencies and insurance regulatory
authorities. These investments represent about 3% of consolidated total assets
at that date. See Note 3 of Notes to Financial Statements for further
information. These securities generally involve greater risk of loss from
borrower default than investment grade securities because their issuers
typically have higher levels of indebtedness and are more vulnerable to adverse
economic conditions than other issuers. The Company's results of operations
historically have not reflected a material adverse impact from investments in
such securities.
In March, 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 121, entitled "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
In October, 1995, FASB issued Statement of Financial Accounting Standards No.
123, entitled "Accounting for Stock-Based Compensation." As discussed in Note 1
of Notes to Financial Statements, the implementation of these Statements during
1996 is not anticipated to have a material impact on the Company's reported
financial position or results of operations.
<PAGE>12
1994 Compared to 1993
For the year ended December 31, 1994, net income amounted to $96.2 million
versus $97.2 million for 1993.
The $96.2 million net income for 1994 included net capital loss
transactions with an after-tax impact of $902 thousand, while 1993 results
included net capital gains with an after-tax impact of $5.5 million. The 1994
net capital losses came primarily from disposal of certain real estate
investments. The net capital gains reported for 1993 reflected $54.5 million
pre-tax gains on disposals of fixed maturity investments, which were partially
offset by pre-tax losses of approximately $10.7 million on disposal of certain
real estate, mortgage and joint venture investments and by additions to
valuation reserves for certain investments with loss exposure. The major
portion of disposals of fixed maturity investments during 1993 related to
securities which were called for redemption by the respective issuers prior to
maturity.
Consolidated net income for 1993 also includes a gain of $1.5 million
(after applicable taxes) from sale of a subsidiary's home office property and a
charge of $2.0 million to recognize the cumulative impact of the change in
corporate Federal income tax rates enacted in August 1993 as required by FASB
Statement No. 109.
Excluding the transactions discussed above (capital gains and losses, 1993
recognition of cumulative impact of income tax rate change, and 1993 home office
property sale), consolidated after-tax income amounted to $97.1 million for 1994
versus $92.1 million for 1993, an increase of $5.0 million or 5%. On a similar
basis, after-tax income of the life insurance subsidiaries increased $7.6
million or 6%. The improvement in life insurance subsidiary results came
primarily from an increase in pre-tax profits from the individual life and
annuity product line, accompanied by alleviation of certain expenses that
negatively impacted 1993 group health results from "association" business as
discussed below. Also on a similar basis, after-tax corporate charges
(including the operating results of USLIFE's servicing units) amounted to $37.1
million in 1994 versus $34.5 million for 1993, resulting in a negative
comparative impact of $2.6 million on after-tax consolidated results. Higher
interest rates applicable to short term corporate borrowings in 1994 were the
primary cause of this negative variance. Corporate charges reflect, among other
factors, interest expense associated with financing of repurchases of the
Company's common stock under the treasury stock repurchase program.
Pre-tax income of the life insurance subsidiaries, excluding capital gains
and losses and the 1993 home office sale as discussed above, was $204.7 million
in 1994 versus $192.9 million in 1993. The major portion of the life insurance
subsidiaries' pre-tax income is attributed to the individual life insurance and
annuity product line. The indicated pre-tax income includes a pre-tax profit
of $11.8 million attributed to all health insurance coverages in 1994, versus
$9.3 million in 1993. Employer / association group health insurance, primarily
consisting of employer-employee cases that are often written in conjunction with
group life insurance, accounted for approximately 84% and 87% of total health
insurance premiums in 1994 and 1993, respectively. A discussion of the
Company's various product lines, excluding the impact of capital gains and
losses and the 1993 subsidiary home office property sale which are previously
discussed, follows.
Individual life and annuity pre-tax profits, on a similar basis and
including income attributable to capital and surplus, amounted to $186.3 million
in 1994 versus $177.1 million in 1993. The increase of approximately $9 million
or 5% reflected improved mortality experience, gains from investment income
margins, and voluntary policy termination (persistency) experience.
A pre-tax profit of $1.1 million was reported for credit life insurance
coverages for 1994, versus $1.3 million for 1993, as less favorable mortality
experience in 1994 offset the impact of increased premium income.
<PAGE>13
Pre-tax profits from the Company's group life insurance lines of business
amounted to $5.5 million in 1994 versus $5.2 million in 1993. Pre-tax income
from employer / association life insurance products increased approximately $650
thousand, from $4.6 million in 1993 to $5.2 million in 1994, reflecting improved
mortality experience and reduced expense levels. A negative variance of about
$300 thousand from the Company's other group life insurance lines, including
mortgage life insurance and specialty coverages, partially offset the improved
employer / association group life results.
Pre-tax profits from the credit disability product line amounted to $5.2
million for 1994, versus $5.0 million in 1993, reflecting more favorable
morbidity experience during 1994.
Pre-tax profits from the Company's group health insurance lines of business
amounted to $5.9 million in 1994 versus $4.6 million in 1993. Pre-tax income
from employer / association health insurance products increased from $4.6
million in 1993 to $5.6 million in 1994. The favorable variance of $1.0 million
came primarily from a decrease in legal and other expenses relating to an
association group health marketing organization which had declared bankruptcy.
These expenses, which were the major contributing factor in a $4.3 million pre-
tax loss for 1993 ascribed to "association" products included in the employer /
association group health line, were subsequently mitigated. Residual expenses
relating to this matter are not expected to have a material adverse impact on
consolidated results of operations. The benefit from mitigation of these
expenses was offset by the impact of a decline in premium revenues on employer /
association health insurance products from $429 million in 1993 to $397 million
in 1994, primarily attributed to small group major medical lines. Since the
major portion of the Company's major medical business has consisted primarily of
"indemnity" coverages, a shift in market emphasis to managed care products
arising from legislation in New York and New Jersey resulted in a reduction in
new sales as well as erosion of business in force. The Company's decision in
late 1993 to restrict major medical sales to states where it has a significant
amount of in-force business also contributed to the decline in revenues.
Total revenues of the life insurance subsidiaries in 1994 amounted to
$1.630 billion, an increase of $46.8 million or 3% over 1993, primarily on
increases of $43.4 million (or 4%) and $16.8 million (or 4%) in premiums and
considerations and net investment income, respectively. Other income decreased
$1.3 million to $17.0 million in 1994, reflecting the inclusion in 1993 results
of $2.3 million income from the sale of a subsidiary's home office property.
The increase in premiums and considerations came primarily from the
individual life insurance and annuity product line and from increased written
premiums on the Company's credit insurance products. A decrease of $31.0
million in employer / association group insurance premiums, reflecting reduced
sales and erosion of in-force business on major medical products as discussed
above, was a partial offset. Premiums and other considerations from individual
life insurance and annuity products amounted to $434.2 million in 1994, compared
to $388.1 million in 1993, with the increase from both interest sensitive and
traditional products and reflecting a larger base of in-force business as well
as increased sales of traditional life insurance products in 1994.
Net investment income of the life insurance subsidiaries increased $16.8
million, as noted above, reflecting a larger investment base in 1994. The pre-
tax annual yield declined from 8.35% in 1993 to 7.92% in 1994, as a decline in
market interest rates resulted in redemptions of higher yielding securities out
of the Company's investment portfolio particularly during 1993 and into the
first quarter of 1994, and the reinvestment of proceeds from these securities,
as well as funds provided from operations, at lower available interest rates.
The Company's interest sensitive life insurance and annuity contracts are
subject to periodic adjustment of credited interest rates which are determined
by management based on available market interest rates and portfolio rates of
return. Investment income gains represent the spread between interest earned on
the investment portfolio and interest credited to policyholders. These gains,
on certain products, benefited during 1993 as reductions in credited rates of
interest were implemented as contractually permitted while reductions in
investment income arising from redemptions by the respective issuers were
experienced over the course of the year. These gains tended to stabilize rather
than increase during most of 1994 due to realization of the full impact of the
investment income reductions associated with the earlier redemptions. Although
available interest rates on securities investments rose during the latter
portion of 1994, the impact on yields was not fully realized during that year.
<PAGE>14
During 1993, interest rates credited on the Company's universal life
insurance contracts typically ranged from 6.5% to 7.5% at the beginning of the
year and from 6.0% to 7.0% at the end of the year, reflecting periodic rate
decreases during that year. Rates were essentially unchanged on these policies
during 1994. In 1993, interest rates credited on the Company's deferred annuity
contracts, exclusive of first year bonuses on certain products, typically ranged
from 4.5% to 5.0%. Credited rates of interest on the Company's deferred
annuities at the beginning of 1994, on a similar basis, typically ranged from
4.5% to 4.8% . Recognizing the rise in available interest rates during the
second half of 1994, first year credited interest rates offered on substantially
all of the Company's deferred and immediate annuity contracts were increased
during that period, with the amount of increase varying based on the type of
contract. Credited renewal rates of interest were also increased on these
contracts, with effective dates either at contract anniversary or January 1,
1995 based on type of contract. At January 1, 1995, giving effect to the
various rate adjustments, the rates offered on these contracts typically ranged
from 4.8% to 5.5% excluding first year bonuses.
Total benefits and expenses of the life insurance subsidiaries increased
$49.4 million or 4% over 1993.
Benefits to policyholders and beneficiaries amounted to $727.9 million in
1994, versus $737.7 million in 1993. The decrease came primarily from reduced
group health insurance volume, particularly in major medical business, relating
to policy lapses and a reduced level of sales as previously discussed.
Interest credited to policyholder account balances increased $10.3 million
(or 6%), reflecting the increased volume of universal life-type and individual
annuity contracts in 1994 with the impact of earlier reductions in credited
rates of interest on certain contracts a partial offsetting factor.
An increase in future policy benefits of $79.3 million was recorded for
1994, versus $39.8 million for 1993, with the $39.4 million variance primarily
associated with the increases in premiums on traditional individual life and
credit insurance coverages. Amortization of deferred policy acquisition costs
amounted to $159.7 million in 1994 versus $151.9 million in 1993, reflecting
various factors including the increased volume of individual life and annuity
business in force during 1994. Commissions, insurance taxes and licenses, and
general expenses totalled $261.9 million in 1994, approximating the $260.4
million recorded in 1993, as volume related increases in commissions and
expenses on the individual life and credit insurance product lines were
essentially offset by expense reductions relating to group health insurance
products as previously discussed.
<PAGE>15
BUSINESS
Lines of Business
USLIFE Corporation ("USLIFE" or the "Company"), a New York business
corporation formed in 1966, is a life insurance-based holding company whose
principal subsidiaries engage in the life insurance business. USLIFE operates
nationwide and offers, through its subsidiaries, a broad portfolio of individual
life insurance and annuity policies as well as group and credit insurance.
Other subsidiaries of USLIFE, engaged in investment advisory, broker-dealer,
marketing, real estate, data processing and administrative operations, provide
services to the life insurance companies. Only life insurance is a reportable
industry segment, and the related information is presented in Note 2 of Notes to
Financial Statements.
The following table sets forth total income and income before taxes of the
operations of USLIFE for the indicated subsidiary groups and "corporate
services" for the past five years.
<TABLE>
<CAPTION>
Year Ended December 31
____________________________________________________________________________________________________________
1995 1994 1993 1992 1991
___________________ _____________________ ____________________ ____________________ ____________________
Income Income Income Income Income
Total Before Total Before Total Before Total Before Total Before
Income Taxes Income Taxes Income Taxes Income Taxes (a) Income Taxes
______ ________ ______ _______ ______ _______ ______ ________ ______ ______
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Life Insurance........ $1,717,519 $221,455 $1,629,968 $203,424 $1,583,197 $206,011 $1,514,233 $159,301 $1,368,592 $171,487
Realty and
Securities Investment 10,184 (321) 12,254 (214) 10,622 (2,542) 11,149 (59) 9,364 429
Corporate Services (b) 11,849 (61,209) 8,965 (56,213) 6,219 (51,898) 4,070 (54,905) 4,950 (60,897)
__________ ________ __________ ________ __________ ________ __________ ________ __________ ________
Consolidated........ $1,739,552 $159,925 $1,651,187 $146,997 $1,600,038 $151,571 $1,529,452 $104,337 $1,382,906 $111,019
========== ======== ========== ======== ========== ======== ========== ======== ========== ========
</TABLE>
_____________________
(a) Before cumulative effect of accounting change relating to
postretirement benefits other than pensions.
(b) Reflects corporate interest expense and overhead, and corporate
services to subsidiaries by USLIFE Corporation, USLIFE Systems
Corporation, USLIFE Insurance Services Corporation, USLIFE Agency
Services, Inc., and USLIFE Financial Institution Marketing Group, Inc.,
as well as consolidating adjustments.
Total income and income before taxes for the product groups included in the Life
Insurance segment are shown in Note 2 of Notes to Financial Statements.
Life Insurance
General
In 1995, USLIFE's life insurance business was conducted by four operating
life insurance subsidiaries (the "Life Insurance Subsidiaries"): The United
States Life Insurance Company In The City of New York ("United States Life"),
All American Life Insurance Company ("All American Life"), The Old Line Life
Insurance Company of America ("Old Line Life"), and USLIFE Credit Life Insurance
Company ("USLIFE Credit Life").
The Life Insurance Subsidiaries are all domestic stock insurance
corporations with strong regional identifications. United States Life is the
oldest stock life insurance company in America, having been incorporated in New
York in February, 1850. While authorized to do business in all fifty states and
the District of Columbia, its business is heavily concentrated in New York and
adjacent eastern states. All American Life was incorporated in Illinois in
1950, and is licensed to do business in all states, except New York, and in the
District of Columbia. Approximately 40% of its business in 1995 was derived
<PAGE>16
from the central and southwestern regions of the United States. Old Line Life,
incorporated in Wisconsin in 1910, is authorized to do business in all states,
except New York, and in the District of Columbia; its business is concentrated
heavily in Wisconsin, California, New Jersey and the north central region of the
United States. USLIFE Credit Life, whose predecessors date from 1890, derives
most of its business from its home state of Illinois and other midwestern and
northwestern states.
Types of Insurance Written
The Life Insurance Subsidiaries offer a broad portfolio of individual life
insurance and annuity policies. Also, through United States Life, part of the
sales forces of the Life Insurance Subsidiaries offer group life and health
insurance policies with particular emphasis on small groups. Group life and
health insurance policies are also offered to associations. Several of the Life
Insurance Subsidiaries also offer products designed for funding pension, profit-
sharing and other qualified plans. In addition, through USLIFE Equity Sales
Corp., equity products are available for the noninsurance portion of these
plans. Credit insurance is offered principally through USLIFE Credit Life.
Individual life policies are offered by all of the Life Insurance
Subsidiaries, except USLIFE Credit Life, on a non-participating and
participating basis. Participating insurance is insurance whereby the
policyholder is entitled to receive policy dividends reflecting the difference
between the premium charged and actual experience, the premium being calculated
to provide a margin over the anticipated cost of insurance protection. On
December 31, 1995, 5% of individual life insurance in force was participating
and premiums on participating policies represented 10% of individual life
insurance premium income in 1995. See "Participating Policies" in Note 1 of
Notes to Financial Statements. All group business, other than credit life
insurance, is on a non-participating basis but approximately 12% of such
business is subject to experience ratings under which the policyholder may
receive refund credits depending on experience. Substantially all of the credit
life insurance in force is non-participating.
Development
The following tabulations set forth the classes of life insurance in force
at December 31, and the amount of new life insurance paid for and premium income
in each of the years 1991 through 1995.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
____ ____ ____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Life Insurance in Force at December 31:
Individual life...................... $ 99,466,568 $ 85,884,409 $ 75,850,909 $ 70,215,988 $ 65,363,964
Credit life.......................... 8,935,598 8,401,213 7,905,294 8,124,861 8,811,313
Group life........................... 32,470,190 30,595,715 26,793,165 25,621,722 23,374,748
Reinsurance assumed(a)............... 18,765,435 16,800,790 14,462,410 11,037,473 10,318,427
____________ ____________ ____________ ____________ ____________
Total in force (a)(b)........... $159,637,791 $141,682,127 $125,011,778 $115,000,044 $107,868,452
============ ============ ============ ============ ============
New Life Insurance:
Individual life...................... $ 24,286,963 $ 19,875,925 $ 15,094,027 $ 13,842,145 $ 13,657,209
Credit life.......................... 5,816,836 5,517,215 4,698,246 3,327,816 3,192,498
Group life........................... 4,308,945 2,739,075 2,474,122 2,433,088 6,628,972
____________ ____________ ____________ ____________ ____________
Total direct new business written... 34,412,744 28,132,215 22,266,395 19,603,049 23,478,679
Reinsurance assumed.................. 355 111,630 5,060 3,644 18,046
____________ ____________ ____________ ____________ ____________
Total new business...... $ 34,413,099 $ 28,243,845 $ 22,271,455 $ 19,606,693 $ 23,496,725
============ ============ ============ ============ ============
</TABLE>
<PAGE>17
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
____ ____ ____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Premium Income:
Life Insurance:
Individual(c)................... $ 274,623 $ 243,817 $ 220,686 $ 207,822 $ 199,968
Credit life..................... 74,308 66,269 56,778 53,555 54,546
Group life...................... 193,069 185,482 178,302 165,897 154,582
____________ ____________ ____________ ___________ ___________
Total life.................. 542,000 495,568 455,766 427,274 409,096
____________ ____________ ____________ ___________ ___________
Health Insurance:
Credit disability............... 75,165 66,423 55,040 52,099 49,407
Group health.................... 375,265 406,688 438,075 452,306 386,373
Other (d)....................... 767 1,024 1,302 1,308 1,198
____________ ____________ ____________ ___________ ___________
Total health................ 451,197 474,135 494,417 505,713 436,978
____________ ____________ ____________ ___________ ___________
Total premium income.... $ 993,197 $ 969,703 $ 950,183 $ 932,987 $ 846,074
============ ============ ============ =========== ===========
</TABLE>
_______
(a) Substantially all of the reinsurance assumed represents Servicemen's
Group Life Insurance and Federal Employees' Group Life Insurance.
(b) Includes ceded reinsurance of approximately $8.0 billion at the end of
1991 and 1992, $7.5 billion at the end of 1993, $7.8 billion at the end of 1994,
and $9.3 billion at the end of 1995.
(c) Under the method of accounting required by Statement No. 97 of the
Financial Accounting Standards Board ("SFAS 97") for universal life-type
products and certain annuity contracts, including the Company's deferred annuity
products, premium receipts are not recorded as revenues and, consequently, are
excluded from the premium income data presented herein. See Note 1 of Notes to
Financial Statements for further information.
(d) Includes individual health policies issued upon conversion of group
health coverages.
Additions and Terminations
There follows a tabulation of the Life Insurance Subsidiaries' additions
and terminations by cause for both individual and group and credit life for the
three years ended December 31, 1995:
<TABLE>
<CAPTION>
Individual Group and Credit
_______________________________________ ______________________________________
Year Ended December 31 Year Ended December 31
_______________________________________ ______________________________________
1995 1994 1993 1995 1994 1993
____ ____ ____ ____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
In force, January 1............... $85,925,752 $75,885,903 $70,247,455 $55,756,375 $49,125,875 $44,752,589
___________ ___________ ___________ ___________ ___________ ___________
Issued......................... 24,271,424 19,859,084 15,064,328 10,125,781 8,256,290 7,172,368
Reinsurance assumed............ 355 11,545 5,060 - 100,085 -
Revived........................ 186,713 142,934 139,475 1,491 - -
Additions by dividend.......... 15,539 16,841 29,699 - - -
Increase, net.................. - - - - 1,846,201 812,904
___________ ___________ ___________ ___________ ___________ ___________
Total................. 24,474,031 20,030,404 15,238,562 10,127,272 10,202,576 7,985,272
___________ ___________ ___________ ___________ ___________ ___________
Terminated by:
Death.......................... 206,378 189,130 174,448 174,817 164,735 154,281
Maturity....................... 2,238 2,403 2,748 - - -
Expiry......................... 52,654 66,936 64,116 1,411,915 1,486,517 1,969,555
Surrender...................... 1,524,627 1,302,168 1,290,923 5,833 2,887 7,421
Lapse.......................... 7,722,925 6,946,802 6,657,464 2,769,018 1,917,937 1,480,729
Decrease, net.................. 315,712 422,941 477,916 1,397,721 - -
Conversion..................... 1,061,801 1,060,175 932,499 - - -
___________ ____________ ___________ ___________ ___________ ___________
Total................. 10,886,335 9,990,555 9,600,114 5,759,304 3,572,076 3,611,986
___________ ___________ ___________ ___________ ___________ ___________
Increase.......................... 13,587,696 10,039,849 5,638,448 4,367,968 6,630,500 4,373,286
___________ ___________ ___________ ___________ ___________ ___________
In force, December 31............. $99,513,448 $85,925,752 $75,885,903 $60,124,343 $55,756,375 $49,125,875
=========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>18
Individual Life Insurance and Annuities
For the last three years, premiums and considerations and income before
taxes (including income from capital and surplus) for the Individual Life
Insurance and Annuity product line were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
_________ __________ _________
(Amounts in Thousands)
<S> <C> <C> <C>
Premiums and considerations................. $ 486,518 $ 434,240 $ 388,076
========= ========= =========
Pre-tax income:
Before capital gains and losses............ $ 206,113 $ 186,274 $ 179,397
Capital gains (losses)..................... 9,759 (3,217) 4,999
_________ _________ _________
Total...................................... $ 215,872 $ 183,057 $ 184,396
========= ========= =========
</TABLE>
Universal life insurance represents approximately 34%, 36% and 37% of total
individual life insurance in force at December 31, 1995, 1994 and 1993,
respectively. Universal life insurance policies permit the policyholder to vary
the timing and amount of premium payments, within contractual limits. Premium
payments under these policies are credited to the policyholder's account
balance, from which amounts are assessed for risk and administrative charges.
These charges are subject to periodic adjustment by the Company. Interest is
credited to the policyholder's account balance at rates which are subject to
periodic adjustment by the Company.
The remainder of the Company's individual life insurance in force consists
primarily of whole life insurance and term insurance coverages. These contracts
generally provide for fixed premium payments and death benefits. Whole life
policies provide insurance over the entire life of the insured, with the face
amount payable only upon the death of the insured, and typically provide for the
accumulation of a surrender value based on contractual terms which may be
payable to the policyholder or utilized to purchase a different form of
insurance in the event that the policy is terminated prior to death of the
insured. Term insurance policies provide insurance over a specified period of
time, with the face amount payable if the insured dies during the policy term.
Inasmuch as term policies generally do not provide for maturity benefits or
accumulation of significant cash surrender values, premiums per dollar of death
benefit are often initially lower than those of whole life policies.
Profitability of universal life insurance is dependent on the Company's
ability to earn a spread between the income on investments supporting these
contracts and the rates of interest credited to policyholders, as well as
underwriting results and actual experience in voluntary policy terminations
("persistency") and expenses in relation to levels assumed in setting premium
rates.
Profitability of non-interest sensitive life insurance coverages is
dependent on underwriting results, the Company's ability to earn investment
income in excess of the amounts required for accumulation of reserves for
ultimate payment of policy benefits, and actual experience in persistency and
expenses in relation to levels assumed in setting premium rates.
The individual annuities that have been sold by the Life Insurance
Subsidiaries are primarily single premium deferred annuity contracts that
provide fixed interest rates which can be adjusted by the Company either on a
calendar year or contract anniversary basis. Profitability of these products is
primarily dependent on the Company's ability to earn a spread between the income
on investments supporting these contracts and the rates of interest credited to
the policyholders. These annuities are offered through financial institutions
as well as general agencies who also offer life insurance products. Total
policyholder account balances for the Company's individual single premium
deferred annuities were $1.8 billion, $1.8 billion and $1.7 billion at December
31, 1995, 1994 and 1993, respectively. Gross deposits for single premium
annuities amounted to $94 million, $245 million and $345 million in 1995, 1994
and 1993, respectively.
<PAGE>19
The 1994 decrease in individual annuity gross deposits reflected previous
management actions with objectives including diversification of sales mix and
production sources. The 1995 decrease resulted from various factors including
the negative impact on sales of declining interest rates offered on these
contracts in 1995.
The 1995 and 1994 increases in face value of individual insurance issued
came primarily from increased term insurance sales. Sales of universal life
insurance and traditional permanent life insurance also increased in both 1995
and 1994 as compared to the respective preceding year. The face amount of
individual life insurance terminated, in the aggregate, by lapse and surrender
amounted to $9.2 billion, $8.2 billion, and $7.9 billion in 1995, 1994 and 1993,
respectively. The relative consistency of these terminations as a percentage of
beginning of year in-force business reflected a continuation of favorable
persistency experience.
Subject to any applicable surrender charges, the Company's universal life
insurance products and individual deferred annuities may be surrendered by the
holder. A cash surrender value, based on contractual terms, is also available
to the policyholder upon surrender of many of the Company's traditional
individual life insurance policies under which cash values are accumulated.
Such surrenders are influenced by various factors including economic conditions,
available alternative investment returns, competition for investment and
insurance funds, and perceived financial strength of the insurer. These
contracts are generally supported by the investment portfolios of the Life
Insurance Subsidiaries, which are primarily comprised of investment grade,
publicly traded corporate bonds. Substantially all of the Company's interest
sensitive life insurance and annuity contracts provide for imposition of a
surrender charge in the event of policy surrender during a specified initial
period commencing with contract inception, typically ten to fifteen years for
universal life insurance and five to seven years for individual annuities, with
the significance of this charge often subject to reduction over the applicable
period or during the later portion thereof. The Company monitors its surrenders
on a monthly basis. Any material deviation or emerging trend is traced to the
product line and agency of record, and remedial action is taken where
appropriate.
As discussed under "Asset / Liability Management; Investments and
Investment Results," the Company's investment portfolios are continually
monitored to determine whether the distribution of investment maturities is
considered appropriate for expected cash flows from policy liabilities,
including policy surrenders.
Credit Life and Disability Insurance
For the last three years, premiums and income before taxes for the Credit
Life and Disability product lines were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
_________ __________ _________
(Amounts in Thousands)
<S> <C> <C> <C>
Premium income:
Credit life................................ $ 74,308 $ 66,269 $ 56,778
Credit disability.......................... 75,165 66,423 55,040
_________ _________ _________
Total...................................... $ 149,473 $ 132,692 $ 111,818
========= ========= =========
Pre-tax income, before capital gains
and losses:
Credit life.............................. $ 907 $ 1,136 $ 1,269
Credit disability........................ 6,883 5,230 5,010
Capital gains (losses)..................... 353 1,099 3,995
_________ _________ _________
Total...................................... $ 8,143 $ 7,465 $ 10,274
========= ========= =========
</TABLE>
Credit life insurance, generally similar to decreasing term life insurance,
is issued on the lives of borrowers to cover payment of loan balances in case of
death. Credit disability insurance is written in conjunction with credit life
insurance and covers the continuation of loan payments to a lender in the event
the borrower becomes disabled. These products are primarily marketed through
financial institutions and automobile dealers.
<PAGE>20
Profitability of these products is dependent upon various factors,
including actual mortality and morbidity experience. Profitability is also
affected by premium rate limitations imposed by regulatory authorities in
various states and by competitive factors, which may affect both premium rates
and levels of compensation provided by the Company to its sources of credit
insurance business.
Group Life and Health Insurance
For the last three years, premiums and income before taxes for the Group
Life and Health product lines were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
_________ __________ _________
(Amounts in Thousands)
<S> <C> <C> <C>
Premium income:
Group life................................. $ 193,069 $ 185,482 $ 178,302
Group health............................... 375,265 406,688 438,075
_________ _________ _________
Total...................................... $ 568,334 $ 592,170 $ 616,377
========= ========= =========
Pre-tax income, before capital gains
and losses:
Group life............................... $ 5,775 $ 5,519 $ 5,215
Group health............................. (5,031) 5,866 4,575
Capital gains (losses)..................... (3,698) 774 1,658
_________ _________ _________
Total...................................... $ (2,954) $ 12,159 $ 11,448
========= ========= =========
</TABLE>
The major portion of the Company's group life and health business consists
of coverages sold through employers to their employees and coverages sold
through associations to their members. The Company also offers group mortgage
life and disability products and specialty group insurance products that are
often marketed through financial institutions.
Profitability of group insurance products is dependent on various factors
including underwriting results and, particularly in the case of employer and
association group health insurance products, the ability of the Company to match
premiums charged to increases in benefit costs through periodic rate adjustments
and to maintain underwriting standards so that premium charged is consistent
with risk assumed on an overall basis. Premiums charged for group health
insurance products are subject to periodic rate adjustments by the Company which
considers, among other factors, trends in the costs of benefits provided in
setting such rates. Profitability is also dependent on the Company's ability to
generate sufficient premium volume to recover expenses necessary to support the
business.
Premium revenues on employer/association group health insurance products
declined from $429 million in 1993 to $397 million in 1994 and to $358 million
in 1995, with the decline primarily attributed to traditional indemnity major
medical cases associated with a shift in market emphasis toward managed care
products. This change in market emphasis resulted both in a reduction of new
sales of the Company's indemnity major medical products as well as erosion of
business in force, over the past several years.
Although a significant portion of the Company's 1995 major medical sales
came from managed care products, historically the majority of its group
insurance premium revenues were derived from indemnity major medical coverages.
As a result, about 60% of employer/association group health and disability
premium in force at year end 1995 relates to traditional indemnity products.
These policies were often sold together with employer/association group life
insurance.
<PAGE>21
The Company has taken a number of actions to address the decline in
revenues, including refinement of "ancillary" group products such as long-term
disability and dental insurance, with goals including an increase in the
proportion of group business from non-major medical lines, and has introduced
new managed care products in several states (using provider networks made
available through unrelated companies).
The Company has also initiated expense reduction measures to alleviate the
impact of reduced group health revenues. Despite these measures, the revenue
decline outpaced reductions in overhead and other expenses during 1995. This
revenue shortfall, together with expense charges of approximately $1 million
related to the closing of a claims office, resulted in the reported pre-tax loss
for 1995. The claims office closing represents the substantial completion of a
program to consolidate these offices in order to achieve future economies.
In January, 1996, the Company announced that it would discontinue offering
its traditional indemnity major medical products, and that it would restrict its
new sales of managed care major medical products to eight states where it has
significant market presence and an appropriate managed care network in place.
The Company will, however, continue to provide full support and service to all
existing indemnity customers regardless of location and will seek to convert
cases from indemnity coverage to managed care in order to conserve the business.
As discussed in Note 4 of Notes to Financial Statements, the Company will
continue to monitor this business in order to determine whether future financial
statement adjustments are necessary.
In addition to the profitability factors indicated above, future results
from the Company's group insurance product lines will be dependent on market
acceptance of the recently introduced managed care and ancillary products and
the degree to which the above strategies result in premium volume that is
commensurate with continuing expense levels.
Asset / Liability Management; Investments and Investment Results
Investments are subject to the direction and control of the Boards of
Directors or Executive Committees of each of the respective Life Insurance
Subsidiaries. Certain investments are made upon the recommendation of USLIFE
Realty Corporation or USLIFE Real Estate Services Corporation (see "Realty
Investment" below) with respect to real estate and mortgages, and upon the
recommendation of the parent company with respect to securities, all of which
furnish such investment advice to the Life Insurance Subsidiaries. All
investments must comply with applicable insurance laws and regulations, which
prescribe the nature, quality and percentages of various types of investments
which may be made by insurance companies. The major portion of funds available
for investment in recent years has been invested in bonds and redeemable
preferred stocks ("fixed maturities"), and in short term investments, including
corporate commercial paper and money market instruments.
The investment management policies of the Company include continual
evaluation of securities market conditions and circumstances relating to
particular investment holdings which may result in sale of fixed maturity or
other investments prior to maturity. Securities may also be sold as part of the
Company's asset / liability management strategy in response to changes in
interest rates, resultant prepayment risk, and similar factors. Additionally,
the Company's investment portfolios are continually monitored to determine
whether the distribution of investment maturities is considered appropriate for
expected cash flows, including surrenders, relating to policy liabilities.
These cash flows are sensitive to various factors including available interest
rates. Securities may be sold prior to maturity in order to rebalance the
distribution of investment maturities based on this evaluation of expected cash
flows. Consequently, the Company's entire portfolio of fixed maturity
investments has been classified as "available for sale." Adjustments to the
investment maturity distribution, if necessary, may also be accomplished by
actions concerning the investment of incoming funds and/or reinvestment of the
proceeds of securities matured or redeemed. The adjusted cost and fair value of
the Company's debt security investments, by contractual maturity, are set forth
in Note 3 of Notes to Financial Statements.
<PAGE>22
The fixed maturities portfolios of the Life Insurance Subsidiaries at
December 31, 1995 were predominantly comprised of investment grade securities
(based on ratings assigned by recognized rating agencies and insurance
regulatory authorities). At December 31, 1995, invested assets of the Life
Insurance Subsidiaries included approximately $230 million (adjusted cost) of
less than investment grade fixed maturity securities, based on these ratings.
The latter investments had an aggregate fair value of approximately $232 million
as of December 31, 1995 and based on fair value, represent approximately 3% of
total assets of the Life Insurance Subsidiaries at that date. These securities
generally involve greater risk of loss from borrower default than investment
grade securities because their issuers typically have higher levels of
indebtedness and are more vulnerable to adverse economic conditions than other
issuers. The results of operations of the Life Insurance Subsidiaries
historically have not reflected a material adverse impact from retention of such
securities. Certain bonds, representing less than one half of 1% of the total
fixed maturities portfolio for the Life Insurance Subsidiaries, have defaulted
in interest. Quality ratings of the fixed maturities portfolio of the Life
Insurance Subsidiaries at December 31, 1995 with respect to each National
Association of Insurance Commissioners (NAIC) credit classification are as
follows:
Fixed Maturities Available for Sale
________________________________________________________________
NAIC Class Adjusted Cost Fair Value
___________ _____________ ____________
(Amounts in Thousands)
1....................... $3,451,633 $3,738,881
2....................... 1,841,746 1,997,951
__________ __________
Total investment grade....... 5,293,379 5,736,832
__________ __________
3....................... 162,621 162,894
4....................... 57,115 58,985
5....................... 3,822 3,377
6....................... 6,410 6,981
__________ __________
Total non-investment grade... 229,968 232,237
__________ __________
Total........................ $5,523,347 $5,969,069
========== ==========
The mortgage portfolio of the Life Insurance Subsidiaries at December 31,
1995 had an aggregate principal amount of approximately $300 million and
consisted of approximately 300 loans. The mortgage portfolio is characterized
by a broad geographical distribution, with approximately 6% of total book value
at December 31, 1995 relating to the New England region of the United States,
17% from the middle-Atlantic states, 21% from the north-central states, 17% from
the south-Atlantic states, 12% from the south-central states, 13% from the
mountain states, and 14% from the Pacific states. Based on book value,
approximately 36% of these mortgage loans at that date are secured by office
buildings, 24% by industrial / warehouse properties, 29% retail, and the
remainder secured by apartments, one to four family residential, hotel / motel,
medically oriented, or other specialty properties. At December 31, 1995, the
average principal balance of mortgage loans contained in the portfolio was $1
million, with a weighted average yield of 10.3% on principal balance. The
average maturity was approximately 6 years. The largest principal balance of
any single mortgage loan at that date was $10 million. The Company regards
delinquent mortgage loans to be those on which interest due is unpaid for 60
days or more or the loan is in foreclosure. The book value of delinquent
mortgage loans amounted to approximately 1.8% and 2.9% of the mortgage loan
portfolio at December 31, 1995 and 1994, respectively. On December 31, 1995
property held as a result of foreclosure of loans amounted to $18 million.
The Company's management of the investment portfolios of the Life Insurance
Subsidiaries includes identification and evaluation of holdings which are non-
performing or have otherwise indicated performance which could imperil future
investment income or recovery of invested amounts. A valuation reserve
(established through income statement charges) is maintained for those
investments where a reduction of value is determined to be other than temporary.
<PAGE>23
In 1993, net additions to the valuation reserve for securities investments
(on a pre-tax basis) amounted to $8 million, and $25 million was added to such
reserves relating to real estate, mortgage loans, and other long term
investments. In 1994, net additions to the valuation reserve for securities
investments were $3 million, and a total of $6 million was released from the
reserves for real estate, mortgage loans and other investments due to disposal
of certain investments for which reserves were previously established. In 1995,
$8 million was released from the reserve for securities, and $24 million from
the reserve for real estate, mortgage loans, and other investments, also as a
result of disposal of investments for which reserves were previously
established. Total pre-tax portfolio reserves for the Life Insurance
Subsidiaries amounted to $89 million at December 31, 1995. The Company believes
that adequate reserves for losses have been established.
The following table shows the investment results of the Life Insurance
Subsidiaries for the periods indicated.
<TABLE>
<CAPTION>
Cash and Invested Assets Net Yield
At End of Period(1) on Cash Pre-tax
___________________________________ Net and Realized
Year Ended Invested Investment Invested Gains
December 31 Cash Assets Total Income(2) Assets(3) (Losses)
___________ ____ ________ _____ __________ _________ ___________
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
1995.......... $51,444 $6,204,247 $6,255,691 $475,839 7.93% $ 6,413
1994.......... 38,789 5,934,178 5,972,967 448,712 7.92 (1,322)
1993.......... 52,179 5,475,671 5,527,850 431,923 8.35 10,835
________
</TABLE>
(1) Does not include adjustments for net unrealized gains and losses on
securities. See Notes 1 and 3 of Notes to Financial Statements for further
information.
(2) Net investment income is after deduction of investment expenses but
before realized capital gains or losses and federal income taxes.
(3) Calculated on the basis of a formula prescribed by the National
Association of Insurance Commissioners which computes the yield on the mean
asset values during the year.
The decrease in net yield on cash and invested assets from 8.35% in 1993 to
7.92% in 1994 reflected a decline in market interest rates that resulted in
calls of higher yielding securities out of the investment portfolio, primarily
in 1993, and reinvestment of proceeds from these securities as well as funds
provided from operations at lower available interest rates.
The Company's liability for policyholder account balances, amounting to
$3.8 billion and $3.6 billion at December 31, 1995 and 1994, respectively,
relates to interest sensitive life insurance and annuity contracts that are
subject to periodic adjustment of credited interest rates by the Company.
Credited interest rates for these products are determined by management based on
factors including available market interest rates and portfolio rates of return,
and accordingly are sensitive to changes in interest rates earned on the
Company's investments and generally follow the pattern of yields on assets
supporting the related liabilities. Credited rates of interest for these
products are discussed in Management's Discussion and Analysis of "Results of
Operations" herein. Traditional contracts (such as permanent and term
insurance) are not subject to credited interest rate adjustments.
As discussed under "Regulation" herein, the Life Insurance Subsidiaries
have complied for statement years 1995, 1994 and 1993 with valuation actuary
testing requirements, promulgated by the NAIC, which apply specified rules to
assess the impact of various interest rate scenarios on the adequacy of assets
to meet policyholder liabilities. These tests did not disclose any failure of
the Company's assets to support its policy liabilities under the NAIC specified
testing scenarios.
<PAGE>24
Reserves and Reinsurance
In accordance with applicable law, the Life Insurance Subsidiaries have set
up and carry actuarial reserves to meet their obligations on their various
policies. These reserves are amounts which, together with additions from
premiums to be received and interest on such reserves compounded annually at
certain assumed rates, are calculated to be sufficient to meet the Life
Insurance Subsidiaries' policy obligations as they mature. The liability for
policy benefits relating to cash values of interest sensitive products is
accumulated based on credited rates of interest which are subject to periodic
adjustment. The statutory reserves of the Life Insurance Subsidiaries are
certified by internal actuaries as permitted by state insurance departments and
are not specifically examined by independent actuaries. The Life Insurance
Subsidiaries generally reinsure risks over $1.5 million as well as selected
risks of lesser amounts. See Note 15 of Notes to Financial Statements.
Employees and Agents
At December 31, 1995, the Life Insurance Subsidiaries had approximately
1,500 regular employees at their home and regional offices, and individual life
insurance policies were sold principally through approximately 550 active
general agencies located throughout the United States. As discussed below,
services are also furnished to the Life Insurance Subsidiaries by the Company's
Realty Investment, Securities Investment, and Corporate Services subsidiaries,
and by USLIFE Corporation.
With few exceptions, the general agents and producers of the Life Insurance
Subsidiaries are independent contractors and are compensated on a commission
basis within limitations set by applicable insurance laws. Service fees and
expense reimbursement allowances are paid to general agents, also within the
limitations of applicable insurance laws. A large percentage of producers also
sell for other companies.
Home Offices
United States Life leases a portion of a building at 125 Maiden Lane, New
York, New York 10038 which houses its principal executive offices as well as the
principal executive offices of USLIFE, USLIFE Equity Sales Corporation, USLIFE
Realty Corporation, USLIFE Advisers, Inc. and an office of USLIFE Systems
Corporation. The leases for space occupied by United States Life and other
USLIFE companies expire in 2006. Present annual base rent for all such
companies is $1.7 million, subject to adjustment, tax and escalation clauses.
The lease provides for two consecutive five year renewal options, based on fair
rental value at the time of renewal. The group insurance operations of United
States Life, certain other clerical and administrative units which provide
support services for that company and certain other Life Insurance Subsidiaries,
and several corporate units are located in a building at 3600 Route 66, Neptune,
New Jersey 07754. This building is rented under a lease expiring in 2003 with
renewal options for two additional five year terms and a further option relating
to rental of additional office space. The annual base rent under this lease is
approximately $2.3 million, subject to adjustment, tax and escalation clauses.
In addition, subsidiaries of USLIFE own or lease other properties which
house insurance and related service operations. Management believes its
facilities are adequate for present needs in all material respects. See Note 12
of Notes to Financial Statements for further information regarding the Company's
lease commitments.
Regulation
The Life Insurance Subsidiaries are subject to regulation and supervision
by the supervisory agency of each state or other jurisdiction in which they are
licensed to do business. These supervisory agencies have broad administrative
powers relating to the granting and revocation of licenses to transact business,
the licensing of agents, the approval of policy forms, premium levels, the form
and content of mandatory financial statements (see "Basis of Presentation" in
Note 1 of Notes to Financial Statements), capital, surplus, reserve requirements
and the types of investments which may be made. The National Association of
Insurance Commissioners ("NAIC") has recommended certain regulatory reporting
requirements for insurance companies, including "valuation actuary" and "risk-
<PAGE>25
based capital" requirements. Under the valuation actuary requirement, the
company must provide an actuary's certification of the adequacy of reserves for
future liabilities, taking account of the assets that support them, under
various possible economic scenarios. As indicated under "Asset / Liability
Management; Investments and Investment Results," the Life Insurance Subsidiaries
have satisfactorily complied with these requirements for statement years 1995,
1994 and 1993. The risk-based capital requirements, effective with statement
year 1993, require the company to demonstrate that capital and surplus meet or
exceed formula-driven standards based on exposure to specific categories of
risk. Companies that do not meet a standard of at least a 200% ratio of "Total
Adjusted Capital" to "Authorized Control Level Risk-Based Capital," as defined
by regulatory authorities, are identified as candidates for various levels of
regulatory action, ranging from increased surveillance to state insurance
department control. At December 31, 1995, each of the Life Insurance
Subsidiaries had a risk-based capital ratio (as defined) of 400% or more, thus
exceeding the required ratio. The Life Insurance Subsidiaries have not
experienced and do not anticipate an adverse impact on their operations as a
consequence of the valuation actuary and risk-based capital requirements. As
specified by the NAIC, Insurance Regulatory Information System ("IRIS") ratios
of certain key statutory data are computed for the Life Insurance Subsidiaries
on an annual basis. These ratios revealed no material exceptions for statement
year 1995. The Life Insurance Subsidiaries may be required, under the solvency
or guaranty laws of the various states in which they are licensed, to pay
assessments up to prescribed limits to fund policyholder losses or liabilities
of insolvent insurance companies. The Life Insurance Subsidiaries are required
to file detailed reports with each supervisory agency, and their books and
records are subject to examination by each. In accordance with the insurance
codes in the states in which they are domiciled and the rules and practices of
the National Association of Insurance Commissioners, the Life Insurance
Subsidiaries are examined periodically by examiners of the states in which they
are domiciled and by representatives (on an "association" or "zone" basis) of
the other states in which they are licensed to do business. All of the Life
Insurance Subsidiaries have been examined at least as of December 31, 1990.
Annual financial statements prepared in accordance with statutory
accounting practices for each of the Company's Life Insurance Subsidiaries,
filed with insurance departments in the states where the Company's Life
Insurance Subsidiaries are domiciled or licensed to do business, require the
inclusion of an interest maintenance reserve ("IMR") and an asset valuation
reserve ("AVR"), according to regulations prescribed by the NAIC. These
regulations apply to all invested assets and require that investment gains and
losses resulting from changes in interest rates be distinguished from gains and
losses resulting from changes in creditworthiness. The IMR captures all
investment gains and losses resulting from changes in interest rates and
provides for subsequent amortization of such amounts into statutory net income
on a basis reflecting the remaining lives of the assets sold. The AVR captures
investment gains and losses related to changes in creditworthiness and is
adjusted each year based on a formula related to the quality and loss experience
of the Company's investment portfolio. The AVR requires reserves for mortgage
loans, other invested assets and short-term investments as well as fixed
maturity and equity security investments. The AVR and IMR are not recorded
under generally accepted accounting principles and consequently have no impact
on reported financial position or results of operations of the Company. The
Company has not experienced any significant adverse impact on its overall
operations as a result of these regulatory accounting requirements and, based on
the current composition of the investment portfolios of the Life Insurance
Subsidiaries, the Company does not currently anticipate significant adverse
impact.
Most states have enacted legislation or adopted administrative regulations
covering such matters as the acquisition of control of insurance companies and
transactions between insurance companies and the persons controlling them. The
National Association of Insurance Commissioners has recommended model
legislation on these subjects which has been adopted, with variations, by many
states. The nature and extent of the legislation and administrative regulations
now in effect vary from state to state, and in most states they require
administrative approval of the acquisition of control of an insurance company
incorporated in the state, whether by tender offer, exchange of securities,
merger or otherwise, and require the filing of detailed information regarding
the acquiring parties and the plan of acquisition. Every insurance company
which is authorized to do business in the state and is a member of an "insurance
holding company system," other than a company incorporated in another state
subject to substantially similar disclosure requirements and standards, is
generally required to register as such with the insurance regulatory authorities
and file periodic reports concerning its relationships with the insurance
holding company and other affiliates of the holding company. Material
transactions between registered insurance companies and members of the holding
company system are required to be "fair and reasonable" and in some cases are
<PAGE>26
subject to administrative approval, and the books, accounts and records of each
party are required to be so maintained as to clearly and accurately disclose the
precise nature and details of the transactions. Notice to or approval by
regulatory authorities is frequently required for dividends paid by insurance
companies, and their surplus following any dividend is required to be reasonable
in relation to outstanding liabilities and adequate for financial needs. See
Note 18 of Notes to Financial Statements for further information regarding
dividends. Broad examination and enforcement powers are conferred on regulatory
authorities. Each of the Life Insurance Subsidiaries is required to register as
a member of an insurance holding company system with the insurance supervisory
authorities in at least one state. USLIFE does not presently anticipate that
legislation and regulation such as that described above will materially restrict
its activities.
Acquired Immune Deficiency Syndrome (AIDS), which has received wide
publicity because of its serious public health implications, presents special
concerns to the life insurance industry. Morbidity and mortality risks are
accepted by insurers based on methods of classification designed to
appropriately relate premiums charged to such risks and, in this connection,
steps have been taken toward strengthening the Company's underwriting and
selection process. The Company's own mortality and morbidity experience
reflects no significant adverse impact as a result of any acceleration of AIDS
claims. The Company is continuing to monitor developments in this area but
cannot predict the long term impact of this problem on the life insurance
industry generally or on the Company.
Competition
The insurance business is highly competitive, and there are approximately
1,800 stock and mutual companies some of which are larger than the Life
Insurance Subsidiaries (individually and in the aggregate). Although most
insurance companies are stock companies, mutual companies account for nearly 40%
of the life insurance in force in the United States and hold a still larger
percentage of the admitted assets. The Life Insurance Subsidiaries believe that
their premium rates and policies are generally competitive with those of other
life insurance companies.
If the aggregate volume of insurance in force of the Life Insurance
Subsidiaries were considered to be that of one company, such company would have
ranked 19th among the companies listed in surveys contained in the June 26, 1995
edition of the National Underwriter, Life and Health Insurance Edition. In
addition to competition among life insurance companies, the Life Insurance
Subsidiaries also compete increasingly with other financial institutions such as
commercial banks and securities brokerage organizations. Competition from such
financial institutions as well as other insurance companies is considered by the
Life Insurance Subsidiaries in determining the rates of return to be offered on
interest sensitive products. See discussion under "Asset / Liability
Management; Investments and Investment Results."
Realty Investment
USLIFE Realty Corporation; USLIFE Real Estate Services Corporation
USLIFE Realty Corporation ("Realty") was incorporated in 1954. Realty
manages a portfolio of real estate, mortgage loan, and joint venture investments
(approximately $800 thousand at December 31, 1995), enters into mortgage and
real estate standby commitments for fees which may include the receipt of equity
interests and participates in real estate joint ventures relating to properties
being built for investment or sale.
USLIFE Real Estate Services Corporation ("Services") was incorporated in
1969. Services, a subsidiary of Realty, provides investment advice and
management services for the combined mortgage and real estate portfolios of the
Life Insurance Subsidiaries as well as certain other services for the Life
Insurance Subsidiaries, such as originating mortgage loans, arranging standby
commitments for fees and participations in real estate equity developments which
frequently include participation in the profits or ownership of the underlying
enterprises. Investment decisions, both as to overall investment objectives
such as diversification, yield and risk, and as to the specific investment,
remain the responsibility of the individual Life Insurance Subsidiaries. USLIFE
Real Estate Services Corporation also provides services relating to mortgage
portfolios of non-affiliated companies amounting to approximately $5 million at
December 31, 1995.
<PAGE>27
Securities Investment
USLIFE Advisers, Inc.
USLIFE Advisers, Inc. ("Advisers"), a wholly-owned subsidiary of USLIFE,
was incorporated in October 1972 to be the adviser to USLIFE Income Fund, Inc.
("Income Fund"), a closed-end mutual fund sponsored by USLIFE. Income Fund's
primary investment objective is to provide a high level of current income to its
shareholders. Income Fund made a public offering of its securities in December
1972 and had net assets of approximately $58 million at December 31, 1995.
Advisers' services to Income Fund are furnished under an investment advisory
contract which, as required by the Investment Company Act of 1940, provides that
its continuance is subject to specific approval at least annually by a majority
of the directors of Income Fund, including a majority of its directors who are
not parties to such agreement or interested persons of any such party, or by
vote of the holders of a majority of the outstanding voting securities of Income
Fund, and to termination by either party on 60 days' notice. In 1995, Advisers
earned fees of $392 thousand pursuant to this contract.
USLIFE Equity Sales Corp.
USLIFE Equity Sales Corp. ("Equity Sales") was incorporated in 1968 as a
wholly-owned subsidiary of USLIFE. It is a member of the National Association
of Securities Dealers, Inc., and Securities Investors Protection Corporation and
is registered as a broker-dealer in all 50 states and the District of Columbia.
Its principal business is the sale of securities by licensed registered
representatives who also sell the life insurance products of the Life Insurance
Subsidiaries.
Approximately 760 registered representatives, almost all of whom are also
licensed insurance agents, are affiliated with Equity Sales and are supervised
by its main office in New York City. Equity Sales works with the Life Insurance
Subsidiaries to recruit their agents to become registered representatives of
Equity Sales. Emphasis is placed on the joint marketing of securities and
insurance products.
Corporate Services
The "Corporate Services" category includes the operations of USLIFE Systems
Corporation, USLIFE Agency Services, Inc., USLIFE Insurance Services
Corporation, and USLIFE Financial Institution Marketing Group, Inc., each of
which furnish services to USLIFE's subsidiaries.
USLIFE Systems Corporation, formed in 1971, provides data processing
support and related services to USLIFE and its subsidiaries. USLIFE Agency
Services, Inc., originally established in 1983, arranges for specialty coverages
not underwritten by the Life Insurance Subsidiaries to be marketed in
conjunction with the products of those companies, and provides other marketing-
related services to the Life Insurance Subsidiaries. USLIFE Insurance Services
Corporation, formed in 1986, develops and implements standard administrative
procedures for certain Life Insurance Subsidiaries. USLIFE Financial
Institution Marketing Group, Inc., formed in 1995, coordinates the activities of
all USLIFE Companies in connection with marketing through banks and other
financial institutions.
Employees
USLIFE and its subsidiaries employed approximately 2,100 persons at
December 31, 1995.
<PAGE>28
Item 2. Properties.
Descriptions of properties of USLIFE and its subsidiaries are set forth in
Item 1.
Item 3. Legal Proceedings.
As previously reported, in November 1981, the Company filed a third amended
complaint against Louis Wilcox and other former officers of USLIFE Savings and
Loan Association, a former subsidiary of the Company, for indemnification,
injunctive relief and accounting (USLIFE Savings and Loan Association v. Louis
Wilcox, et al., Superior Court of the State of California for the County of
Riverside). In April 1984, defendant Louis M. Wilcox filed a cross complaint
against the Company seeking general damages of $1 million, punitive damages of
$10 million and special damages. In 1986, Wilcox's causes of action for
malicious prosecution and abuse of process were dismissed. On appeal, the
dismissal of the cause of action for malicious prosecution was reversed while
the dismissal of the abuse of process claim was upheld. Pursuant to the
Company's request, the case was bifurcated for trial. In July, 1993, the trial
court, after hearing evidence on the issue, without a jury, decided that the
Company had probable cause to sue Wilcox in 1981. That ruling was dispositive
of the claim for malicious prosecution and, thus, the Court dismissed Wilcox's
only remaining claim against the Company. A judgment in the Company's favor was
entered in late 1993. Wilcox has appealed and the appeal is still pending. No
contingent loss has been accrued for this litigation because the amount of loss,
if any, cannot be reasonably estimated, nor is it probable in the opinion of
management that the ultimate outcome of this litigation will result in a
liability to the Company or any of its subsidiaries.
As previously reported in the Company's Report on Form 10-Q for the quarter
ended September 30, 1995, on November 17, 1994, a purported class action (Smith,
et al. v. USLIFE Credit Life Insurance Company, et al.) was filed against three
subsidiaries of the Company in the United States District Court for the Northern
District of Illinois. The Complaint alleges that in connection with purchases
by plaintiffs of single premium term life insurance from mortgage lenders in
connection with second mortgage loans, defendants misrepresented the type of
insurance offered as credit life insurance and sold the term life insurance at
premiums in excess of those permitted for credit life insurance. The Complaint
further alleges that upon prepayment of mortgage loans plaintiffs did not
receive refunds of unearned premiums, which they would have been entitled to
receive had they purchased credit life insurance. On July 27, 1995, the parties
filed a Stipulation of Dismissal of plaintiffs' claims against USLIFE Credit
Life Insurance Company and Security of America Life Insurance Company, leaving
the matter pending against only All American Life Insurance Company. The
parties have agreed to a settlement of all claims asserted and the settlement
was given tentative approval by the Court on December 20, 1995. Under the terms
of the Settlement Agreement, class members will be notified of their right to
file claims for partial premium refunds. The settlement would resolve all
claims against the Company's subsidiaries in this lawsuit as well as the claims
asserted by plaintiffs in two cases previously reported in the Company's Report
on Form 10-Q for the quarter ended September 30, 1995, which have been
terminated without prejudice (Hoban v. USLIFE Credit Life Insurance Company, All
American Life Insurance Company and Security of America Life Insurance Company,
and Grant, et al. v. USLIFE Credit Life Insurance Company and Security of
America Life Insurance Company). A list of potential class members is being
compiled and a status hearing is scheduled. In the opinion of management, the
ultimate resolution of this action in accordance with the terms of the
Settlement Agreement will not result in a material additional liability on the
part of the Company.
As previously reported, on August 28, 1995, a purported class action (John
G. Robinson & Company, et al. v. The Old Line Life Insurance Company of America)
was filed in the District Court of Tarrant County, Texas. On September 29,
1995, the case was removed to the United States District Court for the Northern
District of Texas. The Complaint alleges that defendant, a subsidiary of the
Company, violated the federal Telephone Consumer Protection Act ("TCPA") by
sending unsolicited facsimiles of advertisements. Plaintiff also asserts claims
for negligence, gross negligence, trespass to chattels and invasion of privacy.
The Complaint contains claims for damages in the amount of $500 for each such
unsolicited facsimile (allowed under the TCPA) or alternatively, plaintiffs'
<PAGE>29
actual monetary loss; plaintiffs have also sued for treble damages or
alternatively, punitive damages. Defendant has filed a Motion to Dismiss based
on application of the McCarran-Ferguson Act, a Motion to Dismiss plaintiff's
class action allegations based on procedural defects and a Motion for Partial
Judgment on the Pleadings. These Motions are currently pending before the
Court. No contingent loss has been accrued for this litigation because the
amount of loss, if any, cannot be reasonably estimated.
As previously reported, on March 16, 1995, a purported class action (Dana
Galloway v. USLIFE Credit Life Insurance Company) was filed in the Circuit Court
of Fayette County, Alabama. The complaint alleges that defendant, a subsidiary
of the Company, issued insurance contracts in an amount sufficient to cover the
gross amount of indebtedness, rather than the net amount of indebtedness,
contrary to Alabama law. The complaint contains claims of fraud and breach of
contract based on allegations that defendant misrepresented the amount of
insurance needed (based on a recent ruling in a similar case by the Alabama
Supreme Court in McCullar v. Universal Underwriters ). Plaintiffs seek
compensatory and punitive damages. Defendant contends that its sale of
insurance covering the gross amount of indebtedness was done in reliance on
regulations promulgated by the Insurance Department of the State of Alabama and
is aggressively defending the case. No contingent loss has been accrued for
this litigation because the amount of loss, if any, cannot be reasonably
estimated.
In addition to the aforementioned legal proceedings, the Company and its
subsidiaries are parties to various routine legal proceedings incidental to the
conduct of their business. Based on currently available information, in the
opinion of management, it is not probable that the ultimate resolution of these
suits will result in a material liability on the part of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
USLIFE's Common Stock is traded on the New York, Chicago, Pacific and
London Stock Exchanges. Dividends for the years ended December 31, 1995 and
1994 have been declared and paid to Common Stockholders at the annual rates of
$.91 and $.84 respectively (paid quarterly in 1995 and 1994). As of February
22, 1996 there were approximately 8,500 record holders of the Common Stock. The
following table sets forth the high and low sales prices for the Common Stock as
reported in the consolidated transaction system for each quarterly period during
the years indicated.
MARKET PRICE RANGES
(low to high)
1995 1994
____ ____
First quarter...... 22.58 - 25.58 25.00 - 27.58
Second quarter..... 24.67 - 27.67 23.25 - 26.42
Third quarter...... 26.17 - 31.58 22.08 - 25.17
Fourth quarter..... 26.88 - 32.00 20.58 - 23.92
See Note 18 of Notes to Financial Statements and Management's Discussion and
Analysis of "Liquidity" herein, for information concerning regulatory
restrictions upon payment of dividends by the Life Insurance Subsidiaries to the
Company.
<PAGE>30
Item 8. Financial Statements and Supplementary Data.
See separate Index to Financial Statements and Financial Statement
Schedules on page 45. See Note 21 of Notes to Financial Statements as to
condensed quarterly results of operations.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
<PAGE>31
Item 10. Directors and Executive Officers of the Registrant.
Executive Officers of the Registrant
The executive officers of USLIFE are listed below. The executive officers,
after their initial election, are elected at USLIFE's annual Board of Directors
meeting to serve, unless removed, until the next such annual meeting, scheduled
for May 1996.
<TABLE>
<CAPTION>
Served as
Name Office Age such since
_____ ______ ____ __________
<S> <C> <C> <C>
Gordon E. Crosby, Jr. Chairman of the Board; Chairman, USLIFE 75 (1)
Corporation Subsidiaries and USLIFE Income
Fund, Inc.
Greer F. Henderson Vice Chairman and Chief Executive Officer 64 2-28-96
Christopher S. Ruisi President and Chief Operating 46 2-28-96
Officer; Director
William A. Simpson President - Life Insurance Division; Director 57 2-28-96
A. Scott Bushey Executive Vice President-Corporate Planning 65 4-26-88
Arnold A. Dicke Executive Vice President-Product Actuary 54 4-28-92
Wesley E. Forte Executive Vice President-General Counsel 62 5-21-85
John D. Gavrity Executive Vice President-Financial Actuary 55 10-23-91
Michael LeFante Executive Vice President-Administration 41 2-29-96
James M. Schlomann.. Executive Vice President-Finance 47 2-29-96
Richard G. Hohn..... Senior Vice President - Investor Relations, 59 10-25-94
Secretary and Counsel
Richard J. Chouinard Chief Investment Officer; President and 63 4-26-88
Director, USLIFE Income Fund, Inc.
Frank J. Auriemmo, Jr. Senior Vice President & Treasurer 54 5-3-95
Neal M. Stern Senior Vice President - Controller 44 1-10-96
James A. Bickler President - Chief Executive Officer, All 54 5-2-95
American Life
Ralph J. Cargiulo President and Chief Executive Officer, 61 5-18-93
United States Life
Phillip G. Faulkner President and Chief Executive Officer, 59 6-1-74
USLIFE Real Estate Services Corporation
James A. Griffin President and Chief Executive Officer, 56 10-1-88
Old Line Life
Thomas L. Hendricks President and Chief Executive Officer, 55 4-1-91
USLIFE Systems Corporation and USLIFE
Insurance Services Corporation
William M. Keeler President and Chief Executive Officer, 51 5-1-95
USLIFE Credit Life
__________
</TABLE>
(1) Mr. Crosby has served as Chairman of USLIFE Corporation since March 21,
1967 and as Chief Executive Officer from June 6, 1971 to December 31, 1994. Mr.
Crosby served as President of USLIFE Corporation from November 1966 to June
1971; from October 1974 to March 1976; from January 1984 to November 1987; from
December 1988 to May 1993; and from April 1994 to December 1994.
All of USLIFE's executive officers devote their full time to the business
of USLIFE or its subsidiaries.
<PAGE>32
Messrs. Bushey, Forte, Chouinard, Faulkner and Griffin have served in their
present positions for more than five years.
Mr. Henderson was elected Vice Chairman and Chief Executive Officer in
February 1996. He previously served as Vice Chairman and Chief Financial
Officer since 1983.
Mr. Ruisi was elected President and Chief Operating Officer in February
1996. He previously served as Vice Chairman and Chief Administrative Officer
from May 1993 until that date and has been a Director since November 1992.
Prior to May 1993, he served as Senior Executive Vice President - Administration
since 1990 and as Executive Vice President - Administration from 1987 to 1990.
Mr. Simpson was elected President - Life Insurance Division in February
1996. He previously served as President and Chief Executive Officer of USLIFE
Corporation from January 1995 until that date and has served as a Director since
March 1990. He served as President and Chief Executive Officer of All American
Life from April 1990 to October 1994 and as President - Chief Operating Officer
of the life insurance division of USLIFE Corporation from April 1994 to December
1994. Prior to his employment with USLIFE, Mr. Simpson served as President and
Chief Operating Officer, and a member of the board of directors of Transamerica
Occidental Life Insurance Company since 1986.
Mr. Dicke has served as Executive Vice President - Product Actuary since
April 1992. He previously served as Vice President and Actuary for The
Equitable Life Assurance Society since April 1991, and as Consultant and Actuary
with Tillinghast, a Towers Perrin Company, from 1988 to 1991.
Mr. Gavrity has served as Executive Vice President-Financial Actuary since
October 1991 and previously served as Executive Vice President - Chief Actuary
since 1984.
Mr. LeFante was elected Executive Vice President - Administration in
February 1996. He previously served as Senior Vice President - Audit and
Control since September 1991. Prior to that date, he served as Vice President -
Audit and Control since 1990.
Mr. Schlomann was elected Executive Vice President - Finance in February
1996. He previously served as Executive Vice President - Financial Operations
since joining USLIFE Corporation in October 1993. Prior to that date, he served
as Senior Vice President and Controller with Frank B. Hall & Co., Inc. since
1986.
Mr. Hohn has served as Senior Vice President - Investor Relations,
Secretary and Counsel since October 1994. He previously served as Senior Vice
President - Corporate Secretary and Counsel since May 1993, and as Vice
President - Corporate Secretary since April 1991. Prior to that date, he served
as consultant to the Life Insurance Council of New York, Inc., a trade
association of New York life insurance companies, since 1990.
Mr. Auriemmo has served as Senior Vice President and Treasurer since May
1995. He previously served as Vice President and Treasurer since 1984.
Mr. Stern has served as Senior Vice President - Controller since January
1996. He previously served as Senior Vice President - Accounting since May 1993
and as Vice President - Accounting since 1984.
Mr. Bickler has served as President and Chief Executive Officer of All
American Life since May 1995. He previously served as President - Chief
Operating Officer of All American Life since October 1994. Prior to that date,
he served as Executive Vice President - Marketing with that subsidiary since
1990.
Mr. Cargiulo has served as President and Chief Executive Officer of United
States Life since May 1993. He previously served as President- Chief Operating
Officer of United States Life since October 1991. Prior to that date, he served
as Executive Vice President for individual underwriting and insurance services
of that subsidiary since 1990.
<PAGE>33
Mr. Hendricks has served as President and Chief Executive Officer of USLIFE
Systems Corporation since 1988 and as President and Chief Executive Officer of
USLIFE Insurance Services Corporation since April 1991.
Mr. Keeler has served as President and Chief Executive Officer of USLIFE
Credit Life since May 1995. He previously served as Senior Executive Vice
President - Marketing of that subsidiary since May 1994. Prior to joining
USLIFE Credit Life at that time, he served as President - Chief Operating
Officer for Consolidated Insurance Group of America, Inc. from August 1992. He
previously served as executive vice president - chief operating officer of
domestic insurance operations and a member of the board of directors of AVCO
Financial Services from 1989 to 1992.
Information regarding directors of the Registrant is incorporated by
reference to USLIFE Corporation's definitive proxy statement to be filed within
120 days after the end of USLIFE's fiscal year ended December 31, 1995 for use
in connection with the Annual Meeting of Shareholders to be held on May 21,
1996.
Item 11. Executive Compensation.
Information regarding executive compensation is incorporated by reference
to USLIFE Corporation's definitive proxy statement to be filed within 120 days
after the end of USLIFE's fiscal year ended December 31, 1995 for use in
connection with the Annual Meeting of Shareholders to be held on May 21, 1996.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information regarding beneficial ownership of USLIFE's voting securities by
directors, officers, and persons who, to the best knowledge of USLIFE, are known
to be the beneficial owners of more than 5% of any class of USLIFE's voting
securities as of March 29, 1996, is incorporated by reference to USLIFE
Corporation's definitive proxy statement to be filed within 120 days after the
end of USLIFE's fiscal year ended December 31, 1995 for use in connection with
the Annual Meeting of Shareholders to be held on May 21, 1996.
Item 13. Certain Relationships and Related Transactions.
Information regarding certain relationships and related transactions is
incorporated by reference to USLIFE Corporation's definitive proxy statement to
be filed within 120 days after the end of USLIFE's fiscal year ended December
31, 1995 for use in connection with the Annual Meeting of Shareholders to be
held on May 21, 1996.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1 and 2. Financial Statements and Financial Statement Schedules of
USLIFE and Subsidiaries.
See separate Index to Financial Statements and Financial Statement
Schedules on page 45.
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
undersigned Registrant hereby undertakes as follows, which undertaking shall be
incorporated by reference into the Registrant's Registration Statements on Form
S-8 Nos. 33-40793 (filed June 23, 1991), 33-13999 (filed May 11, 1987) and 2-
77278 (filed April 30, 1982):
<PAGE>34
Insofar as indemnification for liabilities under the Securities Act of 1933
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
<PAGE>35
(a) 3. Exhibits.
3 (i) - Restated Certificate of Incorporation, as amended,
incorporated herein by reference to USLIFE's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993, SEC File No.
1-5683.
3 (ii) - By-laws, as amended and restated, incorporated herein by
reference to USLIFE's Annual Report on Form 10-K for the year
ended December 31, 1994, SEC File No. 1-5683.
4 (i) - See Exhibit 3(i).
(ii) - Indenture dated as of October 1, 1982 (9.15% Notes due June
15, 1999, 6.75% Notes due January 15, 1998, and 6.375% Notes due
June 15, 2000) incorporated herein by reference to USLIFE's
Registration Statement No. 2-79559 on Form S-3.
Agreements or instruments with respect to long-term debt which
are not filed as exhibits hereto do not in total exceed 10% of
USLIFE's consolidated total assets and USLIFE agrees to furnish a
copy thereof to the Commission upon request.
(iii) - Amended and Restated Rights Agreement, dated as of September
27, 1994, between USLIFE Corporation and Chemical Bank (successor
by merger to Manufacturers Hanover Trust Company), as Rights
Agent, relating to Common Stock Purchase Rights issued by USLIFE
on July 10, 1986, incorporated herein by reference to USLIFE's
Report on Form 8-K dated October 12, 1994, SEC File No. 1-5683.
10 * (i) - Employment contract dated as of April 1, 1989 between USLIFE
Corporation and Gordon E. Crosby, Jr., incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1989, SEC File No. 1-5683.
* (ii) - First Amendment dated as of May 1, 1989 to employment contract
dated as of April 1, 1989 between USLIFE Corporation and Gordon
E. Crosby, Jr., incorporated herein by reference to USLIFE's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1989, SEC File No. 1-5683.
* (iii) - Second Amendment dated as of May 1, 1990 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Gordon E. Crosby, Jr., incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1990, SEC File No. 1-5683.
* (iv) - Third Amendment dated as of May 1, 1991 to employment contract
dated as of April 1, 1989, as amended, between USLIFE Corporation
and Gordon E. Crosby, Jr., incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended June
30, 1991, SEC File No. 1-5683.
* (v) - Fourth Amendment dated as of May 1, 1992 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Gordon E. Crosby, Jr., incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1992, SEC File No. 1-5683.
<PAGE>36
* (vi) - Fifth Amendment dated as of February 1, 1993 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Gordon E. Crosby, Jr., incorporated herein by
reference to USLIFE's Annual Report on Form 10-K for the year
ended December 31, 1992, SEC File No. 1-5683.
* (vii) - Sixth Amendment dated as of May 1, 1993 to employment contract
dated as of April 1, 1989, as amended, between USLIFE Corporation
and Gordon E. Crosby, Jr., incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended June
30, 1993, SEC File No. 1-5683.
* (viii) - Seventh Amendment dated as of May 1, 1994 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Gordon E. Crosby, Jr., incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, SEC File No. 1-5683.
* (ix) - Eighth Amendment dated as of May 1, 1995 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Gordon E. Crosby, Jr., incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, SEC File No. 1-5683.
* (x) - Employment contract dated as of April 1, 1989 between USLIFE
Corporation and Greer F. Henderson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1989, SEC File No. 1-5683.
* (xi) - First Amendment dated as of May 1, 1989 to employment contract
dated as of April 1, 1989, between USLIFE Corporation and Greer
F. Henderson, incorporated herein by reference to USLIFE's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1989, SEC File No. 1-5683.
* (xii) - Second Amendment dated as of May 1, 1990 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Greer F. Henderson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1990, SEC File No. 1-5683.
* (xiii) - Third Amendment dated as of May 1, 1991 to employment contract
dated as of April 1, 1989, as amended, between USLIFE Corporation
and Greer F. Henderson, incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended June
30, 1991, SEC File No. 1-5683.
* (xiv) - Fourth Amendment dated as of May 1, 1992 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Greer F. Henderson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1992, SEC File No. 1-5683.
* (xv) - Fifth Amendment dated as of May 1, 1993 to employment contract
dated as of April 1, 1989, as amended, between USLIFE Corporation
and Greer F. Henderson, incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended June
30, 1993, SEC File No. 1-5683.
* (xvi) - Sixth Amendment dated as of May 1, 1994 to employment contract
dated as of April 1, 1989, as amended, between USLIFE Corporation
and Greer F. Henderson, incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended June
30, 1994, SEC File No. 1-5683.
<PAGE>37
* (xvii) - Seventh Amendment dated as of May 1, 1995 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Greer F. Henderson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, SEC File No. 1-5683.
* (xviii) - Employment contract dated as of April 1, 1989 between USLIFE
Corporation and Christopher S. Ruisi, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1989, SEC File No. 1-5683.
* (xix) - First Amendment dated as of May 1, 1989 to employment contract
dated as of April 1, 1989 between USLIFE Corporation and
Christopher S. Ruisi, incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended June
30, 1989, SEC File No. 1-5683.
* (xx) - Second Amendment dated as of May 1, 1990 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Christopher S. Ruisi, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1990, SEC File No. 1-5683.
* (xxi) - Third Amendment dated as of May 1, 1991 to employment contract
dated as of April 1, 1989, as amended, between USLIFE Corporation
and Christopher S. Ruisi, incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended June
30, 1991, SEC File No. 1-5683.
* (xxii) - Fourth Amendment dated as of May 1, 1992 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Christopher S. Ruisi, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1992, SEC File No. 1-5683.
* (xxiii) - Fifth Amendment dated as of May 1, 1993 to employment contract
dated as of April 1, 1989, as amended, between USLIFE Corporation
and Christopher S. Ruisi, incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended June
30, 1993, SEC File No. 1-5683.
* (xxiv) - Sixth Amendment dated as of May 1, 1994 to employment contract
dated as of April 1, 1989, as amended, between USLIFE Corporation
and Christopher S. Ruisi, incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended June
30, 1994, SEC File No. 1-5683.
* (xxv) - Seventh Amendment dated as of May 1, 1995 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Christopher S. Ruisi, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, SEC File No. 1-5683.
* (xxvi) - Employment contract dated as of April 16, 1990 between USLIFE
Corporation and William A. Simpson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1990, SEC File No. 1-5683.
<PAGE>38
* (xxvii) - First Amendment dated as of May 1, 1991 to employment contract
dated as of April 16, 1990 between USLIFE Corporation and William
A. Simpson, incorporated herein by reference to USLIFE's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1991, SEC File No. 1-5683.
* (xxviii) - Second Amendment dated as of May 1, 1992 to employment
contract dated as of April 16, 1990, as amended, between USLIFE
Corporation and William A. Simpson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1992, SEC File No. 1-5683.
* (xxix) - Third Amendment dated as of October 1, 1992 to employment
contract dated as of April 16, 1990, as amended, between USLIFE
Corporation and William A. Simpson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1992, SEC File No. 1-5683.
* (xxx) - Third Amendment dated as of May 1, 1993 to employment contract
dated as of April 16, 1990, as amended, between USLIFE
Corporation and William A. Simpson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993, SEC File No. 1-5683.
* (xxxi) - Fourth Amendment dated as of May 1, 1994 to employment
contract dated as of April 16, 1990, as amended, between USLIFE
Corporation and William A. Simpson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, SEC File No. 1-5683.
* (xxxii) - Fifth Amendment dated as of January 1, 1995 to employment
contract dated as of April 16, 1990, as amended, between USLIFE
Corporation and William A. Simpson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, SEC File No. 1-5683.
* (xxxiii) - Sixth Amendment dated as of May 1, 1995 to employment contract
dated as of April 16, 1990, as amended, between USLIFE
Corporation and William A. Simpson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, SEC File No. 1-5683.
* (xxxiv) - Form of Key Executive Employment Protection Agreement dated
November 14, 1995, between USLIFE Corporation and Gordon E.
Crosby, Jr., Greer F. Henderson, Christopher S. Ruisi, and
William A. Simpson.
* (xxxv) - Form of Employment and Key Executive Employment Protection
Agreement dated November 14, 1995, between USLIFE Corporation and
Wesley E. Forte, A. Scott Bushey, Arnold A. Dicke, James M.
Schlomann and John D. Gavrity.
* (xxxvi) - Form of Key Executive Employment Protection Agreement dated
November 14, 1995, between USLIFE Corporation and Frank J.
Auriemmo, Jr., Richard J. Chouinard, Richard G. Hohn, Michael
LeFante and Neal M. Stern.
* (xxxvii) - Form of Key Executive Employment Protection Agreement dated
November 27, 1995, between All American Life Insurance Company
and James A. Bickler, USLIFE Real Estate Services Corporation and
Philip G. Faulkner, The Old Line Life Insurance Company and James
A. Griffin, USLIFE Insurance Services Corporation and Thomas L.
Hendricks, USLIFE Credit Life Insurance Company and William M.
Keeler, and dated January 24, 1996, between The United States
Life Insurance Company In the City of New York and Ralph J.
Cargiulo.
<PAGE>39
(xxxviii) - Lease dated as of December 30, 1986 between The United States
Life Insurance Company In the City of New York and RREEF USA
Fund-III for the lease of a portion of 125 Maiden Lane, New York,
New York, incorporated herein by reference to USLIFE's Annual
Report on Form 10-K for the year ended December 31, 1986, SEC
File No. 1-5683.
(xxxix) - Amendment to Lease dated August 31, 1988 to Lease dated as of
December 30, 1986 between The United States Life Insurance
Company In the City of New York and RREEF USA Fund-III for the
lease of a portion of 125 Maiden Lane, New York, New York,
incorporated herein by reference to USLIFE's Annual Report on
Form 10-K for the year ended December 31, 1988, SEC File No. 1-
5683.
(xl) - Second Amendment to Lease dated November 16, 1988 to Lease
dated as of December 30, 1986 between The United States Life
Insurance Company In the City of New York and RREEF USA Fund-III
for the lease of a portion of 125 Maiden Lane, New York, New
York, incorporated herein by reference to USLIFE's Annual Report
on Form 10-K for the year ended December 31, 1988, SEC File No.
1-5683.
(xli) - Third Amendment to Lease dated May 10, 1989 to Lease dated as
of December 30, 1986 between The United States Life Insurance
Company In the City of New York and RREEF USA Fund-III for the
lease of a portion of 125 Maiden Lane, New York, New York,
incorporated herein by reference to USLIFE's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995, SEC File No. 1-
5683.
(xlii) - Fourth Amendment to Lease dated April 14, 1995 to Lease dated
as of December 30, 1986 between The United States Life Insurance
Company In the City of New York and RREEF USA Fund-III for the
lease of a portion of 125 Maiden Lane, New York, New York,
incorporated herein by reference to USLIFE's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995, SEC File No. 1-
5683.
(xliii) - Fifth Amendment to Lease dated as of December 26, 1995 to
Lease dated as of December 30, 1986 between The United States
Life Insurance Company In the City of New York and RREEF USA
Fund-III for the lease of a portion of 125 Maiden Lane, New York,
New York.
(xliv) - Sixth Amendment to Lease dated as of December 26, 1995 to
Lease dated as of December 30, 1986 between The United States
Life Insurance Company In the City of New York and RREEF USA
Fund-III for the lease of a portion of 125 Maiden Lane, New York,
New York.
(xlv) - Lease dated May 21, 1987 between The United States Life
Insurance Company In the City of New York and Commercial Realty &
Resources Corp. for the lease of premises at the Jumping Brook
Corporate Office Park in Neptune, New Jersey, incorporated herein
by reference to USLIFE's Annual Report on Form 10-K for the year
ended December 31, 1988, SEC File No. 1-5683.
(xlvi) - February 9, 1989 Amendment to Lease dated May 21, 1987 between
The United States Life Insurance Company In the City of New York
and Commercial Realty & Resources Corp. for the lease of premises
at the Jumping Brook Corporate Office Park in Neptune, New
Jersey, incorporated herein by reference to USLIFE's Annual
Report on Form 10-K for the year ended December 31, 1988, SEC
File No. 1-5683.
* (xlvii) - 1978 Stock Option Plan, as amended, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, SEC File No. 1-5683.
<PAGE>40
* (xlviii) - 1981 Stock Option Plan, incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, SEC File No. 1-5683.
* (il) - USLIFE Corporation Non-Employee Directors' Deferred
Compensation Plan, as amended January 23, 1996.
* (l) - USLIFE Corporation Book Unit Plan, as amended effective
September 1, 1995, incorporated herein by reference to USLIFE's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1995, SEC File No. 1-5683.
* (li) - USLIFE Corporation Retirement Plan for Outside Directors (as
amended January 23, 1996).
* (lii) - USLIFE Corporation Restricted Stock Plan, as amended effective
September 1, 1995, incorporated herein by reference to USLIFE's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1995, SEC File No. 1-5683.
* (liii) - USLIFE Corporation 1991 Stock Option Plan, as amended
effective September 1, 1995, incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, SEC File No. 1-5683.
* (liv) - USLIFE Corporation Non-Employee Directors' Stock Option Plan,
incorporated herein by reference to Exhibit 4(a) to USLIFE's
Registration Statement No. 33-53265 on Form S-8 dated April 25,
1994.
* (lv) - Annual Incentive Plan, as amended October 25, 1994, for
Selected Key Officers of USLIFE Corporation and its Subsidiaries,
incorporated herein by reference to USLIFE's Annual Report on
Form 10-K for the year ended December 31, 1994, SEC File No. 1-
5683.
* (lvi) - USLIFE Corporation Executive Officer Deferred Compensation
Plan (as amended January 23, 1996).
* (lvii) - USLIFE Corporation 1993 Long-Term Incentive Award Guidelines,
as amended, incorporated herein by reference to USLIFE's Annual
Report on Form 10-K for the year ended December 31, 1994, SEC
File No. 1-5683.
* (lviii) - USLIFE Corporation Supplemental Employee Savings and
Investment Plan (as amended January 23, 1996).
* (lix) - USLIFE Corporation Supplemental Retirement Plan (as amended
January 23, 1996).
* (lx) - Trust Agreement made as of March 1, 1994, as amended,
effective January 23, 1996, among USLIFE Corporation, Chemical
Bank, and KPMG Peat Marwick LLP (as independent contractor)
establishing a trust to fund certain employment contracts and the
USLIFE Corporation Executive Officer Deferred Compensation Plan.
* (lxi) - Trust Agreement made as of March 1, 1994, as amended,
effective January 23, 1996, among USLIFE Corporation, Chemical
Bank and KPMG Peat Marwick LLP (as independent contractor)
establishing a trust to fund the USLIFE Corporation Supplemental
Retirement Plan and the Supplemental Employee Savings and
Investment Plan.
* (lxii) - Trust Agreement made as of March 1, 1994, as amended,
effective January 23, 1996, among USLIFE Corporation, Chemical
Bank and KPMG Peat Marwick LLP (as independent contractor)
establishing a trust to fund the USLIFE Corporation Retirement
Plan for Outside Directors and the USLIFE Corporation Deferred
Compensation Plan for outside directors.
12 - Computations of ratios of earnings to fixed charges.
<PAGE>41
21 - List of Subsidiaries.
23 - Consent of Independent Certified Public Accountants (see page
42).
27 - Financial Data Schedule.
99 (i) - Annual Report on Form 11-K of USLIFE Corporation Employee
Savings and Investment Plan for the plan year ended December 31,
1995 (to be filed within 120 days of fiscal year end of Plan).
99 (ii) - Trust Agreement made as of December 6, 1990 among USLIFE
Corporation, Manufacturers Hanover Trust Company (predecessor to
Chemical Bank), and KPMG Peat Marwick LLP (as independent
contractor) establishing a trust to fund the USLIFE Corporation
Retirement Plan, incorporated herein by reference to USLIFE's
Annual Report on Form 10-K for the year ended December 31, 1990,
SEC File No. 1-5683.
99 (iii) - Amendment, effective January 23, 1996, to the Trust Agreement
made as of December 6,1990 among USLIFE Corporation,
Manufacturers Hanover Trust Company (predecessor to Chemical
Bank), and KPMG Peat Marwick LLP (as independent contractor)
establishing a trust to fund the USLIFE Corporation Retirement
Plan.
* Indicates a management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
No Current Report on Form 8-K has been filed for the last quarter of the
fiscal year ended December 31, 1995.
<PAGE>42
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
USLIFE Corporation:
We consent to the incorporation by reference in Registration Statements
Nos. 33-18287, 33-8489, 33-58944, 33-29934, 33-17126, 33-67344 and 33-9159 on
Form S-3 relative to Debt Securities, and common stock, respectively; the post
effective amendment to Registration Statement No. 33-29934 on Form S-3 relative
to Debt Securities; the post effective amendment to Registration Statement No.
33-9159 on Form S-3 relative to common stock; the post effective amendments to
Registration Statement Nos. 2-93655 and 33-11019 on Form S-3 relative to the
General Agents Incentive Compensation Plan; Registration Statement No. 33-45377
on Form S-3 relative to the United States Life Insurance Company Retirement Plan
for General Agents and Producers; the post effective amendments to Registration
Statement No. 33-17126 relative to Debt Securities; Registration Statement No.
33-40793 on Form S-3 relative to the 1991 Stock Option Plan; Registration
Statement No. 33-53265 on Form S-8 relative to the USLIFE Corporation Non-
Employee Directors' Stock Option Plan; and the post effective amendment to
Registration Statement Nos. 2-63159, 2-32606 and 2-77278 on Form S-8 relative to
the Stock Option Plans and Registration Statement Nos. 2-75011 and 33-13999 on
Form S-8 relative to the Employee Savings and Investment Plan of USLIFE
Corporation of our report dated February 27, 1996, relating to the consolidated
balance sheets of USLIFE Corporation and subsidiaries as of December 31, 1995
and 1994 and the related statements of consolidated income, equity capital, and
cash flows for each of the years in the three-year period ended December 31,
1995 which report appears in this December 31, 1995 Annual Report on Form 10-K
of USLIFE Corporation. Our report refers to a change in accounting to adopt the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities".
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
March 26, 1996
345 Park Avenue
New York, New York
<PAGE>43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
USLIFE Corporation
(Registrant)
Dated: March 26, 1996
By:/s/ Gordon E. Crosby, Jr.
___________________________
(Gordon E. Crosby, Jr.,
Chairman of the Board)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
_________ _____ ____
<S> <C> <C>
/s/ Gordon E. Crosby, Jr. Chairman of the Board March 26, 1996
____________________________________
(Gordon E. Crosby, Jr.)
Vice Chairman of the
/s/ Greer F. Henderson Board and Chief Executive Officer
____________________________________ (Principal Executive Officer) March 26, 1996
(Greer F. Henderson)
/s/ Christopher S. Ruisi President and Chief Operating
____________________________________ Officer; Director March 26, 1996
(Christopher S. Ruisi)
/s/ William A. Simpson President - Life Insurance
____________________________________ Division; Director March 26, 1996
(William A. Simpson)
Executive Vice President -
/s/ James M. Schlomann Finance (Principal
____________________________________ Financial Officer) March 26, 1996
(James M. Schlomann)
Senior Vice President -
/s/ Neal M. Stern Controller (Principal
____________________________________ Accounting Officer) March 26, 1996
(Neal M. Stern)
</TABLE>
<PAGE>44
<TABLE>
<CAPTION>
Signature Title Date
_________ _____ ____
<S> <C> <C>
/s/ Kenneth Black, Jr. Director March 26, 1996
____________________________________
(Kenneth Black, Jr.)
/s/ William J. Catacosinos Director March 26, 1996
____________________________________
(William J. Catacosinos)
/s/ Austin L. D'Alton Director March 26, 1996
____________________________________
(Austin L. D'Alton)
Director March 26, 1996
____________________________________
(Charles A. Davis)
/s/ John R. Galvin Director March 26, 1996
____________________________________
(John R. Galvin)
/s/ Robert E. Grant Director March 26, 1996
____________________________________
(Robert E. Grant)
Director March 26, 1996
____________________________________
(Thomas H. Lenagh)
/s/ Robert H. Osborne Director March 26, 1996
____________________________________
(Robert H. Osborne)
/s/ John W. Riehm Director March 26, 1996
____________________________________
(John W. Riehm)
Director March 26, 1996
____________________________________
(Franklin R. Saul)
/s/ Robert L. Shafer Director March 26, 1996
____________________________________
(Robert L. Shafer)
/s/ William G. Sharwell Director March 26, 1996
____________________________________
(William G. Sharwell)
/s/ Beryl W. Sprinkel Director March 26, 1996
____________________________________
(Beryl W. Sprinkel)
</TABLE>
<PAGE>45
<TABLE>
USLIFE CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
<CAPTION>
Page
____
<S> <C>
Selected Financial Data for the five years ended December 31, 1995................... 2
Independent Auditors' Report......................................................... 46
Consolidated balance sheets as of December 31, 1995 and 1994......................... 47
Statements of consolidated income for the three years ended December 31, 1995........ 49
Statements of consolidated cash flows for the three years ended December 31, 1995.... 50
Statements of consolidated Equity Capital for the three years ended December 31, 1995 51
Notes to financial statements........................................................ 52
Schedule of the Registrant:
(A) Schedule II - Condensed Financial Information of Registrant
(incorporated in Note 20 of Notes to Financial Statements).................
Schedules of the Registrant and Consolidated Subsidiaries:
(A) Schedule I - Summary of investments-other than investments in related
parties (incorporated in Note 3 of Notes to Financial Statements)..........
(B) Schedule III - Supplementary insurance information (incorporated in Note 19 of
Notes to Financial Statements).............................................
(C) Schedule IV - Reinsurance (incorporated in Note 15 of Notes to Financial
Statements)................................................................
</TABLE>
<PAGE>46
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
USLIFE Corporation:
We have audited the accompanying consolidated balance sheets of USLIFE
Corporation and subsidiaries as of December 31, 1995 and 1994, and the related
statements of consolidated income, equity capital, and cash flows for each of
the years in the three-year period ended December 31, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of USLIFE
Corporation and subsidiaries at December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for debt and equity securities in 1994
to adopt the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities."
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
February 27, 1996
345 Park Avenue
New York, New York
<PAGE>47
<TABLE>
USLIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
ASSETS
<CAPTION>
December 31
____________________________
1995 1994
____ ____
(Amounts in Thousands)
<S> <C> <C>
Cash:
On hand and in demand accounts..................... $ 63,914 $ 51,878
Restricted funds held in escrow, etc. ............. 1,821 1,653
__________ __________
65,735 53,531
__________ __________
Invested assets:
Fixed maturities available for sale, at fair value
(adjusted cost, 1995: $5,559,322; 1994:
$5,190,230)................................... 6,006,864 4,937,867
Equity securities, at fair value (adjusted cost,
1995: $4,918; 1994: $5,344)...................... 4,717 4,583
Mortgage loans..................................... 296,045 319,618
Real estate........................................ 29,205 41,688
Policy loans....................................... 282,179 283,088
Other long-term investments........................ 6,241 7,400
Short-term investments............................. 69,560 129,335
__________ __________
Total invested assets................. 6,694,811 5,723,579
__________ __________
Total cash and invested assets........ 6,760,546 5,777,110
__________ __________
Other amounts receivable:
Due and uncollected premiums....................... 63,679 53,678
Investment income due and accrued.................. 126,116 126,143
Reinsurance receivables - paid claims.............. 8,568 8,865
Other reinsurance recoverable amounts.............. 138,146 128,252
Other receivables.................................. 37,146 37,227
__________ __________
373,655 354,165
Less: Reserve for uncollectible receivables........ 23,062 23,130
__________ __________
Net other amounts receivable...... 350,593 331,035
__________ __________
Property and equipment:
Land............................................... 50 50
Buildings and improvements......................... 5,166 7,913
Furniture and equipment............................ 43,974 41,357
__________ __________
49,190 49,320
Less: Accumulated depreciation..................... 38,695 37,367
__________ __________
Net property and equipment........ 10,495 11,953
__________ __________
Deferred policy acquisition costs...................... 718,439 793,145
Other assets........................................... 90,431 91,019
__________ __________
Total assets...................... $7,930,504 $7,004,262
========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>48
<TABLE>
LIABILITIES AND EQUITY CAPITAL
<CAPTION>
December 31
___________________________
1995 1994
____ ____
LIABILITIES (Amounts in Thousands)
<S> <C> <C>
Future policy benefits:
Life....................................................... $1,324,395 $1,254,879
Accident and health........................................ 314,032 277,117
Policyholder account balances.................................. 3,787,546 3,641,393
Supplementary contracts without life contingencies............. 28,775 8,329
Policyholder dividend accumulations............................ 20,419 20,178
Policy and contract claims..................................... 177,739 155,048
Other policy and contract liabilities.......................... 32,435 31,265
Current federal income taxes................................... (3,820) 2,647
Deferred federal income taxes.................................. 122,776 (71,665)
Notes payable.................................................. 222,900 196,500
Long-term debt................................................. 349,493 349,360
Accounts payable and accrued liabilities....................... 239,642 250,577
__________ __________
Total liabilities......................... 6,616,332 6,115,628
__________ __________
Deferred income................................................ 5,918 10,746
__________ __________
Contingent liabilities and commitments (Note 13)
NON-REDEEMABLE PREFERRED STOCKS, COMMON STOCK, and
OTHER SHAREHOLDERS' EQUITY
Preferred stock-Series A (authorized and outstanding, 1995:
4,480 shares; 1994: 4,653 shares)............................. 448 465
Preferred stock-Series B (authorized and outstanding, 1995:
1,852 shares; 1994: 2,003 shares)............................. 93 100
Preferred stock-undesignated................................... - -
Common stock (authorized, 60,000,000 shares; issued, 1995:
57,468,882 shares; 1994, adjusted for stock split:
57,465,735 shares)............................................ 57,469 38,310
Paid-in surplus................................................ 117,512 131,823
Net unrealized gains (losses) on securities.................... 195,450 (156,248)
Retained earnings.............................................. 1,284,306 1,210,078
__________ __________
1,655,278 1,224,528
Less: Treasury stock, at cost.................................. 339,662 339,972
Deferred compensation.................................... 7,362 6,668
__________ __________
Total non-redeemable preferred stocks, common stock,
and other shareholders' equity ("Equity Capital")...... 1,308,254 877,888
__________ __________
Total liabilities and Equity Capital.................. $7,930,504 $7,004,262
========== ==========
</TABLE>
<PAGE>49
<TABLE>
USLIFE CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
For the Three Years Ended December 31, 1995
(Amounts in Thousands except Per Share Data)
<CAPTION>
Year Ended December 31
__________________________________________
1995 1994 1993
____ ____ ____
<S> <C> <C> <C>
Premiums:
Life and annuities................................................ $ 541,266 $ 494,908 $ 455,170
Accident and health............................................... 449,555 470,570 489,136
Consideration for supplementary contracts and immediate annuities..... 33,445 29,786 18,397
Other consideration................................................... 186,399 166,063 153,539
Net investment income................................................. 488,479 461,494 444,646
Realized gains (losses) on investments................................ 6,388 (1,380) 8,516
Other income.......................................................... 34,020 29,746 30,634
__________ __________ __________
Total income............................................. 1,739,552 1,651,187 1,600,038
__________ __________ __________
Death and other benefits.............................................. 715,648 727,611 737,331
Increase in future policy benefits.................................... 112,104 79,268 39,830
Interest credited to policyholder account balances.................... 209,788 194,036 183,737
Amortization of deferred policy acquisition costs..................... 162,038 159,702 151,851
Commissions........................................................... 153,491 138,373 129,822
General expenses...................................................... 147,306 133,225 134,829
Insurance taxes and licenses.......................................... 35,966 32,697 35,124
Interest on notes payable............................................. 15,303 11,239 5,716
Interest on long term debt............................................ 24,396 24,388 26,676
Dividends to policyholders............................................ 3,587 3,651 3,551
__________ __________ __________
Total benefits and expenses.............................. 1,579,627 1,504,190 1,448,467
__________ __________ __________
Income from operations before related income taxes................ 159,925 146,997 151,571
Federal income taxes:
Current........................................................... 49,449 63,649 74,053
Deferred.......................................................... 5,062 (12,837) (19,639)
__________ __________ __________
54,511 50,812 54,414
__________ __________ __________
Net income............................................................ $ 105,414 $ 96,185 $ 97,157
========== ========== ==========
Net income per share.................................................. $ 3.03 $ 2.79 $ 2.83
========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>50
<TABLE>
USLIFE CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Three Years Ended December 31, 1995
(Amounts in Thousands)
<CAPTION>
Year Ended December 31
___________________________________________
1995 1994 1993
____ ____ ____
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 105,414 $ 96,185 $ 97,157
Adjustments to reconcile net income to net cash
provided by operating activities:
Change in liability for future policy benefits........ 102,348 73,048 53,008
Interest credited to policyholder account balances.... 209,788 194,036 183,737
Amounts assessed from policyholder account balances... (162,999) (144,726) (130,757)
Additions to deferred policy acquisition costs........ (229,079) (205,099) (187,924)
Amortization of deferred policy acquisition costs..... 162,038 159,702 151,851
Additions to deferred charges......................... (5,865) (6,876) (5,633)
Deferred federal income taxes (net)................... 5,063 (12,836) (19,638)
Depreciation and amortization......................... 13,705 12,706 12,668
Change in amounts due policyholders................... 38,531 5,212 (25,584)
Change in other liabilities and amounts receivable.... (37,529) 6,799 (27,694)
Net realized capital losses (gains)................... (6,388) 1,380 (8,516)
Change in restricted cash............................. (168) (613) 393
Other, net............................................ (14,518) (1,057) 5,225
__________ __________ __________
Total adjustments................................ 74,927 81,676 1,136
__________ __________ __________
Net cash provided by operating activities... 180,341 177,861 98,293
__________ __________ __________
Cash flows from investing activities:
Change in policy loans.................................. 909 (998) 1,794
Proceeds from investments sold, redeemed or matured:
Fixed maturities.................................... 437,683 1,071,521 1,208,973
Equity securities................................... 988 1,602 11,328
Mortgage loan principal receipts.................... 50,380 47,587 31,751
Real estate......................................... 10,517 14,371 5,543
Other long term investments......................... 1,814 266 1,339
Expenditures for property and equipment................. (4,797) (4,608) (4,393)
Cost of investments purchased:
Fixed maturities.................................... (798,527) (1,507,082) (1,751,320)
Mortgage loans...................................... (24,652) (17,769) (26,238)
Real estate......................................... (743) (1,487) (2,821)
Other long term investments......................... (36) (131) (1,380)
Net (purchases) or sales of short term investments.. 59,775 (61,211) 30,797
Other, net............................................ 2,363 1,193 1,812
__________ __________ __________
Net cash used in investing activities....... (264,326) (456,746) (492,815)
__________ __________ __________
Cash flows from financing activities:
Issuance of debt securities........................... - - 300,000
Borrowings under credit facility...................... - 150,000 -
Increase (decrease) in notes payable.................. 26,400 (19,000) (112,400)
Dividends to shareholders............................. (31,186) (28,801) (27,361)
Acquisition of treasury stock......................... (5,334) (7,230) (2,621)
Repayment of long term debt........................... - (100,000) (200,000)
Change in policyholder account balances............... 98,858 269,465 416,696
Other, net............................................ 7,283 6,008 5,955
__________ __________ __________
Net cash provided by financing activities... 96,021 270,442 380,269
__________ __________ __________
Net change in cash.................................. 12,036 (8,443) (14,253)
Cash at beginning of year............................. 51,878 60,321 74,574
__________ __________ __________
Cash at end of year................................... $ 63,914 $ 51,878 $ 60,321
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>51
<TABLE>
USLIFE CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EQUITY CAPITAL
For the Three Years Ended December 31, 1995
(Number of Shares and Amounts in Thousands)
<CAPTION>
Year Ended December 31
______________________________________________________________________
Number of Shares Amounts
__________________________________ _________________________________
1995 1994 1993 1995 1994 1993
____ ____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C> <C>
Non-redeemable preferred stocks, common stock, and
other shareholders' equity:
Preferred stock, Series A:
Issued, beginning of year....................... 5 5 6 $ 465 $ 482 $ 563
Shares converted................................ (1) - (1) (17) (17) (81)
_______ _______ _______ __________ ________ ________
Issued, end of year............................. 4 5 5 448 465 482
======= ======= ======= ========== ======== ========
Preferred stock, Series B:
Issued, beginning of year....................... 2 2 2 100 103 113
Shares converted................................ - - - (7) (3) (10)
_______ _______ _______ __________ ________ ________
Issued, end of year............................. 2 2 2 93 100 103
======= ======= ======= ========== ======== ========
Common stock:
Issued, beginning of year....................... 38,310 38,309 38,256 38,310 38,309 38,256
Options exercised and preferred shares converted 3 1 53 3 1 53
Three-for-two split of common stock............. 19,156 - - 19,156 - -
_______ _______ _______ __________ ________ ________
Issued, end of year............................. 57,469 38,310 38,309 57,469 38,310 38,309
======= ======= ======= ========== ======== ========
Paid-in surplus:
Balance, beginning of year...................... 131,823 125,268 121,491
Options, conversions, and restricted stock plan. 231 358 1,469
Utilization of treasury shares.................. 4,659 6,197 2,308
Three-for-two split of common stock............. (19,201) - -
__________ ________ ________
Balance, end of year............................ 117,512 131,823 125,268
========== ======== ========
Net unrealized gains (losses) on securities:
Balance, beginning of year...................... (156,248) (29) (165)
Impact of adoption of SFAS 115, January 1, 1994. - 171,436 -
Net change during year.......................... 351,698 (327,655) 136
__________ ________ ________
Balance, end of year............................ 195,450 (156,248) (29)
========== ======== ========
Retained earnings:
Balance, beginning of year...................... 1,210,078 1,142,694 1,072,898
Net income...................................... 105,414 96,185 97,157
Cash dividends declared:
Preferred stock:
Series A ($4.50 per share)......... (20) (22) (25)
Series B ($5.00 per share)......... (9) (10) (11)
Common stock ($.91, $.84 and $.81 per
share in 1995, 1994, and 1993,
respectively.......................... (31,157) (28,769) (27,325)
__________ _________ _________
Balance, end of year............................ 1,284,306 1,210,078 1,142,694
========== ========= =========
Treasury stock:
Balance, beginning of year...................... 15,493 15,650 15,753 339,972 339,825 340,382
Three-for-two split of common stock............. 7,747 - - - - -
Shares acquired during year .................... 208 219 66 5,334 7,230 2,621
Shares utilized for employee, officer
and director benefit plans and
dividend reinvestment plan..................... (450) (376) (169) (5,644) (7,083) (3,178)
_______ _______ _______ __________ _________ ________
Balance, end of year............................ 22,998 15,493 15,650 339,662 339,972 339,825
======= ======= ======= ========== ========= ========
Deferred compensation:
Balance, beginning of year...................... 6,668 973 2,333
Deferred compensation arising from awards under
restricted stock plan during year, less
forfeitures.................................... 3,318 7,736 758
Amortization.................................... (2,624) (2,041) (2,118)
__________ _________ ________
Balance, end of year............................ 7,362 6,668 973
========== ========= ========
Total non-redeemable preferred stocks, common stock,
and other shareholders' equity ("Equity Capital")...... $1,308,254 $ 877,888 $966,029
========== ========= ========
See accompanying notes to financial statements.
</TABLE>
<PAGE>52
USLIFE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Note 1. Significant Accounting Policies
Basis of Presentation
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") and include the accounts of
USLIFE and all of its subsidiaries (the "Company"). GAAP differs from the
statutory accounting practices used by the Company's operating subsidiaries to
report to insurance regulatory authorities (see Note 18). All subsidiaries are
wholly owned. All material intercompany accounts and transactions have been
eliminated.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Changes in Accounting Principles
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114 ("SFAS 114"), entitled "Accounting by Creditors for
Impairment of a Loan," as modified by SFAS 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures." These Statements
require a writedown, as defined by SFAS 114, for certain mortgage loans and
similar investments where impairment results in a change in repayment terms.
The adoption of these Statements did not have a material impact on the Company's
reported financial position or results of operations.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 ("SFAS 115"), entitled "Accounting for Certain
Investments in Debt and Equity Securities." SFAS 115 requires that debt
securities which may be sold as part of the Company's asset/liability management
strategy be classified as "available for sale" and carried at fair value in the
Consolidated Balance Sheets, commencing with the date of adoption of the
Statement. The Company's portfolio of debt securities had been similarly
classified as "available for sale" prior to the adoption of SFAS 115, but was
carried at lower of aggregate adjusted cost or fair value pursuant to previous
accounting standards. Since the aggregate fair value of these securities
exceeded their adjusted cost at December 31, 1993, this classification had no
impact on Equity Capital at that date. The Company's equity securities
portfolio had been carried at fair value in accordance with previous accounting
standards prior to the adoption of SFAS 115 and continues to be carried at fair
value as required by the Statement.
As required by SFAS 115, the net impact of the initial adjustment to fair
value of these securities, less corresponding adjustments to deferred policy
acquisition costs (required where fair value differs from cost for certain
securities), certain policyholder liabilities, and deferred income taxes, was
recorded through a direct credit to "Net unrealized gains (losses) on
securities" included in Equity Capital as follows:
<PAGE>53
(Amounts in
Thousands)
Impact of adoption of SFAS 115:
Unrealized gain on debt securities at January 1, 1994......... $380,343
Less:
Adjustment of deferred policy acquisition costs............. 99,889
Increase in certain policyholder liabilities................ 16,706
________
Adjustment to Equity Capital before federal income tax........ 263,748
Adjustment of deferred federal income tax liability........... (92,312)
________
Net adjustment to Equity Capital at January 1, 1994........... $171,436
========
SFAS 115 requires that unrealized gains and losses on available-for-sale
securities, other than those relating to a reduction in value determined to be
other than temporary, be recorded as direct charges and credits to "Net
unrealized gains (losses) on securities" included in Equity Capital.
Consequently, the recognition of these unrealized gains and losses (including
the required adjustments of deferred policy acquisition costs, certain
policyholder liabilities, and deferred income taxes) has no impact on net
income.
Under both SFAS 115 and previous accounting standards, valuation reserves
(established through income statement charges) are maintained as an adjustment
to cost for investments, including "available for sale" securities, with a
reduction in value determined to be other than temporary. The cost and fair
value of the Company's investments in securities are presented in Note 3.
Also in 1994, the Company adopted Statement of Financial Accounting
Standards No. 112, ("SFAS 112") entitled "Employers' Accounting for
Postemployment Benefits." SFAS 112 requires advance recognition of non-
retirement benefits such as severance pay and health insurance continuation when
certain conditions are met. The adoption of SFAS 112 did not have a material
impact on the Company's reported financial position or results of operations.
Financial statements of previous years were not restated as a result of the
adoption of SFAS 112.
Split of Common Stock
In July 1995, the Board of Directors of USLIFE Corporation approved a 3-
for-2 split of its common stock, $1.00 par value. As a result of this action,
one additional share of USLIFE common stock was distributed on September 22,
1995 for each two shares held by shareholders of record on September 1, 1995.
The par value of the common stock was not changed, and the aggregate par value
of $19.2 million for the additional shares issued was transferred from Paid-in
Surplus to Common Stock as of the effective date of the transaction. All
references in the financial statements herein to number of common shares and
related prices, per-share amounts, and stock plan data have been restated as
appropriate to reflect the 3-for-2 split of the Company's common stock.
Future Accounting Changes
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121, entitled "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." The Statement requires that long-lived assets such as property and
equipment, and certain intangible assets, be reviewed for impairment when events
or changes in circumstances indicate that the carrying amount may not be
recoverable. When recoverability standards specified in the Statement are not
met, a writedown of the covered assets may be required. The Statement does not
apply to various classes of assets including the Company's investment securities
and deferred policy acquisition costs, which will continue to be evaluated based
on previously established accounting standards. The adoption of this Statement,
in the first quarter of 1996, will not have a material impact on the Company's
financial position or results of operations.
<PAGE>54
In October 1995, FASB issued Statement of Financial Accounting Standards
No. 123, entitled "Accounting for Stock-Based Compensation." This Statement,
which must be adopted no later than 1996, establishes financial accounting and
reporting standards for stock option plans and other stock-based forms of
compensation. Under previously established accounting standards, stock options
such as those granted by the Company (with option price set equal to market
price at date of grant) do not require income statement charges, although the
outstanding options are considered in earnings per share calculations. FASB 123
introduces standards for computing "fair value" of these stock options using a
mathematical model, as well as expense charges over the related service period
based on this calculated value. However, companies can elect to report the pro-
forma impact of these computed charges on net income and earnings per share in a
footnote rather than actually recording the computed income statement charges.
USLIFE Corporation will adopt Statement No. 123 in 1996 and intends to provide
footnote disclosure of the pro-forma impact of the calculated stock option
expense charges, commencing with its year end 1996 financial statements
(indicating comparative data for 1995), rather than record these charges in its
income statement.
Investments
The Company's investment management policies include continual monitoring
and evaluation of securities market conditions and circumstances relating to its
investment holdings which may result in the selection of investments for sale
prior to maturity. Securities may also be sold as part of the Company's
asset/liability management strategy in response to changes in interest rates,
resultant prepayment risk, and similar factors. Accordingly, the Company's
entire fixed maturity portfolio (bonds and redeemable preferred stocks) is
classified as "available for sale" and is carried in the accompanying
consolidated balance sheets at fair value. The Company's investments in non-
redeemable preferred stocks and common stocks ("equity securities") are carried
at fair value in the accompanying consolidated balance sheets. Fair values for
fixed maturities and equity securities are based on quoted market prices or
dealer quotes.
Mortgage loans are carried at the aggregate of unpaid principal balances,
net of unamortized discount and applicable reserves and writedowns. Mortgage
loans are considered impaired when it is determined to be probable that the
Company will not collect all amounts due under the contractual terms of the loan
agreement, and are evaluated based on present value of estimated future cash
flows discounted at the contractual rate of the loan. Mortgage loans that are
more than 60 days delinquent or in foreclosure are carried at the lower of
amortized cost or estimated net realizable value of the underlying collateral.
Real estate is carried at the lower of depreciated cost or estimated net
realizable value. Depreciation is calculated on a straight line basis with
useful lives varying based on the type of building.
Policy loans are stated at the aggregate of unpaid principal balances.
Other long term investments are stated at the lower of cost or their estimated
net realizable value. Short term investments are carried at cost, which
approximates fair value.
Realized gains and losses are included in net income based on specific
identification of investments disposed.
Valuation reserves (established through income statement charges which are
included in realized gains and losses) are maintained as an adjustment to cost
for investments, including "available for sale" securities, with a reduction in
value determined to be other than temporary.
<PAGE>55
Unrealized gains and losses on available-for-sale securities, other than
those relating to a reduction in value determined to be other than temporary,
are recorded through direct charges and credits to Equity Capital.
Life Insurance
Traditional Individual Contracts; Group and Credit Insurance
The Company's traditional individual life insurance products, including
term insurance, whole life insurance, and immediate annuities, generally provide
fixed premiums and guaranteed benefits. Premiums on these policies, as well as
group and credit life and health insurance contracts, are recognized when due.
Appropriate provisions are made for future policy benefits or unearned premiums.
Policy claims are charged to expense when incurred.
Liabilities for future policy benefits relating to traditional life
insurance policies have been computed by the net level premium method based on
estimated future investment yield, mortality and termination experience.
Interest rate assumptions for most non-interest sensitive life insurance have
ranged from 2-1/2 to 3-1/2 percent on issues of 1959 and prior, to 5-1/2 to 6-
3/4 percent on issues of 1967 and subsequent years. (On certain products, the
rate ranges as high as 8-3/4 percent.) Mortality has been calculated
principally on an experience multiple applied to select and ultimate tables in
common usage in the industry. Estimated terminations have been determined
principally based on industry tables.
Universal Life-Type and Investment Contracts
Universal life insurance policies permit the policyholder to vary the
timing and amount of premium payments, within contractual limits. Revenues for
universal life insurance, other interest-sensitive life insurance, and
investment contracts include policy charges for administration and cost of
insurance, and surrender charges assessed against policyholder account balances
during the period. These charges are subject to periodic adjustment by the
Company. Premiums received on these products are treated as policyholder
deposits rather than revenues. The liability for policyholder account balances
represents the accumulated amounts which accrue to the benefit of policyholders,
and reflects interest credited at rates which are subject to periodic
adjustment. Charges to expense relating to these policies and contracts include
such interest credited as well as benefits during the period in excess of
related policy account balances.
Deferred Policy Acquisition Costs
The costs of acquiring new business (principally commissions) and certain
costs of issuing policies (such as medical examinations and inspection reports)
and certain agency and marketing expenses, all of which vary with and are
primarily related to the production of new business, have been deferred.
For most policies other than universal life-type contracts, these costs are
being amortized over the premium-paying periods of the related policies in
proportion to the ratio of the annual premium revenue to the total anticipated
premium revenue. Anticipated premium revenue was estimated using the same
assumptions which were used for computing liabilities for future policy
benefits.
For universal life-type contracts, these costs are being amortized over the
lives of the policies in relation to the incidence of gross profits arising
principally from investment, mortality and expense margins. Additionally, as
required by SFAS 115, the carrying amount of these costs is adjusted at each
balance sheet date as if the unrealized gains or losses on securities associated
with these contracts had been realized and included in the gross profits used to
determine required amortization.
<PAGE>56
Deferred policy acquisition costs are reviewed at least annually to
determine that the unamortized portion of such costs does not exceed recoverable
amounts, after considering anticipated investment income.
Participating Policies
Participating policies subject to profit limitations approximate 4.9
percent of the individual life insurance in force at December 31, 1995 and 9.5
percent of individual life insurance premium income in 1995. The portion of
earnings therefrom that inures to the benefit of the participating policyholders
is not available to shareholders. Undistributed earnings payable to
participating policyholders are included as a liability in the Consolidated
Balance Sheets.
All participating policies approximate 5.0 percent of the total individual
life insurance in force at December 31, 1995 and 9.7 percent of individual life
insurance premium income in 1995. The provisions for dividends to policyholders
in the statements of consolidated income include dividends paid or payable on
participating policies.
Liability for Unpaid Claims
The liability for unpaid claims and claim adjustment expenses is based on
the estimated amount payable on claims reported prior to the balance sheet date
which have not yet been settled, claims reported subsequent to the balance sheet
date which have been incurred during the period then ended, and an estimate
(based on prior experience) of incurred but unreported claims relating to such
period.
Liability for Guaranty Fund Assessments
The Company's life insurance subsidiaries may be required, under the
solvency or guaranty laws of the various states in which they are licensed, to
pay assessments up to prescribed limits to fund policyholder losses or
liabilities of insolvent insurance companies. Certain states permit these
assessments, or a portion thereof, to be recovered as an offset to future
premium taxes. Assessments are recognized based on notification of liability by
regulatory authorities, including provision for certain future amounts payable,
and, when subject to credit against future premium taxes and judged to be
recoverable, may be capitalized and amortized on a basis consistent with the
credits to be realized under applicable state law.
Reinsurance
Amounts paid for or recoverable under reinsurance contracts are included in
total assets as reinsurance receivable or recoverable amounts. The cost of
reinsurance related to long-duration contracts is accounted for over the life of
the underlying reinsured policies using assumptions consistent with those used
to account for the underlying policies.
Other Assets
Included in other assets is the unamortized portion of goodwill,
representing the excess of cost over the value of net assets acquired in
subsidiary acquisitions accounted for by the purchase method. Such amounts are
being amortized by straight-line basis charges to income over forty year periods
which began at the respective dates of acquisition of the acquired subsidiaries.
Amortization of goodwill amounted to approximately $2 million for each of the
three years ended December 31, 1995.
<PAGE>57
Income Taxes
Deferred income taxes arise as a result of applying enacted statutory tax
rates to the temporary differences between the financial statement carrying
value and the tax basis of assets and liabilities. Such differences result
primarily from amounts capitalized for policy acquisition costs and calculated
for future policy benefit liabilities.
The Company and its subsidiaries file a consolidated Federal income tax
return and have elected to include the life insurance and non-life insurance
subsidiaries in the consolidated tax return. Taxes on income for life insurance
and non-life insurance subsidiaries are recorded in the individual income
accounts of the subsidiaries and are remitted to the Company on a separate
return basis. The provision for taxes in the Statements of Consolidated Income
represents the tax for all companies on a consolidated return basis.
Income Per Share
Income per share was computed by dividing the income applicable to common
and common equivalent shares by the weighted average number of common and common
equivalent shares outstanding during each year. The weighted average number of
common and common equivalent shares was determined by using the average number
of common shares outstanding during each year, net of reacquired (treasury)
shares from the date of acquisition; by converting the shares of the Series A
and Series B Preferred Stock to their equivalent common shares, and by
calculating the number of shares issuable on exercise of those common stock
options with exercise prices lower than the market price of the common stock,
reduced by the number of shares assumed to have been purchased with the proceeds
from the exercise of the options. Fully diluted income per share is the same as
income per share data indicated.
Standby and Permanent Financing Commitments
In the ordinary course of investment operations, the life insurance
subsidiaries may, in return for commitment fees, extend standby commitments
which represent contingent obligations to replace certain borrowings in the
event of default by unaffiliated borrowers. The life insurance subsidiaries
historically have not provided permanent financing on the major portion of such
commitments. The life insurance subsidiaries also may extend permanent
financing commitments for investments in mortgage loans, with specified closing
dates typically within 90 to 120 days after approval and interest rates and
other terms (based on the credit policies utilized for investments in mortgage
loans) determined at the commitment date. There were no outstanding standby
commitments or material permanent financing commitments at December 31, 1995.
Note 2. Nature of Operations and Segment Information
USLIFE Corporation is a life insurance-based holding company whose
principal subsidiaries engage in the life insurance business. USLIFE operates
nationwide through four life insurance companies and offers a broad portfolio of
individual life insurance and annuity policies as well as group and credit
insurance. The individual life and annuity product line, which includes
universal life, term life, whole life, and deferred annuity products as well as
income attributed to capital and surplus, accounts for the major portion of
USLIFE's pre-tax income and total revenues. These individual products are sold
primarily through independent general agencies who are compensated on a
commission basis and usually sell products of other companies in addition to
those of USLIFE. Other product lines include group life and health insurance,
sold principally through employers and associations, and credit life and
disability products which are sold primarily to customers of financial
institutions through USLIFE's credit insurance group.
<PAGE>58
The only reportable industry segment of the Company is "Life Insurance" and
the related information is presented below:
<TABLE>
<CAPTION>
Year Ended December 31, 1995
_____________________________________________
Non-reportable
segments and
Life consolidating
Insurance adjustments Consolidated
___________ ______________ ____________
(Amounts in Thousands)
<S> <C> <C> <C>
Total income from unaffiliated sources......... $1,723,971 $ 15,581 $1,739,552
Intersegment transfers......................... (6,452) 6,452 0
__________ __________ __________
Total income...................... $1,717,519 $ 22,033 $1,739,552
========== ========== ==========
Income before taxes............................ $ 221,455 $ (61,530) $ 159,925
========== ========== ==========
Identifiable assets at December 31............. $7,798,309 $ 132,195 $7,930,504
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1994
_______________________________________________
Non-reportable
segments and
Life consolidating
Insurance adjustments Consolidated
___________ ______________ ____________
(Amounts in Thousands)
<S> <C> <C> <C>
Total income from unaffiliated sources......... $1,625,751 $ 25,436 $1,651,187
Intersegment transfers......................... 4,217 (4,217) 0
__________ __________ __________
Total income..................... $1,629,968 $ 21,219 $1,651,187
========== ========== ==========
Income before taxes............................ $ 203,424 $ (56,427) $ 146,997
========== ========== ==========
Identifiable assets at December 31............. $6,874,956 $ 129,306 $7,004,262
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1993
_______________________________________________
Non-reportable
segments and
Life consolidating
Insurance adjustments Consolidated
___________ ______________ ____________
(Amounts in Thousands)
<S> <C> <C> <C>
Total income from unaffiliated sources......... $1,581,239 $ 18,799 $1,600,038
Intersegment transfers......................... 1,958 (1,958) 0
__________ __________ __________
Total income..................... $1,583,197 $ 16,841 $1,600,038
========== ========== ==========
Income before taxes............................ $ 206,011 $ (54,440) $ 151,571
========== ========== ==========
Identifiable assets at December 31............. $6,607,606 $ 132,635 $6,740,241
========== ========== ==========
</TABLE>
<PAGE>59
Supplementary information for product groups included in the Life Insurance
industry segment is presented below:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1995 December 31, 1994 December 31, 1993
_____________________ _____________________ _____________________
Income Income Income
Total Before Total Before Total Before
Income Taxes Income Taxes Income Taxes
______ ______ ______ ______ ______ ______
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Product line results,
before capital gains and losses:
Individual life and annuity (a).. $ 926,087 $206,113 $ 849,841 $186,274 $ 788,906 $179,397
Credit life...................... 82,772 907 74,316 1,136 64,862 1,269
Employer/association group life.. 125,059 5,119 123,886 5,238 123,361 4,587
Other life ...................... 88,038 656 78,007 281 69,931 628
Credit disability................ 89,780 6,883 80,146 5,230 69,335 5,010
Employer/association group health 364,380 (5,197) 403,718 5,639 435,289 4,627
Other health and disability...... 34,990 561 21,376 948 20,678 (342)
__________ ________ __________ ________ __________ ________
1,711,106 215,042 1,631,290 204,746 1,572,362 195,176
Capital gains (losses)............. 6,413 6,413 (1,322) (1,322) 10,835 10,835
__________ ________ __________ ________ __________ ________
$1,717,519 $221,455 $1,629,968 $203,424 $1,583,197 $206,011
========== ======== ========== ======== ========== ========
(a) Includes income from capital and surplus.
</TABLE>
<PAGE>60
Note 3. Investments
The investments of the Company at December 31, 1995 are summarized as
follows:
<TABLE>
<CAPTION>
Fair Carrying
Type of Investment Cost Value Value
__________________ ____ __________ ____________
(Amounts in Thousands)
<S> <C> <C> <C>
Bonds and notes:
United States Government and government
agencies and authorities........................... $ 123,061 $ 129,198 $ 129,198
States, municipalities and political sub-divisions.. 31,187 32,594 32,594
Foreign government.................................. 205,946 227,242 227,242
Public utilities.................................... 1,456,042 1,558,749 1,558,749
All other corporate................................. 3,741,828 4,035,814 4,035,814
__________ __________ __________
Total bonds and notes............................. 5,558,064 5,983,597 5,983,597
Redeemable preferred stocks.............................. 21,950 23,267 23,267
__________ __________ __________
Total fixed maturities............................ 5,580,014 6,006,864 6,006,864
__________ __________ __________
Common stocks............................................ 969 798 798
Non-redeemable preferred stocks.......................... 4,062 3,919 3,919
__________ __________ __________
Total equity securities........................... 5,031 4,717 4,717
__________ __________ __________
Total fixed maturities and equity securities...... 5,585,045 $6,011,581 6,011,581
__________ ========== __________
Mortgage loans on real estate............................ 304,726 296,045
__________ __________
Real estate:
Investment properties............................... 16,671 10,885
Acquired in satisfaction of debt.................... 32,527 18,320
__________ __________
Total real estate................................. 49,198 29,205
__________ __________
Policy loans............................................. 282,179 282,179
Other long term investments.............................. 52,271 6,241
Short term investments................................... 69,560 69,560
__________ __________
Total invested assets............................. 6,342,979 6,694,811
Cash on hand and in demand accounts...................... 63,914 63,914
Restricted funds held in escrow, etc. ................... 1,821 1,821
__________ __________
Total cash and invested assets.................... $6,408,714 $6,760,546
========== ==========
</TABLE>
Based on balance sheet carrying value, assets categorized as "non-income
producing" for the 12 months ended December 31, 1995 included in fixed
maturities, mortgage loans, real estate investment properties, and real estate
acquired in satisfaction of debt amounted to $7.0 million, $4.5 million, $6.1
million and $.9 million, respectively.
At December 31, 1995, consolidated invested assets included approximately
$244 million (based on adjusted cost) of less than investment grade corporate
securities, based on ratings assigned by recognized rating agencies and
insurance regulatory authorities. Such investments had an aggregate fair value
of approximately $246 million at December 31, 1995 and, based on fair value,
represent approximately 3% of consolidated total assets at that date.
Approximately $7 million (at fair value) of these investments (adjusted cost, $6
million) represented securities in default at December 31, 1995. Also at
December 31, 1995, the book value of mortgage loans included in consolidated
total assets which were 60 days or more delinquent or in foreclosure was
approximately $5 million, and the book value of property acquired through
foreclosure of mortgage loans was approximately $18 million.
<PAGE>61
The adjusted cost and fair value of the Company's consolidated investments
in equity securities and debt securities at December 31, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
December 31, 1995
___________________________________________________
Gross Gross
Adjusted Unrealized Unrealized Fair
Cost Gains Losses Value
__________ __________ __________ __________
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Equity securities.................................. $ 4,918 $ 366 $ 567 $ 4,717
========== ======== ======== ==========
Debt securities available for sale:
U. S. Treasury securities and obligations of U.S.
government corporations and agencies........... $ 123,061 $ 6,446 $ 309 $ 129,198
Obligations of states and political subdivisions.. 31,187 1,464 57 32,594
Debt securities issued by foreign governments..... 205,946 21,307 11 227,242
Corporate securities.............................. 5,246,738 427,001 9,616 5,664,123
Redeemable preferred stocks....................... 21,950 1,329 12 23,267
__________ ________ ________ __________
Total fixed maturities and short term investments
("debt securities").......................... $5,628,882 $457,547 $ 10,005 $6,076,424
========== ======== ======== ==========
Amounts shown in balance sheet:
Fixed maturities.................................. $6,006,864
Short term investments............................ 69,560
__________
Total............................................. $6,076,424
==========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
___________________________________________________
Gross Gross
Adjusted Unrealized Unrealized Fair
Cost Gains Losses Value
__________ __________ __________ __________
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Equity securities.................................. $ 5,344 $ 87 $ 848 $ 4,583
========== ======== ======== ==========
Debt securities available for sale:
U. S. Treasury securities and obligations of U.S.
government corporations and agencies........... $ 121,764 $ 843 $ 8,760 $ 113,847
Obligations of states and political subdivisions.. 32,852 36 2,360 30,528
Debt securities issued by foreign governments..... 201,667 798 15,942 186,523
Corporate securities.............................. 4,919,170 35,942 263,595 4,691,517
Redeemable preferred stocks....................... 44,112 1,381 706 44,787
__________ ________ ________ __________
Total fixed maturities and short term investments
("debt securities").......................... $5,319,565 $ 39,000 $291,363 $5,067,202
========== ======== ======== ==========
Amounts shown in balance sheet:
Fixed maturities.................................. $4,937,867
Short term investments............................ 129,335
__________
Total............................................. $5,067,202
==========
</TABLE>
<PAGE>62
Equity Capital at December 31, 1995 and 1994 includes net unrealized gains
and losses on available-for-sale securities as follows:
<TABLE>
<CAPTION>
December 31
________________________
1995 1994
__________ __________
(Amounts in Thousands)
<S> <C> <C>
Fixed maturities:
Fair value....................................... $6,006,864 $4,937,867
Adjusted cost..................................... 5,559,322 5,190,230
__________ __________
Unrealized gain (loss)......................... 447,542 (252,363)
__________ __________
Equity securities:
Fair value....................................... 4,717 4,583
Adjusted cost..................................... 4,918 5,344
__________ __________
Unrealized gain (loss)......................... (201) (761)
__________ __________
Total unrealized gain (loss)........................ 447,341 (253,124)
__________ __________
Related adjustments:
Deferred policy acquisition costs................ (135,926) 5,821
Policyholder liabilities.......................... (10,721) 6,921
Deferred federal income tax liability............. (105,244) 84,134
__________ __________
(251,891) 96,876
__________ __________
Net unrealized gain (loss) on securities
included in Equity Capital............. $ 195,450 $ (156,248)
========== ==========
</TABLE>
Changes in net unrealized gains and losses on available-for-sale securities
were as follows:
<TABLE>
<CAPTION>
1995 1994
__________ __________
(Amounts in Thousands)
<S> <C> <C>
Unrealized gain (loss) on
available for sale securities:
Beginning of year.............................. $ (253,124) $ 380,314
End of year..................................... 447,341 (253,124)
__________ __________
Net change..................................... 700,465 (633,438)
Change in related adjustments
of balance sheet accounts:
Deferred policy acquisition costs.............. (141,747) 105,710
Policyholder liabilities........................ (17,642) 23,627
Deferred federal income taxes................... (189,378) 176,446
__________ __________
Change in net adjustment to
Equity Capital during the year.................... 351,698 (327,655)
Impact of implementation of
SFAS 115 on January 1, 1994....................... -- 171,436
Net unrealized gain (loss) on
securities at beginning of year................... (156,248) (29)
__________ __________
Net unrealized gain (loss) on
securities at end of year......................... $ 195,450 $ (156,248)
========== ==========
</TABLE>
The classification of the Company's fixed maturity portfolio as "available
for sale" had no impact on Equity Capital at December 31, 1993, when these
securities were carried at the lower of aggregate adjusted cost or market value,
since the aggregate market value of these securities exceeded their adjusted
cost at that date.
<PAGE>63
Realized gains and losses on the Company's consolidated investments in
fixed maturities and equity securities for the three years ended December 31,
1995 are summarized as follows:
<TABLE>
<CAPTION>
Pre-tax Realized Less
Gains (Losses) Amount
________________________ Net
Allocated to Realized
Fixed Equity Participating Tax Gains
Maturities Securities Policyholders Effect (Losses)
__________ __________ _____________ ________ _________
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
1995................... $ 3,629 $ 262 $ (380) $ 1,495 $ 2,776
========= ========= ======== ======== =========
1994................... (630) (923) 784 (818) (1,519)
========= ========= ======== ======== =========
1993................... 46,891 897 1,458 16,216 30,114
========= ========= ======== ======== =========
</TABLE>
Pre-tax realized gains and losses shown above reflect provisions for
valuation of certain investments with decline in value determined to be other
than temporary.
Pre-tax realized gains and losses on fixed maturities and equity securities
are reconciled to consolidated realized gains and losses on investments as
follows:
1995 1994 1993
__________ __________ __________
(Amounts in Thousands)
Realized gains (losses):
Fixed maturities.............. $ 3,629 $ (630) $ 46,891
Equity securities............. 262 (923) 897
__________ __________ __________
3,891 (1,553) 47,788
Real estate, mortgage loans,
and other investments (a)... 2,497 173 (39,272)
__________ __________ __________
Total......................... $ 6,388 $ (1,380) $ 8,516
========== ========== ==========
(a) Reflects provisions for valuation to estimated net realizable value for
certain investments.
The adjusted cost and fair value of debt securities at December 31, 1995
and 1994, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
______________________ ______________________
Adjusted Fair Adjusted Fair
Cost Value Cost Value
__________ __________ __________ __________
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Due in one year or less........................... $ 113,361 $ 130,298 $ 158,412 $ 167,173
Due after one year through five years............. 1,249,441 1,300,961 1,193,662 1,161,539
Due after five years through ten years............ 1,669,897 1,780,227 1,665,353 1,572,737
Due after ten years............................... 2,596,183 2,864,938 2,302,138 2,165,753
__________ __________ __________ __________
Total debt securities............................. $5,628,882 $6,076,424 $5,319,565 $5,067,202
========== ========== ========== ==========
</TABLE>
Proceeds from disposals of investments in debt securities (excluding short
term investments) during 1995, 1994 and 1993 were $437.7 million, $1.072
billion, and $1.209 billion, respectively. During 1995, gross gains of $12.5
million and gross losses of $8.9 million were realized on such disposals.
During 1994, gross gains of $31.3 million and gross losses of $31.9 million were
realized on such disposals. During 1993, gross gains of $57.9 million and gross
losses of $11.0 million were realized on such disposals.
<PAGE>64
The details of consolidated net investment income for the three years ended
December 31, 1995 follow:
<TABLE>
<CAPTION>
Year Ended December 31
_____________________________
1995 1994 1993
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Investment income:
Fixed maturities and short term investments... $438,948 $408,127 $390,792
Mortgage loans................................ 31,208 33,905 36,313
Policy loans.................................. 18,939 18,875 18,495
Real estate and other investments............. 8,303 10,467 10,073
________ ________ ________
Total investment income................... 497,398 471,374 455,673
Investment expenses....................... 8,919 9,880 11,027
________ ________ ________
Net investment income................... $488,479 $461,494 $444,646
======== ======== ========
</TABLE>
Note 4. Deferred Policy Acquisition Costs
Details with respect to consolidated deferred policy acquisition costs for
the three years ended December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31
___________________________________
1995 1994 1993
_________ __________ _________
(Amounts in Thousands)
<S> <C> <C> <C>
Excluding adjustment relating to net
unrealized gains and losses on
securities ("SFAS 115 adjustment"):
Balance at January 1......................... $ 787,324 $741,927 $ 705,854
Additions................................. 229,079 205,099 187,924
Amortization.............................. (162,038) (159,702) (151,851)
_________ ________ _________
Balance at December 31,
before SFAS 115 adjustment.................. 854,365 787,324 741,927
SFAS 115 adjustment............................ (135,926) 5,821 --
_________ ________ _________
Balance at December 31, as
reported in consolidated
balance sheet................................ $ 718,439 $793,145 $ 741,927
========= ======== =========
</TABLE>
<PAGE>65
The balance of deferred policy acquisition costs is allocated to product
lines as follows:
<TABLE>
<CAPTION>
December 31
___________________________________
1995 1994 1993
_________ __________ _________
(Amounts in Thousands)
<S> <C> <C> <C>
Individual life and annuities:
Before SFAS 115 adjustment................ $ 670,778 $ 615,420 $ 577,978
SFAS 115 adjustment....................... (135,926) 5,821 --
_________ _________ _________
534,852 621,241 577,978
Credit life................................. 46,262 41,570 39,089
Employer/association group life............. 20,165 22,410 22,627
Other life.................................. 5,665 5,132 3,193
_________ _________ _________
606,944 690,353 642,887
_________ _________ _________
Credit disability........................... 57,450 52,553 49,716
Employer/association group health........... 51,495 48,637 48,491
Other health and disability................. 2,550 1,602 833
_________ _________ _________
111,495 102,792 99,040
_________ _________ _________
Total................................... $ 718,439 $ 793,145 $ 741,927
========= ========= =========
</TABLE>
The balance of deferred policy acquisition costs for employer/association
group health insurance includes amounts deferred with respect to the Company's
traditional indemnity major medical coverages. As a result of a shift in market
emphasis toward managed care products and consequent decline in revenues from
indemnity products, the Company initiated strategies to increase the proportion
of group business from non-major medical lines, and introduced new managed care
products in several states (using provider networks made available through
unrelated companies).
Although a significant portion of the Company's 1995 major medical sales
came from managed care products, historically the majority of its group
insurance premium revenues were derived from indemnity major medical coverages.
As a result, about 60% of current employer/association group health and
disability premium in force relates to traditional indemnity products. These
policies were often sold together with employer/association group life
insurance. Recoverability of deferred policy acquisition costs for the employer
/ association lines has been evaluated based on estimates of future persistency
and claims experience by aggregating related product groups.
In January 1996, the Company announced that it would discontinue offering
its traditional indemnity major medical products, and that it would restrict its
new sales of managed care major medical products to eight states where it has
significant market presence and an appropriate managed care network in place.
The Company will, however, continue to provide full support and service to all
existing indemnity customers regardless of location and will seek to convert
cases from indemnity coverage to managed care in order to conserve the business.
The Company will continue to monitor this business in order to determine whether
future financial statement adjustments are necessary.
<PAGE>66
Note 5. Notes Payable
Notes payable at December 31, 1995 includes $150 million borrowings under a
revolving credit agreement between the Company and The Bank of New York (as
agent) which expires in April 1996, at which time all borrowings thereunder must
mature. The credit agreement provides for term borrowings in segments of up to
six months with interest indexed to the LIBOR borrowing rate or based on certain
alternative interest rates at the option of the Company. USLIFE has the option
to prepay amounts borrowed under the credit agreement, in whole or in part, and
to reborrow loans thereunder provided the total amount of outstanding borrowings
does not exceed $150 million.
Also included in this item are short term borrowings against bank lines of
credit or pursuant to certain bank revolving credit agreements, and other short
term bank borrowings. The Company has lines of credit of $60.0 million with 7
banks and a revolving short term bank credit agreement which provide term loan
borrowing facilities up to a maximum of $100 million. The lines of credit
provide for annual review and renewal at the option of each bank. The interest
rates and terms of loans under the lines of credit and the revolving credit
agreements are determined bilaterally on the date of borrowing. Although there
are no formal requirements to maintain compensating balances, the Company has
carried balances which generally approximate 5 to 10 percent of the lines.
The following table sets forth summary information with respect to short
term borrowings of the Company for the three years ended December 31, 1995.
<TABLE>
<CAPTION>
As of December 31 Year Ended December 31
________________________ _______________________________________
Weighted Weighted
Average Maximum Average Average
Amount Interest Amount Amount Interest
Outstanding Rate Outstanding Outstanding(a) Rate(b)
___________ ______ ___________ ______________ _________
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
1995............... $ 222,900 6.3% $ 253,000 $ 225,954 6.3%
============ ==== ============ =========== ====
1994............... $ 196,500 6.2% $ 283,500 $ 205,115 5.5%
============ ==== ============ =========== ====
1993............... $ 65,500 3.7% $ 198,900 $ 142,677 3.9%
============ ==== ============ =========== ====
</TABLE>
(a) The average amounts of short term borrowings were computed by
determining the arithmetic average of months' end short term borrowings.
(b) The weighted average interest rates were determined by dividing
interest expense related to short term borrowings by the average amounts of such
borrowings.
<PAGE>67
Note 6. Long Term Debt
At December 31, 1995 and 1994, consolidated long term debt consists of the
following:
<TABLE>
<CAPTION>
December 31
_________________________
1995 1994
___________ ___________
(Amounts in Thousands)
<S> <C> <C>
9.15 percent nonsubordinated notes due 1999, callable at par
commencing June 15, 1996.......................................... $ 50,000 $ 50,000
6.75 percent nonsubordinated notes due 1998, less unamortized
discount of $139 thousand and $202 thousand at December 31, 1995
and 1994, respectively; effective interest rate 6.80 percent...... 149,861 149,798
6.375 percent nonsubordinated notes due 2000, less unamortized
discount of $368 thousand and $438 thousand at December 31, 1995
and 1994, respectively; effective interest rate 6.44 percent...... 149,632 149,562
_________ _________
Total long term debt................................................ $349,493 $349,360
========= =========
</TABLE>
The contractual maturities of the Company's long term debt are as follows:
Parent Company and Consolidated
_______________________________
December 31, December 31,
1995 1994
____________ ____________
(Amounts in Thousands)
1998....................... $149,861 $149,798
1999....................... 50,000 50,000
2000....................... 149,632 149,562
________ ________
Total............... $349,493 $349,360
======== ========
None of the Company's debt issues are or have been in default.
<PAGE>68
Note 7. Federal Income Taxes
Federal income tax expense relating to operations of the Company for 1995,
1994 and 1993 is comprised of the following components:
<TABLE>
<CAPTION>
1995 1994 1993
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Current tax expense........................................ $ 49,449 $ 63,649 $ 74,053
Deferred tax expense:
Excluding Federal income tax rate cumulative adjustment... 5,062 (12,837) (20,961)
Federal income tax rate cumulative adjustment............. -- -- 1,322
________ ________ ________
5,062 (12,837) (19,639)
________ ________ ________
$ 54,511 $ 50,812 $ 54,414
======== ======== ========
</TABLE>
The Omnibus Budget Reconciliation Act of 1993, enacted in August 1993,
increased the Federal corporate income tax rate from 34% to 35% retroactively to
January 1, 1993. This rate increase resulted in additional tax expense for the
first half of 1993 amounting to $666 thousand, and the effect of the tax rate
change upon net deferred tax liabilities as required by Statement of Financial
Accounting Standards No. 109 ("SFAS 109") was $1.322 million. In accordance
with SFAS 109, the $1.988 million aggregate catch-up impact of the rate change
was included in Federal income tax expense for 1993.
The significant components of deferred income tax expense for the years
ended December 31, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Deferral of policy acquisition costs, net
of amortization, for accounting purposes....... $ 23,466 $ 15,826 $ 12,624
Adjustment of future policy benefits for
Federal income tax purposes.................... (11,476) (16,525) (12,179)
Utilization of net operating loss................ (517) (2,416) 3,279
Differences in recognition of capital gains
and losses for tax return purposes and
accounting purposes............................ 88 2,634 (14,764)
Capitalization of policy acquisition costs,
net of amortization, for tax return purposes (10,679) (12,293) (12,951)
Differences between amounts reported for
tax return purposes and statutory
accounting purposes............................ 5,143 129 3,270
Adjustment of prior years' accruals to tax return (944) (119) (424)
Federal income tax rate cumulative adjustment.... -- -- 1,322
Other, net....................................... (19) (73) 184
________ ________ ________
Total deferred tax expense................ $ 5,062 $(12,837) $(19,639)
======== ======== ========
</TABLE>
<PAGE>69
Total tax expense differs from the amount computed by applying the Federal
income tax rate of 35 percent in 1995, 1994 and 1993, to income before tax for
the following reasons:
<TABLE>
<CAPTION>
1995 1994 1993
____________________ _____________________ _____________________
Amounts Percent Amounts Percent Amounts Percent
in of Pretax in of Pretax in of Pretax
Thousands Income Thousands Income Thousands Income
_________ _______ __________ _______ __________ _______
<S> <C> <C> <C> <C> <C> <C>
Application of Federal income tax rate... $ 55,974 35.0 $ 51,449 35.0 $ 53,050 35.0
Tax exempt interest and dividends
received deduction................ (414) (0.3) (508) (0.3) (648) (0.4)
Federal income tax rate change
cumulative adjustment............. -- -- -- -- 1,322 0.9
Other, net.......................... (1,049) (0.6) (129) (0.1) 690 0.4
_________ ____ _________ ____ _________ ____
Actual tax expense.............. $ 54,511 34.1 $ 50,812 34.6 $ 54,414 35.9
========= ==== ========= ==== ========= ====
</TABLE>
<PAGE>70
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1995 and 1994 are presented below:
December 31
______________________
1995 1994
____ ____
(Amounts in Thousands)
Deferred Tax Assets:
Future policy benefits.......................... $ 152,158 $ 136,884
Net unrealized loss on securities............... -- 84,134
Tax net operating loss carryforward............. 26,161 26,752
Capital gains and losses........................ 40,211 39,845
Capitalization of policy acquisition costs,
net of amortization, for tax return purposes.. 66,859 56,313
Sale and leaseback transactions................. 873 1,745
Allowance for uncollectible receivables......... 2,496 2,496
Resisted claim liability........................ 2,840 2,043
Employee retirement benefits.................... 29,740 27,930
Unearned interest............................... 1,451 1,560
Accrual of interest payable..................... 353 1,053
Differences between tax and accounting
for reinsurance............................... 926 5,333
Other........................................... 2,510 2,346
_________ _________
Total gross deferred tax assets................. 326,578 388,434
Total valuation allowance....................... (16,368) (16,368)
_________ _________
Net deferred tax assets......................... 310,210 372,066
_________ _________
Deferred Tax Liabilities:
_________________________
Deferral of policy acquisition costs, net of
amortization, for accounting purposes......... (299,028) (275,501)
Net unrealized gain on securities............... (105,244) --
Basis differences between tax and accounting
for joint ventures............................ (4,499) (6,427)
Basis differences between tax and accounting
for securities................................ (4,920) (5,145)
Depreciation.................................... (5,387) (5,502)
Prepaid expenses................................ (3,055) (1,642)
Other........................................... (10,853) (6,184)
_________ _________
Total gross deferred tax liabilities............ (432,986) (300,401)
_________ _________
Net deferred tax asset (liability).............. $(122,776) $ 71,665
========= =========
Federal income tax returns have been examined and settled for all years
through 1988. The Company believes that its recorded income tax liabilities are
adequate for all open years.
Under the provisions of prior tax law applicable to life insurance
companies, one half of the excess of the gain from operations of a life
insurance company over its taxable investment income was not taxed but was set
aside in a special "Policyholders' Surplus Account". Under provisions of the
Tax Reform Act of 1984, this account is "frozen" as of December 31, 1983 and is
subject to tax under conditions set forth pursuant to prior tax law.
Policyholder Surplus may be taxable at the time of its distribution to the
company's shareholders or under certain other specified conditions. The Company
does not believe that any significant portion of the amount in this account will
be taxed in the foreseeable future. However, should the balance at December 31,
1995 become taxable, the tax computed at present rates would be approximately
$47.8 million.
At December 31, 1995, the Company has nonlife net operating loss
carryforwards for Federal income tax purposes of approximately $74.7 million
which are available to offset future Federal taxable income, if any, through
2010.
<PAGE>71
Note 8. Liability for Unpaid Claims
Activity in the liability for unpaid claims and claim adjustment expenses
for the Company's health and disability coverages is summarized as follows:
1995 1994 1993
________ ________ ________
(Amounts in Thousands)
Balance at January 1................. $ 73,627 $ 81,638 $104,222
Less: reinsurance recoverables....... 4,115 4,021 13,831
________ ________ ________
Net balance at January 1............. 69,512 77,617 90,391
________ ________ ________
Amount incurred (a).................. 301,344 334,699 370,409
Amount paid, related to:
Prior years (b).................. 102,099 94,083 121,470
Current year..................... 196,024 248,721 261,713
________ ________ ________
Total...................... 298,123 342,804 383,183
________ ________ ________
Net balance at December 31........... 72,733 69,512 77,617
Plus: reinsurance recoverables....... 5,107 4,115 4,021
________ ________ ________
Balance at December 31............... $ 77,840 $ 73,627 $ 81,638
======== ======== ========
(a) Substantially all of the Company's incurred claims and claim
adjustment expenses relate to the respective current year.
(b) Includes current year incurred amount on certain claims
originating prior to respective current year.
Note 9. Retirement Plans
The Company and its subsidiaries have a qualified noncontributory defined
benefit pension plan covering substantially all employees. Benefits are
generally based on years of service, the employee's compensation during the last
three years of employment, and an average of Social Security covered wage bases.
It is the Company's policy to fund pension costs in accordance with the
requirements of the Employee Retirement Income Security Act of 1974. Based on
such standards, contributions amounting to $4.2 million, $4.5 million and $4.5
million were made for the years ended December 31, 1995, 1994 and 1993,
respectively. Substantially all of the Plan assets are invested in the general
investment account of a life insurance subsidiary of the Company through a
deposit administration insurance contract. As a result of compensation and
benefit limitations under Federal tax law applicable to the Company's qualified
defined benefit pension plan, the "excess" portion of the pension benefits for
certain employees is provided under an unfunded Supplemental Retirement Plan for
which eligibility requirements and certain other provisions were modified during
1993. Additionally, the Company has an unfunded Retirement Plan for Outside
Directors which provides pension benefits to non-employee Directors of USLIFE
Corporation subject to specified eligibility requirements. Benefits are based
on years of service and the annual retainer at time of retirement.
<PAGE>72
Pension expense for all of the above pension plans amounted to $7.724
million, $7.848 million and $5.212 million in 1995, 1994 and 1993, respectively.
The net periodic pension cost for these plans in 1995, 1994 and 1993 included
the following components:
<TABLE>
<CAPTION>
Year Ended December 31
___________________________________
1995 1994 1993
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Service cost - benefits earned during the period.... $ 5,155 $ 5,672 $ 4,842
Interest cost on projected benefit obligation....... 9,114 8,129 6,654
Actual return on Plan assets........................ (7,642) (7,272) (6,766)
Net amortization and deferral....................... 1,097 1,319 482
_______ _______ _______
Net pension cost.................................... $ 7,724 $ 7,848 $ 5,212
======= ======= =======
</TABLE>
The funded status is reconciled to accrued pension cost included in the
Company's consolidated balance sheets as of December 31, 1995 and 1994 as
follows:
<TABLE>
<CAPTION>
Qualified Plan Non-Qualified Plans
_____________________ ____________________
1995 1994 1995 1994
____ ____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation............................ $ (83,716) $ (65,377) $ (26,977) $ (18,822)
========== ========= ========== =========
Accumulated benefit obligation....................... $ (85,540) $ (67,013) $ (27,044) $ (19,230)
Effect of projected future compensation levels....... (28,457) (21,060) (4,383) (3,303)
__________ _________ __________ _________
Projected benefit obligation for service rendered
to date............................................ (113,997) (88,073) (31,427) (22,533)
Plan assets at fair value................................ 97,849 90,920 -- --
__________ _________ __________ _________
Funded status............................................ (16,148) 2,847 (31,427) (22,533)
Unrecognized net loss from past experience different
from that assumed and effects of changes in assumptions 20,073 1,525 9,045 3,061
Unrecognized portion of initial net (asset) obligation... (5,415) (6,498) 4 5
Unrecognized prior service cost.......................... 271 324 6,734 7,756
Additional minimum balance sheet liability............... -- -- (11,425) (7,564)
__________ _________ __________ _________
Accrued pension cost..................................... $ (1,219) $ (1,802) $ (27,069) $ (19,275)
========== ========= ========== =========
</TABLE>
The unrecognized net asset relating to the qualified pension plan is being
recognized over a 14 year period which began January 1, 1987. Under Statement
of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions,"
an additional minimum pension liability is required for the Company's non-
qualified plans to reflect the excess of the accumulated benefit obligations
over the liability already recognized as unfunded accrued pension cost.
Statement No. 87 also permits offsetting of this liability with an intangible
asset, based on provisions of the Statement. The unrecognized net loss and
unrecognized prior service cost relating to the Company's pension plans are
subject to amortization on a straight-line basis over the estimated average
future service period of active employees expected to receive benefits under the
plan. Assumptions used in the actuarial computations for the Company's pension
plans were as follows:
<TABLE>
<CAPTION>
December 31
________________________
1995 1994 1993
____ ____ ____
<S> <C> <C> <C>
Discount rate..................................... 7.0% 8.25% 7.5%
Rate of increase in compensation levels........... 6.0 6.0 6.0
Expected long-term rate of return on assets....... 7.5 7.5 7.5
</TABLE>
In addition to providing pension benefits, the Company and its subsidiaries
provide certain health care and life insurance benefits to retired employees
under a defined benefit plan. Employees may become eligible for these benefits
if they have accumulated ten years of service and reach normal or early
retirement age while working for the Company. The plan provides benefits
supplemental to Medicare after retirees are eligible for Medicare benefits. The
<PAGE>73
postretirement benefit plan contains cost-sharing features such as deductibles
and coinsurance, and contributions of certain retirees are subject to annual
adjustment. It is the Company's current policy to fund these benefits, which
are provided through an insurance contract with a life insurance subsidiary of
the Company, on a "pay as you go" basis.
During 1993, the Company's non-pension postretirement benefit program was
modified in several respects, including the establishment of a maximum dollar
cap on amounts to be paid by the Company for future increases in the cost of
retiree health benefits. These plan amendments resulted in an unrecognized
reduction in prior service cost, which is being amortized over the remaining
average service period to full eligibility for benefits of the active
participants. Excess gains or losses are being amortized over the average
remaining service period to full eligibility for benefits of the active
participants.
The funded status of the non-pension postretirement benefit program as of
December 31, 1995 and 1994 is reconciled to accrued postretirement benefit cost
as follows:
<TABLE>
<CAPTION>
December 31
_________________________
1995 1994
____ ____
(Amounts in Thousands)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................. $(16,692) $(15,767)
Fully eligible active plan participants.. (4,238) (4,414)
Other active plan participants........... (8,129) (7,309)
________ ________
Total................................. (29,059) (27,490)
Plan assets.............................. -- --
________ ________
Funded status......................... (29,059) (27,490)
Unrecognized net (gain) or loss.......... (15,204) (16,433)
Unrecognized prior service cost.......... (12,940) (13,888)
________ ________
Accrued postretirement benefit cost...... $(57,203) $(57,811)
======== ========
</TABLE>
Net periodic postretirement benefit cost for 1995, 1994 and 1993 included the
following components:
<TABLE>
<CAPTION>
1995 1994 1993
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Service cost - benefits earned during the year........ $ 887 $ 1,044 $ 1,068
Interest cost on accumulated postretirement
benefit obligation.................................. 1,943 2,010 2,198
Net amortization and deferral......................... (1,995) (1,704) (1,162)
_______ _______ _______
Net periodic postretirement benefit cost.............. $ 835 $ 1,350 $ 2,104
======= ======= =======
</TABLE>
For measurement purposes, a 10 percent annual rate of increase in the per-
capita cost of covered health benefits (ie., health care cost trend rate) was
assumed for 1995; the rate was assumed to decrease gradually to 6 percent by the
year 1997 and remain at that level thereafter. A 9 percent annual rate of
increase in claims reimbursed by Medicare for retirees over age 65 was assumed
for 1995; the rate was assumed to decrease gradually to 6 percent by the year
1997 and remain at that level thereafter. The assumed health care cost trend
rate does not have a significant effect on the amounts reported in accordance
with Statement of Financial Accounting Standards No. 106 ("Employers' Accounting
for Postretirement Benefits Other Than Pensions") due to the maximum dollar cap
adopted. For example, increasing the assumed health care cost trend rates by
one percentage point in each year would increase the accumulated postretirement
benefit obligation as of December 31, 1995 by approximately $185 thousand and
the aggregate of the service and interest cost components of 1995 net periodic
postretirement benefit cost by $12 thousand. The discount rate used in
determining the accumulated postretirement benefit obligation was 7.0% at
December 31, 1995, 8.25% at December 31, 1994 and 7.5% at December 31, 1993.
<PAGE>74
Note 10. Capital Stock
Non-Redeemable Preferred Stocks
The $4.50 Series A Convertible Preferred Stock ($1.00 par value; authorized
and issued as of December 31, 1995, 4,480 shares; December 31, 1994, 4,653
shares; December 31, 1993, 4,815 shares) is carried at involuntary liquidating
value of $100 per share in the financial statements; is entitled to cumulative
annual dividends of $4.50 per share; may be redeemed in whole or in part at the
option of the Company at $100 per share; and is convertible at any time into
Common Stock at a conversion price which at December 31, 1995 was $8.33 per
share (each share of Series A Stock valued at $100), subject to adjustment under
a formula intended to protect against dilution in certain events. Holders are
entitled to vote together with the Common Stock and Series B Convertible
Preferred Stock as one class on the basis of one vote per share and to vote as a
class upon the election of two directors during any period in which four
quarterly dividends (whether or not consecutive) are in default.
The $5.00 Series B Convertible Preferred Stock ($1.00 par value; authorized
and issued as of December 31, 1995, 1,852 shares; December 31, 1994, 2,003
shares; December 31, 1993, 2,050 shares) is carried at involuntary liquidating
value of $50 per share in the financial statements; is entitled to cumulative
annual dividends of $5.00 per share; may be redeemed in whole or in part at the
option of the Company at $100 per share; and is convertible at any time into
Common Stock at a conversion price which at December 31, 1995 was $8.34 per
share (each share of Series B Stock valued at $100), subject to adjustment under
a formula intended to protect against dilution in certain events. Voting rights
are the same as those of holders of Series A Stock.
The Preferred Stock, undesignated ($1.00 par value; authorized as of
December 31, 1995, 10,793,668 shares, issued none), may be issued by
authorization of the Board of Directors without further approval of
shareholders. The Board has broad powers to fix the terms of such issues
subject to the limit that the aggregate of all amounts which may be paid to
holders of all of the series of Preferred Stock upon the involuntary
liquidation, dissolution or winding up of the Company cannot exceed $100 times
the number of such shares plus accrued unpaid dividends.
Common Stock
The outstanding shares of Common Stock (par value $1.00 per share;
authorized, as of December 31, 1995, 1994 and 1993: 60,000,000 shares; issued,
including treasury shares, as of December 31, 1995, 57,468,882 shares; December
31, 1994, 57,465,735 shares; December 31, 1993, 57,463,235 shares) entitle each
holder to one vote per share in the election of directors and on all other
matters submitted to a vote of shareholders and to such dividends and
distributions as may be declared by the Board of Directors out of funds legally
available. At December 31, 1995, 75,965 shares of Common Stock were reserved
for issuance upon conversion of Preferred Stock. The Company sponsors, through
certain of its life insurance subsidiaries, savings plans for selected general
agents and producers (the "Agents Plans") providing for distribution of Common
shares to participants if specified qualification and vesting requirements are
satisfied. As of December 31, 1995, participant interests relating to 34,713
Common shares had vested under the Agents Plans. On July 10, 1986 the Company
issued, to shareholders of record on that date, one Common Stock Purchase Right
(a "Right") for each share of Common Stock owned on that date. Until the Rights
become exercisable they will be represented by the stock certificates for all
outstanding Common Stock including newly issued shares. Upon the occurrence of
certain events specified in a Rights Agreement dated as of June 24, 1986 and
amended and restated as of September 27, 1994 between the Company and Chemical
Bank (successor by merger to Manufacturers Hanover Trust Company) as Rights
Agent, the Rights will become exercisable, separate certificates representing
the Rights will be issued, and each Right will entitle the holder to purchase
one half of a share of the Common Stock for $107. Under certain circumstances
specified in the Rights Agreement each Right will entitle the holder to
purchase, for one half of its then market value, publicly traded common stock of
any corporation which acquires the Company; each Right will also entitle the
holder, with certain exceptions specified in the Rights Agreement, to purchase
$150 worth of the Common Stock for $75. As of December 31, 1995, the Rights had
not become exercisable.
<PAGE>75
The Company also sponsors a Dividend Reinvestment and Stock Purchase Plan
which enables holders of the Company's Common Stock to invest cash dividends and
optional cash payments in additional shares of the Common Stock. In 1995, 1994
and 1993, respectively, 37,208, 39,861 and 38,534 shares of the Common Stock had
been sold pursuant to the Dividend Reinvestment and Stock Purchase Plan.
Treasury Stock
At December 31, 1995, there were 22,997,693 shares of Common Stock held in
treasury. During 1995, 207,589 Common shares were acquired (including 128,700
shares purchased under a repurchase program and 78,889 shares relating to
benefit plans), at an aggregate cost of $5.3 million, and 449,618 Common shares,
with an aggregate cost of $5.6 million, were utilized for certain employee,
director, and agent benefit plans and for the Dividend Reinvestment and Stock
Purchase Plan of USLIFE Corporation. At December 31, 1994, treasury stock
consisted of 23,239,722 Common shares. Common shares outstanding, net of
treasury shares, as of December 31, 1995 and 1994 are as follows:
December 31
________________________
1995 1994
____ ____
Common shares issued.............. 57,468,882 57,465,735
Treasury shares................... 22,997,693 23,239,722
__________ __________
Net outstanding common shares..... 34,471,189 34,226,013
========== ==========
Note 11. Stock Options and Long-Term Incentive Plans
In May, 1991, the Company adopted a stock option plan (the "1991 Stock
Option Plan") for key employees to replace the previous stock option plan under
which options could no longer be granted. Under the 1991 Stock Option Plan, a
maximum of 1,575,000 shares of the Company's common stock may be issued upon the
exercise of stock options which may be granted pursuant to the Plan. The 1991
Stock Option Plan also provides for "Reload" options, which are automatically
granted to a participant upon the exercise of an option if the participant uses
previously owned shares to pay for the option shares. Reload options will be
for the number of previously-owned shares delivered upon the employee's exercise
of an option. Under the 1991 Stock Option Plan, the purchase price of shares
subject to each option will be not less than 100% of their fair market value at
the time of the grant of the option. The Plan limits the number of options that
may be granted to any one individual during any one-year period to 112,500. No
options may be granted under the 1991 Stock Option Plan after May 20, 2001.
In May 1994, the Company adopted a stock option plan (the "Non-Employee
Director Stock Option Plan") for directors of USLIFE who are not employees of
the Company or its subsidiaries or affiliates. The Plan provides that on the
date of each Annual Meeting of Shareholders, each eligible director will
automatically be granted options to purchase 3,000 shares of USLIFE common
stock. A maximum of 375,000 shares of the Company's common stock may be issued
upon the exercise of stock options which may be granted under the Non-Employee
Director Stock Option Plan. No options may be granted under this Plan after May
17, 2004.
No option granted under the Company's stock option plans is exercisable in
whole or in part in less than six months from the date of grant. Each option
may be exercisable in one or more installments as provided therein. To the
extent such options are not exercised, installments accumulate to the total
granted and are exercisable in whole or in part at any time during the term of
the option. This term is set forth in the option but in no event is an option
<PAGE>76
exercisable, in whole or in part, after the expiration of ten years from the
date of grant. The 1991 Stock Option Plan provides that in the event of a
Change in Control (as defined in the Plan), all outstanding options granted
under that Plan which have been held for at least six months from the date of
grant shall become immediately exercisable.
As of December 31, 1995, the Company had outstanding options to its
employees (including officers) and non-employee directors for purchase of shares
of its Common Stock as follows:
<TABLE>
<CAPTION>
Average
Number of Number of Option Price
Participants Shares Expiration Dates per Share
____________ _________ ________________ ____________
<S> <C> <C> <C>
157 1,392,100 April 22, 1996 - July 5, 2005 $21.91
</TABLE>
A summary of activity under all stock option plans for the three years
ended December 31, 1995 is presented below:
<TABLE>
<CAPTION>
Number Option Prices
________________________________
of Aggregate
Shares Per Share (in Thousands)
______ _______________ ______________
<S> <C> <C> <C>
Outstanding, December 31, 1992........ 1,147,874 $10.45 - $19.67 $20,260
Granted.......................... 632,250 24.92 - 29.08 15,840
Exercised........................ 207,737 10.45 - 19.67 3,526
Terminated....................... 14,720 10.45 - 24.92 276
_________ _______
Outstanding, December 31, 1993........ 1,557,667 12.28 - 29.08 32,298
Granted.......................... 117,000 24.83 - 25.92 2,981
Exercised........................ 128,823 12.28 - 24.92 2,308
Terminated....................... 41,625 12.28 - 24.92 986
_________ _______
Outstanding, December 31, 1994........ 1,504,219 13.17 - 29.08 31,985
Granted.......................... 108,456 24.83 - 28.92 2,788
Exercised........................ 214,028 13.17 - 25.75 4,105
Terminated....................... 6,547 17.83 - 25.75 162
_________ _______________ _______
Outstanding, December 31, 1995........ 1,392,100 $15.61 - $29.08 $30,506
========= =============== =======
</TABLE>
As of December 31, 1995, options for 904,525 common shares were exercisable
under all stock option plans at $15.61 to $29.08 per share. At December 31,
1995, up to 2,408,636 common shares could be issued under the Company's stock
option plans. Common shares may be issued under the Company's stock option
plans from shares in treasury or authorized but unissued shares.
The Company has a Book Unit Plan for certain key employees. Under the
terms of the Plan, the Board of Directors may award, at its sole discretion, one
or more units to employees it has selected to become participants in the Plan.
No more than 900,000 units shall be outstanding under the Plan at any time. The
value of units granted prior to 1994 shall be the amount by which the book value
per share, as of the award date, has been increased or decreased by (a) the sum
of the increases or decreases in the book value per share of the Company's
common stock, excluding the impact of "mark-to-market" adjustments required by
FASB Statement No. 115 to recognize unrealized gains and losses on debt and
equity securities, plus (b) dividend equivalents for subsequent years up to and
including the valuation date. In May 1994, the Plan was amended to limit the
number of book units that may be granted to any one individual during a one-year
period to no more than 112,500 and further, to eliminate the inclusion of
cumulative dividends paid to shareholders in calculating the value of book units
awarded in 1994 and thereafter. Accordingly, approximately $1.3 million, $1.7
million, and $2.1 million were charged to expense in 1995, 1994 and 1993,
respectively.
<PAGE>77
A summary of units outstanding under the Book Unit Plan follows:
<TABLE>
<CAPTION>
Number Award Valuation
Year of Grant of Units Date Date
_____________ ________ _____ _________
<S> <C> <C> <C>
1992............................. 201,375 January 1, 1992 December 31, 1996
1993............................. 276,000 January 1, 1993 December 31, 1997
1994............................. 11,250 January 1, 1994 December 31, 1998
1995............................. 23,250 January 1, 1995 December 31, 1999
_______
Outstanding, December 31, 1995... 511,875
=======
</TABLE>
The Company also has a Restricted Stock Plan for selected key employees.
Under the terms of the Plan, a committee of the Board of Directors may award
restricted shares of common stock of the Company, up to an aggregate maximum of
1,575,000 shares, to designated Participants. The shares, when awarded, are
initially non-transferable and subject to forfeiture in the event that the
Participant ceases to be an employee of USLIFE or any of its subsidiaries other
than by reason of death, permanent disability, retirement, or certain other
specified circumstances. These restrictions generally terminate with respect to
20% of the number of shares awarded on March 1 of each of the five calendar
years following the year of award, at which time the appropriate number of
unrestricted shares are distributed to the Participant. For certain awards,
restrictions terminate with respect to one-third of the number of shares awarded
on the first, second, and third anniversaries of the award date, with similar
distribution. In the event of a Change in Control, as defined in the Plan,
restrictions would terminate as to previously awarded but unvested shares. The
Plan limits the number of shares that may be granted to any one individual
during any one-year period to 112,500, and provides for forfeiture of awards to
certain key officers under the Plan in the event that performance goals based on
the Company's "Earnings Per Share from Continuing Operations," as defined in the
Plan, are not satisfied. Upon award of shares under the Plan, deferred
compensation equivalent to the market value of the shares on the award date is
charged to Equity Capital. Such deferred compensation is subsequently amortized
by means of charges to expense over the period during which the restrictions
lapse. During 1995, a total of 126,699 shares were awarded under the Plan.
During 1994, a total of 306,411 shares were awarded under the Plan, and 7,998
previously awarded shares were forfeited pursuant to the terms of the Plan. As
of December 31, 1995, there were 375,429 previously awarded shares outstanding
under the Plan as to which the restrictions had not yet lapsed. Expense charges
recognized in 1995, 1994 and 1993 relating to these awards amounted to
approximately $2.6 million, $2.0 million and $2.1 million, respectively.
In May 1994, the Company adopted an Annual Incentive Plan (the "Incentive
Plan") for certain key executive officers. Under the Incentive Plan, annual
bonuses for participating key officers will depend on the attainment of
performance goals based on levels of income from the Company's core life
insurance businesses, as defined in the Plan. The Incentive Plan is
administered by the Executive Compensation and Nominating Committee, which may
authorize awards of up to 75% of a Participant's base salary based on attainment
of performance goals established by the Committee. These awards are payable in
cash no later than April 30 after each plan year, following certification by the
Committee that the performance goals have been met. The Incentive Plan provides
that in the event of a Change in Control (as defined in the Plan), the amount of
awards will be calculated as if all performance targets have been met to produce
the maximum award and payment of the awards will be accelerated to the date on
which the Change in Control occurs.
<PAGE>78
Note 12. Leases
A subsidiary of the Company leases a portion of a building located at 125
Maiden Lane, New York, New York, which houses the subsidiary's principal
executive offices as well as the headquarters of the Company and several other
subsidiaries. The lease expires in 2006 and provides a renewal option based on
fair rental value at time of renewal. Additionally, several subsidiaries lease
office space at other locations generally for periods ranging from five to
fifteen years, and certain subsidiaries utilize leased furniture and office
equipment. Certain of the operating leases for office premises provide for
renewal options for periods ranging from five to twenty years based on fair
rental value at time of renewal, and further options relating to rental of
additional office space. The minimum rental commitments for all such non-
cancelable operating leases as of December 31, 1995 approximate $12.0 million in
1996, $10.2 million in 1997, $9.5 million in 1998, $8.6 million in 1999, $8.0
million in 2000, a total of $25.4 million from 2001 to 2005, and a total of $4.1
million from 2006 to 2007. Total rental expense amounted to approximately $12.5
million, $13.1 million and $13.5 million for the years ended December 31, 1995,
1994 and 1993, respectively.
Note 13. Contingent Liabilities and Commitments
The Company has outstanding Standby Letters of Credit with two banks
representing contingent obligations to fund various trusts established in
connection with certain employment contracts of management employees, as well as
certain employee and Director benefit plans, in the event of a Change in Control
(as defined in the trust agreements), totalling $93 million. The Company has
also entered into Key Executive Employment Protection Agreements with selected
key employees, which provide for certain contingent severance benefits, based on
compensation, in the event of a Change in Control (as defined in the
agreements). Additionally, in connection with the application by a life
insurance subsidiary for an additional state license to transact business,
USLIFE Corporation has agreed to guarantee that subsidiary's maintenance of the
state's minimum capital and surplus requirements (amounting to $4.4 million at
December 31, 1995) for a ten year period commencing at the effective date of
such license. The Company has also agreed to guarantee the payment and
performance of two real estate leases which expire December 31, 2006 and June
30, 2007, respectively, for two of its subsidiaries, which represent gross
minimum rents for the remaining term of the leases totalling, as of December 31,
1995, $19.4 million and $14.9 million, respectively, plus additional rents
representing any increase in operating expenses and real estate taxes over the
base year (defined in the leases as calendar year 1995 and 1997, respectively).
The Company and certain of its subsidiaries are involved in litigation,
which originated in 1981, with a former officer of a former subsidiary of the
Company. Allegations in the former officer's lawsuit include breach of the
covenant of good faith and fair dealing, breach of fiduciary duty, infliction of
emotional distress and malicious prosecution. Judgment was rendered in favor of
the Company. That judgment is being appealed. No contingent loss has been
accrued for this litigation because the amount of loss, if any, cannot be
reasonably estimated, nor is it probable in the opinion of management that the
ultimate outcome of this litigation will result in a liability to the Company or
any of its subsidiaries.
In November, 1994, a purported class action was filed against three of the
Company's subsidiaries alleging that in connection with purchases by plaintiffs
of single premium term life insurance from mortgage lenders, defendants
misrepresented the type of insurance offered as credit life insurance and sold
the term life insurance at premiums in excess of those permitted for credit life
insurance. The parties have agreed to a settlement of all claims asserted and
the settlement was given tentative approval by the Court in December, 1995.
Under the terms of the Settlement Agreement, class members will be notified of
their right to file claims for partial premium refunds. In the opinion of
management, the ultimate resolution of this action in accordance with the terms
of the Settlement Agreement will not result in a material additional liability
on the part of the Company.
In August, 1995, a purported class action was filed alleging that a
subsidiary of the Company violated the federal Telephone Consumer Protection Act
by sending unsolicited facsimiles of advertisements. The Complaint contains
claims for damages in the amount of $500 for each such unsolicited facsimile or
<PAGE>79
alternatively, plaintiffs' actual monetary loss; plaintiffs have also sued for
treble damages or alternatively, punitive damages. No contingent loss has been
accrued for this litigation because the amount of loss, if any, cannot be
reasonably estimated.
In March, 1995, a purported class action was filed alleging that a subsidiary of
the Company issued insurance contracts in an amount sufficient to cover the
gross amount of indebtedness, rather than the net amount of indebtedness,
contrary to Alabama law. The complaint contains claims of fraud and breach of
contract based on allegations that defendant misrepresented the amount of
insurance needed (based on a recent ruling in a similar case by the Alabama
Supreme Court). Plaintiffs seek compensatory and punitive damages. No
contingent loss has been accrued for this litigation because the amount of loss,
if any, cannot be reasonably estimated.
In addition to the aforementioned legal proceedings, the Company and its
subsidiaries are parties to various routine legal proceedings incidental to the
conduct of their business. Based on currently available information, in the
opinion of management it is not probable that the ultimate resolution of these
suits will result in a material liability on the part of the Company.
Note 14. Financial Instruments and Concentrations of Credit Risk
The following methods and assumptions were used to estimate the fair value
of the indicated classes of financial instruments:
Cash and Short-term Investments
The carrying amounts of these assets approximate their fair value.
Fixed Maturities and Equity Securities
Fair values are based on quoted market prices or dealer quotes.
Mortgage Loans
The fair value of mortgage loans, other than those which are more than 60
days delinquent or in foreclosure, is estimated by discounting the expected
future cash flows. The rates used for this purpose are the estimated current
rates that would be applied to the loans in a purchase or sale transaction, on
an aggregate or bulk basis grouped by maturity range, considering the
creditworthiness of the borrowers and the general characteristics of the
collateral. For purposes of this calculation, the fair value of loans with
stated interest rates greater than the estimated applicable market rate was
adjusted to reflect the impact of prepayment options or other contractual terms
upon market value. For mortgage loans which are classified as delinquent or are
in foreclosure, fair value is based on estimated net realizable value of the
underlying collateral.
Policyholder Account Balances Relating to Investment Contracts
The fair value of the Company's liabilities under investment contracts,
primarily deferred annuities, is estimated using discounted cash flow
calculations based on interest rates being offered by the Company for similar
contracts at the balance sheet date.
Long-term Debt
The fair value of the Company's long-term debt is estimated based on rates
believed to be currently available to the Company for borrowings with terms
similar to the remaining maturities of the outstanding debt. For outstanding
debt securities with fixed interest rates in excess of current market rates,
repayment on call dates prior to stated maturity was assumed for purposes of
fair value estimation.
<PAGE>80
The carrying amounts and estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
_______________________ _______________________
Carrying Fair Carrying Fair
Amount Value Amount Value
__________ __________ __________ __________
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Financial Assets:
Cash:
On hand and in demand accounts.......... $ 63,914 $ 63,914 $ 51,878 $ 51,878
Restricted funds held in escrow, etc. .. 1,821 1,821 1,653 1,653
Short-term investments.................... 69,560 69,560 129,335 129,335
Fixed maturities.......................... 6,006,864 6,006,864 4,937,867 4,937,867
Equity securities......................... 4,717 4,717 4,583 4,583
Mortgage loans............................ 296,045 308,343 319,618 325,756
Financial Liabilities:
Policyholder account balances
relating to investment contracts.......... 1,788,794 1,800,825 1,834,418 1,728,122
Long-term debt............................ 349,493 357,161 349,360 318,128
</TABLE>
In accordance with the requirements of Statement No. 107 of the Financial
Accounting Standards Board, the financial instruments presented above exclude
accounts relating to the Company's insurance contracts and certain other classes
of assets and liabilities. The Company has not utilized derivative financial
instruments such as futures, forward, swap, or option contracts as defined in
Statement of Financial Accounting Standards No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments," for
periods presented herein.
The estimated fair values of the Company's policy loan assets at December
31, 1995 and 1994 are not materially different from the respective carrying
values at those dates. It should be noted that fair value estimates based on
assumed discount rates and assumptions and estimates of the timing and amount of
future cash flows are significantly affected by the assumptions used.
Concentrations of Credit Risk
The Company's investments in fixed maturities and equity securities are
comprised of a diverse portfolio represented by approximately 650 issuers, with
no issuer accounting for more than 2% of the Company's total investment in these
securities, based on fair value, at December 31, 1995.
<PAGE>81
The geographical distribution of the collateral for the Company's mortgage
loans at December 31, 1995, by United States region and based on book value, is
as follows:
New England.......................... 6%
Middle Atlantic states............... 17
North-central states................. 21
South Atlantic states................ 17
South-central states................. 12
Mountain states...................... 13
Pacific states....................... 14
_____
100%
=====
The distribution of the Company's mortgage loans at December 31, 1995 by
type of collateral, based on book value, is as follows:
Office buildings..................... 36%
Industrial / warehouse properties.... 24
Retail............................... 29
Apartments........................... 1
One to four family residential....... 2
Hotel / motel, medical, and other.... 8
_____
100%
=====
The Company's reinsurance receivables and other recoverable amounts at
December 31, 1995 relate to approximately 150 reinsurers. Two major United
States insurance companies, rated "A+" (superior) and "A" (excellent)
respectively by A. M. Best Company, a recognized insurance rating agency,
account for approximately 15% and 9%, respectively, of the total reinsurance
receivable and recoverable amount at that date. Other than these companies, no
single reinsurer accounts for more than 6% of the total reinsurance receivable
and recoverable amount at December 31, 1995. The Company monitors the financial
condition of its reinsurers in order to minimize its exposure to loss from
reinsurer insolvencies.
Note 15. Reinsurance
The life insurance subsidiaries reinsure with other companies portions of
the risks they underwrite and assume portions of risks on policies underwritten
by other companies. The life insurance subsidiaries generally reinsure risks
over $1.5 million as well as selected risks of lesser amounts. In this
connection, $9.3 billion, representing 6 percent of total life insurance in
force as of December 31, 1995, was ceded to other carriers. Reinsurance
contracts do not relieve the Company from its obligations to policyholders, and
the Company is contingently liable with respect to insurance ceded in the event
any reinsurer is unable to meet the obligations which have been assumed.
<PAGE>82
The effect of reinsurance on premiums, other considerations, and benefits
to policyholders and beneficiaries, is as follows:
<TABLE>
<CAPTION>
Year Ended December 31
____________________________________
1995 1994 1993
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Premiums, before reinsurance ceded......... $1,067,480 $1,043,958 $1,021,694
Premiums ceded............................. 76,659 78,480 77,388
__________ __________ __________
Net premiums............................... $ 990,821 $ 965,478 $ 944,306
========== ========== ==========
Other considerations, before reinsurance
ceded................................... $ 203,136 $ 180,954 $ 166,477
Other considerations ceded................. 16,737 14,891 12,938
__________ __________ __________
Net other considerations................... $ 186,399 $ 166,063 $ 153,539
========== ========== ==========
Benefits to policyholders and beneficiaries,
before reinsurance recoveries............ $ 778,868 $ 782,415 $ 794,640
Reinsurance recoveries..................... 63,220 54,804 57,309
__________ __________ __________
Benefits to policyholders and beneficiaries,
net of reinsurance recoveries............ $ 715,648 $ 727,611 $ 737,331
========== ========== ==========
</TABLE>
A summary of reinsurance activity for the three years ended December 31,
1995 is presented below:
<TABLE>
<CAPTION>
Percentage
Ceded to Assumed of Amount
Gross Other From Other Net Assumed
Amount Companies Companies Amount to Net
______ _________ _________ ______ _________
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1995
Life insurance in force.............. $140,872,356 $9,270,244 $18,765,435 $150,367,547 12.5%
============ ========== =========== ============ ====
Premiums:
Life insurance.................... $ 529,639 $ 37,513 $ 49,140 $ 541,266 9.1%
Accident and health insurance..... 487,064 39,146 1,637 449,555 .4
____________ __________ ___________ ____________ ____
Total premiums............... $ 1,016,703 $ 76,659 $ 50,777 $ 990,821 5.1%
============ ========== =========== ============ ====
Year Ended December 31, 1994
Life insurance in force.............. $124,881,337 $7,837,101 $16,800,790 $133,845,026 12.6%
============ ========== =========== ============ ====
Premiums:
Life insurance.................... $ 491,151 $ 42,362 $ 46,119 $ 494,908 9.3%
Accident and health insurance..... 503,442 36,118 3,246 470,570 0.7
____________ __________ ___________ ____________ ____
Total premiums............... $ 994,593 $ 78,480 $ 49,365 $ 965,478 5.1%
============ ========== =========== ============ ====
Year Ended December 31, 1993
Life insurance in force.............. $110,549,368 $7,516,633 $14,462,410 $117,495,145 12.3%
============ ========== =========== ============ ====
Premiums:
Life insurance.................... $ 458,492 $ 40,728 $ 37,406 $ 455,170 8.2%
Accident and health insurance..... 524,448 36,660 1,348 489,136 0.3
____________ __________ __________ ____________ ___
Total premiums............... $ 982,940 $ 77,388 $ 38,754 $ 944,306 4.1%
============ ========== ========== ============ ===
</TABLE>
<PAGE>83
The estimated amounts of reinsurance recoverable on paid and unpaid claims
included in the Consolidated Balance Sheets as of December 31, 1995 and 1994 are
as follows:
<TABLE>
<CAPTION>
December 31
__________________________________________________________
1995 1994
_____________________________ ___________________________
Paid Unpaid Paid Unpaid
Claims Claims Claims Claims
______ ______ ______ ______
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Life insurance.................... $ 5,994 $ 11,487 $ 5,824 $ 8,508
Accident and health insurance..... 2,574 5,107 3,041 4,135
_________ _________ _________ _________
Total........................ $ 8,568 $ 16,594 $ 8,865 $ 12,643
========= ========= ========= =========
</TABLE>
The amount included in the consolidated balance sheets at December 31, 1995
and 1994 for "Other reinsurance recoverable" includes the estimated amounts
recoverable on unpaid claims as indicated above as well as prepaid reinsurance
premiums.
Note 16. Income Per Share
The following table sets forth the computations of income per share for the
three years ended December 31, 1995:
<TABLE>
<CAPTION>
Year Ended December 31
_______________________________
1995 1994 1993
____ ____ ____
(Shares and Amounts in Thousands
except Per Share Data)
<S> <C> <C> <C>
Net income............................................. $105,414 $96,185 $97,157
======= ======= =======
Weighted average common shares outstanding,
net of treasury shares............................... 34,363 34,238 33,873
Add-Common share equivalents of:
Preferred Stock - Series A.......................... 54 57 66
Preferred Stock - Series B.......................... 23 24 26
Outstanding stock options-treasury stock method..... 371 211 342
_______ _______ _______
Total common shares and common equivalent shares....... 34,811 34,530 34,307
======= ======= =======
Net income per share................................... $ 3.03 $ 2.79 $ 2.83
======= ======= =======
</TABLE>
<PAGE>84
Note 17. Statement of Cash Flows Information
For the years ended December 31, 1995, 1994 and 1993, respectively,
interest paid amounted to $38.2 million, $34.8 million, and $32.6 million, and
Federal income taxes paid amounted to $55.7 million, $60.5 million and $60.7
million. The major portion of the disposals of fixed maturity investments
relate to securities sold or redeemed prior to their maturity dates. The $438
million disposals of fixed maturity investments by the Company for the year
ended December 31, 1995 included approximately $115 million (adjusted cost) of
securities which were called for redemption by the respective issuers prior to
maturity. On a similar basis, redemptions of fixed maturities included in total
disposals amounted to $209 million and $928 million in 1994 and 1993,
respectively.
Note 18. Statutory Financial Information; Dividend Paying Capability of Life
Insurance Subsidiaries
Net income and equity capital of the life insurance subsidiaries, as
reported on a regulatory basis and as included in USLIFE's consolidated
financial statements in accordance with GAAP, are as follows:
<TABLE>
<CAPTION>
As Reported As Included in the Company's
on a Consolidated Financial Statements
Regulatory Basis (a) in Accordance with GAAP
______________________________ __________________________________
1995 1994 1993 1995 1994 1993
______ ______ ______ ______ ______ ______
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Net income for the year
ended December 31 (b)............... $ 40,626 $ 31,368 $ 89,451 $ 146,058 $ 133,352 $ 132,240
======== ======== ======== ========== ========== ==========
Equity capital at December 31......... $574,757 $572,691 $588,331 $1,786,106 $1,326,922 $1,375,920
======== ======== ======== ========== ========== ==========
______
</TABLE>
(a) Statutory accounting practices require acquisition costs on new business
(including commissions and underwriting and issue costs) to be charged to
expense when incurred. Regulatory net income includes income (loss) attributed
to participating policyholders of approximately $(21) million, $200 thousand,
and $2 million in 1995, 1994, and 1993, respectively, with the 1995 loss
primarily a result of increased sales of participating term insurance products.
Regulatory equity capital includes capital attributed to participating
policyholders of approximately $20 million, $30 million, and $39 million at
December 31, 1995, 1994 and 1993, respectively. Capital attributed to
participating policyholders is not available for payment of dividends to
shareholders.
(b) Regulatory net income includes after-tax capital losses of $8 million, $10
million, and $2 million in 1995, 1994, and 1993, respectively. GAAP net income
includes after-tax capital gains (losses) of $4 million, $(1) million and $7
million in those years, respectively.
The dividend paying capability of the life insurance subsidiaries is
generally limited by after-tax income and equity capital as reported on a
regulatory basis. As a result of the appropriate adjustments, including
deferral and amortization of policy acquisition costs and fair value accounting
for fixed maturities under GAAP, equity capital of the life insurance
subsidiaries prepared in accordance with GAAP exceeds regulatory equity capital
as indicated above. Notice to or approval by regulatory authorities is
frequently required for dividends paid by insurance companies. Loans to or
advances from the life insurance subsidiaries to the parent company may also be
subject to regulatory approval requirements or limitations. At December 31,
1995, the portion of the aggregate $1.786 billion GAAP equity capital of the
life insurance subsidiaries which was not available for transfer to the parent
company by dividend, loan, or advance or available for such transfer only with
regulatory approval ("Restricted Net Assets"), as a result of insurance laws and
regulations, amounted to $1.732 billion. Cash dividends paid by all
consolidated subsidiaries to the parent company totalled $42 million (including
$6.5 million remitted by an inactive life insurance subsidiary and then
contributed to another life subsidiary in connection with the earlier
combination of the two companies' operations), $46 million and $61 million in
1995, 1994 and 1993, respectively. Additionally, during 1993, securities with
market value of $22 million were transferred from a life insurance subsidiary to
the parent company and subsequently contributed to another life insurance
subsidiary in connection with the combination of the two subsidiaries'
operations.
<PAGE>85
Note 19. Supplementary Insurance Information
Supplementary data relating to the life insurance industry segment of the
Company for the three years ended December 31, 1995 is presented below.
<TABLE>
<CAPTION>
Year Ended December 31, 1995 Year Ended December 31, 1994 Year Ended December 31, 1993
__________________________________ _____________________________________ ___________________________________
Non- Non- Non-
Life Reportable Life Reportable Life Reportable
Insurance Segments and Insurance Segments and Insurance Segments and
Industry Consolidating Industry Consolidating Industry Consolidating
Segment Adjustments Consolidated Segment Adjustments Consolidated Segment Adjustments Consolidated
__________ _________ __________ _________ ___________ ____________ __________ _________ __________
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Deferred policy
acquisition
costs........ $ 718,439 $ - $ 718,439 $ 793,145 $ - $ 793,145 $ 741,927 $ - $ 741,927
========== ========= ========== ========== ========= ========== ========== ========= ==========
Future policy
benefits:
Life........... $1,324,395 $ - $1,324,395 $1,254,879 $ - $1,254,879 $1,196,265 $ - $1,196,265
Accident and
health........ 314,032 - 314,032 277,117 - 277,117 257,192 - 257,192
__________ _________ __________ __________ _________ __________ __________ _________ __________
Total......... $1,638,427 $ - $1,638,427 $1,531,996 $ - $1,531,996 $1,453,457 $ - $1,453,457
========== ========= ========== ========== ========= ========== ========== ========= ==========
Policyholder
account balances
for universal
life-type and
investment
contracts....... $3,787,546 $ - $3,787,546 $3,641,393 $ - $3,641,393 $3,322,265 $ - $3,322,265
========== ========= ========== ========== ========= ========== ========== ========= ==========
Other policy
claims and
benefits
payable......... $ 259,135 $ 233 $ 259,368 $ 215,102 $ (282) $ 214,820 $ 211,483 $ (371) $ 211,112
========== ========= ========== ========== ========= ========== ========== ========= ==========
Premium income:
Life........... $ 542,000 $ (734) $ 541,266 $ 495,568 $ (660) $ 494,908 $ 455,766 $ (596) $ 455,170
Accident and
health....... 451,197 (1,642) 449,555 474,135 (3,565) 470,570 494,417 (5,281) 489,136
__________ _________ __________ __________ _________ __________ __________ _________ __________
Total........ $ 993,197 $ (2,376) $ 990,821 $ 969,703 $ (4,225) $ 965,478 $ 950,183 $ (5,877) $ 944,306
========== ========= ========== ========== ========= ========== ========== ========= ==========
Other consider-
ation.......... $ 186,399 $ - $ 186,399 $ 166,063 $ - $ 166,063 $ 153,539 $ - $ 153,539
========== ========= ========== ========== ========= ========== ========== ========= ==========
Net investment
income......... $ 475,839 $ 12,640 $ 488,479 $ 448,712 $ 12,782 $ 461,494 $ 431,923 $ 12,723 $ 444,646
========== ========= ========== ========== ========= ========== ========== ========= ==========
Realized gains
(losses)....... $ 6,413 $ (25) $ 6,388 $ (1,322) $ (58) $ (1,380) $ 10,835 $ (2,319) $ 8,516
========== ========= ========== ========== ========= ========== ========== ========= ==========
Benefits, claims,
losses and
settlement
expenses........ $1,037,307 $ 233 $1,037,540 $1,001,197 $ (282) $1,000,915 $ 961,269 $ (371) $ 960,898
========== ========= ========== ========== ========= ========== ========== ========= ==========
Amortization of
deferred policy
acquisition
costs........... $ 162,038 $ - $ 162,038 $ 159,702 $ - $ 159,702 $ 151,851 $ - $ 151,851
========== ========= ========== ========== ========= ========== ========== ========= ==========
Other operating
expenses ...... $ 296,719 $ 83,330 $ 380,049 $ 265,645 $ 77,928 $ 343,573 $ 264,066 $ 71,652 $ 335,718
========== ========= ========== ========== ========= ========== ========== ========= ==========
</TABLE>
<PAGE>86
<TABLE>
Note 20. Condensed Financial Information of Parent Company
CONDENSED BALANCE SHEETS
PARENT COMPANY
December 31, 1995 and 1994
ASSETS
<CAPTION>
1995 1994
____ ____
(Amounts in Thousands)
<S> <C> <C>
Cash and invested assets:
Cash and certificates of deposit................................................. $ 8,060 $ 9,349
Fixed maturities available for sale, at fair value............................... 42,745 41,045
Equity securities, at fair value................................................. 82 70
Other long term investments, and short term investments.......................... 1,741 1,010
__________ __________
Total cash and invested assets........................................... 52,628 51,474
Other receivables (net).......................................................... 1,114 7,544
Property and equipment (net)..................................................... 662 650
Prepaid expenses, deferred charges and other assets.............................. 45,091 47,081
Investment in life insurance subsidiaries........................................ 1,786,106 1,326,922
Investment in non-life insurance subsidiaries.................................... 30,112 26,668
__________ __________
Total assets.............................................................. $1,915,713 $1,460,339
========== ==========
LIABILITIES AND EQUITY CAPITAL
LIABILITIES:
Federal income taxes (current and deferred)...................................... $ (25,534) $ (18,679)
Notes payable.................................................................... 222,975 196,575
Long-term debt................................................................... 349,493 349,360
Accounts payable and accrued liabilities......................................... 60,525 55,195
__________ __________
Total liabilities........................................................ 607,459 582,451
__________ __________
NON-REDEEMABLE PREFERRED STOCKS, COMMON STOCK, AND OTHER SHAREHOLDERS' EQUITY
("EQUITY CAPITAL"):
Preferred stock - Series A....................................................... 448 465
Preferred stock - Series B....................................................... 93 100
Preferred stock-undesignated..................................................... - -
Common stock..................................................................... 57,469 38,310
Paid-in surplus.................................................................. 117,512 131,823
Net unrealized gain (loss) on securities......................................... 195,450 (156,248)
Retained earnings................................................................ 1,284,306 1,210,078
__________ __________
1,655,278 1,224,528
Less: Treasury stock, at cost.................................................... 339,662 339,972
Deferred compensation...................................................... 7,362 6,668
__________ __________
Total Equity Capital......................................................... 1,308,254 877,888
__________ __________
Total liabilities and Equity Capital..................................... $1,915,713 $1,460,339
========== ==========
</TABLE>
<PAGE>87
<TABLE>
CONDENSED STATEMENTS OF INCOME
PARENT COMPANY
For the Three Years Ended December 31, 1995
<CAPTION>
Year Ended December 31
____________________________________
1995 1994 1993
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Net investment income................................................... $ 4,035 $ 4,661 $ 5,243
Dividends from subsidiaries (eliminated in consolidation)............... 42,312 45,702 82,800
Realized gains (losses) on investments.................................. (28) (86) 80
Other income............................................................ 8,980 8,414 7,760
_______ _______ _______
Total income................................................... 55,299 58,691 95,883
_______ _______ _______
General expenses........................................................ 40,051 36,782 35,506
Interest on notes payable............................................... 15,303 11,239 5,716
Interest on long term debt.............................................. 24,396 24,388 26,676
_______ _______ _______
Total expenses................................................. 79,750 72,409 67,898
_______ _______ _______
Income from operations before related income taxes...................... (24,451) (13,718) 27,985
Provision for income taxes.............................................. (22,820) (19,643) (18,806)
_______ _______ _______
Income (loss) before equity in undistributed net income of subsidiaries. (1,631) 5,925 46,791
Equity in undistributed net income of subsidiaries...................... 107,045 90,260 50,366
_______ _______ _______
Net income.............................................................. $105,414 $96,185 $97,157
======= ======= =======
</TABLE>
<PAGE>88
<TABLE>
STATEMENTS OF CASH FLOWS
PARENT COMPANY
For the Three Years Ended December 31, 1995
<CAPTION>
Year Ended December 31
_________________________________
1995 1994 1993
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................................ $ 105,414 $ 96,185 $ 97,157
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed net income of subsidiaries.................. (107,045) (90,260) (50,366)
Dividends of securities from subsidiaries........................... - - (21,603)
Deferred federal income taxes....................................... (1,875) (1,063) 2,979
Depreciation and amortization....................................... 2,096 2,044 2,109
Change in other liabilities and amounts receivable.................. 11,760 2,146 (14,184)
Change in current federal income tax liability...................... (6,467) 2,894 13,021
Net realized capital losses (gains)................................. 28 86 (80)
Other, net.......................................................... 2,755 2,555 716
_________ _________ _________
Total adjustments.............................................. (98,748) (81,598) (67,408)
_________ _________ _________
Net cash provided by operating activities................. 6,666 14,587 29,749
_________ _________ _________
Cash flows from investing activities:
Proceeds from investments sold, redeemed or matured:
Fixed maturities.................................................. 7,071 12,640 18,118
Mortgage loan principal receipts.................................. - - 1
Expenditures for property and equipment............................... (271) (271) (232)
Capital contributions to subsidiaries................................. (6,645) (18,000) -
Cost of investments purchased:
Fixed maturities.................................................. (4,545) (6,444) (15,729)
Net (purchases) or sales of short term investments................ (731) - 5,000
Other, net............................................................ 3 - (396)
_________ _________ _________
Net cash provided (used) in investing activities.......... (5,118) (12,075) 6,762
_________ _________ _________
Cash flows from financing activities:
Issuance of debt securities......................................... - - 300,000
Borrowings under credit facility.................................... - 150,000 -
Increase (decrease) in notes payable................................ 26,400 (19,000) (112,400)
Dividends to shareholders........................................... (31,186) (28,801) (27,361)
Acquisition of treasury stock....................................... (5,334) (7,230) (2,621)
Repayment of long-term debt......................................... - (100,000) (200,000)
Other, net.......................................................... 7,283 5,998 5,959
_________ _________ _________
Net cash provided (used) in financing activities.......... (2,837) 967 (36,423)
_________ _________ _________
Net change in cash................................................ (1,289) 3,479 88
Cash at beginning of year........................................... 9,349 5,870 5,782
_________ _________ _________
Cash at end of year................................................. $ 8,060 $ 9,349 $ 5,870
========= ========= =========
</TABLE>
<PAGE>89
Note 21. Condensed Quarterly Results of Operations (Unaudited)
The quarterly results of consolidated operations for the two
years ended December 31, 1995 are presented below (in thousands of
dollars except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
______________________________________ ______________________________________
March June September December March June September December
31, 1995 30, 1995 30, 1995 31, 1995 31, 1994 30, 1994 30, 1994 31, 1994
________ ________ _________ ________ ________ ________ _________ ________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total income............................... $418,829 $443,191 $432,558 $444,974 $390,722 $428,875 $413,787 $417,803
Total benefits and expenses................ 382,060 403,176 392,007 402,384 354,425 391,298 375,398 383,069
________ ________ ________ ________ ________ ________ ________ ________
Income from operations
before related income taxes............... 36,769 40,015 40,551 42,590 36,297 37,577 38,389 34,734
Provision for income taxes................. 12,479 13,848 13,908 14,276 12,673 13,413 12,879 11,847
________ ________ ________ ________ ________ ________ ________ ________
Net income............................... $ 24,290 $ 26,167 $ 26,643 $ 28,314 $ 23,624 $ 24,164 $ 25,510 $ 22,887
======== ======== ======== ======== ======== ======== ======== ========
Net income per share................. $ .70 $ .76 $ .76 $ .81 $ .69 $ .70 $ .73 $ .67
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>1
Exhibit 99 - Exhibit Index
__________________________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
EXHIBITS
FILED WITH
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 1995
_____________________________________________
USLIFE Corporation
<PAGE>2
USLIFE Corporation
Index to Exhibits
Exhibit
Number Exhibit
_______ _______
3 (i) - Restated Certificate of Incorporation, as amended,
incorporated herein by reference to USLIFE's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993, SEC File No.
1-5683.
3 (ii) - By-laws, as amended and restated, incorporated herein by
reference to USLIFE's Annual Report on Form 10-K for the year
ended December 31, 1994, SEC File No. 1-5683.
4 (i) - See Exhibit 3(i).
(ii) - Indenture dated as of October 1, 1982 (9.15% Notes due June
15, 1999, 6.75% Notes due January 15, 1998, and 6.375% Notes due
June 15, 2000) incorporated herein by reference to USLIFE's
Registration Statement No. 2-79559 on Form S-3.
Agreements or instruments with respect to long-term debt which
are not filed as exhibits hereto do not in total exceed 10% of
USLIFE's consolidated total assets and USLIFE agrees to furnish a
copy thereof to the Commission upon request.
(iii) - Amended and Restated Rights Agreement, dated as of September
27, 1994, between USLIFE Corporation and Chemical Bank (successor
by merger to Manufacturers Hanover Trust Company), as Rights
Agent, relating to Common Stock Purchase Rights issued by USLIFE
on July 10, 1986, incorporated herein by reference to USLIFE's
Report on Form 8-K dated October 12, 1994, SEC File No. 1-5683.
10 * (i) - Employment contract dated as of April 1, 1989 between USLIFE
Corporation and Gordon E. Crosby, Jr., incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1989, SEC File No. 1-5683.
* (ii) - First Amendment dated as of May 1, 1989 to employment contract
dated as of April 1, 1989 between USLIFE Corporation and Gordon
E. Crosby, Jr., incorporated herein by reference to USLIFE's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1989, SEC File No. 1-5683.
* (iii) - Second Amendment dated as of May 1, 1990 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Gordon E. Crosby, Jr., incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1990, SEC File No. 1-5683.
* (iv) - Third Amendment dated as of May 1, 1991 to employment contract
dated as of April 1, 1989, as amended, between USLIFE Corporation
and Gordon E. Crosby, Jr., incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended June
30, 1991, SEC File No. 1-5683.
* (v) - Fourth Amendment dated as of May 1, 1992 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Gordon E. Crosby, Jr., incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1992, SEC File No. 1-5683.
<PAGE>3
USLIFE Corporation
Index to Exhibits
Exhibit
Number Exhibit
_______ _______
* (vi) - Fifth Amendment dated as of February 1, 1993 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Gordon E. Crosby, Jr., incorporated herein by
reference to USLIFE's Annual Report on Form 10-K for the year
ended December 31, 1992, SEC File No. 1-5683.
* (vii) - Sixth Amendment dated as of May 1, 1993 to employment contract
dated as of April 1, 1989, as amended, between USLIFE Corporation
and Gordon E. Crosby, Jr., incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended June
30, 1993, SEC File No. 1-5683.
* (viii) - Seventh Amendment dated as of May 1, 1994 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Gordon E. Crosby, Jr., incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, SEC File No. 1-5683.
* (ix) - Eighth Amendment dated as of May 1, 1995 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Gordon E. Crosby, Jr., incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, SEC File No. 1-5683.
* (x) - Employment contract dated as of April 1, 1989 between USLIFE
Corporation and Greer F. Henderson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1989, SEC File No. 1-5683.
* (xi) - First Amendment dated as of May 1, 1989 to employment contract
dated as of April 1, 1989, between USLIFE Corporation and Greer
F. Henderson, incorporated herein by reference to USLIFE's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1989, SEC File No. 1-5683.
* (xii) - Second Amendment dated as of May 1, 1990 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Greer F. Henderson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1990, SEC File No. 1-5683.
* (xiii) - Third Amendment dated as of May 1, 1991 to employment contract
dated as of April 1, 1989, as amended, between USLIFE Corporation
and Greer F. Henderson, incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended June
30, 1991, SEC File No. 1-5683.
* (xiv) - Fourth Amendment dated as of May 1, 1992 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Greer F. Henderson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1992, SEC File No. 1-5683.
* (xv) - Fifth Amendment dated as of May 1, 1993 to employment contract
dated as of April 1, 1989, as amended, between USLIFE Corporation
and Greer F. Henderson, incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended June
30, 1993, SEC File No. 1-5683.
<PAGE>4
USLIFE Corporation
Index to Exhibits
Exhibit
Number Exhibit
_______ _______
* (xvi) - Sixth Amendment dated as of May 1, 1994 to employment contract
dated as of April 1, 1989, as amended, between USLIFE Corporation
and Greer F. Henderson, incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended June
30, 1994, SEC File No. 1-5683.
* (xvii) - Seventh Amendment dated as of May 1, 1995 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Greer F. Henderson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, SEC File No. 1-5683.
* (xviii) - Employment contract dated as of April 1, 1989 between USLIFE
Corporation and Christopher S. Ruisi, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1989, SEC File No. 1-5683.
* (xix) - First Amendment dated as of May 1, 1989 to employment contract
dated as of April 1, 1989 between USLIFE Corporation and
Christopher S. Ruisi, incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended June
30, 1989, SEC File No. 1-5683.
* (xx) - Second Amendment dated as of May 1, 1990 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Christopher S. Ruisi, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1990, SEC File No. 1-5683.
* (xxi) - Third Amendment dated as of May 1, 1991 to employment contract
dated as of April 1, 1989, as amended, between USLIFE Corporation
and Christopher S. Ruisi, incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended June
30, 1991, SEC File No. 1-5683.
* (xxii) - Fourth Amendment dated as of May 1, 1992 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Christopher S. Ruisi, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1992, SEC File No. 1-5683.
* (xxiii) - Fifth Amendment dated as of May 1, 1993 to employment contract
dated as of April 1, 1989, as amended, between USLIFE Corporation
and Christopher S. Ruisi, incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended June
30, 1993, SEC File No. 1-5683.
* (xxiv) - Sixth Amendment dated as of May 1, 1994 to employment contract
dated as of April 1, 1989, as amended, between USLIFE Corporation
and Christopher S. Ruisi, incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended June
30, 1994, SEC File No. 1-5683.
<PAGE>5
USLIFE Corporation
Index to Exhibits
Exhibit
Number Exhibit
_______ _______
* (xxv) - Seventh Amendment dated as of May 1, 1995 to employment
contract dated as of April 1, 1989, as amended, between USLIFE
Corporation and Christopher S. Ruisi, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, SEC File No. 1-5683.
* (xxvi) - Employment contract dated as of April 16, 1990 between USLIFE
Corporation and William A. Simpson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1990, SEC File No. 1-5683.
* (xxvii) - First Amendment dated as of May 1, 1991 to employment contract
dated as of April 16, 1990 between USLIFE Corporation and William
A. Simpson, incorporated herein by reference to USLIFE's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1991, SEC File No. 1-5683.
* (xxviii) - Second Amendment dated as of May 1, 1992 to employment
contract dated as of April 16, 1990, as amended, between USLIFE
Corporation and William A. Simpson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1992, SEC File No. 1-5683.
* (xxix) - Third Amendment dated as of October 1, 1992 to employment
contract dated as of April 16, 1990, as amended, between USLIFE
Corporation and William A. Simpson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1992, SEC File No. 1-5683.
* (xxx) - Third Amendment dated as of May 1, 1993 to employment contract
dated as of April 16, 1990, as amended, between USLIFE
Corporation and William A. Simpson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993, SEC File No. 1-5683.
* (xxxi) - Fourth Amendment dated as of May 1, 1994 to employment
contract dated as of April 16, 1990, as amended, between USLIFE
Corporation and William A. Simpson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, SEC File No. 1-5683.
* (xxxii) - Fifth Amendment dated as of January 1, 1995 to employment
contract dated as of April 16, 1990, as amended, between USLIFE
Corporation and William A. Simpson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, SEC File No. 1-5683.
* (xxxiii) - Sixth Amendment dated as of May 1, 1995 to employment contract
dated as of April 16, 1990, as amended, between USLIFE
Corporation and William A. Simpson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, SEC File No. 1-5683.
* (xxxiv) - Form of Key Executive Employment Protection Agreement dated
November 14, 1995, between USLIFE Corporation and Gordon E.
Crosby, Jr., Greer F. Henderson, Christopher S. Ruisi, and
William A. Simpson.
<PAGE>6
USLIFE Corporation
Index to Exhibits
Exhibit
Number Exhibit
_______ _______
* (xxxv) - Form of Employment and Key Executive Employment Protection
Agreement dated November 14, 1995, between USLIFE Corporation and
Wesley E. Forte, A. Scott Bushey, Arnold A. Dicke, James M.
Schlomann and John D. Gavrity.
* (xxxvi) - Form of Key Executive Employment Protection Agreement dated
November 14, 1995, between USLIFE Corporation and Frank J.
Auriemmo, Jr., Richard J. Chouinard, Richard G. Hohn, Michael
LeFante and Neal M. Stern.
* (xxxvii) - Form of Key Executive Employment Protection Agreement dated
November 27, 1995, between All American Life Insurance Company
and James A. Bickler, USLIFE Real Estate Services Corporation and
Philip G. Faulkner, The Old Line Life Insurance Company and James
A. Griffin, USLIFE Insurance Services Corporation and Thomas L.
Hendricks, USLIFE Credit Life Insurance Company and William M.
Keeler, and dated January 24, 1996, between The United States
Life Insurance Company In the City of New York and Ralph J.
Cargiulo.
(xxxviii) - Lease dated as of December 30, 1986 between The United States
Life Insurance Company In the City of New York and RREEF USA
Fund-III for the lease of a portion of 125 Maiden Lane, New York,
New York, incorporated herein by reference to USLIFE's Annual
Report on Form 10-K for the year ended December 31, 1986, SEC
File No. 1-5683.
(xxxix) - Amendment to Lease dated August 31, 1988 to Lease dated as of
December 30, 1986 between The United States Life Insurance
Company In the City of New York and RREEF USA Fund-III for the
lease of a portion of 125 Maiden Lane, New York, New York,
incorporated herein by reference to USLIFE's Annual Report on
Form 10-K for the year ended December 31, 1988, SEC File No. 1-
5683.
(xl) - Second Amendment to Lease dated November 16, 1988 to Lease
dated as of December 30, 1986 between The United States Life
Insurance Company In the City of New York and RREEF USA Fund-III
for the lease of a portion of 125 Maiden Lane, New York, New
York, incorporated herein by reference to USLIFE's Annual Report
on Form 10-K for the year ended December 31, 1988, SEC File No.
1-5683.
(xli) - Third Amendment to Lease dated May 10, 1989 to Lease dated as
of December 30, 1986 between The United States Life Insurance
Company In the City of New York and RREEF USA Fund-III for the
lease of a portion of 125 Maiden Lane, New York, New York,
incorporated herein by reference to USLIFE's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995, SEC File No. 1-
5683.
(xlii) - Fourth Amendment to Lease dated April 14, 1995 to Lease dated
as of December 30, 1986 between The United States Life Insurance
Company In the City of New York and RREEF USA Fund-III for the
lease of a portion of 125 Maiden Lane, New York, New York,
incorporated herein by reference to USLIFE's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995, SEC File No. 1-
5683.
xliii) - Fifth Amendment to Lease dated as of December 26, 1995 to
Lease dated as of December 30, 1986 between The United States
Life Insurance Company In the City of New York and RREEF USA
Fund-III for the lease of a portion of 125 Maiden Lane, New York,
New York.
<PAGE>7
USLIFE Corporation
Index to Exhibits
Exhibit
Number Exhibit
_______ _______
(xliv) - Sixth Amendment to Lease dated as of December 26, 1995 to
Lease dated as of December 30, 1986 between The United States
Life Insurance Company In the City of New York and RREEF USA
Fund-III for the lease of a portion of 125 Maiden Lane, New York,
New York.
(xlv) - Lease dated May 21, 1987 between The United States Life
Insurance Company In the City of New York and Commercial Realty &
Resources Corp. for the lease of premises at the Jumping Brook
Corporate Office Park in Neptune, New Jersey, incorporated herein
by reference to USLIFE's Annual Report on Form 10-K for the year
ended December 31, 1988, SEC File No. 1-5683.
(xlvi) - February 9, 1989 Amendment to Lease dated May 21, 1987 between
The United States Life Insurance Company In the City of New York
and Commercial Realty & Resources Corp. for the lease of premises
at the Jumping Brook Corporate Office Park in Neptune, New
Jersey, incorporated herein by reference to USLIFE's Annual
Report on Form 10-K for the year ended December 31, 1988, SEC
File No. 1-5683.
* (xlvii) - 1978 Stock Option Plan, as amended, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, SEC File No. 1-5683.
* (xlviii) - 1981 Stock Option Plan, incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, SEC File No. 1-5683.
* (il) - USLIFE Corporation Non-Employee Directors' Deferred
Compensation Plan, as amended January 23, 1996.
* (l) - USLIFE Corporation Book Unit Plan, as amended effective
September 1, 1995, incorporated herein by reference to USLIFE's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1995, SEC File No. 1-5683.
* (li) - USLIFE Corporation Retirement Plan for Outside Directors (as
amended January 23, 1996).
* (lii) - USLIFE Corporation Restricted Stock Plan, as amended effective
September 1, 1995, incorporated herein by reference to USLIFE's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1995, SEC File No. 1-5683.
* (liii) - USLIFE Corporation 1991 Stock Option Plan, as amended
effective September 1, 1995, incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, SEC File No. 1-5683.
* (liv) - USLIFE Corporation Non-Employee Directors' Stock Option Plan,
incorporated herein by reference to Exhibit 4(a) to USLIFE's
Registration Statement No. 33-53265 on Form S-8 dated April 25,
1994.
* (lv) - Annual Incentive Plan, as amended October 25, 1994, for
Selected Key Officers of USLIFE Corporation and its Subsidiaries,
incorporated herein by reference to USLIFE's Annual Report on
Form 10-K for the year ended December 31, 1994, SEC File No. 1-
5683.
* (lvi) - USLIFE Corporation Executive Officer Deferred Compensation
Plan (as amended January 23, 1996).
<PAGE>8
USLIFE Corporation
Index to Exhibits
Exhibit
Number Exhibit
_______ _______
* (lvii) - USLIFE Corporation 1993 Long-Term Incentive Award Guidelines,
as amended, incorporated herein by reference to USLIFE's Annual
Report on Form 10-K for the year ended December 31, 1994, SEC
File No. 1-5683.
* (lviii) - USLIFE Corporation Supplemental Employee Savings and
Investment Plan (as amended January 23, 1996).
* (lix) - USLIFE Corporation Supplemental Retirement Plan (as amended
January 23, 1996).
* (lx) - Trust Agreement made as of March 1, 1994, as amended,
effective January 23, 1996, among USLIFE Corporation, Chemical
Bank, and KPMG Peat Marwick LLP (as independent contractor)
establishing a trust to fund certain employment contracts and the
USLIFE Corporation Executive Officer Deferred Compensation Plan.
* (lxi) - Trust Agreement made as of March 1, 1994, as amended,
effective January 23, 1996, among USLIFE Corporation, Chemical
Bank and KPMG Peat Marwick LLP (as independent contractor)
establishing a trust to fund the USLIFE Corporation Supplemental
Retirement Plan and the Supplemental Employee Savings and
Investment Plan.
* (lxii) - Trust Agreement made as of March 1, 1994, as amended,
effective January 23, 1996, among USLIFE Corporation, Chemical
Bank and KPMG Peat Marwick LLP (as independent contractor)
establishing a trust to fund the USLIFE Corporation Retirement
Plan for Outside Directors and the USLIFE Corporation Deferred
Compensation Plan for outside directors.
12 - Computations of ratios of earnings to fixed charges.
21 - List of Subsidiaries.
23 - Consent of Independent Certified Public Accountants
incorporated by reference to page 42 of USLIFE's Annual
Report on Form 10-K for the year ended December 31, 1995.
27 - Financial Data Schedule.
99 (i) - Annual Report on Form 11-K of USLIFE Corporation Employee
Savings and Investment Plan for the plan year ended December 31,
1995 (to be filed within 120 days of fiscal year end of Plan).
99 (ii) - Trust Agreement made as of December 6, 1990 among USLIFE
Corporation, Manufacturers Hanover Trust Company (predecessor to
Chemical Bank), and KPMG Peat Marwick LLP (as independent
contractor) establishing a trust to fund the USLIFE Corporation
Retirement Plan, incorporated herein by reference to USLIFE's
Annual Report on Form 10-K for the year ended December 31, 1990,
SEC File No. 1-5683.
99 (iii) - Amendment, effective January 23, 1996, to the Trust Agreement
made as of December 6,1990 among USLIFE Corporation,
Manufacturers Hanover Trust Company (predecessor to Chemical
Bank), and KPMG Peat Marwick LLP (as independent contractor)
establishing a trust to fund the USLIFE Corporation Retirement
Plan.
* Indicates a management contract or compensatory plan or arrangement.
<PAGE>1
Exhibit 10(xxxiv)
_________________
KEY EXECUTIVE EMPLOYMENT PROTECTION AGREEMENT
_____________________________________________
THIS AGREEMENT between USLIFE Corporation, a New York
corporation (the "Company"), and __________________ (the
"Executive"), dated as of this ___ day of ___________, 199_.
W I T N E S S E T H :
_ _ _ _ _ _ _ _ _ _
WHEREAS, the Company has employed the Executive in a key
executive officer position and has determined that the Execu-
tive holds a position which is of critical importance to the
Company;
WHEREAS, the Company believes that, in the event it is
confronted with a situation that could result in a change in
ownership or control of the Company, continuity of management
will be essential to its ability to evaluate and respond to
such situation in the best interests of shareholders;
WHEREAS, the Company understands that any such situation
will present significant concerns for the Executive with
respect to his financial and job security;
WHEREAS, the Company desires to assure itself of the
Executive's services during the period in which it is
confronting such a situation, and to provide the Executive
with certain financial assurances to enable the Executive to
perform the responsibilities of his position without undue
distraction and to exercise his judgment without bias due to
his personal circumstances;
WHEREAS, to achieve these objectives, the Company and
the Executive desire to enter into an agreement providing the
Company and the Executive with certain rights and obligations
upon the occurrence of a Change of Control (as defined in
Section 2);
NOW, THEREFORE, in consideration of the premises and
mutual covenants herein contained, it is hereby agreed by and
between the Company and the Executive as follows:
1. Operation of Agreement. (a) Effective Date. The
effective date of this Agreement shall be the date on which a
Change of Control occurs (the "Change of Control Date"),
provided that, except as provided in Section 1(b), if the
Executive is not employed by the Company on the Change of
Control Date, this Agreement shall be void and without
effect.
<PAGE>2
(b) Termination of Employment Following a
Potential Change of Control. Notwithstanding Section 1(a),
if (i) the Executive's employment is terminated by the
Company without Cause (as defined in Section 6(c)) after the
occurrence of a Potential Change of Control (as defined in
Section 2(b)) and prior to the occurrence of a Change of
Control and (ii) other Change of Control occurs within one
year of such termination, the Executive shall be deemed,
solely for purposes of determining his rights under this
Agreement, to have remained employed until the date such
Change of Control occurs and to have been terminated by the
Company without Cause immediately after this Agreement
becomes effective.
2. Definitions. (a) Change of Control. For the
purposes of this Agreement, a "Change of Control" shall mean
(i) a merger or consolidation to which the Company is a party
and for which the approval of any shareholders of the Company
is required; (ii) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended) becoming the beneficial owner, directly or
indirectly, of securities of the Company representing 25% or
more of the combined voting power of the Company's then
outstanding securities or (iii) a sale or transfer of
substantially all of the assets of the Company.
(b) Potential Change of Control. For the purposes
of this Agreement, a Potential Change of Control shall be
deemed to have occurred if (i) any "person" (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended) commences a tender offer
for securities, which if consummated, would result in such
person owning 20% or more of the combined voting power of the
Company's then outstanding securities; (ii) the Company
enters into an agreement the consummation of which would
constitute a Change of Control; (iii) proxies for the
election of directors of the Company are solicited by anyone
other than the Company; or (iv) any other event occurs which
is deemed to be a Potential Change of Control by the Board.
3. Employment Period. Subject to Section 6 of this
Agreement, the Company agrees to continue the Executive in
its employ, and the Executive agrees to remain in the employ
of the Company, for the period (the "Employment Period")
commencing on the Change of Control Date and ending on the
third anniversary of the Change of Control Date.
Notwithstanding the foregoing, if, prior to the Change of
Control Date, the Executive is demoted to a lower position
than the position held on the date first set forth above, the
Board may declare that this Agreement shall be without force
and effect by written notice delivered to the Executive (i)
within 30 days following such demotion and (ii) prior to the
occurrence of a Potential Change of Control or a Change of
Control.
4. Position and Duties. (a) No Reduction in Position.
During the Employment Period, the Executive's position
(including his titles, authority and responsibilities) shall
be at least commensurate with those held, exercised and
assigned immediately prior to the Change of Control Date.
The Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Change of Control Date.
<PAGE>3
(b) Business Time. From and after the Change of
Control Date, the Executive agrees to devote his full
attention during normal business hours to the business and
affairs of the Company and to perform faithfully and
efficiently the responsibilities assigned to him hereunder,
to the extent necessary to discharge such responsibilities,
except for periods of vacation, sick leave and other leave
to which he is entitled. It is expressly understood and
agreed that the Executive's continuing to serve on any boards
and committees on which he is serving or with which he is
otherwise associated immediately preceding the Change of
Control Date shall not be deemed to interfere with the
performance of the Executive's services to the Company.
5. Compensation. (a) Base Salary. During the
Employment Period, the Executive shall receive a base salary
at a monthly rate at least equal to the monthly salary paid
to the Executive by the Company immediately prior to the
Change of Control Date. The base salary shall be reviewed at
least once each year after the Change of Control Date, and
may be increased (but not decreased) at any time and from
time to time by action of the Board or any committee thereof
or any individual having authority to take such action in ac-
cordance with the Company's regular practices. The
Executive's base salary, as it may be increased from time to
time, shall hereafter be referred to as "Base Salary".
Neither the Base Salary nor any increase in Base Salary after
the Change of Control Date shall serve to limit or reduce any
other obligation of the Company hereunder.
(b) Annual Bonus and Incentive Compensation.
During the Employment Period, in addition to the Base Salary,
for each fiscal year of the Company ending during the
Employment Period, the Executive shall be entitled to receive
(i) an annual bonus which is at least equal to the greater of
(1) the highest annual bonus, including, without limitation,
any bonus provided under the Company's Annual Incentive Plan,
that had been payable to the Executive in respect of either
of the last two fiscal years ended immediately prior to the
Change of Control Date or (2) the amount that would have been
payable to the Executive as a target bonus including, without
limitation, under the Company's Annual Incentive Plan, for
the year in which the Change of Control occurs, plus (ii)
other long-term incentive compensation opportunities on terms
and conditions no less favorable to the Executive than those
applicable to the Executive prior to the Change of Control
Date. Any amount payable hereunder as an annual bonus shall
be paid as soon as practicable following the year for which
the amount is payable, unless electively deferred by the
Executive pursuant to any deferral programs or arrangements
that the Company may make available to the Executive.
(c) Benefit Plans. During the Employment Period,
the Executive (and, to the extent applicable, his dependents)
shall be entitled to participate in or be covered under all
pension, retirement, deferred compensation, savings, medical,
dental, health, disability, group life, accidental death and
travel accident insurance plans at a level that is
commensurate with the Executive's participation in such plans
immediately prior to the Change of Control Date, or, if more
favorable to the Executive, at the level made available to
the Executive or other similarly situated officers at any
time thereafter. The Executive shall also be entitled to
receive such perquisites as were generally provided to the
Executive in accordance with the Company's policies and
practices immediately prior to the Change of Control Date.
<PAGE>4
(d) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by the Executive in
accordance with the policies and procedures of the Company as
in effect immediately prior to the Change of Control Date.
Notwithstanding the foregoing, the Company may apply the
policies and procedures in effect after the Change of Control
Date to the Executive, if such policies and procedures are
more favorable to the Executive than those in effect
immediately prior to the Change of Control Date.
(e) Indemnification. During and after the Em-
ployment Period, the Company shall indemnify the Executive
and hold the Executive harmless from and against any claim,
loss or cause of action arising from or out of the Ex-
ecutive's performance as an officer, director or employee of
the Company or any of its subsidiaries or in any other
capacity, including any fiduciary capacity, in which the
Executive serves at the request of the Company to the maximum
extent permitted by applicable law and the Company's
Certificate of Incorporation and By-Laws (the "Governing
Documents"), provided that in no event shall the protection
afforded to the Executive hereunder be less than that af-
forded under the Governing Documents as in effect immediately
prior to the Change of Control Date.
6. Termination. (a) Death, Disability or Retirement.
This Agreement shall terminate automatically upon the Exec-
utive's death, termination due to "Disability" (as defined
below) or voluntary retirement under any of the Company's
retirement plans as in effect from time to time. For
purposes of this Agreement, Disability shall mean the
Executive's inability to perform the duties of his position,
as determined in accordance with the policies and procedures
applicable with respect to the Company's long-term disability
plan, as in effect immediately prior to the Change of Control
Date.
(b) Voluntary Termination. Notwithstanding
anything in this Agreement to the contrary, following a
Change of Control the Executive may, upon not less than 10
days' written notice to the Company, voluntarily terminate
his employment for any reason (including early retirement
under the terms of any of the Company's retirement plans as
in effect from time to time), provided that any termination
by the Executive pursuant to Section 6(d) on account of Good
Reason (as defined therein) shall not be treated as a vol-
untary termination under this Section 6(b).
(c) Cause. The Company may terminate the Exec-
utive's employment for Cause. For purposes of this Agree-
ment, "Cause" means (i) the Executive's conviction or plea of
nolo contendere to a felony; (ii) an act or acts of extreme
dishonesty or gross misconduct on the Executive's part which
result or are intended to result in material damage to the
Company's business or reputation; or (iii) repeated material
violations by the Executive of his obligations under Section
4 of this Agreement, which violations are demonstrably
willful and deliberate on the Executive's part and which
result in material damage to the Company's business or
reputation and such violations must have occurred following
the Change of Control Date.
<PAGE>5
(d) Good Reason. Following the occurrence of a
Change of Control, the Executive may terminate his employment
for Good Reason. For purposes of this Agreement, "Good
Reason" means the occurrence of any of the following, without
the express written consent of the Executive, after the
occurrence of a Change of Control:
(i) (A) the assignment to the Executive of any
duties inconsistent in any material adverse respect with
the Executive's position, authority or responsibilities
as contemplated by Section 4 of this Agreement, or (B)
any other material adverse change in such position,
including titles, authority or responsibilities;
(ii) any failure by the Company to comply with any
of the provisions of Section 5 of this Agreement, other
than an insubstantial or inadvertent failure remedied by
the Company promptly after receipt of notice thereof
given by the Executive;
(iii) the Company's requiring the Executive to be
based at any office or location more than 50 miles from
that location at which he performed his services speci-
fied under the provisions of Section 4 immediately prior
to the Change of Control, except for travel reasonably
required in the performance of the Executive's
responsibilities; or
(iv) any failure by the Company to obtain the
assumption and agreement to perform this Agreement by a
successor as contemplated by Section 11(b).
In no event shall the mere occurrence of a Change of Control,
absent any further impact on the Executive, be deemed to
constitute Good Reason.
(e) Notice of Termination. Any termination by the
Company for Cause or by the Executive for Good Reason shall
be communicated by Notice of Termination to the other party
hereto given in accordance with Section 12(e). For purposes
of this Agreement, a "Notice of Termination" means a written
notice given, in the case of a termination for Cause, within
10 business days of the Company's having actual knowledge of
the events giving rise to such termination, and in the case
of a termination for Good Reason, within 180 days of the
Executive's having actual knowledge of the events giving rise
to such termination, and which (i) indicates the specific
termination provision in this Agreement relied upon, (ii)
sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's
employment under the provision so indicated, and (iii) if the
termination date is other than the date of receipt of such
notice, specifies the termination date of this Agreement
(which date shall be not more than 15 days after the giving
of such notice). The failure by the Executive to set forth
in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason shall not waive any
right of the Executive hereunder or preclude the Executive
from asserting such fact or circumstance in enforcing his
rights hereunder.
<PAGE>6
(f) Date of Termination. For the purpose of this
Agreement, the term "Date of Termination" means (i) in the
case of a termination for which a Notice of Termination is
required, the date of receipt of such Notice of Termination
or, if later, the date specified therein, as the case may be,
and (ii) in all other cases, the actual date on which the
Executive's employment terminates during the Employment
Period.
7. Obligations of the Company upon Termination. (a)
Death or Disability. If the Executive's employment is
terminated during the Employment Period by reason of the
Executive's death or Disability, this Agreement shall
terminate without further obligations to the Executive or the
Executive's legal representatives under this Agreement other
than those obligations accrued hereunder at the Date of
Termination, and the Company shall pay to the Executive (or
his beneficiary or estate) (i) the Executive's full Base
Salary through the Date of Termination (the "Earned Salary"),
(ii) any vested amounts or benefits owing to the Executive
under the Company's otherwise applicable employee
compensation and benefit plans and programs, including any
compensation previously deferred by the Executive (together
with any accrued earnings thereon) and not yet paid by the
Company and any accrued vacation pay not yet paid by the
Company (the "Accrued Obligations"), and (iii) any other
benefits payable due to the Executive's death or Disability
under the Company's plans, policies or programs (the
"Additional Benefits").
Any Earned Salary shall be paid in cash in a single lump
sum as soon as practicable, but in no event more than 10
business days (or at such earlier date required by law),
following the Date of Termination. Accrued Obligations and
Additional Benefits shall be paid in accordance with the
terms of the applicable plan, program or arrangement.
(b) Cause and Voluntary Termination. If, during
the Employment Period, the Executive's employment shall be
terminated for Cause or voluntarily terminated by the Execu-
tive (other than on account of Good Reason following a Change
of Control) in accordance with Section 6(b) other than during
the 180 day period described in Section 7(c)(i) below, the
Company shall pay the Executive (i) the Earned Salary in cash
in a single lump sum as soon as practicable, but in no event
more than 10 days, following the Date of Termination, and
(ii) the Accrued Obligations in accordance with the terms of
the applicable plan, program or arrangement.
(c) Termination by the Company other than for
Cause and Certain Terminations by the Executive.
<PAGE>7
(i) Lump Sum Payments. If (x) the Company
terminates the Executive's employment other than for
Cause during the Employment Period, (y) the Executive
terminates his employment for Good Reason at any time
during the Employment Period or (z) the Executive
voluntarily terminates his employment without Good
Reason during the 180 day period beginning on the Change
of Control Date, then the Company shall pay to the
Executive the following amounts:
(A) the Executive's Earned Salary;
(B) a cash amount (the "Severance
Amount") equal to three times the sum of
(1) the Executive's annual Base Salary;
and (2) the greater of (x) the highest
bonus amount payable (including any
amounts payable under the Annual
Incentive Plan) to the Executive in
respect of either of the last two fiscal
years of the Company ending immediately
prior to the Change of Control Date or
(y) the amount that would have been
payable to the Executive as a target
bonus (including any amounts payable
under the Annual Incentive Plan) for the
year in which the Change of Control
occurs; and
(C) the Accrued Obligations.
The Earned Salary and Severance Amount shall be paid in
cash in a single lump sum as soon as practicable, but in
no event more than 10 business days (or at such earlier
date required by law), following the Date of
Termination. Accrued Obligations shall be paid in
accordance with the terms of the applicable plan,
program or arrangement.
(ii) Continuation of Benefits. If the Executive
receives the Severance Amount described in Section
7(c)(i), the Executive (and, to the extent applicable,
his dependents) shall be entitled, after the Date of
Termination until the earlier of (1) the second
anniversary of the Date of Termination (the "End Date")
or (2) the date the Executive becomes eligible for
comparable benefits under a similar plan, policy or
program of a subsequent employer, to continue
participation in all of the Company's employee and
executive welfare and fringe benefit plans (the "Benefit
Plans") and to receive such perquisites as were
generally provided to the Executive in accordance with
the Company's policies and practices immediately prior
to the Change of Control Date. To the extent any such
benefits or perquisites cannot be provided under the
terms of the applicable plan, policy or program, the
Company shall provide a comparable benefit under another
plan or from the Company's general assets. The
Executive's participation in the Benefit Plans and
eligibility for perquisites will be on the same terms
and conditions that would have applied had the Executive
continued to be employed by the Company through the End
Date.
<PAGE>8
(d) Discharge of the Company's Obligations.
Except as expressly provided in the last sentence of this
Section 7(d), the amounts payable to the Executive pursuant
to this Section 7 (whether or not reduced pursuant to Section
7(e)) following termination of his employment shall be in
full and complete satisfaction of the Executive's rights
under this Agreement and any other claims he may have in
respect of his employment by the Company or any of its
subsidiaries. Such amounts shall constitute liquidated
damages with respect to any and all such rights and claims
and, upon the Executive's receipt of such amounts, the
Company shall be released and discharged from any and all
liability to the Executive in connection with this Agreement
or otherwise in connection with the Executive's employment
with the Company and its subsidiaries. Nothing in this
Section 7(d) shall be construed to release the Company from
its commitment to indemnify the Executive and hold the
Executive harmless from and against any claim, loss or cause
of action arising from or out of the Executive's performance
as an officer, director or employee of the Company or any of
its subsidiaries or in any other capacity, including any
fiduciary capacity, in which the Executive served at the
request of the Company to the maximum extent permitted by
applicable law and the Governing Documents.
(e) Certain Further Payments by the Company.
(i) In the event that any amount or benefit paid
or distributed to the Executive pursuant to this Agree-
ment, taken together with any amounts or benefits
otherwise paid or distributed to the Executive by the
Company or any affiliated company (collectively, the
"Covered Payments"), are or become subject to the tax
(the "Excise Tax") imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"),
or any similar tax that may hereafter be imposed, the
Company shall pay to the Executive at the time specified
in Section 7(e)(v) below an additional amount (the "Tax
Reimbursement Payment") such that the net amount
retained by the Executive with respect to such Covered
Payments, after deduction of any Excise Tax on the
Covered Payments and any Federal, state and local income
or employment tax and Excise Tax on the Tax Reimburse-
ment Payment provided for by this Section 7(e), but
before deduction for any Federal, state or local income
or employment tax withholding on such Covered Payments,
shall be equal to the amount of the Covered Payments.
(ii) For purposes of determining whether any of
the Covered Payments will be subject to the Excise Tax
and the amount of such Excise Tax,
(A) such Covered Payments will be
treated as "parachute payments" within the
meaning of Section 280G of the Code, and all
"parachute payments" in excess of the "base
amount" (as defined under Section 280G(b)(3)
of the Code) shall be treated as subject to
the Excise Tax, unless, and except to the
extent that, in the good faith judgment of the
Company's independent certified public
accountants appointed prior to the Change of
Control Date or tax counsel selected by such
Accountants (the "Accountants"), the Company
has a reasonable basis to conclude that such
Covered Payments (in whole or in part) either
do not constitute "parachute payments" or
represent reasonable compensation for personal
services actually rendered (within the meaning
of Section 280G(b)(4)(B) of the Code) in
excess of the "base amount," or such
"parachute payments" are otherwise not subject
to such Excise Tax, and
<PAGE>9
(B) the value of any non-cash benefits
or any deferred payment or benefit shall be
determined by the Accountants in accordance
with the principles of Section 280G of the
Code.
(iii) For purposes of determining the amount of
the Tax Reimbursement Payment, the Executive shall be
deemed to pay:
(A) Federal income taxes at the highest
applicable marginal rate of Federal income
taxation for the calendar year in which the
Tax Reimbursement Payment is to be made, and
(B) any applicable state and local
income taxes at the highest applicable
marginal rate of taxation for the calendar
year in which the Tax Reimbursement Payment is
to be made, net of the maximum reduction in
Federal income taxes which could be obtained
from the deduction of such state or local
taxes if paid in such year.
(iv) In the event that the Excise Tax is subse-
quently determined by the Accountants or pursuant to any
proceeding or negotiations with the Internal Revenue
Service to be less than the amount taken into account
hereunder in calculating the Tax Reimbursement Payment
made, the Executive shall repay to the Company, at the
time that the amount of such reduction in the Excise Tax
is finally determined, the portion of such prior Tax
Reimbursement Payment that would not have been paid if
such Excise Tax had been applied in initially
calculating such Tax Reimbursement Payment, plus
interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code.
Notwithstanding the foregoing, in the event any portion
of the Tax Reimbursement Payment to be refunded to the
Company has been paid to any Federal, state or local tax
authority, repayment thereof shall not be required until
actual refund or credit of such portion has been made to
the Executive, and interest payable to the Company shall
not exceed interest received or credited to the
Executive by such tax authority for the period it held
such portion. The Executive and the Company shall
mutually agree upon the course of action to be pursued
(and the method of allocating the expenses thereof) if
the Executive's good faith claim for refund or credit is
denied.
<PAGE>10
In the event that the Excise Tax is later
determined by the Accountants or pursuant to any
proceeding or negotiations with the Internal Revenue
Service to exceed the amount taken into account
hereunder at the time the Tax Reimbursement Payment is
made (including, but not limited to, by reason of any
payment the existence or amount of which cannot be
determined at the time of the Tax Reimbursement
Payment), the Company shall make an additional Tax
Reimbursement Payment in respect of such excess (plus
any interest or penalty payable with respect to such
excess) at the time that the amount of such excess is
finally determined.
(v) The Tax Reimbursement Payment (or portion
thereof) provided for in Section 7(e)(i) above shall be
paid to the Executive not later than 10 business days
following the payment of the Covered Payments; provided,
however, that if the amount of such Tax Reimbursement
Payment (or portion thereof) cannot be finally
determined on or before the date on which payment is
due, the Company shall pay to the Executive by such date
an amount estimated in good faith by the Accountants to
be the minimum amount of such Tax Reimbursement Payment
and shall pay the remainder of such Tax Reimbursement
Payment (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined, but in no event later than 45
calendar days after payment of the related Covered
Payment. In the event that the amount of the estimated
Tax Reimbursement Payment exceeds the amount
subsequently determined to have been due, such excess
shall constitute a loan by the Company to the Executive,
payable on the fifth business day after written demand
by the Company for payment (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code).
8. Non-exclusivity of Rights. Except as expressly
provided herein, nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in
any benefit, bonus, incentive or other plan, program, or
perquisite provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor shall
anything herein limit or otherwise prejudice such rights as
the Executive may have under any other agreements with the
Company or any of its affiliated companies, including
employment agreements or stock option agreements. Amounts
which are vested benefits or which the Executive is otherwise
entitled to receive under any plan or program of the Company
or any of its affiliated companies at or subsequent to the
Date of Termination shall be payable in accordance with such
plan or program.
9. Full Settlement. The Company's obligation to make
the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by
any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right
which the Company may have against the Executive or others
whether by reason of the subsequent employment of the
Executive or otherwise.
<PAGE>11
10. Legal Fees and Expenses. If the Executive asserts
any claim in any contest (whether initiated by the Executive
or by the Company) as to the validity, enforceability or
interpretation of any provision of this Agreement, the
Company shall pay the Executive's legal expenses (or cause
such expenses to be paid) including, without limitation, his
reasonable attorney's fees, on a quarterly basis, upon
presentation of proof of such expenses, provided that the
Executive shall reimburse the Company for such amounts, plus
simple interest thereon at the 90-day United States Treasury
Bill rate as in effect from time to time, compounded
annually, if the Executive shall not prevail, in whole or in
part, as to any material issue as to the validity, en-
forceability or interpretation of any provision of this
Agreement.
11. Successors. (a) This Agreement is personal to the
Executive and, without the prior written consent of the
Company, shall not be assignable by the Executive otherwise
than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of
and be binding upon the Company and its successors. The
Company shall require any successor to all or substantially
all of the business and/or assets of the Company, whether
direct or indirect, by purchase, merger, consolidation,
acquisition of stock, or otherwise, by an agreement in form
and substance satisfactory to the Executive, expressly to
assume and agree to perform this Agreement in the same manner
and to the same extent as the Company would be required to
perform if no such succession had taken place.
12. Miscellaneous. (a) Applicable Law. This Agreement
shall be governed by and construed in accordance with the
laws of the State of New York, applied without reference to
principles of conflict of laws.
(b) Arbitration. Any dispute or controversy
arising under or in connection with this Agreement shall be
resolved by binding arbitration. The arbitration shall be
held in New York, New York and except to the extent
inconsistent with this Agreement, shall be conducted in
accordance with the Expedited Employment Arbitration Rules of
the American Arbitration Association then in effect at the
time of the arbitration, and otherwise in accordance with
principles which would be applied by a court of law or
equity. The arbitrator shall be acceptable to both the
Company and the Executive. If the parties cannot agree on an
acceptable arbitrator, the dispute shall be heard by a panel
of three arbitrators, one appointed by each of the parties
and the third appointed by the other two arbitrators.
<PAGE>12
(c) Entire Agreement. Upon the Change of Control
Date, this Agreement shall constitute the entire agreement
between the parties hereto with respect to the matters
referred to herein. During the Employment Period, the
Employment Agreement between the Executive and the Company
dated as of April 1, 1989, as amended and as may be amended
from time to time (the "Employment Agreement"), shall be
suspended. If the Executive is still employed at the end of
the Employment Period, the Employment Agreement shall be
reinstated for the remainder of its term immediately
following the end of such Employment Period. No other
agreement relating to the terms of the Executive's employment
by the Company, oral or otherwise, shall be binding between
the parties unless it is in writing and signed by the party
against whom enforcement is sought. This Agreement may not
be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors
and legal representatives. There are no promises, represen-
tations, inducements or statements between the parties other
than those that are expressly contained herein. In the event
any provision of this Agreement is invalid or unenforceable,
the validity and enforceability of the remaining provisions
hereof shall not be affected. The Executive acknowledges
that he is entering into this Agreement of his own free will
and accord, and with no duress, that he has read this Agree-
ment and that he understands it and its legal consequences.
(e) Notices. All notices and other communications
hereunder shall be in writing and shall be given by
hand-delivery to the other party or by registered or cer-
tified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: at the home address of the Executive
noted on the records of the Company
If to the Company: USLIFE Corporation
125 Maiden Lane
New York, New York 10038
Attn.: Executive Vice President -
General Counsel
or to such other address as either party shall have furnished
to the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by
the addressee.
IN WITNESS WHEREOF, the Executive has hereunto set his
hand and the Company has caused this Agreement to be executed
in its name on its behalf, all as of the day and year first
above written.
USLIFE CORPORATION
_______________________
By:
Title:
EXECUTIVE:
________________________
<PAGE>1
Exhibit 10(xxxv)
________________
EMPLOYMENT AND KEY EXECUTIVE EMPLOYMENT PROTECTION AGREEMENT
____________________________________________________________
THIS AGREEMENT between USLIFE Corporation, a New York
corporation (the "Company"), and _______________ (the
"Executive"), dated as of this ___ day of __________, 199_.
W I T N E S S E T H :
_ _ _ _ _ _ _ _ _ _
WHEREAS, the Company has employed the Executive in a
key executive officer position and has determined that the
Executive holds a position of significant importance with the
Company;
WHEREAS, the Company deems it desirable and in its best
interests to make provision for the availability to the
Company, its subsidiaries, and their respective successors and
assigns in the future of the Executive's services on the terms
set forth herein;
WHEREAS, the Company further believes that, in the event
it is confronted with a situation that could result in a change
in ownership or control of the Company, continuity of
management will be essential to its ability to evaluate and
respond to such situation in the best interests of
shareholders;
WHEREAS, the Company also desires to assure itself of the
Executive's services during the period in which it is
confronting such a situation, and to provide the Executive with
certain financial assurances to enable the Executive to perform
the responsibilities of his position without undue distraction
and to exercise his judgment without bias due to his personal
circumstances;
NOW, THEREFORE, in consideration of the premises and
mutual covenants herein contained, it is hereby agreed by and
between the Company and the Executive as follows:
<PAGE>2
1. Agreement to Employ. Except as otherwise
expressly provided herein, the Company agrees to employ the
Executive and the Executive agrees to perform services as an
employee of the Company or one of its subsidiaries for an
initial period commencing on the date hereof (the "Commencement
Date") and ending on the day immediately preceding the third
anniversary of the Commencement Date. Upon each anniversary of
the Commencement Date, the term of this Agreement will be
extended for one (1) additional year without any action by the
Company or the Executive, unless either the Company or the
Executive delivers written notice (the "Notice") to the other
party, during the 90 day period immediately prior to any such
anniversary date, stating that it or he does not want the term
of this Agreement further extended; provided that, except as
provided in the next following sentence, if a Change of Control
(as defined below) occurs during the term of this Agreement,
this Agreement shall in all events continue in effect until the
third anniversary of the date upon which such Change of Control
occurs (the "Change of Control Date"). Notwithstanding the
foregoing, if, prior to the occurrence of a Potential Change of
Control (as defined below) or a Change of Control, the
Executive is demoted to a lower position than the position of
Senior Vice President, the additional protection afforded by
this Agreement in respect of a Change of Control shall be
without force and effect.
2. Duties and Responsibilities. Executive shall be
initially employed as an Executive Vice President, and shall
serve in such other executive capacity or capacities with the
Company or its subsidiaries as its Board of Directors from time
to time may determine at any time prior to the Change of
Control Date. During the term of this Agreement the Executive
will devote all of his business time and attention to the
business and affairs of the Company and its subsidiaries;
provided that the Executive will not be deemed to have violated
his commitment hereunder by reason of periods of vacation, sick
leave and other leave to which he is entitled.
Without limiting the generality of the foregoing,
following a Change of Control, the Executive's position
(including his titles, authority and responsibilities) shall be
at least commensurate with those held, exercised and assigned
immediately prior to the Change of Control Date. Following a
Change of Control, the Executive's services shall be performed
at the location where the Executive was employed immediately
preceding the Change of Control Date.
3. Annual Compensation. (a) Base Salary. The
Company will pay Executive for his services hereunder at the
rate in effect on the date hereof, in equal monthly
installments, plus any lump sum bonus payments, plus such
periodic salary increases and such additional compensation (if
any) as may from time to time be voted by the Company's Board
of Directors and/or the Executive Compensation Committee or its
successor, in the sole and absolute discretion of said Board
and/or Committee. Nothing in this Agreement shall be construed
as precluding merit increases in salary or barring the
Executive from such fringe benefits as the Company may grant.
During the term hereof, the Executive shall be eligible to
participate in each employee benefit plan or program sponsored
or maintained by the Company and in other Company perquisites
to the extent that he is eligible to participate therein in
accordance with the terms and conditions generally applicable
thereto. The Executive's base salary, as it may be increased
from time to time, shall hereafter be referred to as "Base
Salary".
<PAGE>3
Without limiting the generality of the foregoing,
following a Change of Control Date, the Executive shall receive
a Base Salary at a monthly rate at least equal to the monthly
salary paid to the Executive by the Company and any of its
affiliated companies immediately prior to such Change of
Control Date. Neither the Base Salary nor any increase in Base
Salary after the Change of Control Date shall serve to limit or
reduce any other obligation of the Company hereunder.
(b) Annual Bonus. Following a Change of Control,
for each fiscal year of the Company ending during the term of
this Agreement, the Executive shall receive a bonus at least
equal to the greater of (i) the highest bonus amount payable to
the Executive in respect of either of the last two fiscal years
of the Company ending immediately prior to the Change of
Control Date or (ii) the amount that would have been payable to
the Executive as a target bonus for the year in which the
Change of Control occurs plus, long-term incentive compensation
opportunities on terms and conditions no less favorable to the
Executive than those applicable to the Executive prior to the
Change of Control Date. Any amount payable hereunder as an
annual bonus shall be paid as soon as practicable following the
year for which the amount is payable, unless electively
deferred by the Executive pursuant to any deferral programs or
arrangements that the Company may make available to the
Executive.
4. Definitions. (a) Change of Control. For the
purposes of this Agreement, a "Change of Control" shall mean
(i) a merger or consolidation to which the Company is a party
and for which the approval of any shareholders of the Company
is required; (ii) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended) becoming the beneficial owner, directly or
indirectly, of securities of the Company representing 25% or
more of the combined voting power of the Company's then
outstanding securities or (iii) a sale or transfer of
substantially all of the assets of the Company.
(b) Potential Change of Control. For the purposes
of this Agreement, a Potential Change of Control shall be
deemed to have occurred if (i) any "person" (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934, as amended) commences a tender offer for
securities, which if consummated, would result in such person
owning 20% or more of the combined voting power of the
Company's then outstanding securities; (ii) the Company enters
into an agreement the consummation of which would constitute a
Change of Control; (iii) proxies for the election of directors
of the Company are solicited by anyone other than the Company;
or (iv) any other event occurs which is deemed to be a
Potential Change of Control by the Board.
5. Termination. (a) Death, Disability or
Retirement. This Agreement shall terminate automatically upon
the Executive's death, termination due to "Disability" (as
defined below) or voluntary retirement under any of the
Company's retirement plans as in effect from time to time. For
purposes of this Agreement, Disability shall mean the
Executive's inability to perform the duties of his position, as
determined in accordance with the policies and procedures
applicable with respect to the Company's long-term disability
plan, as in effect from time to time, except that, following a
Change of Control, disability shall be determined based on the
policies and procedures in effect immediately prior to the
Change of Control Date.
<PAGE>4
(b) Voluntary Termination. Notwithstanding anything
in this Agreement to the contrary, following a Change of
Control the Executive may, upon not less than 30 days' written
notice to the Company, voluntarily terminate his employment for
any reason (including early retirement under the terms of any
of the Company's retirement plans as in effect from time to
time), provided that any termination by the Executive pursuant
to Section 5(d) on account of Good Reason (as defined therein)
shall not be treated as a voluntary termination under this
Section 5(b).
(c) Cause. The Company may terminate the Exec-
utive's employment for Cause. For purposes of this Agreement,
"Cause" means (i) the Executive's conviction or plea of nolo
contendere to a felony; (ii) an act or acts of extreme dis-
honesty or gross misconduct on the Executive's part which
result or are intended to result in material damage to the
Company's business or reputation; or (iii) repeated material
violations by the Executive of his obligations under Section 2
of this Agreement, provided that, following a Change of Control
Date, Cause shall not exist due to such violations of his
obligations unless such violations are demonstrably willful and
deliberate on the Executive's part and result in material
damage to the Company's business or reputation and such
violations must have occurred following a Change of Control
Date.
(d) Good Reason. Following the occurrence of a
Change of Control, the Executive may terminate his employment
for Good Reason. For purposes of this Agreement, "Good Reason"
means the occurrence of any of the following, without the
express written consent of the Executive, after the occurrence
of a Change of Control:
(i) (A) the assignment to the Executive of any
duties inconsistent in any material adverse respect with
the Executive's position, authority or responsibilities as
contemplated by Section 2 of this Agreement, or (B) any
other material adverse change in such position, including
titles, authority or responsibilities;
(ii) any failure by the Company to comply with any
of the provisions of Section 3 of this Agreement, other
than an insubstantial or inadvertent failure remedied by
the Company promptly after receipt of notice thereof given
by the Executive;
(iii) the Company's requiring the Executive to be
based at any office or location more than 50 miles from
that location at which he performed his services speci-
fied under the provisions of Section 2 immediately prior
to the Change of Control, except for travel reasonably
required in the performance of the Executive's
responsibilities;
<PAGE>5
(iv) the failure by the Company to permit the
Executive to participate in all long-term incentive
compensation programs for key executives at a level that
is commensurate with the Executive's participation in such
plans immediately prior to the Change of Control Date (or,
if more favorable to the Executive, at the level made
available to the Executive or other similarly situated
officers at any time thereafter);
(v) the failure by the Company to permit the
Executive (and, to the extent applicable, his dependents)
to participate in or be covered under all pension,
retirement, deferred compensation, savings, medical,
dental, health, disability, group life, accidental death
and travel accident insurance plans and programs of the
Company and its affiliated companies at a level that is
commensurate with the Executive's participation in such
plans immediately prior to the Change of Control Date (or,
if more favorable to the Executive, at the level made
available to the Executive or other similarly situated
officers at any time thereafter); or
(vi) any failure by the Company to obtain the
assumption and agreement to perform this Agreement by a
successor as contemplated by Section 11(b).
In no event shall the mere occurrence of a Change of Control,
absent any further impact on the Executive, be deemed to
constitute Good Reason.
(e) Notice of Termination. Any termination by the
Company for Cause or by the Executive for Good Reason shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 12(f). For purposes of this
Agreement, a "Notice of Termination" means a written notice
given, in the case of a termination for Cause, within 10
business days of the Company's having actual knowledge of the
events giving rise to such termination, and in the case of a
termination for Good Reason, within 180 days of the Executive's
having actual knowledge of the events giving rise to such
termination, and which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment
under the provision so indicated, and (iii) if the termination
date is other than the date of receipt of such notice,
specifies the termination date of this Agreement (which date
shall be not more than 15 days after the giving of such
notice). The failure by the Executive to set forth in the
Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason shall not waive any
right of the Executive hereunder or preclude the Executive from
asserting such fact or circumstance in enforcing his rights
hereunder.
(f) Date of Termination. For the purpose of this
Agreement, the term "Date of Termination" means (i) in the case
of a termination for which a Notice of Termination is required,
the date of receipt of such Notice of Termination or, if later,
the date specified therein, as the case may be, and (ii) in all
other cases, the actual date on which the Executive's
employment terminates during the Employment Period.
<PAGE>6
6. Obligations of the Company upon Termination.
(a) Death or Disability. If the Executive's employment is
terminated during the term hereof by reason of the Executive's
death or Disability, this Agreement shall terminate without
further obligations to the Executive or the Executive's legal
representatives under this Agreement other than those
obligations accrued hereunder at the Date of Termination, and
the Company shall pay to the Executive (or his beneficiary or
estate) (i) the Executive's full Base Salary through the Date
of Termination (the "Earned Salary"), (ii) any vested amounts
or benefits owing to the Executive under the Company's
otherwise applicable employee compensation and benefit plans
and programs, including any compensation previously deferred by
the Executive (together with any accrued earnings thereon) and
not yet paid by the Company and any accrued vacation pay not
yet paid by the Company (the "Accrued Obligations"), and (iii)
any other benefits payable due to the Executive's death or
Disability under the Company's plans, policies or programs (the
"Additional Benefits").
Any Earned Salary shall be paid in cash in a single
lump sum as soon as practicable, but in no event more than 10
business days (or at such earlier date required by law),
following the Date of Termination. Accrued Obligations and
Additional Benefits shall be paid in accordance with the terms
of the applicable plan, program or arrangement.
(b) Cause and Voluntary Termination. If, during the
Employment Period, the Executive's employment shall be
terminated for Cause or voluntarily terminated by the Executive
in accordance with Section 5(b) other than during the 90 day
period described in Section 6(d)(i) below, the Company shall
pay the Executive (i) the Earned Salary in cash in a single
lump sum as soon as practicable, but in no event more than 10
days, following the Date of Termination, and (ii) the Accrued
Obligations in accordance with the terms of the applicable
plan, program or arrangement.
(c) Termination by the Company Without Cause Prior
to a Change of Control. Except as otherwise expressly provided
in Section 6(d), in the event that the Company terminates the
Executive's employment during the term of this Agreement
without Cause prior to the occurrence of a Change of Control,
the Company's only obligation to the Executive shall be to pay
the Executive an amount equal to his Base Salary (at the same
time as the Executive would have received his Base Salary had
he continued to be employed) for the period ending on the
first to occur of (i) the date on which the Executive obtains
other employment, (ii) the date on which the term of this
Agreement would have expired (but for such termination)
pursuant to Section 1 hereof, assuming that no further renewals
of such term occur after the Executive's Date of Termination,
and (iii) the date on which the Executive breaches any of the
provisions of Section 9.
(d) Certain Terminations In Connection With a Change
of Control.
<PAGE>7
(i) Lump Sum Payments. If, following a Change of
Control, (x) the Company terminates the Executive's em-
ployment other than for Cause, (y) the Executive
terminates his employment at any time for Good Reason or
(z) the Executive voluntarily terminates his employment
without Good Reason during the 90 day period beginning on
the first anniversary of the Change of Control Date, then
the Company shall pay to the Executive the following
amounts:
(A) the Executive's Earned Salary;
(B) a cash amount (the "Severance Amount")
equal to three times the sum of (1) the
Executive's annual Base Salary; and (2)
the greater of (x) the highest bonus amount
payable to the Executive in respect of
either of the last two fiscal years of the
Company ending immediately prior to the
Change of Control Date or (y) the amount
that would have been payable to the
Executive as a target bonus for the year in
which the Change of Control occurs; and
(C) the Accrued Obligations.
Notwithstanding the limitations contained in the preceding
sentence, if (i) the Executive's employment is terminated
by the Company without Cause after the occurrence of a
Potential Change of Control and prior to the occurrence of
a Change of Control and (ii) a Change of Control occurs
within one year of such termination, the Executive shall
be deemed, solely for purposes of determining his rights
under this Agreement, to have remained employed until the
date such Change of Control occurs and to have been
terminated by the Company without Cause immediately after
the Change of Control Date.
The Earned Salary and Severance Amount shall be
paid in cash in a single lump sum as soon as practicable,
but in no event more than 10 business days (or at such
earlier date required by law), following the later of the
Change of Control Date or the Date of Termination.
Accrued Obligations shall be paid in accordance with the
terms of the applicable plan, program or arrangement.
(ii) Continuation of Benefits. If, the Executive is
entitled to receive the Severance Amount, the Executive
(and, to the extent applicable, his dependents) shall be
entitled, after the Date of Termination until the earlier
of (1) the second anniversary of the Date of Termination
(the "End Date") or (2) the date the Executive becomes
eligible for comparable benefits under a similar plan,
policy or program of a subsequent employer, to continue
participation in all of the Company's Executive and
executive welfare and fringe benefit plans (the "Benefit
Plans") and to receive such perquisites as were generally
provided to the Executive in accordance with the Company's
policies and practices immediately prior to the Change of
Control Date. To the extent any such benefits or
perquisites cannot be provided under the terms of the
applicable plan, policy or program, the Company shall
provide a comparable benefit under another plan or from
the Company's general assets. The Executive's par-
ticipation in the Benefit Plans and eligibility for
perquisites will be on the same terms and conditions that
would have applied had the Executive continued to be
employed by the Company through the End Date.
<PAGE>8
(e) Discharge of the Company's Obligations. Except
as expressly provided in the last sentence of this Section
6(e), the amounts payable to the Executive pursuant to this
Section 6 (whether or not reduced pursuant to Section 6(f))
following termination of his employment shall be in full and
complete satisfaction of the Executive's rights under this
Agreement and any other claims he may have in respect of his
employment by the Company or any of its subsidiaries. Such
amounts shall constitute liquidated damages with respect to any
and all such rights and claims and, upon the Executive's
receipt of such amounts, the Company shall be released and
discharged from any and all liability to the Executive in con-
nection with this Agreement or otherwise in connection with the
Executive's employment with the Company and its subsidiaries.
Nothing in this Section 6(e) shall be construed to release the
Company from its commitment to indemnify the Executive and hold
the Executive harmless from and against any claim, loss or
cause of action arising from or out of the Executive's
performance as an officer, director or Executive of the Company
or any of its subsidiaries or in any other capacity, including
any fiduciary capacity, in which the Executive served at the
request of the Company to the maximum extent permitted by
applicable law and the Governing Documents.
(f) Certain Further Payments by the Company.
(i) In the event that any amount or benefit paid or
distributed to the Executive pursuant to this Agreement,
taken together with any amounts or benefits otherwise paid
or distributed to the Executive by the Company or any
affiliated company (collectively, the "Covered Payments"),
are or become subject to the tax (the "Excise Tax")
imposed under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any similar tax that may
hereafter be imposed, the Company shall pay to the
Executive at the time specified in Section 6(f)(v) below
an additional amount (the "Tax Reimbursement Payment")
such that the net amount retained by the Executive with
respect to such Covered Payments, after deduction of any
Excise Tax on the Covered Payments and any Federal, state
and local income or employment tax and Excise Tax on the
Tax Reimbursement Payment provided for by this Section
6(f), but before deduction for any Federal, state or local
income or employment tax withholding on such Covered
Payments, shall be equal to the amount of the Covered
Payments.
(ii) For purposes of determining whether any of the
Covered Payments will be subject to the Excise Tax and the
amount of such Excise Tax,
<PAGE>9
(A) such Covered Payments will be treated
as "parachute payments" within the meaning of
Section 280G of the Code, and all "parachute
payments" in excess of the "base amount" (as
defined under Section 280G(b)(3) of the Code)
shall be treated as subject to the Excise Tax,
unless, and except to the extent that, in the
good faith judgment of the Company's independent
certified public accountants appointed prior to
the Change of Control Date or tax counsel
selected by such accountants (the "Ac-
countants"), the Company has a reasonable basis
to conclude that such Covered Payments (in whole
or in part) either do not constitute "parachute
payments" or represent reasonable compensation
for personal services actually rendered (within
the meaning of Section 280G(b)(4)(B) of the
Code) in excess of the "base amount," or such
"parachute payments" are otherwise not subject
to such Excise Tax, and
(B) the value of any non-cash benefits or
any deferred payment or benefit shall be deter-
mined by the Accountants in accordance with the
principles of Section 280G of the Code.
(iii) For purposes of determining the amount of the
Tax Reimbursement Payment, the Executive shall be deemed
to pay:
(A) Federal income taxes at the highest
applicable marginal rate of Federal income tax-
ation for the calendar year in which the Tax
Reimbursement Payment is to be made, and
(B) any applicable state and local income
taxes at the highest applicable marginal rate of
taxation for the calendar year in which the Tax
Reimbursement Payment is to be made, net of the
maximum reduction in Federal income taxes which
could be obtained from the deduction of such
state or local taxes if paid in such year.
(iv) In the event that the Excise Tax is subse-
quently determined by the Accountants or pursuant to any
proceeding or negotiations with the Internal Revenue
Service to be less than the amount taken into account
hereunder in calculating the Tax Reimbursement Payment
made, the Executive shall repay to the Company, at the
time that the amount of such reduction in the Excise Tax
is finally determined, the portion of such prior Tax
Reimbursement Payment that would not have been paid if
such Excise Tax had been applied in initially calculating
such Tax Reimbursement Payment, plus interest on the
amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. Notwithstanding the foregoing,
in the event any portion of the Tax Reimbursement Payment
to be refunded to the Company has been paid to any Fed-
eral, state or local tax authority, repayment thereof
shall not be required until actual refund or credit of
such portion has been made to the Executive, and interest
payable to the Company shall not exceed interest received
or credited to the Executive by such tax authority for the
period it held such portion. The Executive and the
Company shall mutually agree upon the course of action to
be pursued (and the method of allocating the expenses
thereof) if the Executive's good faith claim for refund or
credit is denied.
<PAGE>10
In the event that the Excise Tax is later determined
by the Accountants or pursuant to any proceeding or
negotiations with the Internal Revenue Service to exceed
the amount taken into account hereunder at the time the
Tax Reimbursement Payment is made (including, but not
limited to, by reason of any payment the existence or
amount of which cannot be determined at the time of the
Tax Reimbursement Payment), the Company shall make an
additional Tax Reimbursement Payment in respect of such
excess (plus any interest or penalty payable with respect
to such excess) at the time that the amount of such excess
is finally determined.
(v) The Tax Reimbursement Payment (or portion
thereof) provided for in Section 6(f)(i) above shall be
paid to the Executive not later than 10 business days
following the payment of the Covered Payments; provided,
however, that if the amount of such Tax Reimbursement
Payment (or portion thereof) cannot be finally determined
on or before the date on which payment is due, the Company
shall pay to the Executive by such date an amount
estimated in good faith by the Accountants to be the
minimum amount of such Tax Reimbursement Payment and shall
pay the remainder of such Tax Reimbursement Payment
(together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined, but in no event later than 45 calendar
days after payment of the related Covered Payment. In the
event that the amount of the estimated Tax Reimbursement
Payment exceeds the amount subsequently determined to have
been due, such excess shall constitute a loan by the
Company to the Executive, payable on the fifth business
day after written demand by the Company for payment (to-
gether with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
7. Non-exclusivity of Rights. Except as expressly
provided herein, nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plan, program or perquisite
provided by the Company or any of its affiliated companies and
for which the Executive may qualify, nor shall anything herein
limit or otherwise prejudice such rights as the Executive may
have under any other agreements with the Company or any of its
affiliated companies, including employment agreements or stock
option agreements. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under any plan
or program of the Company or any of its affiliated companies at
or subsequent to the Date of Termination shall be payable in
accordance with such plan or program.
8. Full Settlement. Following a Change of Control,
the Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company may have
against the Executive or others whether by reason of the
subsequent employment of the Executive or otherwise.
<PAGE>11
9. Noncompetition. The Executive agrees that in the
event his employment is terminated, whether by him or by the
Company, prior to the Change of Control Date he will not for
a period of one (1) year after the Date of Termination (i)
acting alone or in conjunction with others, directly or
indirectly engage (either as owner, partner, stockholder,
employer or employee) in any business in which he has been
directly engaged during the last two (2) years prior to such
termination and which is directly in competition with a
business conducted by the Company or any of its subsidiaries;
(ii) acting alone or in conjunction with others, directly or
indirectly induce any customers of the Company or any of its
subsidiaries with whom the Executive has had contacts or
relationships, directly or indirectly, during and within the
scope of his employment with the Company, to curtail or cancel
their business with such companies or any of them; (iii) acting
alone or in conjunction with others, directly or indirectly
disclose to any person, firm or corporation the names of any
customers of the Company or any of its subsidiaries; (iv)
acting alone or in conjunction with others, solicit or canvass
business from any person who was a customer of the Company or
any of its subsidiaries at or prior to termination of the
Executive's employment; or (v) acting alone or in conjunction
with others, directly or indirectly induce, or attempt to
influence, any executive of the Company or any of its
subsidiaries to terminate their employment. The provisions of
clauses (i), (ii), (iii), (iv), and (v) above are separate and
distinct commitments independent of each of the other clauses.
It is agreed that the ownership of not more than 2% of the
equity securities of any company having securities listed on a
registered exchange or regularly traded in the over-the-counter
market shall not, of itself, be deemed inconsistent with clause
(i).
10. Legal Fees and Expenses. If following a Change
of Control, the Executive asserts any claim in any contest
(whether initiated by the Executive or by the Company) as to
the validity, enforceability or interpretation of any provision
of this Agreement, the Company shall pay the Executive's legal
expenses (or cause such expenses to be paid) including, without
limitation, his reasonable attorney's fees, on a quarterly
basis, upon presentation of proof of such expenses, provided
that the Executive shall reimburse the Company for such
amounts, plus simple interest thereon at the 90-day United
States Treasury Bill rate as in effect from time to time,
compounded annually, if the Executive shall not prevail, in
whole or in part, as to any material issue as to the validity,
enforceability or interpretation of any provision of this
Agreement.
11. Successors. (a) This Agreement is personal to
the Executive and, without the prior written consent of the
Company, shall not be assignable by the Executive otherwise
than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors. The Company
shall require any successor to all or substantially all of the
business and/or assets of the Company, whether direct or
indirect, by purchase, merger, consolidation, acquisition of
stock, or otherwise, by an agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same
extent as the Company would be required to perform if no such
succession had taken place.
<PAGE>12
12. Miscellaneous. (a) Applicable Law. This
Agreement shall be governed by and construed in accordance with
the laws of the State of New York, applied without reference to
principles of conflict of laws.
(b) Arbitration. Following the occurrence of a
Change of Control, any dispute or controversy arising under or
in connection with this Agreement shall be resolved by binding
arbitration. The arbitration shall be held in New York, New
York and except to the extent inconsistent with this Agreement,
shall be conducted in accordance with the Expedited Employment
Arbitration Rules of the American Arbitration Association then
in effect at the time of the arbitration, and otherwise in
accordance with principles which would be applied by a court of
law or equity. The arbitrator shall be acceptable to both the
Company and the Executive. If the parties cannot agree on an
acceptable arbitrator, the dispute shall be heard by a panel of
three arbitrators, one appointed by each of the parties and the
third appointed by the other two arbitrators.
(c) Expenses. During the term hereof, the Executive
shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Executive in accordance
with its usual policies and procedures as in effect from time
to time. Notwithstanding the foregoing, after the Change of
Control Date, such policies and procedures shall be no less
favorable to the Executive than those in effect immediately
prior to the Change of Control Date.
(d) Indemnification. During and after the term
hereof, the Company shall indemnify the Executive and hold the
Executive harmless from and against any claim, loss or cause of
action arising from or out of the Executive's performance as an
officer, director or Executive of the Company or any of its
subsidiaries or in any other capacity, including any fiduciary
capacity, in which the Executive serves at the request of the
Company to the maximum extent permitted by applicable law and
the Company's Certificate of Incorporation and By-Laws (the
"Governing Documents"), provided that in no event shall the
protection afforded to the Executive hereunder following a
Change of Control be less than that afforded under the
Governing Documents as in effect immediately prior to the
Change of Control Date.
(e) Entire Agreement. This Agreement constitutes
the entire agreement between the parties hereto with respect to
the matters referred to herein. No other agreement relating to
the terms of the Executive's employment by the Company, oral or
otherwise, shall be binding between the parties unless it is in
writing and signed by the party against whom enforcement is
sought. There are no promises, representations, inducements or
statements between the parties other than those that are
expressly contained herein. This Agreement may not be amended
or modified otherwise than by a written agreement executed by
the parties hereto or their respective successors and legal
representatives. In the event any provision of this Agreement
is invalid or unenforceable, the validity and enforceability of
the remaining provisions hereof shall not be affected. The
Executive acknowledges that he is entering into this Agreement
of his own free will and accord, and with no duress, that he
has read this Agreement and that he understands it and its
legal consequences.
<PAGE>13
(f) Notices. All notices and other communications
hereunder shall be in writing and shall be given by
hand-delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive: at the home address of the
Executive noted on the records of
the Company
If to the Company: USLIFE Corporation
125 Maiden Lane
New York, New York 10038
Attn.: Executive Vice President -
General Counsel
or to such other address as either party shall have furnished
to the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
IN WITNESS WHEREOF, the Executive has hereunto set
his hand and the Company has caused this Agreement to be
executed in its name on its behalf, all as of the day and year
first above written.
USLIFE CORPORATION
_______________________
By:
Title:
EXECUTIVE:
_________________________
<PAGE>1
Exhibit 10(xxxvi)
_________________
KEY EXECUTIVE EMPLOYMENT PROTECTION AGREEMENT
_____________________________________________
THIS AGREEMENT between USLIFE Corporation, a New York
corporation (the "Company"), and _______________ (the
"Executive"), dated as of this ___ day of ____________, 199_.
W I T N E S S E T H :
_ _ _ _ _ _ _ _ _ _
WHEREAS, the Company has employed the Executive in an
officer position and has determined that the Executive holds a
position of importance with the Company;
WHEREAS, the Company believes that, in the event it is
confronted with a situation that could result in a change in
ownership or control of the Company, continuity of management
will be essential to its continued successful operations;
WHEREAS, the Company understands that any such situation
will present significant concerns for the Executive with respect
to his financial and job security;
WHEREAS, the Company desires to assure itself of the
Executive's services during the period in which it is confronting
such a situation, and to provide the Executive certain financial
assurances to enable the Executive to perform the
responsibilities of his position without undue distraction and to
exercise his judgment without bias due to his personal
circumstances;
WHEREAS, to achieve these objectives, the Company and the
Executive desire to enter into an agreement providing the Company
and the Executive with certain rights and obligations upon the
occurrence of a Change of Control (as defined in Section 2);
NOW, THEREFORE, in consideration of the premises and
mutual covenants herein contained, it is hereby agreed by and
between the Company and the Executive as follows:
1. Operation of Agreement. (a) Effective Date. The
effective date of this Agreement shall be the date on which a
Change of Control occurs (the "Change of Control Date"), provided
that, except as provided in Section 1(c), if the Executive is not
employed by the Company on the Change of Control Date, this
Agreement shall be void and without effect. Notwithstanding the
foregoing, if, prior to the occurrence of a Potential Change of
Control (as defined below) or a Change of Control, the Executive
is demoted to a lower position than the position of Senior Vice
President this Agreement shall be void and without effect.
(b) Employment Protection Benefits. If, on or before
the first anniversary of the Change of Control Date, (x) the
Company terminates the Executive's employment other than due to
Disability (as defined below) or for Cause (as defined below) or
(y) the Executive terminates his employment for Good Reason (as
defined below), the Company shall pay to the Executive a cash
amount (the "Severance Amount") equal to two times the sum of
<PAGE>2
(i) the Executive's annual Base Salary; and (ii) the
highest bonus amount payable to the Executive in
respect of either of the last two fiscal years of the
Company ending immediately prior to the Change of
Control Date.
The Severance Amount shall be paid in a single lump sum as soon
as practicable, but in no event more than 10 business days (or at
such earlier date required by law), following the Executive's
date of termination.
(c) Termination of Employment Following a Potential
Change of Control. Notwithstanding Section 1(a), if (i) the
Executive's employment is terminated by the Company without Cause
(as defined below) after the occurrence of a Potential Change of
Control and prior to the occurrence of a Change of Control and
(ii) a Change of Control occurs within one year of such
termination, the Executive shall be deemed, solely for purposes
of determining his rights under this Agreement, to have remained
employed until the date such Change of Control occurs and to have
been terminated by the Company without Cause immediately after
this Agreement becomes effective.
2. Definitions. (a) Change of Control. For the
purposes of this Agreement, a "Change of Control" shall mean (i)
a merger or consolidation to which the Company is a party and for
which the approval of any shareholders of the Company is
required; (ii) any "person" (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended) becoming the beneficial owner, directly or indirectly,
of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding
securities or (iii) a sale or transfer of substantially all of
the assets of the Company.
(b) Potential Change of Control. For the purposes of
this Agreement, a Potential Change of Control shall be deemed to
have occurred if (i) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended) commences a tender offer for securities, which
if consummated, would result in such person owning 20% or more of
the combined voting power of the Company's then outstanding
securities; (ii) the Company enters into an agreement the con-
summation of which would constitute a Change of Control; (iii)
proxies for the election of directors of the Company are
solicited by anyone other than the Company; or (iv) any other
event occurs which is deemed to be a Potential Change of Control
by the Board.
(c) Cause. For purposes of this Agreement, "Cause"
means (i) the Executive's conviction or plea of nolo contendere
to a felony; (ii) an act or acts of extreme dishonesty or gross
misconduct on the Executive's part which result or are intended
to result in material damage to the Company's business or
reputation; or (iii) repeated material violations by the
Executive of his position, authority or responsibilities as in
effect at the Change of Control Date, which violations are
demonstrably willful and deliberate on the Executive's part and
which result in material damage to the Company's business or
reputation.
<PAGE>3
(d) Good Reason. "Good Reason" means the occurrence
of any of the following, without the express written consent of
the Executive, after the occurrence of a Change of Control:
(i) (A) the assignment to the Executive of any duties
inconsistent in any material adverse respect with the
Executive's position, authority or responsibilities as in
effect at the Change of Control Date, or (B) any other
material adverse change in such position, including titles,
authority or responsibilities;
(ii) any failure by the Company, other than an
insubstantial or inadvertent failure remedied by the Company
promptly after receipt of notice thereof given by the
Executive, to provide the Executive with a base salary or
incentive compensation opportunities at a level which, in
each case, is at least the same as the base salary paid, or
incentive compensation opportunities made available, to the
Executive immediately prior to the Change of Control Date;
(iii) the failure by the Company to permit the
Executive (and, to the extent applicable, his dependents) to
participate in or be covered under all pension, retirement,
deferred compensation, savings, medical, dental, health,
disability, group life, accidental death and travel accident
insurance plans and programs of the Company and its
affiliated companies at a level that is commensurate with
the Executive's participation in such plans immediately
prior to the Change of Control Date (or, if more favorable
to the Executive, at the level made available to the
Executive or other similarly situated officers at any time
thereafter); or
(iv) the Company's requiring the Executive to be based
at any office or location more than 50 miles from that
location at which he performed his services for the Company
immediately prior to the Change of Control, except for
travel reasonably required in the performance of the Ex-
ecutive's responsibilities; or
(v) any failure by the Company to obtain the
assumption and agreement to perform this Agreement by a
successor as contemplated by Section 6(b).
In no event shall the mere occurrence of a Change of Control,
absent any further impact on the Executive, be deemed to
constitute Good Reason.
(e) Disability. For purposes of this Agreement,
Disability shall mean the Executive's inability to perform the
duties of his position, as determined in accordance with the
policies and procedures applicable with respect to the Company's
long-term disability plan, as in effect immediately prior to the
Change of Control Date.
<PAGE>4
3. Other Benefits and Provisions Relating to Termination.
(a) Earned Salary and Accrued Obligations. The
Severance Amount shall be in addition to and neither a limitation
of, nor an offset against, the amount payable to the Executive in
respect of (i) his base salary earned through the date of
termination and (ii) any vested amounts or benefits owing to the
Executive under the Company's otherwise applicable employee
benefit plans and programs, including any compensation previously
deferred by the Executive (together with any accrued earnings
thereon) and not yet paid by the Company and any accrued vacation
pay not yet paid by the Company.
(b) Continuation of Benefits. If the Executive is
entitled to receive the Severance Amount, the Executive (and, to
the extent applicable, his dependents) shall be entitled, after
the date of termination until the earlier of (x) the second
anniversary of his date of termination (the "End Date") or (y)
the date the Executive becomes eligible for comparable benefits
under a similar plan, policy or program of a subsequent employer,
to continue participation in all of the Company's employee and
executive welfare and fringe benefit plans (the "Benefit Plans").
To the extent any such benefits cannot be provided under the
terms of the applicable plan, policy or program, the Company
shall provide a comparable benefit under another plan or from the
Company's general assets. The Executive's participation in the
Benefit Plans will be on the same terms and conditions that would
have applied had the Executive continued to be employed by the
Company through the End Date.
(c) Notice of Termination. Any termination by the
Company for Cause or by the Executive for Good Reason shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 7(d). For purposes of this
Agreement, a "Notice of Termination" means a written notice
given, in the case of a termination for Cause, within 10 business
days of the Company's having actual knowledge of the events
giving rise to such termination, and in the case of a termination
for Good Reason, within 180 days of the Executive's having actual
knowledge of the events giving rise to such termination, and
which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated, and (iii) if the termination date is other than the
date of receipt of such notice, specifies the termination date of
this Agreement (which date shall be not more than 15 days after
the giving of such notice). The failure by the Executive to set
forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason shall not waive any right
of the Executive hereunder or preclude the Executive from
asserting such fact or circumstance in enforcing his rights
hereunder.
(d) Discharge of the Company's Obligations. Except as
expressly provided in the last sentence of this Section 3(d), the
Severance Amount and the amounts payable and benefits provided in
respect of the Executive pursuant to Section 3 following
termination of his employment shall be in full and complete
satisfaction of the Executive's rights under this Agreement and
any other claims he may have in respect of his employment by the
Company or any of its subsidiaries. Such amounts shall
constitute liquidated damages with respect to any and all such
rights and claims and, upon the Executive's receipt of such
amounts, the Company shall be released and discharged from any
and all liability to the Executive in connection with this
Agreement or otherwise in connection with the Executive's
employment with the Company and its subsidiaries. Nothing in
this Section 3(d) shall be construed to release the Company from
its obligation under Section 3(e) below to indemnify the
Executive.
<PAGE>5
(e) Indemnification. The Company shall indemnify the
Executive and hold the Executive harmless from and against any
claim, loss or cause of action arising from or out of the Ex-
ecutive's performance as an officer, director or employee of the
Company or any of its subsidiaries or in any other capacity,
including any fiduciary capacity, in which the Executive serves
at the request of the Company to the maximum extent permitted by
applicable law and the Company's Certificate of Incorporation and
By-Laws (the "Governing Documents"), provided that in no event
shall the protection afforded to the Executive hereunder be less
than that afforded under the Governing Documents as in effect im-
mediately prior to the Change of Control Date.
(f) Certain Further Payments by the Company.
(i) In the event that any amount or benefit paid or
distributed to the Executive pursuant to this Agreement,
taken together with any amounts or benefits otherwise paid
or distributed to the Executive by the Company or any
affiliated company (collectively, the "Covered Payments"),
are or become subject to the tax (the "Excise Tax") imposed
under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), or any similar tax that may hereafter
be imposed, the Company shall pay to the Executive at the
time specified in Section 3(f)(v) below an additional amount
(the "Tax Reimbursement Payment") such that the net amount
retained by the Executive with respect to such Covered
Payments, after deduction of any Excise Tax on the Covered
Payments and any Federal, state and local income or
employment tax and Excise Tax on the Tax Reimbursement
Payment provided for by this Section 3(f), but before deduc-
tion for any Federal, state or local income or employment
tax withholding on such Covered Payments, shall be equal to
the amount of the Covered Payments.
(ii) For purposes of determining whether any of the
Covered Payments will be subject to the Excise Tax and the
amount of such Excise Tax,
(A) such Covered Payments will be treated as
"parachute payments" within the meaning of Section
280G of the Code, and all "parachute payments" in
excess of the "base amount" (as defined under
Section 280G(b)(3) of the Code) shall be treated
as subject to the Excise Tax, unless, and except
to the extent that, in the good faith judgment of
the Company's independent certified public
accountants appointed prior to the Change of
Control Date or tax counsel selected by such
accountants (the "Accountants"), the Company has a
reasonable basis to conclude that such Covered
Payments (in whole or in part) either do not
constitute "parachute payments" or represent
reasonable compensation for personal services
actually rendered (within the meaning of Section
280G(b)(4)(B) of the Code) in excess of the "base
amount," or such "parachute payments" are other-
wise not subject to such Excise Tax, and
<PAGE>6
(B) the value of any non-cash benefits or
any deferred payment or benefit shall be deter-
mined by the Accountants in accordance with the
principles of Section 280G of the Code.
(iii) For purposes of determining the amount of the
Tax Reimbursement Payment, the Executive shall be deemed to
pay:
(A) Federal income taxes at the highest
applicable marginal rate of Federal income tax-
ation for the calendar year in which the Tax Reim-
bursement Payment is to be made, and
(B) any applicable state and local income
taxes at the highest applicable marginal rate of
taxation for the calendar year in which the Tax
Reimbursement Payment is to be made, net of the
maximum reduction in Federal income taxes which
could be obtained from the deduction of such state
or local taxes if paid in such year.
(iv) In the event that the Excise Tax is subsequently
determined by the Accountants or pursuant to any proceeding
or negotiations with the Internal Revenue Service to be less
than the amount taken into account hereunder in calculating
the Tax Reimbursement Payment made, the Executive shall
repay to the Company, at the time that the amount of such
reduction in the Excise Tax is finally determined, the
portion of such prior Tax Reimbursement Payment that would
not have been paid if such Excise Tax had been applied in
initially calculating such Tax Reimbursement Payment, plus
interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code.
Notwithstanding the foregoing, in the event any portion of
the Tax Reimbursement Payment to be refunded to the Company
has been paid to any Federal, state or local tax authority,
repayment thereof shall not be required until actual refund
or credit of such portion has been made to the Executive,
and interest payable to the Company shall not exceed
interest received or credited to the Executive by such tax
authority for the period it held such portion. The
Executive and the Company shall mutually agree upon the
course of action to be pursued (and the method of allocating
the expenses thereof) if the Executive's good faith claim
for refund or credit is denied.
<PAGE>7
In the event that the Excise Tax is later determined by
the Accountants or pursuant to any proceeding or
negotiations with the Internal Revenue Service to exceed the
amount taken into account hereunder at the time the Tax Re-
imbursement Payment is made (including, but not limited to,
by reason of any payment the existence or amount of which
cannot be determined at the time of the Tax Reimbursement
Payment), the Company shall make an additional Tax
Reimbursement Payment in respect of such excess (plus any
interest or penalty payable with respect to such excess) at
the time that the amount of such excess is finally
determined.
(v) The Tax Reimbursement Payment (or portion thereof)
provided for in Section 3(f)(i) above shall be paid to the
Executive not later than 10 business days following the
payment of the Covered Payments; provided, however, that if
the amount of such Tax Reimbursement Payment (or portion
thereof) cannot be finally determined on or before the date
on which payment is due, the Company shall pay to the
Executive by such date an amount estimated in good faith by
the Accountants to be the minimum amount of such Tax Re-
imbursement Payment and shall pay the remainder of such Tax
Reimbursement Payment (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be determined, but in no event later
than 45 calendar days after payment of the related Covered
Payment. In the event that the amount of the estimated Tax
Reimbursement Payment exceeds the amount subsequently
determined to have been due, such excess shall constitute a
loan by the Company to the Executive, payable on the fifth
business day after written demand by the Company for payment
(together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
4. Full Settlement. The Company's obligation to make
the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the
Company may have against the Executive or others whether by
reason of the subsequent employment of the Executive or
otherwise.
5. Legal Fees and Expenses. If the Executive asserts
any claim in any contest (whether initiated by the Executive or
by the Company) as to the validity, enforceability or inter-
pretation of any provision of this Agreement, the Company shall
pay the Executive's legal expenses (or cause such expenses to be
paid) including, without limitation, his reasonable attorney's
fees, on a quarterly basis, upon presentation of proof of such
expenses, provided that the Executive shall reimburse the Company
for such amounts, plus simple interest thereon at the 90-day
United States Treasury Bill rate as in effect from time to time,
compounded annually, if the Executive shall not prevail, in whole
or in part, as to any material issue as to the validity, en-
forceability or interpretation of any provision of this
Agreement.
6. Successors. (a) This Agreement is personal to the
Executive and, without the prior written consent of the Company,
shall not be assignable by the Executive otherwise than by will
or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Executive's
legal representatives.
<PAGE>8
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors. The Company
shall require any successor to all or substantially all of the
business and/or assets of the Company, whether direct or
indirect, by purchase, merger, consolidation, acquisition of
stock, or otherwise, by an agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent
as the Company would be required to perform if no such succession
had taken place.
7. Miscellaneous. (a) Applicable Law. This
Agreement shall be governed by and construed in accordance with
the laws of the State of New York, applied without reference to
principles of conflict of laws.
(b) Arbitration. Any dispute or controversy arising
under or in connection with this Agreement shall be resolved by
binding arbitration. The arbitration shall be held in New York,
New York and except to the extent inconsistent with this
Agreement, shall be conducted in accordance with the Expedited
Employment Arbitration Rules of the American Arbitration
Association then in effect at the time of the arbitration, and
otherwise in accordance with principles which would be applied by
a court of law or equity. The arbitrator shall be acceptable to
both the Company and the Executive. If the parties cannot agree
on an acceptable arbitrator, the dispute shall be heard by a
panel of three arbitrators, one appointed by each of the parties
and the third appointed by the other two arbitrators.
(c) Entire Agreement. Upon the Change of Control
Date, this Agreement shall constitute the entire agreement
between the parties hereto with respect to the matters referred
to herein. No other agreement relating to the terms of the
Executive's employment by the Company, oral or otherwise, shall
be binding between the parties unless it is in writing and signed
by the party against whom enforcement is sought. There are no
promises, representations, inducements or statements between the
parties other than those that are expressly contained herein.
This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives. In the event
any provision of this Agreement is invalid or unenforceable, the
validity and enforceability of the remaining provisions hereof
shall not be affected. The Executive acknowledges that he is
entering into this Agreement of his own free will and accord, and
with no duress, that he has read this Agreement and that he
understands it and its legal consequences.
(d) Notices. All notices and other communications
hereunder shall be in writing and shall be given by hand-delivery
to the other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
<PAGE>9
If to the Executive: at the home address of the
Executive noted on the records of
the Company
If to the Company:
USLIFE Corporation
125 Maiden Lane
New York, New York 10038
Attn.: Executive Vice President -
General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
IN WITNESS WHEREOF, the Executive has hereunto set his
hand and the Company has caused this Agreement to be executed in
its name on its behalf, all as of the day and year first above
written.
USLIFE CORPORATION
_______________________
By:
Title:
EXECUTIVE:
_________________________
<PAGE>1
Exhibit 10(xxxvii)
__________________
KEY EXECUTIVE EMPLOYMENT PROTECTION AGREEMENT
_____________________________________________
THIS AGREEMENT between ______________________________a
__________ corporation (the "Company"), and ________________ (the
"Executive"), dated as of this ___ day of ______________, 1995.
W I T N E S S E T H :
_ _ _ _ _ _ _ _ _ _
WHEREAS, the Company has employed the Executive in an
executive officer position and has determined that the Executive
holds a position of significant importance with the Company;
WHEREAS, the Company believes that, in the event it is
confronted with a situation that could result in a change in
ownership or control of the its parent, USLIFE Corporation (the
"Parent"), continuity of management at the Company will be
essential to the Company's continued successful operations;
WHEREAS, the Company understands that any such
situation will present significant concerns for the Executive
with respect to his financial and job security;
WHEREAS, the Company desires to assure itself of the
Executive's services during the period in which it is confronting
such a situation, and to provide the Executive certain financial
assurances to enable the Executive to perform the
responsibilities of his position without undue distraction and to
exercise his judgment without bias due to his personal
circumstances;
WHEREAS, to achieve these objectives, the Company and
the Executive desire to enter into an agreement providing the
Company and the Executive with certain rights and obligations
upon the occurrence of a Change of Control (as defined in Section
2);
NOW, THEREFORE, in consideration of the premises and
mutual covenants herein contained, it is hereby agreed by and
between the Company and the Executive as follows:
<PAGE>2
1. Operation of Agreement. (a) Effective Date. The
effective date of this Agreement shall be the date on which a
Change of Control occurs (the "Change of Control Date"), provided
that, except as provided in Section 1(c), if the Executive is not
employed by the Company on the Change of Control Date, this
Agreement shall be void and without effect. Notwithstanding the
foregoing, if, prior to the occurrence of a Potential Change of
Control (as defined below) or a Change of Control, the Executive
is demoted, this Agreement shall be void and without effect.
(b) Employment Protection Benefits. If, on or before the
first anniversary of the Change of Control Date, (x) the Company
terminates the Executive's employment other than due to
Disability (as defined below) or for Cause (as defined below) or
(y) the Executive terminates his employment for Good Reason (as
defined below), the Company shall pay to the Executive a cash
amount (the "Severance Amount") equal to two times the sum of
(i) the Executive's annual Base Salary; and (ii) the
highest bonus amount payable to the Executive in respect of
either of the last two fiscal years of the Company ending
immediately prior to the Change of Control Date.
The Severance Amount shall be paid in a single lump sum as soon
as practicable, but in no event more than 10 business days (or at
such earlier date required by law), following the Executive's
date of termination.
(c) Termination of Employment Following a Potential
Change of Control. Notwithstanding Section 1(a), if (i) the
Executive's employment is terminated by the Company without Cause
(as defined below) after the occurrence of a Potential Change of
Control and prior to the occurrence of a Change of Control and
(ii) a Change of Control occurs within one year of such
termination, the Executive shall be deemed, solely for purposes
of determining his rights under this Agreement, to have remained
employed until the date such Change of Control occurs and to have
been terminated by the Company without Cause immediately after
this Agreement becomes effective.
2. Definitions. (a) Change of Control. For the
purposes of this Agreement, a "Change of Control" shall mean (i)
a merger or consolidation to which the Parent is a party and for
which the approval of any shareholders of the Parent is required;
(ii) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended)
becoming the beneficial owner, directly or indirectly, of
securities of the Parent representing 25% or more of the combined
voting power of the Parent's then outstanding securities or (iii)
a sale or transfer of substantially all of the assets of the
Parent.
<PAGE>3
(b) Potential Change of Control. For the purposes of
this Agreement, a Potential Change of Control shall be deemed to
have occurred if (i) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended) commences a tender offer for securities, which
if consummated, would result in such person owning 20% or more of
the combined voting power of the Parent's then outstanding
securities; (ii) the Parent enters into an agreement the con-
summation of which would constitute a Change of Control; (iii)
proxies for the election of directors of the Parent are solicited
by anyone other than the Parent; or (iv) any other event occurs
which is deemed to be a Potential Change of Control by the Board
of Directors of the Parent.
(c) Cause. For purposes of this Agreement, "Cause"
means (i) the Executive's conviction or plea of nolo contendere
to a felony; (ii) an act or acts of extreme dishonesty or gross
misconduct on the Executive's part which result or are intended
to result in material damage to the Company's or the Parent's
business or reputation; or (iii) repeated material violations by
the Executive of his position, authority or responsibilities as
in effect at the Change of Control Date, which violations are
demonstrably willful and deliberate on the Executive's part and
which result in material damage to the Company's or the Parent's
business or reputation.
(d) Good Reason. "Good Reason" means the occurrence
of any of the following, without the express written consent of
the Executive, after the occurrence of a Change of Control:
(i) (A) the assignment to the Executive of any duties
inconsistent in any material adverse respect with the
Executive's position, authority or responsibilities as in
effect at the Change of Control Date, or (B) any other
material adverse change in such position, including titles,
authority or responsibilities;
(ii) any failure by the Company, other than an
insubstantial or inadvertent failure remedied by the Company
promptly after receipt of notice thereof given by the
Executive, to provide the Executive with a base salary or
incentive compensation opportunities at a level which, in
each case, is at least the same as the base salary paid, or
incentive compensation opportunities made available, to the
Executive immediately prior to the Change of Control Date;
<PAGE>4
(iii) the failure by the Company to permit the
Executive (and, to the extent applicable, his dependents) to
participate in or be covered under all pension, retirement,
deferred compensation, savings, medical, dental, health,
disability, group life, accidental death and travel accident
insurance plans and programs of the Company and its
affiliated companies at a level that is commensurate with
the Executive's participation in such plans immediately
prior to the Change of Control Date (or, if more favorable
to the Executive, at the level made available to the
Executive or other similarly situated officers at any time
thereafter); or
(iv) the Company's requiring the Executive to be based
at any office or location more than 50 miles from that
location at which he performed his services for the Company
immediately prior to the Change of Control, except for
travel reasonably required in the performance of the Ex-
ecutive's responsibilities; or
(v) any failure by the Company to obtain the
assumption and agreement to perform this Agreement by a
successor as contemplated by Section 6(b).
In no event shall the mere occurrence of a Change of Control,
absent any further impact on the Executive, be deemed to
constitute Good Reason.
(e) Disability. For purposes of this Agreement,
Disability shall mean the Executive's inability to perform the
duties of his position, as determined in accordance with the
policies and procedures applicable with respect to the Company's
long-term disability plan, as in effect immediately prior to the
Change of Control Date.
3. Other Benefits and Provisions Relating to Termination.
(a) Earned Salary and Accrued Obligations. The
Severance Amount shall be in addition to and neither a limitation
of, nor an offset against, the amount payable to the Executive in
respect of (i) his base salary earned through the date of
termination and (ii) any vested amounts or benefits owing to the
Executive under the Company's otherwise applicable employee
benefit plans and programs, including any compensation previously
deferred by the Executive (together with any accrued earnings
thereon) and not yet paid by the Company and any accrued vacation
pay not yet paid by the Company.
<PAGE>5
(b) Continuation of Benefits. If the Executive is
entitled to receive the Severance Amount, the Executive (and, to
the extent applicable, his dependents) shall be entitled, after
the date of termination until the earlier of (x) the second
anniversary of his date of termination (the "End Date") or (y)
the date the Executive becomes eligible for comparable benefits
under a similar plan, policy or program of a subsequent employer,
to continue participation in all of the Company's employee and
executive welfare and fringe benefit plans (the "Benefit Plans").
To the extent any such benefits cannot be provided under the
terms of the applicable plan, policy or program, the Company
shall provide a comparable benefit under another plan or from the
Company's general assets. The Executive's participation in the
Benefit Plans will be on the same terms and conditions that would
have applied had the Executive continued to be employed by the
Company through the End Date.
(c) Notice of Termination. Any termination by the
Company for Cause or by the Executive for Good Reason shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 7(d). For purposes of this
Agreement, a "Notice of Termination" means a written notice
given, in the case of a termination for Cause, within 10 business
days of the Company's having actual knowledge of the events
giving rise to such termination, and in the case of a termination
for Good Reason, within 180 days of the Executive's having actual
knowledge of the events giving rise to such termination, and
which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated, and (iii) if the termination date is other than the
date of receipt of such notice, specifies the termination date of
this Agreement (which date shall be not more than 15 days after
the giving of such notice). The failure by the Executive to set
forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason shall not waive any right
of the Executive hereunder or preclude the Executive from
asserting such fact or circumstance in enforcing his rights
hereunder.
(d) Discharge of the Company's Obligations. Except as
expressly provided in the last sentence of this Section 3(d), the
Severance Amount and the amounts payable and benefits provided in
respect of the Executive pursuant to Section 3 following
termination of his employment shall be in full and complete
satisfaction of the Executive's rights under this Agreement and
any other claims he may have in respect of his employment by the
Company or any of its subsidiaries. Such amounts shall
constitute liquidated damages with respect to any and all such
rights and claims and, upon the Executive's receipt of such
amounts, the Company shall be released and discharged from any
and all liability to the Executive in connection with this
Agreement or otherwise in connection with the Executive's
employment with the Company and its subsidiaries. Nothing in
this Section 3(d) shall be construed to release the Company from
its obligation under Section 3(e) below to indemnify the
Executive.
<PAGE>6
(e) Indemnification. The Company shall indemnify the
Executive and hold the Executive harmless from and against any
claim, loss or cause of action arising from or out of the Ex-
ecutive's performance as an officer, director or employee of the
Company or any of its subsidiaries or in any other capacity,
including any fiduciary capacity, in which the Executive serves
at the request of the Company to the maximum extent permitted by
applicable law and the Company's Certificate of Incorporation and
By-Laws (the "Governing Documents"), provided that in no event
shall the protection afforded to the Executive hereunder be less
than that afforded under the Governing Documents as in effect im-
mediately prior to the Change of Control Date.
(f) Certain Further Payments by the Company.
(i) In the event that any amount or benefit paid or
distributed to the Executive pursuant to this Agreement,
taken together with any amounts or benefits otherwise paid
or distributed to the Executive by the Company or any
affiliated company (collectively, the "Covered Payments"),
are or become subject to the tax (the "Excise Tax") imposed
under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), or any similar tax that may hereafter
be imposed, the Company shall pay to the Executive at the
time specified in Section 3(f)(v) below an additional amount
(the "Tax Reimbursement Payment") such that the net amount
retained by the Executive with respect to such Covered
Payments, after deduction of any Excise Tax on the Covered
Payments and any Federal, state and local income or
employment tax and Excise Tax on the Tax Reimbursement
Payment provided for by this Section 3(f), but before deduc-
tion for any Federal, state or local income or employment
tax withholding on such Covered Payments, shall be equal to
the amount of the Covered Payments.
(ii) For purposes of determining whether any of the
Covered Payments will be subject to the Excise Tax and the
amount of such Excise Tax,
(A) such Covered Payments will be treated as
"parachute payments" within the meaning of Section
280G of the Code, and all "parachute payments" in
excess of the "base amount" (as defined under
Section 280G(b)(3) of the Code) shall be treated
as subject to the Excise Tax, unless, and except
to the extent that, in the good faith judgment of
the Parent's independent certified public
accountants appointed prior to the Change of
Control Date or tax counsel selected by such
accountants (the "Accountants"), the Company has a
reasonable basis to conclude that such Covered
Payments (in whole or in part) either do not
constitute "parachute payments" or represent
reasonable compensation for personal services
actually rendered (within the meaning of Section
280G(b)(4)(B) of the Code) in excess of the "base
amount," or such "parachute payments" are other-
wise not subject to such Excise Tax, and
<PAGE>7
(B) the value of any non-cash benefits or
any deferred payment or benefit shall be deter-
mined by the Accountants in accordance with the
principles of Section 280G of the Code.
(iii) For purposes of determining the amount of the
Tax Reimbursement Payment, the Executive shall be deemed to
pay:
(A) Federal income taxes at the highest
applicable marginal rate of Federal income tax-
ation for the calendar year in which the Tax Reim-
bursement Payment is to be made, and
(B) any applicable state and local income
taxes at the highest applicable marginal rate of
taxation for the calendar year in which the Tax
Reimbursement Payment is to be made, net of the
maximum reduction in Federal income taxes which
could be obtained from the deduction of such state
or local taxes if paid in such year.
(iv) In the event that the Excise Tax is subsequently
determined by the Accountants or pursuant to any proceeding
or negotiations with the Internal Revenue Service to be less
than the amount taken into account hereunder in calculating
the Tax Reimbursement Payment made, the Executive shall
repay to the Company, at the time that the amount of such
reduction in the Excise Tax is finally determined, the
portion of such prior Tax Reimbursement Payment that would
not have been paid if such Excise Tax had been applied in
initially calculating such Tax Reimbursement Payment, plus
interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code.
Notwithstanding the foregoing, in the event any portion of
the Tax Reimbursement Payment to be refunded to the Company
has been paid to any Federal, state or local tax authority,
repayment thereof shall not be required until actual refund
or credit of such portion has been made to the Executive,
and interest payable to the Company shall not exceed
interest received or credited to the Executive by such tax
authority for the period it held such portion. The
Executive and the Company shall mutually agree upon the
course of action to be pursued (and the method of allocating
the expenses thereof) if the Executive's good faith claim
for refund or credit is denied.
<PAGE>8
In the event that the Excise Tax is later determined by
the Accountants or pursuant to any proceeding or
negotiations with the Internal Revenue Service to exceed the
amount taken into account hereunder at the time the Tax Re-
imbursement Payment is made (including, but not limited to,
by reason of any payment the existence or amount of which
cannot be determined at the time of the Tax Reimbursement
Payment), the Company shall make an additional Tax
Reimbursement Payment in respect of such excess (plus any
interest or penalty payable with respect to such excess) at
the time that the amount of such excess is finally
determined.
(v) The Tax Reimbursement Payment (or portion thereof)
provided for in Section 3(f)(i) above shall be paid to the
Executive not later than 10 business days following the
payment of the Covered Payments; provided, however, that if
the amount of such Tax Reimbursement Payment (or portion
thereof) cannot be finally determined on or before the date
on which payment is due, the Company shall pay to the
Executive by such date an amount estimated in good faith by
the Accountants to be the minimum amount of such Tax Re-
imbursement Payment and shall pay the remainder of such Tax
Reimbursement Payment (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be determined, but in no event later
than 45 calendar days after payment of the related Covered
Payment. In the event that the amount of the estimated Tax
Reimbursement Payment exceeds the amount subsequently
determined to have been due, such excess shall constitute a
loan by the Company to the Executive, payable on the fifth
business day after written demand by the Company for payment
(together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
4. Full Settlement. The Company's obligation to make
the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the
Company may have against the Executive or others whether by
reason of the subsequent employment of the Executive or
otherwise.
<PAGE>9
5. Legal Fees and Expenses. If the Executive asserts
any claim in any contest (whether initiated by the Executive or
by the Company) as to the validity, enforceability or inter-
pretation of any provision of this Agreement, the Company shall
pay the Executive's legal expenses (or cause such expenses to be
paid) including, without limitation, his reasonable attorney's
fees, on a quarterly basis, upon presentation of proof of such
expenses, provided that the Executive shall reimburse the Company
for such amounts, plus simple interest thereon at the 90-day
United States Treasury Bill rate as in effect from time to time,
compounded annually, if the Executive shall not prevail, in whole
or in part, as to any material issue as to the validity, en-
forceability or interpretation of any provision of this
Agreement.
6. Successors. (a) This Agreement is personal to the
Executive and, without the prior written consent of the Company,
shall not be assignable by the Executive otherwise than by will
or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors. The Company
shall require any successor to all or substantially all of the
business and/or assets of the Company, whether direct or
indirect, by purchase, merger, consolidation, acquisition of
stock, or otherwise, by an agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent
as the Company would be required to perform if no such succession
had taken place.
7. Miscellaneous. (a) Applicable Law. This
Agreement shall be governed by and construed in accordance with
the laws of the State of New York, applied without reference to
principles of conflict of laws.
(b) Arbitration. Any dispute or controversy arising
under or in connection with this Agreement shall be resolved by
binding arbitration. The arbitration shall be held in New York,
New York and except to the extent inconsistent with this
Agreement, shall be conducted in accordance with the Expedited
Employment Arbitration Rules of the American Arbitration
Association then in effect at the time of the arbitration, and
otherwise in accordance with principles which would be applied by
a court of law or equity. The arbitrator shall be acceptable to
both the Company and the Executive. If the parties cannot agree
on an acceptable arbitrator, the dispute shall be heard by a
panel of three arbitrators, one appointed by each of the parties
and the third appointed by the other two arbitrators.
<PAGE>10
(c) Entire Agreement. Upon the Change of Control
Date, this Agreement shall constitute the entire agreement
between the parties hereto with respect to the matters referred
to herein. No other agreement relating to the terms of the
Executive's employment by the Company, oral or otherwise, shall
be binding between the parties unless it is in writing and signed
by the party against whom enforcement is sought. There are no
promises, representations, inducements or statements between the
parties other than those that are expressly contained herein.
This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives. In the event
any provision of this Agreement is invalid or unenforceable, the
validity and enforceability of the remaining provisions hereof
shall not be affected. The Executive acknowledges that he is
entering into this Agreement of his own free will and accord, and
with no duress, that he has read this Agreement and that he
understands it and its legal consequences.
(d) Notices. All notices and other communications
hereunder shall be in writing and shall be given by hand-delivery
to the other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive: at the home address of the
Executive noted on the records of
the Company
If to the Company:
with a copy to: USLIFE Corporation
125 Maiden Lane
New York, New York 10038
Attn.: Executive Vice President -
General Counsel
<PAGE>11
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
IN WITNESS WHEREOF, the Executive has hereunto set his
hand and the Company has caused this Agreement to be executed in
its name on its behalf, all as of the day and year first above
written.
[COMPANY]
_______________________
By:
Title:
EXECUTIVE:
_________________________
<PAGE>1
Exhibit 10(xliii)
_________________
FIFTH AMENDMENT OF LEASE
THIS FIFTH AMENDMENT OF LEASE (this "Fifth Amendment"), dated as of
December 26, 1995, between RREEF USA FUND-III, a California group trust
("Landlord"), having an office c/o The RREEF Funds, Park Avenue Plaza, 55 East
52nd Street, New York, New York 10055, and THE UNITED STATES LIFE INSURANCE
COMPANY IN THE CITY OF NEW YORK, a New York corporation ("Tenant"), having an
office at 125 Maiden Lane, New York, New York.
W I T N E S S E T H :
_ _ _ _ _ _ _ _ _ _
WHEREAS, Landlord and Tenant are parties to that certain Lease Agreement,
dated as of December 30, 1986 (the "Original Lease"), whereby Landlord leased
to Tenant and Tenant hired from Landlord a portion of the basement level, first
floor, second floor, third floor, fourth floor and fifth floor (referred to in
the Original Lease collectively as the "Short-Term Space"), and a portion of
the basement level (the "Basement Premises"), second floor (the "Second Floor
Premises"), fifth floor (the "Fifth Floor Premises"), sixth floor (the "Sixth
Floor Premises"), seventh floor (the "Seventh Floor Premises"), eighth floor
(the "Eighth Floor Premises") and ninth floor (the "Ninth Floor Premises") (the
Basement Premises, the Second Floor Premises, the Fifth Floor Premises, the
Sixth Floor Premises, the Seventh Floor Premises, the Eighth Floor Premises and
the Ninth Floor Premises are referred to in the Original Lease collectively as
the "Long-Term Space"), in the building located at 125 Maiden Lane, New York,
New York (the "Building"), all as more particularly described in the Original
Lease; and
WHEREAS, pursuant to that certain Amendment, dated August 31, 1988 (the
"First Amendment"), Landlord and Tenant modified the Original Lease to, among
other things, extend the term of the leasing of the Short-Term Space, all as
more particularly described in the First Amendment; and
WHEREAS, pursuant to that certain Second Amendment to Lease, dated
November 10, 1988 (the "Second Amendment"), Landlord and Tenant further
modified the Original Lease to, among other things, provide for the leasing of
additional space on the fifth floor of the Building (the "Additional Fifth
Floor Premises"), all as more particularly described in the Second Amendment;
and
WHEREAS, pursuant to that certain Third Amendment to Lease, dated May 10,
1989 (the "Third Amendment"), Landlord and Tenant further modified the Original
Lease to, among other things, provide for the leasing of certain space on the
basement level (the "Additional Basement Premises") and the third floor (the
"Third Floor Premises") on a month-to-month basis, all as more particularly
described in the Third Amendment; and
<PAGE>2
WHEREAS, pursuant to that certain Fourth Amendment to Lease, dated as of
April 14, 1995, (the "Fourth Amendment"), Landlord and Tenant further modified
the Lease to, among other things, provide for (i) the surrender by Tenant to
Landlord of the Basement Premises, the Fifth Floor Premises, the Additional
Fifth Floor Premises and a portion of the Sixth Floor Premises and (ii) a
reduction in the term of the Lease, all as more particularly described in the
Fourth Amendment; and
WHEREAS, the Original Lease, as modified by the First Amendment, the
Second Amendment, the Third Amendment and the Fourth Amendment, is hereinafter
referred to as the "Lease"; and
WHEREAS, (i) Landlord and Tenant desire to extend the term of the Lease,
and (ii) Landlord and Tenant desire to make further modifications to the Lease,
in each case, all as more particularly set forth in this Fifth Amendment.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto do hereby agree to modify the Lease
as follows:
1. Definitions. All capitalized terms used and not otherwise defined
herein shall have the respective meanings assigned to them in the
Lease. The term "Effective Date" shall mean the date that is the
earlier of (i) December 31, 1995 and (ii) the Plan Date; provided,
however, that upon the occurrence of a default under the Lease which
continues beyond the expiration of any applicable notice and cure
period, the "Effective Date", at Landlord's election, shall be deemed
to be the date upon which such default occurred.
2. Lease Term. Effective as of the Effective Date, the term of the
Lease shall be extended until December 31, 2006 (or such earlier date
on which the term may end pursuant to any of the terms, conditions or
covenants of the Lease, as modified by this Fifth Amendment, or
pursuant to law, but subject to Tenant's right to extend the term
pursuant to Article 40 of the Lease, as modified by this Fifth
Amendment). Effective as of the Effective Date, (a) the term
"Expiration Date" shall be deemed to mean December 31, 2006 and
(b) all references to the word "term" in the Lease shall be deemed to
refer to the term of the Lease as hereby extended. Effective from
and after the Effective Date, Tenant shall continue to lease the
Premises upon all of the terms and conditions of the Lease, as
modified by this Fifth Amendment (including all of the rights and
privileges provided for Tenant under the Lease).
3. Fixed Base Rent. (a) Effective as of the Effective Date, Exhibit D
of the Lease shall be deleted in its entirety and Exhibit D annexed
hereto shall be substituted in its place.
<PAGE>3
(b) Notwithstanding anything to the contrary contained in the Lease
or this Fifth Amendment, provided Tenant shall not be in
Material Default under any of the terms and provisions of the
Lease, as modified by this Fifth Amendment, the Fixed Base Rent
(excluding the portion of Fixed Base Rent allocable to
electricity) payable under the Lease, as modified by this Fifth
Amendment, shall be abated for the period, if any, commencing on
the Effective Date and ending on December 31, 1995; provided,
however, that upon the occurrence of (but only during the
continuance of) a Material Default by Tenant under any of the
terms and provisions of the Lease, as modified by this Fifth
Amendment, such abatement shall end.
4. Taxes. (a) Effective as of the Effective Date, (i) the section
entitled "BASE TAX YEAR" on the Reference Page of the Original Lease
shall be deleted in its entirety and the following substituted in its
place: "BASE TAX YEAR: July 1, 1995 - June 30, 1996"; (ii) clause
(c) of Section 4.01 of the Original Lease shall be amended by
deleting the clause ", which Base Tax equals $1,335,752.00"; (iii)
Section 4.05 of the Original Lease shall be deleted in its entirety
and the following substituted in its place: "4.05. If the term of
this lease with respect to the Premises shall end on a date which is
not the last day of a Tax Year, the Tax Payment for such Tax Year
allocable to the Premises shall be equitably pro-rated"; and (iv)
Section 4.07 of the Original Lease shall be deleted in its entirety.
(b) Effective as of the Effective Date, Section 4.03 of the Lease
shall be amended as follows:
(i) The first sentence of Section 4.03 shall be deleted in its
entirety and the following substituted in its place:
"(a) If the Taxes for any Tax Year during the term of this lease
shall exceed the Base Tax, Tenant shall pay for such Tax
Year an amount (herein called "Tax Payment") equal to (A)
for each Tax Year during the Tax Cap Period (as hereinafter
defined), the lesser of (x) the sum of (i) Tenant's
Proportionate Share of the excess of such Taxes over the
Base Tax plus (ii) Cumulative Deferred Taxes (as hereinafter
defined), if any, and (y) Tenant's Proportionate Share of
the excess of the Maximum Amount over the Base Tax, and (B)
for each Tax Year following the Tax Cap Period, Tenant's
Proportionate Share of the excess of such Taxes over the
Base Tax."
(ii) The following provisions shall be added to the end of
Section 4.03:
"For the purposes of this Section 4.03:
(A) The term "Deferred Taxes" shall mean (x) with respect to the
first and second Tax Years following the Base Tax Year, $0, and
(y) with respect to the third and fourth Tax Years following the
Base Tax Year, the amount by which (1) Tenant's Proportionate
Share of the excess of Taxes for such Tax Year over the Base Tax
exceeds (2) Tenant's Proportionate Share of the excess of the
Maximum Amount for such Tax Year over the Base Tax.
<PAGE>4
(B) The term "Cumulative Deferred Taxes" shall mean, with respect to
a given Tax Year, the sum of the Deferred Taxes for all prior
Tax Years, less the amount of Cumulative Deferred Taxes
theretofore paid by Tenant as part of Tenant's Tax Payment.
(C) The term "Maximum Amount" shall mean (x) for the first Tax Year
following the Base Tax Year, the amount obtained by multiplying
the Base Tax by 104%, (y) for the second Tax Year following the
Base Tax Year, the amount obtained by multiplying 104% by the
lesser of (1) Taxes for the immediately preceding Tax Year and
(2) the Maximum Amount for the immediately preceding Tax Year,
and (z) for the third and fourth Tax Years following the Base
Tax Year, the amount obtained by multiplying 104% by the Maximum
Amount for the immediately preceding Tax Year.
(D) The term "Tax Cap Period" shall mean the period beginning on the
Effective Date and ending on June 30, 2000."
(c) Landlord and Tenant acknowledge that the Mayor's Plan for the
Revitalization of Lower Manhattan, dated December 15, 1994 (the
"Plan"), contemplates, among other matters, a real property tax
abatement applicable to certain lease renewals. Landlord and
Tenant desire to obtain such abatement in respect of the Lease,
as modified by this Fifth Amendment, to the extent practicable,
and shall reasonably cooperate with each other in (i) making
required filings with the governmental authority having
jurisdiction and (ii) modifying the Lease, as modified by this
Fifth Amendment, if necessary to qualify the Lease, as modified
by this Fifth Amendment, for such abatement, provided that in no
event shall (x) the economic terms of the Lease, as modified by
this Fifth Amendment, be modified in any respect, (y) Landlord's
rights be decreased or Landlord's obligations be increased
(except as provided in clause (i) above) or (z) the
implementation of such abatement result in a reduction in the
payments required to be made by other tenants at the Building in
respect of Taxes. In the event an abatement or reduction of
Taxes is obtained pursuant to the Plan (as enacted and
thereafter in effect from time to time) and such abatement or
reduction is thereafter terminated or reduced (unless due solely
to Landlord's acts, failure to perform any acts required under
the Plan (as enacted and thereafter in effect from time to time)
(including the timely payment of real property taxes provided
Tenant shall have paid to Landlord the applicable installments
of the Tax Payment when due) or misrepresentations), Tenant
shall be responsible for and shall pay to Landlord within 10
days after demand the resulting increase in Taxes payable by
Landlord (including any retroactive increase), and all interest
and penalties relating thereto. In the event an abatement or
reduction of Taxes is obtained pursuant to the Plan (as enacted
and thereafter in effect from time to time) and such abatement
or reduction is thereafter terminated or reduced due solely to
Landlord's acts, failure to perform any acts required under the
Plan (as enacted and thereafter in effect from time to time) or
misrepresentations, Tenant's Tax Payment shall be determined as
if such abatement or reduction were not terminated or reduced as
aforesaid.
<PAGE>5
5. Operating Expense Escalation. Effective as of the Effective Date,
Article 5 of the Lease shall be deleted in its entirety and the
following substituted in its place:
"Operating Expense Escalation.
____________________________
5.01 For purposes of this lease the following terms shall have the
following meanings:
(1) (a) The term "Expenses" shall mean the total of all the costs and
expenses (and taxes thereon, if any) incurred by Landlord with
respect to the operation and maintenance of the Building and the
property on which the Building is located (the "Property") and the
services provided to the tenants of the Building (including Tenant)
computed on an accrual basis including, without limitation, the costs
and expenses with respect to: steam, gas and any other fuel or
utilities; water rates and sewer rents; the cost of operating the
Building's cooling system, as is necessary to provide air
conditioning to the Building at all times; ventilation and heating;
electricity for areas other than those leased to individual tenants
(including electricity for air conditioning such areas) as indicated
by meter, or if there be no meter, as determined by Landlord's
electrical consultant; metal, elevator cab, lobby, plaza, sidewalk,
curb and other public area maintenance and cleaning; interior and
exterior landscaping and decoration; painting of nontenant areas;
window cleaning and cleaning of stainless steel signbands in front of
retail premises; the purchase price or rental cost, as applicable, of
all building and cleaning supplies, tools, materials, machinery and
equipment; depreciation of movable equipment used in the operation or
maintenance of the Property; fire, extended coverage, boiler and
machinery, sprinkler apparatus, public liability and property damage,
loss of rental, fidelity and plate glass insurance and any other
insurance required by the holder of any mortgage or ground lease
covering the Property or customarily carried with respect to
buildings similar to the Building; wages, salaries, bonuses,
disability benefits, hospitalization, medical, surgical, dental,
optical, psychiatric, legal, union and general welfare benefits
(including group life insurance), any pension, retirement or life
insurance plan and other benefit or similar expenses respecting
employees of the Landlord up to and including the building manager;
uniforms and working clothes for such employees and the cleaning and
replacement thereof; expenses imposed on the Landlord pursuant to law
or to any collective bargaining agreement with respect to such
employees; workmen's compensation insurance, payroll, social
security, unemployment and other similar taxes with respect to such
employees; salaries of bookkeepers and accountants; professional and
consulting fees, including legal and accounting fees incurred in the
usual
<PAGE>6
operation of the Building; charges for independent contractors
performing work included within the definition of Expenses;
association fees or dues; telephone and stationery; building
telephone; repairs, replacements and improvements which are necessary
or appropriate for the continued operation or maintenance of the
Building as a first-class office building (provided that such
improvements shall not include improvements expanding the size of the
Building or materially changing the character of the Building) except
that where any such cost is a capital expenditure (as determined in
accordance with generally accepted accounting principles) such cost
shall be amortized, if required, in accordance with subparagraph
(b)(vi) of this Section 5.01; any assessments, dues, levies or
charges paid to any business improvement district or similar
organization or any other person on behalf of such an organization;
and management fees for the management of the Building, or if no
managing agent is employed by Landlord, a sum in lieu thereof which
is not in excess of the then prevailing rates for management fees in
lower Manhattan for first-class office buildings similar to the
Building. To the extent that Landlord manages, maintains or operates
any other buildings using employees, services or supplies from the
Building, Landlord shall make appropriate allocations of the costs
and expenses thereof between such other buildings and the Building.
(b) The following costs and expenses shall be excluded or deducted,
as the case may be, from the foregoing costs and expenses:
(i) the cost of electricity furnished to the Premises and other
space leased to tenants as measured by meters, or if there
be no meters, as determined by Landlord's electrical
consultant;
(ii) leasing commissions, brokerage fees and any other costs
incurred in connection with procuring tenants for the
Building;
(iii) salaries for Landlord's executives above the grade of
building manager;
(iv) cost of repairs or replacements incurred by reason of fire
or other casualty or condemnation to the extent to which
(A) Landlord is compensated therefor through proceeds of
insurance or condemnation awards, (B) Landlord failed to
obtain insurance against such fire or casualty, if
insurance was available against a risk of such nature at
the time of such, and such insurance was then generally
carried by owners of similar buildings in Manhattan, or (C)
Landlord is not reimbursed therefor due to the coinsurance
provisions of its insurance policies on account of
Landlord's failure to obtain a sufficient amount of
coverage against such risk (other than amounts covered by a
standard deductible);
<PAGE>7
(v) costs which would be considered capital expenditures in
accordance with generally accepted accounting principles
for equipment or improvements other than those (A) that are
undertaken to comply with the requirements of any federal,
state or local law or governmental regulations whether
presently existing or hereafter enacted into law or
hereafter promulgated as a regulation, whether or not such
law or regulation is valid or mandatory, (B) that reduce
the expenses that otherwise would be included in Expenses
or (C) which would otherwise constitute repairs,
replacements and improvements which are necessary or
appropriate for the continued operation and maintenance of
the Building as a first-class office building, subject to
the limitations set forth in Paragraph (a) above, provided,
however, if the costs described in clauses (A) to (C) would
be amortized in accordance with generally accepted
accounting principles, then such cost shall be amortized
using straight-line amortization over the useful life of
the item, determined in accordance with generally accepted
accounting principles, together with interest at a rate per
annum equal to the prime commercial lending rate from time
to time announced by Chemical Bank (or any successor
thereto) to be in effect at its principal office in New
York, New York plus 1%, from the due date thereof until
paid, applied to the then unamortized cost of such item,
and as so amortized (including such interest factor),
included in Expenses for the Operating Year in which such
cost is incurred and subsequent Operating Years;
(vi) advertising and promotional expenditures;
(vii) Taxes;
(viii) costs for performing work or performing services for
individual tenants (including Tenant) at such tenants'
expense;
(ix) legal and other professional fees and disbursements
incurred in connection with the negotiation of the leases
or the sale or financing of the Building or the collection
of rent or eviction of other tenants in the Building for
the nonpayment of rent;
(x) the cost of any judgment, settlement or arbitration award
resulting from any tort liability;
(xi) "takeover expenses" (i.e., expenses incurred by Landlord
with respect to space located in another building of any
kind or nature in connection with the leasing of space in
the Building);
(xii) the cost of tenant installations and decorations incurred
in connection with preparing space for any tenant;
<PAGE>8
(xiii) franchise, estate, succession, inheritance, profit, gross
receipts, capital gains, capital stock, transfer and income
taxes imposed upon Landlord or the Building or the land
upon which the Building is located (other than in respect
of electrical service);
(xiv) debt service under any Superior Mortgage on the Building
and financing and refinancing costs in respect of any
mortgage placed upon the Building and any and all other
costs incurred in obtaining or endeavoring to obtain any
such financing or refinancing;
(xv) rent payable under any Superior Lease;
(xvi) depreciation of the Building, amortization and other non-
cash charges;
(xvii) interest or penalties for late payment by Landlord
(provided Tenant shall have made all payments due Landlord
under this lease within the time period specified for
payment in this lease);
(xviii) the cost of installing, operating and maintaining any
specialty service such as an observatory, broadcasting
facilities, luncheon club, athletic and recreational club
which is not generally provided by landlords of first class
office buildings in lower Manhattan;
(xix) the cost of any special or extra heating, ventilating, air-
conditioning, janitorial or other special or extra services
provided to tenants during other than Business Hours and
which is not provided to Tenant (other than at Tenant's
direct expense);
(xx) any fee for the management of the Building to the extent
materially in excess of management fees that would be
payable to a reputable first-class management company which
is unrelated to Landlord;
(xxi) arbitration expenses incurred in connection with the
leasing of space in the Building or with prosecuting
default or eviction proceedings against tenants for
nonpayment of rent; or
(xxii) any rent, additional rent or other charge under any lease
or sublease to or assumed, directly or indirectly, by
Landlord;
(xxiii) costs incurred in performing work or furnishing services
for any tenant (including Tenant), whether at such tenant's
or Landlord's expense, to the extent that such work or
service is materially in excess of any work or service that
Landlord is obligated to furnish to Tenant at Landlord's
expense;
<PAGE>9
(xxiv) there shall be deducted from Expenses an amount equal to
all amounts received by Landlord through proceeds of
insurance to the extent the proceeds are compensation for
Expenses which (i) previously were included in Expenses
hereunder, (ii) are included in Expenses for the Operating
Year in which the insurance proceeds are received, or (iii)
will be included as Expenses in a subsequent Operating
Year;
(xxv) costs and expenses related to or incurred in connection
with the initial construction on the land of the Building
and other improvements, whether above or below ground; and
(xxvi) any expenses related to any retail, parking or garage
facilities or space in, on or about the Building or the
land upon which the Building is located or appurtenant or
adjacent thereto which are not also related to the office
portion of the Building.
(c) In determining the amount of Expenses for the Base Operating
Year or any Operating Year thereafter, Expenses shall be
determined for such Base Operating Year or Operating Year to be
an amount equal to the like expenses which would normally be
expected to be incurred had such occupancy been ninety-five
percent (95%) throughout such Base Operating Year or Operating
Year.
(d) If Landlord is not furnishing any particular work or service
(the cost of which if performed by Landlord would constitute an
Expense) to a tenant because such tenant has undertaken to
perform such work or service itself in lieu of the performance
thereof by Landlord or because such item of work or service is
not required by such tenant or for other reasons, Expenses shall
be determined to be increased by an amount equal to the
additional Expense which reasonably would have been incurred
during such period by Landlord if it had at its own expense
furnished such work or services to such tenant.
(2) The term "Base Operating Year" shall mean the calendar year
commencing on January 1, 1995.
(3) The term "Operating Year" shall mean each calendar year which
includes any part of the term.
(4) The term "Tenant's Proportionate Share" shall mean a fraction with
the numerator equaling the number of rentable square feet in the
Premises (excluding basement storage space) and the denominator
equaling the number of rentable square feet in the Building
(excluding basement storage space and the lobby newsstand). As of
the date hereof, Tenant's Proportionate Share for each portion of the
Premises are the percentages set forth in Exhibit D hereto.
<PAGE>10
(5) The term "Escalation Statement" shall mean a statement setting forth
the amount payable by Tenant for a specified Operating Year or Tax
Year (as defined in Article 4 hereof).
5.02 For each Operating Year commencing during the term of this Lease,
Tenant shall pay ("Tenant's Operating Payment") a sum equal to the
product obtained by multiplying (i) Tenant's Proportionate Share by
(ii) the excess of Expenses for any given Operating Year over
Expenses incurred in the Base Operating Year.
5.03 Landlord shall furnish to Tenant for each Operating Year an
escalation statement (the "Escalation Statement") (subject to
revision as hereinafter provided) setting forth Landlord's estimate
of Tenant's Operating Payment for such Operating Year. Tenant shall
pay to Landlord on the first day of each month during such Operating
Year an amount equal to one-twelfth (1/12) of Landlord's estimate of
Tenant's Operating Payment for such Operating Year. If Landlord
shall furnish such estimate for an Operating Year after the
commencement thereof, then (a) until the first day of the month
following the month in which such estimate is furnished to Tenant,
Tenant shall pay to Landlord on the first day of each month an amount
equal to the monthly sum payable by Tenant to Landlord under this
Section 5.03 for the last month of the preceding Operating Year; (b)
Landlord shall notify Tenant in the Escalation Statement containing
such estimate whether the installments of Tenant's Operating Payment
previously paid for such Operating Year were more or less than the
installments which should have been paid for such Operating Year
pursuant to such estimate and (i) if there shall be an underpayment,
Tenant shall pay the amount thereof within thirty (30) days after
being furnished with such Escalation Statement or (ii) if there shall
be an overpayment, Tenant shall be entitled to a credit in the amount
thereof against subsequent payments of Fixed Base Rent; and (c) on
the first day of the month following the month in which such estimate
is furnished to Tenant and every month thereafter for the balance of
such Operating Year, Tenant shall pay to Landlord an amount equal to
one-twelfth (1/12) of Tenant's Operating Payment as shown on such
estimate. Landlord may at any time and from time to time (but not
more often than two (2) times in any Operating Year) furnish to
Tenant an Escalation Statement setting forth Landlord's revised
estimate of Tenant's Operating Payment for a particular Operating
Year and in such case, Tenant's Operating Payment for such Operating
Year shall be adjusted and paid or credited, as applicable, in the
same manner as provided in the preceding sentence.
5.04 After the end of each Operating Year, Landlord shall submit to Tenant
an annual Escalation Statement setting forth the Expenses for the
preceding Operating Year and the balance of Tenant's Operating
Payment, if any, due to Landlord from Tenant for such Operating Year.
If such annual Escalation Statement shall show that the sums paid by
Tenant under Section 5.03 during such Operating Year exceeded
Tenant's Operating Payment for such Operating Year, Tenant shall be
entitled to a credit in the amount of such excess against subsequent
<PAGE>11
payments under this Article 5. If such annual Escalation Statement
shall show that the sums so paid by Tenant were less than Tenant's
Operating Payment for such Operating Year, Tenant shall pay the
amount of such deficiency to Landlord within thirty (30) days after
being furnished with such annual Escalation Statement. The annual
Escalation Statements with respect to expenses shall be in reasonable
detail and shall either be (i) certified by an officer or partner of
Landlord (or of Landlord's managing agent if the Landlord is the
landlord named herein or any affiliate of the landlord named herein)
or (ii) audited or certified by accountants. Any Escalation
Statement sent to Tenant shall be conclusively binding upon Tenant
unless, within ninety (90) days after such Escalation Statement is
delivered, Tenant shall deliver notice to Landlord stating that
Tenant objects to such Escalation Statement and specifying in
reasonable detail the respects in which such Escalation Statement is
being disputed. Provided Tenant timely objects to an Escalation
Statement as aforesaid, during the 30-day period following Tenant's
delivery of the objection notice, Tenant shall have the right, upon
at least 5 days prior notice, to audit (at a location in the City of
New York designated by Landlord) Landlord's books and records
relating to the Expenses for the Operating Year to which such
Escalation Statement relates. Such audit shall be performed within
the ninety (90) day period and shall be conducted at such time or
times during normal business hours as Landlord shall reasonably
designate and shall be performed by an independent certified public
accounting firm selected by Tenant and approved by Landlord in its
reasonable judgment. Tenant shall deliver a copy of the audit report
prepared by such independent accounting firm to Landlord, and if
Landlord disputes such report, either party may submit such dispute
for expedited arbitration in accordance with the provisions of
Section 5.05. Notwithstanding the making of any objections by
Tenant, and as a condition to Tenant's right to dispute any such
Escalation Statement and to conduct such audit, Tenant shall pay to
Landlord when due the amount shown on any such Escalation Statement
as provided in this Article 5.
5.05 (a) An expedited arbitration for any dispute pursuant to Section
5.04 shall be commenced by either party by the delivery of a notice
(an "Arbitration Notice") which shall set forth the dispute to be
determined. The expedited arbitration shall be determined by a
single arbitrator who shall be a partner or member of one of the so-
called "Big Six" certified public accounting firms (or any successor
firms thereto) and who shall be jointly selected by Landlord and
Tenant within five (5) Business Days after the giving of the
Arbitration Notice. If the parties are unable to agree on an
arbitrator within such five (5) Business Day period, either party,
upon notice to the other party, may request such appointment by the
American Arbitration Association, or any successor thereto (the
"AAA"). If the AAA is unable or refuses to act within five (5)
Business Days after request for an appointment of an arbitrator is
made, then either party may apply to the Supreme Court of the State
of New York, New York County for appointment of the arbitrator.
<PAGE>12
(b) The arbitrator designated or appointed shall be directed to
reach a decision regarding the dispute that is the subject of
the expedited arbitration within ten (10) Business Days
following the arbitrator's designation or appointment. The
expedited arbitration shall be conducted in accordance with the
then prevailing Commercial Arbitration Rules of the AAA (or any
successor rules thereto). The arbitrator's award in connection
with, or determination of, an expedited arbitration shall be
conclusive and binding on the parties, and such award or
determination may be enforced on the application of either party
by the order or judgment of a court of competent jurisdiction.
The arbitrator shall be bound by the provisions of the Lease and
shall not add to, subtract from or otherwise modify such
provisions. The fees and expenses of the arbitrator and all
other costs and expenses of the expedited arbitration shall be
borne by the parties equally, and all costs and expenses
incurred by each party in connection with such expedited
arbitration (including the reasonable fees and disbursements of
attorneys or witnesses) shall be borne by each party
respectively."
6. Termination Option. Provided Tenant shall not be in Material Default
under the terms and provisions of the Lease, as modified by this
Fifth Amendment, both at the time Tenant delivers the Termination
Notice and on the Termination Date, Tenant shall have the right (the
"Termination Right") to terminate the Lease, as modified by this
Fifth Amendment, as of June 30, 2005 (the "Termination Date").
Tenant may exercise the Termination Right only by (i) delivering
irrevocable notice thereof (the "Termination Notice") to Landlord on
or before December 31, 2003 and (ii) paying $462,837 (the
"Termination Payment") to Landlord on or prior to December 31, 2004.
Time shall be of the essence with respect to the giving of the
Termination Notice and the making of the Termination Payment. If
Tenant properly exercises the Termination Right and delivers the
Termination Payment to Landlord as aforesaid, then on the Termination
Date this Lease shall terminate and end as if such Termination Date
was the Expiration Date of the Lease, as modified by this Fifth
Amendment. Tenant shall be responsible for the payment of all taxes
and other payments (including, without limitation, transfer taxes)
required to be paid in connection with or relating to Tenant's
exercise of the Termination Right, regardless of whether such taxes
or other payments are the obligation of Landlord or Tenant. Tenant
shall indemnify and hold harmless Landlord and its partners,
directors, officers, principals, agents, shareholders, trustees,
trust beneficiaries, investment managers and employees from and
against any and all liability, damages, claims, costs or expenses
relating to the payment of any taxes or other payments required to be
paid in connection with or relating to Tenant's exercise of the
Termination Right, together with all costs, expenses and liabilities
incurred in or in connection with each such claim or action or
proceeding brought thereon, including, without limitation, all
reasonable attorneys' fees and expenses.
<PAGE>13
7. Option to Renew. Effective as of the Effective Date, Article 40 of
the Lease shall be deleted in its entirety and the following
substituted in its place:
"40.01. (a) Provided that Tenant is not in Material Default under this
lease, Tenant shall have the option to extend the term of this lease for
two additional periods of 5 years (each, an "Extended Term" and together,
the "Extended Terms"). Such option to extend the terms of this lease may
be exercised only as follows. With respect to the first Extended Term,
(i) in the event that Landlord delivers notice to Tenant no earlier than
December 31, 2004 and no later than June 30, 2005 that Tenant may exercise
its option pursuant to this Section 40.01, Tenant shall notify Landlord on
or before September 30, 2005 as to whether it wishes to so exercise such
option; and (ii) in the event that Landlord delivers notice to Tenant
subsequent to June 30, 2005, or fails to so deliver such notice, Tenant
shall notify Landlord on or before December 31, 2005 but no earlier than
July 1, 2005 as to whether it wishes to so exercise its option pursuant to
this Section 40.01. With respect to the second Extended Term, (i) in the
event that Landlord delivers such notice to Tenant no earlier than
December 31, 2009 and no later than June 30, 2010 that Tenant may exercise
its option pursuant to this Section 40.01, Tenant shall notify Landlord on
or before September 30, 2010 as to whether it wishes to so exercise such
option, and (ii) in the event that Landlord delivers notice to Tenant
subsequent to June 30, 2010, or fails to so deliver such notice, Tenant
shall notify Landlord on or before December 31, 2010 but no earlier than
July 1, 2010 as to whether it wishes to so exercise its option pursuant to
this Section 40.01. If Tenant fails to timely give any notice required by
this Section 40.01, Tenant's option to extend the term of this lease shall
be terminated and be deemed waived by Tenant, and of no further force and
effect and Landlord shall have the right to lease the Premises or any
portion thereof to any entity for any period commencing after the
expiration of this lease. It is expressly agreed that Tenant shall not
have an option to extend the term of this lease beyond the expiration of
the second Extended Term. If this lease shall be terminated before the
commencement of an Extended Term, Tenant's option to extend the term of
this lease, or its exercise thereof, or an Extended Term or lease created
by any such exercise, shall be abrogated and rendered null and void. In
no event shall Tenant be permitted to exercise its option for the second
Extended Term pursuant to this Section 40.01 unless it previously
exercised its option for the first Extended Term pursuant to this
Section 40.01.
(b) Upon Tenant's giving notice of its election to extend the term of
this lease for an Extended Term, pursuant to Section 40.01(a),
this lease shall be deemed automatically amended as of the date
following the Expiration Date with respect to the first Extended
Term, and as of the date following the expiration date of the
first Extended Term with respect to the Second Extended Term, as
follows: (i) the Fixed Base Rent shall be equal to 95% of the
fair market rent (excluding amounts allocable to electricity) for
the Premises for the applicable Extended Term as determined
pursuant to Section 40.02; (ii) the Expiration Date of the first
Extended Term shall be December 31, 2011 and the Expiration Date
of the second Extended Term shall be December 31, 2016; (iii) for
purposes of Article 4, the Base Tax Year shall be the Tax
<PAGE>14
Year commencing on July 1, 2006 and ending June 30, 2007 for the
first Extended Term and the Tax Year commencing on July 1, 2011
and ending on June 30, 2012 for the Second Extended Term; (iv)
for purposes of Article 5, the Base Operating Year shall be the
Operating Year commencing on January 1, 2007 and ending on
December 31, 2007 for the first Extended Term and the Operating
Year commencing on January 1, 2012 and ending on December 31,
2012 for the second Extended Term; (v) with respect to the first
Extended Term only, this Article 40 shall be modified to provide
for the option to extend the term of this lease for only one
additional period of 5 years and (vi) with respect to the second
Extended Term only, this Article 40 shall be deleted in its
entirety. Tenant and Landlord shall promptly execute and deliver
an appropriate modification of this lease to evidence said
Extended Terms.
40.02 (a) For purposes of this Article 40, in such instances that it is
provided that Tenant shall pay a "fair market rent" as Fixed Base
Rent, such fair market rent shall be proposed by Landlord giving
notice therefor (a "FMR Notice") not later than July 1, 2006 with
respect to the first Extended Term and not later than July 1, 2011
with respect to the second Extended Term, and shall exclude amounts
allocable to electricity.
(b) Within 15 Business Days after Landlord gives a FMR Notice, Tenant
shall notify Landlord as to whether Tenant agrees with Landlord's
proposed fair market rent, and if it does not so agree, Tenant shall
in such notice submit to Landlord its proposed fair market rent. If
Tenant fails to respond as aforesaid within said 15-Business Day
period, Tenant shall be deemed to have agreed to the fair market rent
proposed by Landlord.
(c) If Landlord and Tenant do not agree upon the fair market rent within
15 Business Days (the "Negotiation Period") after Tenant delivers its
notification to Landlord in accordance with clause (b) above, the
matter shall be submitted to arbitration in the Borough of Manhattan,
City of New York, in accordance with the Commercial Arbitration Rules
of the American Arbitration Association (or any successor
organization), subject, however, to the following modifications:
(i) Landlord and Tenant shall each within 15 Business Days after the
expiration of the Negotiation Period select an arbitrator, each
of whom shall be a licensed real estate broker with at least ten
years experience in the leasing or management of office space in
the "Downtown" office market in the Borough of Manhattan.
Landlord and Tenant shall each bear the fees and expenses of
their respective arbitrators.
<PAGE>15
(ii) The arbitrators shall be instructed to complete the appraisal
procedure and to submit their written determinations to Landlord
and Tenant within 30 days after their meeting. If said
arbitrators are unable to agree on the fair market rent within
such 30-day period, then (A) if the determination by the
arbitrator appointed by Landlord is less than 110% of the
determination by the arbitrator appointed by Tenant, the fair
market rent shall be the average of the two determinations or
(B) if otherwise, the arbitrators shall within 10 days after
they report their determinations appoint a third arbitrator with
similar qualifications to determine the fair market rent. In
the event the two arbitrators cannot agree as to the selection
of the third arbitrator within 15 Business Days after Landlord
and Tenant are notified of the determination of the arbitrators,
either party may request that the President of the Real Estate
Board of New York Inc. (or any successor organization) appoint
the third arbitrator. The fees of the third arbitrator shall be
borne equally by Landlord and Tenant.
(iii) The third arbitrator shall be instructed to complete
the appraisal procedure and submit a written
determination of the fair market rent to Landlord and
Tenant within 30 days after such arbitrator's
appointment;
(iv) If the difference between the two closest of the three
determinations is less than 10% of the determination
which is neither the highest nor the lowest
determination (the "Middle Determination"), the fair
market rent shall be the average of said two
determinations. Otherwise, the determination of the
third arbitrator shall be the fair market rent.
(v) In rendering such determinations, the arbitrators
shall determine the fair market rent that would be
agreed upon by Landlord and a new unrelated third
party tenant, and in connection therewith shall assume
or take into consideration as appropriate all of the
following: (A) the Landlord and prospective tenant are
typically motivated; (B) the Landlord and prospective
tenant are well informed and well advised and each is
acting in what it considers its own best interest; (C)
a reasonable time under then-existing market
conditions has been allowed for exposure of the
Premises on the open market; (D) the rent is
unaffected by concessions, special financing amounts
and/or terms, or unusual services, fees, leasing
commissions, costs or credits in connection with the
leasing transaction; (E) the Premises are fit for
immediate occupancy and use "as-is" and require no
additional work by Landlord and that no work has been
carried out thereon by the Tenant, its subtenant, or
their predecessors in interest during the term which
has diminished the rental value of the Premises; (F)
in the event the Premises have been destroyed or
damaged by fire or other casualty, they have been
fully restored; (G) the Premises are to be let with
vacant possession and subject to the provisions of
<PAGE>16
this lease for a 5-year term, except that the
arbitrators shall take into consideration that for
purposes of Article 4 the Base Tax Year shall be
governed by the provisions of Section 40.01(b) and
that for purposes of Article 5 the Base Operating Year
shall be governed by the provisions of
Section 40.01(b); and (H) market rents then being
charged for comparable space in other similar office
buildings in the same area. In rendering such
decision and award, the arbitrator shall not modify
the provisions of this lease.
(vi) The decision and award of the arbitrators shall be in
writing and be final and conclusive on all parties and
counterpart copies thereof shall be delivered to each
of said parties. Judgment may be had on the decision
and award of the arbitrators so rendered in any court
of competent jurisdiction.
(d) In the event that, prior to the determination of the fair market
rent for an Extended Term, any payment of Fixed Base Rent is due
hereunder, Tenant shall pay (in addition to any Additional Rent
then required to be paid by Tenant hereunder) as the Fixed Base
Rent hereunder the Fixed Base Rent specified in Landlord's FMR
Notice with respect to such Extended Term plus the amount
allocable to electricity on a "rent inclusion" basis as
determined in accordance with the provisions of this lease,
subject however to such further increases or decreases as are
provided in Article 16 hereof. If the arbitrator determines
that the Fixed Base Rent payable pursuant to this Article 40 is
less than that set forth in the FMR Notice, then Tenant shall be
entitled to a credit in the amount of its overpayment for such
period against subsequent payments of Fixed Base Rent due.
(e) After the determination of the fair market rent (excluding
amounts allocable to electricity) by the agreement of Landlord
and Tenant, as provided in Sections 40.02(a) and 40.02(b), or by
arbitration, as provided in Section 40.02(c), Fixed Base Rent
for the applicable Extended Term shall be the sum of (x) the
fair market rent as so determined, plus (y) the amount allocable
to electricity on a "rent inclusion" basis as determined in
accordance with the provisions of this lease, subject however to
such further increases or decreases as are provided in Article
16 hereof."
8. Contraction Space. (a) Provided Tenant shall not be in Material
Default under any of the terms and provisions of the Lease, as
modified by this Fifth Amendment, both (i) on the date of delivery of
the Surrender Notice (as hereinafter defined) and (ii) on the
Surrender Date (as hereinafter defined), Tenant shall have the right
(the "Surrender Right") at one time during the Term of the Lease to
surrender to Landlord up to 12,842 rentable square feet of the
Premises, in accordance with the provisions of this Section 8.
<PAGE>17
(b) Tenant may exercise the Surrender Right only by delivering
irrevocable notice thereof to Landlord (the "Surrender Notice")
at least 18 months prior to the date upon which Tenant shall
surrender the Surrender Premises (as hereinafter defined) to
Landlord (the "Surrender Date"), which Surrender Notice shall
specify the portion of the Premises to be surrendered (the
"Surrender Premises"). On or before the date that is 6 months
prior to the Surrender Date, Tenant shall pay to Landlord (the
"Surrender Payment") the unamortized portion allocable to the
Surrender Premises (which allocation shall be made on a rentable
square foot basis in respect of the Premises other than the
Additional Basement Space) of (i) the Tenant Allowance, (ii) the
brokerage commission paid by Landlord, (iii) the free rent
granted to Tenant and (iv) the rent differential from the
original lease term attributable to the Surrender Premises in an
amount equal to $2.00 per rentable square foot, which amounts
shall be amortized on a straight-line basis over the period
commencing on July 1, 1995 and ending on the Expiration Date
(the Surrender Payment to be deemed to be Additional Rent). If
Tenant shall fail to deliver the Surrender Notice and the
Surrender Payment in accordance with the provisions of this
Section 8, Tenant's exercise of the Surrender Right shall be
null and void and Tenant shall have no further rights under this
Section 8. Tenant shall, in the Surrender Notice (A) represent
on behalf of itself, its successors and assigns that as of the
date thereof, it shall not have not assigned, pledged or
encumbered the Lease, as modified by this Fifth Amendment, or
sublet the Surrender Premises or done or suffered any other
action as a result of which the Lease or the Surrender Premises
might be subject to any lien or encumbrance, and (B) covenant
that such representation shall also be true, correct and
accurate on the Surrender Date. If Tenant exercises the
Surrender Right as aforesaid, then on or before the Surrender
Date Tenant shall vacate the Surrender Premises and surrender
the Surrender Premises to Landlord in the condition required
pursuant to the Lease, as modified by this Fifth Amendment, as
if such date was initially set forth as the Expiration Date
applicable thereto. If Tenant fails to vacate and deliver
possession of the Surrender Premises to Landlord in the
condition required pursuant to this Section 8(b), on or before
the Surrender Date, then (X) such failure shall be a default by
Tenant under the Lease, as modified by this Fifth Amendment, and
(Y) Tenant shall be deemed to be a holdover in the Surrender
Premises and, in addition to all of Landlord's rights and
remedies set forth in the Lease, Landlord shall have the right
to exercise any of its rights and remedies at law and in equity.
Notwithstanding anything to the contrary contained herein,
Tenant shall not be permitted to exercise the Surrender Right if
the Surrender Premises shall not, in Landlord's reasonable
judgment, be marketable for lease to other tenant(s), taking
into account the size and configuration of the Surrender
Premises and its suitability for normal renting purposes. If
Landlord objects to the Surrender Premises designated by Tenant
in its Surrender Notice, Landlord shall notify Tenant within 15
<PAGE>18
days of its receipt of the Surrender Notice and Tenant shall
thereafter be required to designate a new portion of the
Premises as the Surrender Premises within 10 days after Landlord
gives Tenant notice of its objection, and this process shall be
repeated until Landlord no longer objects to the Surrender
Premises. The Surrender Date shall be extended to be the date
occurring 12 months after Tenant notifies Landlord of the
Surrender Premises that is ultimately acceptable as aforesaid.
(c) If Tenant properly exercises the Surrender Right as aforesaid,
then effective as of the Surrender Date, the term of the Lease
with respect to the Surrender Premises shall end and expire and
Tenant's estate in and possession of the Surrender Premises
shall terminate and be wholly extinguished with the same force
and effect as if such date was initially set forth as the
Expiration Date applicable thereto.
(d) If Tenant properly exercises the Surrender Right as aforesaid,
then effective from and after the day immediately following the
Surrender Date, (i) Tenant shall continue to lease the Premises
(other than the Surrender Premises) upon all of the terms and
conditions of the Lease, as modified by this Fourth Amendment,
(ii) the Fixed Base Rent shall be reduced by the Fixed Base Rent
attributable to the Surrender Premises as set forth on Exhibit
D, (iii) the Lease shall be deemed amended to provide that the
"Premises" and the "premises" shall no longer include the
Surrender Premises, (iv) Tenant shall be deemed to have given,
granted, assigned and surrendered unto Landlord, its successors
and assigns, all right to possession of the Surrender Premises,
(v) Tenant's Proportionate Share shall be appropriately adjusted
to reflect the surrender of the Surrender Premises, and
(vi) Landlord shall be entitled to lease the Surrender Premises
to any person or entity, or take any other action with respect
thereto, free from any claim of Tenant or any person or entity
claiming through Tenant.
(e) Tenant shall be responsible for the payment of all taxes and
other payments (including, without limitation, all transfer
taxes) required to be paid in connection with or relating to
Tenant's surrender of the Surrender Premises, regardless of
whether such taxes or other payments are the obligation of
Landlord or Tenant. Tenant shall indemnify and hold harmless
Landlord and its partners, directors, officers, principals,
agents, shareholders, trustees, trust beneficiaries, investment
managers and employees from and against any and all liability,
damages, claims, costs or expenses relating to the payment of
any taxes or other payments required to be paid in connection
with or relating to Tenant's surrender of the Surrender
Premises, together with all costs, expenses and liabilities
incurred in or in connection with each such claim or action or
proceeding brought thereon, including, without limitation, all
reasonable attorneys' fees and expenses.
<PAGE>19
(f) Landlord and Tenant shall, at the request of the other party,
execute an instrument confirming the terms of the surrender of
the Surrender Premises, but no such instrument shall be
necessary to make the terms hereof effective.
9. Expansion Space. Effective as of the Effective Date, Article 39 of
the Lease shall be deleted in its entirety and the following
substituted in its place:
"39.01. (a) Provided this lease is in full force and effect and no default
has occurred hereunder which is then continuing beyond applicable
notice and grace periods, Landlord shall notify Tenant if Landlord
intends to offer for lease to bona fide third parties (i) all or any
portion of the fifth floor of the Building or (ii) all or any portion
of the tenth floor of the Building (such portions of the fifth floor
and the tenth floor shall herein together be called the "Option
Space"), and Tenant shall have the irrevocable right (during the
period and in the manner specified in Section 39.01(b)) to lease the
Option Space; provided, however, such expansion option shall be
subordinated to any and all expansion options or renewal options held
by other tenants of the Building in effect on the date hereof and
affecting the Option Space. Landlord's notice to Tenant pursuant to
this Section 39.01(a) (the "Option Notice") shall specify that
portion of the Option Space that Landlord intends to lease, including
the number of rentable square feet included therein and the date such
Option Space will be available for lease (the "Option Space
Anticipated Delivery Date").
(b) If Tenant shall wish to exercise its right under this Section
39.01 to lease the Option Space, notice of such election (the
"Answer") shall be given to Landlord within a period of twenty
(20) days after the giving of the Option Notice (the "Acceptance
Period").
(c) (i) Provided (A) Tenant shall have properly delivered an Answer
in accordance with Section 39.01(b), and (B) Tenant shall on the
Option Space Effective Date (as hereinafter defined) not then be
in default under this lease beyond any applicable notice and
cure period, then on the Option Space Effective Date, the
applicable Option Space shall become and be deemed to comprise
part of the Premises as if originally included in the demise
under this lease, upon all of the terms and conditions of this
lease, except that: (I) the Fixed Base Rent shall be increased
by an amount determined pursuant to Section 39.02, (II) Tenant's
Proportionate Share shall be increased by the percentage
obtained by dividing (X) the rentable square footage of the
Option Space by (Y) 294,563, (III) if such Answer is delivered
prior to July 1, 1997, (x) Tenant shall receive an abatement of
Fixed Base Rent payable on account of such Option
<PAGE>20
Space for the number of days calculated by multiplying 180 by a
fraction, the numerator of which shall be the number of days in
the period commencing on the Option Space Effective Date and
ending on December 31, 2006, and the denominator of which shall
be the number of days in the period commencing on July 1, 1995
and ending on December 31, 2006, and (y) Tenant shall receive an
allowance (each, the "Supplemental Tenant Allowance") in an
amount equal to the product obtained by multiplying (A) $25.00
by (B) the rentable square footage of such Option Space by (C) a
fraction, the numerator of which shall be the number of days in
the period commencing on the Option Space Effective Date and
ending on December 31, 2006, and the denominator of which shall
be the number of days in the period commencing on the July 1,
1995 and ending on December 31, 2006 (which Supplemental Tenant
Allowance shall be paid by Landlord to Tenant following (1) the
completion of the work performed by Tenant to prepare the Option
Space for Tenant's occupancy thereof and (2) the delivery to
Landlord of evidence reasonably satisfactory to Landlord
establishing that all sums due and owing to contractors,
subcontractors and materialmen have been paid, including final
lien waivers).
(ii) The term "Option Space Effective Date" shall mean the date
upon which Landlord delivers vacant possession of the
Option Space to Tenant. Landlord shall use reasonable
efforts to deliver possession of the Option Space to Tenant
on or prior to the Option Space Anticipated Delivery Date,
including, to the extent advisable in Landlord's reasonable
business judgment so to do, the institution and prosecution
of holdover or other appropriate proceedings against any
occupant of the Option Space. If Landlord is unable to
deliver possession of the Option Space to Tenant for any
reason on or prior to the Option Space Anticipated Delivery
Date, the Option Space Effective Date with respect thereto
shall be the date on which Landlord is able to so deliver
possession, and Landlord shall not be subject to any
liability and this lease shall not be impaired under such
circumstances. Tenant hereby waives any right to rescind
this lease under the provisions of Section 223-a of the
Real Property Law of the State of New York, and agrees that
the provisions of this Article are intended to constitute
"an express provision to the contrary" within the meaning
of said Section 223-a.
(d) If an Answer shall not be timely given or if Tenant shall
notify Landlord within the Acceptance Period that Tenant
has waived its right to lease the Option Space, all rights
of Tenant under this Section 39.01 with respect to the
Option Space specified in the Option Notice shall be void
and of no further force or effect, but Tenant's rights
under this Section 39.01 with respect to any Option Space
not specified in such Option Notice shall remain in full
force and effect.
<PAGE>21
(e) Landlord and Tenant, at either party's request, shall
promptly execute and exchange an appropriate agreement
evidencing the leasing of any Option Space reasonably
satisfactory to both parties, but no such agreement shall
be necessary in order to make the provisions hereof
effective.
39.02. For purposes of this Article 39 the Fixed Base Rent for the Option
Space shall be determined as follows:
(a) If Tenant's Answer with respect to any Option Space is delivered
to Landlord on or prior to June 30, 1997, Fixed Base Rent
payable by Tenant for such Option Space (excluding any amounts
payable on account of electricity) shall equal (x) for the
period commencing on the commencement date of the leasing of
such Option Space and ending on March 31, 2001, the product
obtained by multiplying (A) $18.75 by (B) the rentable square
footage of such Option Space, and (y) for the period commencing
on April 1, 2001 and ending on the Expiration Date, the product
obtained by multiplying (A) $19.25 by (B) the rentable square
footage of such Option Space.
(b) If Tenant's Answer with respect to any Option Space is delivered
to Landlord after June 30, 1997, Fixed Base Rent for such Option
Space (excluding any amounts payable per account of electricity)
shall be the fair market rent determined in accordance with the
procedures set forth in Section 40.02 of this lease, for
determining fair market rent for the Extended Terms; except that
(x) Landlord shall deliver a FMR Notice to Tenant together with
the Option Notice and (y) pending the determination of the fair
market rent, Tenant shall pay as Fixed Base Rent for such Option
Space the Fixed Base Rent set forth in the FMR Notice. After
the determination of the fair market rent (excluding amounts
allocable to electricity) as herein provided, Fixed Base Rent
for such Option Space shall be the sum of (A) the fair market
rent as so determined, plus (B) the amount allocable to
electricity on a "rent inclusion" basis as determined in
accordance with the provisions of this lease, subject however to
further increases or decreases as are provided in Article 16 of
this lease."
<PAGE>22
10. Brokers. Tenant covenants, represents and warrants that Tenant has
had no dealings or negotiations with any broker or agent other than
Equis of New York (the "Broker") in connection with the consummation
of this Fifth Amendment, and Tenant covenants and agrees to pay, hold
harmless and indemnify Landlord from and against any and all cost,
expense (including reasonable attorneys' fees and court costs), loss
and liability for any compensation, commissions or charges claimed by
any broker or agent, other than the Broker, with respect to this
Fourth Amendment or the negotiation thereof to the extent such claim
or claims by any such broker or agent are based in whole or in part
on dealing with Tenant or its representatives and not Landlord or its
representatives. Landlord shall be responsible for such
compensation, commissions or charges to which Broker may be entitled
pursuant to a separate agreement between Broker and Landlord.
Landlord covenants and agrees to pay, hold harmless and indemnify
Tenant from and against any and all cost, expense (including
reasonable attorneys' fees and court costs), loss and liability for
any compensation, commissions or charges in connection with this
Fourth Amendment or the negotiation thereof, claimed under any
circumstances by the Broker, or claimed by any other broker or agent
if the claims by such other brokers or agents are based in whole or
part on dealing with Landlord or its representatives and not with
Tenant or its representatives.
11. No Modification. Except as specifically provided herein, nothing
contained in this Fifth Amendment shall be deemed to modify in any
respect the terms, provisions or conditions of the Lease, and such
terms, provisions and conditions are hereby ratified and shall remain
in full force and effect as modified hereby.
12. Construction. In the event that there is any inconsistency between
the terms of this Fifth Amendment and the terms of the Lease, the
terms of this Fifth Amendment shall prevail.
13. Entire Agreement. This Fifth Amendment contains the sole and entire
understanding and agreement of the parties with respect to its entire
subject matter and all prior negotiations, discussions,
representations, agreements, and understandings heretofore had among
the parties with respect thereto are merged herein.
14. Counterparts. This Fifth Amendment may be executed in duplicate
counterparts, each of which shall be deemed an original and all of
which, when taken together, shall constitute one and the same
instrument.
<PAGE>23
15. This Fifth Amendment shall be binding upon and inure to the benefit
of Landlord and Tenant and their respective successors and permitted
assigns.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Fourth
Amendment as of the day and year first above written.
LANDLORD:
RREEF USA FUND-III,
a California group trust
By: RREEF MANAGEMENT COMPANY,
a California Corporation
By: /s/ Denise Stewart
__________________
Name: Denise Stewart
Title: Vice President,
Director of Properties
By: /s/ Alane S. Berkowitz
______________________
Name: Alane S. Berkowitz
Title: District Manager
<PAGE>24
TENANT:
THE UNITED STATES LIFE INSURANCE
COMPANY IN THE CITY OF NEW YORK
ATTEST:
By: /s/ James F. DeVarso By: /s/ Richard G. Hohn
____________________ ___________________
Name: James F. DeVarso Name: Richard G. Hohn
Title: Assistant Secretary Title: Senior Vice President
<PAGE>25
EXHIBIT A
[INTENTIONALLY OMITTED]
<PAGE>26
EXHIBIT B
[INTENTIONALLY OMITTED]
<PAGE>27
EXHIBIT C
[INTENTIONALLY OMITTED]
<PAGE>28
<TABLE>
EXHIBIT D
_________
<CAPTION>
Portion of Annual
Fixed Base Rent
Tenant's Fixed Base Rent Allocable to Electricity
Rentable Area Proportionate (with electricity As of the Effective Monthly Installment
Floor (Square Feet) Share included) Date of Fixed Based Rent Expiration Date
__________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Basement 2,455 s.f. -- From the Effective Date $1,227.50 From the Effective Date December 31, 2006
until the Expiration until the Expiration
Date: $13,502.50 Date: $1,125.21
Six 18,540 s.f. 6.29% From the Effective Date $37,080 From the Effective Date December 31, 2006
until 3/31/01: until 3/31/01:
$384,705 $32,058.75
From 4/1/01 until the From 4/1/01 until the
Expiration Date: Expiration Date:
$393,975 $32,831.25
Seven 21,540 s.f. 7.313% From the Effective Date $43,080 From the Effective Date December 31, 2006
until 3/31/01: until 3/31/01:
$446,955 $37,246.25
From 4/1/01 until the From 4/1/01 until the
Expiration Date: Expiration Date:
$457,725 $38,143.75
</TABLE>
<PAGE>29
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Eight 21,540 s.f. 7.313% From the Effective Date $43,080 From the Effective Date December 31, 2006
until 3/31/01: until 3/31/01:
$446,955 $37,246.25
From 4/1/01 until the From 4/1/01 until the
Expiration Date: Expiration Date:
$457,725 $38,143.75
Nine 21,540 s.f. 7.313% From the Effective Date $43,080 From the Effective Date December 31, 2006
until 3/31/01: until 3/31/01:
$446,955 $37,246.25
From 4/1/01 until the From 4/1/01 until the
Expiration Date: Expiration Date:
$457,725 $38,143.75
Totals: 85,615 s.f. 28.233% From the Effective Date $167,547.50 From the Effective Date
until 3/31/01: until 3/31/01:
$1,739,072.50 $144,922.71
From 4/1/01 until the From 4/1/01 until the
Expiration Date: Expiration Date:
$1,780,652.50 $148,387.71
</TABLE>
<PAGE>1
Exhibit 10(xliv)
________________
SIXTH AMENDMENT OF LEASE
THIS SIXTH AMENDMENT OF LEASE (this "Sixth Amendment"), dated as of
December 26, 1995, between RREEF USA, FUND-III, a California group trust
("Landlord"), having an office c/o the RREEF Funds, Park Avenue Plaza, 55 East
52nd Street, New York, New York 10055, and THE UNITED STATES LIFE INSURANCE
COMPANY IN THE CITY OF NEW YORK, a New York corporation ("Tenant"), having an
office at 125 Maiden Lane, New York, New York.
W I T N E S S E T H:
_ _ _ _ _ _ _ _ _ _
WHEREAS, Landlord and Tenant are parties to that certain Lease
Agreement, dated as of December 30, 1986 (the "Original Lease"), whereby
Landlord leased to Tenant and Tenant hired from Landlord certain premises in
the building located at 125 Maiden Lane, New York, New York (the "Building"),
all as more particularly described in the Original Lease; and
WHEREAS, Landlord and Tenant entered into (i) that certain Amendment,
dated August 31, 1988 (the "First Amendment"), (ii) that certain Second
Amendment to Lease, dated November 10, 1988 (the "Second Amendment"), (iii)
that certain Third Amendment to Lease, dated May 10, 1989 (the "Third
Amendment"), (iv) that certain Fourth Amendment to Lease, dated as of April 14,
1995 (the "Fourth Amendment"), and that certain Fifth Amendment to Lease, dated
as of December 26, 1995, (the "Fifth Amendment"); and
WHEREAS, the Original Lease, as modified by the First Amendment, the
Second Amendment, the Third Amendment, the Fourth Amendment and the Fifth
Amendment, is hereinafter referred to as the "Lease"; and
WHEREAS, Landlord and Tenant desire to make further modifications to
the Lease, all as more particularly set forth in this Sixth Amendment.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto do hereby agree
to modify the Lease as follows:
1. Definitions. All capitalized terms used and not otherwise defined
herein shall have the respective meanings assigned to them in the
Lease.
2. Taxes. Effective as of the date hereof, Section 4(c) of the Fifth
Amendment is deleted in its entirety and the following substituted in
its place:
<PAGE>2
"(c) (i) Tenant hereby requests that an application for abatement of
real property taxes pursuant to Title 4 of the Real Property Tax Law
(the "RPTL") be filed by Landlord and Tenant (any abatement granted
pursuant to said Title 4 being hereinafter referred to as the ("Tax
Abatement") for the Premises. Tenant hereby acknowledges that Tenant
shall be solely responsible for (x) the expenditure of all amounts
and the performance of all work to the Premises necessary to obtain
the Tax Abatement and (y) the preparation of the application, the
annual reports and other documentation required pursuant to Title 4
of the RPTL (including, without limitation, pursuant to Sections 499-
d and 499-f of the RPTL). All fees, charges and other expenses
incurred in connection with the application and continuing
eligibility for the Tax Abatement shall be the sole responsibility of
Tenant.
(ii) Pursuant to Section 499-c.5. of the RPTL, Tenant is
hereby informed that:
(v) the percentage of the Building's aggregate floor area allocated
to the Premises, and "tenant's percentage share" for the
purposes of Title 4 of the RPTL, is, as of the date hereof,
28.233%;
(w) an application for abatement of real property taxes pursuant to
Title 4 of the RPTL will be made for the Premises;
(x) the Fixed Base Rent and additional rent payable by Tenant under
this Lease, including amounts payable by Tenant for real
property taxes, will accurately reflect any abatement of real
property taxes granted pursuant to Title 4 of the RPTL for the
Premises;
(y) at least $10 per square foot of space in the Premises must be
spent on improvements to the Premises and the common areas of
the Building since the Lease, as modified by this Sixth
Amendment, is considered a renewal lease pursuant to Title 4 of
the RPTL; and
(z) all abatements granted with respect to a building pursuant to
Title 4 of the RPTL will be revoked if, during the benefit
period, real estate taxes or water or sewer charges or other
lienable charges are unpaid for more than one year, unless such
delinquent amounts are paid as provided in subdivision 4 of
Section 499-f of the RPTL.
(iii) The lease commencement date of the Lease, solely for
the purposes of Title 4 of the RPTL, is January 1,
1997.
(iv) If the Tax Abatement shall be granted to Tenant,
Landlord shall credit against future installments of
the Tax Payment the amount of the Tax Abatement to
which Tenant shall be entitled (or if the Tax
Abatement shall exceed the amount that Landlord is
able to credit, pay to Tenant) as and when the same
shall be received by Landlord.
<PAGE>3
(v) If the Tax Abatement shall be granted and is
thereafter terminated or reduced or recalculated as a
result of a change in the billable assessed value of
the Building or for any other reason (unless due
solely to Landlord's acts, failure to perform any acts
required under Title 4 of the RPTL (including the
timely payment of real property taxes provided Tenant
shall have paid to Landlord the applicable
installments of the Tax Payment when due) or
misrepresentations), Tenant shall be responsible for
and shall pay to Landlord within 30 days after demand
the resulting increase in Taxes payable by Landlord
(including any retroactive increase), and all interest
and penalties relating thereto. If the Tax Abatement
shall be granted and is thereafter terminated or
reduced or recalculated due solely to Landlord's acts,
failure to perform any acts required under Title 4 of
the RPTL or misrepresentations, Tenant's Tax Payment
shall be determined as if such abatement or reduction
were not terminated or reduced as aforesaid. Tenant
shall notify Landlord, and Landlord shall notify
Tenant, within 10 days following the occurrence of any
event which may cause the Tax Abatement to be
terminated or reduced or recalculated.
(vi) Upon the request of Tenant, Landlord shall complete,
execute and submit with Tenant all applications
(including any revised applications therefor),
certificates of continuing eligibility and such other
documents, certificates and instruments that the New
York City Department of Finance may require in order
to issue a certificate of abatement granting the Tax
Abatement or in order to maintain the Tax Abatement in
effect.
(vii) Tenant hereby acknowledges that Landlord has made no
representations or warranties to Tenant with respect
to Title 4 of the RPTL or of any potential Tax
Abatement. Tenant's obligation to pay the Tax Payment
shall not in any way be affected, reduced or impaired
by reason of Tenant's failure to qualify for, or
obtain, any potential Tax Abatement."
3. Modifications to Fifth Amendment. Effective as of the date hereof,
the provisions of Sections 6 and 8 of the Fifth Amendment shall be
deemed null and void and of no further force or effect.
Notwithstanding the foregoing, if Tenant shall not receive a
"certificate of eligibility" (as such term is used in Title 4 of the
RPTL) for the Tax Abatement for any reason on or before December 31,
1997, then the provisions of Sections 6 and 8 of the Fifth Amendment
shall automatically be deemed to be revived and be in full and force
in accordance with the terms and provisions thereof.
<PAGE>4
4. Brokers. Tenant covenants, represents and warrants that Tenant has
had no dealings or negotiations with any broker or agent in
connection with the consummation of this Sixth Amendment, and Tenant
covenants and agrees to pay, hold harmless and indemnify Landlord
from and against any and all cost, expense (including reasonable
attorneys' fees and court costs), loss and liability for any
compensation, commissions or charges claimed by any broker or agent
with respect to this Sixth Amendment or the negotiation thereof to
the extent such claim or claims by any such broker or agent are based
in whole or in part on dealing with Tenant or its representatives and
not Landlord or its representatives. Landlord covenants, represents
and warrants that Landlord has had no dealings or negotiations with
any broker or agent in connection with the consummation of this Sixth
Amendment, and Landlord covenants and agrees to pay, hold harmless
and indemnify Tenant from and against any and all cost, expense
(including reasonable attorneys' fees and court costs), loss and
liability for any compensation, commissions or charges in connection
with this Sixth Amendment or the negotiation thereof, claimed by any
broker or agent if the claims by such brokers or agents are based in
whole or part on dealing with Landlord or its representatives and not
with Tenant or its representatives.
5. No Modification. Except as specifically provided herein, nothing
contained in this Sixth Amendment shall be deemed to modify in any
respect the terms, provisions or conditions of the Lease, and such
terms, provisions and conditions are hereby ratified and shall remain
in full force and effect as modified hereby.
6. Construction. In the event that there is any inconsistency between
the terms of this Sixth Amendment and the terms of the Lease, the
terms of this Sixth Amendment shall prevail.
7. Entire Agreement. This Sixth Amendment contains the sole and entire
understanding and agreement of the parties with respect to its entire
subject matter and all prior negotiations, discussions,
representations, agreements, and understandings heretofore had among
the parties with respect thereto are merged herein.
<PAGE>5
8. Counterparts. The Sixth Amendment may be executed in duplicate
counterparts, each of which shall be deemed an original and all of
which, when taken together, shall constitute one and the same
instrument.
9. Successors and Assigns. This Sixth Amendment shall be binding upon
and inure to the benefit of Landlord and Tenant and their respective
successors and permitted assigns.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Sixth Amendment
as of the day and year first above written.
LANDLORD:
RREEF USA FUND-III,
a California group trust
By: RREEF MANAGEMENT COMPANY,
a California Corporation
By: /s/ Denise Stewart
__________________
Name: Denise Stewart
Title: Vice President,
Director of Properties
By: /s/ Alane S. Berkowitz
______________________
Name: Alane S. Berkowitz
Title: District Manager
TENANT:
THE UNITED STATES LIFE INSURANCE
COMPANY IN THE CITY OF NEW YORK
ATTEST:
/s/ John L. Dietze By: /s/ Richard G. Hohn
__________________ ___________________
Name: John L. Dietze Name: Richard G. Hohn
Title: Assistant Secretary Title: Senior Vice President
<PAGE>6
8. Counterparts. The Sixth Amendment may be executed in duplicate
counterparts, each of which shall be deemed an original and all of
which, when taken together, shall constitute one and the same
instrument.
9. Successors and Assigns. This Sixth Amendment shall be binding upon
and inure to the benefit of Landlord and Tenant and their respective
successors and permitted assigns.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Sixth Amendment
as of the day and year first above written.
LANDLORD:
RREEF USA FUND-III,
a California group trust
By: RREEF MANAGEMENT COMPANY,
a California Corporation
By: /s/ Denise Stewart
__________________
Name: Denise Stewart
Title: Vice President,
Director of Properties
By: /s/ Alane S. Berkowitz
______________________
Name: Alane S. Berkowitz
Title: District Manager
TENANT:
THE UNITED STATES LIFE INSURANCE
COMPANY IN THE CITY OF NEW YORK
ATTEST:
/s/ James F. DeVarso By: /s/ Richard G. Hohn
____________________ ___________________
Name: James F. DeVarso Name: Richard G. Hohn
Title: Assistant Secretary Title: Senior Vice President
<PAGE>1
Exhibit 10(il)
______________
USLIFE CORPORATION
NON-EMPLOYEE DIRECTORS'
DEFERRED COMPENSATION PLAN
(AS AMENDED JANUARY 23, 1996)
1. Eligibility
Each member of the Board of Directors of USLIFE Corporation ("USLIFE")
who is not also an employee of USLIFE, or any of its subsidiaries, is
eligible to participate in this Deferred Compensation Plan (the "Plan"),
pursuant to the terms and conditions as described herein.
2. Participation by Non-Employee Directors
(a) On the date of adoption of this Plan and at any time thereafter,
each non-employee Director may elect to participate in the Plan by
directing that (i) all or part of the cash compensation which would
otherwise have been payable to him for services as a Director
(including any fees payable for services as a member of a committee
of the Board) and (ii) all or any specified percentage of the
shares of USLIFE common stock which would otherwise have been
payable to him for such services shall be credited, respectively,
to a deferred cash compensation account and a unit account subject
to the terms of the Plan.
(b) An election to participate in the Plan shall be in the form of a
document executed by a non-employee Director and filed with the
Secretary of USLIFE, and such election shall continue in effect
until such non-employee Director ceases to be a Director or is
otherwise ineligible for the Plan, or until such non-employee
Director terminates such election, in whole or in part, by written
notice filed with the Secretary of USLIFE. Any such termination,
in whole or in part, shall become effective at the close of the
calendar quarter ending immediately following the date on which the
Secretary receives such notice with respect to any and all
compensation, fees and shares of common stock payable thereafter,
or at the termination of such later calendar quarter as may be
designated in the notice of termination.
(c) A non-employee Director who has filed a termination of election may
thereafter file an election to participate for any future calendar
quarters, at any time with respect to any and all cash
compensation, fees and shares of common stock payable to him as a
non-employee Director of USLIFE. Such election shall be as
provided in Paragraph 2(b).
<PAGE>2
3(A) Deferred Cash Compensation Accounts
(a) All deferred cash compensation accounts shall be held with the
general funds of USLIFE, shall be credited to an account in the
name of the individual Director and shall bear interest, as
described herein, from the date such fees were first awarded or
would otherwise have been paid.
(b) The participant's deferred compensation account shall be credited
at the end of each quarter with an interest equivalent. The
interest equivalent shall be calculated quarterly at a rate set by
the Board, which rate shall be applied to the amounts in each
participant's account at the beginning of such quarter.
(c) The Board of Directors intends to review and set the interest rate
described in Paragraph 3A(b) annually in the light of current
economic conditions; provided, however, that in the event that the
rate is not modified the interest equivalent shall continue to be
calculated at the rate as last set forth by the Board of Directors.
(B) Deferred Stock Unit Accounts
(a) A deferred stock unit account shall be established in the name of
each individual Director (i) who elects to defer receipt of all or
any specified percentage of the shares of USLIFE common stock
payable to him on account of his annual retainer and/or meeting
fees for his services as a Director, or (ii) who irrevocably elects
to have the interest payable under Paragraph 3A above used to
purchase stock units for crediting on a quarterly basis to such
Director's stock unit account, in accordance with the formula
described in Paragraph 3B(b) below.
(b) In the case of stock units credited under item a(i) above, one unit
for each full share of stock awarded shall be credited thereto as
of the date such share(s) would otherwise have been paid. The
number of stock units credited quarterly to the stock unit account
of an electing Director under item a(ii) above will be calculated
by dividing the dollar amount of all interest credited to the
Director's deferred compensation account at the end of each
calendar quarter by the closing price per share of USLIFE common
stock reported as New York Stock Exchange - Composite Transactions
on the first trading day of the next succeeding calendar quarter,
such stock units to be computed to four decimal places.
<PAGE>3
Stock unit accounts shall be in the form of book entry accounts and
no actual shares of stock or certificates therefor shall be issued
or transferred to, or held under, the Plan. Shares of stock issued
and distributed pursuant to Paragraph 4 shall be taken from shares
of common stock previously acquired by USLIFE and held in its
treasury.
(c) Should the Director so elect, the deferred compensation account
described in Paragraph 3A will be credited as of the pertinent
dividend payment date with a dividend equivalent in the amount of
any cash dividends declared and paid from time to time in respect
of USLIFE's issued and outstanding common stock for each unit in
the Director's stock unit account as of such date and interest
shall be credited thereon in the manner, at the times and at the
rate specified in Paragraph 3A(b). Dividend equivalents with
respect to any fraction of a share in the Director's stock unit
account will also be credited to his deferred cash compensation
account.
(d) In lieu of having his deferred compensation account credited with
dividend equivalents as provided in Paragraph 3B(c) above a
Director may direct that such dividend equivalents be reinvested to
create additional stock units which will be credited to his stock
unit account. In the event a Director elects to reinvest the
dividend equivalents, his stock unit account will be credited as of
the dividend payment date with so many additional stock units (and
any fractions of a unit computed to four decimal places) as could
be purchased with such dividend equivalents based on the average of
the high and low sales price of USLIFE's common stock reported as
New York Stock Exchange-Composite Transactions on such dividend
payment date or, if no trading occurs in such stock on the dividend
payment date, on the trading day immediately preceding said date.
In the event a Director elects to reinvest dividend equivalents
under this Paragraph 3A(d), dividend equivalents on fractions of a
share will also be reinvested to create additional units.
(e) In the event a Director elects to defer the receipt of less than
100% of the shares payable to him for his services as a Director,
any fractional share includable with the deferred shares (computed
to four decimal places) will also be credited to his stock unit
account. A certificate(s) will be issued to the Director with
respect to the non-deferred shares but only as to full shares. In
lieu of being issued a certificate for any non-deferred fractional
share, the value of such fractional share will be credited to the
Director's deferred cash compensation account or paid to the
Director in cash in the absence of such account.
<PAGE>4
(f) In the event that the number of outstanding shares of USLIFE common
stock shall be changed by reason of split-ups, combinations,
recapitalizations, stock dividends and the like, the Board of
Directors of USLIFE shall make such adjustments as it deems
appropriate in the number of units credited to the unit accounts of
participants hereunder.
4. Distribution
(a) Each non-employee Director who elects to participate in this Plan
may make an election or may modify any prior election with respect
to the distribution of (i) the cash amounts deferred hereunder plus
accumulated interest and (ii) any deferred shares of stock
represented by the number of units in his unit account in a single
lump sum payment or in annual installments. Elections for
distribution and any designation of beneficiary (which designation
may name an entity other than a natural person) shall first be made
by non-employee Directors at the time that they elect to
participate in the Plan. Any modification of a prior election to
receive payment and/or shares of deferred stock in a lump sum
distribution or in annual installments shall be made no later than
the end of the calendar year preceding the year in which the non-
employee Director ceases to serve as a Director. Any beneficiary
designation, change or cancellation may be made at any time.
A Director may elect to receive payment of (1) cash amounts
deferred under the Plan plus accumulated interest and/or (2)
deferred shares of stock in one distribution or in some other
number of approximately equal annual installments (not exceeding
10). The first installment (or the single payment and/or share
distribution if so elected) shall be paid and/or distributed on or
about the first business day of the month immediately following the
month in which a non-employee Director ceases to be a Director of
the Company. Subsequent installments, if any, shall be paid on or
about the first business day of the first (and each succeeding)
calendar year, following the calendar year in which the first
installment is made, until the entire amount credited to the
individual's deferred cash and/or unit account shall have been
distributed in full. Cash amounts and/or units held pending
distribution pursuant to this paragraph shall continue to accrue
interest and/or receive dividend reinvestment treatment, as the
case may be, as provided in Paragraph 3 until the date of
distribution.
<PAGE>5
(b) The election or any modification of a prior election with respect
to the distribution of cash amounts deferred under the Plan plus
accumulated interest and/or deferred shares of stock shall be
contained in a Notice of Election in a form provided by the
Secretary of USLIFE, and shall be executed by the Director and
filed with the Secretary of USLIFE.
(c) Notwithstanding any election made by a Director, in the event such
Director becomes a proprietor, officer, partner, employee, or
otherwise affiliated with any business that is in competition with
USLIFE or any of its subsidiaries, directly or indirectly, or
becomes employed by any governmental agency having jurisdiction
over the activities of USLIFE or any of its subsidiaries, the (i)
entire balance of his deferred cash compensation, including
interest, and (ii) the deferred shares represented by the number of
stock units then in his stock unit account shall be distributed
immediately to him in a single payment.
(d) If a Director should die before receiving (i) full payment of all
amounts credited to his deferred cash account or (ii) distribution
of all the shares represented by the total number of stock units in
his stock unit account, the balance of such account(s) shall be
paid either
(1) in a single lump sum distribution on the tenth day of the
calendar year immediately following the date of his death to
(i) his designated beneficiary or beneficiaries, if a single
lump sum distribution has been elected for them; or (ii) his
estate, if no beneficiaries have been named or the designated
beneficiaries have predeceased the Director,
OR
(2) in approximately equal annual installments to his designated
beneficiary or beneficiaries in the number of annual
installments (not exceeding ten) elected for the beneficiary
so long as the number of any prior annual installments paid to
the Director and those elected for the beneficiary do not
exceed 10.
<PAGE>6
(e) A Director shall bear full responsibility for the accuracy and
legal sufficiency of any such beneficiary designation. At any
time, and from time to time, any such designation may be changed or
cancelled by the Director without the consent of any beneficiary.
Any such designation, change or cancellation must be made by
written notice filed with the Secretary of USLIFE and shall not be
effective until actually received by the Secretary. If a Director
designates more than one beneficiary, any cash payments and/or
share distributions to such beneficiaries shall be made in equal
shares unless the Director has designated otherwise. In the
absence of a written notice contesting a beneficiary designation or
otherwise contesting a distribution received by the Secretary of
USLIFE before the date of distribution, distribution will be made
in accordance with the beneficiary designation of record.
(f) Notwithstanding any other provisions of this Plan, cash amounts
deferred under the Plan plus accumulated interest together with a
certificate or certificates for all deferred shares represented by
the total number of stock units then outstanding in his stock unit
account shall be immediately distributed to each participating
Director, or his designated beneficiary or beneficiaries or his
estate, as the case may be, in a single lump sum distribution in
the event of a "Change In Control" which means (i) a merger or
consolidation to which USLIFE is a party and for which the approval
of any shareholders of USLIFE is required; (ii) any "person" (as
such term is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended) becoming the beneficial owner,
directly or indirectly, of securities of USLIFE representing 25% or
more of the combined voting power of USLIFE's then outstanding
securities; (iii) a sale or transfer of substantially all of the
assets of USLIFE; (iv) a liquidation or reorganization of USLIFE;
or (v) the occurrence of any Flip Over Transaction or Event, as
defined in Section 1.1(j) of the Amended and Restated Rights
Agreement, as amended from time to time prior to the occurrence of
any such transaction or event that otherwise would have previously
been considered a Flip Over Transaction or Event.
<PAGE>7
5. Miscellaneous
(a) No cash compensation, fees or interest thereon or shares deferred
pursuant to this Plan shall be subject to assignment, attachment,
lien, levy, or other creditors' rights under any state or federal
law.
(b) USLIFE shall not be required to reserve, or otherwise set aside,
funds for the payment or satisfaction of its obligations hereunder.
(c) Copies of the Plan and any and all amendments thereto shall be made
available at all reasonable times at the office of the Secretary of
USLIFE to all non-employee Directors.
(d) This Deferred Compensation Plan may be amended prospectively, from
time to time, by the Board of Directors of USLIFE, and the interest
rate applicable hereunder may be set prospectively by the Board as
provided in Paragraph 3A(b); provided, however, that no amendment
shall, in any event, be made to the Plan which would reduce (i) the
amounts already earned by any non-employee Director or (ii) the
number of any shares deferred hereunder and represented by the
units accumulated in such Director's stock unit account or change
the date or provisions for distribution of such amounts or shares,
unless each non-employee Director personally approves such
amendment insofar as the amendment affects him, and, further,
provided that (1) item (ii) of Paragraph 3B(a) and the provisions
of Paragraph 3B(b) regarding the timing and the formula for
determining the amount and price of the stock units to be purchased
and credited to the non-employee Director's stock unit account
under item (ii) thereof as well as the provisions of Paragraph 1 on
eligibility for participation herein shall not be amended or
revised more than once every six months other than to comport with
changes in the Internal Revenue Code, as amended, the Employee
Retirement Income Security Act, or the rules and regulations
thereunder, and (2) that participation in this Plan by a Director
who elects to have the interest payable under Paragraph 3A used to
purchase stock units pursuant to Paragraphs 3B(a) and 3B(b) shall
not be voluntarily terminated by such Director before the end of
the second full calendar quarter following the effective date of
such election nor may such Director increase or decrease the amount
or percentage of his cash compensation deferred hereunder more than
once every six months, it being intended that such unit purchases
shall qualify in all respects as "formula awards" under Rule 16b-
3(c)2(ii) of Section 16(b) of the Securities Exchange Act of 1934,
as such rule may hereinafter be amended from time to time.
<PAGE>8
(e) If a Director of The United States Life Insurance Company In the
City of New York with a deferred account under that Company's
Deferred Compensation Plan (the "United States Life Plan") at any
time resigns from the Board of Directors of United States Life to
become a member of the Board of Directors of USLIFE Corporation and
participate in this Plan, then upon his election to the Board of
Directors of USLIFE Corporation the Director shall become a
Participant in this Plan, the credit balance in his deferred
account under the United States Life Plan shall automatically be
transferred and credited to the general account of USLIFE
Corporation and the elections made by the Director with respect to
the United States Life Plan shall continue in effect under this
Plan as if they had originally been made thereunder.
(f) Nothing contained herein shall prohibit USLIFE from establishing a
"Rabbi Trust" for the purpose of accumulating funds to pay all (a)
amounts deferred hereunder together with accumulated interest and
(b) shares of stock in a participant's deferred stock unit account;
provided, however, that the assets of such Rabbi Trust shall be
available to the creditors of USLIFE if USLIFE is unable to pay its
debts as they fall due, or if bankruptcy or insolvency proceedings
have been initiated by any USLIFE creditor or USLIFE itself, or by
any third party, under the Bankruptcy Act of the United States or
the bankruptcy laws of any state, alleging that USLIFE is insolvent
or bankrupt. If, in accordance with the terms of such a Rabbi
Trust, any funds held in such trust revert back to USLIFE, such
reversion shall not in any manner reduce or diminish the obligation
of USLIFE under this Plan to any participant.
<PAGE>1
Exhibit 10(li)
______________
USLIFE CORPORATION RETIREMENT PLAN
FOR OUTSIDE DIRECTORS
(AS AMENDED JANUARY 23, 1996)
ARTICLE I
DEFINITIONS
When used herein, the following words and phrases shall have the following
meanings unless a different meaning is clearly required by the context of the
Plan.
1.1 "Board of Directors" or "Board" means the Board of Directors of USLIFE
Corporation.
1.2 "Change in Control" means (i) a merger or consolidation to which the
Company is a party and for which the approval of any shareholders of the
Company is required; (ii) any "person" (as such term is used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as amended) becoming the
beneficial owner, directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding securities; (iii) a sale or transfer of substantially all of the
assets of the Company; (iv) a liquidation or reorganization of the Company; or
(v) the occurrence of any Flip Over Transaction or Event, as defined in Section
1.1(j) of the Amended and Restated Rights Agreement, as amended from time to
time prior to the occurrence of any such transaction or event that otherwise
would have previously been considered a Flip Over Transaction or Event.
1.3 "Committee" means the Executive Compensation Committee of the Board of
Directors, or such other person, committee or other entity as shall be
designated by the Chairman of the Board, President and Chief Executive Officer
of USLIFE Corporation.
1.4 "Company" means USLIFE Corporation.
1.5 "Effective Date" means February 28, 1989.
1.6 "Eligible Director" means an Outside Director of the Board of Directors of
Company serving on or after the Effective Date who is eligible for
participation in the Plan in accordance with the terms of Article II.
1.7 "Outside Director" means a member of the Board of Directors of Company who
is neither an employee nor an officer of Company or of any subsidiary or
affiliate of Company.
1.8 "Participant" means any person who is participating in the Plan in
accordance with its terms.
1.9 "Plan" means the USLIFE Corporation Retirement Plan for Outside Directors.
<PAGE>2
1.10 "Retirement Date" means the later of the following dates:
(a) the date on which an Eligible Director attains age 65 or
(b) the date on which an Eligible Director terminates his service as an
Outside Director as a result of his failure to be renominated or
reelected, his resignation or his completion of the term on the Board
during which he attained age 75.
1.11 "Year of Board Service" means each twelve (12) month period for which an
Outside Director serves as a member of the Board, regardless of the number of
Board meetings attended by such Outside Director in any such period. A Year of
Board Service shall initially commence on the date on which an Outside Director
is appointed or elected to the Board and shall thereafter commence on each
successive yearly anniversary of such date. An Outside Director shall be
deemed to have served as a member of the Board for a full month if he serves as
a member of the Board for any portion of such month. Non-consecutive periods
of service as an Outside Director shall be aggregated for purposes of
determining an Eligible Director's total Years of Board Service. For purposes
of eligibility under Article II and benefits under Article III, service as an
Outside Director of the Board prior to the Effective Date shall be included in
determining his Years of Board Service. If there has been a Change in Control,
the Outside Directors serving on the Board at that time will receive credit on
that date for additional Years of Board Service through and including the date
on which the Outside Directors' current term of office would have otherwise
expired.
ARTICLE II
ELIGIBILITY AND VESTING
2.1 Eligibility - An Outside Director shall become an Eligible Director on the
later of his attainment of age 65 or his completion of five (5) Years of Board
Service. The Committee shall provide written notification to an Eligible
Director at such time as the Eligible Director becomes a Participant in the
Plan.
2.2 Commencement of Participation - An Outside Director shall become a
Participant on the date when he first becomes an Eligible Director.
2.3 Benefit Entitlement - To be eligible to receive benefits, if any, under
the Plan, an Outside Director must terminate his service on the Board of
Directors after completing at least five (5) Years of Board Service.
<PAGE>3
2.4 Special Rule - Notwithstanding anything to the contrary in this Article,
in the event of a Change in Control, the Outside Directors currently serving on
the Board of Directors shall immediately become Eligible Directors and shall be
entitled to receive a benefit on their respective Retirement Dates.
ARTICLE III
BENEFITS
3.1 Amount of Annual Retirement Benefits - Each Eligible Director's annual
retirement benefit will be equal to five percent (5%) of his annual retainer on
his Retirement Date multiplied by the number of his Years of Board Service, but
not exceeding twenty (20) Years of Board Service. Pro-rated credit shall be
provided for any partial Year of Board Service.
3.2 Maximum Number of Annual Payments - Annual installment payments will be
payable for a period of years equal to the number of full Years of Board
Service, but not exceeding ten (10) Years of Board Service.
3.3 Term and Frequency of Payment - Retirement benefits will be payable to
Eligible Directors in annual installments commencing on the first business day
of the calendar year following an Eligible Director's Retirement Date and
continuing on the first business day of each successive year until the maximum
number of payments have been made or until the Eligible Director's prior death.
3.4 Resumption of Service - If an Eligible Director who has terminated his
service as an Outside Director shall again become an Outside Director (i) prior
to the date on which his benefits are to commence, or (ii) while receiving
benefits hereunder, the payment of his benefits shall be deferred or suspended
for the period during which he continues to serve as an Outside Director, and
shall commence or resume on the first business day of the calendar year
following his subsequent termination of service as an Outside Director. The
Eligible Director's maximum number of annual payments shall be based on the
aggregate of his Years of Board Service completed before and after his initial
termination of service, as reduced by the number of annual payments previously
paid to him. The amount of his remaining annual retirement benefit payments,
if any, shall be based on his annual retainer and his total service as an
Outside Director on the date of his subsequent termination of service.
<PAGE>4
ARTICLE IV
ADMINISTRATION
4.1 Power of Committee - The Plan shall be administered and interpreted by the
Committee in accordance with its terms and purposes. The Committee shall
determine the amount and manner of payment of the benefits under the Plan. The
decisions made and the actions taken by the Committee in the administration of
the Plan and the interpretation of Plan provisions shall be final and
conclusive on all persons, and the Committee shall not be subject to liability
with respect to the Plan.
4.2 Expenses - Any expenses incurred in the management, operation,
interpretation or administration of the Plan shall be paid by Company. In no
event shall the benefits otherwise payable under this Plan be reduced to offset
the expenses incurred in managing, operating, interpreting or administering the
Plan.
4.3 Administration - Although the Plan is intended to be an unfunded Plan,
nothing contained herein shall prohibit the Company from establishing a "Rabbi
Trust" for the purpose of accumulating funds to pay benefits under this Plan;
provided, however, that the assets of such Rabbi Trust shall be available to
the creditors of the Company if the Company is unable to pay its debts as they
fall due, or bankruptcy or insolvency proceedings have been initiated by the
Company's creditors or the Company itself, or by any third party, under the
Bankruptcy Act of the United States or the bankruptcy laws of any state,
alleging that the Company is insolvent or bankrupt. If, in accordance with the
terms of a Rabbi Trust, any funds held in such trust revert back to the
Company, such reversion shall not in any manner reduce or diminish the
obligation of the Company under this Plan to any Participant.
ARTICLE V
AMENDMENT AND TERMINATION
5.1 Amendment - The Board of Directors or the Executive Compensation Committee
of the Board of Directors may amend the Plan with respect to future periods at
any time for whatever reason it may deem appropriate.
5.2 Termination - The Board of Directors may terminate the Plan in whole or in
part with respect to future periods at any time for whatever reason it may deem
appropriate. In the event of the complete termination of the Plan, no
Participant shall be entitled to accrue additional benefits under the Plan with
respect to any period after the effective date of termination determined by the
Board of Directors.
<PAGE>5
5.3 Preservation of Benefits on Termination or Amendment - Neither the
termination nor amendment of the Plan shall reduce the benefits previously
accrued by a Participant under this Plan.
ARTICLE VI
MISCELLANEOUS
6.1 Governing Law - The Plan shall be governed by the laws of the State of New
York.
6.2 No Right to Continued Service - Nothing contained in the Plan shall be
construed as conferring upon any Outside Director the right to continue to
serve as an Outside Director on the Board of Directors or as imposing a
limitation of any right to terminate an Outside Director's service.
6.3 Construction of Language - Wherever appropriate in the Plan, words used in
the singular may be read in the plural, words in the plural may be read in the
singular, and words importing the masculine gender shall be deemed equally to
refer to the feminine and the neuter. Any reference to any Article or Section
shall be to an Article or Section of this Plan, unless otherwise indicated.
6.4 Non-Alienation of Benefits - Except as provided by applicable federal or
State law, no benefit payable or any interest under the Plan shall be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, attachment, execution, or the claims of
creditors with respect to any Participant having an interest in this Plan. If
any Participant who is entitled to any benefit under the Plan shall become
bankrupt or attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber or charge such benefit, or if any person shall attempt to garnish,
attach, execute or otherwise encumber a benefit payable or to become payable
under the Plan to any Participant, the Committee, in its sole discretion, may
terminate the interest in such benefit of such Participant and in that event,
the Committee shall cause such benefit, or any part thereof, to be held or
applied for the benefit of such Participant or his spouse, children or other
relatives or dependents, or all or any of them, in such manner as the Committee
shall determine, and any such application shall be a complete discharge of all
liability with respect to such benefit.
<PAGE>6
6.5 Taxation - If a Participant is determined to be subject to federal income
tax on any benefits under the Plan prior to the time such benefits are payable,
then the entire amount of benefits payable to such person under this Plan shall
be due and payable at once, in a single lump sum, determined using the UP 1984
Mortality Table and the Pension Benefit Guaranty Corporation interest rates for
lump sum calculations as in effect on the first day of the Plan year in which
such amount is to be paid. A benefit shall be determined to be subject to
federal income tax upon the earliest of (a) a final determination by the United
States Internal Revenue Service addressed to the Participant which is not
appealed to the courts, or (b) a final determination by the United States Tax
Court or any other Federal court affirming any such determination by the
Internal Revenue Service, or (c) an opinion by counsel chosen by the Company
addressed to the Company that by reason of treasury regulations, amendments to
the Internal Revenue Code, published Internal Revenue Service Rulings, court
decisions or other substantial precedents, such benefits are subject to federal
income tax prior to payment. The Company shall undertake to defend, and bear
the expense of, any tax claims described herein which are asserted by the
Internal Revenue Service or by the taxing authority of any State or locality
against any Participant including the expense of attorney fees and costs of
appeal, and shall have the sole authority to determine whether or not to appeal
any determination made by the Internal Revenue Service, or by any taxing
authorities of any State or locality, or by any court. The Company agrees to
reimburse any Participant for any interest or penalties in respect of Federal,
State or local tax claims hereunder upon receipt of documentation of the same.
<PAGE>1
Exhibit 10(lvi)
_______________
USLIFE CORPORATION
EXECUTIVE OFFICER
DEFERRED COMPENSATION PLAN
(AS AMENDED JANUARY 23, 1996)
1. Purpose of Plan
The purpose of the Deferred Compensation Plan (the "Plan") is to provide
select executives of USLIFE Corporation (the "Corporation") and its
subsidiaries with the opportunity to defer receipt of compensation,
including a portion of annual base salary and incentive award payments,
until a future date. The Corporation has adopted this program in
recognition of the valuable service performed by these executives and the
desire to provide them with additional flexibility in their personal
financial planning.
2. Eligibility
Senior vice presidents and above of the Corporation and chief executive
officers of the subsidiaries of the Corporation are eligible to
participate in the Plan.
3. Administration of the Plan
A. The Plan shall be administered by the Executive Compensation and
Nominating Committee of the Board of Directors of the Corporation
(the "Administrator"). The administrator shall have the authority in
its sole discretion to interpret and apply the provisions of the
Plan.
B. The Administrator may in its discretion delegate responsibility for
the day to day administration and interpretation of the Plan to a
committee composed of three officers of the Corporation (the
"Management Committee") provided that any determination pertaining to
the deferred compensation of any Management Committee member will be
made solely by the Administrator.
4. Election to Participate
A. An eligible employee who participates in the Plan (a "Participant")
may elect that a portion of the compensation which would otherwise be
payable for services to be performed as an employee of the
Corporation or any subsidiary be credited to a deferred compensation
account subject to the terms of the Plan. Such election may apply to
a portion of a Participant's annual base salary at the rate in effect
at the time of the election, up to a maximum of 25%. The election
may also apply to all or a portion of a Participant's cash incentive
award and to all or a portion of a Participant's book unit award. A
newly eligible Participant may make an election to defer compensation
under the Plan within 30 days after becoming eligible to participate.
An election shall only be valid for the twelve month period for which
it is made.
<PAGE>2
B. The election shall be made on a form (the "Election Form") signed by
a Participant and filed with the Secretary of the Corporation. The
election shall be irrevocable, except as specified in Section 8.
C. An election to defer a portion of annual base salary may be made at
any time with respect to the salary payable during the 12 months that
begin on the first regular payroll period after the date of the
filing of the Election Form. Such election shall end 12 months after
the date of such filing or on such earlier date as may be specified
on the Election Form.
D. An election to defer all or a portion of a Participant's annul cash
incentive award shall be made by December 31st with respect to an
award that is payable during the following year.
E. An election to defer all or a portion of a Participant's book unit
award shall be made by December 31st with respect to any book unit
award with a future December 31st valuation date that is payable in
the year following the year in which such valuation date occurs.
F. Notwithstanding 4-C, 4-D and 4-E above, for the first 12 months of
the Plan, all employees who are eligible to participate in the Plan
as of the effective date hereof shall be considered newly eligible
and may make elections within 30 days after such effective date to
defer the future receipt of all or part of their annual base salary
and any cash incentive award for the then current year as well as all
or part of any book unit award.
5. Deferred Accounts
A. A deferred account shall be established for each Participant in book
entry form and shall be maintained by the Administrator. Credit
shall be given to a Participant's deferred account on the same dates
that any payments would otherwise have been made to the Participant
currently, in accordance with the deferral elections indicated on the
Election Form.
<PAGE>3
B. Balances in a Participant's deferred account shall be credited at the
end of each quarter with an interest equivalent. The interest
equivalent shall be calculated quarterly, at a rate set by the
Administrator, and the rate shall be applied to the amounts
accumulated in a Participant's account at the beginning of each
quarter.
C. The Administrator intends to review and set the interest rate
described in 5-B above at least annually in light of current economic
conditions, provided that in the event the rate is not modified the
interest equivalent shall continue to be calculated at the rate last
set by the Administrator.
6. Distribution of Deferred Compensation
A. Participants shall indicate on the Election Form the date or dates on
which their deferred account balance shall be distributed. A
Participant may elect to receive amounts deferred under the Plan plus
accumulated interest in one lump sum payment or in a number of
approximately equal annual installments. Any tax required to be
withheld by any governmental authority shall be deducted from each
distribution under the Plan.
B. A distribution election shall be made at the time a Participant first
enrolls in the Plan. The initial date of distribution shall either
be the Participant's actual date of retirement or an earlier date, as
specified on the Election Form. A modification of a distribution
election that changes the date of distribution to a later date or
changes the lump sum or annual installment election shall be made no
later than 12 months before the previously selected distribution date
by delivering a new signed Election Form to the Secretary of the
Corporation. Distribution of deferred account balances will be made
in accordance with the latest signed Election Form on file with the
Corporate Secretary.
C. Payment of deferred account balances will begin on the earlier of the
last day of the month indicated on the most recently filed Election
Form or on the last day of the month in which termination of
employment or retirement occurs. If a Participant elects to receive
distribution of his or her deferred account balance in annual
installments, subsequent installments shall be paid in succeeding
years on or about the last business day of the same month in which
the first installment was paid until the entire amount credited to
the Participant's account shall be paid in full. All undistributed
account balances shall continue to accrue interest as provided in
Section 5-B until the actual date of distribution.
<PAGE>4
7. Designation of Beneficiary
Each Participant may designate one or more beneficiaries to receive the
entire account balance deferred under the Plan together with accumulated
interest thereon in the event of death. A beneficiary designation, change
or cancellation may be made at any time. In the absence of any designated
beneficiary, the entire deferred account balance shall be paid to the
designated beneficiary under the Corporation's group life insurance
program.
8. Change in Distribution Schedule
A. Each Participant shall make a determination regarding the
distribution of his or her deferred account balance on the Election
Form. If a Participant continues in the employ of the Corporation or
terminates such employment due to retirement, distribution of the
deferred account balance together with accumulated interest shall be
made in accordance with the most recent Election Form on file with
the Corporate Secretary. In the event of any termination of a
Participant's employment for reasons other than death, disability or
retirement, the Board of Directors, in its sole discretion, shall
have the right to pay the entire deferred account balance and
accumulated interest in one lump sum to a Participant regardless of
any specified distribution schedule on an Election Form.
B. If a Participant's employment with the Corporation should terminate
due to death or disability before full payment of his or her deferred
account balance and accumulated interest thereon, the Administrator
in its sole discretion shall determine whether such account balance
shall be paid in a single lump sum or in annual installments. If the
Administrator chooses to make a lump sum distribution, the lump sum
shall be paid to the Participant's beneficiaries or to the
Participant on the last day of the month in which termination occurs.
If the Administrator chooses to make the distribution in annual
installments, the Administrator in its sole discretion shall
determine the number of such installments and payment of the
installments shall begin on the last day of the month in which
termination occurs.
<PAGE>5
C. Distribution of deferred account balances in advance of the scheduled
distribution date on a filed Election Form shall be permitted in the
sole discretion of the Administrator but only in the event of an
unanticipated emergency caused by circumstances beyond the control of
the Participant which would result in severe financial hardship to
the Participant if such distribution were not permitted. A penalty
shall be deducted from such early distribution equal to 10% of the
distribution unless the Administrator in its sole discretion waives
the penalty. Such early distribution shall in no event exceed the
amount necessary to meet the particular hardship plus the penalty. A
Participant who receives an early distribution under this Section 8-C
shall not be permitted to participate in the Plan for a period of 12
months after receipt of the distribution.
D. Notwithstanding any other provisions of this Plan, amounts deferred
hereunder plus accumulated interest shall be immediately payable to
each Participant, or his or her beneficiaries if applicable, in a
single lump sum in the event of a "Change In Control" which means (i)
a merger or consolidation to which the Corporation is a party and for
which the approval of any shareholders of the Corporation is
required; (ii) any "person" (as such term is used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as amended)
becoming the beneficial owner, directly or indirectly, of securities
of the Corporation representing 25% or more of the combined voting
power of the Corporation's then outstanding securities; (iii) a sale
or transfer of substantially all of the assets of the Corporation;
(iv) a liquidation or reorganization of the Corporation; or (v) the
occurrence of any Flip Over Transaction or Event, as defined in
Section 1.1(j) of the Amended and Restated Rights Agreement, as
amended from time to time prior to the occurrence of any such
transaction or event that otherwise would have previously been
considered a Flip Over Transaction or Event.
<PAGE>6
9. Rights of a Participant
Amounts accumulated in a Participant's deferred account represent the
Corporation's mere promise to pay such amounts sometime in the future.
All compensation and other amounts deferred under this Plan shall not be
segregated from the general funds of the Corporation and no Participant
shall have any claim on any specific Corporation assets. To the extent
that any Participant acquires a right to receive benefits under this Plan,
the right shall be no greater than the right of any unsecured general
creditor of the Corporation and is not subject to alienation, sale,
transfer, assignment, pledge, encumbrance, attachment or garnishment by
creditors. A Participant may not pledge benefits under the Plan; any
assets related to the Plan's obligation to a Participant may only be paid
out in the form chosen for the last distribution. It is the intention of
the Corporation that arrangements under the Plan be unfunded for tax
purposes and for purposes of ERISA Title 1.
10. No Implied Contract
Neither the Plan nor the Election Form shall be construed to constitute an
employment contact between the Corporation and any Participant or an
agreement by the Corporation to employ the Participant for a specified
period of time. All Participants shall remain subject to discharge to the
same extent as if the Plan had not been put into effect.
11. Amendment and Termination
A. The Plan may be amended from time to time by resolution of the Board
of Directors to comply with changes in the laws and regulations of
any State or the Federal Government or any agency having supervisory
or regulatory jurisdiction over the Corporation. The amendment or
invalidation of any one or more provisions of the Plan shall not
affect the remaining provisions of the Plan. No amendment shall
reduce any benefits accrued by any Participant prior to the effective
date of the amendment.
B. The Board of Directors has the right in its sole discretion to alter
the method of crediting interest to Participants' deferred account
balances or to cease crediting future interest at any time.
C. The Board of Directors has the right in its sole discretion to
terminate the Plan at any time. All amounts accumulated under the
Plan prior to the Plan's termination will continue to be subject to
the provisions of the Plan.
<PAGE>7
12. Arbitration of Disputes
Any disagreement, dispute, controversy or claim arising out of or relating
to this Plan or the interpretation or validity hereof shall be settled
exclusively and finally by arbitration. The arbitration shall be
conducted in accordance with the commercial arbitration rules of the
American Arbitration Association.
13. Applicable Law
This Plan shall be governed by and interpreted solely in accordance with
the internal law of the State of New York without regard to principles of
conflict of law.
14. Administration
Nothing contained herein shall prohibit the Corporation from establishing
a "Rabbi Trust" for the purpose of accumulating funds to pay amounts
deferred hereunder plus accumulated interest; provided, however, that the
assets of such Rabbi Trust shall be available to the creditors of the
Corporation if the Corporation is unable to pay its debts as they fall
due, or if bankruptcy or insolvency proceedings have been initiated by any
of the Corporation's creditors or the Corporation itself, or by any third
party, under the Bankruptcy Act of the United States or the bankruptcy
laws of any state, alleging that the Corporation is insolvent or bankrupt.
If, in accordance with the terms of such a Rabbi Trust, any funds held in
such trust revert back to the Corporation, such reversion shall not in any
manner reduce or diminish the obligation of the Corporation under this
Plan to any participant.
<PAGE>1
Exhibit 10(lviii)
_________________
USLIFE CORPORATION SUPPLEMENTAL
EMPLOYEE SAVINGS AND INVESTMENT PLAN
EFFECTIVE AS OF JANUARY 1, 1994
(AS AMENDED JANUARY 23, 1996)
Unless otherwise required by the context, the terms herein which are
capitalized are defined in the USLIFE Corporation Employee Savings and
Investment Plan (the "Savings Plan"), as from time to time amended and shall
have the same meaning herein as used therein.
1. Purpose of the Plan
___________________
This Supplemental Employee Savings and Investment Plan (the "Plan")
is intended to be an unfunded, non-qualified plan of deferred
compensation covering a select group of highly compensated or
management employees for the purpose of providing benefits in excess
of the limitations on benefits under the Savings Plan resulting from
the application of section 401(a)(17) (restricting compensation to
$150,000 per year, as adjusted) and section 415 (limitation on annual
contributions to lesser of $30,000 or 25% of compensation as
adjusted, as well as the combined plan limits), of the Internal
Revenue code of 1986 as amended (the "Code") and is not intended to
comply with the requirements of section 401(a) of the Code. The Plan
is also intended to provide any participants in the USLIFE
Corporation Deferred Compensation Plan ("Deferred Compensation Plan")
with the benefits they would have received under the Savings Plan if
they had not made deferrals under the Deferred Compensation Plan.
The Plan shall be administered and construed so as to effectuate this
intent.
2. Administration of the Plan
__________________________
a) The Plan shall be administered by the Executive Compensation and
Nominating Committee of the Board of Directors of the
Corporation (the "Committee"). The Committee shall have the
authority in its sole discretion to interpret and apply the
provisions of the Plan. Any decision of the Committee with
respect to questions arising as to the interpretation of this
Plan, including the severability of any or all of the provisions
thereof, shall be final, conclusive and binding.
b) The Committee in its discretion may delegate responsibility for
the day-to-day administration of the Plan to a committee
composed of three officers of the Corporation (the "Management
Committee").
<PAGE>2
3. Eligibility
___________
The Employees eligible to participate in the Plan are Participants in
the Savings Plan who are (a) a participant in the Deferred
Compensation Plan for management, (b) a Vice President or above of
the Corporation or a Senior Vice President or above of a USLIFE
Corporation subsidiary so long as the Employee's annual compensation
for Savings Plan purposes at any time is projected to exceed the
401(a)(17) earnings limitation or (c) a Vice President and above in
the subsidiaries of USLIFE Corporation, so long as they are employed
on or after January 1, 1995 and the Employee's Annual Compensation
for Savings Plan purposes at any time is projected to exceed the
401(a)(17) earnings limitation, as adjusted from time to time.
4. Deferred Stock Unit Accounts
____________________________
a) A deferred stock unit account shall be established in the name
of each Participant. The unfunded accounts of Participants are
to be credited with a Company Contribution in an amount equal to
100% of the Participant's Basic Contribution under the Savings
Plan times the sum of (a) the Participant's Salary (including
any amounts payable or in connection with an employment contract
with the Corporation) in excess of the said 401(a)(17) earnings
limitation, (b) any Salary deferred under the USLIFE Corporation
Deferred Compensation Plan for management which otherwise would
have been the subject of a Company Contribution under the
Savings Plan, including any Salary above or below the said
401(a)(17) earnings limitation and (c) any other portion of
Salary that would have been the subject of a Company
Contribution under the Savings Plan but for the application of
the section 415 annual contribution limitations. In the event
of a Change-In-Control, Salary also includes (i) amounts which
an Employee is paid or to which an Employee is entitled under
any Key Executive Employment Protection Agreement, the
Restricted Stock Plan or the Book Unit Plan and (ii) any regular
or enhanced severance to which an employee is entitled as the
result of a termination occurring within three years after a
Change-In-Control or three years after the expiration of any
employment contract, whichever is later. "Change-In-Control"
shall mean (i) a merger or consolidation to which the Company is
a party and for which the approval of any shareholders of the
Company is required; (ii) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended) becoming the beneficial owner, directly or
indirectly, of securities of the Company representing 25% or
more of the combined voting power of the Company's then
<PAGE>3
outstanding securities; (iii) a sale or transfer of
substantially all of the assets of the Company; (iv) a
liquidation or reorganization of the Company; or (v) the
occurrence of any Flip Over Transaction or Event, as defined in
Section 1.1(j) of the Amended and Restated Rights Agreement, as
amended from time to time prior to the occurrence of any such
transaction or event that otherwise would have previously been
considered a Flip Over Transaction or Event. The amounts
credited to these unfunded accounts are to be equated with
common stock of USLIFE Corporation of equivalent market value as
provided in 4(b) below.
b) The number of stock units credited will be calculated by
dividing the dollar amount credited to the Participant's
deferred compensation account at the end of each calendar by the
closing price per share of USLIFE common stock on the first
trading day of the next succeeding calendar month, such stock
units to be computed to four decimal places. Stock unit
accounts shall be in the form of book entry accounts and no
actual shares of stock or certificates therefor shall be issued
or transferred to, or held under, the Plan.
c) Dividends declared and paid from time to time in respect of
USLIFE 's issued and outstanding common stock will be credited
on the dividend payment date as so many additional stock units
(and any fractions of a unit computed to four decimal places) as
could be purchased with such dividend equivalents based on the
average of the high and low sales price of USLIFE's common stock
reported as New York Stock Exchange-Composite Transactions on
such dividend payment date or, if no trading occurs in such
stock on the dividend payment date, on the trading day
immediately preceding said date. Dividend equivalents on
fractions of a share will also be reinvested to create
additional units.
d) In the event that the number of outstanding shares of USLIFE
common stock shall be changed by reason of split-ups,
combinations, recapitalizations, stock dividends and the like,
the Committee shall make such adjustments as it deems
appropriate in the number of units credited to the unit accounts
of Participants hereunder.
<PAGE>4
5. Vesting
_______
A Participant will become vested in the amounts credited to his
deferred stock unit account in accordance with the schedule provided
in Article VI of the Savings Plan. In the event of a Change in
Control, a Participant who is then employed by the Company shall
fully (100%) vest immediately.
6. Distributions
_____________
Only lump-sum cash distributions are to be made. Such distributions
are to be in an amount equivalent to the unfunded account value upon
the Participant's termination of employment, death, retirement or
disability. The amounts credited shall qualify in all respects for
exclusion from the definition of the term "derivative securities"
pursuant to Rule 16a-1(c) of the Securities Exchange Act of 1934
("1934 Act") with the result that the crediting of said amounts shall
be exempt from the operation of the Section 16(b) short-swing profit
restrictions under the 1934 Act. In the case of the death of the
Participant, the lump-sum cash distribution shall be made in
accordance with the provisions applicable under Article VII of the
Savings Plan when death occurs, including any beneficiary designation
made under the Savings Plan.
7. Nonassignability
________________
The benefits of a Participant (or his spouse or beneficiary as the
case may be) shall not be transferable or assignable except by reason
of the laws of descent and distribution.
8. Taxation
________
If a Participant, his spouse or beneficiary, is determined to be
subject to Federal income tax on any benefits under the Plan prior to
the time such benefits are payable, then the entire amount of
benefits payable to such person under this Plan shall be due and
payable at once, in a single lump sum cash payment. A benefit shall
be determined to be subject to federal income tax upon the earliest
of (a) a final determination by the United States Internal Revenue
Service addressed to the Participant, his spouse or his beneficiary,
as the case may be which is not appealed to the courts, or (b) a
final determination by the United States Tax Court or any other
Federal court affirming any such determination by the Internal
Revenue Service, or (c) an opinion by counsel chosen by the Company
addressed to the Company that by reason of treasury regulations,
amendments to the Internal Revenue Code, published Internal Revenue
Service Rulings, court decisions or other substantial precedents,
such benefits are subject to
<PAGE>5
Federal Income Tax prior to payment. The Company shall undertake to
defend, and bear the expense of, any tax claims described herein
which are asserted by the Internal Revenue Service or by the taxing
authority of any State or locality against any Participant, his
spouse or beneficiary, including the expense of attorney fees and
costs of appeal, and shall have the sole authority to determine
whether or not to appeal any determination made by the State or
locality, or by any court. The Company agrees to reimburse any
Participant, his spouse or beneficiary for any interest or penalties
in respect of Federal, State or local tax claims hereunder upon
receipt of documentation of the same.
9. Miscellaneous
_____________
a) The Board of Directors of the Company reserves the right to
modify this Plan from time to time, or to terminate the Plan
entirely. Benefits accrued under the Plan as of the date of any
amendment or termination shall not be reduced. The Plan shall
automatically terminate simultaneously with the termination of
the Savings Plan, in which case all benefits shall be paid as of
the first day of the month coincident with or next following
such event in a single lump sum cash payment.
b) Although the Plan is intended to be an unfunded Plan, nothing
contained herein shall prohibit the Company from establishing a
"Rabbi Trust" for the purpose of accumulating funds to pay
benefits under this Plan for any or all Participants, their
spouses, or beneficiaries; provided, however, that the assets of
such Rabbi Trust shall be available to the creditors of the
Company if the Company is unable to pay its debts as they fall
due, or bankruptcy or insolvency proceedings have been initiated
by the Company's creditors or the Company itself, or by any
third party, under the Bankruptcy Act of the United States or
the bankruptcy laws of any state, alleging that the Company is
insolvent or bankrupt. If, in accordance with the terms of a
Rabbi Trust, any funds held in such trust revert back to the
Company, such reversion shall not in any manner reduce or
diminish the obligation of the Company under this Plan to any
Participant.
c) Any liability of the Company to any person with respect to
benefits payable under the Plan shall be based solely upon such
contractual obligations, if any, as shall be created by the
Plan.
d) If upon the payment of any benefits to any person under the
Plan, the Company shall be required to withhold any amounts with
respect to such payment by reason of any Federal, State or local
tax laws, rules or regulations, then the Company shall be
entitled to deduct and withhold such amounts from any such
payments. In any event, such person
<PAGE>6
shall make available to the Company, promptly when requested by
the Company, sufficient funds or other property to meet the
requirements of such withholding, and the Company shall be
entitled to take and authorize such steps as it may deem
advisable in order to have the amounts required to be withheld
made available to the Company out of any funds or property due
or to become due to such person, whether under this Plan or
otherwise.
10. Claims Procedure
________________
The Committee shall establish a procedure for the resolution of
disputes and dispositions of claims arising under the Plan. Until
modified by the Company, this procedure is as follows:
Any Participant, former Participant, or any spouse or other
beneficiary of such Participant or former Participant may, of he so
desires, file with the Committee a written claim for benefits under
the Plan. Within sixty (60) days after the filing of such a claim,
the Committee shall notify the claimant whether his claim is upheld
or denied. The Committee may, under special circumstances, extend
the period of time for processing a claim by an additional sixty (60)
days. If such an extension of time is required, written notice shall
be furnished to the claimant or his duly authorized representative
prior to the termination of the initial sixty (60) day period. Such
notice will indicate the special circumstances requiring an
extension. In the event the claim is denied, the Committee shall
state in writing:
a. the specific reasons for the denial;
b. specific references to pertinent Plan provisions on which
the denial is based;
c. a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary;
and
d. an explanation of the claim review procedure set forth in
this Section 10.
Within sixty (60) days after receipt of notice that his claim has
been denied, the claimant or his duly authorized representative may
file with the Committee a written request for a review hearing and
may, in conjunction therewith, submit written issues and comments.
The Committee shall then schedule, within sixty (60) days after the
filing of such request, a full and fair hearing of the claim before
the Committee. The Committee may,
<PAGE>7
under special circumstances, extend such period of time by an
additional sixty (60) days. Prior to said hearing, the claimant or
his representative shall have a reasonable opportunity to review a
copy of the Plan and other pertinent documents in the possession of
the Committee. The Committee shall communicate their decision in
writing to the claimant within thirty (30) days after the hearing.
Any claim for benefits and any request for a review hearing hereunder
must be filed on forms to be furnished by the Committee upon a
claimant's request.
11. Successors
__________
This Plan shall be binding upon and inure to the benefit of any
successor to the Company or its business as the result of merger,
consolidation, reorganization, transfer of assets or otherwise and
any subsequent successor thereto. In the event of any such similar
transaction, the successor to the Company or its business or any
subsequent successor thereto shall promptly notify the Participants
in writing of its successorship. In no event shall any such
transaction described herein suspend or delay the rights of
Participants, spouses or beneficiaries to receive benefits hereunder.
12. Choice of Law
_____________
This Plan shall be construed in accordance with the laws of the State
of New York except to the extent such laws are pre-empted by the
Employee Retirement Income Security Act of 1974, as amended.
<PAGE>1
Exhibit 10(lix)
_______________
USLIFE CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
EFFECTIVE AS OF JANUARY 1, 1994
(AS AMENDED JANUARY 23, 1996)
Unless otherwise required by the context, the terms used herein which are
capitalized are defined in the USLIFE Corporation Retirement Plan (the
"Retirement Plan"), as from time to time amended, and shall have the same
meaning herein as used therein.
1. Purpose of the Plan
___________________
This Supplemental Retirement Plan (the "Plan") is intended to be a
non-qualified plan of deferred compensation covering a select group
of highly compensated or management employees for the purpose of
providing benefits in excess of the limitations on benefits under the
Retirement Plan. This Plan is not intended to comply with the
requirements of Section 401(a) of the Code. The Plan shall be
administered and construed so as to effectuate this intent.
2. Eligibility
___________
Eligible employees include (1) each Senior Vice President and above
of USLIFE Corporation ("Company"), and each Chief Executive Officer
of any wholly owned subsidiary of USLIFE Corporation, (2) all those
serving as Vice President and above of USLIFE Corporation and all
those serving as Senior Vice President and above in the subsidiaries
of USLIFE Corporation, so long as their earnings as defined for
purposes of this Plan exceeds the 401(a)(17) earnings limitation, as
adjusted from time to time, (3) all those serving as Vice President
and above in the subsidiaries of USLIFE Corporation, so long as they
provide an Hour of Service after November 1, 1994 and their earnings
as defined for purposes of this Plan exceeds the 401(a)(17) earnings
limitation, as adjusted from time to time, and (4) all Participants
in the USLIFE Corporation Deferred Compensation Plan for management,
as well as any highly compensated or management employee of USLIFE
Corporation who is selected by the Board of Directors of the Company.
<PAGE>2
3. Benefits
________
The Plan shall provide a benefit to a Participant (or his spouse or
beneficiary as the case may be) in an annual amount equal to the
difference between the annual amount of the Participant's normal,
early or vested retirement benefit to which he would be entitled
under Article IV of the Retirement Plan upon his termination of
employment if Code Sections 401(a)(17) and 415 were inapplicable, and
the annual amount of such benefit at such time under Article IV of
the Retirement Plan recognizing the effect of such Code sections. If
the Participant has not yet reached age 55 at such time, such offset
shall not occur until his 55th birthday and shall at that time be
based upon his benefit under the Retirement Plan payable at his 55th
birthday.
For all Participants providing an Hour of Service after December 31,
1993, Earnings effective from and after January 1, 1992 means wages,
as defined in section 3401(a) of the Code, and all other payments of
compensation to an employee by the Company (in the course of the
Company's trade or business) for which the Company is required to
furnish the Employee a written statement under section 6041(d) and
6051(a)(3) of the Internal Revenue Code, more commonly known as the
wages, tips and other compensation reported on Form W-2 (hereinafter
"W-2 earnings") including, among other things, payments to which the
Employee is entitled under any employment contract, key executive
employment protection agreement, Restricted Stock Plan, Book Unit
Plan and Annual Incentive Plan, all as amended from time to time
before a Change-In-Control excluding therefrom (1) employee moving or
relocation expenses, (2) any income related to the employee
participation in USLIFE Stock Option Plans, with the exception of the
value of any vested shares of restricted stock awarded as a result of
a stock option exercise, and (3) any severance payments, except as
hereinafter provided. Earnings shall be determined before (1) any
adjustments related to the USLIFE Flexible Advantage Program,
including any "vacation sell" dollars, any elections of medical or
dental options or contributions made to the USLIFE Flexible Advantage
Accounts for health or dependent care, and (2) contributions made
under the ESP Option of the USLIFE Corporation Employee Savings and
Investment Plan. Earnings shall also be increased to include any and
all deferrals under the Deferred Compensation Plan for management.
In the event of a Change In Control, Earnings also includes any
regular or enhanced severance paid to the Employee to which the
Employee is entitled as a result of a termination occurring within
three years after a Change In Control or three years after the
expiration of any employment contract, whichever is later and which
severance shall be included as a part of the Employee's Earnings for
his final full year of employment unless its inclusion in the
Earnings for the final year of employment or part thereof
<PAGE>3
produces a higher Final Average Earnings. For Participant's
providing an Hour of Service after November 1, 1994, in the event of
a Participant's termination of employment as a result of the bulk
sale of assets, the merger of companies, discontinuance of a
company's operations, the sale or divestiture of a company, or the
relocation, consolidation or elimination of functions or positions,
Earnings also includes any regular or enhanced severance paid to the
Employee. For Participant's providing an Hour of Service after
November 1, 1994, in the event of a Participant's termination of
employment as a result of the bulk sale of assets, the merger of
companies, discontinuance of a company's operations, the sale or
divestiture of a company, or the relocation, consolidation or
elimination of functions or positions, Final Average Earnings
includes any regular or enhanced severance paid to the Employee, and
the final year of employment is to be included in the three (3) year
average of Final Average Earnings even if the final year is not a
complete calendar year, but only if its inclusion produces the
highest average amount.
For the purpose of the benefit calculation, Years of Participation
Service shall also include the Participant's total years of
employment, counting as a full Year of Participation Service (1) all
completed Plan Years and (2) any and all partial Plan Years (each and
every partial Plan Year being treated as a full Year of
Participation) from the Participant's date of hire through and
including the date upon which the Participant's employment terminates
or is projected to terminate under any employment contract, whichever
is longer.
4. Method of Payment
_________________
Benefit payments shall be payable monthly (1/12 of the annual amount)
and shall commence on the first day of the month coincident with or
next following the date of the Participant's 55th birthday or his
termination of employment or death, if later. Such monthly benefit
payments shall continue to the Participant for his life. In the case
of those Participants in this Plan as of December 31, 1993, such
payments shall be made to the Participant, or in the case of the
Participant's death to his spouse or beneficiary, as the case may be,
through the month when the Participant would have reached his actual
80th birthday, or for 180 months (15 years) from the date that the
benefits commence to the Participant, his spouse or beneficiary,
whichever is later ("Guaranteed Period"). Those employees who only
participate in the Plan after December 31, 1993 are to have all of
the benefit options available under Article V of the Retirement Plan.
Those employees who participated in the Plan as of December 31, 1993
and continued to participate thereafter are to have the Guaranteed
Period
<PAGE>4
option under this section and all of the benefit options under
Article V of the Retirement Plan.
5. Vesting
_______
A Participant shall be fully vested upon his being credited with ten
Years of Service under the Retirement Plan or upon his death after
attaining age 55 if he is fully vested under the Retirement Plan.
Except as may be provided in Section 6 below, should a Participant
terminate employment with the Company prior to being credited with at
least ten Years of Service under the Retirement Plan, he shall
forfeit all of his benefits under this Plan and no benefit shall
thereafter be payable to such Participant, or to his spouse or
beneficiary.
6. Special Rules
_____________
In the event of the occurrence of a Change In Control which means (i)
a merger or consolidation to which the Company is a party and for
which the approval of any shareholders of the Company is required;
(ii) any "person" (as such term is used in Sections 13(d) and 14(d)2
of the Securities Exchange Act of 1934, as amended) becoming the
beneficial owner, directly or indirectly, of securities of the
Company representing 25% or more of the combined voting power of the
Company's then outstanding securities; (iii) a sale or transfer of
substantially all of the assets of the Company; (iv) a liquidation or
reorganization of the Company; or (v) the occurrence of any Flip Over
Transaction or Event, as defined in Section 1.1(j) of the Amended and
Restated Rights Agreement, as amended from time to time prior to the
occurrence of any such transaction or event that otherwise would have
previously been considered a Flip Over Transaction or Event, then (A)
the benefit under this Plan of each Participant who is then employed
by the Company shall fully (100%) vest immediately, (B) for purposes
of determining the accrued benefit to which the Participant would be
hypothetically entitled under the Retirement Plan as per the first
clause of Section 3 of this Plan, his Final Average Earnings, his
Years of Participation Service and his age will be redefined to
include earnings and service (treating any and all partial Plan Years
as full Years of Participation Service) with USLIFE through the
projected end of his employment contract and any key executive
employment protection agreement with the Company then in effect, as
well as any severance payments (and service reflected by such
severance payments) to which he may be entitled. In such case, the
Participant's benefit under this Plan shall be determined as of the
date of such event in accordance with Section 3 of the Plan (taking
into account his additional deemed earnings, service and severance
pay and service as per the foregoing sentence and his hypothetical
age in determining any
<PAGE>5
appropriate reduction factors) and shall commence, based upon his
hypothetical age, to be paid to the Participant as provided in
Section 4 of the Plan, or, if later, on the first day of the first
month at least thirty (30) days after the Participant's salary is
discontinued or reduced (whether or not the Participant has
terminated employment).
7. Death Benefits
______________
Should a Participant die before all benefit payments to him under
this Plan have been completed, the following shall apply:
A. If a vested, married Participant dies before his Normal
Retirement Date under the Retirement Plan and before his benefit
payments under this Plan have commenced, his spouse shall be
entitled to receive a death benefit with respect to the
Participant's benefits under this Plan determined in the same
manner, and subject to the same rules, as provided in Article V
of the Retirement Plan without regard to Code Sections
401(a)(17) and 415.
B. If a vested Participant who participated in the Plan as of
December 31, 1993 dies after benefit payments under this Plan
have commenced, or after he has reached his Normal or Early
Retirement Date under the Retirement Plan, the Participant's
spouse, if at the time of his death the Participant was married,
or the Participant's beneficiary, if at the time of his death he
was not married, will be entitled to receive the monthly
payments for the duration of the Guaranteed Period that were
being paid to the Participant while he was alive. If such
spouse or other beneficiary, as the case may be, dies before
receiving all of the monthly payments for the duration of the
Guaranteed Period, then the remaining payments during such
Guaranteed Period shall be paid to the estate of such person as
a lump sum (determined using the UP 1984 Mortality Table and the
Pension Benefit Guaranty Corporation interest rates for lump sum
calculations as in effect on the first day of the calendar year
in which such person dies), or the installments over the
remaining Guaranteed Period shall continue, as the Company, in
its discretion decides. If any vested Participant who provided
an Hour of Service after December 31, 1993 dies after benefit
payments have commenced, or after he has reached his Normal
Retirement Date under the Retirement Plan, his spouse or
beneficiary, as the case may be, will also continue to have
those benefit options provided under Article V of the Retirement
Plan, with the benefit determined in the same manner, and
subject to the same rules, as provided in Article V of the
Retirement Plan without regard to Sections 401(a)(17) and 415 of
the Code.
<PAGE>6
Except as provided in paragraph (A) or (B) above or in Section
4, no death benefit shall be payable under this Plan.
8. Lump Sum
________
If the lump sum value of a benefit payable to a Participant, his
spouse or beneficiary is less that $25,000 (determined using the UP
1984 Mortality Table and the Pension Benefit Guaranty Corporation
interest rates for lump sum calculations as in effect on the first
day of the calendar year in which such benefit is to commence) the
Company may direct that such benefit be paid as such lump sum.
9. Nonassignability
________________
The benefits of a Participant (or his spouse or beneficiary as the
case may be) shall not be transferable or assignable except by reason
of the laws of descent and distribution.
10. Taxation
________
If a Participant, his spouse or beneficiary, is determined to be
subject to Federal income tax on any benefits under the Plan prior to
the time such benefits are payable, then the entire amount of
benefits payable to such person under this Plan shall be due and
payable at once, in a single lump sum, determined using the UP 1984
Mortality Table and the Pension Benefit Guaranty Corporation interest
rates for lump sum calculations as in effect on the first day of the
Plan year in which such amount is to be paid. A benefit shall be
determined to be subject to federal income tax upon the earliest of
(a) a final determination by the United States Internal Revenue
Service addressed to the Participant, his spouse or his beneficiary,
as the case may be which is not appealed to the courts, or (b) a
final determination by the United States Tax Court or any other
Federal court affirming any such determination by the Internal
Revenue Service, or (c) an opinion by counsel chosen by the Company
addressed to the Company that by reason of treasury regulations,
amendments to the Internal Revenue Code, published Internal Revenue
Service Rulings, court decisions or other substantial precedents,
such benefits are subject to Federal Income Tax prior to payment.
The Company shall undertake to defend, and bear the expense of, any
tax claims described herein which are asserted by the Internal
Revenue Service or by the taxing authority of any State or locality
against any Participant, his spouse or beneficiary, including the
expense of attorney fees and costs of appeal, and shall have the sole
authority to determine whether or not to appeal any determination
made by the Internal Revenue Service, or by any taxing authorities of
any State or locality, or by any court. The Company agrees to
reimburse any
<PAGE>7
Participant, his spouse or beneficiary for any interest or penalties
in respect of Federal, State or local tax claims hereunder upon
receipt of documentation of the same.
11. Miscellaneous
_____________
(a) The plan shall be administered by the Administrative Committee
("Committee") established under the Retirement Plan and any decision
of said Committee with respect to questions arising as to the
interpretation of this Plan, including the severability of any or all
of the provisions thereof, shall be final, conclusive and binding.
(b) The Board of Directors of the Company reserves the right to
modify this Plan from time to time, or to terminate the Plan
entirely. Benefits accrued under the Plan as of the date of any
amendment or termination shall not be reduced. The Plan shall
automatically terminate simultaneously with the termination of the
Retirement Plan, in which case all benefits shall be paid as of the
first day of the month coincident with or next following such event
in a single lump sum (determined using the UP 1984 Mortality Table
and the Pension Benefit Guaranty Corporation interest rates for lump
sum calculations as in effect on the first day of the calendar year
in which such event occurs).
(c) Nothing contained herein shall prohibit the Company from
establishing a "Rabbi Trust" for the purpose of accumulating funds to
pay benefits under this Plan for any or all Participants, their
spouses, or beneficiaries; provided, however, that the assets of such
Rabbi Trust shall be available to the creditors of the Company if the
Company is unable to pay its debts as they fall due, or bankruptcy or
insolvency proceedings have been initiated by the Company's creditors
or the Company itself, or by any third party, under the Bankruptcy
Act of the United States or the bankruptcy laws of any state,
alleging that the Company is insolvent or bankrupt. If, in
accordance with the terms of a Rabbi Trust, any funds held in such
trust revert back to the Company, such reversion shall not in any
manner reduce or diminish the obligation of the Company under this
Plan to any Participant.
(d) Any liability of the Company to any person with respect to
benefits payable under the Plan shall be based solely upon such
contractual obligations, if any, as shall be created by the Plan.
(e) If upon the payment of any benefits to any person under the
Plan, the Company shall be required to withhold any amounts with
respect to such payment by reason of any Federal, State or local tax
laws, rules or regulations, then the Company shall be entitled to
deduct and withhold such amounts from any such payments. In any
event, such person shall make available to the Company, promptly when
requested by the
<PAGE>8
Company, sufficient funds or other property to meet the requirements
of such withholding, and the Company shall be entitled to take and
authorize such steps as it may deem advisable in order to have the
amounts required to be withheld made available to the Company out of
any funds or property due or to become due to such person, whether
under this Plan or otherwise.
12. Claims Procedure
________________
The Committee shall establish a procedure for the resolution of
disputes and dispositions of claims arising under the Plan. Until
modified by the Company, this procedure is as follows:
Any Participant, former Participant, or any spouse or other
beneficiary of such Participant or former Participant may, if he so
desires, file with the Committee a written claim for benefits under
the Plan. Within sixty (60) days after the filing of such a claim,
the Committee shall notify the claimant whether his claim is upheld
or denied. The Committee may, under special circumstances, extend
the period of time for processing a claim by an additional sixty (60)
days. If such an extension of time is required, written notice shall
be furnished to the claimant or his duly authorized representative
prior to the termination of the initial sixty (60) day period. Such
notice will indicate the special circumstance requiring an
extension. In the event the claim is denied, the Committee shall
state in writing:
a) the specific reasons for the denial;
b) specific references to pertinent Plan provisions on which the
denial is based;
c) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of
why such material or information is necessary; and
d) an explanation of the claim review procedure set forth in this
Section 12.
Within sixty (60) days after receipt of notice that his claim has
been denied, the claimant or his duly authorized representative may
file with the Committee a written request for a review hearing and
may, in conjunction therewith, submit written issues and comments.
The Committee shall then schedule, within sixty (60) days after the
filing of such request, a full and fair hearing of the claim before
the Committee. The Committee may, under special circumstances,
extend such period of time by an additional sixty (60) days. Prior
<PAGE>9
to said hearing, the claimant or his representative shall have a
reasonable opportunity to review a copy of the Plan and other
pertinent documents in the possession of the Committee. The
Committee shall communicate their decision in writing to the claimant
within thirty (30) days after the hearing. Any claim for benefits
and any request for a review hearing hereunder must be filed on forms
to be furnished by the Committee upon a claimant's request.
13. Successors
__________
This Plan shall be binding upon and inure to the benefit of any
successor to the Company or its business as the result of merger,
consolidation, reorganization, transfer of assets or otherwise and
any subsequent successor thereto. In the event of any such merger,
consolidation, reorganization, transfer of assets or other similar
transaction, the successor to the Company or its business or any
subsequent successor thereto shall promptly notify the Participants
in writing of its successorship. In no event shall any such
transaction described herein suspend or delay the rights of
Participants, spouses or beneficiaries to receive benefits hereunder.
14. Choice of Law
_____________
This Plan shall be construed in accordance with the laws of the State
of New York except to the extent such laws are pre-empted by the
Employee Retirement Income Security Act of 1974, as amended.
<PAGE>1
Exhibit 10(lx)
______________
THIS AGREEMENT, made as of the 1st day of March, 1994, among USLIFE
Corporation, a New York corporation (the "Company"), Chemical Bank, a New York
corporation (the "Trustee") and KPMG Peat Marwick ("Independent Contractor").
W I T N E S S E T H :
_ _ _ _ _ _ _ _ _ _
WHEREAS, the Company has entered into certain written employment
contracts (referred to collectively herein as the "Contracts") with a select
group of its management employees (referred to herein as "Contract Holders");
WHEREAS, the Company has provided select executives with the
opportunity to become participants (referred to herein as "Participants") in the
USLIFE Corporation Deferred Compensation Plan (the "Deferred Compensation
Plan");
WHEREAS, the Company desires to provide additional assurance to some
or all such management employees that their unfunded contractual rights under
the Contracts and the Deferred Compensation Plan will in the future be met or
substantially met by application of the procedures set forth herein;
WHEREAS, the Company wishes to establish separate accounts
(hereinafter the "Accounts") with respect to some or all of the Contract Holders
and Participants as determined by the Company prior to a Change in Control (as
hereinafter defined in Section 2.3(d)(iv)) in order to provide a source of
payments as such may be required under the terms of the agreements between the
Company and each of the Contract Holders and under the Deferred Compensation
Plan;
WHEREAS, except as may be expressly provided in this Agreement,
amounts allocated to each separate Account, as determined by the Company from
time to time in its sole discretion, and the earnings attributed thereto shall
be used by the Trustee solely in satisfaction of the liabilities of the Company
with respect to the Contract Holder
<PAGE>2
or Participant for whom such separate Account has been established and the
expenses of administering the trust, established herein, and such utilization
shall be in accordance with the procedures set forth herein;
WHEREAS, the Company wishes to establish a separate account with
respect to all amounts that are contributed hereunder by the Company which are
not allocated by the Company at the time of such contribution to the Account of
an individual Contract Holder or Participant (the "General Account");
WHEREAS, the Trust is intended to be a "grantor trust" with the corpus
and income of the Trust treated as assets and income of the Company for federal
income tax purposes pursuant to Sections 671 through 678 of the Internal Revenue
Code of 1986 (the "Code"); as amended;
WHEREAS, the Company intends that the assets of the Trust will be
subject to the claims of creditors of the Company as provided in Article II;
WHEREAS, the Trustee is not a party to any of the Contracts or the
Deferred Compensation Plan and makes no representations with respect thereto,
and all representations and recitals with respect to the Contracts or the
Deferred Compensation Plan shall be deemed to be those of the Company.
NOW, THEREFORE, in consideration of the premises and mutual and
independent promises herein, the parties hereto covenant and agree as follows:
ARTICLE I
_________
1.1 The Company hereby establishes with the Trustee a trust
consisting of such sums of money and such property acceptable to the Trustee as
shall from time to time be paid or delivered to the Trustee and the earnings and
profits thereon. All such money and property, all investments made therewith
and proceeds thereof, less the
<PAGE>3
payments or other distributions which, at the time of reference, shall have been
made by the Trustee, as authorized herein, are referred to herein as the "Fund"
and shall be held by the Trustee, IN TRUST, in accordance with the provisions of
this Agreement.
1.2 The Trustee shall hold, manage, invest and otherwise administer
the Fund pursuant to the terms of this Agreement. The Trustee shall be
responsible only for contributions actually received by it hereunder. The
amount of each contribution by the Company to the Fund shall be determined in
the sole discretion of the Company and the Trustee shall have no duty or
responsibility with respect thereto.
1.3 The Independent Contractor (as hereinafter in Section 3.1
defined) shall maintain in an equitable manner a separate Account for each
Contract Holder and Participant in which it shall keep a separate record of the
amount of the fund allocated to such Contract Holder or Participant. The
Company shall certify to the Trustee and the Independent Contractor at the time
of each contribution to the Fund the amount of such contribution to be allocated
to each Account. Provided, however, that following a Change in Control, the
Company may only allocate contributions to either the General Account or to
Accounts which were established prior to the Change in Control. Any amount
contributed by the Company that is not so certified shall be allocated to the
General Account.
1.4 The Company may contribute to the Fund an irrevocable letter of
credit (hereinafter referred to as a "L/C"). The following provisions shall be
applicable to any such L/C:
(a) the L/C shall expire no sooner than one (1) year from the
date of issuance,
<PAGE>4
(b) the Company shall continue to maintain such L/C in effect
until it is replaced by cash or another irrevocable L/C or this Agreement
terminates pursuant to Article IX, whichever occurs first,
(c) the Company shall renew or replace such L/C at least thirty
(30) days before its expiration for an additional period of one (1) year,
(d) if such L/C, or any renewal thereof, is not renewed or
replaced by a L/C delivered to the Trustee at least thirty (30) days before the
expiration of the predecessor L/C, the Trustee may draw down the full amount of
such L/C and hold the proceeds pursuant to the terms of this Agreement;
provided, however, that in the event the Company is unable to renew such L/C at
least thirty (30) days prior to the expiration of the predecessor L/C at a cost
equal to or less than twenty-five (25) basis points over the current annual cost
of such L/C, and the Trustee with reasonable diligence is unable to identify a
bank (within the definition of Section 1.4(h)) that will replace such L/C at a
cost equal to or less than twenty-five (25) basis points over the current annual
cost of such L/C, then the Trustee shall not draw down the amount of such L/C as
provided in this Section 1.4(d),
(e) the Trustee may also draw down on such L/C at any time the
Trustee determines the proceeds of such L/C are necessary to allow the Trustee
to fulfill its obligations under this Agreement,
(f) the proceeds of such L/C shall be available to the Trustee
upon the Trustee's presentation of its sight draft,
(g) the Company may, at any time, replace such L/C with another
irrevocable L/C having substantially similar terms, or with an equal amount of
cash, or any combination thereof,
<PAGE>5
(h) any L/C shall be issued by a bank (including the Trustee) with
assets in excess of $2 billion and net worth in excess of $100 million, shall be
reasonably acceptable to the Trustee, and shall be in a form as shall be
reasonably acceptable to the Trustee.
1.5 The Trustee, for investment purposes only, may commingle all of
the assets of the Fund and treat them as a single fund, but the records of the
Independent Contractor at all times shall show the percentages of the Trust
allocable to each Account and to the General Account. The Fund shall be
revalued by the Trustee as of the last business day of each calendar quarter at
current market values, as determined by the Trustee. The Independent Contractor
shall allocate any increase or decrease in the current market value of the Fund,
as determined by the Trustee, pro-rata to all of the Accounts and to the General
Account in proportion to the balance of the assets allocated thereto as of the
last business day of the previous calendar quarter.
ARTICLE II
__________
2.1 Notwithstanding any provision in this Agreement to the contrary,
if at any time while the Trust is still in existence the Company becomes
insolvent (as defined herein), the Trustee shall upon written notice thereof
from the Company's Board of Directors, Chairman of the Board or Chief Executive
Officer suspend the payment of all amounts from the Fund and shall thereafter
hold the Fund in suspense for the benefit of the creditors of the Company until
it receives a court order directing the disposition of the Fund; provided,
however, the Trustee may deduct or continue to deduct its fees and expenses and
other expenses of the Trust, including taxes and the Independent Contractor's
fees and expenses, pending the receipt of such court order. The Company shall
be considered to be insolvent if (a) a final judicial determination is entered
that the Company is unable to pay its debts as such debts mature or (b) there
shall have been filed by or against the Company in any court or other tribunal
either of the United States or of any State or of any other authority now or
hereafter exercising jurisdiction, a petition in
<PAGE>6
bankruptcy or insolvency proceedings or for reorganization or for the
appointment of a receiver or trustee of all or substantially all of the
Company's property under the present or any future Federal bankruptcy code or
any other present or future applicable Federal, State or other bankruptcy or
insolvency statute or law. By its approval and execution of this Agreement, the
Company represents and agrees that its Board of Directors and Chairman of the
Board and Chief Executive Officer, as from time to time acting, shall have the
fiduciary duty and responsibility on behalf of the Company's creditors to give
to the Trustee prompt written notice of any event of the Company's insolvency
and the Trustee shall be entitled to rely thereon to the exclusion of all
directions or claims to make payments thereafter made. Absent such notice, the
Trustee shall have no responsibility for determining whether or not the Company
has become insolvent.
2.2 The Company represents and agrees that the Trust established
under this Agreement does not fund and is not intended to fund its obligations
under the Contracts, the Deferred Compensation Plan or any other employee
benefit plan or program of the Company. Such Trust is and is intended to be a
depository arrangement with the Trustee for the setting aside of cash and other
assets of the Company as and when it so determines in its sole discretion for
the meeting of part or all of its future contractual obligations to some or all
of the Contract Holders and Participants. Contributions by the Company to the
Trust shall be in amounts determined solely by the Company and shall be in
respect of only those Contract Holders and Participants selected prior to a
Change in Control by the Company from time to time as it determines. The
purpose of this Trust is to provide a fund from which the Company's obligations
under the Contracts and Deferred Compensation Plan may be payable and as to
which Contract Holders and Participants with Accounts hereunder may, by
exercising the procedures set forth herein, have access to some or all of the
amounts due them under the Contracts and the Deferred Compensation Plan as such
become due without having the payment of such amounts subject to the
administrative control of the Company unless the Company becomes insolvent as
defined in Section 2.1. The Company further represents that neither the
Contracts nor the Deferred Compensation Plan are part of and do not constitute a
<PAGE>7
qualified plan under Section 401(a) of the United States Internal Revenue Code
and therefore the Contracts and Deferred Compensation Plan are not subject to
any of the Code requirements applicable to tax-qualified plans.
2.3 Amounts paid or delivered by the Company to the Trustee pursuant
to Section 1.1 shall not revert to the Company except as provided below:
(a) Upon the satisfaction of all liabilities of the Company to
Contract Holders and Participants for whom Accounts have been established, any
assets of the Fund then remaining may be distributed to the Company as per its
instructions as provided in Section 3.6 or
(b) Upon termination of the Trust as provided in Section 9.1,
the Fund may be distributed to the Company in accordance with Section 9.2.; or
(c) Upon the insolvency of the Company (as determined in Section
2.1), the assets of the Fund shall be distributed in accordance with the
provisions of Section 2.1; or
(d) Within six (6) months after the payment or delivery by the
Company of any amounts to the Trustee pursuant to Section 1.1, the Company may
request that any portion of such amounts be returned to the Company (whether
affecting the Accounts of all or any specified Contract Holders or
Participants). Such a request shall be honored by the Trustee only if at the
date of such request, the Board of Directors of the Company is made up of
"Continuing Directors" (as defined below). Further, within the original six (6)
month period during which the Continuing Directors may request a return to the
Company of amounts paid or delivered to the Trustee pursuant to Section 1.1, the
Continuing Directors may request a one time extension of such period for an
additional six months.
<PAGE>8
For purposes of this Agreement, the following terms have the meaning indicated:
(i) "Acquiring Person" shall mean any person who is a
Beneficial Owner of 20% or more of the outstanding shares of Common
Stock or 20% or more of the outstanding shares of Voting Stock of the
Company; provided, however, that the term "Acquiring Person" shall not
include the Company or any wholly-owned subsidiary of the Company or
any employee benefit plan established by any of them and either in
effect on the date of this Agreement or hereafter approved by the
Continuing Directors. For purposes of this subsection (i) in
determining the percentage of the outstanding shares of Common Stock
or Voting Stock of the Company with respect to which a person is the
Beneficial Owner, all shares as to which such person is deemed the
Beneficial Owner shall be deemed outstanding.
(ii) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Securities
Exchange Act of 1934, as in effect on the date of this Agreement;
provided, however, that the Company shall, for purposes of this
definition, be deemed to be the "registrant", as such term is used in
such Rule.
(iii) A person shall be deemed the "Beneficial Owner", and to
have "Beneficial Ownership", of any securities as to which such person
or any of such person's Affiliates or Associates is or may be deemed
to be the beneficial owner pursuant to Rule 13d-3 under the Securities
Exchange Act of 1934, as in effect on the date of this Agreement, as
well as any securities as to which such person or any of such person's
Affiliates or Associates has the right to become Beneficial Owner
(whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or
understanding, or upon the exercise of
<PAGE>9
conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a person shall not be deemed the
"Beneficial Owner", or to have "Beneficial Ownership", of any security
(A) solely because such security has been tendered pursuant to a
tender or exchange offer made by such person or any of such person's
Affiliates or Associates until such tendered security is accepted for
purchase or exchange, (B) solely because such person or any of such
person's Affiliates or Associates has or shares the power to vote or
direct the voting of such security pursuant to a revocable proxy given
in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable rules and regulations of
the Securities Exchange Act of 1934, except if such power (or the
arrangements relating thereto) is then reportable under Item 6 of
Schedule 13D under the Securities Exchange Act of 1934 ( or any
similar provision of a comparable or successor report) or (C) held for
or pursuant to the terms of any employee stock ownership or other
employee benefit plan of the Company or a wholly-owned subsidiary of
the Company and either in effect on the date of this Agreement or
hereafter approved by the Continuing Directors.
(iv) "Change in Control" means the occurrence of either (1)
a transaction which has required the affirmative vote of holders of at
least 80% of the outstanding shares of capital stock of the Company
regularly entitled to vote in the election of the directors of the
Company by reason of Article Seven of the Company's Certificate of
Incorporation, or (2) the acquisition by any person, partnership,
corporation or other organization, or by any group of two or more
thereof who are affiliates (as defined by Rule 405 under the
Securities Act of 1933) or who are acting in concert in respect of
such acquisition of more than 25% of such outstanding shares of such
capital stock, if the Company has opposed an acquisition of shares of
the Company by such person, partnership, corporation or other
<PAGE>10
organization or group before any insurance regulatory authority whose
approval of such acquisition was required. Provided, however, that an
event described in (1) or (2) above shall not constitute a Change In
Control if within 10 days of such event the Continuing Directors
provide the Trustee with a resolution expressly stating that such
event shall not constitute a Change In Control for the purposes of
this Agreement.
(v) "Continuing Directors" shall mean those individuals who
constitute the Board of Directors of the Company on the date of this
Agreement and any individual becoming a director subsequent to the
date of this Agreement whose election or nomination for election by
the Company's shareholders is approved by a vote of at least six
Continuing Directors who constitute not less than three-quarters of
the directors comprising the then Continuing Directors, either by a
specific vote or by approval of the proxy statement of the Company in
which such individual is named as a nominee for director, without
objection to such nomination, provided that no person shall under any
circumstances be considered a Continuing Director from and after such
time as such person is an Acquiring Person, an Affiliate or Associate
of an Acquiring Person, or a nominee or representative of any thereof.
References to an approval or other act of Continuing Directors shall
mean approvals given or actions authorized and/or taken both (A) by
the Board of Directors of the Company (or any legal successor thereto)
of which at the time not less than eight directors constituting not
less than two-thirds of the members are Continuing Directors and (B)
by not less than six Continuing Directors constituting at least three-
fourths of all then Continuing Directors.
(vi) "Voting Stock" shall mean shares of capital stock of
the Company entitled to vote generally in the election of the
directors of the Company.
<PAGE>11
ARTICLE III
___________
3.1 By its acceptance of this Trust the Trustee hereby agrees to the
designation by the Company of KPMG Peat Marwick as the Company's independent
contractor (the "Independent Contractor") under this Agreement. Provided,
however, that the Trustee conditions its acceptance of such Independent
Contractor upon the Independent Contractor's execution of the Form of
Acknowledgment and Acceptance, or a similar form acceptable to both the Company
and the Trustee, set forth in Exhibit A of this Agreement. It is herein
recognized that said Independent Contractor is also acting as the independent
consulting actuary of the Company and that the Trustee shall have no
responsibility hereunder for the continued retention of KPMG Peat Marwick and/or
any responsibility assigned to said Independent Contractor or its performance
thereof so long as said firm continues to be the Company's independent
consulting actuary. In the event the Company replaces or no longer uses said
firm as its independent consulting actuary, the Trustee in its sole discretion
may, but need not, designate a new Independent Contractor from the list set
forth in Exhibit B of this Agreement or may continue to use the same Independent
Contractor; or in the event said firm does not accept its designation as
Independent Contractor or accepts said designation and subsequently resigns, the
Trustee shall designate another entity from the list set forth in Exhibit B of
this Agreement to be the Independent Contractor, provided however, that any
Independent Contractor appointed by the Trustee shall be independent of the
Company. The Company shall pay or reimburse the Trustee for all fees and
expenses of any Independent Contractor appointed by the Trustee. The Company
shall indemnify and hold the Trustee harmless for any actions or omissions of
any Independent Contractor and shall indemnify and hold the Independent
Contractor harmless for any actions or omissions of the Trustee. The
Independent Contractor shall be paid for its services on an hourly basis at
rates comparable to the rates that the Independent Contractor charges for
comparable services to its other clients.
<PAGE>12
3.2 Except for the records dealing solely with the Fund and its
investment, which shall be maintained by the Trustee, the Independent Contractor
shall maintain all the records of Contract Holders and Participants contemplated
by this Agreement, including the maintenance of the separate Accounts of each
Contract Holder and Participant under this Agreement and the maintenance of the
General Account. All such records shall be made available promptly on request
of the Trustee of the Company. In the event of a Change in Control the
Independent Contractor shall also be responsible for information with respect to
payments, if any, to Contract Holders and Participants and shall perform such
other duties and responsibilities as the Company or the Trustee determines is
necessary or advisable to achieve the objectives of this Agreement.
3.3 Upon the establishment of this Trust or as soon thereafter as
practicable, the Company shall furnish to the Independent Contractor and to the
Trustee all of the information necessary to determine the amounts payable to or
with respect to each Contract Holder or Participant (hereinafter referred to as
the "Contract Holder and Participant Data"). Notwithstanding the occurrence of
a Change in Control, the Company shall regularly, at least annually, furnish
revised updated Contract Holder and Participant Data to the Independent
Contractor. In the event the Company refuses or neglects to provide updated
Contract Holder or Participant information, as contemplated herein, the
Independent Contractor shall be entitled to rely upon the most recent
information furnished to it by the Company.
3.4 Prior to a Change in Control, upon the direction of the Company
the Independent Contractor shall prepare a certification (a "Payment
Certification") to the Trustee that the Company's obligations to a Contract
Holder or Participant have become payable. Notwithstanding any other provisions
of this Agreement, after a Change in Control upon the proper application of a
Contract Holder or Participant, the Independent Contractor shall, without
direction from the Company, prepare a Payment Certification to the Trustee,
based upon the most recent Contract Holder and Participant Data furnished to the
Independent Contractor prior to the Change in Control and any supplemental
<PAGE>13
information furnished to the Independent Contractor by a Contract Holder or
Participant upon which the Independent Contractor may reasonably rely, that the
Company's obligations to the Contract Holder or Participant have become payable.
In the event that the Trustee (a) suspends payments from the Fund pursuant to
Section 2.1, and (b) pursuant to a court order as required by Section 2.1,
subsequently resumes all of its duties and responsibilities under this
Agreement, the Independent Contractor shall prepare a certification (an "Accrued
Payment Certification") of all amounts that would otherwise have been payable to
each Contract Holder or Participant from the Fund during such period of time as
the Trustee suspended payments pursuant to Section 2.1. Each Payment
Certification and each Accrued Payment Certification shall include the amount of
such payments, the manner of payment and the name, address and social security
number of the recipient. Each Payment Certification shall be updated annually.
The Trustee shall be entitled to rely on any Payment Certification or any
Accrued Payment Certification provided by the Independent Contractor, and shall
have no duty to verify the accuracy thereof. Upon the receipt of a Payment
Certification or an Accrued Payment Certification and appropriate federal, state
and local tax withholding information, the Trustee shall commence cash
distributions from the Trust Fund in accordance therewith to the person or
persons so indicated and to the Company with respect to taxes required to be
withheld and the Independent Contractor shall charge the Account established
hereunder for the Contract Holder or Participant. The Independent Contractor
shall furnish a copy of each Payment Certification and each Accrued Payment
Certification to the Contract Holder, the Participant or the Participant's
beneficiary for which such certification has been prepared. The Company shall
have full responsibility for the payment of all withholding taxes to the
appropriate taxing authority and shall furnish each Contract Holder,
Participant, beneficiary of the Participant and the Independent Contractor with
the appropriate tax information form evidencing such payment and the amount
thereof.
3.5 Notwithstanding any provision in this Agreement to the contrary,
in the event the Trustee in its sole discretion reasonably disagrees with the
accuracy or propriety of any Payment Certification or any Accrued Payment
Certification, the
<PAGE>14
Trustee, if unable to resolve such disagreement with the Independent Contractor,
may apply to a court of appropriate jurisdiction for judicial review of such
Payment Certification or Accrued Payment Certification. Pending the resolution
of any disagreement with the Independent Contractor with regard to the accuracy
or propriety of any Payment Certification or any Accrued Payment Certification,
the Trustee shall not distribute any amount from the Fund pursuant to such
Payment Certification or Accrued Payment Certification. The Trustee shall use
its reasonable best efforts to promptly resolve any such disagreement that it
may have with the Independent Contractor.
3.6 All amounts payable from the Fund to a Contract Holder or
Participant shall be paid solely from the account of such Contract Holder or
Participant. Upon the satisfaction of all Company liabilities to a Contract
Holder or Participant for whom an Account has been established hereunder, the
Independent Contractor shall prepare a certification to the Trustee and to the
Company showing the balance, if any, remaining in such Contract Holder's or
Participant's Account. Such balance from a Participant's Account shall be
allocated first among Participant Accounts and, if the liability of the Company
to all Participants has been satisfied, the balance, if any, shall be allocated
among the Contract Holders' Accounts. Similarly, any Balance from a Contract
Holder's Account shall be allocated first among the Accounts of Contract Holders
and, if the liability of the Company to all Contract Holders has been satisfied,
the balance, if any, shall be allocated among the Participants' Accounts. Such
balance, whether divided among the Contract Holders or the Participants, shall
be reallocated ratably by the Independent Contractor (using the information set
forth on the most recent estimated statement of amounts payable under the
Contracts or under the Deferred Compensation Plan prepared by the Independent
Contractor pursuant to Section 3.3) to the Accounts of Contract Holders or
Participants who at such time have Contracts in effect or interests in the
Deferred Compensation Plan (including Accounts which may have previously been
reduced to a zero balance) in the ratio that liabilities in respect of each such
Contract Holder under the Contracts or Participant under the Deferred
Compensation Plan bear to the total liabilities to all such Contract Holders or
Participants. Upon the satisfaction of
<PAGE>15
all liabilities of the Company to all Contract Holders and Participants for whom
Accounts have been established hereunder, the Independent Contractor shall
prepare a certification to the Trustee and to the Company, and the Trustee upon
receipt of such certification shall transfer all of the assets of the Fund to
the trust established between the Company and Trustee, dated September 25, 1990,
with regard to the Company's Supplemental Retirement Plan and as amended with
regard to its Supplemental Employee Savings and Investment Plan (the "SRIP
Trust"). Provided, however, that if the SRIP Trust has been terminated, upon
receiving the certification referred to in the previous sentence, the Trustee
shall thereupon hold or distribute the Fund in accordance with the written
instructions of the Company. The Trustee and the Independent Contractor shall
have no responsibility for determining whether any Contract Holder or
Participant has died and shall be entitled to rely upon information furnished by
the Company.
3.7 The Company reserves the right to transfer to the Fund paid-up
life insurance, retirement income or annuity policies or contracts on or for the
life of any Contract Holder or Participant for whom an Account has been
established hereunder or, prior to a Change in Control, to direct the Trustee to
purchase any such policies or contracts on or for the life of any such Contract
Holder or Participant out of the amounts allocated to his or her Account. Any
such policy or contract shall be an asset of the Fund subject to the claims of
the Company's creditors in the event of insolvency, as specified in Section 2.1.
The proceeds of any life insurance policy shall upon the death of the insured
Contract Holder be credited to the General Account. The proceeds of any life
insurance policy on a Participant in the Deferred Compensation Plan shall be
distributed to Participant's beneficiary to the extent of any Company liability
under the Deferred Compensation Plan, and thereafter to the General Account.
3.8 Nothing provided in this Agreement shall relieve the Company of
its liabilities to pay the amounts due under the Contracts and Deferred
Compensation Plan except to the extent such liabilities are met by application
of Fund assets. It is the intent of the Company to have each Account
established hereunder treated as a separate
<PAGE>16
trust designed to satisfy in whole or in part the Company's legal liability
under the Contracts in respect of the Contract Holder for whom such Account has
been established, or the Company's legal liability to each Participant under the
Deferred Compensation Plan. The Company, therefore, agrees that all income,
deductions and credits of each such Account belong to it as owner for income tax
purposes and will be included on the Company's income tax returns.
ARTICLE IV
__________
4.1 The Company shall provide the Trustee and the Independent
Contractor with a certified copy of each of the Contracts and the Deferred
Compensation Plan and all amendments thereto and of the resolutions of the Board
of Directors of the Company approving each of the Contracts, the Deferred
Compensation Plan and all amendments thereto, promptly upon their adoption.
After the execution of this Agreement, the Company shall promptly file with the
Trustee and the Independent Contractor a certified list of the names and
specimen signatures of the directors and officers of the Company and any delegee
authorized to act for it. The Company shall promptly notify the Trustee and the
Independent Contractor of the addition or deletion of any person's name to or
from such list, respectively. Until receipt by the Trustee and/or the
Independent Contractor of notice that any person is no longer authorized so to
act, the Trustee or the Independent Contractor may continue to rely on the
authority of the person. All certifications, notices and directions by any such
person or persons to the Trustee or the Independent Contractor shall be in
writing signed by such person or persons. The Trustee and the Independent
Contractor may rely on any such certification, notice or direction purporting to
have been signed by or on behalf of such person or persons that the Trustee or
the Independent Contractor believes to have been signed thereby. The Trustee
and the Independent Contractor may also rely on any certification, notice or
direction of the Company that the Trustee or the Independent Contractor believes
to have been signed by a duly authorized officer or agent of the Company. The
Company shall be responsible for keeping accurate books and records with respect
to the
<PAGE>17
employees of the Company, their compensation and their rights and interests
under the Contracts and the Deferred Compensation Plan.
4.2 The Company shall make its contributions to the Trust in
accordance with appropriate corporate action and the Trustee shall have no
responsibility with respect thereto, except to add such contributions to the
Fund.
4.3 The Company shall indemnify and hold harmless the Trustee for any
liability or expenses, including without limitation advances for or prompt
reimbursement of reasonable fees and expenses of counsel and other agents
retained by it, incurred by the Trustee with respect to holding, managing,
investing or otherwise administering the Fund, other than by its negligence or
willful misconduct.
4.4 The Company shall indemnify and hold harmless the Independent
Contractor for any liability or expenses, including without limitation advances
for or prompt reimbursement of reasonable fees and expenses of counsel and other
agents retained by it, incurred by the Independent Contractor with respect to
keeping the records for Contract Holders' and Participants' Accounts, reporting
thereon to Contract Holders and Participants, certifying payment information to
the Trustee, determining the status of Accounts and payments hereunder and
otherwise carrying out its obligations under this Agreement, other than those
resulting from the Independent Contractor's negligence or willful misconduct.
ARTICLE V
_________
5.1 The Trustee shall not be liable in discharging its duties
hereunder, including without limitation its duty to invest and reinvest the
Fund, if it acts in good faith and in accordance with the terms of this
Agreement and any applicable Federal or state laws, rules or regulations.
<PAGE>18
5.2 Subject to investment guidelines agreed to in writing from time
to time prior to a Change in Control, by the Company and the Trustee, the
Trustee shall have the power in investing and reinvesting the Fund in its sole
discretion:
(a) To invest and reinvest in any property, real, personal or
mixed, wherever situated and whether or not productive of income or consisting
of wasting assets, including without limitation, common and preferred stocks,
bonds, notes, debentures (including convertible stocks and securities but not
including any stock or security of the Trustee, the Company or any affiliate
thereof), leaseholds, mortgages, certificates of deposit or demand or time
deposits (including any such deposits with the Trustee), shares of investment
companies and mutual funds, interests in partnerships and trusts, insurance
policies and annuity contracts, and oil, mineral or gas properties, royalties,
interests or rights, without being limited to the classes of property in which
trustees are authorized to invest by any law or any rule of court of any state
and without regard to the proportion any such property may bear to the entire
amount of the Fund;
(b) To invest and reinvest all or any portion of the Fund
collectively through the medium of any common, collective or commingled trust
fund that may be established and maintained by the Trustee, subject to the
instrument or instruments establishing such trust fund or funds and with the
terms of such instrument or instruments, as from time to time amended, being
incorporated into this Agreement to the extent of the equitable share of the
Fund in any such common, collective or commingled trust fund;
(c) To retain any property at any time received by the Trustee;
(d) To sell or exchange any property held by it at public or
private sale, for cash or on credit, to grant and exercise options for the
purchase or exchange thereof, to exercise all conversion or subscription rights
pertaining to any such
<PAGE>19
property and to enter into any covenant or agreement to purchase any property in
the future;
(e) To participate in any plan of reorganization, consolidation,
merger, combination, liquidation or other similar plan relating to property held
by it and to consent to or oppose any such plan or any action thereunder or any
contract, lease, mortgage, purchase, sale or other action by any person;
(f) To deposit any property held by it with any protective,
reorganization or similar committee, to delegate discretionary power thereto,
and to pay part of the expenses and compensation thereof and any assessments
levied with respect to any such property so deposited;
(g) To extend the time of payment of any obligation held by it;
(h) To hold uninvested any moneys received by it, without
liability for interest thereon, until such moneys shall be invested, reinvested
or disbursed;
(i) To exercise all voting or other rights with respect to any
property held by it and to grant proxies, discretionary or otherwise;
(j) For the purposes of the Trust, to borrow money from others,
to issue its promissory note or notes therefor, and to secure the repayment
thereof by pledging any property held by it;
(k) To manage, administer, operate, insure, repair, improve,
develop, preserve, mortgage, lease or otherwise deal with, for any period, any
real property or any oil, mineral or gas properties, royalties, interests or
rights held by it directly or through any corporation, either alone or by
joining with others, using other Trust assets for any such purposes, to modify,
extend, renew, waive or otherwise adjust
<PAGE>20
any provision of any such mortgage or lease and to make provision for
amortization of the investment in or depreciation of the value of such property;
(l) To employ suitable agents and counsel, who may be counsel to
the Company or the Trustee, and to pay their reasonable expenses and
compensation from the Fund to the extent not paid by the Company;
(m) To cause any property held by it to be registered and held
in the name of one or more nominees, with or without the addition of words
indicating that such securities are held in a fiduciary capacity, and to hold
securities in bearer form;
(n) To settle, compromise or submit to arbitration any claims,
debts or damages due or owing to or from the Trust, respectively, to commence or
defend suits or legal proceedings to protect any interest of the Trust, and to
represent the Trust in all suits or legal proceedings in any court or before any
other body or tribunal; provided, however, that the Trustee shall not be
required to take any such action unless it shall have been indemnified by the
Company to its reasonable satisfaction against liability or expenses it might
incur therefrom;
(o) To organize under the laws of any state a corporation or
trust for the purpose of acquiring and holding title to any property which it is
authorized to acquire hereunder and to exercise with respect thereto any or all
of the powers set forth herein; and
(p) Generally, to do all acts, whether or not expressly
authorized, that the Trustee may deem necessary or desirable for the protection
of the Fund.
Notwithstanding the foregoing, the Trustee shall upon the written
direction of the Company prior to a Change in Control, invest all or part of the
amount to
<PAGE>21
the credit of any Contract Holder's or Participant's Account in a commercial
annuity, retirement income or life insurance policy or contract selected by the
Company and the Trustee shall have no responsibility for any such investment
other than as owner and custodian thereof.
Notwithstanding the foregoing, after a Change in Control, the
Trustee shall follow the investment guidelines agreed to by the Company and the
Trustee as in effect immediately prior to the Change in Control.
5.3 No person dealing with the Trustee shall be under any obligation
to see to the proper application of any money paid or property delivered to the
Trustee or to inquire into the Trustee's authority as to any transaction. The
Independent Contractor's obligations are limited solely to those explicitly set
forth herein and the Independent Contractor shall have no responsibility,
authority or control, direct or indirect, over the maintenance or investment of
the Fund and shall have no obligation in respect of the Trustee or the Trustee's
compliance with the Independent Contractor's certifications to the Trustee.
5.4 The Trustee shall distribute cash or property from the Fund in
accordance with Article III hereof.
The Trustee may make any distribution required hereunder by
mailing its check for the specified amount, or delivering the specified
property, to the person to whom such distribution or payment is to be made, at
such address as may have been last furnished to the Trustee, or if no such
address shall have been so furnished, to such person in care of the Company, or
(if so directed by the Company) by crediting the account of such person or by
transferring funds to such person's account by bank or wire transfer.
<PAGE>22
ARTICLE VI
__________
6.1 The Company shall pay any Federal, state or local taxes on the
Fund, or any part thereof, and on the income therefrom.
6.2 The Company shall pay to the Trustee its reasonable expenses for
the management and administration of the Fund, including without limitation
advances for or prompt reimbursement of reasonable expenses and compensation of
counsel and other agents employed by the Trustee, all other reasonable and
necessary expenses of managing and administering the Trust that are not paid by
the Company including, but not limited to, investment management fees, computer
time charges, data retrieval and input costs, and charges for time expended by
personnel of the Trustee in fulfilling the Trustee's duties. The Company shall
also pay to the Trustee reasonable compensation for its services as Trustee
hereunder, the amount of which shall be agreed upon from time to time by the
Company and the Trustee in writing; provided, however, that if the Trustee
forwards an amended compensation schedule to the Company requesting its
agreement thereto and the Company fails to object thereto within thirty (30)
days of its receipt, the amended compensation schedule shall be deemed to be
agreed upon by the Company and the Trustee. Such expenses and compensation
shall be a charge on the Fund and shall constitute a lien in favor of the
Trustee until paid by the Company. All such expenses and compensation charged
to the Fund, unless otherwise paid by the Company, shall be applied against the
General Account. In the event that the assets allocated to the General Account
are entirely depleted, all such expenses and compensation charged to the Fund
shall be applied pro-rata against all Accounts in proportion to the assets
allocated thereto. Notwithstanding any other provision of this Section 6.2, to
the extent that the Trustee, in its discretion, decides that an expense is
specifically attributable to one or more specified Accounts such expense shall
be charged to such specified Accounts in such proportion as the Trustee decides.
Prior to allocating any particular expense to a specific Account, the Trustee
shall provide notice of its intention to so allocate to the Company, the
<PAGE>23
Independent Contractor and the Contract Holder or Participant for whom such
Account was established.
ARTICLE VII
___________
7.1 The Trustee shall maintain records with respect to the Fund that
show all its receipts and disbursements hereunder. The records of the Trustee
with respect to the Fund shall be open to inspection by the Company, or its
representatives, at all reasonable times during normal business hours of the
Trustee and may be audited not more frequently than once each fiscal year by an
independent certified public accountant engaged by the Company; provided,
however, the Trustee shall be entitled to additional compensation from the
Company in respect of audits or auditors' requests which the Trustee determines
to exceed the ordinary course of the usual scope of such examinations of its
records.
7.2 Within a reasonable time after the close of each fiscal year of
the Company (or, in the Trustee's discretion, at more frequent intervals), or of
any termination of the duties of the Trustee hereunder, the Trustee shall
prepare and deliver to the Company a statement of transactions reflecting its
acts and transactions as Trustee during such fiscal year, portion thereof or
during such period from the close of the last fiscal year or last statement
period to the termination of the Trustee's duties, respectively, including a
statement of the then current value of the Fund. The Independent Contractor
shall also prepare and furnish to the Company a statement of the then current
value of each Account and of the General Account. Any such statement shall be
deemed an account stated and accepted and approved by the Company, and the
Trustee shall be relieved and discharged, as if such account had been settled
and allowed by a judgment or decree of a court of competent jurisdiction, unless
protested by written notice to the Trustee within sixty (60) days of receipt
thereof by the Company.
<PAGE>24
The Trustee shall have the right to apply at any time to a court of
competent jurisdiction for judicial settlement of any account of the Trustee not
previously settled as herein provided or for the determination of any question
of construction or for instructions regarding this Agreement. In any such
action or proceeding it shall be necessary to join as parties only the Trustee
and the Company (although the Trustee may also join such other parties as it may
deem appropriate), and any judgment or decree entered therein shall be
conclusive.
ARTICLE VIII
____________
8.1 Prior to a Change in Control the Trustee may resign at any time
by delivering written notice thereof to the Company; provided, however, that no
such resignation shall take effect until the earlier of (i) sixty (60) days from
the date of delivery of such notice to the Company or (ii) the appointment of a
successor trustee. Following a Change in Control, the Trustee may resign only
under one of the following circumstances:
(a) The Trustee is no longer in the business, or is actively in
the process of removing itself from the business, of acting as trustee
for employee benefit plans.
(b) The Trustee determines that a conflict of interest exists
which would prohibit it from fulfilling its duties under this
Agreement in an ethically proper manner, and a law firm (appointed by
the President of the Association of the Bar of the City of New York,
or by the American Arbitration Association, if the President of the
Association of the Bar of the City of New York fails to so appoint
within thirty days of a request for such appointment, or notifies the
Trustee that it is unable to make such appointment) concurs with the
Trustee. The Trustee shall use its best efforts to avoid the creation
of such a conflict. The decision of such law
<PAGE>25
firm shall be binding, but may be appealed in the same manner, and
under the same conditions, as if it were made by an arbitrator. All
costs incurred by the Trustee in connection with obtaining or
appealing such a decision shall be reimbursable expenses pursuant to
Article VI hereof.
(c) The assets of the Fund have been exhausted or are
insufficient to pay accrued and reasonably anticipated fees and
expenses of the Trustee hereunder, the Company has refused voluntarily
to pay the Trustee's accrued fees and expenses as required pursuant to
Section 6.2 and the Trustee has been unsuccessful in obtaining a court
order requiring the Company to make such payments or has been unable
to collect on a judgment for such fees and expenses.
Notwithstanding the above, the Trustee may resign for reasons set
forth in (a) or (b) only if it has obtained the agreement of a bank with assets
in excess of $2 billion and net worth in excess of $100 million to replace it as
trustee under the terms of this Agreement. The decision rendered under (b), if
that is the reason for the Trustee's resignation, may expressly excuse the
Trustee from this requirement. In any event, the Trustee shall continue to be
custodian of the Trust assets until the new trustee is in place, and the Trustee
shall be entitled to expenses and fees through the later of the effective date
of its resignation as Trustee and the end of its custodianship of the assets of
the Fund.
8.2 Prior to a Change in Control the Trustee may be removed at any
time by the Company, pursuant to a resolution of the Board of Directors of the
Company, upon delivery to the Trustee of a certified copy of such resolution and
sixty (60) days' written notice of such removal, unless such notice period is
waived in whole or in part by the Trustee. Following a Change in Control the
Trustee may be removed at any time by the affirmative vote of two-thirds of the
Contract Holders and Participants voting together on a per capita basis who were
Contract Holders or Participants on the date of the
<PAGE>26
occurrence of the Change in Control, and sixty (60) days' written notice of such
removal, unless such notice period is waived in whole or in part by the Trustee.
8.3 Upon the resignation or removal of the Trustee, U.S. Trust
Company shall be appointed as successor trustee. In the event that U.S. Trust
Company refuses to accept its appointment as successor trustee pursuant to this
Section 8.3, Chase Manhattan Bank, N.A. shall be appointed as successor trustee.
In the event that Chase Manhattan Bank, N.A. refuses to accept its appointment
as successor trustee pursuant to this Section 8.3, a successor trustee shall be
appointed pursuant to Section 8.4. The appointment of a successor trustee
pursuant to this Section 8.3 shall take effect upon the delivery to the Trustee
of a written acceptance by such successor trustee, duly executed thereby. Any
successor trustee shall have all the rights, powers and duties granted the
Trustee hereunder.
8.4 Subject to the provisions of Section 8.3, prior to a Change in
Control, upon the resignation or removal of the Trustee, a successor trustee
shall be appointed by the Company. Subject to the provisions of Section 8.3,
following a Change in Control, upon the resignation of the Trustee, a successor
trustee shall be appointed by the Trustee, and upon the removal of the Trustee a
successor trustee shall be appointed by the affirmative vote of two-thirds of
the Contract Holders and Participants voting on a per capita basis who held
Contracts or participated in the Deferred Compensation Plan on the date of the
occurrence of the Change in Control. Any successor trustee appointed under this
Section 8.4 shall be chosen from the list of potential successor trustees set
forth in Exhibit C. In the event that all of the potential successor trustees
set forth in Exhibit C refuse to accept an appointment as successor trustee,
then the successor trustee shall be appointed as otherwise provided in this
Section 8.4, and shall be a bank or trust company established under the laws of
the United States or a State within the United States with assets in excess of
$2 billion and net worth in excess of $100 million. The appointment of a
successor trustee pursuant to this Section 8.4 shall take effect upon the
delivery to the Trustee of (a) a written appointment of such successor trustee,
duly executed by the
<PAGE>27
Company, the Trustee, or two-thirds of the Contract Holders, as provided for in
this Section 8.4, and (b) a written acceptance by such successor trustee, duly
executed thereby. Any successor trustee shall have all the rights, powers and
duties granted the Trustee hereunder.
8.5 If, within sixty (60) days of the delivery of the Trustee's
written notice of resignation, a successor trustee shall not have been
appointed, the Trustee may apply to any court of competent jurisdiction for the
appointment of a successor trustee.
8.6 Upon the resignation or removal of the Trustee and the
appointment of a successor trustee, and after the acceptance and approval of its
account, the Trustee shall transfer and deliver the Fund to such successor.
Under no circumstances shall the Trustee transfer or deliver the Fund to any
successor which is not a bank or trust company established under the laws of the
United States or a State within the United States with assets in excess of $2
billion and net worth in excess of $100 million.
ARTICLE IX
__________
9.1 Prior to a Change in Control, the Trust established pursuant to
this Agreement may only be terminated by the affirmative vote of two-thirds of
the Contract Holders and Participants voting on a per capita basis. Following a
Change in Control, the Trust established pursuant to this Agreement may not be
terminated by the Company prior to the satisfaction of all liabilities with
respect to all Contract Holders and Participants. Following a Change in
Control, upon receipt of a written certification from the Independent Contractor
that all liabilities have been satisfied with respect to all Contract Holders
and Participants, the Company pursuant to a resolution of its Board of Directors
may terminate the Trust upon delivery to the Trustee of (a) a certified copy of
such resolution, (b) an original certification of the Independent Contractor
that all such
<PAGE>28
liabilities have been satisfied and (c) a written instrument of termination duly
executed and acknowledged in the same form as this Agreement.
9.2 Prior to a Change in Control, upon the termination of the Trust
in accordance with Section 9.1, the Trustee shall, after the acceptance and
approval of its account, distribute the Fund to the Company. After a Change in
Control, upon the termination of the Trust in accordance with Section 9.1, the
Trustee shall, after the acceptance and approval of its account, transfer all of
the assets of the Fund to the SRIP Trust. Provided, however, that if after a
Change in Control the SRIP Trust has been terminated, upon the termination of
the Trust in accordance with Section 9.1 the Trustee shall distribute the Fund
to the Company. Upon completing such distribution, the Trustee shall be
relieved and discharged. The powers of the Trustee shall continue as long as
any part of the Fund remains in its possession.
ARTICLE X
_________
10.1 This Agreement may be amended, in whole or in part, at any time
and from time to time, by the Company, pursuant to a resolution of the Board of
Directors thereof by delivery to the Trustee of a certified copy of such
resolution and a written instrument duly executed and acknowledged in the same
form as this Agreement, except that the duties and responsibilities of the
Trustee shall not be increased without the Trustee's written consent; provided,
however, any such amendment affecting any Account or the procedures for
distribution thereof shall not become effective until sixty (60) days after a
copy of such amendment has been delivered by registered mail by the Company or
the Independent Contractor to each Contract Holder or Participant for whom an
Account is maintained under this Agreement. In the event the Company, Trustee
or Independent Contractor receives written objections to such amendment from
such person within such sixty (60) day period, such amendment shall be
ineffective and void in respect of the Contract Holder so objecting to the
amendment.
<PAGE>29
ARTICLE XI
__________
11.1 This Agreement shall be construed and interpreted under, and the
Trust hereby created shall be governed by, the laws of the State of New York
insofar as such laws do not contravene any applicable Federal laws, rules or
regulations. Nothing in this Agreement shall be construed to subject either the
Trust created hereunder or the Contracts to the Employee Retirement Income
Security Act of 1974, as amended.
11.2 Neither the gender nor the number (singular or plural) of any
word shall be construed to exclude another gender or number when a different
gender or number would be appropriate.
11.3 No right or interest of any Contract Holder or Participant in the
Fund shall be transferable or assignable or shall be subject to alienation,
anticipation or encumbrance, and no right or interest of any Contract Holder in
any Contract or any Participant under the Deferred Compensation Plan, or in the
Fund shall be subject to any garnishment, attachment or execution.
Notwithstanding the foregoing, the Fund shall at all times remain subject to
claims of creditors of the Company in the event the Company becomes insolvent as
provided in Section 2.1.
11.4 The Company agrees that by the establishment of this Trust it
hereby foregoes any judicial review of certifications by the Independent
Contractor as to the amounts payable to any persons hereunder. If a dispute
arises as to the amounts or timing of any such payments or the persons entitled
thereto under the Contracts, the Deferred Compensation Plan or this Agreement,
the Company agrees that such dispute shall be resolved by binding arbitration
proceedings initiated in accordance with the rules of the American Arbitration
Association and that the results of such proceedings shall be conclusive and
shall not be subject to judicial review. It is expressly understood that
pending the resolution of any such dispute payments shall be made and continued
by the Trustee in accordance with the certification of the Independent
Contractor and that the
<PAGE>30
Trustee and the Independent Contractor shall have no liability with respect to
such payments. Provided, however, that the provisions of this Section 11.4 are
subject to the provisions of Section 3.5. The Company also agrees to pay the
entire cost of any arbitration or legal proceeding initiated by it including the
legal fees of the Trustee, the Independent Contractor and the Contract Holder or
Participant regardless of the outcome of any such proceeding and until so paid
the expenses thereof shall be a charge on and lien against the Fund.
11.5 This Agreement shall be binding upon and inure to the benefit of
any successor to the Company or its business as the result of merger,
consolidation, reorganization, transfer of assets or otherwise and any
subsequent successor thereto. In the event of any such merger, consolidation,
reorganization, transfer of assets or other similar transaction, the successor
to the Company or its business or any subsequent successor thereto shall
promptly notify the Trustee in writing of its successorship and furnish the
Trustee and the Independent Contractor with the information specified in Section
4.1 of this Agreement. In no event shall any such transaction described herein
suspend or delay the rights of Contract Holders or Participants hereunder.
11.6 This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which shall together
constitute only one Agreement.
11.7 Communications to the Trustee shall be sent to it at its office
at 450 West 33rd Street, New York, New York 10001, or to such other address as
the Trustee may specify in writing. No communication shall be binding upon the
Trustee until it is received by the Trustee. Communications to the Company
shall be sent to the Company's principal offices or to such other address as the
Company may specify in writing.
<PAGE>31
11.8 In the event any Contract Holder or Participant is determined to
be subject to Federal income tax on any amount to the credit of his Account
under this Agreement prior to the time of payment hereunder, the entire amount
determined to be so taxable shall be distributed by the Trustee to such Contract
Holder or Participant. An amount to the credit of a Contract Holder's or
Participant's Account shall be determined to be subject to Federal income tax
upon the earliest of: (a) a final determination by the United States Internal
Revenue Service addressed to the Contract Holder or Participant which is not
appealed to the courts; (b) a final determination by the United States Tax Court
or any other Federal Court affirming any such determination by the Internal
Revenue Service; or (c) an opinion by counsel chosen by the Company addressed to
the Company and the Trustee, that, by reason of Treasury Regulations, amendments
to the Internal Revenue Code, published Internal Revenue Service rulings, court
decisions or other substantial precedent, amounts to the credit of the Accounts
of Contract Holders or Participants hereunder are subject to Federal income tax
prior to payment. The Company shall undertake to defend, and bear the expense
of, any tax claims described herein which are asserted by the Internal Revenue
Service or by the taxing authorities of any State or locality against any
Contract Holder, Participant or his or her spouse, including the expense of
attorney fees and costs of appeal, and shall have the sole authority to
determine whether or not to appeal any determination made by the Internal
Revenue Service or by any taxing authority of any State or locality or by any
court. The Company agrees to reimburse any Contract Holder or Participant or
his or her spouse for any interest or penalties in respect of Federal, state or
local tax claims hereunder upon receipt of documentation of same. Any
distributions from the Trust Fund to a Contract Holder or Participant under this
Section 11.8 shall be applied in an equitable manner to reduce Company
liabilities to such Contract Holder or Participant; provided, however, that in
no event shall any Contract Holder or Participant have any obligation to return
all or any part of such distribution to the Company if such distribution exceeds
the amount payable under the applicable agreement between the Company and the
Contract Holder or under the Deferred Compensation Plan.
<PAGE>32
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed and their respective corporate seals to be hereto
affixed this day of , .
Attest:
_____________________________ CHEMICAL BANK
Trust Officer
By: /s/ Richard Hauptman
____________________
Richard Hauptman
Vice President
Attest: USLIFE CORPORATION
By: /s/ Christopher S. Ruisi
_____________________________ ________________________
Secretary Christopher S. Ruisi
Vice Chairman and Chief
Administrative Officer
<PAGE>33
EXHIBIT A
_________
ACKNOWLEDGEMENT
AND
ACCEPTANCE
The undersigned hereby acknowledges its receipt of an agreement made
as of the day of between the USLIFE
Corporation and Chemical Bank relating to certain employment contracts entered
into between USLIFE Corporation and a select group of its management employees
and the USLIFE Corporation Deferred Compensation Plan (the "Agreement"). In
addition, the undersigned hereby accepts its appointment as Independent
Contractor under the terms set forth in the Agreement.
Attest: KPMG PEAT MARWICK
________________________________ By ______________________________
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this day of , before me personally came
, to me known, who, being by me duly sworn,
did depose and say that she is one of the partners of the firm of KPMG Peat
Marwick, the firm described in and which executed the foregoing instrument, and
that she signed her name thereto for and on behalf of said firm.
________________________________
Notary Public
<PAGE>34
STATE OF )
: SS.:
COUNTY OF )
On this day of , before me
personally came , to me known,
who, being by me duly sworn, did depose and say that he resides at
, and that he is
of USLIFE
CORPORATION, one of the corporations described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation; and that he signed his name
thereto by like order.
_______________________________
Notary Public
STATE OF )
: SS.:
COUNTY OF )
On this day of , 199 , before me
personally came , to me,
known, who, being by me duly sworn, did depose and say that he resides at
, and that he is a
of Chemical Bank, one
of the corporations described in and which executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to said
instruments is such corporate seal; that it was so affixed by order of the Board
of Directors of said corporation; and that he signed his name thereto by like
order.
_______________________________
Notary Public
<PAGE>35
Amendment
_________
Amendment, effective January 23, 1996, to Trust Agreement dated March 1,
1994, among USLIFE Corporation, Chemical Bank and KPMG Peat Marwick LLP (as
Independent Contractor) establishing a trust to fund certain employment
contracts and the USLIFE Corporation Deferred Compensation Plan.
In accordance with the provisions contained in Section 10.1 of the
Agreement, the language in Section 2.3(d) (iv) is deleted in its entirety and
replaced with the following language:
"Change In Control" means (i) a merger or consolidation to which the
Company is a party and for which the approval of any shareholders of the
Company is required; (ii) any "person" (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended)
becoming the beneficial owner, directly, or indirectly, of securities of
the Company representing 25% or more of the combined voting power of the
Company's then outstanding securities; (iii) a sale or transfer of
substantially all of the assets of the Company; (iv) a liquidation or
reorganization of the Company; or (v) the occurrence of any Flip Over
Transaction or Event, as defined in Section 1.1(j) of the Amended and
Restated Rights Agreement, as amended from time to time prior to the
occurrence of any such transaction or event that otherwise would have
previously been considered a Flip Over Transaction or Event. Provided,
however, that an event described above shall not constitute a Change In
Control if within 10 days of such event the Continuing Directors provide
the Trustee with a resolution expressly stating that such event shall not
constitute a Change In Control for the purpose of the Agreement.
<PAGE>1
Exhibit 10(lxi)
_______________
THIS AGREEMENT, made as of the 1st day of March, 1994 , among USLIFE
Corporation, a New York corporation (the "Company"), Chemical Bank, a New York
corporation (the "Trustee") and KPMG Peat Marwick ("Independent Contractor").
W I T N E S S E T H :
_ _ _ _ _ _ _ _ _ _
WHEREAS, the Company has incurred and expects to continue to incur certain
unfunded retirement income liability to or with respect to certain management
employees pursuant to the terms of the Company's Supplemental Retirement Plan
("Retirement Plan") and the Company's Supplemental Employee Savings and
Investment Plan ("Savings Plan");
WHEREAS, the Company desires to provide additional assurance to some or
all such management employees (the "Participants") and their surviving spouses,
beneficiaries or estates (collectively, the "Beneficiaries") under the
Retirement Plan and the Savings Plan, respectively (hereinafter referred to as
the "Plans") that their unfunded retirement benefit rights under the Plans will
in the future be met or substantially met by application of the procedures set
forth herein;
WHEREAS, the Company wishes to establish separate accounts (hereinafter
the "Accounts") with respect to some or all of the Participants in the Plans as
determined by the Company prior to a Change in Control (as hereinafter defined
in Section 2.3(d) (iv))
<PAGE>2
in order to provide a source of payments as such may be required under the
terms of such Plans;
WHEREAS, except as may be expressly provided in this Agreement, amounts
allocated to each separate Account or Accounts, as determined by the Company
from time to time in its sole discretion, and the earnings attributed thereto
shall be used by the Trustee solely in satisfaction of the liabilities of the
Company with respect to the Participant in the Retirement Plan or Savings Plan
for whom such separate Account or Accounts has been established and the
expenses of administering the trust, established herein, and such utilization
shall be in accordance with the procedures set forth herein;
WHEREAS, the Company wishes to establish a separate account with respect
to all amounts that are contributed hereunder by the Company which are not
allocated by the Company at the time of such contribution to the Account or
Accounts of an individual Participant in either of the Plans (the "General
Account");
WHEREAS, the Trust is intended to be a "grantor trust" with the corpus and
income of the Trust treated as assets and income of the Company for federal
income tax purposes pursuant to Sections 671 through 678 of the Internal
Revenue Code of 1986 (the "Code"); as amended;
WHEREAS, the Company intends that the assets of the Trust will be subject
to the claims of creditors of the Company as provided in Article II;
<PAGE>3
WHEREAS, the Company intends that the existence of the Trust will not
alter the characterization of the Plans as "unfunded" and will not be construed
to provide taxable income to any participant under the Plans prior to actual
payment of benefits thereunder;
WHEREAS, the Trustee is not a party to the Plans and makes no
representations with respect thereto, and all representations and recitals with
respect to the Plans shall be deemed to be those of the Company.
NOW, THEREFORE, in consideration of the premises and mutual and
independent promises herein, the parties hereto covenant and agree as follows:
ARTICLE I
_________
1.1 The Company hereby establishes with the Trustee a trust consisting of
such sums of money and such property acceptable to the Trustee as shall from
time to time be paid or delivered to the Trustee and the earnings and profits
thereon. All such money and property, all investments made therewith and
proceeds thereof, less the payments or other distributions which, at the time
of reference, shall have been made by the Trustee, as authorized herein, are
referred to herein as the "Fund" and shall be held by the Trustee, IN TRUST, in
accordance with the provisions of this Agreement.
<PAGE>4
1.2 The Trustee shall hold, manage, invest and otherwise administer the
Fund pursuant to the terms of this Agreement. The Trustee shall be responsible
only for contributions actually received by it hereunder. The amount of each
contribution by the Company to the Fund shall be determined in the sole
discretion of the Company and the Trustee shall have no duty or responsibility
with respect thereto.
1.3 The Independent Contractor (as hereinafter in Section 3.1 defined)
shall maintain in an equitable manner a separate Account or Accounts for each
Participant under the Plans in which it shall keep a separate record of the
amount of the fund allocated to such Participant. The Company shall certify to
the Trustee and the Independent Contractor at the time of each contribution to
the Fund the amount of such contribution to be allocated to each Account.
Provided, however, that following a Change in Control, the Company may only
allocate contributions to either the General Account or to Accounts which were
established prior to the Change in Control. Any amount contributed by the
Company that is not so certified shall be allocated to the General Account.
1.4 The Company may contribute to the Fund an irrevocable letter of
credit (hereinafter referred to as a "L/C"). The following provisions shall be
applicable to any such L/C:
(a) the L/C shall expire no sooner than one (1) year from the date
of issuance,
<PAGE>5
(b) the Company shall continue to maintain such L/C in effect until
it is replaced by cash or another irrevocable L/C or this Agreement terminates
pursuant to Article IX, whichever occurs first,
(c) the Company shall renew or replace such L/C at least thirty (30)
days before its expiration for an additional period of one (1) year,
(d) if such L/C, or any renewal thereof, is not renewed or replaced
by a L/C delivered to the Trustee at least thirty (30) days before the
expiration of the predecessor L/C, the Trustee may draw down the full amount of
such L/C and hold the proceeds pursuant to the terms of this Agreement;
provided, however, that in the event the Company is unable to renew such L/C at
least thirty (30) days prior to the expiration of the predecessor L/C at a cost
equal to or less than twenty-five (25) basis points over the current annual
cost of such L/C, and the Trustee with reasonable diligence is unable to
identify a bank (within the definition of Section 1.4(h)) that will replace
such L/C at a cost equal to or less than twenty-five (25) basis points over the
current annual cost of such L/C, then the Trustee shall not draw down the
amount of such L/C as provided in this Section 1.4(d),
(e) the Trustee may also draw down on such L/C at any time the
Trustee determines the proceeds of such L/C are necessary to allow the Trustee
to fulfill its obligations under this Agreement,
<PAGE>6
(f) the proceeds of such L/C shall be available to the Trustee upon
the Trustee's presentation of its sight draft,
(g) the Company may, at any time, replace such L/C with another
irrevocable L/C having substantially similar terms, or with an equal amount of
cash, or any combination thereof,
(h) any L/C shall be issued by a bank (including the Trustee) with
assets in excess of $2 billion and net worth in excess of $100 million, shall
be reasonably acceptable to the Trustee, and shall be in a form as shall be
reasonably acceptable to the Trustee.
1.5 The Trustee, for investment purposes only, may commingle all of the
assets of the Fund and treat them as a single fund, but the records of the
Independent Contractor at all times shall show the percentages of the Trust
allocable to each Account and to the General Account. The Fund shall be
revalued by the Trustee as of the last business day of each calendar quarter at
current market values, as determined by the Trustee. The Independent
Contractor shall allocate any increase or decrease in the current market value
of the Fund, as determined by the Trustee, pro-rata to all of the Accounts and
to the General Account in proportion to the balance of the assets allocated
thereto as of the last business day of the previous calendar quarter.
<PAGE>7
ARTICLE II
__________
2.1 Notwithstanding any provision in this Agreement to the contrary, if
at any time while the Trust is still in existence the Company becomes insolvent
(as defined herein), the Trustee shall upon written notice thereof from the
Company's Board of Directors, Chairman of the Board or Chief Executive Officer
suspend the payment of all benefits from the Fund and shall thereafter hold the
Fund in suspense for the benefit of the creditors of the Company until it
receives a court order directing the disposition of the Fund; provided,
however, the Trustee may deduct or continue to deduct its fees and expenses and
other expenses of the Trust, including taxes and the Independent Contractor's
fees and expenses, pending the receipt of such court order. The Company shall
be considered to be insolvent if (a) a final judicial determination is entered
that the Company is unable to pay its debts as such debts mature or (b) there
shall have been filed by or against the Company in any court or other tribunal
either of the United States or of any State or of any other authority now or
hereafter exercising jurisdiction, a petition in bankruptcy or insolvency
proceedings or for reorganization or for the appointment of a receiver or
trustee of all or substantially all of the Company's property under the present
or any future Federal bankruptcy code or any other present or future applicable
Federal, State or other bankruptcy or insolvency statute or law. By its
approval and execution of this Agreement, the Company represents and agrees
that its Board of Directors and Chairman of the Board and Chief Executive
Officer, as from time to time acting, shall have the fiduciary duty and
responsibility on behalf of the Company's creditors to give to the Trustee
<PAGE>8
prompt written notice of any event of the Company's insolvency and the Trustee
shall be entitled to rely thereon to the exclusion of all directions or claims
to pay benefits thereafter made. Absent such notice, the Trustee shall have no
responsibility for determining whether or not the Company has become insolvent.
2.2 The Company represents and agrees that the Trust established under
this Agreement does not fund and is not intended to fund the Plans or any other
employee benefit plan or program of the Company. Such Trust is and is intended
to be a depository arrangement with the Trustee for the setting aside of cash
and other assets of the Company as and when it so determines in its sole
discretion for the meeting of part or all of its future benefit obligations to
some or all of the Participants and their Beneficiaries under the Plans.
Contributions by the Company to the Trust shall be in amounts determined solely
by the Company and shall be in respect of only those Plan Participants selected
prior to a Change in Control by the Company from time to time as it determines.
The purpose of this Trust is to provide a fund from which benefits may be
payable under the Plans and as to which Plan Participants with an Account or
Accounts hereunder and their Beneficiaries may, by exercising the procedures
set forth herein, have access to some or all of their benefits as such become
due without having the payment of such benefits subject to the administrative
control of the Company unless the Company becomes insolvent as defined in
Section 2.1. The Company further represents that the Plans are unfunded
deferred compensation plans for a select group of management or highly
compensated employees and as such are exempt from the application of the
Employee Retirement Income Security Act of 1974 ("ERISA") except for parts 1
<PAGE>9
and 5 of Title I thereof. The Company further represents that the Plans are
not qualified under Section 401(a) of the United States Internal Revenue Code
and therefore are not subject to any of the Code requirements applicable to
tax-qualified plans.
2.3 Amounts paid or delivered by the Company to the Trustee pursuant to
Section 1.1. shall not revert to the Company except as provided below:
(a) Upon the satisfaction of all liabilities of the Company
under both Plans in respect of Participants and Beneficiaries for whom an
Account or Accounts have been established, any assets of the Fund then
remaining may be distributed to the Company as per its instructions as provided
in Section 3.6 or
(b) Upon termination of the Trust as provided in Section 9.1,
the Fund may be distributed to the Company in accordance with Section 9.2; or
(c) Upon the insolvency of the Company (as determined in
Section 2.1), the assets of the Fund shall be distributed in accordance with
the provisions of Section 2.1; or
(d) Within six (6) months after the payment or delivery by the
Company of any amounts to the Trustee pursuant to Section 1.1, the Company may
request that any portion of such amounts be returned to the Company (whether
affecting the Accounts of all or any specified Participants or Beneficiaries).
Such a request shall be honored by the Trustee only if at the date of such
<PAGE>10
request, the Board of Directors of the Company is made up of "Continuing
Directors" (as defined below). Further, within the original six (6) month
period during which the Continuing Directors may request a return to the
Company of amounts paid or delivered to the Trustee pursuant to Section 1.1,
the Continuing Directors may request a one time extension of such period for an
additional six months.
For purposes of this Agreement, the following terms have the meaning indicated:
(i) "Acquiring Person" shall mean any person who is a
Beneficial Owner of 20% or more of the outstanding shares of Common Stock
or 20% or more of the outstanding shares of Voting Stock of the Company;
provided, however, that the term "Acquiring Person" shall not include the
Company or any wholly-owned subsidiary of the Company or any employee
benefit plan established by any of them and either in effect on the date
of this Agreement or hereafter approved by the Continuing Directors. For
purposes of this subsection (i) in determining the percentage of the
outstanding shares of Common Stock or Voting Stock of the Company with
respect to which a person is the Beneficial Owner, all shares as to which
such person is deemed the Beneficial Owner shall be deemed outstanding.
(ii) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Securities
Exchange Act of 1934, as in effect on the date of this Agreement;
<PAGE>11
provided, however, that the Company shall, for purposes of this
definition, be deemed to be the "registrant", as such term is used in such
Rule.
(iii) A person shall be deemed the "Beneficial Owner", and to
have "Beneficial Ownership", of any securities as to which such person or
any of such person's Affiliates or Associates is or may be deemed to be
the beneficial owner pursuant to Rule 13d-3 under the Securities Exchange
Act of 1934, as in effect on the date of this Agreement, as well as any
securities as to which such person or any of such person's Affiliates or
Associates has the right to become Beneficial Owner (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding, or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a person shall not be deemed the
"Beneficial Owner", or to have "Beneficial Ownership", of any security (A)
solely because such security has been tendered pursuant to a tender or
exchange offer made by such person or any of such person's Affiliates or
Associates until such tendered security is accepted for purchase or
exchange, (B) solely because such person or any of such person's
Affiliates or Associates has or shares the power to vote or direct the
voting of such security pursuant to a revocable proxy given in response to
a public proxy or consent solicitation made pursuant to, and in accordance
with, the applicable rules and regulations of the Securities Exchange Act
of 1934, except if such power (or the arrangements relating thereto) is
then reportable under Item 6 of Schedule 13D under the Securities Exchange
Act of 1934 (or any similar provision of a comparable or successor report)
<PAGE>12
or (C) held for or pursuant to the terms of any employee stock ownership
or other employee benefit plan of the Company or a wholly-owned subsidiary
of the Company and either in effect on the date of this Agreement or
hereafter approved by the Continuing Directors.
(iv) "Change in Control" means the occurrence of either (1) a
transaction which has required the affirmative vote of holders of at least
80% of the outstanding shares of capital stock of the Company regularly
entitled to vote in the election of the directors of the Company by reason
of Article Seven of the Company's Certificate of Incorporation, or (2) the
acquisition by any person, partnership, corporation or other organization,
or by any group of two or more thereof who are affiliates (as defined by
Rule 405 under the Securities Act of 1933) or who are acting in concert in
respect of such acquisition of more than 25% of such outstanding shares of
such capital stock, if the Company has opposed an acquisition of shares of
the Company by such person, partnership, corporation or other organization
or group before any insurance regulatory authority whose approval of such
acquisition was required. Provided, however, that an event described in
(1) or (2) above shall not constitute a Change In Control if within 10
days of such event the Continuing Directors provide the Trustee with a
resolution expressly stating that such event shall not constitute a Change
In Control for the purposes of this Agreement.
<PAGE>13
(v) "Continuing Directors" shall mean those individuals who
constitute the Board of Directors of the Company on the date of this
Agreement and any individual becoming a director subsequent to the date of
this Agreement whose election or nomination for election by the Company's
shareholders is approved by a vote of at least six Continuing Directors
who constitute not less than three-quarters of the directors comprising
the then Continuing Directors, either by a specific vote or by approval of
the proxy statement of the Company in which such individual is named as a
nominee for director, without objection to such nomination, provided that
no person shall under any circumstances be considered a Continuing
Director from and after such time as such person is an Acquiring Person,
an Affiliate or Associate of an Acquiring Person, or a nominee or
representative of any thereof. References to an approval or other act of
Continuing Directors shall mean approvals given or actions authorized
and/or taken both (A) by the Board of Directors of the Company (or any
legal successor thereto) of which at the time not less than eight
directors constituting not less than two-thirds of the members are
Continuing Directors and (B) by not less than six Continuing Directors
constituting at least three-fourths of all then Continuing Directors.
(vi) "Voting Stock" shall mean shares of capital stock of the
Company entitled to vote generally in the election of the directors of the
Company.
<PAGE>14
ARTICLE III
___________
3.1 By its acceptance of this Trust the Trustee hereby agrees to the
designation by the Company of KPMG Peat Marwick as the Company's independent
contractor (the "Independent Contractor") under this Agreement. Provided,
however, that the Trustee conditions its acceptance of such Independent
Contractor upon the Independent Contractor's execution of the Form of
Acknowledgment and Acceptance, or a similar form acceptable to both the Company
and the Trustee, set forth in Exhibit A of this Agreement. It is herein
recognized that said Independent Contractor is also acting as the independent
consulting actuary of the Company and that the Trustee shall have no
responsibility hereunder for the continued retention of KPMG Peat Marwick
and/or any responsibility assigned to said Independent Contractor or its
performance thereof so long as said firm continues to be the Company's
independent consulting actuary. In the event the Company replaces or no longer
uses said firm as its independent consulting actuary, the Trustee in its sole
discretion may, but need not, designate a new Independent Contractor from the
list set forth in Exhibit B of this Agreement or may continue to use the same
Independent Contractor; or in the event said firm does not accept its
designation as Independent Contractor or accepts said designation and
subsequently resigns, the Trustee shall designate another entity from the list
set forth in Exhibit B of this Agreement to be the Independent Contractor,
provided however, that any Independent Contractor appointed by the Trustee
shall be independent of the Company. The Company shall pay or reimburse the
Trustee for all fees and expenses of any Independent Contractor appointed by
the Trustee. The Company shall indemnify and hold the Trustee harmless for any
<PAGE>15
actions or omissions of any Independent Contractor and shall indemnify and hold
the Independent Contractor harmless for any actions or omissions of the
Trustee. The Independent Contractor shall be paid for its services on an
hourly basis at rates comparable to the rates that the Independent Contractor
charges for comparable services to its other clients.
3.2 Except for the records dealing solely with the Fund and its
investment, which shall be maintained by the Trustee, the Independent
Contractor shall maintain all the Plan Participant records contemplated by this
Agreement, including the maintenance of the separate Account or Accounts of
each Participant under this Agreement, the maintenance of the General Account,
and the maintenance of Participants' interest under each of the Plans. All
such records shall be made available promptly on request of the Trustee or the
Company. In the event of a Change in Control, the Independent Contractor shall
also prepare and distribute Participants' statements and shall be responsible
for information with respect to payments, if any, to Participants and their
Beneficiaries and shall perform such other duties and responsibilities as the
Company or the Trustee determines is necessary or advisable to achieve the
objectives of this Agreement.
3.3 Upon the establishment of this Trust or as soon thereafter as
practicable, the Company shall furnish to the Independent Contractor and to the
Trustee all of the information necessary to determine the benefits payable to
or with respect to each Participant in both Plans, including any benefits
payable after the Participant's death and the recipient of same (hereinafter
referred to as the "Participant Data"). Notwithstanding the occurrence of a
<PAGE>16
Change in Control, the Company shall regularly, at least annually, furnish
revised updated Participant Data to the Independent Contractor. Based on the
foregoing information the Independent Contractor shall prepare an annual
estimate of the accrued benefit for each Participant and its present value
under the Retirement Plan and shall furnish a copy of same to the Company. In
the event the Company refuses or neglects to provide updated Participant
information, as contemplated herein, the Independent Contractor shall be
entitled to rely upon the most recent information furnished to it by the
Company.
3.4 Prior to a Change in Control, upon the direction of the Company the
Independent Contractor shall prepare a certification (a "Benefit
Certification") to the Trustee that a Participant's benefits under either of
the Plans have become payable. Notwithstanding any other provisions of this
Agreement, after a Change in Control upon the proper application of a
Participant or the Beneficiary of a deceased Participant, the Independent
Contractor shall, without direction from the Company, prepare a Benefit
Certification to the Trustee, based upon the most recent Participant Data
furnished to the Independent Contractor prior to the Change in Control and any
supplemental information furnished to the Independent Contractor by a
Participant or a Beneficiary upon which the Independent Contractor may
reasonably rely, that a Participant's benefits under either of the Plans have
become payable. In the event that the Trustee (a) suspends the payment of
benefits from the Fund pursuant to Section 2.1, and (b) pursuant to a court
order as required by Section 2.1, subsequently resumes all of its duties and
responsibilities under this Agreement, the Independent Contractor shall prepare
a certification (an "Accrued Benefit Certification") of all amounts that would
<PAGE>17
otherwise have been payable to each Participant or Beneficiary from the Fund
during such period of time as the Trustee suspended the payment of benefits
pursuant to Section 2.1. Each Benefit Certification and each Accrued Benefit
Certification shall include the amount of such benefits, the manner of payment
and the name, address and social security number of the recipient. Each
Benefit Certification shall be updated annually. The Trustee shall be entitled
to rely on any Benefit Certification or any Accrued Benefit Certification
provided by the Independent Contractor, and shall have no duty to verify the
accuracy thereof. Upon the receipt of a Benefit Certification or an Accrued
Benefit Certification and appropriate federal, state and local tax withholding
information, the Trustee shall commence cash distributions from the Trust Fund
in accordance therewith to the person or persons so indicated and to the
Company with respect to taxes required to be withheld and the Independent
Contractor shall charge the Participant's Account established hereunder. The
Independent Contractor shall furnish a copy of each Benefit Certification and
each Accrued Benefit Certification to the Participant (or to the Beneficiary of
a deceased Participant) for which such certification has been prepared. The
Company shall have full responsibility for the payment of all withholding taxes
to the appropriate taxing authority and shall furnish each Participant or
Beneficiary and the Independent Contractor with the appropriate tax information
form evidencing such payment and the amount thereof.
3.5 Notwithstanding any provision in this Agreement to the contrary, in
the event the Trustee in its sole discretion reasonably disagrees with the
accuracy or propriety of any Benefit Certification or any Accrued Benefit
Certification, the Trustee, if unable to resolve such disagreement with the
<PAGE>18
Independent Contractor, may apply to a court of appropriate jurisdiction for
judicial review of such Benefit Certification or Accrued Benefit Certification.
Pending the resolution of any disagreement with the Independent Contractor with
regard to the accuracy or propriety of any Benefit Certification or any Accrued
Benefit Certification, the Trustee shall not distribute any amount from the
Fund pursuant to such Benefit Certification or Accrued Benefit Certification.
The Trustee shall use its reasonable best efforts to promptly resolve any such
disagreement that it may have with the Independent Contractor.
3.6 All benefits payable from the Fund to a Participant or his
Beneficiary under the Retirement Plan shall be paid solely from the account of
such Participant established under such Retirement Plan. Benefits payable
under the Savings Plan shall be paid solely from the account of such
Participant established under the Savings Plan. Upon the satisfaction of all
Company liabilities under a Plan to a Participant and any Beneficiary for whom
an Account has been established hereunder, the Independent Contractor shall
prepare a certification to the Trustee and to the Company showing the balance,
if any, remaining in such Participant's Account under the Plan. Such balance
from an account under the Retirement Plan shall be allocated first among
Participant Accounts under the Retirement Plan and, if the liability of the
Company to all Participants has been satisfied, the balance, if any, shall be
allocated among the Accounts of Participants under the Savings Plan.
Similarly, any balance from an Account under the Savings Plan shall be
allocated first among Participant Accounts under the Savings Plan and, if the
liability of the Company to all Participants under the Savings Plan has been
<PAGE>19
satisfied, the balance, if any, shall be allocated among the Accounts of
Participants under the Retirement Plan. Such balance, whether from a
Retirement Plan Account or Savings Plan Account, shall be reallocated ratably
by the Independent Contractor (using the information set forth on the most
recent estimated benefits statement prepared by the Independent Contractor
pursuant to Section 3.3) to the Accounts of Participants and Beneficiaries
being continued under the Plan (including Accounts which may have previously
been reduced to a zero balance) in the ratio that liabilities in respect of
each such Participant and Beneficiary under each Plan bear to the total
liabilities to all such Participants and Beneficiaries under that Plan. Upon
the satisfaction of all liabilities of the Company under both of the Plans to
all Participants and Beneficiaries for whom Accounts have been established
hereunder, the Independent Contractor shall prepare a certification to the
Trustee and to the Company, and the Trustee upon receipt of such certification
shall transfer all of the assets of the Fund to the trust established between
the Company and Trustee, dated September 25, 1990, with regard to certain
employment contracts to which the Company is a party and as amended with regard
to the Deferred Compensation Plan (the "Employment Contract Trust"). Provided,
however, that if the Employment Contract Trust has been terminated, upon
receiving the certification referred to in the previous sentence, the Trustee
shall thereupon hold or distribute the Fund in accordance with the written
instructions of the Company. The Trustee and the Independent Contractor shall
have no responsibility for determining whether any Participant or Beneficiary
has died and shall be entitled to rely upon information furnished by the
Company.
<PAGE>20
3.7 The Company reserves the right to transfer to the Fund paid-up life
insurance, retirement income or annuity policies or contracts on or for the
life of any Participant for whom an Account or Accounts has been established
hereunder or, prior to a Change in Control, to direct the Trustee to purchase
any such policies or contracts on or for the life of any such Participant out
of the amounts allocated to his Account. Any such policy or contract shall be
an asset of the Fund subject to the claims of the Company's creditors in the
event of insolvency, as specified in Section 2.1. The proceeds of any life
insurance policy shall upon the death of the insured Participant be credited to
his Account or Accounts under either of the Plans and shall be an additional
source of benefits, if any, payable to his Beneficiary.
3.8 Nothing provided in this Agreement shall relieve the Company of its
liabilities to pay benefits provided under the Plans except to the extent such
liabilities are met by application of Fund assets. It is the intent of the
Company to have each Account established hereunder treated as a separate trust
designed to satisfy in whole or in part the Company's legal liability under
either of the Plans in respect of the Participant for whom such Account has
been established. The Company, therefore, agrees that all income, deductions
and credits of each such Account belong to it as owner for income tax purposes
and will be included on the Company's tax returns.
<PAGE>21
ARTICLE IV
__________
4.1 The Company shall provide the Trustee and the Independent Contractor
with a certified copy of the Plans and all amendments thereto and of the
resolutions of the Board of Directors of the Company approving the Plans and
all amendments thereto, promptly upon their adoption. After the execution of
this Agreement, the Company shall promptly file with the Trustee and the
Independent Contractor a certified list of the names and specimen signatures of
the directors and officers of the Company and any delegee authorized to act for
it. The Company shall promptly notify the Trustee and the Independent
Contractor of the addition or deletion of any person's name to or from such
list, respectively. Until receipt by the Trustee and/or the Independent
Contractor of notice that any person is no longer authorized so to act, the
Trustee or the Independent Contractor may continue to rely on the authority of
the person. All certifications, notices and directions by any such person or
persons to the Trustee or the Independent Contractor shall be in writing signed
by such person or persons. The Trustee and the Independent Contractor may rely
on any such certification, notice or direction purporting to have been signed
by or on behalf of such person or persons that the Trustee or the Independent
Contractor believes to have been signed thereby. The Trustee and the
Independent Contractor may also rely on any certification, notice or direction
of the Company that the Trustee or the Independent Contractor believes to have
been signed by a duly authorized officer or agent of the Company. The Company
shall be responsible for keeping accurate books and records with respect to the
employees of the Company, their compensation and their rights and interests
under both of the Plans.
<PAGE>22
4.2 The Company shall make its contributions to the Trust in accordance
with appropriate corporate action and the Trustee shall have no responsibility
with respect thereto, except to add such contributions to the Fund.
4.3 The Company shall indemnify and hold harmless the Trustee for any
liability or expenses, including without limitation advances for or prompt
reimbursement of reasonable fees and expenses of counsel and other agents
retained by it, incurred by the Trustee with respect to holding, managing,
investing or otherwise administering the Fund, other than by its negligence or
willful misconduct.
4.4 The Company shall indemnify and hold harmless the Independent
Contractor for any liability or expenses, including without limitation advances
for or prompt reimbursement of reasonable fees and expenses of counsel and
other agents retained by it, incurred by the Independent Contractor with
respect to keeping the records for Participants' Accounts, reporting thereon to
Participants, certifying benefit information to the Trustee, determining the
status of Accounts and benefits hereunder and otherwise carrying out its
obligations under this Agreement, other than those resulting from the
Independent Contractor's negligence or willful misconduct.
<PAGE>23
ARTICLE V
_________
5.1 The Trustee shall not be liable in discharging its duties hereunder,
including without limitation its duty to invest and reinvest the Fund, if it
acts in good faith and in accordance with the terms of this Agreement and any
applicable Federal or state laws, rules or regulations.
5.2 Subject to investment guidelines agreed to in writing from time to
time prior to a Change in Control, by the Company and the Trustee, the Trustee
shall have the power in investing and reinvesting the Fund in its sole
discretion:
(a) To invest and reinvest in any property, real, personal or
mixed, wherever situated and whether or not productive of income or consisting
of wasting assets, including without limitation, common and preferred stocks,
bonds, notes, debentures (including convertible stocks and securities but not
including any stock or security of the Trustee, the Company or any affiliate
thereof), leaseholds, mortgages, certificates of deposit or demand or time
deposits (including any such deposits with the Trustee), shares of investment
companies and mutual funds, interests in partnerships and trusts, insurance
policies and annuity contracts, and oil, mineral or gas properties, royalties,
interests or rights, without being limited to the classes of property in which
trustees are authorized to invest by any law or any rule of court of any state
and without regard to the proportion any such property may bear to the entire
amount of the Fund;
(b) To invest and reinvest all or any portion of the Fund
collectively through the medium of any common, collective or commingled trust
fund that may be established and maintained by the Trustee, subject to the
<PAGE>24
instrument or instruments establishing such trust fund or funds and with the
terms of such instrument or instruments, as from time to time amended, being
incorporated into this Agreement to the extent of the equitable share of the
Fund in any such common, collective or commingled trust fund;
(c) To retain any property at any time received by the Trustee;
(d) To sell or exchange any property held by it at public or
private sale, for cash or on credit, to grant and exercise options for the
purchase or exchange thereof, to exercise all conversion or subscription rights
pertaining to any such property and to enter into any covenant or agreement to
purchase any property in the future;
(e) To participate in any plan of reorganization,
consolidation, merger, combination, liquidation or other similar plan relating
to property held by it and to consent to or oppose any such plan or any action
thereunder or any contract, lease, mortgage, purchase, sale or other action by
any person;
(f) To deposit any property held by it with any protective,
reorganization or similar committee, to delegate discretionary power thereto,
and to pay part of the expenses and compensation thereof and any assessments
levied with respect to any such property so deposited;
<PAGE>25
(g) To extend the time of payment of any obligation held by it;
(h) To hold uninvested any moneys received by it, without
liability for interest thereon, until such moneys shall be invested, reinvested
or disbursed;
(i) To exercise all voting or other rights with respect to any
property held by it and to grant proxies, discretionary or otherwise;
(j) For the purposes of the Trust, to borrow money from others,
to issue its promissory note or notes therefor, and to secure the repayment
thereof by pledging any property held by it;
(k) To manage, administer, operate, insure, repair, improve,
develop, preserve, mortgage, lease or otherwise deal with, for any period, any
real property or any oil, mineral or gas properties, royalties, interests or
rights held by it directly or through any corporation, either alone or by
joining with others, using other Trust assets for any such purposes, to modify,
extend, renew, waive or otherwise adjust any provision of any such mortgage or
lease and to make provision for amortization of the investment in or
depreciation of the value of such property;
(1) To employ suitable agents and counsel, who may be counsel
to the Company or the Trustee, and to pay their reasonable expenses and
compensation from the Fund to the extent not paid by the Company;
<PAGE>26
(m) To cause any property held by it to be registered and held
in the name of one or more nominees, with or without the addition of words
indicating that such securities are held in a fiduciary capacity, and to hold
securities in bearer form;
(n) To settle, compromise or submit to arbitration any claims,
debts or damages due or owing to or from the Trust, respectively, to commence
or defend suits or legal proceedings to protect any interest of the Trust, and
to represent the Trust in all suits or legal proceedings in any court or before
any other body or tribunal; provided, however, that the Trustee shall not be
required to take any such action unless it shall have been indemnified by the
Company to its reasonable satisfaction against liability or expenses it might
incur therefrom;
(o) To organize under the laws of any state a corporation or
trust for the purpose of acquiring and holding title to any property which it
is authorized to acquire hereunder and to exercise with respect thereto any or
all of the powers set forth herein; and
(p) Generally, to do all acts, whether or not expressly
authorized, that the Trustee may deem necessary or desirable for the protection
of the Fund.
Notwithstanding the foregoing, the Trustee shall upon the written
direction of the Company prior to a Change in Control, invest all or part of
the amount to the credit of any Participant's Account in a commercial annuity,
<PAGE>27
retirement income or life insurance policy or contract selected by the Company
and the Trustee shall have no responsibility for any such investment other than
as owner and custodian thereof.
Notwithstanding the foregoing, after a Change in Control, the Trustee
shall follow the investment guidelines agreed to by the Company and the Trustee
as in effect immediately prior to the Change in Control.
5.3 No person dealing with the Trustee shall be under any obligation to
see to the proper application of any money paid or property delivered to the
Trustee or to inquire into the Trustee's authority as to any transaction. The
Independent Contractor's obligations are limited solely to those explicitly set
forth herein and the Independent Contractor shall have no responsibility,
authority or control, direct or indirect, over the maintenance or investment of
the Fund and shall have no obligation in respect of the Trustee or the
Trustee's compliance with the Independent Contractor's certifications to the
Trustee.
5.4 The Trustee shall distribute cash or property from the Fund in
accordance with Article III hereof.
The Trustee may make any distribution required hereunder by mailing
its check for the specified amount, or delivering the specified property, to
the person to whom such distribution or payment is to be made, at such address
as may have been last furnished to the Trustee, or if no such address shall
<PAGE>28
have been so furnished, to such person in care of the Company, or (if so
directed by the Company) by crediting the account of such person or by
transferring funds to such person's account by bank or wire transfer.
ARTICLE VI
__________
6.1 The Company shall pay any Federal, state or local taxes on the Fund,
or any part thereof, and on the income therefrom.
6.2 The Company shall pay to the Trustee its reasonable expenses for the
management and administration of the Fund, including without limitation
advances for or prompt reimbursement of reasonable expenses and compensation of
counsel and other agents employed by the Trustee, all other reasonable and
necessary expenses of managing and administering the Trust that are not paid by
the Company including, but not limited to, investment management fees, computer
time charges, data retrieval and input costs, and charges for time expended by
personnel of the Trustee in fulfilling the Trustee's duties. The Company shall
also pay to the Trustee reasonable compensation for its services as Trustee
hereunder, the amount of which shall be agreed upon from time to time by the
Company and the Trustee in writing; provided, however, that if the Trustee
forwards an amended compensation schedule to the Company requesting its
agreement thereto and the Company fails to object thereto within thirty (30)
days of its receipt, the amended compensation schedule shall be deemed to be
<PAGE>29
agreed upon by the Company and the Trustee. Such expenses and compensation
shall be a charge on the Fund and shall constitute a lien in favor of the
Trustee until paid by the Company. All such expenses and compensation charged
to the Fund, unless otherwise paid by the Company, shall be applied against the
General Account. In the event that the assets allocated to the General Account
are entirely depleted, all such expenses and compensation charged to the Fund
shall be applied pro-rata against all Accounts in proportion to the assets
allocated thereto. Notwithstanding any other provision of this Section 6.2, to
the extent that the Trustee, in its discretion, decides that an expense is
specifically attributable to one or more specified Accounts such expense shall
be charged to such specified Accounts in such proportion as the Trustee
decides. Prior to allocating any particular expense to a specific Account, the
Trustee shall provide notice of its intention to so allocate to the Company,
the Independent Contractor and the Participant for whom such Account was
established.
ARTICLE VII
___________
7.1 The Trustee shall maintain records with respect to the Fund that show
all its receipts and disbursements hereunder. The records of the Trustee with
respect to the Fund shall be open to inspection by the Company, or its
representatives, at all reasonable times during normal business hours of the
Trustee and may be audited not more frequently than once each fiscal year by an
independent certified public accountant engaged by the Company; provided,
however, the Trustee shall be entitled to additional compensation from the
Company in respect of audits or auditors' requests which the Trustee determines
<PAGE>30
to exceed the ordinary course of the usual scope of such examinations of its
records.
7.2 Within a reasonable time after the close of each fiscal year of the
Company (or, in the Trustee's discretion, at more frequent intervals), or of
any termination of the duties of the Trustee hereunder, the Trustee shall
prepare and deliver to the Company a statement of transactions reflecting its
acts and transactions as Trustee during such fiscal year, portion thereof or
during such period from the close of the last fiscal year or last statement
period to the termination of the Trustee's duties, respectively, including a
statement of the then current value of the Fund. The Independent Contractor
shall also prepare and furnish to the Company a statement of the then current
value of each Account and of the General Account. Any such statement shall be
deemed an account stated and accepted and approved by the Company, and the
Trustee shall be relieved and discharged, as if such account had been settled
and allowed by a judgment or decree of a court of competent jurisdiction,
unless protested by written notice to the Trustee within sixty (60) days of
receipt thereof by the Company.
The Trustee shall have the right to apply at any time to a court of
competent jurisdiction for judicial settlement of any account of the Trustee
not previously settled as herein provided or for the determination of any
question of construction or for instructions regarding this Agreement. In any
such action or proceeding it shall be necessary to join as parties only the
Trustee and the Company (although the Trustee may also join such other parties
<PAGE>31
as it may deem appropriate), and any judgment or decree entered therein shall
be conclusive.
ARTICLE VIII
____________
8.1 Prior to a Change in Control the Trustee may resign at any time by
delivering written notice thereof to the Company; provided, however, that no
such resignation shall take effect until the earlier of (i) sixty (60) days
from the date of delivery of such notice to the Company or (ii) the appointment
of a successor trustee. Following a Change in Control, the Trustee may resign
only under one of the following circumstances:
(a) The Trustee is no longer in the business, or is actively in
the process of removing itself from the business, of acting as trustee for
employee benefit plans.
(b) The Trustee determines that a conflict of interest exists
which would prohibit it from fulfilling its duties under this Agreement in
an ethically proper manner, and a law firm (appointed by the President of
the Association of the Bar of the City of New York, or by the American
Arbitration Association, if the President of the Association of the Bar of
the City of New York fails to so appoint within thirty days of a request
for such appointment, or notifies the Trustee that it is unable to make
such appointment) concurs with the Trustee. The Trustee shall use its
best efforts to avoid the creation of such a conflict. The decision of
<PAGE>32
such law firm shall be binding, but may be appealed in the same manner,
and under the same conditions, as if it were made by an arbitrator. All
costs incurred by the Trustee in connection with obtaining or appealing
such a decision shall be reimbursable expenses pursuant to Article VI
hereof.
(c) The assets of the Fund have been exhausted or are
insufficient to pay accrued and reasonably anticipated fees and expenses
of the Trustee hereunder, the Company has refused voluntarily to pay the
Trustee's accrued fees and expenses as required pursuant to Section 6.2
and the Trustee has been unsuccessful in obtaining a court order requiring
the Company to make such payments or has been unable to collect on a
judgment for such fees and expenses.
Notwithstanding the above, the Trustee may resign for reasons set forth in
(a) or (b) only if it has obtained the agreement of a bank with assets in
excess of $2 billion and net worth in excess of $100 million to replace it as
trustee under the terms of this Agreement. The decisions rendered under (b),
if that is the reason for the Trustee's resignation, may expressly excuse the
Trustee from this requirement. In any event, the Trustee shall continue to be
custodian of the Trust assets until the new trustee is in place, and the
Trustee shall be entitled to expenses and fees through the later of the
effective date of its resignation as Trustee and the end of its custodianship
of the assets of the Fund.
8.2 Prior to a Change in Control the Trustee may be removed at any time
by the Company, pursuant to a resolution of the Board of Directors of the
Company, upon delivery to the Trustee of a certified copy of such resolution
and sixty (60) days' written notice of such removal, unless such notice period
<PAGE>33
is waived in whole or in part by the Trustee. Following a Change in Control
the Trustee may be removed at any time by the affirmative vote of two-thirds of
the Participants voting on a per capita basis who were Participants in either
of the Plans on the date of the occurrence of the Change in Control, and sixty
(60) days' written notice of such removal, unless such notice period is waived
in whole or in part by the Trustee.
8.3 Upon the resignation or removal of the Trustee, U.S. Trust Company
shall be appointed as successor trustee. In the event that U.S. Trust Company
refuses to accept its appointment as successor trustee pursuant to this Section
8.3, Chase Manhattan Bank, N.A. shall be appointed as successor trustee. In
the event that Chase Manhattan Bank, N.A. refuses to accept its appointment as
successor trustee pursuant to this Section 8.3, a successor trustee shall be
appointed pursuant to Section 8.4. The appointment of a successor trustee
pursuant to this Section 8.3 shall take effect upon the delivery to the Trustee
of a written acceptance by such successor trustee, duly executed thereby. Any
successor trustee shall have all the rights, powers and duties granted the
Trustee hereunder.
8.4 Subject to the provisions of Section 8.3, prior to a Change in
Control, upon the resignation or removal of the Trustee, a successor trustee
shall be appointed by the Company. Subject to the provisions of Section 8.3,
following a Change in Control, upon the resignation of the Trustee, a successor
trustee shall be appointed by the Trustee, and upon the removal of the Trustee
<PAGE>34
a successor trustee shall be appointed by the affirmative vote of two-thirds of
the Participants voting on a per capita basis who were Participants in either
of the Plans on the date of the occurrence of the Change in Control. Any
successor trustee appointed under this Section 8.4 shall be chosen from the
list of potential successor trustees set forth in Exhibit C. In the event that
all of the potential successor trustees set forth in Exhibit C refuse to accept
an appointment as successor trustee, then the successor trustee shall be
appointed as otherwise provided in this Section 8.4, and shall be a bank or
trust company established under the laws of the United States or a State within
the United States with assets in excess of $2 billion and net worth in excess
of $100 million. The appointment of a successor trustee pursuant to this
Section 8.4 shall take effect upon the delivery to the Trustee of (a) a written
appointment of such successor trustee, duly executed by the Company, the
Trustee, or two-thirds of the Participants in the Plans, as provided for in
this Section 8.4, and (b) a written acceptance by such successor trustee, duly
executed thereby. Any successor trustee shall have all the rights, powers and
duties granted the Trustee hereunder.
8.5 If, within sixty (60) days of the delivery of the Trustee's written
notice of resignation, a successor trustee shall not have been appointed, the
Trustee may apply to any court of competent jurisdiction for the appointment of
a successor trustee.
8.6 Upon the resignation or removal of the Trustee and the appointment of
a successor trustee, and after the acceptance and approval of its account, the
Trustee shall transfer and deliver the Fund to such successor. Under no
circumstances shall the Trustee transfer or deliver the Fund to any successor
which is not a bank or trust company established under the laws of the United
States or a State within the United States with assets in excess of $2 billion
and net worth in excess of $100 million.
<PAGE>35
ARTICLE IX
__________
9.1 Prior to a Change in Control, the Trust established pursuant to this
Agreement may only be terminated by the affirmative vote of two-thirds of the
Participants in either of the Plans voting on a per capita basis. Following a
Change in Control, the Trust established pursuant to this Agreement may not be
terminated by the Company prior to the satisfaction of all liabilities with
respect to all Participants in both of the Plans and their Beneficiaries.
Following a Change in Control, upon receipt of a written certification from the
Independent Contractor that all liabilities have been satisfied with respect to
all Participants in the Plans and their Beneficiaries, the Company pursuant to
a resolution of its Board of Directors may terminate the Trust upon delivery to
the Trustee of (a) a certified copy of such resolution, (b) an original
certification of the Independent Contractor that all such liabilities have been
satisfied and (c) a written instrument of termination duly executed and
acknowledged in the same form as this Agreement.
9.2 Prior to a Change in Control, upon the termination of the Trust in
accordance with Section 9.1, the Trustee shall, after the acceptance and
approval of its account, distribute the Fund to the Company. After a Change in
Control, upon the termination of the Trust in accordance with Section 9.1, the
Trustee shall, after the acceptance and approval of its account, transfer all
<PAGE>36
of the assets of the Fund to the Employment Contract Trust. Provided, however,
that if after a Change in Control the Employment Contract Trust has been
terminated, upon the termination of the Trust in accordance with Section 9.1
the Trustee shall distribute the Fund to the Company. Upon completing such
distribution, the Trustee shall be relieved and discharged. The powers of the
Trustee shall continue as long as any part of the Fund remains in its
possession.
ARTICLE X
_________
10.1 This Agreement may be amended, in whole or in part, at any time and
from time to time, by the Company, pursuant to a resolution of the Board of
Directors thereof by delivery to the Trustee of a certified copy of such
resolution and a written instrument duly executed and acknowledged in the same
form as this Agreement, except that the duties and responsibilities of the
Trustee shall not be increased without the Trustee's written consent; provided,
however, any such amendment affecting any Account or the procedures for
distribution thereof shall not become effective until sixty (60) days after a
copy of such amendment has been delivered by registered mail by the Company or
the Independent Contractor to each Participant (or to the Beneficiary of any
deceased Participant) for whom an Account is maintained under this Agreement.
In the event the Company, Trustee or Independent Contractor receives written
objections to such amendment from such person within such sixty (60) day
period, such amendment shall be ineffective and void in respect of the
Participant or Beneficiary so objecting to the amendment.
<PAGE>37
ARTICLE XI
__________
11.1 This Agreement shall be construed and interpreted under, and the
Trust hereby created shall be governed by, the laws of the State of New York
insofar as such laws do not contravene any applicable Federal laws, rules or
regulations. Nothing in this Agreement shall be construed to subject either
the Trust created hereunder or the Plans to the Employee Retirement Income
Security Act of 1974, as amended.
11.2 Neither the gender nor the number (singular or plural) of any word
shall be construed to exclude another gender or number when a different gender
or number would be appropriate.
11.3 No right or interest of any Participant under either of the Plans in
the Fund shall be transferable or assignable or shall be subject to alienation,
anticipation or encumbrance, and no right or interest of any Participant or
Beneficiary in the Plan or in the Fund shall be subject to any garnishment,
attachment or execution. Notwithstanding the foregoing, the Fund shall at all
times remain subject to claims of creditors of the Company in the event the
Company becomes insolvent as provided in Section 2.1.
11.4 The Company agrees that by the establishment of this Trust it hereby
foregoes any judicial review of certifications by the Independent Contractor as
to the benefit payable to any persons hereunder. If a dispute arises as to the
amounts or timing of any such benefits or the persons entitled thereto under
the Plans or this Agreement, the Company agrees that such dispute shall be
resolved by binding arbitration proceedings initiated in accordance with the
rules of the American Arbitration Association and that the results of such
<PAGE>38
proceedings shall be conclusive and shall not be subject to judicial review.
It is expressly understood that pending the resolution of any such dispute
payment of benefits shall be made and continued by the Trustee in accordance
with the certification of the Independent Contractor and that the Trustee and
the Independent Contractor shall have no liability with respect to such
payments. Provided, however, that the provisions of this Section 11.4 are
subject to the provisions of Section 3.5. The Company also agrees to pay the
entire cost of any arbitration or legal proceeding initiated by it including
the legal fees of the Trustee, the Independent Contractor and the Plan
Participant or the Beneficiary of any deceased Plan Participant regardless of
the outcome of any such proceeding and until so paid the expenses thereof shall
be a charge on and lien against the Fund.
11.5 This Agreement shall be binding upon and inure to the benefit of any
successor to the Company or its business as the result of merger,
consolidation, reorganization, transfer of assets or otherwise and any
subsequent successor thereto. In the event of any such merger, consolidation,
reorganization, transfer of assets or other similar transaction, the successor
to the Company or its business or any subsequent successor thereto shall
promptly notify the Trustee in writing of its successorship and furnish the
Trustee and the Independent Contractor with the information specified in
Section 4.1 of this Agreement. In no event shall any such transaction
described herein suspend or delay the rights of Plan Participants or the
Beneficiaries of deceased participants to receive benefits hereunder.
<PAGE>39
11.6 This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all of which shall together
constitute only one Agreement.
11.7 Communications to the Trustee shall be sent to it at its office at
450 West 33rd Street, New York, New York 10001, or to such other address as the
Trustee may specify in writing. No communication shall be binding upon the
Trustee until it is received by the Trustee. Communications to the Company
shall be sent to the Company's principal offices or to such other address as
the Company may specify in writing.
11.8 In the event any Participant or his Beneficiary is determined to be
subject to Federal income tax on any amount to the credit of any Account under
this Agreement prior to the time of payment hereunder, the entire amount
determined to be so taxable shall be distributed by the Trustee to such
Participant or Beneficiary. An amount to the credit of a Participant's Account
or Accounts shall be determined to be subject to Federal income tax upon the
earliest of: (a) a final determination by the United States Internal Revenue
Service addressed to the Participant or his Beneficiary which is not appealed
to the courts; (b) a final determination by the United States Tax Court or any
other Federal Court affirming any such determination by the Internal Revenue
Service; or (c) an opinion by counsel chosen by the Company addressed to the
Company and the Trustee, that, by reason of Treasury Regulations, amendments to
the Internal Revenue Code, published Internal Revenue Service rulings, court
<PAGE>40
decisions or other substantial precedent, amounts to the credit of
Participant's Accounts hereunder are subject to Federal income tax prior to
payment. The Company shall undertake to defend, and bear the expense of, any
tax claims described herein which are asserted by the Internal Revenue Service
or by the taxing authorities of any State or locality against any Participant,
his or her spouse or Beneficiary, including the expense of attorney fees and
costs of appeal, and shall have the sole authority to determine whether or not
to appeal any determination made by the Internal Revenue Service or by any
taxing authority of any State or locality or by any court. The Company agrees
to reimburse any Participant, his or her spouse or Beneficiary for any interest
or penalties in respect of Federal, state or local tax claims hereunder upon
receipt of documentation of same. Any distributions from the Trust Fund to a
Participant or Beneficiary under this Section 11.8 shall be applied in an
equitable manner to reduce Company liabilities to such Participant and/or
Beneficiary under the Plans; provided, however, that in no event shall any
Participant, Beneficiary or estate of any Participant or Beneficiary have any
obligation to return all or any part of such distribution to the Company if
such distribution exceeds benefits payable under the Plans.
<PAGE>41
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed and their respective corporate seals to be hereto affixed
this day of .
Attest:
____________________________________ CHEMICAL BANK
Trust Officer
By: /s/ Richard Hauptman
____________________
Richard Hauptman
Vice President
Attest: USLIFE CORPORATION
____________________________________ By: /s/Christopher S. Ruisi
_______________________
Secretary Christopher S. Ruisi
Vice Chairman and
Chief Administrative
Officer
<PAGE>42
STATE OF )
: SS.:
COUNTY OF )
On this day of , ,
before me personally came ,
to me, known, who, being by me duly sworn, did depose and say that he resides
at , and that he is
of USLIFE Corporation, one of the corporations described in and which executed
the foregoing instrument; that he knows the seal of said corporation; that the
seal affixed to said instruments is such corporate seal; that it was so affixed
by order of the Board of Directors of said corporation; and that he signed his
name thereto by like order.
_________________________________
Notary Public
STATE OF )
: SS.:
COUNTY OF )
On this day of
, , before me personally came ,
to me known, who, being by me duly sworn, did depose and say that he resides
at , and that he is a Vice President
of CHEMICAL BANK, one of the corporations described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instruments is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation; and that he signed his
name thereto by like order.
_________________________________
Notary Public
<PAGE>43
EXHIBIT A
_________
ACKNOWLEDGEMENT
AND
ACCEPTANCE
The undersigned hereby acknowledges its receipt of an agreement made as of
the day of between the
USLIFE Corporation and Chemical Bank relating to the Retirement Plan and the
USLIFE Corporation Supplemental Retirement Plan and the USLIFE Corporation
Supplemental Employee Savings and Investment Plan (the "Agreement"). In
addition, the undersigned hereby accepts its appointment as Independent
Contractor under the terms set forth in the Agreement.
Attest: KPMG PEAT MARWICK
__________________________________ By ___________________________
STATE OF )
: ss.:
COUNTY OF )
On this day of ,
before me personally came , to
me known, who, being by me duly sworn, did depose and say that she is one of
the partners of the firm of KPMG Peat Marwick, the firm described in and which
executed the foregoing instrument, and that she signed her name thereto for an
on behalf of said firm.
_____________________________________
Notary Public
<PAGE>44
EXHIBIT B
Buck Consultants, Inc.
Two Pennsylvania Plaza
New York, New York 10121
A. Foster Higgins & Co. Inc.
125 Broad Street
New York, New York 10004
William M. Mercer, Inc.
1166 Avenue of the Americas
New York, New York 10036-2708
TPF&C/Towers Perrin
245 Park Avenue
New York, New York 10167
The Wyatt Company
1500 'K' Street NW
Washington, DC 20005
<PAGE>45
Amendment
_________
Amendment, effective January 23, 1996, to Trust Agreement dated March 1,
1994, among USLIFE Corporation, Chemical Bank and KPMG Peat Marwick LLP (as
Independent Contractor) establishing a trust to fund the USLIFE Corporation
Supplemental Retirement Plan and the Supplemental Employee Savings and
Investment Plan.
In accordance with the provisions contained in Section 10.1 of the
Agreement, the language in Section 2.3(d) (iv) is deleted in its entirety and
replaced with the following language:
"Change In Control" means (i) a merger or consolidation to which the
Company is a party and for which the approval of any shareholders of the
Company is required; (ii) any "person" (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended)
becoming the beneficial owner, directly, or indirectly, of securities of
the Company representing 25% or more of the combined voting power of the
Company's then outstanding securities; (iii) a sale or transfer of
substantially all of the assets of the Company; (iv) a liquidation or
reorganization of the Company; or (v) the occurrence of any Flip Over
Transaction or Event, as defined in Section 1.1(j) of the Amended and
Restated Rights Agreement, as amended from time to time prior to the
occurrence of any such transaction or event that otherwise would have
previously been considered a Flip Over Transaction or Event. Provided,
however, that an event described above shall not constitute a Change In
Control if within 10 days of such event the Continuing Directors provide
the Trustee with a resolution expressly stating that such event shall not
constitute a Change In Control for the purpose of the Agreement.
<PAGE>1
Exhibit 10(lxii)
________________
THIS AGREEMENT, made as of the 1st day of March, 1994 among USLIFE
Corporation, a New York corporation (the "Company"), Chemical Bank, a New York
corporation (the "Trustee") and KPMG Peat Marwick ("Independent Contractor").
W I T N E S S E T H:
_ _ _ _ _ _ _ _ _ _
WHEREAS, the Company has incurred and expects to continue to incur certain
unfunded retirement and deferred income liability to or with respect to the
outside directors of the Company's Board of Directors pursuant to the terms of
the USLIFE Corporation Retirement Plan for Outside Directors ("Retirement
Plan") and the USLIFE Corporation Deferred Compensation Plan ("Compensation
Plan");
WHEREAS, the Company desires to provide additional assurance to some or
all such outside directors (the "Participants") that their unfunded retirement
and deferred compensation benefits under the Retirement Plan and Compensation
Plan, respectively (hereinafter referred to as the "Plans") will in the future
be met or substantially met by application of the procedures set forth herein;
WHEREAS, the Company wishes to establish separate accounts (hereinafter
the "Accounts") with respect to some or all of the Participants in the Plans as
determined by the Company prior to a Change In Control (as hereinafter defined
in Section 2.3(d) (iv)) in order to provide a source of payments as such may be
required under the terms of such Plans;
WHEREAS, except as may be expressly provided in this Agreement, amounts
allocated to each separate Account or Accounts, as determined by the Company
from time to time in its sole discretion, and the earnings attributed thereto
<PAGE>2
shall be used by the Trustee solely in satisfaction of the liabilities of the
Company with respect to the Participant in the Retirement Plan or Compensation
Plan for whom such separate Account or Accounts has been established and the
expenses of administering the trust, established herein, and such utilization
shall be in accordance with the procedures set forth herein;
WHEREAS, the Company wishes to establish a separate account with respect
to all amounts that are contributed hereunder by the Company which are not
allocated by the Company at the time of such contribution to the Account or
Accounts of an individual Participant in the Plans (the "General Account");
WHEREAS, the Trust is intended to be a "grantor trust" with the corpus and
income of the Trust treated as assets and income of the Company for federal
income tax purposes pursuant to Sections 671 through 678 of the Internal
Revenue Code of 1986 (the "Code"); as amended;
WHEREAS, the Company intends that the assets of the Trust will be subject
to the claims of creditors of the Company as provided in Article II;
WHEREAS, the Company intends that the existence of the Trust will not
alter the characterization of the Plans as "unfunded" and will not be construed
to provide taxable income to any participant under the Plans prior to actual
payment of benefits thereunder;
WHEREAS, the Trustee is not a party to the Plans and makes no
representations with respect thereto, and all representations and recitals with
respect to the Plans shall be deemed to be those of the Company.
<PAGE>3
NOW, THEREFORE, in consideration of the premises and mutual and
independent promises herein, the parties hereto convenant and agree as follows:
ARTICLE I
_________
1.1 The Company hereby establishes with the Trustee a trust consisting of
such sums of money and such property acceptable to the Trustee as
shall from time to time be paid or delivered to the Trustee and the
earnings and profits thereon. All such money and property, all
investments made therewith and proceeds thereof, less the payments or
other distributions which, at the time of reference, shall have been
made by the Trustee, as authorized herein, are referred to herein as
the "Fund" and shall be held by the Trustee, IN TRUST, in accordance
with the provisions of this Agreement.
1.2 The Trustee shall hold, manage, invest and otherwise administer the
Fund pursuant to the terms of this Agreement. The Trustee shall be
responsible only for contributions actually received by it hereunder.
The amount of each contribution by the Company to the Fund shall be
determined in the sole discretion of the Company and the Trustee
shall have no duty or responsibility with respect thereto.
1.3 The Independent Contractor (as hereinafter in Section 3.1 defined)
shall maintain in an equitable manner a separate Account or Accounts
<PAGE>4
for each Participant under the Plans in which it shall keep a
separate record of the amount of the fund allocated to such
Participant. The Company shall certify to the Trustee and the
Independent Contractor at the time of each contribution to the Fund
the amount of such contribution to be allocated to each Account.
Provided, however, that following a Change In Control, the Company
may only allocate contributions to either the General Account or to
Accounts which were established prior to the Change In Control. Any
amount contributed by the Company that is not so certified shall be
allocated to the General Account.
1.4 The Company may contribute to the Fund an irrevocable letter of
credit (hereinafter referred to as a "L/C"). The following
provisions shall be applicable to any such L/C:
(a) the L/C shall expire no sooner than one (1) year from the date
of issuance,
(b) the Company shall continue to maintain such L/C in effect until
it is replaced by cash or another irrevocable L/C or this
Agreement terminates pursuant to Article IX, whichever occurs
first,
(c) the Company shall renew or replace such L/C at least thirty (30)
days before its expiration for an additional period of one (1)
year,
(d) if such L/C, or any renewal thereof, is not renewed or replaced
by a L/C delivered to the Trustee at least thirty (30) days before
<PAGE>5
the expiration of the predecessor L/C, the Trustee may draw down the
full amount of such L/C and hold the proceeds pursuant to the terms
of this Agreement; provided, however, that in the event the Company
is unable to renew such L/C at least thirty (30) days prior to the
expiration of the predecessor L/C at a cost equal to or less than
twenty-five (25) basis points over the current annual cost of such
L/C, and the Trustee with reasonable diligence is unable to identify
a bank (within the definition of Section 1.4(h)) that will replace
such L/C at a cost equal to or less than twenty-five (25) basis
points over the current annual cost of such L/C, then the Trustee
shall not draw down the amount of such L/C as provided in this
Section 1.4(d),
(e) the Trustee may also draw down on such L/C at any time the
Trustee determines the proceeds of such L/C are necessary to
allow the Trustee to fulfill its obligations under this
Agreement,
(f) the proceeds of such L/C shall be available to the Trustee upon
the Trustee's presentation of its sight draft,
(g) the Company may, at any time, replace such L/C with another
irrevocable L/C having substantially similar terms, or with an
equal amount of cash, or any combination thereof,
(h) any L/C shall be issued by a bank (including the Trustee) with
assets in excess of $2 billion and net worth in excess of $100
million, shall be reasonably acceptable to the Trustee, and
shall be in a form as shall be reasonably acceptable to the
Trustee.
<PAGE>6
1.5 The Trustee, for investment purposes only, may commingle all of the
assets of the Fund and treat them as a single fund, but the records
of the Independent Contractor at all times shall show the percentages
of the Trust allocable to each Account and to the General Account.
The Fund shall be revalued by the Trustee as of the last business day
of each calendar quarter at current market values, as determined by
the Trustee. The Independent Contractor shall allocate any increase
or decrease in the current market value of the Fund, as determined by
the Trustee, pro-rata to all of the Accounts and to the General
Account in proportion to the balance of the assets allocated thereto
as of the last business day of the previous calendar quarter.
ARTICLE II
__________
2.1 Notwithstanding any provision in this Agreement to the contrary, if
at any time while the Trust is still in existence the Company becomes
insolvent (as defined herein), the Trustee shall upon written notice
thereof from the Company's Board of Directors, Chairman of the Board
or Chief Executive Officer suspend the payment of all benefits from
the Fund and shall thereafter hold the Fund in suspense for the
benefit of the creditors of the Company until it receives a court
order directing the disposition of the Fund; provided, however, the
Trustee may deduct or continue to deduct its fees and expenses and
other expenses of the Trust, including taxes and the Independent
<PAGE>7
Contractor's fees and expenses, pending the receipt of such court
order. The Company shall be considered to be insolvent if (a) a
final judicial determination is entered that the Company is unable to
pay its debts as such debts mature or (b) there shall have been filed
by or against the Company in any court or other tribunal either of
the United States or of any State or of any other authority now or
hereafter exercising jurisdiction, a petition in bankruptcy or
insolvency proceedings or for reorganization or for the appointment
of a receiver or trustee of all or substantially all of the Company's
property under the present or any future Federal bankruptcy code or
any other present or future applicable Federal, State or other
bankruptcy or insolvency statute or law. By its approval and
execution of this Agreement, the Company represents and agrees that
its Board of Directors and Chairman of the Board and Chief Executive
Officer, as from time to time acting, shall have the fiduciary duty
and responsibility on behalf of the Company's creditors to give to
the Trustee prompt written notice of any event of the Company's
insolvency and the Trustee shall be entitled to rely thereon to the
exclusion of all directions or claims to pay benefits thereafter
made. Absent such notice, the Trustee shall have no responsibility
for determining whether or not the Company has become insolvent.
<PAGE>8
2.2 The Company represents and agrees that the Trust established under
this Agreement does not fund and is not intended to fund the Plans or
any other employee benefit plan or program of the Company. Such
Trust is and is intended to be a depository arrangement with the
Trustee for the setting aside of cash and other assets of the Company
as and when it so determines in its sole discretion for the meeting
of part or all of its future benefit obligations to some or all of
the Participants under the Plans. Contributions by the Company to
the Trust shall be in amounts determined solely by the Company and
shall be in respect of only those Plan Participants selected prior to
a Change In Control by the Company from time to time as it
determines. The purpose of this Trust is to provide a fund from
which benefits may be payable under the Plans and as to which Plan
Participants with an Account or Accounts hereunder may, by exercising
the procedures set forth herein, have access to some or all of their
benefits as such become due without having the payment of such
benefits subject to the administrative control of the Company unless
the Company becomes insolvent as defined in Section 2.1. The Company
further represents that the Plans are not qualified under Section
401(a) of the United States Internal Revenue Code and therefore are
not subject to any of the Code requirements applicable to tax-
qualified plans.
2.3 Amounts paid or delivered by the Company to the Trustee pursuant to
Section 1.1 shall not revert to the Company except as provided below:
<PAGE>9
(a) Upon the satisfaction of all liabilities of the Company under
both Plans in respect of Participants for whom an Account or
Accounts have been established, any assets of the Fund then
remaining may be distributed to the Company as per its
instructions as provided in Section 3.6 or
(b) Upon termination of the Trust as provided in Section 9.1, the
Fund may be distributed to the Company in accordance with
Section 9.2; or
(c) Upon the insolvency of the Company (as determined in Section
2.1), the assets of the Fund shall be distributed in accordance
with the provisions of Section 2.1; or
(d) Within six (6) months after the payment or delivery by the
Company of any amounts to the Trustee pursuant to Section 1.1,
the Company may request that any portion of such amounts be
returned to the Company (whether affecting the Accounts of all
or any specified Participants). Such a request shall be honored
by the Trustee only if at the date of such request, the Board of
Directors of the Company is made up of "Continuing Directors"
(as defined below). Further, within the original six (6) month
period during which the Continuing Directors may request a
return to the Company of amounts paid or delivered to the
<PAGE>10
Trustee pursuant to Section 1.1, the Continuing Directors may
request a one time extension of such period for an additional
six months.
For purposes of this Agreement, the following terms have the meaning indicated:
(i) "Acquiring Person" shall mean any person who is a
Beneficial Owner of 20% or more of the outstanding
shares of Common Stock or 20% or more of the
outstanding shares of Voting Stock of the Company;
provided, however, that the term "Acquiring Person"
shall not include the Company or any wholly-owned
subsidiary of the Company or any employee benefit plan
established by any of them and either in effect on the
date of this Agreement or hereafter approved by the
Continuing Directors. For purposes of this subsection
(i) in determining the percentage of the outstanding
shares of Common Stock or Voting Stock of the Company
with respect to which a person is the Beneficial
Owner, all shares as to which such person is deemed
the Beneficial Owner shall be deemed outstanding.
(ii) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under
the Securities Exchange Act of 1934, as in effect on
the date of this Agreement; provided, however, that
<PAGE>11
the Company shall, for purposes of this definition, be
deemed to be the "registrant", as such term is used in
such Rule.
(iii) A person shall be deemed the "Beneficial Owner", and
to have "Beneficial Ownership", of any securities as
to which such person or any of such person's
Affiliates or Associates is or may be deemed to be the
beneficial owner pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934, as in effect on the
date of this Agreement, as well as any securities as
to which such person or any of such person's
Affiliates or Associates has the right to become
Beneficial Owner (whether such right is exercisable
immediately or only after the passage of time)
pursuant to any agreement, arrangement or
understanding, or upon the exercise of conversion
rights, exchange rights, rights, warrants or options,
or otherwise; provided, however, that a person shall
not be deemed the "Beneficial Owner", or to have
"Beneficial Ownership", of any security (A) solely
because such security has been tendered pursuant to a
tender or exchange offer made by such person or any of
such person's Affiliates or Associates until such
tendered security is accepted for purchase or
exchange, (B) solely because such person or any of
such person's Affiliates or Associates has or shares
the power to vote or direct the voting of such
security pursuant to a revocable proxy given in
response to a public proxy or consent solicitation
<PAGE>12
made pursuant to, and in accordance with, the
applicable rules and regulations of the Securities
Exchange Act of 1934, except if such power (or the
arrangements relating thereto) is then reportable
under Item 6 of Schedule 13D under the Securities
Exchange Act of 1934 (or any similar provision of a
comparable or successor report) or (C) held for or
pursuant to the terms of any employee stock ownership
or other employee benefit plan of the Company or a
wholly-owned subsidiary of the Company and either in
effect on the date of this Agreement or hereafter
approved by the Continuing Directors.
(iv) "Change In Control" means the occurrence of either (1)
a transaction which has required the affirmative vote
of holders of at least 80% of the outstanding shares
of capital stock of the Company regularly entitled to
vote in the election of the directors of the Company
by reason of Article Seven of the Company's
Certificate of Incorporation, or (2) the acquisition
by any person, partnership, corporation or other
organization, or by any group of two or more thereof
who are affiliates (as defined by Rule 405 under the
Securities Act of 1933) or who are acting in concert
in respect of such acquisition of more than 25% of
such outstanding shares of such capital stock, if the
Company has opposed an acquisition of shares of the
Company by such person, partnership, corporation or
<PAGE>13
other organization or group before any insurance
regulartory authority whose approval of such
acquisition was required. Provided, however, that an
event described in (1) or (2) above shall not
constitute a Change In Control if within 10 days of
such event the Continuing Directors provide the
Trustee with a resolution expressly stating that such
event shall not constitute a Change In Control for the
purposes of this Agreement.
(v) "Continuing Directors" shall mean those individuals
who constitute the Board of Directors of the Company
on the date of this Agreement and any individual
becoming a director subsequent to the date of this
Agreement whose election or nomination for election by
the Company's shareholders is approved by a vote of at
least six Continuing Directors who constitute not less
than three-quarters of the directors comprising the
then Continuing Directors, either by a specific vote
or by approval of the proxy statement of the Company
in which such individual is named as a nominee for
director, without objection to such nomination,
provided that no person shall under any circumstances
be considered a Continuing Director from and after
such time as such person is an Acquiring Person, an
Affiliate or Associate of an Acquiring Person, or a
nominee or representative of any thereof. References
to an approval or other act of Continuing Directors
shall mean approvals given or actions authorized
<PAGE>14
and/or taken both (A) by the Board of Directors of the
Company (or any legal successor thereto) of which at
the time not less than eight directors constituting
not less than two-thirds of the members are Continuing
Directors and (B) by not less than six Continuing
Directors constituting at least three-fourths of all
then Continuing Directors.
(vi) "Voting Stock" shall mean shares of capital stock of
the Company entitled to vote generally in the election
of the directors of the Company.
ARTICLE III
___________
3.1 By its acceptance of this Trust the Trustee hereby agrees to the
designation by the Company of KPMG Peat Marwick as the Company's
independent contractor (the "Independent Contractor") under this
Agreement. Provided, however, that the Trustee conditions its
acceptance of such Independent Contractor upon the Independent
Contractor's execution of the Form of Acknowledgment and Acceptance,
or a similar form acceptable to both the Company and the Trustee, set
forth in Exhibit A of this Agreement. It is herein recognized that
said Independent Contractor is also acting as the independent
consulting actuary of the Company and that the Trustee shall have no
responsibility hereunder for the continued retention of KPMG Peat
Marwick and/or any responsibility assigned to said Independent
Contractor or its performance thereof so long as said firm continues
<PAGE>15
to be the Company's independent consulting actuary. In the event the
Company replaces or no longer uses said firm as its independent
consulting actuary, the Trustee in its sole discretion may, but need
not, designate a new Independent Contractor from the list set forth
in Exhibit B of this Agreement or may continue to use the same
Independent Contractor; or in the event said firm does not accept its
designation as Independent Contractor or accepts said designation and
subsequently resigns, the Trustee shall designate another entity from
the list set forth in Exhibit B of this Agreement to be the
Independent Contractor, provided however, that any Independent
Contractor appointed by the Trustee shall be independent of the
Company. The Company shall pay or reimburse the Trustee for all fees
and expenses of any Independent Contractor appointed by the Trustee.
The Company shall indemnify and hold the Trustee harmless for any
actions or omissions of any Independent Contractor and shall
indemnify and hold the Independent Contractor harmless for any
actions or omissions of the Trustee. The Independent Contractor
shall be paid for its services on an hourly basis at rates comparable
to the rates that the Independent Contractor charges for comparable
services to its other clients.
3.2 Except for the records dealing solely with the Fund and its
investment, which shall be maintained by the Trustee, the Independent
Contractor shall maintain all the Plan Participant records
<PAGE>16
contemplated by this Agreement, including the maintenance of the
separate Account or Accounts of each Participant under this
Agreement, the maintenance of the General Account, and the
maintenance of Participants' interests under each Plan. All such
records shall be made available promptly on request of the Trustee or
the Company. In the event of a Change In Control, the Independent
Contractor shall also prepare and distribute Participants' statements
and shall be responsible for information with respect to payments, if
any, to Participants and shall perform such other duties and
responsibilities as the Company or the Trustee determines is
necessary or advisable to achieve the objectives of this Agreement.
3.3 Upon the establishment of this Trust or as soon thereafter as
practicable, the Company shall furnish to the Independent Contractor
and to the Trustee all of the information necessary to determine the
benefits payable to or with respect to each Participant in both Plans
(hereinafter referred to as the "Participant Data"). Notwithstanding
the occurrence of a Change In Control, the Company shall regularly,
at least annually, furnish revised updated Participant Data to the
Independent Contractor. Based on the foregoing information the
Independent Contractor shall prepare an annual estimate of the
accrued benefit for each Participant and its present value under the
Retirement Plan and shall furnish a copy of same to the Company. In
the event the Company refuses or neglects to provide updated
<PAGE>17
Participant information, as contemplated herein, the Independent
Contractor shall be entitled to rely upon the most recent information
furnished to it by the Company.
3.4 Prior to a Change In Control, upon the direction of the Company the
Independent Contractor shall prepare a certification (a "Benefit
Certification") to the Trustee that a Participant's benefits under
either of the Plans have become payable. Notwithstanding any other
provisions of this Agreement, after a Change In Control upon the
proper application of a Participant, the Independent Contractor
shall, without direction from the Company, prepare a Benefit
Certification to the Trustee, based upon the most recent Participant
Data furnished to the Independent Contractor prior to the Change In
Control and any supplemental information furnished to the Independent
Contractor by a Participant upon which the Independent Contractor may
reasonably rely, that a Participant's benefits under either of the
Plans have become payable. In the event that the Trustee (a)
suspends the payment of benefits from the Fund pursuant to Section
2.1, and (b) pursuant to a court order as required by Section 2.1,
subsequently resumes all of its duties and responsibilities under
this Agreement, the Independent Contractor shall prepare a
certification (an "Accrued Benefit Certification") of all amounts
that would otherwise have been payable to each Participant from the
Fund during such period of time as the Trustee suspended the payment
<PAGE>18
of benefits pursuant to Section 2.1. Each Benefit Certification and
each Accrued Benefit Certification shall include the amount of such
benefits, the manner of payment and the name, address and social
security number of the recipient. Each Benefit Certification shall
be updated annually. The Trustee shall be entitled to rely on any
Benefit Certification or any Accrued Benefit Certification provided
by the Independent Contractor, and shall have no duty to verify the
accuracy thereof. Upon the receipt of a Benefit Certification or an
Accrued Benefit Certification and appropriate federal, state and
local tax withholding information, the Trustee shall commence cash
distributions from the Trust Fund in accordance therewith to the
person or persons so indicated and to the Company with respect to
taxes required to be withheld and the Independent Contractor shall
charge the Participant's Account established hereunder. The
Independent Contractor shall furnish a copy of each Benefit
Certification and each Accrued Benefit Certification to the
Participant for which such certification has been prepared. The
Company shall have full responsibility for the payment of all
withholding taxes to the appropriate taxing authority and shall
furnish each Participant and the Independent Contractor with the
appropriate tax information form evidencing such payment and the
amount thereof.
<PAGE>19
3.5 Notwithstanding any provision in this Agreement to the contrary, in
the event the Trustee in its sole discretion reasonably disagrees
with the accuracy or propriety of any Benefit Certification or any
Accrued Benefit Certification, the Trustee, if unable to resolve such
disagreement with the Independent Contractor, may apply to a court of
appropriate jurisdiction for judicial review of such Benefit
Certification or Accrued Benefit Certification. Pending the
resolution of any disagreement with the Independent Contractor with
regard to the accuracy or propriety of any Benefit Certification or
any Accrued Benefit Certification, the Trustee shall not distribute
any amount from the Fund pursuant to such Benefit Certification or
Accrued Benefit Certification. The Trustee shall use its reasonable
best efforts to promptly resolve any such disagreement that it may
have with the Independent Contractor.
3.6 All benefits payable from the Fund to a Participant under the
Retirement Plan shall be paid solely from the account of such
Participant established under such Retirement Plan. Benefits payable
under the Compensation Plan shall be paid solely from the account of
such Participant established under the Compensation Plan. Upon the
satisfaction of all Company liabilities under a Plan to a Participant
for whom an Account has been established hereunder, the Independent
Contractor shall prepare a certification to the Trustee and to the
Company showing the balance, if any, remaining in such Participant's
<PAGE>20
Account under the Plan. Such balance from an Account under the
Retirement Plan shall be allocated first among Participant accounts
under the Retirement Plan and, if the liability of the Company to all
Participants under the Retirement Plan has been satisfied, the
balance, if any, shall be allocated among the Accounts of
Participants under the Compensation Plan. Similarly, any balance
from an Account under the Compensation Plan shall be allocated first
among Participant Accounts under the Compensation Plan and, if the
liability of the Company to all Participants under the Compensation
Plan has been satisfied, the balance, if any, shall be allocated
among the Accounts of Participants under the Retirement Plan. Such
balance, whether from a Retirement Plan Account or Compensation Plan
Account, shall be reallocated ratably by the Independent Contractor
(using the information set forth on the most recent estimated
benefits statement prepared by the Independent Contractor pursuant to
Section 3.3) to the Accounts of Participants being continued under
the Plan (including Accounts which may have previously been reduced
to a zero balance) in the ratio that liabilities in respect of each
such Participant under each Plan bear to the total liabilities to all
such Participants under that Plan. Upon the satisfaction of all
liabilities of the Company under both of the Plans to all
Participants for whom Accounts have been established hereunder, the
Independent Contractor shall prepare a certification to the Trustee
and to the Company, and the Trustee upon receipt of such
<PAGE>21
certification shall distribute the Fund in accordance with the
written instructions of the Company. The Trustee and the Independent
Contractor shall have no responsibility for determining whether any
Participant has died and shall be entitled to rely upon information
furnished by the Company.
3.7 The Company reserves the right to transfer to the Fund paid-up life
insurance, retirement income or annuity policies or contracts on or
for the life of any Participant for whom an Account or Accounts has
been established hereunder or, prior to a Change In Control, to
direct the Trustee to purchase any such policies or contracts on or
for the life of any such Participant out of the amounts allocated to
his Account. Any such policy or contract shall be an asset of the
Fund subject to the claims of the Company's creditors in the event of
insolvency, as specified in Section 2.1. The proceeds of any life
insurance policy shall upon the death of the insured Participant be
credited to the General Account, except that policies on the life of
a Participant in the Deferred Compensation Plan shall first be
applied toward company liabilities to the beneficiary of the
Participant under the Deferred Compensation Plan.
3.8 Nothing provided in this Agreement shall relieve the Company of its
liabilities to pay the benefits provided under the Plans except to
the extent such liabilities are met by application of Fund assets.
<PAGE>22
It is the intent of the Company to have each Account established
hereunder treated as a separate trust designed to satisfy in whole or
in part the Company's legal liability under either of the Plans in
respect of the Participant for whom such Account has been
established. The Company, therefore, agrees that all income,
deductions and credits of each such Account belong to it as owner for
income tax purposes and will be included on the Company's income tax
returns.
ARTICLE IV
__________
4.1 The Company shall provide the Trustee and the Independent Contractor
with a certified copy of the Plans and all amendments thereto and of
the resolutions of the Board of Directors of the Company approving
the Plans and all amendments thereto, promptly upon their adoption.
After the execution of this Agreement, the Company shall promptly
file with the Trustee and the Independent Contractor a certified list
of the names and specimen signatures of the directors and officers of
the Company and any delegee authorized to act for it. The Company
shall promptly notify the Trustee and the Independent Contractor of
the addition or deletion of any person's name to or from such list,
respectively. Until receipt by the Trustee and/or the Independent
Contractor of notice that any person is no longer authorized so to
act, the Trustee or the Independent Contractor may continue to rely
on the authority of the person. All certifications, notices and
<PAGE>23
directions by any such person or persons to the Trustee or the
Independent Contractor shall be in writing signed by such person or
persons. The Trustee and the Independent Contractor may rely on any
such certification, notice or direction purporting to have been
signed by or on behalf of such person or persons that the Trustee or
the Independent Contractor believes to have been signed thereby. The
Trustee and the Independent Contractor may also rely on any
certification, notice or direction of the Company that the Trustee or
the Independent Contractor believes to have been signed by a duly
authorized officer or agent of the Company. The Company shall be
responsible for keeping accurate books and records with respect to
the outside directors of the Company, their compensation and their
rights and interests under both of the Plans.
4.2 The Company shall make its contributions to the Trust in accordance
with appropriate corporate action and the Trustee shall have no
responsibility with respect thereto, except to add such contributions
to the Fund.
4.3 The Company shall indemnify and hold harmless the Trustee for any
liability or expenses, including without limitation advances for or
prompt reimbursement of reasonable fees and expenses of counsel and
other agents retained by it, incurred by the Trustee with respect to
<PAGE>24
holding, managing, investing or otherwise administering the Fund,
other than by its negligence or willful misconduct.
4.4 The Company shall indemnify and hold harmless the Independent
Contractor for any liability or expenses, including without
limitation advances for or prompt reimbursement of reasonable fees
and expenses of counsel and other agents retained by it, incurred by
the Independent Contractor with respect to keeping the records for
Participants' Accounts, reporting thereon to Participants, certifying
benefit information to the Trustee, determining the status of
Accounts and benefits hereunder and otherwise carrying out its
obligations under this Agreement, other than those resulting from the
Independent Contractor's negligence or willful misconduct.
ARTICLE V
_________
5.1 The Trustee shall not be liable in discharging its duties hereunder,
including without limitation its duty to invest and reinvest the
Fund, if it acts in good faith and in accordance with the terms of
this Agreement and any applicable Federal or state laws, rules or
regulations.
5.2 Subject to investment guidelines agreed to in writing from time to
time prior to a Change In Control, by the Company and the Trustee,
<PAGE>25
the Trustee shall have the power in investing and reinvesting the
Fund in its sole discretion:
(a) To invest and reinvest in any property, real, personal or mixed,
wherever situated and whether or not productive of income or
consisting of wasting assets, including without limitation,
common and preferred stocks, bonds, notes, debentures (including
convertible stocks and securities but not including any stock or
security of the Trustee, the Company or any affiliate thereof),
leaseholds, mortgages, certificates of deposit or demand or time
deposits (including any such deposits with the Trustee), shares
of investment companies and mutual funds, interests in
partnerships and trusts, insurance policies and annuity
contracts, and oil, mineral or gas properties, royalties,
interests or rights, without being limited to the classes of
property in which trustees are authorized to invest by any law
or any rule of court of any state and without regard to the
proportion any such property may bear to the entire amount of
the Fund;
(b) To invest and reinvest all or any portion of the Fund
collectively through the medium of any common, collective or
commingled trust fund that may be established and maintained by
the Trustee, subject to the instrument or instruments
establishing such trust fund or funds and with the terms of such
instrument or instruments, as from time to time amended, being
<PAGE>26
incorporated into this Agreement to the extent of the equitable
share of the Fund in any such common, collective or commingled
trust fund;
(c) To retain any property at any time received by the Trustee;
(d) To sell or exchange any property held by it at public or private
sale, for cash or on credit, to grant and exercise options for
the purchase or exchange thereof, to exercise all conversion or
subscription rights pertaining to any such property and to enter
into any convenant or agreement to purchase any property in the
future;
(e) To participate in any plan of reorganization, consolidation,
merger, combination, liquidation or other similar plan relating
to property held by it and to consent to or oppose any such plan
or any action thereunder or any contract, lease, mortgage,
purchase, sale or other action by any person;
(f) To deposit any property held by it with any protective,
reorganization or similar committee, to delegate discretionary
power thereto, and to pay part of the expenses and compensation
thereof and any assessments levied with respect to any such
property so deposited;
(g) To extend the time of payment of any obligation held by it;
<PAGE>27
(h) To hold uninvested any moneys received by it, without liability
for interest thereon, until such moneys shall be invested,
reinvested or disbursed;
(i) To exercise all voting or other rights with respect to any
property held by it and to grant proxies, discretionary or
otherwise;
(j) For the purposes of the Trust, to borrow money from others, to
issue its promissory note or notes therefor, and to secure the
repayment thereof by pledging any property held by it;
(k) To manage, administer, operate, insure, repair, improve,
develop, preserve, mortgage, lease or otherwise deal with, for
any period, any real property or any oil, mineral or gas
properties, royalties, interests or rights held by it directly
or through any corporation, either alone or by joining with
others, using other Trust assets for any such purposes, to
modify, extend, renew, waive or otherwise adjust any provision
of any such mortgage or lease and to make provision for
amortization of the investment in or depreciation of the value
of such property;
(l) To employ suitable agents and counsel, who may be counsel to the
Company or the Trustee, and to pay their reasonable expenses and
compensation from the Fund to the extent not paid by the
Company;
<PAGE>28
(m) To cause any property held by it to be registered and held in
the name of one or more nominees, with or without the addition
of words indicating that such securities are held in a fiduciary
capacity, and to hold securities in bearer form;
(n) To settle, compromise or submit to arbitration any claims, debts
or damages due or owing to or from the Trust, respectively, to
commence or defend suits or legal proceedings to protect any
interest of the Trust, and to represent the Trust in all suits
or legal proceedings in any court or before any other body or
tribunal; provided, however, that the Trustee shall not be
required to take any such action unless it shall have been
indemnified by the Company to its reasonable satisfaction
against liability or expenses it might incur therefrom;
(o) To organize under the laws of any state a corporation or trust
for the purpose of acquiring and holding title to any property
which it is authorized to acquire hereunder and to exercise with
respect thereto any or all of the powers set forth herein; and
(p) Generally, to do all acts, whether or not expressly authorized,
that the Trustee may deem necessary or desirable for the
protection of the Fund.
<PAGE>29
Notwithstanding the foregoing, the Trustee shall upon the written
direction of the Company prior to a Change In Control, invest all or part of
the amount to the credit of any Participant's Account in a commercial annuity,
retirement income or life insurance policy or contract selected by the Company
and the Trustee shall have no responsibility for any such investment other than
as owner and custodian thereof.
Notwithstanding the foregoing, after a Change In Control, the Trustee
shall follow the investment guidelines agreed to by the Company and the Trustee
as in effect immediately prior to the Change In Control.
5.3 No person dealing with the Trustee shall be under any obligation to
see to the proper application of any money paid or property delivered
to the Trustee or to inquire into the Trustee's authority as to any
transaction. The Independent Contractor's obligations are limited
solely to those explicitly set forth herein and the Independent
Contractor shall have no responsibility, authority or control, direct
or indirect, over the maintenance or investment of the Fund and shall
have no obligation in respect of the Trustee or the Trustee's
compliance with the Independent Contractor's certifications to the
Trustee.
5.4 The Trustee shall distribute cash or property from the Fund in
accordance with Article III hereof.
<PAGE>30
The Trustee may make any distribution required hereunder by mailing its
check for the specified amount, or delivering the specified property, to the
person to whom such distribution or payment is to be made, at such address as
may have been last furnished to the Trustee, or if no such address shall have
been so furnished, to such person in care of the Company, or (if so directed by
the Company) by crediting the account of such person or by transferring funds
to such person's account by bank or wire transfer.
ARTICLE VI
__________
6.1 The Company shall pay any Federal, state or local taxes on the Fund,
or any part thereof, and on the income therefrom.
6.2 The Company shall pay to the Trustee its reasonable expenses for the
management and administration of the Fund, including without
limitation advances for or prompt reimbursement of reasonable
expenses and compensation of counsel and other agents employed by the
Trustee, all other reasonable and necessary expenses of managing and
administering the Trust that are not paid by the Company including,
but not limited to, investment management fees, computer time
charges, data retrieval and input costs, and charges for time
expended by personnel of the Trustee in fulfilling the Trustee's
duties. The Company shall also pay to the Trustee reasonable
<PAGE>31
compensation for its services as Trustee hereunder, the amount of
which shall be agreed upon from time to time by the Company and the
Trustee in writing; provided, however, that if the Trustee forwards
an amended compensation schedule to the Company requesting its
agreement thereto and the Company fails to object thereto within
thirty (30) days of its receipt, the amended compensation schedule
shall be deemed to be agreed upon by the Company and the Trustee.
Such expenses and compensation shall be a charge on the Fund and
shall constitute a lien in favor of the Trustee until paid by the
Company. All such expenses and compensation charged to the Fund,
unless otherwise paid by the Company, shall be applied against the
General Account. In the event that the assets allocated to the
General Account are entirely depleted, all such expenses and
compensation charged to the Fund shall be applied pro-rata against
all Accounts in proportion to the assets allocated thereto.
Notwithstanding any other provision of this Section 6.2, to the
extent that the Trustee, in its discretion, decides that an expense
is specifically attributable to one or more specified Accounts such
expense shall be charged to such specified Accounts in such
proportion as the Trustee decides. Prior to allocating any
particular expense to a specific Account, the Trustee shall provide
notice of its intention to so allocate to the Company, the
Independent Contractor and the Participant for whom such Account was
established.
<PAGE>32
ARTICLE VII
___________
7.1 The Trustee shall maintain records with respect to the Fund that show
all its receipts and disbursements hereunder. The records of the
Trustee with respect to the Fund shall be open to inspection by the
Company, or its representatives, at all reasonable times during
normal business hours of the Trustee and may be audited not more
frequently than once each fiscal year by an independent certified
public accountant engaged by the Company; provided, however, the
Trustee shall be entitled to additional compensation from the Company
in respect of audits or auditors' requests which the Trustee
determines to exceed the ordinary course of the usual scope of such
examinations of its records.
7.2 Within a reasonable time after the close of each fiscal year of the
Company (or, in the Trustee's discretion, at more frequent
intervals), or of any termination of the duties of the Trustee
hereunder, the Trustee shall prepare and deliver to the Company a
statement of transactions reflecting its acts and transactions as
Trustee during such fiscal year, portion thereof or during such
period from the close of the last fiscal year or last statement
period to the termination of the Trustee's duties, respectively,
including a statement of the then current value of the Fund. The
Independent Contractor shall also prepare and furnish to the Company
<PAGE>33
a statement of the then current value of each Account and of the
General Account. Any such statement shall be deemed an account
stated and accepted and approved by the Company, and the Trustee
shall be relieved and discharged, as if such account had been settled
and allowed by a judgment or decree of a court of competent
jurisdiction, unless protested by written notice to the Trustee
within sixty (60) days of receipt thereof by the Company.
The Trustee shall have the right to apply at any time to a court of
competent jurisdiction for judicial settlement of any account of the Trustee
not previously settled as herein provided or for the determination of any
question of construction or for instructions regarding this Agreement. In any
such action or proceeding it shall be necessary to join as parties only the
Trustee and the Company (although the Trustee may also join such other parties
as it may deem appropriate), and any judgment or decree entered therein shall
be conclusive.
ARTICLE VIII
____________
8.1 Prior to a Change In Control the Trustee may resign at any time by
delivering written notice thereof to the Company; provided, however,
that no such resignation shall take effect until the earlier of (i)
sixty (60) days from the date of delivery of such notice to the
<PAGE>34
Company or (ii) the appointment of a successor trustee. Following a
Change In Control, the Trustee may resign only under one of the
following circumstances:
(a) The Trustee is no longer in the business, or is actively in the
process of removing itself from the business, of acting as
trustee for employee benefit plans.
(b) The Trustee determines that a conflict of interest exists which
would prohibit it from fulfilling its duties under this Agreement
in an ethically proper manner, and a law firm (appointed by the
President of the Association of the Bar of the City of New York,
or by the American Arbitration Association, if the President of
the Association of the Bar of the City of New York fails to so
appoint within thirty days of a request for such appointment, or
notifies the Trustee that it is unable to make such appointment)
concurs with the Trustee. The Trustee shall use its best efforts
to avoid the creation of such a conflict. The decision of such
law firm shall be binding, but may be appealed in the same
manner, and under the same conditions, as if it were made by an
arbitrator. All costs incurred by the Trustee in connection with
obtaining or appealing such a decision shall be reimbursable
expenses pursuant to Article VI hereof.
(c) The assets of the Fund have been exhausted or are insufficient
to pay accrued and reasonably anticipated fees and expenses of the
<PAGE>35
Trustee hereunder, the Company has refused voluntarily to pay the
Trustee's accrued fees and expenses as required pursuant to Section
6.2 and the Trustee has been unsuccessful in obtaining a court order
requiring the Company to make such payments or has been unable to
collect on a judgment for such fees and expenses.
Notwithstanding the above, the Trustee may resign for reasons set forth in
(a) or (b) only if it has obtained the agreement of a bank with assets in
excess of $2 billion and net worth in excess of $100 million to replace it as
trustee under the terms of this Agreement. The decision rendered under (b), if
that is the reason for the Trustee's resignation, may expressly excuse the
Trustee from this requirement. In any event, the Trustee shall continue to be
custodian of the Trust assets until the new trustee is in place, and the
Trustee shall be entitled to expenses and fees through the later of the
effective date of its resignation as Trustee and the end of its custodianship
of the assets of the Fund.
8.2 Prior to a Change In Control the Trustee may be removed at any time
by the Company, pursuant to a resolution of the Board of Directors of
the Company, upon delivery to the Trustee of a certified copy of such
resolution and sixty (60) days' written notice of such removal,
unless such notice period is waived in whole or in part by the
Trustee. Following a Change In Control the Trustee may be removed at
<PAGE>36
any time by the affirmative vote of two-thirds of the Participants
voting on a per capita basis who were Participants in either of the
Plans on the date of the occurrence of the Change In Control, and
sixty (60) days' written notice of such removal, unless such notice
period is waived in whole or in part by the Trustee.
8.3 Upon the resignation or removal of the Trustee, U.S. Trust Company
shall be appointed as successor trustee. In the event that U.S.
Trust Company refuses to accept its appointment as successor trustee
pursuant to this Section 8.3, Chase Manhattan Bank, N.A. shall be
appointed as successor trustee. In the event that Chase Manhattan
Bank, N.A. refuses to accept its appointment as successor trustee
pursuant to this Section 8.3, a successor trustee shall be appointed
pursuant to Section 8.4. The appointment of a successor trustee
pursuant to this Section 8.3 shall take effect upon the delivery to
the Trustee of a written acceptance by such successor trustee, duly
executed thereby. Any successor trustee shall have all the rights,
powers and duties granted the Trustee hereunder.
8.4 Subject to the provisions of Section 8.3, prior to a Change In
Control, upon the resignation or removal of the Trustee, a successor
trustee shall be appointed by the Company. Subject to the provisions
<PAGE>37
of Section 8.3, following a Change In Control, upon the resignation
of the Trustee, a successor trustee shall be appointed by the
Trustee, and upon the removal of the Trustee a successor trustee
shall be appointed by the affirmative vote of two-thirds of the
Participants voting on a per capita basis who were Participants in
either of the Plans on the date of the occurrence of the Change In
Control. Any successor trustee appointed under this Section 8.4
shall be chosen from the list of potential successor trustees set
forth in Exhibit C. In the event that all of the potential successor
trustees set forth in Exhibit C refuse to accept an appointment as
successor trustee, then the successor trustee shall be appointed as
otherwise provided in this Section 8.4, and shall be a bank or trust
company established under the laws of the United States or a State
within the United States with assets in excess of $2 billion and net
worth in excess of $100 million. The appointment of a successor
trustee pursuant to this Section 8.4 shall take effect upon the
delivery to the Trustee of (a) a written appointment of such
successor trustee, duly executed by the Company, the Trustee, or two-
thirds of the Participants in the Plans, as provided for in this
Section 8.4, and (b) a written acceptance by such successor trustee,
duly executed thereby. Any successor trustee shall have all the
rights, powers and duties granted the Trustee hereunder.
8.5 If, within sixty (60) days of the delivery of the Trustee's written
notice of resignation, a successor trustee shall not have been
appointed, the Trustee may apply to any court of competent
jurisdiction for the appointment of a successor trustee.
<PAGE>38
8.6 Upon the resignation or removal of the Trustee and the appointment of
a successor trustee, and after the acceptance and approval of its account,
the Trustee shall transfer and deliver the Fund to such successor. Under
no circumstances shall the Trustee transfer or deliver the Fund to any
successor which is not a bank or trust company established under the laws
of the United States or a State within the United States with assets in
excess of $2 billion and net worth in excess of $100 million.
ARTICLE IX
__________
9.1 Prior to a Change In Control, the Trust established pursuant to this
Agreement may only be terminated by the affirmative vote of two-
thirds of the Participants in either of the Plans voting on a per
capita basis. Following a Change In Control, the Trust established
pursuant to this Agreement may not be terminated by the Company prior
to the satisfaction of all liabilities with respect to all
Participants in both of the Plans. Following a Change In Control,
upon receipt of a written certification from the Independent
Contractor that all liabilities have been satisfied with respect to
all Participants in both of the Plans, the Company pursuant to a
<PAGE>39
resolution of its Board of Directors may terminate the Trust upon
delivery to the Trustee of (a) a certified copy of such resolution,
(b) an original certification of the Independent Contractor that all
such liabilities have been satisfied and (c) a written instrument of
termination duly executed and acknowledged in the same form as this
Agreement.
9.2 Upon the termination of the Trust in accordance with Section 9.1, the
Trustee shall, after the acceptance and approval of its account,
distribute the Fund to the Company. Upon completing such
distribution, the Trustee shall be relieved and discharged. The
powers of the Trustee shall continue as long as any part of the Fund
remains in its possession.
ARTICLE X
_________
10.1 This Agreement may be amended, in whole or in part, at any time and
from time to time, by the Company, pursuant to a resolution of the Board
of Directors thereof by delivery to the Trustee of a certified copy of
such resolution and a written instrument duly executed and acknowledged in
the same form as this Agreement, except that the duties and
responsibilities of the Trustee shall not be increased without the
Trustee's written consent; provided, however, any such amendment affecting
any Account or the procedures for distribution thereof shall not become
effective until sixty (60) days after a copy of such amendment has been
<PAGE>40
delivered by registered mail by the Company or the Independent Contractor
to each Participant for whom an Account is maintained under this
Agreement. In the event the Company, Trustee or Independent Contractor
receives written objections to such amendment from such person within such
sixty (60) day period, such amendment shall be ineffective and void in
respect of the Participant so objecting to the amendment.
ARTICLE XI
__________
11.1 This Agreement shall be construed and interpreted under, and the
Trust hereby created shall be governed by, the laws of the State of New
York insofar as such laws do not contravene any applicable Federal laws,
rules or regulations. Nothing in this Agreement shall be construed to
subject either the Trust created hereunder or the Plans to the Employee
Retirement Income Security Act of 1974, as amended.
11.2 Neither the gender nor the number (singular or plural) of any word
shall be construed to exclude another gender or number when a different
gender or number would be appropriate.
11.3 No right or interest of any Participant under either of the Plans in
the Fund shall be transferable or assignable or shall be subject to
alienation, anticipation or encumbrance, and no right or interest of any
<PAGE>41
Participant in either of the Plans or in the Fund shall be subject to any
garnishment, attachment or execution. Notwithstanding the foregoing, the
Fund shall at all times remain subject to claims of creditors of the
Company in the event the Company becomes insolvent as provided in Section
2.1.
11.4 The Company agrees that by the establishment of this Trust it hereby
foregoes any judicial review of certifications by the Independent
Contractor as to the benefit payable to any persons hereunder. If a
dispute arises as to the amounts or timing of any such benefits or the
persons entitled thereto under the Plans or this Agreement, the Company
agrees that such dispute shall be resolved by binding arbitration
proceedings initiated in accordance with the rules of the American
Arbitration Association and that the results of such proceedings shall be
conclusive and shall not be subject to judicial review. It is expressly
understood that pending the resolution of any such dispute payment of
benefits shall be made and continued by the Trustee in accordance with the
certification of the Independent Contractor and that the Trustee and the
Independent Contractor shall have no liability with respect to such
payments. Provided, however, that the provisions of this Section 11.4 are
subject to the provisions of Section 3.5. The Company also agrees to pay
<PAGE>42
the entire cost of any arbitration or legal proceeding initiated by it
including the legal fees of the Trustee, the Independent Contractor and
the Plan Participant regardless of the outcome of any such proceeding and
until so paid the expenses thereof shall be a charge on and lien against
the Fund.
11.5 This Agreement shall be binding upon and inure to the benefit of any
successor to the Company or its business as the result of merger,
consolidation, reorganization, transfer of assets or otherwise and any
subsequent successor thereto. In the event of any such merger,
consolidation, reorganization, transfer of assets or other similar
transaction, the successor to the Company or its business or any
subsequent successor thereto shall promptly notify the Trustee in writing
of its successorship and furnish the Trustee and the Independent
Contractor with the information specified in Section 4.1 of this
Agreement. In no event shall any such transaction described herein
suspend or delay the rights of Plan Participants to receive benefits
hereunder.
11.6 This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all of which shall together
constitute only one Agreement.
11.7 Communications to the Trustee shall be sent to it at its office at
450 West 33rd Street, New York, New York 10001, or to such other address
as the Trustee may specify in writing. No communication shall be binding
upon the Trustee until it is received by the Trustee. Communications to
<PAGE>43
the Company shall be sent to the Company's principal offices or to such
other address as the Company may specify in writing.
11.8 In the event any Participant is determined to be subject to Federal
income tax on any amount to the credit of any Account under this Agreement
prior to the time of payment hereunder, the entire amount determined to be
so taxable shall be distributed by the Trustee to such Participant. An
amount to the credit of a Participant's Account or Accounts shall be
determined to be subject to Federal income tax upon the earliest of: (a)
a final determination by the United States Internal Revenue Service
addressed to the Participant which is not appealed to the courts; (b) a
final determination by the United States Tax Court or any other Federal
Court affirming any such determination by the Internal Revenue Service; or
(c) an opinion by counsel chosen by the Company addressed to the Company
and the Trustee, that, by reason of Treasury Regulations, amendments to
the Internal Revenue Code, published Internal Revenue Service rulings,
court decisions or other substantial precedent, amounts to the credit of
Participant's Accounts hereunder are subject to Federal income tax prior
to payment. The Company shall undertake to defend, and bear the expense
of, any tax claims described herein which are asserted by the Internal
Revenue Service or by any taxing authority of any State or locality or by
any court. The Company agrees to reimburse any Participant or his spouse
for any interest or penalties in respect of Federal, state or local tax
claims hereunder upon receipt of documentation of same. Any distributions
<PAGE>44
from the Trust Fund to a Participant under this Section 11.8 shall be
applied in an equitable manner to reduce Company liabilities to such
Participant under the Plans; provided, however, that in no event shall any
Participant or estate of any Participant have any obligation to return all
or any part of such distribution to the Company if such distribution
exceeds benefits payable under the Plans.
<PAGE>45
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed and their respective corporate seals to be hereto affixed this
1st day of March 1994.
Attest:
_____________________ CHEMICAL BANK
Trust Officer
By: /s/ Richard Hauptman
____________________
Richard Hauptman
Vice President
Attest: USLIFE CORPORATION
_____________________ By: /s/ Christopher S. Ruisi
Secretary ________________________
Christopher S. Ruisi
Vice Chairman and
Chief Administrative
Officer
<PAGE>46
EXHIBIT A
_________
ACKNOWLEDGEMENT
AND
ACCEPTANCE
The undersigned hereby acknowledges its receipt of an agreement made as of
the day of between the USLIFE
Corporation and Chemical Bank relating to the USLIFE Corporation Retirement
Plan for Outside Directors and the USLIFE Corporation Deferred Compensation
Plan (the "Agreement"). In addition, the undersigned hereby accepts its
appointment as Independent Contractor under the terms set forth in the
Agreement.
Attest: KPMG PEAT MARWICK
___________________ By_____________________
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK) )
On this day of , before me personally came
, to me known, who, being by me duly sworn, did
depose and say that she is one of the partners of the firm of KPMG Peat
Marwick, the firm described in and which executed the foregoing instrument, and
that she signed her name thereto for and on behalf of said firm.
_____________________
Notary Public
<PAGE>47
EXHIBIT B
Buck Consultants Inc.
Two Pennsylvania Plaza
New York, New York 10121
A. Foster Higgins & Co. Inc.
125 Broad Street
New York, New York 10004
William M. Mercer, Inc.
1166 Avenue of the Americas
New York, New York 10036-2708
TPF&C/Towers Perrin
245 Park Avenue
New York, New York 10167
The Wyatt Company
1500 'K' Street NW
Washington, D.C. 20005
<PAGE>48
EXHIBIT C
Bankers Trust Company
280 Park Avenue
New York, New York 10017
The Bank of New York
One Wall Street
New York, New York 10286
<PAGE>49
Amendment
_________
Amendment, effective January 23, 1996, to Trust Agreement dated March 1,
1994, among USLIFE Corporation, Chemical Bank and KPMG Peat Marwick LLP (as
Independent Contractor) establishing a trust to fund the USLIFE Corporation
Retirement Plan for Outside Directors and the USLIFE Corporation Deferred
Compensation Plan for outside directors.
In accordance with the provisions contained in Section 10.1 of the
Agreement, the language in Section 2.3(d) (iv) is deleted in its entirety and
replaced with the following language:
"Change In Control" means (i) a merger or consolidation to which the
Company is a party and for which the approval of any shareholders of the
Company is required; (ii) any "person" (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended)
becoming the beneficial owner, directly, or indirectly, of securities of
the Company representing 25% or more of the combined voting power of the
Company's then outstanding securities; (iii) a sale or transfer of
substantially all of the assets of the Company; (iv) a liquidation or
reorganization of the Company; or (v) the occurrence of any Flip Over
Transaction or Event, as defined in Section 1.1(j) of the Amended and
Restated Rights Agreement, as amended from time to time prior to the
occurrence of any such transaction or event that otherwise would have
previously been considered a Flip Over Transaction or Event. Provided,
however, that an event described above shall not constitute a Change In
Control if within 10 days of such event the Continuing Directors provide
the Trustee with a resolution expressly stating that such event shall not
constitute a Change In Control for the purpose of the Agreement.
<PAGE>1
<TABLE>
Exhibit 12
__________
Computations of Ratios of Earnings to Fixed Charges
(Dollar Amounts in Thousands)
<CAPTION>
Year Ended December 31
________________________________________________________
1995 1994 1993 1992 1991
____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C>
1. Excluding interest credited to
policyholder account balances:
Income before taxes on income (1) $159,925 $146,997 $151,571 $104,337 $111,019
Fixed charges:
Interest expense 39,699 35,627 32,392 33,805 39,209
One-third of all rent expense 4,179 4,365 4,497 4,123 4,016
Total fixed charges (A) 43,878 39,992 36,889 37,928 43,225
Total income before taxes on income
and fixed charges (B) 203,803 186,989 188,460 142,265 154,244
Ratio of earnings to fixed charges (B)/(A) 4.64 4.68 5.11 3.75 3.57
2. Including interest credited to
policyholder account balances
Income before taxes on income (1) $159,925 $146,997 $151,571 $104,337 $111,019
Fixed charges:
Interest credited to policyholder
account balances 209,788 194,036 183,737 173,538 137,580
Interest expense 39,699 35,627 32,392 33,805 39,209
One-third of all rent expense 4,179 4,365 4,497 4,123 4,016
Total fixed charges (A) 253,666 234,028 220,626 211,466 180,805
Total income before taxes on income
and fixed charges (B) 413,591 381,025 372,197 315,803 291,824
Ratio of earnings to fixed charges (B)/(A) 1.63 1.63 1.69 1.49 1.61
(1) Before cumulative effect of accounting change relating to non-pension
postretirement benefits recorded in first quarter of 1992.
</TABLE>
<PAGE>1
Exhibit 21
__________
USLIFE Corporation
LIST OF SUBSIDIARIES
Percentage
of Ownership
by Registrant
_____________
USLIFE Corporation (Registrant).............................
The United States Life Insurance Company in the
City of New York (New York) (1).......................... 100
All American Life Insurance Company
(Illinois) (1)........................................... 100
The Old Line Life Insurance Company of America
(Wisconsin) (1).......................................... 100
Security of America Life Insurance Company
(Pennsylvania) (1)....................................... 100
USLIFE Credit Life Insurance Company
(Illinois) (1)........................................... 100
USLIFE Advisers, Inc. (New York) (1)....................... 100
USLIFE Agency Services, Inc. (Illinois) (1)................ 100
USLIFE Equity Sales Corp. (Delaware) (1)................... 100
USLIFE Insurance Services Corporation (Texas) (1).......... 100
USLIFE Realty Corporation (Texas) (1)...................... 100
USLIFE Real Estate Services Corporation (Texas) (1)........ 100 (2)
USLIFE Systems Corporation (Delaware) (1).................. 100
The foregoing list of subsidiaries does not include subsidiaries of USLIFE
or subsidiaries of subsidiaries of USLIFE which, if considered in the aggregate
as a single subsidiary, would not constitute a significant subsidiary.
(1) Included in USLIFE's consolidated financial statements.
(2) Wholly-owned subsidiary of USLIFE Realty Corporation.
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CONSOLIDATED INCOME FOR
THE PERIOD ENDED DECEMBER 31, 1995 OF USLIFE CORPORATION AND
SUBSIDIARIES FILED ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<DEBT-HELD-FOR-SALE> 6,006,864
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 4,717
<MORTGAGE> 296,045
<REAL-ESTATE> 29,205
<TOTAL-INVEST> 6,694,811
<CASH> 65,735
<RECOVER-REINSURE> 8,568
<DEFERRED-ACQUISITION> 718,439
<TOTAL-ASSETS> 7,930,504
<POLICY-LOSSES> 5,425,973
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 210,174
<POLICY-HOLDER-FUNDS> 49,194
<NOTES-PAYABLE> 572,393
0
541
<COMMON> 57,469
<OTHER-SE> 1,250,244
<TOTAL-LIABILITY-AND-EQUITY> 7,930,504
990,821
<INVESTMENT-INCOME> 488,479
<INVESTMENT-GAINS> 6,388
<OTHER-INCOME> 253,864
<BENEFITS> 1,037,540
<UNDERWRITING-AMORTIZATION> 162,038
<UNDERWRITING-OTHER> 376,462
<INCOME-PRETAX> 159,925
<INCOME-TAX> 54,511
<INCOME-CONTINUING> 105,414
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 105,414
<EPS-PRIMARY> 3.03
<EPS-DILUTED> 3.03
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
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</TABLE>
<PAGE>1
Exhibit 99(iii)
_______________
Amendment, effective January 23, 1996, to Trust Agreement dated December
6, 1990, among USLIFE Corporation, Manufacturers Hanover Trust Company
(predecessor to Chemical Bank), and KPMG Peat Marwick LLP (as Independent
Contractor) establishing a trust to fund the USLIFE Corporation Retirement
Plan.
In accordance with the provisions contained in Section 10.1 of the
Agreement, the language in Section 2.3(d) (iv) is deleted in its entirety and
replaced with the following language:
"Change In Control" means (i) a merger or consolidation to which the
Company is a party and for which the approval of any shareholders of the
Company is required; (ii) any "person" (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended)
becoming the beneficial owner, directly, or indirectly, of securities of
the Company representing 25% or more of the combined voting power of the
Company's then outstanding securities; (iii) a sale or transfer of
substantially all of the assets of the Company; (iv) a liquidation or
reorganization of the Company; or (v) the occurrence of any Flip Over
Transaction or Event, as defined in Section 1.1(j) of the Amended and
Restated Rights Agreement, as amended from time to time prior to the
occurrence of any such transaction or event that otherwise would have
previously been considered a Flip Over Transaction or Event. Provided,
however, that an event described above shall not constitute a Change In
Control if within 10 days of such event the Continuing Directors provide
the Trustee with a resolution expressly stating that such event shall not
constitute a Change In Control for the purpose of the Agreement.
